As filed with the Securities and Exchange Commission on Securities
and Exchange Commission on September 20, 1996
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
Registration Statement
Under
The Securities Act of 1933
ACCELR8 TECHNOLOGY CORPORATION
(Exact name of small business issuer as specified in its charter)
Colorado 7371 84-1072256
-------- ---- ----------
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of inorporation or Industrial Classification Identification No)
organization) Code Number)
Thomas V. Geimer
303 East Seventeenth Avenue, 303 East Seventeenth Avenue,
Suite 108 Suite 108
Denver, Colorado 80203 Denver, Colorado 80203
(303) 863-8088 (303) 863-8088
(Address and telephone number of (Name, address and telephone number
registrant's principal executive of agent for service)
offices and principal place of business)
Copies to:
Henry F. Schlueter, Esq. David C. Roos, Esq.
Charles L. Borgman, Esq. Berliner Zisser Walter & Gallegos
Schlueter & Associates, P.C. One Norwest Center
1050 17th Street, Suite 1700 1700 Lincoln Street, Suite 4700
Denver, Colorado 80202 Denver, Colorado 80203-4547
(303) 292-3883 (303) 830-1700
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. /__/
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. /__/
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /__/
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==================================================================================================================================
Title of Each Class Amount Proposed Maximum Proposed Maximum Amount
of Securities to be Offering Price Aggregate Offering of
to be Registered Registered Per Share(1 Price(1) Registration Fee
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<S> <C> <C> <C> <C>
Common Stock, no par value 1,000,000(2) $6.50 $6,500,000(2) $2,241
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Representative's Warrants 34,500 .00289 100 --
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Common Stock, no par value,(3) 34,500 7.80 269,100 93
Underlying Representative's Warrants
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Affiliate's Warrants (4) 60,000 0.36 21,600 7
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Common Stock, no par value, Underlying 60,000 6.50 390,000 135
Warrants Issuable Upon Exercise of
Affiliate's Warrants (5)
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Employee Options (6) 90,000 0.54 48,600 17
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Common Stock, no par value, Underlying 90,000 6.50 585,000 202
Options Issuable Upon Exercise of
Employee Options (7)
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Total $7,814,400 $2,695
==================================================================================================================================
(Footnotes on following page)
</TABLE>
<PAGE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended.
(2) Does not include 150,000 shares that the Underwriters have the option to
purchase to cover over-allotments, if any, from the selling warrantholder
and certain holders of employee options. See Note (8) below.
(3) Pursuant to Rule 416, includes such indeterminate number of additional
shares as may be required for issuance upon exercise of the
Representative's Warrants as a result of any adjustment in the number of
shares issuable upon such exercise by reason of the anti-dilution
provisions of the Representative's Warrants.
(4) To be offered and sold by the selling warrantholder.
(5) Shares issuable upon exercise of the affiliate's warrants.
(6) To be offered and sold by the selling optionholders.
(7) Shares issuable upon exercise of the employee options.
(8) The Underwriters' option to purchase up to an additional 150,000 shares
will be satisfied by the exercise by the selling warrantholder of 60,000
warrants and the exercise by certain holders of employee options of 90,000
options.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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<PAGE>
CROSS REFERENCE SHEET BETWEEN ITEMS
OF FORM SB-2 AND PROSPECTUS
Item
Number Item Location in Prospectus
- ------ ---- ----------------------
Item 1. Front of Registration Statement and
Outside Front Cover of Prospectus Cover Page
Item 2. Inside Front and Outside Back Cover Inside Front Cover and
Pages of Prospectus Outside Back Cover
Item 3. Summary Information and Risk Factors Prospectus Summary,
Risk Factors
Item 4. Use of Proceeds Use of Proceeds
Item 5. Determination of Offering Price Outside Front Cover
Page, Risk Factors,
Underwriting
Item 6. Dilution Dilution; Risk Factors
Item 7. Selling Security Holders Outside Front and
Inside Front Cover
Pages; Principal
Shareholders; and
Selling Warrantholder
and Selling
Optionholders
Item 8. Plan of Distribution Underwriting
Item 9. Legal Proceedings Legal Proceedings
Item 10. Directors, Executive Officers, Management
Promoters and Control Person
Item 11. Security Ownership of Certain Principal Shareholders
Beneficial Owners and Management
Item 12. Description of Securities Description of
Securities
Item 13. Interest of Named Experts and Counsel Legal Proceedings
Item 14. Disclosure of Commission Position on Underwriting and
Indemnification for Securities Act Undertakings
Liabilities
Item 15. Organization Within Last Five Years Not Applicable
Item 16. Description of Business Business
Item 17. Management's Discussion and Analysis Management's Discussion
or Plan of Operation and Analysis of
Financial Condition and
Results of Operations
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<PAGE>
Item 18. Description of Property Business
Item 19. Certain Relationships and Related Certain Transactions
Transactions
Item 20. Market for Common Equity and Related Cover Page of
Stockholder Matters Prospectus, Risk
Factors, Price Range of
Common Stock
Item 21. Executive Compensation Management-Executive
Compensation
Item 22. Financial Statements Financial Statements
Item 23. Changes In and Disagreements With Not Applicable
Accountants on Accounting and
Financial Disclosure
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EXPLANATORY NOTE
This Registration Statement covers the registration of (i) 1,000,000 shares
of no par value common stock (the "Common Stock") of Accelr8 Technology
Corporation (the "Company"); (ii) 60,000 warrants to purchase Common Stock (the
"Affiliate's Warrants") and 60,000 shares of Common Stock underlying the
Affiliate's Warrants for sale by the holder thereof (the "Selling
Warrantholder"); and (iii) 90,000 options to purchase Common Stock (the
"Employee Options") and 90,000 shares of Common Stock underlying the Employee
Options for sale by the holders thereof (the "Selling Optionholders" ). The
shares issued upon exercise of the Affiliate's Warrants and the Employee Options
will be used to satisfy the Underwriters' over-allotment option. Any of the
shares not purchased by the Underwriters pursuant to the over-allotment option
will be sold after the expiration of a 90-day lock-up period by the Selling
Warrantholder and the Selling Optionholders.
Following the Prospectus are certain pages of the Prospectus relating
solely to the Affiliate's Warrants and the shares of Common Stock underlying the
Affiliate's Warrants and the Employee Options and the shares of Common Stock
underlying the Employee Options, which will be sold by the Selling Warrantholder
and the Selling Optionholders if the Underwriters over-allotment option is not
exercised in full. These pages have been marked "Alternate-A" pages. These pages
include alternate front and back cover pages and cross-reference sheet and
sections entitled "Concurrent Sales," " Selling Warrantholder and Selling
Optionholders" and "Plan of Distribution" to be included in the Prospectuses
delivered by the Selling Warrantholder and Selling Optionholders in connection
with the offer and sale by those individuals of the 60,000 Affiliate's Warrants
and the 60,000 shares of Common Stock underlying the Affiliate's Warrants and
the 90,000 Employee Options and the 90,000 shares of Common Stock underlying the
Employee Options. All other sections of the Prospectus for the offering are to
be used in the Prospectus relating to the Selling Warrantholder and Selling
Optionholders.
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<PAGE>
PROSPECTUS SUBJECT TO COMPLETION, DATED ______________, 1996
ACCELR8 TECHNOLOGY CORPORATION
1,000,000 Shares of Common Stock
Accelr8 Technology Corporation ("Accelr8" or the "Company") is hereby
offering 1,000,000 shares of its Common Stock. The Company's Common Stock is
traded in the over-the-counter market on the Nasdaq Electronic Bulletin Board
under the symbol "ACLY." On _______________, 1996, the closing bid and ask
prices as reported on the Nasdaq Electronic Bulletin Board were $_______ and
$_______, respectively. It is currently anticipated that the public offering
price will be between $5.50 and $6.50 per share. The Company has applied for
inclusion of its Common Stock in the Nasdaq National Market under the symbol
"ACLY" effective upon commencement of this offering. The public offering price
of the Common Stock has been determined by negotiations between the Company and
the Representative, based in part upon the most recent bid price of the
Company's Common Stock. See "Underwriting" and "Price Range of Common Stock."
See "Risk Factors" beginning on page 6 for information
prospective investors should consider.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
================================================================================
Price to Underwriting Proceeds to the
Public Commissions(1) Company(2)(3)
------ -------------- -------------
Per Share $ $ $
Total $ $ $
================================================================================
(1) Excludes a non-accountable expense allowance equal to 1.5% of the gross
proceeds of this offering payable to the Representative of the several
Underwriters, and the value of warrants to purchase up to 34,500 shares of
Common Stock to be issued to the Representative. The Company has agreed to
indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Act"). See
"Underwriting."
(2) Before deducting expenses payable by the Company estimated at $266,152,
including the Representative's non-accountable expense allowance.
(3) Certain employees of the Company holding options and warrants to purchase
the Company's Common Stock have granted to the Underwriters a 45-day option
to purchase up to 150,000 additional shares solely to cover
over-allotments, if any. The Company will not receive any proceeds from the
sale of such shares. See "Underwriting."
The shares of Common Stock are offered by the Underwriters subject to
prior sale when, as and if delivered to and accepted by them, and subject to the
right of the Underwriters to withdraw, cancel or modify such offer and reject
any orders in whole or in part, and subject to certain other conditions as set
forth in the Underwriting Agreement between the Company and the Underwriters. It
is expected that delivery of the certificates for such shares will be made
against payment therefor at the offices of Janco Partners, Inc. in Denver,
Colorado on or about ___________, 1996.
JANCO PARTNERS, INC.
The date of this Prospectus is ___________, 1996.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
INSERT INDUSTRY GRAPH AND MIGRATION DIAGRAM HERE
[GRAPHIC OMITTED]
The Company intends to furnish to its shareholders, annual reports which
include audited financial statements reported on by its independent accountants
for each fiscal year, and quarterly reports containing unaudited financial
information for the first three quarters of each year. The Company will continue
to comply with the periodic reporting requirements imposed under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL
MARKET IN ACCORDANCE WITH RULE 10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934.
SEE "UNDERWRITING."
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<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. Unless otherwise indicated, all share and per share data in
this Prospectus give effect to a proposed one-for-six reverse stock split of the
outstanding Common Stock which will be effective prior to the commencement of
this offering, and assume no exercise of the Underwriter's over-allotment option
or options granted or reserved under the Company's stock option plans or
warrants currently outstanding. Prior to commencement of the offering, the Board
of Directors will obtain authorization from the Company's shareholders to
complete a reverse split of the Company's outstanding Common Stock at a rate
ranging from one-for five to one-for-seven. The Board of Directors will complete
the reverse split at a rate which is expected to result in a market price of at
least $5.00 per share. Certain terms used in this Prospectus are defined in the
Glossary beginning at page 40.
The Company
Accelr8 Technology Corporation (the "Company" or "Accelr8") is a leading
provider of software tools and consulting services for the conversion of Digital
Equipment Corporation's ("DEC") VAX/VMS Legacy Systems to UNIX open
Client/Server environments. VAX/VMS Legacy Systems use a Proprietary computer
operating system which is not compatible with other manufacturers' hardware and
software applications. In contrast, UNIX is a powerful, open architecture system
which is compatible with a wide range of hardware platforms and software
applications, including commercial off-the shelf software ("COTS"). The Company
believes that UNIX has become the most widely used Client/Server operating
system, and that the trend to Client/Server Open Systems such as the system
offered by UNIX and Microsoft Corporation's Windows NT operating system ("NT")
will continue for the foreseeable future. In order to attain the advantages of
UNIX while preserving their investment in existing software applications, many
VAX/VMS users will undertake complex conversions to the UNIX operating system.
The Company's consulting services and software conversion tools enable the
Company' s clients to analyze and implement their UNIX conversions in a
predictable and cost-effective manner.
Based on information published by DEC and other industry sources,
management estimates that over 600,000 VAX/VMS Legacy Systems have been
installed and that at least 400,000 of such systems are currently in use. The
Company's clients have consisted primarily of Fortune 1000 companies and
governmental agencies that utilize one or more VAX/VMS Legacy Systems. These
organizations typically have significant technology budgets and recurring
systems development and maintenance needs which the Company addresses through
its software tools and consulting services. The Company's clients include, among
others, Electronic Data Systems Corp., Proctor & Gamble, Kellogg Co., McDonnell
Douglas Corp., Delta Air Lines Corp., Daimler Benz AG, the United States Army
and the United States Navy.
The Company's total revenues have increased from $688,885 in fiscal 1994 to
$2,097,011 in fiscal 1996, and net income increased from a loss of ($261,750) in
fiscal 1994 to $1,192,780 in fiscal 1996. The growth in revenues and net income
reflects the Company's decision in fiscal 1994 to develop specialized consulting
services which can be delivered with the Company's software tools as an
integrated solution to clients' conversion needs. The Company's consulting
services accounted for approximately 51% of 1996 revenues. The growth in
revenues and net income also reflects the Company's success in establishing
international sales, which accounted for approximately 15% of total revenues in
fiscal 1996 as compared to approximately 7% of total revenues in fiscal 1995.
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<PAGE>
The Company is currently engaged in the development of additional software
tools which will complement its existing suite of conversion tools and services.
The Company has commenced development of software tools that are to be used in
converting VAX/VMS Legacy Systems to the NT operating system, running on DEC
Alpha servers. The Company has also completed preliminary development of a
software tool that identifies "Year 2000 Problems" in the VAX/VMS environment.
The Year 2000 Problem is expected to create widespread system failures due to
the use of computer programs that rely on two-digit date codes to perform
computations and other decision-making functions. The Company expects to use a
portion of the net proceeds from this offering to complete and introduce those
products during the second calendar quarter of 1997.
The Company's objective is to enhance its position as a leading provider of
software tools and consulting services which are targeted to VAX/VMS Legacy
System conversions and related Re-engineering services. The Company's strategy
for achieving its objectives includes: (i) continuing to emphasize the
integration of specialized consulting services with the Company's suite of
software tools, including the establishment of up to ten three-person
"conversion teams" in order to staff the anticipated increase in conversion
projects to be performed by the Company; (ii) developing and introducing new
software tools and services, such as those relating to the Year 2000 Problem and
conversion from VAX/VMS Legacy Systems to NT running on DEC Alpha servers; (iii)
development of relationships with significant providers of outsourcing services
for an entity's information technology needs; (iv) expanding the Company's
international marketing programs, particularly in Europe and Asia; (v) securing
additional consulting projects from existing and future clients; (vi) continuing
to target large corporations and government agencies which require integrated
solutions to their Legacy System conversion needs; and (vii) investing in or
acquiring complementary businesses, technologies or product lines.
The Company was incorporated in the State of Colorado in 1982. The
Company's executive offices are located at 303 East 17th Avenue, Suite 108,
Denver, Colorado, and its telephone number is (303) 863-8088.
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<PAGE>
The Offering
Common Stock offered by the Company 1,000,000 shares
Common Stock Outstanding
after the Offering 4,661,667 shares(1)
Use of Proceeds For (i) creation of additional
technical teams to work on Legacy
Code conversion projects; (ii)
completion of a Year 2000 Problem
audit and analysis tool for the
VAX/VMS customer base and the
related expansion of technical and
marketing staff; (iii) development
of products to capitalize on the
VAX/VMS to NT conversion opportunity
and the related expansion of
technical and marketing staff; (iv)
acquisition of or investment in
complementary businesses,
technologies or product lines; and
(v) general corporate purposes,
including working capital and hiring
of additional managerial and
technical personnel.
Proposed Nasdaq National Market Symbol ACLY(2)
- ---------------------------------------
(1) Excludes 316,667 shares of Common Stock issuable upon exercise of employee
stock options and 800,000 shares of Common Stock issuable upon the exercise
of warrants and options held by an affiliate. The Representative has agreed
to cover over-allotments from the exercise of 90,000 employee options and
60,000 warrants. See "Management--Compensation Pursuant to Plans."
(2) The Company's Common Stock is currently trading on the Electronic Bulletin
Board under this symbol.
Summary Financial Information
(In thousands of dollars, except share data)
<TABLE>
<CAPTION>
Year Ended July 31,
-------------------------------------------
Statement of Operations Data: 1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Revenue:
Consulting fees $ 41 $ 294 $ 1,075
Product license and customer support fees 415 751 684
Resale of purchased software 150 338 338
Other revenues 83 - -
Total revenue 689 1,383 2,097
Income (loss) from operations (269) 370 1,114
Net income (loss) (262) 382 1,193
Net income (loss) per share (.071) .087 .266
Weighted average shares outstanding 3,661,667 4,394,000 4,489,251
</TABLE>
July 31, 1996
-------------------------------
Actual As Adjusted(1)
Balance Sheet Data:
Working capital $ 1,704 $ 7,018
Total assets 2,317 7,631
Total liabilities 377 377
Shareholders' equity 1,940 7,254
- --------------------------------------
(1) Adjusted to reflect the sale of 1,000,000 shares of Common Stock offered by
the Company hereby, based on an assumed public offering price of $6.00 per
share, after deducting the estimated underwriting discount and offering
expenses, and after giving effect to the proposed one-for-six Common Stock
reverse split.
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<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should carefully consider the following risk factors prior to making
an investment in the Common Stock offered hereby.
Dependence on Key Employees. The Company's success depends to a significant
extent upon a number of key management and technical personnel, the loss of one
or more of whom could have a material adverse effect on the Company's results of
operations. The Company carries key man life insurance on seven of its key
employees, including Thomas V. Geimer, Harry J. Fleury, Franz Huber and Timothy
Fitzpatrick, in the amount of $250,000 for each individual. The Board of
Directors has adopted resolutions under which one-half of the proceeds of any
such insurance will be dedicated to a beneficiary designated by the insured.
There can be no assurance that the proceeds from such life insurance policies
would be sufficient to compensate the Company for the loss of any of these
employees, and these policies do not provide any benefits to the Company if
these employees become disabled or are otherwise unable to render services to
the Company. The Company believes that its continued success will depend in
large part upon its ability to attract and retain highly-skilled technical,
managerial, sales and marketing personnel. There can be no assurance that the
Company will be successful in attracting and retaining the personnel it requires
to develop and market new and enhanced products and to conduct its operations
successfully. See "Management."
Management of Growth. The Company's rapid growth in business in recent
quarters has placed and may continue to place a significant strain on the
Company, particularly on its customer services organization. Any failure by the
Company to respond quickly to the service needs of its customers could cause the
loss of customers and have a material adverse effect on the Company's results of
operations. The Company's future operating results will depend on its ability to
expand its services organization and infrastructure commensurate with its
expanding base of customers and on its ability to attract, hire and retain
skilled employees. There can be no assurance that the Company will be able to
effectively manage any future growth. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
Dependence on Conversion of DEC VAX/VMS Legacy Systems. The Company's
principal software products and services are designed for conversion from
VAX/VMS Legacy Systems to UNIX open Client/Server environments. To date
substantially all of the Company's revenues have been derived from sales of
these products and services. Future revenues from sales of products and services
are therefore dependent upon users of VAX/VMS Legacy Systems electing to convert
their data and applications to UNIX or NT environments. To the extent that users
of VAX/VMS Legacy Systems elect to abandon their VAX/VMS applications and data,
and to rewrite their information technology systems entirely in UNIX or NT
environments without conversion, the Company's revenues and future prospects
could be materially and adversely affected. See "Business."
Reliance on Existing Products. Substantially all of the Company's software
license fee revenues and its consulting revenues are derived from the Company's
VAX/VMS conversion activities. If license sales, consulting revenues or pricing
levels of Accelr8's products were to decline materially, whether as a result of
technological change, competition or any other factors, the Company's business,
results of operations and financial condition would be adversely affected.
Ability to Respond to Technological Change. The Company's future success
will depend significantly on its ability to enhance its current products and
develop or acquire and market new products which keep pace with technological
developments and evolving industry standards as well as respond to changes in
customer needs. There can be no assurance that the Company will be successful in
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<PAGE>
developing or acquiring product enhancements or new products to address changing
technologies and customer requirements adequately, that it can introduce such
products on a timely basis, or that any such products or enhancements will be
successful in the marketplace. The Company's delay or failure to develop or
acquire technological improvements or to adapt its products to technological
change would have a material adverse effect on the Company's business, results
of operations and financial condition.
Dependence Upon Proprietary Technology; Intellectual Property Rights. The
Company relies primarily on a combination of copyright, trademark and trade
secret laws, employee and third party disclosure agreements, license agreements
and other intellectual property protection methods to protect its Proprietary
rights. The Company's Proprietary software products are generally licensed to
customers on a "right to use" basis pursuant to a perpetual, nontransferable
license that generally restricts use to the customer's internal purposes and to
a specific computer platform that has been assigned a "key code." However, it
may be possible for unauthorized third parties to copy or reverse engineer
certain portions of the Company's products or obtain and use information the
Company regards as Proprietary. The Company currently has no patents and
existing trade secret and copy right laws provide only limited protection. The
Company's competitive position and operations may be adversely affected by
unauthorized use of its Proprietary information, and there can be no assurance
that the protections put in place by the Company will be adequate.
There can be no assurance that third parties will not assert infringement
or other claims against the Company with respect to any existing or future
products, or that licenses would be available if any Company technology were
successfully challenged by a third party, or if it became desirable to use any
third-party technology to enhance the Company's products. Litigation to protect
the Company's Proprietary information or to determine the validity of any
third-party claims could result in significant expense to the Company and divert
the efforts of the Company's technical and management personnel, whether or not
such litigation is determined in favor of the Company. See "Business --
Intellectual Property."
Competition. The market for the Company's products and services is
competitive and subject to rapid change. Further, the Company's products
currently compete primarily in the conversion of VAX/VMS Legacy Systems to UNIX.
Management believes that there are only two companies that compete directly with
the Company in conversion from VAX/VMS Legacy Systems to UNIX Operating Systems.
However, management believes that the Company offers a broader range of products
and services than either of these competitors, and is therefore able to compete
successfully against them. Although DEC does not offer its own products for
conversion from its VAX/VMS Legacy Systems to UNIX, should DEC choose to do so,
the Company could be materially and adversely affected. There can be no
assurance that competitors will not develop products or alternative technologies
that: (i) are superior to the Company's products; (ii) achieve greater market
acceptance; or (iii) make the Company's products obsolete. Further, there can be
no assurance that the Company will be able to compete successfully with its
present or potential competition, or that competition will not have a material
adverse effect on the Company's results of operations and financial condition.
See "Business -- Competition."
Possible Volatility of Stock Price; Dividend Policy. Although the Common
Stock is expected to be approved for quotation on the Nasdaq National Market
upon notice of issuance, there can be no assurance that an active trading market
will develop. The market price of the Common Stock could be subject to
significant fluctuations in response to variations in actual and anticipated
quarterly operating results, changes in earnings estimates by analysts,
announcements of new products or technological innovations by the Company or its
competitors, and other events or factors. In addition, the stocks of many
technology companies have experienced extreme price and volume fluctuations that
have often been unrelated to the companies' operating performance. The Company
does not intend to pay any cash dividends on its Common Stock in the foreseeable
future. See "Dividend Policy."
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<PAGE>
Control by Management . After completion of this offering, the officers,
directors and key employees of the Company will own approximately 24% of the
outstanding shares of Common Stock, and if they exercise all of the options and
warrants that they currently hold, they will own approximately 38% of the
Company's outstanding shares of Common Stock. Due to their stock ownership, the
officers, directors and key employees may be in a position to elect the Board of
Directors and, therefore, control the business and affairs of the Company,
including certain significant corporate actions such as acquisitions, the sale
or purchase of assets and the issuance and sale of the Company's securities. See
"Principal Shareholders" and "Description of Securities--Common Stock."
Shares Eligible for Future Sale; Rights to Acquire Shares. At the date of
this Prospectus, the Company has reserved 316,667 shares of Common Stock for
issuance on exercise of options granted under its stock option plan, of which
options to purchase 316,667 shares were outstanding at July 31, 1996 ("Employee
Options"). Warrants and options to purchase an additional 800,000 shares also
were outstanding at July 31, 1996 ("Affiliate's Warrants"). The exercise prices
of the Employee Options and Affiliate's Warrants range from $0.36 per share to
$0.54 per share, with a weighted average exercise price per share of $0.41.
Sales of Common Stock underlying Employee Options or Affiliate's Warrants may
adversely affect the price of the Common Stock. The existence of such options
and warrants may adversely affect the terms on which the Company may obtain
additional equity capital in the future. In addition, the Board of Directors has
adopted resolutions establishing an incentive stock option plan and a
non-qualified stock option plan, which will be submitted to the shareholders for
their approval. An aggregate of 1,000,000 additional shares of Common Stock have
been reserved for issuance under these two new plans.
Short History of Profitability. Although the Company has been profitable in
each of the last two fiscal years, it had an accumulated deficit of $72,703 as
of July 31, 1996. There can be no assurance that revenue growth or profitable
operations can be sustained in the future. See " Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Immediate Substantial Dilution. As of July 31, 1996, the Company's net
tangible book value per share was $0.53. Based on certain assumptions,
purchasers of shares of Common Stock in this offering will experience immediate
substantial dilution of $4.44 per share. See "Dilution."
Important Factors Related to Forward-Looking Statements and Associated
Risks. This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Act and Section 21E of the Exchange Act and the
Company intends that such forward-looking statements be subject to the safe
harbors created thereby. These forward-looking statements include the plans and
objectives of management for future operations, including plans and objectives
relating to the products and future economic performance of the Company. The
forward-looking statements and associated risks set forth in this Prospectus
include or relate to (i) the successful development and marketing of the Year
2000 Problem audit and analysis tool for the DEC-installed customer base; (ii)
increasing sales through the creation of ten three-person conversion field
teams; (iii) success of additional marketing initiatives to be undertaken by the
Company; (iv) increases in international sales as a result of the execution of
distribution agreements in Australia and Southeast Asia; (v) expansion of sales
to the DEC-installed customer base; (vi) success of the Company's development of
its VAX/VMS conversion tool for NT users; (vii) success in diversifying the
Company's market through increasing sales to non-DEC customers; (viii)
achievement of high gross profit margins by targeting larger conversion projects
in government and commercial enterprises; and (ix) success of the Company in
achieving increases in net sales such that cost of goods sold and selling,
general and administrative expenses decrease as a percentage of net sales.
-8-
<PAGE>
The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. These
forward-looking statements are based on assumptions that the Company will
continue to provide services and develop, market and ship products on a timely
basis, that competitive conditions within the software industry will not change
materially or adversely, that demand for the Company's products and services
will remain strong, that the Company will retain existing independent sales
representatives and key management personnel, that the Company's forecasts will
accurately anticipate market demand and that there will be no material adverse
change in the Company's operations or business. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond the control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could prove inaccurate and, therefore, there can be no assurance
that the results contemplated in forward-looking information will be realized.
In addition, as disclosed elsewhere under other risk factors, the business and
operations of the Company are subject to substantial risks which increase the
uncertainty inherent in such forward-looking statements. In light of the
significant uncertainties inherent in the forward-looking information included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives or plans
of the Company will be achieved.
USE OF PROCEEDS
Based on an assumed offering price of $6.00 per share, the net proceeds to
the Company from the sale of the 1,000,000 shares of Common Stock offered by the
Company are estimated to be approximately $5,313,848. If the Underwriters'
over-allotment option is fully exercised, the Company will not receive any
proceeds from the sale of those shares by the Selling Warrantholder and the
Selling Optionholders. However, the Company will receive the exercise price for
all options and warrants exercised.
The Company expects to use $1,500,000 of the net proceeds to finance the
creation of ten three-person conversion teams which will permit the Company to
staff projects for larger Legacy Code conversions. Such proceeds will also be
used to purchase computer equipment and related software, furniture and fixtures
and leasehold improvements required to support the conversion teams. In
addition, the Company expects to use $1,000,000 of the net proceeds to finance
completion of the Year 2000 Problem audit and analysis tool for the DEC
installed customer base, to expand the Company's technical and marketing staff
to pursue expected growth in the services portion of the Company's business as
it relates to the Year 2000 Problem, and for advertising and promotion of the
Company's Year 2000 capabilities. The Company also expects to use approximately
$1,500,000 of the net proceeds to develop products that relate to the VAX/VMS to
NT conversion opportunity, and to expand the technical and marketing staff to
pursue the expected growth in this area. See "Business." The balance of the
proceeds will be used for working capital and general corporate purposes,
including hiring additional personnel and the possible investment in, strategic
acquisition of or joint ventures with, complementary businesses, technologies or
product lines. As of the date of this Prospectus the Company has no plans,
arrangements, understandings or commitments with respect to any such material
investments, acquisitions or joint ventures, nor is the Company engaged in
negotiations with respect to any such matter. There can be no assurance that any
such investments, acquisitions or joint ventures will become available on terms
acceptable to the Company. See "Business--Business Strategy."
-9-
<PAGE>
The foregoing represents the Company's best estimate of the use of the net
proceeds to be received in this offering based on current planning and business
conditions. The Company reserves the right to change such uses when and if
market conditions or unexpected changes in operating conditions or results
occur. The amounts actually expended for each use may vary significantly
depending upon a number of factors, including future sales growth and the amount
of cash generated by the Company's operations. Net proceeds not immediately
required for the purposes described above will be invested principally in U.S.
government securities, short-term certificates of deposit, money market funds or
other short-term, interest-bearing securities.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common Stock.
The Company plans to retain all future earnings (if any) for use in its business
and, therefore, does not anticipate paying any cash or stock dividends in the
foreseeable future. Any payment of cash dividends in the future will be
dependent upon the Company's financial condition and results of operations, as
well as other factors that the Board of Directors deems relevant.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded in the over-the-counter market on the
Nasdaq Electronic Bulletin Board under the symbol "ACLY." The Company has
applied for inclusion, effective upon commencement of this offering, of the
Common Stock on the Nasdaq National Market.
The table set forth below presents the range, on a quarterly basis, of high
and low bid prices per share of Common Stock as reported by the National
Quotation Bureau, Inc. The prices have been adjusted to reflect an expected
one-for-six reverse stock split that will be completed prior to commencement of
this offering. The quotations represent prices between dealers and do not
include retail markup, markdown or commissions and may not necessarily represent
actual transactions.
Quarter Ended High Bid Low Bid
------------- -------- -------
Fiscal 1995
October 31, 1994 .375 .12
January 31, 1995 .24 .12
April 30, 1995 .33 .12
July 31, 1995 .84 .12
Fiscal 1996
October 31, 1995 .84 .72
January 31, 1996 .96 .66
April 30, 1996 2.25 1.20
July 31, 1996 6.00 2.10
The closing bid price of the Common Stock as of September 18, 1996, was
$1.00 per share. The Company had approximately 141 shareholders of record as of
July 31, 1996, which does not include shareholders whose shares are held in
street or nominee names.
-10-
<PAGE>
DILUTION
The net tangible book value of the Company's Common Stock at July 31, 1996,
was $1,939,716 or $0.53 per share. Assuming an offering price of $6.00 per
share, the net tangible book value per share will increase as a result of this
offering to approximately $1.56 (without adjustment for other changes in net
tangible book value subsequent to July 31, 1996), resulting in an immediate
substantial dilution to new shareholders of $4.44 per share (74%). Dilution is
the reduction in value of the investor's investment measured by the difference
between the price per share in the public offering and the net tangible book
value per share at July 31, 1996, plus the increase attributable to purchases by
shareholders in this offering. "Net tangible book value per share" represents
the amount of total tangible assets, less total liabilities, divided by the
number of shares of Common Stock outstanding. The following table illustrates
the per share effect of this dilution on purchasers in this offering. See
"Description of Securities" and "Financial Statements."
Public Offering Price Per Share $6.00
Net Tangible Book Value Per
Share at July 31, 1996(1) $0.53
Increase Per Share Attributable
to Purchases by New Shareholders $1.03
-----
Pro Forma Net Tangible Book Value
Per Share After Offering(2) $1.56
-----
Dilution to New Shareholders $4.44
=====
Percent of Offering Price 74.0%
=====
- --------------------------------------
(1) Amount results from subtracting the total liabilities and intangible assets
of the Company from its total assets and dividing the remainder by the
number of shares of Common Stock outstanding.
(2) Includes the net tangible book value of $1,939,716 at July 31, 1996, plus
estimated net proceeds of this offering, after payment of expenses and
underwriting discounts and commissions, of $5,313,848. Does not include:
(i) 34,500 shares underlying the Representative's Warrants; or (ii) the
shares included in the over-allotment option.
Assuming the sale of 1,000,000 shares at an assumed offering price of $6.00
per share to the investors in this offering, investors in this offering will own
approximately 21% of the issued and outstanding Common Stock (approximately 24%
of the issued and outstanding Common Stock if the over-allotment option is
exercised in full). This compares with 3,661,667 shares of Common Stock held by
existing shareholders of the Company, for which the Company was paid an
aggregate consideration of $2,012,419 upon initial issuance, or an average of
approximately $0.55 per share, and which will constitute approximately 79% of
the issued and outstanding Common Stock following this offering (approximately
76% if the over-allotment option is exercised in full). Except as otherwise
stated, the foregoing information assumes no exercise of the over-allotment
option, no exercise of outstanding options or warrants and no exercise of the
Representative's Warrants. To the extent that currently outstanding options or
warrants are exercised, there will be further dilution to new investors.
-11-
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of July
31, 1996, as adjusted to give effect to the sale of 1,000,000 shares of Common
Stock at an assumed offering price of $6.00 per share (and after deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company).
July 31, 1996
---------------------------------
Actual As adjusted
------ -----------
Shareholders' equity:
Common Stock, without par value;
11,000,000 shares authorized;
3,661,667 shares issued and
outstanding at July 31, 1996;
4,661,667 issued and outstanding,
as adjusted(1) $1,970,970 $7,284,818
Contributed capital 41,449 41,449
Accumulated deficit (72,703) (72,703)
---------- ----------
Total shareholders' equity 1,939,716 7,253,564
========= =========
Total capitalization $1,939,716 $7,253,564
========== ==========
- -------------------------------------------
(1) Excludes (i) 316,667 shares of Common Stock issuable upon exercise of the
Employee Options; and (ii) 800,000 shares of Common Stock issuable upon
exercise of the Affiliate's Warrants. See "Management--Compensation
Pursuant to Plans ." Gives effect to a proposed one-for-six reverse split
of the authorized and the issued and outstanding shares of the Company's
Common Stock to be effective prior to commencement of this offering.
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the financial statements and related notes thereto appearing elsewhere in this
Prospectus and "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The selected financial data as of July 31, 1995 and 1996
and for each of the three years in the period ended July 31, 1996 have been
derived from the financial statements of the Company which have been audited by
the Company's independent auditors and are included elsewhere in this
Prospectus. The selected financial data for each of the two years in the period
ended July 31, 1993 have been derived from the audited financial statements of
the Company not included herein. The selected financial data provided below is
not necessarily indicative of the future results of operations or financial
performance of the Company.
-12-
<PAGE>
<TABLE>
<CAPTION>
Year Ended July 31,
---------------------------------------------------------------------
Statement of Operations Data: 1992 1993 1994 1995 1996
---- ---- ---- ---- ----
(in thousands except per share data)
<S> <C> <C> <C> <C> <C>
Revenue:
Product license and customer
support fees $ 626 $ 769 $ 415 $ 751 $ 684
Resale of purchased software -- 37 150 338 338
Consulting fees -- 71 41 294 1,075
Other revenues -- -- 83 -- --
Total revenue 626 877 689 1,383 2,097
Income (loss) from operations (225) (20) (269) 370 1,114
Net income (loss) (218) (10) (262) 382 1,193
Net income (loss) per share (.066) (.003) (.071) .087 .266
Weighted average shares outstanding 3,304,445 3,661,667 3,661,667 4,394,000 4,489,251
</TABLE>
July 31,
----------------------------
1995 1996
---- ----
Balance Sheet Data:
Working capital $ 500 $ 1,704
Current assets 731 2,011
Current liabilities 231 307
Total assets 978 2,317
Total liabilities 231 377
Shareholders' equity 747 1,940
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company began to develop software conversion tools for VAX/VMS users to
convert to UNIX environments in 1987. The Company's total revenues have
increased from $688,885 in fiscal 1994 to $2,097,011 in fiscal 1996, and net
income has increased from a loss of ($261,750) in fiscal 1994 to $1,192,780 in
fiscal 1996. The growth in revenues and net income reflects the Company's
decision in fiscal 1994 to develop specialized consulting services which can be
delivered with the Company's software tools as an integrated solution to
clients' conversion needs. The Company's consulting services accounted for
approximately 51% of 1996 revenues. The growth in revenues and net income also
reflects the Company's success in establishing international sales, which
accounted for approximately 15% of total revenues in fiscal 1996 as compared to
7% of total revenues in fiscal 1995.
The Company derives its revenue primarily from software license fees,
software maintenance fees and professional service fees. The Company's software
is licensed to primarily Fortune 1,000 companies and governmental organizations
worldwide. Professional services are provided in conjunction with software
products and also are sold separately if required by the customer. In addition,
the Company realizes license revenue from sales of software by licensees who
have embedded the Company's software in their software pursuant to run time
licenses. The Company's products and services are marketed through its sales
force, both domestically and internationally.
Revenue is recognized for consulting services as services are performed.
Revenue is recognized on product licensing agreements when the Company
substantially completes its obligations under the agreement and the customer has
accepted the product. Revenue is recognized for customer support services on
maintenance agreements using the straight-line method over the term of the
agreement. In connection with its software business, the Company functions as a
value-added reseller of computer software. The Company recognizes revenue when
the computer software is delivered.
-13-
<PAGE>
Results of Operations
The following table sets forth, for the periods indicated, the percentage
of net sales represented by certain items included in the Company's Statements
of Operations:
Fiscal year ended July 31,
-------------------------------------
1994 1995 1996
---- ---- ----
Total revenues 100.0% 100.0% 100.0%
Cost of services 19.40 10.69 14.86
Cost of software purchased
for resale 10.17 7.32 5.61
General and administrative 43.94 19.12 9.34
Marketing and advertising 43.37 26.70 15.50
Research and development 22.10 9.40 1.57
----- ----- ------
Income (loss) from operations (38.98) 26.77 53.12
Interest income 0.98 0.89 2.07
Income tax benefit 0.00 0.00 1.69
------ ------ ------
Net income (loss) (38.00)% 27.66% 56.88%
======== ====== ======
Year Ended July 31, 1996 Compared to Year Ended July 31, 1995
Total revenues for the year ended July 31, 1996, were $2,097,011, an
increase of $714,475, or 51.68%, as compared to the year ended July 31, 1995.
Consulting fees for the year ended July 31, 1996, were $1,074,744, an increase
of $780,614, or 265.40% as compared to the year ended July 31, 1995, and
represented 51.25% of total revenues. This increase primarily resulted from
management's continued emphasis in fiscal 1996 on marketing of consulting
services with less emphasis on marketing of products alone. Management expects
this trend to continue in the future. Product license and customer support fees
for the year ended July 31, 1996, were $683,997, a decline of $66,587, or 8.87%,
as compared to the year ended July 31, 1995. This decline is consistent with the
emphasis on consulting noted above. Revenues from the resale of purchased
software for the year ended July 31, 1996, were $338,270, an increase of $448,
or 0.13%, as compared to the year ended July 31, 1995.
During the year ended July 31, 1996, sales to the Company's three largest
customers were $239,025, $282,100 and $353,075, representing 11.40%, 13.45% and
16.84% of the Company's revenues, respectively. In comparison, sales to a single
customer represented 10.88% of total revenues for the year ended July 31, 1995.
The loss of a major customer could have a significant impact on the Company's
financial performance in any given year.
Cost of services for the year ended July 31, 1996, was $311,534, an
increase of $163,791, or 110.86%, as compared to the year ended July 31, 1995.
Cost of services as a percentage of revenues from both consulting fees and
product license and customer support fees increased from 14.14% for the year
ended July 31, 1995 to 17.71% for the year ended July 31, 1996. This increase
occurred principally because of the increased concentration of Company resources
and personnel in delivery of consulting services.
Cost of software purchased for resale for the year ended July 31, 1996, was
$117,737, an increase of $16,471 or 16.27%, as compared to the year ended July
31, 1995. This increase was directly related to the increased sales of products
and related consulting services.
-14-
<PAGE>
General and administrative expenses for the year ended July 31, 1996 were
$195,802, a decrease of $68,563, or 25.93%, as compared to the year ended July
31, 1995. This decrease was principally due to reduced salary cost that resulted
from the departure of a senior executive who was not replaced.
Marketing and advertising expenses for the year ended July 31, 1996 were
$324,962, a decrease of $44,203, or 11.97%, as compared to the year ended July
31, 1995. This decrease was principally due to decreased advertising in trade
publications and termination of direct mail advertising. Management believes
that advertising the Company's services and products electronically on the
Company's web page is a more cost efficient and effective method to reach the
Company's target markets.
Research and development expenses for the year ended July 31, 1996 were
$33,038, a decrease of $96,921, or 74.58%, as compared to the year ended July
31, 1995. This decrease resulted because technical personnel normally involved
in research and development provided a substantial amount of technical
assistance in connection with the Company's consulting services. For the year
ended July 31, 1996, $193,621 of cost of service represented assistance from
these technical personnel with consulting projects.
Interest income for the year ended July 31, 1996, was $43,342, an increase
of 250.78%, as compared to the year ended July 31, 1995. This increase resulted
from increased cash flows from operations, that could be invested in interest
bearing instruments.
As a result of these factors, operating income for the year ended July 31,
1996, was $1,113,938, an increase of $743,900, or 201.03%, as compared to the
year ended July 31, 1995. Net income for the year ended July 31, 1996, was
$1,192,780, an increase of $810,386, or 211.92%, as compared to the year ended
July 31, 1995.
Year Ended July 31, 1995 Compared to Year Ended July 31, 1994
Total revenues for the year ended July 31, 1995, were $1,382,536, an
increase of $693,651, or 100.69%, as compared to the year ended July 31, 1994.
Consulting fees for the year ended July 31, 1995, were $294,130, an increase of
$252,980, or 614.78% as compared to the year ended July 31, 1994, and
represented 21.27% of total revenues. This increase primarily resulted from
management's emphasis in fiscal 1995 on marketing of consulting services with
less emphasis on marketing of products alone. Product license and customer
support fees for the year ended July 31, 1995, were $750,584, an increase of
$335,577, or 80.86%, as compared to the year ended July 31, 1994. Revenues from
the resale of purchased software for the year ended July 31, 1995, were
$337,822, an increase of $188,129, or 125.68%, as compared to the year ended
July 31, 1994.
During the year ended July 31, 1995, 10.88% of the Company's revenues were
derived from sales to a single customer. In comparison, sales to a single
customer represented 14.96% of total revenues for the year ended July 31, 1994.
The termination or loss of a single large customer could have a significant
impact on the Company's financial performance in any given year.
Cost of services for the year ended July 31, 1995, was $147,743, an
increase of $14,108, or 10.56%, as compared to the year ended July 31, 1994.
Cost of services as a percentage of revenues from both consulting fees and
product license and customer support fees decreased to 14.14% for the year ended
July 31, 1995 from 29.30% for the year ended July 31, 1994.
-15-
<PAGE>
Cost of software purchased for resale for the year ended July 31, 1995, was
$101,266, an increase of $31,182 or 44.49%, as compared to the year ended July
31, 1994. This increase was directly related to the increased sales of products
and related consulting services.
General and administrative expenses for the year ended July 31, 1995 were
$264,365, a decrease of $38,298, or 12.65%, as compared to the year ended July
31, 1994. This decrease was largely due to reduced salary costs.
Marketing and advertising expenses for the year ended July 31, 1995 were
$369,165, an increase of $70,405, or 23.57%, as compared to the year ended July
31, 1994. This increase was principally due to increased advertising in trade
publications, increased use of specific product literature and direct mail
advertising.
Research and development expenses for the year ended July 31, 1995 were
$129,959, a decrease of $22,286, or 14.64%, as compared to the year ended July
31, 1994. This decrease resulted because technical personnel normally involved
in research and development provided a substantial amount of technical
assistance in connection with the Company's consulting services. For the year
ended July 31, 1995, $21,187 of cost of service represented assistance from
these technical personnel with consulting projects.
Interest income for the year ended July 31, 1995, was $12,356, an increase
of 83.00% as compared to the year ended July 31, 1994. This increase resulted
from increased cash flow from operations, that could be invested in interest
bearing instruments.
As a result of these factors, operating income for the year ended July 31,
1995, was $370,038, an increase of $638,540, or 237.82%, as compared to the year
ended July 31, 1994. Net income for the year ended July 31, 1995, was $382,394,
an increase of $644,144, or 246.09%, as compared to the year ended July 31,
1994.
Liquidity and Capital Resources
The Company has relied principally upon internally generated funds to
finance its operations and growth. During the year ended July 31, 1996, the
liquidity of the Company improved significantly because of a substantial
increase in revenues while expenses remained relatively stable from 1995 to
1996. During the year ended July 31, 1996, cash and cash equivalents increased
221.66% from $437,425 to $1,407,026. The Company generated $1,075,515 cash from
operations during the year ended July 31, 1996, compared to $406,610 cash from
operations generated during the year ended July 31, 1995. Shareholders' equity
increased 159.69% from $746,936 at July 31, 1995, to $1,939,716 at July 31,
1996. The primary reasons for the Company's increased liquidity and
shareholder's equity positions is the increased cash flow from operations. At
July 31, 1996, the Company had working capital of $1,703,605 and cash
equivalents of $1,407,026. The net proceeds to the Company from the sale of
securities in this offering are estimated to be $5,313,848. The Company expects
that the internally generated funds and funds from this offering will be
sufficient to satisfy its needs for at least the 12 months following completion
of the offering.
BUSINESS
Introduction
Accelr8 Technology Corporation is a leading provider of software tools and
consulting services for the conversion from DEC's VAX/VMS Legacy Systems to UNIX
open Client/Server environments. VAX/VMS Legacy Systems use a Proprietary
computer operating system which is not compatible with other manufacturers'
hardware and software. In contrast, UNIX is a powerful, open architecture system
which is compatible with a wide range of hardware platforms and software
applications, including COTS. The Company believes that UNIX has become the most
widely used Client/Server operating system, and that the trend to Client/Server
Open Systems such as the systems offered by UNIX and NT will continue for the
foreseeable future.
-16-
<PAGE>
In order to attain the advantages of the UNIX operating system while
preserving their investment in existing software applications, many VAX/VMS
users will undertake complex conversions to the UNIX operating system. The
Company's consulting services and software conversion tools enable the Company's
clients to analyze and implement their UNIX conversions in a predictable and
cost-effective manner. The Company's clients include a number of Fortune 1000
companies and government agencies, including Electronic Data Systems Corp.
("EDS"), Proctor & Gamble, Kellogg Co., McDonnell Douglas Corp., Delta Air Lines
Corp., Daimler Benz AG, the United States Army and the United States Navy.
The Company is currently engaged in the development of additional software
tools which will complement its existing suite of conversion tools and services.
The Company has commenced development of software tools that are to be used in
converting VAX/VMS Legacy Systems to Microsoft Corporation's Windows NT
operating system ("NT"), running on DEC Alpha servers. The Company has also
completed preliminary development of a software tool that identifies Year 2000
Problems in the VAX/VMS environment. The Year 2000 Problem is expected to create
widespread system failures due to the use of computer programs that rely on
two-digit date codes to perform computations and other decision-making
functions. The Company expects to use a portion of the net proceeds from this
offering to complete and introduce those products during the second calendar
quarter of 1997.
Background
In the 1970's many businesses and governmental organizations relied on
mainframe and minicomputers for critical business functions. Each hardware
manufacturer sought to establish a competitive advantage by developing "closed"
environments which were compatible only with the manufacturer's Proprietary
equipment and software applications. Thus a customer was locked into a mission
critical application environment which would only operate on a closed
Proprietary system, which ultimately became known as "Legacy Systems."
Management believes that there has been a trend away from purchasing all of
a company's hardware and software from one vendor. This trend was originally
started by the federal government as a means to ensure competitive pricing among
vendors, and is now being followed by most commercial/private sector entities.
Under this approach bids are obtained from many suppliers, and one company
generally acts as the primary contractor.
Management believes that large hardware manufacturers, like IBM and DEC,
can no longer control the entire purchasing decision for large computer
enterprises without including an element of competitive price and offering
access to open architecture systems such as UNIX or NT. Further, end users have
realized that dependence on a single supplier is non-economic in terms of
performance increases at reasonable prices. In more recent years the trend away
from a single vendor has been accelerated by technological advances which make
possible widely distributed Client/Server environments. Local area Network
servers or "LANS" can be installed on a variety of equipment and allow for
application development in standard languages such as UNIX.
Mid-range computers are either older Legacy Systems or newer "Open Systems"
servers. Legacy Systems are almost always provided by a single vendor and
feature a Proprietary operating system, while the newer, Open Systems servers
are supplied by numerous vendors and usually specify one of several different
versions of the UNIX operating system. One of the most popular legacy computers
has been manufactured by DEC and is called the VAX hardware system. The VAX
Proprietary operating system is called VMS. While many different hardware
manufacturers have licensed the right to resell the UNIX operating system from
AT&T, the major suppliers of hardware that feature UNIX as their operating
system are HP, SUN, SGI, IBM and DEC.
-17-
<PAGE>
Management believes that within the computer user community Open Systems
are considered more desirable than VAX/VMS systems for the following reasons:
(i) UNIX systems offer significant upgraded power at lower cost
(price/performance) than older VAX/VMS systems; (ii) UNIX systems are viewed as
being "open" since they are compatible with a variety of hardware types
(Interoperability); (iii) Industry-wide standards allow UNIX supported software
applications to run unchanged across a wide variety of hardware platforms; (iv)
UNIX has become the new de-facto development environment for new applications;
and (v) significant savings can be realized from reduced maintenance overhead.
As a result of these UNIX characteristics, VAX/VMS users requiring
increased performance from their older, existing Proprietary system, may
consider the Company's conversion services to UNIX for: (i) preserving the
already sizable investment in existing VAX/VMS applications; (ii) a cost
effective approach to maintaining user productivity; (iii) avoiding expensive
user re-training on a new operating system; (iv) allowing competitive bidding of
hardware and software for best price and service from several vendors; and (v)
extending the usable life of older systems.
The Company believes that the primary deterrent to switching from a VAX/VMS
Legacy System to a newer UNIX system is the cost/risk of rewriting a critical,
dependable legacy application program to run in a new and different environment.
Uncertainty as to outcome, lack of available personnel to undertake the task, as
well as the costly re-training process associated with learning a new operating
system, have contributed to users and information technology managers delaying
the decision to make the transition to faster, less expensive, Open Systems
hardware platforms. Adding to the crisis, in many cases, the original developers
of the code are no longer available for consultation as to design goals and/or
specifications. It therefore becomes necessary to evaluate, condense and convert
old code to new operating system environments. While most users, given the
option, would elect to re-host their familiar software application to the faster
environment of UNIX, the uncertainty of a conversion causes slow decision
making.
The Company has sought to address VAX/VMS users' conversion concerns by
offering a service called "Situational Analysis" that provides the user an
accurate assessment of code (line count, system calls, etc.) and gives the user
a rating of "Portability" as to the degree of difficulty in moving critical
legacy applications in advance of doing the conversion. This service assists
customers with the conversion decision, and allows the Company to become
sufficiently familiar with the customer's application to offer a fixed price bid
for the conversion.
In general, the limited functionality of many existing tools, together with
the inability of some organizations to fully utilize available technology, has
created increasing demand for integrated software development tools and
professional services to help organizations fully utilize available technology
and improve their own maintenance and redevelopment processes. The Company
believes that the developing Client/Server market will create additional demand
for software tools and professional services that enable organizations to reduce
the cost of maintenance and redevelopment of existing systems and redeploy these
resources for Client/Server implementation. In addition, the Company believes
that organizations will seek to reuse existing DEC VAX/VMS applications in
Client/Server environments to leverage their existing systems investment.
-18-
<PAGE>
Market Opportunity
Based on published data from DEC and related industry analysts, the Company
estimates that there were in excess of 600,000 VAX/VMS systems installed at over
60,000 sites. Recent figures from DEC suggest that over 400,000 VAX/VMS systems
remain in operation today. Most computer manufacturers, employing the latest
advances in "reduced instruction set computing" ("RISC") chip technology are
selling UNIX Operating Systems. UNIX systems are less costly and provide greater
Interoperability than DEC's VAX/VMS Legacy Systems. For this reason, UNIX
platforms are gaining substantial market share in DEC's traditional markets,
including the engineering and scientific industry segments. The Company's
software products are designed to meet the needs of those industry segments
wishing to convert their existing software and data from VAX/VMS systems to UNIX
systems. The Company has also completed preliminary development of a conversion
tool set that will provide for conversion from VAX/VMS systems to the NT system
running on DEC Alpha servers.
Additionally, many third-party software application solution providers,
driven by market demand to offer their solutions on UNIX Operating Systems, have
utilized the Company's tools to convert their old VAX/VMS software applications
to the UNIX environment.
The Company has targeted several segments of the engineering and commercial
sectors. These include aerospace, telecommunications, banking and financial
services, defense and government contractors, pharmaceutical firms, large
manufacturers, oil and gas producers and distribution and warehousing for
consumer goods. Major UNIX hardware vendors, including DEC, Hewlett Packard
("HP"), IBM, SUN Micro Systems ("SUN") and Silicon Graphics, Inc. ("SGI"),
include the Company's products in their materials for UNIX systems. DEC lists
the Company's products in its price book as well as in the General Services
Administration ("GSA") and Software Enterprise Workstation Program ("SEWP")
schedules.
In February 1992, DEC introduced a new generation of computers named Alpha.
Alpha runs DEC's Proprietary operating system VMS as well as an industry version
of UNIX called DEC UNIX and Microsoft Corporation's Windows NT operating system.
While this system provides VMS on a RISC platform, many industry analysts
believe that current DEC customers will want to move to DEC UNIX or NT running
on Alpha. In order to preserve their VAX/VMS applications, these users will need
to convert VAX/VMS applications to either DEC UNIX or NT. DEC is not currently
providing products to convert from VAX/VMS systems to Alpha. Accordingly,
management believes that Alpha presents a significant market opportunity for the
Company.
Business Strategy
The Company's objective is to enhance its position as a leading provider of
integrated solutions which will meet the conversion needs of VAX/VMS users. Key
elements of the Company's strategy include:
Continue Emphasis on Consulting Services and Establishment of UNIX/NT
Conversion Teams. The Company intends to continue to emphasize the sale of its
integrated consulting services in conjunction with its suite of conversion
software tools. The Company will establish up to ten three-man conversion teams
in order to perform UNIX and NT conversion projects. The conversion teams will
be comprised of software engineers to be recruited following the completion of
this offering. The conversion teams will allow the Company to effectively staff
conversion projects as the Company achieves its anticipated growth (of which
there can be no assurance).
-19-
<PAGE>
Develop New Products and Services. The Company intends to continue to
develop software tools and consulting services which address the needs and
problems encountered in conversion of VAX/VMS Legacy Systems as well as other
information technology environments. The Company has allocated a portion of the
proceeds of this offering to the completion and introduction of software tools
to be used in converting VAX/VMS Legacy Systems to NT environments running on
DEC's Alpha, as well as software solutions to the Year 2000 Problem for VAX/VMS
users. Management believes that the successful development of complementary
products and services will allow the Company to leverage its products and
services into new and significantly larger markets.
Outsourcing. The Company intends to position its software so that it may be
licensed by large outsourcing providers such as EDS, Lockheed Martin Corp., ISSC
and others, thereby increasing its license fees and consulting service fees.
Outsourcing offers organizations a complete information technology system on a
contract basis. Many larger corporations have undertaken this approach in order
to reduce personnel costs and operating overhead. The outsourcing provider is
generally able to provide the services on a more cost effective basis because of
economies of scale and volume purchases that are not available to the typical
user. The Company assists the outsourcing provider (EDS and others) in obtaining
such cost savings by providing a quick and efficient assessment of the presence
of Proprietary systems, and the opportunity for efficient conversion from those
systems. The Company can enable the rapid transition to Open Systems thereby
reducing hardware and software maintenance costs for the outsourcing provider.
Expand International Marketing Activities. In fiscal 1995 and 1996,
revenues derived from international clients totaled approximately $96,547 and
$318,393, respectively. The Company's international clients have included
Daimler Benz, Renault V.I. and Alcatel. The Company will continue to expand its
international marketing activities to increase its market penetration in Europe
and Asia.
Secure Additional Consulting Projects. In the course of performing UNIX
conversion services, the Company's software engineers and technical support
staff establish close relationships with the information technology personnel of
client organizations. Through these relationships, the Company will attempt to
secure additional consulting projects which are within the expertise of the
Company's staff. Such projects may, but need not, be related to the client's
UNIX conversion needs. The Company believes that this strategy will enhance
client relationships while generating profitable consulting fees.
Target Large Corporations and Government Agencies. The Company believes
that there are in excess of 400,000 VAX/VMS systems currently in operation.
These systems are generally operated by large corporations and government
agencies. The Company will continue to identify and direct its marketing efforts
to organizations which have extensive information technology environments
supported by substantial budgets.
Investment in or Acquisition of Complementary Businesses, Technologies or
Product Lines. The Company intends to evaluate opportunities for growth or
expansion of its business through investment in or acquisition of complementary
businesses, technologies or product lines. Management believes that
opportunities to expand will be available to the Company and intends to
investigate opportunities that are consistent with the Company's core business
and its expertise.
-20-
<PAGE>
Services and Products
Services. The Company historically focused its marketing and sales efforts
on selling its various software conversion tools on a "stand-alone" basis. Since
fiscal 1995, the Company has focused its efforts on selling an integrated
package consisting of both software tools and the consulting services of its
highly trained and experienced personnel. Management believes that this change
in strategy better addressed clients needs for conversion services. Management
believes that the dramatic increase in revenues in fiscal 1995 and 1996, as
compared to fiscal 1994, is directly attributable to this change in strategy and
the Company intends to continue this strategy in the future.
The Company now offers a full spectrum of services that are carried out by
the Company's personnel, who are experts in both the VAX/VMS and UNIX
environments. The Company's personnel use Accelr8 tools that automatically
identify and diagnose difficult areas in porting an application. This enables
them to implement conversion techniques that ensure successful conversions and
porting. The Company offers the following services:
1) Situational Analysis: The Company's personnel use automated tools and their
expertise to scan the customer's code while on-site at the customer's
facility. Within four weeks, a written report is provided to the customer
identifying the porting issues and their solution options. The code is
rated on a scale of one to five as to its Portability. If requested by the
customer, a bid to conduct the conversion on a fixed-price basis is also
provided.
2) Implementation Planning: The Company's analysts work with the customer to
select the appropriate solutions for their conversion issues. These answers
are assembled into a project plan that is used by the project manager to
control and synchronize the conversion effort as well as measure progress.
3) Application Port: The Company's analysts perform the code conversion. Where
suitable, the Company performs automatic conversion using the Company's
tools, as well as engineering of modules which must be redesigned to work
on UNIX. This is followed by complete testing and certification. The
Company's service can be contracted as a turnkey port or as part of a
cooperative team effort with the customer's personnel.
4) Implementation Assistance: In addition to industry standard support and
update contracts, the Company offers both on-site and off-site porting
assistance agreements. A foreign customer may contract for off-site
telephone support.
5) Custom Programming: Programming is done on either a fixed price or time and
materials basis for the purpose of Re-engineering and modernizing old
Legacy Code or for porting custom applications that run in front of or
after COTS application.
6) Training: Including VMS Users Introduction to UNIX, Application Conversion
using Tools and existing systems investments.
7) Code Audit Measurement and Analysis: The Company measures adherence to
external and internal coding standards as a means to prevent significant
deviation from standard coding practices.
-21-
<PAGE>
Products. Accelr8's products are part of a sophisticated tool set that
assists in the following tasks: (i) comprehensive analysis of Legacy Code to
determine Portability to Open Systems; (ii) thorough analysis and planning for
conversion; (iii) performance of actual conversion, if required by the customer;
(iv) creation of quality assurance models for the enforcement of external and
internal standards applicable to new target environments; and (v) planning and
implementation for modernization and Re-engineering databases and user
interfaces.
The Company has developed a unique analyzer tool called Open NAVIG8, that
quickly and accurately examines large quantities of Legacy Code, eventually
organizing and prioritizing the individual modules that need to be moved. This
porting process is then performed using the actual porting tools that automate
up to 95% of the conversions.
The Company's conversion process relies on Company owned and developed
tools to provide a level of "transparency" to both VAX/VMS and UNIX users, thus
preserving user productivity while accessing the higher power/lower cost of
UNIX. Additionally, the conversion tools support users as they learn UNIX at
their own pace and enable large batch jobs to be moved to the new, faster UNIX
platform, thereby freeing up the VAX to perform other tasks more efficiently.
Other Company software features include the ability to share information
between UNIX and VAX/VMS systems and to transfer files and records over a
Network. The Company's conversion offerings are available on a wide range of
UNIX systems, including SGI, HP, Sun, DEC and IBM. Features are discussed in
greater detail below as each of the Company's products and services is
individually described.
While Open NAVIG8 tools introduce the client to the Company's competencies,
the rendering of conversion services is the core business that generates
revenues. The Company believes that clients experience greater value from the
modernization and Re-engineering process if their personnel are involved in
understanding what has been done to change the computer environment. Therefore,
various phases of the conversion process are deployed at the customer site with
client personnel as observers. Additionally, the Company conducts training
classes for the client end user groups in the operation of the new environment.
Ongoing training and software updates are a component of gross revenue in each
services contract.
After delivery of a new environment, the Company will offer a service that
measures, on a regular interval, the adherence to either external or internal
coding standards. This "code auditor" service has been driven by the United
States Defense Department objective of prevention of future Legacy Code chaos.
The Company believes that private industry will also move to this objective.
Accelr8's products-Open NAVIG8, Open LIBR8 and Open ACCLIM8-embody the core
technological advantages and competencies of Accelr8; however, the following
groups of tools are integral to all conversion projects.
-22-
<PAGE>
User Productivity
Tools are designed to provide the user with familiar screen
formats and command scripts thereby preserving
productivity while learning a new operating system
(UNIX/NT). The Company's User Productivity Tools
include:
Open DCL VMS command line interface (recall/editing); login
shell
nu TPU VAX-style editor for UNIX (TPU, EDT, WPS modes)
Open SUBMIT VAX to UNIX batch submission utility
-------------------------------------------------
Porting Tools are designed to move and support old Legacy Code
applications in UNIX or NT environments, providing the
same original functionality on the new target platform.
The Company's Porting Tools include:
Open COBOL VAX COBOL source code converter and linker
Open ACCLIM8 Pre-compiler for VAX Fortran; indexed file support
Open BASIC Re-targetable BASIC to C Compiler; VAX BASIC
compatibility
Open PASCAL VAX Pascal to C Translator
C/Fix Translator for VMS specific C constructs (sold with
LIBR8)
Ada Bindings Source code interface routines for all Ada Compilers
and LIBR8
Open LIBR8 VMS runtime library support (ast, qio, event flags,
mailboxes, etc)
Open RMS UNIX equivalent of VMS I/O calls. (sold with LIBR8)
Open SMG VAX compatible Screen Management facility for Open
Systems
FMS/UNIX FMS for UNIX; FMS Editor (100% compatibility) sold
separately
Open DCL Command language interpreter; VMS-style error handling
-------------------------------------------------
Analysis &
Programming
Standards Tools are designed to provide analysis and code auditing
standards and capabilities in a work bench environment,
Legacy Code is easily examined and reconstructed to
meet any user stated rules. The Company's Analysis &
Programming Standards Tools include:
Open NAVIG8 Analyzer & Auditor scans application code
Identifies and documents conversion barriers Monitors
ongoing coding practices and standards compliance.
New Product Offerings
In addition to VAX/VMS to UNIX conversions, the Company believes that there
is a large opportunity in both the government and commercial sector to provide
two additional services: Year 2000 Impact Analysis for the DEC installed
computer base and conversion services/tools for VAX/VMS to NT conversions
running on Alpha servers.
The Year 2000 Problem arises from the widespread use of computer programs
that rely on two-digit date codes to perform computations and decision making
functions. Many of these computer programs may fail due to an inability
-23-
<PAGE>
to interpret date codes properly. For example, such programs may misinterpret
"00" as the year 1900 rather than 2000. While DEC claims that VAX minicomputers
and other computers using the VMS operating system are designed to use four
digits to express dates, DEC customers may be using third party software
packages that do not use four digit dates. The Company intends to provide Year
2000 Impact Analysis services by using a Company owned and developed tool to
identify the variables in the code that are most likely to hold date
information. A prototype of this tool is under development, and $1,000,000 of
the proceeds of this offering has been allocated to: (i) complete development of
the tool; (ii) hire additional technical and marketing personnel to support
sales of this product and related consulting services; and (iii) market,
advertise and promote this product and service.
Microsoft Corporation's Windows NT operating system is the newest operating
system from Microsoft Corporation. DEC has announced a strategic partnership
with Microsoft to offer its VAX minicomputer customers a seamless environment
where Open VMS, DEC UNIX and NT will be supported on DEC's Alpha platform.
Management believes that DEC has no plans to assist users of its older VAX
minicomputers in moving their VAX applications to the new NT operating
environment. The Company plans to port all if its UNIX conversion tools to the
NT environment, thus enabling VAX/VMS users to operate their existing VAX
applications on an NT operating system. The Company has begun to develop the
software tools for the NT conversion opportunity; however, a substantial amount
of work remains to be done to complete this project. Management has allocated
$1,500,000 of the proceeds of this offering to: (i) complete development of the
conversion system; (ii) hire additional technical and marketing personnel to
support sales of this conversion service; and (iii) market, advertise and
promote this product and service.
Customers
The Company's software tools have been sold to over 600 customers. The
Company's customers are principally users of VAX/VMS Legacy Systems that are
either commercial enterprises or government or quasi-government agencies. Set
forth below is a partial list of the Company's customers.
<TABLE>
<CAPTION>
Commercial Enterprises United States Government
---------------------- ------------------------
<S> <C> <C>
Lockheed Martin Corp. McDonnell Douglas Corp. NASA
Delta Air Lines Inc. Proctor & Gamble U.S. Army
Kellogg Co. General Instrument Corp. U.S. Air Force
Alcatel Alsthom Cie Generale Europe Daimler Benz AG U.S. Navy
Union Carbide Corp. Telos Corp.
RGTI Loral Corp.
Renault V.I. Electronic Data Systems Corp.
Mack Trucks
</TABLE>
Union Carbide Corp. & RGTI (sellers of warehouse distribution software)
have embedded the Company's software in their UNIX solutions, thereby yielding
the potential for substantial run-time license fees for the Company during the
current fiscal year.
Marketing and Distribution
The Company has historically utilized several marketing approaches
including direct advertising, press releases, trade shows, Company sponsored
seminars, speaking engagements and independent software vendor catalog listings.
The Company's sales personnel contact the leads generated by these activities.
Recently, the Company decreased its advertising in trade publications and
terminated direct mail advertising. Management believes that advertising the
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<PAGE>
Company's services and products electronically on the Company's web page is a
more cost effective and efficient method of reaching the Company's target
market. The Company will continue to emphasize attendance at trade shows,
Company and vendor sponsored seminars, press releases, speaking engagements and
independent software vendor catalog listings in its marketing efforts. The
Company's international sales represented 15% of the Company's total revenues in
fiscal 1996 as compared to 7% of fiscal 1995 revenues. Management intends to
direct a significant portion of its marketing efforts toward further market
penetration in international markets, with its primary emphasis upon Europe and
Asia.
The Company's on-site personnel often have the opportunity to market
additional Company services to existing customers. The Company's conversion
teams have and will continue to focus upon educating customers as to the full
range of the Company's products and services, and to providing solutions to the
customers' problems.
The Company also attends hardware vendor sales events, such as those
sponsored by HP and DEC, for industry group segments, including TELCOS
(telecommunication companies), government entities, and pharmaceutical
companies. Company representatives follow-up on contacts made at these events,
and where appropriate schedule on-site visits with potential customers. While
on-site with customers and potential customers Accelr8's representatives work
closely with technical personnel in Denver for instant and direct help in
addressing the customers' problems and needs. Management believes that this
coordinated approach between the field sales persons and the technical personnel
in Denver has led to greater sales, and the Company intends to continue this
practice.
Research and Development
The Company conducts its research and development at its headquarters in
Denver, Colorado. The Company believes that the continued development of new
products and enhancement of existing products is essential to maintaining a
competitive position in the marketplace. The Company expended $33,038 on Company
sponsored research and development during fiscal 1996, and $129,959 during
fiscal 1995. This decrease occurred because technical personnel normally
involved in research and development also provided a substantial amount of
technical assistance in connection with the Company's consulting services. For
the year ended July 31, 1996, $193,621 of cost of service represented assistance
from these technical personnel with consulting projects. Management is committed
to a strong research and development program, and intends to continue these
expenditures at levels necessary to allow the Company to maintain a strong
competitive position.
Production
The Company's production facilities are located at its headquarters in
Denver, Colorado, and are primarily used for software development and extensive
testing and quality control of software products. The Company is negotiating for
expansion of its facilities and anticipates hiring additional technical,
marketing, sales and managerial personnel during the 12 months following
completion of this offering.
The Company does not believe that, for the foreseeable future, the
Company's products will be subject to any significant fluctuations in supply
costs. Componentry and systems used to develop products and the actual tape
cassettes on which software is placed can be obtained from a variety of vendors,
none of which holds a controlling position within the market. The Company
believes that it has the ability to fill any anticipated future sales orders
received.
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<PAGE>
Competition
Management is aware of two companies that compete directly with the
Company. BBC of Boston, Massachusetts, has a product available that directly
competes with the Company's Open DCL product. Sector 7, formerly known as
Software Translations, of Austin, Texas offers a limited software conversion
tool set for moving from VMS to UNIX. While Sector 7 has focused on moving VAX
BASIC applications to UNIX, its technology overlaps with the Company's Open DCL
and Open LIBR8 products. Management believes that the Company offers a broader
range of products and services than either of these competitors, and is
therefore able to compete successfully against them.
Although DEC does not offer its own products for conversion from its
VAX/VMS Legacy Systems to UNIX, should DEC choose to do so, the Company could be
materially and adversely affected. At this point, DEC has not announced any
products that compete directly with the Company's products. However, DEC offers
all of the Company's tools in the Digital Price Book and as a specification in
the SEWP contract to NASA, as well as the GSA federal purchasing schedule.
Intellectual Property
The Company relies on a combination of copyright, trademark and trade
secret laws, employee and third party disclosure agreements, license agreements
and other intellectual property protection methods to protect its Proprietary
rights. The Company protects the source code version of its products as a trade
secret and as an unpublished copyrighted work. The Company's Proprietary
software products are generally licensed to customers on a "right to use" basis
pursuant to a perpetual, nontransferable license that generally restricts use to
the customer's internal purposes and to a specific computer platform that has
been assigned a "key code." However, it may be possible for unauthorized parties
to copy or reverse engineer certain portions of the Company's products or obtain
and use information the Company regards as Proprietary. The Company currently
has no patents and existing copyright and trade secret laws offer only limited
protection. Further, the laws of some foreign countries do not protect the
Company's Proprietary rights to the same extent as do the laws of the United
States. The Company has been and may be required from time to time to enter into
source code escrow agreements with certain customers, providing for release of
source code in the event the Company files bankruptcy or ceases to continue
doing business. Although the Company's competitive position may be adversely
affected by unauthorized use of its Proprietary information, the Company
believes that the ability to fully protect its intellectual property is less
significant to the Company' s success than are other factors, such as the
knowledge, ability and experience of its employees and its ongoing product
development and customer support activities. There can be no assurance that the
protections put in place by the Company will be adequate.
There can be no assurance that third parties will not assert infringement
or other claims against the Company with respect to any existing or future
products, or that licenses would be available if any Company technology were
successfully challenged by a third party, or if it became desirable to use any
third-party technology to enhance the Company's products. Litigation to protect
the Company's Proprietary information or to determine the validity of any
third-party claims could result in significant expense to the Company and divert
the efforts of the Company's technical and management personnel, whether or not
such litigation is determined in favor of the Company.
While the Company has no knowledge that it is infringing the Proprietary
rights of any third party, there can be no assurance that such claims will not
be asserted in the future with respect to existing or future products. Any such
assertion by a third party could require the Company to pay royalties, to
participate in costly litigation and defend licensees in any such suit pursuant
to indemnification agreements, or to refrain from selling an alleged infringing
product or service.
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<PAGE>
Employees
The Company has 13 full-time employees at its facilities in Denver,
Colorado, including one administrative employee, three sales and administrative
employees and nine scientific and technical employees. The Company anticipates
hiring up to 30 additional employees to staff its conversion teams, additional
sales and marketing personnel and a senior accounting/financial manager during
the 12 months following completion of the offering. There are no collective
bargaining agreements, and the Company considers its relations with its
employees to be good.
Facilities
The Company currently leases approximately 3,796 square feet of office and
research facility space at 303 E. 17th Avenue, Suite 108, Denver, Colorado 80203
at a monthly rental of approximately $3,385. The Company is negotiating for an
additional 3,000 square feet of office space that is immediately adjacent to its
present space. The additional space will be needed to provide office space for
the additional technical and sales personnel that the Company anticipates hiring
during the next six months. The Company's existing facility is adequate for the
present number of employees and the additional 3,000 square feet of space is
expected to be adequate to accommodate the projected increase in personnel.
Legal Proceedings
The Company is not a party to any legal proceedings, nor does management
believe that any such proceedings are contemplated.
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<PAGE>
MANAGEMENT
Directors, Executive Officers and Key Employees
Set forth below is certain information concerning the directors, executive
officers and key employees of the Company as of the date hereof.
Name Age Position
---- --- --------
Directors and Executive Officers
Thomas V. Geimer 49 Chairman of the Board of Directors,
Secretary, Chief Financial Officer,
Chief Executive Officer
Harry J. Fleury 49 President
David C. Wilhelm(1) 77 Director
A. Alexander Arnold III(1) 54 Director
Key Employees
Timothy Fitzpatrick 41 Vice President Sales and Marketing
Dr. Franz Huber 51 Chief Scientist
Ken Haxby 45 Director of Engineering
- ----------------------------------
(1) Members of the Audit and Compensation Committees
Officers are appointed by and serve at the discretion of the Board of
Directors. Each director holds office until the next annual meeting of
shareholders or until a successor has been duly elected and qualified. All of
the Company's officers devote their full-time to the Company's business and
affairs. There are no family relationships between any directors, executive
officers or key employees.
Thomas V. Geimer has been the Chairman of the Board of Directors and a
director of the Company since 1984. He currently serves as the Chief Executive
Officer, Chief Financial Officer and Secretary of the Company. Mr. Geimer is
responsible for development of the Company's business strategy, day to day
operations, the accounting and finance functions and federal government sales
relationships. Before assuming full-time responsibilities at the Company, Mr.
Geimer founded and operated an investment banking firm.
Harry J. Fleury has served as President of the Company since June 1995. Mr.
Fleury is responsible for engineering activities and strategies of the Company,
and for international sales. From March 1993 until June 1995, Mr. Fleury was
Vice President of International Sales of the Company with responsibility for
developing and directing international sales. Prior to joining the Company in
1993, Mr. Fleury was employed by Digital Equipment Corporation serving in a
variety of engineering and management positions for over 26 years. Mr. Fleury
managed DEC's European, Asian and Pacific corporate engineering groups that were
responsible for service capability world wide, for internal and external
products and for strategic, operational and tactical direction. Mr. Fleury
received an electrical engineering degree in 1967 from Vermont Technical
Engineering College.
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<PAGE>
David C. Wilhelm has been a director of the Company since June 1988. For
the past 30 years, Mr. Wilhelm has been President of Wilhelm Co., an
agribusiness company principally engaged in the cattle feeding and commodity
business, located in Denver, Colorado. Since 1972, Mr. Wilhelm has been a
director of Colorado National Bank located in Denver, Colorado. Mr. Wilhelm is a
member of the International Executive Service Corp., and was formerly the
Director of the Colorado Cattlemen's Association. Mr. Wilhelm received a
Bachelor of Arts in American History from Yale University in 1942.
A. Alexander Arnold III has served as a director of the Company since
September 1992. For the past 25 years, Mr. Arnold has served as a Managing
Director of Trainer, Wortham & Co., Inc., a New York City-based investment
counselor firm, which Mr. Arnold co-founded. Mr. Arnold received a Bachelor of
Arts degree from Rollins College in 1964 and a Masters of Business
Administration from Boston University in 1966.
Timothy Fitzpatrick has served as Vice President of Sales and Marketing of
the Company since 1992. Mr. Fitzpatrick is responsible for domestic marketing
and sales of the Company's products and services. From 1989 to 1992, Mr.
Fitzpatrick was employed as Vice President of Software Translations, Inc. He
also was General Manager of Datavision (UK) Ltd. from 1987 to 1989. Mr.
Fitzpatrick received a Bachelor of Arts Degree in City Planning from Michigan
State University.
Dr. Franz Huber has served as Chief Scientist of the Company since 1988.
Dr. Huber is responsible for the design and development of the Company's
software products. Prior to joining the Company, Dr. Huber (i) taught Computer
Science at the University of Colorado; (ii) taught Computer Applications in
Biomedical Research at the University of Colorado Medical Center; and (iii)
worked for several technology companies in various research and development,
scientific and technical positions. Dr. Huber received his Ph.D. in Physics from
the University of Vienna, Austria in 1968.
Ken Haxby will commence employment with the Company on October 2, 1996, as
Director of Engineering. Mr. Haxby will be responsible for the Company's
conversion teams and for project management of the Company's various service
engagements. Mr. Haxby was employed by US West Information Technologies from
1989 to 1996 in various capacities, including as a Software Development Group
Manager, a Project Manager, a team leader of a software development team and as
a software designer and developer. Mr. Haxby was also employed by XEL
Communications, Aurora, Colorado as Engineering Manager of Embedded Systems
Development Group, and was Technical Lead Developer and Coordinator for Siemens
Information Systems in Boca Raton, Florida. Mr. Haxby received his Master of
Science Degree in Computer Science from Southern Illinois University in 1980.
Board Committees
The Board of Directors maintains a Compensation Committee and an Audit
Committee. The Compensation Committee is composed of Messrs. Arnold and Wilhelm,
the Company's non-management directors. The primary function of the Compensation
Committee is to review and make recommendations to the Board with respect to the
compensation, including bonuses, of the Company's officers and to administer the
Company's stock option plan. The Audit Committee is comprised of Messrs. Arnold
and Wilhelm. The function of the Audit Committee is to review and approve the
scope of audit procedures employed by the Company's independent auditors, to
review and approve the audit reports rendered by the Company's independent
auditors and to approve the audit fee charged by the independent auditors. The
Audit committee reports to the Board of Directors with respect to such matters
and recommends the selection of independent auditors.
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<PAGE>
Executive Compensation
Summary Compensation Table. The following table sets forth the annual and
long-term compensation for services in all capacities to the Company in the
three fiscal years ended July 31, 1996, of Thomas V. Geimer and Harry J. Fleury,
who are the Company's most highly compensated executive officers, and Timothy
Fitzpatrick a key employee of the Company.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------------------------------------------- ------------
Other Number of
Name and Fiscal Annual Options
Principal Position Year Salary Bonus Compensation Awarded
<S> <C> <C> <C> <C> <C>
Thomas V. Geimer, 1996 $70,458 $37,500(1) $ -- 800,000(2)
Chief Executive Officer 1995 $64,250 $ -- $ -- --
and Chief Financial 1994 $62,130 $ -- $ -- --
Officer
Harry J. Fleury 1996 $61,000(3) $10,331 $ -- --
President 1995 $50,846(3) $ 6,685 66,666(4)
1994 $20,961 $ 755
Timothy Fitzpatrick 1996 $57,885 $44,030(5) $ --
Vice President 1995 $55,000 $23,657
Sales and Marketing 1994 $55,000 $17,832
</TABLE>
- ----------------------------
(1) Represents deferred compensation for Mr. Geimer pursuant to the Company's
deferred compensation plan, $37,500 of which vested during the last fiscal
year, and $37,500 of which will vest during the current fiscal year.
(2) Represents stock options and warrants to purchase an aggregate of 800,000
shares at an exercise price of $0.36 per share that were extended until
December 31, 1997.
(3) Includes sales commissions earned by Mr. Fleury on revenues from certain
international sales.
(4) Grant of employee stock option to purchase 66,666 shares at an exercise
price of $0.54 per share, 33,333 of which vested prior to this offering and
the remaining 33,333 of which will vest subject to completion of this
offering.
(5) Represents sales commissions earned by Mr. Fitzpatrick on revenues from
certain domestic sales.
Option/Warrant Values. The following table provides certain information
concerning the fiscal year end value of unexercised options or warrants held by
Mr. Fleury and Mr. Geimer, each of whom served as the Company's chief executive
officer during a portion of 1996, and for Mr. Fitzpatrick.
-30-
<PAGE>
<TABLE>
<CAPTION>
Aggregated Option Exercises in 1996 Fiscal Year
and Fiscal Year End Option Values
Shares Number of Unexercised Value of Unexercised
Acquired on Value Options at Fiscal Year In-the-Money Options
Name Exercise Realized End at Fiscal Year End(1)
- ---- -------- -------- ---------------------- ----------------------
Exer- Unexer- Exer- Unexer-
cisable cisable cisable cisable
<S> <C> <C> <C> <C> <C> <C>
Harry J. Fleury - - 33,333(2) 33,333(2) $ 181,998 $181,998
Thomas V. Geimer - - 800,000 0 $4,512,000 0
Timothy Fitzpatrick - - 83,333 0 $ 454,998 0
</TABLE>
- ------------------------------------
(1) Value calculated by determining the difference between the assumed offering
price of $6.00 per share and the exercise price of the options or warrants.
Fair market value was not discounted for restricted nature of any stock
purchased on exercise of these options or warrants.
(2) Mr. Fleury's options were granted on June 1, 1995. A total of 33,333 (or
50%) of the options have vested and, subject to his continued employment
with the Company, the remainder of his options will vest upon completion of
this offering.
Compensation Pursuant to Plans
Employee Retirement Plan. During fiscal year 1996, the Company established
a SARSEP-IRA employee pension plan that covers substantially all full-time
employees. Under the plan, employees have the option to contribute up to the
lesser of 15% of their compensation or $9,240. The Company may make
discretionary contributions to the plan based on recommendations from the Board
of Directors. For the year ended July 31, 1996, the Board did not authorize any
contributions.
Deferred Compensation Plan. In January of 1996, the Company established a
deferred compensation plan for the Company's employees. The Company may make
discretionary contributions to the plan based upon recommendations from the
Board of Directors.
Options and Warrants. A total of 316,667 shares of the Company's Common
Stock, no par value, have been issued and reserved for issuance to employees
pursuant to the Company's existing non-qualified stock option plan. Options
currently outstanding held by certain of the Company's current and former
employees allow for the purchase of the Company's restricted Common Stock at a
price of $.54 per share (assuming adjustment for the one-for-six reverse split).
According to the governing option agreements, the options vest every 12 months
in one-quarter increments of the total amount granted, over a four year period
beginning on the date they are granted, and remain exercisable for three years
following the original date they vest. Notwithstanding the foregoing, the
Company's Board of Directors during the 1994 fiscal year adopted a resolution
providing that for so long as a recipient of an option grant remains in the
employ of the Company, the options held will not expire and if the recipient's
employment is terminated, the holder will have up to 90 days after termination
to exercise any vested but previously unexercised options. All of the currently
outstanding options have vested, except 33,333 options held by Mr. Fleury, the
Company's current president, and 8,333 options held by Joseph Steger, which will
fully vest upon effectiveness of the Registration Statement of which this
Prospectus is a part. The Board of Directors agreed to permit Messrs.
Fitzpatrick and Huber and three other employees to register an aggregate of
-31-
<PAGE>
90,000 shares underlying their options to satisfy a portion of the Underwriter's
over-allotment option. All options previously granted are administered by the
Company's Board of Directors. The options provide for adjustment of the number
of shares issuable in the case of stock dividends or stock splits or
combinations and adjustments in the case of recapitalization, merger or sale of
assets. See "Selling Warrantholders and Selling Optionholders."
The Company currently has outstanding an aggregate of 800,000 warrants and
options held by Thomas V. Geimer, Chairman of the Board of Directors of the
Company ("Affiliate's Warrants"). The Affiliate's Warrants are exerciseable at
an exercise price of $.36 per share (assuming adjustment for the one-for-six
reverse split). The Affiliate's Warrants, which were originally scheduled to
expire at the close of calendar 1995, were extended for two years and,
accordingly, they are exercisable until December 31, 1997. The Board of
Directors has agreed to permit Mr. Geimer to register 60,000 of the Affiliate's
Warrants (including the shares issuable upon exercise thereof) to satisfy a
portion of the Underwriter's over-allotment option. The Affiliate's Warrants are
not redeemable. The exercise price of the Affiliate's Warrants and the number of
shares of Common Stock to be obtained upon exercise of the Affiliate's Warrants
are subject to adjustment in certain circumstances including (i) the payment of
a stock dividend; (ii) a forward or reverse stock split; (iii) a consolidation
or combination involving the Common Stock; and (iv) a reclassification or
recapitalization involving the Common Stock. See "Selling Warrantholders and
Selling Optionholders."
The Board of Directors of the Company has adopted an incentive stock option
plan (the "Qualified Plan") which provides for the grant of options to purchase
an aggregate of not more than 700,000 shares of the Company's Common Stock. The
purpose of the Qualified Plan is to make options available to management and
employees of the Company in order to provide them with a more direct stake in
the future of the Company and to encourage them to remain with the Company. The
Qualified Plan provides for the granting to management and employees of
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986 (the "Code").
The Board of Directors of the Company has adopted a non-qualified stock
option plan (the "Non-Qualified Plan") which provides for the grant of options
to purchase an aggregate of not more than 300,000 shares of the Company's Common
Stock. The purpose of the Non-Qualified Plan is to provide certain key
employees, independent contractors, technical advisors and directors of the
Company with options in order to provide additional rewards and incentives for
contributing to the success of the Company. These options are not incentive
stock options within the meaning of Section 422 of the Code.
The Qualified Plan and the Non-Qualified Plan (the "Stock Option Plans")
will be administered by a committee (the "Committee") appointed by the Board of
Directors which determines the persons to be granted options under the Stock
Option Plans and the number of shares subject to each option. No options granted
under the Stock Option Plans will be transferable by the optionee other than by
will or the laws of descent and distribution and each option will be
exercisable, during the lifetime of the optionee, only by such optionee. Any
options granted to an employee will terminate upon his ceasing to be an
employee, except in limited circumstances, including death of the employee, and
where the Committee deems it to be in the Company's best interests not to
terminate the options.
The exercise price of all incentive stock options granted under the
Qualified Plan must be equal to the fair market value of such shares on the date
of grant as determined by the Committee, based on guidelines set forth in the
Qualified Plan. The exercise price may be paid in cash or (if the Qualified Plan
shall meet the requirements of rules adopted under the Securities Exchange Act
of 1934) in Common Stock or a combination of cash and Common Stock. The term of
each option and the manner in which it may be exercised will be determined by
the Committee, subject to the requirement that no option may be exercisable more
than 10 years after the date of grant. With respect to an incentive stock option
granted to a participant who owns more than 10% of the voting rights of the
Company's outstanding capital stock on the date of grant, the exercise price of
the option must be at least equal to 110% of the fair market value on the date
of grant and the option may not be exercisable more than five years after the
date of grant.
-32-
<PAGE>
As of the date of this Prospectus, no options have been granted under
either the Qualified Plan or the Non-Qualified Plan. Further, the Stock Option
Plans will be submitted to the shareholders for their approval at the next
regularly scheduled shareholders meeting.
Certain Transactions
During fiscal year 1996, the Company established a deferred compensation
plan for the Company's employees. The Company may make discretionary
contributions to the plan based on recommendations from the Board of Directors.
As of July 31, 1996, the deferred compensation agreement was funded in the
amount of $75,000 for Thomas V. Geimer, and Mr. Geimer was vested in $37,500 of
this amount. The balance of $37,500 will vest during the current fiscal year.
There were no other transactions or series of transactions for the fiscal
year ended July 31, 1996 nor are there any currently proposed transactions, or
series of the same to which the Company is a party, in which the amount involved
exceeds $60,000 and in which, to the knowledge of the Company, any director,
executive officer, nominee, five percent shareholder or any member of the
immediate family of the foregoing persons, have or will have a direct or
indirect material interest.
Compliance with Section 16(a) of the Exchange Act
Mr. Wilhelm, a director of the Company, failed to file Forms 4 for the
months of April, May and July to report purchases of an aggregate of 85,300
shares in the open market. The Company has received representations from each
other person that served during fiscal 1996 as an officer or director of the
Company confirming that there were no transactions that occurred during the
Company's most recent fiscal year end which required the filing of a Form 5.
PRINCIPAL SHAREHOLDERS
The following table, which gives effect to a one-for-six reverse split of
the Company's Common Stock that will be effective prior to commencement of this
offering, sets forth certain information regarding beneficial ownership of the
Company's Common Stock as of July 31, 1996, as adjusted to reflect the sale of
Common Stock offered by this Prospectus by (i) each person who is known by the
Company to own beneficially more than 5% of the Company's outstanding Common
Stock; (ii) each of the Company's executive officers, directors and key
employees; and (iii) all executive officers and directors as a group. Common
Stock not outstanding but deemed beneficially owned by virtue of the right of an
individual to acquire shares within 60 days is treated as outstanding only when
determining the amount and percentage of Common Stock owned by such individual.
Except as noted, each person or entity has sole voting and sole investment power
with respect to the shares shown.
-33-
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Shares to be Beneficially
Name and Address Owned Prior to Offering Owned After Offering(1)
---------------- ----------------------- -----------------------
of Beneficial Owner Number Percent Number Percent
- ------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Thomas V. Geimer(2), (3) 833,333 18.68% 833,333 15.26%
Harry J. Fleury(2), (4) 129,166 3.46% 129,166 2.73%
Timothy Fitzpatrick(2),(5) 83,333 2.23% 83,333 1.76%
Dr. Franz Huber(2),(5) 83,333 2.23% 83,333 1.76%
Ken Haxby(2) -- -- -- --
A. Alexander Arnold III(6) 816,666 18.24% 816,666 14.91%
845 Third Ave., 6th Flr
New York, NY 10021
David C. Wilhelm(7) 215,833 5.57% 215,833 4.43%
3130 E. Exposition Street
Denver, CO 80209
Solar Satellite 351,766 8.76% 351,766 7.02%
Communication, Inc.
5650 Greenwood Plaza
Boulevard #107
Englewood, CO 80111
Officers and Directors 1,994,998 44.06% 1,994,998 36.09%
as a Group (4 persons)
</TABLE>
- ------------------------------
(1) Excludes (i) 34,500 shares of Common Stock issuable upon exercise of the
Representative's Warrants to be issued in conjunction with this offering;
and (ii) the exercise of options and warrants to satisfy the Underwriter's
over-allotment option.
(2) The address for Messrs. Geimer, Fleury, Fitzpatrick, Haxby and Huber is 303
E. 17th Ave., #108, Denver, CO 80203.
(3) Includes 800,000 shares which may be purchased by Mr. Geimer upon exercise
of his warrants and options.
(4) Includes options to purchase 66,666 shares, 33,333 of which vested prior to
this offering and 33,333 of which will vest upon completion of this
offering.
(5) Represents shares which may be acquired by Messrs. Fitzpatrick and Huber
upon exercise of their options.
(6) Represents 816,666 shares held by four trusts. Mr. Arnold merely serves as
trustee for each of those trusts but is not a beneficiary of and has no
pecuniary interest in any of those trusts.
(7) Represents 215,833 shares held by the Jean C. Wilhelm Trust, of which Mr.
Wilhelm is the lifetime beneficiary and trustee.
SELLING WARRANTHOLDER AND SELLING OPTIONHOLDERS
Thomas V. Geimer is offering for sale 60,000 warrants (or 60,000 shares of
Common Stock issuable upon exercise of the warrants) owned by him as described
below. The exercise price is $.36 per share. The Company has agreed to register
on this Registration Statement the 60,000 warrants and the 60,000 shares of
Common Stock issuable upon exercise of the warrants and to pay all
-34-
<PAGE>
expenses in connection therewith (other than brokerage commissions and fees and
expenses of the counsel of the holder of the warrants). The Company will not
receive any proceeds from the sale of Mr. Geimer' s Warrants or the shares of
Common Stock underlying the warrants, and all of these shares will be subject to
the Underwriters over-allotment option, if such option is exercised by the
Underwriters. However, the Company will receive the exercise price for any of
these options or warrants that are exercised. See "Management
Compensation--Pursuant to Plans."
Five of the Company's key employees, the Selling Optionholders, are
offering for sale 90,000 Employee Options (or 90,000 shares of Common Stock
issuable upon exercise of the Employee Options) owned by them as described
below. The Employee Options were granted to each of the individuals identified
in the table below at an exercise price of $.54 per share. All of these options
have vested. The Company will not receive any proceeds from the sale of the
Employee Options or the shares of Common Stock underlying the Employee Options
and all of these shares will be subject to the Underwriters' over-allotment
option, if such option is exercised by the Underwriters. However, the Company
will receive the exercise price for any of these options that are exercised.
The following table sets forth the number of Employee Options (and the
shares of Common Stock underlying the same) and the Affiliate's warrants (and
the shares of Common Stock underlying the same) being registered hereby and the
number of shares that each of the following persons has agreed will be subject
to the Underwriters' over-allotment option if such option is exercised by the
Underwriters.
Number of Employee
Number of SharesSubject to
Name of Employee Employee Options/ Underwriter's Over-
Optionholder/Warrantholder Warrants Registered Allotment Option (1)
- -------------------------- ------------------- ---------------------
Thomas V. Geimer 60,000 60,000
Franz Huber 30,000 30,000
Timothy M. Fitzpatrick 30,000 30,000
James Reiss 12,000 12,000
Norman Rullo 12,000 12,000
Joseph Steger 6,000 6,000
--------- ---------
Total 150,000 150,000
- --------------------------
(1) These figures assume that the Underwriter's over-allotment option is
exercised for the entire 150,000 shares. Should the option be exercised for
an amount less than 150,000 shares, these figures would decrease
proportionately. Any shares not purchased by the Underwriter will be
eligible for resale under the Registration Statement of which this
Prospectus is a part 90 days after the effective date of this Registration
Statement.
DESCRIPTION OF SECURITIES
Common Stock
The Company's Amended and Restated Articles of Incorporation authorize the
issuance of 11,000,000 shares of Common Stock with no par value. Each record
holder of Common Stock is entitled to one vote for each share held on all
matters properly submitted to the stockholders for their vote. Cumulative voting
for the election of directors is not permitted by the Articles of Incorporation.
-35-
<PAGE>
Holders of outstanding shares of Common Stock are entitled to those
dividends declared by the Board of Directors out of legally available funds;
and, in the event of liquidation, dissolution or winding up of the affairs of
the Company, holders are entitled to receive, ratably, the net assets of the
Company available to stockholders after distribution is made to the preferred
stockholders, if any, who are given preferred rights upon liquidation. Holders
of outstanding shares of Common Stock have no preemptive, conversion or
redemptive rights. All of the issued and outstanding shares of Common Stock are,
and all unissued shares when offered and sold will be, duly authorized, validly
issued, fully paid and nonassessable. To the extent that additional shares of
the Company's Common Stock are issued, the relative interests of then existing
stockholders may be diluted.
Transfer Agent
American Securities Transfer, Inc., 938 Quail Street, Suite 101, Lakewood,
Colorado 80215, serves as the transfer agent and registrar for the Company's
Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
After completion of this offering but without giving effect to the exercise
of the Representative's Warrants or the issuance of any shares of Common Stock
reserved for issuance under the Company's Stock Option Plans or any other
options or warrants, the Company will have 4,661,667 shares of Common Stock
outstanding (4,811,667 shares if the Representative's over-allotment option is
exercised in full). Of these, 1,850,943 shares (2,000,943 shares if the
Representative's over-allotment option is exercised in full) will be freely
tradeable without restriction or further registration under the Securities Act.
Included in this amount are 170,833 shares which would be freely tradeable if
the holders of these shares were not affiliates of the Company. The remaining
1,639,891 shares of Common Stock are "restricted securities," as that term is
defined under Rule 144 promulgated under the Securities Act and may only be sold
in the public market pursuant to an effective registration statement or in
accordance with Rule 144. An aggregate of 957,499 of the restricted securities
and 170,833 of the freely tradable shares, which are held by certain affiliates
of the Company, will be subject to a lock-up agreement with the Representative
(the "Lock-Up") restricting their transfer for a period of up to three months
from the date of this Prospectus except with the consent of the Representative.
The Representative has no plans, arrangements, understandings or commitments
with respect to the early release of the Lock-Up; however, investors are
cautioned that the Representative in its sole discretion may elect to release
all or part of the shares subject to the Lock-Up prior to the expiration of the
Lock-Up period. The Company has been advised by the Representative that it has
no general policy with respect to granting releases from Lock-Up agreements. The
Representative may in its discretion and without notice to the public waive the
Lock-Ups and permit the sale of all or any portion of the shares of Common Stock
that are subject to the Lock-Up prior to the expiration of the Lock-Up period.
The early releases of the Lock-Ups and subsequent sale of those shares could
have a depressive effect upon the trading price of the Common Stock. Following
the expiration of the Lock-Up, all of the 957,499 restricted securities and the
170,833 shares of "free trading" stock held by affiliates will be eligible for
resale pursuant to Rule 144 promulgated pursuant to the Securities Act, subject
in some cases to compliance with certain volume limitations imposed pursuant to
Rule 144 and to applicable state securities laws.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are required to be aggregated) who has beneficially owned his or
her shares for at least two years, including affiliates of the Company, would be
entitled to sell within any three-month period a number of shares equal to the
greater of 1% of the then outstanding shares of Common Stock of the Company
(approximately 46,616 shares immediately after this offering) or the average
weekly trading volume of the Company's Common Stock during the four calendar
weeks preceding the filing of the required notice of such sale. Sales under Rule
-36-
<PAGE>
144 are also subject to certain waiver of sale restrictions, notice requirements
and the availability of current public information about the Company. Sales of
substantial numbers of shares of Common Stock pursuant to a registration
statement, Rule 144 or otherwise could adversely affect the market price of the
Common Stock, should such a market develop.
The Company has reserved 1,316,667 shares of Common Stock for issuance upon
exercise of options which may be granted pursuant to the Company's stock option
plans, 800,000 shares of Common Stock for issuance upon exercise of certain
other warrants and options, and 34,500 shares of Common Stock for issuance to
the Representative upon exercise of the Representative's Warrants. The
Representative's Warrants are exercisable at 120% of the initial price to the
public per share for a period of two years commencing one year from the date of
this Prospectus. The Representative's Warrants carry certain registration
rights. The exercise prices of the Representative's Warrants are subject to
adjustment under certain circumstances. If the holders of the Representative's
Warrants exercise their warrants and their registration rights relating to the
underlying Common Stock, they will own registered shares which will be freely
transferable and tradeable without restriction or further registration under the
Securities Act. See "Underwriting."
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, for which Janco Partners, Inc. is acting as the
representative (the "Representative"), have severally agreed to purchase from
the Company the shares of Common Stock offered hereby. Each Underwriter will
purchase the number of shares of Common Stock set forth opposite its name below,
and will purchase the shares at the price to public less underwriting discounts
and commissions set forth on the cover page of this Prospectus.
Number
Underwriter of shares
----------- ---------
Janco Partners, Inc. .....................
Total ........................... 1,000,000
=========
The Underwriting Agreement provides that the Underwriters' obligations are
subject to conditions precedent and that the Underwriters are committed to
purchase all shares of Common Stock offered hereby (other than those covered by
the over-allotment option described below) if the Underwriters purchase any
shares.
The Representative has advised the Company that the several Underwriters
propose to offer the shares of Common Stock in part directly to the public at
the price to public set forth on the cover page of this Prospectus, and in part
to certain dealers at the price to public less a concession not exceeding
$________ per share. The Underwriters may allow, and such dealers may reallow, a
concession not exceeding $________ per share to other dealers. After the shares
of Common Stock are released for sale to the public, the Representative may
change the initial price to the public and other selling terms. No change in
such terms shall change the amount of proceeds to be received by the Company as
set forth on the cover page of this Prospectus. The Representative will also
receive a non-accountable allowance equal to 1.5% of the gross proceeds of the
offering (including the over-allotment option, if exercised), of which $35,000
has been paid.
-37-
<PAGE>
Certain individuals holding options and warrants to purchase shares of
Common Stock of the Company have granted to the Underwriters an option,
exercisable no later than 45 days after the date of this Prospectus, to purchase
up to 150,000 additional shares of Common Stock at the public offering price,
less the underwriting discount, set forth on the cover page of this Prospectus.
To the extent that the Underwriters exercise this option, each of the
Underwriters will have a firm commitment to purchase approximately the same
percentage thereof which the number of shares of Common Stock to be purchased by
it shown in the above table bears to the total number of shares of Common Stock
offered hereby, and the Company and such Selling Optionholders and Selling
Warrantholder will be obligated, pursuant to the option, to sell such shares to
the Underwriters. The Underwriters may exercise their option only to cover
over-allotments made in connection with the sale of shares of Common Stock
offered hereby.
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject an order for the purchase of the shares in whole or in part.
The Underwriting Agreement provides that the Company, the Selling
Optionholders and Selling Warrantholder, if any, and the Underwriters will
indemnify each other against certain liabilities under the Act. Insofar as
indemnification for liabilities arising under the Act may be permitted to
directors, officers or persons controlling the Company pursuant to the
Underwriting Agreement or otherwise, the Company has been informed that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
The Company's officers, directors and key employees, who beneficially own
in the aggregate 2,161,664 shares of Common Stock (including 1,033,332 currently
exercisable options and warrants), have agreed not to offer, sell or otherwise
dispose of any shares of Common Stock for a period of 90 days after the date of
this Prospectus without the prior written consent of the Representative.
However, certain optionholders and a warrantholder may be required by the
Underwriters, subject to a 45 day option, to sell up to 150,000 shares issuable
upon the exercise of the options and warrants to the Underwriters to cover
over-allotments, if any, and the Company may grant additional options under
certain Stock Option Plans without the prior written consent of the
Representative, provided that such options shall not be exercisable during the
90-day lock-up period.
The Company has also agreed to sell to the Representative, for nominal
consideration, warrants (the "Representative's Warrants") to purchase 34,500
shares of Common Stock. The Representative's Warrants will be exercisable, at a
price per share equal to 120% of the initial price to the public, commencing one
year from the date hereof and for a period of two years thereafter. During the
exercise period, holders of the Representative's Warrants are entitled to
certain demand and incidental registration rights with respect to the securities
issuable upon exercise of the Representative's Warrants. The shares of Common
Stock issuable on exercise of the Representative's Warrants are subject to
adjustment in certain events to prevent dilution. The Representative's Warrants
cannot be transferred, assigned or hypothecated for a period of one year from
the date of issuance except to Underwriters, selling group members and their
officers or partners.
The rules of the Commission generally prohibit the Underwriters and other
members of the selling group from making a market in the Company's Common Stock
during the "cooling off" period immediately preceding the commencement of sales
in the offering. The Commission has, however, adopted an exemption from these
rules that permits passive market making under certain conditions. These rules
permit an Underwriter or other member of the selling group to continue to make a
market in the Company's Common Stock subject to the conditions, among others,
that its bid not exceed the highest bid by a market maker not connected with the
offering and that its net purchases on any one trading day not exceed prescribed
limits. Pursuant to these exemptions, certain Underwriters and other members of
the selling group intend to engage in passive market making in the Company's
Common Stock during the cooling off period.
-38-
<PAGE>
New Underwriter
The Representative was formed in December 1995 and became registered as a
securities broker-dealer in February 1996. Since that time, the Representative
has acted as an underwriter in three public offerings and as a selected dealer
in seven additional public offerings. The Representative has not previously
served as the managing underwriter of a public offering. Although the
Representative's principals have extensive experience in the securities
industry, there can be no assurance that the Representative's limited operating
history will not have an adverse effect on the offering or the market for the
Company's securities. See "Underwriting."
LEGAL MATTERS
The Company has been represented, and the legality of the securities being
offered hereby has been passed upon, by Schlueter & Associates, P.C., 1050 17th
Street, Suite 1700, Denver, Colorado 80202. Certain legal matters will be passed
upon by the Underwriters by Berliner Zisser Walter & Gallegos, Denver, Colorado.
EXPERTS
The balance sheets of the Company as of July 31, 1996 and 1995, and the
statements of operations, shareholders' equity and cash flows for the three
years in the period ended July 31, 1996, have been audited by Deloitte & Touche,
LLP, independent auditors, as stated in their report appearing herein, and are
included in reliance upon the report of such firm given upon their authority of
such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a registration statement
(together with all amendments thereto, the "Registration Statement") under the
Act with respect to the Common Stock of the Company offered hereby. This
Prospectus, filed as part of the Registration Statement, omits certain
information contained in the Registration Statement in accordance with the rules
and regulations of the Commission. For further information, reference is hereby
made to the Registration Statement. Statements contained herein concerning the
provisions of any document are not necessarily complete and in each instance,
reference is made to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
The Company is subject to the reporting and other informational
requirements of the Exchange Act and, in accordance therewith, files reports and
other information with the Commission. Such reports, proxy statements and other
information filed by the Company, including the Registration Statement and
exhibits thereto, may be inspected and copied at the public reference facilities
maintained by the Commission at the offices of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C. 20549, and at the
Commission's regional offices at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, New
York, New York 10048. Copies of such materials can also be obtained by written
request to the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street, NW, Washington, D.C. 20549, at prescribed rates.
-39-
<PAGE>
GLOSSARY OF TERMS
Client/Server The model of interaction in distributed data processing in
which a program at one site sends a request to a program at
another site and awaits a response. The requesting program
is called a client, and the answering program is called a
server.
COTS Acronym for "Commercial Off The Shelf" which means hardware
and/or software that is readily available for purchase.
Compiler A program that converts another program from some source
language (or programming language) to machine language
(object code).
DEC Acronym for "Digital Equipment Corporation."
Interoperability The ability of software and hardware, on multiple machines,
from multiple vendors to communicate.
Legacy Code Existing software, including proprietary applications,
out-dated commercial vendor applications, data bases and
element relationships, that have been in use for an extended
period of time, thus accumulating the "legacy" of corporate
memory, files and information system functionality that may
no longer adequately satisfy the owner.
Legacy System Existing hardware and network systems, especially
proprietary, closed mainframe environments or out-dated
architectures that have been in use for an extended period
of time, typically with limited functionality and limited or
no compatibility with more modern systems. DEC's VMS
operating system is an example of a Legacy System.
Network Hardware and software data communication systems.
NT Refers to the Windows NT operating system which is the
latest open system architecture for Windows developed by
Microsoft Corporation.
Open Systems Computer and communications environments based on formal and
de facto interface standards. Such interfaces should not be
controlled by a single vendor and must be freely available.
Systems built using these standard interfaces provide
portability of software across standard computer platforms,
Interoperability between systems and much greater choice and
flexibility in systems procurement.
Operating System The software which schedules tasks, allocates storage,
handles the interface to hardware and presents a default
interface to the user when no application program is
running.
Portability The ease with which a software application can be made to
run in a new environment.
-40-
<PAGE>
Porting The process or ability to electronically "port" or move
data, files and software from one computer or Network
environment to another computer or Network environment.
Proprietary A product not conforming to open system standards, that was
typically developed by a particular hardware manufacturer
for its own computers.
Re-engineering The examination and modification of a system to reconstitute
it in a new form and the subsequent implementation of the
new form.
RISC Acronym for reduced instruction set computing.
UNIX A widely used multi-user, general purpose operating system.
A trademark of X/Open Company Limited, for an operating
system originally developed at the Bell Laboratories of AT&T
in the late 1960's and early 1970's and subsequently
enhanced by the University of California at Berkeley, AT&T,
the Open Software Foundation (OSF) and others.
VAX Virtual Address eXtension. Digital Equipment Corporation's
proprietary 32-bit minicomputer, considered one of the most
successful designs in industry history.
VAX/VMS As used in this Prospectus shall refer to DEC's VAX
minicomputers, which utilize DEC's VMS operating system.
VMS The brand name of the proprietary multi-user, multi-tasking,
virtual memory operating system provided by DEC with its VAX
minicomputers.
Workstation A general purpose computer designed to be used by one person
at a time and which offers higher performance than normally
found in a personal computer, especially with respect to
graphics, processing power and the ability to carry out
several tasks at the same time.
Year 2000 Problem The Year 2000 problem arises from the widespread use of
computer programs that rely on two-digit date codes to
perform computations and decision making functions. Many of
these computer programs may fail due to an inability to
properly interpret date codes. For example, such programs
may misinterpret "00" as the year 1900 rather than 2000.
-41-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors Report F-1
Balance Sheets -- July 31, 1996 and 1995 F-2
Statements of Operations -- For the fiscal
years ended July 31, 1996, 1995 and 1994 F-3
Statements of Shareholders' Equity -- For the fiscal
years ended July 31, 1996, 1995 and 1994 F-4
Statements of Cash Flows -- For the fiscal years
ended July 31, 1996, 1995 and 1994 F-5
Notes to Financial Statements F-6 to F-11
<PAGE>
INDEPENDENT AUDITORS' REPORT
Accelr8 Technology Corporation:
We have audited the accompanying balance sheets of Accelr8 Technology
Corporation as of July 31, 1996 and 1995, and the related statements of
operations, shareholders' equity, and cash flows for each of the three years in
the period ended July 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of July 31, 1996 and 1995,
and the results of its operations and its cash flows for each of the three years
in the period ended July 31, 1996 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
September 4, 1996
F-l
<PAGE>
ACCELR8 TECHNOLOGY CORPORATION
BALANCE SHEETS
JULY 31, 1996 AND 1995
- --------------------------------------------------------------------------------
ASSETS 1996 1995
CURRENT ASSETS:
Cash and cash equivalents $ 1,407,026 $ 437,425
Accounts receivable 431,252 292,536
Prepaid expenses and other 49,695 1,170
Deferred tax assets (Note 6) 123,223
----------- ---------
Total current assets 2,011,196 731,131
----------- ---------
PROPERTY AND EQUIPMENT:
Computer equipment 209,735 248,620
Furniture and fixtures 11,231 11,231
----------- ---------
Total property and equipment 220,966 259,851
Less accumulated depreciation (150,453) (189,346)
----------- ---------
Net property and equipment 70,513 70,505
----------- ---------
SOFTWARE DEVELOPMENT COSTS, less accumulated
amortization: 1996, $746,260; 1995, $650,023 160,321 176,015
OTHER ASSETS (Note 7) 75,000
----------- ---------
TOTAL $2,317,030 $ 977,651
---------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 52,091 $ 60,141
Income taxes payable 18,000
Salaries and payroll taxes 20,316 30,773
Product development advance payable (Note 2) 50,000 50,000
Deferred consulting revenue 91,724
Deferred maintenance revenue 75,460 89,801
----------- ---------
Total current liabilities 307,591 230,715
----------- ---------
DEFERRED TAX LIABILITIES (Note 6) 69,723
----------- ---------
COMMITMENTS (Note 7)
SHAREHOLDERS' EQUITY (Note 3):
Common stock, no par value; 55,000,000
shares authorized; 21,970,000 shares
issued and outstanding 1,970,970 1,970,970
Contributed capital 41,449 41,449
Accumulated deficit (72,703) (1,265,483)
----------- ---------
Shareholders' equity - net 1,939,716 746,936
----------- ---------
TOTAL $ 2,317,030 $ 977,651
=========== =========
See notes to financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
ACCELR8 TECHNOLOGY CORPORATION
STATEMENTS OF OPERATIONS
YEARS ENDED JULY 31,1996, 1995 AND 1994
- --------------------------------------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
REVENUES (Note 4):
Consulting fees $ 1,074,744 $ 294,130 $ 41,150
Product license and customer
support fees 683,997 750,584 415,007
Resale of purchased software 338,270 337,822 149,693
Other (Note 5) 83,035
----------- --------- ---------
Total revenues 2,097,011 1,382,536 688,885
----------- --------- ---------
COSTS AND EXPENSES:
Cost of services 311,534 147,743 133,635
Cost of software purchased for resale 117,737 101,266 70,084
General and administrative 195,802 264,365 302,663
Marketing and advertising 324,962 369,165 298,760
Research and development 33,038 129,959 152,245
----------- --------- ---------
Total expenses 983,073 1,012,498 957,387
----------- --------- ---------
INCOME (LOSS) FROM OPERATIONS 1,113,938 370,038 (268,502)
INTEREST INCOME 43,342 12,356 6,752
----------- --------- ---------
INCOME (LOSS) BEFORE INCOME
TAXES 1,157,280 382,394 (261,750)
----------- --------- ---------
INCOME TAX (PROVISION) BENEFIT
(Note 6):
Current (18,000)
Deferred 53,500
----------- --------- ---------
Total benefit 35,500
----------- --------- ---------
NET INCOME (LOSS) $ 1,192,780 $ 382,394 $(261,750)
=========== ========= =========
WEIGHTED AVERAGE SHARES
OUTSTANDING 26,935,508 26,364,000 21,970,000
========== ========== ==========
NET INCOME (LOSS) PER SHARE $ 0.04 $ 0.01 $ (0.01)
=========== ========= =========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
ACCELR8 TECHNOLOGY CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED JULY 31,1996, 1995 AND 1994
- --------------------------------------------------------------------------------
Common Stock
----------------------- Contributed Accumulated Shareholders'
Shares Amount Capital Deficit Equity-Net
<S> <C> <C> <C> <C> <C>
BALANCE, JULY 31, 1993 21,970,000 $1,970,970 $41,449 $(1,386,127) $ 626,292
Net loss (261,750) (261,750)
---------- ---------- ------- ----------- ----------
BALANCE, JULY 31, 1994 21,970,000 1,970,970 41,449 (1,647,877) 364,542
Net income 382,294 382,394
---------- ---------- ------- ----------- ----------
BALANCE, JULY 31, 1995 21,970,000 1,970,970 41,449 (1,265,483) 746,936
Net income 1,192,780 1,192,780
---------- ---------- ------- ----------- ----------
BALANCE, JULY 31, 1996 21,970,000 $1,970,970 $41,449 $ (72,703) $1,939,716
========== ========== ======= =========== ==========
</TABLE>
See notes to financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
ACCELR8 TECHNOLOGY CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED JULY 31,1996, 1995 AND 1994
- --------------------------------------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,192,780 $382,394 $(261,750)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Marketing credits (71,506)
Depreciation and amortization 121,600 139,072 150,821
Deferred income tax benefit (53,500)
Net change in assets and liabilities:
Accounts receivable (138,716) (108,984) (59,701)
Prepaid expenses and other (48,525) 6,705 525
Other assets (75,000)
Accounts payable (8,050) 30,599 21,959
Income taxes payable 18,000
Salaries and payroll taxes (10,457) 8,001 18,267
Deferred consulting revenue 91,724
Deferred maintenance revenue (14,341) 2,823 28,871
Other payables (10,365)
----------- ---------- ----------
Net cash provided by (used in)
operating activities 1,075,515 460,610 (182,879)
----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Software development costs (80,543) (108,510) (83,853)
Purchase of computer equipment (25,371)
Purchase of furniture and fixtures (3,931)
----------- ---------- ---------
Net cash used in investing activities (105,914) (108,510) (87,784)
----------- ---------- ----------
NET INCREASE (DECREASED) IN CASH
AND CASH EQUIVALENTS 969,601 352,100 (270,663)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 437,425 85,325 355,988
----------- --------- --------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 1,407,026 $437,425 $ 85,325
=========== ======== ========
</TABLE>
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES -
In 1994, marketing credits earned and equipment valued at $71,506 were
received in connection with a marketing program of a major customer (Note 5).
See notes to financial statements.
F-5
<PAGE>
ACCELR8 TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business - Accelr8 Technology Corporation ("Accelr8" or the "Company") is a
provider of software tools and consulting services for the conversion of
Digital Equipment Corporation ("DEC") legacy systems to UNIX open
client/server environments. The Company's consulting services and software
conversion tools enable the Company's customers to analyze and implement
their UNIX conversions in a predictable and cost-effective manner. The
Company's clients include a number of Fortune 1000 companies and government
agencies.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and Cash Equivalents - All highly liquid investments with an original
maturity of three months or less at time of purchase are considered to be
equivalent to cash.
Concentration of Credit Risk - Financial instruments that potentially
subject the Company to concentrations of credit risk consist primarily of
cash equivalents and accounts receivable. The Company places its cash
equivalents with a high credit quality financial institution. The Company
grants credit to domestic and international clients in various industries.
Exposure to losses on accounts receivable is principally dependent on each
client's financial position. The Company performs ongoing credit
evaluations of its client's financial condition.
Property and Equipment - Property and equipment are recorded at cost.
Maintenance and repairs are charged to expense as incurred and expenditures
for major improvements are capitalized. Gains and losses from retirement or
replacement are included in operations.
Depreciation - Depreciation of property and equipment is computed using the
straight-line method over the estimated useful life of the assets ranging
from five to seven years.
Software Development Costs - Costs incurred internally to develop computer
softsware products and the costs to acquire externally developed software
products (which have no alternative future use) to be sold, leased or
otherwise marketed are charged to expense until the technological
feasibility of the product has been established. After technological
feasibility has been established and until the product is available for
general release, software development, product enhancements and acquisition
costs are capitalized. Amortization of capitalized costs is computed on a
product-by-product basis over (a) the period equal to the future revenue
stream of the product using the ratio that current revenues bear to the
total of current and future anticipated revenues of the product, or (b) the
remaining estimated economic life of the product (three years) using the
straight-line method, whichever method results in the greater amount.
Amortization expense relating to software development costs for the years
ended July 31, 1996, 1995 and 1994 was $96,237, $113,396 and $130,762,
respectively.
F-6
<PAGE>
Revenue Recognition - Revenue is recognized for consulting services as
services are performed. Revenue is recognized on product licensing
agreements when the Company substantially completes its obligations under
the agreement and the customer has accepted the product. Revenue is
recognized for customer support services on maintenance agreements using
the straight-line method over the term of the agreement.
In connection with its software business, the Company functions as a
value-added reseller of computer software. The Company recognizes revenue
when the computer software is delivered.
Deferred Revenue - Deferred consulting revenues represent amounts received
but not earned under consulting agreements. Deferred maintenance revenue
represents amounts received but not earned under maintenance agreements.
Income Taxes - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." The standard generally requires that deferred income taxes
be recognized on temporary differences between the financial statements and
income tax basis of assets and liabilities using currently enacted tax
rates.
Earnings (Loss) Per Share - Earnings (loss) per share is computed using the
weighted average number of common and common equivalent shares outstanding
during the period. Common stock equivalents include stock options and
warrants. Common stock equivalents were excluded from the earnings per
share calculation for the year ended July 31,1994 because they were
anti-dilutive.
Reclassifications - Certain amounts in 1995 and 1994 have been reclassified
to conform to the 1996 presentation.
Stock Based Compensation - During 1995, the Financial Accounting Standards
Board issued SFAS No.123, "Accounting for Stock Based Compensation." SFAS
No. 123 requires that stock based compensation be either recognized or
disclosed in the financial statements. The Company is required to adopt
SFAS No.123 in its 1997 fiscal year. Because the Company intends to elect
only the disclosure provisions of SFAS No. 123, adoption of SFAS No.123 is
not expected to have a material effect on the financial position or results
of operations of the Company.
2. PRODUCT DEVELOPMENT ADVANCE PAYABLE
On September 4,1991, the Company entered into a development agreement with
International Business Machines Corporation (IBM), wherein the Company
received $50,000 for the purpose of developing a specific software product
which the Company owns exclusively. The funds were to be repaid upon
completion of the project, at a rate equal to 20% of revenues from the sale
of the product, due in full on July 31,1995. IBM has the option of
converting the balance due to a note bearing interest at 11% payable
quarterly over a two-year period from date of conversion. As of July
31,1996, IBM has not exercised its option to convert the balance due to an
interest bearing note.
3. SHAREHOLDERS' EQUITY
Option Plan - The Company has reserved 3,900,000 shares of its common stock
for issuance to employees under an employee stock option plan. The options
vest 25% each year over a four-year period and are exercisable for three
years after the date of vestiture. As of July 31,1995,1,900,000 options at
$.07 per share were held by a former President of the Company which expired
unexercised in December 1995.
F-7
<PAGE>
As of July 31, 1995, the Chairman of the Board held other options to
purchase 4,800,000 shares of the Company's common stock at $.06 per share
which were to expire as of December 31, 1995. The term of the options was
extended to December 31, 1997 in December 1995. As of July 31, 1995, a
former President of the Company held other options to purchase 1,000,000
shares of the Company's common stock at $.07 per share which expired
unexercised in December 1995.
Warrants outstanding to purchase 150,000 shares of common stock expired
unused in 1995.
Change in options and warrants outstanding for the three years ended July
31, 1996, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
Exercise Employee Exercise Other Options
Price Options Price and Warrants
<S> <C> <C> <C> <C>
Balance, July 31, 1993 $.07-.09 3,925,000 $.06-.15 5,950,000
Expired/Cancelled $.09 (87,500)
--------- ---------
Balance, July 31, 1994 $.07-.09 3,837,500 $.06-.15 5,950,000
Issued $.09 400,000
Expired/Cancelled $.09 (387,500) $0.15 (150,000)
--------- ---------
Balance, July 31, 1995 $.07-.09 3,850,000 $.06-.07 5,800,000
Issued $.09 50,000 $.06 4,800,000
Expired/Cancelled $.07-.09 (2,000,000) $.06-.07 (5,800,000)
--------- ---------
Balance, July 31, 1996 $.09 1,900,000 $.06 4,800,000
========= =========
Vested, July 31, 1996 $.09 1,662,500 $.06 4,800,000
========= =========
</TABLE>
4. REVENUES
Revenue of $239,025 (11%), $282,100 (13%), and $353,075 (17%) in 1996 was
derived from sales to three separate customers. Revenue of $150,381 (11%)in
1995 and $103,064 (15%) in 1994 was derived from sales to a single
customer. The Company's operations are located entirely within the United
States. However, in 1996, $318,393 (15%) of the Company's revenues were to
foreign customers.
5. MARKETING CREDITS
In connection with a marketing program of a major customer, the Company was
awarded marketing credits which can be used for cooperative advertising or
the purchase of computer equipment. When marketing credits are exchanged
for computer equipment, other revenue is recognized to the extent of the
fair value of the equipment received. Other revenue relating to marketing
credits was $83,035 for the year ended July 31, 1994. No marketing credits
were awarded to the Company in 1995 or 1996.
6. INCOME TAXES
During the year ended July 31, 1994, the Company changed its method of
accounting for income taxes to comply with the provisions of SFAS No. 109,
"Accounting for Income Taxes." Adoption of this standard did not have a
significant impact on the Company's financial statements and a cumulative
F-8
<PAGE>
effect adjustment was not required. Prior to adoption of the new standard,
the Company accounted for income taxes using the provisions of Statement of
Financial Accounting Standards No. 96.
The following items comprise the Company's net deferred tax assets as of
July 31:
1996 1995
Deferred tax assets:
Deferred income $ 63,530 $ 57,848
Net operating loss (NOL) carryforwards 41,693 491,197
Alternative minimum (AMT) tax credit
carryforwards 18,000
-------- --------
Total 123,223 549,045
Valuation allowance (472,889)
-------- --------
Total 123,223 76,156
Deferred tax liabilities -
Depreciation and amortization (69,723) (76,156)
-------- --------
Net deferred tax assets $ 53,500 $ 0
======== ========
As of July 31, 1995, the Company concluded that based on available
evidence, realization of existing net operating loss carryforwards was
uncertain, and accordingly, a valuation allowance was recorded. During
fiscal 1996, the Company's valuation allowance decreased $472,889 as the
result of utilization of NOL carryforwards.
A reconciliation of the expected income tax benefit at the federal
statutory income tax rate to the Company's actual income tax expense at its
effective income tax rate for the year ended July 31 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Federal statutory income tax rate 34 % 34 % 34 %
Computed "expected" income taxes $ 393,475 $ 130,014 $ (91,291)
Increase in taxes resulting from:
State income taxes, net of federal
tax benefit 38,190 12,237 (13,425)
Change in valuation allowance (472,889) (142,251) 104,716
Other 5,724
--------- --------- ---------
Income tax provision (benefit) $ (35,500) $ 0 $ 0
========= ========= =========
</TABLE>
As of July 31, 1996, the Company has net operating loss carryforwards of
$112,000 available to offset future taxable income expiring in 2010.
Pursuant to the Tax Reform Act of 1986, net operating losses utilized in
future income tax returns will be subject to alternate minimum tax and
change in ownership regulations which may limit the net operating loss
carryforward utilized in a given fiscal year. The Company also has AMT
credit carryforwards of $ 18,000 available to offset future regular taxable
income that may be carried forward indefinitely.
F-9
<PAGE>
7. COMMITMENTS
Operating Leases - The Company has an operating lease agreement for office
space through July 31, 1996. Total rent expense was $42,989, $40,141 and
$39,014 in 1996, 1995 and 1994, respectively.
Employee Retirement Plan - During the year ended July 31, 1996, the
Company established a SARSEP-IRA employee pension plan that covers
substantially all full-time employees. Under the plan, employees have the
option to contribute up to the lesser of 15% of their compensation or
$9,240 annually to the Plan. The Company may make discretionary
contributions to the Plan based on recommendations from the Board of
Directors. For the year ended July 31, 1996, the Board did not authorize
any contributions.
Deferred Compensation Arrangement - During the year ended July 31, 1996,
the Company established a deferred compensation plan for key employees of
the Company using a "Rabbi" Trust. The Company may make discretionary
contributions to the plan based on recommendations from the Board of
Directors. During fiscal 1996, the Company funded deferred compensation of
$75,000 awarded to the Chairman of the Board with a deposit of $75,000 with
the "Rabbi" Trust. The Chairman vests in the $75,000 over the service
period of January 1, 1996 through January 31, 1997. The funds are subject
to the general claims of creditors and are included in other assets.
8. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The disclosure of estimated fair value of financial instruments is made in
accordance with the requirements of SFAS No. 107, "Disclosures about Fair
Value of Financial Instruments. "
The carrying amounts at July 31, 1996 for cash and cash equivalents,
accounts receivable, other assets, accounts payable, product development
advance payable, accrued expenses and deferred revenue approximate their
fair values due to the short maturity of these instruments.
9. SUBSEQUENT EVENTS
Stock Option Plans - The Company has proposed, subject to stockholder
approval, a decrease in the number of common shares reserved for issuance
from 3,900,000 to 1,900,000 under its existing stock option plan and the
adoption of an incentive stock option plan for employees and a
non-qualified stock option plan for key employees, directors and others.
Authorized Shares and Reverse Stock Split - The Company has proposed,
subject to stockholder approval, a decrease in the number of authorized
common shares from 55,000,000 to 11,000,000 and a one-for-six reverse stock
split of its common stock, which is to be effected on or about October 15,
1996.
F-10
<PAGE>
The following is a pro forma presentation of the effects of the one-for-six
reverse stock split on the number of common shares issued and outstanding
and all option, warrant, and earnings (loss) per share information:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Common stock - issued and outstanding 3,661,667
Common stock reserved for issuance:
Existing stock option plan 316,667
Proposed stock option plans:
Incentive stock option plan 700,000
Non-qualified stock option plan 300,000
1996 1995 1994
Earnings (loss) per share:
Weighted average shares outstanding 4,489,251 4,394,000 3,661,667
========= ========= =========
Net income (loss) per share $ 0.27 $ 0.09 $ (0.07)
========= ========= =========
</TABLE>
Change in options and warrants
outstanding for the three years
ended July 31, 1996, 1995 and 1994
are summarized as follows:
<TABLE>
<CAPTION>
Exercise Employee Exercise Other Options
Price Options Price and Warrants
<S> <C> <C> <C> <C>
Balance, July 1993 $.42-.54 654,167 $.36-.90 991,667
Expired/Cancelled $.54 (14,584)
------- -------
Balance, July 31, 1994 $.42-.54 639,583 $.36-.90 991,667
Issued $.54 66,667
Expired/Cancelled $.54 (64,583) $.90 (25,000)
------- -------
Balance,July 31, 1995 $.42-.54 641,667 $.36-.42 966,667
Issued $.54 8,333 $.36 800,000
Expired/Cancelled $.42-.54 (333,333) $.36-.42 (966,667)
------- -------
Balance, July 31, 1996 $.54 316,667 $.36 800,000
======= =======
Vested, July 31, 1996 $.54 277,083 $.36 800,000
======= =======
* * * * *
F- 11
</TABLE>
<PAGE>
======================================== ===================================
No dealer, salesperson or other person
has been authorized to give any
information or to make any
representation not contained in this
Prospectus, and if given or made, such
information or representations must not
be relied upon as having been authorized
by the Company, any Selling Shareholder
or the Underwriters. This Prospectus 1,000,000 Shares
does not constitute an offer to sell, or
a solicitation of an offer to buy, any
of the securities offered hereby in any
jurisdiction to any person to whom it is
unlawful to make such offer in such
jurisdiction. Neither the delivery of ACCELR8 TECHNOLOGY
this Prospectus nor any sale made CORPORATION
hereunder shall, under any
circumstances, create any implication
that the information herein is correct
as of any time subsequent to the date
hereof or that there has been no change
in the affairs of the Company such date.
------------------------------- Common Stock
TABLE OF CONTENTS
-------------------------------
Page
----
PROSPECTUS SUMMARY .............. 3
RISK FACTORS .................... 6
USE OF PROCEEDS ................. 9
DIVIDEND POLICY ................. 10
PRICE RANGE OF COMMON STOCK ..... 10 ---------------
DILUTION ........................ 11
CAPITALIZATION .................. 12 PROSPECTUS
SELECTED FINANCIAL DATA ......... 12
MANAGEMENT'S DISCUSSION AND ---------------
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ...... 13
BUSINESS ........................ 16
MANAGEMENT ...................... 27
PRINCIPAL SHAREHOLDERS .......... 32
SELLING WARRANTHOLDER AND
SELLING OPTIONHOLDERS ......... 33
DESCRIPTION OF SECURITIES ....... 35
SHARES ELIGIBLE FOR FUTURE SALE . 35
UNDERWRITING .................... 36
LEGAL MATTERS ................... 38 JANCO PARTNERS, INC.
EXPERTS ......................... 38
ADDITIONAL INFORMATION .......... 38
GLOSSARY OF TERMS ............... 40 September , 1996
FINANCIAL STATEMENTS ............ F-1
========================================= ==================================
<PAGE>
Cross Reference Sheet
Form SB-2
Item No. Sections in Prospectus
- -------- ----------------------
1 Front of the Registration Statement and
Outside Front Cover of Prospectus ........... Cover Page
2 Inside Front and Outside Back Cover
Pages of Prospectus ......................... Inside Front Cover Pages;
and Outside Back Cover
Page
3 Summary Information and Risk Factors ........ Prospectus Summary; Risk
Factors
4 Use of Proceeds ............................. Prospectus Summary;
Use of Proceeds
5 Determination of Offering Price ............. Cover Page
6 Dilution .................................... Risk Factors; Dilution
7 Selling Security Holders .................... Outside From Cover Page,
Selling Securityholders
and Selling Optionholders
8 Plan of Distribution ........................ Prospectus Summary; Plan
of Distribution
9 Legal Proceedings ........................... Legal Proceedings
10 Directors, Executive Officers, Promoters
and Control Persons ......................... Management
11 Security Ownership of Certain Beneficial
Owners and Management ....................... Principal Shareholders
12 Description of Securities ................... Description of Securities
13 Interest of Named Experts and Counsel ....... Not Applicable
14 Disclosure of Commission Position on
Indemnification for Securities
Act Liabilities ............................. Plan of Distribution and
Undertakings
15 Organization within Last Five Years ......... Not Applicable
16 Description of Business ..................... Prospectus Summary;
Business
17 Management's Discussion and
Analysis or Plan of Operation ............... Management's Discussion
and Analysis of Financial
Condition and Results of
Operations
18 Description of Property ..................... Business
19 Certain Relationships and Related Transactions Certain Transactions
20 Market for Common Equity and Related
Stockholder Matters ......................... Price Range of Common
Stock
21 Executive Compensation ...................... Management - Executive
Compensation
22 Financial Statements ........................ Financial Statements
23 Changes In and Disagreements With
Accountants on Accounting and
Financial Disclosure ........................ Not Applicable
ALTERNATE A-i
<PAGE>
ACCELR8 TECHNOLOGY CORPORATION
60,000 Warrants to Purchase Common Stock by the Selling Warrantholder
and 60,000 Shares of Common Stock Underlying the Warrants
And
90,000 Options to Purchase Common Stock by the Selling Optionholders
and 90,000 Shares of Common Stock Underlying the Options
This Prospectus relates to 60,000 Warrants to purchase Common Stock (the
"Affiliate Warrants") by the Selling Warrantholder and 60,000 shares of Common
Stock underlying the Warrants (the "Warrant Shares") and 90,000 Options to
purchase Common Stock (the "Employee Options") by the Selling Optionholders and
90,000 shares of Common Stock underlying the Options (the "Option Shares"). The
Affiliate Warrants, the Warrant Shares, the Employee Options, and the Options
Shares shall sometimes hereinafter collectively be referred to as the
"Securities." The Selling Warrantholder and the Selling Optionholders shall
sometimes hereinafter be referred to as the "Selling Securityholders." Each
Affiliate Warrant entitles the registered holder thereof to purchase one share
of Common Stock at a price of $0.36 per share at any time and from time to time
until December 31, 1997, and each Employee Option entitles the registered holder
thereof to purchase one share of Common Stock at a price of $0.54 per share at
any time. The exercise prices of the Affiliate Warrants and the Employee Options
are subject to adjustment under certain circumstances. See
"Management--Compensation Pursuant to Plans."
The Securities offered by this Prospectus may be sold from time to time by
the Selling Securityholders beginning ninety days from the date of this
Prospectus or earlier with the consent of Janco Partners, Inc., the
Representative of the Underwriters for the Company's concurrent public offering.
No underwriting arrangements have been entered into by the Selling
Securityholders. The distribution of the Securities may be effected in one or
more transactions that may take place on the over-the-counter market including
ordinary broker's transactions, privately-negotiated transactions or through
sales to one or more dealers for resale of the Affiliate Warrants, Employee
Options, Warrant Shares, or Option Shares as principals at market prices
prevailing at the time of sale or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Securityholders in connection with sales of the Securities.
The Selling Securityholders and intermediaries through whom such securities
are sold may be deemed "underwriters" within the meaning of the Securities Act
of 1933, as amended (the "Securities Act") with respect to the Securities
offered. The Company has agreed to indemnify the Selling Securityholders against
certain liabilities, including liabilities under the Securities Act.
The Company will not receive any of the proceeds from the sale of the
Securities by the Selling Securityholders; however, the Company will receive the
exercise price for each Affiliate Warrant and each Employee Option exercised.
All costs incurred in the registration of the Securities are being borne by the
Company. See "Plan of Distribution."
On the date of this Prospectus, a Registration Statement under the
Securities Act with respect to an underwritten public offering (the "Offering")
of 1,000,000 shares of Common Stock (without giving effect to the over-allotment
option granted to the Representative of the Underwriters of the Offering) by the
Company was declared effective by the Securities and Exchange Commission (the
"Commission"). See "Concurrent Sales." A total of 1,150,000 shares of Common
Stock are being registered under the Securities Act. Sales pursuant to the
Offering by the Company or pursuant to the sale of Common Stock by the Selling
Securityholders, or even the potential of such sales, would likely have an
adverse effect on the market price of the Company's Common Stock. (Continued on
the next page)
ALTERNATE A-ii
<PAGE>
------------------------------------
THESE SECURITIES INVOLVE A
HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION.
(See "RISK FACTORS" and "DILUTION.")
---------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is ___________, 1996
ALTERNATE A-iii
<PAGE>
[Add to the Prospectus as a new section immediately after "Sales by
the Selling Warrantholder and Selling Optionholders"]
CONCURRENT SALES
On the date of this Prospectus, a Registration Statement under the
Securities Act with respect to an underwritten offering of 1,000,000 shares of
Common Stock by the Company was declared effective by the United States
Securities and Exchange Commission. Sales of shares of Common Stock by the
Company, or even the potential of such sales, would likely have an adverse
effect on the market price of the Securities.
[Replaces "Underwriting" in the Prospectus]
PLAN OF DISTRIBUTION
The Securities offered by this Prospectus may be sold from time to time by
the Selling Securityholders beginning ninety days from the date of this
Prospectus or earlier with the consent of Janco Partners, Inc., the
Representative of the Underwriters for the Company's concurrent public offering.
No underwriting arrangements have been entered into by the Selling
Securityholders. The distribution of the Securities may be effected in one or
more transactions that may take place on the over-the-counter market including
ordinary broker's transactions, privately-negotiated transactions or through
sales to one or more dealers for resale of the Affiliate Warrants, Employee
Options, Warrant Shares, or Option Shares as principals at market prices
prevailing at the time of sale or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Securityholders in connection with sales of the Securities.
The Selling Securityholders and intermediaries through whom such securities
are sold may be deemed "underwriters" within the meaning of the Securities Act
of 1933, as amended (the "Securities Act") with respect to the Securities
offered. The Company has agreed to indemnify the Selling Securityholders against
certain liabilities, including liabilities under the Securities Act.
The Company will not receive any of the proceeds from the sale of the
Securities by the Selling Securityholders; however, the Company will receive the
exercise price for each Affiliate Warrant and each Employee Option exercised.
All costs incurred in the registration of the Securities are being borne by the
Company. See Selling Warrantholder and Selling Optionholders."
[Replaces "Selling Warrantholder and Selling Optionholders" in the Prospectus]
SELLING WARRANTHOLDER AND SELLING OPTIONHOLDERS
Thomas V. Geimer, the Selling Warrantholder, is offering for sale
60,000 Warrants to purchase Common Stock and 60,000 shares of Common Stock
underlying the Warrants owned by him as described below. The exercise price of
the Warrants is $0.36 per Share. The Company has agreed to register on this
Registration Statement the 60,000 Warrants and the 60,000 shares of Common Stock
issuable upon exercise of the Warrants and to pay all expenses in connection
therewith (other than brokerage commissions and fees and expenses of the counsel
of the holder of the Warrants). The Company will not receive any proceeds from
the sale of Mr. Geimer's Warrants or the shares of Common Stock underlying the
Warrants. However, the Company will receive the exercise price for any of the
Warrants that are exercised. See "Management--Compensation Pursuant to Plans."
ALTERNATE A-iv
<PAGE>
Five of the Company's key employees, the Selling Optionholders, who are listed
below, are offering for sale 90,000 Options to purchase Common Stock and 90,000
shares of Common Stock underlying the Options owned by them as described below.
The Employee Options were granted to each of the individuals identified in the
table below at an exercise price of $.54 per share. All of these options have
vested. The Company will not receive any proceeds from the sale of the Employee
Options or the shares of Common Stock underlying the Employee Options. However,
the Company will receive the exercise price for any of these Options that are
exercised. See "Management--Compensation Pursuant to Plans."
The following table sets forth the number of Employee Options (and the
shares of Common Stock underlying the same) and the Affiliate's warrants (and
the shares of Common Stock underlying the same) being registered hereby.
Name of Employee Number of
Optionholder/Warrantholder Employee Options/Warrants Registered
- -------------------------- ------------------------------------
Thomas V. Geimer 60,000
Franz Huber 30,000
Timothy M. Fitzpatrick 30,000
James Reiss 12,000
Norman Rullo 12,000
Joseph Steger 6,000
---------
Total 150,000
The Selling Securityholders have no agreement with the Underwriters with
respect to the sale of their Securities except that they have agreed not to sell
any of their Securities for a period of ninety days from the date hereof without
the prior consent of the Representative. The Securities may be sold from time to
time to purchasers directly by the Selling Securityholders. Alternatively, the
Selling Securityholders may from time to time offer the Securities through
underwriters, dealers or agents, which may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling
Securityholders and/or the purchasers of the Securities for whom they may act as
agents. The Selling Securityholders may be deemed to be "underwriters" under the
Securities Act.
ALTERNATE A-v
<PAGE>
======================================== ===================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE 60,000 Warrants
COMPANY. THIS PROSPECTUS DOES NOT and
CONSTITUTE AN OFFER TO SELL OR A 60,000 Shares of Common Stock
SOLICITATION OF AN OFFER TO BUY ANY Underlying Such Warrants
SECURITIES OTHER THAN THE SHARES OF
COMMON STOCK TO WHICH IT RELATES, OR AN
OFFER OR SOLICITATION OF ANY PERSON IN
ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. THE 90,000 Options
DELIVERY OF THIS PROSPECTUS AT ANY TIME and
DOES NOT IMPLY THAT INFORMATION HEREIN 90,000 Shares of Common Stock
IS CORRECT AS OF ANY TIME SUBSEQUENT TO Underlying Such Options
ITS DATE.
IN CONNECTION WITH THIS OFFERING, THE
UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN
THE MARKET PRICE OF THE SHARES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE ACCELR8
DISCONTINUED AT ANY TIME. TECHNOLOGY
CORPORATION
-------------------------------
TABLE OF CONTENTS
-------------------------------
Page
----
PROSPECTUS SUMMARY .............. 3
RISK FACTORS .................... 6
USE OF PROCEEDS ................. 9
DIVIDEND POLICY ................. 10
PRICE RANGE OF COMMON STOCK ..... 10 ---------------
DILUTION ........................ 11
CAPITALIZATION .................. 12 PROSPECTUS
SELECTED FINANCIAL DATA ......... 12
MANAGEMENT'S DISCUSSION AND ---------------
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ...... 13
BUSINESS ........................ 16
MANAGEMENT ...................... 27
PRINCIPAL SHAREHOLDERS .......... 32
SELLING WARRANTHOLDER AND
SELLING OPTIONHOLDERS ......... 33
DESCRIPTION OF SECURITIES ....... 35
SHARES ELIGIBLE FOR FUTURE SALE . 35
UNDERWRITING .................... 36
LEGAL MATTERS ................... 38 JANCO PARTNERS, INC.
EXPERTS ......................... 38
ADDITIONAL INFORMATION .......... 38
GLOSSARY OF TERMS ............... 40 September , 1996
FINANCIAL STATEMENTS ............ F-1
========================================= ==================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 22. Indemnification of Officers and Directors
The Amended and Restated Articles of Incorporation and the Bylaws of the
Company, respectively filed as Exhibits (3.1) and (3.2), provide that the
Company will indemnify its officers and directors for costs and expenses
incurred in connection with the defense of actions, suits or proceedings where
the officer or director acted in good faith and in a manner he reasonably
believed to be in the Company's best interest and is a party by reason of his
status as an officer or director, absent a finding of negligence or misconduct
in the performance of duty. The Underwriting Agreement filed herewith as Exhibit
(1.1), and incorporated herein by reference, provides for reciprocal indemnity
between the Company and the Underwriter.
Item 23. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses payable by the
registrant in connection with the issuance and distribution of the securities
being registered (other than underwriting discounts and commissions):
S.E.C. Registration Fees $ 2,695
N.A.S.D. Filing Fees 1,281
State Securities Laws Fees and Expenses (Blue Sky) 25,000
Nasdaq National Market Filing Fee 28,308
Printing and Engraving 30,000
Legal Fees 45,000
Representative's Non-Accountable Expense Allowance 90,000*
Accounting Fees and Expenses 30,000
Transfer Agent's Fees and Costs of Certificates 5,000
Miscellaneous Expenses 8,868
-------
Total $ 266,152
===============
- ----------------------------------
*Thirty-Five thousand dollars of this amount has previously been paid by the
Company.
Item 24. Recent Sales of Unregistered Securities
During the past three years, the Company has not engaged in the sale of any
of its securities that were not registered under the Securities Act.
Item 25. Exhibits
The following Exhibits are filed as part of the Registration Statement.
Exhibit
No. Document
--- --------
1.1 Form of Underwriting Agreement by and between Accelr8 Technology
Corporation and Janco Partners, Inc.(1)
1.2 Agreement Among Underwriters(1)
-43-
<PAGE>
Exhibit
No. Document
--- --------
1.3 Form of Selected Dealers Agreement(1)
3.1 Amended and Restated Articles of Incorporation of the Company(2)
3.2 Bylaws of the Company(2)
4.1 Specimen Stock Certificate(1)
4.2 Form of Representative's Warrant(1)
5.1 Opinion of Schlueter & Associates, P.C. as to legality of Common
Stock(2)
10.1 Warrant of the Company to Thomas V. Geimer for the purchase of shares
of common stock of the Company(2)
10.2 Warrant of the Company to Thomas V. Geimer for the purchase of shares
of common stock of the Company(2)
10.3 Option Agreement between Thomas V. Geimer and the Company(2)
10.4 Option Agreement between Franz Huber and the Company dated December
19, 1989(1)
10.5 Option Agreement between Timothy M. Fitzpatrick and the Company dated
April 27, 1992(1)
10.6 Option Agreement between James Reiss and the Company dated January 6,
1994(1)
10.7 Option Agreement between Norman Rullo and the Company dated December
27, 1989(1)
10.8 Option Agreement between Joseph Steger and the Company dated October
25, 1995(1)
10.9 Lease with 1700 Grant Associates, Ltd., dated March 31, 1992(1)
10.10 Deferred Compensation Agreement entered into by Registrant and Thomas
V. Geimer, dated March 4, 1996(1)
10.11 Deferred Compensation Plan Trust Agreement entered into by Registrant
and Kenneth R. Bennington, Trustee, dated March 1, 1996(1)
23.1 Consent of Deloitte & Touche LLP, independent certified public
accountants for the Company(1)
23.2 Consent of Schlueter & Associates will be included in Exhibit 5.1(2)
24.1 Powers of Attorney(1)
- --------------------------------------
(1) Filed herewith
(2) To be filed by amendment
-44-
<PAGE>
Item 26. Undertakings
The undersigned registrant hereby undertakes:
(1) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in such
names as required by the Underwriters to permit prompt delivery to each
purchaser.
(2) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(3) For the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(4) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A under the Securities Act and
contained in a form of prospectus filed by the Company pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.
(5) To file, during any period in which the Registrant offers or sells
securities, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement; and notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the commission
pursuant to Rule 424(b) (ss.230.424(b) of this chapter) if, in the
aggregate, the changes in the volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of registration fee" table in the effective registration
statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(6) To file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
-45-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form SB-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Denver, State of Colorado, on September 19, 1996.
ACCELR8 TECHNOLOGY CORPORATION
By: /s/ Harry J. Fleury
---------------------------------
Harry J. Fleury, President
-46-
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints, jointly and severally, Thomas V. Geimer
and Harry J. Fleury, and each of them, attorneys-in-fact for the undersigned,
each with the power of substitution, for the undersigned, in any and all
capacities, to sign any and all amendments to this Registration Statement
(including post-effective amendments), and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Harry J. Fleury President 9/19/96
- --------------------------
Harry J. Fleury
/s/ Thomas V. Geimer Director, Principal Executive Officer, 9/19/96
- --------------------------- Principal Financial Officer, and
Thomas V. Geimer Principal Accounting Officer
/s/ David C. Wilhelm Director 9/19/96
- ---------------------------
David C. Wilhelm
/s/ A. Alexander Arnold II Director 9/19/96
- ---------------------------
A. Alexander Arnold III
-47-
1,000,000 Shares
ACCELR8 TECHNOLOGY CORPORATION
Common Stock
------------------
UNDERWRITING AGREEMENT
------------------
, 1996
------------
Janco Partners, Inc.
As the Representative of the Several Underwriters
Named in Schedule I Attached Hereto
5251 DTC Parkway, Suite 1010
Englewood, Colorado 80111
Dear Sirs:
Accelr8 Technology Corporation, a Colorado corporation (the "Company"),
proposes to issue and sell an aggregate of 1,000,000 shares of its Common Stock,
no par value (the "Firm Shares"), to Janco Partners, Inc. (the "Representative")
and the several underwriters named in Schedule I hereto (collectively with the
Representative, the "Underwriters" and individually, an "Underwriter," which
terms shall also include any Underwriter substituted as hereinafter provided in
Section 12). The Firm Shares shall be offered to the public at an offering price
of ________ per Firm Share (the "Offering Price"). The Company also proposes to
sell to you individually, and not in your capacity as representative of the
several Underwriters, warrants (the "Representative's Warrants") to purchase up
to 34,500 shares of Common Stock of the Company (the "Representative's Warrant
Stock"), which sale will be consummated in accordance with the terms and
conditions of the Representative's Warrant Agreement (the "Representative's
Warrant Agreement") filed as an exhibit to the Registration Statement described
below.
In addition, the several Underwriters, in order to cover over-allotments in
the sale of the Firm Shares, may purchase from certain shareholders of the
Company (the "Selling Shareholders") within 45 days after the Effective Date (as
hereinafter defined), for their own account for offering to the public at the
Offering Price, up to 150,000 additional Common Shares (the "Optional Shares"),
upon the terms and conditions set forth in Section 5 hereof. The Firm Shares and
the Optional Shares are hereinafter collectively referred to as the "Shares."
The Company and the Selling Shareholders, intending to be legally bound hereby,
confirm this agreement with each of the Underwriters as follows:
1. Representations and Warranties. The Company represents and warrants to,
and agrees with, the several Underwriters that:
<PAGE>
(a) The Company has prepared in conformity with the requirements of
the Securities Act of 1933, as amended (the "Act"), and the rules,
regulations, releases and instructions (the "Regulations") of the
Securities and Exchange Commission (the "SEC") under the Act in effect at
all applicable times and has filed with the SEC a registration statement on
Form SB-2 (SEC File No. 333-______) and one or more amendments thereto
registering the Shares under the Act. Any preliminary prospectus included
in such registration statement or filed with the SEC pursuant to Rule
424(a) of the Regulations is hereinafter called a "Preliminary Prospectus."
The various parts of such registration statement, including all exhibits
thereto and the information contained in any form of final prospectus filed
with the SEC pursuant to Rule 424(b) of the Regulations in accordance with
Section 6(a) of this Agreement and deemed by virtue of Rule 430A of the
Regulations to be part of such registration statement at the time it was
declared effective, each as amended at the time such registration statement
became effective, are hereinafter collectively referred to as the
"Registration Statement." The final prospectus in the form included in the
Registration Statement or first filed with the SEC pursuant to Rule 424(b)
of the Regulations and any amendments or supplements thereto is hereinafter
referred to as the "Prospectus."
(b) The Registration Statement has become effective under the Act as
of the Effective Date, and the SEC has not issued any stop order suspending
the effectiveness of the Registration Statement or preventing or suspending
the use of any Preliminary Prospectus nor has the SEC instituted,
threatened to institute or, to the Company's knowledge, contemplated
proceedings with respect to such an order. The Company has not received any
stop order suspending the sale of the Shares in any jurisdiction designated
by the Representative pursuant to Section 6(f) hereof, and no proceedings
for that purpose have been instituted or to the Company's knowledge, are
threatened or, contemplated. The Company has complied with any request of
the SEC, or, to the Company's knowledge, any state securities commission in
a state designated by the Representative pursuant to Section 6(f) hereof,
for additional information to be included in the Registration Statement or
Prospectus or otherwise. Each Preliminary Prospectus conformed to the Act
and the Regulations as of its date and did not as of its date contain an
untrue statement of material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, except the
foregoing shall not apply to statements in or omissions from any
Preliminary Prospectus in reliance upon and in conformity with information
furnished to the Company in writing by or on behalf of any Underwriter
through the Representative expressly for use therein. The Registration
Statement on the date on which it was declared effective by the SEC (the
"Effective Date") conformed, and any post-effective amendment thereof on
the date it shall become effective, and the Prospectus at the time it is
filed with the SEC pursuant to Rule 424(b) of the Regulations and on the
Closing Date (as defined in Section 4 hereof) and any Option Closing Date
(as defined in Section 5(b) hereof), will conform to the requirements of
the Act and the Regulations, and neither the Registration Statement, any
post-effective amendment thereof nor the Prospectus will, on any of such
respective dates, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, except that this representation
and warranty does not apply to statements in or omissions from the
Registration Statement or the Prospectus made in reliance upon and in
2
<PAGE>
conformity with information furnished to the Company in writing by or on
behalf of any Underwriter through the Representative expressly for use
therein. It is understood that the statements appearing in any Preliminary
Prospectus, the Prospectus or the Registration Statement (A) on the inside
front cover page with respect to stabilization, (B) in the section entitled
"Underwriting," and (C) in the section entitled "Legal Matters" with
respect to the identity of counsel for the Underwriters constitute the only
information furnished in writing by or on behalf of any Underwriter for
inclusion in any Preliminary Prospectus, the Prospectus or the Registration
Statement.
(c) The Company is a corporation duly organized, validly existing and
in good standing under the laws of Colorado, with all necessary corporate
power and authority, and all required licenses, permits, certifications,
registrations, approvals, consents and franchises to own or lease and
operate its properties and to conduct its business as described in the
Prospectus and to execute, deliver and perform this Agreement. The Company
is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where
the failure to be so qualified would not have a material adverse effect on
the Company.
(d) The Company has all necessary corporate power and authority to
issue and deliver the Common Shares to be issued and sold by it to the
Representative under the terms of this Agreement.
(e) This Agreement and the Representative's Warrant Agreement have
been duly authorized, executed and delivered by the Company and constitute
its valid and binding obligation, enforceable against the Company in
accordance with their respective terms, except as rights to indemnity and
contribution hereunder or thereunder may be limited by federal or state
securities laws or principles of public policy, and except as enforcement
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles.
(f) This Agreement conforms to the description thereof in the
Prospectus.
(g) The execution, delivery and performance of this Agreement and the
Representative's Warrant Agreement by the Company do not and will not, with
or without the giving of notice or the lapse of time, (A) conflict with any
terms or provisions of the Articles of Incorporation or By-laws of the
Company, as amended to the date hereof and the Closing Date or Option
Closing Date, as the case may be; (B) result in a breach of, constitute a
default under, result in the termination or modification of or result in
the creation or imposition of any lien, security interest, charge or
encumbrance upon any of the properties of the Company pursuant to any
indenture, mortgage, deed of trust, contract, commitment or other agreement
or instrument to which the Company is a party or by which any of its
properties or assets are bound or affected, the effect of which would have
a material adverse effect on the business or properties of the Company; (C)
violate any law, rule, regulation, judgment, order or decree known to the
Company of any government or governmental agency, instrumentality or court,
domestic or foreign, having jurisdiction over the Company or any of its
properties or businesses or (D) result in a breach, termination or lapse of
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the power and authority of the Company to own or lease and operate its
properties and conduct its business as described in the Prospectus, the
effect of which would have a material adverse effect on the business or
properties of the Company.
(h) The Company has authorized and outstanding capital stock and, as
of the date or dates indicated, the Company had the capitalization set
forth under the caption "Capitalization" in the Prospectus and will have
the as-adjusted capitalization set forth under the caption "Capitalization"
in the Prospectus on the Effective Date. On the Effective Date, the Closing
Date and any Option Closing Date, there will be no options or warrants for
the purchase of, other outstanding rights to purchase, agreements or
obligations to issue or agreements or other rights to convert or exchange
any obligation or security into, capital stock of the Company or securities
convertible into or exchangeable for capital stock of the Company, except
as described in the Prospectus with respect to (A) the outstanding options
that have been granted to employees, directors and others to purchase
____________ Common Shares (the "Employee Options"), (B) the outstanding
warrants to purchase ____________ Common Shares (the "Warrants") and (C)
the Over-allotment Option (as hereinafter defined).
(i) The authorized capital stock of the Company, including, without
limitation, the outstanding Common Shares and the Shares being issued on
the Closing Date and Option Closing Date (if any and to the extent
applicable), conforms to the descriptions thereof in the Prospectus, and
such descriptions conform to the descriptions thereof set forth in the
instruments defining the same. The information in the Prospectus insofar as
it relates to the Employee Options, the Warrants and other outstanding
securities, in each case as of the Effective Date, the Closing Date and any
Option Closing Date is true, correct and complete in all material respects.
(j) The outstanding Common Shares have been duly authorized and are
validly issued, fully paid and non-assessable. The Employee Options and the
Warrants have been duly authorized and validly issued and are valid and
binding obligations of the Company enforceable against it in accordance
with their terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general
equitable principles. The Common Shares issuable pursuant to the Employee
Options and the Warrants, when issued in accordance with the respective
terms thereof, will be duly authorized, validly issued, fully paid and
non-assessable. None of such outstanding Common Shares, Employee Options,
or Warrants were issued or granted in violation of any preemptive rights of
any security holder of the Company. The Company has reserved a sufficient
number of Common Shares for issuance pursuant to the Employee Options and
the Warrants. The holders of the outstanding Common Shares are not, and
will not be, subject to personal liability solely by reason of being such
holders, and the holders of the Common Shares issuable pursuant to the
Employee Options, and the Warrants will not be subject to personal
liability solely by reason of being such holders. The offers and sales of
the outstanding Common Shares, the Employee Options and the Warrants were,
and the issuance of the Common Shares pursuant to the Employee Options and
the Warrants will be, made in conformity with applicable registration
requirements or exemptions therefrom under federal and applicable state
securities laws.
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(k) The issuance and sale of the Shares by the Company have been duly
authorized and, when the Shares have been duly delivered against payment
therefor as contemplated by this Agreement, the Shares will be validly
issued, fully paid and non-assessable, and the holders thereof will not be
subject to personal liability solely by reason of being such holders. None
of the Shares will be issued in violation of any preemptive rights of any
stockholder of the Company. The certificates representing the Shares are in
proper legal form under, and conform to the requirements of, applicable
Colorado law. Neither the filing of the Registration Statement nor the
offering or sale of the Shares as contemplated by this Agreement gives any
security holder of the Company any rights for or relating to the
registration of any Common Shares or other security of the Company.
(l) No consent, approval, authorization, order, registration, license
or permit of any court, government, governmental agency, instrumentality or
other regulatory body or official is required for the valid authorization,
issuance, sale and delivery by the Company of any of the Shares, or for the
execution, delivery or performance by the Company of this Agreement or the
Representative's Warrant Agreement, except (A) such order as may be
required for the registration of the Shares under the Act, which order has
been obtained, (B) such consent, approval or authorization as may be
required for compliance with the applicable state securities or Blue Sky
laws, or (C) such consent approval or authorization as may be required
under the By-laws, rules and other pronouncements of the National
Association of Securities Dealers, Inc. (the "NASD") and the Nasdaq
National Market (the "NMS"). Upon the effectiveness of the Registration
Statement, the Common Shares will be registered pursuant to Section 12(b)
of the Securities Exchange Act of 1934 (the "Exchange Act"), and will be
included on the NMS. The Company has taken no action designed, or likely,
to have the effect of terminating the registration of the Common Shares
under Section 12(b) of the Exchange Act or the inclusion of the Common
Shares on the NMS, nor has the Company received any notification that the
SEC or the NMS is contemplating terminating such registration or inclusion.
(m) The statements in the Registration Statement and Prospectus,
insofar as they are descriptions of or references to contracts, agreements
or other documents, are accurate in all material respects and present or
summarize fairly the information required to be disclosed under the Act and
the Regulations, and there are no contracts, agreements or other documents
required to be described or referred to in the Registration Statement or
Prospectus or to be filed or incorporated by reference as exhibits to the
Registration Statement under the Act or the Regulations that have not been
so described, referred to, filed or incorporated by reference, as required.
(n) The financial statements (including the notes thereto) filed as
part of any Preliminary Prospectus, the Prospectus and the Registration
Statement present fairly the financial position of the Company, as of the
respective dates thereof, and the results of operations and cash flows of
the Company, for the periods indicated therein, all in conformity with
generally accepted accounting principles consistently applied, except as
may be otherwise stated therein. The financial information included in the
Prospectus under the captions "Prospectus Summary" and "Selected Financial
5
<PAGE>
Data" presents fairly the information shown therein and has been compiled
on a basis consistent with that of the audited financial statements
included in the Registration Statement.
(o) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, except as otherwise stated
therein, there has not been (A) any material adverse change (including,
whether or not insured against, any material loss or damage to any assets),
or development involving a prospective material adverse change, in the
general affairs, properties, assets, management, condition (financial or
otherwise), results of operations, stockholders' equity, business or
prospects of the Company, (B) any transaction entered into by the Company
that is material to the Company, (C) any dividend or distribution of any
kind declared, paid or made by the Company and the Selling Shareholders on
its capital stock, (D) any liabilities or obligations, direct or indirect,
incurred by the Company that are material to the Company except in the
ordinary course of business, or (E) any material change in the short-term
debt or long-term debt of the Company. The Company does not have any known
(after due investigation and inquiry) contingent liabilities or obligations
that are material and that are not disclosed in the Prospectus.
(p) The Company has not distributed and, prior to the later to occur
of the Closing Date, the Option Closing Date or the completion of the
distribution of the Shares, will not distribute any offering material in
connection with the offering or sale of the Shares other than the
Registration Statement, the Preliminary Prospectus, the Prospectus and a
blue sky survey, in any such case only as permitted by the Act and the
Regulations.
(q) The Company has filed with the appropriate federal, state and
local governmental agencies, and all foreign countries and political
subdivisions thereof, all tax returns that are required to be filed, or has
duly obtained extensions of time for the filing thereof and has paid all
taxes shown on such returns and all assessments received by it to the
extent that the same have become due. The Company has not executed or filed
with any taxing authority, foreign or domestic, any agreement extending the
period for assessment or collection of any income taxes, is not a party to
any known (after due investigation and inquiry) pending action or
proceeding by any foreign or domestic governmental agencies for the
assessment or collection of taxes, and no claims for assessment or
collection of taxes have been asserted against the Company that might
materially adversely affect the general affairs, properties, assets,
condition (financial or otherwise), results of operations, stockholders'
equity, business or prospects of the Company.
(r) Deloitte & Touche, LLP, which is certifying the financial
statements included in the Prospectus and forming a part of the
Registration Statement, is a firm of independent public accountants as
required by the Act and the Regulations and is a member of the SEC Practice
Section.
(s) The Company is not in violation of, or in default under, any of
the terms or provisions of (A) its Articles of Incorporation or Bylaws,
each as amended to the date hereof, the Closing Date or the Option Closing
Date, as the case may be, (B) any indenture, mortgage, deed of trust,
contract, loan or credit agreement, commitment or other agreement or
instrument to which the Company is a party or by which it or any of its
6
<PAGE>
properties are bound or affected, (C) any law, rule, regulation, judgment,
order or decree known (after due investigation and inquiry) to the Company
of any government or governmental agency, instrumentality or court,
domestic or foreign, having jurisdiction over the Company or any of its
properties or businesses or (D) any license, permit, certification,
registration, approval, consent or franchise referred to in subsection (c)
of this Section 1, except where such violation or default would not have a
material adverse effect on the business or properties of the Company.
(t) Except as disclosed in the Registration Statement, there are no
claims, actions, suits, proceedings, arbitrations, investigations, or
inquiries pending before, or to the Company's knowledge, threatened or
contemplated by, any governmental agency, instrumentality, court or
tribunal, domestic or foreign, or before any private arbitrational
tribunal, relating to or affecting the Company or its properties or
businesses that might affect the issuance or validity of any of the Shares
or the validity of any of the outstanding Common Shares, or that, if
determined adversely to the Company, would, in any case or in the
aggregate, result in any material adverse change in the general affairs,
properties, assets, condition (financial or otherwise), results of
operations, stockholders' equity, business or prospects, of the Company;
nor, to the Company's knowledge, is there any reasonable basis for any such
claim, action, suit, proceeding, arbitration, investigation or inquiry.
There are no outstanding orders, judgments or decrees of any court,
governmental agency, instrumentality or other tribunal known (after due
investigation and inquiry) to the Company enjoining the Company from, or
requiring the Company to take or refrain from taking any action, or to
which the Company, or any of its properties, assets or businesses is bound
or subject.
(u) Except as otherwise stated in the Prospectus, the Company owns, or
possesses adequate rights to use all patents, patent applications,
trademarks, trademark registrations, applications for trademark
registration, trade names, service marks, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential technology, information, systems, design
methodologies and devices or procedures developed or derived from the
Company's businesses), processes and formulations used in or proposed to be
used in the conduct of its business as described in the Prospectus
(collectively, the "Intellectual Property") that, if not so owned or
possessed, would materially adversely affect the general affairs,
properties, condition (financial or otherwise), results of operations,
stockholders' equity, business or prospects of the Company. The Company has
not infringed, is not infringing or has not received any notice of conflict
with the asserted rights of others with respect to the Intellectual
Property, and no others have infringed upon or are in conflict with the
Intellectual Property.
(v) To the best of the Company's knowledge after due investigation and
inquiry, the Company has obtained all permits, licenses and other
authorizations, if any, that are required under all environmental laws,
including but not limited to the Federal Water Pollution Control Act (33
U.S.C. ss.1251 et seq.), Resource Conservation & Recovery Act (42 U.S.C.
ss.6901 et seq.), Safe Drinking Water Act (21 U.S.C. ss.349, 42 U.S.C.
ss.ss.201, 300f), Toxic Substances Control Act (15 U.S.C. ss.2601 et seq.),
Clean Air Act (42 U.S.C. ss. 7401 et seq.), Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. ss.9601 et seq.), other
appropriate laws of jurisdictions in which the Company's products have been
7
<PAGE>
or located and any other laws relating to emissions, discharges, releases
or threatened releases of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes into the environment
(including, without limitation, ambient air, surface water, ground water or
land), or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or
wastes under any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or
approved thereunder (collectively, the "Environmental Laws"), other than
any permits, licenses or other authorizations which, if not obtained, would
not have a material adverse effect on the business or properties of the
Company. The Company is in compliance with all terms and conditions of any
required permits, licenses and authorizations, and is in compliance with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables contained in the
Environmental Laws, except where the failure to so comply would not have a
material adverse effect on the Company.
(w) There are no present or, to the Company's knowledge, past events,
conditions, circumstances, activities, practices, incidents, actions or
plans relating to the business as presently being conducted by the Company
that interfere with or prevent compliance with or continued compliance with
the Environmental Laws, the non-compliance with which would have a material
adverse effect on the Company, or which would be reasonably likely to give
rise to any material legal liability (whether statutory or common law) or
otherwise would be reasonably likely to form the basis of any claim,
action, demand, suit, proceeding, hearing, notice of violation, study,
investigation, remediation, or clean up based on or related to the
generation, manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge, release into
the workplace, community or environment of any pollutant, contaminant,
chemical or industrial, toxic, or hazardous substance or waste, which
claim, action, demand, suit, proceeding, hearing, notice of violation,
study, investigation, remediation, or clean up would have a material
adverse effect on the Company.
(x) The Company has good and marketable title to all personal property
(tangible and intangible) described in the Prospectus as being owned by it,
free and clear of all liens, security interests, charges or encumbrances,
except such as are described in the Prospectus or which are not material to
the business of the Company. The Company has adequately insured the
personal property of the Company against loss or damage by fire or other
casualty and maintains, in adequate amounts, insurance against such other
risks as management of the Company deems appropriate. The Company does not
own any real property, and all real property used or leased by the Company,
as described in the Prospectus (the "Premises"), is held by the Company
under a valid and enforceable lease, except as enforcement may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally or by
general equitable principles. The Premises, and all operations conducted
thereon, are now and, since the Company began to use such Premises, always
have been, to the Company's knowledge (after due investigation and
inquiry), in compliance with the Environmental Laws. The Company has no
knowledge of any use of the Premises prior to when the Company began using
the Premises that constituted a violation of any Environmental Laws. There
is no, and the Company has not received notice of any, claim, demand,
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investigation, regulatory action, suit or other action instituted or
threatened against the Company or the Premises relating to any of the
Environmental Laws. The Company has not received any notice of material
violation, citation, complaint, order, directive, request for information
or response thereto, notice letter, demand letter or compliance schedule to
or from any governmental or regulatory agency arising out of or in
connection with hazardous substances (as defined by applicable
Environmental Laws) on, about, beneath, arising from or generated at the
Premises.
(y) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (A) transactions are
executed in accordance with management's general or specific authorization,
(B) transactions are recorded as necessary in order to permit preparation
of financial statements in accordance with generally accepted accounting
principles and to maintain accountability for assets, (C) access to assets
is permitted only in accordance with management's general or specific
authorization and (D) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(z) No unregistered securities of the Company have been sold by the
Company or on behalf of the Company by any person or persons controlling,
controlled by or under common control with the Company within the three
years prior to the date hereof, except as disclosed in the Registration
Statement.
(aa) Each contract or other instrument (however characterized or
described) to which the Company is a party or by which any of the
properties or business of it is bound or affected and to which reference
has been made in the Prospectus or which has been filed as an exhibit to
the Registration Statement has been duly and validly executed by the
Company, and to the Company's best knowledge (after due investigation and
inquiry) by the other parties thereto. Except as described in the
Prospectus, each such contract or other instrument is in full force and
effect and is enforceable against the parties thereto in accordance with
its terms, and except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general
equitable principles, and neither the Company, nor any other party is in
default thereunder and no event has occurred that, with the lapse of time
or the giving of notice, or both, would constitute a default thereunder.
(bb) Except for the plans and arrangements described in the
Prospectus, the Company has not had any employee benefit plan, profit
sharing plan, employee pension benefit plan or employee welfare benefit
plan or deferred compensation arrangements (collectively, "Plans") that are
subject to the provisions of the Employee Retirement Income Security Act of
1974, as amended, or the rules and regulations thereunder ("ERISA"). To the
Company's knowledge, all Plans that are subject to ERISA are, and have been
at all times since their establishment, in compliance with ERISA and, to
the extent required by the Internal Revenue Code of 1986, as amended (the
"Code"), in compliance with the Code. To the Company's knowledge, the
Company has not had any employee pension benefit plan that is subject to
Part 3 of Subtitle B of Title 1 of ERISA or any defined benefit plan or
multi-employer plan. To the Company's knowledge, the Company has not
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maintained retiree life and retiree health insurance plans that are
employee welfare benefit plans providing for continuing benefit or coverage
for any employee or any beneficiary of any employee after such employee's
termination for employment, except as required by Section 4980B of the
Code. To the Company's knowledge, no fiduciary or other party in interest
with respect to any of the Plans has caused any of such Plans to engage in
a "prohibited action" as defined in Section 406 of ERISA. As used in this
subsection, the terms "defined benefit plan," "employee benefit plan,"
"employee pension benefit plan," "employee welfare benefit plan,"
"fiduciary" and "multi-employer plan" shall have the respective meanings
assigned to such terms in Section 3 of ERISA.
(cc) To the Company's knowledge, no labor dispute exists with the
employees of the Company and no such labor dispute is imminent. There is no
existing or, to the Company's knowledge, imminent labor disturbance by the
employees of any of the Company's principal suppliers, contractors or
customers.
(dd) The Company has not incurred any liability for any finder's fees
or similar payments in connection with the transactions contemplated
herein.
(ee) Except as described in the Prospectus or as otherwise disclosed
to the Underwriters, the Company is not a party to, and is not bound by,
any agreement pursuant to which any material royalties, honoraria or fees
are payable by the Company to any person by reason of the ownership or use
of any Intellectual Property.
(ff) Except as disclosed in the Prospectus, there are no relationships
or related party transactions required to be disclosed therein by Item 404
of Regulation S-B.
(gg) The Company is familiar with the Investment Company Act of 1940,
as amended (the "1940 Act"), and the rules and regulations thereunder, and
has in the past conducted, and intends in the future to continue to
conduct, its affairs in such a manner to ensure that it will not become an
"investment company" within the meaning of the 1940 Act and such rules and
regulations.
(hh) Neither the Company nor any director, officer, agent, employee or
other person associated with or acting on behalf of the Company has,
directly or indirectly, (A) used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
any political activity, (B) made any unlawful payment to foreign or
domestic governments or governmental officials or employees or to foreign
or domestic political parties or campaigns from corporate funds, (C)
violated any provision of the Foreign Corrupt Practices Act of 1977, as
amended or (D) made any bribe, rebate, payoff, influence payment, kickback
or other unlawful payment.
Any certificate signed by any officer of the Company in such capacity and
delivered to the Representative or to counsel for the Underwriters pursuant to
this Agreement shall be deemed a representation and warranty by the Company to
the several Underwriters as to the matters covered thereby.
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2. Representations and Warranties of the Selling Shareholders. Each Selling
Shareholder severally represents and warrants to, and agrees with, the Company
and the Underwriters that:
(a) As of the Option Closing Date (as defined in paragraph 5(b)
hereof), such Selling Shareholder will have valid marketable title to the
Optional Shares proposed to be sold by such Selling Shareholder hereunder
and full right, power and authority to sell, assign, transfer and deliver
such Optional Shares hereunder, free and clear of all voting trust
arrangements, liens, encumbrances, equities, claims and community property
rights; and upon delivery of and payment for such Optional Shares
hereunder, the Underwriters will acquire valid marketable title thereto,
free and clear of all voting trust arrangements, liens, encumbrances,
equities, claims and community property rights.
(b) Such Selling Shareholder has not taken and will not take, directly
or indirectly, any action designed to or which might be reasonably expected
to cause or result, under the Exchange Act or otherwise, in stabilization
or manipulation of the price of the Common Stock to facilitate the sale or
resale of the Firm Shares, the Optional Shares or other shares of Common
Stock.
(c) Such Selling Shareholder has executed and delivered a Selling
Shareholders' Power of Attorney ("Power of Attorney") between the Selling
Shareholder and Thomas V. Geimer (the "Agent"), naming the Agent as such
Selling Shareholder's attorney-in-fact and, by the Agent's execution of
this Agreement, such Agent hereby represents and warrants that he has been
duly appointed as Attorney-in-Fact by each Selling Shareholder pursuant to
the Power of Attorney for the purpose of entering into and carrying out
this Agreement. The Power of Attorney has been duly executed by such
Selling Shareholder and a copy thereof has been delivered to you.
(d) Such Selling Shareholder has deposited in custody with the
custodian, pursuant to a Letter of Transmittal and Custody Agreement
("Custody Agreement") with Berliner Zisser Walter & Gallegos, P.C. (the
"Custodian"), certificates in negotiable form for the Optional Shares to be
sold hereunder by such Selling Shareholder, for the purpose of further
delivery pursuant to this Agreement. Such Selling Shareholder agrees that
the Optional Shares to be sold by such Selling Shareholder on deposit with
the Custodian are subject to the interests of the Company, the Underwriters
and the other Selling Shareholders, that the arrangements made for such
deposit are to that extent irrevocable, and that the obligations of such
Selling Shareholder hereunder shall not be terminated except as provided in
this Agreement or in the Custody Agreement. The Agent has been duly
authorized by such Selling Shareholder to execute and deliver this
Agreement and the Custodian has been authorized to receive and acknowledge
receipt of the proceeds of sale of the Firm Shares to be sold by such
Selling Shareholder against delivery thereof and otherwise act on behalf of
such Selling Shareholder.
(e) Each Preliminary Prospectus, insofar as it has related to such
Selling Shareholder and, to the knowledge of such Selling Shareholder in
all other respects, as of its date, has conformed in all material respects
with the requirements of the Act and, as of this date, has not included any
untrue statement of material fact or omitted to state a material fact
necessary to make the statements therein not misleading; and when the
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Registration Statement became effective, and at all times subsequent
thereto, up to the Option Closing Date, (A) such parts of the Registration
Statement and the Prospectus and any amendments or supplements thereto as
relate to such Selling Shareholder, and the Registration Statement and the
Prospectus and any amendments or supplements thereto, to the knowledge of
such Selling Shareholder, in all other respects, will contain all
statements that are required to be stated therein in accordance with the
Act and the Regulations and will in all material respects conform to the
requirements of the Act and the Regulations, and (B) neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, as it relates to such Selling Shareholder, and, to the knowledge
of such Selling Shareholder in all other respects, will include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading.
(f) Such Selling Shareholder will not sell, contract to sell or
otherwise dispose of any Common Stock for a period of 180 days after this
Agreement becomes effective without the prior written consent of the
Company and the Representative.
(g) Except as disclosed in the Prospectus, such Selling Shareholder is
not a party to any formal or informal voting agreements, understandings or
arrangements with respect to the voting of the Common Stock.
3. Purchase and Sale of Firm Shares. On the basis of the representations,
warranties, covenants and agreements herein contained, and subject to the terms
and conditions herein set forth, the Company shall sell the Firm Shares to the
several Underwriters at the Offering Price less the underwriting discount shown
on the cover page of the Prospectus (the "Underwriting Discount"), and the
Underwriters, severally and not jointly, shall purchase from the Company, on a
firm commitment basis, at the Offering Price less the Underwriting Discount, the
respective Firm Shares set forth opposite their names on Schedule I hereto. In
making this Agreement, each Underwriter is contracting severally, and not
jointly, and, except as provided in Sections 5 and 12 hereof, the agreement of
each Underwriter is to purchase only that number of Firm Shares specified with
respect to that Underwriter in Schedule I hereto. The Underwriters shall offer
the Firm Shares to the public as set forth in the Prospectus.
4. Payment and Delivery. Payment for the Firm Shares shall be made to the
Company by certified or official bank check payable to the order of the Company
in Clearing House funds (next day funds), at the offices of the Representative,
or at such other location as shall be agreed upon by the Company and the
Representative, or in immediately available funds wired to such account or
accounts as the Company may specify (with all costs and expenses incurred by the
Underwriters in connection with such settlement in immediately available funds
(including, but not limited to, interest or cost of funds expenses) to be borne
by the Company), against delivery of the Firm Shares to the Representative at
the offices of the Representative for the respective accounts of the
Underwriters. Such payments and delivery will be made at 10:00 A.M., Denver
time, on the third business day after the date of this Agreement or at such
other time and date not later than three business days thereafter as the
Representative and the Company shall agree upon. Such time and date are referred
to herein as the "Closing Date." The certificates representing the Firm Shares
to be sold and delivered will be in such denominations and registered in such
names as the Representative requests not less than one full business day prior
to the Closing Date, and will be made available to the Representative for
inspection, checking and packaging at the office of the Company's Transfer
Agent, not less than one full business day prior to the Closing Date.
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5. Option to Purchase Optional Shares.
(a) For the purposes of covering any over-allotments in connection
with the distribution and sale of the Firm Shares as contemplated by the
Prospectus, subject to the terms and conditions herein set forth, the
several Underwriters are hereby granted an option by the Selling
Shareholders to purchase all or any part of the Optional Shares from the
Selling Shareholders (the "Over-allotment Option"). The purchase price per
share to be paid for the Optional Shares shall be the Offering Price less
the Underwriting Discount. The Over-allotment Option granted hereby may be
exercised by the Representative on behalf of the several Underwriters as to
all or any part of the Optional Shares at any time (but not more than once)
within 45 days after the Effective Date. No Underwriter shall be under any
obligation to purchase any Optional Shares prior to an exercise of the
Over- allotment Option.
(b) The Over-allotment Option granted hereby may be exercised by the
Representative on behalf of the several Underwriters by giving notice to
the Agent by a letter sent by registered or certified mail, postage
prepaid, telex, telegraph, telegram or facsimile (such notice to be
effective when sent), addressed as provided in Section 14 hereof, setting
forth the number of Optional Shares to be purchased, the date and time for
delivery of and payment for the Optional Shares and stating that the
Optional Shares referred to therein are to be used for the purpose of
covering over-allotments in connection with the distribution and sale of
the Firm Shares. If such notice is given prior to the Closing Date, the
date set forth therein for such delivery and payment shall not be earlier
than three full business days after the date of such notice or the Closing
Date, whichever occurs later. If such notice is given on or after the
Closing Date, the date set forth therein for such delivery and payment
shall be a date selected by the Representative that is not later than three
full business days after the exercise of the Over-allotment Option. The
date and time set forth in such a notice is referred to herein as the
"Option Closing Date," and a closing held pursuant to such a notice is
referred to herein as the "Option Closing." The number of Optional Shares
to be sold to each Underwriter pursuant to the exercise of the
Over-allotment Option shall be the number that bears the same ratio to the
aggregate number of Optional Shares being purchased through such
Over-allotment Option exercise as the number of Firm Shares opposite the
name of such Underwriter in Schedule I hereto bears to the total number of
all Firm Shares; subject, however, to such adjustment as the Representative
may approve to eliminate fractional shares and subject to the provisions
for the allocation of Optional Shares purchased for the purpose of covering
over-allotments set forth in the Agreement Among Underwriters. Upon the
exercise of the Over-allotment Option, the Company shall become obligated
and sell to the Representative for the respective accounts of the
Underwriters, and on the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, and the several Underwriters shall become
severally, but not jointly, obligated to purchase from the Company, the
number of Optional Shares specified in each notice of exercise of the
Over-allotment Option.
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(c) Payment for the Optional Shares shall be made to the Company by
certified or official bank check payable to the order of the Company in
Clearing House funds (next day funds), at the office of the Representative
or such other location as shall be agreed upon by the Agent and the
Representative, or in immediately available funds wired to such accounts as
the Agent may specify (with all costs and expenses incurred by the
Underwriters in connection with such settlement in immediately available
funds [including, but not limited to, interest or cost of funds expenses]
to be borne by the Selling Shareholders), against delivery of the Optional
Shares to the Representative at the offices of the Representative for the
respective accounts of the Underwriters. The certificates representing the
Optional Shares to be issued and delivered will be in such denominations
and registered in such names as the Representative requests not less than
one full business day prior to the Option Closing Date, and will be made
available to the Representative for inspection, checking and packaging at
the office of the Company's Transfer Agent not less than one full business
day prior to the Option Closing Date.
6. Certain Covenants and Agreements of the Company. The Company covenants
and agrees with the several Underwriters as follows:
(a) If Rule 430A of the Regulations is employed, the Company will
timely file the Prospectus pursuant to and in compliance with Rule 424(b)
of the Regulations and will advise the Representative of the time and
manner of such filing.
(b) The Company will not at any time, whether before or after the
Registration Statement shall have become effective, during such period as,
in the opinion of counsel for the Underwriters, the Prospectus is required
by law to be delivered in connection with sales by the Underwriters or a
dealer, file or publish any amendment or supplement to the Registration
Statement or Prospectus of which the Representative has not been previously
advised and furnished a copy, or which is not in compliance with the
Regulations, or, during the period before the distribution of the Firm
Shares and the Optional Shares is completed, file or publish any amendment
or supplement to the Registration Statement or Prospectus to which the
Representative reasonably objects in writing.
(c) The Company will use its best efforts to cause the Registration
Statement, if not effective at the time and date that this Agreement is
executed and delivered by the parties hereto, to become effective and will
advise the Representative immediately, and confirm such advice in writing,
(i) when the Registration Statement, or any post-effective amendment to the
Registration Statement, is filed with the SEC, (ii) of the receipt of any
comments from the SEC, (iii) when the Registration Statement has become
effective and when any post-effective amendment thereto becomes effective,
or when any supplement to the Prospectus or any amended Prospectus has been
filed, (iv) of any request of the SEC for amendment or supplementation of
the Registration Statement or Prospectus or for additional information, (v)
during the period when the Prospectus is required to be delivered under the
Act and Regulations, of the happening of any event which in the Company's
judgment makes any material statement in the Registration Statement or the
Prospectus untrue or which requires any changes to be made in the
Registration Statement or Prospectus in order to make any material
statements therein not misleading and (vi) of the issuance by the SEC of
any stop order suspending the effectiveness of the Registration Statement
or of any order preventing or suspending the use of any Preliminary
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Preliminary Prospectus or the Prospectus, the suspension of the
qualification of any of the Shares for offering or sale in any jurisdiction
in which the Underwriters intend to make such offers or sales, or of the
initiation or threatening of any proceedings for any such purposes. The
Company will use its best efforts to prevent the issuance of any such stop
order or of any order preventing or suspending such use and, if any such
order is issued, to obtain as soon as possible the lifting thereof.
(d) The Company has delivered to the Representative, without charge,
and will continue to deliver from time to time until the Effective Date, as
many copies of each Preliminary Prospectus as the Representative may
reasonably request. The Company will deliver to the Representative, without
charge, as soon as possible after the Effective Date, and thereafter from
time to time during the period when delivery of the Prospectus is required
under the Act, such number of copies of the Prospectus (as supplemented or
amended, if the Company makes any supplements or amendments to the
Prospectus) as the Representative may reasonably request. The Company
hereby consents to the use of such copies of each Preliminary Prospectus
and the Prospectus for purposes permitted by the Act, the Regulations and
the securities or Blue Sky laws of the jurisdictions in which the Shares
are offered or sold by the several Underwriters and by all dealers to whom
Shares may be offered or sold, both in connection with the offering and
sale of the Shares and for such period of time thereafter as the Prospectus
is required by the Act to be delivered in connection with sales by any
Underwriter or dealer. The Company has furnished or will furnish to the
Representative two signed copies of the Registration Statement as
originally filed and of all amendments thereto, whether filed before or
after the Effective Date, two copies of all exhibits filed therewith and
two signed copies of all consents and certificates of experts, and will
deliver to the Representative such number of conformed copies of the
Registration Statement, including financial statements and exhibits, and
all amendments thereto, as the Representative may reasonably request.
(e) The Company will comply with the Act, the Regulations, the
Exchange Act and the rules and regulations thereunder so as to permit the
continuance of offers and sales of, and dealings in, the Shares for as long
as may be necessary to complete the distribution of the Shares as
contemplated hereby.
(f) The Company will furnish such information as may be required and
otherwise cooperate in the registration or qualification of the Shares, or
exemption therefrom, for offering and sale by the several Underwriters and
by dealers under the securities or Blue Sky laws of such jurisdictions in
which the Representative determines to offer the Shares, after consultation
with the Company, and will file such consents to service of process or
other documents necessary or appropriate in order to effect such
registration or qualification; provided, however, that no such
qualification shall be required in any jurisdiction where, solely as a
result thereof, the Company would be subject to taxation or qualification
as a foreign corporation doing business in such jurisdiction where it is
not now so qualified or to take any action which would subject it to
service of process in suits, other than those arising out of the offering
or sale of the Shares, in any jurisdiction where it is not now so subject.
The Company will, from time to time, prepare and file such statements and
reports as are or may be required to continue such qualification in effect
for so long a period as is required under the laws of such jurisdiction for
such offering and sale.
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(g) Subject to subsection (b) of this Section 6, in case of any event,
at any time within the period during which, in the opinion of counsel for
the Underwriters, a prospectus is required to be delivered under the Act
and Regulations, as a result of which event any Preliminary Prospectus or
the Prospectus, as then amended or supplemented, would contain, in the
judgment of the Company or in the opinion of counsel for the Underwriters,
an untrue statement of a material fact, or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, or, if it is
necessary at any time to amend any Preliminary Prospectus or the Prospectus
to comply with the Act and Regulations or any applicable securities or Blue
Sky laws, the Company promptly will prepare and file with the SEC, and any
applicable state securities commission, an amendment or supplement that
will correct such statement or omission or an amendment that will effect
such compliance and will furnish to the Representative such number of
copies of such amendment or amendments or supplement or supplements to such
Preliminary Prospectus or the Prospectus (in form and substance
satisfactory to the Representative and counsel for Underwriters) as the
Representative may reasonably request. For purposes of this subsection, the
Company will furnish such information to the Representative, the
Underwriters' counsel and counsel for the Company as shall be necessary to
enable such persons to consult with the Company with respect to the need to
amend or supplement any Preliminary Prospectus or the Prospectus, and shall
furnish to the Representative and the Underwriters' counsel such further
information as each may from time to time reasonably request. If the
Company and the Representative agree that any Preliminary Prospectus or the
Prospectus should be amended or supplemented, the Company, if requested by
the Representative, will, if and to the extent required by law, promptly
issue a press release announcing or disclosing the matters to be covered by
the proposed amendment or supplement.
(h) The Company will make generally available to its security holders
as soon as practicable and in any event not later than 45 days after the
end of the period covered thereby, an earnings statement of the Company
(which need not be audited unless required by the Act, the Regulations, the
Exchange Act or the rules or regulations thereunder) that shall comply with
Section 11(a) of the Act and cover a period of at least 12 consecutive
months beginning not later than the first day of the Company's fiscal
quarter next following the Effective Date.
(i) For a period of three years from the Effective Date, the Company
will deliver to the Representative upon request: (A) a copy of each report
or document, including, without limitation, reports on Forms 8-K, 10-C,
10-KSB and 10-QSB (or such similar forms as may be designated by the SEC
and be applicable to the Company ), registration statements and any
exhibits thereto, filed with or furnished to the SEC or any securities
exchange or the NASD, as soon as practicable after the date each such
report or document is so filed or furnished, (B) as soon as practicable,
copies of any reports or communications (financial or other) of the Company
mailed to its security holders and (C) every material press release in
respect of the Company or its affairs that was released or prepared by the
Company.
(j) During the course of the distribution of the Shares, the Company
has not taken, nor will it take, directly or indirectly, any action
designed to or that might, in the future, reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common
Shares.
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(k) The Company will cause each person listed on Schedule II hereto
(except as otherwise noted on such Schedule) to execute a legally binding
and enforceable agreement (a "lockup agreement") to, for a period of 180
days from the Effective Date, not sell, offer to sell, contract to sell,
grant any option for the sale of or otherwise transfer or dispose of any
Common Shares (except for the sale of the Shares as contemplated by this
Agreement), any options to purchase Common Shares or any securities
convertible into or exchangeable for Common Shares (excluding the issuance
of Common Shares pursuant to the Employee Options) without the prior
written consent of the Representative, which lockup agreement shall be in
form and substance satisfactory to the Representative and the Underwriters'
counsel, and deliver such lockup agreement to the Representative prior to
the Effective Date. Appropriate stop transfer instructions will be issued
by the Company to the transfer agent for the securities affected by the
lockup agreements.
(l) The Company will not sell, issue, contract to sell, offer to sell
or otherwise dispose of any Common Shares, options to purchase Common
Shares or any other security convertible into or exchangeable for Common
Shares, from the date of the Effective Date through the period ending 120
days after the Effective Date, without the prior written consent of the
Representative, except for the sale of the Shares as contemplated by this
Agreement, the granting of options, and the issuance of Common Shares upon
their exercise, under the Company's stock option plans described in the
Prospectus and the issuance of Common Shares pursuant to the Employee
Options and the Warrants.
(m) The Company will use all reasonable efforts to maintain the
inclusion of the Common Shares on the NMS.
(n) The Company shall, at its sole cost and expense, supply and
deliver to the Representative and the Underwriters' counsel (in the form
they require), within a reasonable period after the Closing Date, three
transaction binders, each of which shall include the Registration
Statement, as amended or supplemented, all exhibits to the Registration
Statement, each Preliminary Prospectus, the Prospectus, the Preliminary
Blue Sky Memorandum and any supplement thereto and all underwriting and
other closing documents.
(o) The Company will use the net proceeds from the sale of the Shares
to be sold by it hereunder substantially in accordance with the description
thereof set forth in the Prospectus.
(p) On or prior to the Closing Date, the Company will sell to the
Representative for a total purchase price of $10.00, a Representative's
Warrant entitling the Representative or its assigns to purchase 34,500
shares of Common Stock at a price equal to 120% of the Offering Price, with
the terms of the Representative's Warrant, including exercise period,
anti-dilution provisions, exercise price, exercise provisions,
transferability, and registration rights, to be in the form filed as an
exhibit to the Registration Statement.
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(q) For a period of three years from the date of the Prospectus, the
Company will not enter into an agreement for any public or private offering
for cash (other than to employees) of any debt or equity securities of the
Company to or through any person, firm or corporation other than the
Representative unless and until the Company shall have first negotiated for
the sale of the Company's securities with or offered to sell its securities
to the Representative. The Company shall notify the Representative in
writing of the Company's intention to offer its securities in such an
offering and the terms (including the price to the underwriter or other
method of determining the underwriting discount or fee) and conditions of
the proposed offering. The Representative shall then have thirty days from
the date it receives such written notice from the Company to decide whether
it wishes to participate as manager, co-manager, underwriter or otherwise.
If the Representative determines that it does not wish to participate in
the proposed offering, then it shall so notify the Company of its intention
in writing within such thirty day period. The Company may within a period
of sixty days from the date of receipt of such notice then enter into a
letter of intent for the public sale or, as appropriate, a contract for the
private sale, of any of its securities through any other person, firm or
corporation on the same general terms and conditions as those which were
tendered to the Representative. Provided, however, if a definitive
underwriting or placement agency agreement is not executed by the Company
with such third party on substantially the terms tendered to the
Representative within 180 days thereafter, all the rights of the
Representative hereunder shall be reinstated. The Company shall not be
required to consult with the underwriter concerning any borrowings from
banks and institutional lenders or concerning financing under any equipment
leasing or similar arrangements.
(r) For a period of three years from the Effective Date, the Company
shall permit the Representative to designate a non-voting observer to
attend meetings of the Board of Directors. The designee, if any, and the
Representative will receive notice of each meeting of the Board of
Directors in accordance with Colorado law, of which no less than four
in-person meetings will be held each year. The designee may attend all such
meetings at the Representative's expense. To the extent permitted by law,
the Representative and its designee shall be indemnified for the actions of
such designee as an observer to the Board of Directors and in the event the
Company maintains a liability insurance policy affording coverage for the
acts of its officers and/or directors, to the extent permitted under such
policy, each of the Representative and its designee shall be an insured
under such policy.
7. Payment of Expenses.
(a) Whether or not the transactions contemplated by this Agreement are
consummated and regardless of the reason this Agreement is terminated, the
Company will pay or cause to be paid, and bear or cause to be borne, all
costs and expenses incident to the performance of the obligations of the
Company under this Agreement, including: (i) the fees and expenses of the
accountants and counsel for the Company incurred in the preparation of the
Registration Statement and any post-effective amendments thereto (including
financial statements and exhibits), each Preliminary Prospectus and the
Prospectus and any amendments or supplements thereto; (ii) printing and
mailing expenses associated with the Registration Statement and any
post-effective amendments thereto, each Preliminary Prospectus, the
Prospectus (including any supplement thereto), this Agreement, the
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Agreement Among Underwriters, the Underwriters' Questionnaire, the Power of
Attorney, the Selected Dealer Agreement and related documents and the
Preliminary Blue Sky Memorandum and any supplement thereto; (iii) the costs
incident to the authentication, issuance, delivery and transfer of the
Shares to the Underwriters; (iv) all taxes, if any, on the issuance,
delivery and transfer of the Shares to be sold by the Company; (v) the
fees, expenses and all other costs of qualifying the Shares for the sale
under the securities or Blue Sky laws of those jurisdictions in which the
Shares are to be offered or sold; (vi) the fees, expenses and other costs
of, or incident to, securing any review or approvals by or from the NASD
exclusive of fees of the Underwriters' counsel; (vii) the filing fees of
the SEC; (viii) the cost of furnishing to the Underwriters copies of the
Registration Statement, each Preliminary Prospectus and the Prospectus
(including any supplement or amendment thereto) as herein provided; (ix)
the Company's travel expenses in connection with meetings with the
brokerage community and institutional investors and expenses associated
with hosting such meetings, including meeting rooms, meals, facilities and
ground transportation expenses; (x) the costs and expenses associated with
settlement in same day funds (including, but not limited to, interest or
cost of funds expenses), if desired by the Company; (xi) the fees for
inclusion of the Shares on the NMS; (xii) the cost of printing and
engraving certificates for the Shares; (xiii) the cost and charges of any
transfer agent; and (xiv) all other costs and expenses reasonably incident
to the performance of its obligations hereunder that are not otherwise
specifically provided for in this Section 7, provided that, except as
specifically set forth in subsection (c) of this Section 7, the
Underwriters shall be responsible for their out-of-pocket expenses,
including their lodging and travel expenses associated with meetings with
the brokerage community and institutional investors, and the fees and
expenses of their counsel.
(b) The Company and the Selling Shareholders shall pay to the
Representative, individually and not in its capacity as a Representative, a
non-accountable expense allowance of 1% of the aggregate Offering Price of
the Firm Shares and the Optional Shares, but only upon payment therefor by
the several Underwriters. If the sale of the Firm Shares provided for
herein is not consummated by reason of any failure, refusal or inability on
the part of the Company to perform any agreement on its part to be
performed, or because any other condition to the Underwriters' obligations
hereunder is not fulfilled, the Company shall pay for all reasonable
out-of-pocket accountable expenses (including fees and disbursements of
counsel) actually incurred by the Underwriters in connection with the
proposed sale of the Firm Shares. If this agreement is terminated or if the
sale of the Firm Shares provided for herein is not consummated for any
reason other than by reason of any failure, refusal or inability on the
part of the Company to perform any agreement on its part to be performed or
because any other condition of the Underwriters' obligations hereunder is
not fulfilled, the Company shall pay the several Underwriters for all
reasonable out-of-pocket accountable expenses (including fees and
disbursements of counsel) actually incurred by the Underwriters in
connection with the proposed sale of the Firm Shares, up to a maximum of
$50,000. The Company shall not in any event be liable to any of the
Underwriters for the loss of anticipated profits from the transactions
covered by this Agreement. You acknowledge that $35,000 has already been
paid to you by the Company to be applied against such non-accountable
expense allowance or such reasonable out-of-pocket accountable expenses if
the sale of Firm Shares is not consummated as provided in the preceding
sentences, as the case may be. You agree that any portion of such $35,000
that is not necessary to pay the Underwriters for their reasonable
out-of-pocket accountable expenses actually incurred if the sale of Shares
is not consummated for any reason shall be returned to the Company.
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(c) The Company shall pay as due any registration, qualification and
filing fees and any accountable out-of-pocket disbursements in connection
with such registration, qualification or filing as may be made in the
jurisdictions in which the Representative determines, after consultation
with the Company, to offer or sell the Shares.
8. Conditions of Underwriters' Obligations. The obligation of each
Underwriter to purchase and pay for the Firm Shares that it has agreed to
purchase hereunder on the Closing Date, and to purchase and pay for any Optional
Shares as to which its right to purchase under Section 5 has been exercised on
an Option Closing Date, is subject at the date hereof, the Closing Date and any
Option Closing Date to the continuing accuracy of the representations and
warranties of the Company set forth herein, to the performance by the Company of
its covenants, agreements and obligations hereunder and to the following
additional conditions:
(a) The Registration Statement shall have become effective not later
than 5:30 P.M., Denver, Colorado time, on the date of this Agreement, or at
such later time or on such later date as the Representative may agree to in
writing; if required by the Regulations, the Prospectus shall have been
filed with the SEC pursuant to Rule 424(b) of the Regulations within the
applicable time period prescribed for such filing by the Regulations and in
accordance with paragraph 6(a) hereof; on or prior to the Closing Date or
any Option Closing Date, as the case may be, no stop order or other order
preventing or suspending the effectiveness of the Registration Statement or
the sale of any of the Shares shall have been issued under the act or any
state securities law and no proceedings for that purpose shall have been
initiated or shall be pending or, to the Representative's knowledge or the
knowledge of the Company, shall be contemplated by the SEC or any authority
in any jurisdiction designated by the Representative pursuant to paragraph
5(f) hereof and any request on the part of the SEC for additional
information shall have been complied with to the reasonable satisfaction of
counsel for the Underwriters.
(b) All corporate proceedings and other matters incident to the
authorization, form and validity of this Agreement and the Shares and the
form of the Registration Statement, each Preliminary Prospectus and the
Prospectus, and all amendments and supplements thereto and all other legal
matters relating to this Agreement and the transactions contemplated
hereby, shall be satisfactory in all respects to counsel to the
Underwriters; the Company shall have furnished to such counsel all
documents and information that they may reasonably request to enable them
to pass upon such matters; and the Representative shall have received from
the Underwriters' counsel, Berliner Zisser Walter & Gallegos, P.C., a
favorable opinion, dated as of the Closing Date and any Option Closing
Date, as the case may be, and addressed to the Representative individually
and as the Representative of the several Underwriters with respect to the
due authorization, execution and delivery of this Agreement, that the
issuance and sale of the Shares have been duly authorized by the Company,
that when the Shares have been duly delivered against payment therefor as
contemplated by this Agreement, they will be validly issued, fully paid and
non-assessable and that the Registration Statement has become effective
under the Act.
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(c) The NASD shall have indicated that it has no objection to the
underwriting arrangements pertaining to the sale of any of the Shares.
(d) The Representative shall have received copies of the lockup
agreements described in paragraph 6(l) signed by those persons set forth on
Schedule II hereto.
(e) The Representative shall have received at or prior to the Closing
Date from the Company's counsel a memorandum or summary, in form and
substance satisfactory to the Representative, with respect to the
qualification for offering and sale by the Underwriters of the Shares under
the securities or Blue Sky laws of such jurisdictions designated by the
Representative pursuant to paragraph 6(f) hereof.
(f) You shall have received on the Closing Date and on the Option
Closing Date, if any, the following opinions of Schlueter & Associates,
counsel for the Company and the Selling Shareholders, dated the Closing
Date and the Option Closing Date, if any, and addressed to the Underwriters
and with reproduced copies or signed counterparts thereof for each of the
Underwriters:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation;
(ii) The Company has the corporate power to own, lease and
operate its properties and to conduct its business as described in the
Prospectus; and the Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in
which the ownership or leasing of properties or the conduct of its
business requires such qualification, except where the failure so to
qualify taken in the aggregate would not have a material adverse
effect on the business, operations or financial condition of the
Company, and to such counsel's knowledge the Company does not own or
control, directly or indirectly, any corporation, association or other
entity.
(iii) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein; the issued and
outstanding shares of capital stock of the Company have been duly and
validly authorized and issued, are fully paid and nonassessable, and
to such counsel's knowledge have not been issued in violation of any
preemptive right, or co-sale right, registration right, right of first
refusal or other similar right;
(iv) The Shares to be issued and sold by the Company to the
several Underwriters pursuant to the terms of this Agreement will be,
upon issuance and delivery against payment therefor in accordance with
the terms hereof, duly authorized and validly issued and fully paid
and nonassessable; and the stockholders of the Company do not have any
preemptive rights, co-sale rights, rights of first refusal or other
similar rights, which rights have not previously been waived, to
purchase any of the Shares pursuant to the Company's charter or
bylaws, or to such counsel's knowledge, any agreement to which the
Company is a party;
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(v) The Company has the corporate power and authority to enter
into this Agreement and to issue, sell and deliver to the Underwriters
the Shares to be issued, sold and delivered by it hereunder;
(vi) This Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed
and delivered by the Company.
(vii) This Agreement and the Representative's Warrant Agreement,
when executed and delivered, shall have been duly authorized by all
necessary corporate action on the part of the Company and have been
duly executed and delivered by the Company and, assuming due
authorization, execution and delivery by you, are the valid and
binding agreements of the Company, except insofar as the
indemnification and contribution provisions may be limited by
applicable law and except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or
affecting creditor's rights generally or by general equitable
principles;
(viii) The Registration Statement has become effective under the
Act, and, to such counsel's knowledge, no stop orders suspending the
effectiveness of the Registration Statement have been issued and no
proceedings for that purpose have been instituted or are pending or
threatened under the Act;
(ix) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements,
financial and statistical data and supporting schedules included or
incorporated by reference in the Registration Statement and the
Prospectus and each amendment or supplement thereto, as to which such
counsel need express no opinion) as of the effective date of the
Registration Statement, complied as to form in all material respects
with the requirements of the Act and the Regulations;
(x) The terms and provisions of the capital stock of the Company
conform in all material respects to the description thereof contained
in the Registration Statement and Prospectus, and the information in
the Prospectus under the caption "Description of Capital Stock" to the
extent that it constitutes matters of law or legal conclusions, has
been reviewed by such counsel and are correct in all material
respects, and the form of certificate evidencing the Common Stock
complies with Colorado law;
(xi) The descriptions in the Registration Statement and the
Prospectus of the articles of incorporation and bylaws of the Company
and of Colorado corporate law, if any, the Act, and the Regulations
are accurate and fairly present the information required to be
presented by the Act or the Regulations;
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(xii) To such counsel's knowledge, there are no agreements,
contracts, leases or documents of a character required to be described
or referred to in the Registration Statement or Prospectus or to be
filed as an exhibit to the Registration Statement that are not
described or referred to therein and filed as required;
(xiii) The performance of this Agreement and the Representative's
Warrant Agreement and the consummation of the transactions
contemplated will not result in any violation of the Company's charter
or bylaws, or, to such counsel's knowledge, result in a material
breach or violation of any of the terms or provisions of, or
constitute a material default under, any material indenture, mortgage,
deed of trust, loan agreement, bond, debenture, note agreement or
other evidence of indebtedness, or any material lease, contract or
other agreement or instrument which has been filed as an exhibit to
the Registration Statement, or, to such counsel's knowledge, any
applicable statute, rule or regulation known to such counsel or, to
such counsel's knowledge, any order, writ or decree of any court or
governmental agency or body having jurisdiction over the Company, or
over any of the Company's properties or operations;
(xiv) No authorization, approval or consent of any governmental
authority or agency is necessary in connection with the consummation
of the transactions herein contemplated, except such as have been
obtained under the Act or as may be required by the National
Association of Securities Dealers, Inc., the NMS or under state or
other securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters;
(xv) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against the Company of
a character that are required to be disclosed in the Registration
Statement or the Prospectus, by the Act or the Regulations;
(xvi) To such counsel's knowledge, except as disclosed in the
Registration Statement, no holders of Common Stock or other securities
of the Company have registration rights with respect to securities of
the Company;
(xvii) The Company is not an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in
the Investment Company Act of 1940;
(xviii) Each Selling Shareholder has duly authorized, executed
and delivered a Power of Attorney and Custody Agreement which
constitute valid and legally binding agreements of such Selling
Shareholder in accordance with their terms, except as enforceability
of the same may be limited by general equitable principles,
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors rights generally;
(xix) This Agreement has been duly and validly executed and
delivered by or on behalf of each Selling Shareholder and constitutes
the valid and legally binding agreement of each Selling Shareholder in
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accordance with its terms, except as enforceability of the same may be
limited by general equitable principles, bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights
generally and except as to those provisions relating to indemnity or
contribution for liability arising under federal or state securities
laws or under common law, as to which no opinion need be expressed;
(xx) Based solely upon representations which such counsel has
obtained from the Selling Shareholders (as to which nothing has come
to the attention of such counsel which has caused such counsel to
believe such representations are untrue) and the examination of the
certificates representing the Shares and, assuming that the
Underwriters are good faith purchasers of the Shares for value without
notice, the Underwriters will be the owners of such Shares, free and
clear of any claims, liens, encumbrances and security interests
whatsoever;
(xxi) To the best knowledge of such counsel, all authorizations,
orders and consents necessary for the execution and delivery by each
Selling Shareholder of this Agreement, the Power of Attorney and the
Custody Agreement have been duly and validly given, and each Selling
Shareholder has full legal rights, power and authority to enter into
this Agreement, the Power of Attorney and the Custody Agreement and to
sell, assign, transfer and deliver to the Underwriters the number of
Shares to be sold by such Selling Shareholder hereunder; and
(xxii) The performance of this Agreement and the consummation of
the transactions contemplated hereby and by the Power of Attorney and
the Custody Agreement will not result in a breach or violation by such
Selling Shareholder of any of the terms or provisions of, or
constitute a default by such Selling Shareholder under, any indenture,
mortgage, trust (constructive or other), loan agreement or instrument
known to such counsel to which such Selling Shareholder is a party or
by which such Selling Shareholder is bound, any statute, or any
judgment, decree, order, rule or regulation known to such counsel of
any court or governmental agency or body applicable to such Selling
Shareholder.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants for the Company, and the
Representative, at which the contents of the Registration Statement and
Prospectus and related matters were discussed and, although such counsel is not
passing upon, and does not assume any responsibility for, the accuracy,
completeness or fairness of the statements contained in the Registration
Statement and Prospectus and has not made any independent check or verification
thereof, on the basis of the foregoing (relying as to materiality to a large
extent upon the statements of officers and other representatives of the
Company), no facts have come to such counsel's attention that lead them to
believe that either the Registration Statement (including the incorporated
documents) at the time such Registration Statement became effective contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or the Prospectus (including the incorporated documents) as of its date
contained an untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that such counsel need
express no opinion with respect to the financial statements, schedules and other
financial and statistical data included in the Registration Statement or
Prospectus.
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In giving their opinion, Schlueter & Associates may rely as to matters of
law, other than the laws of the State of Colorado and the Federal law of the
United States, upon the opinions of counsel satisfactory to you and as to
matters of fact, to the extent Schlueter & Associates deems appropriate, on
certificates of responsible Company officers and public officials.
(g) At the Closing Date and any Option Closing Date: (A) the
Registration Statement and any post-effective amendment thereto and the
Prospectus and any amendments or supplements thereto shall contain all
statements that are required to be stated therein in accordance with the
Act and the Regulations and shall conform, in all material respects, to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor any post-effective amendment thereto nor the Prospectus and
any amendments or supplements thereto shall contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, (B) since the
respective dates as of which information is given in the Registration
Statement and any post-effective amendment thereto and the Prospectus and
any amendments or supplements thereto, except as otherwise stated therein,
there shall have been no material adverse change in the properties,
condition (financial or otherwise), results of operations, stockholders'
equity, business or management of the Company, from that set forth therein,
whether or not arising in the ordinary course of business, other than as
referred to in the Registration Statement or Prospectus, (C) since the
respective dates as of which information is given in the Registration
Statement and any post-effective amendment thereto and the Prospectus or
any amendment or supplement thereto, there shall have been no transaction,
contract or agreement entered into by the Company, other than in the
ordinary course of business and as set forth in the Registration Statement
or Prospectus that has not been, but would be required to be, set forth in
the Registration Statement or Prospectus; (D) no action, suit or proceeding
at law or in equity shall be pending or, to the knowledge of the Company,
threatened against the Company that would be required to be set forth in
Prospectus, other than as set forth therein, and no proceedings shall be
pending or, to the knowledge of the Company, threatened against the Company
before or by any federal, state or other commission, board or
administrative agency wherein an unfavorable decision, ruling or finding
would materially adversely affect the properties, condition (financial or
otherwise), results of operations, stockholders' equity or business of the
Company, other than as set forth in the Prospectus. The Representative
shall have received at the Closing Date and any Option Closing Date
certificates of each of the Chief Executive Officer and the Treasurer of
the Company dated as of the date of the Closing Date or Option Closing
Date, as the case may be, and addressed to the Representative, individually
and as the Representative of the several Underwriters, to the effect, that
the conditions set forth in this subsection have been satisfied and as to
the accuracy and performance, as of the Closing Date or the Option Closing
Date, as the case may be, of the agreements, representations and warranties
of the Company set forth herein.
(h) At the time this Agreement is executed and at the Closing Date and
any Option Closing Date, the Representative shall have received a letter
addressed to the Representative, individually and as the Representative of
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the several Underwriters, and in form and substance satisfactory to the
Representative in all respects (including the nonmaterial nature of the
changes or decreases, if any, referred to in clause (iii) below) from
Deloitte & Touche, L.L.P. dated as of the date of this Agreement, the
Closing Date or Option Closing Date, as the case may be:
(i) confirming that they are independent public accountants
within the meaning of the Act and the Regulations, that they are
members of the SEC Practice Section, and stating that the section of
the Registration Statement under the caption "Experts" is correct
insofar as it relates to them;
(ii) stating that, in their opinion, the financial statements of
the Company audited by them and included in the Registration Statement
comply in form in all material respects with the applicable accounting
requirements of the Act and the Regulations;
(iii) stating that, on the basis of specified procedures, which
included a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the
latest available unaudited interim financial statements), a reading of
the minutes of the meetings of the stockholders and the Board of
Directors of the Company and audit and compensation committees of such
Board, if any, and inquiries to certain officers and other employees
of the Company who are responsible for financial and accounting
matters and other specified procedures and inquiries, nothing has come
to their attention that would cause them to believe that (A) the
unaudited financial statements and related schedules of the Company
included in the Registration Statement, if any, (I) do not comply in
form in all material respects with the applicable accounting
requirements of the Act and the Regulations or (II) were not fairly
presented in conformity with generally accepted accounting principles
on a basis substantially consistent with that of the audited financial
statements and related schedules included in the Registration
Statement or (B)(I) at a specified date, not more than five business
days prior to the date of such letter there was any change in the
capital stock or short-term or long-term debt of the Company, or any
decrease in net current assets, total assets or stockholders' equity
as compared with the amounts shown in the July 31, 1996 audited
balance sheet of the Company included in the Registration Statement,
other than as set forth in or contemplated by the Registration
Statement and Prospectus, and (II) during the period from August 1,
1996 to a specified date not more than five business days prior to the
date of such letter, there has been any material decrease as compared
with the corresponding period in the preceding year, in revenues,
operating income or income before income taxes or in total or per
share amounts of net income of the Company or, if there was any such
change or decrease, setting forth the amount of such change or
decrease; and
(iv) stating that they have compared specific dollar amounts,
numbers of shares and other information (including pro forma
information) pertaining to the Company set forth in the Registration
Statement and Prospectus that have been specified by the
Representative prior to the date of this Agreement, to the extent that
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such amounts, numbers, percentages and information may be derived from
the general accounting or other records of the Company with the result
obtained from the application of specified readings, inquiries and
other appropriate procedures (which procedures do not constitute an
audit in accordance with generally accepted auditing standards) set
forth in the letter, and found them to be in agreement.
(i) At the Closing Date and any Option Closing Date, the
Representative shall have been furnished such additional documents and
certificates as it shall reasonably request.
(j) No action shall have been taken by the NASD the effect of which is
to make it improper, at any time prior to the Closing Date or any Option
Closing Date, for members of the NASD to execute transactions as principal
or as agent in the Shares or to trade or deal in the Shares, and no
proceedings for the purpose of taking such action shall have been
instituted or shall be pending or, to the Company's or the Representative's
knowledge, shall be contemplated by the NASD.
If any conditions to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or any Option Closing Date, as the
case may be, shall not have been fulfilled, the Representative may on behalf of
the several Underwriters terminate this Agreement or, if it so elects, waive any
such conditions which have not been fulfilled or extend the time for their
fulfillment.
9. Indemnification.
(a) The Company shall indemnify and hold harmless each Underwriter,
and each person, if any, who controls each Underwriter within the meaning
of the Act or the Exchange Act, and each of their officers, directors,
partners, employees, agents and counsel and each Selling Shareholder
against any and all loss, liability, claim, damage and expense whatsoever,
joint or several, as incurred, including, but not limited to, attorneys'
fees, any and all expense whatsoever incurred in investigating, preparing
or defending against any litigation, commenced or threatened, or any claim
whatsoever or in connection with any investigation or inquiry of, or action
or proceeding that may be brought against, the respective indemnified
parties, arising out of or based upon (i) any untrue statements or alleged
untrue statements of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment
or supplement to the Preliminary Prospectus, Registration Statement or the
Prospectus or any application or other document, including, but without
limitation "Blue Sky" applications, documents or correspondence (in this
Section 9 collectively called "application") executed by the Company and
based upon written information furnished by or on behalf of the Company
filed in any jurisdiction in order to qualify all or any part of the Shares
under the securities laws thereof or filed with the SEC or the NASD, (ii)
the omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or (iii) any
breach of any representation, warranty, covenant or agreement of the
Company contained in this Agreement; provided, however, that the foregoing
indemnity shall not apply in respect of and to the extent of any statement
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<PAGE>
or omission made in reliance upon and in conformity with written
information furnished to the Company or any Underwriter through the
Representative expressly for use in any Preliminary Prospectus, the
Registration Statement or Prospectus, or any amendment or supplement
thereof. It is understood that the statements appearing in any Preliminary
Prospectus, the Prospectus or the Registration Statement (A) on the inside
front cover page with respect to stabilization and passive market making,
(B) in the section entitled "Underwriting," and (C) in the section entitled
"Legal Matters" with respect to the identity of counsel for the
Underwriters constitute the only information furnished in writing by or on
behalf of any Underwriter for inclusion in any Preliminary Prospectus, the
Prospectus or the Registration Statement. This indemnity agreement will be
in addition to any liability the Company may otherwise have.
(b) The Selling Shareholders shall indemnify and hold harmless the
Company, each Underwriter, and each person, if any, who controls the
Company and each Underwriter within the meaning of the Act or the Exchange
Act, and all officers, directors, employers, agents and counsel of the
Company and each Underwriter against any and all loss, liability, claim,
damage and expense whatsoever, including, but not limited to, attorneys'
fees and any and all expense whatsoever incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or
any claim whatsoever or in connection with any investigation or inquiry of,
or action or proceeding that may be brought against, the respective
indemnified parties, arising out of or based upon any untrue statements or
alleged untrue statements of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any
application or other document (in this Section 9 collectively called
"application") executed by the Selling Shareholders and based upon written
information furnished by or on behalf of the Selling Shareholders filed in
any jurisdiction in order to qualify all or any part of the Shares under
the securities laws thereof or filed with the SEC or the NASD, or the
omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that the foregoing indemnity shall not apply in respect of any
statement or omission made in reliance upon and in conformity with written
information furnished to the Selling Shareholders or any Underwriter
through the Representative expressly for use in any Preliminary Prospectus,
the Registration Statement or Prospectus, or any amendment or supplement
thereof. This indemnity agreement will be in addition to any liability the
Selling Shareholders may otherwise have.
(c) The Underwriters, agree to indemnify and hold harmless the
Company, each of the directors of the Company, each of the officers of the
Company who shall have signed the Registration Statement, each other
person, if any, who controls the Company within the meaning of the Act or
the Exchange Act, the employees, agents and counsel to the Company and each
Selling Shareholder to the same extent as the foregoing indemnities from
the Company and the Selling Shareholders to the several Underwriters, but
only with respect to any loss, liability, claim, damage or expense
resulting from statements or omissions, or alleged statements or omissions,
if any, made in any Preliminary Prospectus, Registration Statement or
Prospectus or any amendment or supplement thereof or any application in
reliance upon, and in conformity with written information furnished to the
Company by any Underwriter through the Representative with respect to any
Underwriter by or on behalf of such Underwriter expressly for use in any
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<PAGE>
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereof or any application, as the case may be.
This indemnity agreement will be in addition to any liability such
Underwriter may otherwise have.
(d) If any action, inquiry, investigation or proceeding is brought
against any person in respect of which indemnity may be sought pursuant to
any of the three preceding paragraphs, such person (hereinafter called the
"indemnified party") shall, promptly after formal notification of, or
receipt of service of process for, such action, inquiry, investigation or
proceeding, notify in writing the party or parties against whom
indemnification is to be sought (hereinafter called the "indemnifying
party") of the institution of such action, inquiry, investigation or
proceeding and the indemnifying party, upon the request of the indemnified
party, shall assume the defense of such action, inquiry, investigation or
proceeding, including the employment of counsel (reasonably satisfactory to
such indemnified party) and payment of expenses. No indemnification
provided for in this Section 9 shall be available to any indemnified party
who shall fail to give such notice if the indemnifying party does not have
knowledge of such action, inquiry, investigation or proceeding and shall
have been materially prejudiced by the failure to give such notice, but the
omission so to notify the indemnifying party shall not relieve the
indemnifying party otherwise than under this Section 9. Such indemnified
party or controlling person shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless the employment of such
counsel shall have been authorized in writing by the indemnifying party in
connection with the defense of such action or the indemnifying party shall
not have employed counsel to have charge of the defense of such action,
inquiry, investigation or proceeding or in the case of the Underwriters,
the Underwriters or any of them shall have been advised by counsel that it
is advisable that they or any of them to be represented by their own
counsel, in any of which events the reasonable fees and expenses of such
counsel shall be borne by the indemnifying party. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses
of more than one separate counsel (in addition to one local counsel in each
jurisdiction in which any proceeding may be brought) for all indemnified
parties. In the case of any such separate counsel for the Underwriters,
such firm shall be designated in writing by the Representative. Expenses
covered by the indemnification in this subsection (d) of this Section 9
shall be paid by the indemnifying party as they are incurred by the
indemnified party. Anything in this subsection to the contrary
notwithstanding, the indemnifying party shall not be liable for any
settlement of any such claim effected without its written consent. The
indemnifying party shall promptly notify the indemnified party of the
commencement of any litigation, inquiry, investigation or proceeding
against the indemnifying party or any of its officers or directors in
connection with the issue and sale of any of the Shares or in connection
with such Preliminary Prospectus, Registration Statement or Prospectus or
any amendment or supplement or any of the foregoing or any such
application.
(e) If the indemnification provided for in this Section 9 is
unavailable to or is insufficient to hold harmless an indemnified party
under subsections (a), (b) and (c) of this Section 9, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, liabilities, claims, damages
or expenses (or actions, inquiries, investigations or proceedings in
respect thereof) referred to in subsections (a), (b) or (c) or this
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Section 9 in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Selling Shareholders on the one
hand and the Underwriters on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is
not permitted by applicable law, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company and the Selling Shareholders on the
one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, liabilities, claims
or expenses (or actions, inquiries, investigations or proceedings in
respect thereof), as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Selling Shareholders
on the one hand and the Underwriters on the other shall be deemed to be in
the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the Selling Shareholders
bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of
the Prospectus. The relative faults shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company and the Selling Shareholders
on the one hand or the Underwriters on the other hand and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this section (e) of this Section 9
were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any method or allocation that
does not take account of the equitable considerations referred to above in
this subsection (e) of this Section 9. The amount paid or payable by an
indemnified party as a result of the losses, liabilities, claims, damages
or expenses (or actions, inquiries, investigations or proceedings in
respect thereof) referred to above in this subsection (e) of this Section 9
shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this subsection (e)
of this Section 9, (i) the provisions of the Agreement Among Underwriters
shall govern contribution among Underwriters, (ii) no Underwriter (except
as provided in the Agreement Among Underwriters) or controlling person of
such Underwriter shall be required to contribute any amount in excess of
the underwriting discounts and commissions applicable to the Shares
purchased by such Underwriter less the aggregate amount of any damages
which such Underwriter and its controlling persons have otherwise been
required to pay in respect of the same or any substantially similar claims
and (iii) no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligation in this subsection (e) of this Section 9 to
contribute are several in proportion to their respective underwriting
obligations and not joint.
The obligations of the Company under this Section 9 shall be in
addition to any liability which the Company may otherwise have, and shall
extend, upon the same terms and conditions to each officer, director,
employee, agent or counsel of each Underwriter and to each person, if any,
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who controls any Underwriter within the meaning of the Act; and the
obligations of the Underwriters under this Section 9 shall be in addition
to any liability that the respective Underwriters may otherwise have, and
shall extend, upon the same terms and conditions, to each of the officers
and directors of the Company who have signed the Registration Statement and
to each person, if any, who controls the Company within the meaning of the
Act and to each employee, agent and counsel to the Company, in either case,
whether or not such person is a party to any action or proceeding.
10. Representations and Agreements to Survive Delivery. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Date and any Option Closing Date; and such
representations, warranties and agreements of the Underwriters and the Company,
including without limitation the indemnity and contribution agreements contained
in Section 9 hereof and the agreements contained in Sections 7, 10, 11 and 14
hereof, shall remain operative and in full force and effect for a period of the
applicable federal and state statutes of limitations regardless of any
investigation made by or on behalf of any Underwriter or any controlling person,
and shall survive delivery of the Shares and termination of this Agreement,
whether before or after the Closing Date or any Option Closing Date.
11. Effective Date of this Agreement and Termination Thereof.
(a) This Agreement shall become effective immediately as to Sections
7, 9, 10, 11 and 14 and, as to all other provisions, (i) if at the time of
execution and delivery of this Agreement the Registration Statement has not
become effective, at 9:30 A.M., Denver, Colorado time, on the first
business day following the Effective Date, or (ii) if at the time of
execution and delivery of this Agreement the Registration Statement has
been declared effective, at 9:30 A.M., Denver, Colorado time, on the date
of execution of this Agreement; but this Agreement shall nevertheless
become effective at such earlier time after the Registration Statement
becomes effective as the Representative may determine by notice to the
Company or by release of any of the Shares for sale to the public. For the
purposes of this Section 11, the Shares shall be deemed to have been so
released upon the release for publication of any newspaper advertisement
relating to the Shares or upon the release by the Representative of
telegrams (i) advising the Underwriters that the shares are released for
public offering or (ii) offering the Shares for sale to securities dealers,
whichever may occur first. The Representative may prevent the provisions of
this Agreement (other than those contained in Sections 7, 9, 10, 11 and 14)
hereof from becoming effective without liability of any party to any other
party, except as noted below, by giving the notice indicated in subsection
(c) of this Section 11 before the time the other provisions of this
Agreement become effective.
(b) The Representative shall have the right to terminate this
Agreement at any time prior to the Closing Date as provided in Sections 8
and 12 hereof or if any of the following have occurred: (i) since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, any material adverse change or any
development involving a prospective material adverse change in or
materially affecting the condition or obligations, financial or otherwise,
of the Company, or the revenues, earnings, business affairs, management or
business prospects of the Company, whether or not arising in the ordinary
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course of business; (ii) any outbreak of hostilities or other national or
international calamity or crisis or change in economic, political or
financial market conditions if such outbreak, calamity, crisis or change
would, in the Representative's reasonable judgment, have a material adverse
effect on the Company, the financial markets of the United States or the
offering or delivery of the Shares; (iii) suspension of trading generally
in securities on the New York Stock Exchange, the American Stock Exchange,
the NMS or the over-the-counter market or limitation on prices (other than
limitations on hours or numbers of days of trading) for securities or the
promulgation of any federal or state statute, regulation, rule or order of
any court or other governmental authority which in the Representative's
reasonable opinion materially and adversely affects trading on any Exchange
or the over-the-counter market; (iv) the decrease in either the Dow Jones
Industrial Average or the Nasdaq Composite Index of 15% or more from their
respective closings on the day immediately preceding the date the
Registration Statement becomes effective; (v) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation,
rule or order of any court or other governmental authority which in the
Representative's reasonable opinion materially and adversely affects or
will within the following twelve month period materially and adversely
affect the business or operations of the Company; (vi) declaration of a
banking moratorium by either federal or state authorities; (vii) the taking
of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs which in the Representative's
reasonable opinion has a material adverse effect on the securities markets
in the United States; (viii) declaration of a moratorium in foreign
exchange trading by major international banks or other institutions; (ix)
trading in any securities of the Company shall have been suspended or
halted by the NASD or the SEC; (x) the Company has failed or refused, at or
prior to the Closing Date, to perform any material agreement on its part
hereunder; or (xi) any other condition to the Underwriters hereunder is not
fulfilled.
(c) If the Representative elects to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this
Section 11, the Representative shall notify the Company thereof promptly by
telephone, telex, telegraph or facsimile, confirmed by letter.
12. Default by an Underwriter.
(a) If any Underwriter or Underwriters shall default in its or their
obligation to purchase Firm Shares or Optional Shares hereunder, and if the
Firm Shares or Optional Shares with respect to which such default relates
do not exceed the aggregate of 10 percent of the number of Firm Shares or
Optional Shares, as the case may be, that all Underwriters have agreed to
purchase hereunder, then such Firm Shares or Optional Shares to which the
default relates shall be purchased severally by the non-defaulting
Underwriters in proportion to their respective commitments hereunder.
(b) If such default relates to more than 10 percent of the Firm Shares
or Optional Shares, as the case may be, the Representative may in its
discretion arrange for another party or parties (including a non-defaulting
Underwriter) to purchase such Firm Shares or Optional Shares to which such
default relates, on the terms contained herein. In the event that the
Representative does not arrange for the purchase of the Firm Shares
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or Optional Shares to which a default relates as provided in this Section
12, this Agreement may be terminated by the Representative or by the
Company without liability on the part of the several Underwriters (except
as provided in Section 9 hereof) or the Company (except as provided in
Sections 7 and 9 hereof), but nothing herein shall relieve a defaulting
Underwriter of its liability, if any, to the other several Underwriters and
to the Company for damages occasioned by its default hereunder.
(c) If the Firm Shares or Optional Shares to which the default relates
are to be purchased by the non-defaulting Underwriters, or are to be
purchased by another party or parties as aforesaid, the Representative or
the Company shall have the right to postpone the Closing Date or any Option
Closing Date, as the case may be, for a reasonable period but not in any
event exceeding seven days, in order to effect whatever changes may thereby
be made necessary in the Registration Statement or the Prospectus or in any
other documents and arrangements, and the Company agrees to file promptly
any amendment to the Registration Statement or supplement to the Prospectus
which in the opinion of counsel for the Underwriters may thereby be made
necessary. The terms "Underwriters" and "Underwriter" as used in this
Agreement shall include any party substituted under this Section 12 with
like effect as if it had originally been a party to this Agreement with
respect to such Firm Shares or Optional Shares.
13. Information Furnished by Underwriters. The statements appearing in any
Preliminary Prospectus, the Prospectus or the Registration Statement (a) on the
inside front cover page with respect to stabilization and passive market-making,
(b) in the section entitled "Underwriting," and (c) in the section entitled
"Legal Matters" with respect to the identity of counsel for the Underwriters
constitute the only information furnished in writing by or on behalf of any
Underwriter for inclusion in any Preliminary Prospectus, the Prospectus or the
Registration Statement referred to in subsection (b) of Section 1 hereof and
subsections (a), (b) and (c) of Section 10 hereof.
14. Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to any Underwriter,
shall be mailed, delivered, telexed, telegrammed, telegraphed or telecopied and
confirmed to such Underwriter, c/o Janco Partners, Inc., 5251 DTC Parkway, Suite
1010, Englewood, Colorado 80111, with a copy to Berliner Zisser Walter &
Gallegos, P.C., 1700 Lincoln Street, Suite 4700, Denver, Colorado 80203,
Attention: David C. Roos; and if sent to the Company or the Agent shall be
mailed, delivered, telexed, telegrammed, telegraphed or telecopied and confirmed
to Accelr8 Technology Corporation, 303 East 17th Avenue, Suite 108, Denver,
Colorado 80203, Attention: Thomas V. Geimer, with a copy to Schlueter &
Associates, 1050 17th Street, Suite 1700, Denver, Colorado 80202, Attention:
Henry F. Schlueter.
15. Parties. This Agreement shall inure solely to the benefit of, and shall
be binding upon, the several Underwriters, the Company, and the controlling
persons, directors, officers, employees, agents and counsel referred to in
Section 9 hereof, and their respective successors, assigns, heirs and legal
representatives, and no other person shall have or be construed to have any
legal or equitable right, remedy or claim under or in respect of or by virtue of
this Agreement or any provision herein contained. The term "successors" and
"assigns" shall not include any purchaser of the Shares merely because of such
purchase.
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16. Definition of Business Day. For purposes of this Agreement, "business
day" means any day on which the New York Stock Exchange, Inc. is open for
trading.
17. Counterparts. This Agreement may be executed in one or more
counterparts and all such counterparts will constitute one and the same
instrument.
18. Construction. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado applicable to agreements made
and performed entirely within such State.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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If the foregoing correctly sets forth the understanding among the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement by and
among the Underwriters and the Company.
Very truly yours,
ACCELR8 TECHNOLOGY CORPORATION
By: /S/ THOMAS V. GEIMER
---------------------------------
Thomas V. Geimer, President
The foregoing Underwriting Agreement Each of the Selling Shareholders
is hereby confirmed and accepted as
of the date first above written.
By:
----------------------------------
Attorney-in-fact
JANCO PARTNERS, INC.
By: /S/ JAN E. HELEN
-----------------------------
Jan E. Helen, President
Acting on behalf of itself and
the several Underwriters named in
Schedule I hereto
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SCHEDULE I
Underwriters
Number of Shares
Underwriter To Be Purchased
----------- ---------------
Janco Partners, Inc. . . . . . . . . . . . . . . . . . . . . .
TOTAL . . . . . . . . . . . . . . . . . . . 1,000,000
=========
<PAGE>
SCHEDULE II
Persons Subject to Lockup Agreements
Shares Subject to
Name Lock-up Agreement
---- -----------------
Public Offering of
1,000,000 Shares Common Stock
ACCELR8 TECHNOLOGY CORPORATION
AGREEMENT AMONG UNDERWRITERS
, 1996
-------------
JANCO PARTNERS, INC.
As Representative of the Several Underwriters
5251 DTC Parkway, Suite 1010
Englewood, Colorado 80111
Ladies and Gentlemen:
1. Underwriting Agreement. We understand that Accelr8 Technology
Corporation, a Colorado corporation (the "Company"), and certain shareholders of
the Company (the "Selling Shareholders") propose to enter into an Underwriting
Agreement substantially in the form attached hereto as Exhibit A (the
"Underwriting Agreement") with you and other prospective underwriters, including
ourselves (the "Underwriters"), acting severally and not jointly, providing for
(a) the purchase by the Underwriters from the Company of an aggregate of
1,000,000 shares of the Common Stock, no par value (the "Common Stock"), of the
Company (the "Firm Shares") and (b) the grant by the Selling Shareholders to the
Underwriters of options to purchase up to an additional 150,000 shares of such
Common Stock (the "Option Shares"), for the purpose of covering over-allotments
in the sale of the Firm Shares, upon the conditions in the Underwriting
Agreement in which we agree, in accordance with the terms thereof and subject to
adjustment pursuant to Section 7 thereof, to purchase the number of Firm Shares
set forth opposite our name in Schedule I thereof and our pro rata portion of
the number of Option Shares with respect to which the over-allotment option has
been exercised. The Firm Shares and the Option Shares so purchased are
hereinafter referred to as the "Shares." The offering of the Shares to the
public in the manner contemplated by the Underwriting Agreement is referred to
herein as the "Public Offering."
2. Registration Statement and Prospectus. The Shares are more particularly
described in the registration statement relating thereto filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act"). Amendments to such registration statement have been or may be
filed, in which, with our consent hereby confirmed, we have been or will be
named as one of the Underwriters of the Shares. Copies of the registration
statement and the related preliminary prospectus have heretofore been delivered
to us, and we confirm that they are correct insofar as they relate to us. Janco
Partners, Inc. ("Janco") is authorized to approve on our behalf any amendments
to the registration statement or any supplements thereto that Janco considers
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<PAGE>
necessary or appropriate and no such amendment or supplement shall release or
affect our obligations hereunder or under the Underwriting Agreement. The
registration statement and related prospectus, as amended and supplemented from
time to time, are hereinafter respectively referred to as the "Registration
Statement" and the "Prospectus." We agree if you so request, to furnish a copy
of any revised preliminary prospectus to each person to whom we have delivered a
copy of any previous preliminary prospectus, and further represent that we have
delivered all preliminary prospectuses and agree that we will deliver all final
prospectuses required for compliance with the provisions of Rule 15c2-8 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
3. Authority of Janco. We authorize Janco (a) to execute and deliver on our
behalf the Underwriting Agreement substantially in the form attached hereto,
with such changes as in Janco's judgment are advisable, including changes in
those who are to be Underwriters and in the respective number of Firm Shares to
be purchased by it (but not any change in the number of Firm Shares to be
purchased by us except with our consent or as provided in the Underwriting
Agreement); (b) to act as our representative in all matters concerning the
Underwriting Agreement, this Agreement and the sale and distribution of the
Shares thereunder, (c) to exercise all authority vested in the Underwriters or
the Representative by the Underwriting Agreement, and (d) to take such action as
you in your discretion may deem necessary or advisable to carry out the
Underwriting Agreement, this Agreement and the transactions for the accounts of
the several Underwriters contemplated thereby, and hereby, including, without
limitation, (i) the purchase, carrying, sale and distribution of the Shares; and
(ii) the determination of whether to purchase any or all of the Option Shares
for the accounts of the several Underwriters.
4. Public Offering. We authorize you to supply the Company with information
to be included in the Registration Statement and Prospectus with respect to the
terms of the offering, to determine the time of the public offering after the
Registration Statement becomes effective, to vary the public offering price of
the Shares and the concessions and discounts to Dealers (as defined herein) and
other terms of sale hereunder and under the agreements with Dealers after the
Shares are released for sale to the public, and to determine all matters
relating to the advertisement of the Shares and communication with dealers or
others.
We authorize you, with respect to any Shares that we so agree to purchase,
to reserve for sale and to sell for our account such number of our Shares as you
shall determine to retail purchasers and to securities dealers ("Dealers")
selected by you, including any of the Underwriters, under agreements
substantially in the form attached hereto as Exhibit B (the "Selected Dealer
Agreement"), and we authorize Janco to fix the concessions and reallowances in
connection with any such sales to Dealers. Such concessions and reallowances may
be allowed only as consideration for services rendered in connection with the
sale and distribution of the Shares and in accordance with the form of Selected
Dealers Agreement annexed hereto. Sales to such retail purchasers shall be made
at the public offering price.
Except for sales for the accounts of Underwriters designated by a
purchaser, aggregate sales of reserved Shares to retail purchasers will be made
at the public offering price for the accounts of the several Underwriters as
nearly as practicable in proportion to their respective underwriting
obligations. Sales of reserved Shares to Dealers will be made at the public
offering price less the Dealers' concession for the accounts of the several
Underwriters in such proportion as you determine.
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<PAGE>
You may in your discretion sell to another Underwriter any of the Shares so
reserved for our account if you determine that such sales were advisable for
Blue Sky purposes. The transfer tax on any such sales shall be charged to the
accounts of the several Underwriters in proportion to their respective
underwriting obligations.
At or prior to the time when the Shares are released for sale, you will
advise us of the number of Shares so sold or reserved for sale for our account.
We will retain for direct sale any Shares purchased by us and not sold or
reserved for sale for our account. With the consent of Janco, we may obtain
release from you for direct sale of Shares reserved for sale to Dealers but not
sold and paid for, in which event the number of Shares reserved for our account
for sale to Dealers shall be correspondingly reduced. After advice from you that
the Shares are released for sale to the public, we will offer for sale to the
public in conformity with the terms of the offering set forth in the Prospectus
such of our Shares as you advise us are not sold or reserved for sale for our
account.
We will advise Janco, from time to time, at Janco's request, of the number
of Shares retained by us remaining unsold. You may at any time (a) reserve any
of such Shares for sale by you for our account or (b) purchase any of such
Shares which, in your opinion, are needed to enable you to make deliveries for
the accounts of several Underwriters pursuant to this Agreement. Such purchases
will be made at the public offering price or, at the option of Janco at such
price less any part of the Dealers' concession.
In respect of any Shares sold directly by us and thereafter purchased by
you at or below the initial public offering price prior to the termination of
this Agreement (or such longer period as may be necessary to cover any short
position with respect to the Public Offering), you may charge our account with
an amount equal to the Dealers' concession with respect thereto and credit such
amount against the cost thereof, or you may require us to purchase such Shares
at a price equal to the total cost thereof, including any commissions and
transfer taxes on redelivery.
You are authorized to purchase Shares for our account from Dealers at the
public offering price less a concession not exceeding the concession to Dealers.
5. Payment and Delivery. On notice from Janco we will deliver to Janco, in
such form and at such time and place as Janco shall direct, funds in an amount
equal to the full purchase price of the Shares, less the Dealer's concession,
that we are obligated to purchase pursuant to the Underwriting Agreement. We
authorize Janco to deliver such funds to the Company or the Selling
Shareholders, as the case may be, against delivery to you for our account of the
Shares purchased by us. Such payment will be credited to our account.
In the event that our funds are not received by the Janco when required,
you are authorized, in your individual capacity or as our Representative, but
shall not be obligated to, make payment pursuant to the Underwriting Agreement
for our account in accordance with the provisions of Section 6 hereof. Any such
payment by you shall not relieve us from any of our obligations hereunder or
under the Underwriting Agreement and we will reimburse you on request.
We authorize you to hold and deliver to Dealers and others, against
payment, our Shares reserved by you for offering to them. Upon receiving payment
for Shares so sold for our account, Janco will remit to us as promptly as
practicable an amount equal to the purchase price paid by us for such Shares (if
any) and debit or credit, as appropriate, our account with the difference
between the sales price and such purchase price.
3
<PAGE>
You will promptly deliver to us any Shares purchased by us and not sold or
reserved for sale by you. All other shares which you then hold for our account
will be delivered to us upon termination of the provisions referred to in the
first paragraph of Section 12 hereof or prior thereto in the discretion of Janco
and may at any time be delivered to us for carrying purposes only, subject to
redelivery upon demand, except that upon termination of the aforementioned
provisions, if the aggregate of all such reserved and unsold Shares of all
Underwriters does not exceed 10% of the total number of Shares, you are
authorized in your discretion to sell such Shares for the accounts of the
several Underwriters at such price as you may determine.
6. Authority to Borrow. In connection with the purchase or carrying for our
account of any Shares purchased for our account under this Agreement or the
Underwriting Agreement, we authorize you, in your discretion, in your individual
capacity, to advance your own funds for our account (in which event we will
reimburse you on request), charging current interest rates, and as our
Representative to arrange and make loans on our behalf and for our account, and
to execute and deliver any notes or other instruments and hold or pledge as
security any of our Shares as may be necessary or advisable in your discretion.
Any lending bank is hereby authorized to rely upon your instructions in all
matters relating to any such loan. We shall be paid or credited with the
proceeds of any such advance or loan made for our account and shall be debited
with any repayment.
You may deliver to us from time to time, for carrying purposes only, any of
our reserved Shares held by you for our account that have not been sold or paid
for. We will redeliver to you on demand any Shares so delivered to us for
carrying purposes.
If we are a member of The Depository Trust Company or any other depository
or similar facility, you are authorized to make appropriate arrangements for
payment for and/or delivery through its facilities of the Shares to be purchased
by us, or, if we are not a member, settlement may be made through a
correspondent that is a member pursuant to timely instructions to you.
7. Stabilization. We ratify and confirm your stabilization transactions, if
any, for the accounts of the several Underwriters prior to the date hereof, and
we authorize you, in your discretion, to buy and sell shares of Common Stock of
the Company in the open market or otherwise, on a when issued basis or
otherwise, for either long or short account, at such prices and on such terms as
you may determine and to over-allot in arranging for the sale of the Shares and
to make purchases for the purpose of covering any over-allotment so made. We
authorize you in your discretion to cover any short position incurred for the
accounting of the several Underwriters pursuant to this Section by exercising
the over-allotment option referred to in Section 3 of the Underwriting Agreement
and by buying shares of Common Stock of the Company and, in lieu of delivering
to the several Underwriters any of such Shares held for their respective
accounts pursuant to this Section, to sell such Shares for the accounts of each
of the Underwriters, in each case at such prices and on such terms as you may
determine. All such purchases, sales and over-allotments will be for the
accounts of the several Underwriters as nearly as practicable in proportion to
their respective underwriting obligations, and at no time will our net
commitment under the foregoing provisions of this paragraph, either for long or
short accounts, exceed 10% of our original underwriting obligation. We will take
up at cost on demand any of the shares of Common Stock of the Company so
purchased for our account and deliver on demand any of the Shares sold or
over-allotted for our account. In the event of default by one or more
Underwriters in respect to their obligations under this paragraph, each
non-defaulting Underwriter shall assume its proportionate share of the
obligations of such defaulting Underwriter without relieving such defaulting
Underwriter of its liability hereunder. The existence of this provision is no
assurance that the price of any of the aforesaid securities will be stabilized
or that stabilizing, if commenced, will not be discontinued at any time.
4
<PAGE>
If you engage in any stabilizing transactions on behalf of the
Underwriters, you shall notify us promptly of the date and time when the first
stabilizing purchase is effected and the date and time when stabilizing is
terminated. We agree (and such agreement will survive the termination of any
provisions of this Agreement) to comply with all requirements of the Exchange
Act, and the rules and regulations thereunder, with respect to notification and
keeping of records of stabilizing transactions including providing you with
information required by Rule 17a-2 under said Exchange Act.
We agree to advise you, from time to time upon your request, of the number
of Shares retained by or released to us and remaining unsold, and will, upon
your request, release to you for the accounts of one or more of the several
Underwriters such number of such Shares as you may designate at such price, not
less than the net price to Dealers nor more than the public offering price as
you may determine.
If, pursuant to the provisions of this Section, you purchase or contract to
purchase any Shares that were retained by us for direct sale, we authorize you
in your discretion either to require us to repurchase such Shares at a price
equal to the total cost of such purchase, including commissions and transfer tax
on redelivery, to sell for our account such Shares and debit or credit our
account for the profit or loss resulting from such sale, or to charge our
account with an amount equal to the concession to Dealers with respect thereto.
Upon the termination of this Agreement, you are authorized in your
discretion, in lieu of delivering to the several Underwriters any Shares then
held for their respective accounts pursuant to this Section 7, to sell such
Shares for the accounts of each of the Underwriters at such prices as you may
determine.
8. Open Market Transactions. Except as permitted by Janco, we will not bid
for, purchase, attempt to induce others to purchase, sell, directly or
indirectly, either before or after the issuance of the Common Stock, any Shares
for our own account or for the account of customers, except (a) the purchase and
sale of Shares as provided in the Underwriting Agreement, this Agreement or the
agreements with Dealers, (b) the purchase from or sale to other Underwriters or
Dealers of Shares at the public offering price or at such price less any part of
the Dealers' concession, and (c) as brokers pursuant to unsolicited orders. We
hereby represent that we have complied with Rule 10b-6 in connection with this
Offering, and we agree that we will at all times comply with the provisions of
Rule 10b-6 of the Commission under the Exchange Act applicable to the Public
Offering.
9. Underwriter Undertakings. We will not make any representations
concerning the Shares other than those set forth in the Company's then current
Prospectus and will offer and sell the Shares in conformity with the terms of
the offering set forth in the Prospectus. By accepting this Agreement, we (i)
acknowledge our understanding of (a) Section 1 of Article III of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc. (the
"Association") and the interpretations of such Section promulgated by the Board
of Governors of the Association (the "Interpretations") including, but not
limited to the Interpretation with respect to Free-Riding and Withholding, (b)
Rule 174 of the rules and regulations promulgated under the Act and Rules 10b-5
and 10b-6 promulgated under the Exchange Act, (c) Release No. 3907 under the
Act, (d) Release No. 4150 under the Act and (e) Sections 8, 24 ,25, and 36 of
Article III of the Rules of Fair Practice of the Association and the
5
<PAGE>
Interpretations of such Sections promulgated by the Board of Governors of the
Association; and (ii) represent, warrant, covenant and agree that we will comply
with all applicable requirements of the Act and the Exchange Act in addition to
the specific provisions cited at subparagraph (i) of this Paragraph 9, and that
we will not violate, directly or indirectly, any provision of applicable law in
connection with our participation in the Public Offering of the Shares.
By accepting this Agreement, we agree to comply with all applicable federal
laws including, but not limited to, the Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder; the Constitution and
all applicable federal laws; the laws of the states or other jurisdictions in
which the Shares may be offered or sold by us; and the Constitution, Bylaws and
Rules of Fair Practice of the Association. Further, we agree that we will not
offer or sell the Shares in any state or jurisdiction except those in which the
Shares have been qualified or qualification is not required. We acknowledge we
will not be entitled to any compensation hereunder for any period during which
we have been suspended or expelled from membership in the Association. Upon
completion of billing of the Public Offering, we will furnish to you one copy of
an executed Territorial Distribution Questionnaire and one copy of a full and
complete list of all record and beneficial owners (if known) of the Shares sold
by us.
10. Employees and other Representatives. By accepting this Agreement, we
assume full responsibility for thorough and proper training of our employees and
other agents and representatives concerning the selling methods to be used in
connection with the Public Offering of the Shares, giving special emphasis to
the principles of full and fair disclosure to prospective investors and the
prohibitions against "Free-Riding and Withholding" as set forth by the
Interpretation of the Board of Governors to Section 1 of Article III of the
Rules of Fair Practice of the Association.
11. Allocation of Expenses. We authorize you to charge our account with all
transfer taxes on sales made by you for our account (except as herein otherwise
provided) and our proportionate share (based upon our underwriting obligation)
of all other expenses incurred by you arising under the terms of this Agreement
or the Underwriting Agreement, or in connection with the purchase, carrying,
sale or distribution of the Shares. Your determination of the amount and
allocation of such expenses shall be final and conclusive. In the event of the
default of any Underwriter in carrying out its obligations hereunder, the
expenses chargeable to such Underwriter pursuant to this Agreement and not paid
by it, as well as any additional losses or expenses arising from such default,
may be proportionately charged by you against the other Underwriters not so
defaulting without, however, relieving such defaulting Underwriter from its
liability therefor.
12. Termination and Settlement. The provisions of Sections 4, 7 and 8
hereof will terminate (a) at the close of business on the thirtieth day after
the date of the Underwriting Agreement; or (b) on such earlier or later date,
not more than thirty (30) days after the date specified in (a), as you may
determine; or (c) on the date of termination of the Underwriting Agreement, if
the same shall be terminated as provided by its terms.
As promptly as practicable after termination of the provisions referred to
in the first paragraph of this Section, our account will be settled and paid,
provided that Janco may reserve from distribution to the several Underwriters
such amounts as Janco deems advisable to cover the possible additional expenses.
The determination by Janco of the amounts to be paid to or by us will be final
and conclusive. Janco may at any time make partial distribution of credit
6
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balances or call on the several Underwriters to pay their respective debit
balances. Any of our funds in your hands may be held with your general funds
without accountability for interest and may be commingled with your general
funds. Notwithstanding termination of this Agreement or any settlement, we agree
to pay (a) our proportionate share (based on our underwriting obligation) of all
expenses and liabilities that may be incurred by or for the account of the
Underwriters, or any of them, and (b) any transfer taxes paid after such
settlement on account of any sale or transfer for our account.
If the Underwriting Agreement shall be terminated as permitted by the terms
thereof or if it shall be executed but shall not become effective, our
obligations herein shall immediately cease and terminate except the obligations
to pay our proportionate share of all expenses and except obligations, if any,
incurred for our account under Section 7 hereof and our obligations under the
second paragraph of this Section 12 and under Section 16 hereof.
13. Default by Underwriters. Default by one or more Underwriters in respect
of their obligations under the Underwriting Agreement shall not release us from
any of our obligations or in any way affect the liability of any defaulting
Underwriter to the other Underwriters for damages resulting from such default.
In case such default is for an aggregate amount which is less than 10% of the
Firm Shares, we will purchase additional Firm Shares as set forth in Section 7
of the Underwriting Agreement. If such default equals or exceeds 10% of the Firm
Shares, you are authorized, but shall not be obligated, to arrange for the
purchase by other persons, who may include yourself or any non-defaulting
Underwriter, of that defaulted portion in excess of such 10%. In the event such
arrangements are made, we will, on your request, purchase additional Firm Shares
not exceeding our original commitment under Section 7 of the Underwriting
Agreement and the respective aggregate amounts of Firm Shares to be purchased by
the non-defaulting Underwriters and by other such persons, if any, shall be
taken as the basis for determining the proportionate several obligations and
benefits hereunder and under the Underwriting Agreement, but this shall in no
way affect the liability of any defaulting Underwriter for damages resulting
from such default. If there is any default as to the purchase of the Option
Shares, you are authorized, but shall not be obligated, to purchase or to
arrange for the purchase by the non-defaulting Underwriters of the defaulted
portion.
14. Position of the Representative. Except as in this Agreement otherwise
specifically provided, you shall have full authority to take such action as you
deem necessary or advisable in respect of all matters pertaining to the
Underwriting Agreement and this Agreement in connection with the purchase,
carrying, sale and distribution of the Shares, including the right to make any
modifications which you consider necessary or desirable in the arrangements with
Dealers or others. You shall be under no liability for or in respect of the
value of the Shares or the validity or the form thereof, any preliminary
prospectus, the Registration Statement, the Prospectus, the Underwriting
Agreement, or other instruments executed by the Company or others; or for the
performance by the Company or others of any agreement on their part; nor shall
you, except for your own want of good faith, be liable to us under any
provisions hereof or for any matters connected herewith or for obligations
expressly assumed by you in this Agreement and for any liabilities imposed upon
you by the Act. No obligations on your part shall be implied herefrom. Authority
with respect to matters to be determined by you, or by you and the Company
pursuant to the Underwriting Agreement, shall survive the termination of the
provisions referred to in the first paragraph of Section 12 hereof.
Nothing contained herein shall constitute us as partners with you or with
other Underwriters or shall constitute the several Underwriters as an
association or other separate entity and the rights and liabilities of ourselves
7
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and each of the other Underwriters (including you) are several and not joint. If
for Federal income tax purposes the Underwriters should be deemed to constitute
a partnership, then each Underwriter elects to be excluded from the application
of Subchapter K, Chapter 1, Subtitle A, of the Internal Revenue Code of 1986, as
amended. You, as Representatives of the Underwriters, are authorized, in your
discretion, to execute on behalf of the Underwriters, such evidence of such
election as may be required by the Internal Revenue Service.
15. Compensation to the Representative. As compensation for your services
as manager, we agree to pay you an amount equal to $________ with respect to
each of the Shares that we become obligated to purchase under the Underwriting
Agreement, and you are authorized to charge our account for such amount.
16. Indemnification and Contribution.
a. Each Underwriter, including ourselves, agrees to indemnify, hold
harmless and reimburse each other Underwriter, each such entities'
officers, directors, partners, employees, agents, and counsel, each person,
if any, who controls any other Underwriter, within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, and any successor of
any other Underwriter, all if and to the extent that each Underwriter will
be obligated in the Underwriting Agreement to indemnify, hold harmless and
reimburse the Company, each of its directors, each of its officers who
signed the Registration Statement, each person, if any, who controls the
Company within the meaning of the Act, and the Selling Shareholders.
b. Each Underwriter (including ourselves) will pay upon request, as
contribution, its proportionate share, based upon its underwriting
commitment, of any and all losses, claims, damages or liabilities, joint or
several, paid or incurred by any Underwriter to any person other than an
Underwriter arising out of or based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement, the Prospectus or any other related preliminary prospectus or
any other selling or advertising material approved by you for use by the
Underwriters in connection with the sale of the Shares, or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein not misleading
(other than an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by an Underwriter specifically for use
therein); and will pay such proportionate share of any legal or other
expenses reasonably incurred by you or with your consent in connection with
investigating or defending any such loss, claim, damage or liability, or
any action in respect thereof. In determining the amount of any
Underwriter's obligation under this paragraph, appropriate adjustment may
be made by you to reflect any amounts received by any one or more
Underwriters in respect of such claim from the Company, pursuant to the
Underwriting Agreement or otherwise. There will be credited against any
amount paid or payable by us pursuant to this paragraph, any loss, damage,
liability or expense which is incurred by us as a result of any such claim
asserted against us, and if such loss, claim, damage, liability or expense
is incurred by us subsequent to any payment by us pursuant to this
paragraph, appropriate provision will be made to effect such credit, by
refund or otherwise.
8
<PAGE>
c. We agree that you shall be under no liability in respect of any
matters connected herewith or actions taken by you pursuant to this
Agreement, except for obligations assumed by you, in this Agreement. In the
event that at any time any claim or claims shall be asserted against you,
as Representative, or otherwise involving the Underwriters generally,
relating to any preliminary prospectus, the Prospectus, the Registration
Statement, the public offering of the Shares, any state securities or Blue
Sky law qualification matters, or any of the transactions contemplated by
this Agreement, we authorize you to make such investigation, to retain such
counsel and in your discretion, separate counsel for any particular
Underwriter or group of Underwriters, and to take such other action as you
may deem necessary or desirable under the circumstances, including
settlement of any such claim or claims if such course of action shall be
recommended by counsel retained by you. We agree to pay you, on request,
our proportionate share (based on our underwriting obligations) of all
expenses incurred by you (including, but not limited to, the disbursement
and fees of counsel retained by you) in investigating and defending against
such claim or claims, and our proportionate share (based on our
underwriting obligation) of any liability incurred by you in respect of
such claim or claims, whether such liability shall be the result of a
judgment against you or the result of any such settlement. On determining
amounts payable pursuant to this paragraph, any loss, claim, damage,
liability or expense incurred by any person controlling any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act that has been incurred by reason of such control relationship shall be
deemed to have been incurred by such Underwriter. Any Underwriter may elect
to retain at its own expense its own counsel. Whenever you receive notice
of the assertion of any claim to which the provisions of this paragraph
would be applicable, you will give prompt notice thereof to each
Underwriter. You will also furnish each Underwriter with periodic reports
as to the status of such claim and the action taken by you in connection
therewith. If any Underwriter or Underwriters default in their obligation
to make any payments under this paragraph, then, without relieving such
defaulting Underwriter of its liability hereunder, each non-defaulting
Underwriter shall be obligated to pay its proportionate share of all
defaulted payments, based on such Underwriter's underwriting commitment as
related to the underwriting commitments of all non-defaulting Underwriters.
Any Underwriter or Underwriters defaulting in their obligations shall be
liable for all losses, claims, damages, liabilities, costs and attorneys
fees paid or incurred by any Underwriter in collection of the defaulted
payments from the defaulting Underwriter. The indemnity and contribution
provisions of this Section 16 shall survive the termination of this
Agreement Among Underwriters.
17. Blue Sky Matters. Prior to the time when the Shares are released for
sale, you will inform us of the states in which it is believed that the Shares
have been qualified are or exempt for sale. However, you will not have any
responsibility with respect to the right of any Underwriter or other person to
sell any of the Shares in any jurisdiction, notwithstanding the information that
you may furnish in that regard.
18. Notices. Any notice from you to us will be deemed to have been duly
given if mailed, telexed or sent by facsimile or other written communication to
us at our address as set forth in the Underwriters' Questionnaire that we have
transmitted to you. Any notice to you shall be deemed given if mailed, telexed
or sent by facsimile or other written communication to Janco Partners, Inc.,
5251 DTC Parkway, Suite 1010, Englewood, Colorado 80111.
9
<PAGE>
19. Miscellaneous.
a. We authorize you to file with any governmental agency any reports
required to be filed with you in connection with the transactions
contemplated by this Agreement or the Underwriting Agreement and we will
furnish any information in our possession needed for such reports.
b. You will not be under any duty to account for any interest on our
funds at any time in your hands.
c. We hereby confirm (i) that we have examined the Registration
Statement and are familiar with the amendments thereto, (ii) that the
information therein is correct and is not misleading and there are no
material omissions insofar as it relates to us, and (iii) that we are
willing to accept the responsibilities under the Act of an Underwriter
named in such Registration Statement. You are authorized in your
discretion, on our behalf, to approve of or object to any further
amendments or supplements to the Registration Statement.
d. You represent that you are a member in good standing of the
National Association of Securities Dealers, Inc. ("NASD") and we represent
that we are a member in good standing of the NASD and agree to comply with
the provisions of Section 24 of Article III of the Rules of Fair Practice
of the NASD.
e. We confirm that the ratio of our aggregate indebtedness to our net
capital is such that we may, in accordance with and pursuant to Rule 15c3-1
under the Exchange Act, obligate ourselves to purchase, and purchase, the
number of Shares which we agree to purchase under the Underwriting
Agreement.
f. This Agreement will be governed by, and construed in accordance
with, the laws of the State of Colorado.
g. In accordance with Rule 15c2-8(b) under the Exchange Act and Act
Release No. 4968, to the extent applicable, we will deliver copies of each
Preliminary Prospectus to our sales persons before they offer the Shares to
their clients, and we will deliver a Preliminary Prospectus to all persons
to whom we expect to mail confirmations of sales not less than 48 hours
prior to the time we expect to mail such confirmations.
h. This Agreement embodies the entire agreement and underwriting
between us and supersedes all prior agreements and understandings related
to the subject matter hereof, and this Agreement may not be modified or
amended or any term or provision hereof waived or discharged except in
writing signed by the party against whom such amendment, modification,
waiver or discharge is sought to be enforced. All the terms of this
Agreement, whether so expressed or not, shall be binding upon the
respective successors and assigns of the parties hereto (in respect of
"successors and assigns," reference is made to Section 15 of the
Underwriting Agreement) and shall inure to the benefit of and be
enforceable by the parties hereto and their respective successors and
assigns. The headings of this Agreement are for purposes of reference only
and shall not limit or otherwise affect the meaning hereof.
10
<PAGE>
20. Duplicate Original Copies. This Agreement may be signed in any number
of counterparts which taken together shall constitute one and the same
instrument.
Very truly yours,
THE UNDERWRITERS NAMED IN SCHEDULE I
TO THE UNDERWRITING AGREEMENT
By:
----------------------------------------
As Attorney-in-Fact for each of the several
Underwriters named in Schedule I to the
Underwriting Agreement
CONFIRMED AND ACCEPTED AS OF THE DATE FIRST ABOVE MENTIONED:
JANCO PARTNERS, INC.
as Representative of the several
Underwriters named in Schedule I
to the Underwriting Agreement
By:
---------------------------------
Name:
------------------------------
Title:
------------------------------
11
<PAGE>
EXHIBIT A
The Underwriting Agreement
12
<PAGE>
EXHIBIT B
The Selected Dealer Agreement
13
Public Offering Of
1,000,000 Shares of Common Stock
ACCELR8 TECHNOLOGY CORPORATION
---------------
SELECTED DEALER AGREEMENT
---------------
, 1996
-------------
Ladies and Gentlemen:
As more fully described in the enclosed Prospectus (the "Prospectus") and
subject to the terms of the Underwriting Agreement referred to therein (the
"Underwriting Agreement"), we have agreed to act as Representative (the
"Representative") of the several Underwriters to purchase from Accelr8
Technology Corporation, a Colorado corporation (the "Company"), 1,000,000
authorized and unissued shares of Common Stock of the Company (the "Firm
Shares"). The Underwriters also have the option to purchase from certain Selling
Shareholders (as defined in the Underwriting Agreement) up to 150,000 additional
shares to cover over-allotments of Common Stock of the Company (the "Option
Shares"). The Firm Shares and Option Shares are hereinafter called the "Shares."
The Shares are described in the Prospectus, additional copies of which will be
supplied in reasonable quantities upon request to us. We are offering the Shares
to the public (the "Public Offering") at an offering price of $____ per Share.
Certain other capitalized terms used herein and in the attached letter of
acceptance which is deemed to be part of this Selected Dealer Agreement are
defined in the Underwriting Agreement and are used herein as therein defined.
The Representative is offering the Shares to certain selected dealers (the
"Selected Dealers") as principals, when, as and if accepted by us and subject to
withdrawal, cancellation or modification of the offer without notice and further
subject to the terms of (i) the Prospectus, (ii) the Underwriting Agreement,
(iii) this Agreement, and (iv) the Representative's instructions which may be
forwarded to the Selected Dealer from time to time. A copy of the Underwriting
Agreement will be delivered to you forthwith for inspection or copying or both,
upon your request therefor. This invitation is made by the Representative only
if the Shares may be offered lawfully to dealers in your state. The further
terms and conditions of this invitation are as follows:
1. Acceptance of Orders. Orders received by us from the Selected Dealer
will be accepted only at the price, in the amounts and on the terms which are
set forth in the Prospectus, subject to allotment in the Representative's
uncontrolled discretion. Subscription books may be closed by us at any time
without notice, and the Representative reserves the right to reject any orders,
in whole or in part.
2. Selling Concession. As a Selected Dealer, you will be allowed on all
Shares purchased by you, which we have not repurchased or contracted to
repurchase prior to termination of this Agreement at or below the initial public
offering price, a concession of $___ per Share as shown in the Prospectus. No
<PAGE>
selling concession will be allowed to any domestic broker-dealer who is not a
member of the National Association of Securities Dealers, Inc. (the
"Association") or to any foreign broker-dealer eligible for membership in the
Association who is not a member of the Association. Payment of such selling
concession to you will be made only as provided in Section 4 hereof. After the
Shares are released for sale to the public, the Representative is authorized to,
and may, change the initial public offering price and the selling concession.
3. Reoffer of Shares. Shares purchased by you are to be bona fide reoffered
by you in conformity with this Agreement and the terms of offering set forth in
the Prospectus. You agree that you will not bid for, purchase, attempt to induce
others to purchase or sell, directly or indirectly, any Shares except as
contemplated by this Agreement and except as a broker pursuant to unsolicited
orders. You confirm that you have complied and agree that you will at all times
comply with the provisions of Rule 10b-6 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") applicable to this offering. In respect of
Shares sold by you and thereafter purchased by us at or below the initial public
offering price prior to the termination of this Agreement as described
hereinafter (or such longer period as may be necessary to cover any short
position with respect to the offering), you agree at our option either to
repurchase the Shares at a price equal to the cost thereof to us, including
commissions and transfer taxes on redelivery, or to repay us such part of your
Selected Dealers' concessions on such Shares as we designate.
4. Payment for Shares. Payment for the Shares purchased by you is to be
made at the net Selected Dealers' price of $_______ per Share, at the office of
Janco Partners, Inc., 5251 DTC Parkway, Englewood, CO 80111, at such time and on
such date as we may designate, by certified or official bank check, payable in
clearing house funds to the order of Janco Partners, Inc. ("Janco"), against
delivery of certificates for the Shares so purchased. If such payment is not
made at such time and on such date, you agree to pay Janco interest on such
funds at the current interest rates. We may in our discretion deliver the Shares
purchased by you through the facilities of the Depository Trust Company or, if
you are not a member, through your ordinary correspondent who is a member,
unless you promptly give us written instructions otherwise.
5. Offering Representations. We have been informed that a Registration
Statement in respect of the Shares is expected to become effective under the
Securities Act of 1933, as amended (the "1933 Act"). You are not authorized to
give any information or to make any representations other than those contained
in the Prospectus or to act as agent for the Company or for the undersigned when
offering the Shares to the public or otherwise.
6. Blue Sky. We do not assume any responsibility or obligations as to your
right to sell the Shares in any jurisdiction, notwithstanding any information we
may furnish in that connection. The Selected Dealer shall report in writing to
the Representative the number of Shares which have been sold by it in each state
and the number of transactions made in each such state. This state report shall
be submitted to the Representative as soon as possible after completion of
billing, but in any event not more than three days after the closing.
7. Dealer Undertakings. By accepting this Agreement, the Selected Dealer in
offering and selling the Shares in the Public Offering (i) acknowledges its
understanding of (a) Section 1 of Article II of the Rules of Fair Practice (the
"Rules") of the Association and the interpretations of such Rules promulgated by
-2-
<PAGE>
the Board of Governors of the Association (the "Interpretations") including, but
not limited to the Interpretation with respect to "Free-Riding and Withholding"
defined therein, (b) Rule 174 of the rules and regulations promulgated under the
1933 Act, (c) Rules 10b-5 and 10b-6 promulgated under the Exchange Act, (d)
Release No. 3907 under the 1933 Act, (e) Release No. 4150 under the 1933 Act and
(f) Sections 8, 24, 25 and 36 of Article III of the Rules and Interpretations,
and (ii) represents, warrants, covenants and agrees that it shall comply with
all applicable requirements of the 1933 Act and the Exchange Act in addition to
the specific provisions cited in subparagraph (i) above and that it shall not
violate, directly or indirectly, any provision of applicable law in connection
with its participation in the Public Offering of the Shares.
8. Conditions of Public Offering. All sales shall be subject to delivery by
the Company or the Selling Shareholders, as the case may be, of certificates
evidencing the Shares against payment therefor.
9. Failure of Order. If an order is rejected or if a payment is received
which proves insufficient or worthless, any compensation paid to the Selected
Dealer shall be returned by (i) restoration by the Representative to the
Selected Dealer of the latter's remittance or (ii) a charge against the account
of the Selected Dealer with the Representative, as the latter may elect without
notice being given of such election.
10. Additional Representations, Covenants and Warranties of Selected
Dealer. By accepting this Agreement, the Selected Dealer represents that it is
registered as a broker-dealer under the Exchange Act; is qualified to act as a
dealer in the states or the jurisdictions in which it shall offer the Shares; is
a member in good standing of the Association; and shall maintain such
registrations, qualifications and membership in full force and effect and in
good standing throughout the term of this Agreement. If the Selected Dealer is
not a member of the Association, it represents that it is a foreign dealer not
registered under the Exchange Act and agrees to make no sales within the United
States, its territories or its possessions or to persons who are citizens
thereof or residents therein, and in making any sales, to comply with the
Association's Interpretation with respect to Free-Riding and Withholding.
Further, the Selected Dealer agrees to comply with all applicable federal laws
including, but not limited to, the 1933 Act and the Exchange Act and the rules
and regulations of the Commission thereunder; the laws of the states or other
jurisdictions in which Shares may be offered or sold by it; and the
Constitution, Bylaws and Rules of Fair Practice of the Association. Further, the
Selected Dealer agrees that it will not offer or sell the Shares in any state or
jurisdiction except those in which the Shares have been qualified or
qualification is not required. The Selected Dealer acknowledges its
understanding that it shall not be entitled to any compensation hereunder for
any period during which it has been suspended or expelled from membership in the
Association.
11. Employees and other Agents of the Selected Dealer. By accepting this
Agreement, the Selected Dealer assumes full responsibility for thorough and
proper training of its employees and other agents and representatives concerning
the selling methods to be used in connection with the Public Offering of the
Shares, giving special emphasis to the principles of full and fair disclosure to
prospective investors and the prohibitions against "Free-Riding and Withholding"
as set forth in the Rules and Interpretation of the Board of Governors to
Section 1 of Article III of the Rules of Fair Practice of the Association.
-3-
<PAGE>
12. Indemnification by the Company and the Selling Shareholders. The
Company and each Selling Shareholder have agreed in Section 9 of the
Underwriting Agreement to indemnify and hold harmless the Underwriters,
including the Representative, and members of the selling group and each of such
entities' officers, directors, partners, employees, agents, and counsel, and
each person, if any, who controls the Underwriters and any selling group member
within the meaning of Section 15 of the 1933 Act or Section 20(a) of the
Exchange Act (each an "Indemnified Underwriter"), against certain liabilities as
described in the Underwriting Agreement. This agreement is qualified in all
respects by reference to the Underwriting Agreement, a copy of which will be
made available for inspection or copying or both to the Selected Dealer upon
written request to the Representative therefor.
13. Indemnification by the Selected Dealer. The Selected Dealer shall
indemnify and hold harmless the Representative and the Company and each person,
if any, who controls the Representative or the Company within the meaning of
Section 15 of the 1933 Act, each director of the Company, each officer of the
Company who has signed the Registration Statement and each Selling Shareholder
(the "Dealer Indemnified Parties") from and against any and all losses, claims,
damages or liabilities to which a Dealer Indemnified Party may become subject
under the 1933 Act or otherwise, but only insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon information contained in the Registration Statement, any Pre-Effective
Prospectus, the Effective Prospectus, the Final Prospectus or other documents
filed with the Commission or in any Application to the extent such information
is supplied by the Selected Dealer to the Representative or the Company for
inclusion therein, or are based upon alleged misrepresentations or omissions to
state material facts in connection with statements made by the Selected Dealer
or the Selected Dealer's employees or other agents to a Dealer Indemnified Party
orally or by any other means; and the Selected Dealer shall reimburse the Dealer
Indemnified Party for any legal or other expenses reasonably incurred by them in
connection with the investigation of or the defense of any such action or claim.
The Representative shall, after receiving the first summons or other legal
process disclosing the nature of the action being brought against it, or any
other Dealer Indemnified Party, in any proceeding with respect to which
indemnity may be sought by a Dealer Indemnified Party hereunder, notify promptly
the Selected Dealer in writing of the commencement thereof; and the Selected
Dealer shall be entitled to participate in (and, to the extent the Selected
Dealer shall wish, to direct) the defense thereof at the expense of the Selected
Dealer, but such defense shall be conducted by counsel satisfactory to the
Company and the Representative. If the Selected Dealer shall fail to provide
such defense, the Dealer Indemnified Party may defend such action at the cost
and expense of the Selected Dealer. The Selected Dealer's obligation under this
Section 13 shall survive any termination of this Agreement, the Underwriting
Agreement and the delivery of and payment for the Shares under the Underwriting
Agreement, and shall remain in full force and effect regardless of the
investigation made by or on behalf of the Representative within the meaning of
Section 15 of the 1933 Act.
14. No Authority to Act as Partner or Agent. Nothing herein shall
constitute the Selected Dealers as an association or other separate entity or
partners with or agents of the Representative or with each other, but each
Selected Dealer shall be responsible for its pro rata share of any liability or
expense based upon any claims to the contrary. The Representative shall not be
under any liability for or in respect of the value, validity or form of the
Shares, or the delivery of certificates for the Shares or the performance by any
person of any agreement on their part, or the qualification of the Shares for
sale under the laws of any jurisdiction, or for or in respect of any matter in
-4-
<PAGE>
connection with this Agreement, except for the lack of good faith and for
obligations expressly assumed by the Representative in this Agreement. No
obligation not expressly assumed by us in this Agreement shall be implied hereby
or inferred herefrom.
15. Expenses. No expenses incurred in connection with offers and sales of
the Shares under the Public Offering will be chargeable to the Selected Dealers.
A single transfer tax, if any, on the sale of Shares by the Selected Dealer to
its customers will be paid when such Shares are delivered to the Selected Dealer
for delivery to its customers. Notwithstanding the foregoing or any termination
of this Agreement as provided in Section 17, the Selected Dealer shall pay its
proportionate share of any transfer tax or any other tax (other than the single
transfer tax described above) if any such tax shall at any time be assessed
against the Representative and other Selected Dealers.
16. Notices. All notices, demands or requests required or authorized
hereunder shall be deemed given sufficiently if in writing and sent by
registered or certified mail, return receipt requested and postage prepaid, or
by tested telex, telegram, cable or facsimile to the Representative, at the
address set forth above, directed to the attention of the President, and in the
case of the Selected Dealer, to the address provided below by the Selected
Dealer, directed to the attention of the President.
17. Termination. This Agreement may be terminated by the Representative
with or without cause upon written notice to the Selected Dealer to such effect;
and such notice having been given, this Agreement shall terminate at the time
specified therein. Additionally, this Agreement shall terminate upon the earlier
of the termination of the Underwriting Agreement, or at the close of Business
thirty days after the Shares are released by us for sale to the public.
18. General Provisions. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Colorado. This
Agreement embodies the entire agreement and understanding between the
Representative and the Selected Dealer and supersedes all prior agreements and
understandings related to the subject matter hereof, and this Agreement may not
be modified or amended or any term or provision hereof waived or discharged
except in writing signed by the party against whom such amendment, modification,
waiver or discharge is sought to be enforced. All the terms of this Agreement,
whether so expressed or not, shall be binding upon, and shall inure to the
benefit of, the respective successors, legal representatives and assigns of the
parties hereto; provided, however, that none of the parties hereto may assign
this Agreement or any of its rights hereunder without the prior written consent
of the other parties hereto, and any such attempted assignment or transfer
without the other parties' prior written consent shall be void and without force
or effect. The headings of this Agreement are for purposes of reference only and
shall not limit or otherwise affect the meaning hereof. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
If the foregoing correctly sets forth the terms and conditions of your
agreement to purchase the Shares allotted to you, please indicate your
acceptance thereof by signing and returning to us the duplicate copy of this
Agreement with signatures and related information set forth on page 7 hereof,
whereupon this letter and your acceptance shall become evidence of a binding
contract between us. Your acceptance hereof will constitute an obligation on
-5-
<PAGE>
your part to purchase, upon the terms and conditions hereof, the aggregate
amount of Shares reserved for and accepted by you and to perform and observe all
the terms and conditions hereof.
JANCO PARTNERS, INC.
By:
-----------------------------------
Its:
----------------------------------
-6-
<PAGE>
JANCO PARTNERS, INC.
As Representative of the Several Underwriters
5251 DTC Parkway, Suite 1010
Englewood, Colorado 80111
Gentlemen:
The undersigned confirms its agreement to purchase _____________ Shares of
Accelr8 Technology Corporation upon the terms and subject to the conditions of
the foregoing Selected Dealers Agreement, and further agrees that any agreement
by it to purchase additional Shares during the life of such Agreement will be
upon the same terms and subject to the same conditions. The undersigned
acknowledges receipt of the Prospectus relating to the Public Offering of the
Shares and confirms that in agreeing to purchase such Shares it has relied on
such Prospectus and not on any other statement whatsoever written or oral. The
undersigned has complied and will comply with the requirements of Rule 15c2-8
under the Exchange Act and with all of its obligations and undertakings
contained in the Selected Dealers Agreement. Furthermore, the undersigned
confirms that the representations and warranties of the undersigned contained in
the Selected Dealers Agreement are true and correct.
Firm Name:
(PRINT OR TYPE NAME OF FIRM)
By:
(AUTHORIZED AGENT)
(PRINT OR TYPE NAME AND TITLE OF AUTHORIZED AGENT)
Address:
Telephone Number:
Facsimile Number:
IRS Employer Identification
Number:
Dated: , 1996
------------------------
-7-
NUMBER ACCELR8 TECHNOLOGY CORPORATION SHARES
Incorporated under the laws of the State of Colorado
Common Stock, No Par Value
CUSIP 004304 10 1
This Certifies That
----------------------------------------------------------
is the owner of
----------------------------------------------------------------
fully paid and non-assessable Common Shares, no par value per share, of
Accelr8 Technology Corporation
transferable only on the books of the Company by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This certificate and the shares represented hereby are issued and
shall be subject to all the provisions of the Articles of Incorporation, to all
of which the holder by acceptance hereby assents.
IN WITNESS WHEREOF, the Company has caused this Certificate to be signed in
facsimile by its duly authorized officers and the facsimile seal of the Company
to be duly affixed hereto.
This Certificate is not valid unless duly countersigned by the Transfer
Agent and Registrar.
Dated
- ---------------------------------- ------------------------------------
Harry J. Fleury, President Thomas Geimer, Chairman of the Board
Countersigned by:
American Securities Transfer, Inc.
<PAGE>
EXHIBIT 4.1
ACCELR8 TECHNOLOGY CORPORATION
Transfer Fee: $7.00 Per Certificate
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM as tenants in common UNIF GIFT MIN ACT Custodian
(Cust (Minor)
TEN ENT as tenants by the entireties under Uniform Gifts to Minors
JT TEN as joint tenants with rights of
survivorship and not as tenants Act
in common State
Additional abbreviations may also be sued thought not
in the above list.
For value received, ______________ hereby sell, assign and transfer unto
Please insert social security or other identifying number of assignee
- -------------------------------------------------------------------------------
Please print or type name and address of assignee
---------------------------------------------------------------------- Shares
of the Common Stock represented by the within Certificate and do hereby
irrevocably constitute and appoint
- --------------------------------------------------------------------------------
Attorney to transfer the said stock on the books of the within-named
Corporation, with full power of substitution in the premises.
Dated
SIGNATURE GUARANTEED:
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN ABOVE
UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT, OR ANY CHANGE WHATEVER.
- --------------------------------------------------------------------------------
SIGNATURE(S) MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM OF ONE OF
THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE, AMERICAN STOCK EXCHANGE,
MIDWEST STOCK EXCHANGE, PACIFIC COAST STOCK EXCHANGE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES
ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, NOR HAVE THEY BEEN REGISTERED UNDER THE
SECURITIES ("BLUE SKY") LAWS OF ANY STATE. THESE SECURITIES MAY NOT BE
SOLD, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS THEY HAVE FIRST
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND UNDER THE
APPLICABLE BLUE SKY LAWS OR UNLESS THE AVAILABILITY OF AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT AND BLUE SKY LAWS IS ESTABLISHED TO
THE SATISFACTION OF THE COMPANY, WHICH MAY NECESSITATE A WRITTEN
OPINION OF SELLER'S COUNSEL SATISFACTORY TO COMPANY COUNSEL.
ACCELR8 TECHNOLOGY CORPORATION
Warrant for the Purchase of Common Stock
No. 001 --------------- Shares of Common Stock
THIS CERTIFIES that, for receipt in hand of $10.00 and other value
received, JANCO PARTNERS, INC. (the "Holder"), is entitled to subscribe for and
purchase from ACCELR8 TECHNOLOGY CORPORATION, a Colorado corporation (the
"Company"), upon the terms and conditions set forth herein, at any time from ,
1997 and before 5:00 P.M. on , 1999, Mountain time, shares of Common Stock (the
"Shares"), at a price of $ per share (the "Exercise Price"). This Warrant may
not be sold, transferred, assigned or hypothecated until , 1997 except that it
may be transferred, in whole or in part, to (i) one or more officers or partners
of the Holder (or the officers, directors or partners of any such partner); (ii)
a successor to the Holder, or the officers, directors or partners of such
successor; (iii) a purchaser of substantially all of the assets of the Holder;
or (iv) by operation of law. After , 1997, this Warrant may be sold,
transferred, assigned or hypothecated provided this Warrant is exercised
immediately upon transfer. If not exercised immediately upon transfer, this
Warrant shall lapse. The term the "Holder" as used herein shall include any
transferee to whom this Warrant has been transferred. The term "Exercise Period"
as used herein shall mean and include the two year period commencing ,1997. As
used herein the term "this Warrant" shall mean and include this Warrant and any
Warrant or Warrants hereafter issued as a consequence of the exercise or
transfer of this Warrant in whole or in part, and the term "Common Stock" shall
mean and include the Company's Common Stock, no par value, with ordinary voting
power which is, at the date hereof, publicly traded.
1. This Warrant may be exercised during the Exercise Period as to the whole
or any lesser number of whole Shares, by the surrender of this Warrant (with the
election at the end hereof duly executed) to the Company at its office at 303
East Seventeenth Avenue, Denver, Colorado 80203, or such other place as
<PAGE>
is designated in writing by the Company, together with a certified or bank
cashier's check payable to the order of the Company in an amount equal to the
Exercise Price multiplied by the number of Shares for which this Warrant is
being exercised.
2. Upon each exercise of this Warrant, the Holder shall be deemed to be the
holder of record of the Shares issuable upon such exercise, notwithstanding that
the transfer books of the Company shall then be closed or certificates
representing such Shares shall not then have been actually delivered to the
Holder. As soon as practicable after each such exercise of this Warrant, the
Company shall issue and deliver to the Holder a certificate or certificates for
the Shares issuable upon such exercise, registered in the name of the Holder or
its designee. If this Warrant should be exercised in part only, the Company
shall, upon surrender of this Warrant for cancellation, execute and deliver a
new Warrant evidencing the right of the Holder to purchase the balance of the
Shares (or portions thereof) subject to purchase hereunder.
3. Any warrants issued upon the transfer or exercise in part of this
Warrant (together with this Warrant, the "Warrants") shall be numbered and shall
be registered in a Warrant Register as they are issued. The Company shall be
entitled to treat the registered Holder of any Warrant on the Warrant Register
as the owner in fact thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrant on the
part of any other person, and shall not be liable for any registration or
transfer of Warrants which are registered or to be registered in the name of a
fiduciary or the nominee of a fiduciary unless made with the actual knowledge
that a fiduciary or nominee is committing a breach of trust in requesting such
registration or transfer, or with the knowledge of such facts that its
participation therein amounts to bad faith. The Warrants shall be transferable
only on the books of the Company upon delivery thereof duly endorsed by the
Holder or by his duly authorized attorney or representative, or accompanied by
proper evidence of succession, assignment or authority to transfer. In all cases
of transfer by an attorney, executor, administrator, guardian or other legal
representative, duly authenticated evidence of his or its authority shall be
produced. Upon any registration of transfer, the Company shall deliver a new
Warrant or Warrants to the person entitled thereto. The Warrants may be
exchanged, at the option of the Holder thereof, for another Warrant, or other
Warrants of different denominations, of like tenor and representing in the
aggregate the right to purchase a like number of Shares (or portions thereof)
upon surrender to the Company or its duly authorized agent. Notwithstanding the
foregoing, the Company shall have no obligation to cause Warrants to be
transferred on its books to any person if, in the opinion of counsel to the
Company, such transfer does not comply with the provisions of the Securities Act
of 1933, as amended (the "Act"), and the rules and regulations thereunder.
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<PAGE>
4. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of this Warrant, such number of shares of Common Stock as shall,
from to time, be sufficient therefor. The Company covenants that all shares of
Common Stock issuable upon exercise of this Warrant shall be validly issued,
fully paid, nonassessable, and free of preemptive rights.
5. (a) In case the Company shall at any time after the date of this
Agreement (i) declare a dividend on the outstanding Common Stock in shares of
its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine
the outstanding Common Stock into a smaller number of shares, or (iv) issue any
shares of its capital stock by reclassification of the Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), then, in each case, the Exercise
Price, and the number and kind of shares receivable upon exercise, in effect at
the time of the record date for such dividend or of the effective date of such
subdivision, combination, or reclassification shall be proportionately adjusted
so that the Holder of this Warrant shall be entitled to receive the aggregate
number and kind of shares which, if such Warrant had been exercised immediately
prior to such time, he would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination, or
reclassification. Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) In case the Company shall issue rights, options, or warrants to all
holders of Common Stock entitling them to subscribe for or purchase Common Stock
(or securities convertible into or exchangeable for Common Stock) at a price per
share (or having a conversion price per share, if a security convertible into or
exchangeable for Common Stock) less than the Current Market Price on such record
date, then, in each case, the Exercise Price shall be adjusted by multiplying
the Exercise Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding on such record date plus the number of shares of Common Stock which
the aggregate offering price of the total number of shares of Common Stock so to
be offered (or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such Current Market Price and the
denominator of which shall be the number of shares of Common Stock outstanding
on such record date plus the number of additional shares of Common Stock to be
offered for subscription or purchase (or into which the convertible or
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<PAGE>
exchangeable securities so to be offered are initially convertible or
exchangeable). Such adjustment shall become effective at the close of business
on such record date; provided, however, that, to the extent the shares of Common
Stock (or securities convertible into or exchangeable for shares of Common
Stock) are not delivered, the Exercise Price shall be readjusted after the
expiration of such rights, options, or warrants (but only with respect to
Warrants exercised after such expiration), to the Exercise Price which would
then be in effect had the adjustments made upon the issuance of such rights or
warrants been made upon the basis of delivery of only the number of shares of
Common Stock (or securities convertible into or exchangeable for shares of
Common Stock) actually issued. In case any subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the board of
directors of the Company, whose determination shall be conclusive absent
manifest error. Shares of Common Stock owned by or held for the account of the
Company or any majority-owned subsidiary shall not be deemed outstanding for the
purpose of any such computation.
(c) In case the Company shall distribute to all holders of Common Stock
(including any such distribution made to the stockholders of the Company in
connection with a consolidation or merger in which the Company is the continuing
corporation) evidences of its indebtedness or assets (other then cash dividends
or distributions and dividends payable in shares of Common Stock), or
subscription rights, options, or warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock (excluding those referred to in paragraph (b) of this Section 5), then, in
each case, the Exercise Price shall be adjusted by multiplying the Exercise
Price in effect immediately prior to the record date for the determination of
stockholders entitled to receive such distribution by a fraction, the numerator
of which shall be the Current Market Price on such record date, less the fair
market value (as determined in good faith by the board of directors of the
Company, whose determination shall be conclusive absent manifest error) of the
portion of the evidences of indebtedness or assets so to be distributed, or of
such subscription rights, options, or warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock, applicable to one share, and the denominator of which shall be such
Current Market Price per share of Common Stock. Such adjustment shall be made
whenever any such distribution is made, and shall become effective on the date
of such distribution retroactive to the record date for the determination of
stockholders entitled to receive such distribution.
(d) Upon each adjustment of the Exercise Price as a result of the
calculations made in paragraphs (a), (b) and (c) of this paragraph 5, this
Warrant shall thereafter evidence the right to purchase, at the adjusted
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<PAGE>
Exercise Price, that number of shares obtained by dividing (A) the product
obtained by multiplying the number of shares purchasable upon exercise of a
Warrant prior to adjustment of the number of shares by the Exercise Price in
effect prior to adjustment of the Exercise Price by (B) the Exercise Price in
effect after such adjustment of the Exercise Price.
(e) Whenever there shall be an adjustment as provided in this paragraph
5, the Company shall promptly cause written notice thereof to be sent by
registered mail, postage prepaid, to the Holder, at its principal office, which
notice shall be accompanied by an officer's certificate setting forth the number
of Shares issuable after such adjustment and setting forth a brief statement of
the facts requiring such adjustment and the computation thereof, which officer's
certificate shall be conclusive evidence of the correctness of any such
adjustment absent manifest error.
(f) All calculations under this paragraph 5 shall be made to the
nearest cent or to the nearest one-tenth of a share, as the case may be.
(g) The Company shall not be required to issue fractions of shares of
Common Stock or other capital stock of the Company upon the exercise of
Warrants. If any fraction of a Share would be issuable on the exercise of any
Warrant (or specified portions thereof), the Company shall purchase such
fraction for an amount in cash equal to the same fraction of the Current Market
Price of such share of Common Stock on the date of exercise of the Warrant.
6. (a) In case of any consolidation with or merger of the Company with or
into another corporation (other than a merger or consolidation in which the
Company is the surviving or continuing corporation), or in case of any sale,
lease or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, such successor, leasing or purchasing
corporation, as the case may be, shall (i) execute with the Holder an agreement
providing that the Holder shall have the right thereafter to receive upon
exercise of this Warrant solely the kind and amount of shares of stock and other
securities, property, cash or any combination thereof receivable upon such
consolidation, merger, sale, lease or conveyance by a holder of the number of
shares of Common Stock for which for this Warrant might have been exercised
immediately prior to such consolidation, merger, sale, lease or conveyance, and
(ii) make effective provision in its certificate of incorporation or otherwise,
if necessary, in order to effect such agreement.
(b) In case of any reclassification or change of the shares of Common
Stock issuable upon exercise of this Warrant (other than a change in par value
or from no par value to a specified par value, or as a result of a subdivision
or combination, but including any change in the shares into two or more classes
or series of shares), or in case of any consolidation or merger of another
5
<PAGE>
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change to the
right to receive cash or other property) of the shares of Common Stock (other
than a change in par value, or from no par value to a specified par value, or as
a result of a subdivision or combination, but including any change in the shares
into two or more classes or series of shares), the Holder shall have the right
thereafter to receive upon exercise of this Warrant solely the kind and amount
of shares of stock and other securities, property, cash or any combination
thereof receivable upon such reclassification, change, consolidation or merger
by a holder of the number of shares of Common Stock for which this Warrant might
have been exercised immediately prior to such reclassification, change,
consolidation or merger. Thereafter, appropriate provision shall be made for
adjustments which shall be as nearly equivalent as practicable to the
adjustments in paragraph 5.
(c) The above provisions of this paragraph 6 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases or conveyances.
7. In case at any time the Company shall propose:
(a) to pay any dividend or make any distribution on shares of Common
Stock in shares of Common Stock or make any other distribution (other than
regularly scheduled cash dividends which are not in a greater amount per share
than the most recent such cash dividend) to all holders of Common Stock; or
(b) to issue any rights, warrants or other securities to all holders of
Common Stock entitling them to purchase any additional shares of Common Stock or
any other rights, warrants or other securities; or
(c) to effect any reclassification or change of outstanding shares of
Common Stock, or any consolidation, merger, sale, lease or conveyance of
property, described in paragraph 6; or
(d) to effect any liquidation, dissolution, or winding-up of the
Company; or
(e) to take any other action which would cause an adjustment to the
Exercise Price; then, and in any one or more of such cases, the Company shall
give written notice thereof, by registered mail, postage pre-paid, to the Holder
at the Holder's address as it shall appear in the Warrant Register, mailed at
least 15 days prior to (i) the date as of which the holders of record of shares
of Common Stock to be entitled to receive any such dividend, distribution,
rights, warrants or other securities are to be determined, (ii) the date on
which any such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
6
<PAGE>
dissolution, or winding-up is expected to become effective, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up; or (iii) the date of such action which would require
an adjustment to the Exercise Price.
8. The issuance of any shares or other securities upon the exercise of this
Warrant, and the delivery of certificates or other instruments representing such
shares, or other securities, shall be made without charge to the Holder for any
tax or other charge in respect of such issuance. The Company shall not, however,
be required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of any certificate in a name other than that
of the Holder and the Company shall not be required to issue or deliver any such
certificate unless and until the person or persons requesting the issue thereof
shall have paid to the Company the amount of such tax or shall have established
to the satisfaction of the Company that such tax has been paid.
9. (a) If the Company shall file a registration statement (other than on
Form S-4, Form S-8, or other inapplicable forms or any successor form) with the
Securities and Exchange Commission (the "Commission") during the Exercise
Period, the Company shall give the Holder of this Warrant and all the then
holders of Shares at least 30 days prior written notice of the filing of such
registration statement. If requested by the Holder or by any such holder in
writing within 20 days after receipt of any such notice, the Company shall, at
the Company's sole expense (other than the fees and disbursements of counsel for
the Holder or such holder and the underwriting discounts, if any, payable in
respect of the Shares sold by the Holder or any such holder), and on one
occasion only, register or qualify the Shares of the Holder or any such holders
who shall have made such request concurrently with the registration of such
other securities, all to the extent requisite to permit the public offering and
sale of the Shares through the facilities of all appropriate securities
exchanges and the over-the-counter market. The Company will use its best efforts
through its officers, directors, auditors and counsel to cause such registration
statement to become effective as promptly as practicable. Notwithstanding the
foregoing, if the managing underwriter of any such offering shall advise the
Company in writing that, in its opinion, the distribution of all or a portion of
the Shares requested to be included in the registration concurrently with the
securities being registered by the Company would materially adversely affect the
distribution of such securities by the Company for its own account, then the
Holder or any such holder who shall have requested registration of his or its
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<PAGE>
hares shall delay the offering and sale of such Shares (or the portions thereof
so designated by such managing underwriter) for such period, not to exceed 90
days, as the managing underwriter shall request, provided that no such delay
shall be required as to any Shares if any securities of the Company are included
in such registration statement for the account of any person other than the
Company and the Holder unless the securities included in such registration
statement for such other person shall have been reduced pro rata to the
reduction of the Shares which were requested to be included in such
registration.
(b) If at any time during the Exercise Period the Company shall receive
a written request from Holders who, in the aggregate, own (or upon exercise of
all Warrants would own) a majority of the total number of Shares issued or
issuable upon exercise of the Warrants, the Company shall, as promptly as
practicable, prepare and file with the Commission a registration statement
sufficient to permit the public offering and sale of the Shares through the
facilities of all appropriate securities exchanges and the over-the-counter
market, and will use its best efforts through its officers, directors, auditors
and counsel to cause such registration statement to become effective as promptly
as practicable; provided, however, that the Company shall only be obligated to
file and obtain effectiveness of such a registration statement on two separate
occasions. All expenses incurred in connection with such registration (other
than the fees and disbursements of counsel for the Holder or such holders and
underwriting discounts, if any, payable in respect of the Underwriter's
Securities sold by the Holder or any such holder) shall be borne by the Company.
(c) In the event of a registration pursuant to the provisions of this
paragraph 9, the Company shall use its best efforts to cause the Shares so
registered to be registered or qualified for sale under the securities or blue
sky laws of such jurisdictions as the Holder or such holders may reasonably
request; provided, however, that by reason of this paragraph 9(c), the Company
shall not be required to qualify to do business in any state in which it is not
otherwise required to qualify to do business.
(d) The Company shall keep effective any registration or qualification
contemplated by this paragraph 9 and shall from time to time amend or supplement
each applicable registration statement, preliminary prospectus, final
prospectus, application, document and communication for such period of time as
shall be required to permit the Holder or such holders to complete the offer and
sale of the Shares covered thereby. The Company shall in no event be required to
keep any such registration or qualification in effect for a period in excess of
nine months from the date on which the Holder and such holders are first free to
sell such Shares; provided, however, that if the Company is required to keep any
8
<PAGE>
such registration or qualification in effect with respect to securities other
than the Shares beyond such period, the Company shall keep such registration or
qualification in effect as it relates to the Shares for so long as such
registration or qualification remains or is required to remain in effect in
respect of such other securities.
(e) In the event of a registration pursuant to the provisions of this
paragraph 9, the Company shall furnish to the Holder and to each such holder
such number of copies of the registration statement and of each amendment and
supplement thereto (in each case, including all exhibits), such reasonable
number of copies of each prospectus contained in such registration statement and
each supplement or amendment thereto (including each preliminary prospectus),
all of which shall conform to the requirements of the Act and the rules and
regulations thereunder, and such other documents, as the Holder or such holders
may reasonably request in order to facilitate the disposition of the Shares
included in such registration. (f) In the event of a registration pursuant to
the provisions of this paragraph 9, the Company shall furnish the Holder and
each holder of any Shares so registered with an opinion of its counsel
(reasonably acceptable to the Holder) to the effect that (i) the registration
statement has become effective under the Act and no order suspending the
effectiveness of the registration statement, preventing or suspending the use of
the registration statement, any preliminary prospectus, any final prospectus, or
any amendment or supplement thereto has been issued, nor has the Securities and
Exchange Commission or any securities or blue sky authority of any jurisdiction
instituted or threatened to institute any proceedings with respect to such an
order, (ii) the registration statement and each prospectus forming a part
thereof (including each preliminary prospectus), and any amendment or supplement
thereto, complies as to form with the Act and the rules and regulations
thereunder, and (iii) such counsel has no knowledge or reason to know of any
material misstatement or omission in such registration statement or any
prospectus, as amended or supplemented. Such opinion shall also state the
jurisdictions in which the Shares have been registered or qualified for sale
pursuant to the provisions of paragraph 9(b). (g) The Company agrees that until
all the Shares have been sold under a registration statement or pursuant to Rule
144, under the Act, it shall file all reports, statements and other materials
required to be filed with the Commission to permit holders of the Shares to sell
such securities under Rule 144. 10. (a) Subject to the conditions set forth
below, the Company agrees to indemnify and hold harmless the Holder, any holder
of any of the Shares, their officers, directors, partners, employees, agents and
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<PAGE>
counsel, and each person, if any, who controls any such person within the
meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), from and against any and all loss,
liability, charge, claim, damage and expense whatsoever (which shall include,
for all purposes of this Section 10, but not be limited to, attorneys' fees and
any and all expense whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever, and
any and all amounts paid in settlement of any claim or litigation), as and when
incurred, arising out of, based upon, or in connection with (i) any untrue
statement or alleged untrue statement of a material fact contained (A) in any
registration statement, preliminary prospectus or final prospectus (as from time
to time amended and supplemented), or any amendment or supplement thereto, or
(B) in any application or other document or communication (in this Section 10
collectively called an "application") executed by or on behalf of the Company or
based upon written information furnished by or on behalf of the Company filed in
any jurisdiction in order to register or qualify any of the Shares under the
securities or blue sky laws thereof or filed with the Commission or any
securities exchange; or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, unless such statement or omission was made in reliance upon and
in conformity with written information furnished to the Company with respect to
the Holder or any holder of any of the Shares by or on behalf of such person
expressly for inclusion in any registration statement, preliminary prospectus,
or final prospectus, or any amendment or supplement thereto, or in any
application, as the case may be, or (ii) any breach of any representation,
warranty, covenant or agreement of the Company contained in this Warrant. The
foregoing agreement to indemnify shall be in addition to any liability the
Company may otherwise have, including liabilities arising under this Warrant.
If any action is brought against the Holder or any holder of any of the
Shares or any of its officers, directors, partners, employees, agents or
counsel, or any controlling persons of such person (an "indemnified party") in
respect of which indemnity may be sought against the Company pursuant to the
foregoing paragraph, such indemnified party or parties shall promptly notify the
Company in writing of the institution of such action (but the failure so to
notify shall not relieve the Company from any liability it may have pursuant to
this paragraph 10(a)) and the Company shall promptly assume the defense of such
action, including the employment of counsel (reasonably satisfactory to such
indemnified party or parties) and payment of expenses. Such indemnified party or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
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<PAGE>
such indemnified party or parties unless the employment of such counsel shall
have been authorized in writing by the Company in connection with the defense of
such action or the Company shall not have promptly employed counsel reasonably
satisfactory to such indemnified party or parties to have charge of the defense
of such action or such indemnified party or parties shall have reasonably
concluded that there may be one or more legal defenses available to it or them
or to other indemnified parties which are different from or additional to those
available to the Company, in any of which events such fees and expenses shall be
borne by the Company and the Company shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties. Anything
in this paragraph to the contrary notwithstanding, the Company shall not be
liable for any settlement of any such claim or action effected without its
written consent.
(b) The Holder agrees to indemnify and hold harmless the Company, each
director of the Company, each officer of the Company who shall have signed any
registration statement covering Shares held by the Holder and each other person,
if any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, to the same extent as the foregoing indemnity
from the Company to the Holder in paragraph 10(a), but only with respect to
statements or omissions, if any, made in any registration statement, preliminary
prospectus, or final prospectus (as from time to time amended and supplemented),
or any amendment or supplement thereto, or in any application, in reliance upon
and in conformity with written information furnished to the Company with respect
to the Holder by or on behalf of the Holder expressly for inclusion in any such
registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be. If
any action shall be brought against the Company or any other person so
indemnified based on any such registration statement, preliminary prospectus, or
final prospectus, or any amendment or supplement thereto, or in any application,
and in respect of which indemnity may be sought against the Holder pursuant to
this paragraph 10(b), the Holder shall have the rights and duties given to the
Company, and the Company and each other person so indemnified shall have the
rights and duties given to the indemnified parties, by the provisions of
paragraph 10(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to paragraph 10(a)
or 10(b) (subject to the limitations thereof) but it is found in a final
judicial determination, not subject to further appeal, that such indemnification
may not be enforced in such case, even though this Agreement expressly provides
for indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the Exchange Act or otherwise, then the
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Company (including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed any such
registration statement and any controlling person of the Company), as one
entity, and the Holder and any holder of any of the Shares included in such
registration in the aggregate (including for this purpose any contribution by or
on behalf of an indemnified party), as a second entity, shall contribute to the
losses, liabilities, claims, damages and expenses whatsoever to which any of
them may be subject, on the basis of relevant equitable considerations such as
the relative fault of the Company and the Holder or any such holder in
connection with the facts which resulted in such losses, liabilities, claims,
damages and expenses. The relative fault, in the case of an untrue statement,
alleged untrue statement, omission or alleged omission, shall be determined by,
among other things, whether such statement, alleged statement, omission or
alleged omission relates to information supplied by the Company, by the Holder
or by any holder of Shares included in such registration, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement, alleged statement, omission or alleged omission. The
Company and the Holder agree that it would be unjust and inequitable if the
respective obligations of the Company and the Holder for contribution were
determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages and expenses (even if the Holder and the other
indemnified parties were treated as one entity for such purpose) or by any other
method of allocation that does not reflect the equitable considerations referred
to in this paragraph 10(c). No person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this paragraph 10(c), each person, if any,
who controls the Holder or any holder of any of the Shares within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and each officer,
director, partner, employee, agent and counsel of each such person, shall have
the same rights to contribution as such person and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, each officer of the Company who shall have signed any
such registration statement, and each director of the Company shall have the
same rights to contribution as the Company, subject in each case to the
provisions of this paragraph 10(c). Anything in this paragraph 10(c) to the
contrary notwithstanding, no party shall be liable for contribution with respect
to the settlement of any claim or action effected without its written consent.
This paragraph 10(c) is intended to supersede any right to contribution under
the Act, the Exchange Act or otherwise.
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11. The securities issued upon exercise of the Warrants shall be subject to
a stop transfer order and the certificate or certificates evidencing any such
securities shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAVE THEY BEEN
REGISTERED UNDER THE SECURITIES ("BLUE SKY") LAWS OF ANY STATE. THESE
SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED, OR HYPOTHECATED
UNLESS THEY HAVE FIRST BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND UNDER THE APPLICABLE STATE SECURITIES ("BLUE SKY") LAWS OR
UNLESS THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT AND LAWS IS ESTABLISHED TO THE SATISFACTION OF THE COMPANY, WHICH
MAY NECESSITATE A WRITTEN OPINION OF SELLER'S COUNSEL SATISFACTORY TO
COMPANY COUNSEL."
12. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), and upon reimbursement of the Company's reasonable
incidental expenses, the Company shall execute and deliver to the Holder thereof
a new Warrant of like date, tenor and denomination.
13. The Holder of any Warrant shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Warrant.
14. This Warrant shall be construed in accordance with the laws of the
State of Colorado, without giving effect to conflict of laws.
Dated: , 1996
---------------
ACCELR8 TECHNOLOGY CORPORATION
By: /S/ THOMAS V. GEIMER
------------------------------------
Thomas V. Geimer, Chairman and Chief
Executive Officer
[ S E A L ]
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FORM OF ASSIGNMENT
(To be executed by the registered Holder if such Holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name, address, social security
or other identifying number of assignee)
Warrants to purchase ____________ shares of Common Stock of Accelr8 Technology
Corporation (the "Company"), together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
_____________________________________________ attorney to transfer such Warrants
on the books of the Company, with full power of substitution.
Dated:
-----------------------
Signature:
---------------------------
Signature Guaranteed:
NOTICE
The signature(s) on the foregoing Assignment must correspond to the
name(s) as written upon the face of this Warrant in every particular, without
alteration or enlargement or any change whatsoever. The signature(s) must be
guaranteed by an eligible guarantor institution (Banks, Stockbrokers, Savings
and Loan Associations and Credit Unions with membership in an approved signature
guarantee Medallion Program).
14
<PAGE>
To: ACCELR8 TECHNOLOGY CORPORATION
303 East Seventeenth Avenue
Denver, Colorado 80203
ELECTION TO EXERCISE
The undersigned hereby exercises his or its rights to subscribe for
__________ shares of Common Stock covered by the within Warrant (each as defined
in the within Warrant) and tenders payment herewith in the amount of $__________
in accordance with the terms thereof, and requests that certificates for such
securities be issued in the name of, and delivered to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name, address, social security
or other identifying number)
and, if such number of Shares (or portions thereof) shall
not be all the Shares covered by the within Warrant, that a new Warrant for the
balance of the Shares (or portions thereof) covered by the within Warrant be
registered in the name of, and delivered to, the undersigned at the address
stated below.
Dated: Name:
------------------------------------- ----------------------------
Address:
-----------------------------------------------------------------------
(Please print or typewrite name and address)
Signature:
-------------------------
Signature Guaranteed:
NOTICE
The signature(s) on the foregoing Election to Exercise must correspond
to the name(s) as written upon the face of this Warrant in every particular,
without alteration or enlargement or any change whatsoever. The signature(s)
must be guaranteed by an eligible guarantor institution (Banks, Stockbrokers,
Savings and Loan Associations and Credit Unions with membership in an approved
signature guarantee Medallion Program).
15
Option Agreement
AGREEMENT made this 19th day of December, 1989, by and between Franz Huber (the
"Optionee") and Accelr8 Technology Corporation (the "Optionor" or the
"Company"), a Colorado corporation.
The Optionor desires, by affording Optionee an opportunity to purchase its no
par value common shares, to advance the interests of the Optionor and its
shareholders by encouraging and enabling Optionee, upon whose judgment,
initiative and effort the Optionor is independent for the successful conduct of
its business, to acquire and retain a proprietary interest in the Optionor
through ownership of its stock.
IT IS THEREFORE AGREED:
1. Option. Optionee is hereby granted the option to purchase 500,000 shares of
Common Stock, no par value ("Common Stock" or "Stock"), of the Optionor, which
Option must be exercised, if at all, on or before the dates set forth in Section
3 below, and in the increments also set forth in Section 3 below. If such option
is exercised shall be given to the Optionor in the manner provided by this
Agreement.
2. Exercise Price. The exercise price of the 500,000 shares subject to this
Agreement shall be $.09 per share ("Exercise Price").
3. Exercise of Option. One quarter of the shares subject to option will vest and
become exercisable every twelve months over a four year period which begins
March 1, 1989, and will remain exercisable for three years following the
original date such increment vested. Thus, 125,000 shares will vest and become
exercisable on March 1, 1989, 1990, 1991, and 1992 respectively, and shall
remain exercisable until 5:00 P.M., Denver time, on March 1, 1992, 1993, 1994,
1995, respectively. Exercise must be in the form of a written request, presented
to the Secretary of the Company at the Company's offices, substantially in the
form attached hereto as Exhibit A, and accompanied by evidence of ownership of
the option. Shares issued upon exercise of the option shall be unregistered
shares of Common Stock. Such Stock will be restricted stock of the Optionor and
will bear a legend to that effect.
4. Transfer and Termination. Unvested portions of Optionee's option shall become
void upon termination of employment of the Optionee with the Optionor, whether
or not such termination is voluntary or involuntary. The options herein granted,
whether vested or unvested, may not be voluntarily transferred or assigned, in
whole or in part, without the express written consent of the Optionor. The
options may not be pledged or hypothecated in any way and no option shall be
subject to execution, attachment or similar process without the express written
consent of the Optionor.
5. Adjustments of Exercise Price:
(A) If the Optionor should at any time or from time to time hereafter issue any
Stock as a stock dividend or other distribution to shareholders, then forthwith
upon such issue, the Exercise Price shall be adjusted to a price (computed to
the nearest cent) determined by dividing (i) the sum of the number of shares of
Stock outstanding immediately prior to such issue multiplied by the Exercise
Price in effect immediately prior to such issue by (ii) the total number of
shares of Stock outstanding immediately after such issue.
<PAGE>
(B) If the Optionor should at any time or from time to time hereafter reduce the
amount of the Stock then outstanding by reverse stock split or otherwise, then
forthwith upon such reduction, the Exercise Price shall be adjusted to a price
(computed to the nearest cent) determined by dividing (i) the sum of the number
of shares of stock outstanding immediately prior to such reduction multiplied by
the Exercise Price in effect immediately prior to such reduction, by (ii) the
total number of shares of Stock outstanding immediately after such reduction.
(C) No Adjustment for Small Amounts. Anything in this Section 5 to the contrary
notwithstanding, the Optionor shall not be required to give effect to any
adjustment in the Exercise Price unless and until the net effect of one or more
adjustments, determined as above provided, shall have required a change of the
Exercise Price at least one cent, but when the cumulative net effect of more
than one adjustment so determined shall be to change the actual Exercise Price
by at least one cent, such change in the Exercise Price shall thereupon be given
effect.
(D) Number of Shares Adjusted. Upon any adjustment of the Exercise Price, the
Holder of the option under this Agreement shall thereafter (until another such
adjustment) be entitled to purchase, at the new Exercise Price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Stock initially issuable upon exercise of Options under this
Agreement by the Exercise Price in effect on the date hereof and dividing the
product so obtained by the new Exercise Price.
(E) Stock Defined for Purpose of Section 5. Whenever reference is made in this
Section 5 to the issue or sale of shares of Stock, the term "Stock" shall mean
the Stock of the Optionor of the class authorized as of the date hereof and any
other class of stock ranking on a parity with such Stock. However, shares
issuable upon exercise of this Option Agreement shall include only shares of the
class designated as no par value Common Stock of the Optionor as of the date
hereof.
6. Officer's Certificate. Whenever the Exercise Price shall be adjusted as
required by the provisions of Section 5 hereof, the Optionor shall forthwith
file in the custody of its Secretary or an Assistant Secretary at its principal
office, and with its Transfer Agent, if any, an officer's certificate showing
the adjusted Exercise Price determined as herein provided and setting forth in
reasonable detail the facts requiring such adjustment. Each such officer's
certificate shall be made available ~t all reasonable times for inspection by
the Optionee and the Optionor shall, promptly after each such adjustment,
deliver a copy of such certificate to the Optionee. Such certificate shall be
conclusive as to the correctness of such adjustment if the Optionee under this
Agreement does not give written notice of an objection to the Optionor within 15
days after such officer's certificate was mailed or otherwise delivered to the
Optionee. If the Optionor is given written notice of objection, and the parties
cannot reconcile the dispute, it shall be arbitrated pursuant to the laws of the
State of Colorado, or as the parties otherwise agree.
7. Notice of Optionee. So long as options under this Agreement shall be
outstanding and unexercised (i) if the Optioner shall pay any dividend or make
any distribution upon the Stock, or (ii) if the Optionor shall offer to the
holders of Stock for subscription or purchase by them any shares of stock of any
class or any other rights or (iii) if any capital reorganization of the
Optionor, reclassification of the capital stock of the Optionor, consolidation
or merger of the Optionor with or into another corporation, sale, lease or
transfer of all or substantially all of the property and assets of the Optionor
to another corporation, or voluntary, or involuntary dissolution, liquidation or
winding up of the Optionor shall be effected, then, in any such case, the
Optionor shall cause to be delivered to the Optionee, at least ten days prior to
the date specified in (A) or (B) below, as the case may be, a notice containing
a brief description of the proposed action and stating the date on which (A) a
record is to be taken of the purpose of such dividend, distribution or rights,
or (B) such reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding up is to take place and the date, if
-2-
<PAGE>
any, is to be fixed, as of which the holders of Stock of record shall be
entitled to exchange their shares of Stock for securities or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
8. Termination of Agreement. This Agreement shall terminate and all rights
thereunder shall cease upon the occurrence of any of the following events:
(a) Mutual agreement of the parties.
(b) The administration of the Optionor's affairs in any bankruptcy or
receivership action, or other proceedings for the relief of debtors.
(c) Expiration of the incremental exercise portions of the Optionee's
Option, unexercised in whole or in part, on March 1, 1992, 1993, 1994,
and 1995.
9. Benefit. This Agreement shall bind the respective parties, jointly and
severally, their successors, assigns, administrators, and executors.
10. Arbitration. in the event any controversy or claim arising out of this
Agreement cannot be settled by the parties, such controversy or claim shall be
settled by arbitration in accordance with the Uniform Arbitration Act as adopted
in Colorado, and judgment on the award may be entered in any court having
jurisdiction thereof.
11. Notice. All communications, notices and demands of any kind which any party
may be required or desire to give to or serve on the other party shall be made
in writing and sent by registered or certified mail, postage paid, return
receipt requested, to the addresses then shown on the books and records of the
Optionor.
IN WlTNESS WHEREOF, the foregoing has been signed as of the date first written
above.
ACCELR8 TECHNOLOGY CORPORATION
By: /s/ Robert W. Hickler By: /s/ Franz Huber
--------------------- ---------------------------------
Name
11537 E. Amherst Circle South
-------------------------------------
Address
Aurora, Colorado 80014
-------------------------------------
###-##-####
-------------------------------------
Social Security Number
-3-
<PAGE>
EXHIBIT A
OPTION EXERCISE FORM
Accelr8 Technology Corporation
Date:________________, 199_
The undersigned hereby elects irrevocably to exercise his or its rights under
the Option Agreement dated December 19, 1989, and to purchase ________________
shares of Common Stock of the Company called for thereby, and hereby makes
payment of $ ____________ (At the rate of $.09 per share of Common Stock)
payable to Accelr8 Technology Corporation in payment of the Exercise Price
pursuant thereto, and if such number of shares shall not be all of the shares
purchasable hereunder, the undersigned retains the right to exercise the balance
of the option in accordance with the Option Agreement.
Please issue the shares of Common Stock as to which this option is exercised in
accordance with instructions given below.
Signature:
-----------------------------
Signature Guaranteed:
------------------
By:
------------------------------------
INSTRUCTIONS FOR ISSUANCE OF STOCK
Name
- --------------------------------------------------------------------------------
(Print in Block Letters)
Address
- --------------------------------------------------------------------------------
NOTICE: The signature to this form to exercise must correspond with the name as
written upon the face of the Option Agreement or an Assignment thereof in every
particular without alteration or enlargement or any change whatsoever, and must
be guaranteed by a bank, other than a savings bank, or by a trust company or by
a firm having membership on a registered national securities exchange.
-4-
Option Agreement
AGREEMENT made this 27th day of April, 1992, by and between Timothy Fitzpatrick
(the "Optionee") and Accelr8 Technology Corporation (the "Optionor" or the
"Company"), a Colorado corporation.
The Optionor desires, by affording Optionee an opportunity to purchase its no
par value common shares, to advance the interests of the Optionor and its
shareholders by encouraging and enabling Optionee, upon whose judgment,
initiative and effort the Optionor is independent for the successful conduct of
its business, to acquire and retain a proprietary interest in the Optionor
through ownership of its stock.
IT IS THEREFORE AGREED:
1. Option. Optionee is hereby granted the option to purchase 500,000 shares of
Common Stock, no par value ("Common Stock" or "Stock"), of the Optionor, which
Option must be exercised, if at all, on or before the dates set forth in Section
3 below, and in the increments also set forth in Section 3 below. If such option
is exercised shall be given to the Optionor in the manner provided by this
Agreement.
2. Exercise Price. The exercise price of the 500,000 shares subject to this
Agreement shall be $.09 per share ("Exercise Price").
3. Exercise of Option. One quarter of the shares subject to option will vest and
become exercisable every twelve months over a four year period which begins
April 27, 1993, and will remain exercisable for three years following the
original date such increment vested. Thus, 125,000 shares will vest and become
exercisable on April 27, 1993, 1994, 1995, and 1996 respectively, and shall
remain exercisable until 5:00 P.M., Denver time, on April 27, 1996, 1997, 1998,
1999, respectively. Exercise must be in the form of a written request, presented
to the Secretary of the Company at the Company's offices, substantially in the
form attached hereto as Exhibit A, and accompanied by evidence of ownership of
the option. Shares issued upon exercise of the option shall be unregistered
shares of Common Stock. Such Stock will be restricted stock of the Optionor and
will bear a legend to that effect.
4. Transfer and Termination. Unvested portions of Optionee's option shall become
void upon termination of employment of the Optionee with the Optionor, whether
or not such termination is voluntary or involuntary. The options herein granted,
whether vested or unvested, may not be voluntarily transferred or assigned, in
whole or in part, without the express written consent of the Optionor. The
options may not be pledged or hypothecated in any way and no option shall be
subject to execution, attachment or similar process without the express written
consent of the Optionor.
5. Adjustments of Exercise Price:
(A) If the Optionor should at any time or from time to time hereafter issue any
Stock as a stock dividend or other distribution to shareholders, then forthwith
upon such issue, the Exercise Price shall be adjusted to a price (computed to
the nearest cent) determined by dividing (i) the sum of the number of shares of
Stock outstanding immediately prior to such issue multiplied by the Exercise
Price in effect immediately prior to such issue by (ii) the total number of
shares of Stock outstanding immediately after such issue.
<PAGE>
(B) If the Optionor should at any time or from time to time hereafter reduce the
amount of the Stock then outstanding by reverse stock split or otherwise, then
forthwith upon such reduction, the Exercise Price shall be adjusted to a price
(computed to the nearest cent) determined by dividing (i) the sum of the number
of shares of stock outstanding immediately prior to such reduction multiplied by
the Exercise Price in effect immediately prior to such reduction, by (ii) the
total number of shares of Stock outstanding immediately after such reduction.
(C) No Adjustment for Small Amounts. Anything in this Section 5 to the contrary
notwithstanding, the Optionor shall not be required to give effect to any
adjustment in the Exercise Price unless and until the net effect of one or more
adjustments, determined as above provided, shall have required a change of the
Exercise Price at least one cent, but when the cumulative net effect of more
than one adjustment so determined shall be to change the actual Exercise Price
by at least one cent, such change in the Exercise Price shall thereupon be given
effect.
(D) Number of Shares Adjusted. Upon any adjustment of the Exercise Price, the
Holder of the option under this Agreement shall thereafter (until another such
adjustment) be entitled to purchase, at the new Exercise Price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Stock initially issuable upon exercise of Options under this
Agreement by the Exercise Price in effect on the date hereof and dividing the
product so obtained by the new Exercise Price.
(E) Stock Defined for Purpose of Section 5. Whenever reference is made in this
Section 5 to the issue or sale of shares of Stock, the term "Stock" shall mean
the Stock of the Optionor of the class authorized as of the date hereof and any
other class of stock ranking on a parity with such Stock. However, shares
issuable upon exercise of this Option Agreement shall include only shares of the
class designated as no par value Common Stock of the Optionor as of the date
hereof.
6. Officer's Certificate. Whenever the Exercise Price shall be adjusted as
required by the provisions of Section 5 hereof, the Optionor shall forthwith
file in the custody of its Secretary or an Assistant Secretary at its principal
office, and with its Transfer Agent, if any, an officer's certificate showing
the adjusted Exercise Price determined as herein provided and setting forth in
reasonable detail the facts requiring such adjustment. Each such officer's
certificate shall be made available ~t all reasonable times for inspection by
the Optionee and the Optionor shall, promptly after each such adjustment,
deliver a copy of such certificate to the Optionee. Such certificate shall be
conclusive as to the correctness of such adjustment if the Optionee under this
Agreement does not give written notice of an objection to the Optionor within 15
days after such officer's certificate was mailed or otherwise delivered to the
Optionee. If the Optionor is given written notice of objection, and the parties
cannot reconcile the dispute, it shall be arbitrated pursuant to the laws of the
State of Colorado, or as the parties otherwise agree.
7. Notice of Optionee. So long as options under this Agreement shall be
outstanding and unexercised (i) if the Optioner shall pay any dividend or make
any distribution upon the Stock, or (ii) if the Optionor shall offer to the
holders of Stock for subscription or purchase by them any shares of stock of any
class or any other rights or (iii) if any capital reorganization of the
Optionor, reclassification of the capital stock of the Optionor, consolidation
or merger of the Optionor with or into another corporation, sale, lease or
transfer of all or substantially all of the property and assets of the Optionor
to another corporation, or voluntary, or involuntary dissolution, liquidation or
winding up of the Optionor shall be effected, then, in any such case, the
Optionor shall cause to be delivered to the Optionee, at least ten days prior to
the date specified in (A) or (B) below, as the case may be, a notice containing
a brief description of the proposed action and stating the date on which (A) a
record is to be taken of the purpose of such dividend, distribution or rights,
or (B) such reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding up is to take place and the date, if
-2-
<PAGE>
any, is to be fixed, as of which the holders of Stock of record shall be
entitled to exchange their shares of Stock for securities or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
8. Termination of Agreement. This Agreement shall terminate and all rights
thereunder shall cease upon the occurrence of any of the following events:
(a) Mutual agreement of the parties.
(b) The administration of the Optionor's affairs in any bankruptcy or
receivership action, or other proceedings for the relief of debtors.
(c) Expiration of the incremental exercise portions of the Optionee's
Option, unexercised in whole or in part, on April 27, 1996, 1997,
1998, and 1999.
9. Benefit. This Agreement shall bind the respective parties, jointly and
severally, their successors, assigns, administrators, and executors.
10. Arbitration. in the event any controversy or claim arising out of this
Agreement cannot be settled by the parties, such controversy or claim shall be
settled by arbitration in accordance with the Uniform Arbitration Act as adopted
in Colorado, and judgment on the award may be entered in
any court having jurisdiction thereof.
11. Notice. All communications, notices and demands of any kind which any party
may be required or desire to give to or serve on the other party shall be made
in writing and sent by registered or certified mail, postage paid, return
receipt requested, to the addresses then shown on the books and records of the
Optionor.
IN WlTNESS WHEREOF, the foregoing has been signed as of the date first written
above.
ACCELR8 TECHNOLOGY CORPORATION
By: /s/ Thomas V. Geimer By: /s/ Timothy Fitzpatrick
--------------------- ------------------------------
Name
6828 S. Elizabeth Street
-------------------------------
Address
Littleton, CO 80122
-------------------------------
###-##-####
-------------------------------
Social Security Number
-3-
<PAGE>
EXHIBIT A
OPTION EXERCISE FORM
Accelr8 Technology Corporation
Date:________________, 199_
The undersigned hereby elects irrevocably to exercise his or its rights under
the Option Agreement dated April 27, 1992, and to purchase ________________
shares of Common Stock of the Company called for thereby, and hereby makes
payment of $ ____________ (At the rate of $.09 per share of Common Stock)
payable to Accelr8 Technology Corporation in payment of the Exercise Price
pursuant thereto, and if such number of shares shall not be all of the shares
purchasable hereunder, the undersigned retains the right to exercise the balance
of the option in accordance with the Option Agreement.
Please issue the shares of Common Stock as to which this option is exercised in
accordance with instructions given below.
Signature:
--------------------------------
Signature Guaranteed:
---------------------
By:
---------------------------------------
INSTRUCTIONS FOR ISSUANCE OF STOCK
Name
- --------------------------------------------------------------------------------
(Print in Block Letters)
Address
- --------------------------------------------------------------------------------
NOTICE: The signature to this form to exercise must correspond with the name as
written upon the face of the Option Agreement or an Assignment thereof in every
particular without alteration or enlargement or any change whatsoever, and must
be guaranteed by a bank, other than a savings bank, or by a trust company or by
a firm having membership on a registered national securities exchange.
-4-
Option Agreement
AGREEMENT made this 6th day of January, 1994, by and between James Reiss (the
"Optionee") and Accelr8 Technology Corporation (the "Optionor" or the
"Company"), a Colorado corporation.
The Optionor desires, by affording Optionee an opportunity to purchase its no
par value common shares, to advance the interests of the Optionor and its
shareholders by encouraging and enabling Optionee, upon whose judgment,
initiative and effort the Optionor is independent for the successful conduct of
its business, to acquire and retain a proprietary interest in the Optionor
through ownership of its stock.
IT IS THEREFORE AGREED:
1. Option. Optionee is hereby granted the option to purchase 100,000 shares of
Common Stock, no par value ("Common Stock" or "Stock"), of the Optionor, which
Option must be exercised, if at all, on or before the dates set forth in Section
3 below, and in the increments also set forth in Section 3 below. If such option
is exercised shall be given to the Optionor in the manner provided by this
Agreement.
2. Exercise Price. The exercise price of the 100,000 shares subject to this
Agreement shall be $.09 per share ("Exercise Price").
3. Exercise of Option. One quarter of the shares subject to option will vest and
become exercisable every twelve months over a four year period which begins
February 8, 1991, and will remain exercisable for three years following the
original date such increment vested. Thus, 25,000 shares will vest and become
exercisable on February 8, 1991, 1992, 1993, and 1994 respectively, and shall
remain exercisable until 5:00 P.M., Denver time, on February 8, 1994, 1995,
1996, 1997, respectively. Exercise must be in the form of a written request,
presented to the Secretary of the Company at the Company's offices,
substantially in the form attached hereto as Exhibit A, and accompanied by
evidence of ownership of the option. Shares issued upon exercise of the option
shall be unregistered shares of Common Stock. Such Stock will be restricted
stock of the Optionor and will bear a legend to that effect.
4. Transfer and Termination. Unvested portions of Optionee's option shall become
void upon termination of employment of the Optionee with the Optionor, whether
or not such termination is voluntary or involuntary. The options herein granted,
whether vested or unvested, may not be voluntarily transferred or assigned, in
whole or in part, without the express written consent of the Optionor. The
options may not be pledged or hypothecated in any way and no option shall be
subject to execution, attachment or similar process without the express written
consent of the Optionor.
5. Adjustments of Exercise Price:
(A) If the Optionor should at any time or from time to time hereafter issue any
Stock as a stock dividend or other distribution to shareholders, then forthwith
upon such issue, the Exercise Price shall be adjusted to a price (computed to
the nearest cent) determined by dividing (i) the sum of the number of shares of
Stock outstanding immediately prior to such issue multiplied by the Exercise
Price in effect immediately prior to such issue by (ii) the total number of
shares of Stock outstanding immediately after such issue.
<PAGE>
(B) If the Optionor should at any time or from time to time hereafter reduce the
amount of the Stock then outstanding by reverse stock split or otherwise, then
forthwith upon such reduction, the Exercise Price shall be adjusted to a price
(computed to the nearest cent) determined by dividing (i) the sum of the number
of shares of stock outstanding immediately prior to such reduction multiplied by
the Exercise Price in effect immediately prior to such reduction, by (ii) the
total number of shares of Stock outstanding immediately after such reduction.
(C) No Adjustment for Small Amounts. Anything in this Section 5 to the contrary
notwithstanding, the Optionor shall not be required to give effect to any
adjustment in the Exercise Price unless and until the net effect of one or more
adjustments, determined as above provided, shall have required a change of the
Exercise Price at least one cent, but when the cumulative net effect of more
than one adjustment so determined shall be to change the actual Exercise Price
by at least one cent, such change in the Exercise Price shall thereupon be given
effect.
(D) Number of Shares Adjusted. Upon any adjustment of the Exercise Price, the
Holder of the option under this Agreement shall thereafter (until another such
adjustment) be entitled to purchase, at the new Exercise Price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Stock initially issuable upon exercise of Options under this
Agreement by the Exercise Price in effect on the date hereof and dividing the
product so obtained by the new Exercise Price.
(E) Stock Defined for Purpose of Section 5. Whenever reference is made in this
Section 5 to the issue or sale of shares of Stock, the term "Stock" shall mean
the Stock of the Optionor of the class authorized as of the date hereof and any
other class of stock ranking on a parity with such Stock. However, shares
issuable upon exercise of this Option Agreement shall include only shares of the
class designated as no par value Common Stock of the Optionor as of the date
hereof.
6. Officer's Certificate. Whenever the Exercise Price shall be adjusted as
required by the provisions of Section 5 hereof, the Optionor shall forthwith
file in the custody of its Secretary or an Assistant Secretary at its principal
office, and with its Transfer Agent, if any, an officer's certificate showing
the adjusted Exercise Price determined as herein provided and setting forth in
reasonable detail the facts requiring such adjustment. Each such officer's
certificate shall be made available ~t all reasonable times for inspection by
the Optionee and the Optionor shall, promptly after each such adjustment,
deliver a copy of such certificate to the Optionee. Such certificate shall be
conclusive as to the correctness of such adjustment if the Optionee under this
Agreement does not give written notice of an objection to the Optionor within 15
days after such officer's certificate was mailed or otherwise delivered to the
Optionee. If the Optionor is given written notice of objection, and the parties
cannot reconcile the dispute, it shall be arbitrated pursuant to the laws of the
State of Colorado, or as the parties otherwise agree.
7. Notice of Optionee. So long as options under this Agreement shall be
outstanding and unexercised (i) if the Optioner shall pay any dividend or make
any distribution upon the Stock, or (ii) if the Optionor shall offer to the
holders of Stock for subscription or purchase by them any shares of stock of any
class or any other rights or (iii) if any capital reorganization of the
Optionor, reclassification of the capital stock of the Optionor, consolidation
or merger of the Optionor with or into another corporation, sale, lease or
transfer of all or substantially all of the property and assets of the Optionor
to another corporation, or voluntary, or involuntary dissolution, liquidation or
winding up of the Optionor shall be effected, then, in any such case, the
Optionor shall cause to be delivered to the Optionee, at least ten days prior to
the date specified in (A) or (B) below, as the case may be, a notice containing
a brief description of the proposed action and stating the date on which (A) a
record is to be taken of the purpose of such dividend, distribution or rights,
or (B) such reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding up is to take place and the date, if
-2-
<PAGE>
any, is to be fixed, as of which the holders of Stock of record shall be
entitled to exchange their shares of Stock for securities or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
8. Termination of Agreement. This Agreement shall terminate and all rights
thereunder shall cease upon the occurrence of any of the following events:
(a) Mutual agreement of the parties.
(b) The administration of the Optionor's affairs in any bankruptcy or
receivership action, or other proceedings for the relief of debtors.
(c) Expiration of the incremental exercise portions of the Optionee's
Option, unexercised in whole or in part, on February 8, 1994, 1995,
1996, and 1997.
9. Benefit. This Agreement shall bind the respective parties, jointly and
severally, their successors, assigns, administrators, and executors.
10. Arbitration. in the event any controversy or claim arising out of this
Agreement cannot be settled by the parties, such controversy or claim shall be
settled by arbitration in accordance with the Uniform Arbitration Act as adopted
in Colorado, and judgment on the award may be entered in any court having
jurisdiction thereof.
11. Notice. All communications, notices and demands of any kind which any party
may be required or desire to give to or serve on the other party shall be made
in writing and sent by registered or certified mail, postage paid, return
receipt requested, to the addresses then shown on the books and records of the
Optionor.
IN WlTNESS WHEREOF, the foregoing has been signed as of the date first written
above.
ACCELR8 TECHNOLOGY CORPORATION
By: /s/ Robert W. Hickler By: /s/ James Reiss
--------------------- ---------------------------
Name
2656 Eaton Street
------------------------------
Address
Edgewater, CO 80214
------------------------------
###-##-####
------------------------------
Social Security Number
-3-
<PAGE>
EXHIBIT A
OPTION EXERCISE FORM
Accelr8 Technology Corporation
Date:________________, 199_
The undersigned hereby elects irrevocably to exercise his or its rights under
the Option Agreement dated January 6, 1994, and to purchase ________________
shares of Common Stock of the Company called for thereby, and hereby makes
payment of $ ____________ (At the rate of $.09 per share of Common Stock)
payable to Accelr8 Technology Corporation in payment of the Exercise Price
pursuant thereto, and if such number of shares shall not be all of the shares
purchasable hereunder, the undersigned retains the right to exercise the balance
of the option in accordance with the Option Agreement.
Please issue the shares of Common Stock as to which this option is exercised in
accordance with instructions given below.
Signature:
-------------------------------
Signature Guaranteed:
--------------------
By:
--------------------------------------
INSTRUCTIONS FOR ISSUANCE OF STOCK
Name
- --------------------------------------------------------------------------------
(Print in Block Letters)
Address
- --------------------------------------------------------------------------------
NOTICE: The signature to this form to exercise must correspond with the name as
written upon the face of the Option Agreement or an Assignment thereof in every
particular without alteration or enlargement or any change whatsoever, and must
be guaranteed by a bank, other than a savings bank, or by a trust company or by
a firm having membership on a registered national securities exchange.
-4-
Option Agreement
AGREEMENT made this 27th day of December, 1989, by and between Norman A. Rullo
(the "Optionee") and Accelr8 Technology Corporation (the "Optionor" or the
"Company"), a Colorado corporation.
The Optionor desires, by affording Optionee an opportunity to purchase its no
par value common shares, to advance the interests of the Optionor and its
shareholders by encouraging and enabling Optionee, upon whose judgment,
initiative and effort the Optionor is independent for the successful conduct of
its business, to acquire and retain a proprietary interest in the Optionor
through ownership of its stock.
IT IS THEREFORE AGREED:
1. Option. Optionee is hereby granted the option to purchase 150,000 shares of
Common Stock, no par value ("Common Stock" or "Stock"), of the Optionor, which
Option must be exercised, if at all, on or before the dates set forth in Section
3 below, and in the increments also set forth in Section 3 below. If such option
is exercised shall be given to the Optionor in the manner provided by this
Agreement.
2. Exercise Price. The exercise price of the 150,000 shares subject to this
Agreement shall be $.09 per share ("Exercise Price").
3. Exercise of Option. One quarter of the shares subject to option will vest and
become exercisable every twelve months over a four year period which begins
October 31, 1989, and will remain exercisable for three years following the
original date such increment vested. Thus, 37,500 shares will vest and become
exercisable on October 31, 1989, 1990, 1991, and 1992 respectively, and shall
remain exercisable until 5:00 P.M., Denver time, on October 31, 1992, 1993,
1994, 1995, respectively. Exercise must be in the form of a written request,
presented to the Secretary of the Company at the Company's offices,
substantially in the form attached hereto as Exhibit A, and accompanied by
evidence of ownership of the option. Shares issued upon exercise of the option
shall be unregistered shares of Common Stock. Such Stock will be restricted
stock of the Optionor and will bear a legend to that effect.
4. Transfer and Termination. Unvested portions of Optionee's option shall become
void upon termination of employment of the Optionee with the Optionor, whether
or not such termination is voluntary or involuntary. The options herein granted,
whether vested or unvested, may not be voluntarily transferred or assigned, in
whole or in part, without the express written consent of the Optionor. The
options may not be pledged or hypothecated in any way and no option shall be
subject to execution, attachment or similar process without the express written
consent of the Optionor.
5. Adjustments of Exercise Price:
(A) If the Optionor should at any time or from time to time hereafter issue any
Stock as a stock dividend or other distribution to shareholders, then forthwith
upon such issue, the Exercise Price shall be adjusted to a price (computed to
the nearest cent) determined by dividing (i) the sum of the number of shares of
Stock outstanding immediately prior to such issue multiplied by the Exercise
Price in effect immediately prior to such issue by (ii) the total number of
shares of Stock outstanding immediately after such issue.
<PAGE>
(B) If the Optionor should at any time or from time to time hereafter reduce the
amount of the Stock then outstanding by reverse stock split or otherwise, then
forthwith upon such reduction, the Exercise Price shall be adjusted to a price
(computed to the nearest cent) determined by dividing (i) the sum of the number
of shares of stock outstanding immediately prior to such reduction multiplied by
the Exercise Price in effect immediately prior to such reduction, by (ii) the
total number of shares of Stock outstanding immediately after such reduction.
(C) No Adjustment for Small Amounts. Anything in this Section 5 to the contrary
notwithstanding, the Optionor shall not be required to give effect to any
adjustment in the Exercise Price unless and until the net effect of one or more
adjustments, determined as above provided, shall have required a change of the
Exercise Price at least one cent, but when the cumulative net effect of more
than one adjustment so determined shall be to change the actual Exercise Price
by at least one cent, such change in the Exercise Price shall thereupon be given
effect.
(D) Number of Shares Adjusted. Upon any adjustment of the Exercise Price, the
Holder of the option under this Agreement shall thereafter (until another such
adjustment) be entitled to purchase, at the new Exercise Price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Stock initially issuable upon exercise of Options under this
Agreement by the Exercise Price in effect on the date hereof and dividing the
product so obtained by the new Exercise Price.
(E) Stock Defined for Purpose of Section 5. Whenever reference is made in this
Section 5 to the issue or sale of shares of Stock, the term "Stock" shall mean
the Stock of the Optionor of the class authorized as of the date hereof and any
other class of stock ranking on a parity with such Stock. However, shares
issuable upon exercise of this Option Agreement shall include only shares of the
class designated as no par value Common Stock of the Optionor as of the date
hereof.
6. Officer's Certificate. Whenever the Exercise Price shall be adjusted as
required by the provisions of Section 5 hereof, the Optionor shall forthwith
file in the custody of its Secretary or an Assistant Secretary at its principal
office, and with its Transfer Agent, if any, an officer's certificate showing
the adjusted Exercise Price determined as herein provided and setting forth in
reasonable detail the facts requiring such adjustment. Each such officer's
certificate shall be made available ~t all reasonable times for inspection by
the Optionee and the Optionor shall, promptly after each such adjustment,
deliver a copy of such certificate to the Optionee. Such certificate shall be
conclusive as to the correctness of such adjustment if the Optionee under this
Agreement does not give written notice of an objection to the Optionor within 15
days after such officer's certificate was mailed or otherwise delivered to the
Optionee. If the Optionor is given written notice of objection, and the parties
cannot reconcile the dispute, it shall be arbitrated pursuant to the laws of the
State of Colorado, or as the parties otherwise agree.
7. Notice of Optionee. So long as options under this Agreement shall be
outstanding and unexercised (i) if the Optioner shall pay any dividend or make
any distribution upon the Stock, or (ii) if the Optionor shall offer to the
holders of Stock for subscription or purchase by them any shares of stock of any
class or any other rights or (iii) if any capital reorganization of the
Optionor, reclassification of the capital stock of the Optionor, consolidation
or merger of the Optionor with or into another corporation, sale, lease or
transfer of all or substantially all of the property and assets of the Optionor
to another corporation, or voluntary, or involuntary dissolution, liquidation or
winding up of the Optionor shall be effected, then, in any such case, the
Optionor shall cause to be delivered to the Optionee, at least ten days prior to
the date specified in (A) or (B) below, as the case may be, a notice containing
a brief description of the proposed action and stating the date on which (A) a
record is to be taken of the purpose of such dividend, distribution or rights,
or (B) such reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding up is to take place and the date, if
-2-
<PAGE>
any, is to be fixed, as of which the holders of Stock of record shall be
entitled to exchange their shares of Stock for securities or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
8. Termination of Agreement. This Agreement shall terminate and all rights
thereunder shall cease upon the occurrence of any of the following events:
(a) Mutual agreement of the parties.
(b) The administration of the Optionor's affairs in any bankruptcy or
receivership action, or other proceedings for the relief of debtors.
(c) Expiration of the incremental exercise portions of the Optionee's
Option, unexercised in whole or in part, on October 31, 1992, 1993,
1994, and 1995.
9. Benefit. This Agreement shall bind the respective parties, jointly and
severally, their successors, assigns, administrators, and executors.
10. Arbitration. in the event any controversy or claim arising out of this
Agreement cannot be settled by the parties, such controversy or claim shall be
settled by arbitration in accordance with the Uniform Arbitration Act as adopted
in Colorado, and judgment on the award may be entered in any court having
jurisdiction thereof.
11. Notice. All communications, notices and demands of any kind which any party
may be required or desire to give to or serve on the other party shall be made
in writing and sent by registered or certified mail, postage paid, return
receipt requested, to the addresses then shown on the books and records of the
Optionor.
IN WlTNESS WHEREOF, the foregoing has been signed as of the date first written
above.
ACCELR8 TECHNOLOGY CORPORATION
By: /s/ Robert W. Hickler By: /s/ Norman A. Rullo
---------------------- -----------------------------
Name
14058 E. Arizona Avenue
---------------------------------
Address
Aurora, CO 80012
---------------------------------
###-##-####
---------------------------------
Social Security Number
-3-
<PAGE>
EXHIBIT A
OPTION EXERCISE FORM
Accelr8 Technology Corporation
Date:________________, 199__
The undersigned hereby elects irrevocably to exercise his or its rights under
the Option Agreement dated March 1, 1988, and to purchase ________________
shares of Common Stock of the Company called for thereby, and hereby makes
payment of $ ____________ (At the rate of $.09 per share of Common Stock)
payable to Accelr8 Technology Corporation in payment of the Exercise Price
pursuant thereto, and if such number of shares shall not be all of the shares
purchasable hereunder, the undersigned retains the right to exercise the balance
of the option in accordance with the Option Agreement.
Please issue the shares of Common Stock as to which this option is exercised in
accordance with instructions given below.
Signature:
---------------------------------
Signature Guaranteed:
----------------------
By:
----------------------------------------
INSTRUCTIONS FOR ISSUANCE OF STOCK
Name
- --------------------------------------------------------------------------------
(Print in Block Letters)
Address
- --------------------------------------------------------------------------------
NOTICE: The signature to this form to exercise must correspond with the name as
written upon the face of the Option Agreement or an Assignment thereof in every
particular without alteration or enlargement or any change whatsoever, and must
be guaranteed by a bank, other than a savings bank, or by a trust company or by
a firm having membership on a registered national securities exchange.
-4-
Option Agreement
AGREEMENT made this 25th day of October, 1995, by and between Joseph Steger (the
"Optionee") and Accelr8 Technology Corporation (the "Optionor" or the
"Company"), a Colorado corporation.
The Optionor desires, by affording Optionee an opportunity to purchase its no
par value common shares, to advance the interests of the Optionor and its
shareholders by encouraging and enabling Optionee, upon whose judgment,
initiative and effort the Optionor is dependent for the successful conduct of
its business, to acquire and retain a proprietary interest in the Optionor
through ownership of its stock.
IT IS THEREFORE AGREED:
1. Option. Optionee is hereby granted the option to purchase 50,000 shares of
Common Stock, no par value ("Common Stock" or "Stock"), of the Optionor, which
Option must be exercised, if at all, on or before the dates set forth in Section
3 below, and in the increments also set forth in Section 3 below. If such option
is exercised, it shall be given to the Optionor in the manner provided by this
Agreement.
2. Exercise Price. The exercise price of the 50,000 shares subject to this
Agreement shall be $.09 per share ("Exercise Price").
3. Exercise of Option. One quarter of the shares subject to option will vest and
become exercisable every twelve months over a four year period which begins
October 25, 1996, and will remain exercisable for three years following the
original date such increment vested. Thus, 12,500 shares will vest and become
exercisable on October 25, 1996, 1997, 1998, and 1999, respectively, and shall
remain exercisable until 5:00 P.M., Denver time, on October 25, 1999, 2000,
2001, and 2002, respectively. Exercise must be in the form of a written request,
presented to the Secretary of the Company at the Company's offices,
substantially in the form attached hereto as Exhibit A, and accompanied by
evidence of ownership of the option. Shares issued upon exercise of the option
shall be unregistered shares of Common Stock. Such Stock will be restricted
stock of the Optionor and will bear a legend to that effect.
4. Transfer and Termination. Unvested portions of the Optionee's option shall
become void upon termination of employment of the Optionee with the Optionor,
whether or not such termination is voluntary or involuntary. The options herein
granted, whether vested or unvested, may not be voluntarily transferred or
assigned, in whole or in part, without the express written consent of the
Optionor. The options may not be pledged or hypothecated in any way and no
option shall be subject to execution, attachment or similar process without the
express written consent of the Optionor.
5. Adjustments of Exercise Price:
(A) If the Optionor should at any time or from time to time hereafter issue any
Stock as a stock dividend or other distribution to shareholders, then forthwith
upon such issue, the Exercise Price shall be adjusted to a price (computed to
the nearest cent) determined by dividing (i) the sum of the number of shares of
Stock outstanding immediately prior to such issue multiplied by the Exercise
Price in effect immediately prior to such issue by (ii) the total number of
shares of Stock outstanding immediately after such issue.
(B) If the Optionor should at any time or from time to time hereafter reduce the
amount of the Stock then outstanding by reverse stock split or otherwise, then
<PAGE>
forthwith upon such reduction, the Exercise Price shall be adjusted to a price
(computed to the nearest cent) determined by dividing (i) the sum of the number
of shares of stock outstanding immediately prior to such reduction multiplied by
the Exercise Price in effect immediately prior to such reduction, by (ii) the
total number of shares of Stock outstanding immediately after such reduction.
(C) No Adjustment for Small Amounts. Anything in this Section 5 to the contrary
notwithstanding, the Optionor shall not be required to give effect to any
adjustment in the Exercise Price unless and until the net effect of one or more
adjustments, determined as above provided, shall have required a change of the
Exercise Price at least one cent, but when the cumulative net effect of more
than one adjustment so determined shall be to change the actual Exercise Price
by at least one cent, such change in the Exercise Price shall thereupon be given
effect.
(D) Number of Shares Adjusted. Upon any adjustment of the Exercise Price, the
Holder of the option under this Agreement shall thereafter (until another such
adjustment) be entitled to purchase, at the new Exercise Price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Stock initially issuable upon exercise of Options under this
Agreement by the Exercise Price in effect on the date hereof and dividing the
product so obtained by the new Exercise Price.
(E) Stock Defined for Purpose of Section 5. Whenever reference is made in this
Section 5 to the issue or sale of shares of Stock, the term "Stock" shall mean
the Stock of the Optionor of the class authorized as of the date hereof and any
other class of stock ranking on a parity with such Stock. However, shares
issuable upon exercise of this Option Agreement shall include only shares of the
class designated as no par value Common Stock of the Optionor as of the date
hereof.
6. Officer's Certificate. Whenever the Exercise Price shall be adjusted as
required by the provisions of Section 5 hereof, the Optionor shall forthwith
file in the custody of its Secretary or and Assistant Secretary at its principal
office, and with its Transfer Agent, if any, an officer's certificate showing
the adjusted Exercise Price determined as herein provided and setting forth in
reasonable detail the facts requiring such adjustment. Each such officer's
certificate shall be made available at all reasonable times for inspection by
the Optionee and the Optionor shall, promptly after each such adjustment,
deliver a copy of such certificate to the Optionee. Such certificate shall be
conclusive as to the correctness of such adjustment if the Optionee under this
Agreement does not give written notice of an objection to the Optionor within 15
days after such officer's certificate was mailed or otherwise delivered to the
Optionee. If the Optionor is given written notice of objection, and the parties
cannot reconcile the dispute, it shall be arbitrated pursuant to the laws of the
State of Colorado, or as the parties otherwise agree.
7. Notice of Optionee. So long as options under this Agreement shall be
outstanding and unexercised (i) if the Optionor shall pay any dividend or make
any distribution upon the Stock, or (ii) if the Optionor shall offer to the
holders of Stock for subscription or purchase by them any shares of stock of any
class or any other rights or (iii) if any capital reorganization of the
Optionor, reclassification of the capital stock of the Optionor, consolidation
or merger of the Optionor with or into another corporation, sale, lease or
transfer of all or substantially all of the property and assets of the Optionor
to another corporation, or voluntary or involuntary dissolution, liquidation or
winding up of the Optionor shall be effected, then, in any such case, the
Optionor shall cause to be delivered to the Optionee, at least ten days prior to
the date specified in (A) or (B) below, as the case may be, a notice containing
a brief description of the proposed action and stating the date on which (A) a
record is to be taken of the purpose of such dividend, distribution or rights,
or (B) such reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation, or winding up is to take place and the date, if
any, is to be fixed, as of which the holders of Stock of record shall be
entitled to exchange their shares of Stock for securities or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
-2-
<PAGE>
8. Termination of Agreement. This Agreement shall terminate and all rights
thereunder shall cease upon the occurrence of any of the following events:
(a) Mutual agreement of the parties.
(b) The administration of the Optionor's affairs in any bankruptcy or
receivership action, or other proceedings for the relief of debtors.
(c) Expiration of the incremental exercise portions of the Optionee's
Option, unexercised in whole or in part, on October 25, 1999, 2000,
2001, and 2002.
9. Benefit. This Agreement shall bind the respective parties, jointly and
severally, their successors, assigns, administrators, and executors.
10. Arbitration. In the event any controversy or claim arising out of this
Agreement cannot be settled by the parties, such controversy or claim shall be
settled by arbitration in accordance with the Uniform Arbitration Act as adopted
in Colorado, and judgment on the award may be entered in any court having
jurisdiction thereof.
11. Notice. All communications, notices and demands of any kind which any party
may be required or desire to give to or serve on the other party shall be made
in writing and sent by registered or certified mail, postage paid, return
receipt requested, to the addresses then shown on the books and records of the
Optionor.
IN WITNESS WHEREOF, the foregoing has been signed as of the date first written
above.
ACCELR8 TECHNOLOGY CORPORATION
By: /s/ Thomas V. Geimer By: /s/ Joseph Steger
-------------------- ---------------------------------
Joseph Steger
2659 Eaton
-------------------------------------
Address
Edgewater, CO 80214
-------------------------------------
###-##-####
-------------------------------------
Social Security Number
-3-
<PAGE>
EXHIBIT A
OPTION EXERCISE FORM
Accelr8 Technology Corporation
Date:________________, 199__
The undersigned hereby elects irrevocably to exercise his or its rights under
the Option Agreement dated Octobert 25, 1995, and to purchase ________________
shares of Common Stock of the Company called for thereby, and hereby makes
payment of $ ____________ (At the rate of $.09 per share of Common Stock)
payable to Accelr8 Technology Corporation in payment of the Exercise Price
pursuant thereto, and if such number of shares shall not be all of the shares
purchasable hereunder, the undersigned retains the right to exercise the balance
of the option in accordance with the Option Agreement. Please issue the shares
of Common Stock as to which this option is exercised in accordance with
instructions given below.
Signature:
------------------------------
Signature Guaranteed:
--------------------
By:
--------------------------------------
INSTRUCTIONS FOR ISSUANCE OF STOCK
Name
- --------------------------------------------------------------------------------
(Print in Block Letters)
Address
- --------------------------------------------------------------------------------
NOTICE: The signature to this form to exercise must correspond with the name as
written upon the face of the Option Agreement or an Assignment thereof in every
particular without alteration or enlargement or any change whatsoever, and must
be guaranteed by a bank, other than a savings bank, or by a trust company or by
a firm having membership on a registered national securities exchange.
-4-
This Lease is made and entered into as of the 13th; day of March, 192 between:
1700 Grant Associates, Ltd., a Colorado limited partnership, ("Landlord") and
Accelr8 Technology Corporation, a Colorado corporation ("Tenant")
I. PREMISES; USE
A. Landlord hereby leases to Tenant approximately 3,796.22 rentable square
feet of floor space on the first floor(s) of the building located at 303
East 17th Avenue, Denver, Colorado 80203. (the "Building"), to be known as
Suite No. 108 (the "Premises"), on the terms and conditions set forth
herein The Premises are more particularly described on Exhibit A attached
hereto
B. Tenant shall not use or permit the Premises or any part thereof to be used
for any purpose or purposes other than general office purposes; Tenant
agrees that no use shall be made or permitted to be made of the Premises,
or acts done, which will increase the rate of insurance upon the Building
or cause a cancellation of any insurance policy covering the Building, or
any part thereof, nor shall Tenant sell, or permit to be kept, used, or
sold in or about the Premises, any article which may be prohibited by the
standard form of insurance policies. Tenant shall not commit or cause to be
committed, any public or private nuisance upon the Premises, or other act
or thing which may disturb the quiet enjoyment of any other tenant in the
Building nor, without limiting the generality of the foregoing, shall
Tenant allow the Premises to be used for any improper, immoral, unlawful or
objectionable purpose
C. Tenant shall at its sole cost and expense comply with all laws, statutes,
ordinances and governmental rules regulations or requirements now in force
or which may hereafter be in force and with the requirements of any board
of fire underwriters or other similar body now or hereafter constituted
relating to or affecting the condition, use or occupancy of the Premises,
excluding structural changes not caused by Tenant's improvements or the
nature of Tenant's occupancy of the Premises
D. Except in connection with normal interior decorating of the Premises,
Tenant shall not place any holes in any part of the Premises or place any
exterior or interior signs or interior drapes, blinds, or similar items
visible from the outside of the Premises without the prior written approval
of Landlord
E. Tenant shall not knowingly permit any employees, agents or guests of Tenant
to violate any covenant or obligation of Tenant hereunder.
F. Except as may be permitted in Section VD below, Tenant agrees that it will
not bring in or permit the placing within the Premises of any machine or
property heavier than customarily used in connection with general office
purposes
II. TERM
A. This Lease shall be for a term of three (3) year(s) and four (4) month(s),
beginning on April 1, 1992 (the "Projected Commencement Date"), and ending
on July 31, 1995, unless sooner terminated as herein provided
B If Landlord, for any reason whatsoever, cannot deliver possession of the
Premises to Tenant on the Projected Commencement Date, this Lease shall not
be void or voidable nor shall Landlord be liable to Tenant for any loss or
<PAGE>
damage resulting therefrom, but in that event the term of the Lease shall
be amended to commence on the dale when the Landlord can deliver possession
and the expiration date shall be extended accordingly (unless possession
cannot be delivered within 120 days after the Projected Commencement Date
for reasons other than Tenant's failure to comply with its obligations
under Exhibit C attached hereto, in which case Tenant shall have the right
to terminate this Lease upon written notice to Landlord without penalty to
either party) 11 permission is given to Tenant to occupy the Premises prior
to the Projected Commencement Date, such occupancy shall be subject to all
of the provisions of this Lease. If the term hereof commences on a date
other than the Projected Commencement Date pursuant to the provisions set
forth herein the parties agree to execute and acknowledge a written
statement setting forth the dates of the commencement and termination of
the term of this Lease, but this Lease shall not be affected in any manner
should either party fail or refuse to execute such statement.
C. It the term begins or ends other than on the first day of a month, Tenant
shall pay proportionate base rent and additional rent at the same rates set
forth herein (also in advance) for such partial month(s) and All other
terms and conditions of this Lease shall be in force and elect during such
partial month(s). By taking possession of the Premises, Tenant shall be
deemed to have agreed that the Premises are in a satisfactory condition
(except for detects not discoverable upon reasonable inspection which are
set forth in a written communication received by Landlord within seven days
alter Tenant's occupancy of the Premises), and Tenant shall provide
Landlord, upon request, with a written acknowledgment of acceptance.
III. RENT
B.* Tenant also agrees to pay to Landlord, as additional rent without offset or
reduction, .1.4297** percent ("Tenant's pro rata share") of the "Shared
Expenses" (as hereinafter defined) during the term of this Lease. From time
to time, Landlord shall reasonably estimate the amount of Shared Expenses,
and Tenant shall pay additional rent, in advance, based upon such estimate.
For example, if Landlord estimates that Shared Expenses for a given six
month period will be S10,000, one-sixth of Tenant's pro rata share of such
amount shall be added to the monthly rent payable under Section A of this
Article. If the actual Shared Expenses exceed Landlord's estimate for a
period, Tenant shall pay to Landlord Tenant's pro rata share of such excess
within ten days of notice of such excess. If the actual Shared Expenses are
less than Landlord's estimate for a period, Tenant's pro rata share of the
difference shall be applied to the next amounts owing by Tenant to Landlord
pursuant to this Section B. If the term of this Lease ends (other than due
to default by Tenant hereunder) and Tenant has complied with all the
provisions hereof, Tenant shall be entitled to a prompt refund of any
excess amounts which Tenant has paid to Landlord pursuant to this Section
B.
C. For the purposes hereof, the term "Building Expenses" shall mean all
expenses pertaining to the Building, the land underneath and surrounding
the Building as described in Exhibit A attached hereto, excluding any
parking area and / or parking structure located thereon (collectively, the
"Building Area"), including, but not limited to. the following :
* Effective April 1, 1993
** 3,796.22 rentable square feet divided by
265,520.62 equals 1.42973%
-2-
<PAGE>
1. all general and special real estate or ad valorem taxes (including.
but not limited to, any new or different tax imposed in lieu of or in
addition to existing taxes) or assessments levied against the Building
Area by any governmental or quasi-governmental authority or by any
applicable association of property owners;
2. the cost of all utilities (including, but not limited to, water,
sewer, electricity, natural gas and any other energy used for heating,
cooling or other purposes);
3. building supplies, janitorial services, trash removal, maintenance,
repair and replacements of the Building Area (including, but not
limited to, elevators and heating, ventilating and air conditioning
equipment and fire monitoring and control systems);
4. landscaping maintenance and replacement;
5. resurfacing and restriping parking surfaces;
6. insurance (including, but not limited to, fire and extended coverage,
public liability and business interruption insurance), but Tenant
shall have no interest in such insurance or the proceeds thereof,
7. labor costs incurred in the operation or maintenance of the Building
Area, including, but not limited to, wages and other payments,
Workmen's Compensation and disability insurance, payroll taxes and
fringe benefits;
8. security;
9. reasonable management fees, legal, accounting, inspection and
consultation fees applicable to the Building Area: and
10. any costs incurred by Landlord for any capital improvements or
structural repairs to the Building Area to effect labor savings or
otherwise reduce Building Expenses, or required by any change
occurring after the issuance of the Certificate of Occupancy for the
Building in the laws, ordinances. rules, regulations or orders of any
governmental or quasi-governmental authority having jurisdiction over
the Building Area, which costs shall be amortized over the useful life
of the applicable capital improvement or structural repair.
If less than 100% of the net rentable area of the Building is occupied by
tennants during any period, the Building Expense for such period shall, for
the purposes of this Article, be deemed to be equal to Landlord's estimate
of what the Building Expenses for such period would have been had 100% of
the net rentable area of the Building been occupied during such period.
D. For the purposes hereof, the term "Landlord's Share" shall mean an amount
equal to the total of actual Building expenses for calendar year 1992, to
be proportionately adjusted it the applicable period is less than or
greater than twelve months.
E. For the purposes hereof, the "Shared Expenses" for a period shall be equal
to the excess of the Building Expenses for such period over the Landlord's
Share for such period. It the Landlord's Share for such period exceeds the
Building Expense for such period, the Shared Expenses for such period shall
be deemed to be zero, and no additional rent shall be payable for such
period pursuant to Section B of this Article; however, in such event,
Tenant shall not be entitled to any reduction in the Monthly Base Rent set
forth in Section A of this Article.
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<PAGE>
F. All reasonable determinations by Landlord pursuant to this Article shall be
presumed to be correct. Until tenant is advised of the adjustment in the
rent, it any, pursuant to the provisions of this Article, Tenant's monthly
rental shall continue to be paid at the current rate (including all prior
adjustments pursuant to Section B of this Article). No failure by Landlord
to require the payment of additional rent by Tenant pursuant to Section B
of the Article for any period shall constitute a waiver of Landlord's right
to collect such additional rent for such period or for any subsequent
period.
G. If any installment of rent due hereunder is not paid by Tenant on or before
twelve o'clock noon on the fifth business day following the day on which
such installment was due, Tenant shall be required to pay a late charge of
ten percent of such delinquent installment. Any such late charge shall be
due and payable immediately.
H. Unless Landlord notifies Tenant to the contrary, all amounts payable
hereunder shall be payable to Landlord at Landlord's address set forth in
Article XVIII below.
I. Upon reasonable notice to Landlord, Tenant shall have the right to review
the documentation relating to the computation of additional rent pursuant
to this Article.
J. All Building Expenses shall be computed on the accrual basis. In computing
Building Expenses, (i) no cost or expense may be counted more than once,
(ii) any expenses which are paid by the proceeds of insurance shall be
excluded, and (iii) any expenses which are separately metered or billed
directly to and separately paid by any tenant shall be excluded
K. Landlord shall provide Tenant with reasonably detailed statements showing
the computation of Tenant's share of the Shared Expenses not less
frequently than once per year. Tenant shall have the right to cause an
audit to be made of such computation, at Tenant's expense. Any errors in
such computation shall be promptly corrected.
L. Notwithstanding anything in this Article to the contrary, Landlord shall
have the right to cause certain categories of utility expenses (e g,
electricity and natural gas) which benefit only a portion (the "Separate
Portion") of the Building to be separately metered or allocated and the
costs thereof (the "Separate Costs") to be payable by the tenant(s) of the
Separate Portion, in which case such tenant(s) would not pay any portion of
such categories of expenses attributable to the remainder (the "Office
Portion") of the Building. If Landlord exercises such right and so notifies
Tenant, for the purpose of Section B of this Article:
1. "Building Expenses" shall be deemed not to include the amount of the
Separate Costs; and
2. "Building Expenses" shall be deemed to include the cost of such
categories of expenses attributable to the Office Portion multiplied
by the ratio of (x) the total number of rentable square feet in the
Building, to (y) the total number of rentable square feet in the
Office Portion.
IV. SECURITY DEPOSIT
Tenant has deposited with Landlord the sum of _____n/a________ dollars
($ n/a ) as security for the full and faithful performance of every provision of
this Lease to be performed by Tenant. If Tenant defaults with respect to any
provision of this Lease, including but not limited to the provisions relating to
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the payment of rent, Landlord may use, apply or retain all or any part of this
security deposit for the payment of any rent or any other sum in default. or for
the payment of any other amount which Landlord may spend or become obligated to
spend by reason of Tenant's default or to compensate Landlord for any other loss
or damage which Landlord may suffer by reason of Tenant's default If any portion
of said deposit is so used or applied, Tenant shall, within five days after
written demand therefor is made, deposit cash with Landlord in an amount
sufficient to restore the security deposit to its original amount. Landlord
shall not be required to keep this security deposit separate from its general
funds and Tenant shall not be entitled to interest on such deposit. If Tenant
shall fully and faithfully perform every provision of this Lease to be performed
by it, the security deposit or any balance thereof shall be returned to Tenant
after the expiration of the lease term and upon Tenant's vacation of the
Premises. Landlord shall deliver the funds deposited herein by Tenant to the
purchaser of the Building in the event the Building is sold (or give such
purchaser a credit against the purchase price in the amount of such deposit),
and thereupon, Landlord shall be discharged from further liability with respect
to such deposit.
V. LANDLORD'S SERVICES
A. Landlord shall maintain and repair the Building Area in a good and
workmanlike manner similar to other first class office buildings located in
the metropolitan area of Denver, Colorado, and shall furnish the following
services to the Premises (the cost of which shall be included within
Building Expenses):
1. air conditioning and heat from 7:00 a.m. to 6 00 p.m. on weekdays and
from 8:00 a.m. to 1:00 p.m. on Saturdays, holidays excluded;
2. elevator service (automatic) and Building security;
3. janitorial service five days per week, holidays excluded (provided,
however, if Tenant's floor covering or other improvements are other
than building standard, Tenant shall pay the additional cleaning costs
attributable thereto as additional rent upon presentation of statement
therefor by Landlord); and
4. hot and cold water (to each floor in the Building) and electric
current for lighting the Premises and for ordinary office appliances
and machines only.
Landlord shall not be liable for damages nor shall any rent be abated for
failure to furnish, or delay in furnishing, any such service which is
occasioned by needed repairs, renewals or improvements, or by any strike or
labor controversy, or by any act or default of Tenant or due to the
inability of Landlord to obtain fuel or power from the utility company
supplying same, or for any cause beyond the reasonable control of Landlord,
unless such delay or service interruption continues for a period in excess
of thirty consecutive days and such delay or interruption renders the
Premises or any portion thereof untenantable for Tenant's normal business
operations, in which case the rent shall be abated in proportion to the
unusable portion of the Premises for any such excess. Landlord agrees to
use its best efforts to cause utility companies to continuously supply gas,
electricity, water and other necessary utilities to the Premises.
B. If heat generating machines or equipment (including, but not limited to,
telephone equipment) are used by Tenant in the Premises which affect the
temperature otherwise maintained by the air conditioning system, Landlord
reserves the right if requested by Tenant to install supplementary air
conditioning units in the Premises and the cost thereof, including the cost
of installation, and the cost of operation and maintenance thereof, shall
be paid by Tenant to Landlord upon demand by Landlord.
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C. Tenant will not without the prior written consent of Landlord use any
apparatus or device in the Premises which will in any way increase the
amount of electricity or water usually furnished or supplied for use of the
Premises as general office space. Tenant shall not connect with any
electric current, except through existing electrical outlets in the
Premises, or to any water pipes, any apparatus or device, for the purposes
of using electric current or water If Tenant shall require water or
electric current in excess of that usually furnished or supplied for use of
the Premises as general office space, Tenant must first procure the consent
of Landlord to the use thereof, and Landlord may cause a water meter or
electric current meter to be installed in the premises, so as to measure
the amount of water and electric current consumed for any such other use
The cost of any such meter and of installation, maintenance and repair
thereof shall be paid for by Tenant and Tenant agrees to pay to Landlord as
additional rent hereunder promptly upon demand therefor by Landlord for all
such water and electrical current consumed, as shown by said meters at the
rates charged for such services by the local public authority, or the local
public utility, as the case may be, furnishing the same, plus any
additional expense incurred in keeping account of the water and electric
current so consumed.
D. Notwithstanding anything contained in this Lease to the contrary, if
Landlord consents, Tenant may maintain and operate data processing
equipment on the Premises All additional costs in connection therewith
(including, but not limited to, additional support flooring, insulation,
electrical outlets and temperature maintenance facilities) shall be borne
by Tenant. In addition, the utility services utilized by or for such
equipment shall be separately metered and the cost of such utility services
with metering shall be borne by Tenant
E. At Tenant's request and with Landlord's approval, Landlord shall furnish
the services described in Section A of this Article at times other than
specified in Section A, provided that Tenant shall pay the entire cost
thereof as reasonably determined by Landlord as additional rental,
notwithstanding the fact that such services may also benefit portions of
the Building other than the Premises.
VI. ASSIGNMENT AND SUBLETTING
Tenant shall not permit any part of the Premises to be used or occupied by
any persons other than Tenant, and the employees of Tenant, nor permit any part
of the Premises to be used or occupied by any licensee or concessionaire, or
permit any persons to be upon the Premises other than Tenant, and its employees,
customers and others having lawful business with Tenant. Tenant shall not assign
this Lease nor sublet all or part of the Premises without the prior written
consent of Landlord, which consent shall not be unreasonably withheld; provided,
however, such consent to any assignment or subletting shall not relieve Tenant
from its obligations as primary obligor (and not as surety or guarantor) for the
payment of all amounts due hereunder and for the full and faithful observance
and performance of the covenants, terms and conditions herein contained.
Notwithstanding the foregoing, Landlord shall be entitled to arbitrarily
withhold consent to a proposed assignment or subletting if Landlord exercises
its right to terminate this Lease as to the entire assignment of this Lease or
to a subletting of the whole or any part of the Premises, Tenant must submit to
Landlord the terms thereof, the name of the proposed assignee or subtenant, such
information as to the nature of its business, financial responsibility and
strength as Landlord may reasonably require, and the proposed effective date
(the "Effective Date") of the proposed assignment or subletting (which Effective
Date shall be neither less than 60 days nor more than 120 days following the
date of Tenant's submission of such information). Upon receipt of such request
and information from Tenant, Landlord shall have the right, exercisable by
notice in writing within fourteen days after such receipt, to terminate this
Lease if the request is to assign this Lease or to sublet all of the Premises
or, if the request is to sublet a portion of the Premises only, to terminate
this Lease with respect to such portion, in each case as of the Effective Date.
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Such right to terminate shall be for any reason whatsoever in the sole
discretion of Landlord, including but not limited to the right to retain any and
all profits of such assignment or sublease. If Landlord shall exercise such
termination right, Tenant shall surrender possession of the entire Premises or
the portion which is the subject of the right, as the case may be, on the
Effective Date in accordance with the provisions of this Lease relating to
surrender of the Premises at the expiration of the Term of this Lease shall be
terminated as to a portion of the Premises only, the rent payable by Tenant
under Article III of this Lease shall be abated proportionately, commencing of
the Effective Date, based upon the percentage of the Premises as to which this
Lease has been terminated.
VII. ESTOPPEL CERTIFICATE
Within ten days of notice from Landlord, Tenant shall execute, acknowledge
and deliver to Landlord an accurate statement (on the form attached hereto as
Exhibit D) certifying that this Lease is unmodified and in full force and effect
(or, if modified, stating the nature of such modification and certifying that
this Lease, as so modified, is in full force and effect) and the dates to which
rental and other charges are paid in advance, if any, and acknowledging that
there are not, to Tenant's knowledge, any uncured defaults on the part of
Landlord hereunder. or specifying such defaults if any are claimed. At
Landlord's option, such form may contain other certifications relating to this
Lease. It is expressly understood and agreed that any such statement may be
relied upon by any prospective purchaser or encumbrance of all or any portion of
the Building Area Tenant's failure to deliver such statement within such time
period shall be conclusive upon tenant that this Lease is in full force and
effect. without modification except as may be represented by Landlord. that
there are no uncured defaults in Landlord's performance and that not more than
one month's rental has been paid in advance
VIII. SUBORDINATION AND ATTORNMENT
This Lease, at Landlord's option, shall be subordinate to any existing or
future mortgage, deed of trust, ground lease or declaration of covenants
(regarding maintenance and use of any areas contained in any portion of the
Building) and to any and all advances made under any mortgage or deed of trust
and to all renewals, modifications, consolidations, replacements and extensions
thereof. Tenant agrees that with respect to any of the foregoing documents, no
documentation, other than this Lease. shall be required to evidence such
subordination. If any holder of a mortgage or deed of trust shall elect to have
this Lease superior to the lien of its mortgage or deed of trust and shall give
written notice thereof to Tenant, this Lease shall be deemed prior to such
mortgage or deed of trust, whether this Lease is dated prior or subsequent to
the date of said mortgage or deed of trust or to the date of recording thereof.
Tenant agrees to execute such documents which may be required by Landlord to
confirm such subordination or priority within ten days of notice from Landlord
(including, but not limited to. a Subordination, Non-Disturbance and
Attornment** and should Tenant fail to do so within such time period, Tenant
does hereby make, constitute and irrevocably appoint Landlord as Tenant's
attorney-in-fact and in Tenant's name, place and stead, to do so. Tenant hereby
agrees to attorn to all successor owners of the Building. whether or not such
ownership is acquired as a result of a sale through foreclosure of a deed of
trust or mortgage, or otherwise. Notwithstanding anything to the contrary
contained in this Article, so long as Tenant fulfills all its obligations under
this Lease, Tenant's possession of the premises and Tenant's other rights under
this Lease* shall not be disturbed or impaired by any holder of a mortgage or a
deed of trust, or by any person claiming through or under Landlord.
* including but not limited to the Rents stated in Exhibit C Paragraph 1
** Agreement in a form reasonably acceptable to both parties
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IX. LANDLORD'S RESERVED RIGHTS
Without notice (except as otherwise set forth in this Article) and without
liability to Tenant (except for damages caused by the negligence or willful
misconduct of Landlord or its agent), Landlord shall have the right at any time
or from time to time:
A. upon at least twenty days prior notice to Tenant, change the name or street
address of the Building;
B. install and maintain signs on the exterior of the Building;
C. enter into the Premises in order to take reasonable measures as Landlord
may deem advisable for the safety, repair, maintenance, improvement, care,
cleanliness, security and reputation of the Building, or for the safety,
security and welfare of the occupants of the Building, including Tenant,
and for such purposes take into and through the Premises or any part of the
Building, all required tools, equipment and materials, and temporarily
suspend use of doors, corridors, elevators or other facilities;
D. exhibit the Premises to others at reasonable times upon reasonable notice;
or
E. upon at least five days prior notice to Tenant, enter the Premises and
perform any obligation of Tenant hereunder which Tenant has failed to
perform satisfactorily if Landlord elects to do so.
X. RULES AND REGULATIONS
The rules and regulations attached hereto as Exhibit B, as well as such
reasonable rules and regulations as may be hereafter adopted by Landlord upon at
least ten days prior notice to Tenant for the safety, care and cleanliness of
the Building Area and the preservation of good order thereon, are hereby
expressly made a part hereof, and Tenant agrees to obey all such rules and
regulations.
XI. REPAIRS AND ALTERATIONS
A. Except for those matters which are the responsibility of Landlord as set
forth in Article V, Tenant shall keep the Premises in good condition and
repair (except for reasonable wear and tear and damage due to fire or other
insured casualty), and the Premises shall not be altered, repaired or
changed without the prior written consent of Landlord. Tenant shall keep
the Premises and Building free and clear of any liens due to the actions of
Tenant or its agents and shall indemnify, hold harmless and defend Landlord
from any such liens and encumbrances arising out of any work performed or
materials furnished by or at the direction of Tenant In the event any such
lien is filed, Tenant shall do all acts necessary to discharge such lien
within ten days of filing, or if Tenant desires to contest such lien, then
Tenant shall deposit with Landlord such reasonable security as Landlord
shall demand to insure the payment of such lien claim. In the event Tenant
shall fail to pay any such lien claim when due or shall tail to deposit the
security with Landlord, then Landlord shall have the right to expend all
sums reasonably necessary to discharge such lien claim on Tenant's behalf,
and Tenant shall reimburse Landlord for such expenditure within ten days of
demand by Landlord
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B. Unless otherwise agreed by Landlord, all alterations, improvements and
changes to the Premises that may be required or permitted hereunder shall
be done either by or under the direction of Landlord but at the cost of
Tenant
C. Unless otherwise agreed by Landlord, all alterations, improvements and
changes to the Premises made by or at the direction of Tenant shall, at the
option of Landlord, become the property of Landlord upon the termination of
this Lease, however such termination shall occur, and shall remain upon and
be surrendered with the Premises without reimbursement by Landlord to
Tenant for the cost of any such alterations, improvements or changes. If
Landlord elects that any of the alterations, improvements or changes be
removed by Tenant upon termination of this Lease, Tenant shall remove the
same prior to the termination hereof and shall repair any damages caused by
such removal
D. Tenant shall not cause or permit any alterations, improvements or changes
to the Premises without Landlord's prior written consent
XII. DAMAGES TO PROPERTY; INJURY TO PERSONS
A. Tenant shall neither hold, nor attempt to hold Landlord liable for any
injury or damage, either proximate or remote, occurring through or caused
by fire, water, steam, or any repairs, alterations, injury or accident, or
any other cause to any person, to the Premises, to any furniture, fixtures,
tenant improvements, or other personal property of Tenant kept or stored in
the Premises, to adjacent premises, or to other parts of the Building,
except to the extent caused by the negligence or willful misconduct of
Landlord or its agent.
B. Tenant hereby agrees to indemnify, defend and save Landlord harmless of and
from all liability, loss, damages, costs or expenses, including reasonable
attorney's fees, on account of injuries to the person or damage to the
Building, the property of Landlord or of any other tenant in the Building,
or to any other person rightfully in the Building for any purpose
whatsoever, to the extent that such injuries or damage are caused by the
negligence or misconduct of Tenant, its agents, or employees, or of any
other person entering upon the Premises under express or implied invitation
of Tenant, or where such injuries are the result of the violation of the
provisions of this Lease by any of such persons.
XIII. FIRE AND RESTORATION OF PREMISES; INSURANCE
A. In the event the Premises or the Building is damaged by fire or other
insured casualty and the insurance proceeds have been made available
therefor by the holder or holders of any mortgages or deeds of trust
covering the Premises, the damage shall be repaired by and at the expense
of Landlord to the extent of such insurance proceeds available therefor,
provided such repairs can, in Landlord's reasonable opinion, be completed
within 120 days after the occurrence of such damage without the payment of
overtime or other premiums. Until such repairs are completed, the rent
shall be abated in proportion to the pan of the Premises which is unusable
by Tenant in the conduct of its business (but there shall be no abatement
of rent by reason of any portion of the Premises being unusable for a
period equal to one day or less). If repairs cannot, in Landlord's
reasonable opinion, be completed within such 120 days, Landlord may elect
to make them within a reasonable time and in such event, this Lease shall
continue in effect and the rent shall be abated in the manner provided
above (except that Tenant shall have the right to terminate this Lease upon
notice to Landlord which notice must be given to Landlord not later than
ten days after Landlord notifies Tenant to such election). If Landlord
elects not to make such repairs which cannot be completed within 120 days,
then either party may, by written notice to the other within thirty days
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after such election, cancel this Lease as of the date of such notice A
total destruction of the Building shall automatically terminate this Lease.
Notwithstanding the foregoing, if any such damage is caused by the fault or
negligence of Tenant or any of Tenant's officers, employees or agents,
there will be no rent abatement on account of such damage and Tenant shall
be liable to Landlord for the cost of repair and restoration to the extent
not covered by insurance proceeds.
B. Unless Landlord or its agents act in an unreasonable manner, there shall be
no abatement of rent and no liability of Landlord by reason of any injury
to or interference with Tenant's business or property arising from the
making of any repairs, alterations or improvements in or to any portion of
the Building of the Premises or in or to fixtures, appurtenances and
equipment therein. Tenant understands that Landlord will not carry
insurance of any kind on Tenant's furniture and furnishings or on any
fixtures or equipment removable by Tenant under the provisions of this
Lease, and that Landlord shall not be obligated to repair any damage
thereto or replace the same. Landlord shall not be required to repair any
injury or damage by fire or other cause, or to make any repairs or
replacements of improvements installed in the Premises by or for Tenant.
C. In the event that the Building be damaged to the extent of more than
33-1/3% of the replacement cost thereof or if insurance proceeds available
for repair of damage are insufficient, Landlord may elect to terminate this
Lease as of the date of the occurrence of such damage, whether the Premises
be injured or not
D. Landlord shall maintain fire and extended coverage on the Building
(including Building standard leasehold improvements) in amounts determined
by Landlord, with the cost thereof to be included in Building Expenses
under Article III of this Lease Tenant agrees to maintain reasonable
insurance coverage with respect to Tenant's property located within the
Building
E. Landlord and Tenant each hereby waives any and all causes of action and
rights of recovery against the other, its officers, employees and agents,
for any loss or damage occurring to the Premises or the Building, or the
improvements, fixtures, merchandise and personal property of every kind
located in and about the Building to the extent required to be covered by
insurance (whether or not such insurance is actually maintained) regardless
of cause or origin, including the negligence or either party, its officers.
employees or agents To the extent necessary to effect the foregoing waiver
of subrogation. Landlord and Tenant agree to obtain from their respective
insurance carriers endorsements to all appropriate policies of insurance
waiving the right of subrogation of the insurance carriers
F. Whenever Landlord has an opportunity to make an election under this
Article, Landlord must make such election within sixty days of the
occurrence of the event which gives rise to such opportunity. Whenever
Landlord elects under this Article to repair the Premises, the Premises
shall be repaired to building standard condition, however, in such event,
Tenant shall have the right to cause Landlord to repair the Premises to the
condition which existed prior to the applicable damage, provided that
Tenant pays to Landlord, in advance, that portion of the cost of such
repair in excess of the cost to repair the Premises to building standard
condition
XIV. CONDEMNATION
If any portion of the Premises or any portion of the Building which shall
render the Premises untenantable shall be taken by right of eminent domain or by
condemnation or shall be conveyed in lieu of any such taking, then this Lease,
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at the option of either Landlord or Tenant exercised by either party giving
notice to the other of such termination within thirty days after such taking or
conveyance, shall terminate and the rent shall be duly appointed as of the date
of such taking or conveyance. Tenant thereupon shall surrender to Landlord the
Premises and all interest therein under this Lease, and Landlord may reenter and
take possession of the Premises or remove Tenant therefrom. In the event of any
such taking or conveyance, Landlord shall receive the entire award or
consideration of the lands and improvements so taken and Tenant hereby assigns
to Landlord all rights of Tenant, if any, to receive any such award or
consideration (except any separate award reimbursing Tenant for moving or
relocation expenses or specifically allocated to Tenant's property or
improvements to the Premises which were paid for by Tenant).
XV. DEFAULT
The occurrence of any one or more of the following events shall constitute an
"event of default":
A. Tenant shall tail to pay in full, when due, any amount of rent or any other
amount payable hereunder, and such failure shall continue for five days
after notice from Landlord to Tenant;
B. Tenant shall vacate or abandon the Premises for a period in excess of 30
consecutive days without the consent of Landlord;
C. Tenant's interest in this Lease or the Premises or any part thereof shall
be taken upon execution or by other process of law directed against Tenant,
or shall be subject to any attachment at the instance of any creditor or
claimant against Tenant, and said attachment shall not be discharged or
disposed of within thirty days after the levy thereof;
D. Tenant or any guarantor of Tenant's obligations hereunder shall file a
petition in bankruptcy or insolvency or for reorganization or arrangement
under the bankruptcy laws of the United States or under any insolvency act
of any state, or shall voluntarily take advantage of any such law or act by
answer or otherwise, or shall be dissolved or shall make a general
assignment for the benefit of creditors:
E. Involuntary proceedings under any such bankruptcy law or insolvency act or
for the dissolution of Tenant or any guarantor of Tenant's obligations
hereunder shall be instituted against Tenant or any guarantor of Tenant's
obligations hereunder, or a receiver or trustee shall be appointed for all
or substantially all of the property of Tenant or any guarantor of Tenant's
obligations hereunder, and such proceeding shall not be dismissed or such
receivership or trusteeship vacated within sixty days after such
institution or appointment;
F. Tenant shall fail to comply with the provisions of Article VII or Article
VIII.
G. Tenant shall breach any of the other agreements, terms, covenants or
conditions hereof on Tenant's part to be performed, and such breach shall
continue for a period of thirty days after notice thereof by Landlord to
Tenant; or
H. Tenant or any guarantor of Tenant's obligations hereunder shall be unable
to pay its debts as they become due.
Upon the occurrence of an event of default, Landlord shall have the right, at
its election, then or at any time thereafter, either:
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1. to give Tenant written notice of intention to terminate this Lease on
the date of such given notice or on any later date specified therein,
whereupon Tenant's right to possession of the Premises shall cease and
this Lease shall thereupon be terminated,
2 without demand or notice, to reenter and take possession of the
Premises or any part thereof, repossess the same, expel Tenant and
those claiming through or under Tenant, and remove the effects of both
or either, without being liable for prosecution thereof so long as due
care is used in such removal, without being deemed guilty of any
manner of trespass Should Landlord elect to reenter as provided in
this Section 2, or should Landlord take possession pursuant to legal
proceedings or pursuant to any notice provided by law, Landlord shall,
without terminating this Lease, use its good faith efforts to relet
the Premises or any part thereof in Landlord's name for the account of
Tenant on such terms and conditions as Landlord then deems to be
reasonable in light of then current market conditions. No such reentry
or taking possession of the Premises by Landlord shall be construed as
an election on Landlord's part to terminate this Lease unless a
written notice of such intention be given to Tenant. No notice from
Landlord hereunder or under a forcible entry and detainer statute or
similar law shall constitute an election by Landlord to terminate this
Lease unless such notice specifically so states. Landlord reserves the
right following any such reentry and/or reletting to exercise its
right to terminate this Lease by giving Tenant such written notice, in
which event the Lease will terminate as specified in said notice
Nothing in this Article is intended to relieve Landlord of any
obligation imposed by Colorado law to mitigate damages in the event of
a default by Tenant hereunder.
In the event that Landlord does not elect to terminate this Lease as
permitted in Section 1 of this Article, but on the contrary, elects to take
possession as provided in Section 2 of this Article, Tenant shall pay to
Landlord (i) the rent and other sums as herein provided, which would be payable
hereunder if such repossession had not occurred, less (ii) the net proceeds, if
any, of any reletting of the Premises after deducting all Landlord's expenses in
connection with such reletting, including, but without limitation, all
repossession costs, brokerage commissions, attorneys' fees, expenses of
employees, alteration and repair costs and expenses of preparation for such
reletting If, in connection with any reletting, the new lease term extends
beyond the existing term, or the premises covered thereby include other premises
not part of the Premises, a fair apportionment of the rent received from such
reletting and the expenses incurred in connection therewith as provided
aforesaid will be made in determining the net proceeds from such reletting, and
any rent concessions will be equally apportioned over the term of the new lease
Tenant shall pay such rent and other sums to Landlord monthly on the day on
which the rent would have been payable hereunder if possession had not been
retaken and Landlord shall be entitled to receive the same from Tenant on each
such day.
In the event, however, this Lease is terminated by Landlord on account of
an event of default, Landlord shall be entitled to recover forthwith against
Tenant as damages for loss of the bargain and not as a penalty, an aggregate sum
which, at the time of such termination of this Lease, represents the excess of
the aggregate of the rent and all other sums payable by Tenant hereunder that
would have accrued for the balance of the term over the aggregate rental value
of the Premises (such rental value to be computed on the basis of a tenant
paying not only a rent to Landlord for the use and occupation of the Premises,
but also such other charges as are required to be paid by Tenant under the terms
of this Lease) for the balance of such term both discounted to present value at
the rate of eight percent per annum.
Suit or suits for the recovery of the amount and damages set forth
hereinabove (and for amounts owing by Tenant to Landlord under this Lease prior
to Landlord's election of remedies under this Article) may be brought by
Landlord, from time to time, at Landlord's election, and nothing herein shall be
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deemed to require Landlord to await the date whereon this Lease or the term
hereof would have expired had there been no event of default. Each right and
remedy provided for in this Lease shall be cumulative and shall be in addition
to every other right or remedy provided for in this Lease or now or hereafter
existing at law or in equity or by statute or otherwise, and the exercise or
beginning of the exercise by Landlord of any one or more of the rights or
remedies provided for in this Lease or now or hereafter existing at law or in
equity or by statute or otherwise shall not preclude the simultaneous or later
exercise by Landlord of any or all other rights or remedies provided for in this
Lease or now or hereafter existing at law or in equity or by statute or
otherwise.
Nothing contained in this Article shall limit or prejudice the right of
Landlord to prove and obtain as liquidated damages in any bankruptcy,
insolvency, receivership, reorganization or dissolution proceeding, an amount
equal to the maximum allowed by any statute or rule of law governing such
proceeding and in effect at the time when such damages are to be proved, whether
or not such amount be greater, equal to or less than the amounts recoverable,
either as damage or rent, referred to in any of the preceding provisions of this
Article.
Notwithstanding anything contained in this Article to the contrary, any
such proceeding or action involving bankruptcy, insolvency, reorganization,
arrangement, assignment for the benefit of creditors, or appointment of receiver
or trustee, as outlined in this Article, shall be considered to be an event of
default only when such proceeding. action or remedy shall be taken or brought by
or against the then holder of the leasehold estate under this Lease (which
holder must have been consented to by Landlord pursuant to Article VI).
XVI, LANDLORD'S DEFAULT
In the event Tenant alleges any default by Landlord hereunder, Tenant shall
deliver to Landlord written notice and Landlord shall have 30 days following
receipt of such notice to cure such alleged default or, in the event such
alleged default cannot reasonably be cured within such 30-day period, to
commence action to cure such alleged default within a reasonable time A copy of
such notice shall be sent by registered mail to any holder of a mortgage or
other encumbrance on the Building the name and address of which Tenant has been
notified in writing (by way of notice of assignment of rents and leases or
otherwise), and such holder shall also have the same time period to cure such
alleged default. which period shall begin to run 30 days after the expiration of
any period allowed Landlord hereunder, or if such default cannot be cured within
that time, then such additional time as may be necessary to effect such cure, so
long as such holder commences such cure within such 30 day period and thereafter
diligently pursues any remedies necessary or, appropriate for curing such
default (including. but not limited to. commencement of foreclosure
proceedings), in which event this Lease shall not be terminated while such
remedies are being so diligently pursued
XVII. SURRENDER; HOLDING OVER; PERSONAL PROPERTY
A. Upon termination of this Lease, either by lapse of time or otherwise,
Tenant shall peaceably surrender the Premises in good condition and repair
except for ordinary wear and tear, or damage by Act of God or other
casualty beyond Tenant's control, or by fire or other casualty covered by
standard extended coverage insurance Tenant shall remove Tenant's moveable
personal property from the Premises upon such termination and shall repair
all damages to the Premises caused by such removal.
B. No surrender of the Premises shall be executed by Landlord's acceptance of
the keys or of the rent or by any other means whatsoever without Landlord's
written acknowledgment of such acceptance as a surrender.
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<PAGE>
C. Should Tenant, with Landlord's written consent, hold over after the
termination of this Lease, Tenant shall become a Tenant from month-to-month
upon each and all of the terms herein provided. During such holding over,
Tenant shall pay base rent at the highest monthly rate provided for herein
and shall pay all other rent and other amounts owing to Landlord hereunder.
Such month-to-month tenancy shall continue until either party gives to the
other party notice at least one month prior to the date of termination of
its intention to terminate such tenancy.
D. All movable personal property of Tenant not removed from the Premises upon
the abandonment thereof or upon the termination of this Lease for any cause
whatsoever shall conclusively be deemed to have been abandoned and may be
appropriated, sold. stored, destroyed or otherwise disposed of by Landlord
without notice to Tenant or any other person and without obligation to
account therefor, and Tenant shall pay Landlord all expenses incurred in
connection with the disposition of such property in excess of any amount
received by Landlord in connection with such disposition.
E. During the term hereof, Tenant shall pay prior to delinquency all taxes
assessed against and levied upon fixtures, furnishings, equipment and all
other personal property of Tenant contained in the Premises, and Tenant
shall cause said fixtures, furnishings, equipment and other personal
property to be assessed and billed separately from the real property of
Landlord.
XVIII. COVENANT OF QUIET ENJOYMENT
Landlord covenants that Tenant shall be granted peaceable and quiet
enjoyment of the Premises during the term hereof so long as Tenant punctually
(i) pays the rent and all other amounts payable by Tenant hereunder and (ii)
performs all of Tenant's other covenants and obligations hereunder.
XIX. NOTICES;
Any notice, request, demand, Consent, approval or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given when personally delivered or mailed by United States certified mail,
return receipt requested, postage prepaid, addressed to the party for whom it is
intended at the following addresses:
LANDLORD: 1700 Grant Associates, Ltd.
303 E. 17th Avenue, Suite 200
Denver, C0 80203
TENANT: Accelr8 Technology Corporation with a copy to
Attn: Robert Hickler, President Accelr8 Technology Corporation
303 E. 17th Avenue, Suite 108 Attn: Thomas V. Geimer, Chairman
Denver, C0 80203 303 E. 17th Avenue, Suite 108
Denver, C0 80203
provided; however, that either party may change its address for purposes of
receipt of any such communication by giving ten days' prior written notice of
such change to the other party in the manner prescribed above.
-14-
<PAGE>
XX. MISCELLANEOUS
A. Subject to the provisions of Article VI, all agreements covenants and
obligations of this Lease shall be binding upon apply and inure to the
benefit of the parties hereto and their respective heirs, personal
representatives. successors and assigns.
B. This Lease contains the entire agreement between the parties and may be
amended only by subsequent written agreement. No promises or
representations except as herein contained, have been made to Tenant
respecting the condition of the Premises or the manner of operating the
Building.
C. The captions of the various Articles of this Lease are for convenience only
and do not necessarily define. limit, describe or construe the contents of
such Articles.
D. The words "Landlord" and "Tenant" as used herein shall include the plural
as well as the singular. Words used herein in one gender shall include the
other genders where applicable. If there be more than one Tenant the
obligations hereunder imposed upon Tenant shall be joint and several.
E. Time is of the essence of this Lease and each and all of its provisions.
F. Submission of this instrument for examination or signature by Tenant does
not constitute a reservation of or option for Lease, and it is not elective
as a Lease or otherwise until execution and delivery by both Landlord and
Tenant.
G. Except for delinquent rent for which late charges are due under Article
III, any amount due from Tenant to Landlord hereunder which is not paid
when due shall bear interest at two percent per annum above the prime
interest rate of IntraWest Bank of Denver National Association, or its
successor from the due dale until paid, but the payment of such interest
shall not excuse or cure any default by Tenant under this Lease. and in no
event shall such rate exceed the highest rate allowed by law in Colorado.
H. Any provisions of this Lease which shall prove to be invalid. void or
illegal shall in no way affect, impair or invalidate any other provision
hereof and such other provisions shall remain in lull force and effect.
I. This Lease shall be governed by and construed pursuant to the laws of the
State of Colorado.
J. Each party agrees to promptly reimburse the other party for any costs or
reasonable attorneys' tees incurred by the non-breaching party on account
of any breach by the other party of any of the provisions of this Lease.
K. Landlord shall not be liable to Tenant for any default under this Lease
which occurs after the sale of the Building by Landlord, and Tenant agrees
that its rights with respect to any such default shall be asserted against
Landlord's successor in interest.
L. Landlord may, at its option, make any payment or perform any defaulted
covenant or agreement of Tenant contained herein, and any monies advanced
by Landlord for such purposes (including expenses and reasonable attorneys'
fees shall be immediately due and payable by Tenant to Landlord.
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<PAGE>
M. Within ten days of notice from the other party, each party agrees to
provide such other party with reasonable evidence (e.g, an opinion of
counsel or a corporate or partnership resolution) that this Lease has been
duly executed, authorized and delivered by such party.
N. No failure by either party to insist upon the strict performance of any
agreement. term, covenant or condition hereof or to exercise any right or
remedy consequent upon a breach thereof, and no acceptance of full or
partial rent during the continuance of any such breach, shall constitute a
waiver of any such breach of such agreement, term, covenant or condition or
a relinquishment of the right to exercise such right or remedy. No
agreement, term, covenant or condition hereof to be performed or complied
with by either party, and no breach thereof, shall be waived, altered or
modified except by written instrument executed by the other party. No
waiver of any breach shall affect or alter this Lease, but each and every
agreement, term, covenant and condition hereof shall continue in full force
and effect with respect to any other then existing or subsequent breach
thereof. Notwithstanding any termination of this Lease, the same shall
continue in force and effect as to any provisions hereof which require
observance or performance of Landlord or Tenant subsequent to termination.
O. Landlord shall have absolutely no personal liability with respect to any
provision of this Lease or any obligation or liability arising from this
Lease or in connection with this Lease in the event of a breach or default
of Landlord of any of its obligations Tenant shall look solely to the
Landlord's equity in the Building, at the time of the breach or default for
the satisfaction of any remedies of Tenant Such exculpation of liability
shall be absolute and without any exception whatsoever
XXI CONSTRUCTION OF LEASEHOLD IIIIPROVEII ENTS
Landlord and Tenant shall diligently pursue the preparation of all plans
and specifications for the Improvement of the Premises shall be performed in a
good and workmanlike manner and in compliance with all applicable laws rules end
regulations
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<PAGE>
XXII ADDITIONAL PROVISIONS
The additional provisions set forth in Exhibit C attached hereto constitute
part of this Lease
IN WITNESS WHEREOF the parties hereto execute this Lease the day and year
first above written
LANDLORD: 1700 GRANT ASSOCIATES, LTD.
a Colorado limited partnership
By: STARR REALTY CORPORATION
a Delaware corporation
doing business in Colorado as
STARR REALTY MANAGEMENT CORPORATION
authorized agent
By: /s/ Edward J. Schmidt
---------------------------------
Edward J. Schmidt
President
TENANT: ACCELR8 TECHNOLOGY CORPORATION
a Colorado corporation
By: /s/ Robert Hicker
-----------------------------------
Robert Hickler
President
-17-
<PAGE>
EXHIBIT A
A floor plan drawing indicating the location of the Premises in the
Building will be provided by Landlord an initialed by the parties. Such drawing
shall be attached to the Lease as part of this Exhibit A.
Location of the Building: 303 East 17th Avenue
Denver, Colorado 80203
Description of the Building: That certain twelve-story building known as
Seventeenth and Grant Building
Legal description of land underneath and surrounding the Building: See Exhibit
A, page A-2
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<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
PARCEL 1: Lots 11 through 20 inclusive, Block 264 Clements Addition to the
City of Denver, City and County of Denver, State of Colorado.
PARCEL 2: A 16 toot wide parcel lying between Lots 11 through 20 inclusive,
Block 70 H.C. Brown's Addition to the City and County of Denver
and Lot 11 through 20 inclusive, Block 264 Clements Addition to
the City and County of Denver, more particularly described and
bounded as follows:
Beginning at the southeast corner of Lot 20, Block 70 of said
H.C. Brown's Addition; thence northerly along the easterly line
of said Block 70 a distance of 250.75 feet to a point, said point
being then northeast corner of Lot 11, Block 70 of said H.C.
Brown's Addition ;thence on a deflection angle to the right of
90(a)02'09" and easterly a distance of 16.00 feet to a point,
said point being the northwest corner of Lot 11, Block 264 of
said Clements Addition; thence on a deflection angle to the right
of 89(a)57'51" and southerly along the westerly line of said
Block 264 a distance of 250.75 feet to a point, said point being
the southwest corner of Lot 20, Block 264 of said Clements
Addition, said point also being a point on the north right-of-way
line of 17th Avenue; thence on a deflection angle to the right of
90(a)02'09" and westerly along said northright-of-way line of
l7th Avenue a distance of 16.00 feet to the point of beginning,
containing 4,012.00 square feet or 0.092 acre, more or less.
PARCEL 3: Lots 11 through 20, inclusive, Block 70 H.C. Brown's
Addition to the City of Denver, City and County of Denver, State
of Colorado.
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<PAGE>
EXHIBIT B
RULES AND REGULATIONS
1. At all times during the term of this Lease, Landlord shall have the right
by itself, its agents and employees, to enter into and upon the Premises
during reasonable business hours for the purpose of examining and
inspecting the same and determining whether Tenant shall have complied with
its obligations under the Lease, including the Rules and Regulations.
2. Tenant shall not use the name of the Building for any purpose other than
Tenant s business address and shall not use a picture or likeness of the
Building or Premises in any advertisement, notice or correspondence without
the prior written consent of Landlord.
3. Tenant shall not make or permit any noise or odor that is objectionable ~o
the public or to other occupants of the Building to emanate from the
Premises, shall not create or maintain a nuisance thereon and shall not do
anything tending to injure the reputation of the Building or the Premises.
4. Tenant shall not place or permit any radio antenna, loud speakers, sound
amplifiers, or similar devices on the roof or outside of the Building.
5. The sidewalks, entrances, passages, elevators, vestibules, stairways,
corridors and halls may not be obstructed or used for any purpose other
than ingress or egress to and from the Premises.
6. Supplies, goods, materials, packages, furniture and all such items of every
kind are to be delivered at the entrance point provided therefor as
Landlord may designate. All such items moved in or out of the Building
shall be done at such time and in such manner as designated by Landlord.
7. Landlord may retain a passkey to the Premises. Tenant shall not alter any
lock or install a new lock on any door of the Premises without the prior
written consent of Landlord; if such consent is given, Tenant shall provide
Landlord with an additional key for the use of Landlord.
8. Upon leaving the Premises, Tenant shall close and lock all windows and
doors of the Premises, and shall shut off all water faucets and major
electrical apparatus located within the Premises
9. Tenant shall not install any concession or vending machines in the
Premises, and shall not sell from the Premises the following items: cigars,
cigarettes, tobaccos, pipes, candies, newspapers, magazines or greeting
cards.
10. Landlord reserves the right to reasonably designate all contractors for
sign painting and lettering
11. Tenant shall, upon termination of the Lease or of Tenant s possession,
surrender all keys of the Premises to Landlord at the place then fixed for
the payment of rent and shall provide Landlord with all combinations and
keys for any locks, safes, cabinets and vaults remaining in the Premises.
12. All persons entering or leaving the Building between the hours of 6:00 p.m.
and 8:00 a.m., Monday through Friday, or at any time on Saturdays, Sundays
or Holidays, may be required to do so under such regulations as Landlord
may Impose.
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<PAGE>
Landlord shall, from time to time upon ten days notice to Tenant, have the
right to amend, modify or waive any of the foregoing Rules and Regulations.
The failure of Landlord to enforce any of the Rules and Regulations against
any other tenant in the Building shall not be deemed a waiver of any of such
Rules and Regulations. Landlord shall not be liable to Tenant for violation of
any of the Rules and Regulations or the breach of any covenant or condition in
any lease by any other tenant in the Building.
No act or thing done or omitted to be done by Landlord or Landlord s agent
during the term of the Lease to enforce the Rules and Regulations shall
constitute an eviction of Tenant by Landlord, nor shall it be deemed an
acceptance or surrender of said Premises; no agreement to accept such surrender
shall be valid unless in writing signed by Landlord.
-21-
<PAGE>
EXHIBIT "C"
ADDITIONAL PROVISIONS
1. Rent. Tenant shall pay to Landlord as base rent without offset or
reduction during the term of this Lease the total sum of $116,417.52 which shall
be payable in the following amounts during the periods indicated:
(a) during the period from April 1, 1992 through March 31, 1994, the
sum of $2,847.17 per month, a rate of $9.00 per square foot; and
(b) during the period from April 1, 1994 through July 31, 1995, the
sum of $3,005.34 per month, a rate of $9.50 per square foot.
2. Parking. Tenant shall have the right to lease one parking space for each
650 usable square feet in the premises throughout the term of the Lease. Upon
Lease Commencement Landlord will provide six unassigned parking spaces at $40.00
per space per month during the Lease term.
4. Option to Extend Lease Term. Provided Tenant is not then in default
under the terms and conditions of this Lease, Landlord hereby grants to Tenant
the Option to Extend the Lease Term for one year, August 1, 1995 to July 31,
1996, exercisable by written notice to the Landlord 90 days but no more than 120
days prior to the expiration of the primary term of the Lease.
5. Rent During Option Period. If Tenant elects to exercise its Option to
Extend Lease Term Rent During Option Period will be $3,084.43 per month, a rate
of $9.75 per square foot.
6. Right of First Offer. Provided Tenant is not then in default under the
terms and conditions of this Lease, Landlord hereby grants to Tenant the
continuous Right of First Offer on the adjacent 2,243.48 rentable square feet
east of the premises. Provided space is taken in "as is" condition except for a
doorway into the expansion space and patching the carpet where doorway is
created, the Rent will be at the same rate as in effect as of the date of
expansion.
7. Storage Service. Landlord will provide storage for Tenant's empty boxes
at a rate of $25.00 per month throughout the term of the Lease. Location of such
stored empty boxes will be at the discretion of Building Engineer and access to
the boxes will be limited to times reasonably convenient to Building Engineer.
-22-
<PAGE>
FIRST AMENDMENT TO OFFICE LEASE
This First Amendment to Office Lease is made and entered into as of the
11th day of May 1995 between 1700 Grant Associates, Ltd., a Colorado limited
partnership ("Landlord"), and Accelr8 Technology Corporation, a Colorado
corporation ("Tenant").
WHEREAS, Landlord and Tenant entered into an Office Lease dated March 13,
1992 ("Lease") whereby Landlord leased to Tenant approximately 3,796.22 square
feet of floor space on the first (lst) floor of the building located at 303 East
17th Avenue, Denver, Colorado ("Building") to be known as Suite #108
("Premises") and;
WHEREAS, Landlord and Tenant hereby agree to Amend said Lease as follows:
1. EXTENDED TERM: The Extended Term shall be for one (1) year commencing
August 1, 1995 and terminating July 31, 1996.
2. RENTAL PAYMENTS: Tenant shall pay to Landlord as base rent without
offset or reduction during the term of this Lease the total sum of
Thirty-Seven Thousand Thirteen and 16/lOOths Dollars ($37,013.16)
which shall be payable as follows:
(a) during the period from August 1, 1995 through July 31, 1996 the
sum of $3,084.43 per month $9.75 per rentable square foot.
3. OPTION TO RENEW. Provided Tenant is not then in default under the
terms and conditions of this Lease, Landlord hereby grants to Tenant
an Option to Extend this Lease for one five (5) month additional term.
Such term shall commence August 1, 1996 and terminate December 31,
1996. Rent for said Option Period shall be $3,084.42 per month, $9.75
per rentable square foot.
4. PARKING GARAGE. Tenant shall have the right to lease one parking space
for each 650 usable square feet in the premises throughout the
Extended Term and the Option. Landlord will provide nine (9)
unassigned parking spaces at prevailing market rate of $40.00 per
space per month. This rate will be adjusted from time to time to
coincide with the prevailing market rate, and Tenant will be provided
a thirty (30) day written notice of such adjustment.
In the event of any conflict or express inconsistencies between the terms
of the Lease and the terms of this First Amendment, the terms of this First
Amendment shall govern. Unless modified by this First Amendment, the terms and
conditions of the Lease are hereby incorporated into this First Amendment, in
toto.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the
day and year first above written.
LANDLORD: 1700 GRANT ASSOCIATES, LTD.
a Colorado limited partnership
By: STARR REALTY CORPORATION
a Delaware corporation doing business in Colorado
as Starr Realty Management Corporation
/s/ Edward J. Schmidt
-------------------------------------------------
TENANT: ACCELR8 TECHNOLOGY CORPORATION,
a Colorado corporation
/s/ Thomas V. Geimer
-------------------------------------------------
Chairman of the Board
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<PAGE>
EXHIBIT 10.9
STARR REALTY
MANAGEMENT CORPORATION
303 EAST 17TH AVENUE, SUITE 770
DENVER, COLORADO 80203
(303) 832-7500
August 6, 1996
Mr. Randy Martin
Long Beach Mortgage Company
303 E. 17th Avenue, Suite 110
Denver Colorado 80203
RE: Letter Agreement
Long Beach Mortgage Company
17th & Grant
Dear Randy:
1700 Grant Associates, Ltd., the ownership of the 17th & Grant Building,
(Landlord) and Long Beach Mortgage Company (Tenant) agree to a month to month
extension of their current Lease for Suite 110 in the Building. All terms and
conditions of the Lease will remain in full force and effect during the holdover
period.
Accelr8, a Tenant in Suite 108 of the 17th & Grant Building, has elected to
exercise a Right of First Offer on Suite 110, currently occupied by Long Beach
Mortgage Company, and reserves the right to take possession of the premises upon
thirty (30) days notice to Long Beach Mortgage Company.
Please sign both copies of this letter, keeping one for your records and
returning one to our office. Should you have any question, please do not
hesitate to let me know.
Sincerely,
STARR REALTY MANAGEMENT CORPORATION
/s/ Tamara Featherston
- -----------------------------------
Assistant Real Estate Manager
AGREED TO AND ACCEPTED THIS 6th DAY OF AUGUST, 1996.
ACCELR8 TECHNOLOGY CORPORATION
By: /s/ Thomas Geimer
--------------------------------
Thomas Geimer
Authorized Representative
-24-
DEFERRED COMPENSATION AGREEMENT
This Deferred Compensation Agreement is entered into on the date indicated
below by and between Accelr8 Technology Corporation ("Employer"), and the
employee identified on the Beneficiary Designation ("Beneficiary Designation"
attached to this Agreement ("Employee"). The Beneficiary Designation is a part
of this Agreement and is incorporated herein by this reference. For valuable
consideration, the parties agree as follows:
1. Employer shall continue to employ Employee and Employee shall continue
to serve Employer, devoting Employee's normal working time to the interests and
activities of Employer, in such capacity as Employer from time to time may
assign to Employee. Employee's employment shall continue to be considered
employment at will, and Employer shall be entitled to terminate Employee's
services for any reason without prior notice. This Agreement shall not be
construed as a contract creating an expectation of continued employment. Nothing
contained herein shall be construed as conferring upon Employee the right to
continue in the employ of the Employer in any capacity.
2. Employer shall credit to a book reserve account (identified as the
"Deferred Compensation Account") established for this purpose such amounts as
Employer's board of directors shall determine as deferred compensation on behalf
of Employee. Employer may also set aside sufficient funds in a separate trust to
satisfy Employer's obligations under this Agreement. EMPLOYEE RECOGNIZES THAT
EMPLOYER IS NOT OBLIGATED TO MAKE CONTRIBUTIONS AND EMPLOYEE MAY NOT RECEIVE ANY
BENEFITS UNDER THIS AGREEMENT.
3. Any funds contributed to the Deferred Compensation Account may be kept
in cash or invested and reinvested in mutual funds, stocks, bonds, securities or
any other assets as may be selected by the board in its discretion. In addition,
the funds in the Deferred Compensation Account may be conveyed to a trustee to
be held and invested in consultation with the Board of Directors. Any such trust
must provide that it is established solely to pay benefits under this Agreement
or to satisfy the claims of Employer's creditors. In the exercise of investment
powers, the board may delegate to the trustee full or limited authority to
select the assets in which the funds are to be invested. ON BEHALF OF HIMSELF
AND HIS ESTATE, HEIRS, SUCCESSORS, AND DESIGNATED BENEFICIARY, EMPLOYEE ASSUMES
ALL RISKS IN CONNECTION WITH ANY DECREASE IN VALUE OF THE FUNDS THAT ARE
INVESTED OR CONTINUE TO BE INVESTED IN ACCORDANCE WITH THIS AGREEMENT.
4. The benefits to be paid as deferred compensation, unless forfeited as
provided in this Agreement, are as follows:
a. Upon Employee's termination of employment or attainment of age 65,
Employer shall pay Employee in ten annual installments an amount equal to
the fair market value of the assets in the Deferred Compensation Account as
of the date of termination or on which Employee attains age 65.
Notwithstanding the foregoing, the total amount payable to Employee shall
be increased or decreased as the case may be, but not more than
semi-annually, to reflect the appreciation or depreciation in value and the
net income or loss on the funds that remain invested in the Deferred
Compensation Account. If Employee dies after commencing distribution but
before the ten annual payments are made, the unpaid balance will continue
to be paid in installments for the unexpired portion of the ten-year period
to his designated beneficiary in the same manner as set forth above. Until
all amounts are paid, the funds in the Deferred Compensation Account shall
continue to be invested or held in cash as Employer in its discretion may
determine. Notwithstanding the foregoing, if before reaching age 65
Employee dies or becomes disabled, payments shall be made in the same
manner and to the same extent as set forth in paragraphs 4.b and 4.c below,
as appropriate.
<PAGE>
b. If Employee dies while still employed by Employer, Employer shall
pay Employee's beneficiary in ten annual installments an amount equal to
the fair market value of the assets in the Deferred Compensation Account as
of the date of Employee's death in the same manner and to the same extent
as provided in paragraph 4.a above. Notwithstanding anything in this
Agreement to the contrary, if Employer purchases insurance to fund the
payments upon Employee's death, the payment provided in this paragraph
shall be paid only to the extent that insurance proceeds are paid as a
result of Employee's death.
c. If Employee becomes disabled, Employer shall pay Employee in ten
annual installments an amount equal to the fair market value of the assets
in the Deferred Compensation Account as of the date on which Employee
became disabled in the same manner and to the same extent as provided in
paragraph 4.a above. For purposes of this Agreement, Employee shall be
considered disabled on the date Employer's board of directors finds on the
basis of medical evidence satisfactory to the board that Employee is
totally disabled, mentally or physically, so as to be prevented from
engaging in further employment with Employer and that such disability will
be permanent and continuous during the remainder of Employee's life.
d. If Employee's designated beneficiary (or last surviving contingent
beneficiary, as the case may be) dies before all payments under this
Agreement have been paid, the remaining value of the Deferred Compensation
Account shall be determined as of the date of death of the beneficiary and
shall be paid to the last surviving beneficiary's estate on the same
schedule until the ten annual payments are completed.
e. Employer may elect to accelerate payment of periodic payments under
this Agreement upon Employee's death or otherwise. Employer shall have the
sole discretion to determine whether and how to accelerate payments, and if
so, when to make the accelerated payment(s).
f. The installment payments to be made to Employee after termination
of employment (including without limitation upon disability) shall commence
on the first day of the month next following the date of the termination of
employment. The installment payments to be made to the designated
beneficiary under the provisions of this Agreement shall commence on a date
to be selected by Employer but within six months from the date of
Employee's death.
5. Nothing in this Agreement and no action taken pursuant to the provisions
of this Agreement shall create or be construed to create a trust of any kind or
a fiduciary relationship between Employer and Employee, his designated
beneficiary, or any other person. Any funds that may be invested under the
provisions of this Agreement shall continue for all purposes to be a part of the
general funds of Employer and no person other than Employer shall have any
interest in the funds. Title to and beneficial ownership of any assets, whether
cash or investments that Employer may earmark to pay the contingent deferred
compensation hereunder, shall at all times remain in Employer, and Employee and
his designated beneficiary shall not have any property interest whatsoever in
any specific assets of Employer. All contributions, property, or rights under
this Agreement shall remain subject to the rights of Employer and shall be
subject to the claims of Employer's general creditors until distributed to
Employee or Employee's beneficiaries under this Agreement. Any funds held in a
separate trust established by Employer to receive funds allocated and any
earnings thereon shall be used exclusively for the uses and purposes of Employee
and the general creditors of Employer. Any rights created under the Plan for
Employee or Employee's beneficiaries shall be mere unsecured contractual rights
against Employer.
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<PAGE>
6. If Employer shall find that any person to whom any payment is payable
under this Agreement is unable to care for his affairs because of illness or
accident or is a minor, any payment due (unless a prior claim therefor shall
have been made by a duly appointed guardian, committee or other legal
representative) may be paid to the spouse, child, parent, or brother or sister
of the recipient, or to any person deemed by Employer to have incurred expense
for such person otherwise entitled to payment, in such manner and proportions as
Employer may determine. Any such payment shall be a complete discharge of the
liabilities of Employer under this Agreement.
7. Nothing contained in this Agreement shall be deemed to exclude Employee
from any supplemental compensation, bonus, pension, insurance, severance pay, or
other benefit to which Employee might otherwise be entitled as an employee of
Employer. Deferred compensation payable under this Agreement shall not be deemed
salary or other compensation to Employee for the purpose of computing benefits
to which Employee may be entitled under any pension plan or other arrangement of
Employer for the benefit of its employees.
8. This Agreement is a personal agreement and the rights and interests of
Employee may not be sold, transferred, assigned, pledged, or hypothecated. This
Agreement shall be binding on the heirs, executors, and administrators of
Employee and on the successors and assigns of Employer. Employee's benefits
under this Agreement shall not be subject to execution or attachment by
Employee's creditors.
9. Employer shall have full power and authority to interpret, construe, and
administer this Agreement and Employer's interpretations and construction
thereof, and actions thereunder, including any valuation of the Deferred
Compensation Account, or the amount or recipient of the payment to be made
therefrom, shall be binding and conclusive on all persons for all purposes. No
member of Employer's board of any officer, employee, agent, or adviser to
Employer shall be liable to any person for any action taken or omitted in
connection with the interpretation and administration of this Agreement unless
attributable to his own willful misconduct or lack of good faith.
10. During Employee's lifetime, Employer and Employee may by mutual
agreement amend, modify, or rescind this Agreement in writing without the
consent of any other person.
11. This Agreement shall be governed by the laws of the state of Colorado.
This Agreement is not intended to be a qualified retirement plan under Section
401 of the Internal Revenue Code or to satisfy any Code provision relating to
qualified retirement plans.
EMPLOYER: EMPLOYEE:
Accelr8 Technology Corporation
By: /s/ David P. Wilhelm /s/ Thomas V. Geimer
------------------------------ --------------------------------
Title: Director
---------------------------
Date: 3/4/95 Date:
---------------------------- ---------------------------
-3-
ACCELR8 TECHNOLOGY CORPORATION
DEFERRED COMPENSATION PLAN TRUST AGREEMENT
This Agreement made this 15th day of May, 1996, by and between ACCELR8
TECHNOLOGY CORPORATION (Company) and Ken Bennington (Trustee);
WHEREAS, Company has adopted the nonqualified deferred compensation Plan(s)
as listed in Appendix A.
WHEREAS, Company has incurred or expects to incur liability under the terms
of such Plan(s) with respect to the individuals participating in such Plan(s);
WHEREAS, Company wishes to establish a trust (hereinafter called "Trust")
and to contribute to the Trust assets that shall be held therein, subject to the
claims of Company's creditors in the event of Company's Insolvency, as herein
defined, until payed to Plan participants and their beneficiaries in such manner
and at such times as specified in the Plan(s);
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the
Plan(s) as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
WHEREAS, it is the intention of Company to make contributions to the Trust
to provide itself with a source of funds to assist it in the meeting if its
liabilities under the Plan(s);
NOW, THEREFORE, the parties to hereby establish the Trust and agree that
the Trust shall be comprised, held, and disposed of as follows:
1. ESTABLISHMENT OF TRUST
a. Company hereby deposits with Trustee in trust $75,000, which shall
become the principal of the Trust to be held, administered and disposed of
by Trustee as provided in this Trust Agreement.
b. The Trust hereby established is revocable by Company; it shall
become irrevocable upon a Change of Control, as defined herein.
c. The Trust is intended to be a grantor trust, of which Company is
the grantor, within the meaning of subpart E, part I, subchapter J, chapter
1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall
be construed accordingly.
d. The principal of the Trust, and any earnings thereon shall be held
separate and apart from other funds of Company and shall be used
exclusively for the uses and purposes of Plan participants and general
creditors as herein set forth. Plan participants and their beneficiaries
shall have no preferred claim on, or any beneficial ownership interest in,
any assets of the Trust. Any rights created under the Plan(s) and this
Trust Agreement shall be mere unsecured contractual rights of Plan
participants and their beneficiaries against Company. Any assets held by
the Trust will be subject to the claims of Company's general creditors
under federal and state law in the event of Insolvency, as defined in
Section 3(a) herein.
<PAGE>
e. Company, in its sole discretion, may at any time, or from time to
time, make additional deposits of cash or other property in trust with
Trustee to augment the principal to be held, administered and disposed of
by Trustee as provided in this Trust Agreement. Neither Trustee nor any
Plan participant or beneficiary shall have any right to compel such
additional deposits.
f. Within thirty (30) days following the end of the Plan year(s),
ending after the Trust has become irrevocable pursuant to Section 1(b)
hereof, Company shall be required to irrevocably deposit additional cash or
other property to the Trust in an amount sufficient to pay each Plan
participant or beneficiary the benefits payable pursuant to the terms of
the Plan(s) as of the close of the Plan year(s).
2. Payments to Plan Participants and Their Beneficiaries
a. Company shall deliver to Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each Plan
participant (and his or her beneficiaries), that provides a formula or
other instructions acceptable to Trustee for determining the amounts so
payable, the form in which such amount is to be paid (as provided for
or available under the Plan(s)), and the time of commencement for
payment of such amounts. Except as otherwise provided herein, Trustee
shall make payments to the Plan participants and their beneficiaries in
accordance with such Payment Schedule. The Trustee shall make provision
for the reporting and withholding of any federal, state, or local taxes
that may be required to be withheld with respect to the payment of
benefits pursuant to the terms of the Plan(s) and shall pay amounts
withheld to the appropriate taxing authorities or determine that such
amounts have been reported, withheld, and paid by Company.
b. The entitlement of a Plan participant or his or her beneficiaries
to benefits under the Plan(s) shall be determined by Company or such party
as it shall designate under the Plan(s), and any claim for such benefits
shall be considered and reviewed under the procedures set out in the
Plan(s).
c. Company may make payment of benefits directly to Plan participants
or their beneficiaries as they become due under the terms of the Plan(s).
Company shall notify Trustee of its decision to make payment of benefits
directly prior to the time amounts are payable to participants or their
beneficiaries. In addition if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in accordance with
the terms of the Plan(s), Company shall make the balance of each such
payment as it falls due. Trustee shall notify Company where principal and
earnings are not sufficient.
3. Trustee Responsibility Regarding Payments to Trust Beneficiary When
Company Is Insolvent
a. Trustee shall cease payment of benefits to Plan participants and
their beneficiaries if the Company is insolvent. Company shall be
considered "insolvent" for purposes of this Trust Agreement if (i) Company
is unable to pay its debts as they become due, or (ii) Company is subject
to a pending proceedings as a debtor under the United States Bankruptcy
Code.
b. At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject
to claims of general creditors of Company under federal and state law as
set forth below.
-2-
<PAGE>
i. The Board of Directors and Chief Executive Officer of Company
shall have the duty to inform Trustee in writing of Company's
insolvency. If a person claiming to be a creditor of Company alleges
in writing to Trustee that Company has become insolvent, Trustee shall
determine whether Company is Insolvent and, pending such
determination, Trustee shall discontinue payment of benefits to Plan
participants or their beneficiaries.
ii. Unless Trustee has actual knowledge of Company insolvency, or
has received notice from Company or a person claiming to be a creditor
alleging that Company is Insolvent, Trustee shall have no duty to
inquire whether Company is Insolvent. Trustee may in all events rely
on such evidence concerning Company's solvency as may be furnished to
Trustee and that provides Trustee with a reasonable basis for making a
determination concerning Company's solvency.
iii. If at any time Trustee has determined that Company is
insolvent, Trustee shall discontinue payments to Plan participants or
their beneficiaries and shall hold the assets of the Trust for the
benefit of Company's general creditors. Nothing in this Trust
Agreement shall in any way diminish any rights of Plan participants or
their beneficiaries to pursue their rights as general creditors of
Company with respect to benefits due under the Plan(s) or otherwise.
iv. Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with Section 2 of
this Trust Agreement only after Trustee has determined that Company is
not insolvent (or is no longer insolvent).
c. Provided that there are sufficient assets, if Trustee discontinues
the payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
Plan participants or their beneficiaries under the terms of the Plan(s) for
the period of such discontinuance, less the aggregate amount of any
payments made to Plan participants or their beneficiaries by Company in
lieu of the payments provided for hereunder during any such period of
discontinuance.
4. Payments to Company
Except as provided in Section 3 hereof, after the Trust has become
irrevocable, Company shall have no right or power to direct Trustee to return to
Company or to divert to others any of the Trust assets before all payment of
benefits have been made to Plan participants and their beneficiaries pursuant to
the terms of the Plan(s).
5. Investment Authority
Trustee may invest in securities (including stock or rights to acquire
stock) or obligations issued by Company. All rights associated with assets of
the Trust shall be exercised by Trustee or the person designated by Trustee, and
shall in no event be exercisable by or rest with Plan participants, except that
voting rights with respect to Trust assets will be exercised by Company. Company
shall have the right at any time, and from time to time in its sole discretion,
to substitute assets of equal fair market value for any asset held by the Trust.
This right is exercisable by Company in a nonfiduciary capacity without the
approval or consent of any person in a fiduciary capacity.
-3-
<PAGE>
6. Disposition of Income
During the term of this Trust, all income received by the Trust, net
of expenses and taxes, shall be accumulated and reinvested.
7. Accounting by Trustee
Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between
Company and Trustee. Within sixty (60) days following the close of each calendar
year and within thirty (30) days after the removal or resignation of Trustee,
Trustee shall deliver to Company a written account of its administration of the
Trust during such year or during the period from the close of the last preceding
year to the date of such removal or resignation, setting forth all investments,
receipts, disbursements and other transactions effected by it, including a
description of all securities and investments purchased and sold with the cost
or net proceeds of such purchases or sales (accrued interest paid or receivable
being shown separately), and showing all cash, securities, and other property
held in the Trust and the end of such year or as of the date of such removal or
resignation, as the case may be.
8. Responsibility of Trustee
a. Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in
like capacity and familiar with such matters ~ would use in the conduct of
an enterprise of a ]like character and with like aims; provided, however,
the Trustee shall incur no liability to any person for any action taken
pursuant to a direction, request, or approval given by Company which is
contemplated by, and in conformity with, the terms of the Plan(s) or this
Trust and is given in writing by Company. In the event of a dispute between
Company and a party, Trustee may apply to a court of competent jurisdiction
to resolve the dispute.
b. If Trustee undertakes or defends any litigation arising in
connection with this Trust, Company agrees to indemnify Trustee against
Trustee's costs, expenses, and liabilities (including without limitation
attorney fees and expenses) relating thereto and to be primarily liable for
such payments. If Company does not pay such costs, expenses, and
liabilities in a reasonable timely manner, Trustee may obtain payment from
the Trust.
c. Trustee may consult with legal counsel (who may also be counsel for
the Company generally) with respect to an of its duties or obligations
hereunder.
d. Trustee may hire agents, accountants, actuaries, investment
advisors. financial consultants, or other professionals to assist it in
performing any of its duties or obligations hereunder.
e. Trustee shall have, without exclusion, all powers conferred on
Trustees by applicable law, unless expressly provided otherwise herein;
provided, however, that if an insurance policy is held as an assets of the
Trust, Trustee shall have no power to name a beneficiary of the policy
other than the Trust, to assign the policy (as distinct from conversion of
the policy to a different form) other than to a successor Trustee, or to
loan to any person the proceeds of any borrowing against such policy.
f. Notwithstanding any powers granted to Trustee pursuant to this
Trust Agreement or to applicable law, Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing
the gains therefrom within the meaning of Section 301.7701-2 of the
Procedure and Administrative Regulations promulgated pursuant to the
Internal Revenue Code.
-4-
<PAGE>
9. Compensation and Expenses of Trustee
Company shall pay all administrative and Trustee's fees and expenses.
If not so paid, the fees and expenses shall be paid from the Trust.
10. Resignation and Removal of Trustee
a. Trustee may resign at any time by written notice to Company, which
shall be effect thirty (30) days after receipt of such notice unless
Company and Trustee agree otherwise.
b. Trustee may be removed by Company on thirty (30) days notice or
upon shorter notice accepted by Trustee.
c. Upon resignation or removal of Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to The
successor Trustee. The transfer shall be completed within sixty (60) days
after receipt of notice of resignation, removal, or transfer, unless
Company extends the time limit.
d. If Trustee resigns or is removed, a successor shall be appointed,
in accordance with Section 11 hereof, by the effective date of resignation
or removal under paragraphs (a) or (b) of this section. If no such
appointment has been made, Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for instructions. All
expenses of Trustee in connection with the proceeding shall be allowed as
administrative expenses of the Trust.
11. Appointment of Successor
a. If Trustee resigns or is removed in accordance with Section 10(a)
or (b) hereof, Company may appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee powers
under state law, as a successor to replace Trustee upon resignation or
removal. The appointment shall be effective when accepted in writing by the
new Trustee, who shall have all of the rights and powers of the former
Trustee, including ownership rights in the Trust assets. The former Trustee
shall execute any instrument necessary or reasonably required by Company or
the successor Trustee to evidence the transfer.
b. The successor Trustee need not examine the records and acts of any
prior Trustee and may retain or dispose of existing Trust assets, subject
to Sections 7 and 8 hereof. The successor Trustee shall not be responsible
for and Company shall indemnify and defend the successor Trustee from any
claim or liability resulting from any action or inaction of any prior
Trustee or from any other past event, or any condition existing at the time
it becomes successor Trustee.
12. Amendment or Termination
This Trust may be amended by a written instrument executed by Trustees and
Company. notwithstanding the foregoing, no such amendment shall conflict with
the terms of the Plan(s) or shall make the Trust revocable after it has become
irrevocable in accordance with Section l(b) hereof.
-5-
<PAGE>
b. The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to benefits
pursuant to the terms of the Plan(s?, unless sooner revoked in
accordance with Section I (b) hereof. Upon termination of the Trust any
assets remaining in the Trust shall be returned to the Company.
c. Upon written approval of participants or beneficiaries
entitled to payment of benefits pursuant to the terms of The Plan(s),
Company may terminate this Trust prior to the lime all benefit payments
under the Plan(s) have been made. All assets in the Trust at
termination shall be returned to Company.
13. Miscellaneous
a. Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
b. Benefits payable to Plan participants and their beneficiaries under
this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered, or subjected to attachment,
garnishment, levy, execution, or other legal or equitable process.
c. This Trust Agreement shall be governed by and construed in
accordance with the law of Colorado.
d. For purposes of this Trust, Change of Control shall mean the
purchase or other acquisition by any person, entity, or group of persons,
within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act
of 1934 ("Act"), or any comparable successor provisions, of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Act) of
25 percent or more of either the outstanding shares of common stock or the
combined voting power of Company's then outstanding voting securities
entitled to vote generally, or the approval by the stockholders of Company
of a reorganization, merger, or consolidating, in each case, with respect
to which persons who were stockholders of Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
more than 50 percent of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged or
consolidated Company's then outstanding securities, or a liquidation or
dissolution of Company or of the sale of all or substantially of Company's
assets.
14. Effective Date
The effective date of this Trust Agreement shall be March 1, 1996.
COMPANY
ACCELR8 TECHNOLOGY CORPORATION
By: /s/ Thomas V. Geimer
-------------------------------------
Title: Chairman
---------------------------------
TRUSTEE
/s/ Kenneth R. Bennington
-----------------------------------------
-6-
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Accelr8 Technology
Corporation on Form SB-2 of our report dated September 4, 1996, appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Selected Financial
Data" and "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Denver, Colorado
September 17, 1996
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints, jointly and severally, Thomas V. Geimer
and Harry J. Fleury, and each of them, attorneys-in-fact for the undersigned,
each with the power of substitution, for the undersigned, in any and all
capacities, to sign any and all amendments to this Registration Statement
(including post-effective amendments), and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Harry J. Fleury President 9/19/96
- --------------------------
Harry J. Fleury
/s/ Thomas V. Geimer Director, Principal Executive Officer, 9/19/96
- --------------------------- Principal Financial Officer, and
Thomas V. Geimer Principal Accounting Officer
/s/ David C. Wilhelm Director 9/19/96
- ---------------------------
David C. Wilhelm
/s/ A. Alexander Arnold II Director 9/19/96
- ---------------------------
A. Alexander Arnold III
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from Form SB-2
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> JUL-31-1996 JUL-31-1995
<PERIOD-END> JUL-31-1996 JUL-31-1995
<CASH> 1,407,026 437,425
<SECURITIES> 0 0
<RECEIVABLES> 431,252 292,536
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 2,011,196 731,131
<PP&E> 220,966 259,851
<DEPRECIATION> (150,453) (189,346)
<TOTAL-ASSETS> 2,317,030 977,651
<CURRENT-LIABILITIES> 307,591 230,715
<BONDS> 0 0
0 0
0 0
<COMMON> 2,012,419 2,012,419
<OTHER-SE> (72,703) (1,265,483)
<TOTAL-LIABILITY-AND-EQUITY> 2,317,030 977,651
<SALES> 338,270 337,822
<TOTAL-REVENUES> 2,097,011 1,382,536
<CGS> 117,737 101,266
<TOTAL-COSTS> 983,073 1,012,498
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 43,342<F1> 12,356<F1>
<INCOME-PRETAX> 1,157,280 382,394
<INCOME-TAX> (35,500)<F2> 0
<INCOME-CONTINUING> 1,113,938 370,038
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,192,780 382,394
<EPS-PRIMARY> 0.04 0.01
<EPS-DILUTED> 0.04 0.01
<FN>
<F1>Represents interest income rather than interest expense.
<F2>Represents Income Tax Benefit for the fiscal year.
</FN>
</TABLE>
