<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 18, 1996
SEC REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM SB-2 REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
NAVIDEC, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
COLORADO 7373 33-0502730
(State or Other (Primary Standard Industrial (IRS Employer
Jurisdiction of Incorporation) Classification Code Number) Identification
Number)
</TABLE>
14 INVERNESS DRIVE, BUILDING F, SUITE 116 ENGLEWOOD, COLORADO 80112 (303)
790-7565
(Address and telephone number of principal executive offices and principal place
of business)
RALPH ARMIJO
14 INVERNESS DRIVE, BUILDING F, SUITE 116
ENGLEWOOD, COLORADO 80112
(Name, Address and Telephone Number of Agent for Service)
------------------------------
COPIES TO:
ROGER V. DAVIDSON, ESQ. DAVID C. ROOS, ESQ.
JOHN D. TISHLER, ESQ. Berliner Zisser Walter
Cohen Brame & Smith Professional & Gallegos, P.C.
Corporation
1700 Lincoln Street, Suite 1800 1700 Lincoln Street, Suite 4700
Denver, Colorado 80203 Denver, Colorado 80203
(303) 837-8800 (303) 830-1700
Fax (303) 894-0475 Fax (303) 830-1705
------------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE (1) OFFERING PRICE
<S> <C> <C> <C>
Common Stock, no par value ("Common Stock") (2)... 910,000 shares $ 6.90 $6,279,000
Common Stock Purchase Warrant ("Warrant") (3)..... 1,150,000 warrants $ 0.10 115,000
Common Stock Issuable Upon Exercise of the
Warrants (2)(4)................................. 1,150,000 shares $ 8.28 9,552,000
Representative's Options (5)...................... 100,000 options $ .001 100
Common Stock Issuable Upon Exercise of
Representative's Options (7).................... 100,000 shares $ 8.40(8) 840,000
Warrants Issuable Upon Exercise of
Representative's Options........................ 100,000 warrants -- --
Common Stock Issuable Upon Exercise of the
Warrants Included in the Representative's
Options (4)..................................... 100,000 shares $ 8.28 828,000
Common Stock Issued to Bridge Financing Selling
Stockholders.................................... 428,565 shares $ 7.00 2,999,955
Warrants Issued to Bridge Financing Selling
Stockholders.................................... 428,565 warrants -- --
Common Stock Issuable Upon Exercise of Warrants
Issued to Bridge Financing Selling Stockholders
(4)............................................. 428,565 shares $ 8.28 3,548,518
Total............................................. $24,162,573
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT OF
SECURITIES TO BE REGISTERED REGISTRATION FEE
<S> <C>
Common Stock, no par value ("Common Stock") (2)... $2,165.17
Common Stock Purchase Warrant ("Warrant") (3)..... 39.66
Common Stock Issuable Upon Exercise of the
Warrants (2)(4)................................. 3,293.78
Representative's Options (5)...................... $ -0- (6)
Common Stock Issuable Upon Exercise of
Representative's Options (7).................... 289.65
Warrants Issuable Upon Exercise of
Representative's Options........................ --
Common Stock Issuable Upon Exercise of the
Warrants Included in the Representative's
Options (4)..................................... 285.52
Common Stock Issued to Bridge Financing Selling
Stockholders.................................... 1,034.38
Warrants Issued to Bridge Financing Selling
Stockholders.................................... --
Common Stock Issuable Upon Exercise of Warrants
Issued to Bridge Financing Selling Stockholders
(4)............................................. 1,223.52
Total............................................. $8,331.68
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Includes 150,000 shares of Common Stock subject to sale upon exercise of
over-allotment option granted to Representative on the shares of Common
Stock offered by the Company and the Bridge Financing Selling Stockholders
which the Underwriter is committed to purchase, which may be offered to
cover over-allotments, if any.
(3) Includes 150,000 Warrants subject to sale upon exercise of over-allotment
option granted to Representative, which may be offered to cover
over-allotments, if any.
(4) Pursuant to Rule 416, there are also being registered such indeterminable
number of additional shares of Common Stock, which may be issued as a result
of the anti-dilution provisions of the Warrants.
(5) Represents options, to be issued to the Representative, to purchase Common
Stock and Warrants.
(6) No separate registration fee is required pursuant to Rule 457(g).
(7) Pursuant to Rule 416, there are being registered such indeterminate number
of additional shares of Common Stock which may be issued as a result of the
anti-dilution provisions of the Representative's Options.
(8) Represents the exercise price of the Representative's 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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
1,000,000 COMMON SHARES
AND 1,000,000 WARRANTS
------------------
NAVIDEC, INC.
Of the 1,000,000 shares of Common Stock, no par value (the "Common Stock")
and 1,000,000 Common Stock purchase warrants (the "Warrants") of NAVIDEC, Inc.,
a Colorado corporation (the "Company") offered hereby, 760,000 shares of the
Common Stock and 1,000,000 Warrants are being sold by the Company and 240,000
shares of Common Stock are being sold by certain stockholders of the Company
(the "Bridge Financing Selling Stockholders"). See "Bridge Financing Selling
Stockholders." Until the completion of this offering, the Common Stock and
Warrants may only be purchased together on the basis of one share of Common
Stock and one Warrant at an anticipated combined public offering price of
between $6.50 and $7.50 ("Combined Offering Price"), of which $.10 is the
anticipated public offering price of the Warrants. The Common Stock and Warrants
offered hereby are sometimes hereinafter collectively referred to as the
"Securities." Upon completion of the offering, the Common Stock and the Warrants
will immediately trade separately. The Company will not receive any of the
proceeds from sales of Common Stock by the Bridge Financing Selling
Stockholders. Each Warrant entitles the holder to purchase one share of Common
Stock at a price of $ (120% of the initial offering price of a share of
Common Stock) until , 2001 (five years from the date of this
Prospectus). The Warrants are redeemable at the option of the Company, at $.05
per Warrant, at any time on or after , 1997 (one year from the
date of this Prospectus) or such earlier date as may be determined by Joseph
Charles & Associates, Inc., the representative (the "Representative") of the
Underwriters, upon at least thirty days' notice if the closing price of the
Common Stock equals or exceeds $ (140% of the initial offering price for a
share of Common Stock) for twenty consecutive trading days ending within thirty
days prior to the date notice of redemption is given, and at such time there is
a current effective registration statement covering the shares of Common Stock
underlying the Warrants.
In addition to the shares of Common Stock being sold hereby by the Bridge
Financing Selling Stockholders, an aggregate of 188,565 shares of Common Stock
and 428,565 Warrants are being registered simultaneously with this offering for
resale by such Bridge Financing Selling Stockholders. The Bridge Financing
Selling Stockholders have, however, agreed not to resell any additional Common
Stock until ten months from the consummation of this offering, subject, however,
to earlier sale upon the prior written consent of the Representative in its
discretion in each case. See "Additional Registered Securities" and
"Underwriting."
--------------------------
(CONTINUED ON NEXT PAGE)
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.
<TABLE>
<CAPTION>
PROCEEDS TO
BRIDGE
PROCEEDS TO FINANCING
UNDERWRITING THE SELLING
PRICE TO PULIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
<S> <C> <C> <C> <C>
Per Share.......................... $ $ $ $
Per Warrant........................ $ $ $ $
Total (3).......................... $ $ $ $
</TABLE>
(FOOTNOTES CONTINUED ON INSIDE FRONT COVER)
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
AND IMMEDIATE SUBSTANTIAL DILUTION AND SHOULD NOT BE PURCHASED BY INVESTORS
WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE
"RISK FACTORS" BEGINNING ON PAGE AND "DILUTION."
The Securities are offered by the several Underwriters, subject to prior
sales, when, as and if delivered to and accepted by the Underwriters and subject
to approval of certain legal matters by counsel and to certain other conditions.
The Underwriters reserve the right to withdraw, cancel or modify the offering
and to reject any offer to purchase in whole or in part. It is expected that
delivery of the certificates representing the Securities will be made against
payment therefor at the offices of the Joseph Charles & Associates, Inc., 9701
Wilshire Boulevard, Ninth Floor, Beverly Hills, California 90212, or through the
facilities of Depository Trust Company, on or about , 1996.
JOSEPH CHARLES & ASSOCIATES, INC.
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
(FOOTNOTES CONTINUED FROM COVER)
- ------------------------
(1) Does not include additional compensation to be received by the
Representative in the form of (i) a 3% non-accountable expense allowance and
(ii) sale to the Representative for $100 of options ("Representative's
Options") to purchase 100,000 shares of Common Stock and 100,000 Warrants at
a combined price of $ (120% of the Combined Offering Price) exercisable
over a period of four years, commencing one year from the date of this
Prospectus. The Company has also agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933. See "Underwriting."
(2) Before deducting other expenses of this offering payable by the Company,
estimated to be $450,000, including the Representative's non-accountable
expense allowance.
(3) The Company has granted the Underwriters an option ("Over-allotment
Option"), exercisable within sixty days from the date of this Prospectus, to
purchase up to 150,000 additional shares of Common Stock and 150,000
additional Warrants on the same terms as set forth above, solely for the
purpose of covering over-allotments, if any. If the Underwriters'
Over-allotment Option is exercised in full, the total Price to the Public,
Underwriting Discount, and Proceeds to the Company will be $ , $
and $ , respectively. See "Underwriting."
Prior to this offering, there has been no public market for the Securities
of the Company and there can be no assurance that any such market will develop
or be sustained after this offering. The initial public offering price of the
Securities has been determined by negotiation between the Company and the
Representative and does not necessarily reflect the Company's asset value,
performance or any other established criteria. For information regarding the
factors considered in determining the initial public offering price of the
Securities and the terms of the Warrants, see "Underwriting." The Company has
applied to have the Common Stock and the Warrants approved for inclusion on The
NASDAQ SmallCap-SM- Market under the symbols NVDC and NVDCW, respectively.
AS OF THE DATE OF THIS PROSPECTUS, THE COMPANY WILL BECOME SUBJECT TO THE
REPORTING REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934 AND IN ACCORDANCE
THEREWITH WILL FILE REPORTS, PROXY STATEMENTS AND OTHER INFORMATION WITH THE
SECURITIES AND EXCHANGE COMMISSION. THE COMPANY INTENDS TO FURNISH ITS
STOCKHOLDERS WITH ANNUAL REPORTS CONTAINING AUDITED FINANCIAL STATEMENTS AND
SUCH OTHER PERIODIC REPORTS AS THE COMPANY DEEMS APPROPRIATE OR AS MAY BE
REQUIRED BY LAW.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED IN THIS
PROSPECTUS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. EACH PROSPECTIVE INVESTOR IS URGED TO CAREFULLY
READ THIS PROSPECTUS IN ITS ENTIRETY, INCLUDING BUT NOT LIMITED TO THE RISK
FACTORS.
THE COMPANY
The Company is a leading provider of comprehensive Internet and Intranet
solutions for regional, national and international business organizations. The
Company also serves as a distributor of various high technology and other
products through traditional and electronic channels. The Company provides its
services and distributes its products to over 500 customers as of the date of
this Prospectus. The Company's Internet/Intranet Solutions focus on all aspects
of commercial Internet and Intranet presence, including design and development
of World Wide Web ("WWW" or "Web") sites, marketing, database integration,
electronic commerce and order fulfillment. ("Intranets" are internal corporate
networks based upon protocols and technology developed for the Internet.)
Product distribution includes the sale and installation of high technology
systems and components from third party manufacturers principally through
traditional distribution channels. The Company's core competencies in
Internet/Intranet technology and traditional product marketing and distribution
form its business model of providing complete Internet/ Intranet solutions.
These solutions include computer and network infrastructure equipment, software
and services, content and aggregation, electronic commerce and fulfillment of
orders.
The Company provides Internet/Intranet solutions to regional, national and
international clients including Hewlett Packard, AT&T, KN Energy, Kimmon
Electric of Japan, the Colorado Avalanche National Hockey League team, Gannett's
KUSA-TV Denver, the Colorado Rockies Major League Baseball team, Live
Entertainment, the Denver Metro Convention Bureau and others. The Company
distributes high technology products manufactured or produced by IBM, Apple,
Hewlett Packard, Tektronix, Kimmon Electric of Japan, Hayashi Denko, Silicon
Graphics, Netscape, Netcom, Sybase and others.
To date, distribution of high technology products and related services has
accounted for the substantial majority of the Company's revenue. Although the
Company intends to continue expansion of its traditional high technology product
distribution, the Company believes that substantial revenue growth opportunities
exist in the Internet/Intranet solutions industry and the Company has positioned
itself to take advantage of these growth opportunities.
The Company has developed a number of strategic relationships with Internet
industry participants, including AT&T, IBM, Hewlett Packard, Silicon Graphics,
Microsoft, Netscape and Sybase. The Company believes that the combination of
these relationships with the Company's business model allows the Company to
offer uniquely complete, integrated commercial Internet and Intranet solutions
to its clients. The Company is able to design and implement Internet or Intranet
sites and networks serving the full range of client needs, from simple
informational sites to interactive product distribution sites to advanced, user
friendly corporate Intranets. The Company has also developed a number of
proprietary software tools to implement Internet/Intranet interactivity and
electronic commerce on the Internet. These tools are licensed to clients in
connection with Internet/Intranet sites and networks designed and maintained by
the Company. In addition, many of the Company's Internet/Intranet clients have
become sources of recurring revenue as a result of their continued utilization
of the full range of Internet/Intranet solutions offered by the Company,
including technical upgrades, site maintenance, advertising and marketing.
The Company merged with Interactive Planet, Inc., a designer and developer
of Internet World Wide Web ("WWW" or "Web") sites, in July 1996. The merger was
consummated in order to establish the Company's business model of combined
expertise in traditional marketing and distribution and Internet/ Intranet
technology.
3
<PAGE>
UNLESS OTHERWISE INDICATED, ALL SHARE AND PER SHARE DATA AND INFORMATION
CONTAINED IN THIS PROSPECTUS RELATING TO THE NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING (I) ASSUMES THE EFFECT OF A ONE SHARE FOR TWO SHARE (1 FOR 2)
REVERSE SPLIT OF THE COMPANY'S OUTSTANDING COMMON SHARES EFFECTED OCTOBER 18,
1996, (II) ASSUMES THE ISSUANCE UPON CONSUMMATION OF THIS OFFERING OF AN
AGGREGATE OF 428,565 SHARES OF COMMON STOCK AND 428,565 WARRANTS UPON CONVERSION
OF $1,500,000 PRINCIPAL AMOUNT OF 10% UNSECURED SUBORDINATED CONVERTIBLE
PROMISSORY NOTES OF THE COMPANY ("BRIDGE PROMISSORY NOTES") SOLD IN A PRIVATE
PLACEMENT FINANCING IN AUGUST THROUGH OCTOBER OF 1996 ("BRIDGE FINANCING PRIVATE
PLACEMENT"), (III) ASSUMES NO EXERCISE OF THE WARRANTS, (IV) ASSUMES NO EXERCISE
OF THE OVER-ALLOTMENT OPTION, (V) DOES NOT INCLUDE 100,000 SHARES OF COMMON
STOCK AND 100,000 WARRANTS (AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE OF
SUCH WARRANTS) RESERVED FOR ISSUANCE TO THE REPRESENTATIVE UPON EXERCISE OF
OPTIONS TO BE ISSUED TO THE REPRESENTATIVE UPON CONSUMMATION OF THIS OFFERING
(THE "REPRESENTATIVE'S OPTIONS"), AND (VI) DOES NOT INCLUDE A TOTAL OF 250,000
SHARES RESERVED FOR ISSUANCE UPON EXERCISE OF OPTIONS FOR 250,000 SHARES OF
COMMON STOCK GRANTED TO AN EMPLOYEE OF THE COMPANY (THE "EMPLOYEE'S OPTIONS").
THIS PROSPECTUS INCLUDES PRODUCT NAMES, TRADE NAMES AND MARKS OF COMPANIES
OTHER THAN THE COMPANY. ALL OTHER COMPANY OR PRODUCT NAMES ARE TRADEMARKS,
REGISTERED TRADEMARKS, TRADE NAMES OR MARKS OF THEIR RESPECTIVE OWNERS AND ARE
NOT THE PROPERTY OF THE COMPANY.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Outstanding Prior to the Offering........................... 2,000,700 shares
Common Stock Offered by the Company...................................... 760,000 shares
Common Stock Offered by the Bridge Financing Selling Stockholders........ 240,000 shares
Common Stock to be Outstanding After the Offering........................ 3,189,265
shares(1)
</TABLE>
- ------------------------
(1) Includes 188,565 shares of Common Stock to be issued to Bridge Financing
Selling Stockholders which are not included in this offering.
<TABLE>
<CAPTION>
Use of Proceeds................... For purchase of capital equipment, development of
Internet/ Intranet solutions, advertising and marketing,
repayment of loans and working capital and other general
corporate purposes. See "Use of Proceeds."
<S> <C>
Proposed NASDAQ SmallCap-SM-
Symbols
Common Stock.................. NVDC
Warrants...................... NVDCW
Risk Factors...................... The Securities offered hereby are highly speculative and
involve a high degree of risk and should be purchased
only by investors who can afford the loss of their
entire investment. See "Risk Factors." In addition,
there is immediate substantial dilution from the public
offering price. See "Dilution."
</TABLE>
4
<PAGE>
SUMMARY COMBINED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following tables set forth summary combined financial information and
other equity information of the Company. The summary financial information in
the tables is derived from the financial statements of the Company and IPI and
pro forma financial information, and should be read in conjunction with and is
qualified in its entirety by the more detailed financial statements, pro forma
combined financial information and related notes thereto, and other financial
information included herein.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1996 NAVIDEC, INC. IPI PRO FORMA(3)
- --------------------------------------------------------------------------- -------------- ----------- -------------
<S> <C> <C> <C>
Net Revenues............................................................... 2,472 185 2,657
Operating Loss............................................................. (224) (100) (356)
Net Loss................................................................... (249) (101) (381)
Loss Per Share............................................................. (.16) (.16)
Shares Outstanding(6)...................................................... 1,541,303 2,339,982
<CAPTION>
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 NAVIDEC, INC. IPI(1) PRO FORMA(2)
- --------------------------------------------------------------------------- -------------- ----------- -------------
<S> <C> <C> <C>
Net Revenues............................................................... 4,121 168 4,288
Operating Loss............................................................. (3) -- (67)
Net Loss................................................................... (23) -- (87)
Loss Per Share............................................................. (.02) (.04)
Shares Outstanding(6)...................................................... 1,541,303 2,339,982
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
----------------------------
BEFORE AFTER
BALANCE SHEET AT JUNE 30, 1996 NAVIDEC, INC. IPI OFFERING(4) OFFERING(5)
- ----------------------------------------------------------------- ----------------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Cash............................................................. 53 5 1,371 5,580
Working Capital (Deficit)........................................ (418) (82) 813 5,127
Total Assets..................................................... 684 66 2,568 6,590
Long-Term Liabilities............................................ -- 45 1,545 --
Stockholders' Equity (Deficit)................................... (275) (100) (56) 5,615
</TABLE>
- ------------------------
(1) IPI was incorporated May 15, 1995.
(2) Reflecting the combination of the Company and IPI as if the acquisition
occurred January 1, 1995.
(3) Reflecting the combination of the Company and IPI as if the acquisition
occurred January 1, 1996.
(4) Reflecting the combination of the Company and IPI as if the acquisition and
the issuance of the Bridge Promissory Notes were completed on June 30, 1996.
(5) Reflecting the combination of the Company and IPI as if the acquisition, the
issuance and conversion of the Bridge Promissory Notes and this offering
were completed on June 30, 1996.
(6) Options and shares from the conversion of the Bridge Promissory Notes were
considered in the calculation of weighted average shares under the treasury
stock method based on the proposed public offering price.
5
<PAGE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. EACH
PROSPECTIVE INVESTOR SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS INHERENT IN,
AND AFFECTING THE BUSINESS OF, THE COMPANY AND THIS OFFERING BEFORE MAKING AN
INVESTMENT DECISION.
RISK FACTORS RELATING TO THE COMPANY
1. OPERATING RESULTS. Although the Company has been in business for three
years, its business has only recently expanded into Internet and Intranet
infrastructure equipment, software and services, content creation and
aggregation, commerce and distribution (together, "Internet/Intranet
Solutions"). As a result of this expansion, the Company is subject to all the
risks inherent in a new business enterprise. The Company has only a very limited
operating history in the Internet/Intranet Solutions business upon which to base
any evaluation of the Company's performance and prospects in such business. On a
pro forma combined basis for the year ended December 31, 1995 (which includes
approximately six months of Interactive Planet, Inc.'s ("IPI") operations since
its formation), the Company would have realized $4,288,317 in net sales and
recorded a net loss of $87,319. On a pro forma combined basis for the six months
ended June 30, 1996, the Company would have recorded $2,657,297 in net sales and
a net loss of $381,229. Although there has been growth in annual revenue, the
Company likely will incur losses and experience negative cash flow during at
least the first three quarters following this offering. The Company plans to
focus in the near future on growing its Internet/Intranet Solutions business and
increasing its distribution activities. In order to do so, it must increase
significantly its expenses for personnel, marketing, equipment and other product
purchases. In addition, the Company may experience fluctuations in future
operating results due to a variety of factors (many of which are out of the
Company's control), including general economic conditions, specific economic
conditions in the Internet industry, capital and other costs relating to the
expansion of operations and the mix of services and distribution channels
offered by the Company. There can be no assurance that the Company's operations
will generate sufficient revenues to become profitable. The likelihood of the
Company's success must be considered relative to the problems, experiences,
difficulties, complications and delays frequently encountered in connection with
the operation and development of a new business and the competitive environment
in which the Company operates. See "Business."
2. IPI HISTORY OF OPERATING LOSSES. IPI operated from May 1995 until the
merger with the Company in July 1996. During that time IPI accumulated net
losses of approximately $100,000. The business of IPI is integral to the
Company's new focus on Internet/Intranet Solutions. Management believes that
substantial revenue growth opportunities exist in the Internet/Intranet
Solutions business; however, there can be no assurance that the Company's
Internet/Intranet Solutions business will achieve profitability. See
"Business--Internet/Intranet Solutions" and Financial Statements.
3. SIGNIFICANT CAPITAL REQUIREMENTS. The Company's capital requirements
have been and will continue to be significant. To date, the Company has been
dependent primarily on bank loans and loans from the Company's affiliates and
employees, as well as the net proceeds from the recent Bridge Financing Private
Placement, to fund its capital requirements. To date, there has been limited
equity investment in the Company. The Company is dependent on and intends to use
a significant portion of the proceeds of this offering to fund its ongoing
operations as well as to implement its proposed expansion plans. The Company
anticipates that the proceeds to the Company from this offering, together with
projected cash flow from operations, will be sufficient to fund the Company's
operations during the twelve months following the consummation of this offering.
In the event that the Company's plans change, there are any delays in
implementing the proposed expansion, the Company's projections prove to be
inaccurate or the proceeds of this offering prove to be insufficient, the
Company may be required to seek additional financing or curtail its operations
and/or expansion activities. In such case, the Company will generally be
required to seek additional debt or equity financing to fund the costs of daily
operation and of continuing to expand its operations. Any additional equity
financing may involve substantial dilution to the Company's
6
<PAGE>
then-existing stockholders. The Company has no current commitments or
arrangements with respect to, or readily available sources of, additional
financing and there can be no assurance that the current stockholders of the
Company will provide any portion of the Company's future financing requirements.
There can be no assurance that additional financing will be available to the
Company when needed or, if available, that it can be obtained on commercially
reasonable terms. Any inability to obtain additional financing when needed would
have a material adverse effect on the Company including requiring the Company to
curtail the expansion of its operations and possibly causing the Company to
cease its operations. Even if the Company is successful in its expansion plans,
no assurances can be given that the Company will be successful or that investors
will derive a profit from their investment. See "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business" and Financial Statements.
4. DEVELOPING MARKET: UNPROVEN MARKET FOR THE COMPANY'S PRODUCT. The
Internet, and particularly the Web, represent markets for the Company's products
and services which have only recently begun to develop, are rapidly evolving and
are characterized by low barriers to entry and an increasing number of market
entrants who have introduced or developed a wide variety of products and
services for communication, information and commerce. As is typical in the case
of a new and rapidly evolving industry, demand and market acceptance for new
products and services are subject to a high level of uncertainty. Moreover,
critical issues concerning the commercial use of the Internet (including
security, reliability, compatibility, cost, difficulty in obtaining user
demographic information, difficulty of use and access, and quality of service)
remain unresolved and may impact the growth of Internet and Web use. There can
be no assurance that marketing or commerce over the Internet will become
widespread, or that products and services which are being developed by the
Company for use on the Internet will become accepted. In particular, enterprises
that have already invested substantial resources in other means of conducting
commerce and exchanging information may be reluctant to adopt a new strategy
that could make their existing products and infrastructure obsolete. In
addition, there can be no assurance that individual personal computer users in
business or at home will adopt the Web for on-line commerce and communication.
Because the market for the Company's products and services is new and evolving,
it is also difficult to predict with any assurance the future growth rate, if
any, and the size of the market. There can be no assurance that the market for
the Company's products and services will continue to expand, that the Company's
products or services will be accepted, or that individual personal computer
users in business or at home will use the Internet or the Company's products and
services for commerce, information and communication. If a significant market
develops more slowly than expected or becomes saturated with competitors, or if
the Company's products do not achieve market acceptance, the Company's business,
operating results and financial condition will be materially adversely affected.
See "Business."
5. COMPETITION. The market for Internet/Intranet Solutions is new,
intensely competitive, quickly evolving and subject to rapid technological
change. This market is also characterized by low barriers to entry and frequent
product introductions, and the Company therefore expects competition will
increase in the future. Some of the Company's current and many of the Company's
potential competitors have greater name recognition, larger installed customer
bases and significantly greater financial, technical and marketing resources
than the Company. Potential competitors include browser and software vendors and
servers, PC and UNIX software vendors, on-line service providers, client/server
applications and other database companies, multimedia companies, document
management companies, networking software companies, network management
companies, educational software companies, traditional advertising agencies and
interactive television. In a broader sense, the Company may compete with the
more traditional marketing and distribution mediums, such as traditional
distribution channels developed for products and services. This intense level of
competition could materially and adversely affect the Company's future operating
results and financial conditions.
A large number of companies act as manufacturer's representatives and
re-marketers of high technology equipment and related products, and the
Company's competition in this business is therefore
7
<PAGE>
also intense. The distribution business is also characterized by low barriers to
entry. In some instances, the Company, in acting as a re-marketer, may compete
with the original manufacturer. Many of the Company's competitors in the
distribution business have longer operating histories, greater name recognition,
larger installed customer bases and significantly greater financial, technical
and marketing resources than the Company.
There can be no assurance that the Company will be able to compete
successfully against current or future competitors or that competitive pressures
faced by the Company will not materially adversely affect its business,
operating results and financial condition. See "Business--Competition."
6. OBSOLESCENCE AND TECHNOLOGICAL CHANGE. The market for Internet/Intranet
Solutions is characterized by rapidly changing technology, frequent
introductions of new products and evolving industry standards which result in
product obsolescence and short product life cycles. Accordingly, the Company's
success is dependent upon its ability to anticipate technological changes in the
industry and to continually identify, obtain and successfully market new
products and services that satisfy evolving technologies, customer preferences
and industry requirements. There can be no assurance that competitors will not
market products and services which have perceived advantages over those of the
Company or which render products and services to be offered by the Company
obsolete or less marketable. See "Business."
7. DEPENDENCE ON INTERNET INFRASTRUCTURE AND ACCESS. The Company's
revenues will depend in large part upon a robust industry and infrastructure for
providing Internet access and carrying Internet traffic. Notwithstanding current
interest and worldwide subscriber growth, the Internet may not prove to be a
viable commercial marketplace because of inadequate development of the necessary
infrastructure or complementary products, such as high speed modems. Because
global commerce and on-line exchange of information on the Internet and other
open area networks are new and evolving, it is difficult to predict with any
assurance whether the Internet will prove to be a viable commercial marketplace.
There can be no assurance that the infrastructure or complementary products
necessary to make the Internet a viable commercial marketplace will be developed
or, if developed, that the Internet will in fact become a viable commercial
marketplace. If the necessary infrastructure or complementary products are not
developed, or if the Internet does not become a viable commercial marketplace,
the Company's business, operating results and financial condition will be
materially adversely affected. See "Business."
8. MANAGEMENT OF GROWTH. The Company's rapid growth and plans for further
growth have placed, and are expected to continue to place, a significant strain
on its administrative, operational and financial resources. The Company's
ability to sustain growth effectively will depend, in part, on its ability to
manage growth and to train, motivate and manage its employees. Currently, the
Company relies on a limited staff which is responsible for all of the Company's
activities, including sales and promotion, client planning, product distribution
and technical development of products for clients. Many of the staff members are
currently performing a combination of these functions. The Company's continued
growth will require it to recruit and hire new technical, sales and marketing
personnel so that the staff can be better specialized to market the services of
the Company and serve client needs. At the present time, the Company plans to
use a portion of the net proceeds of this offering to increase its sales force
and technical staff, although no assurances can be given that qualified
personnel can be hired. Market competition for the services of the limited
number of people who are capable of performing the technical services of the
Company is intense. The inability to recruit, hire and retain necessary
personnel or the emergence of unexpected expansion difficulties could adversely
affect the Company's business, operating results and financial condition. See
"Management" and "Business--Employees."
9. DEPENDENCE ON RELATIONSHIPS. The Company maintains many relationships
with it clients and suppliers. These relationships often result in opportunities
for expanding the Company's client base, technical capability and revenue base.
The most significant of these relationships are with AT&T, IBM, Hewlett Packard,
Silicon Graphics, Microsoft, Netscape and Sybase. While the Company has
contracts with most of these companies, none of the contracts are exclusive and
for the most part these companies
8
<PAGE>
are free to terminate their relationship with the Company at any time. The
termination or deterioration of one or more of these relationships could have a
material adverse effect on the Company's business, operating results and
financial condition. A disruption in the supply of any of the high technology
products distributed by the Company could have a short-term financial impact on
the Company, but management believes it would be able promptly to find
alternative sources for any such products. See "Business."
10. DEPENDENCE ON RECURRING REVENUES. A substantial part of the Company's
income is derived from the recurring revenues associated with sales of supplies
to existing clients and periodic maintenance and upgrades to Internet and
Intranet sites. Clients of the Company are not required to purchase supplies
from the Company and may find another source for such supplies, or their need
for such supplies may diminish or disappear as a result of technological
advances or changes in customer utilization of hardware. In addition, most of
the Company's Internet/Intranet Solutions clients are not required to utilize
the Company for periodic maintenance and updates to their Internet and Intranet
sites. Although many of the sites designed for the Company's clients contain
proprietary tools licensed by the Company to such clients only so long as the
Company maintains such sites, such clients are nonetheless free to take the
information content of their sites to their own servers or servers maintained by
competitors of the Company. The loss of clients who provide recurring revenues
could have a material adverse effect on the Company. See "Business."
11. DEPENDENCE ON PROPRIETARY TECHNOLOGY; RISKS OF THIRD PARTY INFRINGEMENT
CLAIMS. The Company presently has no patents with respect to its proprietary
technology. Instead, the Company currently relies upon copyright and trademark
laws, trade secrets, confidentiality procedures and contractual provisions, all
of which afford only limited protection, to protect its proprietary products.
Accordingly, there can be no assurance that the Company's measures to protect
its current proprietary rights will be adequate to prevent misappropriation of
such rights or that the Company's competitors will not independently develop or
patent technologies that are substantially equivalent or superior to the
Company's technologies. Additionally, although the Company believes that its
products and technologies do not infringe upon the proprietary rights of any
third parties, there can be no assurance that third parties will not assert
infringement claims against the Company. Similarly, infringement claims could be
asserted against products and technologies which the Company licenses, or has
the rights to use, from third parties. Any such claims, if proved, could
materially and adversely affect the Company's business and results of
operations. In addition, although any such claims may ultimately prove to be
without merit, the necessary management attention to, and legal costs associated
with, litigation or other resolution of such claims could materially and
adversely affect the Company's business and results of operations. See
"Business--Proprietary Rights."
12. DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a
significant extent on the continued service of certain key management personnel,
in particular Ralph Armijo, the Company's President and Chief Executive Officer.
The loss or interruption of Mr. Armijo's services, for whatever reason, would
have a material adverse effect on the Company. In the event of the loss of
services of Mr. Armijo, no assurance can be given that the Company will be able
to obtain the services of adequate replacement personnel. The loss or
interruption of the services of any of the Company's other senior management
personnel would also have an adverse effect on the Company. The Company has
entered into a two-year employment agreement with Mr. Armijo and the Company
currently maintains a $2 million life insurance policy on his life; however, no
assurance can be given that the Company will be able to keep such policy in
effect. The Company does not have employment agreements with or maintain life
insurance policies for any of its other executive officers. See "Management."
13. GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES. The Company is not
currently subject to direct regulation by any government agency, other than
regulations applicable to businesses generally. However, due to the increasing
popularity and use of the Internet, it is possible that a number of laws and
regulations may be adopted with respect to the Internet, covering issues such as
user privacy, unsolicited marketing, pricing and characteristics and quality of
products and services. The adoption of any such laws or
9
<PAGE>
regulations may decrease the growth of the Internet, which could in turn
decrease the demand for the Company's products, increase the Company's cost of
doing business or otherwise have an adverse effect on the Company's business,
operating results or financial condition. Moreover, the applicability to the
Internet of existing laws governing issues such as real and intellectual
property ownership, libel and personal privacy is uncertain.
14. ELIMINATION OF DIRECTOR LIABILITY. The Company's Articles of
Incorporation contain a provision eliminating a director's liability to the
Company or its shareholders for monetary damages for a breach of fiduciary duty,
except in circumstances involving certain wrongful acts, such as the breach of a
director's duty of loyalty or acts or omissions which involve intentional
misconduct or a knowing violation of law. The Company's Articles of
Incorporation also obligate the Company to indemnify its directors and officers
to the fullest extent permitted under Colorado law. While the Company believes
that these provisions will assist the Company in attracting and retaining
qualified individuals to serve as directors, they could also serve to insulate
directors of the Company against liability for actions which damage the Company
or its shareholders. See "Management."
RISK FACTORS RELATING TO THIS OFFERING
1. IMMEDIATE AND SUBSTANTIAL DILUTION. An investor in this offering will
experience immediate and substantial dilution of $5.24, or 76%, per share
between the adjusted pro forma net tangible book value per share after the
offering and the initial public offering price of $7.00 per share. To the extent
that any Warrants, options or other securities convertible into shares of Common
Stock currently outstanding or subsequently granted to purchase the Common Stock
are exercisable at a price less than the net tangible book value per share
following this offering, there will be further dilution upon the exercise of
such securities. See "Dilution" and "Description of Securities."
2. CONTROL BY PRINCIPAL STOCKHOLDERS. Based upon the 3,189,265 shares of
Common Stock which will be outstanding upon completion of this offering,
assuming no exercise of the Warrants, the Over-allotment Option, the
Representative's Options or the Employee's Options, the Company's officers and
directors, as a group, will beneficially own and control 42% of the Company's
outstanding Common Stock (or approximately 20% assuming all of the foregoing
Warrants and options are granted and exercised to their fullest extent). In
addition, cumulative voting (which provides that a stockholder can cast votes in
the election of directors equal to the number of shares owned by such
stockholder multiplied by the number of directors to be elected to a single
candidate or among the candidates as the stockholder wishes) is not permitted
with respect to the Company's Common Stock. As a result, these persons acting
together, although not controlling a majority of the Common Stock, will be able
to exercise significant influence over all matters requiring stockholder
approval, including the election of directors and the approval of significant
corporate transactions. See "Principal Stockholders."
3. NO DIVIDENDS ON COMMON STOCK. The Company has not previously paid any
cash or other dividends on its Common Stock and does not anticipate payment of
any dividends for the foreseeable future, it being anticipated that any earnings
would be retained by the Company to finance its operations and future growth and
expansion. See "Dividend Policy."
4. DETERMINATION OF OFFERING PRICE. The Combined Offering Price for the
Securities has been determined by negotiations between the Company and the
Representative and does not necessarily bear any relationship to the assets,
performance, book value or net worth of the Company or any other recognized
criteria of value. Among the factors considered in determining such price were
the business experience of the Company's management, the prospects for the
industry in which the Company operates, growth prospects of the Company and
prevailing market conditions generally. The Combined Offering Price should not
be considered to be an indication of the actual value of the Company. See
"Dilution" and "Underwriting--Determination of Offering Price."
10
<PAGE>
5. BROAD DISCRETION IN APPLICATION OF PROCEEDS. Although the Company has
tentatively allocated the net proceeds from this offering for various uses, the
projected expenditures are estimates and approximations and do not represent
firm commitments of the Company. Accordingly, management of the Company has
broad discretion to adjust the application and allocation of the net proceeds of
this offering, in order to address changed circumstances and opportunities. In
the event that the Company's plans change, or if the proceeds of this offering
together with the Company's cash flow prove to be insufficient to fund
operations, the Company may find it necessary to reallocate some or all of the
proceeds from the offering. See "Use of Proceeds."
6. NO ASSURANCE OF PUBLIC TRADING MARKET; POSSIBLE VOLATILITY OF STOCK
PRICE. Prior to this offering, there has been no established trading market for
the Company's securities and there can be no assurance that an active trading
market for the Company's securities will develop after the completion of this
offering. If a trading market does in fact develop for the Securities offered
hereby, there can be no assurance that it will be sustained. The Company
anticipates that, upon completion of this offering, the Common Stock and
Warrants will be listed on the Nasdaq SmallCap-SM- Market System ("NASDAQ"). If
the Company should experience losses from operations, it may be unable to
maintain the standards for continued quotation on NASDAQ. If, for any reason,
the Company's securities are not eligible for either listing or continued
listing or if a public trading market does not develop, purchasers of the
Securities may have difficulty selling their Securities should they desire to do
so. The trading prices of the Company's securities could be subject to wide
fluctuations in response to quarterly variations in actual or anticipated
results of operations of the Company, changes in analysts' earnings estimates,
announcements of technological innovations or new products or services by the
Company or its competitors, general conditions in the Internet or other high
technology industries or other factors. In addition, the securities markets
frequently experience extreme price and volume fluctuation which affect market
prices for securities of companies generally, and technology companies in
particular. Such fluctuations are often unrelated to the operating performance
of the affected companies. Broad market fluctuations may adversely affect the
market price of the Company's securities.
7. SHARES ELIGIBLE FOR FUTURE SALE. Upon consummation of this offering,
the Company will have 3,189,265 shares of Common Stock outstanding, of which
760,000 shares of Common Stock offered hereby by the Company and the 240,000
shares of Common Stock offered by the Bridge Financing Selling Stockholders will
be freely tradable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"). In addition, 188,565
additional shares of Common Stock issuable upon conversion of the Bridge
Promissory Notes are also being registered simultaneously with this offering for
resale by the holders thereof from time to time after ten months from the
consummation of this offering (or sooner, if permitted by the Representative in
its sole discretion). When sold, such shares will be freely tradable without
restriction or further registration under the Securities Act. The remaining
2,000,700 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
pursuant to a registration statement under the Securities Act; in compliance
with the exemption provisions of Rule 144; or pursuant to another exemption
under the Securities Act. The holders of all 2,000,700 restricted shares have
agreed not to sell any shares of Common Stock owned by them for a period of
twelve months after the date of this Prospectus without the Representative's
prior written consent. No prediction can be made as to the effect, if any, that
sales of shares of Common Stock or even the availability of such shares for sale
will have on the market prices of the Company's securities prevailing from time
to time. The possibility that substantial amounts of the Company's securities
may be sold in the public market may adversely affect prevailing market prices
for the securities and could impair the Company's ability to raise capital
through the sale of its equity securities. See "Description of Securities,"
"Shares Eligible for Future Sale" and "Underwriting."
8. FUTURE ISSUANCES OF STOCK BY THE COMPANY WITHOUT SHAREHOLDER
APPROVAL. Following the sale of the Securities offered hereby, a total of
3,189,265 shares of Common Stock will be issued and outstanding. The remaining
authorized but unissued shares of Common Stock not reserved for specific
purposes may be
11
<PAGE>
issued without any action or approval of the Company's stockholders. Although
there are no present plans, agreements or undertakings involving the issuance of
such shares, except as disclosed in this Prospectus, any such issuances could be
used as a method of discouraging, delaying or preventing a change in control of
the Company or could significantly dilute the public ownership of the Company,
which could adversely affect the market. There can be no assurance that the
Company will not undertake to issue such shares if it deems it appropriate to do
so. The holders of options, Warrants and other securities convertible into
shares of Common Stock have the opportunity to profit from a rise in the market
price of the Common Stock, if any, without assuming the risk of ownership, with
a resulting dilution in the interest of other stockholders.
The existence of the aforementioned options and Warrants and any other options
or warrants that may be granted in the future may prove to be a hinderance to
future equity financings by the Company. Further, the holders of such warrants
and options may exercise them at a time when the Company would otherwise be able
to obtain additional equity capital on terms more favorable to the Company. See
"Description of Securities."
9. CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED TO EXERCISE
WARRANTS. The Company will be able to issue shares of its Common Stock upon the
exercise of Warrants only if there is a current prospectus relating to the
Common Stock issuable upon the exercise of the Warrants under an effective
registration statement filed with the Securities and Exchange Commission and
such Common Stock is then qualified for sale or exempt therefrom under
applicable state securities laws of the jurisdictions in which the various
holders of Warrants reside. Although the Company has undertaken to maintain the
effectiveness of a current Prospectus covering the Common Stock underlying the
Warrants, there can be no assurance that the Company will be successful in
maintaining a current registration statement. The Warrants, therefore, may be
deprived of any value if for any reason a current prospectus covering the Common
Stock issuable upon exercise of the Warrants is not kept effective, or if such
Common Stock is not qualified or exempt from qualification in the states in
which the Warrant holders reside. The Company intends to qualify the sale of the
Common Stock and the Warrants in states, although certain exemptions under
certain state securities ("blue sky") laws may permit the Common Stock and
Warrants to be transferred to purchasers in states other than those in which the
Common Stock and Warrants were initially qualified. See "Description of
Securities--Warrants."
10. WARRANTS SUBJECT TO REDEMPTION. Each Warrant will entitle the holder
to purchase one share of Common Stock at an exercise price equal to 120% of the
public offering price commencing from the effective date of this Prospectus. The
Warrants are redeemable by the Company for $.05 per Warrant at any time one year
after the date of this Prospectus (which period may be reduced or waived by the
Representative in its sole discretion) upon at least thirty days' prior written
notice provided the closing price of the Common Stock for twenty consecutive
trading days within the thirty-day period preceding the date of the notice of
redemption equals or exceeds 140% of the Combined Offering Price. In the event
the Company exercises the right to redeem the Warrants, a holder would be forced
either to exercise the Warrant within the period of the notice of redemption
(which could occur at a time when it may be disadvantageous to do so), to sell
the Warrants at the then current market price when the holder might otherwise
wish to hold them, or to accept the redemption. The Company presently expects to
call all of the Warrants for redemption as soon as permitted provided that a
current prospectus relating to the Common Stock underlying such Warrants is then
in effect. See "Description of Securities--Warrants."
12
<PAGE>
USE OF PROCEEDS
After deducting the underwriting discount of $534,400 and other expenses of
the offering estimated to be $450,000 (which includes the Representative's
non-accountable expense allowance), and assuming a Combined Offering Price of
$7.00, the Company will receive net proceeds from the offering of approximately
$4,359,600. The Company expects to use the proceeds substantially as follows:
<TABLE>
<CAPTION>
APPROXIMATE
APPROXIMATE PERCENTAGE OF
APPLICATION OF PROCEEDS DOLLAR AMOUNT NET PROCEEDS
- ------------------------------------------------------------------------------------ -------------- ----------------
<S> <C> <C>
Purchase of Capital Equipment(1).................................................... $ 1,000,000 23%
Development of Internet/Intranet Solutions(2)....................................... 750,000 17%
Advertising and Marketing(3)........................................................ 750,000 17%
Repayment of Loans(4)............................................................... 150,000 3%
Working Capital and Other General Corporate Purposes(5)............................. 1,709,600 40%
-------------- ---
Total........................................................................... $ 4,359,600 100%
-------------- ---
-------------- ---
</TABLE>
- ------------------------
(1) Such proceeds will be utilized for the purchase of additional computer
equipment, information systems and database services required in connection
with the Company's anticipated growth.
(2) Includes the development of new proprietary software tools, upgrades of
existing proprietary software tools, license fees for third-party software
tools and training of personnel for new Internet/Intranet technologies and
applications.
(3) Such proceeds will principally be used for purchasing advertising in trade
journals, newsprint and on the Internet to expand awareness of the Company's
products and services in domestic and international markets.
(4) Includes repayment of the loans to Arthur Armijo, the brother of the
Company's President, and Patrick Mawhinney, a director, executive officer
and principal shareholder of the Company.
(5) This sum shall be available for the payment of operational expenses
including salaries, rent and other similar items to the extent revenues from
operations are insufficient for such purposes. Additionally, these proceeds
may be used to acquire the assets or operations of other companies engaged
in related businesses as part of the Company's expansion. No such
opportunities are currently under consideration.
The amounts set forth above are the Company's best estimates based upon its
present plans and certain assumptions regarding general economic and industry
conditions and the Company's anticipated future revenue and expenditures, and
merely indicate the proposed use of proceeds. Actual expenditures may vary
substantially from these estimates depending upon many factors, such as the
financial health of the Company, economic conditions, possible mergers with or
acquisitions of other companies (the determination of which shall be in the sole
discretion of management), the success, if any, of the Company's business and
operations and the availability of other financing arrangements, such as lines
of credit and loans. Accordingly, stockholders of the Company must rely upon the
judgment and discretion of management with regard to that portion of the net
proceeds of this offering allocated for working capital and general corporate
purposes. To the extent that the Over-allotment Option or the Warrants are
exercised, any proceeds received from such exercise will be used for working
capital and general corporate purposes of the Company. Pending use of the
proceeds from this offering as set forth above, the Company may invest all or a
portion of such proceeds in short-term bank certificates of deposit, U.S.
Government obligations, money market investments and short-term investment grade
securities.
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<PAGE>
DIVIDEND POLICY
The Company intends to retain earnings, if any, to finance the development
and expansion of its business. Accordingly, the Company does not intend to pay
cash dividends in the foreseeable future on its Common Stock. Holders of the
Company's Common Stock are entitled to dividends when, as and if declared by the
Board of Directors out of funds legally available therefor. The payment of
dividends, therefore, is within the discretion of the Company's Board of
Directors. Cash dividends, if any, that may be paid in the future to holders of
Common Stock will be payable when, as and if declared by the Board of Directors
of the Company, based upon the Board's assessment of the financial condition of
the Company, its earnings, need for funds, capital requirements and other
factors, including any applicable laws. In addition, any financing which the
Company may obtain in the future may contain provisions restricting the
Company's ability to pay dividends. The Company is not currently a party to any
agreement restricting the payment of dividends.
DILUTION
The difference between the initial public offering price per share of Common
Stock and the adjusted pro forma net tangible book value per share after giving
effect to this offering constitutes the dilution to investors in this offering.
Adjusted pro forma net tangible book value per share is determined by dividing
the adjusted pro forma net tangible book value of the Company (total tangible
assets less total liabilities) by the number of shares of Common Stock
outstanding. All numbers included herein assume conversion of all of the Bridge
Promissory Notes to Common Stock and Warrants prior to this offering and do not
give effect to the conversion or exercise of any convertible securities or
options outstanding or being sold hereby.
At June 30, 1996, the net tangible book value of the Company was negative
$(274,575), or $(0.23) per share of Common Stock (based on 2,000,700 shares
outstanding). After giving effect to consummation of the merger with IPI and the
Bridge Financing Private Placement, the net tangible book value of the Company
would have been $937,630, or $.39 per share of Common Stock (based on 2,429,265
shares outstanding, assuming the issuance of an aggregate of 428,565 shares upon
conversion of the Bridge Promissory Notes). After giving effect to the sale by
the Company of the 760,000 shares of Common Stock offered by it hereby and the
receipt of estimated net proceeds to the Company of $4,359,600 (after deducting
underwriting discounts and commissions and estimated expenses of this offering),
and after giving effect to the merger with IPI and the Bridge Financing Private
Placement, the net tangible book value of the Company at June 30, 1996, would
have been $5,297,230 or $1.66 per share. This represents an immediate increase
in the net tangible book value of $1.27 per share to the existing stockholders
and an immediate dilution of net tangible book value of $5.24 (or 76%) per share
to new investors in this offering. The following table illustrates the foregoing
dilution to the investors on a per share basis:
<TABLE>
<CAPTION>
Initial public offering price per share............................... $ 6.90
<S> <C> <C>
Pro forma net tangible book value per share before offering........... $ .39
Increase per share attributable to new investors...................... $ 1.27
---------
Pro forma net tangible book value per share after offering............ $ 1.66
---------
Dilution per share to new investors................................... $ 5.24
---------
---------
</TABLE>
To the extent outstanding options and Warrants are exercised, further
dilution to new investors in this offering may result.
14
<PAGE>
The following table sets forth, on an unaudited pro forma basis as of June
30, 1996, the differences in the total consideration and the average price per
share paid by the Company's existing stockholders, the Bridge Financing Selling
Stockholders and investors in this offering with respect to the Company's Common
Stock:
<TABLE>
<CAPTION>
TOTAL CONSIDERATION
SHARES PURCHASED -------------------------
--------------------------------------------- AVERAGE
APPROX. APPROX. PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
-------------- ------------ --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Existing Stockholders............................. 2,000,700 62.7% $ 309,399(3) 4% $ 0.15
Bridge Financing Selling Stockholders............. 188,565(1) 5.9% 659,978 8% $ 3.50
New Investors..................................... 1,000,000(2) 31.4% 6,900,000 88% $ 6.90
-------------- --- --------------- --- -----
Total......................................... 3,189,265 100% $ 7,869,377 100% $ 2.47
-------------- --- --------------- --- -----
-------------- --- --------------- --- -----
</TABLE>
- ------------------------
(1) Does not include 240,000 shares of Common Stock sold in this offering by the
Bridge Financing Selling Stockholders.
(2) Includes 760,000 shares of Common Stock purchased from the Company and
240,000 shares of Common Stock purchased from the Bridge Financing Selling
Stockholders.
(3) Includes paid in capital of the Company at June 30, 1996 and the value
assigned to the shares of Common Stock issued to IPI shareholders in the
merger.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1996 (i) on an actual basis; (ii) on a pro forma basis to reflect the merger
of the Company and IPI in July 1996 and the issuance in August through October
18, 1996 of the Bridge Promissory Notes; and (iii) on a pro forma basis as
adjusted to give effect to the conversion of the Bridge Promissory Notes into
428,565 shares of Common Stock and Warrants upon consummation of this Offering,
and the sale of the 760,000 shares of Common Stock and 1,000,000 Warrants
offered by the Company hereby and the application of the net proceeds therefrom
as described under "Use of Proceeds." This table should be read in conjunction
with the Financial Statements and Notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
-----------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA ADJUSTED
----------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt.................................................................. 45 1,545(1) -- (2)
Shareholder's Equity
Common Stock, no par value, authorized 20,000,000 shares; issued and
outstanding 1,202,021 shares actual; 2,000,700 shares pro forma; 3,189,265
shares pro forma as adjusted................................................ 91 410 6,082
Retained Deficit................................................................ (366) (467) (467)
--- ----- -----
Total Shareholder's Equity (Deficit)............................................ (275) (57) 5,615
--- ----- -----
Total Capitalization........................................................ (230) 1,488 5,615
--- ----- -----
--- ----- -----
</TABLE>
- ------------------------
(1) Includes Bridge Promissory Notes in the principal amount of $1,500,000.
(2) Reflects the conversion of the Bridge Promissory Notes.
16
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following tables set forth summary combined financial information and
other equity information of the Company. The summary financial information in
the tables is derived from the financial statements of the Company and IPI and
pro forma financial information, and should be read in conjunction with and is
qualified in its entirety by the more detailed financial statements, pro forma
combined financial information and related notes thereto, and other financial
information included herein.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1996 NAVIDEC, INC. IPI PRO FORMA(3)
- --------------------------------------------------------------------------- -------------- ----------- -------------
<S> <C> <C> <C>
Net Revenues............................................................... 2,472 185 2,657
Operating Loss............................................................. (224) (100) (356)
Net Loss................................................................... (249) (101) (381)
Loss Per Share............................................................. (.16) (.16)
Shares Outstanding(6)...................................................... 1,541,303 2,339,982
<CAPTION>
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 NAVIDEC, INC. IPI(1) PRO FORMA(2)
- --------------------------------------------------------------------------- -------------- ----------- -------------
<S> <C> <C> <C>
Net Revenues............................................................... 4,121 168 4,288
Operating Loss............................................................. (3) -- (67)
Net Loss................................................................... (23) -- (87)
Loss Per Share............................................................. (.02) (.04)
Shares Outstanding(6)...................................................... 1,541,303 2,339,982
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE
----------------------------
BEFORE AFTER
BALANCE SHEET AT JUNE 30, 1996 NAVIDEC, INC. IPI OFFERING(4) OFFERING(5)
- ----------------------------------------------------------------- ----------------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Cash............................................................. 53 5 1,382 5,594
Working Capital (Deficit)........................................ (418) (82) 824 5,141
Total Assets..................................................... 684 66 2,568 6,590
Long-Term Liabilities............................................ -- 45 1,545 --
Stockholders' Equity (Deficit)................................... (275) (100) (56) 5,615
</TABLE>
- ------------------------
(1) IPI was incorporated May 15, 1995.
(2) Reflects the combination of the Company and IPI as if the acquisition
occurred January 1, 1995.
(3) Reflects the combination of the Company and IPI as if the acquisition
occurred January 1, 1996.
(4) Reflects the combination of the Company and IPI as if the acquisition and
the issuance of the Bridge Promissory Notes were completed on June 30, 1996.
(5) Reflects the combination of the Company and IPI as if the acquisition, the
issuance and conversion of the Bridge Promissory Notes and this offering
were completed on June 30, 1996.
(6) Options and shares from the conversion of the Bridge Promissory Notes were
considered in the calculation of weighted average shares under the treasuary
stock method based on the proposed public offering price.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was organized as ACI Systems, Inc. in July 1993. The Company's
principal sources of revenue are resales of computer equipment, high technology
peripherals and electronic components manufactured by independent vendors
("Product Distribution") and services related to Internet/Intranet Solutions.
Effective July 11, 1996, the Registrant acquired all of the outstanding common
shares of IPI in exchange for 798,679 shares of the Company's Common Stock and
merged IPI into the Company. Management believes the merger with IPI has
accelerated implementation of the Company's Internet/ Intranet Solutions
operating plan while contributing to continued growth in systems integration and
sales of networking and computer peripherals and supplies. Prior to the merger,
IPI had only limited operations. The historic operations of IPI are minimal,
comparable financial data is not available and therefore only limited discussion
of IPI operating results is possible.
The Company's strategy is to increase revenue generated by its two core
competencies: (1) Internet/ Intranet Solutions, which are focused in five major
market areas, including computer and network infrastructure equipment, software
and services, content and aggregation, electronic commerce and order
fulfillment, and (2) Product Distribution. The Company has built and intends to
continue to build an infrastructure that assumes this strategy will succeed. The
failure of the Company to achieve this strategy could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company recognizes revenue upon delivery of its Internet/Intranet
Solutions and Product Distribution goods. Internet/Intranet Solutions generally
begin with consulting arrangements which are billed on an hourly basis and
progress to a bid for a proposed project. Deposits are then taken upon
acceptance of the bid. Most of the Company's customers elect to update and
expand their Web sites frequently, and clients are billed monthly on a time and
materials basis for these services. Additional sources of ongoing revenue
include revenue from advertising sold by the Company on clients' Web sites,
revenue from sales of merchandise and services over clients' Web sites and
revenue from maintenance of client Web sites. The Company receives a percentage
of the gross revenue from advertising and merchandise sales immediately upon
completion of these sales.
Presently, the Company factors its receivables on a recourse basis allowing
it to have readily available access to cash from receivables at acceptable
discount rates. See Note 5 to the Financial Statements of NAVIDEC, Inc.
Depending upon the Company's cash position, management will consider alternative
credit facilities in order to lower its cost of capital.
18
<PAGE>
RESULTS OF OPERATIONS
NAVIDEC, INC.
The following table sets forth for the periods indicated the percentage of
net sales represented by certain line items included in the Company's statement
of operations.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30 YEAR ENDED DECEMBER 31
------------------------ ------------------------
1996 1995 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales..................................................................... 100% 100% 100% 100%
Cost of Sales................................................................. 83 81 81 75
--- --- --- ---
Gross Margin.................................................................. 17 19 19 25
Operating Expense............................................................. 26 15 19 23
Other Income (Expense)........................................................ (1) (1) (1) 1
--- --- --- ---
Net Income (Loss)............................................................. (10)% 3% (1)% (1)%
--- --- --- ---
--- --- --- ---
</TABLE>
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Net sales for the six months ended June 30, 1996 were $2,471,868 which
represents an increase of 19% compared to the prior year period net sales of
$2,081,456. The increase in net sales was principally due to implementation of
the Company's Internet/Intranet Solutions operating plan, growth in systems
integration and growth in sales of networking and computer peripherals and
supplies.
Gross margin was 17% during the six months ended June 30, 1996, as compared
to 19% during the prior year period. Management expects gross margin to increase
commencing in the third quarter of 1996 as a result of a larger proportion of
sales from Internet/Intranet Solutions, including advertising and merchandise
sales.
Operating expenses for the six months ended June 30, 1996 were $632,687
compared with $315,294 for the prior year period. The increase in operating
expenses was primarily the result of an increase in staff and marketing activity
and legal and consulting fees.
Net interest expense for the six months ended June 30, 1996 was $21,567
compared with $14,670 for the prior year period. The increased interest expense
for 1996 was a direct result of increased credit facilities with the Company's
banks and expenses related to loans from its principal shareholders. Interest
expense is expected to increase significantly during the second half of 1996 as
a result of the Bridge Promissory Notes. Interest expense should be reduced
during fiscal 1997 as a result of the conversion of the Bridge Promissory notes
upon consummation of this offering.
YEAR ENDED DECEMBER 31, 1995 AND 1994
Net sales for fiscal 1995 were $4,120,742 which represents an increase of
125% compared to net sales of $1,830,734 in fiscal 1994. The increase was
primarily attributable to the Company's introduction of new products and
services with an emphasis in two areas: (1) computer systems integration and
networking and (2) computer peripherals and supplies. Net sales generated by
systems integration and networking increased by $1,323,476, or 1620%, in fiscal
1995 to $1,405,183 compared to $81,707 for fiscal 1994. Net sales generated by
computer peripherals and supplies increased by $779,812, or 309%, in fiscal 1995
to $1,032,003 compared to $252,191 for fiscal 1994. The increase in revenues in
both cases was primarily attributable to expanded product lines, increased
marketing activities and greater market penetration.
Gross margin was 19% during fiscal 1995 as compared to 25% during fiscal
1994. The decline in gross margin was principally due to the increased cost of
products imported from Japan (as a result of the decreased value of the Dollar
against the Yen) and increased sales of higher volume, lower gross margin
19
<PAGE>
products. The Company expects gross margin to improve commencing in the third
quarter of 1996 as a result of increasing sales of higher margin
Internet/Intranet Solutions.
Operating expenses for fiscal 1995 were $784,150 compared with $497,284 for
fiscal 1994. The increase in operating expenses was primarily due to an increase
in personnel expenses.
Net interest expense for fiscal 1995 was $29,739 compared with $17,867 for
fiscal 1994, reflecting the Company's increased borrowing levels during fiscal
1995.
IPI
MAY 15, 1995 (INCEPTION DATE) TO DECEMBER 31, 1995
IPI was founded in May 1995 and therefore had no revenues during fiscal
1994. Revenues for 1995 were $167,574. Gross margin was 78% of revenues during
1995, which reflects the nature of IPI's business of providing high margin
services which are billed at a contract or hourly basis to its customers.
Operating expenses for the year ended December 31, 1995 totalled $131,739. The
principal operating expenses were salary, payroll taxes and marketing expenses.
SIX MONTHS ENDED JUNE 30, 1996
Revenues for the six months ended June 30, 1996 were $185,429 with gross
margin of 68%. Operating expenses for the six months ended June 30, 1996 were
$225,161. The decline in gross margin and increase in operating expenses for the
six months ended June 30, 1996 compared to the period ended December 31, 1995
resulted principally from the decision of IPI's management to invest in content
aggregation Web sites such as All About Colorado. See "Business."
LIQUIDITY AND CAPITAL RESOURCES
Through June 30, 1996, the Company funded its operations primarily through
revenues generated from operations, loans from principal shareholders and
employees, lines of credit and factoring arrangements made available to it by
banks. On June 30, 1996, the Company had cash and cash equivalents of $53,396
and a net working capital deficit of $417,444. This compares with cash and cash
equivalents of $106 and a working capital deficit of $92,423 at December 31,
1995. The change in the Company's working capital deficit resulted primarily
from a $389,315 increase in accounts payable.
The Company raised net proceeds of approximately $1,312,500 from sale of the
Bridge Promissory Notes from August through October of 1996. Management believes
that such proceeds combined with the proceeds of this offering will be
sufficient to fund the Company's operations for at least the next twelve months.
Cash provided by operating activities for the Company totalled $114,199 and
$28,264 for the six month periods ended June 30, 1996 and 1995, respectively.
Cash used in investing activities consisted of expenditures for property and
equipment. Such expenditures increased to $141,651 during the six months ended
June 30, 1996 from $26,148 during the prior year period primarily due to
expanded operations. During the six months ended June 30, 1996 and 1995, cash
from financing activities included borrowings (including advances under the
Company's line of credit and factoring arrangement) of $1,932,419 and $510,568,
respectively, net of note and line of credit payments of $2,321,998 and
$516,149, respectively.
Cash used in operating activities by the Company totalled $104,951 during
fiscal 1995 as compared to $153,931 during fiscal 1994. Cash used in investing
activities in each of fiscal 1995 and fiscal 1994 consisted of expenditures for
property and equipment of $34,210 and $33,600, respectively. Expenditures for
property and equipment were the direct result of increasing business operations.
Cash provided by financing activities consisted of borrowings (including
advances under the Company's revolving line of
20
<PAGE>
credit) of $790,215 and $488,885 during fiscal 1995 and fiscal 1994,
respectively, net of $659,004 and $330,203 in note and line of credit payments
during fiscal 1995 and fiscal 1994, respectively.
The Company has not recorded a deferred tax asset as it cannot conclude to
date that it is more likely than not that the deferred tax asset will be
realized.
Except for historical information contained herein, statements in this
discussion, including information regarding the combined business of the Company
and IPI, are forward looking statements. Forward looking statements involve
known and unknown risks and uncertainties which may cause the Company's actual
results in future periods to differ materially from forecast results.
INFLATION
The Company does not believe that inflation will have a material impact on
the Company's future operations.
21
<PAGE>
BUSINESS
OVERVIEW
The Company is a leading provider of comprehensive Internet and Intranet
solutions for regional, national and international business organizations. The
Company also serves as a distributor of various high technology and other
products through traditional and electronic channels. The Company provides its
services and distributes its products to over 500 customers as of the date of
this Prospectus. The Company's Internet/Intranet Solutions focus on all aspects
of commercial Internet and Intranet presence, including design and development
of World Wide Web ("WWW" or "Web") sites, marketing, database integration,
electronic commerce and order fulfillment. Product distribution includes the
sale of high technology systems and components manufactured by third parties,
principally through traditional distribution channels, and related services. The
Company's core competencies in Internet/Intranet technology and traditional
product marketing and distribution form its business model of providing complete
Internet/Intranet Solutions. These solutions include computer and network
infrastructure equipment, software and services, content and aggregation,
electronic commerce and fulfillment of orders.
The Company was formed as a Colorado corporation in July 1993 and since that
time has engaged in the distribution of high technology products and related
services. The Company merged with IPI, a designer and developer of Internet
World Wide Web sites, in July 1996. The merger was consummated in order to
establish the Company's business model of combined expertise in traditional
marketing and distribution and Internet/Intranet technology.
BUSINESS STRATEGY
The Company's goal is to enhance its position as a leading provider of
comprehensive networking and electronic marketing and distribution solutions to
regional, national and international clients. To achieve this objective, the
Company is pursuing the following strategies.
LEVERAGE EXPERTISE AND CORE COMPETENCIES. The Company leverages its
expertise in two core businesses, high technology product distribution and
Internet/Intranet Solutions, into complete electronic marketing and networking
solutions. The Company's solutions span all segments of the commercial Internet
industry, including networking equipment and routers, Internet software,
Internet/Intranet design and implementation, content creation and aggregation,
promotion and advertising, electronic commerce and order fulfillment. Management
believes that its ability to offer this full range of Internet/Intranet products
and services as well as traditional distribution and marketing services is
unique in its industry.
EXPLOIT RECURRING REVENUE STREAMS. The Company emphasizes ongoing services
to its Internet/ Intranet Solutions clients, which services are a source of
recurring revenues often well in excess of the fees associated with initial Web
site development. Most of the Company's clients elect to update and expand their
Web sites on at least a monthly basis to reflect updated information and the
latest Internet technology. The data underlying a number of client Web sites is
stored on a Company server which is connected to the Internet by a high-speed
T-1 connection. The Company receives a monthly maintenance fee for this
"hosting" service. The Company also develops and markets advertising space on a
number of client Web sites and receives a portion of the revenues generated from
such advertisements. Annual recurring revenues derived from some
Internet/Intranet Solutions clients have been several times the original site
development revenues from those clients.
DEVELOP STRATEGIC RELATIONSHIPS. The Company has developed technology,
marketing and distribution relationships with a number of leading Internet
industry and computer companies. Important relationships include those with
AT&T, IBM, Silicon Graphics, Sybase, Netscape, Netcom, Verity, Ajilon Services
and Ryan & Associates. The Company's strategic relationships with IBM and AT&T
have led to subcontracting agreements with those companies for the provision by
the Company of Internet/Intranet Solutions to customers of IBM and AT&T. See
"--Marketing." As a result of the Company's technical expertise, it has
21
<PAGE>
been designated as a Netscape Commercial Applications Products Provider Partner
(NCAPP), which is Netscape's top reseller designation and which allows the
Company to offer all of Netscape's high-end commercial Internet software
products to its clients. These and other strategic relationships have fueled
much of the recent growth of the Company, and management expects them to
continue to generate additional clients and revenue.
MAINTAIN EXPERTISE. The Company intends to use a substantial portion of the
proceeds from this offering for development of proprietary software tools,
licensing of new third-party software tools and training of personnel in order
to maintain the Company's technological expertise. See "Use of Proceeds."
EMPHASIZE CLIENT RETURN ON INVESTMENT. The Company furnishes clients with
solutions which are designed to provide a return on their investment through
generation of leads, increased sales, reduced personnel expenses and/or revenues
from advertising. The Company intends to further promote advertising on client
Internet and Intranet sites as a means of offsetting clients' site development,
update and maintenance costs. The Company also intends to emphasize hardware
solutions such as on- and off-site computer kiosks which expand the audience for
the client's electronic marketing presence.
PROMOTE INTRANETS. The Company believes that many companies can benefit
from the ease of use and familiarity of a Web-style interface for their internal
networks. Intranets can provide an open, non-proprietary "enterprise" interface
to a closed, proprietary "legacy" database system, thereby avoiding the need to
replace the entire legacy system when an updated enterprise interface is
desired. The Company has a strategic relationship with Ajilon Services, a major
provider of legacy/enterprise conversion and data migration services, which
allows the Company to offer integrated database conversion and migration
solutions as part of its Intranet solutions. The Company has implemented a major
Intranet system for KN Energy and intends to promote its expertise in this area
to other large companies with a need for an easy to use internal network
interface.
EXPAND TRADITIONAL DISTRIBUTION CHANNELS. To date, distribution of high
technology products and related services has accounted for the substantial
majority of the Company's revenue. The Company intends to expand its high
technology product distribution business by increasing its sales staff and its
national network of local representatives for products distributed by the
Company. The Company also plans to implement and promote its own Internet Web
site for direct sales of high technology products.
INTERNET/INTRANET SOLUTIONS
INTERNET/INTRANET INDUSTRY OVERVIEW
The Internet is a network of computer networks that are both commercially
and publicly owned. The networks all use a common set of nonproprietary
networking protocols. This commonality of protocols provides what appears to the
Internet user to be a seamless, integrated virtual network notwithstanding the
heterogeneity of the computer hardware and communications systems underlying the
Internet. Although the individual networks comprising the Internet are privately
owned, no one organization owns or controls the Internet. Any network may join
or remove itself from the Internet at any time and this open access has allowed
the Internet to grow exponentially as a resource in the United States and
world-wide.
Each new network (or individual connecting through a network) becomes not
only a consumer of information available on the Internet but also a potential
information or content provider to other users of
22
<PAGE>
the Internet. The following table illustrates the growth in computers and
routers ("hosts") which are connected to the Internet.
[GRAPH]
GRAPH SHOWING NUMBER OF INTERNET HOSTS FROM JANUARY 1993 THROUGH JUNE OF 1996 AS
REPORTED BY NETWORK WIZARDS WITH DATA AVAILABLE ON THE INTERNET AT
HTTPI//WWW.NW.COM -- DATA POINTS ARE AS FOLLOWS:
<TABLE>
<CAPTION>
JANUARY 1993 1,313,000
<S> <C>
JULY 1993 1,776,000
JANUARY 1994 2,217,000
JULY 1994 3,212,000
JANUARY 1995 4,852,000
JULY 1995 6,642,000
JANUARY 1996 9,472,000
JULY 1996 12,881,00
[/GRAPH]
</TABLE>
Internet networks are connected in a variety of ways, including regular
analog phone lines, high-speed digital lines and fiber optic links. The Internet
permits users to communicate electronically, share or publish information,
download software and participate in commercial transactions. Internet data
packets are transferred through flexible routing protocols which allow signals
to reach their destinations even though portions of the network may be down or
overburdened. Nonetheless, because of the rapidly growing traffic on the
Internet, users sometimes report significant delays in data transfer and some
loss of data. There is a risk that as the Internet grows in popularity, its
infrastructure will become overwhelmed to the point where its functionality is
impaired, perhaps significantly.
Because connecting directly to the Internet requires expensive equipment and
considerable technical expertise, most Internet users connect to the Internet
through one of a rapidly growing number of local and national Internet Service
Providers ("ISPs"), including the major on-line services such as America Online
and Compuserve. The Company is not one of these ISPs.
THE WORLD WIDE WEB. Much of the recent growth in Internet use has been
attributable to a network of servers and information available via open
protocols known as the World Wide Web. The Web can be accessed through software
programs such as Netscape Navigator and Microsoft Explorer, which allow non-
technical users to exploit the capabilities of the Internet. The Web enables
users to find, retrieve and link to multimedia content on the Internet with easy
to use graphical interfaces. Electronic documents are published on Web servers
in a common format called hypertext markup language ("HTML"). Web software
browsers can retrieve these documents across the Internet by making requests
through a standard communications protocol called Uniform Resource Locators, or
"URLs."
The technical capabilities of the Web together with the increasing
availability of user-friendly navigational and utility tools and search engines
such as Yahoo, Excite, Webcrawler, Magellan and Alta Vista are responsible for
the rapid growth in the popularity of the Web as a distribution channel. The Web
is growing exponentially with over 1,000 businesses joining as participants each
day. (Source: Network Wizards).
23
<PAGE>
The term "Web site" is commonly used to describe the computer screen layouts
and the file server computer that are accessible by users of the Web. Typically,
a Web site has a collection of "Web pages" which may contain text, graphics,
pictures, sound, animation, video or other multimedia content. One important
feature of the HTML format is that it allows a Web user to travel to other sites
simply by selecting with a mouse or other pointing device a text or graphic
marker on the current Web page. In this manner, users can quickly and
effortlessly connect to Web pages that are part of the same Web site or to Web
pages located on servers in another continent. Web sites vary significantly in
their complexity and interactivity. A simple Web site may have only text in
outline form. More complex sites may have full multimedia content. Web sites may
also vary in their level of interactivity with the user. Many Web sites are for
inquiry only (informational), while others allow the user to interact with,
enter and process information (interactive).
COMMERCIAL USES OF THE INTERNET. Commercial uses of the Internet include
business-to-business and business-to-consumer transactions, product marketing,
advertising, entertainment, electronic publishing, electronic services and
Internet support. The Company views the Internet and in particular the Web as
presenting significant opportunities for electronic marketing, sale and
distribution of products. In the Company's view, the Internet's benefits
include:
- Low cost in comparison to other marketing channels
- Direct marketing of products and services
- Audio/visual display and demonstration of products
- Ability to capture orders electronically at significantly lower personnel
costs than traditional order-taking
- Provision of client services such as order tracking and trouble-shooting
- Immediate fulfillment and satisfaction of certain orders, such as software
and information deliverable electronically
- Customer convenience (24-hour, 7 days a week access)
- Potential for narrowly-targeted marketing
A number of companies have developed systems to maintain the security of
transactions on the Internet and the Company has developed its own proprietary
merchandise engine which provides security for order-taking functions. While
transaction security remains a concern of many industry participants, it appears
that the security risk associated with on-line transactions will soon be no
greater than with ordinary transactions.
Web sites used for commercial applications are usually designated with
".com" domain extension in the URL. The number of ".com" domain names has grown
dramatically in the last two years, as illustrated in the following table.
ADVERTISING. The Internet is essentially a media outlet and as such serves
as an attractive platform for advertising. Typically, advertising on the Web is
in the form of a customized graphic box, or "billboard," covering a portion of
the screen being viewed. Viewers of the site who are attracted to the
advertisement can generally click on the billboard and be connected directly to
the Web site of the advertiser, which may be located on the server of the host
site or addressed to another Internet server. The Company currently sells
advertising on certain Web sites it maintains to companies including AT&T,
Silicon Graphics, Sybase, Penzoil, The Rocky Mountain News, The Denver Post and
BFI Waste Services. Advertising proceeds are generally shared by the Company and
the client that commissioned the site.
INTRANETS. Because of the ease of use and widespread acceptance of Internet
protocols, HTML and other scripting languages and tools, a number of companies
have implemented internal networks, or Intranets, based on such protocols. The
use of these protocols allows employees using personal computers and Web browser
software to access and interact with a broad range of information sources within
their company, independent of physical location and underlying computer and
database design, on the familiar platform of Web browser software.
24
<PAGE>
THE COMPANY'S INTERNET/INTRANET SOLUTIONS
The Company provides its Internet/Intranet Solutions through six business
units: Business Development Services, World Wide Web Services, Marketing
Services, Media Services, Client Services and Channel Services. These units
function as a team in providing solutions for clients. The Internet/Intranet
Solutions provided to clients often also involve one or more of the traditional
distribution services offered by the Company. See "--Distribution and Related
Services."
BUSINESS DEVELOPMENT SERVICES are delivered through consulting engagements,
generally billed on an hourly basis, in which Company professionals analyze
client business requirements and recommend comprehensive solutions for the
client's Internet or Intranet requirements. Proposed solutions offered by the
Company include one or more of the following components:
- Network solutions
- Web site specifications
- Private Intranets
- Web distribution strategies
- Traditional channel strategies
- Integrated marketing
- Image development
- Product introduction
- Project management
- Graphic design
- Product distribution
WORLD WIDE WEB SERVICES provide the design and implementation of a Web site
based upon specifications developed by the Company and the client. The Company's
World Wide Web Services also include the design and implementation of private
Intranets, including hardware and software implementation.
The Company designs many of its Web sites with database system integration,
which allows the Web site to act as an interface to selected portions of the
client's internal legacy or enterprise systems. Such integration allows the Web
site to reflect continuously the most current information concerning the client.
The Company has developed a set of proprietary software tools for
implementation on client Web sites. These tools are licensed to clients for use
on the particular site for so long as the site is maintained by the Company. A
brief description of each of the Company's proprietary tools follows.
- NAVIDEX. The Navidex tool is a dynamic, database driven table of contents
that allows the user to intuitively navigate the Web site.
- NAVIMAP. The Navimap tool is a graphical representation of site
information with links to other areas on the site.
- MERCHANDISE ENGINE. The Merchandise Engine creates an on-line catalog of
products available for sale through the Web site. The Merchandise Engine
also contains a secure algorithm for transmitting credit card information
and is capable of capturing contact and marketing information from
customers placing orders.
- CALENDAR TOOL. The Calendar Tool provides a visual interface for
searching through a database of date oriented activities, announcements,
meetings or other events.
- E-MAIL TOOL. The E-Mail Tool is an e-mail engine which allows e-mail to
be sent from the Web site to e-mail addresses designated by the client for
purposes such as customer feedback, customer information capture and
customer service inquiries.
- ADMINISTRATION TOOLS. Administration Tools provide clients with the means
to maintain and update their sites themselves.
25
<PAGE>
MARKETING SERVICES consist of market research, marketing, advertising and
public relations consulting and implementations designed to promote the client's
Internet presence. Such services are generally billed on an hourly basis.
Marketing Services also include the promotion and implementation of advertising
on client sites where appropriate. The Company generally charges for such
advertising placement through sharing of advertising revenues.
MEDIA SERVICES include digital image capture, post-processing services for
scanned images and graphic arts production. The Company offers these services to
assist clients in developing a uniform company image that spans both traditional
and electronic media. Actual output services provided by the Company include
photographic quality prints, color transparencies and printed output in all
sizes. The Company typically bills Media Services on a project basis.
CLIENT SERVICES include technical support, network implementation, Web site
maintenance and evolution, hosting of Web sites on a Company Internet server,
database management, product support and electronic messaging implementation.
The Company charges a variety of fees for these services, ranging from a
specific one time fee for change requests to a monthly fee for site maintenance.
CHANNEL SERVICES include all of the functions necessary to implement an
Internet marketing and distribution plan, including on-line sales of
merchandise, warehousing and order fulfillment. The Company generates revenues
from these services principally through sales commissions which vary depending
upon the level of Company involvement in the distribution plan.
SIGNIFICANT CLIENTS
The Company's major Internet/Intranet Solutions projects include the
following:
- HEWLETT PACKARD (HTTP://WWW.HP.COM). The Company designed the layout,
graphics and reusable templates for the Web pages of three Hewlett Packard
divisions (Electronic Measurements Division, Test & Measurement Operations
and the Colorado Division) contained within Hewlett Packard's primary Web
site.
- KN ENERGY ONLINE. The Company developed an Intranet for KN Energy that is
the primary resource for its employees to access company information. The
KN Energy Internet has a number of attractive features, including:
- a user interface featuring an animated "guide"
- a fully integrated search engine
- download capabilities
- internal authority and signature verification
- an extensive employee database
The Company maintains and enhances this network on the basis of a monthly
retainer and several major enhancements are planned for the network
commencing in the fourth quarter of 1996.
- LIVE ENTERTAINMENT. The Company, in partnership with Ajilon Services,
Inc., has entered into an agreement to design and implement a Web site for
Live Entertainment, which is a major Los Angeles distributor of
entertainment video tapes. The Web site will interface with Live
Entertainment's internal database to provide an on-line catalog of all
videos offered by Live Entertainment. The Company will also fulfill
on-line orders of Live Entertainment videos from the Company's warehouse
facility. The Company hopes to complete the Live Entertainment Web site in
November of 1996.
- COLORADO AVALANCHE (HTTP://WWW.COLORADOAVALANCHE.COM). The Company
developed this site during the 1995-1996 hockey season and the site has
been redesigned for the 1996-1997 season. The site received a four star
rating (the highest rating) from Magellan and it was chosen as the best
site in the NHL by ISWire. The site generates an average of 300,000
visitors a month, and hosted 2,000,000
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<PAGE>
visitors after the Avalanche won the Stanley Cup in June of 1996. The
Avalanche site has electronic commerce capabilities and team apparel and
other goods are being sold over the site. The redesigned site features
advanced graphics, video and audio clips, player statistics and regularly
updated features about the team. The Company has a contract in place to
maintain the Avalanche site until the end of the 1996-1997 hockey season.
- BURT AUTOMOTIVE GROUP (HTTP://WWW.BURT.COM). The Company created and
maintains a large Web site for this multi-dealer automobile retailer. The
Company has installed hardware at the various dealerships and has deployed
computer kiosks at some of the dealerships to allow walk-in customers to
access the Web site information. The Burt Group, with the Company's
assistance, intends to place similar kiosks in remote locations such as
credit unions to further promote the dealership group. The Company intends
to use the Burt site as the prototype for the development of a nationwide
network of car dealerships through the Company's association with Ryan &
Associates, a national provider of services to automotive dealerships.
- ALL ABOUT COLORADO (HTTP://WWW.AACO.COM). All About Colorado is a
community directory organized by the Company and KUSA-9News, a Denver,
Colorado, NBC-TV affiliate. The site contains general information,
activity and entertainment listings in over fifty categories. Each
category is located on a separate page and each page has billboard
advertising space available for sale. The Company is currently in the
process of redesigning the site to provide substantial interactive
abilities, such as search capabilities and visitor profiles, and to allow
commerce to be performed over the site. The Company believes that this
site has the potential to generate substantial advertising revenue, and
pursuant to an agreement with the major site sponsors, the Company is
entitled to retain a significant percentage of such revenue. The Company
intends to complete the first phase of this site in November 1996.
Other sites developed by the Company include Kimmon Electric Co., Ltd.
(http://www.kimmon.com), the Denver-Metro Regional Transportation District
(http://www.RTD-denver.com), Denver Metro Convention & Visitors Bureau
(http://www.denver.org), KUSA-9News (http://www.9news.com), the Colorado Rockies
(currently under development), Colorado Recreation
(http://www.coloradorecreation.com) and the American Animal Hospital Association
(http://www.healthypet.com).
DISTRIBUTION AND RELATED SERVICES
The Company distributes high technology systems and components manufactured
by third parties and provides related services such as system integration and
installation. Product distribution clients range from small businesses to
Fortune 100 companies. Significant product distribution clients include Lockheed
Martin, Johnson Controls, Hughes Aircraft and US West. The Company serves both
as a national manufacturer's representative for the products of certain
international manufacturers and as a reseller of selected computer products in
the Rocky Mountain region. The Company focuses its distribution efforts towards
selling specialized, higher margin products. The Company intends to expand its
product distribution activities into electronic channels, including sales over
the Internet on the Company's Web site.
Distribution activities usually involve the receipt by the Company of orders
for equipment from prospective purchasers and the delivery and/or installation
of the equipment by the Company. The Company purchases the equipment directly
from the manufacturer or vendor and resells it to the purchaser at a price which
includes the Company's cost and a profit margin. With the exception of graphics
supplies and certain imported components, the Company does not generally
maintain an inventory of products it distributes. The Company specializes in
components, lasers, graphics, supplies, systems integration and reprographic
services.
COMPONENTS. The Company represents and distributes component products from
several Japanese manufacturers, principally Hayashi Denko and Sunmoulon.
Products include temperature sensors, push-button switches and numerous other
specialized components. These products are sold primarily through
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<PAGE>
phone sales as well as through a national network of manufacturer's
representatives. Most of these components are sold to original equipment
manufactures ("OEMs") which incorporate these components into their product
designs. Key industries for the Company's component products include: industrial
process control, heating, ventilation and air conditioning (HVAC), energy
management, food processing, consumer appliances and medical monitoring.
LASERS. The Company is the exclusive agent in North America for Kimmon
Electric Co., Ltd. Kimmon is the largest manufacturer in the world of Helium
Cadmium (HeCd) lasers and the Company provides all sales, service and support
for Kimmon's products in North America. These lasers are sold through a
combination of on-site direct sales, trade shows and telephone orders. The
Company sells Kimmon products to both end-users and OEMs. The primary
applications for HeCd lasers are mastering of CDs & CD-ROMS, prototype
production through three-dimensional stereolithography, production of holograms,
medical imaging and research.
GRAPHICS. The Company sells graphics products focused in the areas of data
capture (scanning, digital cameras and X-terminals) and color output (color
printers and LCD projection devices). The sale of many of these products is
through territorial authorizations granted to the Company by the manufacturers.
The Company has significant manufacturer alliances with Xerox, Tektronix, Sony,
InFocus and Hewlett Packard. Graphics products are sold primarily to end-user
customers by a direct sales team operating both in the field as well as through
an inside sales group which takes orders from existing customers.
REPROGRAPHIC SERVICES. This division acts as a complement to the graphics
division and provides the services described above under "Media Services." Sales
in this division are made through a direct sales force working with both
end-user and reseller customers.
SUPPLIES. The Company sells consumable supplies for color graphic output
devices. The Company stocks an inventory of popular consumables in order to
provide prompt response for customer orders. In addition, the supplies division
sells third-party extended warranty agreements for all hardware products.
SYSTEMS INTEGRATION. The Company offers network design and implementation
services to corporate customers in the Rocky Mountain region, which services
often include the acquisition and location of network equipment and servers.
These services are performed by a direct sales team. The primary manufacturers
of network equipment and servers distributed by the Company are Compaq, IBM and
Hewlett Packard.
MARKETING
Upon consummation of this offering, the Company intends to hire additional
personnel dedicated to marketing efforts. See "--Employees." In light of its
current client base, the Company's upcoming marketing efforts will be focused on
developing additional clients in the automotive, sports franchise, corporate
Intranet and regional directory businesses. The Company will also focus on
developing interest in electronic commerce and order fulfillment by the Company
amongst the Company's existing and new clients.
The Company expects to generate additional Internet/Intranet Solutions
clients from subcontracting arrangements entered into between the Company and
AT&T and IBM, each in August 1996. Under the terms of each of these agreements,
AT&T or IBM may refer customers to the Company and AT&T and IBM will receive in
exchange a percentage of the revenues received from such customers. Neither
agreement obligates the Company to accept any particular clients or projects or
obligates IBM or AT&T to refer any particular or minimum number of clients to
the Company, and both agreements are non-exclusive. Although there is no
guarantee that the Company will receive a substantial number of referrals or
derive substantial revenues from these agreements, management does expect that
these agreements will significantly expand the Company's client and revenue
base. Management plans to seek additional subcontracting opportunities with
other major computer and Internet industry companies.
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<PAGE>
PROPRIETARY RIGHTS
The Company has not yet determined whether any of its current products or
services are patentable. It has applied for federal trade name and trademark
registration of the "NAVIDEC" name and mark. The Company relies on a combination
of copyright, trade secret and trademark laws, and nondisclosure and other
contractual provisions to protect its various Web site tools and other
proprietary rights. These safeguards may not prevent competitors from imitating
the Company's products and services or from independently developing competing
products and services.
Because the Company's business is characterized by rapid technological
change, the Company believes that factors such as the technological and creative
skills of its personnel, name recognition and reliable client service and
support are more important to establishing and maintaining a competitive
position in its industry than the various legal protections of its proprietary
developments.
The Company believes that its proprietary rights do not infringe the
proprietary rights of third parties. There can be no assurance however that
third parties will not assert such infringement by the Company with respect to
current or future software, trade names or services. Any such claim, with or
without merit, could be time consuming, result in costly litigation and cause
product release delays and might require the Company to enter into royalty or
licensing agreements. Such royalty or licensing agreements, if required, may not
be available on terms acceptable to the Company.
EMPLOYEES
There are currently 31 full-time employees of the Company. These include six
in Business Development, six in World Wide Web Services, three in Marketing
Services, three in Media (reprographic) Services, one in Client Services, six in
Channel Services (which includes high technology product sales personnel) and
six in management and accounting.
The Company expects to hire fifteen additional full-time employees in the
twelve months following this offering. The Company currently anticipates three
new hires dedicated to sales, four new hires dedicated to marketing and nine new
technical employees. The new employees will span all six of the Company's
business units, and some may be assigned to more than one unit.
PROPERTIES
The Company's headquarters are located in Englewood, Colorado, in a 5,900
square foot facility, which includes approximately 1,500 square feet in
warehouse space. The facility is occupied under a lease with an unaffiliated
party expiring in June 2001 and providing for a current monthly lease rate of
$4,166. The Company maintains a second office facility in Englewood, Colorado
consisting of approximately 2,600 square feet. This facility is occupied under a
lease with an unaffiliated party which will expire in December 1996 and provides
for a monthly lease rate of $1,750. The Company intends to obtain comparable
substitute facilities upon expiration of this lease. The Company may lease
additional warehouse space if needed to support the growth in traditional and
on-line product distribution.
COMPETITION
Existing competitors to the Internet/Internet Solutions business include
Online Systems Services, Inc., Eagle River Interactive, Inc. and Open Market,
Inc., all public companies traded on NASDAQ, as well as a large number of
regional firms providing similar services to those of the Company. Potential
competitors in this business include browser software vendors, PC and UNIX
software vendors and on-line service providers. Additional competition comes
from numerous client/server companies, database companies, multimedia companies,
advertising agencies, document management companies, networking software
companies, network management companies and educational software companies. In a
broader sense, the Company may compete with the more traditional advertising and
distribution mediums, such as radio, television and mail order outlets.
Potential competition also comes from the Company's clients, who could
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<PAGE>
choose to address their Internet/Intranet needs through in-house personnel. Some
of the Company's current and many of the Company's potential competitors have
longer operating histories, greater name recognition, larger installed customer
bases and significantly greater financial, technical and marketing resources
than those of the Company. Competitive factors in the Internet/Intranet
Solutions business include core technology, breadth of services offered,
creative and artistic ability, marketing and distribution resources, customer
service and support and price.
A large number of companies act as re-marketers of computer networks,
graphics equipment and components, and the Company's competition in the high
technology product distribution business is therefore also intense. In some
instances, the Company, in acting as a re-marketer, may compete with the
original manufacturer. In addition, a large number of companies offer the
reprographic services offered by the Company and competition in this area is
also intense. Many of the Company's competitors in the high technology product
distribution business have longer operating histories, greater name recognition,
larger installed customer bases, larger sales staffs and substantially greater
financial, technical and marketing resources than those of the Company.
Competitive factors in the distribution business include technical expertise,
breadth of products offered, product quality, performance and reliability,
price, name recognition, customer service and support and access to distribution
channels.
Both the Internet/Intranet Solutions business and the high technology
product distribution business are characterized by low financial barriers to
entry and frequent introductions of new products. The Company therefore expects
competition in each of its businesses to increase in the future. There can be no
assurance that the Company will be able to successfully compete in its
businesses. Although the Company believes that it has the requisite management,
technical and creative abilities to successfully compete, the intense level of
competition in each of the Company's businesses could materially, adversely
affect the Company's future operating results and financial condition.
LEGAL MATTERS
The Company is currently not involved in any material legal proceedings.
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<PAGE>
MANAGEMENT
DIRECTORS AND OFFICERS
The following table sets forth the name, age and position with the Company
of each officer and director of the Company as of the date of this Prospectus.
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------- --- --------------------------------------------------------------------
<S> <C> <C>
Ralph Armijo 44 President, Chief Executive Officer and Director
Andrew Davis 43 Vice President of Sales and Marketing
Patrick R. Mawhinney 32 Chief Financial Officer, Treasurer and Director
Kevin L. Blankenship 32 Vice President of Interactive Network Services and Secretary
Harold Anderson II 32 Vice President of Business Development
Lloyd G. Chavez, Jr. 46 Director Nominee
</TABLE>
The Company's Board of Directors currently consists of two members. All
directors hold office until the next annual meeting of the Company shareholders
and their successors are elected and qualified. The officers are elected by the
Board of Directors at the first meeting after each annual meeting of the Company
shareholders and shall hold office until their successors are duly elected and
qualified or otherwise in accordance with the Bylaws of the Company.
RALPH ARMIJO has served as the President, Chief Executive Officer and a
director of the Company since its inception in 1993. From 1981 to 1993, Mr.
Armijo was employed by Tektronix, Inc., a large communications company which
also produced testing and measuring equipment. Mr. Armijo's responsibilities at
Tektronix progressed from sales manager, to branch manager, to district manager
and, ultimately, to Western Regional Manager, a position he held for five years.
In that position, he was responsible for a $100 million budget in sales,
graphics, technical support and administration, and he was responsible for
developing new distribution channels, including reseller agreements. From 1976
to 1981, Mr. Armijo was employed by IBM Corporation, where he sold computerized
accounting and financial applications to small and medium-sized businesses. Mr.
Armijo received his B.A. from Colorado College and his M.B.A. from the
University of California, Los Angeles.
PATRICK R. MAWHINNEY served as the President of IPI from its inception until
its merger with the Company in July 1996 and since that time has acted as Chief
Financial Officer, Treasurer and a director of the Company. From May 1995 until
May 1996, Mr. Mawhinney also served as a financial/accounting consultant for
MIS\Sunguard, a provider of accounting and investment software. Mr. Mawhinney
was employed as an Assistant Vice President of The Bank of Cherry Creek from
November 1993 to May 1995; as a Vice President of Vectra Banking Corporation
from June 1989 to November 1993; and as Operations Coordinator for Zions
Bancorporation from August 1986 to June 1989. He received his B.S. from Colorado
State University.
ANDREW DAVIS has served as Vice President of Sales and Marketing of the
Company since May 1996. From January 1994 to May 1996, Mr. Davis was manager of
wholesale distribution at InFocus Systems, a manufacturer of high resolution
projection systems. From September 1982 to January 1994, Mr. Davis held various
sales and marketing positions in Tektronix, Inc. including Director of Marketing
for the Interactive Technologies Division. Mr. Davis attended the University of
Denver from 1971 to 1974 where he studied Business Management and Marketing.
KEVIN L. BLANKENSHIP, Vice President of Interactive Network Services and
Secretary since July 1996, served as the Vice President of Technology for IPI
from May 1995 until the July 1996 merger with the Company. Mr. Blankenship also
serves on the Internet Advisory Council of Sybase, Inc., a major manufacturer of
database systems. From January 1993 to May 1995, Mr. Blankenship served as the
Director of Client Integration and Development for ADIA Information Technology
and was employed by
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<PAGE>
U.S. West Communications as Manager of Multimedia Applied Engineering from
September 1986 to January 1993. Prior to 1989, Mr. Blankenship held various
positions of responsibility for software systems design. Mr. Blankenship has
expertise in the field of document and information management, as well as an
extensive background in complex, heterogeneous, corporate systems and computing
architectures. Mr. Blankenship attended the University of Colorado between
1982-1987 where he studied Electrical and Computer Science and Computer
Engineering.
HAROLD ANDERSON II, Vice President of Business Development since July 1996,
served as Vice President of Business Development for IPI from July 1995 until
the July 1996 merger with the Company. From September 1986 to July 1995, Mr.
Anderson was employed by U.S. West Advance Technologies and Communications,
where he worked in Distributed Technology Platform Security, served as the
Technical Project Manager, and later acted as a Product Marketing Specialist for
the U.S. West Internet Services Provider/On-line Service Project. Mr. Anderson
received his B.S. degree in Business Administration from the University of
Arizona in 1986 and a Masters degree in Computer Information Systems from the
University of Denver in 1991.
No director or executive officer of the Company is related to any other
director or executive officer. None of the Company's officers or directors hold
any directorships in any public company. Presently the Company has no
nominating, compensation or audit committees; however the Company does plan to
establish compensation and audit committees subsequent to this offering.
DIRECTOR NOMINEE
The Company intends to increase the size of the Board of Directors to five
directors after consummation of this offering. Two of the three vacancies
created thereby will be filled by the Board of Directors pursuant to the
Company's Bylaws, and the Company has agreed to allow the Representative to
nominate the third director, subject to the Company's approval. See
"Underwriting--Designee to the Board of Directors." Lloyd G. Chavez, Jr. has
agreed to serve as director following consummation of this offering. The Company
is currently seeking a second qualified nominee. If the Representative does not
nominate a director, the Company will seek a third qualified director to be
added to the Board. The business background of Mr. Chavez is as follows:
LLOYD G. CHAVEZ, JR. has been the Director of Automotive Markets at the Burt
group of automobile dealerships in Denver, Colorado since 1988. From 1983 to
1994, Mr. Chavez was Vice President of Fort Dodge Laboratories, a subsidiary of
American Home Products, where he was responsible for business acquisitions, new
products and technologies, joint ventures, intellectual property acquisitions,
strategic planning, market research and sale projections. From 1982 to 1983, Mr.
Chavez was Vice President of General Genetics Corporation, where he was
responsible for management of biological and pharmaceutical research and
development. Mr. Chavez received his B.A. in Molecular, Cellular, Development
Biology from the University of Colorado, his M.A. in Old Testament Studies from
Denver Seminary, his Ph.D. in Microbiology and Immunology from the University of
Virginia, and was a post-doctoral Fellow in Chemistry at Cornell University.
DIRECTOR COMPENSATION
None of the Company's directors received any compensation during the most
recent fiscal year for serving in their position as a director. No plans have
been adopted to compensate directors in the future; however it is likely that
during fiscal 1997 the Board of Directors will adopt an employee stock option
plan which includes provision for stock options to be issued to directors.
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets out the annual compensation paid to Ralph Armijo
for the last three fiscal years. No other executive officer has received annual
compensation in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------------------- ALL OTHER
--------------------- RESTRICTED STOCK COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS OPTIONS ($)
- -------------------------------------- --------- ---------- --------- ------------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Ralph Armijo, Chief 1995 $ 111,444 $ 24,000 0 0 $ 9,000(1)
Executive Officer 1994 $ 69,541 $ 0 0 161,953(2) 0
1993 $ 0 $ 0 0 784,966(2) 0
</TABLE>
- ------------------------
(1) Consists of an automobile allowance.
(2) During 1994 and 1993 the Company issued stock options to Ralph Armijo to
purchase a total of 946,919 shares of Common Stock for a total exercise
price of $1,746. Compensation expense of $10,000 and $29,000 was recorded
for 1994 and 1993, respectively.
AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1995(#) DECEMBER 31, 1995($)
SHARES ACQUIRED ON EXERCISEABLE/ EXERCISEABLE/
NAME EXERCISE (#) VALUE REALIZED ($) UNEXERCISEABLE(1) UNEXERCISEABLE(2)
- -------------------------- ------------------- ------------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C>
Ralph Armijo, Chief
Executive Officer -- -- 946,919/0 $156,199/0
</TABLE>
- ------------------------
(1) Represents options to purchase 946,919 shares of common stock for a total
exercise price of $1,745. These options were exercised prior to the
acquisition of IPI during June 1996.
(2) Value of the options was determined by the Board of Directors at December
31, 1995 and assumes the exercise of the option and payment of the exercise
price. No market for the Company's securities existed at December 31, 1995.
No officer or director received any form of compensation other than cash
during 1995 and no long term incentive, bonus or option plans were or are in
place. Management expects to develop employee stock option plans during fiscal
1997.
The current annual salaries of the executive officers of the Company are as
follows: Ralph Armijo, President, $140,000; Andrew Davis, Vice President of
Sales and Marketing, $105,000; Patrick Mawhinney, Chief Financial Officer,
$75,000; Kevin L. Blankenship, Vice President of Interactive Network Services,
$70,000; and Harold Anderson II, Vice President of Business Development,
$68,000. Total annual compensation for all executive officers is $458,000.
The Board of Directors may, at its discretion, award discretionary bonuses
in the future. It is anticipated that a compensation committee will be
established during 1997. The compensation committee will establish salaries,
incentives and other forms of compensation for directors, officers and other
employees of the Company, and establish and administer the Company's benefit
plans and recommend policies relating to such plans.
33
<PAGE>
EMPLOYMENT AGREEMENTS
As a condition to the merger between the Company and IPI, the Company
entered into an employment agreement with Ralph Armijo. Such agreement will
continue through June 30, 1998, unless earlier terminated for cause and provides
for annual compensation of $140,000. Mr. Armijo also has agreed not to compete
with the Company during his employment term and for a period of one year
thereafter.
The Company entered into an employment agreement with John R. McKowen
employing Mr. McKowen as Director of Investor Relations for an initial term of
six months commencing in August 1996. The agreement will automatically be
extended upon consummation of this offering for 24 months following the date of
this Prospectus. Mr. McKowen's compensation under the agreement is $5,000 per
month and Mr. McKowen is entitled to an automobile allowance not to exceed $400
per month. In addition, he was granted options to purchase 250,000 shares of
Common Stock at an exercise price of $3.50 per share, exercisable no sooner than
thirty months following the date of grant and no later than sixty months from
such date.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Articles of Incorporation eliminate the personal liability of
its directors to the Company and its shareholders for monetary damages for
breach of the directors' fiduciary duties in certain circumstances. The Articles
of Incorporation further provide that the Company will indemnify its officers
and directors to the fullest extent permitted by law. The Company believes that
such indemnification covers at least negligence and gross negligence on the part
of the indemnified parties. Insofar as indemnification for liabilities under the
Securities Act may be permitted to directors, officers, and controlling persons
of the Company pursuant to the foregoing provisions or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the date of this Prospectus, and as
adjusted to reflect the sale by the Company of the 760,000 shares of Common
Stock offered by the Company hereby, the Common Stock ownership of each person
known by the Company to be the beneficial owner of five percent or more of the
Company's Common Stock, all directors individually, each executive officer and
all directors and executive officers of the Company as a group. Each person has
sole voting and investment power, as well as record and beneficial ownership,
with respect to the shares shown. None of the named persons hold any options,
warrants or other securities convertible into Common Stock within sixty days
after the date of this Prospectus.
As of the date of this Prospectus, there were 2,429,265 shares of Common
Stock issued and outstanding, including the 428,565 shares issued to the Bridge
Financing Selling Stockholders.
<TABLE>
<CAPTION>
COMMON STOCK PERCENT OF BENEFICIAL OWNERSHIP
BENEFICIALLY ---------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED BEFORE OFFERING AFTER OFFERING
- --------------------------------------------------------------- ----------------- ------------------- ------------------
<S> <C> <C> <C>
Ralph Armijo................................................... 978,422 40% 31%
Patrick R. Mawhinney........................................... 171,832 7% 5%
Harold Anderson II............................................. 90,086 4% 3%
Drew Davis..................................................... 25,000 1% 1%
Kevin L. Blankenship........................................... 90,086 4% 3%
Cynthia J. Simmons............................................. 421,332 17% 13%
84 Willowleaf Drive
Littleton, CO 80125
All directors and executive officers as a Group (Five
Persons)...................................................... 1,355,426 56% 42%
</TABLE>
- ------------------------
(1) Except as indicated herein, the address for each person is 14 Inverness
Drive, Bldg. F., Suite 116, Englewood, Colorado 80112.
BRIDGE FINANCING PRIVATE PLACEMENT
From August through October 1996, the Company sold an aggregate of
$1,500,000 principal amount of 10% Unsecured Subordinated Convertible Promissory
Notes, due December 31, 1997 (the "Bridge Promissory Notes") in a private
placement to certain investors (the "Bridge Financing Private Placement"). Upon
consummation of the offering made by this Prospectus, each $50,000 in principal
amount of the Bridge Promissory Notes is automatically converted into 14,285.5
shares of Common Stock and 14,285.5 Warrants, in each case rounded to nearest
whole share or Warrant. Based upon the sale of Bridge Promissory Notes in the
aggregate amount of $1,500,000, upon the consummation of the offering made by
this Prospectus, the Bridge Promissory Notes will be automatically converted
into an aggregate of 428,565 shares of Common Stock (the "Converted Shares") and
428,565 Warrants, and the Bridge Promissory Notes will no longer be outstanding.
All of the Converted Shares and the Warrants have been registered pursuant to
the Registration Statement, of which this Prospectus is a part, and 240,000
Converted Shares are being offered hereby and 188,565 Converted Shares may be
sold from time to time in the open market by the holders thereof (the "Bridge
Financing Selling Stockholders"), provided that the Bridge Financing Selling
Stockholders have agreed that they will not make any such sales of the Converted
Shares for ten months after the date of this Prospectus without the prior
written consent of the Representative in its sole discretion in each case. See
"Bridge Financing Selling Stockholders." The Warrants owned by the Bridge
Financing Selling Stockholders are not subject to any restrictions on sale and
may be sold at any time.
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<PAGE>
BRIDGE FINANCING SELLING STOCKHOLDERS
The following table sets forth information with respect to the Bridge
Financing Selling Stockholders, who will own an aggregate of 428,565 shares of
Common Stock and 428,565 Warrants issuable upon conversion of the Bridge
Promissory Notes, all of which are being registered in the Registration
Statement of which this Prospectus forms a part. Of the Common Stock received
upon conversion, an aggregate of 240,000 of such shares are being offered hereby
by the Bridge Financing Selling Stockholders. See "Bridge Financing Private
Placement." The Company will not receive any proceeds from the sale of these
shares. The Representative will receive from the Company a non-accountable
expense allowance equal to three percent of the total proceeds of the 240,000
shares offered hereby. The cost of qualifying these shares under federal and
state securities laws, together with other costs in connection with their
offering, will be paid by the Company. The remainder of the shares of Common
Stock owned by the Bridge Financing Selling Stockholders may be sold from time
to time in the future, subject however to the Bridge Financing Selling
Stockholders' agreement not to sell any of these shares for ten months after the
date of this Prospectus without the prior written consent of the Representative
in its sole discretion in each case.
<TABLE>
<CAPTION>
RECEIVED ON CONVERSION OWNED WARRANTS RECEIVED ON
OF BRIDGE PROMISSORY OFFERED AFTER CONVERSION OF BRIDGE
NAME NOTES HEREBY OFFERING PROMISSORY NOTES
- ------------------------------------------ ---------------------- --------- --------- ----------------------
<S> <C> <C> <C> <C>
Richard Liner............................. 14,286 14,286
Rick Scheider............................. 37,143 37,143
Jeffrey Huston............................ 57,142 57,142
Mabrey Downey............................. 14,286 14,286
Caribou Bridge Fund....................... 42,857 42,857
David and Patricia Cooke.................. 14,286 14,286
Michael Rosen............................. 28,571 28,571
Timothy Quartly-Watson.................... 14,286 14,286
Inverness Profit Sharing Plan............. 14,286 14,286
Robert M. Neider.......................... 14,286 14,286
Generation Capital Associates............. 28,571 28,571
Ritchie Friedman.......................... 14,286 14,286
Jeffrey Markowitz......................... 14,286 14,286
William Gonte............................. 14,286 14,286
David Levenreich.......................... 14,286 14,286
H. Alan Dill.............................. 14,286 14,286
Ralph Riggs............................... 14,286 14,286
Dave Bluett............................... 8,572 8,572
Fred and Margaret Hoeppner................ 8,572 8,572
Aaron Zegelman............................ 28,571 28,571
Eric Fishman.............................. 14,286 14,286
Steven Warfield........................... 11,429 11,429
Marvin Barish............................. 14,286 14,286
Jerry Davis............................... 8,572 8,572
LeRoy Dukes............................... 14,286 14,286
Robert Hall............................... 28,571 28,571
James Hall................................ 28,571 28,571
William Grace............................. 7,143 7,143
John Wise................................. 14,286 14,286
Philip Patterson.......................... 7,143 7,143
Donald Almeida............................ 7,143 7,143
Jerry S. McKay............................ 7,143 7,143
Nancy G. Matsen........................... 7,143 7,143
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
RECEIVED ON CONVERSION OWNED WARRANTS RECEIVED ON
OF BRIDGE PROMISSORY OFFERED AFTER CONVERSION OF BRIDGE
NAME NOTES HEREBY OFFERING PROMISSORY NOTES
- ------------------------------------------ ---------------------- --------- --------- ----------------------
Debbie Schwartzberg....................... 28,571 28,571
<S> <C> <C> <C> <C>
Melvin Shikora............................ 7,143 7,143
Greg Hupe................................. 7,143 7,143
Elliott Funkhauser........................ 14,286 14,286
Ajan Family Trust......................... 7,143 7,143
Felix Campos.............................. 14,286 14,286
HNC Associates............................ 7,143 7,143
Nancy G. Matsen...........................
Myron Spanier............................. 7,143 7,143
------- --------- --------- -------
Total................................. 428,565 240,000 188,565 428,565
------- --------- --------- -------
------- --------- --------- -------
</TABLE>
37
<PAGE>
ADDITIONAL REGISTERED SECURITIES
The Bridge Financing Selling Stockholders will receive 428,565 shares of
Common Stock and 428,565 Warrants from conversion of the Bridge Promissory Notes
upon consummation of this offering. Of such 428,565 shares of Common Stock,
240,000 are being offered hereby by the Bridge Financing Selling Stockholders.
The remaining 188,565 shares of Common Stock and the 428,565 Warrants which are
not being offered hereby are being registered simultaneously with this offering
for resale by the Bridge Financing Selling Stockholders from time to time,
provided that such stockholders have agreed with the Company not to make any
sales of the Common Stock until ten months after the consummation of this
offering without the prior written consent of the Representative in its sole
discretion in each case. The Company has been advised by the Representative that
it has no present plan or intention to consent to any early release from such
agreement. The Warrants owned by the Bridge Financing Selling Stockholders are
not subject to any restriction on sale and may be sold at any time.
There are no material relationships between any of the Bridge Financing
Selling Stockholders and the Company, nor have any such material relationships
existed within the past three years. The Company has been informed by the
Representative that there are no agreements between any of the Underwriters and
any Bridge Financing Selling Stockholders regarding the distribution of their
Common Stock or Warrants, other than the shares of Common Stock offered hereby
by the Bridge Financing Selling Stockholders. The Company has been further
advised by the Representative that none of the Bridge Financing Selling
Stockholders have any current plan or other arrangement or commitment with
respect to the sale of their Common Stock or Warrants.
The sale of Common Stock or Warrants by the Bridge Financing Selling
Stockholders may be effected from time to time in transactions (which may
include block transactions by or for the account of the Bridge Financing Selling
Stockholders) in the over-the-counter markets, in privately negotiated
transactions or otherwise. Sales may be made at fixed prices which may be
changed, at market prices prevailing at the time of sale, or at negotiated
prices. Bridge Financing Selling Stockholders may effect such transactions by
selling directly to purchasers, through broker/dealers acting as the seller's
agents or to broker/dealers who may purchase such securities as principals and
thereafter sell the securities from time to time in the over-the-counter market,
in negotiated transactions or otherwise. Such broker/dealers, if any, may
receive compensation in the form of discounts, concessions or commissions from
the sellers and/or the purchasers from whom such broker/dealers may act as
agents or to whom they may sell as principals or otherwise (which compensation
as to a particular broker/dealer may exceed customary commissions). Bridge
Financing Selling Stockholders will be required to deliver a current prospectus
in connection with their offer and sale of Common Stock or Warrants.
If any of the following events occur, the prospectus will be amended to
include additional disclosure before offers and sales of the Common Stock or
Warrants by the Bridge Financing Selling Stockholders are made: (i) to the
extent such securities are sold at a fixed price or by option at a price other
than the prevailing market price, such price would be set forth in the
prospectus; (ii) if the securities are sold in block transactions and the
purchaser wishes to resell, such arrangements would be described in the
prospectus; and (iii) if the compensation paid to broker/dealers is other than
usual and customary discounts, concessions or commissions, disclosure of the
terms of the transaction would be included in the prospectus. The prospectus
would also disclose if there are other changes to the stated plan of
distribution, including arrangements that either individually or as a group
would constitute an orchestrated distribution of the securities.
Under applicable rules and regulations under the Securities Exchange Act of
1934 (the "Exchange Act"), any person engaged in the distribution of the Common
Stock or the Warrants may not simultaneously engage in market making activities
with respect to any securities of the Company for a period of at least two (and
possibly nine) business days prior to the commencement of such distribution.
Accordingly, in the event that the Representative or any of the other
Underwriters makes a market in the Company's
38
<PAGE>
securities, the Bridge Financing Selling Stockholders will likely be required to
sell such securities through another broker/dealer. In addition, each Bridge
Financing Selling Stockholder desiring to sell securities will be subject to the
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation Rules 10b-6 and 10b-7, which provisions
may limit the timing of the purchases and sales by the Bridge Financing Selling
Stockholders.
The Bridge Financing Selling Stockholders and broker/dealers, if any, acting
in connection with such sales might be deemed to be "underwriters" as defined in
the Securities Act and any commission received by them and any profit on the
resale of the securities may be deemed underwriting discounts and commissions
under the Securities Act.
CERTAIN TRANSACTIONS
In October 1993, Arthur Armijo, brother of the Company's President, Ralph
Armijo, made a $119,199 loan to the Company. The loan is evidenced by a
promissory note dated October 1, 1993 bearing interest at the rate of 5% per
year. As of the date of this Prospectus, the outstanding amount due under the
note is approximately $100,000, which amount is to be paid in full out of the
proceeds of this offering.
In November 1993, Arthur Armijo and Ralph Armijo each personally guaranteed
a line of credit in the amount of $200,000 extended by Vectra Bank, Denver,
Colorado, to the Company. Such line of credit and Messrs. Armijos' personal
guarantees were terminated in February 1996. No compensation was paid by the
Company for such personal guarantees. In February 1996, Arthur Armijo and Ralph
Armijo each personally guaranteed a promissory note of the Company in favor of
Colorado State Bank of Denver in the principal amount of $750,000. The note was
entered into by the Company in connection with a receivables factoring
arrangement between the Company and the bank. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation." To date, Messrs.
Armijo have received no compensation from the Company for such personal
guarantees.
In July 1996, Littleton Land Company made a $182,500 loan to the Company.
The loan was evidenced by a non-interest bearing promissory note with a maturity
date of August 31, 1996. Such note was prepaid in full on August 22, 1996. John
McKowen, an employee of the Company, is an affiliate of Littleton Land Company.
In August 1996, the Company granted options to Mr. McKowen to purchase 250,000
shares of Common Stock at an exercise price of $3.50 per share, exercisable from
February 1999 to August 2001. See "Management--Employment Agreements."
On March 31, 1996, Patrick Mawhinney, a shareholder, director and Chief
Financial Officer of the Company, made a $45,110 loan to IPI. The loan is
evidenced by a promissory note dated March 31, 1996, which provides for the
accrual of interest at a fixed rate of 10% per year and a maturity date of
December 31, 1997. The loan will be prepaid in full out of the proceeds of this
offering.
In June 1996, Schneider Mawhinney & Associates, P.C. advanced $32,500 to
IPI. Such amount was repaid without interest in October 1996. Patrick
Mawhinney's spouse is a principal of Schneider Mawhinney & Associates.
In July 1996, Cindy Simmons, a principal shareholder of the Company, made a
$75,000 loan to the Company as part of the merger with IPI. The loan is
evidenced by a non-interest bearing promissory note which provides for monthly
payments of $6,250 due on the first day of each month beginning August 1, 1996
and maturing on July 1, 1997.
In July 1996, Mr. Mawhinney made a loan to the Company in the amount of
$30,000, evidenced by a promissory note dated July 26, 1996 and bearing interest
at the rate of 9.75 percent per year. Such note was prepaid in full in October
1996.
39
<PAGE>
In August 1996, Ralph Armijo made a loan to the Company in the amount of
$70,000, evidenced by a promissory note dated August 6, 1996 and bearing
interest at the rate of 9.75 percent per year. Such note was prepaid in full in
October 1996.
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 20,000,000 shares of Common Stock, no par
value, of which 2,429,265 shares are currently outstanding including the shares
issued upon conversion of the Bridge Promissory Notes. After this offering,
there will be 3,189,265 shares of Common Stock outstanding, assuming no exercise
of the Warrants, the Over-allotment Option, the Representative's Options or the
Employee's Options.
Holders of Common Stock are entitled to dividends when, as and if declared
by the Board of Directors out of funds available therefor, subject to any
priority as to dividends for any preferred stock that may be outstanding. There
currently is no preferred stock authorized or outstanding. Holders of Common
Stock are entitled to cast one vote for each share held at all stockholder
meetings for all purposes including the election of directors. Cumulative voting
for the election of directors is not permitted. The holders of a majority of the
Common Stock issued and outstanding and entitled to vote, in person or by proxy,
constitute a quorum at meetings of stockholders and the vote of the holders of a
majority of Common Stock present at such a meeting will decide any question
brought before such meeting, except for certain actions such as amendments to
the Company's Articles of Incorporation, mergers or dissolutions, all of which
require the vote of the holders of a majority of the outstanding Common Stock.
Upon liquidation or dissolution, the holder of each outstanding share of Common
Stock will be entitled to share ratably in the net assets of the Company legally
available for distribution to such stockholder after the payment of all debts
and other liabilities and after distributions to preferred stockholders, if any,
legally entitled thereto. No holder of Common Stock has any preemptive or
preferential rights to purchase or subscribe for any part of any unissued or any
additional authorized stock or any securities of the Company convertible into
shares of its stock, nor does any holder of Common Stock have redemption or
conversion rights. The outstanding shares of Common Stock are, and the Common
Stock offered hereby will be when issued and paid, fully paid and nonassessable.
STOCK PURCHASE WARRANTS
Prior to the offering there were no warrants issued by the Company. Upon
consummation of this offering, 1,428,565 Warrants will be issued and outstanding
(consisting of 1,000,000 Warrants sold by the Company in this offering and the
428,565 Warrants issued to the Bridge Financing Selling Stockholders upon
consummation of this offering), assuming no exercise of the Over-allotment
Option. Each Warrant entitles the holder to purchase one share of Common Stock
at an exercise price equal to $ (120% of the initial offering price of a
share of the Common Stock), subject to adjustment, for a period of five years
commencing from the date of this Prospectus. No holder of Warrants, as such,
will be entitled to vote or receive dividends or be deemed the holder of shares
of Common Stock for any purpose whatsoever until such Warrants have been duly
exercised and the purchase price has been paid in full. Each Warrant will be
redeemable by the Company for $.05 per Warrant at any time commencing one year
after the effective date of this offering ("Effective Date") (which period may
be reduced or waived by the Representative in its sole discretion), upon thirty
days' prior written notice, at any time when the closing price per share of
Common Stock for twenty consecutive trading days within the thirty-day period
prior to the date notice of redemption is given equals or exceeds 140% of the
initial public offering price of a share of Common Stock and at such time there
is a current effective registration statement covering the shares of Common
Stock underlying the Warrants. The Company presently expects to call all of the
Warrants for redemption as soon as permitted provided that a current Prospectus
relating to the Common Stock underlying such Warrants is effective at that time.
In the event the Company gives notice of its intention to redeem, a holder may
40
<PAGE>
exercise his Warrants within the period set forth in the notice of redemption or
they will be redeemed upon payment of the redemption price. The Warrants will be
entitled to the benefit of adjustments in the exercise price and in the number
of shares of Common Stock delivered upon the exercise thereof upon the
occurrence of certain events, such as stock dividends, stock splits,
recapitalizations, consolidations or mergers.
The Warrants will be exercisable only when there is a current effective
registration statement covering the shares of Common Stock underlying the
Warrants. If the Company does not or is unable to maintain a current effective
registration statement, the Warrant holders will be unable to exercise the
Warrants and the Warrants may become valueless. Because the Warrants may be
transferred, it is possible that the Warrants may be acquired by persons
residing in states where the Company has not registered them, or is not exempt
from registration, such that the shares of Common Stock underlying the Warrants
may not be sold or transferred upon exercise of the Warrants. Warrant holders
residing in those states would have no choice but to attempt to sell their
Warrants or let them expire unexercised.
Holders of the Warrants may be able to sell the Warrants if a market
develops rather than exercise them. However, there can be no assurance that a
market will develop, or if developed, will continue as to such Warrants.
Each Warrant will be exercisable by surrendering the Warrant certificate,
with the formal subscription form on the reverse side of the Warrant certificate
properly completed and executed, together with payment of the exercise price to
the Warrant Agent. Prior to their expiration or redemption by the Company, the
Warrants will be exercisable from time to time in whole or in part. If less than
all of the Warrants evidenced by a Warrant certificate are exercised, a new
Warrant certificate will be issued for the remaining number of Warrants.
REPRESENTATIVE'S OPTIONS
Subject to the terms and conditions of the Underwriting Agreement between
the Company and the Representative, the Company has agreed to sell to the
Representative options to purchase 100,000 shares of Common Stock and 100,000
Warrants. See "Underwriting--Representative's Options."
TRADING SYMBOL
The Company has applied for inclusion of its Common Stock and Warrants for
quotation on NASDAQ under the symbols "NVDC" and "NVDCW," respectively. This
offering is the initial public offering of the Company's Securities and,
accordingly, there is currently no public trading market for any such
Securities. Even if the Company's Common Stock and Warrants are accepted for
quotation on NASDAQ, there can be no assurance that a public trading market will
ever develop or, if one develops, that it will be maintained. Although it has no
legal obligation to do so, the Representative from time to time may act as a
market maker and otherwise effect transactions for its own account, or for the
account of others, in the Company's securities. The Representative, if it so
participates, may be a dominating influence in any market that may develop for
any of the Company's Securities.
TRANSFER AGENT AND REGISTRAR
The transfer agent for the Company's Common Stock and the Warrant Agent for
the Company's Warrants is American Securities Transfer & Trust, Inc.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this offering, the Company will have 3,189,265
shares of Common Stock outstanding, including 428,565 shares issued upon
conversion of the Bridge Promissory Notes. Of the 3,189,265 shares of Common
Stock outstanding, the 1,000,000 shares of Common Stock offered hereby will
41
<PAGE>
be freely tradeable without restriction or further registration under the
Securities Act, except for any shares purchased by an affiliate of the Company
(in general, a person who has a control relationship with the Company), which
shares will be subject to the resale limitations of Rule 144 under the
Securities Act. In addition to the 1,000,000 shares of Common Stock offered
hereby, 188,565 shares of Common Stock issued in the conversion of the Bridge
Promissory Notes are being registered simultaneously with this offering for
resale by the holders thereof from time to time commencing ten months after the
consummation of this offering (or sooner, if permitted by the Representative in
its sole discretion). When sold, such shares will be freely tradeable without
restriction or further registration under the Securities Act. See "Additional
Registered Securities." The remaining 2,000,700 shares of Common Stock
outstanding are deemed to be "restricted securities," as the term is defined
under Rule 144 promulgated under the Securities Act, in that such shares were
purchased by the stockholders of the Company prior to the offering in
transactions not involving a public offering and as such may only be sold
pursuant to a registration statement under the Securities Act, in compliance
with the exemption provisions of Rule 144, or pursuant to another exemption
under the Securities Act. Rule 144 provides, in essence, that a person
(including a group of persons whose shares are aggregated) and including any
person who may be deemed an "affiliate" of the Company, as that term is defined
under the Securities Act, who has satisfied a two-year holding period for such
restricted securities may sell within any three-month period, under certain
circumstances, an amount of restricted securities which does not exceed the
greater of one percent of that class of the Company's outstanding securities or
the average weekly trading volume of that class of securities during the four
calendar weeks prior to such sale. Sales under Rule 144 are also subject to
certain manner of sale provisions, notice requirements and the availability of
current public information about the Company. In addition, pursuant to Rule 144,
persons who are not affiliated with the Company and who have held their
restricted securities for at least three years are not subject to the quantity
limitations or the manner of sale restrictions of the rule. As of the date
hereof, 250,000 shares of Common Stock are available for resale pursuant to Rule
144; however, pursuant to an agreement with the Representative, the holders of
all of such shares are restricted from selling them for a period of twelve
months from the date of this Prospectus. See "Underwriting--Lock-Up Agreement."
A sale of shares by the Company's current stockholders, whether pursuant to Rule
144 or otherwise, may have an adverse effect upon the market price of the
Securities in any market for them that may develop. To the extent that these
shares enter the market, the value of the Common Stock in the over-the-counter
market may be reduced. See "Risk Factors."
42
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting Agreement,
the Underwriters named below, for whom Joseph Charles & Associates, Inc. is
acting as representative (the "Representative"), have severally agreed to
purchase from the Company and the Bridge Financing Selling Stockholders, and the
Company and the Bridge Financing Selling Stockholders have each agreed to sell
to the Underwriters named below, the aggregate number of Securities set forth
opposite their respective names in the table below at the price to the public
less underwriting discounts set forth on the cover page of this Prospectus. The
Securities are being sold on a firm commitment basis. The Underwriting Agreement
provides, however, that the obligations of the Underwriters to pay for and
accept delivery of the Securities are subject to certain conditions precedent,
and that the Underwriters are committed to purchase and pay for all Securities
if any Securities are purchased.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
UNDERWRITERS AND WARRANTS
- ------------------------------------------------------------------------------------- -----------------
<S> <C>
Joseph Charles & Associates, Inc.....................................................
-----------------
Total............................................................................ 1,000,000
-----------------
-----------------
</TABLE>
The Company has been advised by the Representative that the Underwriters
propose initially to offer the Securities directly to the public at the offering
price set forth on the cover page of this Prospectus and to certain dealers (who
may include the Underwriters) at such price less a concession not in excess of
$ per Unit. The Underwriters may allow, and such dealers may reallow, a
concession to certain other dealers (who may include the Underwriters) not in
excess of $ per Unit. After the initial offering to the public, the
offering price and other selling terms may be changed by the Representative.
The Representative of the Underwriters has advised the Company that the
Underwriters do not intend to confirm sales to any accounts over which they
exercise discretionary authority as to such sale.
OVER-ALLOTMENT OPTION
The Company has granted to the Representative an option, exercisable for
sixty days after the date of this Prospectus, to purchase up to a maximum of an
additional 150,000 shares of Common Stock and 150,000 Warrants at the Combined
Offering Price, less the underwriting discounts, set forth on the cover page of
this Prospectus. The Representative may exercise such option only to cover
over-allotments made in connection with the sale of the Common Stock and
Warrants offered hereby.
NON-ACCOUNTABLE EXPENSE ALLOWANCE
The Company has agreed to pay to the Representative a non-accountable
expense allowance equal to three percent of the total proceeds of the offering
including proceeds paid to the Bridge Financing Selling Stockholders, or
$210,000 (based upon an assumed Combined Offering Price of $7.00), of which
$40,000 has previously been paid. The Representative's expenses in excess of the
non-accountable expense allowance will be borne by the Representative. To the
extent that the expenses of the Representative are less than the non-accountable
expense allowance, the excess will be deemed to be underwriting compensation. In
addition to the Underwriter's discount and the non-accountable expense
allowance, the Company is required to pay the costs of qualifying the Securities
under federal and state securities laws, together with legal and accounting
fees, printing and other costs in connection with this offering.
43
<PAGE>
The Bridge Financing Selling Stockholders will sell such shares to the
Underwriter less a discount equal to ten percent of the offering price for the
Common Stock. The costs of qualifying these shares under federal and state
securities laws, together with legal and accounting fees, printing and other
costs in connection with the offering, will be paid by the Company.
REPRESENTATIVE'S FINANCIAL CONSULTANT AGREEMENT
The Company has agreed to retain the Representative as a financial
consultant for a period of two years from the date of this Prospectus for a fee
of $3,000 per month. The financial consulting services to be provided by the
Representative include assisting in the development of a long-term financial
strategy and working with financial analysts.
DESIGNEE TO THE BOARD OF DIRECTORS
The Company has agreed, for a period of four years from the date of this
Prospectus, at the option of the Representative, to nominate a designee of the
Representative, reasonably acceptable to the Company, for election to the
Company's Board of Directors or, at the option of the Representative, if the
Company is unable to obtain directors and officers insurance satisfactory to the
Representative, to designate a consultant to the Board of Directors who will
have the right to attend all Board and Board committee meetings and will be
compensated on the same basis as non-employee members of the Board. The
Representative has not yet exercised its right to designate such a person.
WARRANT SOLICITATION
The Company has agreed with the Representative not to solicit Warrant
exercises other than through the Representative. Upon exercise of any Warrants,
commencing one year from the date of this Prospectus, the Company will pay the
Representative a fee of three percent of the aggregate exercise price, if (i)
the market price of the Common Stock on the date the Warrant is exercised is
greater than the then exercise price of the Warrant; (ii) the exercise of the
Warrant was solicited by a member of the National Association of Securities
Dealers, Inc., who is designated in writing by the holder exercising the
Warrant; (iii) the Warrant is not held in a discretionary account except where
prior specific written approval for the exercise has been received; (iv)
disclosure of compensation arrangements was made both at the time of the
offering and at the time of exercise of the Warrant; (v) the solicitation of the
exercise of the Warrant was not in violation of Rule 10b-6 promulgated under the
Exchange Act; and (vi) the Representative provides bona fide services in
connection with the solicitation of the Warrant. No solicitation fee will be
paid to the Representative on Warrants exercised within one year of the date of
this Prospectus or on Warrants voluntarily exercised at any time without
solicitation. In addition, unless granted an exemption by the Commission from
Rule 10b-6 under the Exchange Act, the Representative will be prohibited from
engaging in any market making activities or solicited brokerage activities until
the later of the termination of such solicitations activity or the termination
by waiver or otherwise of any right the Representative may have to receive a fee
for the exercise of the Warrants following such solicitation. Such a
prohibition, while in effect, could impair the liquidity and market price of the
Securities.
REPRESENTATIVE'S OPTIONS
Subject to the terms and condition of the Underwriting Agreement between the
Company and the Representative, the Company has agreed to sell to the
Representative, for an aggregate purchase price of $100, as additional
compensation in connection with this offering, options (the "Representative's
Options") to purchase up to 100,000 shares of Common Stock and 100,000 Warrants.
The shares of Common Stock in the Representative's Options are identical to the
shares offered hereby, and the Warrants underlying the Representative's Options
will have an exercise price and other terms identical to the Warrants offered
hereby except that such Warrants will not be redeemable. The Representative's
Options are exercisable for a four-year period commencing one year from the date
of this Prospectus and
44
<PAGE>
entitle the Representative to purchase up to 100,000 shares of Common Stock and
100,000 Warrants at a price per share equal to 120% of the initial offering
price of each such security subject to adjustment in certain events. The
Representative's Options are restricted from sale, transfer, assignment or
hypothecation for a period of one year from the date of this Prospectus except
to officers or partners of the Representative, other Underwriters, and members
of the selling group and/or their officers or partners. The Representative's
Options contain anti-dilution provisions providing for adjustment of the
exercise prices as well as the number of shares of Common Stock and Warrants
issuable upon the occurrence of certain events, including the issuance of shares
of Common Stock or Warrants at a price per share or per Warrant less than the
exercise price or the market price of the security, or in the event of any
recapitalization, reclassification, stock dividend, stock split, stock
combination or similar transaction. The Representative's Options grant to the
holders thereof certain piggyback and demand registration rights as described
below.
If the holders of at least a majority of the Representative's Options or the
securities underlying them wish to register the Representative's Options or any
of the securities underlying them during the period commencing one year
following the date of this Prospectus and ending five years from the date of
this Prospectus, the Company has agreed to register or qualify such shares, one
time only, upon the request of the holders of at least a majority of such
Representative's Options or the securities underlying them ("Demand Registration
Right"). The Company will bear the full expense of such registration which may
be substantial. If the Demand Registration Right is exercised, the Company at
such time at its option may purchase the Representative's Options for the
difference between their exercise price and fair market value of the shares
issuable upon exercise. In addition, the Company has also agreed for a period of
five years commencing on the date of this Prospectus to give notice to the
holder or holders of the Representative's Options, or the Common Stock and
Warrants underlying the Representative's Options, of its intention to file a
registration statement under the Securities Act, and in that event the holders
of the Representative's Options or the securities underlying such options shall
have the right to request the Company to include the Representative's Options
and such securities underlying them in such Registration Statement. The
Representative's Options and the securities underlying them are being registered
as part of the Registration Statement of which this Prospectus forms a part.
The holders of the Representative's Options have no voting, dividend or
other rights as shareholders of the Company with respect to the shares of Common
Stock underlying the Representative's Options until the Representative's Options
have been exercised. The Company is obligated at all times to set aside and have
available sufficient number of authorized but unissued shares of Common Stock
and Warrants to be issued upon exercise of the Representative's Options.
LOCK-UP AGREEMENT
Except in connection with acquisitions or the exercise of options and
warrants that have been previously granted and the grant of options under an
incentive stock option plan reasonably acceptable to the Representative, the
Company has agreed, for a period of one year from the closing of this offering,
not to issue, sell or purchase any shares of Common Stock or other equity
securities of the Company without the prior written consent of the
Representative. The holders of the shares not being offered hereby and the
officers, directors and present stockholders have agreed that they will not
offer, sell or otherwise dispose of any shares of the Company owned by them to
the public for a period of at least twelve months from the closing of this
offering without the prior written consent of the Representative. The
Representative may, in its discretion, and without notice to the public, waive
such restrictions and permit holders otherwise agreeing to restrict their shares
to sell any or all of their shares.
45
<PAGE>
INVESTOR RELATIONS
The Company has agreed with the Representative to engage the services of an
investor relations advisory firm, acceptable to the Representative, for at least
one year following the consummation of this offering.
DIRECTORS AND OFFICERS LIABILITY INSURANCE
The Company has agreed with the Representative to acquire a reasonable
amount of directors and officers liability insurance (provided that such
insurance can be obtained at a reasonable cost, as determined by the Company and
the Representative) from an insurer satisfactory to the Representative.
RECIPROCAL INDEMNIFICATION
The Underwriting Agreement provides for reciprocal indemnification between
the Company, the Bridge Financing Selling Stockholders and the Underwriters
against certain liabilities in connection with the Registration Statement,
including liabilities under the Securities Act, and contribution to payments
that may be required to be made. Insofar as indemnification for liabilities
arising under the Securities Act may be provided to directors, officers and
controlling persons of the Company, the Company has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no public market for the Common Stock
or Warrants. The purchase price for the Common Stock and Warrants and the
exercise price and other terms of the Representative's Options were determined
by negotiations between the Company and the Representative, are not necessarily
related to the assets, book value, earnings or net worth of the Company or any
other established criteria of value, and should in no event be regarded as an
indication of any future market price of these securities. Among the factors
considered in determining the initial public offering price and the exercise
price of the Warrants were the prospects for the Company, an assessment of the
industry in which the Company operates, the business experience of management,
the number of Common Stock and Warrants offered, the price that purchasers of
such securities might be expected to pay given the nature of the Company and the
general condition of the securities markets at the time of the offering.
Accordingly, the initial public offering price of the Common Stock and of the
Warrants set forth on the cover page of this Prospectus should not be considered
an indication of the actual value of such Securities. Each such price is subject
to change as a result of market conditions and other factors, and no assurance
can be given that the Common Stock or Warrants can be resold at their respective
initial public offering price.
The foregoing does not purport to be a complete statement of the terms and
conditions of the Underwriting Agreement, copies of which are on file at the
offices of the Representative, the Company and the Securities and Exchange
Commission, Washington, D.C. See "Additional Information."
In connection with the Bridge Financing Private Placement (see "Bridge
Financing Private Placement"), the Company paid the Representative a commission
in the amount of $150,000 and reimbursed the Representative for its
non-accountable expenses relating to the Bridge Financing Private Placement in
the amount of $37,500, including fees and expenses of its counsel. In addition,
the Company issued warrants to the Representative which were cancelled upon the
effective date of this offering.
A significant amount of Securities offered hereby may be sold to customers
of the Representative or the other Underwriters and the concentration of
customers of the Representative or the other Underwriters may adversely affect
the market for and liquidity of the Company's securities. Such customers
subsequently may engage in transactions for the sale or purchase of such
Securities through or with the
46
<PAGE>
Representative or the other Underwriters. Although they may have no obligation
to do so, the Representative or the other Underwriters may make a market in the
Company's securities and may otherwise effect transactions in such securities.
If they participate in the market, the Representative or the other Underwriters
may exert a dominating influence on the market, if one develops, for the
Securities described in this Prospectus. Such market activity may be
discontinued at any time. The price and liquidity of the Securities may be
significantly affected by the degree, if any, of the Representative's or the
other Underwriter's participation in such market.
EXPERTS
The financial statements of the Company as of December 31, 1995 and 1994 and
of IPI as of December 31, 1995 have been included herein in reliance on the
report of Hein + Associates LLP, independent accountants, given on the authority
of that firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters, including the legality of the issuance of the
Securities offered hereby, are being passed upon for the Company by Cohen Brame
& Smith Professional Corporation, 1700 Lincoln Street, Suite 1800, Denver,
Colorado 80203. Certain legal matters will be passed upon for the Underwriters
by Berliner Zisser Walter & Gallegos, P.C., Denver, Colorado.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. Office, a registration statement under the Securities Act on
Form SB-2 ("Registrations Statement") with respect to the Common Stock and
Warrants offered hereby. No distribution of the Common Stock or Warrants will be
made until the Registration Statement, as it may be amended, has been declared
effective. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits thereto, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Statements
contained in this Prospectus as to the contents of any contract of other
document referred to are not necessarily complete and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference. For further information with respect to the Company and the
Common Stock and Warrants offered hereby, reference is hereby made to the
Registration Statement and the exhibits thereto. All of these documents may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies may be
obtained at the prescribed rates from the Public Reference Section of the
Commission at its principal office in Washington, D.C. The Commission also
maintains a site on the Web that contains reports, proxy and information
statements, and other information regarding the Company. The address for such
site is http://www.sec.gov.
47
<PAGE>
NAVIDEC, INC. (FORMERLY ACI SYSTEMS, INC.)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
PRO FORMA COMBINING, CONDENSED FINANCIAL INFORMATION (UNAUDITED):
INTRODUCTION............................................................................................... F-2
COMBINING, CONDENSED BALANCE SHEET--June 30, 1996.......................................................... F-3
COMBINING, CONDENSED STATEMENT OF OPERATIONS--For the Six Months Ended June 30, 1996....................... F-4
COMBINING, CONDENSED STATEMENT OF OPERATIONS--For the Year Ended December 31, 1995......................... F-5
NOTES TO COMBINING, CONDENSED FINANCIAL INFORMATION........................................................ F-6
NAVIDEC, INC. (FORMERLY ACI SYSTEMS, INC.):
INDEPENDENT AUDITOR'S REPORT............................................................................... F-7
BALANCE SHEETS--June 30, 1996 (Unaudited) and December 31, 1995............................................ F-8
STATEMENTS OF OPERATIONS--For the Six Months Ended June 30, 1996 and 1995 (Unaudited) and for the Years
Ended December 31, 1995 and 1994......................................................................... F-9
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)--For the Six Months Ended June 30, 1996 (Unaudited)
and for the Years Ended December 31, 1995 and 1994....................................................... F-10
STATEMENTS OF CASH FLOWS--For the Six Months Ended June 30, 1996 and 1995 (Unaudited) and for the Years
Ended to December 31, 1995 and 1994...................................................................... F-11
NOTES TO FINANCIAL STATEMENTS.............................................................................. F-12
INTERACTIVE PLANET, INC.:
INDEPENDENT AUDITOR'S REPORT............................................................................... F-20
BALANCE SHEETS--June 30, 1996 (Unaudited) and December 31, 1995............................................ F-21
STATEMENTS OF OPERATIONS--For the Six Months Ended June 30, 1996 (Unaudited) and for the Period from May
15, 1995 (Inception Date) to December 31, 1995........................................................... F-22
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)--For the Six Months Ended June 30, 1996 (Unaudited)
and for the Period from May 15, 1995 (Inception Date) to December 3, 1995................................ F-23
STATEMENTS OF CASH FLOWS--For the Six Months Ended June 30, 1996 (Unaudited) and for the Period from May
15, 1995 (Inception Date) to December 31, 1995........................................................... F-24
NOTES TO FINANCIAL STATEMENTS.............................................................................. F-25
</TABLE>
<PAGE>
NAVIDEC, INC. (FORMERLY ACI SYSTEMS, INC.)
INTERACTIVE PLANET, INC.
INTRODUCTION
The accompanying unaudited pro forma combining, condensed balance sheet
combines the balance sheet of NAVIDEC, Inc. (formerly ACI Systems, Inc.) (the
Company) as of June 30, 1996 with the balance sheet of Interactive Planet, Inc.
(IPI) and then assumes the receipt of the net proceeds of $1,312,500 from the
sale of unsecured subordinated convertible promissory notes from bridge
financing completed in October 1996, and the receipt of estimated net proceeds
of $4,359,600 from the sale of 760,000 shares of common stock of 760,000
warrants at $6.90 and $.10, respectively (estimated) and 240,000 additional
warrants at $.10 per warrant, as contemplated in the proposed public offering as
if such acquisition, financing, and public offering occurred at June 30, 1996.
The promissory notes are convertible into 14,285.5 shares of common stock and
14,285.5 warrants for every $50,000 in principal and must convert on a public
offering.
The accompanying unaudited pro forma combining, condensed statements of
operations combine the operations of the Company and IPI for the year ended
December 31, 1995 and the six months ended June 30, 1996 as if the acquisition
was completed as of the beginning of the period presented under the purchase
method of accounting and based upon the assumptions as included in the notes to
the pro forma statements.
These statements are not necessarily indicative of future operations or the
actual results that would have occurred had the merger been consummated at the
beginning of the periods indicated.
The unaudited pro forma combined, condensed financial statements should be
read in conjunction with the historical financial statements and notes thereto,
included elsewhere in this document.
F-2
<PAGE>
NAVIDEC, INC. (FORMERLY ACI SYSTEMS, INC.) AND
INTERACTIVE PLANET, INC.
COMBINING, CONDENSED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
INTERACTIVE -------------------------- PRO FORMA PRO FORMA
NAVIDEC, PLANET, BRIDGE BEFORE OFFERING PRO FORMA
INC. INC. MERGER FINANCING OFFERING ADJUSTMENTS COMBINED
--------- ----------- ------------ ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash............................ $ 53,396 $ 4,987 $ -- $1,312,500(B) $1,370,883 $4,209,600 (C) $5,580,483
Trade account receivables....... 84,357 19,085 -- -- 103,442 -- 103,442
Inventories..................... 325,043 -- -- -- 325,043 -- 325,043
Prepaid expenses and other
current assets................ 78,502 15,000 -- -- 93,502 -- 93,502
--------- ----------- ------------ ------------ ----------- ------------- -----------
Total current assets.......... 541,298 39,072 -- 1,312,500 1,892,870 4,209,600 6,102,470
Property and equipment, net....... 142,869 26,966 -- -- 169,835 -- 169,835
Intangible assets -- -- 318,000(A) 187,500(B) 505,500 (187,500)(B) 318,000
--------- ----------- ------------ ------------ ----------- ------------- -----------
TOTAL ASSETS...................... $ 684,167 $ 66,038 $ 318,000 $1,500,000 $2,568,205 $4,020,100 $6,590,305
--------- ----------- ------------ ------------ ----------- ------------- -----------
--------- ----------- ------------ ------------ ----------- ------------- -----------
CURRENT LIABILITIES:
Notes payable--related party.... $ 100,491 $ 32,500 $ -- $ -- $ 132,991 $ (104,890 (C) $ 28,101
Accounts payable................ 812,682 2,070 -- -- 814,752 -- 814,752
Other accrued liabilities....... 45,569 86,653 -- -- 132,222 -- 132,222
--------- ----------- ------------ ------------ ----------- ------------- -----------
TOTAL CURRENT LIABILITIES..... 958,742 121,223 -- -- 1,079,965 (104,890 ) 975,075
LONG-TERM DEBT:
Related party................... -- 45,110 -- -- 45,110 (45,110 (C) --
Other........................... -- -- -- 1,500,000 (B) 1,500,000 (1,500,000 (B) --
4,359,600(C)
STOCKHOLDERS' EQUITY (DEFICIT).... (274,575) (100,295 ) 318,000 (A) -- (56,870 ) 1,312,500(B) 5,615,230
--------- ----------- ------------ ------------ ----------- ------------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT)... $ 684,167 $ 66,038 $ 318,000 $1,500,000 $2,568,205 $4,022,100 $6,590,305
--------- ----------- ------------ ------------ ----------- ------------- -----------
--------- ----------- ------------ ------------ ----------- ------------- -----------
</TABLE>
See Accompanying Notes to Combining, Condensed Financial Information.
F-3
<PAGE>
NAVIDEC, INC. (FORMERLY ACI SYSTEMS, INC.) AND
INTERACTIVE PLANET, INC.
COMBINING, CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
INTERACTIVE PRO FORMA
NAVIDEC, PLANET, PRO FORMA BEFORE
INC. INC. ADJUSTMENTS OFFERING
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
NET REVENUES............................................... $ 2,471,868 $ 185,429 $ -- $ 2,657,297
COST OF REVENUES........................................... 2,063,206 60,017 -- 2,123,223
------------ ----------- ----------- ------------
GROSS MARGIN............................................... 408,662 125,412 -- 534,074
OPERATING EXPENSES......................................... 632,687 225,161 31,800 889,648
------------ ----------- ----------- ------------
OPERATING LOSS............................................. (224,025) (99,749) (31,800) (355,574)
Other income (expense), net.............................. (24,526) (1,129) -- (25,655)
------------ ----------- ----------- ------------
NET LOSS................................................... $ (248,551) $ (100,878) $ (31,800 ) $ (381,229)
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
LOSS PER SHARE............................................. $ (.16) $ (.16)
------------ ------------
------------ ------------
WEIGHTED AVERAGE SHARES (E)................................ 1,541,303 798,679 2,339,982
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
See Accompanying Notes to Combining, Condensed Financial Information.
F-4
<PAGE>
NAVIDEC, INC. (FORMERLY ACI SYSTEMS, INC.) AND
INTERACTIVE PLANET, INC.
COMBINING, CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
INTERACTIVE PRO FORMA
NAVIDEC, PLANET, PRO FORMA BEFORE
INC. INC. ADJUSTMENTS OFFERING
------------ ----------- --------------- ------------
<S> <C> <C> <C> <C>
NET REVENUES............................................ $ 4,120,743 $ 167,574 $ -- $ 4,288,317
COST OF REVENUES........................................ 3,339,891 36,252 -- 3,376,143
------------ ----------- --------------- ------------
GROSS MARGIN............................................ 780,852 131,322 -- 912,174
OPERATING EXPENSES...................................... 784,150 131,739 63,600 (D) 979,489
------------ ----------- --------------- ------------
OPERATING LOSS.......................................... (3,298) (417) (63,600) (67,315)
Other income (expense), net........................... (20,004) -- -- (20,004)
------------ ----------- --------------- ------------
NET LOSS................................................ $ (23,302) $ (417 ) $ (63,600 ) $ (87,319)
------------ ----------- --------------- ------------
------------ ----------- --------------- ------------
LOSS PER SHARE.......................................... $ (.02) $ (.04)
------------ ------------
------------ ------------
WEIGHTED AVERAGE SHARES (E)............................. 1,541,303 798,679(A) 2,339,982
------------ --------------- ------------
------------ --------------- ------------
</TABLE>
See Accompanying Notes to Combining, Condensed Financial Information.
F-5
<PAGE>
NAVIDEC, INC. (FORMERLY ACI SYSTEMS, INC.) AND
INTERACTIVE PLANET, INC.
NOTES TO COMBINING, CONDENSED FINANCIAL INFORMATION
(A) To reflect the acquisition of the IPI in a purchase transaction where
NAVIDEC, Inc. acquired 100% of the stock of IPI for 798,679 shares of common
stock of the Company. The acquisition was valued at $218,000, resulting in
goodwill of of approximately $318,000 which will be amortized over 5 years.
(B) To reflect the bridge financing debt of $1,500,000 completed in October 1996
and then to reflect the conversion of the notes into 428,565 shares of
common stock as contemplated in the proposed public offering.
(C) To reflect the sale of 760,000 shares of common stock and 1,000,000 warrants
at $6.90 and $.10, respectively, net of offering costs of $984,400, as
contemplated in the proposed public offering and the use of proceeds to
repay $150,000 in notes payable to related parties. Related past interest
expense on the $150,000 has not been a significant amount in the net loss
per share amount (if outstanding shares were adjusted to reflect such net
proceeds used to repay the debt).
(D) To reflect amortization of goodwill resulting from the value assigned in
purchase price allocation.
(E) Options and shares from the conversion of the bridge financing debt were
considered in the calculation of weighted average shares under the treasury
stock method based on the proposed public offering price.
F-6
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
NAVIDEC, Inc.
Englewood, Colorado
We have audited the accompanying balance sheet of the Company as of December
31, 1995, and the related statements of operations, changes in stockholders'
equity (deficit), and cash flows for the years ended December 31, 1995 and 1994.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company, Inc. as of
December 31, 1995, and the results of its operations and its cash flows for the
years ended December 31, 1995 and 1994, in conformity with generally accepted
accounting principles.
/s/ HEIN + ASSOCIATES LLP
Denver, Colorado
October 4, 1996
F-7
<PAGE>
NAVIDEC, INC.
(FORMERLY ACI SYSTEMS, INC.)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
1995
JUNE 30, ------------
1996
-----------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents........................................................... $ 53,396 $ 106
Trade accounts receivable, net of $9,000 and $18,250 allowance for doubtful
accounts.......................................................................... 84,357 668,312
Inventories......................................................................... 325,043 203,753
Prepaid expenses and other current assets........................................... 78,502 10,252
----------- ------------
Total current assets.............................................................. 541,298 882,423
PROPERTY AND EQUIPMENT, net........................................................... 142,869 37,715
----------- ------------
TOTAL ASSETS.......................................................................... $ 684,167 $ 920,138
----------- ------------
----------- ------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable:
Related party..................................................................... $ 100,491 $ 103,199
Other............................................................................. -- 386,801
Accounts payable.................................................................... 812,682 423,366
Other accrued liabilities........................................................... 45,569 61,480
----------- ------------
Total current liabilities......................................................... 958,742 974,846
----------- ------------
COMMITMENTS AND CONTINGENCIES (NOTES 5 AND 7)
STOCKHOLDERS' DEFICIT:
Common stock, no par value; 20,000,000 shares authorized; 255,102 and 1,202,021
shares issued and outstanding as of December 31, 1995 and June 30, 1996,
respectively...................................................................... 91,399 62,714
Accumulated deficit................................................................. (365,974) (117,422)
----------- ------------
Total stockholders' deficit....................................................... (274,575) (54,708)
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT........................................... $ 684,167 $ 920,138
----------- ------------
----------- ------------
</TABLE>
See accompanying notes to these financial statements.
F-8
<PAGE>
NAVIDEC, INC.
(FORMERLY ACI SYSTEMS, INC.)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEARS ENDED
ENDED JUNE 30, DECEMBER 31,
-------------------------- --------------------------
1996 1995 1995 1994
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET SALES................................................ $ 2,471,868 $ 2,081,456 $ 4,120,743 $ 1,830,734
Cost of Sales.......................................... 2,063,206 1,691,752 3,339,891 1,370,874
------------ ------------ ------------ ------------
GROSS MARGIN............................................. 408,662 389,704 780,852 459,860
Operating expense...................................... 632,687 315,294 784,150 497,284
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS).................................. (224,025) 74,410 (3,298) (37,424)
OTHER INCOME (EXPENSE):
Interest expense, net.................................. (21,567) (14,670) (29,739) (17,867)
Other.................................................. (2,959) -- 9,735 32,416
------------ ------------ ------------ ------------
Other, Net............................................. (24,526) (14,670) (20,004) 14,549
------------ ------------ ------------ ------------
NET INCOME (LOSS)........................................ $ (248,551) $ 59,740 $ (23,302) $ (22,875)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
PRO FORMA NET INCOME (LOSS) PER SHARE.................... $ (0.16) $ (0.02)
------------ ------------
------------ ------------
PRO FORMA COMMON SHARES AND EQUIVALENTS OUTSTANDING...... 1,541,303 1,541,303
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to these financial statements.
F-9
<PAGE>
NAVIDEC, INC.
(FORMERLY ACI SYSTEMS, INC.)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
--------------------- ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
---------- --------- ------------ -----------
<S> <C> <C> <C> <C>
BALANCES, January 1, 1994...................................... 255,102 $ 52,714 $ (71,246) $ (18,532)
Options issued to officer for compensation................... -- 10,000 -- 10,000
Net loss..................................................... -- -- (22,875) (22,875)
---------- --------- ------------ -----------
BALANCES, December 31, 1994.................................... 255,102 62,714 (94,121) (31,407)
Net loss..................................................... -- -- (23,302) (23,302)
---------- --------- ------------ -----------
BALANCES, December 31, 1995.................................... 255,102 62,714 (117,423) (54,709)
Exercise of stock options (unaudited)........................ 946,919 1,745 -- 1,745
Compensation recognized related to transfers of common stock
to employees (unaudited)................................... -- 26,940 -- 26,940
Net loss (unaudited)......................................... -- -- (248,551) (248,551)
---------- --------- ------------ -----------
BALANCES, June 30, 1996 (unaudited)............................ 1,202,021 $ 91,399 $ (365,974) $ (274,575)
---------- --------- ------------ -----------
---------- --------- ------------ -----------
</TABLE>
See accompanying notes to these financial statements.
F-10
<PAGE>
NAVIDEC, INC.
(FORMERLY ACI SYSTEMS, INC.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEARS ENDED
ENDED JUNE 30, DECEMBER 31,
-------------------------- ------------------------
1996 1995 1995 1994
------------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................ $ (248,551) $ 59,740 $ (23,302) $ (22,875)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 36,498 8,701 33,595 6,087
Stock based compensation............................... 26,940 -- -- 10,000
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable................................ 115,449 (215,692) (352,390) (140,773)
Inventories........................................ (121,290) (10,758) (52,889) (62,969)
Other assets....................................... (68,250) (16,066) 13,216 (8,790)
Increase (decrease) in:
Accounts payable and accrued liabilities........... 389,315 206,878 244,771 37,964
Other liabilities.................................. (15,912) (4,539) 32,048 27,425
------------- ----------- ----------- -----------
Net cash provided by (used in) operating activities...... 114,199 28,264 (104,951) (153,931)
CASH FLOWS FROM INVESTING ACTIVITIES -- Capital
expenditures for property and equipment................... (141,651) (26,148) (34,210) (33,006)
------------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITY:
Proceeds from issuance of common stock................... 1,745 -- -- --
Proceeds from issuance of notes payable.................. 1,932,419 510,568 790,215 488,885
Proceeds from sale of accounts receivable................ 468,506 -- -- --
Payment on notes payable................................. (2,321,928) (516,149) (659,004) (330,203)
------------- ----------- ----------- -----------
Net cash provided by (used in) financing activities.... 80,742 (5,581) 131,211 158,682
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........... 53,290 (3,465) (7,950) (28,255)
CASH AND CASH EQUIVALENTS, beginning of period............. 106 8,056 8,056 36,311
------------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period................... $ 53,396 $ 4,591 $ 106 $ 8,056
------------- ----------- ----------- -----------
------------- ----------- ----------- -----------
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION -- Cash
payments for interest..................................... $ 21,567 $ 14,670 $ 29,739 $ 17,867
------------- ----------- ----------- -----------
------------- ----------- ----------- -----------
</TABLE>
See accompanying notes to these financial statements.
F-11
<PAGE>
NAVIDEC, INC.
(FORMERLY ACI SYSTEMS, INC.)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND NATURE OF OPERATIONS--The Company was incorporated in the
State of Colorado in 1993. The Company's products and services currently center
around computer and related equipment and Internet hardware. Effective July 1,
1996, the Company acquired IPI in a purchase transaction, where the Company
acquired 100% of the stock of IPI for 798,679 shares of common stock of the
Company. IPI develops, markets, and supports World Wide Web (Web) sites, on the
Internet or Intranets. IPI designs and implements Web sites ranging from basic
inquiry-only sites to complex, interactive sites capable of providing on-line
commerce, database integration and manipulation, sophisticated graphics,
animation, and other multi-media content. IPI also serves as a value-added
reseller of software capable of allowing the Internet or Intranet user to use
self-service applications such as the on-line purchase of products or services,
product warranty and support, employee benefit enrollments and other
applications. The Company and IPI historically has sold approximately 40% of
their products and services in the State of Colorado, with remaining revenue
derived from sales throughout the United States.
INVENTORIES--Inventories are stated at the lower of cost or market,
determined by the first-in, first-out method and consist primarily of products
held for resale.
PROPERTY AND EQUIPMENT--Property and equipment is stated at cost.
Depreciation is computed over the estimated useful lives of the assets using the
200% declining balance method generally over a three to seven year period.
Leasehold improvements are amortized on the straight-line method over the lesser
of the lease term or the useful life. Expenditures for ordinary maintenance and
repairs are charged to expense as incurred. Upon retirement or disposal of
assets, the cost and accumulated depreciation are eliminated from the account
and any gain or loss is reflected in the statements of operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The estimated fair values for financial
instruments are determined at discrete points in time based on relevant market
information. These estimates involve uncertainties and cannot be determined with
precision. The carrying amounts of cash, trade accounts receivable, notes
payable--other, accounts payable, and accrued liabilities approximates fair
value. The carrying amount of notes payable--stockholder which has an interest
rate of 5% is considered to be at a below market rate, however, based on the
short-term nature of the note, the fair value is not materially different from
the stated value.
CASH EQUIVALENTS--For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments with original maturities of three
months or less to be cash equivalents.
PRO FORMA INCOME (LOSS) PER SHARE--Loss per share is generally computed
based on the weighted average number of shares outstanding. However, for the
periods presented, common and common equivalent shares, including the options
and convertible notes discussed in Note 7, issued prior to the filing of the
Company's registration statement, at prices below the $7.00 per share
(estimated) minimum price (which is anticipated for the Company's proposed
public offering) have been included in the weighted average calculation, as if
they were outstanding for the year ended December 31, 1995 and the six months
ended June 30, 1996 (using the treasury stock method and the anticipated public
offering price.
INCOME TAXES--No provision has been made for income taxes since the Company
has elected to be taxed as an "S Corporation" as defined by the Internal Revenue
Code. The Company's stockholders will report the Company's taxable income or
loss on their individual income tax returns. Pro forma income tax
F-12
<PAGE>
NAVIDEC, INC.
(FORMERLY ACI SYSTEMS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
expense for the six months ended June 30, 1996 is not presented due to
anticipated losses for the year and a valuation allowance for the loss
carryovers which would have been recorded under FASB 109 after the Company's
proposed public offering and the termination of the "S" corporate election.
Subsequent to June 30, 1996, the Company converted to a "C Corporation" and
adopted Statement of Financial Accounting Standards No. 109, which requires
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax assets and liabilities are
determined, based on the difference between the financial statements and tax
bases of asset and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
USE OF ESTIMATES--The preparation of the Company's financial statements in
conformity with generally accepted accounting principles requires the Company's
management to make estimates and assumptions that affect the amounts reported in
these financial statements and accompanying notes. Actual results could differ
from those estimates.
IMPAIRMENT OF LONG-LIVED ASSETS--Effective January 1, 1996, the Company
adopted Financial Accounting Standards Board Statement 121 (FAS 121). In the
event that facts and circumstances indicate that the cost of assets or other
assets may be impaired, an evaluation of recoverability would be performed. If
an evaluation is required, the estimated future undiscounted cash flows
associated with the asset would be compared to the asset's carrying amount to
determine if a write-down to market value or discounted cash flow value is
required. Adoption of FAS 121 had no effect on the unaudited June 30, 1996
financial statements.
STOCK-BASED COMPENSATION--In October 1995, the Financial Accounting
Standards Board issued a new statement titled "Accounting for Stock-Based
Compensation" (FAS 123). The new statement was effective for the Company January
1, 1996. FAS 123 encourages, but does not require, companies to recognize
compensation expense for grants of stock, stock options, and other equity
instruments to employees based on fair value. Companies that do not adopt the
fair value accounting rules must disclose the impact of adopting the new method
in the notes to the financial statements. Transactions in equity instruments
with non-employees for goods or services must be accounted for on the fair value
method. The Company has elected not to adopt the fair value accounting
prescribed by FAS 123 for employees, and will be subject only to the disclosure
requirements prescribed by FAS 123.
UNAUDITED INFORMATION--The balance sheet as of June 30, 1996 and the
statements of operations for the six-month period ended June 30, 1996 and 1995
were taken from the Company's books and records without audit. However, in the
opinion of management, such information includes all adjustments (consisting
only of normal accruals), which are necessary to properly reflect the financial
position of the Company as of June 30, 1996 and the results of operations for
the six months ended June 30, 1996 and 1995. The results of operations for the
interim periods presented are not necessarily indicative of those expected for
the year.
F-13
<PAGE>
NAVIDEC, INC.
(FORMERLY ACI SYSTEMS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
2. LIQUIDITY AND CONTINUED OPERATIONS:
The Company has incurred net losses for the past two years and has had
negative cash flows from operations. As described in Note 8, management has
taken the following actions to improve the Company's cash flow and operating
results.
- Subsequent to June 30, 1996, the Company completed a private offering for
the sale of $1,500,000 of unsecured subordinated convertible promissory
notes and intends to complete a public offering to provide gross proceeds
of approximately $5,344,000.
- Effective July 11, 1996, the Company acquired IPI. Even though IPI has had
insignificant revenues, management believes that the merger will enhance
the operating results of the combined entity.
Management believes that the actions taken will provide the Company with
sufficient working capital to provide adequate funding to meet the Company's
future operating needs to enable it to continue as a going concern for at least
the next twelve months. The Company is also aggressively working to increase
revenues and improve operating results to ultimately achieve profitability,
although no assurances can be given the Company will be successful.
3. DEPENDENCE ON SUPPLIERS:
The Company is dependent on seven key suppliers. The Company has contracts
with these suppliers, however, they are not exclusive and can be terminated at
any time. Management believes that while the Company may suffer a short-term
adverse impact, it would be able to replace anyone of these suppliers.
4. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
JUNE 30, ------------
1996
-----------
(UNAUDITED)
<S> <C> <C>
Furniture, fixtures and equipment................................. $ 210,258 $ 82,924
Leasehold improvements............................................ 15,938 1,620
----------- ------------
226,196 84,544
Less accumulated depreciation..................................... (83,327) (46,829)
----------- ------------
$ 142,869 $ 37,715
----------- ------------
----------- ------------
</TABLE>
F-14
<PAGE>
NAVIDEC, INC.
(FORMERLY ACI SYSTEMS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
5. NOTES PAYABLE:
Notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
JUNE 30, ------------
1996
-----------
(UNAUDITED)
<S> <C> <C>
Related Parties
Note payable to a shareholder, principal and interest at 5% per
annum are due as determined by the Company's shareholders. The
Company intends to pay this note from the proceeds of its
initial public offering (see Note 7). $ 100,491 $ 103,199
----------- ------------
----------- ------------
Other
Note payable to a bank, interest at prime plus 1.5% (10.5% at
December 31, 1995) and principal payments of $3,333 payable
monthly, with remaining principal paid upon maturity in June
1996, collateralized by accounts receivable, inventory,
furniture, fixtures, equipment and a shareholder's home,
guaranteed by two shareholders of the Company. $ -- $ 200,000
Revolving line-of-credit with bank maximum borrowings of
$200,000; interest of prime plus 1.5% (10.5% at December 31,
1995); collateralized by accounts receivable, inventory,
furniture, fixtures, equipment and a shareholder's home,
guaranteed by two shareholders of the Company. The revolving
line-of-credit agreement required compliance with certain
covenants and expired in June 1996. -- 186,801
----------- ------------
$ -- $ 386,801
----------- ------------
----------- ------------
</TABLE>
LEASE COMMITMENTS--The Company leases two offices under operating leases for
terms expiring in 1996 and 2001. Subsequent to June 30, 1996, the Company
terminated one of its leases effective December 1996. A termination fee of
$10,000 is due on December 31, 1996. The Company moved its
F-15
<PAGE>
NAVIDEC, INC.
(FORMERLY ACI SYSTEMS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
5. NOTES PAYABLE: (CONTINUED)
offices and entered into a new lease. The lease calls for monthly payments of
$4,584. These lease payments are included in the schedule below. The aggregate
minimum annual lease payments are as follows:
<TABLE>
<CAPTION>
OPERATING
LEASES
----------
<S> <C>
Year ending December 31:
1996.............................................................................. $ 51,496
1997.............................................................................. 55,012
1998.............................................................................. 55,012
1999.............................................................................. 55,626
2000.............................................................................. 55,626
Thereafter........................................................................ 35,287
----------
Total minimum lease payments...................................................... $ 308,059
----------
----------
</TABLE>
In 1996, the Company entered into an agreement with a bank to sell, with
full recourse, existing and future accounts receivable to a maximum of $750,000
at a 2.55% discount. The Company must maintain a cash reserve account with the
bank of up to 20% of the face amount of receivables sold to the bank. The
Company's recourse obligation is secured by all of the Company's assets and is
guaranteed by two of the Company's shareholders. As of June 30, 1996, the face
amount of receivables sold was $468,506.
6. STOCKHOLDERS' EQUITY:
During 1996, the Company declared a 510.2041 to 1 stock split. The Company
also declared a 1 for 2 reverse stock split to be effective on the date of the
filing of an initial public offering (Note 7). Accordingly, all common stock
reflected in the financial statements and accompanying notes reflect the effect
of the split and reverse split.
During 1994 and 1993, the Company issued stock options to an officer and
shareholder to purchase 946,919 shares of common stock at an exercise price of
$1,745, which resulted in compensation expense being recognized of $10,000 and
$29,000, respectively, related to the issuance of such options. During June
1996, these options were exercised.
In June 1996, an officer and a shareholder transferred 98,500 shares of
common stock to employees at no cost. The Company recognized $26,940 in
compensation expense related to this transfer.
7. SUBSEQUENT EVENTS:
PRIVATE OFFERING OF UNSECURED SUBORDINATED CONVERTIBLE PROMISSORY NOTES--The
Company is offering for sale a minimum of $500,000 and a maximum of $1,500,000
of unsecured subordinated convertible promissory notes. Each $50,000 in
principal is convertible into 14,285.50 shares of common stock and 14,285.50
warrants upon consummation of the initial public offering. The warrants will be
identical to the warrants offered in the initial public offering. Interest at
10% per annum is due on the earlier of December 30, 1997 or the consummation of
the public offering. In the event that the Company has not consummated the
initial public offering prior to December 30, 1997 and the Company defaults in
the repayment of the notes, the Company will issue 12,500 units for every
$50,000 in principal. The warrants in
F-16
<PAGE>
NAVIDEC, INC.
(FORMERLY ACI SYSTEMS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
7. SUBSEQUENT EVENTS: (CONTINUED)
such case will be exercisable within five years from the closing date of the
offering of these notes at $3.64 per share. In addition, principal and interest
at the lesser of prime rate plus 8% or the maximum rate permitted by law will
become immediately payable. The notes are subordinated to all other indebtedness
of the Company.
The Company will issue warrants to the placement agent entitling it to
purchase 25,000 shares of common stock at an exercise price of $7.28 per share.
Subsequent to June 30, 1996, the Company accepted $1,500,000 in
subscriptions for these notes.
LETTER OF INTENT FOR A PUBLIC OFFERING--On July 1, 1996, the Company signed
a letter of intent with an underwriter which has subsequently been amended, to
provide for a public offering consisting of 1,000,000 shares of common stock and
1,000,000 warrants, to provide gross proceeds to the Company of approximately
$5,344,000. Included in the 1,000,000 shares is 240,000 shares of common stock
offered by the holders of the unsecured subordinated convertible promissory
notes. The Company anticipates that the offering price will be $6.90 for the
shares of common stock and $.10 for the warrants. Each warrant will allow the
holder to purchase one share of common stock at an exercise price of 120% of the
offering price for a period of five years after the date of the offering. The
warrants are redeemable by the Company at $.05 per warrant upon 30 days notice
if the market price of the common stock for 20 consecutive trading days within
the 30 day period preceding the date the notice is given equals or exceeds 140%
of the public offering price. The underwriter has a 60 day option
(over-allotment option) to purchase up to 150,000 shares of common stock and
150,000 warrants at the offering price. The Company will also sell to the
underwriter at the close of the public offering underwriters warrants, at a
price of $0.001 per warrant, to purchase 100,000 shares of common stock and
100,000 warrants exclusive of the over-allotment. The underwriters warrants will
be exercisable for 4 years beginning one year after the effective date of the
registration statement at 120% of the offering price. The letter of intent is
subject to change and cancellation by either party.
EMPLOYMENT AGREEMENTS--In July, 1996, the Company has entered into
employment agreements with two shareholders. The agreements provide for payments
totaling $165,000 per year through June 30, 1998 and include covenants not to
compete during the term of employment and for one year thereafter.
The Company has entered into an employment agreement with an employee which
commences upon the completion of the private placement offering and ends six
months thereafter unless extended for an additional 24 months from the date of
completion of an initial public offering by the Company. The agreement provides
for payments of $5,400 per month plus options to purchase 250,000 shares of the
Company's common stock at $3.50 per share. The options are exercisable after 30
months and must be exercised within 60 months from the date of the agreement.
The agreement also contains a covenant not to compete during the term of the
employee's employment and for one year thereafter.
NOTES PAYABLE TO SHAREHOLDERS--Subsequent to June 30, 1996, the Company
obtained loans in the amount of $75,000 and $100,000 from shareholders. The
loans are unsecured and are subordinated to all other indebtedness of the
Company. The loans bear interest at zero and 9.75% per annum, respectively, and
are due on December 31, 1996 and July 1, 1997.
F-17
<PAGE>
NAVIDEC, INC.
(FORMERLY ACI SYSTEMS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
7. SUBSEQUENT EVENTS: (CONTINUED)
PRO FORMA INFORMATION--As discussed in Note 1, effective July 1, 1996, the
Company acquired IPI in a purchase transaction. The unaudited following
information presents the effect of the merger as if it occurred on January 1,
1995.
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Revenue.................................................... $ 2,657,297 $4,288,317
------------ ------------
------------ ------------
Net loss................................................... $ (381,229) $ (87,319)
------------ ------------
------------ ------------
Loss per share............................................. $ (.16) $ (.04)
------------ ------------
------------ ------------
Common share and equivalents outstanding................... 2,339,982 2,339,982
------------ ------------
------------ ------------
</TABLE>
The above pro forma information is not necessarily indicative of the
financial results which would have occurred if such acquisition had taken place
at the earlier date, nor of future operating results.
F-18
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Interactive Planet, Inc.
Denver, Colorado
We have audited the accompanying balance sheet of Interactive Planet, Inc.
(IPI) as of December 31, 1995, and the related statements of operations, changes
in stockholders' equity (deficit), and cash flows for the period from May 15,
1995 (inception date) to December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of IPI as of December 31, 1994,
and the results of its operations and its cash flows for the period from May 15,
1995 (inception date) to December 31, 1995, in conformity with generally
accepted accounting principles.
/s/ HEIN + ASSOCIATES LLP
Denver, Colorado
October 4, 1996
F-19
<PAGE>
INTERACTIVE PLANET, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
1995
JUNE 30, ------------
1996
-----------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents....................................... $ 4,987 $ 4,429
Trade accounts receivable, net of $9,250 and $-0-allowance for
doubtful accounts............................................. 19,085 11,743
Prepaid expenses and other current assets....................... 15,000 39,536
----------- ------------
Total current assets...................................... 39,072 55,708
PROPERTY AND EQUIPMENT, net....................................... 26,966 34,155
----------- ------------
TOTAL ASSETS...................................................... $ 66,038 $ 89,863
----------- ------------
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Note payable--related party..................................... $ 32,500 $ --
Accounts payable.................................................. 2,070 --
Other accrued liabilities....................................... 86,653 55,919
----------- ------------
Total current liabilities................................. 121,223 55,919
LONG-TERM DEBT - RELATED PARTY 45,110 33,361
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, no par value; 1,597,357 shares authorized;
1,597,357 shares issued and outstanding....................... 1,000 1,000
Accumulated deficit............................................. (101,295) (417)
----------- ------------
Total stockholders' equity (deficit)...................... (100,295) 583
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT).............. $ 66,038 $ 89,863
----------- ------------
----------- ------------
</TABLE>
See Accompanying Notes to These Financial Statements.
F-20
<PAGE>
INTERACTIVE PLANET, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
MAY 15, 1995
(INCEPTION
DATE) TO
DECEMBER 31,
1995
FOR THE SIX ------------
MONTHS ENDED
JUNE 30,
1996
------------
(UNAUDITED)
<S> <C> <C>
REVENUES......................................................... $ 185,429 $ 167,574
Cost of services............................................. 60,017 36,252
------------ ------------
GROSS MARGIN..................................................... 125,412 131,322
Operating expense............................................ 225,161 131,739
------------ ------------
OPERATING LOSS................................................... (99,749) (417)
Interest expense............................................. 1,129 --
NET LOSS......................................................... $ (100,878) $ (417)
------------ ------------
------------ ------------
</TABLE>
See Accompanying Notes to These Financial Statements.
F-21
<PAGE>
INTERACTIVE PLANET, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM MAY 15, 1995 THROUGH JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
--------------------- ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
---------- --------- ------------ ------------
<S> <C> <C> <C> <C>
BALANCES, MAY 15, 1995..................... -- $ -- $ -- $ --
Common stock to founders for cash...... 1,597,357 1,000 -- 1,000
Net loss............................... -- -- (417) (417)
---------- --------- ------------ ------------
BALANCES, December 31, 1995................ 1,597,357 1,000 (417) 583
Net loss (unaudited)................... -- -- (100,878) (100,878)
---------- --------- ------------ ------------
BALANCES, June 30, 1996 (Unaudited)........ 1,597,357 $ 1,000 $ (101,295) $ (100,295)
---------- --------- ------------ ------------
---------- --------- ------------ ------------
</TABLE>
See Accompanying Notes to These Financial Statements.
F-22
<PAGE>
INTERACTIVE PLANET, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MAY 15, 1995
(INCEPTION DATE)
TO DECEMBER 31,
1995
FOR THE SIX -----------------
MONTHS ENDED
JUNE 30, 1996
-------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (100,878) $ (417)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization........................... 8,305 5,545
Changes in operating assets and liabilities -
(Increase) decrease in:
Accounts receivable................................. (7,342) (11,743)
Other assets........................................ 24,536 (39,536)
Increase (decrease) in:
Accounts payable and accrued liabilities............ 2,070 --
Other liabilities................................... 30,734 55,919
------------- -----------------
Net cash provided by (used in) operating activities..... (42,575) 9,768
CASH FLOWS FROM INVESTING ACTIVITIES -
Capital expenditures for property and equipment........... 1,116 39,700
------------- -----------------
Net cash used in investing activities................... (1,116) (39,700)
CASH FLOWS FROM FINANCING ACTIVITY:
Proceeds from issuance of common stock.................... -- 1,000
Proceeds from issuance of notes payable................... 44,249 33,361
------------- -----------------
Net cash provided by financing activities............... 44,249 34,361
INCREASE IN CASH AND CASH EQUIVALENTS 558 4,429
CASH AND CASH EQUIVALENTS, beginning of period 4,429 --
------------- -----------------
CASH AND CASH EQUIVALENTS, end of period $ 4,987 $ 4,429
------------- -----------------
------------- -----------------
</TABLE>
See Accompanying Notes to these Financial Statements.
F-23
<PAGE>
INTERACTIVE PLANET, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION--IPI was incorporated in the State of Colorado in 1995. The
Company develops, markets, and supports World Wide Web (Web) sites, on the
Internet or Intranets. The Company designs and implements Web sites ranging from
basic inquiry-only sites to complex, interactive sites capable of providing
on-line commerce, database integration and manipulation, sophisticated graphics,
animation, and other multi-media content. The Company plans to utilize leading
edge software in its Web site development.
PROPERTY AND EQUIPMENT--Property and equipment is stated at cost.
Depreciation is computed over the estimated useful lives of the assets using the
straight-line method generally over a 2 to 3-year period. Leasehold improvements
are amortized on the straight-line method over the lesser of the lease term or
the useful life. Expenditures for ordinary maintenance and repairs are charged
to expense as incurred. Upon retirement or disposal of assets, the cost and
accumulated depreciation are eliminated from the account and any gain or loss is
reflected in the statements of operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The estimated fair values for financial
instruments are determined at discrete points in time based on relevant market
information. These estimates involve uncertainties and cannot be determined with
precision. The carrying amounts of cash, trade receivables, notes payable,
accounts payable, and accrued liabilities approximates fair value.
CASH EQUIVALENTS--For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments with original maturities of three
months or less to be cash equivalents.
INCOME TAXES--The Company accounts for income taxes under SFAS No. 109 which
requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined, based on the difference between the financial
statements and tax bases of asset and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.
USE OF ESTIMATES--The preparation of the Company's financial statements in
conformity with generally accepted accounting principles requires the Company's
management to make estimates and assumptions that affect the amounts reported in
these financial statements and accompanying notes. Actual results could differ
from those estimates.
IMPAIRMENT OF LONG-LIVED ASSETS--Effective January 1, 1996, the Company
adopted Financial Accounting Standards Board Statement 121 (FAS 121). In the
event that facts and circumstances indicate that the cost of assets or other
assets may be impaired, an evaluation of recoverability would be performed. If
an evaluation is required, the estimated future undiscounted cash flows
associated with the asset would be compared to the asset's carrying amount to
determine if a write-down to market value or discounted cash flow value is
required. Adoption of FAS 121 had no effect on the unaudited June 30, 1996
financial statements.
STOCK BASED COMPENSATION--In October 1995, the Financial Accounting
Standards Board issued a new statement titled "Accounting for Stock-Based
Compensation" (FAS 123). The new statement is effective for fiscal years
beginning after December 15, 1995. FAS 123 encourages, but does not require,
companies to recognize compensation expense for grants of stock, stock options,
and other equity instruments to employees based on fair value. Companies that do
not adopt the fair value accounting rules must disclose
F-24
<PAGE>
INTERACTIVE PLANET, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
the impact of adopting the new method in the notes to the financial statements.
Transactions in equity instruments with non-employees for goods or services must
be accounted for on the fair value method. The Company has elected not to adopt
the fair value accounting prescribed by FAS 123 for employees, and will be
subject only to the disclosure requirements prescribed by FAS 123.
UNAUDITED INFORMATION--The balance sheet as of June 30, 1996 and the
statements of operations for the six-month period ended June 30,1996 were taken
from the Company's books and records without audit. However, in the opinion of
management, such information includes all adjustments (consisting only of normal
accruals), which are necessary to properly reflect the financial position of the
Company as of June 30, 1996 and the results of operations for the six months
ended June 30, 1996. The results of operations for the interim period presented
is not necessarily indicative of those expected for the year.
The Company had no operations from May 15, 1995 (inception date) to June 30,
1995, and as such, no comparative interim financial statements have been
presented for this period.
2. CONTINUED OPERATIONS:
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates the realization of
assets, including liquidation of liabilities in the normal course of business.
The Company has incurred substantial debt and recurring losses. As of December
31, 1995, the Company has a working capital deficiency of $211,000 and total
stockholders' equity of $583. As discussed in Note 7, subsequent to June 30,
1996, the Company merged with NAVIDEC, Inc. NAVIDEC, Inc., which has also
incurred losses, has completed a private placement of debt which management
believes should provide adequate funding to enable the combined entity to
continue operations for at least the next twelve months. In addition, management
is aggressively pursuing an increase in revenues, which ultimately, the Company
believes, will result in profitable operations.
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
JUNE 30, ------------
1996
-----------
(UNAUDITED)
<S> <C> <C>
Computer equipment................................................ $ 22,578 $ 21,450
Software.......................................................... 18,250 18,250
----------- ------------
Less accumulated depreciation..................................... (13,862) (5,545)
----------- ------------
$ 26,966 $ 34,155
----------- ------------
----------- ------------
</TABLE>
F-25
<PAGE>
INTERACTIVE PLANET, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
4. NOTES PAYABLE AND LONG-TERM DEBT - RELATED PARTY:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
JUNE 30, ------------
1996
-----------
(UNAUDITED)
<S> <C> <C>
Note payable to a stockholder due on demand, non-interest bearing. $ 32,500 $ --
----------- ------------
----------- ------------
Note payable to a stockholder, principal along with interest at
10% per annum due on December 31, 1997. $ 45,110 $ 33,361
----------- ------------
----------- ------------
</TABLE>
5. STOCKHOLDERS' EQUITY (DEFICIT):
During 1996, the Company declared a 15.97357 for 1 stock split. Accordingly,
all common stock reflected in the financial statements and accompanying notes
reflect the effect of the split.
6. INCOME TAXES:
The components of the net deferred tax asset recognized as of December 31,
1995 is as follows:
<TABLE>
<S> <C>
Long-term deferred tax assets
(liabilities):
Net operating loss
carryforwards.................. $ 13,726
Valuation allowance.............. (13,726)
--------
Net long-term deferred tax
asset.......................... $ --
--------
--------
</TABLE>
At December 31, 1995, the Debtor had net operating loss carryforwards for
Federal tax purposes of approximately $13,726. The loss carryforwards, unless
utilized, will expire in 2010.
The Company's ability to use its net operating loss (NOL) carryforwards to
offset future income is subject to restrictions attributable to equity
transactions that result in change in ownership as defined by the Internal
Revenue Code. As a result of a merger subsequent to June 30, 1996 (see Note 7),
these restrictions will limit, on an annual basis, the Company's future use of
its NOL loss carryforwards.
7. MAJOR CUSTOMERS:
For the period from May 15, 1995 (inception date) to December 31, 1995, the
Company had sales to three customers representing 23%, 20%, and 12% of total
sales, respectively. As of December 31, 1995, the Company's accounts receivable
was from four customers. These receivables were collected in full subsequent to
the period end.
8. SUBSEQUENT EVENTS:
Effective on July 1, 1996, the Company entered into an agreement and plan of
merger with the Company. Each of the issued and outstanding shares of the
Company's stock was exchanged for a share of the Company's common stock.
Subsequent to June 30, 1996, the Company completed an offering for $1,500,000 of
unsecured subordinated convertible promissory note. Additionally, the Company
signed a letter of intent with an underwriter for a proposed public offering.
F-26
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. ANY INFORMATION OR REPRESENTATION
NOT HEREIN CONTAINED, IF GIVEN OR MADE, MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES
OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SECURITIES BY ANY PERSON IN ANY JURISDICTION
WHERE SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING SUCH OFFER IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. THE DELIVERY OF THIS PROSPECTUS
SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................
The Company...............................................................
Risk Factors..............................................................
Use of Proceeds...........................................................
Dividend Policy...........................................................
Dilution..................................................................
Capitalization............................................................
Selected Financial Data...................................................
Management's Discussion & Analysis of Financial Condition and Results of
Operations..............................................................
Business..................................................................
Management................................................................
Principal Stockholders....................................................
Bridge Financing Private Placement........................................
Bridge Financing Selling Stockholders.....................................
Additional Registered Securities..........................................
Certain Transactions......................................................
Description of Securities.................................................
Shares Eligible for Future Sale...........................................
Underwriting..............................................................
Experts...................................................................
Change in Independent Accountants.........................................
Legal Matters.............................................................
Additional Information....................................................
Index to Financial Statements.............................................
</TABLE>
------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
1,000,000 COMMON SHARES
AND
1,000,000 WARRANTS
NAVIDEC, INC.
---------------------
PROSPECTUS
---------------------
JOSEPH CHARLES & ASSOCIATES, INC.
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation eliminate the personal liability of
directors to the Company or its stockholders for monetary damages for breach of
fiduciary duty to the extent permitted by Colorado law. The Company's Articles
of Incorporation and Bylaws provide that the Company shall indemnify its
officers and directors to the extent permitted by Colorado law, which authorizes
a corporation to indemnify directors, officers, employees or agents of the
corporation in non-derivative suits if such party acted in good faith and in a
manner such party reasonably believed to be in or not opposed to the best
interest of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The Colorado Business Corporation Act further provides that indemnification
shall be provided if the party in question is successful on the merits or
otherwise.
Reference is hereby made to the caption "Management--Limitation of Liability
and Indemnification" in the Prospectus which is a part of this Registration
Statement for a description of indemnification arrangements between the Company
and its directors.
The form of Underwriting Agreement, including as Exhibit 1.1, provides for
indemnification of the Company and certain controlling persons under certain
circumstances, including liabilities under the Securities Act of 1933, as
amended ("Securities Act"). Insofar as indemnification for liabilities under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions of the Underwriting Agreement,
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
Securities Act and therefore is unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses of the distribution, all of which are to be borne by
the Company, are as follows:
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $ 8,332
NASD Fee.......................................................... $ 2,416
NASDAQ Fees....................................................... $ 10,000
Blue Sky Fees and Expenses........................................ $ 4,000*
Transfer Agent Fees............................................... $ 5,000*
Accounting Fees and Expenses...................................... $ 55,000*
Legal Fees and Expenses........................................... $ 80,000*
Representative's Non-Accountable Expense Allowance................ $ 210,000*
Printing and Engraving Expenses................................... $ 60,000*
Miscellaneous Fees and Expenses................................... $ 15,252*
---------
Total......................................................... $ 450,000
---------
---------
</TABLE>
- ------------------------
* All amounts are estimates
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In August 1996, the Company issued to John McKowen, an employee of the
Company, options to purchase 250,000 shares of Common Stock at an exercise price
of $3.50 per share in connection with an Employment Agreement between the
Company and Mr. McKowen. Such options are exercisable after February 1, 1999 and
expire August 1, 2001.
II-1
<PAGE>
In July 1996, the Company issued an aggregate of 798,679 shares of Common
Stock to the existing shareholders of Interactive Planet, Inc. ("IPI") in
exchange for all of this issued and outstanding shares of IPI in connection with
the merger of IPI with and into the Company.
From August through October 18, 1996, the Company consummated the sale of an
aggregate of $1,500,000 principal amount of 10% Unsecured Subordinated
Convertible Promissory Notes, due December 31, 1997, in a private placement to
investors. The Notes are automatically converted into an aggregate of 428,565
shares of Common Stock and 428,565 five-year redeemable Common Stock purchase
warrants of the Company upon the consummation of the initial public offering, at
which time the Notes will no longer be outstanding. Joseph Charles & Associates,
Inc., received $150,000 in commissions and $37,500 in expenses as placement
agent in such private placement. Joseph Charles & Associates also received five-
year warrants for the purchase of 25,000 shares at an exercise price of $3.64
per share. These warrants will be rescinded by Joseph Charles & Associates upon
consummation of this offering.
In June 1996, Ralph Armijo exercised options to purchase 946,919 shares of
Common Stock for an aggregate exercise price of $1,745. These options were
granted during 1993 and 1994 in lieu of salary.
Each of the foregoing transactions was exempt from registration under the
Securities Act of 1933, as amended, pursuant to the provisions of Section 4(2)
thereof and, with respect to the Notes sold in September, 1996, Regulation D
under the Securities Act, for transactions not involving a public offering. With
respect to each transaction, no person acting on the Company's behalf offered or
sold the securities by means of any form of general solicitation or general
advertising.
ITEM 27. EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement
1.2 Form of Selected Dealers Agreement
*1.3 Warrant Exercise Fee Agreement
3.1 Amended and Restated Articles of Incorporation of ACI Systems, Inc.
3.2 Amended and Restated Bylaws of ACI Systems, Inc.
3.3 Articles of Merger and Agreement and Plan of Merger Between ACI Systems, Inc. and
Interactive Planet, Inc.
*4.1 Form of Certificate for Common Stock of NAVIDEC, Inc.
4.2 Form of Warrant
4.3 Form of Warrant Agreement
4.4 Form of Representative's Option Agreement
4.5 Form of Private Placement Financing Converted Units Registration Rights Agreement
4.6 Form of 10% Unsecured Subordinated Convertible Promissory Note
*4.7 Form of Placement Agent's Warrant Registration Rights Agreement
4.8 Form of Placement Agent's Warrant for the Purchase of Shares of Common Stock and
Warrants
5.1 Opinion, with Consent, of Cohen Brame & Smith Professional Corporation
10.1 Form of "Lock Up" Letter to be entered into by the Company's officers, directors and
shareholders
10.2 Form of Shareholders' Agreement dated July 12, 1996, among NAVIDEC, Inc. and its
shareholders on such date.
10.3 Form of Confidentiality and Non-Disclosure Agreement between the Company and its
significant employees
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.4 Employment Agreement dated July 3, 1996 between NAVIDEC, Inc. and Ralph Armijo
10.5 Employment Agreement between NAVIDEC, Inc. and John R. McKowen
10.6 Lease Agreement dated February 23, 1996 for the premises located at 14 Inverness
Dr., Building F, Suite 116, Englewood, Colorado 80112
10.7 Lease Agreement dated October 27, 1993 for the premises located at 7002 S. Revere
Parkway, Suite 40, Englewood, Colorado 80112 [NEED]
10.8 Promissory Note as of October 1, 1993, in the principal amount of $119,199, from ACI
Systems, Inc. payable to Arthur Armijo
10.9 Promissory Note as of March 31, 1996, in the principal amount of $45,110 from
Interactive Planet, Inc. payable to Patrick Mawhinney
10.10 Promissory Note as of July 9, 1996, in the principal amount of $75,000 from NAVIDEC,
Inc. payable to Cynthia Simmons
10.11 Business/Manager Agreement and Commercial Security Agreement, each dated February
27, 1996, between NAVIDEC, INC. and Colorado State Bank of Denver
10.12 Form of Commercial Guarantee of Ralph Armijo and Arthur Armijo in favor of Colorado
State Bank of Denver in connection with the February 27, 1996 Promissory Note
10.13 Form of Commercial Continuing Guarantee of Ralph Armijo and Arthur Armijo dated
November 17, 1993 in favor of Vectra Bank in connection with line of credit
terminated in February 1996
10.14 Promissory Note as of August 6, 1996, in the principal amount of $70,000 from
NAVIDEC, INC. payable to Ralph Armijo
10.15 Promissory Note as of July 26, 1996 in the principal amount of $30,000 from NAVIDEC,
INC. payable to Patrick Mawhinney
10.16 Promissory Note as of July 25, 1996, in the principal amount of $182,500 from
NAVIDEC, INC. payable to Littleton Land Company
10.17 Netscape Commercial Applications Partner Program (NCAPP) Guidelines
10.18 Form of Agreement Not to Sell with Bridge Financing Selling Stockholders
21.1 Subsidiaries of the Registrant
23.1 Consent of Hein + Associates LLP
23.2 Consent of Cohen Brame & Smith Professional Corporation (included in Exhibit 5.1)
24.1 Power of Attorney with respect to certain signatures in the Registration Statement
(see signature page to Registration Statement)
27 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment
ITEM 28. UNDERTAKINGS
1. The Registrant hereby undertakes:
(1) that for purposes of determining any liability under the Securities
Act, treat the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant under Rule 424(b)(1) or (4) or
497(h) under the Securities Act as part of this Registration Statement as of
the time the Commission declared it effective.
II-3
<PAGE>
(2) that for the purpose of determining any liability under the
Securities Act, treat each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities offered in the
Registration Statement, and that offering of the securities at that time as
the initial bona fide offering of those securities.
(3) to file, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereto) that, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) to include any additional or changed material information on
the plan of distribution.
(4) to remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the termination
of the offering.
(5) to provide to the Representative of the Underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations
and registered in such names as required by the Representative of the
Underwriters to permit prompt delivery to each purchaser.
2. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities or controlling person of the
small business issuer 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 small business issuer will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Englewood, State of Colorado, on the 18th day of
October, 1996.
NAVIDEC, INC.
By: /s/ RALPH ARMIJO
-----------------------------------------
Ralph Armijo, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Ralph Armijo his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for him in his name, place and stead, in any and
all capacities, to sign this Registration Statement and any and all amendments
(including post-effective amendments) to this Registration Statement on Form
SB-2 and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following person in the capacities
and on the dates indicated.
SIGNATURES TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ RALPH ARMIJO
- ------------------------------ President, Chief Executive October 18, 1996
Ralph Armijo Officer and Director
/s/ PATRICK R. MAWHINNEY
- ------------------------------ Chief Financial Officer, October 18, 1996
Patrick R. Mawhinney Treasurer and Director
II-5
<PAGE>
NAVIDEC, INC.
14 INVERNESS DRIVE, BUILDING F, SUITE 166
ENGLEWOOD, COLORADO 80112
UNDERWRITING AGREEMENT
_______________, 1996
Joseph Charles & Associates, Inc.
As Representative of the Several Underwriters
9701 Wilshire Boulevard, Ninth Floor
Beverly Hills, CA 90212
Ladies and Gentlemen:
NAVIDEC, INC., a Colorado corporation (the "Company"), and certain
security holders of the Company listed on Schedule A hereto (such security
holders being referred to in this Agreement as the "Selling Stockholders"),
propose to issue and sell pursuant to this Underwriting Agreement (the
"Agreement"), an aggregate of 1,000,000 shares of Common Stock, $.001 par
value per share (the "Shares"), and 1,000,000 Warrants, each of which may be
exercised to purchase one share of Common Stock (the "Warrants") commencing
on the effective date of the Registration Statement (the "Effective Date").
The Shares consist of 760,000 shares to be sold by the Company (the "Company
Shares") and 240,000 shares to be sold by the Selling Stockholders (the
"Stockholder Shares"). All of the Warrants are to be sold by the Company. In
addition, the Company proposes to grant the option referred to in Section
2(b) to purchase all or any part of an aggregate of 150,000 additional Shares
and 150,000 additional Warrants. You are acting as Representative (the
"Representative") of the Underwriters listed on Schedule I hereto (the
"Underwriters").
The aggregate of 1,000,000 Shares and 1,000,000 Warrants, together with
all or any part of the 150,000 Shares and 150,000 Warrants which the
Underwriters have the option to purchase, are herein called the "Securities."
The Common Stock of the Company to be outstanding after giving effect to the
sale of the Shares (including the 150,000 Shares that the Underwriters have
the option to purchase) is herein called the "Common Stock."
The Underwriters have advised the Company that they desire to purchase
the Securities. The Company and the Selling Stockholders confirm the
agreements made by them, respectively, with respect to the purchase of the
Shares by the Underwriters, as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
A. The Company represents and warrants to, and agrees with, each
Underwriter that:
(a) A registration statement (File No. 333-_________) on Form SB-2
relating to the public offering of the Securities, including a preliminary
form of prospectus, copies of which have heretofore been delivered to you,
has been prepared by the Company in conformity with the
<PAGE>
requirements of the Securities Act of 1933, as amended (the "Act") and the
rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and has been with the
Commission under the Act. "Preliminary Prospectus" shall mean each prospectus
filed pursuant to Rule 430 of the Rules and Regulations. The registration
statement (including all financial schedules and exhibits) as amended at the
time it becomes effective and the final prospectus included therein are
respectively referred to as the "Registration Statement" and the
"Prospectus", except that (i) if the prospectus first filed by the Company
pursuant to Rule 424(b) or Rule 430A of the Rules and Regulations or
otherwise utilized and not required to be so filed shall differ from said
prospectus as then amended, the term "Prospectus" shall mean the prospectus
first filed pursuant to Rule 424(b) or Rule 430A or so utilized from and
after the date on which it shall have been filed or utilized, and (ii) if
such registration statement or prospectus is amended or such prospectus is
supplemented, after the effective date of such registration statement and
prior to the Option Closing Date (as defined in Section 2(b)), the term
"Registration Statement" shall include such registration statement as so
amended, and the term "Prospectus" shall include the prospectus as so amended
or supplemented, or both, as the case may be.
(b) At the time the Registration Statement becomes effective and
at all times subsequent thereto up to the Option Closing Date (hereinafter
defined), (i) the Registration Statement and Prospectus will in all material
respects conform to the requirements of the Act and the Rules and
Regulations; and (ii) neither the Registration Statement nor the Prospectus
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 in light of the circumstances under which
they were made; provided, however, that the Company makes no representations,
warranties or agreements as to information contained in or omitted from the
Registration Statement or Prospectus in reliance upon, and in conformity
with, written information furnished to the Company by or on behalf of you or
any Selling Stockholder specifically for use in the preparation thereof. It
is understood that the statements set forth in the Prospectus with respect to
stabilization, the material set forth under the heading "Underwriting" and
the identity of counsel to the Underwriter under the heading "Legal Matters"
constitute the only information furnished in writing by the Underwriters for
inclusion in the Registration Statement and Prospectus, as the case may be.
(c) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation, with full power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus and is
duly qualified to do business as a foreign corporation and is in good
standing in all other jurisdictions in which the nature of its business or
the character or location of its properties requires such qualification,
except where failure to so qualify is not reasonably likely to materially
adversely affect the Company's business, properties or financial condition.
(d) The authorized capital stock of the Company as of the
Effective Date was as set forth under "Capitalization" in the Prospectus. The
shares of issued and outstanding capital stock of the Company set forth
thereunder have been duly authorized, validly issued and are fully paid and
non-assessable; except as set forth in the Prospectus, no options, warrants
or other rights to purchase, agreements or other obligations to issue, or
agreements or other rights to convert any obligation into, any shares of
capital stock of the Company have been granted or entered into by the
Company. The
2
<PAGE>
Securities and Representative's Warrants conform in all material respects to
all statements relating thereto contained in the Registration Statement and
Prospectus.
(e) The Securities are duly authorized and, when issued, delivered
and paid for pursuant to this Agreement, will be duly authorized, validly
issued, fully paid and nonassessable and free of preemptive rights of any
security holder of the Company. The certificates evidencing the Securities
are and will be in valid and proper legal form. The Representative's Warrants
(as defined in Section 12) will be exercisable for Securities in accordance
with the terms of the Representative's Warrants and at the prices therein
provided for. The shares of Common Stock and Warrants have been duly
authorized and reserved for issuance upon such exercise, and such Securities,
when issued upon such exercise in accordance with the terms of the
Representative's Warrants and when the price is paid, shall be fully paid and
non-assessable. Neither the filing of the Registration Statement nor the
offering or sale of the Securities as contemplated in this Agreement gives
rise to any rights, other than those which have been waived or satisfied, for
or relating to the registration of any securities of the Company, except as
described in the Registration Statement.
(f) This Agreement and the Representative's Warrants have been
duly and validly authorized, executed and delivered by the Company, and
assuming due execution by the other party or parties hereto and thereto,
constitute valid and binding obligations of the Company enforceable against
the Company in accordance with their respective terms, except as rights to
indemnity and contribution hereunder may be limited by applicable law and
except as enforceability may be limited by bankruptcy, insolvency or other
laws affecting the rights of creditors generally or by general equitable
principles. The Company has full power and lawful authority to authorize,
issue and sell the Shares to be sold by it hereunder on the terms and
conditions set forth herein, and no consent, approval, authorization or other
order of any governmental authority is required in connection with such
authorization, execution and delivery or with the authorization, issue and
sale of the Securities or the Representative's Warrants, except such as may
be required under the Act or state securities laws.
(g) Except as described in the Prospectus, the Company is not in
material violation, breach or default of or under, and consummation by the
Company of the transactions herein contemplated and the fulfillment by the
Company of the terms of this Agreement and the Representative's Warrants will
not conflict with, or result in a breach of, any of the terms or provisions
of, or constitute a default under, or result in the creation or imposition of
any lien, charge or encumbrance pursuant to the terms of, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company is a party or by which the Company may be bound or to which
any of the property or assets of the Company are subject, which would have a
material adverse effect on the business, properties or financial condition of
the Company, nor will such action result in any violation of the provisions
of the certificate of incorporation or the by-laws of the Company, as
amended, or any statute or any order, rule or regulation applicable to the
Company of any court or of any regulatory authority or other governmental
body having jurisdiction over the Company, which would have a material
adverse effect on the business, properties or financial condition of the
Company.
(h) The Company owns no real property and, subject to the
qualifications stated in the Prospectus, the Company has good and marketable
title to all properties and assets described in the Prospectus as owned by
it, free and clear of all liens, charges, encumbrances or restrictions,
except such
3
<PAGE>
as are not materially significant or important in relation to its business;
all of the leases and subleases under which the Company is the lessor or
sublessor of properties or assets or under which the Company holds properties
or assets as lessee or sublessee as described in the Prospectus are in full
force and effect, and, except as described in the Prospectus, the Company is
not in default in any respect with respect to any of the terms or provisions
of any of such leases or subleases which would have a material adverse effect
on the business, properties or financial condition of the Company, and no
claim has been asserted by anyone adverse to rights of the Company as lessor,
sublessor, lessee or sublessee under any of the leases or subleases mentioned
above, or affecting or questioning the right of the Company to continued
possession of the leased or subleased premises or assets under any such lease
or sublease except as described or referred to in the Prospectus, which would
have a material adverse effect on the business properties or financial
condition of the Company; and the Company owns or leases all such properties
described in the Prospectus as are necessary to its operations as now
conducted and, except as otherwise stated in the Prospectus, as proposed to
be conducted as set forth in the Prospectus.
(i) Hein + Associates, who have given their report on
certain financial statements filed and to be filed with the Commission
as a part of the Registration Statement, which are included in the
Prospectus, are with respect to the Company independent public
accountants as required by the Act and the Rules and Regulations.
(j) The financial statements and schedules, together with
related notes, set forth in the Prospectus or the Registration
Statement present fairly the financial position and results of
operations and changes in financial position of the Company on the
basis stated in the Registration Statement, at the respective dates and
for the respective periods to which they apply. Said statements and
schedules and related notes have been prepared in accordance with
generally accepted accounting principles applied on a basis which is
consistent during the periods involved.
(k) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, the Company has not
incurred any liabilities or obligations, direct or contingent, not in the
ordinary course of business, or entered into any transaction not in the
ordinary course of business, which is material to the business of the
Company, and there has not been any change in the capital stock of, or any
incurrence of long-term debt by, the Company or any issuance of options,
warrants or other rights to purchase the capital stock of the Company or any
adverse change or any development involving, so far as the Company can now
reasonably foresee, a prospective adverse change in the condition (financial
or other), net worth, results of operations, business, key personnel or
properties of it which would be material to the business or financial
condition of the Company, and the Company has not become party to, and
neither the business nor the property of the Company has become the subject
of, any material litigation whether or not in the ordinary course of business.
(l) Except as set forth in the Prospectus, there is not now
pending nor, to the knowledge of the Company, threatened, any action, suit or
proceeding (including those related to environmental matters or
discrimination on the basis of age, sex, religion or race) to which the
Company is a party before or by any court or governmental agency or body,
which, if adversely determined, would result in any material adverse change
in the condition (financial or other), business
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prospects, net worth or properties of the Company; and, except as set forth
in the Prospectus, no labor disputes involving the employees of the Company
exist which, if adversely determined, would result in any material adverse
change in the condition (financial or otherwise), business prospects, net
worth or property of the Company.
(m) Except as disclosed in the Prospectus, the Company has filed
all necessary federal, state and foreign income and franchise tax returns and
has paid all taxes shown as due thereon; and there is no tax deficiency which
has been or to the knowledge of the Company might be asserted against the
Company which has not been adequately reserved for on the Company's balance
sheet.
(n) The Company has sufficient licenses, permits and other
governmental authorizations currently required for the conduct of its
business or the ownership of its property as described in the Prospectus and
is in all material respects complying therewith and owns or possesses
adequate rights to use all material patents, patent applications, trademarks,
mark registrations, copyrights and licenses necessary for the conduct of such
business and has not received any notice of conflict with the asserted rights
of others in respect thereof. To the best knowledge of the Company, none of
the activities or business of the Company is in violation of, or causes the
Company to violate, any law, rule, regulation or order of the United States,
any state, county or locality, or of any agency or locality, the violation of
which would have a material adverse effect upon the condition (financial or
otherwise), business prospects, net worth or properties of the Company.
(o) The Company has not, directly or indirectly, at any time (i)
made any contributions to any candidate for foreign political office, or if
made, failed to disclose fully any such contribution made in violation of
law, or (ii) made any payment to any state, federal or foreign governmental
officer or official, or other person charged with similar public or quasi
public duties, other than payments or contributions required or allowed by
applicable law. The Company's internal accounting controls and procedures are
sufficient to cause the Company to comply in all material respects with the
Foreign Corrupt Practices Act of 1977, as amended.
(p) On the Closing Dates (as defined in Section 2(c)), all
transfer or other taxes (including franchise, capital stock or other tax,
other than income taxes imposed by any jurisdiction), if any, which are
required to be paid in connection with the sale and transfer of the
Securities to the Underwriters hereunder will have been fully paid or
provided for by the Company and all laws imposing such taxes will have been
fully complied with.
(q) All contracts and other documents of the Company which are,
under the Rules and Regulations, required to be filed as exhibits to the
Registration Statement have been so filed.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the Securities or to facilitate
the sale or resale of the Securities.
(s) Except as disclosed in the Registration Statement, the Company
has no subsidiaries.
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(t) Except for this Agreement and other agreements with you, and
except as disclosed in the Registration Statement, the Company has not
entered into any agreement pursuant to which any person is entitled either
directly or indirectly to compensation from the Company for services as a
finder in connection with the proposed public offering.
B. Each Selling Stockholder severally represents and warrants to, and
agrees with, each Underwriter that:
(a) When the Registration Statement shall become effective, and at
all times subsequent thereto up to the First Closing Date (defined below)
and, if any Optional Shares are purchased, up to the Option Closing Date
(defined below) (i) such parts of the Registration Statement and any
amendments and supplements thereto as specifically refer to such Selling
Stockholder will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading and (ii) such parts of the Prospectus
as specifically refer to such Selling Stockholder will not include an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(b) The execution and delivery by such Selling Stockholder of, and
the performance by such Selling Stockholder of its obligations under, this
Agreement, the Custody Agreement signed by such Selling Stockholder and
American Securities Transfer, Inc., as custodians (the "Custodians"),
relating to the deposit of the Stockholder Shares to be sold by such Selling
Stockholder (the "Custody Agreement") and the Power of Attorney appointing
certain individuals as such Selling Stockholder's attorneys-in-fact to the
extent set forth therein, relating to the transactions contemplated hereby
and the Registration Statement (the "Power of Attorney") will not contravene
any provision, or the certificate or articles of incorporation or by-laws of
such Selling Stockholder (if such Selling Stockholder is a corporation), or
any agreement or other instrument binding upon such Selling Stockholder or
any judgment, order or decree of any governmental body, agency or court
having jurisdiction over such Selling Stockholder, and no consent, approval,
authorization or order of or qualification with any governmental body or
agency, financial institution, or other person or entity is required for the
performance by such Selling Stockholder of its obligations under this
Agreement or the Custody Agreement or Power of Attorney of such Selling
Stockholder, except as required by the Securities Act or the securities or
Blue Sky laws of the various states in connection with the offer and sale of
the Shares.
(c) This Agreement, the Custody Agreement and the Power of
Attorney have been duly authorized, executed and delivered by, and are
binding and valid agreements of, such Selling Stockholder.
(d) Such Selling Stockholder on the First Closing Date will have
good and marketable title to the Stockholder Shares to be sold by such
Selling Stockholder, free and clear of any pledge, lien, security interest,
charge, claim, equity or encumbrance of any kind, and full right, power and
authority to enter into this Agreement and to sell, assign, transfer and
deliver the Shares to be sold by such Selling Stockholder hereunder. Upon the
delivery of and payment for the Stockholder Shares hereunder, good and
marketable title to the Stockholder Shares to be sold by such Selling
Stockholder
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will pass to the several Underwriters, free and clear of any pledge, lien,
security interest, charge, claim, equity or encumbrance of any kind.
(e) Certificates for all of the Stockholder Shares to be sold by
such Selling Stockholder pursuant to this Agreement in suitable form for
transfer by delivery or accompanied by duly executed instruments of transfer
or assignment in blank (with signatures guaranteed), have been placed in
custody with the Custodians for the purpose of effecting delivery pursuant to
this Agreement.
(f) Such Selling Stockholder shall not sell, transfer or otherwise
dispose of, or offer or contract to sell transfer or otherwise dispose of,
directly or indirectly (except for transfers during such Selling
Stockholder's lifetime or on death by will or intestacy to his or her
immediate family or a family trust; provided that such transferee shall agree
in writing to the restrictions on transfer set forth therein), any Common
Stock, any securities convertible into or exchangeable for Common Stock or
any rights to purchase or acquire Common Stock for a period of ten months
after the date of the public offering of the Shares contemplated hereby,
without your prior written consent, except for the Stockholder Shares offered
hereunder.
(g) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to cause or result in, or that
has constituted, or might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company and
such Selling Stockholder has not distributed and will not distribute any
prospectus or other offering material in connection with the offering and
sale of the Stock other than any Preliminary Prospectus filed with the
Commission or the Prospectus Or other material permitted by the Securities
Act.
2. PURCHASE, DELIVERY AND SALE OF THE SHARES.
(a) Subject to the terms and conditions of this Agreement, and
upon the basis of the representations, warranties and agreements herein
contained, (i) the Company agrees to issue and sell to the Underwriters and
the Underwriters agree to buy from the Company at $_____________ per
Share and $_________ per Warrant at the place and time hereinafter specified,
the number of Shares and Warrants set forth opposite each Underwriter's name
in Schedule I hereto (the "Company Firm Securities") (ii) each Selling
Stockholder agrees, severally but not jointly, to sell to the Underwriters
and the Underwriters agree to buy the number of Shares indicated by such
Selling Stockholder's name on Schedule II to this Agreement (the "Selling
Stockholders Firm Shares"). Together, the Company Firm Securities and the
Selling Stockholder's Firm Shares are the "Firm Securities." Each of the
Underwriters agrees, severally and not jointly, to purchase from the Company
and the Selling Stockholders, at a combined purchase price of
$____________ per Share and Warrant, the number of Firm Securities set
forth opposite such Underwriter's name on Schedules I and II hereto.
Delivery of the Firm Securities against payment therefor shall take
place at the offices of Joseph Charles & Associates, Inc., 9701 Wilshire
Boulevard, Ninth Floor, Beverly Hills, California 90212 (or at such other
place as may be designated by agreement between the Representative and the
Company) at 10:00 a.m. New York time on ______,1996, or at such other time
and date, not later than seven calendar days thereafter, as you may
designate, such time and date of payment and delivery for the Firm Securities
being herein called the "First Closing Date." Time shall be of the essence
and
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delivery at the time and place specified in this subsection (a) is a further
condition to the Underwriters' obligations hereunder.
(b) In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and
agreements herein contained, the Company hereby grants the Underwriters an
option to purchase all or any part of an aggregate of 150,000 additional
Shares and 150,000 additional Warrants at $___________ per Share and
$_____ per Warrant (such additional Shares and Warrants being referred to
herein as the "Option Securities"). This option may be exercised on one
occasion within 45 days after the Effective Date upon notice by the
Representative to the Company advising it as to the amount of Option
Securities as to which the option is being exercised, the names and
denominations in which the certificates for such Option Securities are to be
registered and the time and date when such certificates are to be delivered.
Such time and date shall be determined by the Representative but shall not be
earlier than four and not later than seven calendar days after the exercise
of said option, nor in any event prior to the First Closing Date, and such
time and date is referred to herein as the "Option Closing Date." Delivery of
the Option Securities against payment therefor shall take place at the
offices of Joseph Charles & Associates, Inc., 9701 Wilshire Boulevard, Ninth
Floor, Beverly Hills, California 90212. Time shall be of the essence and
delivery at the time and place specified in this subsection (b) is a further
condition to the Underwriters' obligations hereunder.
The Option granted hereunder may be exercised only to cover
over-allotments in the sale by the Underwriters of Firm Securities referred
to in subsection (a) above.
(c) The Company will make the certificates for the Securities to
be purchased by the Underwriters hereunder available to the Representative
for checking at least two full business days prior to the First Closing Date
or the Option Closing Date (which are collectively referred to herein as the
"Closing Dates" and individually as a "Closing Date"), as the case may be.
The certificates shall be in such names and denominations as the
Representative may request, at least two full business days prior to the
relevant Closing Dates.
Definitive engraved certificates in negotiable form for the
Securities to be purchased by the Underwriters hereunder will be delivered by
the Company to the Underwriters for the Underwriters' account against payment
of the purchase price by the Underwriters, at the option of the
Representative, by certified or bank cashier's checks in New York Clearing
House funds or by wire transfer, payable to the order of the Company and the
Selling Stockholders, as the case may be.
In addition, in the event the Underwriters exercise the option to
purchase from the Company all or any portion of the Option Securities
pursuant to the provisions of subsection (b) above, payment for such Option
Securities shall be made to or upon the order of the Company by the
Underwriters, at the option of the Representative, by certified or bank
cashier's checks payable in New York Clearing House funds or by wire
transfer, at the offices of Joseph Charles & Associates, Inc. at the time and
date of delivery of such Option Securities as required by the provisions of
subsection (b) above, against receipt of the certificates for such Option
Securities by the Underwriters, registered in such names and in such
denominations as the Underwriters may request.
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It is understood that you propose to offer the Securities to be
purchased hereunder to the public upon the terms and conditions set forth in
the Registration Statement, after the Registration Statement becomes effective.
3. COVENANTS OF THE COMPANY.
The Company covenants and agrees with each Underwriter that:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective and, upon notification from the
Commission that the Registration Statement has become effective, will so
advise the Representative and will not at any time, whether before or after
the Effective Date, file any amendment to the Registration Statement or
supplement to the Prospectus of which the Representative shall not previously
have been advised and furnished with a copy or to which the Representative or
counsel to the Underwriters shall have reasonably objected in writing or
which is not in compliance with the Act and the Rules and Regulations. At any
time prior to the later of (A) the completion by you of the distribution of
the Securities contemplated hereby (but in no event more than nine months
after the Effective Date) and (B) 25 days after the Effective Date, the
Company will prepare and file with the Commission, promptly upon your
request, any amendments or supplements to the Registration Statement or
Prospectus which, in the Representative's reasonable opinion, may be
necessary or advisable in connection with the distribution of the Securities.
Promptly after the Representative or the Company is advised
thereof, the Representative will advise the Company or the Company will
advise the Representative, as the case may be, and confirm the advice in
writing, of the receipt of any comments of the Commission, of the
effectiveness of any post effective amendment to the Registration Statement,
of the filing of any supplement to the Prospectus or any amended Prospectus,
of any request made by the Commission for amendment of the Registration
Statement or for supplementing of the Prospectus or for additional
information with respect thereto, of the issuance by the Commission or any
state or regulatory body of any stop orders or other order suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of any preliminary prospectus or the Prospectus, or of the
suspension of the qualification of the Securities for offering in any
jurisdiction, or the institution of any proceedings for any of such purposes,
and will use its best efforts to prevent the issuance of any such order and,
if issued, to obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to the Underwriters copies
of each Preliminary Prospectus, and the Company has consented and hereby
consents to the use of such copies for the purposes permitted by the Act. The
Company authorizes the Underwriters and selected dealers to use the
Prospectus in connection with the sale of the Securities for such period not
to exceed nine months from the Effective Date as in the reasonable opinion of
counsel for the Underwriters the use thereof is required to comply with the
applicable provisions of the Act and the Rules and Regulations. In case of
the happening, at any time within such period as a Prospectus is required
under the Act to be delivered in connection with sales by an underwriter or
dealer, of any event of which the Company has knowledge and which materially
affects the Company or the Securities, or which in the opinion of counsel for
the Company or counsel for the Underwriters should be set forth in an
amendment to the Registration Statement or a supplement to the Prospectus in
order to make the statements therein not then misleading, in light of the
circumstances existing at the time the Prospectus is required to be
9
<PAGE>
delivered to a purchaser of the Securities, or in case it shall be necessary
to amend or supplement the Prospectus to comply with the Act or with the
Rules and Regulations, the Company will notify the Representative promptly
and forthwith prepare and furnish to the Underwriters copies of such amended
Prospectus or of such supplement to be attached to the Prospectus, in such
quantities as the Underwriters may reasonably request, in order that the
Prospectus, as so amended or supplemented, will not contain any untrue
statement of a material fact or omit to state any material facts necessary in
order to make the statements in the Prospectus, in the light of the
circumstances under which they are made, not misleading. The preparation and
furnishing of any such amendment or supplement to the Registration Statement
or amended Prospectus or supplement to be attached to the Prospectus shall be
without expense to the Underwriters, except that in case the Underwriters are
required, in connection with the sale of the Shares, to deliver a Prospectus
nine months or more after the Effective Date, the Company will upon request
of and at the Underwriters' expense, amend or supplement the Registration
Statement and Prospectus and furnish you with reasonable quantities of
prospectuses complying with Section 10(a)(3) of the Act.
(b) The Company will comply with the Act, the Rules and
Regulations and the Shares Exchange Act of 1934, as amended (the "Exchange
Act") and the rules and regulations thereunder in connection with the
offering and issuance of the Securities.
The Company will use its best efforts to qualify or register the
Securities for sale under the securities or "blue sky" laws of such
jurisdictions as the Representative may have designated in writing prior to
the execution hereof and will make such applications and furnish such
information to counsel for the Underwriters as may be required for that
purpose and to comply with such laws, provided that the Company shall not be
required to qualify as a foreign corporation or a dealer in securities or to
execute a general consent to service process in any jurisdiction. 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 you may reasonably request. Legal fees for such qualifications
shall be itemized based on the time expended and costs incurred, shall not in
any event exceed $30,000.00, exclusive of filing fees (unless otherwise
agreed).
(c) The Company will instruct its transfer agent to provide the
Representative with copies of the Depository Trust Company stock transfer
sheets on a weekly basis for a period of six months from the First Closing
Date and on a monthly basis thereafter for six additional months.
(d) The Company will use its best efforts to cause a Registration
Statement under the Exchange Act to be declared effective on the Effective Date.
(e) For so long as the Company is a reporting company under either
Section 12(g), 13 or 15(d) of the Exchange Act, the Company, at its expense,
will furnish to its stockholders an annual report (including financial
statements audited by independent public accountants), in reasonable detail
and at its expense, will furnish to the Representative during the period
ending five years from the date hereof, (i) as soon as practicable after the
end of each fiscal year, a balance sheet of the Company and any subsidiaries
as at the end of such fiscal year, together with statements of income,
stockholders, equity and cash flows of the Company and any subsidiaries as at
the end of such fiscal year, all in reasonable detail and accompanied by a
copy of the certificate or report thereon of independent accountants; (ii) as
soon as they are available, a copy of all reports (financial or other)
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<PAGE>
mailed to security holders; (iii) as soon as they are available, a copy of
all non-confidential reports and financial statements furnished to or filed
with the Commission; and (iv) such other information of a public nature as
you may from time to time reasonably request.
(f) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in sub-section (e) above
will be on a consolidated basis to the extent the accounts of the Company and
its subsidiary or subsidiaries are consolidated in reports furnished to its
stockholders generally.
(g) The Company will deliver to the Representative at or before
the First Closing Date one signed copy of the Registration Statement
including all financial statements and exhibits filed therewith, and of all
amendments thereto. The Company will deliver to or upon the Representative's
order, from time to time until the Effective Date as many copies of any
Preliminary Prospectus filed with the Commission prior to the Effective Date
as the Underwriters may reasonably request. The Company will deliver to the
Representative on the Effective Date and thereafter for so long as a
Prospectus is required to be delivered under the Act, from time to time, as
many copies of the Prospectus, in final form, or as thereafter amended or
supplemented, as the Underwriters may from time to time reasonably request.
(h) The Company will make generally available to its security
holders and deliver to the Representative as soon as it is practicable to do
so, but in no event later than 90 days after the end of 12 months after its
current fiscal quarter, an earnings statement (which need not be audited)
covering a period of at least 12 consecutive months beginning after the
Effective Date which shall satisfy the requirements of Section 11(a) of the Act.
(i) The Company will apply the net proceeds from the sale of the
Securities substantially for the purposes set forth under "Use of Proceeds"
in the Prospectus, and will file such reports with the Commission with
respect to the sale of the Shares and the application of the proceeds
therefrom as may be required pursuant to Rule 463 of the Rules and
Regulations.
(j) The Company will, promptly upon the Representative's request,
prepare and file with the Commission any amendments or supplements to the
Registration Statement, Preliminary Prospectus or Prospectus and take any
other action, which in the opinion of Berliner Zisser Walter & Gallegos,
P.C., counsel to the Underwriters, may be reasonably necessary or advisable
in connection with the distribution of the Securities and will use its best
efforts to cause the same to become effective as promptly as possible.
(k) Prior to the Effective Date, the Company will use its best
efforts to cause the cause the Selling Stockholders and all other
Stockholders of the Company to enter into a written agreement with the
Representative, which among other things shall provide that for a period of
10 and 12 months following the closing date of the offering, respectively,
such stockholders will not sell, assign, hypothecate or pledge any of the
securities of the Company owned by them on the Effective Date, or
subsequently acquired by the exercise of any options or warrants or
conversion of any convertible security of the Company held by them on the
Effective Date directly or indirectly, except with the Representative's prior
written consent (except for transfers during such stockholder's lifetime or
on death by will or intestacy to his or her immediate family or a family
trust; provided that such
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<PAGE>
transferee shall agree in writing to the restrictions on transfer set forth
therein). Such stockholders will permit all certificates evidencing those
shares to be stamped with an appropriate restrictive legend, and will cause
the transfer agent for the Company to note such restrictions on transfer
books and records of the Company.
(l) The Company shall, as soon as practicable after the initial
filing of the Registration Statement, make all filings required to obtain
approval for the quotation of the Securities on the Nasdaq SmallCap market
("NASDAQ") and will use its best efforts to effect and maintain the aforesaid
approval for at least five (5) years from the date of this Agreement. Within
ten (10) days after the Effective Date, the Company shall use its best
efforts to cause the Company to be listed in the Moody's OTC Industrial
Manual and cause such listing to be maintained for five years from the date
of this Agreement.
(m) The Company represents that it has not taken, and agrees that
it will not take, directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the Securities or to facilitate
the sale or resale of the Securities.
(n) During the period of the offering, and for a period of twelve
(12) months from the Effective Date, the Company will not sell or otherwise
dispose of any securities of the Company (except for shares of Common Stock
issuable pursuant to acquisitions and upon exercise of options or warrants
outstanding on the Effective Date ) without your prior written consent.
(o) Prior to the Effective Date, the Company shall had retained a
public relations firm reasonably acceptable to the Representative, and shall
continue to retain such firm, or any alternate firm reasonably acceptable to
the Representative, for a minimum period of one (1) year from the First
Closing Date.
(p) The Company will reserve and keep available that maximum
number of its authorized but unissued securities which are issuable upon
exercise of the Representative's Warrants (including securities issuable upon
the exercise of the Warrants which are issuable upon the exercise of the
Representative's Warrants) outstanding from time to time.
(q) The Company shall deliver to the Representative, at the Company's
expense, a total of three (3) bound volumes in form and content acceptable to
you, containing the Registration Statement and all exhibits filed therewith,
and all amendments thereto, and all other material correspondence, filings,
certificates and other documents filed and/or delivered in connection with
this offering. The Company shall use its best efforts to deliver such volumes
within ninety (90) days of the First Closing Date.
(r) The Company shall have acquired a reasonable amount of
Director and Officer Liability Insurance (provided that such insurance can be
obtained at a reasonable cost as determined by the Company and the
Representative) from a responsible insurer, all satisfactory to the
Representative, prior to the effectiveness of the Registration Statement.
The Company shall have acquired keyman life insurance on Ralph Armijo on the
terms described in the Prospectus.
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(s) Joseph Charles & Associates, Inc. shall have the right for a
period of four (4) years from the First Closing Date to designate one nominee
for election to the Board of Directors of the Company, such nominee to be
reasonably acceptable to the Company. In the event that the Company is unable
to obtain the Directors and Officers insurance described in subparagraph (r)
above, Joseph Charles & Associates, Inc. shall have the right for such four
(4) year period to designate a consultant to the Board of Directors of the
Company, which consultant shall have the right to attend all Board and Board
committee meetings and shall be compensated with respect to meetings of the
Board on the same basis as outside members of the Board.
(t) The Company agrees to deliver to the Representative a
financial consulting agreement whereby the Company will retain Joseph Charles
& Associates, Inc. as a financial consultant for a period of two years
following the First Closing Date for a fee of $3,000 per month.
(u) Each Selling Shareholder agrees to deliver to the
Representative on or prior to the First Closing Date a properly completed and
executed United States Treasury Department Form W-9 (or other applicable form
or statement specified by Treasury Department regulations in lieu thereof).
4. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS
The Underwriters' obligations to purchase and pay for the Securities
which they have agreed to purchase hereunder are subject to the accuracy (as
of the date hereof, and as of the Closing Dates) of and compliance with the
representations and warranties of the Company herein, to the performance by
the Company and the Selling Stockholders of their obligations hereunder, and
to the following conditions:
(a) The Registration Statement shall have become effective and the
Representative shall have received notice thereof not later than 4:30 p.m.,
Los Angeles time, on the date of this Agreement, or at such later time or on
such later date as to which you may agree in writing; on the Closing Dates,
no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that or any similar purpose
shall have been instituted or shall be pending or, to the knowledge of any
Underwriter or to the knowledge of the Company, shall be contemplated by the
Commission; any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
Berliner Zisser Walter & Gallegos, P.C., counsel to the Underwriters; and no
stop order shall be in effect denying or suspending effectiveness of the
Registration Statement nor shall any stop order proceedings with respect
thereto be instituted or pending or threatened under the Act.
(b) At the First Closing Date, you shall have received the
opinion, dated as of the First Closing Date, of Cohen Brame & Smith
Professional Corporation, counsel for the Company, in form and substance
reasonably satisfactory to counsel for you, to the effect that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Colorado and is duly qualified or licensed to do business as a foreign
corporation in good standing in each other jurisdiction in which the
ownership or leasing of its properties or the conduct of its business
requires such
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qualification, except where failure to so qualify will not have a material
adverse effect in the business, properties or financial condition of the
Company;
(ii) the authorized capitalization of the Company as of the date
of the Prospectus was as set forth in the Prospectus; all of the shares of
the Company's outstanding stock requiring authorization for issuance by
the Company's Board of Directors have been duly authorized and validly
issued, are fully paid and non-assessable and conform to the description
thereof contained in the Prospectus; the outstanding shares of Common Stock
of the Company, to such counsel's knowledge, have not been issued in
violation of the preemptive rights of any stockholder and the stockholders
of the Company do not have any preemptive rights or other rights to
subscribe for or to purchase any of the Shares offered hereby; except for
the transfer restrictions regarding "affiliates" contained in Rule 144
promulgated under the Act and restrictions provided for in this Agreement,
to the knowledge of counsel, there are no restrictions upon the voting or
transfer of, any of the Shares; the Securities and the Representative's
Warrants conform in all material respects to the respective descriptions
thereof contained in the Prospectus; the Securities to be issued as
contemplated in the Registration Statement and this Agreement have been
duly authorized and, when paid, will be validly issued, fully paid and
non-assessable and free of preemptive rights, if any, contained in the
Company's certificate of incorporation or by-laws, or any other document,
instrument or agreement known to counsel; a sufficient number of shares of
Common Stock has been reserved for issuance upon exercise of the Warrants
and the Representative's Warrants (including shares issuable upon the
exercise of the Warrants which are issuable upon the exercise of the
Representative's Warrants); to such counsel's knowledge, neither the filing
of the Registration Statement nor the offering or sale of the Securities
as contemplated by this Agreement gives rise to any registration rights or
other rights, other than those contemplated by the Representative's
Warrants or which have been waived or satisfied, for or relating to the
registration of the Shares;
(iii) this Agreement and the Representative's Warrants
(sometimes hereinafter collectively referred to as the "Representative
Agreements") have been duly and validly authorized, executed and delivered
by the Company, and assuming due execution and delivery of the
Representative Agreements by you, such agreements are, or when duly
executed will be, the valid and legally binding obligations of the Company
except as enforceability may be limited by bankruptcy, insolvency,
moratorium or other laws affecting the rights of creditors, or by general
equitable principles and except as rights to indemnity and contribution
hereunder may be limited by applicable securities laws or public policy;
(iv) the certificates evidencing the Stockholder Shares are, and
the certificates representing the Company Shares and Warrants will be,
when issued, in valid and proper legal form; the Representative's Warrants
will be exercisable for shares of Common Stock of the Company in accordance
with the terms of the Representative's Warrants and at the prices therein
provided for; the shares of Common Stock and Warrants of the Company
issuable upon exercise of the Representative's Warrants have been duly
authorized and reserved for issuance upon such exercise, and such shares
and Warrants, when issued upon such exercise in accordance with the terms
of the Representative's Warrants and when the price is paid shall be fully
paid and non-assessable;
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(v) Such counsel knows of no pending or threatened legal or
governmental proceedings to which the Company is a party which are
required to be described or referred to in the Registration Statement
which are not so described or referred to;
(vi) The execution and delivery of this Agreement by the
Company and the Representative's Warrants and the incurrence of the
obligations of the Company herein and therein set forth and the
consummation by the Company of the transactions herein or therein
contemplated will not result in a violation of, or constitute a default
under, the certificate or articles of incorporation or by-laws of the
Company, or in a material violation of or default under any obligation,
agreement, covenant or condition contained in any bond, debenture, note
or other evidence of indebtedness or in any of the contracts,
indentures, mortgages, loan agreements, leases, joint ventures or other
agreements or instruments to which the Company is a party that are filed
as Exhibits to the Registration Statement or otherwise known to counsel;
(vii) The Registration Statement has become effective
under the Act, and to such counsel's knowledge, no stop order suspending
the effectiveness of the Registration Statement is in effect, no
proceedings for that purpose have been instituted or are pending before,
or threatened by, the Commission and the Registration Statement and the
Prospectus (except, in the case of both the Registration Statement and
any Amendment thereto, and the Prospectus and any supplement thereto for
the financial statements and notes and schedules thereto, and other
financial information or statistical data contained therein, or omitted
therefrom, as to which such counsel need express no opinion) comply as
to form in all material respects with the applicable requirements of the
Act and the Rules and Regulations;
(viii) All descriptions in the Registration Statement and
the Prospectus, and any amendment or supplement thereto, of contracts
and other documents are accurate and fairly present the information
required to be shown, and such counsel is familiar with all contracts
and other documents referred to in the Registration Statement and the
Prospectus and any such amendment or supplement, or filed as exhibits to
the Registration Statement, and such counsel does not know of any
contracts or documents of a character required to be summarized or
described therein or to be filed as exhibits thereto which are not so
summarized, described or filed;
(ix) No authorization, approval, consent or license of any
governmental or regulatory authority or agency is necessary in
connection with the authorization, issuance, transfer, sale or delivery
of the Securities by the Company, in connection with the execution,
delivery and performance of this Agreement or the Representative's
Warrants by the Company or in connection with the taking of any action
contemplated herein or therein, or the issuance of the Representative's
Warrants or the Shares or Warrants underlying the Representative's
Warrants, other than registration or qualification of the Shares or
Warrants under applicable state or foreign securities or blue sky laws
(as to which such counsel need express no opinion) and registration
under the Act; and
(x) To the extent that the statements contained in the
Prospectus under the headings "Business", "Management", "Description of
Capital Stock", "Shares Eligible For Future Sale" and "Legal Matters"
refer to opinions of such counsel or matters of law or purport
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to summarize the status of litigation or purport to summarize the
provisions of statutes, regulations, contracts, agreements or other
documents, such statements have been reviewed by such counsel and
accurately reflect the status of any such litigation, such provisions
purported to be summarized and any such opinions of such counsel;
(xi) The Company is not an investment company under the
Investment Company Act of 1940; and
(xii) Based solely on a review of the Company's transfer
records, the Selling Stockholders are the holders of record of the
Stockholder Shares.
Such counsel has participated in conferences with officers and
representatives of the Company and representatives of the Underwriters in
connection with the preparation of the Registration Statement and the
Prospectus and, although such counsel has not reviewed the accuracy or
completeness of, the statements contained in the Registration Statement or
Prospectus, on the basis of the foregoing, nothing has come to the attention
of such counsel that caused such counsel to have reason to believe that the
Registration Statement or any amendment thereto at the time it became
effective contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectus or any
supplement thereto contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make statements therein in
light of the circumstances under which they were made not misleading (except,
in the case of both the Registration Statement and any amendment thereto and
the Prospectus and any supplement thereto, for the financial statements,
notes and schedules thereto and other financial information and statistical
data contained therein, as to which such counsel need express no opinion);
In rendering such opinion, such counsel may (i) rely upon
certificates of any officer of the Company or public officials as to matters
of fact and (ii) rely as to all matters of law other than the law of the
United States or of the State of Colorado upon opinions of counsel reasonably
satisfactory to you.
(c) All corporate proceedings and other legal matters relating to
this Agreement, the Registration Statement, the Prospectus, and other related
matters shall be reasonably satisfactory to or approved by Berliner Zisser
Walter & Gallegos, P.C., counsel to the Underwriters, and you shall have
received from such counsel a signed opinion, dated as of the First Closing
Date, with respect to the validity of the issuance of the Securities, the
form of the Registration Statement and Prospectus (other than the financial
statements and other financial data contained therein), the execution of this
Agreement and other related matters as the Representative may reasonably
require. The Company shall have furnished to counsel for the Underwriters
such documents as they may reasonably request for the purpose of enabling
them to render such opinion.
(d) You shall have received a letter on and as of the Effective
Date and again on and as of the First Closing Date, in each instance
describing procedures carried out to a date within five (5) days of the date
of the letter, from Hein + Associates, independent public accountants for the
Company, substantially in the form approved by the Representative.
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(e) At each of the Closing Dates, (i) the representations and
warranties of the Company and the Selling Stockholders contained in this
Agreement shall be true and correct with the same effect as if made on and as
of such Closing Date, and the Company and the Selling Stockholders shall have
performed all of its obligations hereunder and satisfied all the conditions
on its part to be satisfied at or prior to such Closing Date; (ii) the
Registration Statement and the Prospectus and any amendments or supplements
thereto shall contain all statements which are required to be stated therein
in accordance with the Act and the Rules and Regulations, and shall in all
material respects conform to the requirements thereof, and neither the
Registration Statement nor the Prospectus nor any amendment or supplement
thereto shall contain any untrue statements 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 in light of the circumstances under
which they were made; (iii) there shall have been, since the respective dates
as of which information is given, no material adverse change in the business,
properties, condition (financial or otherwise), results of operations,
capital stock, long-term or short-term debt or general affairs of the Company
from that set forth in the Registration Statement and the Prospectus, except
changes which the Registration Statement and Prospectus indicate might occur
after the Effective Date and the Company shall not have incurred any material
liabilities nor entered into any agreement not in the ordinary course of
business other than as referred to in the Registration Statement and
Prospectus; and (iv) except as set forth in the Prospectus, no action, suit
or proceeding at law shall be pending or threatened against the Company which
would be required to be disclosed in the Registration Statement, and no
proceedings shall be pending or threatened against the Company before or by
any commission, board or administrative agency in the United States or
elsewhere, wherein an unfavorable decision, ruling or finding would
materially and adversely affect the business, property, condition (financial
or otherwise), results of operations or general affairs of the Company. In
addition, the Representative shall have received, at the First Closing Date,
a certificate signed by the President and the principal financial or
accounting officer of the Company, dated as of the First Closing Date,
evidencing compliance with the provisions of this subsection (e). The power
of attorney for the Selling Stockholders shall have executed and delivered to
you a certificate dated the First Closing Date to the effect that the
representations and warranties of such Selling Stockholder contained in this
Agreement are true and correct on and as of the date of this Agreement and
such Closing Date and such Selling Stockholder has timely performed or
complied with all covenants and conditions therein contained required to be
performed or complied with on his, her or its part in all material respects
at or prior to such Closing Date.
(f) Upon exercise of the option provided for in Section 2(b)
hereof, the Underwriters' obligations to purchase and pay for the Option
Securities referred to therein will be subject (as of the date hereof and as
of the Option Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain effective at the
Option Closing Date, no stop order suspending the effectiveness thereof
shall have been issued, and no proceedings for that purpose shall have
been instituted or shall be pending, or, to the knowledge of any
Underwriter or the knowledge of the Company, shall be contemplated by
the Commission, and any reasonable request on the part of the Commission
for additional information shall have been complied with to the
reasonable satisfaction of Berliner Zisser Walter & Gallegos, P.C.,
counsel to the Underwriters.
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(ii) At the Option Closing Date there shall have been
delivered to the Representative the signed opinion of Cohen Brame &
Smith Professional Corporation, counsel for the Company, dated as of the
Option Closing Date, in form and substance reasonably satisfactory to
Berliner Zisser Walter & Gallegos, P.C., counsel to the Underwriters,
which opinion shall be substantially the same in scope and substance as
the opinion furnished to the Representative at the First Closing Date
pursuant to Section 4(b) hereof, except that such opinion, where
appropriate, shall cover the Option Securities rather than the Firm
Securities. If the First Closing Date is the same as the Option Closing
Date, such opinions may be combined.
(iii) At the Option Closing Date, there shall have been
delivered to the Representative a certificate of the President and
financial officer of the Company dated the Option Closing Date, in form
and substance reasonably satisfactory to Berliner Zisser Walter &
Gallegos, P.C., counsel to the Underwriters, substantially the same in
scope and substance as the certificate furnished to the Representative
at the First Closing Date pursuant to Section 4(e) hereof.
(iv) Each Selling Stockholder or his designated
attorney-in-fact shall have executed and delivered to the Representative
a certificate dated the Option Closing Date to the effect that the
representations and warranties of such Selling Stockholder contained in
this Agreement are true and correct on and as of the date of this
Agreement are such Closing Date and such Selling Stockholder has timely
performed or complied with all covenants and conditions therein
contained required to be performed or complied with on his/her or its
part in all material respects at or prior to such Option Closing Date.
(v) At the Option Closing Date, there shall have been
delivered to the Representative a letter in form and substance
satisfactory to you from Hein + Associates, dated the Option Closing
Date and addressed to the Representative, confirming the information in
their letter referred to in Section 4(d) hereof as of the date thereof
and stating that, without any additional investigation required, nothing
has come to their attention during the period from the ending date of
their review referred to in said letter to a date not more than five (5)
days prior to the Option Closing Date which would require any change in
said letter if it were required to be dated the Option Closing Date.
(vi) All proceedings taken at or prior to the Option Closing
Date in connection with the sale and issuance of the Option Securities
shall be reasonably satisfactory in form and substance to the
Representative, and you and Berliner Zisser Walter & Gallegos, P.C.,
counsel to the Underwriters, shall have been furnished with all such
documents and certificates as you may request in connection with this
transaction in order to evidence the accuracy and completeness of any of
the representations, warranties or statements of the Company or its
compliance with any of the covenants or conditions contained therein.
(g) If any of the conditions herein provided for in this Section
shall not have been completely fulfilled as of the date indicated, this
Agreement and all obligations of the Underwriters under this Agreement may be
cancelled at, or at any time prior to, each Closing Date by your notifying
the Company and the Selling Stockholders of such cancellation in writing or
by telegram at or prior
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to the applicable Closing Date. Any such cancellation shall be without
liability of any Underwriter to the Company and the Selling Stockholders,
except as otherwise provided herein.
5. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY AND THE SELLING
STOCKHOLDERS.
The obligation of the Company and the Selling Stockholders to sell and
deliver the Securities is subject to the following conditions:
(a) The Registration Statement shall have become effective not
later than 4:30 p.m. Los Angeles time, on the date of this Agreement, or on
such later date or time as the Representative and the Company may agree in
writing.
(b) on the Closing Dates, no stop order suspending the
effectiveness of the Registration Statement shall have been issued under the
Act or any proceedings therefor initiated or threatened by the Commission.
If the conditions to the obligations of the Company and the Selling
Stockholders provided for in this Section have been fulfilled on the First
Closing Date but are not fulfilled after the First Closing Date and prior to
the Option Closing Date, then only the obligation of the Company to sell and
deliver the Option Securities on exercise of the option provided for in
Section 2(b) hereof shall be affected.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Representative and each Underwriter and, each person, if any, who controls
each Representative and each Underwriter, within the meaning of the Act, from
and against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys, fees), to
which you or such controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in (A) the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment thereof or supplement thereto, (B) any blue sky application or
other document executed by the Company specifically for that purpose or based
upon written information furnished by the Company filed in any state or other
jurisdiction in order to qualify any or all of the Shares under the
securities laws thereof (any such application, document or information being
hereinafter called a "Blue Sky Application"), or arise out of or are based
upon the omission or alleged omission to state in the Registration Statement,
or any supplement thereto, or in any Blue Sky Application, a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that the Company will not be liable in any
such case to the extent, but only to the extent, that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with written information furnished to the Company by
or through the Representative or by or on behalf of any Selling Stockholder
specifically for use in the preparation of the Registration Statement or any
such amendment or supplement thereof or any such Blue Sky Application or any
such Preliminary Prospectus or the Prospectus or any such amendment or
supplement thereto and provided further, that the indemnity agreement
provided in this Section 6(a) with respect to any Preliminary
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Prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any losses, claims, charges, liabilities or litigation based
upon any untrue statement or alleged untrue statement of a material fact or
omission or alleged omission to state therein a material fact purchased
Shares, if a copy of the Prospectus in which such untrue statement or alleged
untrue statement or omission or alleged omission was corrected has not been
sent or given to such person within the time required by the Act and the
Rules and Regulations thereunder. It is understood that the statements set
forth in the Prospectus with respect to stabilization, the material set forth
under the heading "Underwriting" and the identity of counsel to the
Underwriter under the heading "Legal Matters" constitute the only information
furnished in writing by the Underwriter for inclusion in the Registration
Statement and Prospectus, as the case may be. This indemnity will be in
addition to any liability which the Company may otherwise have.
(b) Each Selling Stockholder will, severally but not jointly,
indemnify and hold harmless each Representative, each Underwriter, and the
Company, and each person, if any who controls the Representative and each
Underwriter and the Company against any losses, claims, damages or
liabilities, joint or several, to which such entity or person may become
subject, under the Securities Act, the Exchange Act or otherwise, (including,
without limitation all costs of investigating, disputing or defending any
such claim or action or any amount paid in settlement thereof) insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, the
Prospectus, or any amendment or supplement thereto, or any related
Preliminary Prospectus, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or (ii)
any untrue statement or alleged untrue statement of a material fact contained
in any application or other document or communication executed by or on
behalf of the Company and based upon written information furnished by or on
behalf of the Selling Stockholders filed in any jurisdiction in order to
qualify 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 therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was based on information concerning
such Selling Stockholder included therein in reliance upon and in conformity
with written information furnished to the Company by such Selling Stockholder
expressly for use therein, and will reimburse each Representative and each
Underwriter and the Company for any legal or other expenses reasonably
incurred by each such Underwriter and the Company in connection with
investigating or defending any such loss, claim, damage, liability or action
as such expenses are incurred. Notwithstanding the foregoing, (i) in no event
shall the liability of any Selling Stockholder under this Section 6 (b)
exceed the proceeds received by such Selling Stockholder in connection with
the sale of the Shares as contemplated hereunder and, (ii) the Selling
Stockholders shall not be liable in any such case to the extent that any
losses, claims, damages or liabilities arise out of or are based upon an
untrue statement or alleged untrue statement in or omission or alleged
omission from the information included under the headings "Underwriting" and
"Legal Matters" in the Prospectus in reliance upon and in conformity with
written information furnished to the Company by you or by or on behalf of any
Underwriter through you specifically for inclusion therein;
(c) The Representative and each of the Underwriters agree to
indemnify and hold harmless the Company, each of its directors, each nominee
(if any) for director named in the
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Prospectus, each of its officers who have signed the Registration Statement,
and each person, if any, who controls the Company and each Selling
Stockholder, within the meaning of the Act, from and against any losses,
claims, damages or liabilities (which shall, for all purposes of this
Agreement, shall include, but not be limited to, all reasonable costs of
defense and investigation and all reasonable attorneys, fees) to which the
Company or any such director, nominee, officer or controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or the alleged untrue statement or omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only
to the extent, that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or omission or alleged untrue statement
or omission made in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or any amendment or supplement thereto, in reliance upon and
in conformity with written information furnished to the Company by or through
the Representative specifically for use in preparation thereof. It is
understood that the statements set forth in the Prospectus with respect to
stabilization, the material set forth under the heading "Underwriting" and
the identity of counsel to the Underwriter under the heading "Legal Matters"
constitute the only information furnished in writing by the Underwriter for
inclusion in the Registration Statement and Prospectus, as the case may be.
This indemnity agreement will be in addition to any liability which the
Representative and each of the Underwriters may otherwise have.
(d) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section, notify in writing the indemnifying party of the
commencement thereof, but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party otherwise than under this Section. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
in and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, subject to the
provisions herein stated, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation. The indemnified party shall have the right
to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall not be at
the expense of the indemnifying party if the indemnifying party has assumed
the defense of the action with counsel reasonably satisfactory to the
indemnified party; provided that if the indemnified party is any underwriter
or a person who controls any Underwriter within the meaning of the Act, the
fees and expenses of such counsel shall be at the expense of the indemnifying
party if (i) the employment of such counsel has been specifically authorized
in writing by the indemnifying party or (ii) the named parties to any such
action (including any impleaded parties) include both such Underwriter or
such controlling person and the indemnifying party, and in your reasonable
judgment (based upon the written opinion of your counsel), it is advisable
for such Underwriter or controlling persons to be represented by separate
counsel (in which case the indemnifying party shall not have the right to
assume the defense of such action on behalf of such
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Underwriter or such controlling person, it being understood, however, that
the indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys). No settlement of any action against an indemnified party for
other than payment of money shall be made without the consent of the
indemnified party, which shall not be unreasonably withheld.
7. CONTRIBUTION.
In order to provide for just and equitable contribution in circumstances
in which the indemnification provided for in Section 6(a), (b) or (c) above
is due in accordance with its terms but for any reason is held to be
unavailable from the Company or each person who controls the Company or the
Selling Stockholders or any Underwriter, the Company, the Selling
Stockholders and the Underwriters shall contribute to the aggregate losses,
claims, damages, liabilities and expenses (including, without limitation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit, proceeding or litigation, or any claim, but
after deducting any contribution received from persons other than the parties
hereto, such as persons who control the Company within the meaning of the
Securities Act, officers of the Company who signed the Registration Statement
and directors of the Company, who may also be liable for the contribution) to
which the Company, the Selling Stockholders and one or more of the
Underwriters may be subject in such proportion as is appropriate to reflect
the relative benefits received by the Company, the Selling Stockholders, and
the Underwriters, from the offering of the Shares or, if such allocation is
not permitted by applicable law or indemnification is not available as a
result of the indemnifying party not having received notice as provided in
Section 13 hereof, then each such indemnifying party shall contribute to such
amount paid or payable to such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company, the Selling Stockholders and the Underwriters, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The Company, the Selling Stockholders and the
Underwriters, shall be deemed to be in the same proportion as (a) the total
proceeds from the offering (net of underwriting discounts but before
deducting expenses) received by the Company, the Selling Stockholders, as set
forth in the table on the cover page of the Prospectus, bear to (b) the
underwriting discounts received by the Underwriters, as set forth in the
table on the cover page of the Prospectus. The relative fault of the Company,
the Selling Stockholders, or the Underwriters, shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact related to information supplied by the Company,
the Selling Stockholders, or the Underwriters, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, the Selling Stockholders and
the Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above. Notwithstanding the
provisions of this Section 7, (i) in no case shall any Underwriter (except as
otherwise agreed among the Underwriters) be liable or responsible for any
amount in excess of the underwriting discount applicable to the Shares
purchased by such Underwriter hereunder and (ii) the Company and the Selling
Stockholders shall be liable and responsible for any amount in excess of such
underwriting discount; provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section
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11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Any party
entitled to contribution will promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect
of which a claim for contribution may be made against another party or
parties under this Section 7, notify such party or parties from whom
contribution may be sought, but the omission so to notify such party or
parties from whom contribution may be sought shall not relieve the party or
parties from whom contribution may be sought from any other obligation such
party or parties may have hereunder or otherwise than under this Section 7.
No party shall be liable for contribution with respect to any action, suit
proceeding or claim settled without its written consent. The Underwriters'
obligations to make contributions pursuant to this Section 7 are several in
proportion to their respective underwriting commitments and not joint.
8. COSTS AND EXPENSES.
(a) Whether or not this Agreement becomes effective or the sale of
the Securities to you is consummated, the Company will pay all costs and
expenses incident to the performance of this Agreement by the Company,
including but not limited to the fees and expenses of counsel to the Company
and of the Company's accountants; the costs and expenses incident to the
preparation, printing, filing and distribution under the Act of the
Registration Statement (including the financial statements therein and all
amendments and exhibits thereto), each Preliminary Prospectus and the
Prospectus, as amended or supplemented, the fee of the National Association
of Securities Dealers, Inc. ("NASD") in connection with the filing required
by the NASD relating to the offering of the Securities contemplated hereby;
all expenses, including reasonable fees (but not in excess of the amount set
forth in Section 3(b)) and disbursements of counsel to you, in connection
with the qualification of the Shares under the State Securities or Blue Sky
Laws which you shall designate; the cost of printing and furnishing to you
copies of the Registration Statement, each Preliminary Prospectus, the
Prospectus, this Agreement, the Warrant Agreement and the Blue Sky
Memorandum; the cost of printing the certificates representing the Shares,
the expenses of Company due diligence meetings and presentations, (but not of
you or your counsel in connection therewith) and the expense (which shall not
exceed $7,500) of placing one or more "tombstone" advertisements as directed
by you. The Company shall pay any and all taxes (including any transfer,
franchise, capital stock or other tax imposed by any jurisdiction) on sales
to you hereunder. The Company will also pay all costs and expenses incident
to the furnishing of any amended Prospectus or of any supplement to be
attached to the Prospectus as called for in Section 3(a) of this Agreement
except as otherwise set forth in said Section.
(b) In addition to the foregoing expenses, the Company shall at
the First Closing Date pay to you the balance of a non-accountable expense
allowance equal to 3% of the gross proceeds of the offering of the Firm
Securities, of which $40,000 has been paid. In the event the over allotment
option is exercised in part or in full, the Company shall pay to you at the
Option Closing Date an additional amount equal to 3% of the gross proceeds
received upon exercise of the over allotment option. In the event the
transactions contemplated hereby are not consummated for any reason, the
Company shall be liable for your actual accountable out-of-pocket expenses
(with credit given to the $40,000 paid), including legal fees, provided
however, that any portion of the $40,000 paid by the Company that has not
been utilized by you in connection with the offering on an accountable basis
shall be refunded by you to the Company; and further provided that if the
contemplated transactions are not consummated by reason of breach by the
Company of this Agreement or of any representation,
23
<PAGE>
warranty, covenant or condition contained herein, the Company shall be liable
for your accountable out-of-pocket expenses up to a maximum of $85,000.
(c) No person is entitled either directly or indirectly to
compensation from the Company, from any Selling Stockholder, from any
Underwriter or from any other person for services as a finder in connection
with the proposed offering, and the Company and each Selling Stockholder
agrees to indemnify and hold harmless the Representative and each
Underwriter, and the Representative and each Underwriter agrees to indemnify
and hold harmless, severally and not jointly, the Company and each Selling
Stockholder, from and against any losses, claims, damages or liabilities,
joint or several (which shall, for all purposes of this Agreement, include,
but not be limited to, all reasonable costs of defense and investigation and
all reasonable attorneys' fees), to which the indemnified party may become
subject insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon the claim of any person
(other than an employee of the party claiming indemnity) or entity that he or
it is entitled to a finder's fee in connection with the proposed offering by
reason of such person's or entity's influence or prior contact with the
indemnifying party.
9. EFFECTIVE DATE.
The Agreement shall become effective upon its execution, except that the
Representative may, at your option, delay its effectiveness until the earlier
to occur of 10:00 A.M., New York time on the first full business day
following the Effective Date as the Representative in its discretion shall
first commence the initial public offering by the Representative of any of
the Shares. The time of the initial public offering shall mean the time of
release by Representative of the first newspaper advertisement with respect
to the Shares, or the time when the Shares are first generally offered by the
Representative to dealers by letter or telecopier, whichever shall first
occur. This Agreement may be terminated by you at any time before it becomes
effective as provided above, except that Sections 6, 7, 8, 12, 13, 14 and 15
shall remain in effect notwithstanding such termination.
10. TERMINATION.
(a) This Agreement, except for Sections 6, 7, 8, 12, 13, 14 and
15, may be terminated at any time prior to the First Closing Date, and the
option referred to in Section 2(b), if exercised, may be cancelled, at any
time prior to the Option Closing Date, by the Representative if in its
judgment it is impracticable to offer for sale or to enforce contracts made
by the Representative for the resale of the Securities agreed to be purchased
hereunder, by reason of (i) the Company having sustained a material loss,
whether or not insured, by reason of fire, earthquake, flood, accident or
other calamity, or from any labor dispute or court or government action,
order or decree, (ii) trading in securities on the New York Stock Exchange or
the American Stock Exchange having been suspended or limited, (iii) material
governmental restrictions having been imposed on trading in securities
generally which are not in force and effect on the date hereof, (iv) a
banking moratorium having been declared by federal of New York State
authorities, (v) an outbreak of major international hostilities or other
national or international calamity having occurred, (vi) the passage by the
Congress of the United States or by any state legislative body of similar
impact, of any act or measure, or the adoption of any orders, rules or
regulations by any governmental body or any authoritative accounting
institute or board, or any governmental executive, which is reasonably
believed likely by you to have a material adverse impact on the business,
financial condition or financial statements of the Company, (vii) any
material
24
<PAGE>
adverse change in the financial or securities markets beyond normal
fluctuations in the United States having occurred since the date of this
Agreement, or (viii) any material adverse change having occurred, since the
respective dates for which information is given in the Registration Statement
and Prospectus, in the earnings, business, prospects or general condition of
the Company, financial or otherwise, whether or not arising in the ordinary
course of business.
(b) If the Representative elects to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this Section
10 or in Section 9, the Company shall be promptly notified by the
Representative, by telephone or facsimile transmission, confirmed by letter.
11. REPRESENTATIVE'S WARRANTS.
On the First Closing Date, the Company will issue to the Representative,
for consideration of $100.00 and upon the terms and conditions set forth in
the form of Representative's Warrants annexed as an exhibit to the
Registration Statement, Representative's Warrants to purchase an aggregate of
100,000 Shares. In the event of conflict in the terms of this Agreement and
the Representative's Warrants, the language of the Representative's Warrants
shall control.
12. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
The respective indemnities, agreements, representations, warranties and
other statements of the Company, and the Selling Stockholders, where
appropriate, and you, set forth in or made pursuant to this Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the Representative or any Underwriter, the Company or any of its
officers or directors or any controlling persons and the Selling Shareholders
and will survive delivery of and payment for the Shares and the termination
of this Agreement.
13. NOTICE.
All communications hereunder will be in writing and, except as otherwise
expressly provided herein, if sent to you, will be mailed, delivered or
telecopied and confirmed to it at Joseph Charles & Associates, 9701 Wilshire
Boulevard, Ninth Floor, Beverly Hills, California 90212, with a copy sent to
David C. Roos, Esq., Berliner Zisser Walter & Gallegos, P.C., 1700 Lincoln
Street, Suite 4700, Denver, CO 80203-4547, or if sent to the Company or the
Selling Stockholders, will be mailed, delivered, or facsimile and confirmed
to Ralph Armijo of NAVIDEC, Inc., with copy sent to Roger V. Davidson, Esq.,
Cohen Brame & Smith, 1700 Lincoln Street, Suite 1800, Denver, Colorado 80203.
14. PARTIES IN INTEREST.
The Agreement herein set forth shall inure solely to the benefit of, and
shall be binding upon, the Representative and the Underwriters, the Company,
the Selling Stockholders and, to the extent expressed, any person controlling
the Company, or you, and directors of the Company, nominees for directors of
the Company (if any) named in the Prospectus, the officers of the Company who
have signed the Registration Statement, and their respective executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term
25
<PAGE>
"successors and assigns" shall not include any purchaser of Securities from
any Underwriter merely because of such purchase.
15. APPLICABLE LAW.
This Agreement will be governed by, and construed in accordance with,
the laws of the State of California applicable to agreements made and to be
entirely performed within California.
If the foregoing is, in accordance with your understanding of our
agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement among the Company, the Selling
Stockholders and the several Underwriters in accordance with its terms.
Very truly yours,
NAVIDEC, INC.
By:
-----------------------------------
Ralph Armijo, President
SELLING STOCKHOLDERS:
The foregoing Underwriting
Agreement is hereby By:
confirmed and accepted -----------------------------------
as of the date first , Attorney-in-fact
above written. ---------------
JOSEPH CHARLES & ASSOCIATES, INC.
For itself and for the other
several Underwriters listed in
Schedule I to the foregoing
Agreement.
By:
--------------------------------
26
<PAGE>
SCHEDULE I
Underwriting Agreement dated _____________, _1996
Number of Firm
Shares
Underwriter to be Purchased
- ----------- ---------------
Joseph Charles & Associates, Inc.
---------------
1,000,000
27
<PAGE>
SCHEDULE II
Stock to be sold by Selling Stockholders
Number of
Shares
Name and Address of Selling Stockholder of Stock
---------
Total. . . . . . . . . . . . . . . . . . . . .
28
<PAGE>
______________, 1996
SELECTED DEALER AGREEMENT
Dear Sirs:
In connection with public offerings of securities underwritten by us, or
by a group of underwriters, including us (the "Underwriters"), represented by
us, you may be offered the opportunity to purchase, as principal, a portion of
such securities at a discount from the offering price representing a selling
concession or reallowance granted as consideration for services rendered by
you in the sale of such securities. We request that you agree to the following
terms and provisions, and make the following representations, which, together
with any additional terms and provisions set forth in any wire or letter sent
to you in connection with a particular offering, will govern all such
purchases of securities and the reoffering thereof by you.
YOUR SUBSCRIPTION TO, OR PURCHASE OF, SUCH SECURITIES WILL CONSTITUTE
YOUR REAFFIRMATION OF THIS AGREEMENT.
1. When we are acting as representative (the "Representative") of the
Underwriters in offering securities to you, it should be understood that all
offers are made subject to prior sale of the subject securities, when, as and
if such securities are delivered to and accepted by the Underwriters and
subject to the approval of legal matters by their counsel. In such cases, any
order from you for securities will be strictly subject to confirmation and we
reserve the right in our uncontrolled discretion to reject any order in whole
or in part. Upon release by us, you may reoffer such securities at the
offering price fixed by us. With our consent, you may allow a discount, not in
excess of the reallowance fixed by us, in selling such securities to other
dealers, provided that in doing so you comply with the Rules of Fair Practice
of the National Association of Securities Dealers, Inc. (the "NASD"). Upon our
request, you will advise us of the identify of any dealer to whom you allow
such a discount and any Underwriter or dealer from whom you receive such a
discount. After the securities are released for sale to the public, we may
vary the offering price and other selling terms.
2. You represent that you are a dealer actually engaged in the
investment banking or securities business and that you are either (i) a member
in good standing of the NASD or (ii) a dealer with its principal place of
business located outside the United States, its territories or possessions and
not registered under the Securities Exchange Act of 1934 (a "non-member
foreign dealer") or (iii) a bank not eligible for membership in NASD. If you
are a non-member foreign dealer, you agree to make no sales of securities
within the United States, its territories or its possessions or to persons who
are nationals thereof or residents therein. If you are a non-member foreign
dealer or bank, you agree, in making any sales, to comply with the NASD's
interpretation with respect to free-riding and withholding. In accepting a
reallowance from us whether or not we are acting as such Representative of the
Underwriters, in accepting a reallowance from us whether or not we are acting
as such Representative, and in allowing a discount to any other
1
<PAGE>
person, you agree to comply with the provision of Section 24 of Article III
of the Rules of Fair Practice of the NASD, and, in addition, if you are a
non-member foreign dealer or bank, you agree to comply, as though you were a
member of the NASD, with the provisions of Section 8 and 36 of Article III of
such Rules of Fair Practice and to comply with Section 25 of Article III
thereof as that Section applies to a non-member foreign dealer or bank. You
represent that you are fully familiar with the above provisions of the Rules
of Fair Practice of the NASD.
3. If the securities have been registered under the Securities Act of
1933, as amended (the "1933 Act"), in offering and selling such securities,
you are not authorized to give any information or make any representation not
contained in the prospectus relating thereto. You confirm that you are
familiar with the rules and policies of the Securities and Exchange Commission
relating to the distribution of preliminary and final prospectuses, including
but not limited to Rule 15c2-8 under the Securities Exchange Act of 1934 (the
"1934 Act"), and you agree that you will comply therewith in any offering
covered by this Agreement. If we are acting as Representative of the
Underwriters, we will make available to you, to the extent made available to
use by the issuer of the securities, such number of copies of the prospectus
(or offering documents for securities not registered under the 1933 Act) as
you may reasonably request for the purposes contemplated by the 1933 Act of
the 1934 Act, or the rules and regulations thereunder.
4. If we are acting as Representative of the Underwriters of
securities of an issuer that is not required to file reports under the 1934
Act, you agree that you will not sell any of the securities to any account
over which you have discretionary authority.
5. Payment for securities purchased by you is to be made at our
office, 356 North Camden Drive, Beverly Hills, California 90210 (or at such
other place as we may advise), at the offering price less the concession
allowed to you, on such date as we may advise, by certified or official bank
check in New York Clearing House funds (or such other funds as we may advise),
payable to our order, against delivery of the securities to be purchased by
you. We shall have authority to make appropriate arrangements for payment for
and/or delivery through the facility of The Depository Trust Company or any
such other depository or similar facility for the securities.
6. In the event that, prior to the completion of the distribution of
securities covered by this Agreement, we purchase in the open market or
otherwise any securities delivered to you, if we are acting as Representatives
of the Underwriters, you agree to repay to us for the accounts of the
Underwriters the amount of the concession allowed to you plus brokerage
commissions and any transfer taxes paid in connection with such purchase.
7. At any time prior to the completion of the distribution of
securities covered by this Agreement you will, upon our request as
Representative of the Underwriters, report to us the amount of securities
purchased by you which then remains unsold and will, upon our request, sell to
us for the account of one or more of the Underwriters such amount of such
unsold securities as we may designate, at the offering price less an amount to
be determined by us not in excess of the concession allowed to you.
2
<PAGE>
8. If we are acting as Representative for the Underwrites, upon
application to us, we will inform you of the states and other jurisdictions of
the United States in which it is believed that the securities offered are
qualified for sale under, or are exempt responsibility with respect to your
right to sell securities in any jurisdiction. We shall have authority to file
with the Department of State of the State of New York a Further State Notice
with respect to the securities, if necessary.
9. You agree, that in connection with any offering of securities
covered by this Agreement you will comply with the applicable provisions of
the 1933 Act and the 1934 Act and the applicable rules and regulations of the
Securities and Exchange Commission thereunder the applicable rules and
regulations of the NASD, and the applicable rules of any securities exchange
having jurisdiction over the offering.
10. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to any offering covered by this
Agreement. We shall be under no liability to you except for our lack of good
faith and for obligations assumed by us in this Agreement, except that you do
not waiver any rights that you may have under the 1933 Act or the rules and
regulations thereunder.
11. Any notice from us shall be deemed to have been duly give if
mailed or transmitted by any standard form of written telecommunications to
you at such address as you shall specify to us in writing.
12. With respect to any offering of securities covered by this
Agreement, the price restrictions contained in Paragraph 1 hereof and the
provisions of Paragraphs 6 and 7 hereof shall terminate as to such offering at
the close of business on the 45th day after the securities are released for
sale or, as to any or all such provisions, at such earlier time as we may
advise. All other provisions of this Agreement shall remain operative and in
full force and effect with respect to such offering.
13. This Agreement shall be governed by the laws of the State of New
York applicable to agreements made and to be performed entirely within such
State.
3
<PAGE>
Please confirm your agreement hereto by signing the enclosed duplicate copy
hereof in the place provided below and returning such signed duplicate copy to
us at 356 North Camden Drive, Beverly Hills, California 90210, Attention:
Syndicate Department (310) 274-4402. Upon receipt thereof, this instrument and
such signed duplicate copy will evidence the agreement between us.
Very truly yours,
JOSEPH CHARLES & ASSOCIATES, INC.
By:
-----------------------------------
Richard A. Rappaport
Managing Director
Confirmed and accepted as of the
____ day of ___________, 199__
- ------------------------------------
Name of Dealer
- ------------------------------------
Authorized Officer or Partner
(if not Officer or Partner, attach
copy of Instrument of Authorization)
4
<PAGE>
Please complete and return with one executed copy of the Standard Dealer
Agreement.
Firm Name:
--------------------------------------------------------
Address: Street:
--------------------------------------------
City:
--------------------------------------------
State:
--------------------------------------------
Zip Code:
--------------------------------------------
Phone Number:
--------------------------------------------------------
Fax Number:
--------------------------------------------------------
Contact Person:
--------------------------------------------------------
Tax I.D. #:
--------------------------------------------------------
DTC #
--------------------------------------------------------------
ABA #
--------------------------------------------------------------
Corporate Delivery Instructions:
----------------------------------------
----------------------------------------
Government Deliver Instructions:
----------------------------------------
----------------------------------------
5
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
A C I SYSTEMS, INC.
We, the undersigned, as President and Secretary of A C I Systems, Inc., a
Colorado corporation (the "Corporation"), adopt the following Amended and
Restated Articles of Incorporation, pursuant to the provisions of the Colorado
Business Corporation Act.
These Amended and Restated Articles of Incorporation correctly set forth
the provisions of the Articles of Incorporation of the Corporation; they have
been duly adopted as required by law; and they supersede the original Articles
of Incorporation of the Corporation as originally filed on June 17, 1993 and all
amendments thereto. The number of votes cast for these Amended and Restated
Articles of Incorporation by each voting group entitled to vote separately on
the amendment was sufficient for approval by that voting group.
The Amended and Restated Articles of Incorporation shall read as follows:
FIRST: The name of the Corporation is A C I Systems, Inc.
SECOND: The Corporation shall have and may exercise all of the rights,
powers and privileges now or hereafter conferred upon corporations organized
under the laws of Colorado. In addition, the Corporation may do everything
necessary, suitable, or proper for the accomplishment of any of its corporate
purposes. The Corporation may conduct part or all of its business in any part
of Colorado, the United States or the world and may hold, purchase, mortgage,
lease, and convey real and personal property in any of such places.
THIRD: (a) The aggregate number of shares which the Corporation shall
have authority to issue is 20,000,000 shares of common stock. The shares of
this class of common stock shall have no par value and shall have unlimited
voting rights and shall constitute the sole voting group of the Corporation,
except to the extent any additional voting group or groups may hereafter be
established in accordance with the Colorado Business Corporation Act. The
shares of this class shall also be entitled to receive the net assets of the
Corporation upon dissolution.
(b) Each shareholder of record shall have one vote for each
share of stock standing in his name on the books of the Corporation and entitled
to vote, except that in the election of directors each shareholder shall have as
many votes for each share held by him as there are directors to be elected and
for whose election the shareholder has a right to vote. Cumulative voting shall
not be permitted in the election of directors or otherwise.
(c) Unless otherwise ordered by a court of competent
jurisdiction, at all meetings of shareholders of a majority of the shares of a
voting group entitled to vote at such
<PAGE>
meeting, represented in person or by proxy, shall constitute a quorum of that
voting group.
FOURTH: The number of directors of the Corporation shall be fixed by the
bylaws, or if the bylaws fail to fix such a number, then by resolution adopted
from time to time by the board of directors.
FIFTH: The street address of the registered office of the Corporation is
7002 South Revere Parkway, Suite 40, Englewood, Colorado 80112. The name of the
registered agent of the Corporation at such address is Ralph Armijo.
SIXTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and the same are
in furtherance of and not in limitation or exclusion of the powers conferred by
laws.
(a) CONFLICTING INTEREST TRANSACTIONS. As used in this
paragraph, "conflicting interest transaction" means any of the following: (i) a
loan or other assistance by the Corporation to a director of the Corporation or
to an entity in which a director of the Corporation is a director or officer or
has a financial interest; (ii) a guaranty by the Corporation of an obligation of
a director of the Corporation or of an obligation of an entity in which a
director of the Corporation is a director or officer or has a financial
interest; or (iii) a contract or transaction between the Corporation and a
director of the Corporation or between the Corporation and an entity in which a
director of the Corporation is a director or officer or has a financial
interest.
To the full extent permitted by Colorado law, no conflicting
interest transaction shall be void or voidable or be enjoined, set aside, or
give rise to an award of damages or other sanctions in a proceeding by a
shareholder or by or in the right of the Corporation, solely because the
conflicting interest transaction involves a director of the Corporation or an
entity in which a director of the Corporation is a director or officer or has a
financial interest, or solely because the director is present at or participates
in the meeting of the Corporation's board of directors or of the committee of
the board of directors which authorizes, approves or ratifies a conflicting
interest transaction, or solely because the director's vote is counted for such
purpose if:
(A) the material facts as to the director's relationship or
interest and as to the conflicting interest transaction are disclosed or are
known to the board of directors or the committee, and the board of directors or
committee in good faith authorizes, approves, or ratifies the conflicting
interest transaction by the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors are less than a quorum; or
(B) the material facts as to the director's relationship or
interest and as to the conflicting interest transaction are disclosed or are
known to the shareholders
2
<PAGE>
entitled to vote thereon, and the conflicting interest transaction is
specifically authorized, approved or ratified in good faith by a vote of the
shareholders; or
(C) a conflicting interest transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified in good faith
by a vote of the shareholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
which authorizes, approves, or ratifies the conflicting interest transaction.
The board of directors or a committee thereof shall not authorize
(i) a loan by the Corporation to a director of the Corporation or to an entity
in which a director of the Corporation is a director or officer or has a
financial interest or (ii) a guaranty by the Corporation of an obligation of a
director of the Corporation or of an obligation of an entity in which a director
of the Corporation is a director or officer or has a financial interest,
pursuant to paragraph (A) above until at least ten days after written notice of
the proposed authorization of the loan or guaranty has been given to the
shareholders who would be entitled to vote thereon if the issue of the loan or
guaranty were submitted to a vote of the shareholders.
(b) INDEMNIFICATION. The Corporation shall indemnify, to the
maximum extent permitted by Colorado law, any person who is or was a director,
officer, agent, fiduciary, or employee of the Corporation against any claim,
liability, or expense arising against or incurred by such person made party to a
proceeding because he is or was a director, officer, agent, fiduciary, or
employee of the Corporation or because he is or was serving another entity or
employee benefit plan as a director, officer, partner, trustee, employee,
fiduciary, or agent at the Corporation's request. The Corporation shall further
have the authority to the maximum extent permitted by Colorado law to purchase
and maintain insurance providing such indemnification.
(c) LIMITATION ON DIRECTOR'S LIABILITY. No director of this
Corporation shall have any personal liability for monetary damages to the
Corporation or its shareholders for breach of his fiduciary duty as a director,
except that this provision shall not eliminate or limit the personal liability
of a director to the Corporation or its shareholders for monetary damages for
any breach, act, omission, or transaction as to which the Colorado Business
Corporation Act (as in effect from time to time) prohibits expressly the
elimination or limitation of liability. Nothing contained herein will be
construed to deprive any director of his right to all defenses ordinarily
available to a director nor will anything herein be construed to deprive any
director of any right he may have for contribution from any other director or
other person.
DATED the 30th day of June, 1996.
3
<PAGE>
A C I SYSTEMS, INC.
By: /s/ RALPH ARMIJO
-------------------------------------
Ralph Armijo, President
By: /s/ ART ARMIJO
-------------------------------------
Art Armijo, Secretary
4
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
A C I SYSTEMS, INC.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I. OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1. ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3. PLACE OF MEETING . . . . . . . . . . . . . . . . . . . . . 2
SECTION 4. NOTICE OF MEETING. . . . . . . . . . . . . . . . . . . . . 2
SECTION 5. FIXING OF RECORD DATE. . . . . . . . . . . . . . . . . . . 3
SECTION 6. VOTING LISTS . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 7. RECOGNITION PROCEDURE FOR BENEFICIAL OWNERS. . . . . . . . 4
SECTION 8. QUORUM AND MANNER OF ACTING. . . . . . . . . . . . . . . . 5
SECTION 9. PROXIES. . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 10. VOTING OF SHARES . . . . . . . . . . . . . . . . . . . . . 6
SECTION 11. CORPORATION'S ACCEPTANCE OF VOTES. . . . . . . . . . . . . 7
SECTION 12. INFORMAL ACTION BY SHAREHOLDERS. . . . . . . . . . . . . . 7
SECTION 13. MEETINGS BY TELECOMMUNICATION. . . . . . . . . . . . . . . 7
ARTICLE III. BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 1. GENERAL POWERS . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2. NUMBER, QUALIFICATIONS AND TENURE. . . . . . . . . . . . . 8
SECTION 3. VACANCIES. . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 4. REGULAR MEETINGS . . . . . . . . . . . . . . . . . . . . . 8
SECTION 5. SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . . . 8
SECTION 6. NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 7. QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 8. MANNER OF ACTING . . . . . . . . . . . . . . . . . . . . . 9
SECTION 9. COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 10. PRESUMPTION OF ASSENT. . . . . . . . . . . . . . . . . . . 9
SECTION 11. COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . .10
SECTION 12. INFORMAL ACTION BY DIRECTORS . . . . . . . . . . . . . . .10
SECTION 13. TELEPHONIC MEETINGS. . . . . . . . . . . . . . . . . . . .11
SECTION 14. STANDARD OF CARE . . . . . . . . . . . . . . . . . . . . .11
ARTICLE IV. OFFICERS AND AGENTS . . . . . . . . . . . . . . . . . . . . . .11
SECTION 1. GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . .11
ii
<PAGE>
SECTION 2. APPOINTMENT AND TERM OF OFFICE . . . . . . . . . . . . . .12
SECTION 3. RESIGNATION AND REMOVAL. . . . . . . . . . . . . . . . . .12
SECTION 4. VACANCIES. . . . . . . . . . . . . . . . . . . . . . . . .12
SECTION 5. PRESIDENT. . . . . . . . . . . . . . . . . . . . . . . . .12
SECTION 6. VICE PRESIDENTS. . . . . . . . . . . . . . . . . . . . . .13
SECTION 7. SECRETARY. . . . . . . . . . . . . . . . . . . . . . . . .13
SECTION 8. TREASURER. . . . . . . . . . . . . . . . . . . . . . . . .14
ARTICLE V. STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 1. CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 2. CONSIDERATION FOR SHARES . . . . . . . . . . . . . . . . .15
SECTION 3. LOST CERTIFICATES. . . . . . . . . . . . . . . . . . . . .15
SECTION 4. TRANSFER OF SHARES . . . . . . . . . . . . . . . . . . . .15
SECTION 5. TRANSFER AGENT, REGISTRARS AND PAYING AGENTS . . . . . . .15
ARTICLE VI. INDEMNIFICATION OF CERTAIN PERSONS. . . . . . . . . . . . . . .16
SECTION 1. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . .16
SECTION 2. RIGHT TO INDEMNIFICATION . . . . . . . . . . . . . . . . .17
SECTION 3. EFFECT OF TERMINATION OF ACTION. . . . . . . . . . . . . .17
SECTION 4. GROUPS AUTHORIZED TO MAKE INDEMNIFICATION DETERMINATION. .17
SECTION 5. COURT-ORDERED INDEMNIFICATION. . . . . . . . . . . . . . .18
SECTION 6. ADVANCE OF EXPENSES. . . . . . . . . . . . . . . . . . . .18
SECTION 7. ADDITIONAL INDEMNIFICATION TO CERTAIN PERSONS OTHER
THAN DIRECTORS . . . . . . . . . . . . . . . . . . . . . .18
SECTION 8. WITNESS EXPENSES . . . . . . . . . . . . . . . . . . . . .18
SECTION 9. REPORT TO SHAREHOLDERS . . . . . . . . . . . . . . . . . .18
ARTICLE VII. PROVISION OF INSURANCE. . . . . . . . . . . . . . . . . . . . .19
SECTION 1. PROVISION OF INSURANCE . . . . . . . . . . . . . . . . . .19
ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . .19
SECTION 1. SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . .19
SECTION 2. FISCAL YEAR. . . . . . . . . . . . . . . . . . . . . . . .19
SECTION 3. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . .19
SECTION 4. RECEIPT OF NOTICES BY THE CORPORATION. . . . . . . . . . .20
SECTION 5. GENDER . . . . . . . . . . . . . . . . . . . . . . . . . .20
SECTION 6. CONFLICTS. . . . . . . . . . . . . . . . . . . . . . . . .20
SECTION 7. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . .20
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AMENDED AND RESTATED BYLAWS
OF
A C I SYSTEMS, INC.
ARTICLE
OFFICES I
The principal office of the corporation shall be designated from time to
time by the corporation and may be within or outside the State of Colorado.
The corporation may have such other offices, either within or outside
the State of Colorado, as the board of directors may designate or as the
business of the corporation may require from time to time.
The registered office of the corporation required by the Colorado
Business Corporation Act to be maintained in Colorado may be, but need not
be, identical with the principal office, and the address of the registered
office may be changed from time to time by the board of directors.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders
shall be held each year on a date and at a time fixed by the board of
directors of the corporation (or by the president in the absence of action by
the board of directors), for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the
election of directors is not held on the day fixed as provided herein for any
annual meeting of the shareholders, or any adjournment thereof, the board of
directors shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as it may conveniently be held.
A shareholder may apply to the district court in the county in Colorado
where the corporation's principal office is located or, if the corporation
has no principal office in Colorado, to the district court of the county in
which the corporation's registered office is located to seek an order that a
shareholder meeting be held (i) if an annual meeting was not held within six
months after the close of the corporation's most recently ended fiscal year
or fifteen months after its last annual meeting, whichever is earlier, or
(ii) if the shareholder participated in a proper call of or proper demand for
a special meeting and notice of the special meeting was not given within
thirty days after the date of the call or the date the last of the demands
necessary to require calling of the meeting was received by the corporation
pursuant to C.R.S. Section 7-107-102(1)(b), or the special meeting was not
held in accordance with the notice.
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SECTION 2. SPECIAL MEETINGS. Unless otherwise prescribed by
statute, special meetings of the shareholders may be called for any purpose
by the president or by the board of directors. The president shall call a
special meeting of the shareholders if the corporation receives one or more
written demands for the meeting, stating the purpose or purposes for which it
is to be held, signed and dated by holders of shares representing at least
ten percent of all the votes entitled to be cast on any issue proposed to be
considered at the meeting.
SECTION 3. PLACE OF MEETING. The board of directors may designate
any place, either within or outside Colorado, as the place for any annual
meeting or any special meeting called by the board of directors. A waiver of
notice signed by all shareholders entitled to vote at a meeting may designate
any place, either within or outside Colorado, as the place for such meeting.
If no designation is made, or if a special meeting is called other than by
the board, the place of meeting shall be the principal office of the
corporation.
SECTION 4. NOTICE OF MEETING. Written notice stating the place,
date, and hour of the meeting shall be given not less than ten nor more than
sixty days before the date of the meeting, except that (i) if the number of
authorized shares is to be increased, at least thirty days' notice shall be
given, or (ii) if any other longer notice period is required by the Colorado
Business Corporation Act, such longer period of notice shall be applicable.
The secretary shall be required to give such notice only to shareholders
entitled to vote at the meeting except as otherwise required by the Colorado
Business Corporation Act.
Notice of a special meeting shall include a description of the purpose
or purposes of the meeting. Notice of an annual meeting need not include a
description of the purpose or purposes of the meeting except the purpose or
purposes shall be stated with respect to (i) an amendment to the articles of
incorporation of the corporation, (ii) a merger or share exchange in which
the corporation is party and, with respect to a share exchange, in which the
corporation's shares will be acquired, (iii) a sale, lease, exchange or other
disposition, other than in the usual and regular course of business, of all
or substantially all of the property of the corporation or of another entity
which this corporation controls, in each case with or without the goodwill,
(iv) a dissolution of the corporation, or (v) any other purpose for which a
statement of purpose is required by the Colorado Business Corporation Act.
Notice shall be given personally or by mail, private carrier, telegraph,
teletype, electronically transmitted facsimile or other form of wire or
wireless communication by or at the direction of the president, the
secretary, or the officer or persons calling the meeting, to each shareholder
of record entitled to vote at such meeting. If mailed and if in a
comprehensible form, such notice shall be deemed to be given and effective
when deposited in the United States mail, addressed to the shareholder at his
address as it appears in the corporation's current record of shareholders,
with postage prepaid. If notice is given other than by mail, and provided
that such notice is in a comprehensible form, the notice is given and
effective on the date actually received by the shareholder.
If requested by the person or persons lawfully calling such meeting, the
secretary shall give notice thereof at corporate expense. No notice need be
sent to any shareholder if three
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successive notices mailed to the last known address of such shareholder have
been returned as undeliverable until such time as another address for such
shareholder is made known to the corporation by such shareholder. In order
to be entitled to receive notice of any meeting, a shareholder shall advise
the corporation in writing of any change in such shareholder's mailing
address as shown on the corporation's books and records.
When a meeting is adjourned to another date, time or place, notice need
not be given of the new date, time or place if the new date, time or place of
such meeting is announced before adjournment at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact
any business which may have been transacted at the original meeting. If the
adjournment is for more than 120 days, or if a new record date is fixed for
the adjourned meeting, a new notice of the adjourned meeting shall be given
to each shareholder of record entitled to vote at the meeting as of the new
record date.
A shareholder may waive notice of a meeting before or after the time and
date of the meeting by a writing signed by such shareholder. Such waiver
shall be delivered to the corporation for filing with the corporate records,
but this delivery and filing shall not be conditions to the effectiveness of
the waiver. Further, by attending a meeting either in person or by proxy, a
shareholder waives objection to lack of notice or defective notice of the
meeting unless the shareholder objects at the beginning of the meeting to the
holding of the meeting or the transaction of business at the meeting because
of lack of notice or defective notice. By attending the meeting, the
shareholder also waives any objection to consideration at the meeting of a
particular matter not within the purpose or purposes described in the meeting
notice unless the shareholder objects to considering the matter when it is
presented.
SECTION 5. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to (i) notice of or vote at any meeting of shareholders
or any adjournment thereof, (ii) receive distributions or share dividends, or
(iii) demand a special meeting, or to make a determination of shareholders
for any other proper purpose, the board of directors may fix a future date as
the record date for any such determination of shareholders, such date in any
case to be not more than seventy days, and, in case of a meeting of
shareholders, not less than ten days, prior to the date on which the
particular action requiring such determination of shareholders is to be
taken. If no record date is fixed by the directors, the record date shall be
the day before the notice of the meeting is given to shareholders, or the
date on which the resolution of the board of directors providing for a
distribution is adopted, as the case may be. When a determination of
shareholders entitled to vote at any meeting of shareholders is made as
provided in this section, such determination shall apply to any adjournment
thereof unless the board of directors fixes a new record date, which it must
do if the meeting is adjourned to a date more than 120 days after the date
fixed for the original meeting. Unless otherwise specified when the record
date is fixed, the time of day for such determination shall be as of the
corporation's close of business on the record date.
Notwithstanding the above, the record date for determining the
shareholders entitled to
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take action without a meeting or entitled to be given notice of action so
taken shall be the date a writing upon which the action is taken is first
received by the corporation. The record date for determining shareholders
entitled to demand a special meeting shall be the date of the earliest of any
of the demands pursuant to which the meeting is called.
SECTION 6. VOTING LISTS. After a record date is fixed for a
shareholders' meeting, the secretary shall make, at the earlier of ten days
before such meeting or two business days after notice of the meeting has been
given, a complete list of the shareholders entitled to be given notice of
such meeting or any adjournment thereof. The list shall be arranged by
voting groups and within each voting group by class or series of shares,
shall be in alphabetical order within each class or series, and shall show
the address of and the number of shares of each class or series held by each
shareholder. For the period beginning the earlier of ten days prior to the
meeting or two business days after notice of the meeting is given and
continuing through the meeting and any adjournment thereof, this list shall
be kept on file at the principal office of the corporation, or at a place
(which shall be identified in the notice) in the city where the meeting will
be held. Such list shall be available for inspection on written demand by
any shareholder (including for the purpose of this Section 6 any holder of
voting trust certificates) or his agent or attorney during regular business
hours and during the period available for inspection. The original stock
transfer books shall be prima facie evidence as to who are shareholders
entitled to examine such list or to vote at any meeting of shareholders.
Any shareholder, his agent or attorney may copy the list during regular
business hours and during the period it is available for inspection, provided
(i) the shareholder has been a shareholder for at least three months
immediately preceding the demand or holds at least five percent of all
outstanding shares of any class of shares as of the date of the demand, (ii)
the demand is made in good faith and for a purpose reasonably related to the
demanding shareholder's interest as a shareholder, (iii) the shareholder
describes with reasonable particularity the purpose and the records the
shareholder desires to inspect, (iv) the records are directly connected with
the described purpose, and (v) the shareholder pays a reasonable charge
covering the costs of labor and material for such copies, not to exceed the
estimated cost of production and reproduction.
SECTION 7. RECOGNITION PROCEDURE FOR BENEFICIAL OWNERS. The board
of directors may adopt by resolution a procedure whereby a shareholder of the
corporation may certify in writing to the corporation that all or a portion
of the shares registered in the name of such shareholder are held for the
account of a specified person or persons. The resolution may set forth (i)
the types of nominees to which it applies, (ii) the rights or privileges that
the corporation will recognize in a beneficial owner, which may include
rights and privileges other than voting, (iii) the form of certification and
the information to be contained therein, (iv) if the certification is with
respect to a record date, the time within which the certification must be
received by the corporation, (v) the period for which the nominee's use of
the procedure is effective, and (vi) such other provisions with respect to
the procedure as the board deems necessary or desirable. Upon receipt by the
corporation of a certificate complying with the procedure established by the
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board of directors, the persons specified in the certification shall be
deemed, for the purpose or purposes set forth in the certification, to be the
registered holders of the number of shares specified in place of the
shareholder making the certification.
SECTION 8. QUORUM AND MANNER OF ACTING. A majority of the votes
entitled to be cast on a matter by a voting group represented in person or by
proxy, shall constitute a quorum of that voting group for action on the
matter. If less than a majority of such votes are represented at a meeting, a
majority of the votes so represented may adjourn the meeting from time to
time without further notice, for a period not to exceed 120 days for any one
adjournment. If a quorum is present at such adjourned meeting, any business
may be transacted which might have been transacted at the meeting as
originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, unless the
meeting is adjourned and a new record date is set for the adjourned meeting.
If a quorum exists, action on a matter other than the election of
directors by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast within the voting group
opposing the action, unless the vote of a greater number or voting by classes
is required by law or the articles of incorporation.
SECTION 9. PROXIES. At all meetings of shareholders, a shareholder
may vote by proxy by signing an appointment form or similar writing, either
personally or by his duly authorized attorney-in-fact. A shareholder may
also appoint a proxy by transmitting or authorizing the transmission of a
telegram, teletype, or other electronic transmission providing a written
statement of the appointment to the proxy, a proxy solicitor, proxy support
service organization, or other person duly authorized by the proxy to receive
appointments as agent for the proxy, or to the corporation. The transmitted
appointment shall set forth or be transmitted with written evidence from
which it can be determined that the shareholder transmitted or authorized the
transmission of the appointment. The proxy appointment form or similar
writing shall be filed with the secretary of the corporation before or at the
time of the meeting. The appointment of a proxy is effective when received
by the corporation and is valid for eleven months unless a different period
is expressly provided in the appointment form or similar writing.
Any complete copy, including an electronically transmitted facsimile, of
an appointment of a proxy may be substituted for or used in lieu of the
original appointment for any purpose for which the original appointment could
be used.
Revocation of a proxy does not affect the right of the corporation to
accept the proxy's authority unless (i) the corporation had notice that the
appointment was coupled with an interest and notice that such interest is
extinguished is received by the secretary or other officer or agent
authorized to tabulate votes before the proxy exercises his authority under
the appointment, or (ii) other notice of the revocation of the appointment is
received by the secretary or other officer or agent authorized to tabulate
votes before the proxy exercises his authority under the
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appointment. Other notice of revocation may, in the discretion of the
corporation, be deemed to include the appearance at a shareholders' meeting
of the shareholder who granted the proxy and his voting in person on any
matter subject to a vote at such meeting.
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other
officer or agent authorized to tabulate votes before the proxy exercises his
authority under the appointment.
The corporation shall not be required to recognize an appointment made
irrevocable if it has received a writing revoking the appointment signed by
the shareholder (including a shareholder who is a successor to the
shareholder who granted the proxy) either personally or by his
attorney-in-fact, notwithstanding that the revocation may be a breach of an
obligation of the shareholder to another person not to revoke the appointment.
Subject to Section 11 and any express limitation on the proxy's
authority appearing on the appointment form, the corporation is entitled to
accept the proxy's vote or other action as that of the shareholder making the
appointment.
SECTION 10. VOTING OF SHARES. Each outstanding share, regardless of
class, shall be entitled to one vote, except in the election of directors,
and each fractional share shall be entitled to a corresponding fractional
vote on each matter submitted to a vote at a meeting of shareholders, except
to the extent that the voting rights of the shares of any class or classes
are limited or denied by the articles of incorporation as permitted by the
Colorado Business Corporation Act. Cumulative voting shall not be permitted
in the election of directors or for any other purpose.
In the election of directors each record holder of stock shall be
entitled to vote all of his votes for as many persons as there are directors
to be elected. At each election of directors, that number of candidates
equaling the number of directors to be elected, having the highest number of
votes cast in favor of their election, shall be elected to the board of
directors.
Except as otherwise ordered by a court of competent jurisdiction upon a
finding that the purpose of this section would not be violated in the
circumstances presented to the court, the shares of the corporation are not
entitled to be voted if they are owned, directly or indirectly, by a second
corporation, domestic or foreign, and the first corporation owns, directly or
indirectly, a majority of the shares entitled to vote for directors of the
second corporation except to the extent the second corporation holds the
shares in a fiduciary capacity.
Redeemable shares are not entitled to be voted after notice of
redemption is mailed to the holders and a sum sufficient to redeem the shares
has been deposited with a bank, trust company or other financial institution
under an irrevocable obligation to pay the holders the redemption price on
surrender of the shares.
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SECTION 11. CORPORATION'S ACCEPTANCE OF VOTES. If the name signed on a
vote, consent, waiver, proxy appointment, or proxy appointment revocation
corresponds to the name of a shareholder, the corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, proxy appointment or
proxy appointment revocation and give it effect as the act of the shareholder.
If the name signed on a vote, consent, waiver, proxy appointment or proxy
appointment revocation does not correspond to the name of a shareholder, the
corporation, if acting in good faith, is nevertheless entitled to accept the
vote, consent, waiver, proxy appointment or proxy appointment revocation and to
give it effect as the act of the shareholder if:
SECTION 12. INFORMAL ACTION BY SHAREHOLDERS. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a written consent (or counterparts thereof) that sets forth the
action so taken is signed by all of the shareholders entitled to vote with
respect to the subject matter thereof and received by the corporation. Such
consent shall have the same force and effect as a unanimous vote of the
shareholders and may be stated as such in any document. Action taken under this
Section 12 is effective as of the date the last writing necessary to effect the
action is received by the corporation, unless all of the writings specify a
different effective date, in which case such specified date shall be the
effective date for such action. If any shareholder revokes his consent as
provided for herein prior to what would otherwise be the effective date, the
action proposed in the consent shall be invalid. The record date for
determining shareholders entitled to take action without a meeting is the date
the corporation first receives a writing upon which the action is taken.
Any shareholder who has signed a writing describing and consenting to
action taken pursuant to this Section 12 may revoke such consent by a writing
signed by the shareholder describing the action and stating that the
shareholder's prior consent thereto is revoked, if such writing is received by
the corporation before the effectiveness of the action.
SECTION 13. MEETINGS BY TELECOMMUNICATION. Any or all of the
shareholders may participate in an annual or special shareholders' meeting by,
or the meeting may be conducted through the use of, any means of communication
by which all persons participating in the meeting may hear each other during the
meeting. A shareholder participating in a meeting by this means is deemed to be
present in person at the meeting.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. All corporate powers shall be exercised by
or under the authority of, and the business and affairs of the corporation shall
be managed under the direction of its board of directors, except as otherwise
provided in the Colorado Business Corporation Act or the articles of
incorporation.
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SECTION 2. NUMBER, QUALIFICATIONS AND TENURE. The number of directors
of the corporation shall be fixed from time to time by the board of directors,
within a range of not less than two or more than seven but no decrease in the
number of directors shall have the effect of shortening the term of any
incumbent director. A director shall be a natural person who is eighteen years
of age or older. A director need not be a resident of Colorado or a shareholder
of the corporation.
Directors shall be elected at each annual meeting of shareholders. Each
director shall hold office until the next annual meeting of shareholders
following his election and thereafter until his successor shall have been
elected and qualified. Directors shall be removed in the manner provided by the
Colorado Business Corporation Act. Any director may be removed by the
shareholders of the voting group that elected the director, with or without
cause, at a meeting called for that purpose. The notice of the meeting shall
state that the purpose or one of the purposes of the meeting is removal of the
director. A director may be removed only if the number of votes cast in favor
of removal exceeds the number of votes cast against removal.
SECTION 3. VACANCIES. Any director may resign at any time by giving
written notice to the secretary. Such resignation shall take effect at the time
the notice is received by the secretary unless the notice specifies a later
effective date. Unless otherwise specified in the notice of resignation, the
corporation's acceptance of such resignation shall not be necessary to make it
effective. Any vacancy on the board of directors may be filled by the
affirmative vote of a majority of the shareholders at a special meeting called
for that purpose or by the board of directors. If the directors remaining in
office constitute fewer than a quorum of the board, the directors may fill the
vacancy by the affirmative vote of a majority of all the directors remaining in
office. If elected by the directors, the director shall hold office until the
next annual shareholders' meeting at which directors are elected. If elected by
the shareholders, the director shall hold office for the unexpired term of his
predecessor in office; except that, if the director's predecessor was elected by
the directors to fill a vacancy, the director elected by the shareholders shall
hold office for the unexpired term of the last predecessor elected by the
shareholders.
SECTION 4. REGULAR MEETINGS. A regular meeting of the board of
directors shall be held without notice immediately after and at the same place
as the annual meeting of shareholders. The board of directors may provide by
resolution the time and place, either within or outside Colorado, for the
holding of additional regular meetings without other notice.
SECTION 5. SPECIAL MEETINGS. Special meetings of the board of
directors may be called by or at the request of the president or any two
directors. The person or persons authorized to call special meetings of the
board of directors may fix any place, either within or outside Colorado, as the
place for holding any special meeting of the board of directors called by them,
provided that no meeting shall be called outside the State of Colorado unless a
majority of the board of directors has so authorized.
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SECTION 6. NOTICE. Notice of the date, time and place of any special
meeting shall be given to each director at least two days prior to the meeting
by written notice either personally delivered or mailed to each director at his
residence or business address, or by notice transmitted by private courier,
telegraph, telex, electronically transmitted facsimile or other form of wire or
wireless communication. If mailed, such notice shall be deemed to be given and
to be effective on the earlier of (i) five days after such notice is deposited
in the United States mail, properly addressed, with first class postage prepaid,
or (ii) the date shown on the return receipt, if mailed by registered or
certified mail return receipt requested, provided that the return receipt is
signed by the director to whom the notice is addressed. If notice is given by
telex, electronically transmitted facsimile or other similar form of wire or
wireless communication, such notice shall be deemed to be given and to be
effective when sent, and with respect to a telegram, such notice shall be deemed
to be given and to be effective when the telegram is delivered to the telegraph
company. If a director has designated in writing one or more reasonable
addresses or facsimile numbers for delivery of notice to him, notice sent by
mail, telegraph, telex, electronically transmitted facsimile or other form of
wire or wireless communication shall not be deemed to have been given or to be
effective unless sent to such addresses or facsimile numbers, as the case may
be.
A director may waive notice of a meeting before or after the time and date
of the meeting by a writing signed by such director. Such waiver shall be
delivered to the corporation for filing with the corporate records, but such
delivery and filing shall not be conditions to the effectiveness of the waiver.
Further, a director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless at the beginning of the meeting, or
promptly upon his later arrival, the director objects to holding the meeting or
transacting business at the meeting because of lack of notice or defective
notice and does not thereafter vote for or assent to action taken at the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
SECTION 7. QUORUM. A majority of the number of directors fixed by the
board of directors pursuant to Article III, Section 2 or, if no number is fixed,
a majority of the number in office immediately before the meeting begins, shall
constitute a quorum for the transaction of business at any meeting of the board
of directors. If less than such majority is present at a meeting, a majority of
the directors present may adjourn the meeting from time to time without further
notice, for a period not to exceed sixty days at any one adjournment.
SECTION 8. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
SECTION 9. COMPENSATION. By resolution of the board of directors, any
director may be paid any one or more of the following: his expenses, if any, of
attendance at meetings, a fixed sum for attendance at each meeting, a stated
salary as director, or such other compensation as the corporation and the
director may reasonably agree upon. No such payment shall preclude any
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director from serving the corporation in any other capacity and receiving
compensation therefor.
SECTION 10. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the board of directors or committee of the board at
which action on any corporate matter is taken shall be presumed to have assented
to the action taken unless (i) the director objects at the beginning of the
meeting, or promptly upon his arrival, to the holding of the meeting or the
transaction of business at the meeting and does not thereafter vote for or
assent to any action taken at the meeting, (ii) the director contemporaneously
requests that his dissent or abstention as to any specific action taken be
entered in the minutes of the meeting, or (iii) the director causes written
notice of his dissent or abstention as to any specific action to be received by
the presiding officer of the meeting before its adjournment or by the secretary
promptly after the adjournment of the meeting. A director may dissent to a
specific action at a meeting, while assenting to others. The right to dissent
to a specific action taken at a meeting of the board of directors or a committee
of the board shall not be available to a director who voted in favor of such
action.
SECTION 11. COMMITTEES. By resolution adopted by a majority of all the
directors in office when the action is taken, the board of directors may
designate from among its members an executive committee and one or more other
committees, and appoint one or more members of the board of directors to serve
on them. To the extent provided in the resolution, each committee shall have
all the authority of the board of directors, except that no such committee shall
have the authority to (i) authorize distributions, (ii) approve or propose to
shareholders actions or proposals required by the Colorado Business Corporation
Act to be approved by shareholders, (iii) fill vacancies on the board of
directors or any committee thereof, (iv) amend the articles of incorporation,
(v) adopt, amend or repeal the bylaws, (vi) approve a plan of merger not
requiring shareholder approval, (vii) authorize or approve the reacquisition of
shares unless pursuant to a formula or method prescribed by the board of
directors, or (viii) authorize or approve the issuance or sale of shares, or
contract for the sale of shares or determine the designations and relative
rights, preferences and limitations of a class or series of shares, except that
the board of directors may authorize a committee or officer to do so within
limits specifically prescribed by the board of directors. The committee shall
then have full power within the limits set by the board of directors to adopt
any final resolution setting forth all preferences, limitations and relative
rights of such class or series and to authorize an amendment of the articles of
incorporation stating the preferences, limitations and relative rights of a
class or series for filing with the Secretary of State under the Colorado
Business Corporation Act.
Sections 4, 5, 6, 7, 8 and 12 of Article III, which govern meetings,
notice, waiver of notice, quorum, voting requirements and action without a
meeting of the board of directors, shall apply to committees and their members
appointed under this Section 11.
Neither the designation of any such committee, the delegation of authority
to such committee, nor any action by such committee pursuant to its authority
shall alone constitute compliance by any member of the board of directors or a
member of the committee in question with his responsibility to conform to the
standard of care set forth in Article III, Section 14 of
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these bylaws.
SECTION 12. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at a meeting of the directors or any committee designated
by the board of directors may be taken without a meeting if a written consent
(or counterparts thereof) that sets forth the action so taken is signed by all
of the directors entitled to vote with respect to the action taken. Such
consent shall have the same force and effect as a unanimous vote of the
directors or committee members and may be stated as such in any document.
Unless the consent specifies a different effective time or date, action taken
under this Section 12 is effective at the time or date the last director signs a
writing describing the action taken, unless, before such time, any director has
revoked his consent by a writing signed by the director and received by the
president or the secretary of the corporation.
SECTION 13. TELEPHONIC MEETINGS. The board of directors may permit any
director (or any member of a committee designated by the board) to participate
in a regular or special meeting of the board of directors or a committee thereof
through the use of any means of communication by which all directors
participating in the meeting can hear each other during the meeting. A director
participating in a meeting in this manner is deemed to be present in person at
the meeting.
SECTION 14. STANDARD OF CARE. A director shall perform his duties as a
director, including without limitation his duties as a member of any committee
of the board, in good faith, in a manner he reasonably believes to be in the
best interests of the corporation, and with the care an ordinarily prudent
person in a like position would exercise under similar circumstances. In
performing his duties, a director shall be entitled to rely on information,
opinions, reports or statements, including financial statements and other
financial data, in each case prepared or presented by the persons herein
designated. However, he shall not be considered to be acting in good faith if
he has knowledge concerning the matter in question that would cause such
reliance to be unwarranted. A director shall not be liable to the corporation
or its shareholders for any action he takes or omits to take as a director if,
in connection with such action or omission, he performs his duties in compliance
with this Section 14.
The designated persons on whom a director is entitled to rely are (i) one
or more officers or employees of the corporation whom the director reasonably
believes to be reliable and competent in the matters presented, (ii) legal
counsel, public accountant, or other person as to matters which the director
reasonably believes to be within such person's professional or expert
competence, or (iii) a committee of the board of directors on which the director
does not serve if the director reasonably believes the committee merits
confidence.
ARTICLE IV
OFFICERS AND AGENTS
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SECTION 1. GENERAL. The officers of the corporation shall be a
president, one or more vice presidents, a secretary and a treasurer, each of
whom shall be appointed by the board of directors and shall be a natural person
eighteen years of age or older. One person may hold more than one office. The
board of directors or an officer or officers so authorized by the board may
appoint such other officers, assistant officers, committees and agents,
including a chairman of the board, assistant secretaries and assistant
treasurers, as they may consider necessary. Except as expressly prescribed by
these bylaws, the board of directors or the officer or officers authorized by
the board shall from time to time determine the procedure for the appointment of
officers, their authority and duties and their compensation, provided that the
board of directors may change the authority, duties and compensation of any
officer who is not appointed by the board.
SECTION 2. APPOINTMENT AND TERM OF OFFICE. The officers of the
corporation to be appointed by the board of directors shall be appointed at each
annual meeting of the board held after each annual meeting of the shareholders.
If the appointment of officers is not made at such meeting or if an officer or
officers are to be appointed by another officer or officers of the corporation,
such appointments shall be made as determined by the board of directors or the
appointing person or persons. Each officer shall hold office until the first of
the following occurs: his successor shall have been duly appointed and
qualified, his death, his resignation, or his removal in the manner provided in
Section 3.
SECTION 3. RESIGNATION AND REMOVAL. An officer may resign at any time
by giving written notice of resignation to the president, secretary or other
person who appoints such officer. The resignation is effective when the notice
is received by the corporation unless the notice specifies a later effective
date.
Any officer or agent may be removed at any time with or without cause by
the board of directors or an officer or officers authorized by the board. Such
removal does not affect the contract rights, if any, of the corporation or of
the person so removed. The appointment of an officer or agent shall not in
itself create contract rights.
SECTION 4. VACANCIES. A vacancy in any office, however occurring, may
be filled by the board of directors, or by the officer or officers authorized by
the board, for the unexpired portion of the officer's term. If an officer
resigns and his resignation is made effective at a later date, the board of
directors, or officer or officers authorized by the board, may permit the
officer to remain in office until the effective date and may fill the pending
vacancy before the effective date if the board of directors or officer or
officers authorized by the board provide that the successor shall not take
office until the effective date. In the alternative, the board of directors, or
officer or officers authorized by the board of directors, may remove the officer
at any time before the effective date and may fill the resulting vacancy.
SECTION 5. PRESIDENT. The president shall preside at all meetings of
shareholders and all meetings of the board of directors unless the board of
directors has appointed a chairman, vice chairman, or other officer of the board
and has authorized such person to preside at meetings of the board of directors.
Subject to the direction and supervision of the board of directors, the
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president shall be the chief executive officer of the corporation, and shall
have general and active control of its affairs and business and general
supervision of its officers, agents and employees. Unless otherwise directed by
the board of directors, the president shall attend in person or by substitute
appointed by him, or shall execute on behalf of the corporation written
instruments appointing a proxy or proxies to represent the corporation, at all
meetings of the stockholders of any other corporation in which the corporation
holds any stock. On behalf of the corporation, the president may in person or
by substitute or by proxy execute written waivers of notice and consents with
respect to any such meetings. At all such meetings and otherwise, the
president, in person or by substitute or proxy, may vote the stock held by the
corporation, execute written consents and other instruments with respect to such
stock, and exercise any and all rights and powers incident to the ownership of
said stock, subject to the instructions, if any, of the board of directors. The
president shall have custody of the treasurer's bond, if any. The president
shall have such additional authority and duties as are appropriate and customary
for the office of president and chief executive officer, except as the same may
be expanded or limited by the board of directors from time to time.
SECTION 6. VICE PRESIDENTS. The vice presidents shall assist the
president and shall perform such duties as may be assigned to them by the
president or by the board of directors. In the absence of the president, the
vice president, if any (or, if more than one, the vice presidents in the order
designated by the board of directors, of if the board makes no such designation,
then the vice president designated by the president, or if neither the board nor
the president makes any such designation, the senior vice president as
determined by first election to that office), shall have the powers and perform
the duties of the president.
SECTION 7. SECRETARY. The secretary shall (i) prepare and maintain as
permanent records the minutes of the proceedings of the shareholders and the
board of directors without a meeting, a record of all actions taken by a
committee of the board of directors in place of the board of directors on behalf
of the corporation, and a record of all waivers of notice of meetings of
shareholders and of the board of directors or any committee thereof, (ii) see
that all notices are duly given in accordance with the provisions of these
bylaws and as required by law, (iii) serve as custodian of the corporate records
and of the seal of the corporation and affix the seal to all documents when
authorized by the board of directors, (iv) keep at the corporation's registered
office or principal place of business a record containing the names and
addresses of all shareholders in a form that permits preparation of a list of
shareholders arranged by voting group and by class or series of shares within
each voting group, that is alphabetical within each class or series and that
shows the address of, and the number of shares of each class or series held by,
each shareholder, unless such a record shall be kept at the office of the
corporation's transfer agent or registrar, (v) maintain at the corporation's
principal office the originals or copies of the corporation's articles of
incorporation, bylaws, minutes of all shareholders' meetings and records of all
action taken by shareholders without a meeting for the past three years, all
written communications within the past three years to shareholders as a group or
to the holders of any class or series of shares as a group, a list of the names
and business addresses of the current directors and officers, a copy of the
corporation's most recent corporate report filed with the
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Secretary of State, and financial statements showing in reasonable detail the
corporation's assets and liabilities and results of operations for the last
three years, (vi) have general charge of the stock transfer books of the
corporation, unless the corporation has a transfer agent, (vii) authenticate
records of the corporation, and (viii) in general, perform all duties
incident to the office of secretary and such other duties as from time to
time may be assigned to him by the president or by the board of directors.
Assistant secretaries, if any, shall have the same duties and powers, subject
to supervision by the secretary. The directors and/or shareholders may
however respectively designate a person other than the secretary or assistant
secretary to keep the minutes of their respective meetings.
Any books, records, or minutes of the corporation may be in written form or
in any form capable of being converted into written form within a reasonable
time.
SECTION 8. TREASURER. The treasurer shall be the principal financial
officer of the corporation, shall have the care and custody of all funds,
securities, evidences of indebtedness and other personal property of the
corporation and shall deposit the same in accordance with the instructions of
the board of directors. Subject to the limits imposed by the board of
directors, he shall receive and give receipts and acquittances for money paid in
on account of the corporation, and shall pay out of the corporation's funds on
hand all bills, payrolls and other just debts of the corporation of whatever
nature upon maturity. He shall perform all other duties incident to the office
of the treasurer and, upon request of the board, shall make such reports to it
as may be required at any time. He shall, if required by the board, give the
corporation a bond in such sums and with such sureties as shall be satisfactory
to the board, conditioned upon the faithful performance of his duties and for
the restoration to the corporation of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the corporation. He shall have such other powers and perform such other
duties as may from time to time be prescribed by the board of directors or the
president. The assistant treasurers, if any, shall have the same powers and
duties, subject to the supervision of the treasurer.
The treasurer shall also be the principal accounting officer of the
corporation. He shall prescribe and maintain the methods and systems of
accounting to be followed, keep complete books and records of account as
required by the Colorado Business Corporation Act, prepare and file all local,
state and federal tax returns, prescribe and maintain an adequate system of
internal audit and prepare and furnish to the president and the board of
directors statements of account showing the financial position of the
corporation and the results of its operations.
ARTICLE V
STOCK
SECTION 1. CERTIFICATES. The board of directors shall be authorized to
issue any of its
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classes of shares with or without certificates. The fact that the shares are
not represented by certificates shall have no effect on the rights and
obligations of shareholders. If the shares are represented by certificates,
such shares shall be represented by consecutively numbered certificates
signed, either manually or by facsimile, in the name of the corporation by
the president, a vice president, the secretary or an assistant secretary. In
case any officer who has signed or whose facsimile signature has been placed
upon such certificate shall have ceased to be such officer before such
certificate is issued, such certificate may nonetheless be issued by the
corporation with the same effect as if he were such officer at the date of
its issue. The names of the owners of the certificates, the number of
shares, and the date of issue shall be entered on the books of the
corporation. Each certificate representing shares shall state upon its face:
SECTION 2. CONSIDERATION FOR SHARES. Certificates or uncertificated
shares shall not be issued until the shares represented thereby are fully paid.
The board of directors may authorize the issuance of shares for consideration
consisting of any tangible or intangible property or benefit to the corporation,
including cash, promissory notes, services performed or other securities of the
corporation. Future services shall not constitute payment or partial payment
for shares of the corporation. The promissory note of a subscriber or an
affiliate of a subscriber shall not constitute payment or partial payment for
shares of the corporation unless the note is negotiable and is secured by
collateral, other than the shares being purchased, having a fair market value at
least equal to the principal amount of the note. For purposes of this Section
2, "promissory note" means a negotiable instrument on which there is an
obligation to pay independent of collateral and does not include a non-recourse
note.
SECTION 3. LOST CERTIFICATES. In case of the alleged loss, destruction
or mutilation of a certificate of stock, the board of directors may direct the
issuance of a new certificate in lieu thereof upon such terms and conditions in
conformity with law as the board may prescribe. The board of directors may in
its discretion require an affidavit of lost certificate and/or a bond in such
form and amount and with such surety as it may determine before issuing a new
certificate.
SECTION 4. TRANSFER OF SHARES. Upon surrender to the corporation or to
a transfer agent of the corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and receipt of such documentary stamps as may be required by law and
evidence of compliance with all applicable securities laws and other
restrictions, the corporation shall issue a new certificate to the person
entitled thereto, and cancel the old certificate. Every such transfer of stock
shall be entered on the stock books of the corporation which shall be entered on
the stock books of the corporation which shall be kept at its principal office
or by the person and the place designated by the board of directors.
Except as otherwise expressly provided in Article II, Sections 7 and 11,
and except for the assertion of dissenters' rights to the extent provided in
Article 113 of the Colorado Business Corporation Act, the corporation shall be
entitled to treat the registered holder of any shares of the corporation as the
owner thereof for all purposes, and the corporation shall not be bound to
recognize any equitable or other claim to, or interest in, such shares or rights
deriving from such
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shares on the part of any person other than the registered holder, including
without limitation any purchaser, assignee or transferee of such shares or
rights deriving from such shares on the part of any person other than the
registered holder, including without limitation any purchaser, assignee or
transferee of such shares or rights deriving from such shares, unless and
until such other person becomes the registered holder of such shares, whether
or not the corporation shall have either actual or constructive notice of the
claimed interest of such other person.
SECTION 5. TRANSFER AGENT, REGISTRARS AND PAYING AGENTS. The board may
at its discretion appoint one or more transfer agents, registrars and agents for
making payment upon any class of stock, bond, debenture or other security of the
corporation. Such agents and registrars may be located either within or
outside Colorado. They shall have such rights and duties and shall be entitled
to such compensation as may be agreed.
ARTICLE VI
INDEMNIFICATION OF CERTAIN PERSONS
SECTION 1. INDEMNIFICATION. For purposes of Article VI, a "Proper
Person" means any person (including the estate or personal representative of a
director) who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether formal or informal, by
reason of the fact that he is or was a director, officer, employee, fiduciary or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee, fiduciary or agent of any
foreign or domestic profit or nonprofit corporation or of any partnership, joint
venture, trust, profit or nonprofit unincorporated association, limited
liability company, or other enterprise or employee benefit plan. The
corporation shall indemnify any Proper Person against reasonably incurred
expenses (including attorneys' fees), judgments, penalties, fines (including any
excise tax assessed with respect to an employee benefit plan) and amounts paid
in settlement reasonably incurred by him connection with such action, suit or
proceeding if it is determined by the groups set forth in Section 4 of this
Article that he conducted himself in good faith and that he reasonably believed
(i) in the case of conduct in his official capacity with the corporation, that
his conduct was in the corporation's best interests, or (ii) in all other cases
(except criminal cases), that his conduct was at least not opposed to the
corporation's best interests, or (iii) in the case of any criminal proceeding,
that he had no reasonable cause to believe his conduct was unlawful. Official
capacity means, when used with respect to a director, the office of director
and, when used with respect to any other Proper Person, the office in a
corporation held by the officer or the employment, fiduciary or agency
relationship undertaken by the employee, fiduciary, or agent on behalf of the
corporation. Official capacity does not include service for any other domestic
or foreign corporation or other person or employee benefit plan.
A director's conduct with respect to an employee benefit plan for a purpose
the director
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reasonably believed to be in the interests of the participants in or
beneficiaries of the plan is conduct that satisfies the requirements in (ii)
of this Section 1. A director's conduct with respect to an employee benefit
plan for a purpose that the director did not reasonably believe to be in the
interests of the participants in or beneficiaries of the plan shall be deemed
not to satisfy the requirement of this section that he conduct himself in
good faith.
No indemnification shall be made under this Article VI to a Proper Person
with respect to any claim, issue or matter in connection with a proceeding by or
in the right of a corporation in which the Proper Person was adjudged liable to
the corporation or in connection with any proceeding charging that the Proper
Person derived an improper personal benefit, whether or not involving action in
an official capacity, in which he was adjudged liable on the basis that he
derived an improper personal benefit. Further, indemnification under this
Section in connection with a proceeding brought by or in the right of the
corporation shall be limited to reasonable expenses, including attorneys' fees,
incurred in connection with the proceeding.
SECTION 2. RIGHT TO INDEMNIFICATION. The corporation shall indemnify
any Proper Person who was wholly successful, on the merits or otherwise, in
defense of any action, suit, or proceeding as to which he was entitled to
indemnification under Section 1 of this Article VI against expenses (including
attorneys' fees) reasonably incurred by him in connection with the proceeding
without the necessity of any action by the corporation other than the
determination in good faith that the defense has been wholly successful.
SECTION 3. EFFECT OF TERMINATION OF ACTION. The termination of any
action, suit or proceeding by judgment, order, settlement or conviction, or upon
a plea of nolo contendere or its equivalent shall not of itself create a
presumption that the person seeking indemnification did not meet the standards
of conduct described in Section 1 of this Article VI. Entry of a judgment by
consent as part of a settlement shall not be deemed an adjudication of
liability, as described in Section 2 of this Article VI.
SECTION 4. GROUPS AUTHORIZED TO MAKE INDEMNIFICATION DETERMINATION.
Except where there is a right to indemnification as set forth in Sections 1 or 2
of this Article or where indemnification is ordered by a court in Section 5, any
indemnification shall be made by the corporation only as determined in the
specific case by a proper group that indemnification of the Proper Person is
permissible under the circumstances because he has met the applicable standards
of conduct set forth in Section 1 of this Article. This determination shall be
made by the board of directors by a majority vote of those present at a meeting
at which a quorum is present, which quorum shall consist of directors not
parties to the proceeding ("Quorum"). If a Quorum cannot be obtained, the
determination shall be made by a majority vote of a committee of the board of
directors designated by the board, which committee shall consist of two or more
directors not parties to the proceeding, except that directors who are parties
to the proceeding may participate in the designation of directors for the
committee. If a Quorum of the board of directors cannot be obtained and the
committee cannot be established, or even if a Quorum is obtained or the
committee is designated and a majority of the directors constituting such Quorum
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or committee so directs, the determination shall be made by (i) independent
legal counsel selected by a vote of the board of directors or the committee in
the manner specified in this Section 4 or, if a Quorum of the full board of
directors cannot be obtained and a committee cannot be established, by
independent legal counsel selected by a majority vote of the full board
(including directors who are parties to the action) or (ii) a vote of the
shareholders.
Authorization of indemnification and advance of expenses shall be made in
the same manner as the determination that indemnification or advance of expenses
is permissible except that, if the determination that indemnification or advance
of expenses is permissible is made by independent legal counsel, authorization
of indemnification and advance of expenses shall be made by the body that
selected such counsel.
SECTION 5. COURT-ORDERED INDEMNIFICATION. Any Proper Person may apply
for indemnification to the court conducting the proceeding or to another court
of competent jurisdiction for mandatory indemnification under Section 2 of this
Article, including indemnification for reasonable expenses incurred to obtain
court-ordered indemnification. If a court determines that the Proper Person is
entitled to indemnification under Section 2 of this Article, the court shall
order indemnification, including the Proper Person's reasonable expenses
incurred to obtain court-ordered indemnification. If the court determines that
such Proper Person is fairly and reasonably entitled to indemnification in view
of all the relevant circumstances, whether or not he met the standards of
conduct set forth in Section 1 of this Article or was adjudged liable in the
proceeding, the court may order such indemnification as the court deems proper
except that if the Proper Person has been adjudged liable, indemnification shall
be limited to reasonable expenses incurred in connection with the proceeding and
reasonable expenses incurred to obtain court-ordered indemnification.
SECTION 6. ADVANCE OF EXPENSES. Reasonable expenses (including
attorneys' fees) incurred in defending an action, suit or proceeding as
described in Section 1 may be paid by the corporation to any Proper Person in
advance of the final disposition of such action, suit or proceeding upon receipt
of (i) a written affirmation of such Proper Person's good faith belief that he
has met the standards of conduct prescribed by Section 1 of this Article VI,
(ii) a written undertaking, executed personally or on the Proper Person's
behalf, to repay such advances if it is ultimately determined that he did not
meet the prescribed standards of conduct (the undertaking shall be an unlimited
general obligation of the Proper Person but need not be secured and may be
accepted without reference to financial ability to make repayment), and (iii) a
determination is made by the proper group (as described in Section 4 of this
Article VI) that the facts as then known to the group would not preclude
indemnification. Determination and authorization of payments shall be made in
the same manner specified in Section 4 of this Article VI.
SECTION 7. ADDITIONAL INDEMNIFICATION TO CERTAIN PERSONS OTHER THAN
DIRECTORS. In addition to the indemnification provided to officers, employees,
fiduciaries or agents because of their status as Proper Persons under this
Article, the corporation may also indemnify and advance expenses to them if they
are not directors of the corporation to a greater extent than is provided in
these bylaws, if not inconsistent with public policy, and if provided for by
general or
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specific action of its board of directors or shareholders or by contract.
SECTION 8. WITNESS EXPENSES. The sections of this Article VI do not
limit the corporation's authority to pay or reimburse expenses incurred by a
director in connection with an appearance as a witness in a proceeding at a time
when he has not been made a named defendant or respondent in the proceeding.
SECTION 9. REPORT TO SHAREHOLDERS. Any indemnification of or advance
of expenses to a director in accordance with this Article VI, if arising out of
a proceeding by or on behalf of the corporation, shall be reported in writing to
the shareholders with or before the notice of the next shareholders' meeting.
If the next shareholder action is taken without a meeting at the instigation of
the board of directors, such notice shall be given to the shareholders at or
before the time the first shareholder signs a writing consenting to such action.
ARTICLE VII
PROVISION OF INSURANCE
SECTION 1. PROVISION OF INSURANCE. By action of the board of directors,
notwithstanding any interest of the directors in the action, the corporation
may purchase and maintain insurance, in such scope and amounts as the board
of directors deems appropriate, on behalf of any person who is or was a
director, officer, employee, fiduciary or agent of the corporation, or who,
while a director, officer, employee, fiduciary or agent of the corporation,
is or was serving at the request of the corporation as a director, officer,
partner, trustee, employee fiduciary or agent of any other foreign or
domestic corporation or of any partnership, joint venture, trust, profit or
nonprofit unincorporated association, limited liability company, other
enterprise or employee benefit plan, against any liability asserted against,
or incurred by, him in that capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of Article VI or applicable law. Any such
insurance may be procured from any insurance company designated by the board of
directors of the corporation, whether such insurance company is formed under the
laws of Colorado or any other jurisdiction of the United States or elsewhere,
including any insurance company in which the corporation has an equity interest
or any other interest, through stock ownership or otherwise.
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ARTICLE VIII
MISCELLANEOUS
SECTION 1. SEAL. The board of directors may adopt a corporate seal,
which shall be circular in form and shall contain the name of the corporation
and the words, "Seal, Colorado."
SECTION 2. FISCAL YEAR. The fiscal year of the corporation shall be as
established by the board of directors.
SECTION 3. AMENDMENTS. The board of directors shall have power, to the
maximum extent permitted by the Colorado Business Corporation Act, to make,
amend and repeal the bylaws of the corporation at any regular or special meeting
of the board unless the shareholders, in making, amending or repealing a
particular bylaw, expressly provide that the directors may not amend or repeal
such bylaw. The shareholders also shall have the power to make, amend or repeal
the bylaws of the corporation at any annual meeting or at any special meeting
called for that purpose.
SECTION 4. RECEIPT OF NOTICES BY THE CORPORATION. Notices, shareholder
writings consenting to action, and other documents or writings shall be deemed
to have been received by the corporation when they are actually received: (1) at
the registered office of the corporation in Colorado; (2) at the principal
office of the corporation (as that office is designated in the most recent
document filed by the corporation with the secretary of state for Colorado
designating a principal office) addressed to the attention of the secretary of
the corporation; (3) by the secretary of the corporation wherever the secretary
may be found; or (4) by any other person authorized from time to time by the
board of directors or the president to receive such writings, wherever such
person is found.
SECTION 5. GENDER. The masculine gender is used in these bylaws as a
matter of convenience only and shall be interpreted to include the feminine and
neuter genders as the circumstances indicate.
SECTION 6. CONFLICTS. In the event of any irreconcilable conflict
between these bylaws and either the corporation's articles of incorporation or
applicable law, the latter shall control.
SECTION 7. DEFINITIONS. Except as otherwise specifically provided in
these bylaws, all terms used in these bylaws shall have the same definition as
in the Colorado Business Corporation Act.
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AGREEMENT AND PLAN OF MERGER
BETWEEN
ACI SYSTEMS, INC.
AND
INTERACTIVE PLANET, INC.
June 21, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) The Merger . . . . . . . . . . . . . . . . . . . . . . . 4
(b) The Closing . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Actions at the Closing . . . . . . . . . . . . . . . . . 4
(d) Effect of Merger . . . . . . . . . . . . . . . . . . . . 4
(e) Procedure for Payment . . . . . . . . . . . . . . . . . . 5
(f) No Fractional Shares . . . . . . . . . . . . . . . . . . 6
(g) Stock Legend . . . . . . . . . . . . . . . . . . . . . . 6
(h) Closing of Transfer Records . . . . . . . . . . . . . . . 6
3. Representations and Warranties Concerning the Target . . . . . . . 6
(a) Organization, Qualification, and Corporate Power . . . . 6
(b) Capitalization . . . . . . . . . . . . . . . . . . . . . 7
(c) Noncontravention . . . . . . . . . . . . . . . . . . . . 7
(d) Title to Assets . . . . . . . . . . . . . . . . . . . . . 7
(e) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 8
(f) Financial Statements . . . . . . . . . . . . . . . . . . 8
(g) Events Subsequent to Target Balance Sheet . . . . . . . . 8
(h) Undisclosed Liabilities . . . . . . . . . . . . . . . . . 8
(i) Legal Compliance . . . . . . . . . . . . . . . . . . . . 8
(j) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 8
(k) Real Property . . . . . . . . . . . . . . . . . . . . . . 9
(l) Intellectual Property . . . . . . . . . . . . . . . . . . 9
(m) Contracts . . . . . . . . . . . . . . . . . . . . . . . . 10
(n) Notes and Accounts Receivable . . . . . . . . . . . . . . 12
(o) Powers of Attorney . . . . . . . . . . . . . . . . . . . 12
(p) Insurance . . . . . . . . . . . . . . . . . . . . . . . . 12
(q) Litigation . . . . . . . . . . . . . . . . . . . . . . . 12
(r) Employees . . . . . . . . . . . . . . . . . . . . . . . . 13
(s) Employee Benefits . . . . . . . . . . . . . . . . . . . . 13
(t) Guaranties . . . . . . . . . . . . . . . . . . . . . . . 13
(u) Environment, Health, and Safety . . . . . . . . . . . . . 13
(v) Disclosure . . . . . . . . . . . . . . . . . . . . . . . 14
(w) Bank Accounts . . . . . . . . . . . . . . . . . . . . . . 14
(x) Broker's Fees . . . . . . . . . . . . . . . . . . . . . . 14
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TABLE OF CONTENTS
PAGE
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4. Representations and Warranties Concerning the Buyer . . . . . . . . 14
(a) Organization, Qualification, and Corporate Power . . . . 14
(b) Capitalization . . . . . . . . . . . . . . . . . . . . . 15
(c) Noncontravention . . . . . . . . . . . . . . . . . . . . 15
(d) Title to Assets . . . . . . . . . . . . . . . . . . . . . 15
(e) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 16
(f) Financial Statements . . . . . . . . . . . . . . . . . . 16
(g) Events Subsequent to Buyer Balance Sheet . . . . . . . . 16
(h) Undisclosed Liabilities . . . . . . . . . . . . . . . . . 16
(i) Legal Compliance . . . . . . . . . . . . . . . . . . . . 16
(j) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 16
(k) Real Property . . . . . . . . . . . . . . . . . . . . . . 17
(l) Intellectual Property . . . . . . . . . . . . . . . . . . 18
(m) Contracts . . . . . . . . . . . . . . . . . . . . . . . . 19
(n) Notes and Accounts Receivable . . . . . . . . . . . . . . 20
(o) Powers of Attorney . . . . . . . . . . . . . . . . . . . 20
(p) Insurance . . . . . . . . . . . . . . . . . . . . . . . . 20
(q) Litigation . . . . . . . . . . . . . . . . . . . . . . . 21
(r) Employees . . . . . . . . . . . . . . . . . . . . . . . . 21
(s) Employee Benefits . . . . . . . . . . . . . . . . . . . . 22
(t) Guaranties . . . . . . . . . . . . . . . . . . . . . . . 22
(u) Environment, Health, and Safety . . . . . . . . . . . . . 22
(v) Disclosure . . . . . . . . . . . . . . . . . . . . . . . 23
(w) Bank Accounts . . . . . . . . . . . . . . . . . . . . . . 23
(x) Broker's Fees . . . . . . . . . . . . . . . . . . . . . . 23
5. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . 23
(b) Notices and Consents . . . . . . . . . . . . . . . . . . 23
(c) Regulatory Matters and Approvals . . . . . . . . . . . . 23
(d) Operation of Business . . . . . . . . . . . . . . . . . . 24
(e) Full Access . . . . . . . . . . . . . . . . . . . . . . . 24
(f) Notice of Developments . . . . . . . . . . . . . . . . . 25
6. Conditions to Obligation to Close . . . . . . . . . . . . . . . . . 25
(a) Conditions to Obligation of the Buyer . . . . . . . . . . 25
(b) Conditions to Obligation of the Target . . . . . . . . . 26
7. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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TABLE OF CONTENTS
PAGE
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(a) Termination of Agreement . . . . . . . . . . . . . . . . 27
(b) Effect of Termination . . . . . . . . . . . . . . . . . . 27
8. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(a) Survival . . . . . . . . . . . . . . . . . . . . . . . . 28
(b) Press Releases and Public Announcements . . . . . . . . . 28
(c) No Third Party Beneficiaries . . . . . . . . . . . . . . 28
(d) Entire Agreement . . . . . . . . . . . . . . . . . . . . 28
(e) Succession and Assignment . . . . . . . . . . . . . . . . 28
(f) Counterparts . . . . . . . . . . . . . . . . . . . . . . 28
(g) Headings . . . . . . . . . . . . . . . . . . . . . . . . 28
(h) Notices . . . . . . . . . . . . . . . . . . . . . . . . . 28
(i) Governing Law . . . . . . . . . . . . . . . . . . . . . . 29
(j) Amendments and Waivers . . . . . . . . . . . . . . . . . 29
(k) Severability . . . . . . . . . . . . . . . . . . . . . . 29
(l) Expenses . . . . . . . . . . . . . . . . . . . . . . . . 29
(m) Construction . . . . . . . . . . . . . . . . . . . . . . 29
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger is entered into as of June ___, 1996 by
and between ACI Systems, Inc., a Colorado corporation (the "Buyer"), and
Interactive Planet, Inc., a Colorado corporation (the "Target"). The Buyer and
the Target are referred to collectively herein as the "Parties."
This Agreement contemplates a tax-free merger of the Target with and into
the Buyer in a reorganization pursuant to Code Section 368(a)(1)(A). The Target
Shareholders will receive capital stock in the Buyer in exchange for their
capital stock in the Target.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Articles of Merger" has the meaning set forth in Section 2(c) below.
"Buyer" has the meaning set forth in the preface above.
"Buyer Balance Sheet" has the meaning set forth in Section 4(f) below.
"Buyer Share" means any share of the Common Stock, no par value per share,
of the Buyer.
"Closing" has the meaning set forth in Section 2(b) below.
"Closing Date" has the meaning set forth in Section 2(b) below.
"Colorado Business Corporation Act" means the Business Corporation Act of
the State of Colorado, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Target that is not already generally available to the public.
"Contract" means any contract, mortgage, deed of trust, bond, indenture,
lease, license, note, franchise, certificate, option, warrant, right, or other
instrument, document, obligation, or agreement.
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"Effective Time" has the meaning set forth in Section 2(d)(i) below.
"Encumbrance" means any security agreement, financing statement filed with
any governmental authority, conditional sale or other title retention agreement,
any lease, consignment or bailment given for purposes of security, any lien,
mortgage, indenture, pledge, option, encumbrance, adverse interest, constructive
trust or other trust, claim attachment, exception to or defect in title or other
ownership interest (including but not limited to reservations, rights of entry,
possibilities of reverter, encroachments, easements, rights-of-way, restrictive
covenants leases, and licenses) of any kind, which otherwise constitutes an
interest in or claim against property, whether arising pursuant to any law or
regulation, contract or otherwise.
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
"Extremely Hazardous Substance" has the meaning set forth in Section 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-
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how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing
plans and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"IRS" means the Internal Revenue Service.
"Knowledge" or "knowledge" means actual knowledge after reasonable
investigation.
"Merger" has the meaning set forth in Section 2(a) below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
"Requisite Buyer Shareholder Approval" means the affirmative vote of the
holders of 100% of the Buyer Shares in favor of this Agreement and the Merger.
"Requisite Target Shareholder Approval" means the affirmative vote of the
holders of 100% of the Target Shares in favor of this Agreement and the Merger.
"Special Buyer Meeting" has the meaning set forth in Section 5(c)(ii)
below.
"Special Target Meeting" has the meaning set forth in Section 5(c)(ii)
below.
"Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors.
"Surviving Corporation" has the meaning set forth in Section 2(a) below,
"Target" has the meaning set forth in the preface above.
"Target Balance Sheet" has the meaning set forth in Section 3(f) below.
"Target Share" means any share of the Common Stock, $1.00 par value per
share, of the
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Target.
"Target Shareholder" means any Person who holds any Target Shares.
"Taxes" means all levies and assessments of any kind or nature imposed by
any governmental authority, including but not limited to all income, sales, use,
ad valorem, value added, franchise, severance, net or gross proceeds,
withholding, payroll, employment, excise, or property taxes, together with any
interest thereon and any penalties, additions to tax, or additional amounts
applicable thereto.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including without limitation
any schedule or attachment thereto, and any amendment thereof.
2. BASIC TRANSACTION.
(a) THE MERGER. On and subject to the terms and conditions of this
Agreement, the Target will merge with and into the Buyer (the "Merger") at the
Effective Time. The Buyer shall be the corporation surviving the Merger (the
"Surviving Corporation").
(b) THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Parcel, Mauro,
Hultin & Spaanstra, P.C. in Denver, Colorado, commencing at 9:00 a.m. local time
on the second business day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself) or such other date, time and
place as the Parties may mutually determine (the "Closing Date").
(c) ACTIONS AT THE CLOSING. At the Closing, (i) the Target will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 6(a) below, (ii) the Buyer will deliver to the Target the
various certificates, instruments, and documents referred to in Section 6(b)
below, and (iii) the Buyer and the Target will file with the Secretary of State
of the State of Colorado Articles of Merger in the form required by the Colorado
Business Corporation Act (the "Articles of Merger").
(d) EFFECT OF MERGER.
(i) GENERAL. The Merger shall become effective at the time (the
"Effective Time") the Buyer and the Target file the Articles of Merger with the
Secretary of State of the State of Colorado. The Merger shall have the effect
set forth in the Colorado Business Corporation Act. The Surviving Corporation
may, at any time after the Effective Time, take any action (including executing
and delivering any document) in the name and on behalf of either the Buyer or
the Target in order to carry out and effectuate the transactions contemplated by
this
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Agreement.
(ii) ARTICLES OF INCORPORATION. The Articles of Incorporation of
the Buyer in effect at and as of the Effective Time will remain the Articles of
the Surviving Corporation without any modification or amendment in the Merger;
provided, however, the name of the Surviving Corporation shall be "NAVIDEC,
Inc."
(iii) BYLAWS. The Bylaws of the Buyer in effect at and as of
the Effective Time will remain the Bylaws of the Surviving Corporation without
any modification or amendment in the Merger.
(iv) DIRECTORS AND OFFICERS. At the Effective Time the directors
and officers of the Surviving Corporation shall be as set forth below:
Directors: Ralph Armijo
Patrick Mawhinney
Officers: Ralph Armijo, President
Andrew Davis, Vice President
Patrick Mawhinney, Secretary
Patrick Mawhinney, Treasurer
(v) CONVERSION OF TARGET SHARES. At and as of the Effective
Time, each Target Share shall be converted into the right to receive one Buyer
Share. No Target Share shall be deemed to be outstanding or to have any rights
other than those set forth above in this Section 2(d)(v) after the Effective
Time.
(vi) BUYER SHARES. Each Buyer Share issued and outstanding at
and as of the Effective Time will remain issued and outstanding immediately
after the Effective Time.
(e) PROCEDURE FOR PAYMENT.
(i) After the Effective Time and subject to the provisions of
Section 2(f) below, the Buyer will issue to each Target Shareholder who (A)
surrenders to the Buyer the certificates which represented his Target Shares and
(B) delivers to Buyer a completed and executed investment letter in the form
attached hereto as Exhibit A, a stock certificate representing that number of
Buyer Shares equal to the number of outstanding Target Shares so surrendered by
such Target Shareholder.
(ii) The Buyer will not pay any dividend or make any distribution
on Buyer Shares (with a record date at or after the Effective Time) to any
record holder of outstanding Target Shares until the holder surrenders for
exchange his certificates which
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represented Target Shares. The Buyer instead will hold the dividend or the
distribution in trust for the benefit of the holder pending surrender and
exchange. In no event, however, will any holder of outstanding Target Shares
be entitled to any interest or earnings on the dividend or distribution
pending receipt.
(f) NO FRACTIONAL SHARES. Notwithstanding any other provisions of
this Agreement to the contrary, fractional Buyer Shares will not be issued upon
conversion of Target Shares into Buyer Shares. Each Target Shareholder who,
upon conversion of all Target Shares held of record by such Target Shareholder,
would otherwise be entitled to receive a fractional Buyer Share of more than 0.5
shall receive a whole Buyer Share in place of such fractional Buyer Share. Each
Target Shareholder who, upon conversion of all Target Shares held of record by
such Target Shareholder, would otherwise be entitled to receive a fractional
Buyer Share of 0.5 or less shall receive only the whole number of Buyer Shares
to which such Target Shareholder is entitled, and the fractional Buyer Share
shall be eliminated for all purposes and without compensation therefor.
(g) STOCK LEGEND. Certificates representing Buyer Shares issued to
Target Shareholders upon conversion of their Target Shares shall bear the
following legend:
"The securities represented by this certificate
have not been registered under the Securities Act
of 1933, as amended, or any state securities laws.
The securities represented by this certificate may
not be transferred, sold, offered for sale or
otherwise disposed of unless there is an effective
registration statement or other qualification
relating to such securities under the Securities
Act of 1933, as amended, and any applicable state
securities laws or unless the Corporation receives
an opinion of counsel satisfactory to the
Corporation that such registration or other
qualification under the Securities Act of 1933, as
amended, and any applicable state securities laws
is not required in connection with such transfer,
sale, offer or disposition."
(h) CLOSING OF TRANSFER RECORDS. After the close of business on the
Closing Date, transfers of Target Shares outstanding prior to the Effective Time
shall not be made on the stock transfer books of the Surviving Corporation.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TARGET. The Target
represents and warrants to the Buyer that the statements contained in this
Section 3 are correct and complete
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as of the date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 3).
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Target is
a corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. The Target is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required. The Target has full corporate power and
authority and all licenses, permits, and authorizations necessary to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it. The Target has delivered to the Buyer correct and complete
copies of the charter and bylaws of the Target (as amended to date). The minute
books (containing the records of meetings of the shareholders, the board of
directors, and any committees of the board of directors), the stock certificate
books, and the stock record books of the Target are correct and complete. The
Target is not in default under or in violation of any provision of its charter
or bylaws.
(b) CAPITALIZATION. The entire authorized capital stock of the
Target consists of 100,000 Target Shares, of which 100,000 Target Shares are
issued and outstanding and none are held in treasury. All of the issued and
outstanding Target Shares have been duly authorized, are validly issued, fully
paid, and nonassessable, and are held of record by the respective Persons set
forth in Exhibit B hereto. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require the Target to
issue, sell, or otherwise cause to become outstanding any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Target. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of the Target.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Target is subject or any provision of
the charter or bylaws of the Target or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Target is a party or by which it is bound or to which
any of its assets is subject (or result in the imposition of any Encumbrance
upon any of its assets). Except for the Requisite Target Shareholder Approval,
the Target is not required to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency or any other Person in order for the Parties to consummate the
transactions contemplated by this Agreement.
(d) TITLE TO ASSETS. The Target has good and marketable title to, or
a valid
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leasehold interest in, the properties and assets used by it, located on its
premises, or shown on the Target Balance Sheet or acquired after the date
thereof, free and clear of all material Encumbrances (except as previously
disclosed to the Buyer), except for properties and assets disposed of in the
Ordinary Course of Business since the date of the Target Balance Sheet. All
tangible personal property held or used by the Target is in good operating
condition and repair, ordinary wear and tear excepted, and is suitable and
adequate for continued use in the manner in which it currently is used.
(e) SUBSIDIARIES. The Target has no Subsidiaries.
(f) FINANCIAL STATEMENTS. The Target has delivered to the Buyer
correct and complete copies of the Target's unaudited balance sheets as of
December 31, 1995 and March 31, 1996 (the "Target Balance Sheets") and unaudited
income statements for the period June 1, 1995 to December 31, 1995 and January
1, 1996 to March 31, 1996. The Target Balance Sheets present fairly the
financial condition of the Target as of the indicated date, are correct and
complete in all respects, and are consistent with the books and records of the
Target.
(g) EVENTS SUBSEQUENT TO TARGET BALANCE SHEET. Except as previously
disclosed to the Buyer, since the date of the Target Balance Sheet, there has
not been any material adverse change in the business, financial condition,
operations, results of operations, or future prospects of the Target.
(h) UNDISCLOSED LIABILITIES. The Target any no liabilities (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), including any liability for taxes, except for
(i) liabilities set forth on the face of the Target Balance Sheets and (ii)
liabilities which have arisen after the date of the Target Balance Sheets in the
Ordinary Course of Business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law).
(i) LEGAL COMPLIANCE. The Target has complied with all applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against the Target alleging any failure so to comply.
(j) TAX MATTERS.
(i) The Target has filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all respects. All
Taxes owed by the Target (whether or not shown on any Tax Return) have been
paid. The Target is not currently the beneficiary of any extension of time
within which to file any Tax Return. No claim has ever
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been made by an authority in a jurisdiction where any of the Target does not
file Tax Returns that it is or may be subject to taxation by that jurisdiction.
There are no Encumbrances on any of the assets of any of the Target that arose
in connection with any failure (or alleged failure) to pay any Tax.
(ii) The Target has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder, or other third party.
(iii) Neither the Target nor, to the knowledge of the Target,
any director or officer (or employee responsible for Tax matters) of the Target
expects any authority to assess any additional Taxes for any period for which
Tax Returns have been filed. There is no dispute or claim concerning any Tax
Liability of the Target either (A) claimed or raised by any authority in writing
or (B) as to which any of the Target or, to the knowledge of the Target, the
directors and officers (and employees responsible for Tax matters) of the Target
has now ledge based upon personal contact with any agent of such authority. The
Target has delivered to the Buyer correct and complete copies of all federal
income Tax Returns, examination reports, and statements of deficiencies assessed
against or agreed to by any of the Target since inception of the Target.
(iv) The Target has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(k) REAL PROPERTY. The Target does not own or lease any real
property or otherwise hold any interest in real property.
(l) INTELLECTUAL PROPERTY.
(i) The Target owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property necessary for the
operation of the businesses of the Target as presently conducted. Each item of
Intellectual Property owned or used by the Target immediately prior to the
Closing hereunder will be owned or available for use by the Surviving
Corporation on identical terms and conditions immediately subsequent to the
Closing hereunder. The Target has taken all necessary action to maintain and
protect each item of Intellectual Property that it owns or uses.
(ii) The Target has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and the Target has not ever received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that the
Target must license or refrain from using any Intellectual Property rights of
any third party). To the knowledge the Target, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the
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Target.
(iii) No patents or registrations have been issued to the
Target with respect to any of its Intellectual Property, no patent applications
or applications for registration have been made by the Target with respect to
any of its Intellectual Property, and no licenses, agreements, or other
permissions have been granted by the Target to any third party with respect to
any of its Intellectual Property. Except a previously disclosed to the Buyer,
no trade names or unregistered trademarks are used by the Target in connection
with any of its businesses.
(iv) The Target has delivered to the Buyer correct and complete
copies of all licenses, sublicenses, agreements, and permissions (as amended to
date) with respect to Intellectual Property that any third party owns and the
Target uses. With respect to each such item of Intellectual Property:
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full force and
effect;
(B) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the Closing;
(C) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(D) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(E) with respect to each sublicense, the representations
and warranties set forth in subsections (A) through (D) above are true and
correct with respect to the underlying license;
(F) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge;
(G) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the knowledge of the
Target, is threatened which challenges the legality, validity, or enforceability
of the underlying item of Intellectual Property; and
(H) the Target has not granted any sublicense or similar
right
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with respect to the license, sublicense, agreement, or permission.
(m) CONTRACTS. The Target has delivered to the Buyer a correct and
complete copy of each of the following written agreements and a written summary
setting forth the terms and conditions of each of the following oral agreements:
(i) any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for lease payments in
excess of $5,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year, result in a loss to
the Target, or involve consideration in excess of $5,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $5,000 or under which
it has imposed an Encumbrance on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any agreement with any of the shareholders of the Target;
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement for
the benefit of its current or former directors, officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of $5,000 or providing severance benefits;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xi) any agreement under which the consequences of a default or
termination could have an adverse effect on the business, financial condition,
operations, results of operations, or future prospects of the Target; or
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(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $5,000.
With respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (B) the agreement will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby; (C) no
party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (D) no party has
repudiated any provision of the agreement.
(n) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable
of the Target reflected properly on its books and records, are valid receivables
subject to no setoffs or counterclaims, are current and collectible, and will be
collected in accordance with their terms at their recorded amounts, subject only
to the reserve for bad debts set forth on the face of the Target Balance Sheet
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Target.
(o) POWERS OF ATTORNEY. Except as previously disclosed to the Buyer,
there are no outstanding powers of attorney executed on behalf of the Target.
(p) INSURANCE. The Target has delivered to the Buyer correct and
complete copies of each insurance policy (including policies providing property,
casualty, liability, and workers' compensation coverage and bond and surety
arrangements) to which the Target has been a party, a named insured, or
otherwise the beneficiary of coverage at any time since its inception, including
the following information:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage
was on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable,
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and in full force and effect; (B) the policy will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby; (C)
neither the Target nor any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of notices),
and no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination, modification, or
acceleration, under the policy; and (D) no party to the policy has repudiated
any provision thereof.
(q) LITIGATION. The Target is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge and is not a party or, to
the knowledge of the Target, is threatened to be made a party to any action,
suit, proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. The Target has no reason to believe that
any such action, suit, proceeding, hearing, or investigation may be brought or
threatened against the Target.
(r) EMPLOYEES.
(i) The Target has delivered to the Buyer a correct and complete
list setting forth the names and positions of all employees of the Target
employed as of the date of this Agreement, and the current annual salary or wage
payable to each such person. None of such employees has notified the Target,
and the Target has no knowledge, of his or her intention to resign or retire.
(ii) The Target has complied and is in compliance in all material
respects with all laws and regulations relating to the employment of labor,
including without limitation laws and regulations relating to wages, hours,
unemployment compensation, worker's compensation, equal employment opportunity,
age and disability discrimination, immigration control, and the payment and
withholding of Taxes.
(iii) The Target has not violated any law or regulation
prohibiting discrimination in its employment conditions or practices. There are
no unfair labor practices charges and there are no discrimination complaints
pending or, to the knowledge of the Target, threatened against the Target, and
to the knowledge of the Target, no basis therefor exists.
(iv) The Target is not a party to any collective bargaining
agreement or other Contract with any labor organization, has not recognized or
agreed to recognize, and is not required to recognize, any union or other
collective bargaining unit. To the knowledge of the Target, its employees are
not engaged in organizing activity with respect to any labor organization.
(s) EMPLOYEE BENEFITS. The Target does not maintain or contribute
to, it has never maintained or contributed to, and it is not and at no time has
been required to maintain or
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contribute to, any employee benefit or welfare plan, bonus, deferred
compensation, incentive compensation, retirement, stock purchase, stock
option, severance, hospitalization, medical, life insurance, dental, vision,
disability, salary continuation, unemployment, or fringe benefit plan,
program, or arrangement. The Target has complied in all respects with the
continuation coverage requirements of Section 4980B of the Code with regard
to each group health plan, if any, within the meaning of Section 4980B(g) of
the Code.
(t) GUARANTIES. The Target is not a guarantor or otherwise is liable
for any liability or obligation (including indebtedness) of any other Person.
(u) ENVIRONMENT, HEALTH, AND SAFETY.
(i) The Target has complied with all Environmental, Health, and
Safety Laws, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against it
alleging any failure so to comply. Without limiting the generality of the
preceding sentence, the Target has obtained and been in compliance with all of
the terms and conditions of all permits, licenses, and other authorizations
which are required under, and has complied with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables which are contained in, all Environmental, Health, and
Safety Laws.
(ii) The Target has no liability or obligation (and has not
handled or disposed of any substance, arranged for the disposal of any
substance, exposed any employee or other individual to any substance or
condition, or owned or operated any property or facility in any manner that
could form the basis for any present or future liability) for damage to any
site, location, or body of water (surface or subsurface), for any illness of or
personal injury to any employee or other individual, or for any reason under any
Environmental, Health, and Safety Law.
(iii) To the knowledge of the Target, all properties and
equipment used in the business of the Target have been free of asbestos, PCB's,
methylene chloride, trichloroethylene, 1,2-trans-dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances.
(v) DISCLOSURE. The representations and warranties contained in this
Section 3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 3 not misleading.
(w) BANK ACCOUNTS. The Target has delivered to the Buyer a correct
and complete list setting forth all bank accounts, brokerage accounts, and safe
deposit boxes of any kind maintained by the Target and, in each case,
identifying the Persons who are authorized signatories for, or who are
authorized to have access to, each of them.
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(x) BROKER'S FEES. The Target does not have any liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE BUYER. The Buyer
represents and warrants to the Target that the statements contained in this
Section 4 are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 4).
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Buyer
is a corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation. The Buyer is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required. The Buyer has full
corporate power and authority and all licenses, permits, and authorizations
necessary to carry on the businesses in which it is engaged and to own and
use the properties owned and used by it. The Buyer has delivered to the
Target correct and complete copies of the charter and bylaws of the Buyer (as
amended to date). The minute books (containing the records of meetings of
the shareholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of the
Buyer are correct and complete. The Buyer is not in default under or in
violation of any provision of its charter or bylaws.
(b) CAPITALIZATION. The entire authorized capital stock of the
Buyer consists of 20,000,000 Buyer Shares, of which 4,490.138 Buyer Shares
are issued and outstanding and none are held in treasury. All of the issued
and outstanding Buyer Shares have been duly authorized, are validly issued,
fully paid, and nonassessable, and are held of record by the respective
Persons set forth in Exhibit C. There are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require the
Buyer to issue, sell, or otherwise cause to become outstanding any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
Buyer. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the Buyer.
(c) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Buyer is subject or
any provision of the charter or bylaws of the Buyer or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Buyer is a party or by which it
is bound or to
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which any of its assets is subject (or result in the imposition of any
Encumbrance upon any of its assets). Except for the Requisite Buyer
Shareholder Approval, the Buyer is not required to give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency or any other Person in order for the
Parties to consummate the transactions contemplated by this Agreement.
(d) TITLE TO ASSETS. The Buyer has good and marketable title to,
or a valid leasehold interest in, the properties and assets used by it,
located on its premises, or shown on the Buyer Balance Sheet or acquired
after the date thereof, free and clear of all material Encumbrances (except
as previously disclosed to the Target), except for properties and assets
disposed of in the Ordinary Course of Business since the date of the Buyer
Balance Sheet. All tangible personal property held or used by the Buyer is
in good operating condition and repair, ordinary wear and tear excepted, and
is suitable and adequate for continued use in the manner in which it
currently is used.
(e) SUBSIDIARIES. The Buyer has no Subsidiaries.
(f) FINANCIAL STATEMENTS. The Buyer has delivered to the Target
correct and complete copies of the Buyer's unaudited balance sheets as of
December 31, 1995 and March 31, 1996 (the "Buyer Balance Sheets") and
unaudited income statements for the fiscal year then ended and the period
January 1, 1996 to March 31, 1996. The Buyer Balance Sheets present fairly
the financial condition of the Buyer as of the indicated date, are correct
and complete in all respects, and are consistent with the books and records
of the Buyer.
(g) EVENTS SUBSEQUENT TO BUYER BALANCE SHEET. Except as
previously disclosed to the Target, since the date of the Buyer Balance
Sheet, there has not been any material adverse change in the business,
financial condition, operations, results of operations, or future prospects
of the Buyer.
(h) UNDISCLOSED LIABILITIES. The Buyer has no liabilities
(whether known or unknown, whether asserted or unasserted, whether absolute
or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any liability for
taxes, except for (i) liabilities set forth on the face of the Buyer Balance
Sheets and (ii) liabilities which have arisen after the date of the Buyer
Balance Sheets in the Ordinary Course of Business (none of which results
from, arises out of, relates to, is in the nature of, or was caused by any
breach of contract, breach of warranty, tort, infringement, or violation of
law).
(i) LEGAL COMPLIANCE. The Buyer has complied with all applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local,
and foreign governments (and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or
notice has been filed or commenced against the Buyer alleging any failure so
to comply.
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(j) TAX MATTERS.
(i) The Buyer has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all respects.
All Taxes owed by the Buyer (whether or not shown on any Tax Return) have
been paid. The Buyer is not currently the beneficiary of any extension of
time within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where any of the Buyer does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction. There are no
Encumbrances on any of the assets of any of the Buyer that arose in
connection with any failure (or alleged failure) to pay any Tax.
(ii) The Buyer has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, shareholder, or other third party.
(iii) Neither the Buyer nor, to the knowledge of the Buyer,
any director or officer (or employee responsible for Tax matters) of the
Buyer expects any authority to assess any additional Taxes for any period for
which Tax Returns have been filed. There is no dispute or claim concerning
any Tax Liability of the Buyer either (A) claimed or raised by any authority
in writing or (B) as to which any of the Buyer or, to the knowledge of the
Buyer, the directors and officers (and employees responsible for Tax matters)
of the Buyer has now ledge based upon personal contact with any agent of such
authority. The Buyer has delivered to the Target correct and complete copies
of all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by any of the Buyer since
inception of the Buyer.
(iv) The Buyer has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(k) REAL PROPERTY.
(i) The Buyer does not own any real property.
(ii) The Buyer has delivered to the Target correct and
complete copies of all real property leases of the Buyer. With respect to
each such lease:
(A) the lease is legal, valid, binding, enforceable, and
in full force and effect;
(B) the lease will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby;
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(C) no party to the lease is in breach or default, and
no event has occurred which, with notice or lapse of time, would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
(D) no party to the lease has repudiated any provision
thereof;
(E) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease;
(F) the Buyer has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold; and
(G) to the knowledge of the Buyer, the owner of the
facility leased has good and marketable title to the parcel of real property,
free and clear of any Encumbrance, easement, covenant, or other restriction,
except for installments of special easements not yet delinquent and recorded
easements, covenants, and other restrictions which do not impair the current
use, occupancy, or value, or the marketability of title, of the property
subject thereto.
(l) INTELLECTUAL PROPERTY.
(i) The Buyer owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
necessary for the operation of the businesses of the Buyer as presently
conducted. Each item of Intellectual Property owned or used by the Buyer
immediately prior to the Closing hereunder will be owned or available for use
by the Surviving Corporation on identical terms and conditions immediately
subsequent to the Closing hereunder. The Buyer has taken all necessary
action to maintain and protect each item of Intellectual Property that it
owns or uses.
(ii) The Buyer has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and the Buyer has not ever received any
charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that the
Buyer must license or refrain from using any Intellectual Property rights of
any third party). To the knowledge the Buyer, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into conflict with
any Intellectual Property rights of the Buyer.
(iii) No patents or registrations have been issued to the
Buyer with respect to any of its Intellectual Property, no patent
applications or applications for registration have been made by the Buyer
with respect to any of its Intellectual Property, and no licenses,
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agreements, or other permissions have been granted by the Buyer to any third
party with respect to any of its Intellectual Property. Except as previously
disclosed to the Target, no trade names or unregistered trademarks are used
by the Buyer in connection with any of its businesses.
(iv) The Buyer has delivered to the Target correct and
complete copies of all licenses, sublicenses, agreements, or permissions (as
amended to date) with respect to Intellectual Property that any third party
owns and the Buyer uses. With respect to each such item of Intellectual
Property:
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full force
and effect;
(B) the license, sublicense, agreement, or permission
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the Closing;
(C) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(D) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(E) with respect to each sublicense, the representations
and warranties set forth in subsections (A) through (D) above are true and
correct with respect to the underlying license;
(F) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge;
(G) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the knowledge of the
Buyer, is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property; and
(H) the Buyer has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or permission.
(m) CONTRACTS. The Buyer has delivered to the Target a correct
and complete copy of each of the following written agreements and a written
summary setting forth the terms and conditions of each of the following oral
agreements:
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(i) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease payments
in excess of $5,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year, result
in a loss to the Buyer, or involve consideration in excess of $5,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of $5,000 or
under which it has imposed an Encumbrance on any of its assets, tangible or
intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement with any of the shareholders of the Buyer;
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement
for the benefit of its current or former directors, officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $5,000 or providing severance benefits;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xi) any agreement under which the consequences of a default
or termination could have an adverse effect on the business, financial
condition, operations, results of operations, or future prospects of the
Buyer; or
(xii) any other agreement (or group of related agreements)
the performance of which involves consideration in excess of $5,000.
With respect to each such agreement: (A) the agreement is legal, valid,
binding, enforceable, and
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in full force and effect; (B) the agreement will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby; (C) no
party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (D) no party has
repudiated any provision of the agreement.
(n) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts
receivable of the Buyer reflected properly on its books and records, are
valid receivables subject to no setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts set forth on the
face of the Buyer Balance Sheet adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the Buyer.
(o) POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of the Buyer.
(p) INSURANCE. The Buyer has delivered to the Target correct and
complete copies of each insurance policy (including policies providing
property, casualty, liability, and workers' compensation coverage and bond
and surety arrangements) to which the Buyer has been a party, a named
insured, or otherwise the beneficiary of coverage at any time since its
inception, including the following information:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are calculated and
operate) of coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will
continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (C) neither the Buyer nor any other party to the policy
is in breach or default (including with respect to the payment of premiums or
the giving of notices), and no
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event has occurred which, with notice or the lapse of time, would constitute
such a breach or default, or permit termination, modification, or
acceleration, under the policy; and (D) no party to the policy has repudiated
any provision thereof. The Buyer has been covered since its inception by
insurance in scope and amount customary and reasonable for the businesses in
which it has engaged during the aforementioned period.
(q) LITIGATION. The Buyer is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge and or is not a party
or, to the knowledge of the Buyer, is threatened to be made a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any
court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator. The Buyer has no
reason to believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against the Buyer.
(r) EMPLOYEES.
(i) The Buyer has delivered to the Target a correct and
complete list setting forth the names and positions of all employees of the
Buyer employed as of the date of this Agreement, and the current annual
salary or wage payable to each such person. None of such employees has
notified the Buyer, and the Buyer has no knowledge, of his or her intention
to resign or retire.
(ii) The Buyer has complied and is in compliance in all
material respects with all laws and regulations relating to the employment of
labor, including without limitation laws and regulations relating to wages,
hours, unemployment compensation, worker's compensation, equal employment
opportunity, age and disability discrimination, immigration control, and the
payment and withholding of Taxes.
(iii) The Buyer has not violated any law or regulation
prohibiting discrimination in its employment conditions or practices. There
are no unfair labor practices charges and there are no discrimination
complaints pending or, to the knowledge of the Buyer, threatened against the
Buyer, and to the knowledge of the Buyer, no basis therefor exists.
(iv) The Buyer is not a party to any collective bargaining
agreement or other Contract with any labor organization, has not recognized
or agreed to recognize, and is not required to recognize, any union or other
collective bargaining unit. To the knowledge of the Buyer, its employees are
not engaged in organizing activity with respect to any labor organization.
(s) EMPLOYEE BENEFITS. Except as previously disclosed to the
Target, the Buyer does not maintain or contribute to, it has never maintained
or contributed to, and it is not and at no time has been required to maintain
or contribute to, any employee benefit or welfare plan, bonus, deferred
compensation, incentive compensation, retirement, stock purchase, stock
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option, severance, hospitalization, medical, life insurance, dental, vision,
disability, salary continuation, unemployment, or fringe benefit plan,
program, or arrangement. The Buyer has complied in all respects with the
continuation coverage requirements of Section 4980B of the Code with regard
to each group health plan, if any, within the meaning of Section 4980B(g) of
the Code.
(t) GUARANTIES. The Buyer is not a guarantor or otherwise is
liable for any liability or obligation (including indebtedness) of any other
Person.
(u) ENVIRONMENT, HEALTH, AND SAFETY.
(i) The Buyer has complied with all Environmental, Health,
and Safety Laws, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced
against it alleging any failure so to comply. Without limiting the
generality of the preceding sentence, the Buyer has obtained and been in
compliance with all of the terms and conditions of all permits, licenses, and
other authorizations which are required under, and has complied with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are contained in,
all Environmental, Health, and Safety Laws.
(ii) The Buyer has no liability or obligation (and has not
handled or disposed of any substance, arranged for the disposal of any
substance, exposed any employee or other individual to any substance or
condition, or owned or operated any property or facility in any manner that
could form the basis for any present or future liability) for damage to any
site, location, or body of water (surface or subsurface), for any illness of
or personal injury to any employee or other individual, or for any reason
under any Environmental, Health, and Safety Law.
(iii) To the knowledge of the Buyer, all properties and
equipment used in the business of the Buyer have been free of asbestos,
PCB's, methylene chloride, trichloroethylene, 1,2-trans-dichloroethylene,
dioxins, dibenzofurans, and Extremely Hazardous Substances.
(v) DISCLOSURE. The representations and warranties contained in
this Section 4 do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Section 4 not misleading.
(w) BANK ACCOUNTS. The Buyer has delivered to the Target a
correct and complete list setting forth all bank accounts, brokerage
accounts, and safe deposit boxes of any kind maintained by the Buyer and, in
each case, identifying the Persons who are authorized signatories for, or who
are authorized to have access to, each of them.
23
<PAGE>
(x) BROKER'S FEES. The Buyer does not have any liability or
obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement.
5. COVENANTS. The Parties agree as follows with respect to the period
from and after the execution of this Agreement.
(a) GENERAL. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth
in Section 6 below).
(b) NOTICES AND CONSENTS. The Target will give any notices to
third parties, and will use its reasonable best efforts to obtain any third
party consents, that the Buyer reasonably may request in connection with the
matters referred to in Section 3(d) above.
(c) REGULATORY MATTERS AND APPROVALS. Each of the Parties will
give any notices to, make any filings with, and use its reasonable best
efforts to obtain any authorizations, consents, and approvals of governments
and governmental agencies in connection with the matters referred to in
Section 3(d) and Section 4(d) above. Without limiting the generality of the
foregoing:
(i) COLORADO BUSINESS CORPORATION ACT. The Target will call
a special meeting of its shareholders or obtain the unanimous written consent
of its shareholders (the "Special Target Meeting") as soon as reasonably
practicable in order that its shareholders may consider and vote upon the
adoption of this Agreement and the approval of the Merger in accordance with
the Colorado Business Corporation Act. The Buyer will call a special meeting
of its shareholders or obtain the unanimous written consent of its
shareholders (the "Special Buyer Meeting") as soon as reasonably practicable
in order that the shareholders may consider and vote upon the adoption of
this Agreement and the approval of the Merger in accordance with the Colorado
Business Corporation Act.
(d) OPERATION OF BUSINESS. The Target will not engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. Without limiting the generality of the foregoing:
(i) the Target will not authorize or effect any change in its
charter or bylaws;
(ii) the Target will not grant any options, warrants, or
other rights to purchase or obtain any of its capital stock or issue, sell,
or otherwise dispose of any of its capital stock (except upon the conversion
or exercise of options, warrants, and other rights currently
24
<PAGE>
outstanding);
(iii) except as required in Section 6 below, the Target will
not declare, set aside, or pay any dividend or distribution with respect to
its capital stock (whether in cash or in kind), or redeem, repurchase, or
otherwise acquire any of its capital stock;
(iv) the Target will not issue any note, bond, or other debt
security or create, incur, assume, or guarantee any indebtedness for borrowed
money or capitalized lease obligation;
(v) the Target will not impose any Encumbrance upon any of
its assets;
(vi) the Target will not make any capital investment in, make
any loan to, or acquire the securities or assets of any other Person;
(vii) the Target will not make any change in employment terms
for any of its directors, officers, and employees; and
(viii) the Target will not commit to any of the foregoing.
(e) FULL ACCESS. The Target will permit representatives of the
Buyer to have full access to all premises, properties, personnel, books,
records (including tax records), contracts, and documents of or pertaining to
the Target. The Buyer will treat and hold as such any Confidential
Information it receives from any of the Target in the course of the reviews
contemplated by this Section 5(g), will not use any of the Confidential
Information except in connection with this Agreement, and, if this Agreement
is terminated for any reason whatsoever, agrees to return to the Target all
tangible embodiments (and all copies) thereof which are in its possession.
(f) NOTICE OF DEVELOPMENTS. Each Party will give prompt written
notice to the other of any material adverse development causing a breach of
any of its own representations and warranties in Section 3 and Section 4
above. No disclosure by any Party pursuant to this Section 5(h), however,
shall be deemed to prevent or cure any misrepresentation, breach of warranty,
or breach of covenant.
6. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
25
<PAGE>
(i) this Agreement and the Merger shall have received the
Requisite Target Shareholder Approval;
(ii) the Target shall have procured all of the third party
consents specified in Section 5(b) above;
(iii) the representations and warranties set forth in Section
3 above shall be true and correct in all material respects at and as of the
Closing Date;
(iv) the Target shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(v) the Target shall have delivered to the Buyer a certificate
to the effect that each of the conditions specified above in Section 6(a)(i)-
(iv) is satisfied in all respects;
(vi) this Agreement and the Merger shall have received the
Requisite Buyer Shareholder Approval;
(vii) the Parties shall have received all other
authorizations, consents, and approvals of governments and governmental agencies
referred to in Sections 3(d) and 4(d) above;
(viii) all actions to be taken by the Target in connection
with consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Buyer;
(ix) the Target Shareholders shall have executed and delivered a
Shareholders Agreement in form and substance acceptable to the Buyer and its
shareholders;
(x) Ralph Armijo shall have executed and delivered to the Buyer
an employment agreement in form and substance satisfactory to the Buyer;
(xi) the Buyer shall have effected a one for 510.2041 stock
split of the Buyer Shares, and the Target shall have reallocated the Target
Shares by stock split or otherwise such that the holders of the Target Shares
hold the number of Target Shares set forth in Exhibit B hereto.
The Buyer may waive any condition specified in this Section 6(a) if it
executes a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF THE TARGET. The obligation of the
Target to
26
<PAGE>
consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) this Agreement and the Merger shall have received the
Requisite Buyer Shareholder Approval;
(ii) the representations and warranties set forth in Section 4
above shall be true and correct in all material respects at and as of the
Closing Date;
(iii) the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(iv) the Buyer shall have delivered to the Target a certificate
to the effect that each of the conditions specified above in Section 6(b)(i)-
(iii) is satisfied in all respects;
(v) this Agreement and the Merger shall have received the
Requisite Target Shareholder Approval;
(vi) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Target;
(vii) all of the shareholders of Buyer shall have executed
and delivered a Shareholders Agreement in form and substance acceptable to the
Target Shareholders; and
(viii) the Buyer shall have executed and delivered to Ralph
Armijo an employment agreement in form and substance satisfactory to him.
(ix) the Buyer shall have effected a one for 510.2041 stock
split of the Buyer Shares, and the Target shall have reallocated the Target
Shares by stock split or otherwise such that the holders of the Target Shares
hold the number of Target Shares set forth in Exhibit B hereto.
The Target may waive any condition specified in this Section 6(b) if it
executes a writing so stating at or prior to the Closing.
7. TERMINATION.
(a) TERMINATION OF AGREEMENT. Either of the Parties may terminate
this Agreement with the prior authorization of its board of directors (whether
before or after
27
<PAGE>
shareholder approval) as provided below:
(i) the Parties may terminate this Agreement by mutual written
consent at any time prior to the Effective Time;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Target at any time prior to the Effective Time (A) in the event
the Target has breached any representation, warranty, or covenant contained in
this Agreement in any material respect, the Buyer has notified the Target of
this breach, and the breach has continued without cure for a period of five days
after the notice of breach or (B) if the Closing shall not have occurred on or
before July 15, 1996, by reason of the failure of any condition precedent under
Section 6(a) hereof (unless the failure results primarily from the Buyer
breaching any representation, warranty, or covenant contained in this
Agreement);
(iii) the Target may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Effective Time (A) in the
event the Buyer has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Target has notified the
Buyer of the breach, and the breach has continued without cure for a period of
five after the notice of breach or (B) if the Closing shall not have occurred on
or before July 15, 1996, by reason of the failure of any condition precedent
under Section 6(b) hereof (unless the failure results primarily from the Target
breaching any representation, warranty, or covenant contained in this
Agreement);
(iv) any Party may terminate this Agreement by giving written
notice to the other Party at any time after the Special Buyer Meeting or the
Special Target Meeting in the event this Agreement and the Merger fail to
receive the Requisite Buyer Shareholder Approval or the Requisite Target
Shareholder Approval respectively.
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 7(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); provided, however, that
the confidentiality provisions contained in Section 5(g) above shall survive any
such termination.
8. MISCELLANEOUS.
(a) SURVIVAL. None of the representations, warranties, and covenants
of the Parties (other than the provisions in Section 2 above concerning issuance
of the Buyer Shares, the provisions in Section 5(j) above concerning insurance
and indemnification) will survive the Effective Time.
(b) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue
any press
28
<PAGE>
release or make any public announcement relating to the subject matter
of this Agreement without the prior written approval of the other Party
(c) NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns; provided, however, that the
provisions in Section 2 above concerning issuance of the Buyer Shares are
intended for the benefit of the Target Shareholders.
(d) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, to the extent they related in any way to
the subject matter hereof.
(e) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party.
(f) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if sent by
facsimile transmission, or delivered by messenger, or mailed, certified first
class mail, return receipt requested, postage prepaid, and addressed to the
intended recipient as set forth below:
If to the Target: Interactive Planet, Inc.
89 Willowleaf Drive
Littleton, CO 80127
Attention: Mr. Patrick Mawhinney
Facsimile no.: (303) 904-1441
If to the Buyer: ACI Systems, Inc.
7002 South Revere Parkway, Suite 40
Englewood, CO 80112
Attention: Mr. Ralph Armijo
29
<PAGE>
Facsimile no.: (303) 790-8845
or to such other address as any Party shall have furnished to the other by
notice given in accordance with this Section. Such notice shall be effective
when received.
(i) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Colorado without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Colorado or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Colorado.
(j) AMENDMENTS AND WAIVERS. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective boards of directors; provided, however,
that any amendment effected subsequent to shareholder approval will be subject
to the restrictions contained in the Colorado Business Corporation Act. No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by both of the Parties. No waiver by any Party
of any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach
30
<PAGE>
of warranty or covenant hereunder or affect in any way any rights arising by
virtue of any prior or subsequent such occurrence.
(k) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) EXPENSES. Each of the Parties will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(m) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
ACI SYSTEMS, INC.
By: /s/ RALPH ARMIJO
---------------------------------
Name: Ralph Armijo
Title: President
INTERACTIVE PLANET, INC.
By: /s/ PATRICK MAWHINNEY
---------------------------------
Name: Patrick Mawhinney
Title: President
31
<PAGE>
EXHIBIT A
FORM OF INVESTMENT LETTER
<PAGE>
EXHIBIT B
LIST OF SHAREHOLDERS OF THE TARGET
NAME SHARES
---- ------
Cindy Simmons 813,669
Patrick R. Mawhinney 314,671
Kevin L. Blankenship 171,393
Harold Anderson II 171,393
Tom Parr 38,087
Matthew D. Gitchell 200
Lee Trujillo 300
Robert Medlin 200
John Sims 1,000
Kirk Steinbock 100
Jason Kay 100
Maria Zenaida Tamundong Carpio 200
Louis Joseph Rubbo II 500
LGC Management 10,000
---------
1,521,813
---------
---------
<PAGE>
EXHIBIT C
LIST OF SHAREHOLDERS OF THE BUYER
NAME POST-SPLIT SHARES
---- -----------------
Ralph Armijo 1,838,687
Arthur Armijo 250,000
Curtis Armijo 50,000
Christian Dwyer 50,000
Andrew Davis 50,000
Patrick Townsend 6,000
Julie Erjavec 6,000
Ralph Ambruster 20,000
Dan Flenniken 4,000
Les Lira 4,000
Gregory Hatstat 5,000
Greg Beckham 350
Deborah Block 750
Carol Pritchard 350
Norma Montgomery 750
Reserved 6,000
---------
2,290,887
---------
---------
34
<PAGE>
NAVIDEC, INC.
REDEEMABLE COMMON STOCK PURCHASE WARRANT
No. Warrants
THIS CERTIFIES THAT, for value received _______________________ as
registered owner (the "Registered Owner") of this Redeemable Common Stock
Purchase Warrant (the "Warrant"), is entitled at any time commencing on
__________________, 199__ and before 5:00 p.m. Mountain Time on ____________,
2002 (the "Expiration Date"), which is the last day of the five-year period
commencing on the date the Registration Statement on Form SB-2 (No.
______________) was initially declared effective by the Securities and
Exchange Commission (the "Effective Date"), to subscribe for, purchase and
receive one fully paid and nonassessable share of common stock, no par value
(a "Warrant Share"), of NAVIDEC, Inc. (the "Company"), for each one Warrant
specified above, at the price of $____ per share (the "Exercise Price"), upon
presentation and surrender of this Warrant, together with payment of the
Exercise Price for the Warrant Shares to be purchased, to the Company at its
principal office or to the Company's warrant agent at the warrant agent's
principal office in the manner described in the Warrant Agreement (the
"Warrant Agreement") between the Company and American Securities Transfer &
Trust, Incorporated; provided, however, that upon the occurrence of any of
the events specified in such Warrant Agreement, the rights granted by this
Warrant shall be adjusted as specified therein. This Certificate and the
Warrant represented hereby are issued pursuant to and are subject in all
respects to the terms and conditions set forth in the Warrant Agreement.
Upon exercise of this Warrant, the form of Election to Purchase
hereinafter provided must be duly executed, the Exercise Price must be paid
in lawful money of the United States of America in cash, certified check,
bank draft or wire transfer and the instructions for the registration of the
Warrant Shares acquired by such exercise must be completed. If the rights
represented hereby shall not be exercised at or before 5:00 p.m., Mountain Time
on the Expiration Date, this Warrant shall become and be void without further
force or effect, and all rights represented hereby shall cease and expire.
Commencing one year from the Effective Date, the Company may, at its
option, redeem this Warrant in whole for a redemption price of $.05 per
Warrant, on 30 days' prior written notice to the Registered Owner; provided,
however, the right to redeem this Warrant may be exercised by the Company
only in the event (i) the closing bid price for the Company's Common Stock
equals or exceeds $________ for 20 consecutive trading days within the
thirty-day period immediately prior to such notice, and (ii) the Company has
a registration statement (or a post-effective amendment to an existing
registration statement) pertaining to the Warrant Shares effective with the
Securities and Exchange Commission, which registration statement would enable
the Registered Owner to exercise the Warrant. In the event the Company
exercises its right to redeem this Warrant, the Expiration Date will be
deemed to be, and this Warrant will be exercisable until the close of
business on, the date fixed for redemption in such notice. If this Warrant
has been called for redemption and is not exercised by such time, this
Warrant will cease to be exercisable and the Registered Owner hereof will be
entitled only to the redemption price.
<PAGE>
Subject to the terms contained herein and in the Warrant Agreement, this
Warrant may be assigned or exercised by the Registered Owner in whole or in
part by execution by the Registered Owner of the form of Assignment or Election
to Purchase, as appropriate, appearing on the reverse side hereof. If the
assignment is in whole, the Company shall execute and deliver a new Warrant
or Warrants of like tenor to this Warrant to the appropriate assignee expressly
evidencing the right to purchase the aggregate number of Warrant Shares
purchasable hereunder; and if the assignment is in part, the Company shall
execute and deliver to the appropriate assignee a new Warrant or Warrants of
like tenor expressly evidencing the right to purchase the portion of the
aggregate number of Warrant Shares as shall be contemplated by any such
assignment, and shall concurrently execute and deliver to the Owner a new
Warrant of like tenor evidencing the right to purchase the remaining portion
of Warrant Shares purchasable hereunder which has not been transferred to the
assignee. In the event this Warrant is exercised in part only, the Company
shall cause to be delivered to the Registered Owner a new Warrant of like
tenor evidencing the right of the Registered Owner to purchase the number of
Warrant Shares purchasable hereunder as to which this Warrant has not been
exercised. No fractional shares will be issued upon exercise of this Warrant.
In no event shall this Warrant (or the Warrant Shares issuable upon full
or partial exercise hereof) be offered or sold except in conformity with all
applicable state and federal securities laws.
The Company and the Warrant Agent may deem and treat the Registered Owner
hereof as the absolute owner of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone) for all purposes
and neither the Company nor the Warrant Agent shall be affected by any notice
to the contrary. The Registered Owner of this Warrant, as such, shall not have
any rights of a shareholder of the Company, either at law or at equity, and the
rights of the Registered Owner, as such, are limited to those rights expressly
provided in this Warrant Certificate and in the Warrant Agreement. This
certificate is not valid unless countersigned by the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officers.
DATED: NAVIDEC, Inc.
-----------------------
By:
-----------------------------------
Ralph Armijo, President
[SEAL]
By:
-----------------------------------
Kevin L. Blankenship, Secretary
COUNTERSIGNED:
AMERICAN SECURITIES TRANSFER & TRUST, INCORPORATED
Warrant Agent
- ---------------------------------------
Authorized Officer
-2-
<PAGE>
NAVIDEC, INC.
ELECTION TO PURCHASE
The undersigned hereby elects irrevocably to exercise the within Warrant
and to purchase _________________ shares of Common Stock of NAVIDEC, Inc. and
hereby makes payment of $_____________ (at the rate of $_____________ per share)
in payment of the Exercise Price pursuant hereto. Please issue the shares as to
which this Warrant is exercised in accordance with the instructions given below.
Dated: Signature:
------------------------- ----------------------------
INSTRUCTIONS FOR REGISTRATION OF SHARES
Please insert Social Security or other identifying number of owner
-----------
Name
-------------------------------------------------------------------------
(Print in Block Letters)
Address
----------------------------------------------------------------------
ASSIGNMENT
FOR VALUE RECEIVED, _______________________________________ does hereby
sell, assign and transfer unto
Please insert Social Security or other identifying number of owner
-----------
- ------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address, Including Zip Code, of Assignee)
the right to purchase _________________________________ shares of Common Stock
of NAVIDEC, INC., evidenced by the within Warrant, and does hereby irrevocably
constitute and appoint ________________________________________________ Attorney
to transfer such right on the books of NAVIDEC, Inc., with full power of
substitution in the premises.
Dated: Signature:
------------------------- ----------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
- ----------------------------------------------
THE SIGNATURE(S) SHOULD 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), PURSUANT
TO S.E.C. RULE 17Ad-15.
REFERENCE IS MADE TO THE WARRANT AGREEMENT REFERRED TO ON THE FRONT SIDE
HEREOF AND THE PROVISIONS OF SUCH WARRANT AGREEMENT SHALL FOR ALL PURPOSES HAVE
THE SAME EFFECT AS THOUGH FULLY SET FORTH ON THE FRONT OF THIS CERTIFICATE.
<PAGE>
WARRANT AGREEMENT
---------------
NAVIDEC, INC.
AND
AMERICAN SECURITIES TRANSFER & TRUST, INC.
WARRANT AGENT
_____________ , 1996
---------------
<PAGE>
WARRANT AGREEMENT
THIS AGREEMENT dated as of ________________, 199__, between NAVIDEC, Inc.,
a Colorado corporation (the "Company"), and American Securities Transfer &
Trust, Inc., a transfer agency located in Denver, Colorado (the "Warrant
Agent").
WHEREAS:
In connection with a public offering (the "Public Offering"), the Company
has issued or will issue shares of Common Stock of the Company, no par value
("Common Stock") and Redeemable Common Stock Purchase Warrants entitling the
Registered Owner thereof to purchase shares of Common Stock (the 1,000,000
Warrants sold by the Company pursuant to the "firm" purchase agreements
contained in an underwriting agreement, a "Firm Warrant" or the "Firm
Warrants"); and
The Company also has granted or will grant the several underwriters (the
"Underwriters") of the Company's Public Offering, the option to purchase
additional Redeemable Common Stock Purchase Warrants entitling the Registered
Owner thereof to purchase shares of Common Stock to cover over-allotments
(the "Over-Allotment Warrants"); and
The Company also has issued or will issue upon effectiveness of the
Registration Statement (as hereinafter defined") to certain bridge financing
lenders (the "Bridge Holders") additional shares of Common Stock and
additional Redeemable Common Stock Purchase Warrants entitling the Registered
Owner thereof to purchase shares of Common Stock (the "Bridge Warrants"); and
The Company also has granted the representative of the several
Underwriters (the "Representative") of the Company's Public Offering pursuant
to the Underwriting Agreement purchase options (the "Purchase Options") to
purchase Common Stock and Redeemable Common Stock Purchase Warrants entitling
the Registered Owner thereof to purchase shares of Common Stock (the
"Representative's Warrants")(the Firm Warrants, the Over-Allotment Warrants,
the Bridge Warrants and the Representative's Warrants collectively, the
"Warrants"); and
The Company desires to provide for the issuance, registration, transfer,
exchange and exercise of certificates representing the Warrants (the "Warrant
Certificates"); and
The Company desires the Warrant Agent to act on behalf of the Company, and
the Warrant Agent is willing to so act, in connection with the issuance,
registration, transfer and exchange of Warrant Certificates and exercise of
the Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrant Certificates and the Warrants, and the
<PAGE>
respective rights and obligations thereunder of the Company, the registered
holders of the Warrant Certificates and the Warrant Agent, the parties hereto
agree as follows:
1. DEFINITIONS. As used herein:
(a) "Bridge Warrants" shall mean 428,565 Warrants to purchase 428,565
shares of Common Stock, all of which will be registered on the Registration
Statement but none of which is subject to purchase by the Underwriters
pursuant to the Underwriting Agreement. The Bridge Warrants shall have
identical terms and conditions to those established for the Firm Warrants,
subject to their issuance in accordance with Section 2 hereof.
(b) "Common Stock" shall mean Common Stock, no par value per share, of the
Company, whether now or hereafter authorized, holders of which have the right
to participate in the distribution of earnings and assets of the Company
without limit as to amount or percentage.
(c) "Corporate Office" shall mean the place of business of the Warrant
Agent (or its successor) located in Denver, Colorado, which office is
presently located at 1825 Lawrence Street, Denver, Colorado 80202.
(d) "Effective Date" shall mean ____________, 199__, the date on which
the Company's Registration Statement is or will be declared effective by the
Securities and Exchange Commission.
(e) "Exercise Date" shall mean the date of surrender for exercise of any
Warrant Certificate, provided the exercise form on the back of the Warrant
Certificate or a form substantially similar thereto has been completed in
full by the Registered Owner or a duly appointed attorney and the Warrant
Certificate is accompanied by payment in full of the Exercise Price.
(f) "Exercise Period" shall mean the period commencing on the Effective
Date and extending to and through the Expiration Date.
(g) "Exercise Price" shall mean a purchase price of $_______ per share of
Common Stock (120% of the $_______ offering price of the Common Stock);
provided, however, that in the event the Company reduces the Exercise Price,
the Exercise Price shall be as established by the Company.
(h) "Expiration Date" shall mean 5:00 P.M. Mountain Standard or Daylight
Time on the last day of the five year period commencing on the Effective
Date, subject to the terms provided in Section 5 herein for redemption and
subject to extension by the Board of Directors of the Company; provided
however, if such date shall be a holiday or a day on which banks are
authorized to close, then Expiration Date shall mean 5:00 p.m.,
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Mountain Standard or Daylight Time on the next following day which in the
State of Colorado is not a holiday or a day on which banks are authorized to
close. The Expiration Date may be extended from time to time, by resolution
of the Board of Directors of the Company, to a later date upon giving notice
to the Warrant Agent and the Registered Owners; provided, however, that
notice to the Registered Owners of an extension of the Expiration Date may be
made by publication or by release to Dow Jones, P.R. Newswire or other means
of general distribution. If the Company redeems the Warrants as provided in
Section 5 of this agreement, the Expiration Date shall be the date fixed for
redemption.
(i) "Firm Warrants" shall mean 1,000,000 Warrants to purchase 1,000,000
shares of Common Stock, all purchased by the several Underwriters from the
Company and sold in the Public Offering in accordance with the Underwriting
Agreement.
(j) "Over-Allotment Warrants" shall mean 150,000 Warrants to purchase
150,000 shares of Common Stock, any or all of which may be purchased by the
Representative for the several Underwriters from the Company in accordance
with the Underwriting Agreement. The Over-Allotment Warrants shall have
identical terms and conditions to those established for the Firm Warrants,
subject to their issuance in accordance with Section 2 hereof.
(k) "Registered Owner" shall mean the person in whose name any Warrant
Certificate shall be registered on the books maintained by the Warrant Agent
pursuant to Section 6 of this Agreement.
(l) "Registration Statement" shall mean the Company's Registration
Statement on Form SB-2 (S.E.C. File No. 333-_______), as amended.
(m) "Representative" shall mean Joseph Charles & Associates, Inc., the
representative of the several Underwriters.
(n) "Representative's Warrants" shall mean 100,000 Redeemable Common Stock
Purchase Warrants to purchase 100,000 shares of Common Stock, issuable upon
exercise of the Representative's Purchase Options and all of which were or
will be registered on the Registration Statement. The Representative's
Warrants shall have identical terms and conditions to those established for
the Firm Warrants, subject to their issuance in accordance with Section 2
hereof.
(o) "Subsidiary" shall mean any corporation of which shares having
ordinary voting power to elect a majority of the Board of Directors of such
corporation (regardless of whether the shares of any other class or classes
of such corporation shall have or may have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned by
the Company or one or more subsidiaries of the Company.
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(p) "Warrant" or the "Warrants" shall mean and include up to 1,678,000
Warrants to purchase 1,678,565 authorized and unissued Shares of Common Stock
of the Company and, unless otherwise noted, shall include 1,000,000 Firm
Warrants, 150,000 Over-Allotment Warrants, 428,565 Bridge Warrants and
100,000 Representative's Warrants.
(q) "Warrant Agent" shall mean American Securities Transfer & Trust, Inc.,
or its successor, as the transfer agent and registrar of the Warrants.
(r) "Warrant Shares" shall mean and include up to 1,678,565 authorized and
unissued shares of Common Stock reserved for issuance on exercise of the
Warrants, and unless otherwise noted, shall include 1,000,000 shares of
Common Stock issuable upon exercise of the Firm Warrants, 150,000 shares of
Common Stock issuable upon exercise of the Over-Allotment Warrants, 428,565
shares of Common Stock issuable upon exercise of the Bridge Warrants, 100,000
shares of Common Stock issuable upon exercise of the Representative's
Warrants and any additional shares of Common Stock or other property which
may hereafter be issuable or deliverable on exercise of the Warrants pursuant
to Section 9 of this Agreement.
2. WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES. Each Warrant shall
initially entitle the Registered Owner of the Warrant Certificates
representing such Warrant to purchase one share of Common Stock on exercise
thereof, subject to modification and adjustment as hereinafter provided in
Section 9. Warrant Certificates representing 1,000,000 Firm Warrants
evidencing the right to purchase an aggregate of 1,000,000 shares of Common
Stock of the Company shall be executed by the proper officers of the Company
and delivered to the Warrant Agent for countersignature on the Effective
Date. Certificates representing the Warrants to be delivered to the Warrant
Agent shall be in direct relation to the Common Stock sold in the Company's
Public Offering and shall be attached to certificates representing an equal
number of shares of Common Stock. The Warrant Certificates will be issued
and delivered on written order of the Company signed by an authorized
officer. The Warrant Agent shall deliver Warrant Certificates in required
whole number denominations to the persons entitled thereto in connection with
any transfer or exchange permitted under this Agreement.
The Over-Allotment Warrants shall carry identical terms and conditions to
those established for the Firm Warrants and outlined herein. Up to 150,000
Over-Allotment Warrants may be issued and such Over-Allotment Warrants shall
evidence the right of the Registered Owners thereof to purchase an aggregate
of up to 150,000 shares of Common Stock of the Company. Any Over-Allotment
Warrants to be issued will be executed by the proper officers of the Company
and delivered to the Warrant Agent for countersignature on exercise of the
option to purchase Over-Allotment Warrants by the several Underwriters in
accordance with the Underwriting Agreement. Certificates representing
Over-Allotment Warrants may be initially attached to certificates
representing an equal number of Over-Allotment shares of Common Stock of the
Company, but are not required to be so attached; it being the intent of the
parties that the Representative may exercise the over-allotment option to
purchase the Over-Allotment Common Stock and/or the Over-Allotment Warrants.
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The Bridge Warrants shall carry identical terms and conditions to those
established for the Firm Warrants and outlined herein. Up to 428,565 Bridge
Warrants may be issued and such Bridge Warrants shall evidence the right of
the Registered Owners thereof to purchase an aggregate of up to 428,565
shares of Common Stock of the Company. Any Bridge Warrants to be issued will
be executed by the proper officers of the Company and delivered to the
Warrant Agent for countersignature upon closing of the Public Offering.
Certificates representing Bridge Warrants need not be attached to
certificates for shares of Common Stock of the Company.
The Representative's Warrants shall carry identical terms and conditions
to those established for the Firm Warrants and outlined herein. Up to
100,000 Representative's Warrants may be issued and such Representative's
Warrants shall evidence the right of the Registered Owners thereof to
purchase an aggregate of up to 100,000 shares of Common Stock of the Company.
Any Representative's Warrants to be issued will be executed by the proper
officers of the Company and delivered to the Warrant Agent for
countersignature on exercise of the Representative's Purchase Options to
purchase shares of Common Stock and Representative's Warrants, which Purchase
Options may not be exercised prior one year from the Effective Date.
Certificates representing Representative's Warrants may be initially attached
to certificates representing an equal number of shares of Common Stock of the
Company, but are not required to be so attached.
Except as provided in Section 8 hereof, share certificates representing
the Warrant Shares shall be issued only on or after the Exercise Date on
exercise of the Warrants or on transfer or exchange of the Warrant Shares.
The Warrant Agent, if other than the Company's Transfer Agent, shall arrange
with the Transfer Agent for the issuance and registration of all Warrant
Shares.
3. FORM AND EXECUTION OF WARRANT CERTIFICATES. The Warrant Certificates
shall be substantially in the form attached as Exhibit "A" and may have such
letters, numbers or other marks of identification and such legends, summaries
or endorsements printed, lithographed or engraved thereon as the Company may
deem appropriate and as are not inconsistent with the provisions of this
Agreement. The Warrant Certificates shall be dated as of the date of
issuance, whether on initial issuance, transfer, exchange or in lieu of
mutilated, lost, stolen or destroyed Warrant Certificates.
Each Firm Warrant Certificate shall be initially issued only when attached
to a certificate representing the same number of shares of Common Stock as
Firm Warrants and shall be separately transferable from the certificate
representing shares of Common Stock immediately upon issuance. Warrant
Certificates issued upon exercise of the Over-Allotment Warrants or
Representative's Warrants may be issued with a certificate representing
shares of Common Stock, but need not be so issued. Bridge Warrants shall not
be attached to certificates for Common Stock.
The Warrant Certificates shall be executed on behalf of the Company by its
President and Secretary, by manual signatures or by facsimile signatures
printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal. The Warrant Certificates shall be manually countersigned by
the Warrant Agent and
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shall not be valid for any purpose unless so countersigned. In the event any
officer of the Company who executed the Warrant Certificates shall cease to
be an officer of the Company before the date of issuance of the Warrant
Certificates or before countersignature and delivery by the Warrant Agent,
such Warrant Certificates may be countersigned, issued and delivered by the
Warrant Agent with the same force and effect as though the person who signed
such Warrant Certificates had not ceased to be an officer of the Company.
4. EXERCISE. In accordance with Section 1(f) of this Agreement, the
Warrants will become exercisable on the Effective Date. The exercise of
Warrants in accordance with this Agreement shall only be permitted during the
Exercise Period.
Warrants shall be deemed to have been exercised immediately prior to the
close of business on the Exercise Date. The exercise form shall be executed
by the Registered Owner thereof or his attorney duly authorized in writing
and shall be delivered together with payment to the Warrant Agent, in cash or
by official bank or certified check, of an amount in lawful money of the
United States of America. Such payment shall be in an amount equal to the
Exercise Price as hereinabove defined.
The person entitled to receive the number of Warrant Shares deliverable on
such exercise shall be treated for all purposes as the Registered Owner of
such Warrant Shares as of the close of business on the Exercise Date. The
Company shall not be obligated to issue any fractional share interests in
Warrant Shares. If Warrants represented by more than one Warrant Certificate
shall be exercised at one time by the same Registered Owner, the number of
full Warrant Shares which shall be issuable on exercise thereof shall be
computed on the basis of the aggregate number of full Warrant Shares issuable
on such exercise.
As soon as practicable on or after the Exercise Date and in any event
within 30 days after such date, the Warrant Agent shall cause to be issued
and delivered by the Transfer Agent to the person or persons entitled to
receive the same, a certificate or certificates for the number of Warrant
Shares deliverable on such exercise. No adjustment shall be made in respect
of cash dividends on Warrant Shares deliverable on exercise of any Warrant.
The Warrant Agent shall promptly notify the Company in writing of any
exercise and of the number of Warrant Shares caused to be delivered and shall
cause payment of an amount in cash equal to the Exercise Price to be made
promptly to the order of the Company. The parties contemplate such payments
will be made by the Warrant Agent to the Company on a weekly basis and will
consist of collected funds only. The Warrant Agent shall hold any proceeds
collected and not yet paid to the Company in a Federally-insured escrow
account at a commercial bank selected by agreement of the Company and the
Warrant Agent, at all times relevant hereto. Following a determi-nation by
the Warrant Agent that collected funds have been received, the Warrant Agent
shall cause the Transfer Agent to issue share certificates representing the
number of Warrant Shares purchased by the Registered Owner.
Expenses incurred by the Warrant Agent, including administrative costs,
costs of maintaining records and other expenses, shall be paid by the Company
according to the standard fees imposed by the Warrant
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<PAGE>
Agent for such services. All expenses incurred by the Warrant Agent and to
be paid by the Company shall be deducted from the escrow account prior to
distribution of funds to the Company.
A detailed accounting statement setting forth the number of Warrants
exercised, the number of Warrant Shares issued, the net amount of exercised
funds and all expenses incurred by the Warrant Agent shall be transmitted to
the Company on payment of each exercise amount. Such accounting statement
shall serve as an interim accounting for the Company during the Exercise
Period. The Warrant Agent shall render to the Company, at the completion of
the Exercise Period, a complete accounting setting forth the number of
Warrants exercised, the identity of persons exercising such Warrants, the
number of Warrant Shares issued, the amounts distributed to the Company, and
all expenses incurred by the Warrant Agent.
The Company may be required to deliver a prospectus that satisfies the
requirements of Section 10 of the Securities Act of 1933, as amended (the
"1933 Act") with delivery of the Warrant Shares and must have a registration
statement (or a post-effective amendment to an existing registration
statement) effective under the 1933 Act in order for the Company to comply
with any such prospectus delivery requirements. The Company will advise the
Warrant Agent of the status of any such registration statement under the 1933
Act and of the effectiveness of the Company's registration statement or lapse
of effectiveness.
No issuance of Warrant Shares shall be made unless there is an effective
registration statement under the 1933 Act, and registration or qualification
of the Warrant Shares, or an exemption therefrom, has been obtained from
state or other regulatory authorities in the jurisdiction in which such
Warrant Shares are sold. The Company will provide to the Warrant Agent
written confirmation of all such registration or qualification, or an
exemption therefrom, when requested by the Warrant Agent.
5. REDEMPTION. The Company may, at its option, redeem the Warrants in
whole, but not in part, for a redemption price of $.05 per Warrant, on 30
days' prior written notice to the Registered Owners. The right to redeem the
Warrants may be exercised by the Company only in the event (i) the closing
bid price for Company's shares of Common Stock has exceeded 140% of the
initial public offering price of the Common Stock during a period of at least
20 consecutive trading days within the thirty day period immediately
preceding any notice of the call for redemption, (ii) the Company has a
registration statement (or a post-effective amendment to an existing
registration statement) pertaining to the Warrant Shares effective under
federal law, which registration statement would enable a Registered Owner to
exercise the Warrants provided the Registered Owner resides in a jurisdiction
in which exercise is permitted, and (iii) the expiration of the 30 day notice
period is within the Exercise Period. In the event the Company exercises its
right to redeem the Warrants, the Expiration Date will be deemed to be, and
the Warrants will be exercisable until the close of business on, the date
fixed for redemption in such notice. If any Warrant called for redemption is
not exercised by such time, it will cease to be exercisable and the
Registered Owner thereof will be entitled only to the redemption price.
6. RESERVATION OF SHARES AND PAYMENT OF TAXES. The Company covenants
that it will at all times reserve and have available from its authorized
shares of Common
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Stock such number of shares of Common Stock as shall then be issuable on
exercise of all outstanding Warrants. The Company covenants that all Warrant
Shares issuable shall be duly and validly issued, fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof.
The Registered Owner shall pay all documentary, stamp or similar taxes
and other government charges that may be imposed with respect to the issuance
of the Warrants, or the issuance, transfer or delivery of any Warrant Shares
on exercise of the Warrants. In the event the Warrant Shares are to be
delivered in a name other than the name of the Registered Owner of the
Warrant Certificates, no such delivery shall be made unless the person
requesting the same has paid to the Warrant Agent or Transfer Agent the
amount of any such taxes or charges incident thereto.
The Company will supply the Warrant Agent with blank Warrant Certificates,
so as to maintain an inventory satisfactory to the Warrant Agent. The
Company will file with the Warrant Agent a statement setting forth the name
and address of its Transfer Agent for Warrant Shares and of each successor
Transfer Agent, if any.
7. REGISTRATION OF TRANSFER. The Warrant Certificates may be transferred
in whole or in part and may be separately transferred from the Common Stock
share certificate to which such Warrant Certificate is attached upon initial
issuance, if any. Warrant Certificates to be exchanged shall be surrendered
to the Warrant Agent at its cor-porate office. The Company shall execute and
the Warrant Agent shall countersign, issue and deliver in exchange therefor,
the Warrant Certificate or Certificates which the holder making the transfer
shall be entitled to receive.
The Warrant Agent shall keep transfer books at its corporate office on
which Warrant Certificates and the transfer thereof shall be registered. On
due presentment for registration of transfer of any Warrant Certificate at
such office, the Company shall execute and the Warrant Agent shall issue and
deliver to the transferee or transferees a new Warrant Certificate or
Certificates representing an equal aggregate number of Warrants.
All Warrant Certificates presented for registration of transfer or
exercise shall be duly endorsed or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company and the Warrant
Agent.
Prior to due presentment for registration of transfer thereof, the Company
and the Warrant Agent may treat the Registered Owner of any Warrant
Certificate as the absolute owner thereof (notwithstanding any notations of
ownership or writing thereon made by anyone other than the Company or the
Warrant Agent) and the parties hereto shall not be affected by any notice to
the contrary.
8. LOSS OR MUTILATION. On receipt by the Company and the Warrant Agent
of evidence satisfactory as to the ownership of and the loss, theft,
destruction or mutilation of any Warrant Certificate, the Company
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<PAGE>
shall execute and the Warrant Agent shall countersign and deliver in lieu
thereof, a new Warrant Certificate representing an equal aggregate number of
Warrants. In the case of loss, theft or destruction of any Warrant
Certificate, the Registered Owner requesting issuance of a new Warrant
Certificate shall be required to secure an indemnity bond in favor of the
Company and Warrant Agent in an amount satisfactory to each of them. In the
event a Warrant Certificate is mutilated, such Certificate shall be
surrendered and cancelled by the Warrant Agent prior to delivery of a new
Warrant Certificate. Applicants for a substitute Warrant Certificate shall
also comply with such other regulations and pay such other reasonable charges
as the Company may prescribe.
9. ADJUSTMENT OF EXERCISE PRICE AND SHARES.
(a) If at any time prior to the expiration of the Warrants by their terms
or by exercise, the Company increases or decreases the number of its issued
and outstanding shares of Common Stock, or changes in any way the rights and
privileges of such shares of Common Stock, by means of (i) the payment of a
share dividend or the making of any other distribution on such shares of
Common Stock payable in its shares of Common Stock, (ii) a split or
subdivision of shares of Common Stock, or (iii) a consolidation or
combination of shares of Common Stock, then the Exercise Price in effect at
the time of such action and the number of Warrants required to purchase each
Warrant Share at that time shall be proportionately adjusted so that the
numbers, rights and privileges relating to the Warrant Shares then
purchasable upon the exercise of the Warrants shall be increased, decreased
or changed in like manner, for the same aggregate purchase price set forth in
the Warrants, as if the Warrant Shares purchasable upon the exercise of the
Warrants immediately prior to the event had been issued, outstanding, fully
paid and nonassessable at the time of that event. Any dividend paid or
distributed on the shares of Common Stock in shares of any other class of
shares of the Company or securities convertible into shares of Common Stock
shall be treated as a dividend paid in shares of Common Stock to the extent
shares of Common Stock are issuable on the payment or conversion thereof.
(b) In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall be recapitalized by reclassifying its
outstanding shares of Common Stock into shares with a different par value, or
by changing its outstanding shares of Common Stock to shares without par
value or in the event of any other material change of the capital structure
of the Company or of any successor corporation by reason of any
reclassification, recapitalization or conveyance, prompt, proportionate,
equitable, lawful and adequate provision shall be made whereby any Registered
Owner of the Warrants shall thereafter have the right to purchase, on the
basis and the terms and conditions specified in this Agreement, in lieu of
the Warrant Shares theretofore purchasable on the exercise of any Warrant,
such securities or assets as may be issued or payable with respect to or in
exchange for the number of Warrant Shares theretofore purchasable on exercise
of the Warrants had such reclassification, recapitalization or conveyance not
taken place; and in any such event, the rights of any Registered Owner of a
Warrant to any adjustment in the number of Warrant Shares purchasable on
exercise of such Warrant, as set forth above, shall continue and be preserved
in respect of any stock, securities or assets which the Registered Owner
becomes entitled to purchase.
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<PAGE>
(c) In the event the Company, at any time while the Warrants shall remain
unexpired and unexercised, shall sell all or substantially all of its
property, or dissolves, liquidates or winds up its affairs, prompt,
proportionate, equitable, lawful and adequate provision shall be made as part
of the terms of such sale, dissolution, liquidation or winding up such that
the Registered Owner of a Warrant may thereafter receive, on exercise
thereof, in lieu of each Warrant Share which he would have been entitled to
receive, the same kind and amount of any stock, securities or assets as may
be issuable, distributable or payable on any such sale, dissolution,
liquidation or winding up with respect to each share of Common Stock of the
Company; provided, however, that in the event of any such sale, dissolution,
liquidation or winding up, the right to exercise the Warrants shall terminate
on a date fixed by the Company, such date to be not earlier than 5:00 P.M.,
Mountain Time, on the 30th day next succeeding the date on which notice of
such termination of the right to exercise the Warrants has been given by mail
to the Registered Owners thereof at such addresses as may appear on the books
of the Company.
(d) On exercise of the Warrants by the Registered Owners, the Company
shall not be required to deliver fractions of Warrant Shares; provided,
however, that the Company shall make prompt, proportionate, equitable, lawful
and adequate provisions in respect of any such fraction of one Warrant Share
either on the basis of adjustment in the then applicable Exercise Price or a
purchase of the fractional interest at the price of the Company's shares of
Common Stock or such other reasonable basis as the Company may determine.
(e) In the event, prior to expiration of the Warrants by exercise or by
their terms, the Company shall determine to take a record of the holders of
its shares of Common Stock for the purpose of determining shareholders
entitled to receive any stock dividend, distribution or other right which
will cause any change or adjustment in the number, amount, price or nature of
the shares of Common Stock or other stock, securities or assets deliverable
on exercise of the Warrants pursuant to the foregoing provisions, the Company
shall give to the Registered Owners of the Warrants at the addresses as may
appear on the books of the Company at least 30 days' prior written notice to
the effect that it intends to take such a record. Such notice shall specify
the date as of which such record is to be taken; the purpose for which such
record is to be taken; and the number, amount, price and nature of the shares
of Common Stock or other stock, securities or assets which will be
deliverable on exercise of the Warrants after the action for which such
record will be taken has been completed. Without limiting the obligation of
the Company to provide notice to the Registered Owners of the Warrants of any
corporate action hereunder, the failure of the Company to give notice shall
not invalidate such corporate action of the Company.
(f) The Warrants shall not entitle the Registered Owner thereof to any of
the rights of shareholders or to any dividend declared on the shares of
Common Stock unless the Warrant is exercised and the Warrant Shares purchased
prior to the record date fixed by the Board of Directors of the Company for
the determination of holders of shares of Common Stock entitled to such
dividend or other right.
(g) No adjustment of the Exercise Price shall be made as a result of or in
connection with (i) the issuance of shares of Common Stock of the Company
pursuant to options, warrants, employee stock ownership
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plans and share purchase agreements outstanding or in effect on the date
hereof, (ii) the establishment of additional option plans of the Company, the
modification, renewal or extension of any plan now in effect or hereafter
created, or the issuance of shares of Common Stock on exercise of any options
pursuant to such plans, and (iii) the issuance of shares of Common Stock in
connection with compensation arrangements for officers, employees or agents
of the Company or any subsidiary, and the like.
10. DUTIES, COMPENSATION AND TERMINATION OF WARRANT AGENT. The Warrant
Agent shall act hereunder as agent and in a ministerial capacity for the
Company, and its duties shall be determined solely by the provisions hereof.
The Warrant Agent shall not, by issuing and delivering Warrant Certificates
or by any other act hereunder, be deemed to make any representations as to
the validity, value or authorization of the Warrant Certificate or the
Warrants represented thereby or of the Warrant Shares or other property
delivered on exercise of any Warrant. The Warrant Agent shall not be under
any duty or responsibility to any holder of the Warrant Certificates to make
or cause to be made any adjustment of the Exercise Price or to determine
whether any fact exists which may require any such adjustments.
The Warrant Agent shall not (i) be liable for any recital or statement of
fact contained herein or for any action taken or omitted by it in reliance on
any Warrant Certificate or other document or instrument believed by it in
good faith to be genuine and to have been signed or presented by the proper
party or parties, (ii) be responsible for any failure on the part of the
Company to comply with any of its covenants and obligations contained in this
Agreement or in the Warrant Certificates, or (iii) be liable for any act or
omission in connection with this Agreement except for its own negligence or
willful misconduct.
The Warrant Agent may at any time consult with counsel satisfactory to it
(who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken or omitted by it in good faith in
accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order or demand of
the Company shall be sufficiently evidenced by an instrument signed by its
President and attested by its Secretary or Assistant Secretary. The Warrant
Agent shall not be liable for any action taken or omitted by it in accordance
with such notice, statement, instruction, request, direction, order or demand.
The Company agrees to pay the Warrant Agent reasonable compensation for
its services hereunder and to reimburse the Warrant Agent for its reasonable
expenses. The Company further agrees to indemnify the Warrant Agent against
any and all losses, expenses and liabilities, including judgments, costs and
counsel fees, for any action taken or omitted by the Warrant Agent in the
execution of its duties and powers hereunder, excepting losses, expen-ses and
liabilities arising as a result of the Warrant Agent's negligence or willful
misconduct.
The Warrant Agent may resign its duties or the Company may terminate the
Warrant Agent and the Warrant Agent shall be discharged from all further
duties and liabilities hereunder (except liabilities arising
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as a result of the Warrant Agent's own negligence or willful misconduct) on
30 days' prior written notice to the other party. At least 30 days prior to
the date such resignation is to become effective, the Warrant Agent shall
cause a copy of such notice of resignation to be mailed to the Registered
Owner of each Warrant Certificate. On such resignation or termination, the
Company shall appoint a new Warrant Agent. If the Company shall fail to make
such appointment within a period of 30 days after it has been notified in
writing of the resignation by the Warrant Agent, then the Registered Owner of
any Warrant Certificate may apply to any court of competent jurisdiction for
the appointment of a new Warrant Agent. Any new Warrant Agent, whether
appointed by the Company or by such court, shall be a bank or trust company
having a capital and surplus, as shown by its last published report to its
shareholders, of not less than $1,000,000, and having its principal office in
the United States.
After acceptance in writing of an appointment of a new Warrant Agent is
received by the Company, such new Warrant Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally
named herein as the Warrant Agent, without any further assurance, conveyance,
act or deed; provided, however, if it shall be necessary or expedient to
execute and deliver any further assurance, conveyance, act or deed, the same
shall be done at the expense of the Company and shall be legally and validly
executed. The Company shall file a notice of appointment of a new Warrant
Agent with the resigning Warrant Agent and shall forthwith cause a copy of
such notice to be mailed to the Registered Owner of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new Warrant Agent may
be converted or merged, or any corporation resulting from any consolidation
to which the Warrant Agent or any new Warrant Agent shall be a party, or any
corporation succeeding to the corporate trust business of the Warrant Agent
shall be a successor Warrant Agent under this Agreement, provided that such
corporation is eligible for appointment as a successor to the Warrant Agent.
Any such successor Warrant Agent shall promptly cause notice of its
succession as Warrant Agent to be mailed to the Company and to the Registered
Owner of each Warrant Certificate. No further action shall be required for
establishment and authorization of such successor Warrant Agent.
The Warrant Agent, its officers or directors and it subsidiaries or
affiliates may buy, hold or sell Warrants or other securities of the Company
and otherwise deal with the Company in the same manner and to the same extent
and with like effect as though it were not Warrant Agent. Nothing herein
shall preclude the Warrant Agent from acting in any other capacity for the
Company.
11. MODIFICATION OF AGREEMENT. The Warrant Agent and the Company may by
supplemental agreement make any changes or corrections in this Agreement they
shall deem appropriate to cure any ambiguity or to correct any defective or
inconsistent provision or mistake or error herein contained. Additionally,
the parties may make any changes or corrections deemed necessary which shall
not adversely affect the interests of the Registered Owners of Warrant
Certificates; provided, however, this Agreement shall not otherwise be
modified, supplemented or altered in any respect except with the consent in
writing of the
-12-
<PAGE>
Registered Owners of Warrant Certificates representing not less than a
majority of the Warrants outstanding. Additionally, no change in the number
or nature of the Warrant Shares purchasable on exercise of a Warrant or the
Exercise Price therefor shall be made without the consent in writing of the
Registered Owner of the Warrant Certificate representing such Warrant, other
than such changes as are specifically prescribed by this Agreement.
12. NOTICES. All notices, demands, elections, opinions or requests
(however characterized or described) required or authorized hereunder shall
be deemed given sufficiently in writing and sent by registered or certified
mail, return receipt requested and postage prepaid, or by tested telex,
telegram or cable to, in the case of the Company:
NAVIDEC, Inc.
14 Inverness Drive, Building F, Suite 166
Englewood, Colorado 80112
and in the case of the Warrant Agent:
American Securities Transfer & Trust, Inc.
1825 Lawrence Street, Suite 444
Denver, Colorado 80202
with a copy to:
David C. Roos, Esq.
Berliner Zisser Walter & Gallegos, P.C.
Suite 4700
1700 Lincoln Street
Denver, Colorado 80203
and if to the Registered Owner of a Warrant Certificate, at the address of
such Registered Owner as set forth on the books maintained by the Warrant
Agent.
13. PERSONS BENEFITING. This Agreement shall be binding upon and
inure to the benefit of the Company, the Warrant Agent and their respective
successors and assigns, and the Registered Owners and beneficial owners from
time to time of the Warrant Certificates. Nothing in this Agreement is
intended or shall be construed to confer on any other person any right,
remedy or claim or to impose on any other person any duty, liability or
obligation.
14. FURTHER INSTRUMENTS. The parties shall execute and deliver any
and all such other instruments and shall take any and all such other actions
as may be reasonable or necessary to carry out the intention of this
Agreement.
15. SEVERABILITY. If any provision of this Agreement shall be held,
declared or pronounced void, voidable, invalid, unenforceable or inoperative
for any reason by any court of competent jurisdiction, government authority
or otherwise, such holding, declaration or pronouncement shall not affect
adversely any
-13-
<PAGE>
other provision of this Agreement, which shall otherwise remain in full force
and effect and be enforced in accordance with its terms, and the effect of
such holding, declaration or pronouncement shall be limited to the territory
or jurisdiction in which made.
16. WAIVER. All the rights and remedies of either party under this
Agreement are cumulative and not exclusive of any other rights and remedies
as provided by law. No delay or failure on the part of either party in the
exercise of any right or remedy arising from a breach of this Agreement shall
operate as a waiver of any subsequent right or remedy arising from a
subsequent breach of this Agreement. The consent of any party where required
hereunder to any act or occurrence shall not be deemed to be a consent to any
other action or occurrence.
17. GENERAL PROVISIONS. This Agreement shall be construed and
enforced in accordance with, and governed by, the laws of the State of
Colorado. Except as otherwise expressly stated herein, time is of the
essence in performing hereunder. This Agreement embodies the entire
agreement and understanding between the parties and supersedes all prior
agreements and understandings relating 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. The
headings of this Agreement are for convenience of reference only and shall
not limit or otherwise affect the meaning thereof. 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above mentioned.
THE COMPANY:
NAVIDEC, Inc.
(CORPORATE SEAL)
By:
----------------------------------
Ralph Armijo, President
ATTEST:
- -------------------------------
Kevin L. Blankenship, Secretary
THE WARRANT AGENT:
AMERICAN SECURITIES TRANSFER & TRUST, INC .
By:
----------------------------------
ATTEST: Title:
-------------------------------
- -------------------------------
Title:
-------------------------
-14-
<PAGE>
STATE OF COLORADO )
) ss.
COUNTY OF ARAPAHOE )
Subscribed and sworn to before me by Ralph Armijo, President of NAVIDEC,
Inc., this ____ day of ________, 199__.
Witness my hand and official seal.
----------------------------------------
( S E A L ) Notary Public
My commission expires:
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
Subscribed and sworn to before me by ___________________________,
____________________ of American Securities Transfer & Trust, Inc., this ___
day of ______, 199__.
Witness my hand and official seal.
----------------------------------------
( S E A L ) Notary Public
My commission expires:
DCR\Navidec\Warrant.Agr
-15-
<PAGE>
THE PURCHASE OPTION REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES
ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, PURSUANT TO A REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. HOWEVER, NEITHER THE PURCHASE
OPTION NOR SUCH SECURITIES CAN BE OFFERED OR SOLD EXCEPT PURSUANT TO (i)
A POST-EFFECTIVE AMENDMENT TO SUCH REGISTRATION STATEMENT, (ii) A SEPARATE
REGISTRATION STATEMENT UNDER SUCH ACT, OR (iii) AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT.
THE TRANSFER OF THIS PURCHASE OPTION IS RESTRICTED AS DESCRIBED HEREIN.
NAVIDEC, INC.
PURCHASE OPTION FOR THE PURCHASE OF SHARES OF COMMON STOCK AND
WARRANTS TO PURCHASE SHARES OF COMMON STOCK
No. ____
THIS CERTIFIES that, for receipt in hand of $10.00 and other value
received, JOSEPH CHARLES & ASSOCIATES, INC. (the "Holder") and/or its
permitted assigns, is entitled to subscribe for and purchase from NAVIDEC,
Inc., a Colorado corporation (the "Company"), upon the terms and conditions
set forth herein, at any time or from time to time after __________, 199___,
and before 5:00 p.m. Eastern time on __________, 200__ (the "Exercise
Period"), 100,000 shares of Common Stock (the "Shares") and Warrants to
purchase an additional 100,000 shares of Common Stock (the "Warrants") at a
combined price of $______________ per Share and Warrant (the "Exercise
Price"), Each Warrant will have an exercise price and other terms which are
identical to the Warrants to be issued by the Company in its public offering
to be completed on or before the date hereof (the "Public Offering"), except
that the Warrants shall not be redeemable. This Purchase Option may not be
sold, transferred, assigned or hypothecated until ___________, 199__ 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 ____________,
199__, this Purchase Option may be sold, transferred, assigned or
hypothecated in accordance with applicable law. The term the "Holder" as
used herein shall include any transferee to whom this Purchase Option has
been transferred in accordance with the above. As used herein the term "this
Purchase Option" shall mean and include this Purchase Option and any Purchase
Option or Options hereafter issued as a consequence of the
<PAGE>
exercise or transfer of this Purchase Option in whole or in part, and the
term "Common Stock" shall mean and include the Company's Common Stock with
ordinary voting power, which class at the date hereof is publicly traded.
1. a. This Purchase Option may be exercised during the Exercise Period as
to the whole or any lesser number of whole Shares and Warrants by the
surrender of this Purchase Option (with the election attached hereto duly
executed) to the Company at its office at 14 Inverness Drive, Building F,
Suite 116, Englewood, Colorado 80112, or such other place as is
designated in writing by the Company, together with a certified or bank
cashier's check payable to the order of the Company in an amount equal to
the Exercise Price multiplied by the number of shares of Common Stock and
Warrants for which this Purchase Option is being exercised.
b. Upon written request of the Holder, and in lieu of payment for the
Shares and Warrants by check in accordance with paragraph 1(a) hereof,
the Holder may exercise the Purchase Option (or any portion thereof) for
and receive the number of Shares and Warrants equal to a fraction, the
numerator of which equals (i) the amount by which the average closing bid
price of the Common Stock for the ten (10) trading days preceding the
date of exercise (the "Current Market Price" as further defined in
paragraph 5(l) below) exceeds the Exercise Price per share, multiplied by
(ii) the number of Shares and Warrants to be purchased; the denominator
of which equals the Current Market Price.
2. Upon each exercise of this Purchase Option, the Holder shall be
deemed to be the holder of record of the Shares and Warrants issuable
upon such exercise, notwithstanding that the transfer books of the
Company shall then be closed or certificates representing such Shares and
Warrants shall not then have been actually delivered to the Holder. As
soon as practicable after each such exercise of this Purchase Option, the
Company shall issue and deliver to the Holder a certificate or
certificates for the Shares and Warrants issuable upon such exercise,
registered in the name of the Holder or its designee. If this Purchase
Option should be exercised in part only, the Company shall, upon
surrender of this Purchase Option for cancellation, execute and deliver a
new Purchase Option evidencing the right of the Holder to purchase the
balance of the Shares and Warrants (or portions thereof) subject to
purchase hereunder.
3. Warrants issued upon the transfer or exercise in whole or in part
of this Purchase Option shall be numbered and shall be registered in the
records of the Company as they are issued. The Company shall be entitled
to treat the registered holder of any Purchase Option on the
2
<PAGE>
records of the Company 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 Purchase Option on the part of any other person. The
Purchase Options 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 Purchase Option to the person entitled thereto. The
Purchase Options may be exchanged, at the option of the Holder thereof,
for another Purchase Option, or other Purchase Options of different
denominations, of like tenor and representing in the aggregate the right
to purchase a like number of Shares and Warrants upon surrender to the
Company or its duly authorized agent. Notwithstanding the foregoing, the
Company shall have no obligation to cause Purchase Options 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"), or applicable state blue
sky laws and the rules and regulations thereunder.
4. The Company shall at all times reserve and keep available out of
its authorized and unissued Common Stock, solely for the purpose of
providing for the exercise of this Purchase Option and the Warrants
purchasable upon exercise of this Purchase Option, such number of shares
of Common Stock as shall, from time to time, be sufficient therefor. The
Company covenants that all shares of Common Stock issuable upon exercise
of this Purchase Option or the Warrants shall be validly issued, fully
paid, nonassessable, and free of preemptive rights.
5. a. In case the Company shall sell or issue hereafter either its
Common Stock or any rights, options, warrants or obligations or
securities containing the right to subscribe for or purchase any Common
Stock ("Options") or exchangeable for or convertible into Common Stock
("Convertible Securities"), at a price per share, as determined pursuant
to paragraph (b) of this section, less than the Exercise Price then in
effect on the date of such sale or issuance, then the number of Shares
and Warrants thereafter purchasable upon exercise of this Purchase Option
shall be determined by multiplying the number of Shares and Warrants
theretofore purchasable upon exercise of this Purchase Option by a
fraction, (i) the numerator of which shall be the number of shares of
Common Stock outstanding on the date of issuance of such Common Stock,
Options or Convertible Securities and (ii) the denominator of which shall
be the number of shares
3
<PAGE>
of Common Stock outstanding on the date prior to the date of issuance of such
Common Stock or Convertible Securities plus the number of shares of Common
Stock which the aggregate consideration received by the Company upon such
issuance would purchase on such date at the Exercise Price then in effect.
b. The following provisions, in addition to other provisions of this
section shall be applicable in determining any adjustment under (a) above:
(i) In case of the issuance or sale of Common Stock part or all of
which shall be for cash, the cash consideration received by the
Company therefor shall be deemed to be the amount of cash proceeds of
such sale of shares less any compensation paid or discount allowed in
the sale, underwriting or purchase thereof by underwriters or dealers
or others performing similar services or any expenses incurred in
connection therewith, plus the amounts, if any, determined as provided
in (b)(ii) below.
(ii) In case of the issuance or sale of Common Stock wholly or partly
for a consideration other than cash, the amount of the consideration
other than cash received by the Company for such Common Stock shall be
deemed to be the fair value of such consideration as determined by a
resolution adopted by the Board of Directors of the Company acting in
good faith, less any compensation paid or incurred by the Company for
any underwriting of, or otherwise in connection with such issuance,
provided, however, the amount of such consideration other than cash
shall in no event exceed the cost thereof as recorded on the books of
the Company. In case of the issuance or sale of Common Stock
(otherwise than upon conversion or exchange) together with other stock
or securities or other assets of the Company for a consideration which
is received for both such Common Stock and other securities or assets,
the Board of Directors of the Company acting in good faith shall
determine what part of the consideration so received is to be deemed
to be the consideration for the issuance of such Common Stock, less
any compensation paid or incurred by the Company for any underwriting
of, or otherwise in connection with such issuance, provided, however,
the amount of such consideration other than cash shall in no event
exceed the cost thereof as recorded on the books of the Company. In
case at any time the Company shall declare a dividend or make any
other distribution upon any stock of the Company payable in Common
Stock then such Common Stock issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without
consideration.
4
<PAGE>
(iii) The price per share of any Common Stock sold or issued by
the Company (other than pursuant to Options or Convertible Securities)
shall be equal to a price calculated by dividing (A) the amount of the
consideration received by the Company, as determined pursuant to (b)(i)
and (b)(ii) above, upon such sale or issuance by (B) the number of
shares of Common Stock sold or issued.
(iv) In case the Company shall at any time after the date hereof
issue any Options or Convertible Securities, the following provisions
shall apply in making any adjustment:
(A) The price per share for which Common Stock is issuable
upon the exercise of the Options or upon conversion or exchange of
the Convertible Securities shall be determined by (1) dividing the
total amount, if any, received or receivable by the Company as
consideration for the issuance of such Options or Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon exercise of such
Options or the conversion or exchange of such Convertible
Securities, by (2) the aggregate maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities.
(B) In determining the price per share for which Common
Stock is issuable upon exercise of the Options or conversion or
exchange of the Convertible Securities as set forth above and in
computing any adjustment pursuant to (a) above: the aggregate
maximum number of shares of Common Stock issuable upon the exercise
of such Convertible Securities shall be considered to be
outstanding at the time such Options or Convertible Securities were
issued and to have been issued for such price per share as
determined pursuant to (b)(iv)(A), and the consideration for the
issuance of such Options or Convertible Securities and the amount
of additional consideration payable to the Company upon exercise of
such Options or upon the conversion or exchange of such Convertible
Securities shall be determined in the same manner as the
consideration received upon the issuance or sale of Common Stock as
provided in paragraphs (b)(i) and (b)(ii).
(C) On the expiration of such Options or the termination of
any right to convert or exchange any Convertible Securities, the
number of Shares and Warrants subject to this Purchase Option shall
forthwith be readjusted to such number of Shares and Warrants as
would have been obtained had the adjustments made upon the issuance
5
<PAGE>
of such Options or Convertible Securities been made upon the basis
of the delivery of only the number of shares of Common Stock
actually delivered upon the exercise of such Options or upon
conversion or exchange of such Convertible Securities.
(D) If the minimum purchase price per share of Common Stock
provided for in any Option, or the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock,
shall change or a different purchase price or rate shall become
effective at any time or from time to time (other than pursuant to
any anti-dilution provisions of such Options or Convertible
Securities) then upon such change becoming effective, the number of
Shares and Warrants subject to this Purchase Option shall forthwith
be increased or decreased to such number of shares as would have
been obtained had the adjustments made upon the granting or
issuance of such Options or Convertible Securities been made upon
the basis of (1) the issuance of the number of shares of Common
Stock theretofore actually delivered upon the exercise of such
Options or upon the conversion or exchange of such Convertible
Securities, and the total consideration received therefor, and (2)
the granting or issuance at the time of such change of any such
Options or Convertible Securities then still outstanding for the
consideration, if any, received by the Company therefor and to be
received on the basis of such changed price or rate of exchange or
conversion.
(v) Except as otherwise specifically provided herein, the date
of issuance or sale of Common Stock shall be deemed to be the date the
Company is legally obligated to issue such Common Stock or the date the
Company is legally obligated to issue any Option or Convertible
Security. If the Company shall take a record date for the purpose of
determining holders of Common Stock entitled to (A) receive a dividend
or other distribution payable in Common Stock or in Options or
Convertible Securities or (B) subscribe for or purchase Common Stock,
Options or Convertible Securities, such record date shall be deemed to
be the date of issue or sale of the Common Stock, Options or Convertible
Securities.
(vi) The number of shares of Common Stock outstanding at any given
time shall not include treasury shares but the disposition of any such
treasury shares shall be considered an issue or sale of Common Stock for
the purposes of this section.
6
<PAGE>
(vii) Anything hereinabove to the contrary notwithstanding, no
adjustment shall be made pursuant to (a) above to the Exercise Price or
to the number of Shares and Warrants purchasable upon:
(A) The issuance or sale by the Company of any Common Stock
or Warrants pursuant to this Purchase Option, any securities
offered in a public offering underwritten by Joseph Charles &
Associates, Inc., any shares, Options or Convertible Securities
issued and outstanding at the effective date of such public
offering or at the date of this Purchase Option, or any shares
issuable pursuant to the Company's stock option plan currently in
effect, provided the total number of shares issuable pursuant to
such plan does not exceed ______ shares of Common Stock.
(B) The issuance or sale of Common Stock pursuant to the
exercise of Options or conversion or exchange of Convertible
Securities hereinafter issued for which an adjustment has been made
(or was not required to be made) pursuant to the provisions hereof.
(C) The increase in the number of shares of Common Stock
subject to any Option or Convertible Security referred to in
subsections (A) and (B) hereof pursuant to the provisions of such
Option or Convertible Securities designed to protect against
dilution.
c. If the Company shall at any time subdivide its outstanding Common
Stock by recapitalization, reclassification or split-up thereof, the number
of Shares and Warrants subject to this Purchase Option immediately prior to
such subdivision shall be proportionately increased, and if the Company shall
at any time combine the outstanding Common Stock by recapitalization,
reclassification or combination thereof, the number of Shares and Warrants
subject to this Purchase Option immediately prior to such combination shall
be proportionately decreased. Any corresponding adjustment to the Exercise
Price shall become effective at the close of business on the record date for
such subdivision or combination.
d. If the Company after the date hereof shall distribute to the
holders of its Common Stock any securities or other assets (other than a
distribution of Common Stock or a cash distribution made as a dividend
payable out of earnings or out of any earned surplus legally available for
dividends under the laws of the jurisdiction of incorporation of the
Company), the Board of Directors shall be required to make such equitable
adjustment in the Exercise
7
<PAGE>
Price in effect immediately prior to the record date of such distribution as
may be necessary to preserve the rights substantially proportionate to those
enjoyed hereunder by the Holder immediately prior to the happening of such
distribution. Any such adjustment made in good faith by the Board of
Directors shall be final and binding upon the Holder and shall become
effective as of the record date for such distribution.
e. No adjustment in the number of Shares and Warrants subject to this
Purchase Option shall be required unless such adjustment would require an
increase or decrease in such number of Shares and Warrants of at least 1% of
the then adjusted number of Shares and Warrants issuable upon exercise of
this Purchase Option, provided, however, that any adjustments which by reason
of the foregoing are not required at the time to be made shall be carried
forward and taken into account and included in determining the amount of any
subsequent adjustment; and provided further, however, that in case the
Company shall at any time subdivide or combine the outstanding Common Stock
or issue any additional Common Stock as a dividend, said percentage shall
forthwith be proportionately increased in the case of a combination or
decreased in the case of a subdivision or dividend of Common Stock so as to
appropriately reflect the same. If the Company shall make a record of the
holders of its Common Stock for the purpose of entitling them to receive any
dividend or distribution and legally abandon its plan to pay or deliver such
dividend or distribution then no adjustment in the number of shares of Common
Stock subject to the Purchase Option shall be required by reason of the
making of such record.
f. Whenever the number of shares of Common Stock purchasable upon the
exercise of this Purchase Option is adjusted as provided herein, the Exercise
Price shall be adjusted (to the nearest one tenth of a cent) by respectively
multiplying such Exercise Price immediately prior to such adjustment by a
fraction, the numerator of which shall be the number of Shares and Warrants
purchasable upon the exercise of this Purchase Option immediately prior to
such adjustment, and the denominator of which shall be the number of Shares
and Warrants purchasable immediately thereafter.
g. In case of any reclassification of the outstanding Common Stock
(other than a change covered by (c) hereof or which solely affects the par
value of such Common Stock) or in the case of any merger or consolidation of
the Company with or into another corporation (other than a consolidation or
merger in which the Company is the continuing corporation and which does not
result in any reclassification or capital reorganization of the outstanding
Common Stock), or in the case of any sale or conveyance to another
corporation of the
8
<PAGE>
property of the Company as an entirety or substantially as an entirety in
connection with which the Company is dissolved, the Holder of this Purchase
Option shall have the right thereafter (until the expiration of the right of
exercise of this Purchase Option) to receive upon the exercise hereof, for
the same aggregate Exercise Price payable hereunder immediately prior to such
event, the kind and amount of shares of stock or other securities or property
receivable upon such reclassification, capital reorganization, merger or
consolidation, or upon the dissolution following any sale or other transfer,
by a holder of the number of shares of Common Stock of the Company obtainable
upon the exercise of this Purchase Option immediately prior to such event;
and if any reclassification also results in a change in Common Stock covered
by (c) above, then such adjustment shall be made pursuant to both this
paragraph (g) and paragraph (c). The provisions of this paragraph (g) shall
similarly apply to successive re-classifications, or capital reorganizations,
mergers or consolidation, sales or other transfers.
If the Company after the date hereof shall issue or agree to issue
Common Stock, Options or Convertible Securities at less than the Exercise
Price, other than as described herein, and such issuance or agreement would
in the opinion of the Board of Directors of the Company materially affect the
rights of the Holders of the Purchase Options, the Exercise Price and the
number of Shares and Warrants purchasable upon exercise of the Purchase
Options shall be adjusted in such manner, if any, and at such time as the
Board of Directors of the Company, in good faith, may determine to be
equitable in the circumstances. The minutes or unanimous consent approving
such action shall set forth the Board of Director's determination as to
whether an adjustment is warranted and the manner of such adjustment. In the
absence of such determination, any Holder may request in writing that the
Board of Directors make such determination. Any such determination made in
good faith by the Board of Directors shall be final and binding upon the
Holders. If the Board fails, however, to make such determination within
sixty (60) days after such request, such failure shall be deemed a
determination that an adjustment is required.
h. (i) Upon occurrence of each event requiring an adjustment of the
Exercise Price and of the number of Shares and Warrants purchasable upon
exercise of this Purchase Option in accordance with, and as required by, the
terms hereof, the Company shall forthwith employ a firm of certified public
accountants (who may be the regular accountants for the Company) who shall
compute the adjusted Exercise Price and the adjusted number of Shares and
Warrants purchasable at such adjusted Exercise Price
9
<PAGE>
by reason of such event in accordance herewith. The Company shall give to
each Holder of the Purchase Options a copy of such computation which shall be
conclusive and shall be binding upon such Holders unless contested by Holders
by written notice to the Company within thirty (30) days after receipt
thereof.
(ii) In case the Company after the date hereof shall propose (A) to
pay any dividend payable in stock to the holders of its Common Stock or
to make any other distribution (other than cash dividends) to the
holders of its Common Stock or to grant rights to subscribe to or
purchase any additional shares of any class or any other rights or
options, or (B) to effect any reclassification involving merely the
subdivision or combination of outstanding Common Stock or (C) any
capital reorganization or any consolidation or merger, or any sale,
transfer or other disposition of its property, assets and business
substantially as an entirely, or the liquidation, dissolution or winding
up of the Company, then in each such case, the Company shall obtain the
computation described above and if an adjustment to the Exercise Price
is required, the Company shall notify the Holders of the Purchase
Options of such proposed action, which shall specify the record date for
any such action or if no record date is established with respect
thereto, the date on which such action shall occur or commence, or the
date of participation therein by the holders of Common Stock if any such
date is to be fixed, and shall also set forth such facts with respect
thereto as shall be reasonably necessary to indicate the effect of such
action on the Exercise Price and the number, or kind, or class of shares
or other securities or property obtainable upon exercise of this
Purchase Option after giving effect to any adjustment which will be
required as a result of such action. Such notice shall be given at
least twenty (20) days prior to the record date for determining holders
of the Common Stock for purposes of any such action, and in the case of
any action for which a record date is not established then such notice
shall be mailed at least twenty (20) days prior to the taking of such
proposed action.
(iii) Failure to file any certificate or notice or to give any
notice, or any defect in any certificate or notice, shall not effect the
legality or validity of the transaction or the adjustment in the
Exercise Price or in the number, or kind, of class or shares or other
securities or property obtainable upon exercise of the Purchase Options
or of any transaction giving rise thereto.
i. The Company shall not be required to issue fractional Shares or
Warrants upon any exercise of the Purchase Options. As to any final fraction
of a Share or Warrant which the
10
<PAGE>
Holder of a Purchase Option would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such
final fraction in an amount equal to the same fraction of the market
price of a share of such stock on the business day preceding the day of
exercise. The Holder of a Purchase Option, expressly waives any right to
receive any fractional shares of stock upon exercise of the Purchase
Option.
j. Irrespective of any adjustments pursuant to this section in the
Exercise Price or in the number, or kind, or class of shares or other
securities or other property obtainable upon exercise of a Purchase
Option, a Purchase Option Certificate may continue to express the
Exercise Price and the number of Shares and Warrants obtainable upon
exercise at the same price and number of Shares and Warrants as are
stated herein.
k. The number of Shares and Warrants, the Exercise Price and all other
terms and provisions of the Company's agreement with the Holder of this
Purchase Option shall be determined exclusively pursuant to the
provisions hereof.
l. For the purposes of any computation under this Agreement, the
"Current Market Price" at any date shall be the closing bid price of
Common Stock on the business day next preceding the event requiring a
calculation of current market value. If the principal trading market for
such securities is an exchange, the closing bid price shall be the
reported last sale price on such exchange on such day provided if trading
of such Common Stock is listed on any consolidated tape, the closing bid
price shall be the reported last sale price set forth on such
consolidated tape. If the principal trading market for such securities
is the over-the-counter market, the closing bid price shall be the
closing bid price on such date as set forth by The Nasdaq Stock Market,
Inc., or, if the security is not quoted on such market, the closing bid
price as set forth in the National Quotation Bureau sheet or the
Electronic Bulletin Board System for such day. Notwithstanding the
foregoing, if there is no reported last sale price or closing bid price,
as the case may be, on a date prior to the event requiring a calculation
hereunder, then the Current Market Price shall be determined as of the
latest date prior to such day for which such last sale price or closing
bid price is available.
m. The above provisions of this section 5 shall similarly apply to
successive transactions which require adjustments.
n. If the Company shall issue any Option or Convertible Securities
with anti-dilution provisions which are more favorable to the Holders
than the provisions of this Section 5
11
<PAGE>
would be, such other anti-dilution provisions shall apply and will be
incorporated by reference herein.
6. The issuance of any Shares, Warrants or other securities upon the
exercise of this Purchase Option or any Warrant upon the exercise of the
Warrants, and the delivery of certificates or other instruments
representing such securities, 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.
7. a. If, at any time after ____________, 199__, and ending
______________, 200__, the Company shall file a registration statement
(other than on Form S-4, Form S-8, or any successor form) with the
Securities and Exchange Commission (the "Commission") while Shares and
Warrants are available for purchase upon exercise of this Purchase Option
or while any Shares and Warrants (which have not been so registered) are
outstanding, the Company shall give the Holder and all the then holders
of such Shares and Warrants 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 and
Warrants sold by the Holder or any such holder), register or qualify the
Shares or Warrants, or both (collectively, the "Representative's
Securities") 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
Representative's Securities, and will use its best efforts through its
officers, directors, auditors and counsel to cause such registration
statement to become effective as promptly as practicable.
Notwithstanding the 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 Representative's Securities
requested to be included in the registration concurrently with the
securities being registered by the Company would materially adversely
affect the distribution of such securities by the Company for its own
12
<PAGE>
account, then the Holder or any such holder who shall have requested
registration of his or its Representative's Securities shall delay the
offering and sale of such Representative's Securities (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 Representative's
Securities 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 or any such holder unless the securities included
in such registration statement for such other person shall have been
reduced pro rata to the reduction of the Representative's Securities
which were requested to be included in such registration.
b. If at any time after ____________, 199__ and before ____________,
200__, the Company shall receive a written request from holders of
Representative's Securities who, in the aggregate, own (or upon exercise
of all Purchase Options will own) a majority of the total number of
Shares and Warrants issued or issuable upon exercise of the Purchase
Options, 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 Representative's Securities, and will use
its best efforts through its officers, directors, auditors and counsel to
cause such registration statement to become effective as promptly as
practicable; PROVIDED, HOWEVER, that the Company shall only be obligated
to file and obtain effectiveness of one such registration statement for
which 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
Representative's Securities sold by the Holder or any such holder) shall
be borne by the Company. Upon receiving a demand for registration
pursuant to this paragraph 7, the Company, at its option, shall have the
right to purchase all outstanding Purchase Options which have
participated in such demand at a price which is equal to the number of
Purchase Options to be repurchased multiplied by the sum of (i) the
difference between the exercise price of the Purchase Options and the
Current Market Price of the Common Stock as of the date of the demand
plus, (ii) the difference between the exercise price of the Warrants
issuable upon exercise of the Purchase Options and the Current Market
Price of the Common Stock as of the date of the demand.
c. In the event of a registration pursuant to the provisions of this
paragraph 7, the Company shall use its best efforts to cause the
Representative's Securities so registered
13
<PAGE>
to be registered or qualified for sale under the securities or blue sky
laws of such jurisdictions as the Holder or such holders may reasonably
request; provided, however, that the Company shall not be required to
qualify to do business in any state by reason of this paragraph 7(c) 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 7 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 Representative's Securities
covered thereby. The Company shall in no event be required to keep any
such registration or qualification in effect for a period in excess of
nine months from the date on which the Holder and such holders are first
free to sell such Representative's Securities; provided, however, that if
the Company is required to keep any such registration or qualification in
effect with respect to securities other than the Representative's
Securities beyond such period, the Company shall keep such registration
or qualification in effect as it relates to the Representative's
Securities for so long as such registration or qualification remains or
is required to remain in effect in respect of such other securities.
e. In the event of a registration pursuant to the provisions of this
paragraph 7, the Company shall furnish to the Holder and to each such
holder such reasonable 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 Representative's
Securities included in such registration.
f. In the event of a registration pursuant to the provisions of this
paragraph 7, the Company shall furnish the Holder and each holder of any
Representative's Securities so registered with an opinion of its counsel
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 to such
counsel's actual knowledge has the Securities and Exchange
14
<PAGE>
Commission or any securities or blue sky authority of any jurisdiction
instituted or threatened to institute any proceedings with respect to
such an order and (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. Such counsel shall also provide a Blue
Sky Memorandum setting forth the jurisdictions in which the
Representative's Securities have been registered or qualified for sale
pursuant to the provisions of paragraph 7(c).
g. The Company agrees that until all the Representative's Securities
have been sold under a registration statement or pursuant to Rule 144
under the Act, it shall keep current in filing all reports, statements
and other materials required to be filed with the Commission to permit
holders of the Representative's Securities to sell such securities under
Rule 144.
h. The Holder and any holders who propose to register their
Representative's Securities under the Act shall execute and deliver to
the Company a selling shareholder questionnaire on a form to be provided
by the Company.
8. a. Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless the Holder, any holder of any of the
Representative's Securities, their officers, directors, partners,
employees, agents and 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
8, 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 8 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 Representative's
Securities under the securities or blue sky laws thereof or filed with
the Commission or any securities exchange; or any omission or alleged
omission to state a material fact required to be stated therein or
necessary to make
15
<PAGE>
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 Representative's Securities 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 Purchase Option. The foregoing agreement to indemnify shall be
in addition to any liability the Company may otherwise have, including
liabilities arising under this Purchase Option.
If any action is brought against the Holder or any holder of any of the
Representative's Securities 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 otherwise have to Holder or
any holder of any of the Representative's Securities) 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
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 and each holder agrees to indemnify and hold harmless the
Company, each director of the Company, each officer of the Company who shall
have signed any
16
<PAGE>
registration statement covering Representative's Securities held by the
Holder and each 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 and each holder in paragraph 8(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 and each
holder by or on behalf of the Holder and each 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 and each
holder pursuant to this paragraph 8(b), the Holder and each 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 8(a).
c. To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to
paragraph 8(a) or 8(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 because the indemnification provided
for in this Section 8 is for any reason held to be unenforceable by the
Company and the Holder and any holder, then the Company (including for
this purpose any contribution made by or on behalf of any director of
the Company, any officer of the Company who signed any such registration
statement and any controlling person of the Company), as one entity, and
the Holder and any holder of any of the Representative's Securities
included in such registration in the aggregate (including for this
purpose any contribution by or on behalf of the Holder or any holder),
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
17
<PAGE>
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 Representative's
Securities 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 8(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 8(c), each person, if any, who controls the
Holder or any holder of any of the Representative's Securities 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 8(c). Anything in this paragraph 8(c) to the contrary
notwithstanding, no party shall be liable for contribution with respect
to the settlement of any claim or action effected without its written
consent. This paragraph 8(c) is intended to supersede any right to
contribution under the Act, the Exchange Act or otherwise.
9. The securities issued upon exercise of the Purchase Options shall be
subject to a stop transfer order and the certificate or certificates
evidencing any such securities shall bear the following legend:
18
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO A REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. HOWEVER,
SUCH SECURITIES CANNOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) A
POST-EFFECTIVE AMENDMENT TO SUCH REGISTRATION STATEMENT UNDER SUCH ACT,
(ii) A SEPARATE REGISTRATION STATEMENT UNDER SUCH ACT, OR (iii) AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
10. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Purchase Option (and upon surrender
of any Purchase Option if mutilated), and indemnity satisfactory to the
Company and upon reimbursement of the Company's reasonable incidental
expenses, the Company shall execute and deliver to the Holder thereof a new
Purchase Option of like date, tenor and denomination.
11. The Holder of any Purchase Option 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 Purchase Option.
12. This Purchase Option shall be construed in accordance with the
laws of the State of California, without giving effect to conflict of laws.
Dated: , 199
--------------- --
NAVIDEC, INC.
By:
---------------------------------
Ralph Armijo, President
[SEAL]
19
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer
the attached Purchase Option.)
FOR VALUE RECEIVED, ___________________________________ hereby sells,
assigns and transfers unto ________________________ Purchase Options to
purchase __________ Shares of Common Stock and __________ Warrants to Purchase
Common Stock of Navidec, Inc. (the "Company"), together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint
____________________________ attorney to transfer such Purchase Options on
the books of the Company, with full power of substitution.
Dated:
---------------------
Signature:
-----------------------------------
Signature Guaranteed:
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Purchase Option in every particular, without
alteration or enlargement or any change whatsoever. Signature(s) must be
guaranteed by an eligible guarantor institution which is a participant in a
Securities Transfer Association recognized program.
20
<PAGE>
ELECTION TO EXERCISE
(To be executed by the holder if such holder desires
to exercise the attached Purchase Option)
The undersigned hereby exercises his or its rights to subscribe for
__________ Shares of Common Stock and __________ Warrants to purchase Common
Stock covered by the within Purchase Option and tenders payment herewith in
the amount of $__________ in accordance with the terms thereof, and requests
that certificates for such Shares and Warrants be issued in the name of, and
delivered to:
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
(Print Name, Address and Social Security or Tax Identification Number)
and, if such number of Shares and Warrants (or portions thereof) shall not be
all the Shares and Warrants covered by the within Purchase Option, that a new
Purchase Option for the balance of the Shares and Warrants (or portions
thereof) covered by the within Purchase Option be registered in the name of,
and delivered to, the undersigned at the address stated below.
Name:
----------------------------------------------------------------------
(Print)
Address:
-------------------------------------------------------------------
--------------------------------------
(Signature)
Dated: Signature Guaranteed:
----------------------- -----------------------
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Purchase Option in every particular, without
alteration or enlargement or any change whatsoever. Signature(s) must be
guaranteed by an eligible guarantor institution which is a participant in a
Securities Transfer Association recognized program.
21
<PAGE>
EXHIBIT 4.5 - FORM OF PRIVATE PLACEMENT FINANCING CONVERTED
UNITS REGISTRATION RIGHTS AGREEMENT
CONVERTED UNITS
REGISTRATION RIGHTS AGREEMENT
AGREEMENT, dated as of the ____ day of __________, 1996,
between _____________________________________, residing at
_____________________________________________________________, as
the holder (the "Holder") of the Company's 10% unsecured
subordinated convertible notes, due December 30, 1997 (the "Notes),
issued pursuant to the Confidential Private Placement Memorandum of
the Company dated July 18, 1996 (the "Memorandum"), and NAVIDEC,
Inc., having its executive office and principal place of business
at 14 Inverness Drive, Building F, Suite 116, Englewood, CO 80112
(the "Company").
WHEREAS, the Company desires to grant to the Holder the
registration rights set forth herein with respect to the Units
issuable to the Holder upon conversion of the Notes (the
"Registrable Securities"), each Unit consisting of one share of the
Company's no par value Common Stock ("Common Stock" or the "Common
Shares"), and one redeemable warrant to purchase one Common Share
("Warrant");
NOW, THEREFORE, the parties hereto mutually agree as
follows:
1. Registration Rights. The Company intends to prepare and
file a Registration Statement under the Securities Act of 1933, as
amended (the "Act"), relating to the initial public offering of the
Company's Common Stock (the "Public Offering"), including the Units
and the components of the Units, and to use its best efforts to
cause such Registration Statement to become effective within twelve
months following the initial closing date of the sale of the Notes.
The Company shall include all of the Registrable Securities
issuable to the Holder in the Registration Statement relating to
the Public Offering to permit the sale or other disposition by the
Holder of the Registrable Securities so registered. The Holder
will not sell, however, pursuant to the Registration Statement or
otherwise for a period of ten months after consummation of the
Public Offering any Registrable Securities in excess of such number
of Units, or components of Units, which will provide gross proceeds
(based on the underwritten public offering price of Common Stock
<PAGE>
sold in the Public Offering) from the sale thereof equal to the
aggregate principal amount of Notes initially purchased by the
Holder from the Company pursuant to the Memorandum.
2. Underwritten Offering. If requested by the managing
underwriter in the Public Offering, all or part of the Registrable
Securities determined by the managing underwriter shall be included
in the underwriting on the same terms and conditions as like
securities are being sold through underwriters in the Public
Offering.
3. Additional Terms. The following provisions shall be
applicable to the Registration Statement filed pursuant to
Paragraph 1 of this Agreement:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective as promptly as
practicable and, if any stop order shall be issued by the SEC in
connection therewith, to use its reasonable efforts to obtain the
removal of such order. Following the effective date of the
Registration Statement, the Company shall, upon the request of the
Holder, forthwith supply such reasonable number of copies of the
Registration Statement, preliminary prospectus and prospectus
meeting the requirements of the Act, and other documents necessary
or incidental to the Public Offering, as shall be reasonably
requested by the Holder to permit the Holder to make a public
distribution of its Registrable Securities. The Company will use
its reasonable efforts to qualify the Registrable Securities for
sale in such states as the Holder shall reasonably request,
provided that no such qualification will be required in any
jurisdiction where, solely as a result thereof, the Company would
be subject to service of general process or to taxation or
qualification as a foreign corporation doing business in such
jurisdiction. The obligations of the Company hereunder with respect
to the Holder's Registrable Securities are expressly conditioned on
the Holder's furnishing to the Company such appropriate information
concerning the Holder, the Holder's Registrable Securities and the
terms of the Holder's offering of such Registrable Securities as
the Company may reasonably request. The Company shall maintain the
Registration Statement in effect for so long as the Registrable
Securities remain unsold, provided, however, that the Company shall
not be required to keep such Registration Statement effective, and
it may deregister any unsold Registrable Securities, if, in the
opinion of counsel to the Company, such shares may then be sold
pursuant to the provisions of Rule 144 under the Act.
<PAGE>
(b) The Company shall bear the entire cost and expense of
any registration of the Registrable Securities; provided, however,
that the Holder shall be solely responsible for the fees of any
counsel retained by him in connection with such registration and
any transfer taxes or underwriting discounts or commissions
applicable to the Registrable Securities sold by him pursuant
thereto.
(c) The Company shall indemnify and hold harmless the
Holder and each underwriter, within the meaning of the Act, who may
purchase from or sell for the Holder any Registrable Securities,
from and against any and all losses, claims, damages and
liabilities caused by any untrue statement of a material fact
contained in the Registration Statement, any post-effective
amendment to such Registration Statement, or any prospectus
included therein required to be filed or furnished by reason of
this Agreement or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages or liabilities are caused
by any such untrue statement or alleged untrue statement or
omission or alleged omission based upon information furnished or
required to be furnished in writing to the Company by the Holder or
underwriter expressly for use therein; which indemnification shall
include each person, if any, who controls any such underwriter
within the meaning of the Act and each officer, director, employee
and agent of such underwriter. The Holder and any such underwriter
and other person, shall be obligated to indemnify the Company, its
directors, each officer signing the Registration Statement and each
person, if any, who controls the Company within the meaning of the
Act, from and against any and all losses, claims, damages and
liabilities caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration
Statement, any registration statement or any prospectus required to
be filed or furnished by reason of this Agreement or caused by any
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
insofar as such losses, claims, damages or liabilities are caused
by any untrue statement or alleged untrue statement or omission
based upon information furnished in writing to the Company by the
Holder or underwriter or other person expressly for use therein.
(d) If for any reason the indemnification provided for in
the preceding subparagraph is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect
<PAGE>
to any loss, claim, damage, liability or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid
or payable by the indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to
reflect not only the relative benefits received by the indemnified
party and the indemnifying party, but also the relative fault of
the indemnified party and the indemnifying party, as well as any
other relevant equitable considerations.
(e) Neither the filing of a Registration Statement by the
Company pursuant to this Agreement nor the making of any request
for prospectuses by the Holder shall impose upon the Holder any
obligation to sell his Registrable Securities.
(f) The Holder, upon receipt of notice from the Company
that an event has occurred which requires a post-effective
amendment to the Registration Statement or a supplement to the
prospectus included therein, shall promptly discontinue the sale of
his Registrable Securities until the Holder receives a copy of a
supplemented or amended prospectus from the Company, which the
Company shall provide as soon as practicable after such notice.
4. Governing Law.
(a) The Registrable Securities are being delivered in
Colorado. This Agreement shall be deemed to have been made and
delivered in the State of Colorado and shall be governed as to
validity, interpretation, construction, effect and in all other
respects by the internal laws of the State of Colorado.
(b) The Company and the Holder each (a) agree that any
legal suit, action or proceeding arising out of or relating to this
Agreement, or any other agreement entered into between the Company
and the Holder pursuant to the private placement of the Notes or
the Public Offering shall be instituted exclusively in District
Court, Arapahoe County, State of Colorado, or in the United States
District Court for the District of Colorado, each and any of which
shall apply Colorado law, (b) waives any objection which the
Company or such Holder may have now or hereafter to the venue of
any such suit, action or proceeding, and (c) irrevocably consents
to the jurisdiction of the District Court, County of Arapahoe and
the United States District Court for the District of Colorado in
any such suit, action or proceeding. The Company and the Holder
each further agrees to accept and acknowledge service of any and
<PAGE>
all process which may be served in any such suit, action or
proceeding in the District Court, County of Arapahoe and the United
States District Court for the District of Colorado, and agrees that
service of process upon the Company or the Holder mailed by
certified mail to the Company's or, as the case may be, the
Holder's address shall be deemed in every respect effective service
of process upon the Company or the Holder, as the case may be, in
any suit, action or proceeding.
5. Amendment. This Agreement may only be amended by a
written instrument executed by the Company and the Holder.
6. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter
hereof, and supersedes all prior agreements and understandings of
the parties, oral and written, with respect to the subject matter
hereof.
7. Execution in Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the
same document.
8. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed
duly given when delivered by hand, by Federal Express or other
national overnight courier service, or mailed by registered or
certified mail, postage prepaid, return receipt requested, and, if
mailed, shall be deemed to have been received on the third day
after a notice has been sent as follows:
If to the Holder, to its address set forth on the
signature page of this Agreement.
If to the Company, to the address set forth on the first
page of this Agreement.
9. Binding Effect; Benefits. The Holder may not assign its
rights hereunder. This Agreement shall inure to the benefit of, and
be binding upon, the parties hereto and their respective heirs,
legal representatives, successors and permitted assigns, including,
without limitation, the permitted transferees of the Registrable
Securities. Nothing herein contained, express or implied, is
intended to confer upon any person other than the parties hereto
and their respective heirs, legal representatives, successors and
<PAGE>
such permitted assigns, any rights or remedies under or by reason
of this Agreement.
10. Headings. The headings contained herein are for the sole
purpose of convenience of reference, and shall not in any way limit
or affect the meaning or interpretation of any of the terms or
provisions of this Agreement.
11. Severability. Any provision of this Agreement which is
held by a court of competent jurisdiction to be prohibited or
unenforceable in any jurisdiction(s) shall be, as to such
jurisdiction(s), ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of
this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto as of the date first above written.
NAVIDEC, INC.
By:
Ralph Armijo, President
HOLDER:
Name:
Address:
<PAGE>
Exhibit 4.6
Form of 10% Unsecured Convertible Promissory Note
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. NO INTEREST IN THIS NOTE MAY BE OFFERED OR
SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (ii) AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND WHERE THE HOLDER
HAS FURNISHED TO THE COMPANY AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM REGISTRATION
UNDER SAID ACT IS AVAILABLE.
NAVIDEC, INC.
10% UNSECURED SUBORDINATED
CONVERTIBLE PROMISSORY NOTE
$____,000 As of _______________,1996
Denver, Colorado
FOR VALUE RECEIVED, NAVIDEC, Inc., a Colorado corporation
(the "Payor"), having its executive office and principal place of
business at 14 Inverness Drive, Building F, Suite 116, Englewood,
CO 80112, hereby promises to pay to (the "Payee"), having an
address at
on December 30, 1997 (the
"Maturity Date") (unless sooner converted as provided herein), at
the Payee's address set forth above or at such other place as the
Payee shall hereafter specify in writing, the principal sum of
Dollars ($ ,000) in such coin or
currency of the United States of America as at the time shall be
legal tender for the payment of public and private debts. This
Note may be prepaid, in whole or in part, at any time prior to
the Maturity Date without penalty.
This Note is part of a series of notes (the "Notes") being
issued pursuant to the Payor's Confidential Private Placement
Memorandum dated July 18, 1996 (the "Memorandum"), relating to
the Payor's offering of up to $1,500,000 aggregate principal
amount of Notes. This Note shall rank pari passu with all other
Notes but shall be subordinated to certain other indebtedness as
provided herein.
<PAGE>
Reference to the Memorandum shall in no way impair the
absolute and unconditional obligation of the Payor to pay both
principal and interest hereon as provided herein.
1. Conversion.
If an initial public offering (the "Public Offering")
which includes the Payor's Units (as defined in the Memorandum)
registered with the Securities and Exchange Commission pursuant
to the Securities Act of 1933, as amended, is consummated prior
to the Maturity Date, this Note shall be converted for each
$50,000 principal amount into 28,571 Units (pro rata if the
principal amount is other than $50,000 or increments thereof) on
the date of consummation of the Public Offering. The number of
Units issuable upon conversion of this Note may be adjusted in
accordance with Section 9 and 10 when certain circumstances set
forth therein occur.
2. Interest and Payment; Issuance of Stock on Default.
2.1. The unpaid principal amount hereof shall bear
simple interest from the date hereof at the rate of 10% per annum
until the Maturity Date.
2.2. Interest shall accrue and be payable in full on
the Maturity Date or immediately prior to the consummation of the
Public Offering, if so consummated on or prior to the Maturity
Date.
2.3. If payment of the principal amount hereof and
interest accrued thereon is not made on or before the Maturity
Date, unless this Note is sooner converted, (A) interest shall
become immediately due and payable at an interest rate equal to
the lesser of (i) the Prime Rate (as defined below) plus 8%, or
(ii) the maximum rate permitted by law, and (B) 25,000 Units
shall be issued to the Payee of this Note for each $50,000
principal amount of this Note (pro rata if the principal amount
is other than $50,000 or increments thereof). For the purposes
of this Note, "Prime Rate" shall mean the prime rate, as adjusted
from time to time, as established and reported by Citibank, N.A.,
in New York City, from time to time or, if such rate is no longer
reported by Citibank, then the rate established by any comparable
bank as its prime rate, from time to time.
2.4. In no event shall the Payee be entitled to receive
<PAGE>
interest, however characterized and including other consideration
received in connection with this Note, at an effective rate in
excess of the maximum rate permitted by law. In the event that a
court of competent jurisdiction shall determine that such amounts
paid or agreed to be paid by the Payor in connection with this
Note causes the effective interest rate on this Note to exceed
the maximum rate permitted by law, such interest or other
consideration shall automatically be reduced to a rate which
results in an effective interest rate under this Note equal to
the maximum rate permitted by law over the term hereof, and, in
such event, the Payee shall either apply to the reduction of the
unpaid principal balance of this Note any amounts received by it
deemed to constitute excessive interest or refund such excess to
Payor.
3. Replacement of Note.
3.1. In case this Note is mutilated, destroyed, lost or
stolen, the Payor shall, at its sole expense, execute, register
and deliver a new Note, in exchange and substitution for this
Note, if mutilated, or in lieu of and substitution for this Note,
if destroyed, lost or stolen. In the case of destruction, loss
or theft, the Payee shall furnish to the Payor indemnity
reasonably satisfactory to the Payor, and in any such case, and
in the case of mutilation, the Payee shall also furnish to the
Payor evidence to its reasonable satisfaction of the mutilation,
destruction, loss or theft of this Note and of the ownership
thereof. Any replacement Note so issued shall be in the same
outstanding principal amount as this Note and dated the date to
which interest shall have been paid on this Note, or if no
interest shall have yet been paid, dated the date of this Note.
3.2. Every Note issued pursuant to the provisions of
Section 3.1 hereof in substitution for this Note, shall
constitute an additional contractual obligation of the Payor,
whether or not this Note shall be found at any time, or be
enforceable by anyone.
4. Events of Default. If any of the following conditions,
events or acts shall occur, this Note shall become immediately
due and payable:
4.1. The dissolution of the Payor or any vote in favor
thereof by the Board of Directors and stockholders of the
Company; or
<PAGE>
4.2. The Payor's insolvency, assignment for the benefit
of creditors, application for or appointment of a receiver,
filing of a voluntary or involuntary petition under any provision
of the Federal Bankruptcy Code or amendments thereto or any other
federal or state statute affording relief to debtors; or the
commencement against the Payor of any such proceeding or filing
against the Payor of any such application or petition, which
proceeding, application or petition is not dismissed or withdrawn
within thirty (30) days of commencement or filing as the case may
be; or
4.3. The failure by the Payor to make any payment of
any amount of principal on, or accrued interest under, this Note,
or any of the Notes offered pursuant to the Memorandum as and
when the same shall become due and payable; or
4.4. The sale by the Payor of all or substantially all
of its assets (other than the sale of inventory in the ordinary
course of business), or the merger or consolidation by the Payor
with or into another corporation, except for mergers or
consolidations where the Payor is the surviving entity or where
the surviving entity expressly accepts and assumes all of the
obligations of the Payor under all of the Offering Notes; or
4.5. The commencement of a proceeding to foreclose the
security interest or lien in any property or assets to satisfy
the security interest or lien therein of any secured creditor of
the Payor whose debt is in excess of $100,000; or
4.6. The entry of a final judgment for the payment of
money in excess of $100,000 by a court of competent jurisdiction
against the Payor, which judgment the Payor shall not discharge
(or provide for such discharge) in accordance with its terms
within thirty (30) days of the date of entry thereof, or procure
a stay of execution thereof within thirty (30) days from the date
of entry thereof and, within such thirty (30) day period, or such
longer period during which execution of such judgment shall have
been stayed, appeal therefrom and cause the execution thereof to
be stayed during such appeal; or
4.7. Any attachment or levy, or the issuance of any
note of eviction against the assets or properties of the Payor
involving an amount in excess of $100,000, which attachment, levy
or issuance is not dismissed, bonded, or otherwise terminated
within thirty (30) days of the effectiveness of such attachment,
<PAGE>
levy or issuance; or
4.8. The default in the due observance or performance
of any material covenant, condition or agreement on the part of
the Payor to be observed or performed pursuant to the terms of
this Note, and such default shall continue uncured for thirty
(30) days after written notice thereof, specifying such default,
shall have been given to the Payor by the holder of the Note;
then, in any such event and at any time thereafter (and, in the
case of an event described in Subsection 4.5 or a default in
payment of accrued interest and/or principal as described in
Subsection 4.3, upon 30 days written notice), while such event is
continuing, the Payee shall have the right to declare an event of
default hereunder ("Event of Default"), provided that upon the
occurrence of an event described in Subsections 4.1 or 4.2 such
event shall be deemed to be an Event of Default hereunder whether
or not the Payee makes such a declaration (an "Automatic
Default"), and the indebtedness evidenced by this Note shall
immediately upon such declaration or Automatic Default become due
and payable, both as to principal and interest, without
presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived, notwithstanding anything
contained herein to the contrary.
5. Suits for Enforcement and Remedies. If any one or more
defaults shall occur and be continuing, the Payee may proceed to
protect and enforce such Payee's rights either by suit in equity
or by action at law, or both, whether for the specific
performance of any covenant, condition or agreement contained in
this Note or in any agreement or document referred to herein or
in aid of the exercise of any power granted in this Note or in
any agreement or document referred to herein, or proceed to
enforce the payment of this Note or to enforce any other legal or
equitable right of the Payee of this Note. No right or remedy
herein or in any other agreement or instrument conferred upon the
holder of this Note is intended to be exclusive of any other
right or remedy, and each and every such right or remedy shall be
cumulative and shall be in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise.
6. Unconditional Obligation; Fees; Waivers; Other.
6.1. The obligations to make the payments provided for
in this Note are absolute and unconditional and not subject to
<PAGE>
any defense, set-off, counterclaim, rescission, recoupment or
adjustment whatsoever.
6.2. No forbearance, indulgence, delay or failure to
exercise any right or remedy with respect to this Note shall
operate as a waiver, nor as an acquiescence in any default, nor
shall any single or partial exercise of any right or remedy
preclude any other or further exercise thereof or the exercise of
any other right or remedy.
6.3. This Note may not be modified except by a writing
duly executed by the Payor and the Payee.
6.4. The Payor hereby expressly waives demand and
presentment for payment, notice of nonpayment, notice of dis-
honor, protest, notice of protest, bringing of suit, and dili-
gence in taking any action to collect amounts called for here-
under, and shall be directly and primarily liable for the payment
of all sums owing and to be owing hereon, regardless of and
without any notice, diligence, act or omission with respect to
the collection of any amount called for hereunder or in
connection with any right, lien, interest or property at any and
all times which the Payee had or is existing as security for any
amount called for hereunder.
6.5. The Payor shall bear all of its expenses,
including attorneys' fees incurred in connection with the
preparation of this Note.
7. Subordination. The payment of principal and interest on
this Note shall be (i) subordinate in payment and right of
payment to the payment or provision for payment in full of all
other indebtedness (a) for money borrowed, except with respect to
money borrowed from affiliates of the Payor or (b) evidenced by a
note, debenture or similar instrument, in either case whether now
or hereafter incurred by the Payor in the ordinary course of its
business, and (ii) shall rank pari passu with all other Notes and
all other unsecured indebtedness not falling within the
description set forth in clause (i).
8. Restriction on Transfer. By its acceptance of this
Note, the Payee acknowledges that this Note has not been
registered under the securities laws of the United States of
America or any state thereof and represents that (i) this Note
has been acquired for investment, and (ii) no interest in this
<PAGE>
Note may be offered for sale, sold, delivered after sale,
transferred, pledged, or hypothecated in the absence of
registration and qualification of this Note under applicable
federal and state securities laws or an opinion of counsel
reasonably satisfactory to the Payor that such registration and
qualification are not required.
9. Standard Antidilution Provisions.
If the note is converted pursuant to Section 1. hereof, the
number of Units to be received shall be subject to adjustment as
follows:
9.1 In the case the Company shall at any time after
the date of the Note (i) pay a dividend of its capital stock (ii)
subdivide its outstanding shares of Common Stock, (iii) combine
its outstanding shares of Common Stock:
(a) the number of Units issuable as a result of the
Note conversion privileges in effect immediately prior to such
date shall be multiplied by a fraction ("Adjustment Ratio"), the
denominator of which shall be the number of shares of Common
Stock outstanding on such date before giving effect to such stock
dividend, subdivision, or combination and the numerator of which
shall be the number of shares of Common Stock outstanding after
giving effect thereto;
(b) the exercise price of each Warrant which is a
component of the Units shall be the exercise price immediately
prior to the date of the occurrence of an event specified in (i),
(ii), or (iii) in Section 9.1 above multiplied by the inverse of
the Adjustment Ratio; and
(c) the redemption price of the Warrants shall be the
redemption price of the Warrants immediately prior to the date of
the occurrence of an event specified in (i), (ii) or (iii) in
Section 9.1 above multiplied by the inverse of the Adjustment
Ratio.
9.2 If the Units issuable upon the Note conversion
privileges shall be changed into the same or a different number
of shares and warrants of any class or classes of stock, whether
by capital reorganization, reclassification or otherwise (other
than a subdivision or combination of shares or stock dividend
provided for in Section 9.1 above, or a reorganization, merger,
<PAGE>
consolidation or sale of assets provided for in Section 9.3
below) then, and after such event, the Payee of this Note shall
have the right but not the obligation to exercise the Note
conversion privileges and receive the kind and amount, as
reasonably determined by the Company's Board of Directors, of
shares of Common Stock and other securities and property
receivable upon such reorganization, merger, consolidation, asset
sale, reclassification, or other change in exchange for shares
that would have been issued if the Notes had been converted into
Units immediately prior to such reorganization, reclassification,
merger, consolidation, asset sale, or change, all subject to
further adjustment as provided herein.
9.3 If at any time or from time to time there shall be
a reorganization of the Common Stock (other than a subdivision or
combination of shares or stock dividend provided for in Section
9.1 or 9.2 above) or a merger or consolidation of the Company
with or into another Corporation or other entity, or sale of all
or substantially all of the Company's properties and assets to
any other person, then, as part of such reorganization, merger,
consolidation or sale, provision shall be made as reasonably
determined by the Company's Board of Directors so that the Payee
of the Note shall thereafter have the right but not the
obligation to receive upon exercise of the conversion privileges
of the Note, including the exercise of the warrant included in
the Units, the number of shares of stock or other securities or
property of the Company or the Successor entity resulting from
such merger or consolidation or sale to whom a holder of Common
Stock delivered upon the exercise of the conversion privileges
immediately prior to such reorganization, merger, consolidation
or sale, would have been entitled to receive on such
reorganization, merger, consolidation or sale.
9.4 The adjustments provided for in this Section 9 are
cumulative and shall apply to successive divisions, subdivisions,
combinations, reorganizations, mergers or other events
contemplated herein resulting in any adjustment under the
provisions of this Section, provided that, notwithstanding any
other provision of this Section 9.4, no adjustment of the Units
issuable upon conversion of this Note shall be required unless
such adjustment would require an increase or decrease of at least
1% in the number of Units issuable upon conversion of this Note.
9.5 Upon each adjustment of the Adjustment Ratio, the
Company shall give prompt written notice thereof addressed to the
<PAGE>
registered Payee at the address of such Payee as shown on the
records of the Company, which notice shall state the Adjustment
Ratio resulting from such adjustment and the increase or
decrease, if any, in the number of shares issuable upon the
exercise the conversion privileges of such Payee's Note, setting
forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
10. Special Antidilution Provisions
With the exception of the options to be issued to John R.
McKowen pursuant to his employment agreement, if after the date
of this offering but before the conversion of this Note into
Units, the Company issues or grants any Common Stock or other
securities, options or other rights to purchase or acquire any
Common Stock (hereafter such Common Stock, convertible stock or
other securities, and the Common Stock subject to the purchase
right described in this sentence is referred to as the
"Additional Stock" and the date on which the Common Stock or
such other securities, options or rights to acquire Common Stock
are issued shall be referred to as the "Grant Date"), and if the
consideration received or receivable by the Company upon the
issuance of the Additional Stock or the conversion price used to
determine the number of shares of Common Stock issuable upon
conversion of the convertible security (hereafter such
consideration is referred to as the "Additional Issue Price") is
less than $1.75 per share (the "Conversion Price"), then the
number of Units into which this Note shall be converted shall be
determined by multiplying the number of units theretofore
issuable upon conversion of this Note by a fraction, (i) the
numerator of which shall be the number of shares of Common Stock
outstanding on the Grant Date after giving effect to the issuance
of the Additional Stock, and (ii) the denominator of which shall
be the number of shares of Common Stock outstanding immediately
prior to the Grant Date plus the number of shares of Common Stock
which the aggregate purchase price for the Additional Stock would
purchase at the Conversion Price.
11. Miscellaneous.
11.1. The headings of the various paragraphs of
this Note are for convenience of reference only and shall in no
way modify any of the terms or provisions of this Note.
11.2. All notices required or permitted to be given
<PAGE>
hereunder shall be in writing and shall be deemed to have been
duly given when personally delivered, delivered by Federal
Express or other national overnight courier, or sent by
registered or certified mail, return receipt requested, postage
prepaid, to the address of the intended recipient set forth in
the preamble to this Note or at such other address as the
intended recipient shall have hereafter given to the other party
hereto pursuant to the provisions hereof.
11.3. This Note and the obligations of the Payor and
the rights of the Payee shall be governed by and construed in
accordance with the laws of the State of Colorado, including
conflicts of laws, with respect to contracts made and to be fully
performed therein.
11.4. The Payor (a) agrees that any legal suit, action
or proceeding arising out of or relating to this Note will be
instituted exclusively in District Court, County of Arapahoe,
State of Colorado, and the United States District Court for the
District of Colorado, each and any of which shall apply Colorado
law, (b) waives any objection which the Payor may have now or
hereafter to the venue of any such suit, action or proceeding,
and (c) irrevocably consents to the jurisdiction of the Colorado
District Court, County of Arapahoe and the United States District
Court for the District of Colorado in any such suit, action or
proceeding. The Payor further agrees to accept and acknowledge
service of any and all process which may be served in any such
suit, action or proceeding in the Colorado District Court, County
of Arapahoe and the United States District Court for the District
of Colorado, and agrees that service of process upon the Payor
mailed by certified mail to the Payor's address will be deemed in
every respect effective service of process upon the Payor, in any
suit, action or proceeding.
11.5 This Note shall bind the Payor and its successors
and assigns.
NAVIDEC, INC.
By:
-------------------------------
Ralph Armijo, President
ATTEST:
<PAGE>
- -------------------------------
Kevin L. Blankenship,
Secretary
<PAGE>
EXHIBIT 4.8 - FORM OF
PLACEMENT AGENT'S WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE,
ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STTEMENT UNDER SAID ACT OR AN EXEMPTION
FROM REGISTRATION AND THE HOLDER HAS FURNISHED TO THE COMPANY AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT AN
EXEMPTION UNDER SAID ACT IS AVAILABLE.
NAVIDEC, INC.
(Incorporated under the laws of the State of Colorado)
Void after 5:00 p.m. on the date set forth in this Warrant
Warrant to Purchase on ___________ ________,
______ 1996
50,000 Shares of
Common Stock
Warrant for the Purchase of Shares of Common Stock
FOR VALUE RECEIVED, NAVIDEC, INC., a Colorado corporation (the
"Company"), hereby certifies that JOSEPH CHARLES & ASSOCIATES, INC.
(the "Holder"), with an address at 356 North Camden Drive, Beverly
Hills, California 90210, is entitled, subject to the provisions of
this warrant (the "Warrant"), to purchase, from the Company, from
the earlier of the date which is (i) six months after the
consummation of the contemplated Public Offering referred to in the
Company's Confidential Private Placement Memorandum dated July ,
1996 (the "Memorandum"), and (ii) one year after the date of the
initial closing of the Bridge Financing described in the Memorandum
in connection with which this Warrant is being issued (the
"Effective Date"), until expiration at 5:00 p.m. Denver local time
on the date which is five years after the Effective Date (the
"Expiration Date"), 50,000 fully paid and nonassessable shares of
Common Stock, no par value (the "Common Stock"), of the Company at
a price of per share (such exercise price per share, as so
<PAGE>
adjusted by the terms hereof, being hereinafter referred to as the
"Exercise Price").
The number of shares of Common Stock to be received upon the
exercise of this Warrant may be adjusted from time to time as
hereinafter set forth. The shares of Common Stock deliverable upon
such exercise, and as adjusted from time to time, are hereinafter
sometimes referred to as "Warrant Stock."
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date. Any such
new Warrant executed and delivered shall constitute an additional
contractual obligation on the part of the Company, whether or not
this Warrant so lost, stolen, destroyed or mutilated shall be at
any time enforceable by anyone.
The Holder agrees with the Company that this Warrant is
issued, and all the rights hereunder shall be held, subject to all
of the conditions, limitations and provisions set forth herein.
1. Exercise of Warrant. This Warrant may be exercised in
whole or in part at any time, or from time to time, during the
period commencing on the Effective Date and expiring 5:00 p.m.
Denver local time on the Expiration Date, or, if such day is a day
on which banking institutions in Denver are authorized by law to
close, then on the next succeeding day that shall not be such a
day, by presentation and surrender hereof to the Company at its
principal office, or at the office of its stock transfer agent, if
any, with the Warrant Exercise Form attached hereto duly executed
and accompanied by payment (either in cash or by certified or
official bank check, payable to the order of the Company) of the
Exercise Price for the number of shares specified in such Form and
instruments of transfer, if appropriate, duly executed by the
Holder or his duly authorized attorney. 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 rights of the Holder to purchase the balance of the
shares purchasable hereunder. Upon receipt by the Company of this
Warrant, together with the Exercise Price, at its office, or by the
stock transfer agent of the Company at its office, in proper form
for exercise, the Holder shall be deemed to be the holder of record
<PAGE>
of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder.
The Company shall pay any and all documentary stamp or similar
issue taxes payable in respect of the issue or delivery of shares
of Common Stock on exercise of this Warrant.
2. Reservation of Shares. The Company will at all times
reserve for issuance and delivery upon exercise of this Warrant
all shares of Common Stock or other shares of capital stock of
the Company (and other securities and property) from time to time
receivable upon exercise of this Warrant. All such shares (and
other securities and property) shall be duly authorized and, when
issued upon such exercise, shall be validly issued, fully paid
and nonassessable and free of all preemptive rights.
3. Absence of Registration under Securities Act of 1933.
3.1 The shares of Common Stock issuable upon exercise of
this Warrant are not presently registered under the Securities
Act of 1933, as amended (the "Securities Act"). This Warrant is
not and will not be registered under the Securities Act.
3.2 The Warrant Stock and the Warrant may be sold or
otherwise disposed of only in accordance with the provisions of
this Section 3.
3.3 The Holder agrees, prior to the transfer of this
Warrant or any Warrant Stock, to give written notice to the
Company of his intention to effect such transfer and to comply in
all other respects with the provisions of this Section 3. Each
such notice shall describe the manner and circumstances of the
proposed transfer and shall be accompanied by the written
opinion, addressed to the Company, of counsel for the Holder, as
to whether in the opinion of such counsel (which counsel and
opinion shall be satisfactory to counsel for the Company) such
proposed transfer may be effected without registration under the
Securities Act; provided, however, that no such opinion shall be
required in connection with a transaction complying with the
requirements of Rule 144 (as amended from time to time)
promulgated under the Securities Act (or successor Rule thereto).
If, in the opinion of such counsel (if such opinion is required
hereunder) and counsel for the Company, the proposed transfer of
<PAGE>
this Warrant or any Warrant Stock may be effected without
registration under the Securities Act, the Holder shall thereupon
be entitled to transfer this Warrant or such Warrant Stock in
accordance with the terms of the notice delivered by him to the
Company. Each certificate or other instrument evidencing the
securities issued upon the transfer of this Warrant or any
Warrant Stock (and each certificate or other instrument
evidencing any untransferred balance of such securities) shall
bear the legend described in Section 12 hereafter unless in the
opinion of such counsel and counsel for the Company registration
of future transfer is not required by the applicable provisions
of the Securities Act; provided, however, that such legend shall
not be required on any certificate or other instrument evidencing
the securities issued upon such transfer in the event such
transfer shall be made in compliance with the requirements of
Rule 144 (as amended from time to time) promulgated under the
Securities Act (or successor Rule thereto). The Holder shall not
transfer this Warrant or any Warrant Stock until such opinion of
counsel has been given to the Company (unless waived by the
Company or unless such opinion is not required in accordance with
the provisions of this Section 3) or until any registration of
the Warrant Stock involved in the above-mentioned request has
become effective under the Securities Act.
4. Registration Rights. The Warrant Stock is subject to
certain registration rights as more fully described in the
Placement Agent's Warrant Registration Rights Agreement which is
an Exhibit thereto.
5. Fractional Shares. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise
of this Warrant, but the Company shall issue one additional share
of its Common Stock in lieu of each fraction of a share otherwise
called for upon any exercise of this Warrant.
6. Exchange, Transfers, Assignment of Warrant. This
Warrant is not registered under the Securities Act nor under any
applicable state securities law or regulation. This Warrant
cannot be exchanged, transferred or assigned without the prior
written consent of the Company, and then in accordance with the
provisions of Section 3 hereof. Upon such event and upon
surrender of this Warrant to the Company or at the office of its
stock transfer agent, if any, with a duly executed assignment and
funds sufficient to pay any transfer tax, the Company shall,
<PAGE>
without charge, execute and deliver a new Warrant in the name of
the assignee named in such instrument of assignment and this
Warrant shall promptly be canceled.
7. Redemption. At any time commencing six months after
the consummation of the contemplated Public Offering, if such
Public Offering is consummated, this Warrant is redeemable by the
Company, in whole, but not in part, at a price of $.05 for each
share of Common Stock exercisable hereunder, upon at least 30
days' prior written notice, provided that the closing bid price
for the shares of Common Stock as reported by NASDAQ during a
period of 20 consecutive trading days within the 30-day period
prior to the date notice of redemption is given is at least 150%
above the Public Offering price of the shares of Common Stock,
and provided further that at such time there is a current
prospectus relating to the Warrant Stock then in effect, and such
Warrant Stock is qualified for sale or exempt from qualification
under applicable state securities laws of the state in which the
Holder resides.
8. Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder of the
Company, either at law or in equity, and the rights of the Holder
are limited to those expressed in this Warrant.
9. Reports. For so long as the Holder is the registered
owner of the Warrant, the Company shall furnish to the Holder one
copy of (i) such financial statements and other periodic reports
as it may from time to time distribute generally to the holders
of any class of its capital stock; and (ii) each annual or other
report it is required to file with the Securities and Exchange
Commission.
10. Standard Antidilution Provisions.
This Warrant shall be subject to adjustment as follows:
10.1 In case the Company shall at any time after the
Effective Date (i) pay a dividend in shares of its capital stock,
(ii) subdivide its outstanding shares of Common Stock, or (iii)
combine its outstanding shares of Common Stock:
(a) the Exercise Price in effect immediately prior to
<PAGE>
such date shall be multiplied by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding
on such date before giving effect to such stock dividend,
subdivision, or combination and the denominator of which shall be
the number of shares of Common Stock outstanding after giving
effect thereto; and
(b) the number of shares of Common Stock issuable upon
the exercise of this Warrant immediately prior to the date of the
occurrence of an event specified in (i), (ii) or (iii) above
shall be multiplied by a fraction, the denominator of which shall
be the number of shares of Common Stock outstanding on such date
before giving effect to such stock dividend, subdivision, or
combination and the numerator of which shall be the number of
shares of Common Stock outstanding after giving effect thereto.
10.2 If the Common Stock issuable upon the exercise of this
Warrant shall be changed into the same or a different number of
shares of any class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend provided
for in Section 10.1 above, or a reorganization, merger,
consolidation or sale of assets provided for in Section 10.3
below), then, and after such event, the Holder of this Warrant
shall upon the exercise of this Warrant receive the kind and
amount, as reasonably determined by the Company's Board of
Directors, of shares of Common Stock and other securities and
property receivable upon such reorganization, merger,
consolidation, asset sale, reclassification, or other change in
exchange for shares that would have been issued if this Warrant
had been exercised, immediately prior to such reorganization,
reclassification, merger, consolidation, asset sale, or change,
all subject to further adjustment as provided herein.
10.3 If at any time or from time to time there shall be a
reorganization of the Common Stock (other than a subdivision or
combination provided for in Sections 10.1 or 10.2 above) or a
merger or consolidation or the Company with or into another
corporation or other entity, or the sale of all or substantially
all of the Company's properties and assets to any other person,
then, as a part of such reorganization, merger, consolidation or
sale, provision shall be made as reasonably determined by the
Company's Board of Directors so that the Holder of the Warrant
shall thereafter be entitled to receive upon exercise of such
Warrant, the number of shares of stock or other securities or
<PAGE>
property of the Company or the successor entity resulting from
such merger or consolidation or sale to whom a holder of Common
Stock delivered upon exercise of the Warrant immediately prior to
such reorganization, merger, consolidation or sale, would have
been entitled to receive on such reorganization, merger,
consolidation or sale.
10.4 The adjustments provided for in this Section 10 are
cumulative and shall apply to successive divisions, subdivisions,
combinations, reorganizations, mergers or other events
contemplated herein resulting in any adjustment under the
provisions of this Section, provided that, notwithstanding any
other provision of this Section 10.4, no adjustment of the
Exercise Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in the Exercise
Price then in effect.
10.5 Upon each adjustment of the Exercise Price, the
Company shall give prompt written notice thereof addressed to the
registered Holder at the address of such Holder as shown on the
records of the Company, which notice shall state the Exercise
Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares issuable upon the
exercise of such Holder's Warrant, setting forth in reasonable
detail the method of calculation and the facts upon which such
calculation is based.
10.6 In the event of any question arising with respect to
the adjustments provided for in this Section 10, such question
shall be conclusively determined by an opinion of independent
certified public accountants appointed by the Company (who may be
auditors of the Company) and reasonably acceptable to the Holder
of this Warrant. Such accountants shall have access to all
necessary records of the Company, and such determination shall be
binding upon the Company and the Holder.
10.7 Notwithstanding anything to the contrary contained
herein, the provisions of this Section 10 shall not apply to the
reverse split of the Company's shares of Common Stock
outstanding, as described in the Memorandum.
11. Special Antidilution Provisions. If after the date of
this Warrant, the Company issues or grants any Common Stock or
other securities or options convertible into Common Stock or
other rights to purchase any Common Stock (hereafter such Common
<PAGE>
Stock, convertible stock or other securities, and the Common
Stock subject to the purchase right described in this sentence is
referred to as the "Additional Stock" and the date of the
issuance of grant shall be referred to as the "Grant Date"), and
if the consideration received or receivable by the Company upon
the issuance of the Additional Stock or the conversion price used
to determine the number of shares of Common Stock issuable upon
conversion of the convertible security (hereafter such
consideration is referred to as the "Additional Issue Price") is,
prior to the contemplated Public Offering, if such Public
Offering is consummated, less than the exercise price of the
Warrant Stock hereunder, or after the consummation of such Public
Offering, less than the fair market value of the Common Stock at
the Grant Date, then there shall be issued to the Holder that
number of additional shares of Common Stock sufficient so that
the product of (X) the number of shares of Warrant Stock
exercisable hereunder multiplied by (Y) the fair market value of
the Common Stock at the Grant Date is equal to the product of (A)
the Additional Issue Price and (B) the sum of (i) the number of
shares of Warrant Stock exercisable hereunder and (ii) the
additional shares of Common Stock issuable under this Section
11.1. In no event shall the term "Adjustment Stock" refer to, or
will the provisions of this Section 11.1 be applicable to Common
Stock or other securities or options convertible into Common
Stock or other rights to purchase any Common Stock granted or
issued to bona-fide employees and independent consultants to the
Company and any of its subsidiaries.
For purposes of this Section 11, fair market value
shall be determined by the Company's Board of Directors and, if
the Common Stock is listed on a national securities exchange or
traded on the Over-the-Counter market, the fair market value
shall be the closing price of the Common Stock on such exchange,
or on the Over-the-Counter market as reported by the National
Quotation Bureau, Incorporated, as the case may be, on the day on
which the Additional Stock is granted, or, if there is no trading
or closing price on that day, the closing price on the most
recent day preceding the day for which such prices are available.
12. Legend. Upon exercise of this Warrant and the issuance
of any of the Warrant Stock thereunder, all certificates
representing shares shall bear on the face thereof substantially
the following legends:
<PAGE>
The shares of common stock represented by this
certificate have not been registered under the Securities Act of
1933, as amended, and may not be sold, offered for sale,
assigned, transferred or otherwise disposed of, unless registered
pursuant to the provisions of that Act or an opinion of counsel
to the Corporation is obtained stating that such disposition is
in compliance with an available exemption from such registration.
13. Applicable Law. The Warrant is issued under and shall
for all purposes be governed by and construed in accordance with
the laws of the State of Colorado.
14. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed
duly given when delivered by hand, by Federal Express or other
national overnight courier service, or mailed by registered or
certified mail, postage prepaid, return receipt requested, and,
if mailed, shall be deemed to have been received on the third day
after a notice has been sent as follows:
If to the Holder, to the address provided by such
Holder.
If to the Company, at 14 Inverness Drive, Building F,
Suite 116, Englewood, Colorado 80112.
IN WITNESS WHEREOF, the Company has caused this Warrant to
be signed on its behalf, in its corporate name, by its duly
authorized officer, all as of the day and year first above
written.
NAVIDEC, INC.
By:
------------------------------
Ralph Armijo, President
<PAGE>
WARRANT EXERCISE FORM
(To be executed by the Registe red Holder
in order to Exercise the Warra nt)
The undersigned hereby irrevocably elects to exercise the
right to purchase shares covered by this Warrant
according to the conditions hereof and herewith makes payment of
the Exercise Price of such shares in full.
Signature
Address
Dated: , 199__
<PAGE>
EXHIBIT 5.1
OPINION OF COHEN BRAME & SMITH PROFESSIONAL CORPORATION
COHEN BRAME & SMITH
Professional Corporation
Attorneys at Law
One Norwest Center, Suite 1800
1700 Lincoln Street
Denver, Colorado 80203
Ralph Armijo, President
Navidec, Inc.
14 Inverness Drive East
Building F, Suit 116
Englewood, CO 80112
RE: Form SB-2 Registration Statement relating to shares of No Par Value
Common Stock and Warrants to Acquire Common Stock Offered by the
Company and for the account of Certain Selling Shareholders
Dear Mr. Armijo:
We have acted as counsel for Navidec, Inc. (the "Company") in connection
with the Form SB-2 Registration Statement to be filed by the Company with the
Securities and Exchange Commission relating to the shares of the Company's no
par value Common Stock (the "Common Stock") and Warrants to purchase one
share of Common Stock for each Warrant (the "Warrants") being offered for
sale by the Company and by certain selling shareholders. As such counsel, we
have examined and relied upon such records, documents, certificates and other
instruments as in our judgment are necessary or appropriate to form the basis
for the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
(i) Navidec, Inc. is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Colorado.
(ii) The shares of Common Stock and Warrants including the Underwriter's
over-allotment option being offered by the Company and by the Selling
Shareholders when sold in accordance with the terms set forth in the
Registration Statement will be validly issued and outstanding, fully paid and
nonassessable.
(iii) The Company at the time of this opinion has adequate authorized but
unissued shares available to authorize the issuance of Common Stock upon the
exercise of
<PAGE>
the Warrants and the exercise of the Underwriter's Options and the warrants
and Common Stock underlying the Underwriter's Options (as described in the
Registration Statement). Assuming the availability of authorized but unissued
Common Stock at the time of exercise, the Common Stock, when issued in
accordance with the rights granted in the Warrants and options as defined in
the Registration Statement will be validly issued and outstanding, fully paid
and nonassessable.
We consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Registration Statement.
Very truly yours,
/s/ Cohen Brame & Smith Professional Corporation
<PAGE>
LOCK-UP LETTER
Joseph Charles & Associates, Inc.
9701 Wilshire Boulevard, Ninth Floor
Beverly Hills, CA 90212
Gentlemen:
In connection with your acting as the Representative of the underwriters
in the public offering (the "Offering") of securities of Navidec, Inc. (the
"Company"), and in consideration of $10.00 and other good and valuable
consideration, the receipt and sufficiency of which the undersigned hereby
acknowledges, the undersigned hereby agrees that (i) it has not taken and
will not take, directly or indirectly, any action designed to cause or result
in, or which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the securities
offered or to facilitate the sale or resale of the securities offered, (ii) it
waives any registration rights it may have with respect to the Offering and for
a period of six months thereafter, and (iii) for a period of 12 months after
the commencement of the Offering it will not, directly or indirectly, issue,
offer, sell (including any short sale), grant any option for the sale of,
acquire any option to dispose of, assign, transfer, pledge, hypothecate or
otherwise encumber or dispose of, any shares of Common Stock of the Company,
or securities convertible into or exercisable or exchangeable for or evidencing
any right to purchase or subscribe for any shares of such Common Stock or any
beneficial interest therein held by the undersigned as of the date the
Registration Statement relating to the Offering becomes effective, without
the prior written consent of Joseph Charles & Associates, Inc.
Notwithstanding the restrictions contained herein, the undersigned may
transfer shares of Common Stock:
(a) in accordance with the terms and conditions of the Underwriting
Agreement to be entered into by and between the Company and Joseph Charles
& Associates, Inc.
(b) to his or her spouse, parent, sibling or lineal descendants, or
to any trust for the benefit of such persons; or
(c) to any distributee, legatee or devisee of the undersigned who
acquires its shares by will or operation of law upon the death or
dissolution of the undersigned.
As a condition to a transfer to be made pursuant to paragraphs (b) or
(c), the transferee shall agree in writing to be bound by the terms of this
agreement to the same extent as the undersigned, but only through and until
the date the undersigned will be bound by the foregoing provisions (I.E., 12
months after commencement of the Offering). The undersigned consents to the
placement of a legend on the certificate(s) evidencing ownership of Common
Stock or other securities held by the undersigned consistent with the foregoing.
Very truly yours,
Date: Name:
---------------- ---------------------------------
<PAGE>
SHAREHOLDERS' AGREEMENT
SHAREHOLDERS' AGREEMENT dated as of July __, 1996 (this "Agreement") by
and among NAVIDEC, Inc., a Colorado corporation (the "Corporation"), and the
Persons (as hereinafter defined) listed on Schedule A hereto (together with
their transferees of shares of Common Stock (as hereinafter defined) and all
Persons who become a party to this Agreement after the date hereof, the
"Shareholders"). All capitalized terms used herein and not otherwise defined
shall have the meanings ascribed in Article 5 hereto.
RECITAL
On the date hereof, the Shareholders own all of the outstanding shares
of common stock, no par value (the "Common Stock"), of the Corporation and
wish (1) to provide for the continuity of management of the Corporation, (2)
to avoid dissension among the parties holding Common Stock, (3) to control
the transfer of the shares of Common Stock, and (4) to otherwise make
provision for the future management of the Corporation.
AGREEMENTS
Accordingly, the parties hereto agree as follows:
ARTICLE 1 -- OWNERSHIP OF COMMON STOCK
1.1 OWNERSHIP. The Shareholders own the number of shares of Common
Stock set forth opposite their respective names on Schedule A hereto.
1.2 AUTHORIZED CAPITAL STOCK. The authorized capital stock of the
Corporation on the date hereof consists of 20,000,000 shares of Common Stock.
Except for the 4,000,000 shares of Common Stock listed on SCHEDULE A hereto,
no shares of capital stock of the Corporation are outstanding on the date
hereof.
ARTICLE 2 -- RESTRICTIONS ON TRANSFER
2.1 TRANSFERS VOID. Each Shareholder agrees that it will not for a
period of three years from the date hereof (the "Restricted Period") sell,
give, transfer, assign, pledge, or otherwise grant a security interest in
(collectively, "Transfer"), any Common Stock now owned or hereafter acquired
by such Shareholder, except as expressly permitted by, and in compliance
with, the terms and conditions of Sections 3.1, 3.2, 3.3 or 3.4 and 3.5 (if
applicable) hereof (each, a "Permitted Transfer"). Any Transfer in violation
of this Section 2.1 shall be null and void. After the expiration of the
Restricted Period, each Shareholder shall be entitled to Transfer shares of
Common Stock to any other Person only in accordance with the remaining
provisions of this Agreement.
<PAGE>
2.2 ALL TRANSFERS IN COMPLIANCE WITH LAW AND SUBJECT TO THIS AGREEMENT.
(a) Every Transfer of shares of Common Stock otherwise permitted
or required by this Agreement shall be in compliance with federal and state
securities laws, including without limitation the Securities Act, and the
Corporation may require an opinion of counsel to the transferor of such
shares as to such compliance.
(b) Every Transfer of shares of Common Stock otherwise permitted
or required by this Agreement shall be, and the Person to whom any shares of
Common Stock are transferred (other than pursuant to a public offering or a
sale pursuant to Rule 144 of the Securities Act) shall agree to take and hold
such shares of Common Stock, subject to this Agreement. Without limiting the
generality of the foregoing, the provisions of this Section 2.2(b) shall
apply to every Transfer to any Affiliate, or the estate, executors,
administrators, personal representatives, heirs, and devises, of any
Shareholder. No Transfer shall be effective unless and until the transferee
of the shares of Common Stock sought to be transferred shall execute and
deliver to the Corporation an instrument in which such transferee agrees to
be bound by this Agreement and to observe and comply with this Agreement and
with all obligations and restrictions imposed on Shareholders hereby.
(c) Prompt notice shall be given by the transferor to all the
parties hereto of any Transfer of shares of Common Stock.
ARTICLE 3 -- PERMITTED TRANSFERS
3.1 TRANSFERS TO FAMILY MEMBERS. Each Shareholder who is a natural
person may, at any time or times, Transfer any or all of his or her shares of
Common Stock to the following Persons:
(a) his or her spouse, siblings, or descendants;
(b) to the trustee(s) of one or more trusts (the terms of which
are not inconsistent with this Agreement) at any time established by such
Shareholder for the sole benefit of one or more Persons listed in clause (a)
above; or
(c) to the trustee(s) of one or more voting trusts of which all
voting trust certificates are owned by one or more Persons listed in clause
(a) above;
(the Persons described in clauses (a) through (c) above are collectively
referred to herein as "Family Members").
3.2 TRANSFERS TO AFFILIATES. Each Shareholder that is not a natural
person may, at any time or times, transfer any or all of its shares of Common
Stock to one or more of its Affiliates.
-2-
<PAGE>
3.3 TRANSFERS TO OTHER SHAREHOLDERS. Notwithstanding any other
provision of this Agreement to the contrary, any Shareholder shall be
entitled to Transfer shares of Common Stock to any other Shareholder who is a
party to this Agreement or to the Corporation.
3.4 TRANSFERS WITH CONSENT. Notwithstanding any other provision of this
Agreement to the contrary, Shareholders may Transfer shares of Common Stock
to any Person with the written consent of the other Shareholders holding an
aggregate of at least 70% of the shares of Common Stock then held by all of
the Shareholders.
3.5 NOTICE OF TRANSFER. Unless waived or modified by the Corporation,
each transferor of shares of Common Stock pursuant to Sections 3.1, 3.2 or
3.3 above shall give notice to the Corporation of the intention to make any
such Transfer not less than ten days prior to effecting such Transfer, which
notice shall state the name and address of each proposed transferee, the
number of shares of Common Stock proposed to be transferred to each, and the
date of the proposed Transfer.
ARTICLE 4 -- CERTAIN RIGHTS WITH RESPECT TO COMMON STOCK
4.1 RIGHT OF FIRST REFUSAL.
(a) Subject to Section 2.1 above, if any Shareholder (an "RFR
Transferor") receives from any Person (an "RFR Transferee") any proposal
(other than a Permitted Transfer described in Section 3.1 or 3.2 hereof) to
purchase any shares of Common Stock ("RFR Securities"), and the RFR
Transferor intends to accept such proposal, the RFR Transferor shall give
prompt notice (an "RFR Notice") to the Corporation and each other Shareholder
to such effect, which notice shall include the following:
(1) a copy of the proposal or, if not in writing, a full
description thereof;
(2) the proposed purchase price;
(3) whether the proposed purchase price is payable in cash,
notes, securities or other forms of consideration;
(4) the name of the RFR Transferee;
(5) the conditions and timing of the proposed purchase; and
(6) all other terms upon which such transfer is proposed to
be made.
In addition, the RFR Transferor shall notify the RFR Transferee of the
rights of the Corporation and each other Shareholder hereunder.
-3-
<PAGE>
(b) Upon receipt of the RFR Notice, the Corporation and each other
Shareholder shall each have an irrevocable option to purchase all or any
number of the RFR Securities on the same terms and conditions as those set
forth in the RFR Notice in the following order of priority:
(1) the option to purchase the RFR Securities shall be
exercisable first by the Corporation within five Business Days after receipt
of the RFR Notice: to the extent the Corporation does not purchase all of the
RFR Securities, the Corporation shall give each other Shareholder a notice to
that effect;
(2) subject to Section 4.1(d) below, within five Business
Days after receipt of such notice from the Corporation, each other
Shareholder shall have the option to purchase, Pro Rata, that part of the RFR
Securities which the Corporation has elected not to purchase, with any
remaining RFR Securities to be iteratively allocated Pro Rata to the
Shareholders electing to purchase them.
(c) If the Corporation and/or the Shareholders do not exercise
their option to purchase all of the RFR Securities on the basis set forth
above, then the RFR Transferor shall be free to sell the RFR Securities to the
RFR Transferee on the terms which were contained in the RFR Notice for a
period of 120 days from the earlier of the following:
(1) the expiration of the option period described in
Section 4.1(b) above (or as extended by Section 4.1(d) below); and
(2) the date such RFR Transferor shall have received written
notice from the Corporation and each Shareholder stating that the option
granted to them under the foregoing provisions will not be exercised in full.
Any transfer to the RFR Transferee not made within such 120-day period or
which is proposed to be made on terms other than those set forth in the RFR
Notice may only be made, if at all, after again complying with this
Section 4.1.
(d) Notwithstanding any other provision of this Agreement to the
contrary, if the RFR Transferor is an original party to this Agreement
(designated as an "Original Shareholder" on the execution page hereto), or a
transferee thereof, then the Original Shareholders shall have the option to
purchase the RFR Securities within five Business Days after the date of
receipt of notice from the Corporation pursuant to Section 4.1(b)(1) hereof,
and to the extent the Original Shareholders do not purchase all of the RFR
Securities, the Original Shareholders shall give the other Shareholders a
notice to that effect, and such other Shareholders then shall have the option
to acquire the remaining RFR Securities in accordance with Section 4.1(b)(2)
hereof, and the period for exercise of such option shall begin upon receipt of
such notice from the Original Shareholders rather than the Corporation.
-4-
<PAGE>
4.2 LEGALLY BINDING OBLIGATION. The giving of a notice or the accepting
of an offer as provided in Section 4.1 hereof shall create a legally binding
obligation as provided in such Section 4.1.
4.3 INVOLUNTARY TRANSFERS. If an Involuntary Transfer of any of the
Common Stock owned a Shareholder shall occur, the other Shareholders shall
have the same right of first refusal provided in Section 4.1 hereof with
respect thereto as if the Involuntary Transfer had been a proposed voluntary
Transfer by such Shareholder, governed by Section 4.1, except that
(a) the periods within which such rights must be exercised shall
run from the date upon which notice of the Involuntary Transfer is received,
(b) such rights shall be exercised by notice to the Involuntary
Transferee ("Involuntary Transfer Notice") rather than the Shareholder who
suffered the Involuntary Transfer, and
(c) the purchase price per share of Common Stock shall be the
"fair market value" thereof determined as follows:
(1) as agreed upon in writing by the Involuntary Transferee
and the other Shareholders making such purchase, or, failing such agreement
within five Business Days of receipt of the Involuntary Transfer Notice by
the Involuntary Transferee,
(2) as determined by an investment banking firm that is
(i) reasonably satisfactory to both the Involuntary Transferee and the
Shareholders making such purchase and (ii) willing and able to complete the
valuation within forty-five days of being retained to do so, or, failing such
agreement within ten Business Days of receipt of the Involuntary Transfer
Notice by the Involuntary Transferee,
(3) as determined by an investment banking firm selected by
the Corporation's auditors/accountants for such purpose.
The determination of the purchase price per share by an investment
banking firm hereunder shall be final and binding upon all parties hereto and
the Involuntary Transferee. The fees of such investment banking firm shall be
split equally among the Corporation and Shareholders making such purchase.
The closing of any purchase under this Section 4.3 shall be held at the
principal office of the Corporation at 11:00 A.M. local time on the
forty-fifth day after the date on the purchase price per share has been
determined, or at such other time and place as the parties to the transaction
may agree upon. At such closing, the Involuntary Transferee shall deliver
certificates representing the shares being purchased by the Shareholders,
duly endorsed for transfer and accompanied by all requisite stock transfer
taxes. The Involuntary Transferee shall represent and
-5-
<PAGE>
warrant that it is the beneficial owner of such Common Stock and that such
Common Stock is free and clear of any liens, claims, options, charges,
encumbrances, or rights of others arising through the action or inaction of
the Involuntary Transferee. The Shareholders making such purchase shall
deliver at closing, by official bank check, payment in full for such Common
Stock. At such closing, all parties to the transaction shall execute such
additional documents as are otherwise appropriate.
In the event that the provisions of this Section 4.3 shall be held to be
unenforceable with respect to any particular Involuntary Transfer of Common
Stock, the other Shareholders shall have the rights provided in Section 4.1
hereof if the transferee of the Involuntary Transfer subsequently obtains a
bona fide offer for, and desires to transfer, such Common Stock, in which
event such transferee shall be deemed to be the "RFR Transferor" under
Section 4.1 and shall be bound by the other provisions of that Section and
the related provisions of this Agreement.
ARTICLE 4.4--DEFINITIONS
As used herein, the following terms shall be defined as follows:
"Affiliate" shall have the meaning ascribed in the Securities Act.
"Agreement" shall have the meaning ascribed in the Preamble.
"Business Day" shall mean any day which is not a weekend, holiday, or
other day on which banks are required to be closed in the State of Colorado.
"Common Stock" shall have the meaning ascribed in the Recital.
"Corporation" shall have the meaning ascribed in the Preamble.
"Family Member" shall have the meaning ascribed in Section 3.1 hereof.
"Involuntary Transfer" shall mean any Transfer, proceeding, or action by
or in which a Shareholder shall be deprived or divested of any right, title,
or interest in or to any of the Common Stock, including, without limitation,
any seizure under levy of attachment or execution, any transfer in connection
with bankruptcy (whether pursuant to the filing of a voluntary or
involuntary petition under the Federal Bankruptcy Code of 1978, or any
modifications or revisions thereto) or other court proceeding to a debtor in
possession, trustee in bankruptcy or receiver or other officer or agency, any
transfer to a state or to a public officer or agency pursuant to any statute
pertaining to escheat or abandoned property, any transfer pursuant to a final
decree of a court in a divorce action, any transfer upon or occasioned by the
incompetence of any Shareholder, or any transfer to a legal representative
of any Shareholder. Permitted Transfers shall not be considered Involuntary
Transfers.
-6-
<PAGE>
"Involuntary Transferee" shall mean the proposed recipient of Common
Stock pursuant to any Involuntary Transfer.
"Involuntary Transfer Notice" shall have the meaning ascribed in Section
4.3(b) hereof.
"Original Shareholder" shall have the meaning ascribed in Section 4.1(d)
hereof.
"Permitted Transfer" shall have the meaning ascribed in Section 2.1
hereof.
"Person" shall mean an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority, or other entity of
whatever nature.
"Pro Rata" shall mean, with respect to any Shareholder, the fraction,
expressed as a percentage, with a numerator equal to the number of shares of
Common Stock then owned by that Shareholder and a denominator equal to the
aggregate number of shares of Common Stock then owned by all Shareholders.
"RFR Notice" shall have the meaning ascribed in Section 4.1(a) hereof.
"RFR Securities" shall have the meaning ascribed in Section 4.1(a) hereof.
"RFR Transferee" shall have the meaning ascribed in Section 4.1(a) hereof.
"RFR Transferor" shall have the meaning ascribed in Section 4.1(a) hereof.
"Restricted Period" shall have the meaning ascribed in Section 2.1 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Transfer" shall have the meaning ascribed in Section 2.1 hereof.
ARTICLES 4.5--MISCELLANEOUS
4.6. TERMINATION OF RESTRICTIONS ON TRANSFER AND RIGHTS OF FIRST
REFUSAL. The provisions of Articles 2 and 4 and Section 7.3 of this
Agreement shall terminate upon the sale by the Corporation and/or
Shareholders of at least 25% of the shares of Common Stock (based on the
total number of shares outstanding immediately after such sale) pursuant to
a registration statement under the Securities Act.
4.7 INSPECTION RIGHTS. The Shareholders shall have the right to
inspect all financial records and physical facilities of the Corporation, as
long as the time, place, and manner are reasonable.
-7-
<PAGE>
4.8. GOVERNING LAW. This Agreement shall be subject to and governed by
the laws of the State of Colorado.
4.9 LEGEND. Each certificate of Common Stock now held or hereafter
acquired by any Shareholder shall, for as long as this Agreement is effective
or required by applicable law, bear a legend substantially as follows:
The transfer of any of the shares of Common Stock represented by
this certificate are restricted by the terms of a certain
Shareholders' Agreement, a copy of which may be inspected at the
Corporation's principal office. Any sale of the Common Stock
represented by this certificate is subject to certain rights of
first refusal held by other Shareholders of the Corporation, and
other transfers are generally prohibited.
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or applicable state
securities laws. The shares represented by this certificate may not
be transferred, sold, offered for sale, or otherwise disposed of
unless there is an effective registration statement or other
qualification relating to such securities under the Securities Act
of 1933, as amended, and any applicable state securities laws, or
unless the Corporation receives an opinion of counsel satisfactory
to the Corporation that such registration or other qualification
under the Securities Act of 1933, as amended, and any applicable
state securities laws is not required in connection with such
transfer, sale, offer or disposition.
4.10. BINDING ON TRANSFEREES. The provisions of this Agreement shall
be binding upon and inure to the benefit of any permitted transferee of
capital stock owned by the Shareholders from and after the effective date
hereof.
4.11. NOTICES. Notices hereunder shall be given only by personal
delivery, registered or certified mail, return receipt requested, or
overnight courier service and shall be deemed received when personally
delivered or five days after being deposited in the mail or one day after
being delivered to a courier service or a carrier for electronic transmittal
(as the case may be), postage or charges prepaid, and properly addressed to
the particular party to whom the notice is to be sent. Unless and until
changed by notice given as provided herein, notices shall be sent to the
addresses set forth on Schedule A hereto.
4.12. REFERENCES TO CLOSING DATES. If any date specified hereunder as
a closing date shall fall on other than a Business Day, such closing date
shall occur on the next succeeding Business Day, subject to the right of the
parties hereto to set a different closing date as provided
-8-
<PAGE>
herein.
4.13. SEVERABILITY. In the event that any provision hereof is held
void or unenforceable by any court, then such provision shall be severable
and shall not affect the remaining provisions hereof.
4.14. COUNTERPARTS. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
4.15. ENTIRE AGREEMENT; AMENDMENT. This Agreement sets forth the
entire understanding of the parties and supersedes all prior agreements,
arrangements, outlines and communications, whether oral or written, with
respect to the subject matter hereof. This Agreement shall be amended from
time-to-time to reflect changes in the composition of the Shareholders and
changes in stock ownership that may occur from time-to-time as a result of
Transfers permitted hereunder. Subject to the provisions of Section 6.1
hereof, this Agreement and/or its provisions may be amended, revised or
terminated with the prior written consent of Shareholders and their
respective permitted transferees, if any, owning an aggregate of 70% of the
shares of Common Stock then outstanding and owned by Shareholders and their
respective transferees.
4.16. WAIVER. Any failure by a party hereto to comply with any
obligation, agreement or condition herein may be expressly waived as set forth
in Section 6.10 hereof, but such waiver or failure to insist upon strict
compliance with such obligation, agreement, or condition shall not operate as
a waiver of, or estoppel with respect to, any such subsequent or other
failure.
4.17. CONSENT TO SPECIFIC PERFORMANCE. The parties hereto declare that
it is impossible to measure in money the damages which would accrue to a
party by reason of another party's failure to perform any of the obligations
hereunder. Therefore, if any party shall institute any action or proceeding
to enforce the provisions hereof, any party against whom such action or
proceeding is brought hereby waives any claim or defense therein that the
plaintiff party has any adequate remedy at law, and consents to specific
performance as a remedy.
4.18. NEW PARTIES. The Corporation shall not record a transfer of
Common Stock from any Shareholder to any Person not a party hereto unless
such Person shall execute an acknowledgment of the terms hereof and an
agreement to be bound hereby. Upon execution of such acknowledgments, such
new Shareholder shall be deemed for all purposes to be a party hereto, and
shall be subject to all the obligations and entitled to all the benefits
created hereby with respect to Shareholders.
4.19. VARIATIONS IN PRONOUNS. All pronouns and variations thereof
shall be deemed to refer to the masculine, feminine or neuter, singular or
plural, as the identity of the antecedent Person or Persons or entity or
entitles may require.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the date first above written.
NAVIDEC, Inc.
By: ___________________________________
Name:
Title:
ORIGINAL SHAREHOLDERS:
_______________________________________
Ralph Armijo
_______________________________________
Jonathan A. Simmons
_______________________________________
Arthur Armijo
_______________________________________
Patrick R. Mawhinney
_______________________________________
Kevin L. Blankenship
_______________________________________
Harold Anderson II
_______________________________________
Tom Parr
_______________________________________
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<PAGE>
Matthew D. Gitchell
_______________________________________
Lee Trujillo
_______________________________________
Robert Medlin
_______________________________________
John Sims
_______________________________________
Kirk Steinbock
_______________________________________
Jason Kay
_______________________________________
Maria Zenaida Tamundong Carpio
_______________________________________
Louis Joseph Rubbo II
_______________________________________
Curtis Armijo
_______________________________________
Christian Dwyer
_______________________________________
-11-
<PAGE>
Andrew Davis
_______________________________________
Eric Nastri
_______________________________________
Patrick Townsend
_______________________________________
Julie Erjavec
_______________________________________
Ralph Armbruster
_______________________________________
Dan Flenniken
_______________________________________
Les Lira
_______________________________________
Gregory Hatstat
_______________________________________
Greg Beckham
_______________________________________
Deborah Block
_______________________________________
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<PAGE>
Carol Pritchard
_______________________________________
Norma Montgomery
_______________________________________
LGC Management
-13-
<PAGE>
SCHEDULE A
SHAREHOLDERS
Name and Address Shares
- ---------------- ------
Ralph Armijo 1,838,687
2818 E. Geddes Avenue
Littleton, CO 80122
Cindy Simmons 813,669
89 Willowleaf Drive
Littleton, CO 80127
Arthur Armijo 250,000
0475 Country Road 167
Glenwood Springs, CO
81101
Patrick R. Mawhinney 314,671
9292 Buttonhill Court
Highlands Ranch, CO 80126
Kevin L. Blankenship 171,393
13145 W. 85th Place
Arvada, CO 80005
Harold Anderson II 171,393
1217 E. Ascol Ave.
Highlands Ranch, CO 80126
Tom Parr 38,087
7376 S. Garfield Court
Littleton, CO 80122
Matthew D. Gitchell 200
5944 S. Union Street
Lakewood, CO 80127
Lee Trujillo 300
3320 S. Dahlia Street
Denver, CO 80222
<PAGE>
Robert Medlin 200
2396 S. Dawson Way
Aurora, CO 80014
John Sims 1,000
7652 S. Logan
Littleton, CO 80122
Kirk Steinbock 100
1449 Emerson St. #2
Denver, CO 80218
Jason Kay 100
7347 S. Quebec
Englewood, CO 80112
Maria Zenaida Tamundong 200
Carpio
1919 N. Nevada Avenue
Colorado Springs, CO 80907
Louis Joseph Rubbo II 500
10914 West 102nd Circle
Westminster, CO 80021
Curtis Armijo 50,000
2353 S. Corona Street
Denver, CO 80210
Christian Dwyer 50,000
2234 S. Downing Street
Denver, CO 80210
Andrew Davis 50,000
7815 S. Ivy Way
Englewood, CO 80112
Patrick Townsend 6,000
6833 S. Ivy, Unit 6-208
Englewood, CO 80112
Julie Erjavec 6,000
3030 W. Prentice Ave., Unit I
Littleton, CO 80123
<PAGE>
Ralph Ambruster 20,000
7307 South Waco
Foxfield, CO 80016
Dan Flenniken 4,000
15168 E. Grand Avenue
Aurora, CO 80015
Les Lira 4,000
7474 S. Milwaukee Ct.
Littleton, CO 80122
Gregory Hatstat 5,000
16765 Rockledge Cove
Parker, CO 80134
Gregory Beckham 350
4369 S. Quebec Street
Denver, CO 80237
Deborah Block 750
678 Clarkson Street
Denver, CO 80218
Carol Pritchard 350
5441 S. Tabor Street
Littleton, CO 80127
Norma Montgomery 750
1871 W. David Drive
Littleton, CO 80123
LGC Management 10,000
Reserved for Future Issuance 193,300
TOTAL 4,000,000
---------
---------
<PAGE>
NAVIDEC, INCORPORATED
TRADE SECRET/NON-DISCLOSURE AGREEMENT
In consideration of the mutual promises made herein, as well as the
agreement between Navidec, Incorporated and _______________ , the parties
hereby agree as follows:
____________________ , agrees that, in consideration for being shown or
told about certain trade secrets or property belonging to Navidec,
Incorporated, ____________________, shall not disclose or cause to be
disclosed, disseminated or distributed any information concerning said trade
secret or property to any person, entity, business or other individual or
company without the prior written permission of Navidec, Incorporated.
Further, ___________________ , agrees not to use, either directly or
indirectly any of the material, ideas, objects or portions thereof of said
trade secret or property disclosed by Navidec, Incorporated in any manner
whatsoever without the prior written consent of Navidec, Incorporated.
Any dispute that arises hereunder shall be resolved by arbitration
pursuant to the rules of the American Arbitration Association or the rules of
the State of Colorado.
In the event that any litigation or arbitration is commenced to enforce
any of the provisions of this agreement, the prevailing party of said
litigation shall be entitled to all costs thereof including reasonable
attorney's fees.
This agreement shall be governed by and interpreted in accordance
without the laws of the State of Colorado.
EXECUTED this _____________ day of __________________ 1996, in Englewood,
in the State of Colorado.
---------------------------------------
Navidec, Incorporated
---------------------------------------
(Signature of Agreeing Party)
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into between NAVIDEC, Inc., a
Colorado corporation ("Employer"), and Ralph Armijo ("Employee").
RECITALS
ACI Systems, Inc. and Interactive Planet, Inc. ("IPI") are the parties
to a Plan and Agreement of Merger dated as of June 21, 1996, pursuant to
which ACI Systems, Inc. will survive under the name NAVIDEC, Inc. Employee is
a founder, an employee and the President of ACI Systems, Inc. Employer
desires to continue the employment of Employee upon the effectiveness of the
merger between ACI Systems, Inc. and IPI, and Employee desires to continue
his employment with ACI, all upon and subject to the terms and conditions
contained herein.
AGREEMENTS
Now, therefore, in consideration of the foregoing and the mutual
promises set forth below, the parties agree as follows:
1. EMPLOYMENT. Employer hereby employes Employee and Employee hereby
accepts such employment, subject to the terms and conditions of this
Agreement. Employment shall serve in such capacities and perform such
functions as the Board of Directors of the Company shall determine from time
to time; provided, however, that Employee's duties shall always be
professional in nature and shall utilize and be consistent with the training,
talent, and ability of Employee.
2. FULL-TIME BEST EFFORTS. Employee shall devote his full professional
time and attention to the performance of his obligations under this
Agreement, and shall at all times faithfully, industriously, and to the best
of his ability, experience, and talent perform all of his obligations
hereunder.
3. TERM AND TERMINATION. The term of this Agreement shall commence on
the date on which the proposed merger of IPI with and into ACI Systems, Inc.
becomes effective and shall continue uninterrupted through June 30, 1998,
unless sooner terminated by mutual agreement or as provided below in this
Section 3. This Agreement may be otherwise terminated as follows:
(a) Employer may terminate the employment of Employee hereunder:
(i) upon the death of Employee;
(ii) upon Employee's inability, by reason of sickness or
other disability, to perform his obligations hereunder for more than 90
consecutive days; or
(iii) upon a showing of good cause, which for purposes of
this Agreement shall mean: (A) Employee's failure to act in accordance with
this Agreement or any other breach of this Agreement by Employee; (B)
Employee's willful misconduct or gross or persistent negligence in the
discharge of his duties hereunder, or (C) Employee's commission of any act
detrimental to Employer or any act of moral turpitude; provided, however,
that prior to terminating Employee pursuant to clause (A), Employer shall
give Employee at least 15 days' written notice of such failure to act or
breach, which notice shall specify such failure or breach, and, if Employee
cures such failure or breach within such 15-day period, this Agreement shall
then continue as provided herein.
(b) Employee may terminate his employment hereunder upon at least
15 days' written notice to Employer of a material breach of this Agreement by
Employer, which notice shall specify such breach, provided that, if Employer
cures such breach within such 15-day period, this Agreement shall then
continue as provided herein.
4. COMPENSATION. In consideration for his services, Employer shall pay
Employee a salary at the rate of $140,000 per annum. Employee's salary
hereunder shall be payable in installments on the 15th day and the last day
of each month, or on such other payment schedule as is used to pay senior
executives of Employer.
5. EMPLOYEE BENEFITS. Employee shall be entitled to such employee
benefits as are from time to time made available generally by Employer to its
senior executives, including, without limitation, paid vacation and sick
leave, health insurance, life insurance, office amenities, and the like.
6. COVENANT NOT TO COMPETE.
(a) During the term of Employee's employment with Employer and for
a period of one year thereafter, Employee shall not be a consultant,
director, officer, employee, or advisor, and shall not have any interest,
either directly or indirectly, in any business competitive with the business
of Employer in the State of Colorado; provided, however, that the foregoing
shall not prohibit the ownership by Employee of less than 5% of any
publicly-traded class of security of an organization which competes with the
business of Employer.
(b) In furtherance of the foregoing and not in limitation thereof,
during the term of Employee's employment with Employer and for a period of
one year thereafter, Employee shall not, directly or indirectly, employ,
solicit for employment, or in any other manner seek to induce the
discontinuance of any business relationship between Employer and any person
who is, or who was while Employee was employed by Employer, an employee,
consultant, or advisor of Employer.
(c) In furtherance of the foregoing and not in limitation thereof,
during the term of Employee's employment with Employer and for a period of
one year thereafter, Employee
-2-
<PAGE>
shall not, directly or indirectly, in any manner seek to induce the
discontinuance of any business relationship between Employer and any customer,
client, or supplier of Employer.
(d) If Employee violates any provision of this Section 7 and Employer
brings legal action for injunctive or other relief, Employer shall not, as a
result of the time involved in obtaining relief, be deprived of the benefit
of the full period of the restrictive covenants herein. Accordingly, the
restrictive covenants shall be deemed to have the respective durations
specified above, computed from the date the relief is granted but reduced
only by the time between the period when the restriction began to run and
the date of the first violation of the restrictive covenant by Employee.
7. CONFIDENTIALITY
(a) For purposes of this Agreement, "Confidential Information" means
product designs, manufacturing information, program flow charts, file
layouts, source code listings, computer programs, technical information,
customer information, marketing plans, financial information, business plans
and strategies, know-how, trade secrets, and any other information of a
similar nature, created, learned or otherwise obtained by Employee in
connection with his work for Employer or any client or customer of Employer.
During the term of Employee's employment by Employer, and at all times
thereafter, Employee shall keep confidential, and shall not use, disclose or
disseminate, directly or indirectly, any Confidential Information except as
required for the performance of Employee's duties for Employer. Upon request
of Employer, Employee shall deliver to Employer all records, notes, data,
memoranda, disks, programs and other information and documents compiled by or
made available to Employee during the course of his employment by Employer,
and any copies thereof, whether or not they contain Confidential Information.
8. OWNERSHIP OF DEVELOPMENTS. All ideas, inventions, discoveries,
innovations, programs and other creative works, whether or not patentable or
copyrightable, which are conceived, developed or made by Employee during the
term of his employment with Employer or within 6 months after the termination
of his employment with Employer and which relate to any aspect of the
business of Employer (collectively, "Developments"), shall promptly be
disclosed to Employer and shall be the sole and exclusive property of
Employer. Employee hereby assigns all right, title and interest in and to all
Developments to Employer. Employee shall execute and deliver to Employer all
documents requested by Employer to evidence its ownership of the
Developments. Employee shall treat all Developments as Confidential
Information.
9. ENFORCEMENT. If any court shall determine that all or any part,
including without limitation the duration or geographical limit, of any
provision contained in Section 7, 8, or 9 is unenforceable, it is the
intention of the parties that such provisions shall not be terminated but
shall be deemed amended to the extent required to render them valid and
enforceable, such amendment to apply only with respect to the operation of
said Section 7, 8 or 9, as the case may be, in the jurisdiction of the court
that has made the adjudication. If Employees breaches or
-3-
<PAGE>
threatens to breach any provision of Section 7, 8 or 9, Employer shall be
entitled to preliminary and permanent injunctive relief, in addition to any
other remedies available to it.
10. NOTICE. All notices or other communications hereunder shall be in
writing and shall be deemed to be properly delivered or given if and when
delivered in person, or by first class, prepaid, registered or certified
mail, or by recognized overnight courier service, to the addresses set forth
below. Any party may change its address for notice hereunder by giving notice
thereof.
If to Employer:
NAVIDEC, Inc.
7002 So. Revere Parkway, Ste. 40
Englewood, CO 80112
Attention: President
If to Employee:
Mr. Ralph Armijo
2918 E. Geddes Ave.
Littleton, CO 80122
12. ATTORNEY'S FEES AND COSTS. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which that party may be
entitled. This provision shall be construed as applicable to the entire
Agreement.
13. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the complete agreement
between the parties with respect to the subject matter hereof and supersedes
any prior agreements or understandings, written or oral. No waiver under this
Agreement shall be valid unless it is in writing and duly executed by the
party to be charged therewith. This Agreement may be amended at any time,
provided that such amendment is in writing and is signed by each of the
parties hereto.
(b) SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the other provisions hereof, and, except as
otherwise provided in Section 10, this Agreement shall be construed as if
such invalid or unenforceable provision were omitted.
(c) BINDING EFFECT. This Agreement may not be assigned by Employee.
Subject to that limitation, this Agreement shall be binding upon and shall
inure to the benefit of
-4-
<PAGE>
Employee, his heirs and personal representatives, and
shall be binding upon and shall inure to the benefit of Employer, its
successors and assigns.
(d) GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the internal laws of the State of Colorado.
(e) SURVIVAL. The provisions of Sections 7, 8, 9, 10 and 12 hereof shall
survive the expiration or termination of this Agreement as well as the
termination of Employee's employment hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates
indicated below.
NAVIDEC, Inc.
By: /s/ PATRICK MAWHINNEY
----------------------------------------
Patrick Mawhinney, Secretary
Dated:
EMPLOYEE
/s/ Ralph Armijo
----------------------------------------
Ralph Armijo
Dated: 7-3-96
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into between NAVIDEC, Inc., a Colorado
corporation ("Employer"), and John R. McKowen ("Employee").
RECITALS
Employer desires to employ the Employee and Employee desires to be employed
by Employer subject to the terms and conditions contained herein.
AGREEMENTS
Now, therefore, in consideration of the foregoing and the mutual promises set
forth below, the parties agree as follows:
1. EMPLOYMENT. Employer hereby employs Employee and Employee hereby
accepts such employment, subject to the terms and conditions of this
Agreement. Employee shall serve in the capacity of Director of Investor
Relations and perform such functions as the Board of Directors of the Company
shall determine is appropriate for the position.
2. TIME AND BEST EFFORTS. Employee shall devote the appropriate amount
of time and attention necessary to the performance of his obligations under
this Agreement and shall at all times faithfully, industriously, and to the
best of his ability, experience, and talent perform all of this obligations
hereunder.
3. TERM AND TERMINATION. The term of this Agreement shall commence on
the date on which the proposed $1,000,000 Private Placement is completed and
shall continue uninterrupted for six months thereafter unless extended for an
additional twenty-four months by and from the date of completion of an
initial public offering by the Company. This Agreement may be otherwise
terminated as follows:
(a) Employer may terminate the employment of the Employee hereunder:
(i) upon death of the Employee;
(ii) upon Employee's inability, by reason of sickness or other
disability, to perform his obligations hereunder for more than 90 consecutive
days; or
(iii) upon a showing of good cause, which for the purposes of this
agreement shall mean: (A) Employee's failure to act in accordance with this
Agreement or any other breach of this Agreement by Employee; Employee's
willful misconduct or gross or persistent negligence in the discharge of his
duties hereunder.
(b) Employee may terminate his employment hereunder upon at least 15
days written notice to Employer.
4. COMPENSATION. In Consideration for his services, Employer shall pay
Employee a salary at a rate of $5,000 per month. Employee's salary hereunder
shall commence and first months payment be due at the time of any closing,
partial or full, of the contemplated $1,000,000 Private Placement. Employee
shall be paid at the first of the month thereafter for the coming month.
Employer shall also pay Employee an amount not to exceed $400 a month as a
vehicle allowance.
5. STOCK OPTIONS. Upon commencement of employment of Employee, the
Employer shall issue to Employee options to purchase 500,000 shares of the
Company's common stock at an exercise price of $1.75 per share. The options
shall be exercisable after thirty months and contain the one time right to
register the underlying shares at the Company's expense and must be exercised
within sixty months from the date of this agreement.
6. COVENANT NOT TO COMPETE.
(a) During the term of Employee's employment with Employer and for a
period of one year thereafter, Employee shall not be a consultant, director,
officer, employee, or advisor, and shall not have any interest, either
directly or indirectly, in any business competitive with the business of
Employer in the State of Colorado; provided, however, that the foregoing
shall not prohibit the ownership by Employee of less than 5% of any
publicly-traded class of security of an organization which competes with
business of Employer.
(b) In furtherance of the foregoing and not in limitation thereof,
during the term of Employee's employment with Employer and for a period of
one year thereafter, Employee shall not, directly or indirectly, employ,
solicit for employment, or in any other manner seek to induce the
discontinuance of any business relationship between Employer and any person
who is, or who was while Employee was employed by Employer, an employee,
consultant, or advisor of Employer.
(c) In furtherance of the foregoing and not in limitation thereof,
during the term of Employee's employment with Employer and for a period of
one year thereafter, Employee shall not, directly or indirectly, employ,
solicit for employment, or in any other manner seek to induce the
discontinuance of any business relationship between Employer and any
customer, client, or supplier of Employer.
(d) If Employee violates any provision of this section 6 and Employer
brings legal action for injunctive relief or other relief, Employer shall
not, as a result of the time involved in obtaining relief, be deprived of the
benefit of the full period of the restrictive covenants herein. Accordingly,
the restrictive covenants shall be deemed to have the respective durations
specified above, computed from the date the relief is granted but reduced
only by the time between the period when the restriction began to run and the
date of the first violation of the restrictive covenant by the Employee.
<PAGE>
7. CONFIDENTIALITY For purposes of this agreement, "Confidential
Information" means product designs, manufacturing information, program flow
charts, file layouts, source code listings, computer programs, technical
information, customer information, marketing plans, financial information,
business plans and strategies, know-how, trade secrets, and any other
information of a similar nature, created, learned or otherwise obtained by
Employee in connection with his work for Employer or any client or customer
of Employer. During the term of Employee's employment by employer, and at all
times thereafter, Employee shall keep confidential, and shall not use,
disclose or disseminate, directly or indirectly, any Confidential
Information except as required for the performance of Employee's duties for
Employer. Upon request of Employer, Employee shall deliver to Employer all
records, notes, data memoranda, disks, programs and other information and
documents compiled by or made available to Employee during the course of his
employment by Employer, and any copies thereof, whether or not they contain
Confidential Information.
8. OWNERSHIP OF DEVELOPMENTS. All ideas, inventions, discoveries,
innovations, programs, and otherwise creative works, whether or not
patentable or copyrightable, which are conceived, developed or made by
Employee during the term of his employment with Employer or within 6 months
after the termination of his employment with Employer and which relate to any
aspect of the business of Employer (collectively, "Developments"), shall
promptly be disclosed to Employer and shall be the sole and exclusive
property of Employer. Employee shall execute and deliver to Employer all
documents requested by Employer to evidence its ownership of the
Developments. Employee shall treat all Developments as Confidential
Information.
9. ENFORCEMENT. If any court shall determine that all or any part,
including without limitation the duration or geographical limit, of any
provision contained in Section 6, 7, or 8 is unenforceable, it is the
intention of the parties that such provisions shall not be terminated but
shall be deemed amended to the extent required to render them valid
and enforceable, such amendment to apply only with respect to the operation of
said Section 6, 7, or 8, as the case may be, in the jurisdiction of the court
that has made the adjudication. If Employee breaches or threatens to breach
any provision of Section 6, 7, or 8, Employer shall be entitled to
preliminary and permanent injunctive relief, in addition to any other
remedies available to it.
10. NOTICE. All notices or other communication hereunder shall be in
writing and shall be deemed to be properly delivered or given if and when
delivered in person, or by first class, prepaid, registered or certified
mail, or by recognized overnight courier service, to the addresses set forth
below. Any party may change its address for notice hereunder by giving notice
thereof.
If to Employer:
NAVIDEC, Inc.
14 Inverness Drive East
Suite F-116
Englewood, CO 80112 Attention: President
<PAGE>
If to Employee:
Mr. John R. McKowen
2511 Mt. Royal Dr.
Castle Rock, CO 80104
12. ATTORNEY'S FEES AND COSTS. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief of which the party may be
entitled. This provision shall be construed as applicable to the entire
Agreement.
13. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This agreement contains the complete agreement
between the parties with respect to the subject matter hereof and supersedes
any prior agreements or understandings, written or oral. No waiver under this
Agreement shall be valid unless it is in writing and duly executed by the
party to be charged therewith. This Agreement may be amended at any time,
provided that such amendment is in writing and is signed by each of the
parties hereto.
(b) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the other provisions hereof,
and, except as otherwise provide in Section 10, this Agreement shall be
construed as if such invalid or unenforceable provision were omitted.
(c) BINDING EFFECT. This Agreement, except for the compensation
provided for in Section 6, Stock Options, may not be assigned by Employee.
Subject to that limitation. This Agreement shall be binding upon and inure to
the benefit of the Employee, his heirs and personal representatives, and
shall be binding upon and shall inure to the benefit of the Employer, its
successor and assigns.
(d) GOVERNING LAW. The Agreement shall be governed and interpreted
in accordance with the internal laws of the state of Colorado.
(e) SURVIVAL. The provisions of Sections 5, 6, 7, 8, 9, and 11
hereof shall survive the expiration or termination of this Agreement as the
termination of Employee's employment hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates
indicated below.
NAVIDEC, Inc.
By: /s/ RALPH ARMIJO
------------------------------------
Ralph Armijo, President
Dated:
EMPLOYEE
/s/ JOHN R. McKOWEN
------------------------------------
John R. McKowen
<PAGE>
LEASE
This Lease, dated for reference purposes only as of February 23, 1996, is
entered into by and between Transamerica Occidental Life Insurance Company,
a California corporation ("Landlord"), and ACI Systems Inc., a Colorado
corporation ("Tenant"), in consideration of the rents and covenants stated
below. Landlord leases to Tenant and Tenant leases from Landlord the Premises
described below upon the following terms and conditions:
1.1 FUNDAMENTAL LEASE PROVISIONS:
A. Demised Premises: Landlord leases to Tenant the premises located at
and commonly known as 14 Inverness Drive East, Building F, Units 112, 116 and
120, consisting of approximately 5,900 s.f. (the "Premises").
B. Term: The term of the Lease is sixty-one (61) months, beginning May
1, 1996 (the "Commencement Date") and ending May 31, 2001 (the "Expiration
Date"). Tenant may take occupancy of the Premises on May 1, 1996 (the "Occupancy
Date").
C. Minimum Monthly Rent:
(i) Initial Minimum Monthly Rent: The minimum monthly rent
payable for each of the first thirty-six (36) months of the Lease term shall be
Four Thousand Four Hundred Twenty-Five and no/100ths Dollars ($4,425.00). The
minimum monthly rent shall be increased pursuant to the provisions of either
subparagraph C(ii) or subparagraph C(iii) below.
(ii) Fixed Minimum Monthly Rent Increases: The Initial minimum
monthly rent shall be increased to the amount(s) stated below and shall be
payable for each of the months during the periods stated below:
MINIMUM
MONTHLY RENT PERIOD
------------ ------
$4,547.92 May 1, 1999 - April 30, 2000
$4,670.84 May 1, 2000 - May 31, 2001
D. Additional Rent: Tenant shall also pay to Landlord its proportionate
share of the amount of increases in taxes and the amount of increases in
insurance costs and common area maintenance costs for the Premises in excess of
the respective taxes and insurance costs for the Base Year. The "Base Year" for
purposes of determining increases in taxes is 1996 and for purposes of
determining increases in insurance costs is calendar year 1996. Tenant's
proportionate share of increases in taxes is 2.74% and Tenant's proportionate
share of increases in insurance costs is 2.74%.
E. Prepaid Rent: Tenant shall pay Landlord Four Thousand Four Hundred
Twenty-Five and no/100ths Dollars ($4,425.00) at the same time Tenant executes
and delivers this Lease to Landlord as prepaid rent which shall be applied by
Landlord to the payment of rent as it becomes due under this Lease.
F. Security Deposit: Tenant shall deposit Four Thousand Four Hundred
Thirty and no/100ths Dollars ($4,430.00) at the same time Tenant executes and
delivers this Lease to Landlord as security (the "security deposit") subject to
the provisions of Paragraph 7.1.
G. Use: Tenant shall use and occupy the Premises only for the following
specifically stated purpose: office and warehouse for distribution and
representation of high technology products.
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H. Address for Notices: Landlord's address for notices is Fuller
Management Group, 14 Inverness Drive East, Building C, Suite 228, Englewood, CO
80112. Tenant's address for notices is 14 Inverness Drive East, Building F, Unit
116, Englewood, CO 80112.
I. Tenant's Public Liability Insurance: Tenant shall obtain
comprehensive public liability insurance with limits of not less than One
Million and no/100ths Dollars ($1,000,000.00) for injury or death of any one or
more persons and One Million and no/100ths Dollars ($1,000,000.00) for property
damage.
K. Broker: The following person(s) have performed services for Tenant or
Landlord in connection with this Lease and no other persons shall have any claim
for any compensation in connection herewith: Jeffrey D. Roemer and Timothy I.
Gilchrist of Fuller and Company, Colorado Real Estate Brokers License # 07612.
2.1 THE PREMISES: The Premises described in Paragraph 1.1, subparagraph A
is shown as the cross-hatched space within the building complex shown on the
attached EXHIBIT A. The building complex (the "Complex") consists of, among
other things, the land, the physical improvements, landscaping, parking
areas, sidewalks and the common area shown on the general site plan which is
attached as EXHIBIT A. Tenant agrees that Landlord, in Landlord's sole
discretion may change the size, shape, location, number and extent of the
improvements shown on EXHIBIT A and may eliminate or add any improvements to
any portion of the Complex.
2.2 LANDLORD'S RESERVED RIGHTS FOR THE COMPLEX: Landlord reserves the absolute
rights to itself to (a) use the roof, exterior walls and the area beneath the
Premises and (b) install, use, maintain and replace equipment, machinery, pipes,
conduits and wiring located within the Premises which serve other parts of the
Complex in a manner and in locations which do not unreasonably interfere with
Tenant's use of the Premises.
2.3 COMMON AREAS OF THE COMPLEX:
A. Nonexclusive Right to Use Common Areas of the Complex: Landlord
shall make available during the term of this Lease such portions of the
Complex as Landlord in its sole, conclusive and exclusive judgment designates
from time to time for use by all tenants of the Complex as common area,
Tenant shall have a nonexclusive right during the term of this Lease to use
the common area of the Complex for itself, its employees, agents, customers,
servants and invitees solely for those purposes which Landlord in its sole,
conclusive and exclusive judgment designates as proper common area use.
B. Common Area Defined: The term "common area" means the portions of the
Complex which from time to time are designated and/or improved by Landlord for
the common use by more than one tenant of the Complex including, without
limitation, the following: the land and facilities used as parking areas; access
and perimeter roads; truck passageways (which may be in whole or in part
subsurface); service corridors and stairways providing access to and from
various premises within the Complex; landscaped areas; exterior walks,
stairways, elevators and/or ramps; interior corridors, elevators and/or stairs;
and code required public facilities, but excluding any portion thereof which may
be designated by Landlord for non-common use.
3.1 TERM
A. Delivery of Possession Delayed: If Landlord is unable to deliver
possession of the Premises to Tenant on the Commencement Date specified in
Paragraph 1.1, subparagraph B, Landlord shall not be liable for any damages
resulting from such delayed possession and this Lease shall not become void or
voidable because of such event except as provided below. If delivery of
possession of the Premises is delayed beyond the Commencement Date stated above,
the term of the Lease will begin on the date Landlord tenders possession of the
Premises to Tenant and the Expiration Date specified in Paragraph 1.1,
subparagraph B shall be extended to the last day of the calendar month being the
number of full calendar months subsequent to the delayed commencement date equal
to the number of months specified in Paragraph 1.1, subparagraph B. Any such
delayed Commencement Date shall be stated in writing which must be signed by
both parties and which written statement shall constitute an amendment to this
Lease. If Landlord is unable to tender possession of the Premises to Tenant
within four (4) months after the Commencement Date stated above, then either
party shall have the right to terminate this Lease without liability to the
other. Such right must be exercised upon at least fifteen (15) days prior
written notice to the other party and the Lease shall be deemed terminated
effective on the 15th day following delivery of such notice unless Landlord
tenders possession of the Premises to Tenant during such interim period in which
case the notice shall be deemed null and void. The six-month period stated above
shall be extended by the number of days of delay caused by or attributable to
Tenant or resulting from a cause force majeure of the type specified in
Paragraph 27.1, subparagraph D of this Lease.
B. Early Possession: If the Occupancy Date specified in Paragraph 1.1,
subparagraph B is earlier than the Commencement Date, then all of the terms,
covenants and conditions of this Lease shall apply during any period of Tenant's
possession prior to the Commencement Date except that Tenant shall not be
required to pay rent for the use and occupancy of the Premises for any period of
possession prior to the Commencement Date and Landlord and Tenant agree that
Tenant may take possession of the Premises on such earlier Occupancy Date.
4.1 RENT: Tenant shall pay as rent for the use and occupancy of the Premises
the sums stated below and stated in Paragraph 1.1, subparagraph C and
subparagraph D at the times and in the manner specified below.
A. Rent Defined: The term "rent" shall mean any sum required to be paid
by Tenant to Landlord under this Lease including, without limitation, the
specified minimum monthly rent, adjustments to rent, fixed rent increases,
impounds or reimbursements to Landlord relating to taxes, insurance and/or
common area maintenance costs. If any, attorneys' fees, interest on any past due
amounts, late fees (regardless of how such sums are designated) and any sums due
to Landlord Pursuant to Paragraph 16.1, subparagraph D hereof.
B. Time for Payment: Unless the time for payment is otherwise specified,
all sums required to be paid by Tenant under this Lease shall be paid to
Landlord, without any deductions or set-offs of any kind whatsoever, in advance
on the first day of each calendar month at the address specified in Paragraph
1.1, subparagraph H of this Lease. The requirement to pay rent at such times
shall NOT be conditioned upon the tender of a statement to Tenant for any fixed
or adjusted amounts previously specified by Landlord.
C. Proration of Rental Amounts for Partial Months: if the Commencement
Date of the term of the Lease occurs on a day other
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<PAGE>
than the first day of the month, then the minimum monthly rent and/or any
impounds or other regular monthly payments for the first partial month of the
Lease term shall be prorated on the basis of a thirty-day month. If the term of
the Lease ends on a date other than the last day of the month, then the rent
for such month shall be prorated on the basis of a thirty-day month.
4.2 PAYMENT OF TAXES AND INSURANCE COSTS AS ADDITIONAL RENT: Tenant shall pay
the costs of taxes and insurance to Landlord as additional rent for the use and
occupancy of the Premises at the times, to the extent and in the manner
specified below:
A. Tenant to Pay Proportionate Share of Increases in Taxes and Insurance
Costs Over the Base Year. Tenant shall reimburse Landlord Tenant's proportionate
share of the amount of increases in taxes and the amount of increases in
insurance costs for the Premises in the manner and at the times stated below it,
for any calendar year during the Lease term after the Base Year described in
Paragraph 1.1, subparagraph D, the respective taxes and insurance costs are
greater than the amount of taxes and insurance costs for the Base Year. The
terms "taxes" and "insurance costs" are defined in Paragraph 4.2, subparagraph B
below. Landlord shall obtain the insurance coverages of the types stated in
Paragraph 4.2, subparagraph B below. Tenant's proportionate share of increases
in taxes described as a percentage in Paragraph 1.1, subparagraph D equals the
ratio which the area of the Premises bears to the total area of the building(s)
located within the Complex which are included in the same tax parcel within
which the Premises is located for which tax parcel a separate assessment is made
and tax bill is issued by the applicable taxing authority. Tenant's
proportionate share of increases in insurance costs described as a percentage in
Paragraph 1.1, subparagraph D equals the ratio which the area of the Premises
bears to the total area of the building(s) located within the Complex which are
included in the calculation of insurance costs for the Complex.
B. Taxes and Insurance Costs Defined:
(i) Taxes: "Taxes" shall mean any form of tax, assessment, excise,
license fee, business tax, rental tax, improvement bond, levy, lien, charge or
penalty (whether general, special, ordinary or extraordinary, foreseen or
unforeseen) imposed or assessed by any authority having the direct or indirect
power to tax (including any city, county, state or federal government, or any
school, agricultural, lighting, drainage, sewage, irrigation or other
improvement or other special district) against or in respect of or which may be
or become a lien or charge upon (a) any legal or equitable interest of Landlord
in the Premises or in the real property of which the Premises is a part, or (b)
Landlord's right to or receipt of rent or other income from the Premises or by
Landlord's business of leasing the Premises. "Taxes" shall also mean any tax
imposed in substitution, partially or totally, of or for any tax previously
included in the definition of taxes stated in the first sentence of this
subparagraph B(i). "Taxes" shall also mean any tax imposed for any service or
right which was not charged to property owners prior to June 1, 1988 or, if
previously charged, for any increase for such service occurring since June 1,
1988. Taxes shall also mean any tax imposed or added to real property taxes as a
result of reassessment upon a transfer or lease of all or part of Landlord's
interest in the Premises or the real property of which the Premises is a part,
Landlord and Tenant intend that all taxes of any kind or character relating to
or concerning the Premises or any part thereof, including, without limitation, a
reassessment of the value thereof, shall be included within the term "Taxes."
"Taxes" shall not include Landlord's personal, or corporate income, franchise,
inheritance or estate taxes.
(ii) Insurance Costs: Landlord shall obtain and/or maintain all of
the insurance coverage of the types described as Landlord's Property Insurance,
Landlord's Rent Insurance and Landlord's Liability Insurance. "Insurance costs"
shall mean all costs incurred by Landlord for policies of insurance, brokerage
fees, loss control costs and self-insured losses covering the following:
(a) the real property of which the Premises is a part, in an
amount not less than 100% of the replacement value of the building and other
improvements located within such real property, as such replacement value may
increase from time to time, providing protection against any peril generally
included within the designation "all risk" (which may include earthquake and
flood insurance among other things) and coverage for vandalism and malicious
mischief (all of the types of coverage listed in this subparagraph B(ii)(a)
being referred to in this Lease as "Landlord's Property Insurance");
(b) the rents payable under this Lease (such coverage being
referred to in this Lease as "Landlord's Rent Insurance");
and
(c) any general liability coverage, premises liability coverage
or other type of Insurance relating to claims arising under negligence,
intentional tort, or liability theories brought by any party in
connection with the Premises or any condition or use thereof (all of the types
of coverage listed in this subparagraph B(ii)(c) being referred to in this Lease
as "Landlord's Liability Insurance").
C. Rental Business Tax: Tenant shall reimburse Landlord for any tax or
charge imposed upon Landlord by the State of Colorado or any political
subdivision of the State, commonly known as a "rental business tax", "head tax",
"occupancy tax" or "gross receipts tax", all of which are collectively referred
to as the "Rental Business Tax" in this Lease, provided that Tenant shall only
pay the amount of such business tax that would be payable by the Landlord if the
Premises was the only property of the Landlord. For purposes of this Lease only,
the calculation of any such business tax shall include only those payments from
Tenant under this Lease upon which the taxing statute or ordinance then in
effect assesses such business tax.
D. Time for Payment: On the first day of each calendar month during the
Lease term, Tenant shall pay, to the extent stated in Paragraph 4.2,
subparagraph A an amount equal to 1/12th of the estimated taxes and insurance
costs and Rental Business Tax for the Premises for the current tax year and
policy year, as the case may be. The monthly estimated taxes and insurance costs
and Rental Business Tax shall not be less than 1/12th of the actual taxes and
insurance and Rental Business Tax for the Premises for the preceding tax year in
the case of taxes or the preceding policy year in the case of insurance.
Annually and following Landlord's receipt of the applicable tax bill, Landlord
shall notify Tenant if any additional amount is owing and Tenant shall pay
Landlord such additional amount within ten (10) days thereafter. If Tenant's
monthly tax payments exceed the actual taxes for the period covered by the
actual tax bill, such excess shall be credited against the next monthly
installment of rent and additional rent and charges due. If Tenant's monthly
payments in reimbursement for Insurance costs as defined above are less than or
exceed the insurance costs determined in the manner stated above for any policy
year, then after the actual costs for such policy year become known Landlord
shall notify Tenant of such fact in writing and Tenant shall pay any deficiency
to Landlord on the later date of ten (10) days following delivery of such notice
or the first day of the next calendar month or Landlord shall credit any excess
paid by Tenant against the next monthly installment of rent and additional rent
and charges due, as the case may be. If the Lease expires or terminates prior to
the date that the actual taxes, Rental Business Tax and Insurance costs
determined in the manner stated above are determined, Landlord shall as soon as
is practicable after such items are determined notify Tenant in writing of any
adjustment and any additional amount by Tenant or refund by Landlord shall be
paid within ten (10) days after receipt of such notice.
5.1 UTILITIES AND SERVICES:
A. Tenant's Responsibility for Utilities and Services: Tenant shall make
all arrangements for and pay for all utilities and services furnished to or used
by it at the Premises, including, without limitation, gas, electricity, water,
telephone service,
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<PAGE>
cleaning, and for all connection charges, initial deposits or other fees
therefor. Landlord shall have the option of requiring Tenant to install its own
meter(s), at Tenant's expense. Otherwise, Tenant shall pay its pro rata share of
utilities or services which are jointly metered or furnished based upon the
square footage of the building(s) within the Complex being serviced. Landlord
shall not be liable in damages or otherwise for any failure or interruption of
any utility services and Tenant shall not be entitled to terminate this Lease as
a result of such failure or interruption.
B. Common Area Maintenance Costs:
(i) Landlord's Duty to Maintain Common Areas: Definition of Common
Area Maintenance Costs: During the term of this Lease, Landlord shall keep or
cause the common areas to be kept in a neat, clean and orderly condition,
properly lighted and landscaped, and shall be charged and prorated in the manner
stated below. It is understood and agreed that the term "common area maintenance
costs" shall mean all sums expended by Landlord for payment of all work, deemed
necessary by Landlord for the management, operation, maintenance, replacement
and repair of the Complex and its common areas, including, without limitation,
the following: water, sewage service, pest control, trash collection, painting;
janitorial services; maintenance, repair and replacement when necessary of
sidewalks, curbs, bumpers, signs, planting and landscaping, and lighting and
other utilities; resurfacing, restriping, cleaning and sweeping the parking
areas: operation, maintenance and repair of any common fire protection systems,
automatic sprinkler systems and storm drainage systems: personnel to implement
such services including, without limitation, the cost of security guards; police
and fire protection services; any taxes and assessments imposed by governmental
agencies: costs of utility services for common areas; depreciation on
maintenance and operating machinery and equipment, if owned, and rental paid for
such machinery and equipment if rented: public liability and property damage
insurance on the common areas: all wage and labor costs (including salaries,
wages, payroll and similar taxes, Social Security taxes, unemployment insurance
costs, workers' compensation and other insurance and medical and other benefits)
applicable to persons engaged in the management, operation, maintenance,
replacement and repair of the common areas; fuel; supplies for the provision of
the foregoing services: and the cost of capital improvements (amortized in
accordance with generally accepted accounting principles together with interest
at the annual rate of two (2) percentage points in excess of the reference rate
being quoted by the Bank of America, N.T. & S.A. on the unamortized portion of
such cost) made after the date of this Lease which reduce other items of common
area maintenance costs or are required under any governmental law or regulation
that was not applicable to the building or complex at the time it was
constructed. Landlord may cause any of such services or items to be provided by
an independent contractor or contractors.
(ii) Time and Method of Payment: Tenant shall pay its proportionate
share of common area maintenance costs as follows:
(b) Within ninety (90) days after the end of each calendar year,
Landlord shall furnish Tenant with a statement covering the calendar year just
expired, certified as correct by Landlord, showing the total of the common area
maintenance costs, the amount of Tenant's share of same for each calendar year,
and the payments made by Tenant with respect to such calendar year. If Tenant's
share of said costs exceed Tenant's payments so made, Tenant shall pay Landlord
the deficiency within ten (10) days after receipt of said statement. If said
payments exceed Tenant's share of same, Landlord shall credit the excess against
payments thereafter due to Landlord under subparagraph B(ii)(a). If the Lease
expires or terminates prior to the date that the actual common area maintenance
costs are determined, Landlord shall, as soon as is practicable after such
common area maintenance costs are determined, notify Tenant in writing of any
adjustment and any additional amount by Tenant or refund by Landlord shall be
paid within ten (10) days after receipt of such notice.
(iii) Tenant's Proportionate Share Defined: Tenant's "proportionate
share of common area maintenance costs" shall mean the product which results
by multiplying the total of said costs by a fraction, the numerator of which
is the area of the Premises and the denominator of which is the total area of
the buildings contained within the Complex which are from time to time
occupied and open for business as of each calendar quarter.
6.1 REPAIR AND MAINTENANCE:
A. Tenant's Duty to Maintain the Premises: Throughout the Lease Term,
Tenant shall keep the Premises, including all improvements constructed by Tenant
therein, in good, clean and sanitary order, condition and repair, reasonable
wear and tear excepted, including, without limitation, the interior surface of
exterior walls: all windows, doors, door frames, and door closures; all plate
glass, storefronts and showcases: all carpeting and other floor covering; all
electrical equipment; and all plumbing systems, excluding fire sprinkler
systems, if any, installed therein. Tenant shall as necessary, or when required
by governmental authority, make modifications or replacements for any of the
items specified in the preceding sentence. Tenant waives the right to make
repairs at Landlord's expense under the provisions of any laws permitting
repairs by a tenant at the expense of the landlord because Landlord and Tenant
have made specific provisions in this Lease for such repairs and have defined
respective obligations relating thereto.
B. Landlord's Option to Make Neglected Repairs or to Maintain the
Premises: If Tenant refuses or neglects to make repairs to and/or maintain the
Premises, or any part thereof, in a manner reasonably satisfactory to Landlord,
Landlord shall have the right, but shall not be obligated, to enter upon the
Premises or any part thereof and cause such repairs or maintenance to be made on
behalf of and for the account of Tenant. In such event, such work shall be paid
for by Tenant as additional rent promptly upon demand, together with interest
thereon at the reference rate then being charged by the Bank of America N.T. &
S.A. plus four percent (4%) per annum.
C. Landlord's Duty to Maintain and Repair Foundations, Exterior Walls,
Roof, Fire Sprinkler System and Landlord's HVAC Equipment: Landlord shall
keep in good working order, condition and repair the foundations, exterior
walls (excluding the interior of all walls and the exterior or interior on
any windows, doors, plate glass and display windows), roof (excluding
interior ceiling), fire sprinkler systems (if any) and Landlord's HVAC
(heating, ventilation and air conditioning) equipment (if any) of or in the
Premises, except for any damage thereto caused by any act negligence or
omission of Tenant (excluding reasonable wear and tear), and except for any
structural alterations or improvements required by any governmental agency by
reason of Tenant's use and occupancy of the Premises, and provided Landlord
shall be exempt from any liability, injury or damage with respect to the
roof, fire sprinkler system and HVAC equipment. The term "Landlord's HVAC
equipment" as used in this Paragraph 6.1, shall mean and include all HVAC
equipment servicing the Premises as of the Commencement Date of this Lease.
Tenant expressly agrees that it will not enter nor permit its employees,
agents, customers, servants or invitees to enter upon the roof of the
Premises without the prior written consent of Landlord.
6.2 CONDITION OF THE PREMISES:
A. At Commencement Date or on Early Possession: Tenant acknowledges that
neither Landlord nor its agents have made any promise to alter, remodel or
improve the Premises or the building or any other improvement thereon, except as
expressly provided in a written rider, addendum or amendment to this Lease.
Tenant acknowledges neither Landlord nor its agents have made any representation
or warranty with respect to the condition of the Premises or the building or any
other improvement thereon. Tenant's taking possession of the Premises shall
conclusively establish that the Premises and the building and other improvements
located thereon were, at such time, taken by Tenant "as is" and Tenant hereby
waives any claims which may hereafter arise against
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Landlord resulting from the condition of the Premises or any improvement
thereon. Except as otherwise provided in this Lease, Tenant shall only
maintain on the Premises such furniture, furnishings, equipment and other
property as may be required to use the Premises for the purposes described in
Paragraph 1.1, subparagraph G.
B. Removal of Personal Property and Trade Fixtures at Expiration or
Termination: Any such property of Tenant may be sold, encumbered, replaced or
removed from the Premises at any time by Tenant provided, however, that upon
expiration or earlier termination of this Lease, Tenant agrees to remove any
such property from the Premises if so directed by Landlord, and provided further
that Tenant shall repair any and all damage to the Premises or building
resulting from the removal of any of Tenant's property after expiration or
termination of the Lease.
C. At Expiration or on Termination of the Lease: Upon the expiration or
other termination of this Lease, Tenant shall surrender the Premises to Landlord
broom clean in a good state of repair and in the same configuration and at least
as good condition as when received, subject to the provisions of Paragraphs 6.1,
6.2 and 10.1 of this Lease, and Tenant shall remove all its property as directed
by Landlord. Any and all alterations, improvements, changes or repairs to the
Premises and all electrical, plumbing, sewage, and other mechanical systems on
or in the Premises or the building and other improvements forming a part
thereof, exclusive of Tenant's trade fixtures, shall be surrendered with the
Premises upon termination of this Lease in good and working order, reasonable
wear and tear excepted. Any property left on or in the Premises upon expiration
or other termination of this Lease may, at Landlord's option, either be deemed
abandoned and, at Landlord's option, be disposed of or be placed in storage in
a public warehouse in the name of, for the account of and at the sole expense
and risk of Tenant, but Tenant shall remain liable to Landlord for any and all
damages to the Premises caused by removal of Tenant's property and for any or
all costs and expenses paid or incurred by Landlord in connection with the
foregoing. Tenant hereby agrees to release, indemnify, hold harmless, protect
and defend Landlord from any and all loss, cost, damage and expense, including
attorneys' fees arising out of any damage to or loss of any property left by
Tenant upon the Premises upon the expiration or other termination of this Lease
and with respect to any and all claims and liability relating to such property.
7.1 SECURITY DEPOSIT: Landlord shall hold the security deposit described in
Paragraph 1.1, subparagraph F as security for Tenant's performance of its
respective obligations, covenants and conditions under this Lease. The
security deposit shall be increased at the same time(s) and in the same
proportion(s) as the minimum monthly rent increases under Paragraph 1.1,
subparagraph C(ii) or C(iii). Tenant shall deposit with the Landlord the
amount of such increase on the same date as the first respective installment
of increased minimum monthly rent is due. If Tenant defaults in the
performace of its obligations, covenants and conditions under the Lease,
Landlord may use the security deposit, or any portion of it, to cure the
default or to compensate Landlord for all damage sustained by Landlord
resulting from Tenant's default. If any portion of the security deposit is so
used, Tenant shall deposit cash with Landlord in an amount sufficient to
restore the security deposit to the full amount stated above, as previously
adjusted, within five (5) days after Landlord has demanded such replenishment.
If Tenant is not in default at the expiration or termination of this Lease,
Landlord shall return the security deposit to Tenant within thirty (30) days
after expiration or termination of this Lease subject to the conditions that
Tenant has surrendered possession of the Premises to Landlord free of any
subtenants or other persons claiming possession or right to occupy the
Premises and Tenant has performed all of its obligations under this Lease,
Landlord will commingle the security deposit with Landlord's general and
other funds and shall not be required to pay interest on the security
deposit. No trust relationship is created herein between Landlord and Tenant
with respect to the security deposit. The use of the security deposit by
Landlord in the manner stated above shall not limit or restrict Landlord from
exercising any other rights or remedies provided to Landlord under this Lease
or under law or equity if Tenant defaults. If Landlord sells or otherwise
transfers the Premises or any interest in this Lease, Landlord may assign the
security deposit to the purchaser or other transferee thereof and if Landlord
makes such assignment Landlord shall no longer be liable to Tenant and Tenant
shall look solely to such purchaser or other transferee for the return of the
security deposit. Tenant shall not assign or encumber its contingent rights
to the return of the security deposit.
8.1 USE: Tenant shall not use or permit the Premises to be used for any other
purpose than that stated in Paragraph 1.1, subparagraph G without the prior
written consent of Landlord. Tenant expressly acknowledges that Landlord or its
agents have not made any representations as to the suitability of the Premises
for the use stated above and Tenant has been advised by Landlord or its agents
to make its own independent determination as to the suitability of the Premises
to the stated use, and any related zoning or other laws, ordinances, regulations
and directives or any applicable covenants, conditions and restrictions
affecting the Premises which may limit or restrict the stated use. The taking
of possession of the Premises by Tenant shall conclusively establish that the
Premises were at such time in a satisfactory condition. Tenant shall not
commit, or permit to be committed, any waste upon the Premises, or any nuisance
or other act in violation of public policy. Further, Tenant shall not commit,
or suffer to be committed, anything which would subject the Landlord to
responsibility or liability for injury or damage to any person or property or
which would invalidate or increase the cost of any insurance coverage described
in this Lease. Tenant shall comply with all rules, regulations, orders and
requirements of Landlord's then current insurance carrier(s) with respect to the
use of the Premises and necessary for maintaining reasonable insurance coverage
of the types specified in this Lease. Tenant shall not do or permit anything to
be done in, or about the Premises or the Complex which will in any way obstruct
or interfere with the rights of other tenants or occupants of the Complex, or
injure or annoy them, or use or allow the Premises to be used for any improper,
immoral, unlawful or objectionable purpose.
A. No Exterior Storage: Tenant shall not store or permit to be stored on
the Premises, other than within the building which is the principal building
located on the Premises in the case of a free-standing building or within the
Premises in the case where the Premises is a part of a multi-tenant structure,
any goods, machinery, merchandise, equipment or other property or materials
unless such exterior storage is specifically provided for by rider, addendum or
other amendment to this Lease and only is such exterior storage is permitted by
law, ordinance, rule or regulation of all applicable governing authorities
having jurisdiction over the Premises.
B. Dust and Fume Control: No wood shaping or spraying material processes
will be performed on any part of the Premises except in an environment
controlled by appropriately designed and installed air-handling equipment which
shall be maintained and operated at all times during the Lease term as required
to prevent hazardous accumulations of wood and chemical pollutants in the
atmosphere within the Premises, and all equipment installations required to
comply with this subparagraph B shall be commenced, performed and completed
promptly after the commencement date. Tenant warrants to Landlord that such
installation shall be made in correctly designed facilities and in a
workmanlike manner.
C. Hazardous Materials: Tenant shall not, without first obtaining
Landlord's written consent, bring or allow to be brought upon or about the
Premises or the Complex any substance which is regulated as a toxic waste or
hazardous material under any law or regulation of any governmental authority
(including, without limitation, any toxic or hazardous substance, material or
waste listed from time to time in the United States Department of Transportation
Table (49 CFR 172.101) or by the Environmental Protection Agency as a hazardous
substance (40 CFR, Part 302) ("Hazardous Materials)."
9.1 LAW COMPLIANCE: Tenant shall comply with all applicable covenants,
conditions and restrictions now or hereafter affecting the Premises or the
Complex, with all laws, ordinances, regulations, directives and requirements of
all government authorities having jurisdiction over the Premises or the Complex
(including, without limitation, those relating to health, safety, noise,
environmental protection, waste disposal, water and air quality, and the use,
storage and disposal of Hazardous Materials) and with the certificate of
occupancy for the Premises or the Complex and shall not permit anything to be
done on the Premises or within the Complex in violation thereof. Upon written
demand, Tenant shall discontinue any use of the Premises in violation of any
covenants, conditions and restrictions, or of any law, ordinance, regulation or
governmental directive or of the certificate of occupancy.
10.1 ALTERATIONS AND REPAIRS:
A. Landlord's Consent Required: Conditions of Consent: Tenant shall not
make or cause to be made any exterior, interior,
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structural, electrical, ventilation, air conditioning or other type of
alterations, improvements, additions, changes or repairs in or to the
Premises, without Landlord's prior written consent. Landlord may arbitrarily
withhold consent to any alteration or improvement which affects, or is
visible from, the exterior of the Premises or any building located within the
Premises or any building of which the Premises forms a part or which affects
the structural components of the Premises or any building located within the
Premises or any building of which the Premises forms a part. As to all other
types of alterations, improvements, additions, changes or repairs to the
Premises, Landlord's consent shall not be unreasonably withheld. However, as
a condition to granting its consent, Landlord may impose reasonable
requirements including, without limitation, requirements as to the manner and
time for the performance of any such work and the type and amount of
insurance and bonds Tenant must acquire and maintain in connection therewith
and the requirement that Tenant deposit with Landlord additional security
deposit(s) sufficient to defray the costs of restoration of the Premises to
the same configuration and at least as good condition as existed prior to the
installation of the proposed improvements, alterations, additions, or
changes. At the completion of such work, Tenant shall deliver to Landlord
the "as-built" plans and specifications and a certificate from Tenant's
architect or engineer stating that the work has been completed in full
compliance with such plans and specifications, such certificate to be in form
and substance reasonably satisfactory to Landlord. In addition, at
Landlord's option, Landlord shall have the right: to approve the contractors
or mechanics performing the work; to approve all plans and specifications
relating to the work; to review the work of Tenant's architects, engineers,
contractors or mechanics and to control any construction or other activities
being undertaken in connection with the Premises, with Landlord to be
reimbursed for any costs incurred in connection with such review and/or
control; and to order reasonable changes in the work in instances in which
materials or workmanship is defective or not in accordance with plans or
specifications previously approved by Landlord. Tenant shall provide and pay
for all alterations, improvements, additions, changes or repairs to the
Premises at Tenant's sole expense, except as expressly provided in a rider,
addendum or amendment to this Lease. Except for trade fixtures regularly
used in Tenant's business, all improvements, alterations, additions, changes
or repairs to the Premises shall become the property of Landlord at the time
such items are installed and attached to the Premises and shall be
surrendered with the Premises in good and working order or condition upon
termination of this Lease. However, Landlord may, by written notice to Tenant
given at least thirty (30) days prior to termination of this Lease, require
Tenant to remove any or all improvements, alterations, additions, or fixtures
installed or made by Tenant on or to the Premises and to repair any damages
to the Premises caused by such removal.
B. Tenant's Duty to Repair: All damage or injury to the Premises or
Complex caused by the act or negligence of Tenant or its employees, agents,
customers, servants or invitees shall be promptly repaired by Tenant at
Tenant's expense and to the satisfaction of Landlord in accordance with this
Paragraph 10.1: provided, however, Landlord may, at its option, make or
cause to be made any such repairs and may charge Tenant for any costs and
expenses paid or incurred, by Landlord in connection therewith. Except as
specifically provided in Paragraph 15.1 below, there shall be no reduction in
rent payable by Tenant and no liability on the part of Landlord by reason of
inconvenience, annoyance or injury to business arising from the making of any
repairs, alterations or improvements to any portion of the Premises or the
Complex or fixtures and equipment related thereto, and no liability on the
part of Landlord for failure to make repairs, alterations or improvements to
the Premises or the Complex or any fixtures and equipment related thereto
which are necessitated by reason of the act or negligence of any other tenant
or occupant of the Complex.
C. Law Compliance and Improvement Work: All work in connection with any
alterations, improvements, changes, additions or repairs in the Premises or the
Complex, made for the benefit of Tenant shall be performed in full compliance
with all laws, ordinances, regulations, rules and requirements of all
governmental entities having jurisdiction and in full compliance with all rules,
orders, directions, regulations and requirements of Landlord's then current
insurance carrier(s). If there is now or if there shall be installed in the
Premises a sprinkler system, and if Landlord's then current insurance carrier(s)
or any governmental authority having jurisdiction requires or recommends that
any changes, modifications or alterations to the sprinkler system, or requires
or recommends additional sprinkler heads or other equipment be made or supplied
by reason of Tenant's business or the improvements it has added or the location
of partitions, trade fixtures or other contents of the Premises, or if any such
changes, modifications, alterations, additions or other equipment become
necessary to prevent imposition of a penalty or charge against the full
allowance for a sprinkler system in the fire insurance rate as fixed by
Landlord's then current insurance carrier(s), Tenant shall, at its own cost,
promptly make and supply all such changes, modifications, alterations,
additional sprinkler heads or other equipment.
D. Notices of Nonresponsibilty, Mechanics' Liens and Bonds: Before work
is commenced as provided in this Paragraph 10.1, Tenant shall give Landlord at
least fifteen (15) days written notice to afford Landlord an opportunity to post
appropriate notices of nonresponsibilty. Tenant shall secure at Tenant's own
cost, a completion and lien indemnity bond, satisfactory to Landlord, for said
work. Any mechanics' liens for work claimed to have been performed for, or
materials claimed to have been furnished to, Tenant shall be discharged by
Tenant, by bond or otherwise, within ten (10) days after the filing of such
lien, at Tenant's sole expense. In the event that Tenant does not, within ten
(10) days following the recording of notice of any such lien, cause such lien to
be released of record, by payment or posting of a proper bond, Landlord shall
have, in addition to all other remedies provided herein and by law, the right,
but not the obligation, to cause the same to be released by such means as it
shall deem proper, including payment of the claim giving rise to such lien. All
sums paid by Landlord and all expenses incurred by it in connection therewith,
including attorneys' fees and court costs shall be payable to Landlord by Tenant
on demand with interest at the Maximum rate allowed by law or, if no such
maximum rate is prescribed by law, then at the Default Rate, (as defined in
Paragraph 19.1, subparagraph C(ii)(h)) from the date such expenses are incurred
by Landlord to the date payment is received by Landlord from Tenant. Tenant
agrees to indemnity, hold harmless and defend Landlord from any loss, cost,
damage or expense, including attorneys' fees, arising out of any such lien claim
or out of any other claim relating to work done or materials supplied to the
Premises at Tenant's request or on Tenant's behalf.
11.1 SIGNS: No signs shall be installed on or about the Premises without
Landlord's prior written approval. The installation and maintenance of any and
all signs by or on behalf of Tenant shall be in full compliance with all
applicable laws, ordinances, regulations, rules and orders of any governmental
authority having jurisdiction, and Tenant shall obtain all necessary licenses
and permits in connection therewith. Tenant shall install and promptly repair,
maintain and service all such signs in accordance with proper techniques and
procedures, and shall indemnity, hold harmless and defend Landlord from all
loss, cost, damage or expense, including attorneys' fees arising out of any
claim relating to the installation, existence, operation, maintenance, repair,
removal or condition of any such sign. On or before the termination of this
Lease, Tenant shall, at its sole expense, remove all such signs in a manner
satisfactory to Landlord and shall immediately repair, at Tenant's sole expense,
any injury or damage caused by removal. All costs and expenses relating to all
such signs shall be borne solely by Tenant.
12.1 INDEMNIFICATION: Tenant agrees to indemnity, hold harmless, defend and
protect Landlord and its shareholders, partners, directors, officers, agents
and employees from any loss, cost, damage, liability or expense (including,
without limitation, attorneys' fees and legal costs) arising out of or
related to any claim, suit or judgment brought by or in favor of any
person(s) for damage, loss or expense (including, without limitation, bodily
injury, including death, or property damage) which is occasioned by or in any
way attributable to or arising out of the use or occupancy of the Premises or
the acts or omissions of Tenant or its employees, agents, customers, servants
or invitees or the breach or default by Tenant of any of its obligations
under this Lease, including, without limitation, the provisions set forth in
Paragraph 8.1 and Paragraph 9.1 above. This indemnification of Landlord by
Tenant includes, without limitation, costs incurred in connection with any
investigation of site conditions or any clean up, remedial removal or
restoration work required by any federal, state or local government agency
because of Hazardous Materials present in the soil or ground water on or
under the Premises. However, Tenant shall not be responsible for damage,
loss or expense caused by the sole negligence or willful misconduct of
Landlord or its agents or employees. Tenant's obligations under this
Paragraph 12.1 shall expressly survive the termination of this Lease.
Landlord shall not be liable for, and is released by Tenant with respect to,
any damage, loss or expense occurring on or about the Premises during the
Lease term unless caused by the sole negligence or willful misconduct of
Landlord or its agents or employees. The limits of any insurance required to
be maintained by Landlord or Tenant, as provided in Paragraph 13.1 of this
Lease, shall not be deemed to limit Tenant's obligations under this Paragraph
12.1 or under any other provision of this Lease. Neither Landlord not its
agents or employees shall be liable for any damage to property resulting from
fire, earthquake or earth movement, explosion, falling glass or other
materials, steam, gas, electricity, water or rain which may leak from any
part of the building or other improvements forming a part of the Premises or
of which the Premises is a part, or from the pipes, appliances or plumbing
works therein, or from the roof, street or subsurface thereof or from any
other place or resulting
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from dampness or any other cause whatsoever, unless caused by or due to the sole
negligence or willful misconduct of Landlord, its agents or employees. Landlord
or its agents shall not be liable for interference with light or other
incorporeal hereditaments. Landlord shall not be liable for any latent defect
in the Premises or the building or other improvements forming a part thereof
or of which the Premises is a part. Tenant shall give prompt notice to
Landlord in case of fire or accidents in the Premises or the building or of
defects therein or in the fixtures or equipment related thereto.
13.1 INSURANCE REQUIRED TO BE OBTAINED BY TENANT:
A. Public Liability Insurance: At all times during the Lease term,
Tenant shall maintain in full force comprehensive public liability insurance
as may be generally available from insurance companies of the type described
below with limits of not less than those required in Paragraph 1.1.
subparagraph 1 and such policy(ies) shall name Landlord and Landlord's
managing agent as additional insureds. The term of such insurance policy may
be for such period as shall be designated by Tenant; provided, however, that
within thirty (30) days prior to the expiration of such policy, Tenant shall
procure another policy of said insurance so that, throughout the entire Lease
term Landlord and Landlord's managing agent shall always be additional
insureds under policies with insurance coverages of the type specified. The
policy limits shall never be decreased, but shall be reasonably increased in
accordance with increases, if any, necessary to maintain policy limits from
time to time customary and usual for premises of the similar type, size and
use as the Premises in the city and county where the Premises is located.
Increases in the policy limits shall not be required more frequently than
once a year.
B. Insurance on Tenant's Personal Property, Improvements and Alterations:
Tenant at its cost shall maintain on all its personal property, leasehold
improvements, and alterations, in, on, or about the Premises, a policy of
standard fire and extended coverage insurance, with vandalism and malicious
mischief endorsements in the amount of the full replacement cost thereof.
Landlord shall in no way be liable for damage to Tenant's personal property,
alterations and improvements.
C. Plate Glass Insurance: Tenant at its cost shall maintain full
coverage plate glass insurance on the Premises.
D. General Requirements: All the insurance required of Tenant under this
Lease shall (i) be issued by insurance companies authorized to issue the
relevant insurance and to do business in Colorado with at least an "A", class X
rating, as rated in the most recent edition of Best's Rating Guide, (ii) be
issued as a primary policy but may include umbrella policies, (iii) contain an
endorsement requiring thirty (30) days written notice from the insurance company
to Landlord, Tenant and Landlord's lender, if any, before cancellation or
change in the coverage, scope, or amount of any policy and (iv) shall name
Landlord and Landlord's managing agent (and at Landlord's option, the holder of
any mortgage or deed of trust affecting the Premises) as additional insureds.
Each policy or a certificate thereof shall be deposited with the Landlord on or
before the commencement of the term, and on renewal of the policy not less than
twenty (20) days before expiration of the term of the policy.
14.1 WAIVER OF SUBROGATION: Landlord and Tenant mutually waive any and all
rights of recovery against each other and each of their respective officers,
employees, agents and representatives for loss of or damage to the other or its
property or the property of others under its control, arising from any cause
insured against but only to the extent of such insurance, exclusive of any
deductible amount and any amount in excess of policy limits, under any policy of
insurance carried by such waiving party. Tenant shall obtain and furnish
evidence to Landlord of the waiver by Tenant's insurance carriers of any right
of subrogation against Landlord.
15.1 DAMAGE OR DESTRUCTION:
A. Landlord's Duty to Restore When the Premises is Destroyed: If,
during the term, the building or other improvements located on the Premises
or the building and other improvements in which the Premises is located are
totally or partially destroyed from any cause covered by Landlord's Property
Insurance described in Paragraph 4.2 subparagraph B(ii)(a), rendering the
Premises totally or partially inaccessible or unusable, Landlord shall
restore the building or other improvements located on the Premises or the
building and other improvements in which the Premises is located to
substantially the same condition as they were in immediately before the
destruction, if the restoration can be made under the existing laws and can
be completed within 180 days after the date of destruction. Such destruction
shall not terminate this Lease. If the restoration cannot be made within
said 180 days, then within 10 days after the parties determine that the
restoration cannot be made within said period, either party can elect to
terminate this Lease immediately by giving written notice to the other. If,
during the term, the building or other improvements located on the Premises
or the building and other improvements in which the Premises is located are
totally or partially destroyed from a risk not covered by Landlord's Property
insurance described in Paragraph 4.2 subparagraph B(ii)(a) rendering the
Premises totally or partially inaccessible or unusable, Landlord shall have
the sole, exclusive and conclusive option and right to restore the building
or other improvements located on the Premises or the building and other
improvements in which the Premises is located to substantially the same
condition as they were in immediately before destruction, if the restoration
can be made under the existing laws and can be completed within 180 days
after the date of destruction. Such destruction shall not terminate this
Lease. If the existing laws do not permit the restoration, either party can
terminate the Lease immediately by giving written notice to the other party.
If the restoration can be made within 180 days after the date of destruction,
Landlord must elect either to terminate this Lease or to restore the building
or other improvements located on the Premises or the building and other
improvements in which the Premises is located by giving notice to Tenant
within 10 days after determining the restoration can be completed within said
180 days after the date of destruction. However, if Landlord elects to so
terminate this Lease, Tenant may elect to pay for the cost of such restoration
and override Landlord's election to terminate by providing Landlord notice of
Tenant's election to pay for such restoration accompanied by payment of the
estimated costs of such restoration with 10 days after Tenant's receipt of
Landlord's notice to terminate Tenant's right to pay for such restoration and
override Landlord's election to terminate the Lease can be exercised only if
restoration can be completed within said 180 day period and 180 day period
remains within the term of this Lease. If Landlord elects to terminate this
Lease and Tenant does not elect to pay for the costs of restoration, this
Lease shall terminate on the 10th day after Landlord notifies Tenant of its
intention to so terminate.
B. Extent of Landlord's Obligation to Restore: If Landlord is required
or elects to restore the Premises as provided in this Paragraph 15.1, Landlord
shall not be required to restore alterations and improvements made by Tenant,
Tenant's trade fixtures and Tenant's personal property, such excluded items
being the sole responsibility of Tenant to restore any and all common area
maintenance costs.
C. Abatement or Reduction of Rent: In the case of destruction, and such
destruction is not caused by the negligence of Tenant, its employees, agents,
customers, servants or invitees, there shall be an abatement or reduction of
minimum monthly rent only between the date of destruction and the date of
substantial completion of restoration, based on the extent to which the
destruction interferes with Tenant's use of the Premises.
D. Loss During the Last Part of the Term: If destruction of the type
specified in this Paragraph 15.1 occurs during the last year of the term,
Landlord can terminate this Lease by giving written notice to Tenant no later
than 15 days after the date of destruction. However, if Tenant has been granted
an option to extend the term of the Lease by rider, amendment or addendum to
this Lease, and the time within which the option can be exercised has not
expired, and Tenant exercises the option to extend the term as provided in said
rider, amendment or addendum, then Landlord shall restore the Premises subject
to the provisions stated in this paragraph 15.1.
E. Waivers: Tenant hereby waives all rights under any statute or law of
the State of Colorado, currently existing or hereinafter enacted or promulgated,
authorizing a tenant to make repairs at the expense of a landlord or to
terminate a lease upon the complete or partial destruction of the premises;
provided, however, that such waivers are not intended to limit or impair any
express rights or privileges which may have been granted to Tenant in this
Lease.
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* , and subject to Tenant's right to reaffirm its interests in Premises and this
Lease as defined in this Paragraph 16.1C
16.1 ASSIGNMENT AND SUBLETTING:
A. Restrictions and Conditions: tenant shall not, either voluntarily or
by operation of law, directly or indirectly, sell, assign, transfer or
hypothecate this Lease or sublet the Premises, or any part thereof, or permit
the Premises, or any part thereof, to be occupied by anyone other than Tenant or
Tenant's employees without prior written consent of Landlord in each instance. A
transfer of stock control in Tenant, if Tenant is a corporation, or the transfer
of any partnership interest in Tenant, if Tenant is a partnership, shall be
deemed an act of assignment hereunder. Subject to the provisions of
subparagraphs B, C and D of this Paragraph 16.1. Landlord's consent to
assignment or subletting (subject to the procedures set forth in subparagraph A
of this Paragraph 16.1) shall not be unreasonably withheld, provided the
proposed assignee or subtenant (i) is satisfactory to Landlord as to credit,
character and professional standing, (ii) will meet any other tenant
requirements then generally imposed by Landlord with respect to new tenants of
the Complex, or for the Premises, (iii) will use the Premises for purposes which
are reasonably acceptable to Landlord and which will not conflict with any use
or zoning restriction, not increase the burdens on the facilities and equipment
servicing the Premises and not conflict with any other commitments which
Landlord has theretofore made to other tenants in the Complex and (iv) will not
use any part of the Premises for the generation, storage, use or disposal of any
Hazardous Material. Landlord may, however, withhold such consent if, in
Landlord's reasonable judgment, the occupancy of the proposed assignee or
subtenant will tend to impair the character or dignity of the building or impose
any additional burden upon Landlord in the operation of the building. Any sale,
assignment, mortgage, transfer or subletting of this Lease which is not in
compliance with the provisions of this Paragraph 16.1 shall be void and shall,
at the option of Landlord, terminate this Lease. The consent by Landlord to an
assignment or subletting shall not be construed as relieving Tenant from
obtaining the express prior written consent of Landlord to any further
assignment or subletting or as releasing Tenant from any liability or obligation
hereunder, whether or not then accrued. Tenant agrees that in no event will it
attempt to assign or sublet to any existing tenant or subtenant of the Complex.
B. Notice and Documentation: As conditions precedent to any assignment of
the whole of Tenant's interest in this Lease or the subletting by Tenant of the
whole or any part of the Premises, (i) at least thirty (30) days prior to any
proposed assignment or subletting. Tenant shall submit to Landlord a statement
containing (a) the name and address of the proposed assignee or subtenant; (b) a
current financial statement of the proposed assignee or subtenant containing
therein bank and other credit references; (c) the specific type of use proposed
for the Premises; and (d) all of the principal terms and conditions of the
proposed assignment or subletting including, without limitation, the proposed
commencement and expiration dates of the term thereof and the amount of rent to
be payable by the assignee or subtenant and a floor plan delineating the
proposed, assigned or sublet area; and (ii) Tenant shall deliver to Landlord an
original assignment or sublease executed by Tenant and the proposed assignee or
subtenant on a form approved by Landlord which shall expressly provide (a) for
the assumption by such proposed assignee or subtenant of all of Tenant's
obligations under the terms of this Lease; (b) that Tenant shall indemnify and
hold Landlord harmless from any and all claims, obligations and liabilities
(including reasonable attorneys' fees) arising from such assignee's or
subtenant's occupancy and use of the Premises, or any portion thereof, whether
such claim, obligation or liability arises from such assignee's or subtenant's
conduct, activity, work or any other matter in, on or about the Premises and/or
the building; (c) that Tenant shall further indemnify and hold Landlord harmless
from any costs, obligations or liabilities (including reasonable attorneys'
fees) arising from any act or negligence of such assignee or subtenant, or any
employee, agent, customer, servant or invitee of such assignee or subtenant, and
from any claim, action or proceeding brought thereon; (d) that in no event shall
Tenant, by reason of Landlord's approval of the assignment or sublease, be
deemed relieved from any obligation or liability under the Lease, including,
without limitation, the obligation to obtain Landlord's consent to any further
assignment or subletting; and (e) that such proposed assignment or subletting
shall not be deemed effective for any purpose unless and until Landlord's
written consent thereto is obtained. Tenant shall reimburse Landlord for all
costs incurred by Landlord in connection with its review and consideration of
any proposed assignment, transfer, mortgage, pledge, encumbrance or
hypothecation of the Lease or subletting of the Premises, or any part thereof,
including, without limitation, reasonable attorneys' fees.
C. Right of Recapture: In lieu of giving or withholding its consent to
any proposed subletting or assignment, Landlord shall have the following
right to recapture the Premises and shall thereafter be free to lease the
area subject to the proposed assignment or sublease directly to the proposed
assignee or sublessee or any other person without such act being construed to
(1) unreasonably interfere with Tenant's contractual relations, (2)
constitute unfair competition or (3) otherwise create any claim or cause of
action in favor of Tenant.* In lieu of consenting or not consenting,
Landlord may within thirty (30) days after Landlord has received all of the
documentation described in subparagraph B of this Article 16.1, at its
option, (i) in the case of the proposed assignment or subletting of Tenant's
entire leasehold interest, terminate Tenant's lease in its entirety, or (ii)
terminate Tenant's lease as to that portion of the Premises which Tenant has
proposed to sublet.** In the event Landlord elects to terminate this Lease
pursuant to clause (ii) above. Tenant's obligations as to rent shall be
reduced in the same proportion that the rentable area of the portion of the
Premises taken by the proposed assignee or subtenant bears to the total
rentable area of the Premises. The reservation of Landlord's right of
recapture is a critically important economic right in favor of Landlord which
has been expressly negotiated between the parties and which requires the
release of liability on the part of Tenant for any obligations with respect
to the area subject to the proposed sublease or assignment.
D. Landlords Right to Profit: In the event of any assignment or sublease
approved by Landlord of all or any portion of the Premises, where the rent
reserved in the assignment or sublease exceeds the rent or pro rata portion of
the rent, as the case may be, for such space reserved in this Lease. Tenant
shall pay to Landlord monthly, as additional rent, at the same time as the
monthly installments of rent required hereunder, seventy five percent (75%) of
the excess of the rent reserved in the assignment or sublease, over the rent
reserved in the Lease, applicable to the assigned or subleased space. Landlord's
right to any such profit payable by the approved assignee or sublessee is a
critically important economic right in favor of Landlord which has been
expressly negotiated between the parties in contemplation of and in
consideration for the specific minimum monthly rent negotiated between the
parties and specified in this Lease. Such minimum monthly rent has been set with
the specific intent that Landlord alone is entitled to what is commonly known as
the appreciation in the equity value of the Lease and that the minimum monthly
rent would have been established at a higher rate had the parties negotiated for
any sharing in such appreciated equity value, if any.
17.1 CONDEMNATION: If the whole of the Premises or so much thereof as to render
the balance of the Premises unusable by Tenant, shall be taken or condemned by
any authority under power of eminent domain or any similar power for any public
or quasi-public use or purpose or shall be transferred by agreement in
connection with such public or quasi-public use or purpose with or without a
condemnation action or proceeding being instituted, this Lease shall terminate
as of the date of such taking or condemnation. No award for any partial or
entire taking shall be apportioned, and Tenant hereby assigns to Landlord any
award which may be made in connection with such taking or condemnation, together
with any and all rights of Tenant now or hereafter arising with respect to all
or part of such award or any proceedings relating thereto; provided, however,
that Landlord shall have no interest in any award separately made to Tenant for
the interruption of or damage to Tenant's business, or its trade figures,
equipment or movable furniture, so long as such award does not diminish the
award made to Landlord. In the event that any such taking or condemnation is
temporary or is partial and does not render the balance of the Premises unusable
by Tenant, this Lease shall not terminate but the rent and other charges payable
to Landlord by Tenant shall be equitably abated for the remainder of the Lease
term, which abatement, in the case of a temporary taking, shall be limited to
the amount of the award. As used in the preceding sentence, a condemnation or
taking shall be deemed temporary if it is for a period of six (6) months or
less. Each party waives all rights, if any, under Colorado law or statute which
would allow either party to terminate this Lease by seeking an Order or other
relief from a court having jurisdiction hereover.
18.1 TAXES ON PERSONAL PROPERTY: Tenant shall pay all taxes assessed against or
levied upon fixtures, furnishings, equipment and all personal property owned or
possessed by Tenant and located on the Premises prior to delinquency. When
reasonably possible, Tenant shall cause such fixtures, furnishings, equipment
and other personal property to be assessed and billed to Tenant separately from
the real property of which the Premises forms a part. If any or all of such
fixtures, furnishings, equipment and other personal property shall be assessed
and taxed with the real property. Tenant shall pay to Landlord its share of such
taxes within fifteen (15) days prior to delinquency. Tax bills for such taxes
shall be provided by Landlord to Tenant not later than thirty (30) days prior to
the delinquency date therefor. Any amounts due hereunder shall be deemed
additional rent payable to Landlord.
8
** provided, however, Tenant shall have ten (10) days after receipt of
Landlord's notice of its intent to exercise its rights under this Paragraph
16.1C to notify Landlord that Tenant elects, at Tenant's sole option, to
reaffirm Tenant's interest in the Premises and this Lease. If tenants fail
to reaffirm, Tenant shall have forfeited its right to reaffirm and this
Lease shall terminate.
<PAGE>
19.1 DEFAULTS AND REMEDIES:
A. Events of Default: The occurrence of any of the following shall
constitute a material default and breach of this Lease by Tenant.
(i) Failure to pay rent as such term is defined in Paragraph 4.1,
subparagraph A, when due.
(ii) Abandonment and vacation of the Premises. Failure to occupy and
operate Tenant's business at the Premises for ten (10) consecutive days shall be
deemed an abandonment and vacation of the Premises.
(iii) Failure to perform any other provision of this Lease if the
failure to perform is not cured within ten (10) days after written notice has
been given to Tenant. If the default cannot reasonably be cured within ten (1)
days. Tenant shall not be in default of the Lease if Tenant commences to cure
the default within the ten-day period and diligently and in good faith continues
to cure the default to completion. The ten-day notice described in this
subparagraph (iii) for default other than the payment of rent is in lieu of, and
not in addition to, any notice required under Colorado law.
(iv) The making by Tenant of any general assignment for the benefit of
creditors, the filing by or against Tenant of a petition under any federal or
state bankruptcy or insolvency laws (unless, in the case of a petition filed
against Tenant, the same is dismissed within thirty (30) days after filing); the
appointment of a trustee or receiver to take possession of substantially all of
Tenant's assets at the Premises or Tenant's interest in this Lease or the
Premises, when possession is not restored to Tenant within thirty (30) days; or
the attachment, execution or other seizure of substantially all of Tenant's
assets located at the Premises or Tenant's interest in this Lease or the
Premises, if such seizure is not discharged within thirty (30) days.
B. Notices: Notices given under Paragraph 19.1 shall specify the alleged
default and shall demand that Tenant perform the provisions of this Lease or pay
the rent that is in arrears, as the case may be, within the applicable time
period, or quit the Premises. No such notice shall be deemed a forfeiture or a
termination of this Lease unless Landlord so elects in the notice.
C. Landlord's Remedies: Landlord shall have the following remedies if
Tenant commits a default. These remedies are not exclusive; they are cumulative
and in addition to any remedies now or later allowed by law or equity.
(i) Landlord's Election to Retake Possession Without Termination of
Lease: Landlord may retake possession of the Premises and shall have the
right, but not the obligation, without being deemed to have accepted a
surrender thereof, and without terminating this Lease, to relet the same for
the remainder of the Term of the Lease upon terms and conditions satisfactory
to Landlord; and if the rent received through such reletting does not at
least equal the Minimum Monthly Rent and Additional Rent, Tenant shall pay
and satisfy any deficiency between the amount of rent so provided in this
Lease and the rent received through reletting the Premises; and, in addition,
Tenant shall pay all reasonable expenses incurred in connection with any such
reletting, including, but not limited to, the cost of renovating, altering
and decorating for any occupant and leasing commissions paid to any real
estate broker or agent, and attorney's fees incurred. In no event shall
Tenant be entitled to receive or have any obligation abated or offset for any
rent received by Landlord in excess of the rent so provided in this Lease.
(ii) Landlord's Election to Terminate Lease: Landlord may terminate
the Lease and forthwith repossess the Premises and be entitled to recover as
damages a sum of money equal to the total of the following amounts:
(a) The unpaid Minimum Monthly Rent and Additional Rent earned
at the time of termination, plus interest thereon at the Default Rate from the
due date;
(b) The balance of the Minimum Monthly Rent for the remainder of
the Term of the Lease less the reasonable rental value of the Premises if
subleased under the terms of this Lease that Tenant so proves;
(c) Damages for the wrongful withholding of the Premises by
Tenant;
(d) All legal expenses, including attorneys' fees, experts'
fees, witness fees, Court costs and other costs incurred in the preparation of
any litigation or consultations with counsel or incurred in exercising its
rights under the lease;
(e) All costs incurred in recovering the Premises;
(f) All costs incurred by Landlord in restoring the Premises to
good order and condition, and altering or preparing the Premises for reletting;
(g) All commissions incurred by Landlord in reletting the
Premises; and
(h) Any other amount, or other Court costs, necessary to
compensate Landlord for all detriment proximately caused by Tenant's default.
The default rate of interest is computed by allowing interest at the referenced
rate then being charged by the Bank of America, N.T. and S.A. plus four percent
(4%) per annum ("Default Rate").
(iii) Appointment of Receiver: If Tenant is in default of this Lease,
Landlord shall have the right to have a receiver appointed to collect rent and
conduct Tenant's business. Neither the filing of a petition for the appointment
of a receiver nor the appointment itself shall constitute an election by
Landlord to terminate this Lease.
(iv) Landlord's Right to Cure Tenant's Default: Landlord, at any time
after Tenant commits a default, can cure the default at Tenant's cost. If
Landlord at any time, by reason of Tenant's default, pays any sum or does any
act that requires the payment of any sum, the sum paid by the Landlord shall be
due immediately from Tenant to Landlord at the time the sum is paid, and if paid
at a later date shall bear interest at the default rate from the date the sum is
paid by Landlord until Landlord is reimbursed by Tenant. The sum, together with
interest on it, shall be additional rent.
(v) Interest on Unpaid Rent: Rent not paid when due shall bear
interest from the date due until paid at the Default Rate.
(vi) Late Charge. Tenant acknowledges that late payment by Tenant to
Landlord of rent will cause Landlord to incur costs not contemplated by this
Lease, the exact amount of such costs being extremely difficult and
impracticable to fix. Such costs include, without limitation, processing and
accounting charges, and late charges that may be imposed on Landlord by the
terms of any encumbrance and note secured by an encumbrance covering the
Premises. Therefore, if any installment of rent due from Tenant is not received
by Landlord within ten (10) days of when due, Tenant shall pay to Landlord an
additional sum of 10% of the overdue rent as a late charge. The parties agree
that this late charge represents a fair and reasonable estimate of the costs
that Landlord will incur by reason of late payment of Tenant. Acceptance of any
late charge shall not constitute a waiver of Tenant's default with respect to
the overdue amount, or prevent Landlord from exercising any of the other rights
and remedies available to Landlord.
(vii) Non-Waiver. No covenant, term or condition or the breach thereof
shall be deemed waived, except by written consent of the party against whom the
waiver is claimed, and any waiver or the breach of any covenant, term or
condition shall not be deemed to be a waiver of any preceding or succeeding
breach of the same or any other covenant, term or condition of this Lease.
Acceptance by Landlord or any performance by Tenant after the time the same
shall have become due shall not constitute a waiver by Landlord of the breach or
default of any covenant, term or condition of the Lease unless otherwise
expressly agreed to by Landlord in writing. No payment by Tenant or receipt by
Landlord of a lesser amount than the minimum monthly rent or any other
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<PAGE>
amount payable by Tenant and defined as "rent" in Paragraph 4.1, subparagraph A
shall be deemed to be other than an account of the earliest outstanding
installment of any stipulated amount due. No endorsement or statement on any
check or any letter accompanying any check or payment shall be deemed an accord
and satisfaction and Landlord may accept such check or payment without prejudice
to Landlord's rights to recover the balance of any outstanding amounts then due
and payable or past due and in arrears under this Lease and without prejudice to
any other remedy provided in this Lease. Nothing in this Paragraph 19.1 shall be
deemed to affect Landlord's rights to indemnification and other rights provided
under Paragraph 12.1 arising out of any act, omission, event or occurrence which
took place prior to the termination of the Lease whether a claim relating to
such acts, omissions, events or occurrences is made before or after the date of
termination of this Lease. The delivery of keys to any employee of Landlord or
its agents or employees shall not operate as a termination of this Lease or a
surrender of the Premises.
(viii) Right of Redemption: Tenant hereby expressly waives any and all
rights of redemption granted by or under any present or future law in the event
of Tenant's eviction or dispossession pursuant to any default under this Lease
or in the event of Landlord's obtaining possession of the Premises by reason of
Tenant's violation of any of the covenants, conditions or agreements contained
herein.
20.1 SUBORDINATION/MORTGAGEE PROTECTION:
A. Subordination: This Lease is subject and subordinate to all ground or
underlying leases, mortgages and deeds of trust which now affect the Premises or
which affect any ground or underlying leases and all renewals, extensions,
modifications or amendments thereof. This Lease may, at Landlord's option, be
made subordinate to any future ground or underlying leases, mortgages or trust
deed which may affect the Premises or which may affect the ground or underlying
leases provided, however, that the mortgagee or trust deed beneficiary or the
lessor in any such ground or underlying lease shall agree to recognize this
Lease in the event of foreclosure of Landlord's interest, provided Tenant is not
in default. Tenant further agrees to execute and deliver such instruments as may
be necessary or proper to effect the foregoing and, if Tenant fails to do so
within ten (1) days after written demand therefor, such failure shall be a
material breach of this Lease. Notwithstanding anything herein to the contrary,
upon request of Landlord, Tenant agrees to execute any appropriate instrument
making this Lease and the leasehold estate created herein superior to the lien
of any underlying or ground lease, mortgage or dead of trust.
B. Attornment: If any ground or underlying lease is terminated or deed
of trust is foreclosed, this Lease shall not terminate or be terminated by
Tenant unless Tenant was specifically named in any termination or a
foreclosure judgment or final order. If any such ground or underlying lease
is terminated or if any such mortgage or dead of trust is foreclosed, Tenant
agrees that Tenant will enter into a new lease covering the Premises for the
remainder of the Lease term on the same terms, conditions and rent as stated
in this Lease with, and at the election of the holder of any superior lease
or, if there is no superior lease in existence, with and at the election of
the holder of the fee title to the real property of which the Premises forms
a part; or at the request of the aforesaid parties in the order stated, to
attorn to them and to execute and deliver at any time and from time to time
upon such request any instrument which may be necessary or appropriate to
evidence such attornment. Landlord hereby makes no warranties or
representations that any attornment which Tenant herein agrees to make will
be accepted and recognized by any of the parties to whom such attornment is
made.
C. Mortgage Protection: If Landlord is in default under this Lease,
Tenant will accept cure and any default by any holder of any underlying or
ground lease or mortgage or deed of trust (the "Holder") whose name and address
shall have been furnished to Tenant in writing. Tenant may not terminate this
Lease for Landlord's default unless Tenant has given notice thereof to each such
Holder and the default is not cured within thirty (30) days thereafter or such
greater time as may be reasonably necessary to cure such default. A default
which cannot reasonably be cured within said 30-day period shall be deemed cured
within said period if work necessary to cure the default is commenced within
such time and proceeds diligently thereafter until the default is cured. If any
Holder should require, as a condition of any underlying or ground lease,
mortgage, or deed of trust, a modification of the provisions of this Lease,
Tenant shall approve and execute any such modification promptly after such
request, provided no such modification shall relate to the rent payable
hereunder, or the length of the term hereof or otherwise materially after the
rights or obligations of Tenant hereunder.
21.1 QUIET ENJOYMENT. Landlord covenants that if Tenant shall not be in default
in the performance of all the terms, covenants, conditions, provisions and
agreements required of Tenant under this Lease, Landlord or anyone claiming by
or through Landlord will not disturb Tenant's quiet enjoyment of the Premises,
subject, however, to the terms of this Lease and of the ground and underlying
leases, mortgages and deeds of trust which may exist from time to time.
22.2 ESTOPPEL CERTIFICATES: Tenant agrees that, at any time and from time to
time upon not less than ten (10) days prior notice by Landlord, Tenant will
execute, acknowledge and deliver to Landlord a statement in writing certifying
that this Lease is unmodified and in full force and effect (or if there have
been modifications, that the same is in full force and effect as modified and
stating the modifications), and the dates to which the minimum monthly rent,
additional rent and other charges have been paid in advance, if any, and stating
whether or not to the best knowledge of the signer of such certificate. Landlord
is in default in the performance of any covenant, agreement or condition
contained in this Lease and, if so, specifying each such default of which the
signer may have knowledge, it being intended that any such statement delivered
pursuant to this Paragraph 22.1 may be relied upon by any prospective purchaser
or mortgagee of the Premises or any other person designed by Landlord. Tenant's
failure to deliver said statement in the time required shall be conclusive upon
Tenant that: (i) the Lease is in full force and effect, without modification
except as may be represented by Landlord; (ii) there are no uncured defaults in
Landlord's performance and Tenant has no right of offset, counterclaim or
deduction against Rent under the Lease; and (iii) no more than one month's rent
has been paid in advance.
23.1 LANDLORD'S RESERVED RIGHTS:
A. Entry by Landlord: Landlord may enter the Premises at all
reasonable times with twenty-four (24) hours verbal notice to: inspect the
same: exhibit the same to prospective purchasers, lenders or tenants;
determine whether Tenant is complying with all of its obligations under this
Lease; to post customary "For Sale," "For Lease" and similar types of signs:
post notices of nonresponsibility; and make repairs or improvements in or to
the Premises or the building as Landlord deems necessary or proper, provided,
however, that Landlord shall exercise any such rights so as to cause as
little interference to Tenant as is reasonably possible. Tenant hereby
waives any claim for damages for any injury or inconvenienct to, or
interference with Tenant's business, any loss of occupancy or quiet enjoyment
of the Premises or any other loss occasioned by such entry. Landlord may have
to retain a key with which to unlock all of the doors in, on or about the
Premises (excluding Tenant's vaults, safes and similar areas designated by
Tenant in writing in advance), and Landlord shall have the right to use any
and all means by which Landlord may deem proper to open such doors to obtain
entry to the Premises, and any entry to the Premises obtained by Landlord by
any such means, or otherwise, shall not under any circumstances be deemed or
construed to be a forcible or unlawful entry into or a detainer of the
Premises or an eviction, actual or constructive, of Tenant from any part of
the Premises.
B. Easements: Landlord shall have the right to grant public utility
easements and other rights on, over and under the Premises without any abatement
in rent, provided that such rights do not unreasonable interfere with Tenant's
business operations on the Premises.
C. Configuration of Common Area: Landlord shall also have the right at
any time to change the number, size, location or arrangement of entrances or
passageways, parking areas, landscaped areas, exterior walls, or other common
area parts of the Complex.
D. Name and Address of Complex: Landlord may at any time change the name,
number or designation by which the Complex is
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<PAGE>
commonly known, and none of the foregoing shall be deemed an actual or
constructive eviction of Tenant, nor shall it entitle Tenant to any reduction of
rent or result in any liability of Landlord to Tenant. Tenant hereby agrees that
it shall not use the name of the Complex for any purpose other than as the
address of the business conducted by Tenant in the Premises without first
obtaining the written consent of Landlord.
24.1 LIMITATION OF LIABILITY, TRANSFER OF LANDLORD'S INTEREST:
A. Limitation of Landlord's Liability: Tenant agrees to look only to the
equity of Landlord in the Premises or the Complex and not to Landlord personally
with respect to any obligations or payments due or which may become due from
Landlord hereunder, and no other property or assets of Landlord or any partner,
joint venture, officer, director, shareholder, agent, or employee of Landlord,
disclosed or undisclosed, shall be subject to levy, execution or other
enforcement procedure for the satisfaction of Tenant's claims under or with
respect to this Lease, and no partner, officer, director, shareholder, agent or
employee of Landlord shall be personally liable in any manner or to any extent
under or in connection with this Lease, if at any time the holder of Landlord's
interests hereunder is a partnership or joint venture, a deficit in the capital
account of any partner or joint venturer shall not be considered an asset of
such partnership or joint venture.
B. Sale by Landlord: In the event of a sale or conveyance of the
Landlord's interest in the Premises of the Complex, Landlord shall thereafter
be released from any further liability for any of the terms, covenants or
conditions (express or implied) herein contained in favor of Tenant; and Tenant
agrees thereafter to look solely to the successor in interest of Landlord for
the performance of any of Landlord's obligations hereunder. This Lease and
Tenant's rights hereunder shall not be affected by any such sale or conveyance,
and Tenant agrees to attorn to the successor in interest of such transferor.
25.1 HOLDOVER TENANCY: If Tenant holds over after expiration of the Lease term,
such tenancy shall be from month-to-month only at Landlord's sole, exclusive and
conclusive election, and not a renewal hereof or an extension of any further
term, and in such case rent shall be payable at the time specified in Paragraph
4.1 and in an amount to be determined by Landlord, but not less than 150% of all
sums due and payable under this Lease for the last month of the Lease term, and
such monthly rent may be increased upon thirty (30) days prior written notice to
Tenant. However, if Landlord has previously notified Tenant at least three (3)
days prior to the expiration of the term of this Lease that Landlord shall not
permit Tenant to hold over, then if Tenant holds over Tenant shall be considered
a trespasser and Landlord may immediately file suit for unlawful detainer
without further notice to Tenant. If Landlord permits such holdover, then the
month-to-month tenancy shall be subject to every other term, covenant, condition
and agreement contained herein. Further, if the Premises is not surrendered at
the end of the Lease term, or any renewal or extension thereof, Tenant shall be
responsible to Landlord for all damage which Landlord shall suffer by reason
thereof, and Tenant shall indemnify, hold harmless and defend Landlord from all
claims made by a successor tenant resulting from Landlord's delay in delivering
possession of the Premises to such successor tenant.
26.1 NOTICES: All notices which Landlord or Tenant may be required, or may
desire, to serve on the other may be served personally, or by registered or
certified mail, return receipt requested, postage prepaid, addressed to the
Landlord at Landlord's address for notices described in Paragraph 1.1
subparagraph H or to Tenant at Tenant's address described in Paragraph 1.1,
subparagraph H or from and after the commencement date, to the Tenant at the
Premises whether or not Tenant has departed from, abandoned or vacated the
Premises, or addressed to such other address or addresses as either Landlord or
Tenant may from time to time designate to the other in writing.
27.1 GENERAL PROVISIONS:
A. Entire Agreement: This Lease and the attached Addendum, if any,
consisting of Articles 28.1 through 32.1, inclusive, contain all of the
agreements and understandings relating to the leasing of the Premises and the
obligations of Landlord and Tenant in connection with such leasing. Landlord
has not made, and Tenant is not relying upon, any warranties, or
representations, promises or statements made by Landlord or any agent of
Landlord, except as expressly set forth herein. This Lease supersedes any and
all prior agreements and understandings between Landlord and Tenant and alone
expresses the agreement of the parties.
B. Amendments: This Lease shall not be amended, changed or modified in
any way unless in writing executed by Landlord and Tenant. Landlord shall not
have waived or released any of its rights hereunder unless in writing executed
by Landlord.
C. Successors: Except as expressly provided herein, the Lease and the
obligations of Landlord and Tenant shall bind and benefit the successors and
assigns of each of the parties.
D. Force Majeure: Landlord shall incur no liability to Tenant, and shall
not be responsible for any failure to perform any of Landlord's obligations
hereunder, if such failure is caused by reason of strike, other labor trouble,
governmental rule, regulations, ordinance, statute or interpretation, or by
fire, earthquake, civil commotion, or any and all other causes beyond the
reasonable control of Landlord. The amount of time for Landlord to perform any
of Landlord's obligations shall be extended for the amount of time Landlord is
delayed in performing such obligation by reason of such force majeure
occurrence.
E. Survival of Obligations: Any obligations of Tenant accruing prior to
the expiration of this Lease shall survive termination of the Lease, and Tenant
shall promptly perform all such obligations whether or not the Lease term has
expired.
F. Governing Law: This Lease shall be governed by and construed in
accordance with, the laws of the State of Colorado.
G. Severability: In the event any provision of this Lease is found to be
unenforceable, the remainder of this Lease shall not be affected, and any
provision found to be invalid shall be enforced to the extent permitted by law.
The parties agree that in the event two different interpretations may be given
to any provision hereunder, one of which will render the provision
unenforceable, and one of which will render the provision enforceable, the
interpretation rendering the provision enforceable shall be adopted.
H. Captions: All captions, headings, titles and numerical references are
for convenience only and shall have no effect on the interpretation of this
Lease.
I. Construction: Tenant acknowledges that it has read and reviewed this
Lease and that it has had the opportunity to confer with counsel in the
negotiation of this Lease. Accordingly, this Lease shall be construed neither
for nor against Landlord or Tenant, but shall be given a reasonable
interpretation in accordance with the meaning of its terms and the intent of the
parties.
J. Independent Covenants: Each covenant, agreement, obligation or other
provision of this Lease to be performed by Tenant are separate and independent
covenants of Tenant, and not dependent on any other provision of the Lease.
K. Number and Gender. All terms and words used in this Lease, regardless
of the number or gender in which they are used, shall be deemed to include the
appropriate number and gender, as the context may require.
L. Time is of the Essence: Time is of the essence of this Lease and the
performance of all obligations hereunder.
M. Joint and Several Liability. If Tenant comprises more than one person
or entity, or if this Lease is guaranteed by any party, all such persons shall
be jointly and severally liable for payment of rents and the performance of
Tenants obligations hereunder. As to a tenant which consists of husband and
wife, the obligations shall extend individually to their sole and separate
property as well as community property.
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N. Attorneys' Fees: If Tenant or Landlord shall bring any action for any
relief against the other, declaratory or otherwise, arising out of this Lease,
including, without limitation, any suit by Landlord for the recovery of rent or
possession of the Premises, the losing party shall pay the successful party the
court costs and reasonable attorneys' fees incurred therefor and such expenses
shall be paid whether or not such action is prosecuted to judgment. Should
Landlord, without fault on Landlord's part, be made a party in any litigation
instituted by Tenant or by any third party against Tenant, or by or against any
person holding under or using the Premises by license of Tenant (for the
purposes of this Paragraph the "Licensee") or for the foreclosure of any lien
for labor or material furnished to or for Tenant or any Licensee or otherwise
arising out of or resulting from any act or transaction of Tenant or of any
Licensee, and Tenant agrees and covenants to save and hold Landlord harmless
from any judgment rendered against Landlord or the Premises or any part of
either thereof, and to protect, defend and indemnify Landlord as to any and all
costs and expenses, including attorneys' fees and court costs, incurred by
Landlord in or in connection with such litigation.
Q. Surrender of Lease: The voluntary or other surrender of this Lease by
Tenant, or a mutual cancellation thereof, shall not work a merger, and shall, at
the option of the Landlord, terminate all or any existing subleases or
subtenancies, or may, at the option of Landlord, operate as an assignment to it
of any or all such subleases or subtenancies.
P. Tenant's Authority: If Tenant is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants
that he or she is duly authorized to execute and deliver this Lease on behalf
of said corporation in accordance with a duly adopted resolution of the Board
of Directors of said corporation or in accordance with the By-Laws of said
corporation, and that this Lease is binding upon said corporation in
accordance with its terms; and at the time of execution of this Lease. Tenant
shall, at Landlord's option, deliver to Landlord a certified copy of a
resolution of the Board of Directors of siad corporation authorizing or
ratifying the execution of this Lease. If Tenant is a partnership and less
than all partners of the partnership execute this Lease, each individual
executing this Lease on behalf of said partnership represents and warrants
that he or she is duly authorized to execute and deliver this Lease on behalf
of said partnership in accordance with the partnership agreement of said
partnership.
Q. Brokerage: Tenant covenants and represents that it has negotiated this
Lease directly with the Landlord and has not acted by implication to authorize,
nor has authorized any real estate broker, finder or salesman to act for it in
these negotiations other than the Broker (as defined in Paragraph 1.1,
subparagraph K). Tenant agrees to hold Landlord harmless from and to defend and
indemnify Landlord against any and all claims, cost, liability and/or expense
(including attorneys' fees and court costs) incurred by Landlord in connection
with any claim by any real estate broker or salesman or finder (other than the
Broker) for a commission or finder's fee as a result of Tenant's entering into
this Lease. The provisions contained herein shall survive the termination of
this Lease.
R. No Third Party Beneficiaries: Unless otherwise expressly specified
herein, no term, covenant, condition or provision of this Lease shall be
construed to be for the benefit of any other third party or entity (including
any other tenant or occupant of the Complex, if any).
S. Exhibits: The exhibits described in Paragraphs 1.1 and 2.1 are
incorporated in the Lease by reference and made a part hereof as if fully set
forth herein, AND THOSE LISTED BELOW.*
T. Offer to Lease: The submission of this Lease to Tenant or its broker
or other agent, does not constitute an offer to Tenant to lease the Premises.
The instrument shall have no force and effect until it is executed and delivered
by Tenant to Landlord and executed by Landlord.
IN WITNESS WHEREOF, The parties hereto have executed this Lease as of the date
stated below.
LANDLORD TENANT
Transamerica Occidental Life Insurance ACI Systems Inc., a Colorado
Company, a California corporation corporation
By: By:
----------------------------------- ----------------------------------
Its: Its:
----------------------------------- ----------------------------------
Date: Date:
--------------------------------- --------------------------------
By: By:
----------------------------------- ----------------------------------
Its: Its:
----------------------------------- ----------------------------------
Date: Date:
--------------------------------- --------------------------------
* Exhibit "B" - Personal Guaranty - Specifically Deleted
Exhibit "C" - Space Plan
Exhibit "D" - Rules and Regulations
<PAGE>
ADDENDUM
Addendum to that certain lease (the "Lease") dated, for reference purposes only,
JANUARY 22, 1996 by and between TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY,
A CALIFORNIA CORPORATION ("Landlord"), and ACI SYSTEMS INC., A COLORADO
CORPORATION, for the premises commonly known as 14 INVERNESS DRIVE EAST,
BUILDING F, UNITS 112, 116 AND 120, ENGLEWOOD, COLORADO 80112 (the "Premises").
28.1 COMMON AREA MAINTENANCE COSTS. Paragraph 5.1 B (ii)(a) of this Lease
shall be deleted in its entirety and replaced with the following:
Tenant shall reimburse Landlord Tenant's proportionate share of the
amount of increases in common area maintenance costs for the Premises in the
manner and at the times stated below if, for any calendar year during the Lease
term after the Base Year described in paragraph 1.1, subparagraph D, the
respective common area maintenance costs are greater than the amount of common
area maintenance costs for the Base Year. The term "common area maintenance
costs" is defined in Paragraph 5.1, subparagraph B (i). Tenant shall pay
Landlord on the first day of each calendar month of the term of this lease an
amount computed by multiplying the actual area of the Premises by the difference
between Landlord's estimate of the common area maintenance costs per square foot
per month for the then current calendar year and the common area maintenance
costs per square foot per month for the Base Year. The foregoing rate per
square foot may be adjusted by Landlord on the basis of Landlord's experience
and anticipated costs from time to time during any given calendar year.
29.1 TENANT IMPROVEMENTS. Tenant accepts the Premises in its "as-is"
condition except, that Landlord agrees to complete the improvements for the
Premises shown on EXHIBIT C, which is attached hereto and incorporated herein by
this reference (the "Tenant Improvements"), using similar materials to those
already existing in the Premises. Except as specifically set forth below, the
Tenant Improvements shall be constructed at Landlord's sole cost and expense.
a. Landlord shall commence to construct the Tenant Improvements and
shall use reasonable efforts to Substantially Complete, as defined below,
construction thereof on or before the Commencement Date, subject, however, to
extensions equal to the delays suffered by Landlord and caused by strikes,
lockouts, fire or other casualty loss, acts of God, unavailability of materials,
hostile or war-like action, riot, or other causes beyond Landlord's reasonable
control. If any request(s) for change(s) to materials, labor or the Space Plans
("Changes") made by Tenant (which Changes must be approved in writing by
Landlord) or delays caused in whole or in part by Tenant result in any increase
in the costs of completing the Tenant Improvements, such increased costs shall
be at the sole cost and expense of Tenant and paid by Tenant to Landlord from
time-to-time upon demand by Landlord.
b. Tenant's obligation to pay rent for the Premises under this Lease
shall not commence until the date the Premises is Substantially Complete;
provided, however, that if Landlord shall be delayed in rendering the Premises
Substantially Complete by the Commencement Date set out in Paragraph 1.1B of
this Lease as a result of one or more of the following:
(i) Tenant's failure to devote the time or furnish the
information required in connection with the space plan for the Tenant
Improvements; or
(ii) Tenant's changes to the Tenant Improvements in the space
plan relating thereto, or in the plans for such changes (notwithstanding
Landlord's approval of any such changes); or
(iii) Any other act or omission by Tenant or its agents;
then and in any such event, Tenant's obligation to commence the payment of rent
under this Lease on the Commencement Date provided for in Paragraph 1.1B shall
not be affected or deferred of such delay.
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c. If Landlord is unable to cause the Premises to be Substantially
Completed by the Commencement Date for reasons other than those not set out in
subsection (i) through (iii) of Paragraph b above, then, as Tenant's sole
remedy, the Commencement Date of this Lease shall be on the first date the
Premises is Substantially Complete; provided, however if the date the Premises
is Substantially complete is not the first day of a month, then the Commencement
Date shall be the first day of the month immediately following the date the
Premises is Substantially Complete. The period between the date the Premises is
Substantially Complete and the Commencement Date shall be deemed to be the
Interim Lease Term and Tenant shall be obligated to pay rent for such Interim
Lease Term on a pro rata basis based on the current minimum monthly rent and
additional rent for the first full month of the Lease term following the
Commencement Date. Tenant shall hold the Premises during the Interim Lease Term
under all of the other terms and conditions of the Lease. In the event the
Commencement Date set out in Paragraph 1.1B of this Lease is changed as provided
for in this Paragraph c, then the Lease Expiration Date as set forth in
Paragraph 1.1B of this Lease, shall be extended through the end of the thirty-
sixth (36th) month following Commencement Date. Tenant shall, at Landlord's
request, execute an Amendment to Lease stating the Commencement Date in which
the parties specify the Commencement Date and Expiration Date of the Lease term.
"Substantially Complete" as used herein shall mean the date on
which Landlord shall have substantially completed all the Tenant Improvements to
the extent that only minor details of construction (so-called "punch-list"
items) and minor mechanical adjustments remain to be done to the Premises, which
punch-list items shall then be completed within a reasonable period following
the delivery of the punch-list to Landlord.
d. From and after completion of construction of the Tenant
Improvements, Tenant shall be solely responsible for the repair and maintenance
thereof as part of the Premises as set forth in Paragraph 6.1 of this Lease.
e. Landlord's approval of Tenant's plans for Landlord's work shall
create no responsibility or liability on the part of Landlord for their
completeness, design sufficiency, or compliance with all laws, rules and
regulations of governmental agencies or authorities.
30.1 RENT ABATEMENT. Notwithstanding the provisions of Paragraph 1.1c(i)
of the Lease, during the period commencing May 1, 1996 and ending May 31, 1996
(the Rent Abatement Period), Tenant shall not be required to pay the minimum
monthly rent specified therein. In addition to the foregoing statement of
minimum monthly rent, Tenant shall not be required to pay any other rent (as
defined in Paragraph 4.1 A of the Lease) attributable to and payable by Tenant
during the Rent Abatement Period.
31.1 OPTION TO EXTEND. Subject to the conditions stated in this Paragraph
31.1, Tenant shall have the right to extend the term of this Lease for one (1)
successive five (5) year option term. Tenant must exercise the right to extend
the term of this Lease by delivering to Landlord written notice of such exercise
which must be sent certified mail, return receipt requested with postage
prepaid, no earlier than six (6) calendar months but no later than ninety (90)
days prior to the respective commencement date of the option period. The
commencement date of the option term is June 1, 2001.
a. Rent During Option Term: If Tenant exercises the right to extend
the Lease for the option term, the rent payable during the option term, will be
at the fair market value of similar premises in the complex as of the
commencement date of the respective option term and as determined by Landlord
in its sole discretion. Within 30 days of Landlord's receipt of Tenant's
notice of its intent to exercise its option, Landlord shall notify Tenant of
the then market rental rate. Tenant shall have five business days to either
accept or reject the same. If Tenant rejects the rental rate, the Lease shall
expire by its terms upon expiration of the Lease term. If Tenant approves the
rental rate, the Lease shall be extended accordingly. Failure by Tenant to
give notice in accordance herewith, time being of the essence, shall render
this option null and void.
b. Effect of Default on Option to Extend: The right to extend the
term of the Lease provided in this Paragraph 31.1 cannot be exercised if Tenant
is in default of any of the terms, covenants and conditions of this Lease. If
the time to exercise such option lapses and Tenant has not cured any default
prior to the last day of notice period specified above, then any
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<PAGE>
subsequent attempt to exercise the option shall be deemed null and void and the
Lease shall terminate upon the expiration date of the then current term. If
Tenant defaults in the performance of any of the terms, covenants and conditions
of this Lease during the period from the timely and proper exercise of its right
to extend the term to the commencement date of the option term immediately
following such date of exercise, then the exercise of the right to extend the
term of the Lease shall be deemed null and void and the Lease shall terminate
upon the expiration of the then current term.
c. No Withdrawal: Once Tenant has timely and properly exercised its
right to extend the term of this Lease by delivery of written notice to Landlord
and provided that Tenant is otherwise in compliance with the provisions of this
Paragraph 31.1, Tenant may not subsequently withdraw its exercise.
d. Option to Extend is Nonassignable: It is expressly understood and
agreed that the right to extend the term of this Lease, provided in this
Paragraph 31.1 is nonassignable and may not be exercised by anyone, or in favor
of anyone, other than the initial Tenant specified on Page 1 of this Lease and
identified above. This entire Paragraph 31.1 shall be deemed stricken from the
Lease and of no force and effect if said initial Tenant assigns its interest in
this Lease.
e. Tenant's Possession as a Condition Precedent: Tenant must be in
possession of the Premises and must remain in possession of the Premises and
operating its business from the Premises at the time Tenant delivers written
notice of the exercise of any option provided in this Paragraph 31.1 through and
including the commencement date of any respective option(s). If Tenant is not
in possession, fails to remain in possession and/or fails to operate its
business from the Premises throughout such interim period(s), then Tenant shall
not have the right to extend the term of this Lease and any prior exercise of
such right shall be deemed null and void and the Lease shall terminate upon the
expiration of the then current term.
32.1 RIGHT OF FIRST REFUSAL TO EXPAND. During the term of the Lease and
subject to the conditions stated in this Paragraph 2, Tenant shall have a
continuing right of first refusal to expand the Leased Premises into the space
adjacent and to the east of the Premises consisting of approximately 3,892 s.f.,
(the "Expansion Space"), such premises currently being more particularly shown
in Exhibit A hereto. Tenant must exercise the right to expand into such space
by delivering to Landlord written notice of such exercise within 48 hours
following Landlord's written notice to Tenant that Landlord has received a third
party offer to lease all or part of the Expansion Space. Tenant's failure to
give Landlord timely notice of its intent to expand into the Expansion Space
shall be deemed to be refusal of that space; and the rights granted hereby with
respect to the Expansion Space shall terminate and be of no further force or
effect.
a. Rent for Expansion Space: If Tenant exercises its right to expand the
Leased Premises into the Expansion Space shall be both (i) equal to or better
than, the third party offer and (ii) equal to, or better than the terms of the
Lease. Tenant shall also pay Tenant's increased proportionate share of the
Basic Cost in Additional Rental as specified in Paragraph 6 of the Lease.
b. Effect of Default on Right of First Refusal to Expand: The right of
first refusal to expand the Lease Premises into the Expansion Space cannot be
exercised if Tenant is in default of any of the terms, covenants and conditions
of this Lease. If the time to exercise such right of first refusal lapses and
Tenant has not cured any default prior to the last date of notice period
specified above, then any subsequent attempt to exercise the right of first
refusal shall be deemed null and void.
c. No Withdrawal: Once Tenant has timely and properly exercised its right
of first refusal to expand the Leased Premises by delivery of written notice to
Landlord, Tenant may not subsequently withdraw its exercise.
d. Right of First Refusal is Nonassignable: It is expressly understood
and agreed that the right of first refusal relating to the Expansion Space is
nonassignable and may not be exercised by anyone, or in favor of anyone, other
than the initial Tenant specified on Page 1 of the Lease and identified above.
15
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e. Tenant's Possession as a Condition Precedent: Tenant must be in
possession of the Leased Premises and must remain in possession of the Leased
Premises and operating its business from the Leased Premises at the time Tenant
delivers written notice of the exercise of any right provided herein. If Tenant
is not in possession, fails to remain in possession and/or fails to operate its
business from the Leased Premises throughout the term of this Lease, than Tenant
shall not have the right of first refusal to the Expansion Space, and any prior
exercise of such right shall be deemed null and void.
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<PAGE>
EXHIBIT "A"
"The Premises"
14 Inverness Drive East, Building F, Unit(s) 112, 116 & 120
Englewood, Colorado 80112
[FLOORPLAN]
Expansion Space, the Premises, First Floor Plan, Second Floor Plan, Key Plan
17
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EXHIBIT "A"
Page 2
PROPERTY ADDRESS: 14 Inverness Drive East
Englewood, Colorado 80110
LEGAL DESCRIPTION
Parcel A:
Lot 1.
Block 6.
1st Amended Plat of Inverness Subdivision Filing No. Two
Parcel B:
That portion of Lot 2.
Block 6.
1st Amended plat of Inverness Subdivision Filing No. Two.
Described as follows:
Beginning at the southernmost corner of said lot being the true point of
beginning;
Thence along the boundary of said Lot 2, N 56 DEG. 31' 53" W 411.78 feet;
Thence continuing along said boundary N 23 DEG. 06' 23" E 602.27 feet;
Thence leaving said boundary S 66 DEG. 53' 37" E 497.20 feet;
Thence S 82 DEG. 12' 22" E 30.12 feet to a point on the west right of way of
Inverness Place East;
Thence along said right of way on a curve to the left whose tangent bearing is S
7 DEG 47' 38" W, said curve having a radius of 241.50 feet, a central angle of
22 DEG. 09' 12", and an arc distance of 93.38 feet to a point on said boundary
of Lot 2;
Thence leaving said right of way along the said boundary of Lot 2, S 72 DEG. 40'
25" W 45.86 feet;
Thence continuing along said boundary S 39 DEG. 44' 23" W 207.39 feet;
Thence continuing along said boundary S 33 DEG. 28' 07" W 378.89 feet;
to the true point of beginning.
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EXHIBIT "C"
14 Inverness Drive East, Building F, Unit(s) 112, 116 & 120
Englewood, Colorado 80112
[FLOORPLAN]
ACI SYSTEMS, INC.
14 INVERNESS DRIVE EAST
SUITES F112-120
ENGLEWOOD, COLORADO
<PAGE>
EXHIBIT "D"
RULES AND REGULATIONS
14 Inverness Drive East
Englewood, Colorado 80112
1. Except with the prior written consent of the Landlord, Tenant shall not
sell or permit the sale of any merchandise at retail in or from the
Premises. Tenant shall not occupy or permit any portion of the Premises to
be occupied for any business other than that specifically provided for in
this lease. No Tenant shall at any time occupy any part of the Building or
Premises as sleeping or lodging quarters.
2. Tenant shall not do or permit anything to be done on the Premises, or
bring or keep anything therein, which shall in any way obstruct or
interfere with the rights of other tenants, or in any way injure or annoy
them, or conflict with the regulations of the Fire Department or fire laws,
or with any insurance policy upon the Building or any part thereof, or
with any rules and ordinances established by the Board of Health or other
governmental authority.
3. Tenant shall not sweep or throw or permit to be swept or thrown from the
Premises any dirt or other substance into any of the corridors or halls, or
out the doors or stairways of the Building. No Tenant shall use, keep or
permit to be used any foul or noxious gas or substance in the Premises, or
permit or suffer the Premises to be occupied or used in a manner offensive
or objectionable to Tenant or other occupants of the Building by reason of
noise, odors and/or vibrations.
4. Tenant shall not store, nor cause to be stored, any material, substance,
equipment, supplies or vehicles outside or adjacent to the Premises
described in this Lease.
5. Tenant and its employees shall not go upon the roof of the Building without
prior written consent of the Landlord.
6. No animals, birds or reptiles may be brought in or kept in or about the
Premises.
7. Children are not allowed on the Premises or in the Building unless escorted
by an adult.
8. No cooking shall be done or permitted by Landlord on the Premises, except
that the preparation of coffee, tea, hot chocolate and similar items for
the Tenant and its employees and business visitors shall be permitted.
9. Canvassing, soliciting and peddling in the Building or on the Premises are
prohibited and Tenant shall cooperate to prevent the same.
10. Tenant shall not use or keep on the Premises any kerosene, gasoline or any
inflammable, combustible or explosive fluid, chemical or substance or use
any method of heating or air conditioning other than that authorized by the
Lessor.
11. No machinery of any kind, including air conditioning units or other similar
apparatus, or vending machines of any description, shall be installed,
maintained or operated on the leased Premises without the written consent
of Landlord.
12. Tenant shall give prompt notice to Landlord of any accidents to or defects
in plumbing, electrical fixtures, heating or cooling apparatus or other
utilities.
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13. The toilet rooms, toilets, urinals, wash bowls and other apparatus serving
the Premises shall not be used for any purpose other than that for which
they were constructed, and no foreign substance of any kind whatsoever
shall be thrown therein. All damage resulting from any misuse or the
fixtures shall be borne by Tenant to the extent its servants, employees,
agents, visitors or licensees shall have caused it.
14. No painting shall be done, nor shall any alterations be done to any part of
the Premises by installing or changing any partition or partitions, doors
or door, windows or window, nor shall there by any nailing, boring or
screwing into the walls, woodwork or plaster without the consent of the
Landlord. Landlord shall not permit any contractor or other person making
any authorized alternations, additions or installations within the Premises
to use the hallways, lobby or corridors as storage or work areas without
the prior written consent of Landlord. Tenant shall be liable for and
shall pay the expense of any additional cleaning or other maintenance
required to be performed by Landlord as a result of the transportation or
storage of materials or work performed on or near the Premises by or for
Tenant.
15. Tenant will refer all contractors, contractor's representatives and
installation technicians, rendering any service on or to the leased
premises for Tenant to Landlord for Landlord's approval and supervision
before performance of any contractual service. This provision shall apply
to all work performed in the Building including installation of telephones,
telegraph equipment, electrical devices and attachments and installations
of any nature affecting floors, walls, woodwork, trim, windows, ceiling,
equipment of any other physical portion of the Building.
16. Lessor shall have the right to determine or limit the weight, size and
position of all safes and other heavy equipment brought onto the Premises.
Safes or other heavy objects shall, if considered necessary by Landlord,
stand on wooden strips of such thickness as is necessary to properly
distribute their weight. Landlord will not be responsible for loss or for
damage to any such safe or property or their contents from any cause, and
all damage done to the Premises by moving or maintaining any such safe or
property shall be repaired at the expense of the Tenant.
17. The sidewalks, halls, passages, exits, entrances, and stairways in and
around the Premises shall not be obstructed by Tenant or used by them for
any purpose other than for ingress to and egress from the leased Premises.
The halls, passages, exits, entrances, stairways, balconies and roof are
not for the use of the general public, and Landlord shall in all cases
retain the right to control and prevent access thereto by all persons whose
presence, in the judgment of Landlord, shall be prejudicial to the safety,
character, reputation and interest of the Building and its tenants,
provided, that nothing herein contained shall be construed to prevent such
access to persons with whom Tenant normally deals in the ordinary course of
its business unless such persons are engaged in illegal activities.
18. Landlord agrees to furnish Tenant two keys without charge; additional keys
will be furnished at a nominal charge. Tenant shall not alter any lock nor
install any new or additional locks or any bolts on any door of the
Premises without written consent of the Landlord. If Landlord shall give
its consent, Tenant shall in each case furnish the Landlord with a key for
any such lock.
Tenant must, upon the termination of this lease, restore to Landlord all
keys or stores, offices and toilet rooms, either furnished to, or otherwise
procured by, Tenant and in the event of the loss of any keys so furnished,
Tenant shall pay to Landlord the cost of replacing the same or of changing
the lock or locks opened by such lost key if Landlord shall deem it
necessary to make such change. Landlord will not permit entrance to
Tenant's offices by use of pass key controlled by Landlord, to any person
at any time without written permission by Tenant, except employees,
contractors, or service personnel directly supervised by Landlord.
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19. Tenant shall insure the windows and doors of the Premises are closed and
securely locked before leaving the Premises. Tenant must observe strict
care and caution that all water faucets or other apparatus are entirely
shut off before Tenant or Tenant's employees leave the Premises so as to
prevent damage, and for any such default or carelessness Tenant shall
make good all injuries sustained by other tenant or Landlord.
20. The requirements of Tenant will be attended to only upon application at the
office of the Building Manager. Employees of Landlord shall not perform
any work or do anything outside of their regular duties unless under
special instructions from the Landlord.
21. Landlord will not be responsible for lost or stolen personal property,
equipment, money or jewelry from Tenant's area or public rooms regardless
of whether such loss occurs when area is locked against entry or not.
22. The directorie of the Building will be provided exclusively for the display
or the name and location of tenants only and Landlord reserves the right to
exclude any other names therefrom.
23. Tenant, its employees, agents or invitees shall comply with all direction
posted in and for the use of the common parking areas.
24. Landlord shall have the right, exercisable without notice and without
liability to Tenant to change the name and the street address of the
Building of which the Premises are a part.
25. Tenant and its employees, agents and invitees shall park their vehicles
only in those parking areas designated by Landlord. Tenant shall not leave
any vehicles in a state of disrepair (including without limitations, flat
tires, out of date inspection stickers or license plates) in the parking
areas. Tenant shall not park any vehicle, truck, car, trailer or boat in
the parking area for longer than 24 hours without Landlord's prior written
approval. If Tenant or its employees, agents or invitees park their
vehicles in areas other than the designated parking areas for longer than
24 hours, Landlord shall have the right without notice to Tenant to remove
such vehicles at Tenant's expense.
26. The Landlord at all times shall have the right to amend, modify or waive
any of the foregoing Rules and Regulations and to make such other and
future rules and regulations as the Landlord may adopt.
27. The failure of the Landlord to seek redress for violation of, or insist
upon the strict performance of any covenants or conditions of this Lease or
any of the Rules and Regulations set forth above or hereafter adopted by
Landlord, shall not prevent a subsequent act, which would have originally
constituted a violation, from having all the force and effect of any
original violation. The receipt by Landlord of rent with knowledge of the
breach of any covenant of this Lease or breach of these Rules and
Regulations shall not be deemed a waiver of such breach. The failure of
Landlord to enforce any of these Rules and Regulations as set forth above
or hereafter adopted against any Tenant and/or any other Tenant in the
Building shall not be deemed a waiver of any such Rules and Regulations.
28. Landlord shall not be liable to Tenant for violation of any said Rules and
Regulations or the breach of any covenant or condition in any Lease by any
other tenant in the Building.
29. No act or thing done or omitted to be done by Landlord or Landlord's
agent during the term of the Lease which is necessary to enforce these
Rules and Regulations shall constitute an eviction by Landlord nor shall
it be deemed a surrender or acceptance of said Premises, and no agreement
to accept such surrender shall be valid unless in writing signed by
Landlord. No employee of Landlord or Landlord's agent shall have any
power to accept the keys of said Premises prior to the termination of the
leasehold agreement. The delivery of keys to any employee of Landlord or
Landlord's agent shall not be construed as a termination of the Lease or
a surrender of the Premises.
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30. Signage Regulations:
In addition to the signage restrictions placed upon all tenants of the
Inverness area by the restrictive covenants of the property the following
restrictions and regulations shall be made part of any lease contract
consummated at 14 Inverness Drive East.
a. The main entry sign on Inverness Drive East identifies the property
and its address; 14 Inverness Drive East. The tenant directory
displays a map of the eight-building complex and lists each tenant
alphabetically. One slot per tenant is permitted.
b. An additional tenant directory is located on Inverness Place East
listing each tenant alphabetically.
c. Each building has an identity sign strategically located for easy
visibility with a letter designation. This identification also
includes a register of each tenant listed alphabetically with building
and suite designations on a name place.
d. Each tenant or suite is identified by a 3" three-digit number attached
to the glass door panel. Each second level entry has a directory
listing the tenant alphabetically. These are used for corporate names
only - no individual listings are permitted unless the tenant occupies
at least half the space for which that directory applies.
e. Addressing: The following is a sample address method:
Company Name
14 Inverness Drive East
Building __, Suite __
Englewood, Colorado 80112
f. All tenant identity signage must be approved by the Landlord and in
any case will be restricted to the following:
- Any style of lettering is permissible
- All lettering shall be on glass doors or windows
- The glass area used for lettering shall be restricted
to one pane of glass for each 20 feet of frontage of
building.
- All lettering shall be done in white with the
exception of the first letter of the corporate names
which may be at the tenants option.
- Any corporate log, seal or design may be used in
optical colors.
g. Landlord reserves the right to designate all sources furnishing sign
painting and lettering to establish a limitation on sign styles and
format. Tenant shall affix no additional signage not considered
building standard in the Landlord's discretion, without prior written
approval of Landlord.
These Rules and Regulations shall be binding upon heirs, successors,
representatives and assigns of the Tenant.
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COVER SHEET
FOR
LEASE AGREEMENT
OWNER: SKY HARBOR ASSOCIATES LIMITED PARTNERSHIP
TENANT: ACI SYSTEMS, INC., A Colorado Corporation
<PAGE>
TABLE OF CONTENTS
BASIC LEASE PROVISIONS
GENERAL LEASE PROVISIONS:
1. Incorporation of Attachments; Definitions
2. Lease Grant
3. Term
4. Payment of Rent
5. Base Rent and Percentage Rent
6. Additional Rent; Escalation
7. Late Charge and Interest on Overdue Rent
8. Security Deposit
9. Use of Premises; Merchant's Association; Covenant's
10. Use of Common Areas; Parking
11. Rules and Regulations
12. Building Services and Utilities
13. Owner's Construction of Premises
14. Tenant's Alterations
15. Repairs and Maintenance
16. Signs and Advertising
17. Mechanics' Liens
18. Indemnification and Exculpation
19. Tenant's Liability Insurance; Subrogation Rights
20. Subordination
21. Estoppel Certificates
22. Assignment and Subletting by Tenant
23. Holding Over
24. Acceptance of Surrender of Premises
25. Condemnation
26. Fire and Other Casualty
27. Events of Default
28. Owner's Remedies
29. Owner's Lien
30. Certain Rights Reserved by Owner
31. Relocation of Tenant
32. Brokers
33. Quiet Enjoyment
34. Notices
35. Force Majeure
36. Entire Agreement; Amendments; Waivers; Binding Effect
37. Severability
38. Joint and Several Liability of Tenant
39. Owner's Liability Limitation
40. Arbitration
41. Waiver of Trial by Jury
42. Applicable Law
43. Miscellaneous
44. Special Provisions
45. Acts to be Performed by Tenant Prior to Tenant's Construction
46. Personal Property Taxes
47. Transfer of Interest
48. Special Provisions
RIDERS
I Additional Rent; Escalation
II Building Services and Utilities
EXHIBITS
A-1 Description of Land
A-2 Description of Building
A-3 Description of Premises
B Rules and Regulations
<PAGE>
BASIC LEASE PROVISIONS
LEASE DATE: October 27, 1993
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TENANT:
Name: ACI Systems, Inc.
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Legal Form: (Individual; Ltd Partnership; Gen Partnership, Corp.; Other):
Corporation
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Legal Situs: (State of Residence, Incorporation or Formation): Colorado
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Address: 7002 So. Revere Parkway, Englewood, Colorado
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Authorized Representative: Ralph Armijo
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Telephone:
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OWNER:
Name: Sky Harbor Associates Limited Partnership
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Legal Form: Limited Partnership
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Legal Situs: Michigan
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Address: 745 Barclay Circle, Suite 325, Rochester Hills, MI
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Authorized Representative: Cytryn/Tischler Properties, Inc.
Telephone: (303) 292-1243
LAND: The tract of land located in Arapahoe County and described in Exhibit A-1.
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BUILDING: The building commonly known as S. Revere Parkway Englewood, CO
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situated on the Land and described in or depicted on Exhibit A-2.
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PREMISES: Suite No.(s) 40 , being the portion(s) of the Building shown on
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the Floor Plan, EXHIBIT A-3.
STATE: Colorado
TERM: 5 years 2 months (subject to adjustment pursuant to Paragraph 3).
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ENDING DATE OF TERM (pursuant to paragraph 3): January 31, 1999.
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Initials: Owner ______
Tenant ______
ESTIMATED COMMENCEMENT DATE: December 1, 1993
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ACTUAL COMMENCEMENT DATE:(pursuant to paragraph 3): ___________________
Initials: Owner ______
Tenant ______
BASE RENT: $ See Addendum No. 1 per year, payable in monthly installments
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of $ See Addendum No.1 per month
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REIMBURSEMENT INTEREST RATE: twelve (12) % per annum
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<PAGE>
OVERDUE INTEREST RATE: twelve (12)% per annum (but never to exceed the
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maximum rate of interest permitted by applicable law to be charged Tenant for
the use, forbearance or detention of money.)
LATE CHARGE: $100.00 .
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SECURITY DEPOSIT: $1,150.00
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FIRST OPERATING COST YEAR: Means the twelve (12) month period commencing on
the first day of January, 1993 .
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INITIAL MONTHLY ESTIMATED ADDITIONAL RENT: $ 2.04 per square foot per year
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= $452.54 per month for the Premises.
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TENANT'S PROJECT PROPORTIONAL SHARE: The percentage which expresses the
ratio between the number of square feet leased and the rentable square feet
within the project (initially approximately 108,021 ) which for the purpose
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of the Lease shall initially be conclusively deemed to be 2.464 %. This
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percentage shall be the initial Tenant's Project Proportionate Share. If and
at such times as the Project is expanded or diminished, Owner shall equitably
adjust Tenant's Project Proportionate Share to reflect the increased or
decreased rentable square feet within the Project using the formula set forth
<PAGE> GENERAL LEASE PROVISIONS
This LEASE AGREEMENT ("Lease") is entered into as of the Lease Date
between Owner and Tenant. In consideration of the mutual covenants herein set
forth, and intending to be legally bound hereby, Owner and Tenant agree as
follows:
1. INCORPORATION OF ATTACHMENTS: DEFINITIONS. This Lease consists of the
the Cover Sheet, Table of Contents, Basic Lease Provisions, General Lease
Provisions, Riders, Addendums and Exhibits all of which are attached and
incorporated by reference for all purposes. The terms defined in the Basic
Lease Provisions, General Lease Provisions, Riders, Addendum and Exhibits
shall be deemed to have the meanings ascribed, wherever used herein. The
Cover Sheet, Table of Contents and headings of paragraphs, Riders, Addendum
and Exhibits are for convenience only and shall not be deemed to enlarge or
diminish the meanings of the provisions of this Lease.
2. LEASE GRANT. Owner leases to Tenant and Tenant leases from Owner the
Premises for the Term and upon the provisions and subject to the conditions
set forth herein.
3. TERM.
(a) The Commencement Date of the Term shall be the earlier of (i) the
date on which Tenant, with Owner's approval, takes possession of the Premises
for the Permitted Use, or (ii) on the thirtieth (30th) day following the date
on which Owner notifies Tenant that the Premises will be available for
occupancy, provided that Owner's work on the the Premises is substantially
completed as specified in paragraph 13 by such date, and if not then
substantially completed, (iii) five (5) days following the date of
substantial completion of such work. Upon notification as provided in (ii)
above, Owner and Tenant shall schedule a pre-occupancy inspection of the
Premises at which time all mechanical systems will be demonstrated to Tenant,
a punchlist of outstanding items, if any, shall be completed by Owner for
conformance to construction plans, and a letter of acceptance of the Premises
shall be executed by Tenant, on Owner's usual form. If the Commencement Date
is other than the first day of a calendar month, the Term shall be deemed
extended by the period from (including) the Commencement Date to the end of
such month.
(b) Notwithstanding said commencement date, if for any reason Owner
cannot deliver possession of the Premises to tenant on said date, Owner shall
not be subject to any liability therefor, nor shall such failure affect the
validity of this Lease or the obligations of Tenant hereunder. However, in
such case Tenant shall not be obligated to pay rent until possession of the
Premises is tendered to Tenant. Upon Owner's request, the parties agree to
execute in writing an Addendum to certify the Commencement Date and
expiration date hereof, but this Lease shall not be affected in any manner if
either party fails or refuses to execute such Addendum.
4. PAYMENT OF RENT. The term "Rent" means Base Rent, Additional Rent and
any charges, fees and other amounts due from tenant to Owner hereunder,
Tenant agrees to pay all Rent to Owner, in lawful currency of the United
States of America, at Owner's Address or at such other location as Owner may
specify by notice to Tenant, without notice or demand (except as may be
expressly provided for herein with regard to a particular portion of Rent)
and without setoff or deduction. Tenant's obligation to pay any and all Rent
owing by Tenant to Owner under this Lease shall survive any expiration or
termination of this Lease.
5. BASE RENT. Base Rent is payable in monthly installments in advance on
the first day of each calendar month during the Term, except that the monthly
installment of Base Rent due for the first full calendar month of the Term
shall be paid on the Lease Date. If the Commencement Date is other than the
first day of a calendar month, Tenant shall pay on the Commencement Date a
pro rata portion of the monthly installment of Base Rent for the month during
which the Commencement Date falls, such pro rate portion being equal to
one-thirtieth of the monthly installment times the number of days from
(including) the commencement Date to the end of such month.
<PAGE>
6. ADDITIONAL RENT: ESCALATION. Additional Rent shall be calculated and
is payable as provided in RIDER I.
7. LATE CHARGE AND INTEREST ON OVERDUE RENT. If any installment of Base
Rent or Additional Rent is not received within ten (10) days after the due
date thereof (without in any way implying Owner's consent to such late
payment), Tenant agrees to pay Owner the Late Charge, to the extent permitted
by law, in addition to said installment of Base Rent or Additional Rent, it
being understood that the Late Charge shall constitute liquidated damages and
such liquidated damages shall be solely for the purpose of reimbursing Owner
for the additional costs and expenses which Owner presently expects to incur
in connection with the handling and processing of late payments of Base Rent
and/or Additional Rent. Owner and Tenant agree that in the event of any such
late payment by Tenant, the damages resulting to Owner will be difficult to
ascertain precisely, and that the Late Charges constitutes a reasonable and
good faith estimate by the parties of the extent of such damages. In addition
to the Late Charge, Tenant agrees to pay Owner interest, at the Overdue
Interest Rate, on any installment of Base Rent or Additional Rent not paid
within thirty (30) days after the due date thereof, which interest shall
accrue from the due date to the date of payment. Notwithstanding the
foregoing, the Late Charge shall not apply to any sum which may have been
advanced by Owner to or for the benefit of Tenant pursuant to any provision
of this Lease, it being understood that such sum shall bear interest, which
Tenant agrees to pay Owner, at the Interest Rate specified in such provision.
8. SECURITY DEPOSIT. The Security Deposit shall be delivered by Tenant to
Owner on the Lease Date, and shall be held by Owner, without liability for
interest, as security for the performance by Tenant of Tenant's covenants and
obligations under this Lease, it being expressly understood that the Security
Deposit shall not considered an advance payment of Rent or a measure of
Owner's damages in case of default by Tenant. Upon the occurrence of and
Event of Default, Owner, from time to time and without prejudice to any other
remedy, may use the Security Deposit to the extent necessary to make good any
arrearages of Rent and any other damage, injury, expense or liability caused
to Owner by such Event of Default. Following any such application of the
Security Deposit to its original amount. If Tenant is not then in default
hereunder, any remaining balance of the Security Deposit shall be returned by
Owner to Tenant within a reasonable period of time after the termination of
this Lease, and in any event within the time period prescribed by State law,
if any. If Owner transfers its interest in the Premises during the Term,
Owner may assign the Security Deposit (or so much thereof as has not been
used and not restored by Tenant) to the transferee and thereafter Owner shall
have no further liability to Tenant for the return of the Security Deposit.
9. USE OF PREMISES. Tenant shall use the Premises only for the Permitted
Use. Tenant will not occupy or use the Premises, or permit any portion of the
Premises to be occupied or used, for any business or purpose other than the
Permitted Use or for any use or purpose which is unlawful in part or in whole
or deemed to be disreputable in any manner or extra hazardous on account of
fire or other casualty, nor permit anything to be done which will in any way
increase the rate of insurance on the Building or contents; and in the event
that, by reason of acts of Tenant or Tenant's servants, employees, agents,
contractors, licensees or invitees ("Tenant Parties"), there shall be any
increase in rate of insurance on the Building or contents, then such acts
shall be deemed to be an Event of Default hereunder and Tenant hereby agrees
to pay to Owner the amount of such increase on demand. Tenant will conduct
its business and control Tenant Parties in such a manner as not to create any
nuisance, nor interfere with, annoy or disturb other tenants or Owner in the
ownership or management of the Land or Building. Tenant will maintain the
Premises in a clean, healthful and safe condition and will comply with all
laws, ordinances, orders, rules and regulations (of federal, state, municipal
and other agencies or bodies having any jurisdiction thereof), and any
restrictive covenants and condominium association by-laws, rules and
regulations of which Tenant has been advised, with reference to the use,
condition or occupancy of the Premises.
10. USE OF COMMON AREAS: PARKING.
(a) Tenant shall have the right, nonexclusive and in common with
others, to use (i) any common hallways, entrances, lobbies, elevators,
stairways, common restroom facilities and similar common areas of the
Building for the purposes for which the same were designed and (ii) to use
the exterior paved driveways and walkways of the Land for vehicular and
pedestrian access to the Building. Tenant shall also have the right,
non-exclusive and in common with other tenants of the Building and Owner, to
use the designated free parking areas
<PAGE>
8.1 Tenant has paid security deposit of $1,150.00 prior to occupancy
in temporary space. This shall transfer as deposit for the five
year lease under this agreement. The third month's base rent will
be submitted with the signed lease agreement. As stated on page 3
item 12 of Addendum No. 1, the first two month's Base Rent shall
be abated.
/s/ RA
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Owner's Initials Tenant's Initials
above.
<PAGE>
of the Land, if any, for the parking of automobiles and other vehicles of
Tenant and its employees and business visitors; incident to Tenant's
Permitted Use of the Premises; provided that Owner shall have the right to
restrict or limit Tenant's utilization of such parking areas in the event the
same become overburdened and in such case to allocate on a proportionate
basis or assign parking spaces among Tenant and the other tenants of the
Building. Owner shall have the right to establish other reasonable
regulations, applicable to all tenants, governing the use of or access to any
interior or exterior common areas, and such regulations; when communicated by
written notification from Owner to Tenant, shall be deemed incorporated by
reference into Exhibit B hereof.
(b) Tenant covenants and agrees that all loading and unloading of
freight, merchandise, supplies, construction materials, trade fixtures and
other goods delivered to or from the Premises shall be done only in the
loading dock area of the Premises or the Building, as applicable. Under no
circumstances shall Tenant allow freight, merchandise, supplies, construction
materials, trade fixtures or other goods delivered to or from the Premises to
be stored on, accumulate on, or obstruct the entrances of the Building or the
loading dock area, roads, trash bay, sidewalks, driveways or parking areas
within the Project. A violation or violations of this sub-paragraph shall
constitute a material breach of this lease.
(c) Tenant shall not perform or permit work to be done on the loading
dock, roads, sidewalks, driveways, parking areas, landscaped areas or any
other exterior areas within the Project. This includes, but is not limited
to, assembly, construction, mechanical work, painting, drying, layout,
cleaning or repair of goods or materials.
11. RULES AND REGULATIONS. Tenant will comply fully with all
requirements of the Rules and regulations set forth in EXHIBIT B. Owner
shall at all times have the right to change the Rules and Regulations or to
promulgate other Rules and Regulations in such manner as Owner may deem
advisable for safety, care, or cleanliness of the Building, Land and
Premises, and for preservation of good order therein, all of which additional
Rules and Regulations, changes and amendments will be forwarded to Tenant in
writing and shall be carried out and observed by Tenant. Tenant shall
further be responsible for compliance with such Rules and Regulations by
Tenant Parties. Nothing in this Lease shall be construed to impose upon
Owner any duty or obligation to enforce the rules and Regulations or terms,
covenants or conditions in any other lease, against any other tenant, and
Owner shall not be liable to Tenant for violation of the same by any other
tenant, its tenant parties, or other visitors.
12. BUILDING SERVICES AND UTILITIES. Building services and utilities
shall be provided by Owner as provided in RIDER II.
13. OWNER'S CONSTRUCTION OF PREMISES.
(a) Before the Commencement Date, Owner will substantially complete the
construction of the Building (if not substantially completed as of the Lease
Date) to the stage that the Building is operable for Tenant's purposes, which
shall be defined as occurring when the public entrances of the Building,
including ground floor lobbies and the public hallways of the floor(s)
containing the Premises (or portions of said lobbies and hallways necessary
to provide reasonable and safe access to the Premises) are substantially
completed and elevators necessary (if any) to provide service to the
Premises, the heating and air conditioning system (as required for the season
and then prevailing climate) and all other mechanical systems required for
service to the Premises are in regular operation.
(b) The Premises shall be deemed to be substantially completed when all
work specified to be done in EXHIBIT C ("Tenant Finish") has been
substantially completed, except for (i) minor items of finishing and
construction of a nature which are not necessary to make the Premises
reasonably tenantable for the Permitted Use, and (ii) items not then
completed because of delay by Tenant in furnishing any drawings, plans or
approvals (collectively, "Plans") required by EXHIBIT C or because of
approved requests made by Tenant subsequent to delivery of Plans, for changes
or additions therein.
(c) If Tenant fails to furnish any Plans by the dates specified in
EXHIBIT C or makes any changes in such Plans after said dates, (i) Owner my
proceed with the building Standard work set forth in EXHIBIT C and layout as
determined solely by Owner, or (ii) Owner may accept late delivery of the
Plans. In either such event, Tenant shall bear any additional construction
or other expense to Owner caused directly or indirectly by any delay in
furnishing
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<PAGE>
the Plans or by any such changes and shall pay Owner as a portion of Rent, at
the Commencement Date, an amount equal to the aggregate number of days lapsed
between the delivery dates set forth in EXHIBIT C and the actual delivery
dates, multiplied by 1/365th of the annual Base Rent, plus an amount of
Additional Rent attributable to such period as reasonably estimated by Owner.
Owner and Tenant, understanding the difficulty in determining or estimating
the actual damages that will result form Tenant's tardiness in delivering
Plans, have agreed upon the foregoing as an appropriate method of liquidating
such damages.
(d) Owner shall have the Premises substantially completed by the
Estimated Commencement Date, except for delays due to Force Majeure or
Tenant's failure to timely furnish the Plans, any of which shall extend the
Estimated Commencement Date for a period equal to the total of the duration
of each such delay. If the Premises is not substantially completed within
three (3) months following the Estimated Commencement Date, as the same may
be extended in accordance herewith, Tenant, as Tenant's sole right thereby
arising, may terminate this Lease by notice to Owner given thereafter,
provided that the Term shall not have commenced within thirty (30) days after
the giving of such notice by Tenant. This Lease shall terminate in such case
upon expiration of thirty (30) days after Owner's receipt of such notice
without substantial completion having occurred, whereupon Owner shall return
all rent and the Security Deposit paid by Tenant to Owner in advance, and all
further obligations of the parties hereunder shall end. It is understood that
in the event of such termination by Tenant, Owner shall have no
responsibility to reimburse Tenant for any cost or expense which Tenant may
have directly or indirectly incurred with respect to this Lease or the
projected occupancy of the Premises, whether arranging for, or termination of
arrangements for, other space, or any Alterations to the Premises or
otherwise.
14. TENANT'S ALTERATIONS.
(a) Tenant will not make or allow to be made any alterations, additions
or improvements ("Alterations") in or to the Premises without the prior
written consent of Owner. Alterations to the Premises shall be done by Owner
or by contractors approved in writing by Owner, at Tenant's sole cost and
expense. If Owner approves Tenant's proposed Alterations and agrees to
permit Tenant's contractor to do the work, Tenant's contractor must first
furnish to Owner insurance coverage against such risks and in such amounts as
Owner may require, including but not limited to Workman's Compensation
Insurance (as required under the Workman's Compensation Act of Colorado),
issued by such companies as Owner may approve. All Alterations permitted by
Owner must conform to all rules and regulations established form time to time
by the Underwriter's Association (or comparable organization) of the local
area in which the Land and Building are located, and conform to all
requirements of all governmental entities having jurisdiction. Tenant's
contractor shall also furnish all applicable building and occupancy permits
required by law. Owner shall have the right to have Tenant's contractor's
work inspected by architects and engineers, the cost of which shall be paid
by Tenant to Owner on demand, with interest thereon at the Reimbursement
Interest Rate from the due date until paid. At any time Tenant either
desires to, or is required to make repairs or Alterations in accordance with
this Lease, Owner may, in addition to its other options, require tenant at
Tenant's sole cost and expense, to obtain and provide to Owner a lien and
completion bond (or such other applicable bond as reasonably determined by
Owner) in an amount equal to one and one-half (1.5) times the estimated cost
of such improvements to insure Owner against risk and liability, including
but not limited to liability for mechanics and materialman's lien, and to
insure the completion of the work.
(b) All Alterations (whether temporary or permanent in character and
whether made with or without Owner's consent) made in or upon the Premises,
either by Owner or Tenant, shall be Owner's property upon installation and
shall remain on the Premises without compensation to Tenant unless Owner
shall, by written notice, elect to have the alterations so made be removed
upon expiration of the Term or termination of this Lease. Owner may give
this notice of election to Tenant at anytime during the Term of the Lease,
and for a period of three (3) days after the expiration of the Term or the
termination of this Lease. If Owner shall make such election that
Alterations so made shall be removed, then tenant agrees to cause same to be
removed and to restore the Premises to their former condition at Tenant's
sole cost and expense, and should Tenant fail to remove the same and
restore the Premises, then Owner may cause same to be removed and the
Premises restored at Tenant's expense, and Tenant agrees to reimburse Owner
of demand for the cost of such removal and restoration, together with any
and all damages which Owner may suffer and sustain by reason of the failure
of tenant to remove the same with interest thereon at the Reimbursement
Interest Rate from the due date until paid.
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<PAGE>
Upon acceptance of Tenant's alterations to the premises, Tenant will not be
required to remove such alterations from the premises upon expiration of the
lease.
/s/ RA
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Owner's Initials Tenant's Initials
34
<PAGE>
(c) At the Ending Date of Term or other termination of this Lease, all
furniture, movable trade fixtures and personal property of Tenant may be
removed by Tenant if Tenant so elects and no Event of Default then exists,
and shall be so removed if required by Owner, or if not so removed shall, at
the option of Owner, become the property of Owner.
(d) All Alterations, installations, removals and restoration shall be
accomplished in a good and workmanlike manner so as not to damage the
Premises or the Building, and in such manner as not to distrub other tenants
in their use and occupancy of the Building.
15. REPAIRS AND MAINTENANCE.
(a) Owner shall be responsible for repair and maintenance of the
foundation, floors (beneath the carpet or other floor covering), roof, the
exterior walls (excluding all glass windows, window frames and doors), and
the electrical service to the wall box (before any Tenant finish), the
plubing to the wall stubs and common areas. Owner shall also be responsible
for the preventative maintenance contract for the roof mounted air
conditioning and heating apparatus. Tenant shall pay for these items as
provided for in Rider I.(1)
(b) Tenant shall use, operate and maintain the Premises and its
systems, including all fixtures and equipment installed by Tenant, in such
manner as to keep the same in good order and condition, making all repairs
and replacements necessary to maintain such good order and condition all at
Tenant's expense, including but not limited to, plumbing from the wall stubs,
electrical service from the wall box, sewer, water and heating pipes from the
exterior wall, and all glass. Tenant shall be responsible for the maintenance
(other than preventative maintenance) and repair and/or replacement of any
heating, ventilating, air conditioning, plumbing, electrical or other systems
and fixtures installed solely to service the Premises, whether installed or
paid for by Owner or Tenant. The performance by Tenant of its obligations to
maintain the Premises shall be conducted only by contractors approved in
writing by Owner, it being understood that Tenant shall procure and maintain
and shall cause contractors engaged by or on behalf of Tenant to procure and
maintain insurance coverage against such risks and in such amounts as Owner
may require, including but not limited to Workmen's Compensation Insurance
(as required under the Workmen's Compensation Act of Colorado), issued by
such companies as Owner may approve, in connection with such maintenance. If
Tenant fails to make any repair within fifteen (15) days after the occurence
of the damage necessitating same, or fails to cause other maintenance to be
performed within fifteen (15) days after notice from Owner of the need
therefor, Owner at its option may make such repair, or cause such other
maintenace to be performed, and tenant, shall on demand therefor, pay Owner
for the cost thereof, with interest thereon at the Reimbursement Interest
Rate from the due date until paid. At the Ending Date of Term or other
termination of this Lease, Tenant shall deliver up the Premises including all
Alterations (except as otherwise herein provided), in good repair and
condition, reasonable wear and tear excepted, and shall deliver to Owner all
keys to the Premises.
(c) Tenant shall give Owner prompt written notice of any damage to or
defects in, the Premises and in the plumbing, electrical, heating, air
conditioning and other systems and apparatus located in the Premises. The
obligation to repair such damages or defects shall be as stated in this
paragraph 15. In no event shall Owner be obligated to repair any damage to
the Premises or the Building caused by any act, omission or negligence of
Tenant or Tenant Parties. Tenant shall reimburse Owner for all costs and
expenses of repairing and replacing all damage to the Premises and Building
and to fixtures and equipment caused by Tenant or Tenant Parties or as the
result of all or any of them moving in or out of Building or by installation
or removal of furniture, fixtures or other property. Such costs and expenses
shall be paid by Tenant to Owner on demand, with interest thereon at the
Reimbursement Interest Rate from the due date until paid.
(d) Owner shall not be liable by reason of any injury to or
interference with Tenant's business arising from the making of any repairs or
alterations in or to the Premises or the Building or to any appurtenances or
equipment therein. There shall be no abatement of Rent because of such
repairs or alterations, or because of any delay by Owner in making the same.
16. SIGNS AND ADVERTISING. No sign, advertisement or notice shall be
inscribed, painted, affixed or otherwise displayed on any part of the outside
or the inside of the Building except on the directories and doors of offices,
and then only in such place, number, size, color and style
<PAGE>
(1) Tenant will not be responsible for any damage to glass, doors and
upheaval of concrete directly resulting from expansive soils and shall be
the sole responsibility of the Owner to remedy.
/s/ R A
- -------------------- --------------------
Owner's Initials Tenant's Initials
7A
<PAGE>
as is approved by Owner and provided by Owner at Tenant's cost and expense;
if any such sign, advertisement or notice is nevertheless exhibited by
Tenant, Owner shall have the right to remove same and Tenant shall be liable
for any and all expenses incurred by Owner in said removal, which shall be
payable by Tenant to Owner on demand, with interest thereon at the
Reimbursement Interest Rate from the due date until paid. Owner shall have
the right to prohibit (by injunction or otherwise) any advertisement of
Tenant which in Owner's opinion tends to impair the reputation of the
Building or its desirability. Upon written notice from Owner, Tenant shall
immediately refrain from and discontinue any such advertisement.
17. MECHANIC'S LIENS.
(a) Tenant will not suffer or permit any mechanic's, laborer's or
materialman's lien to be filed against the Land, Building, or Premises, or
any part thereof, by reason of work, labor services or materials supplied or
claimed to have been supplied to tenant; and if any such lien shall at any
time be filed, Tenant, within ten (10) days after notice of the filing
thereof, shall cause it to be discharged of record by payment, deposit, bond,
order of a court of competent jurisdiction or as otherwise provided by law.
If Tenant shall fail to cause such lien to be discharged within the period
aforesaid, then in addition to any other right or remedy, Owner may, but
shall not be obligated to, discharge it either by paying the amount claimed
to be due or by procuring the discharge of such lien by deposit or by bonding
or other proceedings. Owner may at its option and without waiving any of its
rights set forth in the immediately preceding sentence, permit Tenant to
contest validity of any such lien or claim, provided that in such
circumstances the Tenant shall at its expense defend itself and Owner against
the same and shall pay and satisfy any such adverse judgment that may be
rendered thereon before the enforcement thereof against the Owner, the
Premises or the building, provided further that Owner may at any time require
the Tenant to post a bond with an entity satisfactory to Owner in an amount
one and one-half (1.5) times the amount of the lien or to deposit with the
Court exercising jurisdiction over such claim such amount as either the Court
or statute may determine to be sufficient as a release and discharge of the
lien. If Tenant shall not immediately make such payment upon the request of
Owner, Owner may make said payment in the amount so paid together with
interest thereon from the date of payment and all legal costs and charges,
including attorney fees incurred by Owner in connection with said payment
shall be deemed Additional Rent and shall be payable on the next date on
which a base rental installment is due. Any amount so paid by Owner, plus all
of Owner's costs and expenses associated therewith, shall be paid by Tenant
to Owner on demand, with interest thereon at the Reimbursement Interest Rate
from the due date until paid.
(b) Nothing in this Lease, nor any approval by Owner of any of
Tenant's Alterations or contractors, shall be deemed or construed in any way
as constituting consent by Owner for the making of any alterations or
additions by Tenant within the meaning of any State law, or constituting a
request by Owner, expressed or implied, to any contractor, subcontractor,
laborer or materialman for the performance of any labor or the furnishing of
any materials for the use or benefit of Owner.
18. INDEMNIFICATION AND EXCULPATION.
(a) Tenant indemnifies and agrees to hold harmless Owner against
and from any and all claims arising from Tenant's use of the Premises, or
from the conduct of Tenant's business or from any activity, work or things
done, permitted or suffered by Tenant in or about the Premises, Land,
Building or elsewhere, and Tenant further indemnifies and agrees to hold
harmless Owner against and from any and all claims arising from any breach or
default in the performance of any obligation on Tenant's part to be performed
under the terms of this Lease, or arising from any negligence of Tenant or
Tenant Parties, and from and against all costs, attorney's fees, expenses and
liabilities incurred in the defense of any such claims or any action or
proceeding brought thereon, and if any action or proceeding is brought
against Owner by reason of any such claim, Tenant upon notice from Owner
shall defend the same at Tenant's expense by counsel satisfactory to Owner.
(b) Owner shall not be liable or responsible for any loss or
damage to any property or death or injury to any person occasioned by theft,
fire, act of God or public enemy, criminal conduct of third parties,
injunction, riot, strike, insurrection, war, court order, requisition or
other act of governmental body or authority, acts of other tenants of the
Building, or any other matter beyond the control of Owner, or for any injury
or damage or inconvenience which may arise through repair or alteration of
any part of the Building, or failure to make
<PAGE>
repairs, or from any cause whatever except Owner's gross negligence or
willful wrong.
19. TENANT'S LIABILITY INSURANCE; SUBROGATION RIGHTS
(a) Tenant shall obtain and keep in effect throughout the Term, an
insurance policy or policies, issued by insurance carriers reasonably
satisfactory to Owner, providing general public liability insurance against
claims for personal injury (including death), property damage, or otherwise,
arising out of or in any way connected with the Premises or this Lease, in
amounts of not less than a combined single limit of $1,000,000.00. Such
insurance shall not be subject to cancellation, reduction of coverage or
other modification without at least thirty (30) days prior notice to all
insureds, and such insurance shall name Owner, first mortgagee and Tenant as
insured and if requested by Owner shall also name as additional insureds any
lessor and any other mortgagee.
(b) Prior to the commencement of the Term, Tenant shall provide
Owner with original certificates or duplicate originals of the policy or
policies of insurance referred to in subparagraph (a) with evidence that
premiums have been paid in full for the respective policy periods. Tenant
also shall furnish to Owner throughout the Term, replacement certificates or
renewal policies, together with evidence of like premium payment at least ten
(10) days prior to the respective expiration dates of the then current policy
or policies.
(c) Each party hereto waives any cause of action it might have
against the other party on account of any loss or damage that is insured
against under any insurance policy (to the extent that such loss or damage is
recoverable under such insurance policy and only to the extent of and with
respect to any loss or damage occurring during such time as the policy or
policies of insurance covering said loss shall contain a clause or
endorsement to the effect that this waiver shall not adversely affect or
impair said insurance or prejudice the right of the insured to recover
thereunder) that covers the Building, the Land, the Premises, Owner's or
Tenant's fixtures, personal property, leasehold improvements or business and
which names Owner or Tenant, as the case may be, as a party insured. Each
party hereto agrees that it will request its insurance carrier to endorse all
applicable policies waiving the carrier's rights of recovery under
subrogation or otherwise against the other party.
(d) Tenant shall obtain and keep in effect throughout the Term of
the Lease an insurance policy or policies with coverage known as business
interruption or business continuation insurance. This policy shall name Owner
as an additional insured. Such insurance shall not be subject to
cancellation, reduction of coverage or other modification without at least
thirty (30) days prior written notice to Owner.
(e) Any insurance required by Tenant hereunder shall be in
companies rated A+, AAA or better in "Best's Insurance Guide". If in the
reasonable opinion of Owner, the amount of liability insurance required
hereunder or the coverage under such policy is not adequate, then not more
frequently than twice during this Lease and any extension or renewal term of
this Lease, if any, Tenant shall reasonably increase said insurance coverage,
either in an amount or breadth of insurance as required by Owner provided
however that in no event shall the amount of the liability insurance increase
by more than fifty per cent (50%) of the amount of the insurance during the
preceding term of this Lease.
20. SUBORDINATION.
(a) This lease and all rights of Tenant hereunder are subject and
subordinate to any first deed of trust, first mortgage or other first
instrument of security (a "Mortgage"), and at Owner's option, this Lease and
all rights of Tenant hereunder are subject and subordinate to any junior
deed of trust, junior mortgage or other junior instrument of security, as
well as to any ground Lease or primary Lease (an "Underlying Lease") that now
or hereafter covers all or any part of the Building, the Land, or any
interest of Owner therein, and to any and all advances made on the security
thereof, and to any and all increases, renewals, modifications,
consolidations, replacements and extensions of any Mortgage or Underlying
Lease. This provision is self-operative and no further instrument shall be
required to effect such subordination of this Lease. Tenant shall, however,
upon demand at any time or times execute, acknowledge and deliver to Owner or
to the holder ("Holder") of any Mortgage, or lessor ("Lessor") in any
Underlying Lease, any and all instruments and certificates that in the
judgment of Owner, Holder or Lessor may be necessary or desirable to confirm
or evidence such
<PAGE>
subordination. Not in limitation of the generality of the foregoing. Tenant
agrees that any Holder shall have the right at any time to subordinate any
Mortgage to this Lease on such terms and subject to such conditions as such
Holder may deem appropriate in its discretion. Tenant further covenants and
agrees upon demand by Holder or Lessor at any time, before or after the
institution of any proceedings for foreclosure or sale pursuant to any
Mortgage, or termination of any Underlying Lease, to attorn to the purchaser
upon such foreclosure or sale or to Lessor upon such termination, and to
recognize such purchaser or Lessor as Owner under this Lease. The agreement
of Tenant to attorn contained in the immediately preceding sentence shall
survive any such foreclosure, sale or termination. Tenant, upon demand at
any time or times, before or after any such foreclosure, sale or termination,
shall execute, acknowledge and deliver to Holder or Lessor any and all
instruments that in the judgment of Holder or Lessor may be necessary or
desirable to confirm or evidence such attornment and Tenant hereby
irrevocably authorizes Holder or Lessor to execute, acknowledge and deliver
any such instruments on Tenant's behalf. 1
(b) If Owner shall be or is alleged to be in default of any of its
obligations owing to Tenant under this Lease, Tenant agrees to give to Holder
and Lessor a copy of any written notice (by registered or certified mail or
by delivery service) of any such default which Tenant shall have served upon
Owner, provided that prior thereto Tenant has been notified in writing (by
way of notice of assignment of rents and/or leases, or otherwise) of the name
and addresses of any such Holder and Lessor. Tenant shall not be entitled to
exercise any right or remedy as may exist because of any default by Owner
without having given such notice to Holder and Lessor; and Tenant further
agrees that if Owner shall fail to cure such default; (i) Holder or Lessor
shall have an additional thirty (30) days (measured from the later of the
date on which the default should have been cured by Owner, or the date of
Holder's or Lessor's receipt of such notice from Tenant), provided that if
such default could not be cured within such thirty (30) day period and Holder
or Lessor is diligently pursuing the remedies necessary to effectuate the
cure (including but not limited to foreclosure or termination proceedings, if
appropriate) such longer period as may be necessary, within which to cure
such default; and (ii) Tenant shall not exercise any right or remedy as may
exist or arise because of Owner's default, as may be expressly provided for
herein or available to Tenant as a matter of law, if the Holder or Lessor
either has cured the default within such thirty (30) day period, or as the
case may be, has initiated the cure of same within such thirty (30) day
period and is diligently pursuing the cure of same as aforesaid.
(c) If any Holder or Lessor, or a successor of either, succeeds to
the interest of Owner in the Land or Building, or acquires the right to
possession of the Land or Building, such person shall not be (i) liable for
any act or omission of Owner under this Lease; (ii) liable for the
performance of Owner's covenants hereunder which arise and accrue prior to
such person's succeeding to the interest of Owner hereunder or acquiring such
right to possession; (iii) subject to any offsets or defenses which Tenant
may have at any time against Owner; (iv) bound by any rent which Tenant may
have prepaid for more than one month; (v)in the event the unexpired term of
this Lease exceeds three years at the time of such succession or acquisition
of the right to possession, bound by any amendment or modification hereof
relating to the reduction of rent, shortening of term, or effecting a
cancellation or surrender hereof and made without the consent of such person;
or (vi) liable for the performance of any covenant of Owner under this Lease
which is capable of performance only by the original Owner.
21. ESTOPPEL CERTIFICATES. Tenant agrees, from time to time as may be
requested by Owner, Holder or Lessor, within (5) days after such request, to
execute, acknowledge and deliver to such person(s) as may be specified in the
request, a certificate confirming and containing such factual certifications
and representations with respect to Tenant and this Lease, as may be deemed
appropriate by Owner, Holder or Lessor. Not in limitation of the foregoing,
such certificate shall confirm that this Lease is in full force and effect
and has not been amended, modified or superseded, that Owner has
satisfactorily completed all construction work required by this Lease
(subject to completion of punchlist items), that Tenant has accepted the
Premises and is then in possession thereof, that Tenant has no defense,
offsets or counterclaims hereunder or otherwise against Owner with respect to
this Lease or the Premises, that Owner is not in default hereunder, that
Tenant has no knowledge of any pledge or assignment of this Lease or rentals
hereunder (other than to Holder), and that Rent is accruing under this Lease
but has not been paid more than one month in advance (and specifying the date
to which Rent has been paid). If any of the foregoing shall not be the case,
Tenant shall specify in reasonable detail the extent and nature of the
deviation therefrom.
<PAGE>
1 So long as Tenant is not in default under the Lease, the holder agrees
not to disturb the use and occupancy of the Tenant and if the Tenant is
required to attorn to a new Owner, such attornment shall be subject to
all of the terms and conditions of the Lease.
/s/RA
- ---------------------- ------------------
Owner's Initials Tenant's Initials
10A
<PAGE>
22. ASSIGNMENT AND SUBLETTING BY TENANT.
(a) Without the prior written consent of Owner, Tenant shall not
(i) assign or in any manner transfer this Lease or any estate or interest
therein, or (ii) permit any assignment of this Lease or any estate or
interest therein by operation of law, or (iii) sublet the Premises or any
part thereof, or (iv) grant any license, concession or other right of
occupancy of any portion of the Premises, or (v) permit the use of the
Premises by any parties other than Tenant, its agents and employees, and any
such acts without Owner's prior written consent shall be void and of no
effect. Consent by Owner to one or more assignments or sublettings shall not
operate as a consent to, or a waiver of Owner's rights with respect to, any
subsequent assignments and sublettings. Notwithstanding any assignment or
subletting, Tenant and any guarantor of Tenant's obligations under this Lease
shall at all times remain fully responsible and liable for the payment of the
Rent and for compliance with all of Tenant's other obligations under this
Lease. If an Event of Default should occur while the Premises or any part
thereof is then assigned or sublet, Owner, in addition to any other remedies
herein provided or provided by law, may at its option collect directly from
such assignee or sublessee all payments becoming due to Tenant under such
assignment or sublease and apply such payments against any sums due to Owner
by Tenant hereunder, and Tenant hereby authorizes and directs any such
assignee or sublease to make such payments directly to Owner upon receipt of
notice from Owner. No direct collection by Owner from any such assignee or
sublessee (regardless of whether or not such assignee or sublessee shall be
deemed to be void and of no effect as stated in the first sentence of this
(a)) shall be construed to constitute a novation or a release of Tenant or
any guarantor of Tenant from the further performance of its obligations
hereunder. Receipt by Owner of payments from any assignee, sublessee or
occupant of the Premises shall not be deemed a waiver of the covenants in
this Lease against assignment and subletting, or a release of Tenant under
this Lease. The receipt by Owner from any such assignee or sublessee
obligated to make payments shall be a full and complete release, discharge
and acquittance to such assignee or sublessee to the extent of any such
amount so paid to Owner. Owner is authorized and empowered on behalf of
Tenant to endorse the name of Tenant upon any check, draft, or other
instrument payable to Tenant evidencing payment under an assignment or
sublease to Tenant, and to receive and apply the proceeds thereof in
accordance with the terms hereof.
(b) Tenant shall not mortgage, pledge or otherwise encumber this
Lease or any estate or interest therein or in the Premises.
(c) If Tenant requests Owner's consent to an assignment of the
Lease or subletting of all or a part of the Premises, it shall submit to
Owner, in writing, the name of the proposed assignee or subtenant and the
nature and character of the business of the proposed assignee or subtenant,
the term, use, rental rate and other particulars of the proposed subletting
or assignment, including without limitation, evidence satisfactory to Owner
that the proposed subtenant or assignee is financially responsible and will
immediately occupy and thereafter use the Premises (or any sublet portion
thereof) for the remainder of the term (or for the entire term of the
sublease, if shorter).
(d) If Owner consents to any subletting or assignment by Tenant as
above
<PAGE>
provided, and subsequently any payments received by Tenant under any such
sublease are in excess of the Rent payable by Tenant under this Lease, or any
additional consideration is paid to Tenant by the assignee under any such
assignment, then Owner may, at its option, either (i) declare such excess
payments under such sublease or such additional consideration for such
assignment to be due and payable by Tenant to Owner as Additional Rent
hereunder, or (ii) elect to cancel this Lease as provided in subparagraph (c)
hereof.
(e) All of the foregoing notwithstanding, Tenant shall not enter into
any lease, sublease, license, concession or other agreement for the use,
occupancy or utilization of the Premises or any portion thereof, which
provides for a rental or other payment for such use, occupancy or utilization
based in whole or in part on the income or profits derived by any persons
from the property leased, occupied or utilized (other than an amount based on
a fixed percentage of percentages of receipts or sales). Any such purported
lease, sublease, license, concession or other agreement shall be absolutely
void and ineffective as a conveyance of any right or interest in the
possession, use or occupancy of any part of the Premises. 1
23. HOLDING OVER. Tenant shall, at the expiration or earlier termination of
the Term, promptly quit and surrender the Premises in good order and
condition and in conformity with the applicable provisions of this Lease,
excepting only reasonable wear and tear and damage by fire or other insured
casualty. Tenant shall have no right to hold over beyond the expiration or
earlier termination of the Term and in the event Tenant shall fail to deliver
possession of the Premises as herein provided, such occupancy shall not be
construed to effect or constitute other than a tenancy at sufferance, at a
daily rental equal to (a) the greater of (i)2 the Rent (calculated on a per
diem basis) in effect for the last day of the Term, or (ii) the then current
market rental (calculated on a per diem basis) for the Premises, plus (b) all
damages, costs and expenses sustained by Owner by reason of Tenant's holding
over. Without limiting any rights and remedies of Owner as a result of the
holding over by Tenant, and without creating any right in Tenant to continue
in possession of the Premises, all of Tenant's obligations provided for in
this Lease with respect to the use, occupancy and maintenance of the Premises
shall continue during such hold over period. The inclusion of this paragraph
shall not be construed as Owner's consent for Tenant to hold over.
24. ACCEPTANCE OF SURRENDER OF PREMISES. During the Term, tenant shall
continuously occupy the Premises and shall not permit the Premises to become
vacant or abandoned. No act or thing gone by Owner or its agents during the
Term shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept a surrender of the Premises shall be valid unless the
same is made in writing and signed by Owner.
25. CONDEMNATION.
(a) If any taking by condemnation, or sale in lieu thereof, pursuant to
an exercise of a power of eminent domain ("Condemnation") occurs with respect
to the Building or Land or any portion of either, which would leave the
remainder of the Building or Land unsuitable for use comparable (economically
or otherwise) to its use prior to the Condemnation, in Owner's reasonable
judgement, then Owner may terminate this Lease.
(b) If any Condemnation occurs with respect to the entire Premises, or
more than 25% thereof (by floor area), or such portion of the Premises as
renders the remainder thereof unsuitable for use comparable (economically or
otherwise) to its use prior to the Condemnation, in Owner's reasonable
judgement, then Owner or Tenant may terminate this Lease.
(c) If Owner determines that the compensation awarded for Condemnation,
available for restoration of the Land, Building or Premises will not be
sufficient to pay the cost of restoration, or if such award is required to be
applied on account of any Mortgage or Underlying Lease, or if Owner
determines that the length of the Term remaining after restoration would make
restoration impractical (whether for economic of other reasons), Owner may
terminate this Lease.
(d) Any termination of this Lease pursuant to this paragraph shall be
effective upon the earlier of the date title to or possession of the
condemned real estate vests in the condemnor. All Rent shall be apportioned
equitably and paid in full be Tenant to Owner to that date. In the event of a
Condemnation which does not effect a termination of this Lease but does
deprive Tenant of the use of a portion of the Premises, there shall be an
equitable reduction of
<PAGE>
1 Owner agrees that consent for assignment will not be unreasonably withheld
provided the entity the lease is being assigned to has equal or greater net
worth than the existing Tenant.
2 One Hundred Fifty Percent (150%)
/s/ RA
- ------------------------ -------------------------
Owner's Initials Tenant's Initials
12A
<PAGE>
expense, to insure the value of its leasehold improvements, fixtures, equipment
or other property located in the Premises, for the purpose of providing funds
to Owner to repair the Premises. Except as otherwise provided in this Lease,
any insurance which may be carried by Owner or Tenant against loss or damage to
the Building or to the Premises shall be for the sole benefit of the party
carrying such insurance and under its sole control.
(f) If this Lease is terminated pursuant to this paragraph, all
Rent shall be apportioned equitably and paid in full by Tenant to Owner to
the date of termination. This provision shall not relieve Tenant of
liability to Owner for damages (including damages arising due to early
termination of this Lease) arising out of the negligence or other tortious
conduct of Tenant or Tenant Parties.
(g) In the event of a fire or other casualty damage not arising out
of the negligence or other tortious conduct of Tenant or Tenant Parties,
which does not result in termination of this Lease pursuant to this paragraph
but does deprive Tenant of the use of a portion of the Premises, there shall
be an equitable reduction of the Rent, taking into account the period for
which and the extent to which such portion of the Premises is not reasonably
usable for the Permitted Use.
27. EVENTS OF DEFAULT. In addition to any Event of Default specified
elsewhere in this Lease, each of the following events shall be deemed to be
an "Event of Default" by Tenant under this Lease:
(a) Failure by Tenant to pay when due any installment of Rent payable
by Tenant hereunder (or any rental or other sum under any other lease now or
hereafter executed by Tenant in connection with space in the Building).
(b) Failure by Tenant to comply with or observe any other provision
of this Lease (or any other Lease now or hereafter executed by Tenant in
connection with space in the Building) after ten (10) days notice of such
failure.
(c) Vacation or abandonment by Tenant or any portion of the Premises.
(d) (i) Appointment of a receiver to take possession of, or making of
an attachment or execution against, Tenant's assets or any substantial portion
thereof, or Tenant's interest in this Lease; or
(ii) Making by Tenant of a general assignment for the benefit or
creditors; or
(iii) Admission by Tenant in writing of its inability to meet its
obligations as they mature; or
(iv) Commission by Tenant of any other act of bankruptcy or filing
by Tenant of a petition or institution of a proceeding on its behalf under any
section or chapter of the Bankruptcy Code of the United States, as amended, or
under any similar law or statute of the United States or any state thereof
("Bankruptcy Laws"); or
(v) Filing by any third party of a petition or institution by any
third party of a proceeding against Tenant under any Bankruptcy Law, and such
petition or proceeding is not dismissed within thirty (30) days; or
(vi) Adjudication of Tenant as a bankrupt; or
(vii) Occurrence of any of the foregoing actions in this
subparagraph (d) with respect to any guarantor of Tenant's obligations under
this Lease, or default by such guarantor in performance of any provision under
its guaranty.
28. OWNER'S REMEDIES. If an Event of Default shall occur, the following
provisions shall apply and Owner shall have the rights and remedies,
cumulatively if possible, set forth herein, which rights and remedies may be
exercised, separately or cumulatively, notwithstanding any election of
remedies, upon or at any time following the occurrence of an Event of Default
unless, prior to such exercise, Owner shall agree in writing with Tenant that
the Event of Default has been cured by Tenant in all respects;
<PAGE>
Tenant will be granted a ten (10) day grace period for late payment of rent,
as stipulated in paragraph 7. page 4 of 23.
/s/RA
- -------------------- ---------------------
Owner's Initials Tenant's Initials
14A
<PAGE>
(a) Acceleration of Rent. (i) By notice to Tenant, Owner shall have the
right to accelerate all Base Rent and all Additional Rent due hereunder and
otherwise payable in installments over the remainder of the Term, and, at
Owner's option, any other Additional Rent and other Rent to the extent that
such Additional Rent and other Rent can be determined and calculated (which
may be reasonably estimated by Owner) to a fixed sum; and the amount of all
of such accelerated Rent, without further notice or demand for payment, shall
be due and payable by Tenant within five (5) days after Owner has so notified
Tenant. Additional Rent and other Rent which has not been included in
accelerated Rent, shall be due and payable by Tenant during the remainder of
the Term, in the amounts and at the times otherwise provided for in this
Lease.
(ii) Notwithstanding the foregoing or the application of any rule
of law based on election of remedies or otherwise, if Tenant fails to pay the
accelerated Rent in full when due, Owner thereafter shall have the right by
notice to Tenant. (A) to terminate Tenant's further right to possession of
the Premises and (B) to terminate this Lease under subparagraph (c) below;
and if Tenant shall have paid part but not all of the accelerated Rent, the
portion thereof attributable to the period equivalent to the part of the Term
remaining after Owner's termination of possession or termination of this
Lease shall be applied by Owner against Tenant's obligations owing to Owner
as determined by the applicable provisions of subparagraphs (d) and (f) below.
(b) Taking of Possession - Curing Tenant's Defaults. (i) With or
without notice, Owner shall have the right to enter upon and take possession
of the Premises and expel or remove Tenant and any other person who may be
occupying the Premises or any part thereof, by force if necessary, without
being liable for prosecution or any claim for damages therefore. No re-entry
or taking possession of the Premises by Owner shall be construed as an
election on its part to terminate this Lease, unless a written notice of
termination is given to Tenant.
(ii) With or without re-entering and taking possession of the
Premises, and with or without notice to Tenant, Owner may make any payment
which Tenant was obligated but failed to make under this Lease, and perform
or attempt to perform any other obligation of Tenant under this Lease which
Tenant has failed to perform.
(c) Termination of Lease. (i) By notice to Tenant, Owner shall have
the right to terminate this Lease as of the date specified in the notice.
Tenant's rights to the possession and use of the Premises shall end
absolutely as of the specified termination date, and this Lease shall
terminate in all respects except for the provisions hereof regarding Owner's
damages and Tenant's liabilities arising prior to, out of and following the
Event of Default and the ensuing termination, and the provisions hereof which
by their terms survive termination. Therefore after termination of the Lease,
Tenant shall remain liable to Owner for damages as calculated pursuant to
28.(f).
(ii) Following such termination (as well as upon any other
termination of this Lease by expiration of the Term or otherwise) Owner
immediately shall have the right to recover possession of the Premises; and
to that end, Owner may enter the Premises and take possession, without the
necessity of giving Tenant any notice to quit or any other notice, with or
without legal process or proceedings, and in so doing Owner may remove
Tenant's property (including any improvements or additions to the Premises
which Tenant made, unless made with Owner's consent which expressly permitted
Tenant to not remove the same upon expiration of the Term), as well as the
property of others as may be in the Premises, and make disposition thereof in
such manner as Owner may deem to be commercially reasonable under the
circumstances.
(d) Tenant's Continuing Obligations - Owner's Re-letting Rights.
(i) Unless and until Owner shall have in writing terminated this Lease under
subparagraph (c) above, Tenant shall remain fully liable and responsible to
perform all of the covenants and to observe all the conditions of this Lease
throughout the remainder of the Term; and, in addition, whether or not Owner
shall have terminated this Lease, Tenant shall pay to Owner, on demand and
with interest thereon at the Reimbursement Interest Rate from the due date
until paid, the total sum of all costs, losses and expenses, including
reasonable counsel fees, as Owner incurs, directly or indirectly, because of
any Event of Default having occurred.
(ii) If Owner either terminates Tenant's right to possession
without terminating this Lease or terminates this Lease and Tenant's
leasehold estate as above provided,
<PAGE>
Owner shall have the unrestricted right to re-let the Premises or any part
thereof to such tenants, on such provisions, and for such periods as Owner
may deem appropriate. It is understood that Owner shall have no obligation to
have the Premises available for re-letting or otherwise endeavor to re-let so
long as Owner (or any affiliated entity) has other comparable or competing
vacant space or property available for leasing to others in the Building or
in other buildings in the general market area of which the Building is a
part; and that notwithstanding non-availability of other space or property.
Owner's obligation to mitigate damages shall be limited to such efforts as
Owner, in its reasonable judgment, deems appropriate.
(e) Bankruptcy Assurances. Owner and Tenant understand that,
notwithstanding certain provisions to the contrary contained herein, a
trustee or debtor in possession under the Bankruptcy Code of the United
States (or other Bankruptcy Laws) may have certain rights to assume or assign
this Lease. Owner and Tenant further understand that in any event Owner is
entitled under the Bankruptcy Code (or other Bankruptcy Laws) to adequate
assurances of future performance of the terms and provisions of this Lease.
For purposes of any such assumption or assignment, the parties hereto agree
that the term "adequate assurance" shall include at least the following:
(i) In order to assure Owner that the proposed assignee will have
the resources with which to pay the Rent, any proposed assignee must have
demonstrated to Owner's satisfaction a net worth (as defined in accordance
with generally accepted accounting principles consistently applied) at least
as great as the net work of Tenant on the commencement Date, increased by ten
percent (10%) for each year from the Commencement Date through the date of
the proposed assignment. The financial condition and resources of Tenant
were a material inducement to Owner in entering into this Lease.
(ii) Any proposed assignee must have been engaged in the business
conducted by Tenant in the Premises, allowable pursuant to the Permitted Use,
for at least five (5) years prior to any such proposed assignment.
(iii) Any proposed assignee must agree to use the Premises only for
the Permitted Use. In entering into this Lease, Owner considered extensively
the Permitted Use and determined that such Permitted Use would add
substantially to Owner's tenant balance and that were it not for Tenant's
agreement to use the Premises only for the Permitted Use, Owner would not
have entered into this Lease. Owner's overall operation will be substantially
impaired if the trustee in bankruptcy or any assignee of this Lease makes any
use of the Premises other than the Permitted Use.
(f) Owner's Damages. (i) Whether the Lease is terminated or not the
damages which Owner shall be entitled to recover from Tenant shall be the sum
of:
(A) All Rent accrued and unpaid as of the termination date or the
date Owner retakes possession of the premises (whichever occurs later); and
(B) (1) all costs and expenses incurred by Owner in recovering
possession of the Premises, including removal and storage of Tenant's
property, improvements and Alterations therefrom, (2) the costs and expenses
of curing or attempting to cure any default by Tenant, (3) the costs and
expenses of restoring the Premises to the condition in which the same were to
have been surrendered by Tenant as of the Ending Date of Term, or, in lieu
thereof, the costs and expenses of remodeling or altering the Premises or any
part for re-letting the same, (4) the costs of re-letting (exclusive of those
covered by the foregoing) including brokerage fees and reasonable counsel
fees, and (5) any special overhead expenses related to the vacancy of the
Premises not in excess of ten percent (10%) of the monthly Base Rent
otherwise to be paid by Tenant over the remainder of the Term, for each month
or part between the date of termination and the re-letting of the entire
Premises; and
(C) All Base Rent and Additional Rent and other Rent (to the
extent that the amount of Additional Rent and other Rent has been then
determined or estimated as provided above) otherwise payable by Tenant over
the remainder of the Term; and
(D) All reasonable attorney fees, court costs, arbitration costs,
witness fees and similar costs of enforcing this Lease;
(E) Less [deducting from the total determined under subparagraphs
(A),
<PAGE>
(B), (C) and (D)] all Rent and Additional Rent which Owner receives from
other tenants by reason of the leasing of the Premises or part thereof or
attributable to any period falling within what would otherwise have been the
remainder of the Term. If the premises covered by a new lease by other
tenants include other premises not part of the Premises of this Lease, a fair
apportionment of the rent received from such new lease and expenses incurred
in connection therewith as provided aforesaid will be made in determining the
net proceeds from such new lease. If the existing term of a new lease by
other tenants is different from the Term of this Lease any rent concessions
will be equally apportioned over the term of the new lease.
(ii) the damages payable by Tenant under the preceding provisions
of this subparagraph (f) shall be payable on demand from time to time as the
amounts are determined; and if from Owner's subsequent receipt of rent as
aforesaid from re-letting, there shall be any excess payment(s) by Tenant by
reason of the crediting of such rent thereafter received, the excess
payment(s) shall be refunded by Owner to Tenant, without interest.
(iii) If this Lease is terminated, then Owner shall have the
additional options to determine the damages as follows:
(A) Tenant shall be liable for amounts determined pursuant to 28,
OWNER'S REMEDIES. (a)(i). Owner may have damages determined under this
section A. even if Owner did not previously accelerate the rent pursuant to
28 (a)(i).
(B) Owner 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
aggregate of the rent and all other sums payable by Tenant hereunder that
would have accrued for the balance of the term discounted present worth at
the rate of 4% per annum.
(g) Interest on Damages Amounts. Any sums payable by Tenant hereunder
which are not paid after the same shall be due shall bear interest, from the
due date until paid, at the Overdue Interest Rate.
(h) Owner's Statutory Rights. Owner shall have all rights and remedies
now or hereafter existing at law or in equity with respect to the
enforcement of Tenant's obligations hereunder and the recovery of the
Premises. No right or remedy herein conferred upon or reserved to Owner shall
be exclusive of any other right or remedy, but shall be cumulative and in
addition to all other rights and remedies given hereunder or now or hereafter
existing at law or in equity. Owner shall be entitled to injunctive relief in
case of the violation, or attempted or threatened violation, by Tenant of any
covenant, agreement, condition or provision of this Lease, or to a decree
compelling performance of any covenant, agreement, condition or provision of
this Lease. If Tenant is in default, Tenant may not remove property subject
to the security interest referred to in paragraph 29. OWNER'S LIEN. Owner
shall be entitled to injunctive relief in case Tenant attempts to remove
property subject to the security interest referred to in paragraph 29.
OWNER'S LIEN. This injunctive relief includes, but is not limited to a
temporary or permanent restraining order. Tenant hereby agrees to the
issuance of such restraining order ex parte. Tenant acknowledges that Owner's
Remedy at law in such a case would be inadequate and that the equitable
relief may be brought without the necessity of proof of actual damage or
inadequacy or any legal remedy. Notwithstanding any statute to the contrary,
Owner shall have the right to such restraining order without the necessity
of a bond.
(i) Remedies Not Limited. Nothing herein contained shall limit or
prejudice the right of Owner to exercise any or all rights and
remedies available to Owner by reason of default or to prove and obtain in
proceedings under any Bankruptcy Laws, an amount equal to the maximum
allowance permitted by an law in effect at the time when, and governing the
proceedings in which, the damages are to be proved, whether or not the amount
is greater, equal to, or less than the amount of the loss or damages referred
to above.
(j) No termination Except by Owner in writing. No action by Owner,
including without limitation legal proceedings for eviction, unlawful detainer
or similar actions that may be available under the laws of the State, shall be
deemed a termination of this Lease or of Tenant's obligations hereunder
unless Owner specifies in writing that the Lease is terminated and that Tenant
has no further liability hereunder.
<PAGE>
(k) No Waiver by Owner. No delay or forbearance by Owner in exercising
any right or remedy hereunder, or Owner's undertaking or performing any act
or matter which is not expressly required to be undertaken by Owner shall be
construed, respectively, to be a waiver of Owner's rights or to represent any
agreement by Owner to undertake or perform such act or matter thereafter.
Waiver by Owner of any breach by Tenant of any covenant or condition herein
contained (which waiver shall be effective only if so expressed in writing by
Owner) or failure by Owner to exercise any right or remedy in respect of any
such breach shall not constitute a waiver or relinquishment for the future of
Owner's right to have any such covenant or condition duly performed or
observed by Tenant, or of Owner's rights arising because of any subsequent
breach of any covenant or condition, nor bar any right or remedy of Owner in
respect of such breach or any subsequent breach. Owner's receipt and
acceptance of any payment from Tenant which is tendered not in conformity
with the provisions of this Lease or following an Event of Default
(regardless of any endorsement or notation on any check or any statement in
any correspondence accompanying any payment) shall not operate as an accord
and satisfaction or a waiver of the right of Owner to recover any payments
then owing by Tenant which are not paid in full, or act as a bar to the
termination of this Lease and the recovery of the Premises because of
Tenant's previous default.
30. CERTAIN RIGHTS RESERVED BY OWNER. Owner (acting itself or through
persons authorized by it) shall have the following rights, exercisable from
time to time without notice and without liability to Tenant or damage or
injury to property, persons or business and without effecting an eviction,
constructive or actual, or disturbance of Tenant's use or possession of the
Premises or giving rise to any claim for set off or abatement of Rent or
otherwise affecting Tenant's obligations hereunder:
(a) To decorate and to make repairs, alterations, additions, changes or
improvements whether structural or otherwise, in and about the Building, or
any part thereof, and for such purposes to enter upon the Premises, and
during the continuance of any such work, to temporarily close doors,
entryways, common areas, public space and corridors in the Building, to
interrupt or temporarily suspend Building Services and facilities and to
change the arrangement and location of entrances or passageways, doors and
doorways, corridors, elevators, stairs, toilets, or other public parts of the
Building, so long as the Premises are reasonably accessible and Tenant is not
unreasonably disturbed in use or possession thereof.
<PAGE>
(b) To have and retain paramount title to the Premises free and clear of
any act of Tenant purporting to burden or encumber the Premises.
(c) To grant to anyone the exclusive right to conduct any business in or
render any service to the Building, provided such exclusive right shall not
operate to exclude Tenant from the Permitted Use.
(d) To prohibit the placing of vending or dispensing machines of any
kind in or about the Premises without the prior written permission of Owner.
(e) To have access for Owner and other tenants of the Building to any
mail chutes located on the Premises according to the rules of the United
States Postal Service.
(f) To take all such reasonable measures as Owner may deem advisable for
the security of the Building and its occupants, including without limitation,
the search of persons entering or leaving the Building, the evacuation of the
Building for cause, suspected cause, or for drill purposes, the temporary
denial of access to the Building, and the closing of the Building after
normal business hours and on Saturdays, Sundays and holidays, subject,
however to Tenant's right to admittance when the Building is closed after
normal business hours under such reasonable regulations as Owner may
prescribe from time to time which may include by way of example but not of
limitation, that persons entering or leaving the Building, whether or not
during normal business hours, identify themselves to a security officer by
registration or otherwise and that such persons establish their right to
enter or leave the Building.
(g) To enter the Premises to perform Owner's covenants under this Lease,
to exercise Owner's remedies under this Lease, to ascertain if tenant is in
compliance with its covenants under this Lease, to inspect the Premises, and
to exhibit the Premises to Mortgagees and Lessors and to prospective lenders,
purchasers and tenants. 1
(h) To change the name by which the Building is designated.
(i) To transfer, assign and convey, in whole or in part, the Building
and any and all of its rights under this Lease, and in the event Owner
assigns its rights under this lease, Owner shall thereby be released from any
further obligations hereunder, and Tenant agrees to attorn to and look solely
to such successor in interest of the Owner for performance of such
obligations.
<PAGE>
1. Owner agrees to give Tenant reasonable notice prior to entering the
premises except in the case of an emergency.
/s/ RA
----------------------------- ------------------------------
Owner's Initials Tenant's Initials
<PAGE>
32. BROKERS. Each party warrants to the other that it has had no dealings
with any broker or agent in connection with the negotiation or execution of
this Lease except as may be named in the Basic Lease Provisions, and each
party agrees to indemnify the other against all costs, expenses, attorney's
fees or other liability for commissions or other compensation or charges
claimed by any broker or agent claiming the same by, through or under said
indemnifying party.
33. QUIET ENJOYMENT. Provided Tenant has performed all of the terms and
conditions of this Lease, including the payment of Rent, to be performed by
Tenant, Tenant shall peaceably and quietly hold and enjoy the Premises for
the Term, without hindrance from Owner, subject to the terms and conditions
of this Lease.
34. NOTICES. Each provision of this Lease, or of any applicable
governmental law, ordinance or regulation, or other requirement, with
reference to the sending, mailing or delivery of any notice or document, or
with reference to the making of any payment by Tenant to Owner, shall be
deemed to be complied with when and if the following steps are taken:
(a) All Rent and other payments required to be made by Tenant to
Owner hereunder shall be payable to Owner at Owner's Address set forth in the
Basic Lease Provisions or at such other address as Owner may specify from
time to time by notice to Tenant, and shall be deemed delivered only upon
actual receipt (and if other than in cash, subject to collection).
(b) Any notice or document required to be delivered hereunder shall
be deemed to be delivered if actually received and whether or not received
when deposited in the United States mail, postage prepaid, certified or
registered mail (with return receipt requested), addressed to the party to
receive same at its address set forth in the basic Lease Provisions or at
such other address as said party has theretofore specified to the other by
notice.
35. FORCE MAJEURE. Whenever a period of time is herein prescribed for
action to be taken by Owner, Owner shall not be liable or responsible for,
and there shall be excluded from the computation of any such period of time,
any delays due to strikes, riots, acts of God, shortages of labor or
materials, war, governmental laws, regulations or restrictions or any other
causes of any kind whatsoever which are beyond the control of Owner ("Force
Majeure").
<PAGE>
36. ENTIRE AGREEMENT: ADDENDUMS: WAIVERS: BINDING EFFECT. This Lease
contains and embodies the entire agreement of the parties hereto with respect
to the subject matter hereof, and no representations, inducements or
agreements, oral or otherwise, between the parties not contained in this
Lease shall be of any force or effect. This Lease may not be supplemented or
amended, except by instrument in writing signed by both parties hereto. No
provision of this Lease shall be deemed to have been waived by Owner unless
such waiver is in writing signed by Owner and addressed to Tenant, nor shall
any custom or practice which may evolve between the parties in the
administration of the terms thereof be construed to waive or lessen the right
of Owner to insist upon performance by Tenant in strict accordance with the
terms hereof. The terms and conditions contained in this Lease shall apply
to, inure to the benefit of, and be binding upon the parties hereto, and upon
their respective successors in interest and legal representatives, except as
otherwise herein expressly provided.
37. SEVERABILITY. If any clause or provision of this Lease is illegal,
invalid, or unenforceable under present or future laws effective during the
Term, the remainder of this Lease shall not be affected thereby and in lieu
of such clause or provision, there shall be deemed added as a part of this
Lease a clause or provision as similar in terms thereto as may be possible and
be legal, valid and enforceable.
38. JOINT AND SEVERAL LIABILITY OF TENANT. If there is more than one
person comprising Tenant, the obligations imposed upon Tenant hereunder shall
be joint and several. If there is a guarantor or there are guarantors of
Tenant's obligations hereunder, the obligations imposed upon Tenant shall be
the joint and several obligations of Tenant and each such guarantor and Owner
need not first proceed against Tenant before proceeding against any such
guarantor, nor shall any such guarantor be released from its guaranty for any
reasons whatsoever, including without limitation, any amendment hereto,
waiver of any provision hereof or failure to give such guarantor any notice
hereunder.
39. OWNER'S LIABILITY LIMITATION. The liability of Owner to Tenant for
fulfillment of any obligation of Owner or for any default by Owner under the
terms of this Lease shall be limited to the interest of Owner in the Building
and the Land; tenant shall look solely to such interest for satisfaction
thereof; and Owner shall not be personally liable for any deficiency.
40. ARBITRATION. 1
(a) At Owner's option, all claims, disputes and other matters in
question or calling for mutual agreement, between Owner and Tenant arising
out of, or relating to this Lease or the breach thereof, shall be decided by
arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association then obtaining. At Owner's option, any
arbitration arising out of or relating to this Lease or any breach hereof
shall include, by consolidation, joinder or joint filing any other person not
a party to this Lease to the extent necessary for the final resolution of the
matter in controversy. This agreement by Tenant to arbitrate shall be
specifically enforceable by Owner under the prevailing arbitration law. The
award rendered by the arbitrators shall be final, and judgment may be entered
upon it in accordance with applicable law in any court having jurisdiction
thereof.
(b) Notice of the demand for arbitration shall be filed by Owner in
writing with tenant and with the American Arbitration Association. The demand
for arbitration shall be made within a reasonable time after the claim,
dispute or other matter has arisen, and in no event shall it be made after
the date when institution of legal or equitable proceedings based on such
claim, dispute or other matter would be barred by the applicable statute of
limitations.
(c) Unless otherwise agreed in writing by Owner, Owner and Tenant
shall continue to perform their obligations under this Lease in accordance
with Owner's interpretation of the claim, dispute or other matter during any
arbitration proceedings, until final resolution thereof.
(d) At Owner's option, the venue for arbitration or litigation with
respect to all claims, controversies and disputes arising out of or relating
to this Lease or any breach hereof, shall be the county in which the Land
and Building are located.
41. WAIVER OF TRIAL BY JURY. To the extent such waiver is permitted by
applicable law, Owner and Tenant waive trial by jury in any action or
proceeding brought in connection with
<PAGE>
1 Tenant shall have the same right to require arbitration as does Owner as
stated in this paragraph.
/s/ RA
------------------------------ ------------------------------
Owner's Initials Tenant's Initials
<PAGE>
this Lease or the Premise.
42. APPLICABLE LAW. This Lease and the rights and obligations of Owner
and Tenant hereunder shall be construed in accordance with and governed by
the laws of the State of Colorado.
43. MISCELLANEOUS.
(a) Any approval by Owner of Owner's architects and/or engineers
of any of Tenant's Plans shall not in any way be construed or operate to bind
Owner or to constitute a representation or warranty of Owner as to the
adequacy or sufficiency of such Plans or the Alterations to which they
relate, for any use, purpose, or condition, but such approval shall merely be
the consent of Owner as may be required hereunder.
(b) Nothing contained in this Lease shall be deemed or construed
to create a partnership or joint venture of or between Owner and Tenant, or
to create any other relationship between the parties hereto other than that
of landlord and tenant.
(c) Words of any gender used in this Lease shall be held and
construed to include any other gender, and words in the singular number shall
be held to include the plural, unless the context otherwise requires. The
word "person" as used in this Lease means any natural person, legal entity,
or body politic.
(d) The submission of this Lease to Tenant shall not be construed
as an offer, nor shall Tenant have any rights with respect thereto unless and
until Owner shall have executed a copy of this Lease and delivered the same
to the Tenant.
(e) If Tenant is a corporation, each of the persons executing
this Lease on behalf of Tenant hereby warrants that Tenant is a duly formed
and existing corporation, qualified to do business in the State, that the
Tenant has the full right and authority to enter into the Lease, and that
each of the persons signing on behalf of Tenant are authorized to do so.
(f) The covenants and obligations of Owner and Tenant hereunder
are independent, such that the obligations of Tenant to pay rent hereunder
are not contingent upon any act or failure to act by Owner.
(g) If Owner consults with an attorney to enforce any provisions
of this Lease then all costs, including reasonable attorney fees from the
date any such matter is turned over to an attorney shall be recoverable by 1
44. RECORDING. Tenant hereby covenants and agrees not to place the
Lease of record. If so requested by Owner, Tenant shall execute a short form
memorandum of lease which memorandum may, at Owner's option, be placed of
record. Any recording of the Lease or of any notice or memorandum thereof by
Tenant without Owner's prior written consent shall be a default under the
Lease and Owner shall have all of the rights and remedies set forth therein
for a default. In addition, if requested by Owner, tenant shall execute a
memorandum of lease to be filed with the Colorado Department of Revenue on
such form as may be prescribed by said department within ten (10) days after
execution of the Lease, or any other such memorandum so that Owner may avail
itself of such statutes as Section 39-22-604(7)(c) of the Colorado Revised
Statutes (1973).
45. ACTS TO BE PERFORMED BY TENANT PRIOR TO TENANT'S CONSTRUCTION.
(a)In the event that Tenant receives Owner's prior written
approval to commence any alterations, additions, improvements or construction
of whatever kind or nature to be done by Tenant in or about the Premises (the
"Alterations"), which approval or disapproval shall be in Owner's sole and
subjective discretion, then, as a condition precedent to Tenant's commencing
such Alterations, Tenant shall submit to Owner the following items:
(i) all architectural, engineering, construction and/or
design drawings, plans, specifications, studies, reports, bids and other
material of every kind relating to the Alterations (the "Plans and
Specifications");
(ii) an originally signed copy of the contract between
Tenant and any and
<PAGE>
1 the prevailing party
- -------------------- ----------------------
Owner's Initials Tenant's Initials
22A
<PAGE>
all contractors, subcontractors, materialmen or suppliers together with
copies of any and all subcontracts and supply
contracts relating to the Alterations;
(iii) a standard indemnification in a form approved by
Owner.
(iv) originally signed lien waivers from all subcontractors
and materialmen or suppliers for all work done and/or material supplied in
connections with the Alterations in a form approved by Owner; and
(v) an originally signed general release of liens from
Tenant's general contractor in a form approved by Owner; and
(vi) a standard form of notice to be posted at the Property
in a form approved by Owner.
(b) Upon completion of the Alterations, tenant shall submit to
Owner:
(i) a certification from Tenant's general contractor and,
if requested by Owner, from Tenant's architect, certifying that each has
inspected the Premises not more than five (5) days prior to the date of the
certification and that the Alterations have been constructed in good and
workmanlike manner and in substantial accordance with the Plans and
Specifications and with the requirements of the governmental authorities
having jurisdiction or control over same, and that all materials for which
payments has been made by Tenant have been delivered to and have been
incorporated into the Premises; and
(iii) final unconditional certificate(s) of occupancy, or
the equivalent issued by the applicable governmental authority.
46. PERSONAL PROPERTY TAXES. Tenants shall pay, prior to delinquency,
all taxes, assessments license fees and public charges levied, assessed or
imposed upon or measured by the value of its personal property and business
operations, including but not limited to, the furniture, fixtures, leasehold
improvements, equipment and other property of Tenant at pay time situated
upon or installed in the Premises by Tenant. Tenant shall cause all such
personal property to be assessed and billed separately from the real property
of Owner.
47. TRANSFER OF INTEREST. If Tenant is a partnership or corporation,
the transfer, sale, conveyance and disposition of a controlling interest in
Tenant to any third party, including without limitation, to an affiliate of
Tenant shall be deemed as assignment or transfer of Tenant's interest under
the Lease for purposes of Section 22 of the Lease. As used herein, the term
"affiliate" shall mean any subsidiary or parent company of Tenant and any
subsidiary of a parent company of Tenant, or any entity related to Tenant or
held in common control with Tenant.
48. SPECIAL PROVISIONS. Special Provisions, if any, are provided in
ADDENDUM I.
IN WITNESS WHEREOF, Owner and Tenant have executed this Lease as of the
Lease date.
OWNER: TENANT:
SKY HARBOR ASSOCIATES LIMITED PARTNERSHIP ACI SYSTEMS, INC.
------------------------------
By: Pomeroy Investment By: /s/ Ralph Armijo
Corporation, General Partner --------------------------
Ralph Armijo
Its: President
By: --------------------------
-----------------------------------
Howard Leshman
Its:
-------------------------------
<PAGE> RIDER I
This Rider to Lease is attached to and forms a part of that certain lease
between SKY HARBOR ASSOCIATES LIMITED PARTNERSHIP ("Owner") and ACI SYSTEMS,
INC.,* ("Tenant") dated as of the _______ day of OCTOBER, 1993 (the "Lease"),
and sets forth additional terms and provisions to be incorporated into the
Lease.
* a Colorado corporation
ADDITIONAL RENT. It is expressly agreed that Tenant will pay in addition
to the Base Rent, Additional Rent, herein defined as those items enumerated
in this Rider.
A. Tenant shall pay to Owner as Additional Rental commencing with
the First Operating Cost Year (as said term is hereinafter defined), and for
each Subsequent Operating Cost Year thereafter an amount equal to Tenant's
Project Proportionate Share (as said term in hereinbefore defined) of the
total aggregate of Operating Costs (as said term is hereinafter defined) of
said Operating Cost Year.
B. The term "Operating Costs" means the total amounts paid or
payable, whether by Owner or otherwise on behalf of Owner, in connection with
the ownership, management, maintenance, repair and operation of the Building,
including by way of illustration and not a limitation, and without limiting
the generality of the foregoing, the aggregate of the amounts paid or payable
for: (i) all electricity furnished to the Building except those amounts paid
directly by Tenant or tenants; (ii) the amount paid or payable for all water
furnished to the Building other than those amounts paid directly by Tenant or
tenants; (iii) labor and or wages and other payments made by Owner in the
operation, maintenance and repair of the Building, including, without
limitation, the cost to Owner of workman's compensation and disability
insurance, payroll taxes, and contributions to any social security,
unemployment insurance, welfare, pension or similar fund and payments for
other fringe benefits made to or on behalf of all employees of Owner
performing services rendered in connection with the operation and maintenance
of the Building, including, without limitation, porters, janitors, handymen,
watchmen, persons engaged in patrolling and protection the Building,
carpenters, engineers, mechanics, electricians, plumbers, building manager,
clerical and administrative personnel, contractors, subcontractors (It is
understood that Owner is under no obligation to have employed any or all of
such above-referred to employees.); (iv) the total charges of any independent
contractors employed in the repair, care, operation, maintenance and cleaning
of the Building; (v) the cost of replacements for tools and equipment used in
the operation and maintenance of the Building, including without limitation
electric light bulbs, tubes and ballasts used in connection with Building
Common Areas and parking lots; (vi) the cost of telephone service, postage,
office supplies, maintenance and repair of office equipment and similar costs
related to operation of the Building and manager's office (whether in the
Building or not); (vii) the cost of licenses, permits and similar fees and
charges related to the operation, repair, maintenance of the Building (viii)
the cost of maintenance of parking areas and driveways, including, but not
limited to cleaning, snow removal, repaving, relining and repainting; (ix)
cleaning cost for the Building, including the windows, sidewalks, all snow
removal (including separate contracts therefore) and the cost of all labor,
supplies, equipment and materials incidental thereto; (x) the cost of
premiums and other charges incurred by Owner with respect to all insurance
relating to the Building and the operation and maintenance thereof,
including without limitation, fire and extended coverage insurance, including
windstorm, hail, explosion, riot, rioting attending a strike, civil
commotion, aircraft, vehicle and smoke insurance, public liability, elevator,
workman's compensation, boiler and machinery, rent, use and occupancy, and
health, accident and group life insurance of all employees; (xi) the cost of
sales and excise taxes and the like upon any of the expenses enumerated
herein; (xii) the cost of decorating, repainting or otherwise maintaining the
exterior of the Building; (xiii) the cost of auditing fees necessarily
incurred in connection with the maintenance and operation of the Building and
accounting fees incurred in connection with the preparation and certification
of the real estate tax escalation and the operation expense escalation
statements pursuant to this Rider; (xiv) fees for legal, inspection,
accounting and consulting services; (xv) all costs incurred by Owner to
retrofit any portion or all of the Building to comply with change in existing
legislation or introduction of new
<PAGE>
legislation, whether federal, state or municipal, state, county or municipal
(including any agency or arm of said governmental unit; (xvi) the cost of
repairs, replacements and improvements which are appropriate for the
continued operation of the Building; (xvii) all expenses associated with the
installation of any energy, cost or labor saving devices; (xviii) costs of
all landscaping; (xix) costs of any security guards or security; (xx) any and
all other expenditures of Owner in connection with the operation, repair or
maintenance of a Building which are properly expensed in accordance with
generally accepted accounting principles consistently applied with respect to
the operation and repair and maintenance of comparable buildings in the
southern Metro Denver Area. The above enumeration of any Operating cost shall
not create any obligation (express or implied) on the part of Owner to
furnish such service.
If Owner shall purchase any item of capital equipment or make any
capital expenditure as described in (xv), (xvi), or (xvii) above, then the
cost for the same shall be included in operating expenses in the year of
installation and in subsequent years amortized in accordance with generally
accepted accounting principles. If Owner shall lease such item of capital
equipment, then the rentals or other operating costs paid pursuant to such
leasing shall be included in operating expenses for each year in which they
are incurred.
In addition, Operating Cost shall also include all Real Estate
Taxes. The term Real Estate Taxes includes, without limitation, general and
special taxes, assessments, duties and levies, charged and levied upon or
assessed against the Building, the land upon which it is located, and
improvements situated on the real property, any leasehold improvements,
fixtures, installations, additions and equipment used in the maintenance or
operation of the Building, whether owned by Owner or Tenant and not paid
directly by Tenant, including, without limitation, real estate taxes,
personal property taxes, general or special assessments, any duties or levies
charged or levied upon or assessed against the building and the property and
personal property transfer taxes, all costs and expenses (including legal
fees and court costs) charged for the protest or reduction of property taxes
or assessments in connection with the property and the Building, or any tax
or excise on rent or any other tax (however described) on account of rental
received for use and occupancy of any or all of the Building and the
property, whether any such taxes are imposed by the United States, the State
of Colorado, the County in which the Building is located, or any local
governmental municipality, authority or agency or any political subdivision
of any thereof. Real Estate Taxes shall not include franchise, gift, estate
or inheritance taxes. Further, if at any time during the Term the method of
taxation of real estate prevailing at the time of execution hereof shall be,
or has been, altered so as to cause the whole or any part of the taxes now or
hereafter levied, assessed or imposed on real estate to be levied assessed or
imposed upon Owner, wholly or partially as a capital levy or otherwise, or on
measured by the rents received, then such new or altered taxes attributable
to the Demised Premises shall be deemed to be included within the term Real
Estate Taxes for purposes of this paragraph, save and except that such shall
not be deemed to include any increase in said tax not attributable to the
Building. Furthermore, if at any time during the term hereof a tax or excise
on rents or income or other tax however described (herein called Rent Tax) is
levied or assessed by the State of Colorado, or any political subdivision
thereof, on account of the rents hereunder of the interest of Owner under
this Lease, such Rent Tax shall constitute Real Estate Taxes, provided,
further, in no event shall Tenant be obligated to (i) pay for any year any
greater amount by any of such Rent Tax than would have been payable by Tenant
had the rentals paid to the Owner under all Building leases (being the
rentals upon which such Rent Tax is imposed) been the sole taxable income of
Owner for the year in question or (ii) to pay or to reimburse Owner for any
tax of any kind assessed against Owner on account of any such rent Tax having
been reimbursed.
Operating costs shall not include (1) leasing commissions,
advertising expenses and other costs incurred in leasing or procuring new
Tenant; (2) the cost of any capital addition made to the Building, including
the cost to prepare space for occupancy by a new Tenant; (3) depreciation and
amortization of the Building, other than (a) capital expenditures which under
generally applied real estate practices are expensed or regarded as deferred
expenses; (b) capital expenditures appropriate to a building comparable to
this in the southern Metro Denver Area or required by law as described in
(xv) and (xvi) above; and (c) capital expenditures designed to result in
savings or reductions in operating expenses as described in (xvii) above; (4)
interest and principal payments on mortgages and other debt costs; (5) Any
cost or expenditure (or portion thereof) for which Owner is reimbursed,
whether by insurance proceeds or otherwise (Base Rent adjustments under any
provision of this Rider and under similar provisions and other Tenant leases
are not reimbursements); and (6) cost of any service
<PAGE>
furnished to any other occupant of the Building which Owner does not provide
to Tenant hereunder.
In the event during all or any portion of any calendar year the
Building is not fully rented and occupied, Owner may elect to make an
appropriate adjustment of Operating Costs for such year, employing sound
accounting and management principles, to determine the Operating Cost that
would have been paid or incurred by Owner had the Building been fully rented
and occupied and the amount so determined shall be deemed to have been the
Operating Costs for such year. If Owner selects an accrual accounting basis
rather than a cash accounting basis for operating expenses purposes,
operating expenses shall be deemed to have been paid when such expenses have
accrued.
All references to "Building" in this Rider shall include all other
Buildings in the Project (as defined in Basis Lease Provisions) and all
related facilities, including without limitation, corridors, lobbies,
sidewalks, grounds, parking spaces, driveway areas, elevators and other
common or public areas contained in or around the real estate as well as
landscaping, exterior walkways, and improvements or facility utilized in
common by the Building (and other Buildings of the projects upon or adjacent
to the real property). It is the express intent of the parties that all
Operating Costs be determined on the Project level, rather than at an
individual Building level.
(i) First Operating Cost Year is as defined in Basis Lease
Provisions.
(ii) Subsequent Operating Cost Year means each twelve month
calendar period following the First Operating Cost Year, the whole or any
part of which full period is included within the Term.
(iii) The Amount of Operating Costs for any period shall be the
amount as determined by the Owner in accordance with generally accepted
accounting principles.
C. If only part of the Term is included within any Operating Cost
Year, then such amount payable by Tenant for such Operating Cost Year shall
be estimated by Owner acting reasonably and reduced proportionately on a per
diem basis and shall be payable according to the terms and conditions in
subparagraph D. below.
D. Any additional Rent payable by Tenant under this Rider shall be
payable as follows, unless otherwise provided;
During the Term, Tenant shall pay to owner monthly in advance and
every month during the Term, one-twelfth (1/12th) of the amount of such
Additional Rent as estimated by Owner, from time to time, in advance, acting
reasonably, to be due from Tenant. Within a reasonable time after the close
of each calendar year, Owner shall give Tenant a statement of the year's
Operating Costs and the total amount of the Additional Rent, if any. If such
year's Operating Cost is different than the estimated amount paid by Tenant,
Tenant shall pay Owner or Owner shall credit Tenant, as applicable, within 30
days of the date of the Statement, Tenant's proportionate share which has
either (i) not be paid by Tenant or (ii) overpaid by Tenant pursuant to an
estimate. One-twelfth of the amount of Additional Rent, as reasonably
estimated by Owner, for the First Operating Cost Year, to be paid by Tenant
with each month's Base Rent as Additional Rent shall be as stated in Basic
Lease Provisions as "Initial Monthly Estimated Additional Rent". This amount
shall be paid monthly until such time as Owner, in writing, reasonably
adjusts the estimated Additional Rent pursuant to the first sentence of this
paragraph.
For purposes of calculating Additional Rent, Tenant's proportionate
share of the total shall be deemed to be as set forth in paragraph F. below.
E. For the protection of Tenant, Owner shall maintain books of account
which shall be open to Tenant and its representatives for thirty days after
billing for Additional Rent, at all reasonable times so that Tenant can
determine that such Additional Rent costs have, in fact, been paid or
incurred. Tenant shall have the right to contest or question the amount and
the appropriateness of the Operating Cost and Additional Rent for a period of
thirty (30) days after the billing for Additional Rent. If Tenant does not so
contest or question within said thirty (30) day period, then all the
determinations by Owner shall be conclusive.
Page 3 of 4
<PAGE>
F. TENANT'S PROJECT PROPORTIONATE SHARE is as defined in Basic Lease
Provisions.
G. Except as otherwise expressly provided in the Lease, the parties
agree that Owner shall have no obligation of any kind to make any
expenditures upon or with respect to the Premises. It is intended that Tenant
shall throughout the term, at its sole expense, maintain in good condition,
repair and order all of the Premises and all parts thereof and shall pay to
Owner Additional Rent as stated in this Rider I.
RIDER II
This Rider to Lease is attached to and forms a part of that certain lease
between SKY HARBOR ASSOCIATES LIMITED PARTNERSHIP ("Owner") and ACI SYSTEMS,
INC.,* ("Tenant") dated as of the _______ day of October 1993 (the "Lease"),
and sets forth additional terms and provisions to be incorporated into the
Lease.
* a Colorado corporation
BUILDING SERVICES AND UTILITIES
(a) Subject to the limitation herein set forth. Owner will furnish
Tenant while occupying the Premises and while Tenant is not in default under
this lease:
(i) water to the wall stub of the Premises;
(ii) snow removal and snow plowing of all common areas of the
Building and Project;
(iii) cleaning and maintenance of driveways and parking areas of
the Project;
(iv) trash and refuse removal;
(v) maintenance and repair of all building standard
air-conditioning and heating apparatus.
In addition, Owner will maintain the public and common areas of the
Building and Project, such as walkways, stairs, and landscaping, if any, in
reasonable good order and condition, except for damage occasioned by Tenant
or Tenant's parties.
(b) UTILITIES. Owner shall have the option to have: (i) Tenant pay
promptly all charges for heating, natural gas and electrical service used on
the Premises directly to the appropriate public utility company. If Tenant
shall fail to pay any utilities as required above, Owner shall have the
right, at his option, but without any obligation to do so, to pay such
utilities (without affecting any other remedy available to Owner) on account
of Tenant and the same shall constitute Additional Rent hereunder and shall
be repaid by Tenant to Owner forthwith; or (ii) Tenant pay all charges for
heating, natural gas and electrical service used on the Premises as
Additional Rent pursuant to Rider I. Owner shall make an election pursuant
to this paragraph from time to time, by 30 day notice to Tenant. Owner may
elect to have certain utilities paid pursuant to (i) above and to have other
utilities paid pursuant to (ii) above. If Owner makes no written election,
then all utilities that are separately metered shall be paid pursuant to (i)
above and all items that are not separately metered shall be paid pursuant to
(ii) above.
Notwithstanding the above, Tenant covenants and agrees that at all times
its use of electric current shall never exceed the capacity of the existing
feeders to the Building or the risers or wiring installations. Any risers or
wiring to meet Tenant's excess electrical requirements will be installed by
Owner at the sole cost and expense of Tenant (if, in Owner's sole judgement,
the same are necessary and will not cause permanent damage or injury to the
Building or the Premises or cause or create a dangerous or hazardous
condition or entail excessive or unreasonable alterations, repairs or expense
or interfere with or disturb other tenants or occupants).
If initially Tenant is paying all or any public utilities pursuant to
(ii) above, Owner may at its option, upon not less than 30 days prior written
notice to Tenant discontinue the availability of such utility service. If
Owner gives any such notice of discontinuance, Owner shall make all necessary
arrangements with the public utility supplying the utilities to the area in
which the Building is located with respect to obtaining such utility service
to the Premises, but Tenant will contract directly with such public utility
for the supplying of such utility service to the Premises. In the event
Owner deems it appropriate to make available separately metered service to
the Premises, Owner may require that separate submeters be installed in or
for the Premises, at Owner's expense, and Tenant will be billed monthly from
such sub-meter in a
<PAGE>
manner provided hereinbefore, provided that no such sub-metering shall
relieve Tenant from its obligation to pay Tenant's share of other utility
charges under this paragraph.
Owner shall not in any way be liable or responsible to Tenant for any
loss or damage or expense which Tenant may sustain or incur if either the
quantity or character of any utility service is changed or no longer
available or is no longer suitable for Tenant's requirements.
(c) Failure to any extent to make available, or any slow-down, stoppage
or interruption of, these defined services resulting from any cause
(including, but not limited to, Owner's compliance with (i) any voluntary or
similar governmental or business guideline now or hereafter published or (ii)
any requirements now or hereafter established by any governmental agency,
board or bureau having jurisdiction over the operation and maintenance of the
Building) shall not render Owner liable in any respect for damages to either
person, property or business, nor be construed as an eviction of Tenant or
work an abatement of rent, nor relieve Tenant from fulfillment of any
covenant or agreement hereof. Should any equipment or machinery which Owner
is obligated to maintain and repair pursuant to this Lease break down or for
any reason cease to function properly, Owner shall use reasonable diligence
to repair same promptly, but Tenant shall have no claim for abatement of rent
or damages on account of any interruptions in service occasioned thereby or
resulting therefrom.
(d) Notwithstanding any termination of this Lease prior to the Ending
Date of Term, tenant's obligations to pay any and all Rent pursuant to this
Rider shall continue and shall cover all periods up to the acrual expiration
date of the Term; provided, however, if Owner terminates this Lease without
waiving Owner's right to seek damages against Tenant, Tenant's obligation to
pay any and all Rent pursuant to this Rider shall not terminate as a result
thereof.
(e) TRASH AND REFUSE REMOVAL. If Owner determines, in its sole
discretion, that Owner provides Tenant with more than normal and ordinary
Trash and Refuse Removal ("Excess Removal"), then Owner shall have the option
to i) charge Tenant, as Additional Rent, an amount for such Excess Removal
(Owner's determination of such amount shall be binding on the parties), or
ii) cease providing Tenant with Trash and Refuse Removal.
Page 2 of 2
<PAGE>
EXHIBIT A-1
DESCRIPTION OF LAND
Building B, Block 1, Linpro Araphoe Land Limited, County of Arapahoe, Colorado
<PAGE>
EXHIBIT B
RULES AND REGULATIONS
1. SIGNS
A. No sign, advertisement, notice, placard, picture, name or other
lettering shall be exhibited, inscribed, printed displayed or affixed on or
to any part of the inside or outside of the Demised Premises of the Building
without the prior written consent of Owner. Owner shall have the right to
remove any such sign, advertisement, notice, placard, picture, logo, name or
other lettering without notice and at the expense of Tenant.
B. All approved signs or lettering on doors shall be printed, painted,
affixed or inscribed at the expense of Tenant by a person selected by Owner.
2. SIDEWALKS, OBSTRUCTIONS. The sidewalks, halls, entrances, exists,
passages, stairways and elevators of the Building shall not be obstructed by
Tenant, its agents or employees, nor shall they be used for any purpose other
than ingress and egress to and from the Premises. The halls, passages,
entrances, exits, stairways, elevators, balconies and roof are not for the
use of the general public, and Owner shall in all cases retain the right to
control and prevent access thereto by all persons whose presence in the
judgment of Owner might be prejudicial to the safety, reputation and
interests of the Building and its tenants, provided that nothing herein
contained shall be construed to prevent such access to persons with whom
Tenant normally deals in the ordinary course of Tenant's business, unless
such persons are engaged in illegal activities. No tenant and no employees
or invitees of any tenant shall go upon the roof of the Building.
3. LOCKS. Tenant shall not alter any lock or install any new or place
additional locks or any bolts or mail slots on any door, wall or window of
the Premises without the prior written consent of Owner.
4. KEYS. All keys to the Building, Premises, rooms and toilet rooms
shall be and remain the property of Owner and shall be obtained from Owner's
Building Management Office, and Tenant shall not from any other source
duplicate, obtain keys or have keys made. Tenant, upon termination of the
tenancy, shall deliver to Owner all keys to the Building, Premises, rooms and
toilet rooms that have been furnished or shall pay the Owner the cost of
replacing same or of changing the lock or locks opened by such lost key(s) if
Owner deems it necessary to make such change.
5. WATER FIXTURES. The toilet rooms, urinals, wash bowls, drinking
fountains and other apparatus shall not be used for any purposes other than
that for which they were constructed, and no foreign substance of any kind
whatsoever shall be thrown therein. The expense of any breakage, stoppage or
damage resulting from the violation of this rule shall be borne by the tenant
who, or whose employees or invitees, shall have caused it. No person shall
waste water by leaving faucets open or in any other manner.
6. FLOOR LOADING. Tenant shall not overload the floor of the Premises.
Owner shall prescribe, after consultation with the appropriate architects and
engineers, the floor loading permissible.
7. ALTERATIONS. In addition to the provisions of the Lease. Tenant
shall not mark, paint, drill into, drive nails or screw into or in any way
deface or change any part of the Premises or the Building. Owner will direct
electricians as to where electric and telephone wires are to be introduced.
No boring, cutting or stringing of wires will be allowed except as approved
and directed by Owner. The locations of telephones, call boxes and other
office equipment affixed to the Premises shall be subject to the approval of
Owner. Owner shall permit reasonable numbers of picture hangers and other
reasonable attachments to be made to walls, floors and ceilings.
<PAGE>
8. FLOOR COVERINGS. The only floor coverings shall be the building
standard carpet, or such other covering(s) as Owner may approve in writing.
The expense of repairing any damage resulting form tenant's violation of this
rule or from removal of any floor covering shall be borne by the tenant by
whom, or by whose contractors, employees or invitees, the damagee shall have
been caused.
9. DISTURBANCES AND USE.
A. Tenant shall not use, keep or permit to be used or kept any food
(other than that to be kept in reasonable amounts for the consumption by its
own employees and all of that to be kept in tightly sealed containers and/or
in a refrigerator) or noxious gas or substance in the Premises, or permit or
suffer the Premises to be occupied or used in a manner offensive or
objectionable to Owner or to other occupants of the Building by reason of
noise, odors and/or vibrations, or interfere in any way with other tenants or
those having business therein.
B. Only incidental cooking for the use of Tenant may be done on the
Premises, and that only using equipment and in a place within the Premises
specifically authorized in writing by Owner, and in a way so that no odors of
food are observed by other occupants of the Building.
C. No vending or machines of any description may be installed,
maintained or operated in the Premises without the written consent of Owner.
D. No animals or birds may be brought in or kept in or about the
Premises or the Building.
E. No tenant, employee or invitee of any tenant shall make or permit to
be made any unseemly or disturbing noises or disturb or interfere with
occupants of this or neighboring buildings or Premises or those having
business with them whether by use of any musical instrument, radio,
phonograph, unusual noise, or in any other way.
F. No tenant, employee or invitee of any tenant shall throw anything
out of doors or down any passageway, any stairway, elevator shaft or
ventilating duct or shaft of the Building.
G. Tenant shall not disturb, solicit, peddle or canvass any occupancy
of the building and shall cooperate to prevent same.
H. Tenant shall be responsible for keeping any children visiting or
accompanying anyone visiting the Premises under control an quiet so that they
do not disturb other occupants of the Building.
I. Tenant shall not use the Premises for any purpose other than that
described in the Lease, for manufacturing, for the storage of merchandise,
except as such storage may be incidental to the use of the Premises for the
purpose(s) described in the Lease, for washing clothes, for lodging or for
illegal, improper, immoral or objectionable purpose.
J. Tenant shall not advertise for laborers giving an address at the
Building or Premises.
10. FIRE AND OTHER GOVERNMENTAL REGULATIONS. Tenant shall not do or
permit anything to be done in the Premises, or bring or keep anything
therein, which will in any way increase the fire insurance rates on the
building or on the property kept therin; or obstruct or interfere with the
rights of other tenants, or in any way injure or annoy them or conflict with
the laws relating to fire, or with any regulations of the fire department, or
with any insurance policy upon the Building or any part thereof or conflict
with any of the rules or ordinances of the governmental jurisdictions in
which the Building lies.
A. Tenant agrees that it will comply with all fire and security
regulations that may be issued from time to time by Owner, and Tenant also
shall provide Owner with the name of a designated employee responsible to
represent Tenant in all matters pertaining to such fire or security
regulations.
<PAGE>
B. Tenant shall not use or keep in the Premises any gasoline,
kerosene or inflammable, combustible, or explosive fluid or material, other
than nominal amounts of ordinary office fluids to be used for duplicating or
photocopying machines or other, similar office equipment.
C. Tenant shall not use any method of heating or air conditioning
other than that supplied by Owner.
D. Tenant shall install and properly maintain, at Tenant's sole
cost and expense, an adequate, visibly marked and at all times properly
operational fire extinguisher next to any duplicating or photocopying machine
or any cooking device or any similar heat-producing equipment which may or
may not contain combustible material in the Premises.
11. LEAVING THE PREMISES. Tenant shall see that the doors of the
Premises are closed and securely locked before leaving the Building and must
observe strict care and caution that all water faucets or other water
apparatus in the Premises are entirely shut off before Tenant leaves the
Building, and that all unnecessary electricity shall likewise be carefully
shut off, so as to prevent waste or damage. For any default or carelessness,
Tenant shall make good all injuries sustained by Tenant, by other tenants or
occupants of the Building.
All doors opening to public corridors shall be kept closed except
for normal ingress and egress from the Premises.
12. OBJECTIONABLE BUILDING OCCUPANTS. Owner reserves the right to
exclude or expel from the Building any person who, in the judgement of Owner,
appears intoxicated or under the influence of alcohol or drugs, or who shall
in any manner do any act in violation of any of the rules and regulations of
the Building.
13. PAINTING AND DECORATING. All painting and decorating in the
Premises must be agreed to in writing and in advance by Owner. Any such work
as may be agreed to be done by and at the expense of Owner shall be done
during regular working hours. Should Tenant desire such work to be done
outside of regular working hours, Tenant shall pay the extra cost thereof.
14. WINDOW COVERINGS. No curtains, blinds, shades, draperies, screens
or other materials shall be attached to, hung in or used in connection with
any window or sidelight of the Premises other than those supplied by or
otherwise agreed to by Owner.
A. The sashes, sash doors, skylights, windows and sidelights that
reflect or admit light or air into the halls, passageways or other public
places in the Building shall not be covered or obstructed by Tenant.
B. Tenant shall not place anything or allow anything to be placed
near the glass of any window, skylights, door, partition or wall which may,
in the sole opinion of Owner, appear unsightly from outside the Premises.
15. LIGHT FIXTURES. No electrical fixtures shall be hung or otherwise
installed in the Premises other than those supplied by or otherwise agreed to
by Owner.
16. SHOW CASES. No show case or other articles shall be put in front
of or affixed to any part of the exterior of the Building, nor placed in
public portions thereof.
17. INFESTATION. If the Premises is or becomes infested with vermin as
a result of the use or any misuse or neglect of Premises by Tenant, Owner
shall forthwith at Tenant's sole cost and expense cause the same to be
exterminated from time to time to the satisfaction of Owner.
18. TENANT'S CONTRACTORS. Tenant's contractor(s) (any of which shall
be subject to the prior written approval of Owner) shall, while in the
Building or elsewhere on the Property, be subject to and under the control
and direction of Owner or Owner's agent(s) but said contractor(s) shall not
be the agent or servant of Owner or Owner's agent(s).
<PAGE>
19. TENANT'S NEEDS. The requirements of Tenant will be attended to
only upon application at the office of the Building. Owner's employees shall
not perform any work or do anything outside of their regular duties unless
under special instructions from Owner.
20. ADVERTISING. Without the prior written consent of Owner, Tenant
shall not use the name of the Building nor any picture of the Building in
connection with or in promoting or advertising the business of Tenant, or on
its stationery or in any other manner except as Tenant's address.
21. BUILDING NAME. Owner shall have the right, exercisable without
notice and without liability to Tenant, to change the name and the street
address of the Building.
22. GOVERNMENT REGULATIONS. If, as a result of any governmental rule
or regulation, Owner imposes a curtailment of services or equipment in
Premises or the Building, Tenant shall comply therewith and shall be liable
to Owner for any surcharge imposed for any violation by Tenant.
23. OUTSIDE SERVICES. No tenant shall obtain for use in the Premises
towel or other similar service or accept barbering, boot-blacking or other
similar services on the Premises, except from persons authorized by the Owner
and at the hours and under regulations fixed by the Owner.
24. BUILDING OPERATION. Owner shall have the right to control and
operate the public portions and the public facilities of the Building and the
heating and air conditioning, as well as facilities furnished for the common
use of the tenants, in such manner as it deems best for the benefit of the
tenants generally.
25. PARKING.
A. Tenant shall not park any vehicles in any driveways, service
entrances or areas posted either as "No Parking" or as "Visitor Parking".
B. Tenant shall not park any vehicles in any parking space
designated for handicapped parking unless such vehicle bears a current
handicapped license plate or windshield placard.
C. Tenant shall not park in such a manner as to occupy more than
one parking space per vehicle, except in such case where a delivery vehicle
too large for one space is parked for the purpose of making a specific
delivery to or pickup from the Premises.
26. DEFINITIONS. For the purposes of the Rules and Regulations, in
every case where the work "Tenant" is used, it shall be deemed to mean the
Tenant, its employees, agents, servants, contractors, licensees, visitors,
delivery people and invitees.
27. RULE WAIVER. Owner reserves the right by written notice to Tenant
to rescind, alter, waiver or add any rule or regulations prescribed for the
Building at any time when, in Owner's sole judgment, it is necessary,
desirable or proper for the best interest of the Building and its tenants.
<PAGE>
ADDENDUM NO. 1
TO
LEASE AGREEMENT
BY AND BETWEEN SKY HARBOR ASSOCIATES LIMITED PARTNERSHIP
AS OWNER
AND
This Addendum No. 1 to one certain Lease Agreement dated October __, 1993 by
and between Sky Harbor Associates Limited Partnership as Owner and ACI
SYSTEMS, INC., a Colorado corporation as Tenant is entered into this ____
day of October, 1993 by and between Sky Harbor Associates Limited
Partnership as Owner and ACI SYSTEMS, INC. as Tenant. For and in
consideration of the mutual covenants herein contained and contained in the
Lease Agreement, the parties do hereby agree as follows:
1. Base Rent: Monthly Base Rental for years one through five is as
follows:
BASE RENT MONTHLY
YEAR PER SQ. FT. BASE RENT INSTALLMENT
- ---- ----------- ---------- -----------
1 $5.00 $13,310.00 $1,109.17
2 $5.00 $13,310.00 $1,109.17
3 $5.25 $13,975.50 $1,164.63
4 $5.25 $13,975.50 $1,164.63
5 $5.50 $14,641.00 $1,220.08
2. Commencement Date: Notwithstanding anything in the Lease to the
contrary, the Commencement Date of the Lease shall be the date upon which
Tenant takes occupancy of the Premises, which is estimated to be November 30,
1993.
3. Owner's Tenant Finish: Owner shall construct the tenant
improvements in accordance with Exhibit A-3.
4. Construction Drawings: Owner has at Owner's expense prepared
Construction Drawings for the construction of the Tenant Improvements which
shall be submitted to Tenant. Tenant shall indicate his approval of same by
causing the signatures of one or more of Tenant's agents or employees to be
affixed to each page of the Drawings. The Construction Drawings conform to
the requirements of Exhibit A-3 of the Lease. In the event of a conflict
between the Construction Drawings and the Lease or this Addendum No.1, then
the Lease and this Addendum No. 1 shall prevail.
5. Environmental Compliance:
(a) All operations and activities to be conducted by Tenant at the
Premises are described in Basic Lease Provision of the Lease. Tenant agrees
that Tenant will not conduct any operations or activities not specifically
described in Basic Lease Provisions at the Premises without the prior
specific written consent of Owner.
(b) All operations and activities of Tenant on the Premises will
comply with all applicable federal, state and local environmental laws and
regulations and shall be conducted in a manner which will not give rise to
any environmental hazard or claim. Operations and activities of Tenant
involving the handling, storage, disposal or transportation to and from the
Premises of hazardous materials, substances and/or waste (hereinafter
"hazardous materials") shall be conducted in accordance with all applicable
laws and regulations and in a manner so as to prevent any releases of
hazardous materials.
<PAGE>
(c) As used herein, "Environmental Cleanup Liability" shall mean
any liability, loss, cost, expense, find or penalty of any nature incurred
or imposed by any authority as a result of the necessity to contain,
dispose, remove, treat, remedy or abate any air, soil, groundwater or other
contamination on or off the Premises and on or off the property of which the
Premises are a part, only to the extent arising from Tenant's acts or
omissions in the storage, disposal or transportation of chemicals or other
products of Tenant on or to the Premises including but not limited to:
(a) costs or expenses for investigation, study, assessment, legal
representation, cost recovery by government agency, or monitoring of such
contamination; and (b) cost, expense, loss or damage incurred as a result of
actions or measures necessary to implement effectuate any containment,
removal, disposal, treatment, remediation, cleanup or abatement of such
contamination.
(d) Tenant agrees to protect, defend, indemnify and hold Owner
harmless from any Environmental Cleanup Liability to the extent that such
liability arises from the operations, acts or omissions of Tenant on the
Premises including but no limited to Tenant's disposal from the Premises or
transportation of hazardous materials to or from the Premises. This agreement
of Tenant to protect, defend, indemnify and hold Owner harmless shall extend
to all acts or omissions of Tenant and shall not be limited to negligent or
wrongful acts or omissions of Tenant.
(e) The obligations of this Section 5 shall survive the termination
of this lease.
6. Change in Regulations: Tenant and Owner acknowledge and agree that
if at any time during the term of the Lease the rules and regulations of the
Uniform Building Code or the Uniform Fire Code pertaining to hazardous
materials change so as to require an additional investment in ire protection
equipment in the Premises then such additional investment shall be the
obligation of Tenant, provided however that such additional investment shall
not be required as a result of any action of Owner with respect to the
Premises, the Building or the Project.
7. Tenant shall have the obligation to conduct an inspection of the
Premises with Owner and its representatives within fourteen (14) days after
substantial completion of the Tenant Finish and to give Owner, within said
fourteen day period, a punch list of all items to be completed and/or
corrected. Any items not on such punch list shall be deemed accepted by
Tenant, except for latent defects which exception shall be effective for
one (1) year following the Commencement Date (unless such defect or
subsequent damage was caused by tenant or its agents, employees, invitees,
contractors or suppliers). Owner shall correct any punch list items after
receipt of said punch list.
8. Owner's Default: Notwithstanding any other provisions of this Lease,
if default shall be made by Owner in the performance of the agreements,
conditions or covenants of this Lease to be performed by Owner, and said
default shall have continued for thirty (30) days after written notice
thereof to Owner or if such default cannot be cured within such thirty (30)
day period if Owner shall have failed to commence and diligently pursue such
cure, then Tenant in addition to all other remedies now or hereafter provided
by law, may at its election, perform such covenant or agreement for or on
behalf of Owner, or make good any such default, and any amount or amounts
which Tenant shall advance pursuant thereto shall be repaid by Owner to
Tenant on demand.
9. Utilities Interruption: Owner agrees to use reasonable efforts to
remedy any situation (other than caused by Tenant) which gives rise to
interruption or failure to furnish any utility services. Additionally, if
the Premises are rendered untenantable or inaccessible due to interruption of
service attributable solely to Owner's fault, rent shall be abated for the
period of such untenantability.
10. Save and except the foregoing provisions, all other paragraphs and
covenants of the Lease Agreement, Riders and Exhibits shall remain in full
force and effect as therein stated. In the event of a conflict between the
provisions of this Addendum No. 1 and the Lease Agreement or its Riders
and/or Exhibits, then the provisions of this Addendum No. 1 shall prevail.
11. The Lease Agreement, Riders, Exhibits and this Addendum No. 1 may
only be modified in a writing executed by both parties.
Dated as of the ____day of October, 1993.
OWNER: TENANT:
SKY HARBOR ASSOCIATES LIMITED ACI SYSTEMS, INC.,
PARTBERSHIP a Colorado corporation
By: Pomeroy Investment By: _______________________________
Corporation, General Partner Ralph Armijo
Its: _____________________________
By: ____________________________ President
Howard Leshman
Its: _______________________
Vice President
12. FREE RENT: Lessee's initial two (2) month's Base Rent shall be abated.
Lessee will only be responsible for its share of operating expenses during
this free rent period.
13. TENANT IMPROVEMENT: Lessor agrees to provide building-standard carpet
and paint throughout the space and make all other improvements to the
premises as shown on the attached Exhibit "C" dated September 17, 1993.
14. EARLY OCCUPANCY: Lessee will be given access to the adjacent 2,000
square foot unit for their temporary use at no additional cost while their
space is being completed.
15. EARLY TERMINATION: Lessee will be given the option to terminate the
lease after the initial three (3) years of the term provided Lessee gives
Lessor four (4) months prior written notice and pays a penalty fee of
$10,000.00, which shall be due upon the expiration of the third year of the
lease term.
16. MOVING ALLOWANCE: Lessee will be given an allowance of $250.00 for
moving expenses from the temporary space to the primary space.
17. EXPANSION: Lessee will be given a second or junior
right-of-first-refusal behind Shippert Medical, Inc. on the adjacent 2,000
square foot space immediately east of the primary space. Lessee must give
written notice to Lessor of its intent to exercise its right-of-first-refusal
on or before ten (10) days after receipt of written notice from Lessor of a
bona-fide third party offer to lease the subject space. Should Shippert
Medical, Inc. default on their existing lease, Lessee's second position will
become first position.
18. SIGNAGE: Lessor agrees to provide for Lessee the cost and installation
of the monument sign lettering at the entrance to the park and the plain
standard sign at the unit. Lessee will be responsible for the cost of
lettering applied to the standard sign and windows at the unit.
19. RENEWAL OPTION: Lessee will be given one (1) three (3) year option to
renew the Lease. The lease rate will be based on current market rents for
similar space at that time. Lessee must exercise its option to renew three
(3) months prior to the expiration of the lease term.
<PAGE>
GUARANTY
Annexed to and forming a part of Lease dated April 30, 1993, by and between
SKY HARBOR ASSOCIATES LIMITED PARTNERSHIP, a Michigan limited partnership, as
Lessor, and CODY DISTRIBUTION, INC., a Colorado corporation, as Lessee.
The undersigned, Ralph Armijo, an individual, whose address is
___________________________________________ in consideration of the leasing
of the leased premises described in the annexed Lease ("Lease") to the above
named Lessee ("Lessee"), does hereby covenant and agree as follows:
A. The undersigned does hereby guarantee the full, faithful and timely
payment and performance by Lessee of all of the payments, covenants and other
obligations of Lessee under or pursuant to the Lease. If Lessee shall default
at any time in the payment of any rent or any other sums, costs, or charges
whatsoever, or in the performance of any of the covenants and obligations of
Lessee, under or pursuant to the Lease, then the undersigned, at its expense,
shall on demand of said Lessor ("Lessor") fully and promptly, and well and
truly, pay all rent, sums, costs and charges to be paid by Lessee, and
perform all the other covenants and obligations to be performed by Lessee,
under or pursuant to the Lease, and in addition shall on Lessor's demand pay
to Lessor any and all sums due to Lessor, including (without limitation) all
interest on past due obligations of Lessee, costs advanced by Lessor, and
damages and all expenses (including reasonable attorneys' fees and litigation
costs), that may arise in consequence of Lessee's default. The undersigned
hereby waives all requirements of notice of the acceptance of this Guaranty
and all requirements of notice of breach or non-performance by Lessee.
B. The obligations of the undersigned hereunder are independent of, and
may exceed, the obligations of Lessee. A separate action or actions may, at
Lessor's option, be brought and prosecuted against the undersigned, whether
or not any action is first or subsequently brought against Lessee, or whether
or not Lessee is joined in any such action, and the undersigned may be joined
in any action or proceeding commenced by Lessor against Lessee arising out
of, in connection with or based upon the Lease. The undersigned waives any
right to require Lessor to proceed against Lessee or pursue any other remedy
in Lessor's power whatsoever, any right to complain or delay in the
enforcement of Lessor's rights under the Lease, and any demand by Lessor
and/or prior action by Lessor of any nature whatsoever against Lessee, or
otherwise.
C. This Guaranty shall remain and continue in full force and effect and
shall not be discharged in whole or in part notwithstanding (whether prior or
subsequent to the execution hereof) any alteration, renewal, extension,
modification, amendment or assignment of, or subletting, concession,
franchising, licensing or permitting under, the Lease; provided, however,
that in the event of an assignment of the Lease to an entity unrelated to the
Lessee or the undersigned, the obligations of the undersigned pursuant to the
terms of this Guaranty shall not extend beyond the expiration of the term of
the Lease during which such assignment shall occur. The undersigned hereby
waives notices of any of the foregoing, and agrees that the liability of the
undersigned hereunder shall be based upon the obligations of Lessee set forth
in the Lease as the same may be altered, renewed, extended, modified, amended
or assigned for the purpose ofthis Guaranty and the obligations and
liabilities of the undersigned hereunder, "Lessee" shall be deemed to include
any and all concessionaires, licensees, franchisees, department operators,
assignees, subtenants, permitees or others directly or indirectly operating
or conducting a business in or from the leased premises, as fully as if any
of the same were the named Lessee under the Lease.
D. The undersigned's obligations hereunder shall remain fully binding
although Lessor may have waived one or more defaults by Lessee, extended the
time of performance by Lessee, released, returned or misapplied other
collateral at any
<PAGE>
time given as security for Lessee's obligations (including other guaranties)
and/or released Lessee from the performance of its obligations under the
Lease.
E. This Guaranty shall remain in full force and effect notwithstanding
the institution by or against Lessee, of bankruptcy, reorganization,
readjustment, receivership or insolvency proceedings of any nature, or the
disaffirmance of the Lease in any such proceedings or otherwise.
F. If this Guaranty is signed by more than one party, their obligations
shall be joint and several, and the release of one such gaurantors shall not
release any other of such guarantors.
G. This Guaranty shall be applicable to and binding upon the heirs,
executors, administrators, represntatives, successors and assigns of Lessor,
Lessee and the undersigned, Lessor may, without notice, assign this Guaranty
in whole or in part.
H. In the event that Lessor should institute any suit against
undersigned for violation of or to enforce any of the covenants or conditions
of this Guaranty or to enforce any right of Lessor hereunder, or should the
undersigned institute any suit against Lessor arising out of or in connection
with this Guaranty, or should either party institute a suit against the other
for a declaration of rights hereunder, or should either party intervene in
any suit in which the other is a party, to enforce or protect its interest or
rights hereunder, the prevailing party in any such suit shall be entitled to
the fees of its attorney(s) in the reasonable amount thereof, to be
determined by the court and taxed as a part of the costs therein.
I. The execution of this Guaranty prior to execution of the Lease shall
not invalidate this Guaranty or lessen the obligations of Guarantor(s)
hereunder.
J. This Guaranty shall terminate 24 months after the commencement date
of the Lease, assuming Lessee has not been in default during the 24 month
period.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty this 3 day
of November, 1993.
WITNESSES:
WITNESSES:
___________________________________ By:______________________________
___________________________________ Its:_____________________________
<PAGE>
PROMISSORY NOTE
$ 119,199.00 Englewood, Colo., October 1, 19 93
------------------- --------------- ---------- ------
for value received ACI promise to pay to the order of
- ------------------------- -----
Arthur Armijo at
- -----------------------------------------------------------------------------
0475 County Road 167 in
- -----------------------------------------------------------------------------
Glenwood Springs, Colorado,
- ------------------------- ---------------------------------------------
119,199.00 dollars, with interest at the rate of 5 per cent per
- ------------------------ ------
annum payable as follows:
Payment due as determined by ACI Systems, Inc. stockholders. Prorated payments
to begin not less than one year and not more than five years. Interest payments
may be substituted by payment of expenses.
IT IS AGREED that if this note is not paid when due or declared due hereunder,
the entire principal and accrued interest thereon shall draw interest at the
rate of 5 per cent per annum, and that failure to make any payment of
--------
principal or interest when due or any default under any encumbrance or agreement
securing this note shall cause the whole note to become due at once, or the
interest to be counted as principal, at the option of the holder of the note.
The markers and endorsers hereof severally waive presentment for payment,
protest, notice of non-payment and of protest, and agree to any extension of
time of payment and partial payments before, at or after maturity, and if this
note or interest thereon is not paid when due, or suit is brought, agree to pay
all reasonable costs of collection, including 0 for attorney's fees, and if
------
foreclosure is made by the Public Trustee, 0 for attorney's fees to be
-------
added by the Public Trustee to the cost of foreclosure.
/s/ Ralph Armijo
----------------------------------------
Due As identified above
--------------------------------- ----------------------------------------
This Note is Secured by
--------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<S> <C> <C>
LENDER BORROWER FIXED RATE
Pat Mawhinney Interactive Planet, Inc.
9292 Buttonhill Ct.
Highlands Ranch, CO ADDRESS PROMISSORY
80126 89 Willowleaf Dr. NOTE
Littleton, CO 80127
TELEPHONE NO. CERTIFICATION NO.
OFFICER INITIALS INTEREST RATE PRINCIPAL AMOUNT FUNDING DATE MATURITY DATE CUSTOMER NUMBER LOAN NUMBER
10.00% $45,110.00 3/31/96 12/31/97
PROMISE TO PAY
For value received, Borrower promises to pay to the order of Lender, at the office indicated above, the principal amount of
forty five thousand one hundred and ten and no/100's Dollars ($45,110.00) plus interest on the unpaid balance at the rate and in
the manner described below. All amounts received by Lender shall be applied first to current installments and then to late
installments, as permitted by Law.
INTEREST RATE: Interest shall be computed on the base of 360 days per year. Interest on the Note shall be calculated at the
fixed rate of ten percent (10.00%) per annum or at the maximum interest rate Lender is permitted to charge by law, whichever is
less.
PAYMENT SCHEDULE: Borrower shall pay the principal and interest according to the following schedule:
Interest and Principal is due at maturity.
All payments will be made to Lender at its address described above and in lawful currency of the United States of America.
RENEWAL: If checked, / / this Note is a renewal of loan number _____________________________ .
PREPAYMENT/MINIMUM FINANCE CHARGE: This Note may be prepaid in part or in full on or before its maturity date. If this Note
contains more than one installment, as prepayments will be credited as determined by Lender and as permitted by law. If this
Note is prepaid in full there will be /X/ No minimum finance charge. / / A minimum finance charge of $ ___________, as
permitted by law.
SECURITY: To secure the payment and performance of obligations incurred under this Note, Borrower grants Lender a security
interest in, and pledges and assigns to Lender as of Borrower's rights, title and interest, in all monies, instruments, savings,
checking and other deposit accounts of Borrower's (excluding IRA, Keogh and trust accounts and deposits subject to tax
penalties if so assigned) that are now or in the future in Lender's custody or control. Upon default, and to the extent
permitted by applicable law, Lender may exercise its security interest in all such property which shall be in addition to
Lender's common law right of setoff. / / If checked, the obligations under this Note are also secured by a lien and/or security
interest in the property described in the documents executed in connection with this Note as well as any other property
designated as security now or in the future.
LATE PAYMENT CHARGES: If an installment payment is received more than _________ days late, Borrower will be charged a late
payment charge of / / __________________ % of the unpaid late installment, / / ___________% of the unpaid late installment or
$ ___________ , whichever is less; as permitted by law. No more than one (1) late payment charge will be imposed on any single
installment of portion of any installment.
- --------------------------------------------------------------------------------------------------------------------------------
BORROWER ACKNOWLEDGES THAT BORROWER HAS READ, UNDERSTANDS, AND AGREES TO THE TERMS AND CONDITIONS OF THIS NOTE INCLUDING THE
PROVISIONS ON THE REVERSE SIDE. BORROWER ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS NOTE.
Dated: March 31, 1996
/s/ JON SIMMONS
- -------------------------------------------------------- --------------------------------------------------------
BORROWER Jon Simmons, CEO BORROWER
Interactive Planet, Inc.
/s/ PAT MAWHINNEY
- -------------------------------------------------------- --------------------------------------------------------
BORROWER Pat Mawhinney, President BORROWER
Interactive Planet, Inc.
</TABLE>
<PAGE>
PROMISSORY NOTE
NAVIDEC, INC.
0% UNSECURED SUBORDINATED
PROMISSORY NOTE
$75,000
As of July 7, 1996
Denver, Colorado
FOR VALUE RECEIVED, NAVIDEC, Inc., a Colorado corporation (the "Payor"),
having its executive office and principal place of business at 14 Inverness
Drive, Building F, Suite 116, Englewood, CO 80112, hereby promises to pay to
Cynthia Simmons (the "Payee"), having an address at 89 Willowleaf Dr.,
Littleton, CO 80126 twelve monthly payment of $6250.00 due on the first of each
month beginning August 1, 1996 and ending July 1, 1997, at the Payee's address
set forth above or at such other place as the Payee shall hereafter specify in
writing. This note may be prepaid, in whole or in part, at any time prior to
the Maturity Date without penalty.
1.0. In no event shall the Payee be entitled to receive interest,
however characterized and including other consideration received in
connection with this Note, at an effective rate in excess of the maximum rate
permitted by law. In the event that a court of competent jurisdiction shall
determine that such amounts paid or agreed to be paid by the Payor in
connection with this Note causes the effective interest rate on this Note to
exceed the maximum rate permitted by law, such interest or other
consideration shall automatically be reduced to a rate which results in an
effective interest rate under this Note equal to the maximum rate permitted
by law over the term hereof, and, in such event, the Payee shall either apply
to the reduction of the unpaid principal balance of this Note any amounts
received by it deemed to constitute excessive interest or refund such excess
to Payor.
2. REPLACEMENT OF NOTE.
2.1. In case this Note is mutilated, destroyed, lost or stolen, the
Payor shall, at its sole expense, execute, register and deliver a new Note,
in exchange and substitution for this Note, if mutilated, or in lieu of and
substitution for this Note, if destroyed, lost or stolen. In the case of
destruction, loss or theft, the Payee shall furnish to the Payor indemnity
reasonably satisfactory to the Payor, and in any such case, and in the case
of mutilation, the Payee shall also furnish to the Payor evidence to its
reasonable satisfaction of the mutilation, destruction, loss or theft of this
Note and of the ownership thereof. Any replacement Note so issued shall be
in the same outstanding principal amount as this Note and the date of this
Note.
2.2. Every Note issued pursuant to the provisions of Section 3.1
hereof in substitution for this Note, shall constitute an additional contractual
obligation of the Payor, whether or not this Note shall be found at any time, or
be enforceable by anyone.
3. EVENTS OF DEFAULT. If any of the following conditions, events or acts
shall occur,
<PAGE>
this Note shall become immediately due and payable:
3.1. The dissolution of the Payor or any vote in favor thereof by the
Board of Directors and stockholders of the Company; or
3.2. The Payor's insolvency, assignment for the benefit of creditors,
application for or appointment of a receiver, filing of a voluntary or
involuntary petition under any provision of the Federal Bankruptcy Code or
amendments thereto or any other federal or state statute affording relief to
debtors; or the commencement against the Payor of any such proceeding or filing
against the Payor of any such application or petition, which proceeding,
application or petition is not dismissed or withdrawn within thirty (30) days of
commencement or filing as the case may be; or
3.3. The failure by the Payor to make any payment of any amount of
principal on, or accrued interest under, this Note, or any of the Notes offered
pursuant to the Memorandum as and when the same shall become due and payable; or
3.4. The sale by the Payor of all or substantially all of its assets
(other than the sale of inventory in the ordinary course of business), or the
merger or consolidation by the Payor with or into another corporation, except
for mergers or consolidations where the Payor is the surviving entity or where
the surviving entity expressly accepts and assumes all of the obligations of the
Payor under all of the Offering Notes; or
3.5. The commencement of a proceeding to foreclose the security
interest or lien in any property or assets to satisfy the security interest or
lien therein of any secured creditor of the Payor whose debt is in excess of
$100,000; or
3.6. The entry of a final judgment for the payment of money in excess
of $100,000 by a court of competent jurisdiction against the Payor, which
judgment the Payor shall not discharge (or provide for such discharge) in
accordance with its terms within (30) days of the date of entry thereof, or
procure a stay of execution thereof within thirty (30) days from the date of
entry thereof and, within such thirty (30) day period, or such longer period
during which execution of such judgment shall have been stayed, appeal therefrom
and cause the execution thereof to be stayed during such appeal; or
3.7. Any attachment or levy, or the issuance of any note of eviction
against the assets or properties of the Payor involving an amount in excess of
$100,000, which attachment, levy or issuance is not dismissed, bonded, or
otherwise terminated within thirty (30) days of the effectiveness of such
attachment, levy or issuance; or
3.8. The default in the due observance or performance of any material
covenant, condition or agreement on the part of the Payor to be observed or
performed pursuant to the terms of this Note, and such default shall continue
uncured for thirty (30) days after written notice thereof, specifying such
default, shall have been given to the Payor by the holder of the Note; then, in
any such event and at any time thereafter (and, in the case of an event
described in Subsection 3.5 or a default in payment of accrued interest and/or
principal as described in
<PAGE>
Subsection 3.3, upon 30 days written notice), while such event is continuing,
the Payee shall have the right to declare an event of default hereunder ("Event
of Default"), provided that upon the occurrence of an event described in
Subsections 3.1 or 3.2 such event shall be deemed to be an Event of Default
hereunder whether or not the Payee makes such a declaration (an "Automatic
Default"), and the indebtedness evidenced by this Note shall be immediately upon
such declaration or Automatic Default become due and payable, both as to
principal and interest, without presentment, demand, protest or other notice of
any kind, all of which are hereby expressly waived, notwithstanding anything
contained herein to the contrary.
4.0 SUITS FOR ENFORCEMENT AND REMEDIES. If any one or more defaults
shall occur and be continuing, the Payee may proceed to protect and enforce
such Payee's rights either by suit in equity or by action at law, or both,
whether for the specific performance of any covenant, condition or agreement
contained in this Note or in any agreement or document referred to herein or
in aid of the exercise of any power granted in this Note or in any agreement
or document referred to herein, or proceed to enforce the payment of this
Note or to enforce any other legal or equitable right of the Payee of this
Note. No right or remedy herein or in any other agreement or instrument
conferred upon the holder of this Note is intended to be exclusive of any
other right or remedy, and each and every such right or remedy shall be
cumulative and shall be in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
5. UNCONDITIONAL OBLIGATION; FEES; WAIVERS; OTHER.
5.1. The obligations to make the payments provided for in this Note
are absolute and unconditional and not subject to any defense, set-off,
counterclaim, rescission, recoupment or adjustment whatsoever.
5.2. No forbearance, indulgence, delay or failure to exercise any
right or remedy with respect to this Note shall operate as a waiver, nor as an
acquiescence in any default, nor shall any single or partial exercise of any
right or remedy preclude any other or further exercise thereof or the exercise
of any other right or remedy.
5.3. This Note may not be modified except by a writing duly executed
by the Payor and the Payee.
5.4. The Payor hereby expressly waives demand and presentment for
payment, notice of nonpayment, notice of dishonor, protest, notice of protest,
bringing of suit, and diligence in taking any action to collect amounts called
for hereunder, and shall be directly and primarily liable for the payment of all
sums owing and to be owing hereon, regardless of and without any notice,
diligence, act or omission with respect to the collection of any amount called
for hereunder or in connection with any right, lien, interest or property at any
and all times which the Payee had or is existing as security for any amount
called for hereunder.
5.5. The Payor shall bear all of its expenses, including attorney's
fees incurred in connection with the preparation of this Note.
<PAGE>
6. SUBORDINATION. The payment of principal and interest on this Note
shall be (i) subordinate in payment and right of payment or provision for
payment in full of all other indebtedness (a) for money borrowed, except with
respect to money borrowed from affiliates of the Payor or (b) evidenced by a
note, debenture or similar instrument, in either case whether now or hereafter
incurred by the Payor in the ordinary course of its business, and (ii) shall
rank PARI PASSU with all other Notes and all other unsecured indebtedness not
falling within the description set forth in clause (i).
NAVIDEC, INC.
By: /s/ Ralph Armijo
------------------------------------
Ralph Armijo, President
ATTEST:
/s/ Pat Mawhinney
- ------------------------------
Pat Mawhinney
Chief Financial Officer
<PAGE>
THE BUSINESS/MANAGER-REG- AGREEMENT
WITH BUSINESSES AND PROFESSIONALS
TO: COLORADO STATE BANK OF DENVER FROM: ACI SYSTEMS, INC.
----------------------------- -------------------------------
1600 BROADWAY 7002 SOUTH REVERE PKWY SUITE 40
----------------------------- -------------------------------
DENVER CO 80202-4999 ENGLEWOOD CO 80112-3932
----------------------------- -------------------------------
(the "Bank") (the "Business")
The Business named above agrees to the following terms according to which,
when accepted by the Bank, the Business will receive payment for receivables
arising from sales or services to Customers and purchased by the Bank
pursuant to the Bank's Business/Manager plan.
SECTION 1: DEFINITIONS
1.1 "CREDIT APPLICATION AND AGREEMENT" means a Credit Application
and Agreement executed by a Customer and any other agreement or documentation
that governs the terms and disclosures relating to a Receivable.
1.2 "CREDIT MEMO" means a form reflecting a credit, other than a credit
arising from a payment, to a Customers account with the Business.
1.3 "CUSTOMER" means a debtor obligated on one or more Receivables
which arose from goods the Business sold or services it rendered to the
Customer.
1.4 "FACE AMOUNT" of a Receivable means on any date the outstanding
balance of such Receivable (after taking into account, without duplication,
all payments, returns, credits, or allowances of any nature at any time
issued, owing, granted or outstanding), plus any taxes imposed in connection
with such Receivable.
1.5 "INVOICE" means an invoice or similar evidence of the terms of a
sale of goods or provision of services previously made by the Business to a
Customer.
1.6 "NET AMOUNT" of a Receivable means the Face Amount of a
Receivable less the Service Charge.
1.7 "OBLIGATIONS" means all of the Business's obligations to the
Bank, whether pursuant to this Agreement, under any note, contract, guaranty,
accommodation or otherwise, however and whenever created, arising or
evidenced, whether direct or indirect, absolute or contingent, now or
hereafter existing or due.
1.8 "RECEIVABLES" means all accounts, instruments, contract lights,
chattel paper, documents, and general intangibles arising from the Business's
sale of goods or rendering of services, and the proceeds thereof, and all
security and guaranties therefore, whether now existing or hereafter created,
that are accepted by the Bank for purchase hereunder in the Bank's sole and
absolute discretion.
<PAGE>
1.9 "RECOURSE OBLIGATION" means the liability of the Business to the
Bank under this agreement in an amount equal on any date to the Face Amount
of Receivables on that date, plus attorneys' fees (if incurred) and accrued
and unpaid finance charges related to such Receivables. Upon a Default or
termination under this Agreement, the Recourse Obligation shall also include
the amount of all indemnities and other obligations arising under this
Agreement.
1.10 "RESERVE" means funds of the Business used to provide for the
funding of the Business's Recourse Obligation. "RESERVE ACCOUNT" means the
deposit account of the Business containing the Reserve established pursuant
to Section 2.5 of this Agreement.
1.11 "SERVICE CHARGE" means a discount equal to 2.55 percent (2.55%)
of the Face Amount of each Receivable the Business tenders to the Bank that
is acquired by the Bank. The Service Charge may be periodically reviewed and
adjusted at the Bank's discretion based on activity levels, credit quality,
and current economic conditions. The Business acknowledges that the Service
Charge is a discount for value and in no event constitutes interest or a
similar charge and that the transaction contemplated under this Agreement is
not a transaction for the use, forbearance or detention of money. The
Service Charge is in the view of the parties a reasonable and customary
discount.
SECTION 2.- SALE; PURCHASE PRICE; BILLING AND COLLECTION; RESERVE
2.1 ASSIGNMENT AND SALE. The Business hereby assigns and sells to
the Bank as absolute owner, with full recourse as set out below, the
Business's entire interest in such of its currently outstanding Receivables
as are described on attached Exhibit 2.1, as well as its future Receivables
represented by Invoices it delivers to the Bank; provided, however, that at
no time shall the total Face Amount of Receivables outstanding exceed
$750,000.00 unless agreed to by the Bank. The Business and the Bank agree
that the transaction contemplated by this Agreement is an account purchase
transaction and that the accounts are being purchased by the Bank from the
Business at a discount. The amount of the Recourse Obligation shall be
payable by the Business to the Bank on demand by the Bank following a Default
or termination under this Agreement.
2.2 PURCHASE PRICE. The purchase price of the Receivables shall be
equal to the Net Amount thereof. The Net Amount less the Reserve associated
with the Receivables shall be credited to the Business's primary account with
the Bank on or before the next banking day after delivery to the Bank of
acceptable Invoices.
2.3 DOCUMENTATION. The Business will provide the Bank with
appropriate Credit Applications and Agreements, Invoices, and Credit Memos
(if applicable) related to all sales and services creating Receivables of
Customers, and such other documents and proof of delivery of goods or
rendering of services as the Bank may reasonably require. As to the
Receivables described on Exhibit 2.1, the payment of the purchase price by
the Bank as set forth in Section 2.2 hereof shall be conclusive evidence of
assignment and sale thereof, and, if the Bank so requires, any invoices the
Business may thereafter send (if any) will clearly indicate that the related
Receivables have been assigned, sold, and are payable to the Bank only.
2.4 BILLING. The Bank will send a monthly statement to all Customers
itemizing their account activity during the preceding billing period, unless
otherwise agreed by the parties. All Customers will be instructed to make
payments to a post office box controlled by the Bank. All
2
<PAGE>
payments received from or for the account of a Customer will be applied to
the obligations of that Customer. Payment will be deemed made when received
by the Bank. All variations, modifications or extensions of indebtedness on
Receivables sold to the Bank hereunder will be made only by the Bank. Nothing
in this Agreement authorizes the Business to collect Receivables sold to the
Bank hereunder, but in the event the Business does, it will receive
remittances in trust for the Bank and will remit the same to the Bank,
properly endorsed, no later than the next banking day. The Business will pay
to the Bank any finance charges incurred pursuant to the applicable Credit
Application and Agreement by a Customer because of delay on the Business's
part in delivering payments or Credit Memos to the Bank.
2.5 RESERVE. The Bank may retain a portion of the sums payable to
the Business, the amount of which the Bank may adjust from time to time in
its reasonable discretion, to provide for satisfaction of the Business's
Recourse Obligation. The initial amount of the Reserve will be equal to
10.0% of the Face Amount of all Receivables initially purchased by the Bank.
Thereafter, and subject to the Bank's fight to adjust the Reserve as set out
above, the amount of the Reserve will be increased by 10.0% of the Face
Amount of all Receivables purchased by the Bank subsequent to its initial
purchase of the Receivables. The Reserve will be held in a separate,
interest-bearing account for the benefit of the Business.
SECTION 3: REASSIGNMENT OF RECEIVABLES; SECURITY INTEREST
3.1 REASSIGNMENT. With respect to any Receivables initially
purchased by the Bank and shown on Exhibit 2.1, the Bank may reassign and
charge back to the Business all or any portion of such Receivables from any
particular Customer if any minimum payment due on one or more of such
Receivables remains unpaid following 90 days after its due date. With
respect to any Receivables purchased subsequent to the Bank's initial purchase
hereunder, the Bank may reassign and charge back to the Business all or any
portion of such Receivables from any particular Customer if any minimum
payment due on one or more of such Receivables remains unpaid following 90
days after its due date. For purposes of this Agreement the aging status of
Receivables purchased from the Business as shown on the aging of Receivables
produced or generated by the Bank will be deemed conclusive (absent manifest
error) in determining which Receivables may be reassigned by the Bank to the
Business. Regardless of when purchased, the Bank may reassign and charge
back to the Business all or any portion of such Receivables from any
particular Customer if such Customer is bankrupt or insolvent or if any
dispute arises with a Customer regarding such Receivables (including, without
limitation, any alleged deduction, defense, offset or counterclaim thereto).
The Bank may reassign and charge back to the Business all outstanding
Receivables (a) upon a Default, as defined in Section 8, or (b) upon the
termination of this Agreement. Any decision by the Bank to reassign less
than the maximum amount permitted by this Agreement shall not be deemed a
waiver of the Bank's rights of reassignment to the maximum extent permitted
in this Agreement.
3.2 EFFECT OF REASSIGNMENT. Upon a reassignment of one or more
Receivables, the Business shall be liable to the Bank for payment of the
Recourse Obligation with respect to the reassigned Receivables. Without
notice to or demand on the Business, the Bank may debit such amount (and any
amount necessary to bring the Reserve to the level required by the Bank in
its sole and reasonable discretion) against the Business's Reserve Account or
any other deposit account of the Business with the Bank. In the event such
accounts contain insufficient funds for the Bank's debit or the Bank elects not
to make such debit, the Business agrees to pay any such
3
<PAGE>
deficiency or shortfall on demand. Upon a reassignment of Receivables, the
Bank shall have no further undertaking with respect to the billing or
collection of the Receivables so reassigned.
3.3 SECURITY INTEREST. The Business hereby grants the Bank a
security interest in all of its present and future accounts, instruments,
contract fights, chattel paper, documents and general intangibles (in each
case as defined in the Uniform Commercial Code as in effect in the State
whose law governs this Agreement) and the proceeds thereof, and all returned,
repossessed, and reclaimed goods, and related books and records, to secure
all of the Business's Obligations, and agrees to execute appropriate UCC-1
financing and other related statements. The Business further sells and
assigns the Bank all of the Business's rights as an unpaid vendor or lendor,
all of its related rights of stoppage in transit, replevin and reclamation
and rights against third parties, and the Business agrees to cooperate with
the Bank in exercising these rights. In addition, the Business grants the
Bank a security interest in the Reserve and in the Reserve Account to secure
all of the Business's Obligations. The Business agrees to execute such
additional documents and take such further action as Bank deems necessary, or
desirable in order to perfect the security interests granted herein, to
effectuate the sale and assignment of the Receivables, and otherwise to
effectuate the purposes of the Agreement. In the event that the Bank
requires additional security for the Business's obligations under this
Agreement and the Business or other party executes additional security
agreements, pledge agreements, guaranties and documents of similar import
(collectively, the "Additional Security Documents"), terms used therein such
as, but not limited to, "loans," "indebtedness," "secured obligations," and
"obligations," shall be deemed to include the Recourse Obligation as defined
herein, and notwithstanding the provisions of the Additional Security
Documents, the Recourse Obligation secured thereby shall not constitute loans
or indebtedness.
SECTION 4: REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 REPRESENTATIONS AND WARRANTIES. The Business represents and
warrants that it is fully authorized to enter into this Agreement and to
perform hereunder, and that this Agreement constitutes its legal, valid and
binding obligation; that the Business is solvent and in good standing in the
State of its organization; that its Receivables are and that they will be at
the time of their creation, bona fide and existing obligations of Customers
of the Business arising out of its sales or services, free and clear of all
security interests, liens, and claims whatsoever of third parties and that
the documentation under which the Receivables are payable authorize the payee
thereof to charge, collect and receive interest at the rate provided in such
documentation; that all Receivables and all documents and practices related
thereto comply with all applicable federal and state laws; that the
collateral of the Business in which a security interest is granted in Section
3.3 hereof or any Additional Security Documents is not subject to any other
security interest, lien or encumbrance whatsoever (except in favor of the
Bank), and that the Business will not permit such collateral to become so
encumbered without the Bank's prior written consent; and that the Business's
inventory is not subject to any security interest, lien or encumbrance
whatsoever and that the Business will not permit its inventory to become so
encumbered without the Bank's prior written consent.
4.2 COVENANTS. The Business covenants that (i) it will allow the
Bank to review and inspect during reasonable business hours, and the Business
will supply, financial information and necessary documentation on the
Business, any guarantors, or on any Customer upon the Bank's request; and
(ii) with respect to each Receivable as it arises: (a) the Business will have
made
4
<PAGE>
delivery of the goods and/or will have rendered the services represented by
the Invoice, and the goods and/or services will have been accepted; (b) the
Business will have preserved and will continue to preserve any liens and any
rights to liens available by virtue of the sales and/or services; (c) the
Customer will not be the Business's affiliate; (d) the Bank's copy of the
Invoice will be genuine and will comply with this Agreement; (e) the Business
will have no knowledge of any dispute or potential dispute that may impair
the validity of the transaction or the Customer's obligation to pay the
related Receivable in accordance with its terms; (f) the Business will have
the right to render the services and/or to sell the goods creating the
Receivable, and will do so in accordance with all applicable laws; (g) the
Business will have paid or provided for the payment of all taxes arising from
the transaction creating the Receivable; and (h) the Receivable will not be
subject to any deduction, offset, defense, or counterclaim.
SECTION 5: FORMS AND PROCEDURES; RESPONSIBILITY FOR USE
5.1 FORMS AND PROCEDURES. The Business will use only forms,
agreements, and advertising materials supplied or approved by the Bank in
connection with the Receivables and will follow all procedures that are
satisfactory to the Bank in connection with the use of such forms,
agreements, and advertising materials.
5.2 RESPONSIBILITY. The Business will be solely responsible for,
the adequacy, completeness and accuracy of the raw data and its preparation
in the form required and its transmission to the Bank, and will indemnify and
hold the Bank and its agents and employees (and anyone else providing
processing, billing, or receivables management services) harmless from (and
pay all reasonable attorneys' fees with respect to) any claim or liability
sustained by virtue of acting in reliance upon data furnished by the
Business. The Business understands that the form of credit application and
agreement and other documentation the Bank supplies to the Business should be
reviewed by the Business's local counsel as the Bank makes no representation
or warranty as to their enforceability in the Business's state or their
compliance with applicable federal and state laws. The Bank and the Business
agree that the Bank is the owner of all Receivables purchased by the Bank
hereunder, and that all activities of the Bank in connection with the
collection of Receivables, generation of information, and processing of data,
is for the account of the Bank's own affairs; that the information generated
in connection therewith is the property of the Bank; and that the use of
computers by the Bank in connection with its activities under this agreement
is used to facilitate the performance of services other than "data
processing." The Business will indemnify and hold the Bank and its agents and
employees (and anyone else providing processing or billing services)
harmless from (and pay all reasonable attorneys' fees with respect to) any
loss or claim involving breach of warranty or representation by the Business
and from any loss or claim by any Customer relating to goods and/or services
(or the manner or type of their sale or provision) giving rise to Receivables
purchased by the Bank hereunder.
SECTION 6: POWER OF ATTORNEY
The Business appoints the Bank as its attorney-in-fact to receive,
open, and dispose of all mail addressed to the Business pertaining to
Receivables; to endorse the Business's name upon any notes, acceptances,
checks, drafts, money orders, and other evidences of payment of Receivables
that may come into the Bank's possession, and to deposit or otherwise collect
the same; and to do all other acts and things necessary to carry out the
terms of this Agreement. This power, being coupled with an interest, is
irrevocable while any Receivable shall remain unpaid.
5
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SECTION 7: APPLICABLE LAW
This Agreement shall be governed by, construed and enforced according to
the laws of the State of COLORADO.
SECTION 8: DEFAULT
8.1 EVENT OF DEFAULT. The following events will constitute a default (a
"Default") under the terms of this Agreement: (a) the Business fails to pay
the Recourse Obligation or any other payment obligation of the Business under
this Agreement on demand or the Business fails to pay any indebtedness of the
Business owed to the Bank pursuant to its terms; (b) the Business fails to
perform any obligation, covenant or liability in connection with this
Agreement within ten (10) days after the date that written notice thereof is
given to the Business; (c) any warranty, representation or statement whenever
made by the Business in connection with this Agreement proves to be false in
any material respect when made, or the Business fails to disclose to the Bank
that any such warranty, representation or statement has become untrue in any
material respect; (d) dissolution or termination of the Business if the
Business is a corporation, partnership, or other entity, or if the Business
is an individual, the death of such individual; (e) the Business's
insolvency; (f) the assignment for the general benefit of the Business's
creditors, the appointment of a receiver or trustee for its assets, the
commencement of any proceeding under any bankruptcy or insolvency laws by or
against the Business or any proceeding for the dissolution or liquidation,
settlement of claims against or winding up of its affairs; (g) the
termination or withdrawal of any guaranty for the Business's Obligations; (h)
the Business fails to pay when due any tax imposed on it or any tax lien is
filed against the Business or any of its assets; (i) any judgment against the
Business remains unpaid, unstayed on appeal undischarged, unbonded or
undismissed for a period of thirty (30) days; (j) the Business discontinues
its business as a going concern; or (k) the Bank in good faith deems the
prospect of the Business's payment or performance of its Obligations to have
been impaired.
8.2 EFFECT OF DEFAULT. Upon the occurrence of any Default, in
addition to any rights the Bank has under this Agreement or applicable law,
the Bank may immediately terminate this Agreement, at which time all
Obligations the Business owes to the Bank will immediately become due and
payable without notice, and the Bank's obligations to the Business hereunder
will cease. After the occurrence of a Default, the Bank will have the right
to withhold any further payments to the Business, and none of the Bank's
rights or collateral will be adversely affected thereby.
SECTION 9: NON-LIABILITY OF BANK; RELEASE
Except for a breach by the Bank of this Agreement, the Business hereby
releases, discharges, and acquits the Bank, its officers, directors,
employees, participants, successors and assigns from any and all claims,
demands, losses, and liability of any nature which the Business ever had, now
or hereafter can, shall or may have in connection with or arising out of the
transactions contemplated herein or the documentation hereof. In addition to
the provisions of this Section and Section 5.2, the Bank shall not be liable
for any indirect, special or consequential damages, such as loss of
anticipated revenues or other economic loss in connection with or arising
out of any default in performance hereunder or other matter arising herefrom.
Nor shall the Bank be liable for any errors of judgment or mistake of fact
when acting as the Business's attorney-in-fact pursuant to Section 6, or liable
for delay in the performance of the Bank's duties caused by strike, lawsuit,
riot, civil disturbance, fire, shortage of supplies or materials, or any
other cause
6
<PAGE>
reasonably beyond the Bank's control.
SECTION 10: EFFECTIVE DATE: TERMINATION; BINDING EFFECT
This Agreement will be effective when accepted by the Bank, and
will continue in full force and effect until the earlier of: (a) one year
after the effective date of this Agreement; or (b) Sixty (60) days after
written notice of termination has been given by one party to the other (in
each case subject to immediate termination upon a Default); and the term of
this Agreement will automatically be extended for periods of one year each
following its otherwise scheduled termination, subject to Section 8.2 above
and to the parties' rights to terminate this Agreement under clause (b) of
this Section 10. Upon termination of this Agreement, the Business will pay
all of its Obligations to the Bank; and in any event the Business will remain
liable to the Bank for any deficiency remaining after liquidation of any
collateral; and the Bank may withhold any payment to the Business unless
supplied with an indemnity satisfactory to the Bank. This Agreement shall
bind the Business and the Business's heirs, executors, successors and assigns
and shall inure to the benefit of the Bank and the Bank's successors and
assigns. The Business agrees that the Bank may delegate its duties
hereunder, but that the Business may not do so without the Bank's prior
written consent.
SECTION 11: ATTORNEY'S FEES; PAST-DUE OBLIGATIONS; WAIVER;
SEVERABILITY; HEADINGS; ENTIRE AND CONTROLLING AGREEMENT;
NOTICES; COUNTERPARTS
The Business will pay all reasonable expenses incurred by the Bank
in connection with the execution of this Agreement, including expenses
incurred in connection with the filing of financing statements, continuation
statements and record searches. All past-due obligations of the Business
arising under this Agreement shall bear interest at the maximum nonusurious
rate permitted under applicable state or federal law. The Business hereby
waives grace, demand (other than demand pursuant to Section 2.1 hereof),
presentment for payment, notice of dishonor or default, notice of intent to
accelerate, notice of acceleration, protest and notice of protest and
diligence in collecting and bringing of suit against the Business. Upon
liquidation of any collateral, settlement or prosecution of a dispute with
any Customer, or enforcement of any obligation of the Business hereunder, the
Business will pay to the Bank, and the Bank may charge to the Business's
account, all costs and expenses incurred, including reasonable attorneys'
fees, and such costs, expenses and fees shall constitute part of the
Business's Obligations. No delay or failure on the Bank's part in exercising
any right, privilege, or option hereunder shall operate as a waiver of such
or of any other right, privilege, or option, and no waiver, amendment or
modification of any provision of this Agreement shall be valid unless in
writing signed by the Bank, and then only to the extent therein stated; the
Bank does, however, have the right to amend this Agreement upon thirty (30)
days written notice to the Business. Should any provision of this Agreement
be prohibited by or invalid under applicable law, the validity of the
remaining provisions shall not be affected. The headings herein are for
convenience only, and shall not define or limit the scope, extent, meaning or
intent of this Agreement. This Agreement embodies the Business's entire
agreement as to its affiliation with the Bank's Business Manager program,
although the Business anticipates that the Bank will subsequently outline
certain depository and billing procedures. In the event of any inconsistency
between this Agreement and any other agreement signed by the Business and the
Bank in connection with this Agreement, including without limitation, any
Additional Security Documents, the terms and provisions of this Agreement
shall control and the terms and provisions
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<PAGE>
of any such other document shall be ineffective to the extent of any such
inconsistency. Any notice, request or demand to be given hereunder will be
deemed to be given when deposited with delivery service addressed to, or sent
by registered or certified mail to, the address of the recipient listed at
the beginning of this Agreement. This Agreement may be executed in multiple
counterparts, which when taken together shall constitute one and the same
Agreement.
SECTION 12: SPECIAL STIPULATIONS
Execution of loan documents including: Corporate Resolution to Borrow,
Commercial Security Agreement, Commercial Guaranty, UCC-1 Financing Statement.
Remittance of Quarterly Financial Statements for ACI.
Remittance of Monthly Accounts Receivable and Accounts Payable Aging.
BUSINESS:
ACI SYSTEMS, INC.
By: /s/ RALPH ARMIJO
-------------------------------------
Title: PRESIDENT/CEO
----------------------------------
ACCEPTANCE:
This Agreement is accepted this 27th day of February, 1996.
BANK:
COLORADO STATE BANK OF DENVER
---------------------------------------
By: /s/ BRIAN WILKINSON
------------------------------------
Title: ASSISTANT VICE PRESIDENT/PROGRAM
DIRECTOR
--------------------------------
- -C- Copyright 1995 by Private Business, Inc. All Rights Reserved.
Business/Manager-Registered Trademark- is a registered trademark of
Private Business, Inc. 0895.PBI
8
<PAGE>
COMMERCIAL SECURITY AGREEMENT
<TABLE>
- -----------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$750,000.00 02-27-1996 02-27-1997 0034-00001 61 4A 0034-00001 BRW
- -----------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document
to any particular loan or item.
- -----------------------------------------------------------------------------------------------------------
</TABLE>
BORROWER: ACI SYSTEMS INC. LENDER: COLORADO STATE BANK OF DENVER
7002 SOUTH REVERE PKWY SUITE 40 1600 BROADWAY
ENGLEWOOD, CO 80112-3932 DENVER, CO 80202-4999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE COMMERCIAL SECURITY AGREEMENT IS ENTERED INTO BETWEEN ACI SYSTEMS INC.
(REFERRED TO BELOW AS "GRANTOR"); AND COLORADO STATE BANK OF DENVER (REFERRED
TO BELOW AS "LENDER"). FOR VALUABLE CONSIDERATION, GRANTOR GRANTS TO LENDER A
SECURITY INTEREST IN THE COLLATERAL TO SECURE THE INDEBTEDNESS AND AGREES
THAT LENDER SHALL HAVE THE RIGHTS STATED IN THIS AGREEMENT WITH RESPECT TO
THE COLLATERAL, IN ADDITION TO ALL OTHER RIGHTS WHICH LENDER MAY HAVE BY LAW.
DEFINITIONS. The following words shall have the following meanings when used
in this Agreement. Terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
AGREEMENT. The word "Agreement" means this Commercial Security Agreement,
as this Commercial Security Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to this Commercial
Security Agreement from time to time.
COLLATERAL. The word "Collateral" means the following described property of
Grantor, whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located:
ALL INVENTORY, ACCOUNTS, EQUIPMENT, GENERAL INTANGIBLES AND FIXTURES.
In addition, the word "Collateral" includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:
(a) All attachments, accessions, accessories, tools, parts, supplies,
increases, and additions to and all replacements of and substitutions
for any property described above.
(b) All products and produce of any of the property described in this
Collateral section.
(c) All accounts, contract rights, general intangibles, instruments, rents,
monies, payments, and all other rights, arising out of a sale, lease, or
other disposition of any of the property described in this Collateral
section.
(d) All proceeds (including insurance proceeds) from the sale, destruction,
loss, or other disposition of any of the property described in this
Collateral section.
(e) All records and data relating to any of the property described in this
Collateral section, whether in the form of a writing, photograph, microfilm,
microfiche, or electronic media, together with all of Grantor's right, title
and interest in and to all computer software required to utilize, create,
maintain, and process any such records or data on electronic media.
Fixtures are and will be located on the following described real estate:
7002 SOUTH REVERE PKWY SUITE 40, ENGLEWOOD COLORADO. THE RECORD OWNER OF
THE REAL PROPERTY IS , ,
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section titled
"Events of Default."
GRANTOR. The word "Grantor" means ACI SYSTEMS INC., its successors and
assigns.
GUARANTOR. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in connection
with the Indebtedness.
INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by
the Note, including all principal and interest, together with all other
indebtedness and costs and expenses for which Grantor is responsible under
this Agreement or under any of the Related Documents.
LENDER. The word "Lender" means COLORADO STATE BANK OF DENVER, its
successors and assigns.
NOTE. The word "Note" means the note or credit agreement dated February 27,
1996, in the principal amount of $750,000.00 from Grantor to Lender, together
with all renewals of, extensions of, modifications of, refinancings of,
consolidations of and substitutions for the note or credit agreement.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guarantees, security agreements, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
ORGANIZATION. Grantor is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Colorado.
Grantor has its chief executive office at 7002 SOUTH REVERE PKWY SUITE 40,
ENGLEWOOD, CO 80112-3932. Grantor will notify Lender of any change in the
location of Grantor's chief executive office.
AUTHORIZATION. The execution, delivery, and performance of this Agreement by
Grantor have been duly authorized by all necessary action by Grantor and do
not conflict with, result in a violation of, or constitute a default under
(a) any provision of its articles of incorporation or organization, or
bylaws, or any agreement or other instrument binding upon Grantor or (b) any
law, governmental regulation, court decree, or order applicable to Grantor.
PERFECTION OF SECURITY INTEREST. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by Lender to
perfect and continue Lender's security interest in the Collateral. Upon
request of Lender, Grantor will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Grantor will note
Lender's interest upon any and all chattel paper if not delivered to Lender
for possession by Lender. Grantor hereby appoints Lender as its irrevocable
attorney-in-fact for the purpose of executing any documents necessary to
perfect or to continue the security interest granted in this Agreement.
Lender may at any time, and without further authorization from Grantor, file
a carbon, photographic or other reproduction or any financing statement or of
this Agreement for use as a financing statement. Grantor will reimburse
Lender for all expenses for the perfection and the continuation of the
perfection of Lender's security interest in the Collateral. Grantor promptly
will notify Lender before any change in Grantor's name including any change
to the assumed business names of Grantor. THIS IS A CONTINUING SECURITY
AGREEMENT AND WILL CONTINUE IN EFFECT EVEN THOUGH ALL OR ANY PART OF THE
INDEBTEDNESS IS PAID IN FULL AND EVEN THOUGH FOR A PERIOD OF TIME GRANTOR MAY
NOT BE INDEBTED TO LENDER.
NO VIOLATION. The execution and delivery of this Agreement will not violate
any law or agreement governing Grantor or to which Grantor is a party, and
its certificate or articles of incorporation and bylaws do not prohibit any
term or condition of this Agreement.
ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, the Collateral is
enforceable in accordance with its terms, is genuine, and complies with
applicable laws concerning form, content and manner of preparation and
execution and all persons appearing to be obligated on the Collateral have
authority and capacity to contract and are in fact obligated as they appear
to be on the Collateral. At the time any account becomes subject to a
security interest in favor of Lender, the account shall be a good and valid
account representing an undisputed, bona fide indebtedness incurred by the
account debtor, for merchandise held subject to delivery instructions or
theretofore shipped or delivered pursuant to a contract of sale, or for
services theretofore performed by Grantor with or for the account debtor;
there shall be no setoffs or counterclaims against any such account; and no
agreement under which any deductions or discounts may be claimed shall have
been made with the account debtor except those disclosed to Lender in writing.
LOCATION OF THE COLLATERAL. Grantor, upon request of the Lender, will
deliver to the Lender in form satisfactory to Lender a schedule of real
properties and Collateral locations relating to Grantor's operations,
including without limitation the following: (a) all real property owned or
being purchased by Grantor; (b) all real property being rented or leased by
Grantor; (c) all storage facilities owned, rented, leased, or being used by
Grantor; and (d) all other properties where collateral is or may be located.
Except in the ordinary course of its business, Grantor shall not remove the
Collateral from its existing locations without the prior written consent of
the Lender.
REMOVAL OF COLLATERAL. Grantor shall keep the Collateral (or to the extent
the Collateral consists of intangible property such as accounts, the records
concerning the Collateral) at Grantor's address shown above, or at such other
locations as are acceptable to Lender. Some or all of the Collateral may be
located at the real property described above. Except in the ordinary course
of business, including the sales of inventory, Grantor shall not remove the
Collateral from its existing locations without the prior written consent of
Lender. To the extent that the Collateral consists of vehicles, or other
titled property, Grantor shall not take or permit any action which would
require application for certificates of title for the vehicles outside the
State of Colorado, without the prior written consent of Lender.
<PAGE>
02-27-1996 COMMERCIAL SECURITY AGREEMENT PAGE 2
LOAN NO 0034-00001 (CONTINUED)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not
sell, offer to sell, or otherwise transfer or dispose of the Collateral.
While Grantor is not in default under this Agreement, Grantor may sell
inventory, but only in the ordinary course of its business and only to buyers
who qualify as a buyer in the ordinary course of business. A sale in the
ordinary course of Grantor's business does not include a transfer in partial
or total satisfaction of a debt or any bulk sale. Grantor shall not pledge,
mortgage, encumber or otherwise permit the Collateral to be subject to any
lien, security interest, encumbrance, or charge, other than the security
interest provided for in this Agreement, without the prior written consent of
Lender. This includes security interests even if junior in right to the
security interests granted under this Agreement. Unless waived by Lender, all
proceeds from any disposition of the Collateral (for whatever reason) shall
be held in trust for Lender and shall not be commingled with any other funds;
provided however, this requirement shall not constitute consent by Lender to
any sale or other disposition. Upon receipt, Grantor shall immediately
deliver any such proceeds to Lender.
TITLE. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement. No financing statement
covering any of the Collateral is on file in any public office other than
those which reflect the security interest created by this Agreement or to
which Lender has specifically consented. Grantor shall defend Lender's rights
in the Collateral against the claims and demands of all other persons.
COLLATERAL SCHEDULES AND LOCATIONS. As often as Lender shall require, and
insofar as the Collateral consists of accounts and general intangibles,
Grantor shall deliver to Lender schedules of such Collateral, including such
information as Lender may require, including without limitation names and
addresses of account debtors and agings of accounts and general intangibles.
Insofar as the Collateral consists of inventory and equipment, Grantor shall
deliver to Lender, as often as Lender shall require, such lists,
descriptions, and designations of such Collateral as Lender may require to
identify the nature, extent, and location of such Collateral. Such
information shall be submitted for Grantor and each of its subsidiaries or
related companies.
MAINTENANCE AND INSPECTION OF COLLATERAL. Grantor shall maintain all
tangible Collateral in good condition and repair. Grantor will not commit or
permit damage to or destruction of the Collateral or any part of the
Collateral. Lender and its designated representatives and agents shall have
the right at all reasonable times to examine, inspect, and audit the
Collateral wherever located. Grantor shall immediately notify Lender of all
cases involving the return, rejection, repossession, loss or damage of or to
any Collateral; of any request for credit or adjustment or of any other
dispute arising with respect to the Collateral; and generally of all
happenings and events affecting the Collateral or the value or the amount of
the Collateral.
TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon this
Agreement, upon any promissory note or notes evidencing the indebtedness, or
upon any of the other Related Documents. Grantor may withhold any such
payment or may elect to contest any lien if Grantor is in good faith
conducting an appropriate proceeding to contest the obligation to pay and so
long as Lender's interest in the Collateral is not jeopardized in Lender's
sole opinion. If the Collateral is subjected to a lien which is not
discharged within fifteen (15) days, Grantor shall deposit with Lender cash,
a sufficient corporate surety bond or other security satisfactory to Lender
in an amount adequate to provide for the discharge of the lien plus any
interest, costs, attorneys' fees or other charges that could accrue as a
result of foreclosure or sale of the Collateral. In any contest Grantor shall
defend itself and Lender and shall satisfy any final adverse judgment before
enforcement against the Collateral. Grantor shall name Lender as an
additional obligee under any surety bond furnished in the contest proceedings.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply promptly
with all laws, ordinances, rules and regulations of all governmental
authorities, now or hereafter in effect, applicable to the ownership,
production, disposition, or use of the Collateral. Grantor may contest in
good faith any such law, ordinance or regulation and withhold compliance
during any proceeding, including appropriate appeals, so long as Lender's
interest in the Collateral, in Lender's opinion, is not jeopardized.
HAZARDOUS SUBSTANCES. Grantor represents and warrants that the Collateral
never has been, and never will be so long as this Agreement remains a lien on
the Collateral, used for the generation, manufacture, storage,
transportation, treatment, disposal, release or threatened release of any
hazardous waste or substance, as those terms are defined in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended,
42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 49 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant to
any of the foregoing. The terms "hazardous waste" and "hazardous substance"
shall also include, without limitation, petroleum and petroleum by-products
or any fraction thereof and asbestos. The representations and warranties
contained herein are based on Grantor's due diligence in investigating the
Collateral for hazardous wastes and substances. Grantor hereby (a) releases
and waives any future claims against Lender for indemnity or contribution in
the event Grantor becomes liable for cleanup or other costs under any such
laws, and (b) agrees to indemnify and hold harmless Lender against any and
all claims and losses resulting from a breach of this provision of this
Agreement. This obligation to indemnify shall survive the payment of the
indebtedness and the satisfaction of this Agreement.
MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain all
risks insurance, including without limitation fire, theft and liability
coverage together with such other insurance as Lender may require with
respect to the Collateral, in form, amounts, coverages and basis reasonably
acceptable to Lender and issued by a company or companies reasonably
acceptable to Lender. Grantor, upon request of Lender, will deliver to Lender
from time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages will not be
cancelled or diminished without at least ten (10) days' prior written notice
to Lender and not including any disclaimer of the insurer's liability for
failure to give such a notice. Each insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not be impaired
in any way by any act, omission or default of Grantor or any other person. In
connection with all policies covering assets in which Lender holds or is
offered a security interest, Grantor will provide Lender with such loss
payable or other endorsements as Lender may require. In no event shall the
insurance be in an amount less than the amount agreed upon in the Agreement
to Provide Insurance. If Grantor at any time fails to obtain or maintain any
insurance as required under this Agreement, Lender may (but shall not be
obligated to) obtain such insurance as Lender deems appropriate, including if
it so chooses "single interest insurance," which will cover only Lender's
interest in the Collateral.
APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify Lender of
any loss or damage to the Collateral. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty. All proceeds
of any insurance on the collateral, including accrued proceeds thereon, shall
be held by Lender as part of the Collateral. If Lender consents to repair or
replacement of the damaged or destroyed Collateral, Lender shall, upon
satisfactory proof of expenditure, pay or reimburse Grantor from the proceeds
for the reasonable cost of repair or restoration. If Lender does not consent
to repair or replacement of the Collateral, Lender shall retain a sufficient
amount of the proceeds to pay all of the indebtedness, and shall pay the
balance to Grantor. Any proceeds which have not been disbursed within six (6)
months after their receipt and which Grantor has not committed to the repair
or restoration of the collateral shall be used to prepay the indebtedness.
INSURANCE RESERVES. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be created by
monthly payments from Grantor of a sum estimated by Lender to be sufficient
to produce, at least fifteen (15) days before the premium due date, amounts at
least equal to the insurance premiums to be paid. If fifteen (15) days before
payment is due, the reserve funds are insufficient, Grantor shall upon
demand pay any deficiency to Lender. The reserve funds shall be held by
Lender as a general deposit and shall constitute a non-interest=bearing
account which Lender may satisfy by payment of the insurance premiums
required to be paid by Grantor as they become due. Lender does not hold the
reserve funds in trust for Grantor, and Lender is not the agent of Grantor
for payment of the insurance premiums required to be paid by Grantor. The
responsibility for the payment of premiums shall remain Grantor's sole
responsibility.
INSURANCE REPORTS. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as
Lender may reasonably request including the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the
property insured; (e) the then current value on the basis of which insurance
has been obtained and the manner of determining that value; and (f) the
expiration date of the policy. In addition, Grantor shall upon request by
Lender (however not more often than annually) have an independent appraiser
satisfactory to Lender determine, as applicable, the cash value or replacement
cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and
except as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to
possession and beneficial use shall not apply to any Collateral where
possession of the Collateral by Lender is required by law to perfect Lender's
security interest in such Collateral. Until otherwise notified by Lender,
Grantor may collect any of the Collateral consisting of accounts. At any time
and even though no Event of Default exists, Lender may exercise its rights to
collect the accounts and to notify account debtors to make payments directly
to Lender for application to the indebtedness. If Lender at any time has
possession of any Collateral, whether before or after an Event of Default,
Lender shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral if Lender takes such action for that purpose as
Grantor shall request or as Lender, in Lender's sole discretion, shall deem
appropriate under the circumstances, but failure to honor any request by
Grantor shall not of itself be deemed to be a failure to exercise reasonable
care. Lender shall not be required to take any steps necessary to preserve any
rights in the Collateral against prior parties, nor to protect, preserve or
maintain any security interest given to secure the indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without
limitation all taxes, liens, security interests, encumbrances, and other
claims, at any time levied or placed in the Collateral. Lender also may (but
shall not be obligated to) pay all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or paid by Lender
for such purposes ???en bear interest at the rate charged under the Note from
the date incurred or paid by Lender to the date of repayment by Grantor. All
such expenses shall become a part of the indebtedness and,
<PAGE>
02-27-1996 COMMERCIAL SECURITY AGREEMENT Page 3
Loan No 0034-00001 (Continued)
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at Lender's option, will (a) be payable on demand, (b) be added to the
balance of the Note and be apportioned among and be payable with any
instalment payments to become due during either (i) the term of any
applicable insurance policy or (ii) the remaining term of the Note, or (c) be
treated as a balloon payment which will be due and payable at the Note's
maturity. This Agreement also will secure payment of these amounts. Such
right shall be in addition to all other rights and remedies to which Lender
may be entitled upon the occurrence of an Event of Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Grantor to make any payment when due
on the indebtedness.
OTHER DEFAULTS. Failure of Grantor to comply with or to perform any
other term, obligation, covenant or condition contained in this
Agreement or in any of the Related Documents or in any other agreement
between Lender and Grantor.
INSOLVENCY. The dissolution or termination of Grantor's existence as a
going business, the insolvency of Grantor, the appointment of a receiver
for any part of Grantor's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Grantor.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against the Collateral or any other collateral
securing the Indebtedness. This includes a garnishment of any of
Grantor's deposit accounts with Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or such Guarantor
dies or becomes incompetent.
ADVERSE CHANGE. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of
the Indebtedness is impaired.
INSECURITY. Lender, in good faith, deems itself insecure.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a
secured party under the Colorado Uniform Commercial Code. In addition and
without limitation, Lender may exercise any one or more of the following
rights and remedies:
ACCELERATE INDEBTEDNESS. Lender may declare the entire indebtedness,
including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice.
ASSEMBLE COLLATERAL. Lender may require Grantor to deliver to Lender all
or any portion of the Collateral and any and all certificates of title
and other documents relating to the Collateral. Lender may require
Grantor to assemble the Collateral and make it available to Lender at a
place to be designated by Lender. Lender also shall have full power to
enter upon the property of Grantor to take possession of and remove the
Collateral. If the Collateral contains other goods not covered by this
Agreement at the time of repossession, Grantor agrees Lender may take
such other goods, provided that Lender makes reasonable efforts to
return them to Grantor after repossession.
SELL THE COLLATERAL. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in
its own name or that of Grantor. Lender may sell the Collateral at
public auction or private sale. Unless the Collateral threatens to
decline speedily in value or is of a type customarily sold on a
recognized market, Lender will give Grantor reasonable notice of the
time after which any private sale or any other intended disposition of
the Collateral is to be made. The requirements of reasonable notice
shall be met if such notice is given at least ten (10) days before the
time of the sale or disposition. All expenses relating to the
disposition of the Collateral, including without limitation the expenses
of retaking, holding, insuring, preparing for sale and selling the
Collateral, shall become a part of the indebtedness secured by this
Agreement and shall be payable on demand, with interest at the Note rate
from date of expenditure until repaid.
APPOINT RECEIVER. To the extent permitted by applicable law, Lender
shall have the following rights and remedies regarding the appointment
of a receiver: (a) Lender may have a receiver appointed as a matter of
right, (b) the receiver may be an employee of Lender and may serve
without bond, and (c) all fees of the receiver and his or her attorney
shall become part of the indebtedness secured by this Agreement and
shall be payable on demand, with interest at the Note rate from date of
expenditure until repaid. The receiver may be appointed by a court of
competent jurisdiction upon ex parte application and without notice,
notice being expressly waived.
COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may at any time in its discretion transfer any
Collateral into its own name or that of its nominee and receive the
payments, rents, income, and revenues therefrom and hold the same as
security for the Indebtedness or apply it to payment of the Indebtedness
in such order of preference as Lender may determine. Insofar as the
Collateral consists of accounts, general intangibles, insurance
policies, instruments, chattel paper, choses in action, or similar
property, Lender may demand, collect, receipt for, settle, compromise,
adjust, sue for, foreclose, or realize on the Collateral as Lender may
determine, whether or not Indebtedness or Collateral is then due. For
these purposes, Lender may, on behalf of and in the name of Grantor,
receive, open and dispose of mail addressed to Grantor; change any
address to which mail and payments are to be sent; and endorse notes,
checks, drafts, money orders, documents of title, instruments and items
pertaining to payment, shipment, or storage of any Collateral. To
facilitate collection, Lender may notify account debtors and obligors on
any Collateral to make payments directly to Lender.
OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the
Collateral, Lender may obtain a judgment against Grantor for any
deficiency remaining on the Indebtedness due to Lender after application
of all amounts received from the exercise of the rights provided in this
Agreement. Grantor shall be liable for a deficiency even if the
transaction described in this subsection is a sale of accounts or
chattel paper.
OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and remedies
of a secured creditor under the provisions of the Uniform Commercial
Code, as may be amended from time to time. In addition, Lender shall
have and may exercise any or all other rights and remedies it may have
available at law, in equity, or otherwise.
CUMULATIVE REMEDIES. All of Lender's rights and remedies, whether
evidenced by this Agreement or the Related Documents or by any other
writing, shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude
pursuit of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Grantor under this Agreement,
after Grantor's failure to perform, shall not affect Lender's right to
declare a default and to exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part
of this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or
amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and accepted
by Lender in the State of Colorado. If there is a lawsuit, Guarantor
agrees upon Lender's request to submit to the jurisdiction of the courts
of DENVER County, State of Colorado. This Agreement shall be governed by
and construed in accordance with the laws of the State of Colorado.
ATTORNEYS' FEES; EXPENSES. Guarantor agrees to pay upon demand all of
Lender's costs and expenses, including attorneys' fees and Lender's
legal expenses, incurred in connection with the enforcement of this
Agreement. Lender may pay someone else to help enforce this Agreement, and
Guarantor shall pay the costs and expenses of such enforcement. Costs
and expenses include Lender's attorneys' fees and legal expenses whether
or not there is a lawsuit, including attorneys' fees and legal expenses
for bankruptcy proceedings (and including efforts to modify or vacate
any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Guarantor also shall pay all court
costs and such additional fees as may be directed by the court.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the
provisions of this Agreement.
NOTICES. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimile, and shall be effective
when actually delivered or when deposited with a nationally recognized
overnight courier or deposited in the United States mail, first class
postage prepaid, addressed to the party to whom the notice is to be
given at the address shown above. Any party may change its address for
notices under this Agreement by giving formal written notice to the
other parties, specifying that the purpose of the notice is to change
the party's address. To the extent permitted by applicable law, if there
is more than one Grantor, notice to any Grantor will constitute notice
to all Grantors. For notice purposes, Grantor agrees to keep Lender
informed at all times of Grantor's current address(es).
POWER OF ATTORNEY. Grantor hereby appoints Lender as its true and lawful
attorney-in-fact, irrevocable, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover
all sums of money or other property which may now or hereafter become
due, owing or payable from the Collateral; (b) to execute, sign and
endorse any and all claims, instruments, receipts, checks, drafts or
warrants issued in payment for the Collateral; (c) to settle or
compromise any and all claims arising under the Collateral, and, in the
place and stead of Grantor, to execute and deliver its release and
settlement for the claim; and (d) to file any claim or claims or to take
any action or institute or take part in any proceedings, either in its
own name or in the name of Grantor, or otherwise, which in the
discretion of Lender may seem to be necessary or advisable. This power
is given as security for the Indebtedness, and the authority hereby
conferred is and shall be irrevocable and shall remain in full force and
effect until renounced by Lender.
<PAGE>
02-27-1996 COMMERCIAL SECURITY AGREEMENT Page 4
Loan No 0034-00001 (Continued)
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SEVERABILITY. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending
provision cannot be so modified, it shall be stricken and all other
provisions of this Agreement in all other respects shall remain valid
and enforceable.
SUCCESSOR INTERESTS. Subject to the limitations set forth above on
transfer of the Collateral, this Agreement shall be binding upon and
inure to the benefit of the parties, their successors and assigns.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender
of a provision of this Agreement shall not prejudice or constitute a
waiver of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Agreement. No prior waiver by
Lender, nor any course of dealing between Lender and Grantor, shall
constitute a waiver of any of Lender's rights or of any of Grantor's
obligations as to any future transactions. Whenever the consent of
Lender is required under this Agreement, the granting of such consent by
Lender in any instance shall not constitute continuing consent to
subsequent instances where such consent is required and in all cases
such consent may be granted or withheld in the sole discretion of Lender.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED FEBRUARY 27,
1996.
GRANTOR
ACI SYSTEMS INC.
By: /s/ RALPH ARMIJO
---------------------------
RALPH ARMIJO, PRESIDENT/CEO
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<PAGE>
COMMERCIAL GUARANTY
<TABLE>
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
61 4A 0034-00001 BRW
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References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
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BORROWER: ACI SYSTEMS INC. LENDER: COLORADO STATE BANK OF DENVER
7002 SOUTH REVERE PKWY SUITE 40 1600 BROADWAY
ENGLEWOOD, CO 80112-3932 DENVER, CO 80202-4999
GUARANTOR: RALPH ARMIJO
2918 EAST GEDDES AVENUE
LITTLETON, CO 80122
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</TABLE>
AMOUNT OF GUARANTY. THIS IS A GUARANTY OF PAYMENT OF THE NOTE, INCLUDING
WITHOUT LIMITATION THE PRINCIPAL NOTE AMOUNT OF SEVEN HUNDRED FIFTY THOUSAND
& 00/100 DOLLARS ($750,000.00)
GUARANTY. FOR GOOD AND VALUABLE CONSIDERATION, RALPH ARMIJO ("GUARANTOR")
ABSOLUTELY AND UNCONDITIONALLY GUARANTEES AND PREMISES TO PAY TO COLORADO
STATE BANK OF DENVER ("LENDER") OR ITS ORDER, IN LEGAL TENDER OF THE UNITED
STATES OF AMERICA, THE INDEBTEDNESS (AS THAT TERM IS DEFINED BELOW) OF ACI
SYSTEMS INC. ("BORROWER") TO LENDER ON THE TERMS AND CONDITIONS SET FORTH IN
THIS GUARANTY.
DEFINITIONS. The following words shall have the following meanings when used
in this Guaranty:
BORROWER. The word "Borrower" means ACI SYSTEMS INC.
GUARANTOR. The word "Guarantor" means RALPH ARMIJO.
GUARANTY. The word "Guaranty" means this Guaranty made by Guarantor for
the benefit of Lender dated February 27, 1996.
INDEBTEDNESS. The word "Indebtedness" means the Note, including (a) all
principal, (b) all interest, (c) all late charges, (d) all loan fees and
loan charges, and (e) all collection costs and expenses relating to the
Note or to any collateral for the Note. Collection costs and expenses
include without limitation all of Lender's attorneys' fees and Lender's
legal expenses, whether or not suit is instituted, and attorneys' fees
and legal expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services.
LENDER. The word "Lender" means COLORADO STATE BANK OF DENVER, its
successors and assigns.
NOTE. The word "Note" means the promissory note or credit agreement
dated February 27, 1996, IN THE ORIGINAL PRINCIPAL AMOUNT OF $750,000.00
from Borrower to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of, and substitutions
for the promissory note or agreement. NOTICE TO GUARANTOR: THE NOTE
EVIDENCES A REVOLVING LINE OF CREDIT FROM LENDER TO BORROWER.
RELATED DOCUMENTS. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection
with the Indebtedness.
MAXIMUM LIABILITY. THE MAXIMUM LIABILITY OF GUARANTOR UNDER THIS
GUARANTY SHALL NOT EXCEED AT ANY ONE TIME THE AMOUNT OF THE INDEBTEDNESS
DESCRIBED ABOVE, PLUS ALL COSTS AND EXPENSES OF (a) ENFORCEMENT OF THIS
GUARANTY AND (b) COLLECTION AND SALE OF ANY COLLATERAL SECURING THIS
GUARANTY.
The above limitation on liability is not a restriction on the amount of
the indebtedness of Borrower to Lender either in the aggregate or at any
one time. If Lender presently holds one or more guaranties, or hereafter
receives additional guaranties from Guarantor, the rights of Lender
under all guaranties shall be cumulative. This Guaranty shall not
(unless specifically provided below to the contrary) affect or
invalidate any such other guaranties. The liability of Guarantor will be
the aggregate liability of Guarantor under the terms of this Guaranty
and any such other unterminated guaranties.
NATURE OF GUARANTY. Guarantor intends to guarantee at all times the
performance and prompt payment when due, whether at maturity or earlier
by reason of acceleration or otherwise, of all indebtedness within the
limits set forth in the preceding section of this Guaranty. THIS
GUARANTY COVERS A REVOLVING LINE OF CREDIT AND GUARANTOR UNDERSTANDS AND
AGREES THAT THIS GUARANTEE SHALL BE OPEN AND CONTINUOUS UNTIL THE LINE
OF CREDIT IS TERMINATED AND THE INDEBTEDNESS IS PAID IN FULL, AS
PROVIDED BELOW.
DURATION OF GUARANTY. This Guaranty will take effect when received by
Lender without the necessity of any acceptance by Lender, or any notice
to Guarantor or to Borrower, and will continue in full force until all
indebtedness shall have been fully and finally paid and satisfied and
all other obligations of Guarantor under this Guaranty shall have been
performed in full. Release of any other guarantor or termination of any
other guaranty of the indebtedness shall not affect the liability of
Guarantor under this Guaranty. A revocation receive by Lender from any
one or more Guarantors shall not affect the liability of any remaining
Guarantors under this Guaranty. THIS GUARANTY COVERS A REVOLVING LINE OF
CREDIT AND IT IS SPECIFICALLY ANTICIPATED THAT FLUCTUATIONS WILL OCCUR
IN THE AGGREGATE AMOUNT OF INDEBTEDNESS OWING FROM BORROWER TO LENDER.
GUARANTOR SPECIFICALLY ACKNOWLEDGES AND AGREES THAT FLUCTUATIONS IN THE
AMOUNT OF INDEBTEDNESS, EVEN TO ZERO DOLLARS ($0.00), SHALL NOT
CONSTITUTE A TERMINATION OF THIS GUARANTY. GUARANTOR'S LIABILITY UNDER
THIS GUARANTY SHALL TERMINATE ONLY UPON (a) TERMINATION IN WRITING BY
BORROWER AND LENDER OF THE LINE OF CREDIT, (b) PAYMENT OF THE
INDEBTEDNESS IN FULL IN LEGAL TENDER, AND (c) PAYMENT IN FULL IN LEGAL
TENDER OF ALL OTHER OBLIGATIONS OF GUARANTOR UNDER THIS GUARANTY.
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender,
WITHOUT NOTICE OR DEMAND AND WITHOUT LESSENING GUARANTOR'S LIABILITY
UNDER THIS GUARANTY, FROM TIME TO TIME: (a) TO MAKE ONE OR MORE
ADDITIONAL SECURED OR UNSECURED LOANS TO BORROWER, TO LEASE EQUIPMENT
OR OTHER GOODS TO BORROWER, OR OTHERWISE TO EXTEND ADDITIONAL CREDIT TO
BORROWER; (b) TO ALTER, COMPROMISE, RENEW, EXTEND, ACCELERATE, OR
OTHERWISE CHANGE ONE OR MORE TIMES THE TIME FOR PAYMENT OR OTHER TERMS
OF THE INDEBTEDNESS OR ANY PART OF THE INDEBTEDNESS, INCLUDING INCREASES
AND DECREASES OF THE RATE OF INTEREST ON THE INDEBTEDNESS; EXTENSIONS
MAY BE REPEATED AND MAY BE FOR LONGER THAN THE ORIGINAL LOAN TERM; (c)
TO TAKE AND HOLD SECURITY FOR THE PAYMENT OF THIS GUARANTY OR THE
INDEBTEDNESS, AND EXCHANGE, ENFORCE, WAIVE, SUBORDINATE, FAIL OR DECIDE
NOT TO PERFECT, AND RELEASE ANY SUCH SECURITY, WITH OR WITHOUT THE
SUBSTITUTION OF NEW COLLATERAL; (d) TO RELEASE, SUBSTITUTE, AGREE NOT TO
SUE, OR DEAL WITH ANY ONE OR MORE OF BORROWER'S SURETIES, ENDORSERS, OR
OTHER GUARANTORS ON ANY TERMS OR IN ANY MANNER LENDER MAY CHOOSE; (e) TO
DETERMINE HOW, WHEN AND WHAT APPLICATION OF PAYMENTS AND CREDITS SHALL
BE MADE ON THE INDEBTEDNESS; (f) TO APPLY SUCH SECURITY AND DIRECT THE
ORDER OR MANNER OF SALE THEREOF, INCLUDING WITHOUT LIMITATION, ANY
NONJUDICIAL SALE PERMITTED BY THE TERMS OF THE CONTROLLING SECURITY
AGREEMENT OR DEED OF TRUST, AS LENDER IN ITS DISCRETION MAY DETERMINE;
(g) TO SELL, TRANSFER, ASSIGN, OR GRANT PARTICIPATIONS IN ALL OR ANY
PART OF THE INDEBTEDNESS; AND (h) TO ASSIGN OR TRANSFER THIS GUARANTY IN
WHOLE OR IN PART.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and
warrants to Lender that (a) no representations or agreements of any kind
have been made to Guarantor which would limit or qualify in any way the
terms of this Guaranty; (b) this Guaranty is executed at Borrower's
request and not at the request of Lender; (c) Guarantor has not and
will not, without the prior written consent of Lender, sell, lease,
assign, encumber, hypothecate, transfer, or otherwise dispose of all or
substantially all of Guarantor's assets, or any interest therein; (d)
Lender has made no representation to Guarantor as to the creditworthiness
of Borrower; (e) upon Lender's request, Guarantor will provide to Lender
financial and credit information in form acceptable to Lender, and all
such financial information provided to Lender is true and correct in all
material respects and fairly presents the financial condition of
Guarantor as of the dates thereof, and no material adverse change has
occurred in the financial condition of Guarantor since the date of the
financial statements; and (f) Guarantor has established adequate means
of obtaining from Borrower on a continuing basis information regarding
Borrower's financial condition. Guarantor agrees to keep adequately
informed from such means of any facts, events, or circumstances which
might in any way affect Guarantor's risks under this Guaranty, and
Guarantor further agrees that, absent a request for information, Lender
shall have no obligation to disclose to Guarantor any information or
documents acquired by Lender in the course of its relationship with
Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor
waives any right to require Lender (a) to continue lending money or to
extend other credit to Borrower; (b) to make any presentment, protest,
demand, or notice of any kind, including notice of any nonpayment of the
indebtedness or of any nonpayment related to any collateral, or notice
of any action or nonaction on the part of Borrower, Lender, any surety,
endorser, or other guarantor in connection with the indebtedness or in
connection with the creation of new or additional loans or obligations;
(c) to resort for payment or to proceed directly or at once against any
person, including Borrower or any other guarantor; (d) to proceed
directly against or exhaust any collateral held by Lender from Borrower,
any other guarantor, or any other person; (e) to give notice of the
terms, time, and place of any public or private sale of personal
property security held by Lender from Borrower or to comply with any
other applicable provisions of the Uniform Commercial Code; (f) to
pursue any other remedy within Lender's power; or (g) to commit any act
or omission of any kind, or at any time, with respect to any matter
whatsoever.
Guarantor also waives any and all rights or defenses arising by reason
of (a) any "one action" or "anti-deficiency" law or any other law which
may prevent Lender from bringing any action, including a claim for
deficiency, against Guarantor, before or after Lender's commencement or
completion of any foreclosure action, either judicially or by exercise
of a power of sale; (b) any election of remedies by Lender which
destroys or otherwise adversely affects Guarantor's subrogation rights
or Guarantor's rights to proceed against Borrower for reimbursement,
including without limitation, any loss of rights Guarantor may suffer by
reason of any law limiting, qualifying, or discharging the indebtedness;
(c) any disability or other defense of Borrower, of any other guarantor,
or of any other person, or by reason of the cessation of Borrower's
liability from any cause whatsoever, other than payment in full
<PAGE>
02-27-1996 COMMERCIAL GUARANTY PAGE 2
LOAN NO 0034-00001 (CONTINUED)
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In legal tender, of the Indebtedness; (d) any right to claim discharge of the
Indebtedness on the basis of unjustified impairment of any collateral for the
Indebtedness; (e) any statute of limitations, if at any time any action or
suit brought by Lender against Guarantor is commenced there is outstanding
Indebtedness of Borrower to Lender which is not barred by any applicable
statute of limitations; or (f) any defenses given to guarantors at law or in
equity other than actual payment and performance of the Indebtedness. If
payment is made by Borrower, whether voluntarily or otherwise, or by any
third party, on the Indebtedness and thereafter Lender is forced to remit the
amount of that payment to Borrower's trustee in bankruptcy or to any similar
person under any federal or state bankruptcy law or law for the relief of
debtors, the indebtedness shall be considered unpaid for the purpose of
enforcement of this Guaranty.
Guarantor further waives and agrees not to assert or claim at any time any
deductions to the amount guaranteed under this Guaranty for any claim of
setoff, counterclaim, counter demand, recoupment or similar right, whether
such claim, demand or right may be asserted by the Borrower, the Guarantor,
or both.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and
agrees that each of the waivers set forth above is made with Guarantor's full
knowledge of its significance and consequences and that, under the
circumstances, the waivers are reasonable and not contrary to public policy
or law. If any such waiver is determined to be contrary to any applicable law
or public policy, such waiver shall be effective only to the extent permitted
by law or public policy.
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter
created, shall be prior to any claim that Guarantor may now have or hereafter
acquire against Borrower, whether or not Borrower becomes insolvent.
Guarantor hereby expressly subordinates any claim Guarantor may have against
Borrower, upon any account whatsoever, to any claim that Lender may now or
hereafter have against Borrower. In the event of insolvency and consequent
liquidation of the assets of Borrower, through bankruptcy, by an assignment
for the benefit of creditors, by voluntary liquidation, or otherwise, the
assets of Borrower applicable to the payment of the claims of both Lender and
Guarantor shall be paid to Lender and shall be first applied by Lender to the
Indebtedness of Borrower to Lender. Guarantor does hereby assign to Lender
all claims which it may have or acquire against Borrower or against any
assignee or trustee in bankruptcy of Borrower; provided however, that such
assignment shall be effective only for the purpose of assuring to Lender full
payment in legal tender of the Indebtedness. If Lender so requests, any notes
or credit agreements now or hereafter evidencing any debts or obligations of
Borrower to Guarantor shall be marked with a legend that the same are subject
to this Guaranty and shall be delivered to Lender. Guarantor agrees, and
Lender hereby is authorized, in the name of Guarantor, from time to time to
execute and file financing statements and continuation statements and to
execute such other documents and to take such other actions as Lender deems
necessary or appropriate to perfect, preserve and enforce its rights under
this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part
of this Guaranty:
AMENDMENTS. This Guaranty, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Guaranty. No alteration of or amendment to this
Guaranty shall be effective unless given in writing and signed by the party
or parties sought to be charged or bound by the alteration or amendment.
APPLICABLE LAW. This Guaranty has been delivered to Lender and accepted
by Lender in the State of Colorado. If there is a lawsuit, Guarantor
agrees upon Lender's request to submit to the jurisdiction of the courts
of DENVER County, State of Colorado. This Guaranty shall be governed by
and construed in accordance with the laws of the State of Colorado.
ATTORNEYS' FEES; EXPENSES. Guarantor agrees to pay upon demand all of
Lender's costs and expenses, including attorneys' fees and Lender's
legal expenses, incurred in connection with the enforcement of this
Guaranty. Lender may pay someone else to help enforce this Guaranty, and
Guarantor shall pay the costs and expenses of such enforcement. Costs
and expenses include Lender's attorneys' fees and legal expenses whether
or not there is a lawsuit, including attorneys' fees and legal expenses
for bankruptcy proceedings (and including efforts to modify or vacate
any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Guarantor also shall pay all court
costs and such additional fees as may be directed by the court.
NOTICES. All notices required to be given by either party to the other
under this Guaranty shall be in writing, may be sent by telefacsimile,
and shall be effective when actually delivered or when deposited with a
nationally recognized overnight courier, or when deposited in the United
States mail, first class postage prepaid, addressed to the party to whom
the notice is to be given at the address shown above or to such other
addresses as either party may designate to the other in writing. If
there is more than one Guarantor, notice to any Guarantor will
constitute notice to all Guarantors. For notice purposes, Guarantor
agrees to keep Lender informed at all times of Guarantor's current
address.
INTERPRETATION. In all cases where there is more than one Borrower or
Guarantor, then all words used in this Guaranty in the singular shall be
deemed to have been used in the plural where the context and
construction so require; and where there is more than one Borrower named
in this Guaranty or when this Guaranty is executed by more than one
Guarantor, the words "Borrower" and "Guarantor" respectively shall mean
all and any one or more of them. The words "Guarantor," "Borrower," and
"Lender" include the heirs, successors, assigns, and transferees of each
of them. Caption headings in this Guaranty are for convenience purposes
only and are not to be used to interpret or define the provisions of
this Guaranty. If a court of competent jurisdiction finds any provision
of this Guaranty to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances, and all
provisions of this Guaranty in all other respects shall remain valid and
enforceable. If any one or more of Borrower or Guarantor are
corporations or partnerships, it is not necessary for Lender to inquire
into the powers of Borrower or Guarantor or of the officers, directors,
partners, or agents acting or purporting to act on their behalf, and any
indebtedness made or created in reliance upon the professed exercise of
such powers shall be guaranteed under this Guaranty.
WAIVER. Lender shall not be deemed to have waived any rights under this
Guaranty unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender
of a provision of this Guaranty shall not prejudice or constitute a
waiver of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Guaranty. No prior waiver by
Lender, nor any course of dealing between Lender and Guarantor, shall
constitute a waiver of any of Lender's rights or of any of Guarantor's
obligations as to any future transactions. Whenever the consent of
Lender is required under this Guaranty, the granting of such consent by
Lender in any instance shall not constitute continuing consent to
subsequent instances where such consent is required and in all cases
such consent may be granted or withheld in the sole discretion of Lender.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF
THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR
UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND
DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL
TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED "DURATION OF
GUARANTY." NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY
EFFECTIVE. THIS GUARANTY IS DATED FEBRUARY 27, 1996.
GUARANTOR
X /s/ RALPH ARMIJO
---------------------------
RALPH ARMIJO
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<PAGE>
[logo] COMMERCIAL CONTINUING
GUARANTY
Ventura Bank
1650 South Colorado Blvd.
Denver, CO 80222
"Lender"
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GUARANTOR BORROWER
ARTHUR C. ARMIJO ACI SYSTEMS, INC.
ADDRESS ADDRESS
04/5 26/ ROAD 7002 REVERE PARKWAY, SUITE 40
GLENWOOD, CO 81601 ENGLEWOOD, CO 80111
TELEPHONE NO. IDENTIFICATION NO. TELEPHONE NO. IDENTIFICATION NO.
###-##-#### 790-7565 33-0502730
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1. CONSIDERATION. This Guaranty is being executed to induce Lender
indicated above to enter into one or more loans or other financial
accommodations with or on behalf of Borrower.
2. GUARANTY. Guarantor hereby unconditionally guarantees the prompt
and full payment and performance of Borrower's present and future, joint
and/or several, direct and indirect, absolute and contingent, express and
implied, indebtedness, liabilities, obligations and covenants (cumulatively
"Obligations") to Lender as follows:
[X] UNLIMITED: Guarantor's Obligations under this Guaranty shall be
unlimited and shall include all present or future Obligations between
Borrower and Lender (whether executed for the same or different purposes
than the foregoing) together with all interest and all of Lender's
expenses and costs, incurred in connection with the Obligations,
including any amendments, extensions, modifications, renewals,
replacements or substitutions thereto.
[ ] LIMITED: Guarantor's Obligations under this Guaranty shall include
all present or future written agreements between Borrower and Lender
(whether executed for the same or different purposes), but shall be
limited to the principal amount of _____________________________________
_______________________________________________________________ Dollars,
together with all interest and all of Lender's expenses and costs,
incurred in connection with the Obligations, including any amendments,
extensions, modifications, renewals, replacements of substitutions
thereto.
[ ] LIMITED TO THE FOLLOWING DESCRIBED NOTES/ AGREEMENTS: Guarantor's
Obligations under this Guaranty shall be limited to the following
described promissory notes and agreements between Borrower and Lender,
together with all interest and all of Lender's expenses and costs,
incurred in connection with the Obligations, including any amendments,
extensions, modifications, renewals, replacements or substitutions
thereto:
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INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
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3. ABSOLUTE AND CONTINUING NATURE OF GUARANTY. Guarantor's
obligations under this Guaranty are absolute and continuing and shall not be
affected or impaired if Lender amends, renews, extends, compromises,
exchanges, fails to exercise, impairs or releases any of the obligations
belonging to any Borrower, Co-guarantor or third party or any of Lender's
rights against any Borrower, Co-guarantor, third party, or collateral. In
addition, Guarantor's Obligations under this Guaranty shall not be affected
or impaired by the death, incompetency, termination, dissolution, insolvency,
business cessation or other financial deterioration of any Borrower,
Guarantor, or third party.
4. DIRECT AND UNCONDITIONAL NATURE OF GUARANTY. Guarantor's Obligations
under this Guaranty are direct and unconditional and may be enforced without
requiring Lender to exercise, enforce, or exhaust any right or remedy
against any Borrower, Co-guarantor, third party, or collateral.
5. WAIVER OF NOTICE. Guarantor hereby waives notice of the acceptance
of this Guaranty, notice of present and future extensions of credit and other
financial accommodations by Lender to any Borrower, notice of presentment for
payment, demand, protest, dishonor, default, and nonpayment pertaining to the
Obligations and the Guaranty and all other notices and demands pertaining to
the Obligations and this Guaranty as permitted by law.
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GUARANTOR ACKNOWLEDGES GUARANTOR HAS READ, UNDERSTANDS, AND AGREES TO THE
TERMS AND CONDITIONS OF THIS AGREEMENT INCLUDING THE TERMS AND CONDITIONS ON
THE REVERSE SIDE. GUARANTOR HAS EXECUTED THIS AGREEMENT WITH THE INTENT TO BE
LEGALLY BOUND. GUARANTOR ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS
AGREEMENT.
DATED: NOVEMBER 17, 1993
GUARANTOR: ARTHUR C. ARMIJO GUARANTOR:
- --------------------------------------- ------------------------------------
ARTHUR C. ARMIJO
GUARANTOR: GUARANTOR:
- -------------------------------------- -------------------------------------
<PAGE>
PROMISSORY NOTE
---------------
NAVIDEC, INC.
9.75% UNSECURED SUBORDINATED
PROMISSORY NOTE
$70,000 As of August 6, 1996
Denver, Colorado
FOR VALUE RECEIVED, NAVIDEC, Inc., a Colorado corporation (the
"Payor"), having its executive office and principal place of business at 14
Inverness Drive, Building F, Suite 116, Englewood, CO 80112, hereby promises
to pay to Ralph Armijo (the "Payee"), having an address at 2918 E. Geddes
Ave. Littleton, CO 80122 four payments of interest only beginning on
September 1, 1996 and payable on the first of each month there after, and one
payment of principal plus interest on December 31, 1996, at the Payee's
address set forth above or at such other place as the Payee shall hereafter
specify in writing. This Note may be repaid, in whole or in part, at any time
prior to the Maturity Date without penalty.
1.0. In no event shall the Payee be entitled to receive interest,
however characterized and including other consideration received in
connection with this Note, at an effective rate in excess of the maximum rate
permitted by law. In the event that a court of competent jurisdiction shall
determine that such amounts paid or agreed to be paid by the Payor in
connection with this Note causes the effective interest rate on this Note to
exceed the maximum rate permitted by law, such interest or other
consideration shall automatically be reduced to a rate which results in an
effective interest rate under this Note equal to the maximum rate permitted
by law over the term hereof, and, in such event, the Payee shall either apply
to the reduction of the unpaid principal balance of this Note any amounts
received by it deemed to constitute excessive interest or refund such excess
to Payor.
2. REPLACEMENT OF NOTE.
2.1. In case this Note is mutilated, destroyed, lost or stolen, the
Payor shall, at its sole expense, execute, register and deliver a new Note,
in exchange and substitution for this Note, if mutilated, or in lieu of and
substitution for this Note, if destroyed, lost or stolen. In the case of
destruction, loss or theft, the Payee shall furnish to the Payor indemnity
reasonably satisfactory to the Payor, and in any such case, and in the case
of mutilation, the Payee shall also furnish to the Payor evidence to its
reasonable satisfaction of the mutilation, destruction, loss or theft of this
Note and of the ownership thereof. Any replacement Note so issued shall be in
the same outstanding principal amount as this Note and the date of this Note.
2.2. Every Note issued pursuant to the provisions of Section 3.1
hereof in substitution for this Note, shall constitute an additional
contractual obligation of the Payor, whether or not this Note shall be found
at any time, or be enforceable by anyone.
3. EVENTS OF DEFAULT. If any of the following conditions, events or
acts shall occur,
<PAGE>
this Note shall become immediately due and payable:
3.1. The dissolution of the Payor or any vote in favor thereof by
the Board of Directors and stockholders of the Company; or
3.2. The Payor's insolvency, assignment for the benefit of
creditors, application for or appointment of a receiver, filing of a
voluntary or involuntary petition under any provision of the Federal
Bankruptcy Code or amendments thereto or any other federal or state statute
affording relief to debtors; or the commencement against the Payor of any
such proceeding or filing against the Payor of any such application or
petition, which proceeding, application or petition is not dismissed or
withdrawn within thirty (30) days of commencement or filing as the case may
be; or
3.3. The failure by the Payor to make any payment of any amount of
principal on, or accrued interest under, this Note, or any of the Notes
offered pursuant to the Memorandum as and when the same shall become due and
payable; or
3.4. The sale by the Payor of all or substantially all of its
assets (other than the sale of inventory in the ordinary course of business),
or the merger or consolidation by the Payor with or into another corporation,
except for mergers or consolidations where the Payor is the surviving entity
or where the surviving entity expressly accepts and assumes all of the
obligations of the Payor under all of the Offering Notes; or
3.5. The commencement of a proceeding to foreclose the security
interest or lien in any property or assets to satisfy the security interest
or lien therein of any secured creditor of the Payor whose debt is in excess
of $100,000; or
3.6. The entry of a final judgment for the payment of money in
excess of $100,000 by a court of competent jurisdiction against the Payor,
which judgment the Payor shall not discharge (or provide for such discharge)
in accordance with its terms within thirty (30) days of the date of entry
thereof, or procure a stay of execution thereof within thirty (30) days from
the date of entry thereof and, within such thirty (30) day period, or such
longer period during which execution of such judgment shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal; or
3.7. Any attachment or levy, or the issuance of any note of
eviction against the assets or properties of the Payor involving an amount in
excess of $100,000, which attachment, levy or issuance is not dismissed,
bonded, or otherwise terminated within thirty (30) days of the effectiveness
of such attachment, levy or issuance; or
3.8. The default in the due observance or performance of any
material covenant, condition or agreement on the part of the Payor to be
observed or performed pursuant to the terms of this Note, and such default
shall continue uncured for thirty (30) days after written notice thereof,
specifying such default, shall have been given to the Payor by the holder of
the Note; then, in any such event and at any time thereafter (and, in the
case of an event described in Subsection 3.5 or a default in payment of
accrued interest and/or principal as described in
<PAGE>
Subsection 3.3, upon 30 days written notice), while such event is continuing,
the Payee shall have the right to declare an event of default hereunder
("Event of Default"), provided that upon the occurrence of an event
described in Subsections 3.1 or 3.2 such event shall be deemed to be an Event
of Default hereunder whether or not the Payee makes such a declaration (an
"Automatic Default"), and the indebtedness evidenced by this Note shall
immediately upon such declaration or Automatic Default become due and
payable, both as to principal and interest, without presentation, demand,
protest or other notice of any kind, all of which are hereby expressly
waived, notwithstanding anything contained herein to the contrary.
4.0. SUITS FOR ENFORCEMENT AND REMEDIES. If any one or more
defaults shall occur and be continuing, the Payee may proceed to protect and
enforce such Payee's rights either by suit in equity or by action at law, or
both, whether for the specific performance of any covenant, condition or
agreement contained in this Note or in any agreement or document referred to
herein or in aid of the exercise of any power granted in this Note or in any
agreement or document referred to herein, or proceed to enforce the payment
of this Note or to enforce any other legal or equitable right of the Payee of
this Note. No right or remedy herein or in any other agreement or instrument
conferred upon the holder of this Note is intended to be exclusive of any
other right or remedy, and each and every such right or remedy shall be
cumulative and shall be in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
5. UNCONDITIONAL OBLIGATION: FEES; WAIVERS; OTHER.
5.1. The obligations to make the payments provided for in this Note
are absolute and unconditional and not subject to any defense, set-off,
counterclaim, rescission, recoupment or adjustment whatsoever.
5.2. No forbearance, indulgence, delay or failure to exercise any
right or remedy with respect to this Note shall operate as a waiver, nor as
an acquiescence in any default, nor shall any single or partial exercise of
any right or remedy preclude any other or further exercise thereof or the
exercise of any right or remedy.
5.3. This Note may not be modified except by a writing duly
executed by the Payor and the Payee.
5.4. The Payor hereby expressly waives demand and presentment for
payment, notice of nonpayment, notice of dishonor, protest, notice of
protest, bringing of suit, and diligence in taking any action to collect
amounts called for hereunder, and shall be directly and primarily liable for
the payment of all sums owing and to be owing hereon, regardless of and
without any notice, diligence, act or omission with respect to the collection
of any amount called for hereunder or in connection with any right, lien,
interest or property at any and all times which the Payee had or is existing
as security for any amount called for hereunder.
5.5. The Payor shall bear all of its expenses, including attorneys'
fees incurred in connection with the preparation of this Note.
<PAGE>
6. SUBORDINATION. The payment of principal and interest on this Note
shall be (i) subordinate in payment and right of payment to the payment or
provision for payment in full of all other indebtedness (a) for money
borrowed, except with respect to money borrowed from affiliates of the Payor
or (b) evidenced by a note, debenture or similar instrument, in either case
whether now or hereafter incurred by the Payor in the ordinary course of its
business, and (ii) shall rank PARI PASSU with all other Notes and all other
unsecured indebtedness not falling within the description set forth in clause
(i).
NAVIDEC, INC.
By: /s/ Ralph Armijo
_________________________
Ralph Armijo, President
ATTEST:
/s/ Pat Mawhinney
_________________________
Pat Mawhinney
Chief Financial Officer
<PAGE>
PROMISSORY NOTE
NAVIDEC, INC.
9.75% UNSECURED SUBORDINATED
PROMISSORY NOTE
$30,000 As of July 26, 1996
Denver, Colorado
FOR VALUE RECEIVED, NAVIDEC, Inc., a Colorado corporation (the "Payor"),
having its executive office and principal place of business at 14 Inverness
Drive, Building F, Suite 116, Englewood, CO 80112, hereby promises to pay to Pat
Mawhinney (the "Payee"), having an address at 9292 Buttonhill Ct., Highlands
Ranch, CO 80126 one payment of principal plus interest on December 31, 1996, at
the Payee's address set forth above or at such other place as the Payee shall
hereafter specify in writing. This Note may be prepaid, in whole or in part, at
any time prior to the Maturity Date without penalty.
1.0. In no event shall the Payee be entitled to receive interest,
however characterized and including other consideration received in connection
with this Note, at an effective rate in excess of the maximum rate permitted by
law. In the event that a court of competent jurisdiction shall determine that
such amounts paid or agreed to be paid by the Payor in connection with this Note
causes the effective interest rate on this Note to exceed the maximum rate
permitted by law, such interest or other consideration shall automatically be
reduced to a rate which results in an effective interest rate under this Note
equal to the maximum rate permitted by law over the term hereof, and, in such
event, the Payee shall either apply to the reduction of the unpaid principal
balance of this Note any amounts received by it deemed to constitute excessive
interest or refund such excess to Payor.
2. REPLACEMENT OF NOTE.
2.1. In case this Note is mutilated, destroyed, lost or stolen, the
Payor shall, at its sole expense, execute, register and deliver a new Note, in
exchange and substitute for this Note, if mutilated, or in lieu of and
substitution for this Note, if destroyed, lost or stolen. In the case of
destruction, loss or theft, the Payee shall furnish to the Payor indemnity
reasonably satisfactory to the Payor, and in any such case, and in the case of
mutilation, the Payee shall also furnish to the Payor evidence to its reasonable
satisfaction of the mutilation, destruction, loss or theft of this Note and of
the ownership thereof. Any replacement Note so issued shall be in the same
outstanding principal amount as this Note and the date of this Note.
2.2. Every Note issued pursuant to the provisions of Section 3.1
hereof in substitution for this Note, shall constitute an additional contractual
obligation of the Payor, whether or not this Note shall be found at any time, or
be enforceable by anyone.
3. EVENTS OF DEFAULT. If any of the following conditions, events or acts
shall occur, this Note shall become immediately due and payable:
<PAGE>
3.1. The dissolution of the Payor or any vote in favor thereof by
the Board of Directors and stockholders of the Company, or
3.2. The Payor's insolvency, assignment for the benefit of
creditors, application for or appointment of a receiver, filing of a voluntary
or involuntary petition under any provision of the Federal Bankruptcy Code or
amendments thereto or any other federal or state statute affording relief to
debtors; or the commencement against the Payor of any such proceeding or
filing against the Payor of any such application or petition, which
proceeding, application or petition is not dismissed or withdrawn within
thirty (30) days of commencement or filing as the case may be; or
3.3. The failure by the Payor to make any payment of any amount of
principal on, or accrued interest under, this Note, or any of the Notes offered
pursuant to the Memorandum as and when the same shall become due and payable; or
3.4. The sale by the Payor of all or substantially all of its assets
(other than the sale of inventory in the ordinary course of business), or the
merger or consolidation by the Payor with or into another corporation, except
for mergers or consolidations where the Payor is the surviving entity or where
the surviving entity expressly accepts and assumes all of the obligations of the
Payor under all of the Offering Notes; or
3.5. The commencement of a proceeding to foreclose the security
interest or lien in any property or assets to satisfy the security interest or
lien therein of any secured creditor of the Payor whose debt is in excess of
$100,000; or
3.6. The entry of a final judgment for the payment of money in
excess of $100,000 by a court of competent jurisdiction against the Payor,
which judgment the Payor shall not discharge (or provide for such discharge)
in accordance with its terms within thirty (30) days of the date of entry
thereof, or procure a stay of execution thereof within thirty (30) days from
the date of entry thereof and, within such thirty (30) day period, or such
longer period during which execution of such judgment shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal; or
3.7. Any attachment or levy, or the issuance of any note of eviction
against the assets or properties of the Payor involving an amount in excess of
$100,000, which attachment, levy or issuance is not dismissed, bonded, or
otherwise terminated within thirty (30) days of the effectiveness of such
attachment, levy or issuance; or
3.8. The default in the due observance or performance of any
material covenant, condition or agreement on the part of the Payor to be
observed or performed pursuant to the terms of this Note, and such default
shall continue uncured for thirty (30) days after written notice thereof,
specifying such default, shall have been given to the Payor by the holder of
the Note; then, in any such event and at any time thereafter (and, in the
case of an event described in Subsection 3.5 or a default in payment of
accrued interest and/or principal as described in Subsection 3.3, upon 30
days written notice), while such event is continuing, the Payee shall
<PAGE>
have the right to declare an event of default hereunder ("Event of Default"),
provided that upon the occurrence of an event described in Subsections 3.1 or
3.2 such event shall be deemed to be an Event of Default hereunder whether or
not the Payee makes such a declaration (an "Automatic Default"), and the
indebtedness evidenced by this Note shall immediately upon such declaration or
Automatic Default become due and payable, both as to principal and interest,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived, notwithstanding anything contained herein to the
contrary.
4.0 SUITS FOR ENFORCEMENT AND REMEDIES. If any one or more defaults shall
occur and be continuing, the Payee may proceed to protect and enforce such
Payee's rights either by suit in equity or by action at law, or both, whether
for the specific performance of any covenant, condition or agreement contained
in this Note or in any agreement or document referred to herein or in aid of the
exercise of any power granted in this Note or in any agreement or document
referred to herein, or proceed to enforce the payment of this Note or to enforce
any other legal or equitable right of the Payee of this Note. No right or
remedy herein or in any other agreement or instrument conferred upon the holder
of this Note is intended to be exclusive of any other right or remedy, and each
and every such right or remedy shall be cumulative and shall be in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or by statute or otherwise.
5. UNCONDITIONAL OBLIGATION; FEES; WAIVERS; OTHER.
5.1. The obligations to make the payments provided for in this Note
are absolute and unconditional and not subject to any defense, set-off,
counterclaim, rescission, recoupment or adjustment whatsoever.
5.2. No forbearance, indulgence, delay or failure to exercise any
right or remedy with respect to this Note shall operate as a waiver, nor as an
acquiescence in any default, nor shall any single or partial exercise of any
right or remedy preclude any other or further exercise thereof or the exercise
of any other right or remedy.
5.3. This Note may not be modified except by a writing duly executed
by the Payor and the Payee.
5.4. The Payor hereby expressly waives demand and presentment for
payment, notice of nonpayment, notice of dishonor, protest, notice of protest,
bringing of suit, and diligence in taking any action to collect amounts called
for hereunder, and shall be directly and primarily liable for the payment of all
sums owing and to be owing hereon, regardless of and without any notice,
diligence, act or omission with respect to the collection of any amount called
for hereunder or in connection with any right, lien, interest or property at any
and all times which the Payee had or is existing as security for any amount
called for hereunder.
5.5. The Payor shall bear all of its expenses, including attorneys'
fees incurred in connection with the preparation of this Note.
6. SUBORDINATION. The payment of principal and interest on this Note
shall be (i)
<PAGE>
subordinate in payment and right of payment to the payment or provision for
payment in full of all other indebtedness (a) for money borrowed, except with
respect to money borrowed from affiliates of the Payor or (b) evidenced by a
note, debenture or similar instrument, in either case whether now or hereafter
incurred by the Payor in the ordinary course of its business, and (ii) shall
rank PARI PASSU with all other Notes and all other unsecured indebtedness not
falling within the description set forth in clause (i).
NAVIDEC, INC.
By: /s/ Ralph Armijo
------------------------------
Ralph Armijo, President
ATTEST:
/s/ Pat Mawhinney
- --------------------
Pat Mawhinney
Chief Financial Officer
<PAGE>
PROMISORY NOTE
July 25, 1996
FOR VALUE RECEIVED, NAVIDEC, Inc., a Colorado corporation (the "Payor"),
having its executive office and principal place of business at 14 Inverness
Drive, Building F, Suite 116, Englewood, CO 80112, hereby promises to pay to
Littleton Land Company (the "Payee"), having an address at 2511 Mt. Royal
Drive, Castle Rock, CO 80104 on August 31, 1996 (the "Maturity Date") (unless
sooner as provided herein), at the Payee's address set forth above or at such
other place as the Payee shall hereafter specify in writing, the principal
sum of one hundred and Eighty Two Thousand Five hundred and no 100's Dollars
($182,500.00), in such coin or currency of the United States of America as at
the time shall be legal tender for the payment of public and private debts.
This Note may be prepaid, in whole or in part, at any time prior to the
Maturity Date without penalty.
1. Events of Default. If any of the following conditions, events
or acts shall occur, this Note shall become immediately due and payable:
1.1. The dissolution of the Payor or any vote in favor thereof
by the Board of Directors and stockholders of the Company; or
1.2. The Payor's insolvency, assignment for the benefit of
creditors, application for or appointment of a receiver, filing of a voluntary
or involuntary petition under any provision of the Federal Bankruptcy Code or
amendments thereto or any other federal or state statute affording relief to
debtors; or the commencement against the Payor of any such proceeding or filing
against the Payor of any such application or petition, which proceeding,
application or petition is not dismissed or withdrawn within thirty (30) days
of commencement or filing as the case may be; or
1.3. The failure by the Payor to make any payment of any amount of
principal on, or accrued interest under, this Note; or
1.4. The sale by the Payor of all or substantially all of its
assets (other than the sale of inventory in the ordinary course of business),
or the merger or consolidation by the Payor with or into another corporation,
except for mergers or consolidations where the Payor is the surviving entity
or where the surviving entity expressly accepts and assumes all of the
obligations of the Payor under all of the Offering Notes; or
1.5. The commencement of a proceeding to foreclose the security
interest or lien in any property or assets to satisfy the security interest
or lien therein of any secured creditor of the Payor whose debt is in excess
of $100,000; or
1.6. The entry of a final judgment for the payment of money in
excess of $100,000 by a court of competent jurisdiction against the Payor,
which judgment the
<PAGE>
Payor shall not discharge (or provide for such discharge) in accordance with
its terms within thirty (30) days of the date of entry thereof, or procure a
stay of execution thereof within thirty (30) days from the date of entry
thereof and, within such thirty (30) day period, or such longer period during
which execution of such judgment shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal; or
1.7. Any attachment or levy, or the issuance of any note of
eviction against the assets or properties of the Payor involving an amount in
excess of $100,000, which attachment, levy or issuance is not dismissed,
bonded, or otherwise terminated within thirty (30) days of the effectiveness
of such attachment, levy or issuance; or
2. SUITS FOR ENFORCEMENT AND REMEDIES. If any one or more defaults
shall occur and be continuing, the Payee may proceed to protect and enforce
such Payee's rights either by suit in equity or by action at law, or both,
whether for the specific performance of any covenant, condition or agreement
contained in this Note or in any agreement or document referred to herein or
in aid of the exercise of any power granted in this Note or in any agreement
or document referred to herein, or proceed to enforce the payment of this
Note or to enforce any other legal or equitable right of the Payee of this
Note. No right or remedy herein or in any other agreement or instrument
conferred upon the holder of this Note is intended to be exclusive of any
other right or remedy, and each and every such right or remedy shall be
cumulative and shall be in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
3. UNCONDITIONAL OBLIGATION; FEES; WAIVERS; OTHER.
3.1. The obligations to make the payments provided for in this Note
are absolute and unconditional and not subject to any defense, set-off,
counterclaim, rescission, recoupment or adjustment whatsoever.
3.2. No forbearance, indulgence, delay or failure to exercise any
right or remedy with respect to this Note shall operate as a waiver, nor as
an acquiescence in any default, nor shall any single or partial exercise of
any right or remedy preclude any other or further exercise thereof or the
exercise of any other right or remedy.
3.3. This Note may not be modified except by a writing duly
executed by the Payor and the Payee.
3.4. The Payor hereby expressly waives demand and presentment for
payment, notice of nonpayment, notice of dishonor, protest, notice of protest,
bringing of suit, and diligence in taking any action to collect amounts
called for hereunder, and shall be directly and primarily liable for the
payment of all sums owing and to be owing hereon, regardless of and without
any notice, diligence, act or omission with respect to the collection of any
amount called for hereunder or in connection with any right, lien,
<PAGE>
interest or property at any and all times which the Payee had or is existing
as security for any amount called for hereunder.
3.5. The Payor shall bear all of its expenses, including attorneys'
fees incurred in connection with the preparation of this Note.
4. PAVMENT TERMS:
This note is due and payable upon the occurrence of the earlier of
five business days after the breaking of escrow of the Payor's Private
Placement (as described in its Private Placement Memorandum dated July 18, 1996)
or August 31, 1996.
5. MISCELLANEOUS.
5.1 The headings of the various paragraphs of this Note are for
convenience of reference only and shall in no way modify any of the terms or
provisions of this Note.
5.2 All notices required or permitted to be given hereunder shall
be in writing and shall be deemed to have been duly given when personally
delivered, delivered by Federal Express or other national overnight courier,
or sent by registered or certified mail, return receipt requested, postage
prepaid, to the address of the intended recipient set forth in the preamble
to this Note or at such other address as the intended recipient shall have
hereafter given to the other party hereto pursuant to the provisions hereof.
5.3. This Note and the obligations of the Payor and the rights of
the Payee shall be governed by and construed in accordance with the laws of
the State of Colorado, including conflicts of laws, with respect to contracts
made and to be fully performed therein.
5.4. The Payor (a) agrees that any legal suit, action or proceeding
arising out of or relating to this Note will be instituted exclusively in
District Court, County of Arapahoe, State of Colorado, and the United States
District Court for the District of Colorado, each and any of which shall apply
Colorado law, (b) waives any objection which the Payor may have now or hereafter
to the venue of any such suit, action or proceeding, and (c) irrevocably
consents to the jurisdiction of the Colorado District Court, County of
Arapahoe and the United States District Court for the District of Colorado in
any such suit, action or proceeding. The Payor further agrees to accept and
acknowledge service of any and all process which may be served in any such
suit, action or proceeding in the Colorado District Court, County of Arapahoe
and the United States District Court for the District of Colorado, and agrees
that service of process upon the Payor mailed by certified mail to the Payor's
address will be deemed in every respect effective service of process upon the
Payor, in any suit, action or proceeding.
<PAGE>
5.5 This Note shall bind the Payor and its successors and assigns.
NAVIDEC, INC.
By: /s/ Ralph Armijo
--------------------------
Ralph Armijo, President
ATTEST:
/s/ Pat Mawhinney
- --------------------------
Pat Mawhinney
Chief Financial Officer
<PAGE>
NETSCAPE COMMERCIAL APPLICATIONS
PARTNER PROGRAM GUIDELINES
Netscape Communications Corporation
Channels Management
June 25, 1996
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Netscape Communications Corporation
Netscape Products Review
Netscape Commercial Applications Partner Definition
Netscape Commercial Applications Partner Program Benefits
Netscape Commercial Applications Partner Program Requirements
- --------------------------------------------------------------------------------
2
<PAGE>
NETSCAPE COMMUNICATIONS CORPORATION
- --------------------------------------------------------------------------------
NETSCAPE COMMUNICATIONS CORPORATION
Netscape Communications Corporation, since its founding in April 1994, has set
as its goal to be the premier provider of open software for linking people and
information over enterprise networks and the Internet. Today, in keeping with
that goal, Netscape offers a full line of client and server software that gives
users at work or at home the online solutions that fit their individual
application. Based on industry-standard protocols, Netscape's software line is
designed for performance, ease of use, and security -- and creates an ideal
platform for creating live online applications. The product line includes four
families:
-Netscape Commercial Applications
-Netscape Servers
-Netscape Navigator-TM- Clients
-Netscape Development Tools
3
<PAGE>
NETSCAPE COMMERCIAL APPLICATIONS PRODUCTS
- --------------------------------------------------------------------------------
NETSCAPE COMMERCIAL APPLICATIONS
Netscape Commercial Applications work in concert with Netscape's open client and
server software lines to provide turnkey solutions for full-scale electronic
commerce. The applications integrate high-volume transaction processing, real-
time data management, easy-to-use interfaces, and encrypted communications for
creating sophisticated online services and large-scale businesses on the
Internet. All are build on Netscape Commerce Server with integrated security,
and include relational database technology.
NETSCAPE COMMUNITY SYSTEM
Netscape Community System gives organizations the ability to create and
foster virtual communities based on shared interests through electronic
mail, bulletin boards, real-time chat services, and private discussion
groups. This software solution appeals to a broad range of firms wanting
to expand their interaction with subscribers. Invite subscribers to chat
online with other Internet explorers.
NETSCAPE MERCHANT SYSTEM
Netscape Merchant System enables large retailers or merchants to create and
manage virtual shopping malls or a large retail store online. Each store
within the mall retains its own unique image yet shoppers enjoy a
consistent method of shopping and making purchases with their credit card.
NETSCAPE PUBLISHING SYSTEM
Netscape Publishing System is designed for publishers who want to create
subscription-based online publications. This software solution is not just
for news services, but for anyone publishing large amounts of information,
such as banks communicating daily news information and services, car
manufacturers publishing specifications on new vehicles; or industry
analysts issuing reports on new market developments.
SERVERS
The Netscape server family allows corporations and small businesses to
communicate and conduct commercial operations easily and securely over the
networks. With the server software, users can harness the power of networks
both inside and beyond the enterprise for distributing documents, improving
collaboration among geographically dispersed groups, conducting electronic
commerce, and enhancing the performance and security of Internet access from
corporate networks.
Netscape servers offer high performance, including fast response times and
maximum throughput. They are easy to install and maintain, using intuitive
online forms and documentation. And they provide integrated security features
that help users control access to important resources. The Netscape server
family includes the following:
SUITESPOT
SuiteSpot is a flexible suite of five integrated servers which enable
business workgroups to communicate and collaborate, utilizing open Internet
technology. The Netscape SuiteSpot is the intersection of information,
applications, and collaboration. SuiteSpot includes Netscape's LiveWire
Pro plus your choice of ANY combination of five of the following Internet
servers:
Enterprise Server - for high-performance HTML delivery and management
Mail Server - for efficient, open standards-based messaging
News Server - for Usenet-compatible, collaborative computing
Proxy Server - for Web replication and site access control
Catalog Server - for "Yahoo" -style director services
4
<PAGE>
NETSCAPE COMMERCIAL APPLICATIONS PRODUCTS
- --------------------------------------------------------------------------------
ENTERPRISE SERVER
The Enterprise Server is a high-performance, secure World Wide Web server
for creating, managing, and intelligently distributing information and
running Internet applications. It is an open platform for creating
network-centric applications using cross-platform tools based on the Java
and JavaScript programming languages.
MAIL SERVER
Mail Server is the next generation of an open standards-based client-server
messaging system that provides superior administration, scalability,
performance, security and remote connectivity. Netscape Mail Server is
seamlessly integrated with Netscape Navigator and many other messaging
clients, creating a turnkey messaging system at the core of an intranet
environment.
NEWS SERVER
The News Server is easy-to-use, secure, server software that enables
effective group communication and collaboration using secure discussion
groups built on standard Internet protocols. The New Server enables users
to exchange rich information including text, pictures, and other document
types securely. Using the server, organizations can conduct "virtual
meetings" in which collaboration occurs regardless of time and place.
PROXY SERVER
Proxy Server is high-performance server software for replicating and
filtering access to Web content on the Intermet or intranet. The Proxy
Server dramatically lowers network costs by locally caching documents so
that subsequent requests for the same document are fulfilled without
traversing the network. This filtering mechanism enables network
administrators fine-grained control over the use of network resources.
CATALOG SERVER
Netscape Catalog Server makes it easy to create, manage, and keep current
an online catalog of intranet or Internet resources such as documents,
email addresses, and file archives. Using this server, companies can set
up and automatically maintain "Yahoo"-type services for their corporate
networks. The service is efficient, automated, open, customizable, and
cross-platform, enabling companies to deploy Netscape Catalog Server
network-wide across different brands of operating systems and Web servers.
CERTIFICATE SERVER
Certificate Server software creates, signs, and manes standards-based
certificates. Certificates enable applications such as Netscape Navigator
and Netscape SuiteSpot servers to communicate privately using Secure
Sockets Layer (SSL). The server enables organizations to act as their own
Certificate Authority rather that use an external certificate service
provider. This allows organizations to manage their own certificate
infrastructure and exercise full control over their certificate management
policies.
FASTTRACK
The FastTrack Server is an easy to use, entry level Web server designed to
let novices create and manage a Web site. It is a complete solution for
creating and managing Web sites on the Internet or Intranet. Easily
upgradeable to Netscape Enterprise Server, the FastTrack is an open
platform for publishing traditional Internet documents as well as
developing and deploying live network-centric and media-rich applications.
DIRECTORY SERVER
Director Server easily supports 100,000 corporate users that is accessible
through the Internet standard Lightweight Directory Access Protocol (LDAP).
Corporate users can quickly and easily query directories of people stored
on the corporate intranets and the Internet. It also provide publishing
capabilities of the directory names and sophisticated replication
capabilities including selective replication.
5
<PAGE>
NETSCAPE COMMERCIAL APPLICATIONS PRODUCTS
- --------------------------------------------------------------------------------
NAVIGATOR
Navigator 2.0
Navigator Gold 2.0
TOOLS
Netscape LiveWire and LiveWire Pro
- --------------------------------------------------------------------------------
PURPOSE OF THIS PROGRAM GUIDELINE
This document is intended to serve as a guide to Netscape Communication
Corporation's Commercial Application Partner Program. This guide will assist
you in becoming a Netscape Commercial Application Partner.
6
<PAGE>
NETSCAPE COMMERCIAL APPLICATIONS PARTNER PROGRAM
- --------------------------------------------------------------------------------
PARTNER DEFINITION
THE NETSCAPE COMMERCIAL APPLICATIONS PROGRAM PARTNER sells, implements and
provides first line support for Netscape products. The partner would also
provide services for more traditional system integration efforts. These could
include the following:
* Business process re-engineering
* Enterprise architecture for hardware, software, applications and
organization
* Design, analysis and implementation of required connectivity to back-
office, legacy or heritage systems, or to other applications
* Large scale project management
* Disaster Recovery planning
* Process Architecture
* Operational Consulting
* Systems and Network Integration
* IT Outsourcing
Once certified, Netscape Commercial Applications Program partners may work
independently with customers, team with other Netscape Partners and/or Netscape
Professional Services. Scope of work could include the following:
* "End-to-End" Solutions
* Project Planning and Management
* Fit Analyses
* Modifications
* Interface Development
* Conversion Utilities
* Upgrade Support
* Data Conversion
* Database Migration Assistance
- --------------------------------------------------------------------------------
7
<PAGE>
NETSCAPE COMMERCIAL APPLICATIONS PARTNER PROGRAM
- --------------------------------------------------------------------------------
NETSCAPE COMMERCIAL APPLICATIONS PARTNER PROGRAM BENEFITS
- --------------------------------------------------------------------------------
* Demonstration Software License
* Publishing System
* Merchant System
* Community System
* Technical support contract for Demonstration license
* Commercial Applications Product Training Courses
* Netscape Development Partner Program membership
* Access to Partner Pavillion
* Netscape Alliance Program Membership
* Access to Netscape Professional Services Group
* Partner News
* Field Sales Support
- --------------------------------------------------------------------------------
DEMONSTRATION SOFTWARE LICENSE - COMMERCIAL APPLICATIONS
Fully functional demonstration license of the appropriate Netscape Commercial
Application(s) that can be used for your web site and to demonstrate to your
prospective customers.
TECHNICAL SUPPORT CONTRACT FOR DEMONSTRATION LICENSE
A Netscape Commercial Applications backline support contract will provide you
with the following:
1. Telephone and email support
2. 24x7 emergency paper support
3. Maintenance releases
4. Secure newsgroups for the appropriate Commercial Application (monitored by
Netscape tech support):
* Merchant System
* Publishing System
* Community System
COMMERCIAL APPLICATIONS PRODUCT TRAINING COURSES
Initial training courses for two technical staff members on the appropriate
Netscape Commercial Applications.
ACCESS TO PARTNER PAVILION
Netscape Commercial Applications Program partner's private web site. This is
where you will find information, sales tools and access to other Netscape
Partner Programs and services not available to the general reseller community.
New product positioning information, detailed current product information,
including strategy papers, roadmaps and product direction will be found here.
Additionally, datasheets, presentations, demonstrations, technical whitepapers
and technical support content will be included.
NETSCAPE ALLIANCE LOGO PROGRAM MEMBERSHIP
The exclusive right to use the Netscape NCAPP Alliance logo on your collateral
and correspondence. Additionally, Alliance Program members will be promoted
through Netscape marketing programs, at trade shows, and through our Netscape
Online Product and Services Catalog on our home page. From the catalog,
customers can search for NCAPP members near them, view a summary of their
capabilities, and contact you directly via a hotlink to your home page.
8
<PAGE>
NETSCAPE COMMERCIAL APPLICATIONS PARTNER PROGRAM
- --------------------------------------------------------------------------------
ACCESS TO NETSCAPE DEVELOPMENT PARTNER PROGRAM
The Netscape Development Partners Program is an annual subscription service that
gives you the software, tools, information, and support you need to develop
products and services based on open, secure Netscape technology. You'll have
the most up-to-date information on Netscape products, as well as the best tools
available, to help you develop and deploy business solutions or commercial
applications for your customers. As a Commercial Applications Partner member,
you will receive automatic enrollment in the Netscape Development Partner Member
Program. You may also enroll in the Development Partner Program at a higher
level for a discounted annual fee.
NETSCAPE'S PROFESSIONAL SERVICES ORGANIZATION
As an NCAPP member, you will have access to Netscape's Professional Services
Organization.
PARTNER NEWS
Weekly email communication that highlights late breaking Netscape product, sales
and program news.
FIELD SALES/INSIDE SALES SUPPORT
Netscape's Field Sales personnel can assist you on deals or with other demand
creation activities such as tradeshows and seminars. You will also have a
point-of-contact inside Netscape to assist you.
9
<PAGE>
NETSCAPE COMMERCIAL APPLICATIONS PARTNER PROGRAM
- --------------------------------------------------------------------------------
NETSCAPE COMMERCIAL APPLICATIONS PARTNER PROGRAM REQUIREMENTS SUMMARY
* NCAPP Technical Capability Requirements
* Business Plan
* Technical Support Requirements
* Product Training requirements
* Non-Disclosure Agreement
* Sourcing Agreement
* Web site requirements
* Program fee
- --------------------------------------------------------------------------------
10
<PAGE>
NETSCAPE COMMERCIAL APPLICATIONS PARTNER PROGRAM
- --------------------------------------------------------------------------------
TECHNICAL CAPABILITY REQUIREMENTS
Current certification must be supplied in the following areas:
1. SERVER CERTIFICATION:
Sun Microsystems
Hewlett Packard
Silicon Graphics
IBM
Digital Equipment Corp
Microsoft Windows NT
2. LAN/WAN EXPERTISE:
SunSoft SunNet Manager
Novell Netware
Banyan Vines
3Com Corp
Cisco Systems
Bay Networks
3. RDBMS CERTIFICATION (DATABASES):
Oracle - Oracle7
Sybase - System 11
Informix
Illustra - The Illustra Server
Microsoft - SQL Server
4. RDBMS CERTIFICATION (TOOLS):
Powersoft - PowerBuilder, Designor
Gupta - Centura, SQL Windows
5. SECURITY/FIREWALL EXPERIENCE:
Checkpoint Software Technologies - Firewall-1
SunSoft - Solstice Firewall-1
Raptor - Eagle Family
Digital - Firewall for UNIX, Firewall Service, Internet Tunnel,
6. HTTP/HTML EXPERTISE
NCSA
CERN Server
Cyberleaf
HoTMetal
EMWAC NT Server
Open Market
7. SEARCH ENGINES:
Yahoo!
Excite
Verity
Netscape Commercial Application Program partners are required to keep their
third-party certifications current. Netscape reserves the right to audit
certifications with a 30 day notification.
11
<PAGE>
NETSCAPE COMMERCIAL APPLICATIONS PARTNER PROGRAM
- --------------------------------------------------------------------------------
TECHNICAL SUPPORT CONTRACTS
1. A Netscape Commercial Applications End User Support contract must be sold
with each Netscape Commercial Application sold to an end user.
2. Fifty percent (50%) of each Netscape End User support contract that the
Commercial Applications Program partner sells goes to Netscape
Communications. The percentage paid to Netscape is based on the Netscape
Communications suggested retail price for contracts.
TECHNICAL SUPPORT REQUIREMENTS
1. Minimum staffing requirement: 2 support engineers on duty 8 hours per day
Mondays through Fridays.
2. Must have a defined escalation process.
3. Must have a call tracking system.
4. Must supply us with 1 contact and one alternate.
5. Must supply us with a skill profile demonstrating proficiencies in
operating systems, Databases, TCP/IP, and the software they support.
6. Must guarantee the following response times:
- --------------------------------------------------------------------------------
PRIORITY RESPONSE TIME TARGET FIX OR WORKAROUND
- --------------------------------------------------------------------------------
P1 2 hours 5 days
- --------------------------------------------------------------------------------
P2 2 hours 10 days
- --------------------------------------------------------------------------------
P3 4 hours 15 days
- --------------------------------------------------------------------------------
P4 8 hours Next release
- --------------------------------------------------------------------------------
P5 8 hours Next release
- --------------------------------------------------------------------------------
Priority Response Definitions:
P1 - Fatal (no useful work can be done)
P2 - Severe Impact (Functionality disabled): Errors which result in a lack of
application functionality or cause intermittent system failure.
P3 - Degrade Operations: Errors causing malfunction of non-critical
functions.
P4 - Minimal Impact: Attributes and/or options to utility programs do not
operate as stated.
P5 - Enhancement Request.
12
<PAGE>
NETSCAPE COMMERCIAL APPLICATIONS PARTNER PROGRAM
- --------------------------------------------------------------------------------
PRODUCT TRAINING REQUIREMENTS
The partners required level of knowledge is verified in two parts:
1. Skill Profile Review
2. Netscape Commercial Applications Product Training
SKILL PROFILE REVIEW
The first level of certification would be reviewing the skills profiles
submitted for the partner personnel who would participate in the training.
These, at a minimum, must meet or exceed the pre-requisites for
established curriculum.
TECHNICAL SKILLS PROFILE
The baseline represents an inventory of desired skills for professional services
consultants. Qualified staff will have some subset of the skills listed in the
baseline. The baseline does not address level of proficiency for each skill, or
years of experience. These factors would vary based on the staff level.
LANGUAGES
* PERL scripting language
* C/C++ language or object oriented (i.e. JAVA) language experience
* UNIX shell scripting experience
* Hypertext Markup Language (HTML)
APPLICATION IMPLEMENTATION EXPERIENCE
* General networking knowledge.
* Router & hub installation
* Architecture; client/server, enterprise, application
DATABASE
* Database application development, including knowledge of SQL
* Performance and tuning
* Database administration skills
* Installation and configuration skills
OPERATING SYSTEMS
* UNIX
* Sun Solaris,
* AIX,
* SGI IRIX
* UNIX system administrator
NON-TECHNICAL
* Prior consulting experience.
* Project/account management experience.
* Basic knowledge of sales process.
* Project management techniques.
13
<PAGE>
NETSCAPE COMMERCIAL APPLICATIONS PARTNER PROGRAM
- --------------------------------------------------------------------------------
NETSCAPE COMMERCIAL APPLICATIONS PRODUCT TRAINING
All technical staff members must complete and pass applicable Netscape
Commercial Application Product Training
CURRICULUM
PRODUCT COURSES
- ------------------------------------------------------------
Publishing System PUBLISHING SYSTEM COURSE
Merchant System MERCHANT SYSTEM COURSE
Community System COMMUNITY SYSTEM COURSE
- ------------------------------------------------------------
NETSCAPE-TRAINED TECHNICAL STAFF REQUIREMENTS
- ------------------------------------------------------------
NUMBER EMPLOYEES MINIMUM NUMBER OF TRAINED
PERSONNEL
- ------------------------------------------------------------
Less than 100 2 per product certified for
- ------------------------------------------------------------
Greater than 100 greater of 3 or 1 per 50
employees
- ------------------------------------------------------------
SPECIFIC TASKS WITHIN A PROJECT THAT THE NETSCAPE COMMERCIAL APPLICATIONS -
TRAINED INDIVIDUAL(S) MUST BE ASSOCIATED WITH:
1. Customer needs assessment.
2. Customer project proposal development.
3. Approval of said customer project proposal.
4. Execution of Commercial Applications Product installation and
implementation.
5. Customer post-sales support.
14
<PAGE>
NETSCAPE COMMERCIAL APPLICATIONS PARTNER PROGRAM
- --------------------------------------------------------------------------------
BUSINESS PLAN
To invest and promote the partnership within your organization, a business plan
must be developed outlining goals, objectives, plans, resources, and
measurements of the Netscape partnership. Netscape will work with you to
develop this important document that will be used as a guideline to develop,
maintain, and measure the success of the partnership.
WEB SITE REQUIREMENTS
1. Web Server hosted by a Netscape Server
2. Home page must link to http://home.netscape.com
REFERENCE ACCOUNTS
To ensure quality and experience, Netscape requests that each qualifying NCAPP
provide three client references that exemplifies Internet/intranet capabilities.
For each reference, please supply the following:
* Client Name
* Contact Person Name and Title
* Contact Phone Number
* Project Scope
* Netscape Products Used
* Project Length/Size (time and resources from the NCAPP)
* NCAPP Project Responsibilities
NCAPP PARTNERSHIP SUPPORT
As a NCAPP partner, you must identify the prime contact within your organization
that drives and supports the Netscape relationship throughout your organization.
This prime contact will work closely with Netscape's account management team to
drive deals and promote the partnership in your organization day to day, promote
yourselves to Netscape and jointly to the external world. This person will be
our main point of contact and will help facilitate sales, marketing, and service
support within your organization.
ADDITIONAL REQUIREMENTS
1. Execute a Netscape Non-Disclosure Agreement.
2. Complete Sourcing Agreement.
3. Complete sales forecast.
PROGRAM FEE
This applicable program fee that includes all of the Program Benefits is
required for program acceptance. Program Fee varies with the specific Netscape
Commercial Application(s) that the partner will support and with the partner
technical support options chosen. Please contact Cathry Buran at 415-937-6797
for specific program fee details.
15
<PAGE>
EXHIBIT 10.18--FORM OF
AGREEMENT NOT TO SELL
Joseph Charles & Associates, Inc.
356 North Camden Drive
Beverly Hills, California 90210
Re: Agreement Not to Sell
Ladies and Gentlemen:
We refer to the 10% Unsecured Convertible Promissory Notes
due December 30, 1997 (the "Notes") issued by NAVIDEC, Inc., a
Colorado corporation (the "Company") and sold in a private
placement to accredited investors in reliance upon exemptions
from the Securities Act of 1933, as amended (the "Act"), all as
described in the Company's Confidential Private Placement
Memorandum dated July 18, 1996 (the "Memorandum"). As described
in the Memorandum, if a contemplated initial public offering (the
"Public Offering") of the Company's securities registered with
the Securities and Exchange Commission under the Act is
consummated prior to the Maturity Date, the Notes, upon
consummation of the Public Offering, are automatically converted
for each $50,000 principal amount into 28,571 Units, with each
Unit consisting of one share of Common Stock and one Warrant to
purchase one share of such Common Stock. The Common Stock and
the Warrants are to be included for registration in the
Registration Statement relating to the Public Offering.
As a condition to the purchase of any of the Notes (as
described in the Memorandum), the undersigned has agreed not to
sell for a period of ten months after the consummation of the
Public Offering any of the Common Stock or Warrants received by
the undersigned upon conversion of the Notes in excess of such
number of shares of Common Stock which provide to the undersigned
net proceeds from the sale thereof up to a maximum of the
principal amount of the Notes converted. (By way of example of
the foregoing, and not by way of any limitation, if the
undersigned purchased $50,000 principal amount of Notes, the
undersigned can sell such number of shares of Common Stock or
Warrants as results in net proceeds to the undersigned of
$50,000.) Accordingly, in consideration of the sale of the Notes
to the undersigned, and to effectuate the condition to the sale
of any of the Notes to the undersigned, the undersigned agrees
<PAGE>
not to offer, sell, contract to sell, pledge, hypothecate, grant
any option to purchase or otherwise dispose of (collectively, the
"Resale Restrictions") (i) any shares of Common Stock or Warrants
in excess of such number of shares of Common Stock which provide
to the undersigned net proceeds from the sale thereof up to a
maximum of the principal amount of the Notes converted, or (ii)
the Common Stock issuable upon exercise of the Warrant for the
period specified hereafter without the prior written consent of
Joseph Charles & Associates, Inc. Such restrictions shall apply
for a period of one year after the consummation of the Public
Offering (the "Restriction Period").
As a reasonable means of ensuring compliance with the terms
of this Agreement, the undersigned further agrees that (i) the
undersigned shall deliver the certificates evidencing the shares
of Common Stock for deposit with an escrow agent during the
Restriction Period; (ii) the certificates representing the shares
of Common Stock shall have noted conspicuously thereon a legend
that such shares are subject to the restrictions on transfer
imposed by the terms of this Agreement Not to Sell; and (iii) the
Company may instruct the transfer agent for the Common Stock to
place a transfer restriction on such transfer agent's records.
Notwithstanding the foregoing, if the undersigned is an
individual, he or she may transfer any or all of the shares of
Common Stock subject to the Resale Restrictions either during his
or her lifetime or on death by will or intestacy to his or her
immediate family or to a trust, the beneficiaries of which are
exclusively the undersigned and/or a member or members of his or
her immediate family; provided, however, that in any such case it
shall be a condition to the transfer that the transferee execute
an agreement stating that the transferee is receiving and holding
such shares of Common Stock subject to the provisions of this
Agreement. For purposes of this paragraph, "immediate family"
shall mean spouse, lineal descendant, father, mother, brother or
sister of the transferor.
In addition, notwithstanding the foregoing, if the
undersigned is a partnership, the partnership may transfer any
shares of Common Stock subject to the Resale Restrictions to a
partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate
of any such partner or retired partner, and any partner who is an
individual may transfer shares of Common Stock subject to the
Resale Restrictions by gift, will or intestate succession to his
<PAGE>
or her immediate family (as defined above) or ancestors; and if
the undersigned is a corporation, the corporation may transfer
shares of Common Stock subject to the Resale Restrictions to any
shareholder of such corporation and any shareholder who is an
individual may transfer shares of Common Stock subject to the
Resale Restrictions by gift, will or intestate succession to his
or her immediate family (as defined above) or ancestors;
provided, however, that in any such case, it shall be a condition
to the transfer that the transferee execute an agreement stating
that the transferee is receiving and holding such shares of
Common Stock subject to the provisions of this Agreement, and
there shall be no further transfer except in accordance with this
Agreement.
Very truly yours,
By:
---------------------------------
Shares of common stock Signature
(including shares which
may be acquired through /s/
warrants) subject Spouse's signature if joint tenancy
to this Agreement
after consummation of /s/
Public Offering Printed name of person or entity
Title if signing for an
entity
-----------------
Dated: July ____, 1996
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
None.
<PAGE>
INDEPENDENT AUDITOR'S CONSENT
We consent to the use of our reports dated October 4, 1996 accompanying the
financial statements of NAVIDEC, Inc. and Interactive Planet, Inc. included in
the Form SB-2 Registration Statement of NAVIDEC, Inc. and to the use of our
name and the statements with respect to us, as appearing under the heading
"Experts" in the Registration Statement.
/s/ HEIN + ASSOCIATES LLP
Denver, Colorado
October 18, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-END> JUN-30-1996 DEC-31-1995
<CASH> 53 0
<SECURITIES> 0 0
<RECEIVABLES> 93 687
<ALLOWANCES> (9) (18)
<INVENTORY> 325 204
<CURRENT-ASSETS> 541 882
<PP&E> 226 85
<DEPRECIATION> (83) 47
<TOTAL-ASSETS> 684 920
<CURRENT-LIABILITIES> 959 975
<BONDS> 0 0
0 0
0 0
<COMMON> 91 63
<OTHER-SE> (366) (117)
<TOTAL-LIABILITY-AND-EQUITY> 684 920
<SALES> 2472 4121
<TOTAL-REVENUES> 2472 4121
<CGS> 2063 3340
<TOTAL-COSTS> 2063 3340
<OTHER-EXPENSES> 622 780
<LOSS-PROVISION> 9 4
<INTEREST-EXPENSE> 22 30
<INCOME-PRETAX> (249) (23)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (249) (23)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (249) (23)
<EPS-PRIMARY> (.16) (.02)
<EPS-DILUTED> 0 0
</TABLE>
