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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
UNDER SECTION (b) or (g) OF THE SECURITIES AND EXCHANGE
ACT OF 1934
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SUREQUEST SYSTEMS, INC.
(Name of Small Business Issuer in its Charter)
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NEVADA 41-1826635
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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C. SCOTT SYKES, JR., PRESIDENT
SUREQUEST SYSTEMS, INC.
13606 TI BLVD
DALLAS, TEXAS 75243-1408
(972) 238-7200
(Address and telephone number of issuer's principal executive offices)
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
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Common stock, par value $.001 per share OTC:BB Symbol: DIETE
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
(Title of Class)
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TABLE OF CONTENTS
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PART I
Item 1. Description of Business..................................... 1
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 8
Item 3. Description of Property..................................... 10
Item 4. Security Ownership of Certain Beneficial Owners and
Management.................................................. 11
Item 5. Directors, Executive Officers, Promoters and Control
Persons..................................................... 11
Item 6. Executive Compensation...................................... 13
Item 7. Certain Relationships and Related Transactions.............. 13
Item 8. Description of Securities................................... 13
PART II
Item 1. Market Price of and Dividends on the Registrant's Common
Equity and other Shareholder matters........................ 14
Item 2. Legal Proceedings........................................... 14
Item 3. Changes in and Disagreements with Accountants............... 14
Item 4. Recent Sales of Unregistered Securities..................... 14
Item 5. Indemnification of Directors and Officers................... 15
PART F/S............................................................... 16
PART III
Item 1. Index to Exhibits........................................... 16
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FORWARD-LOOKING STATEMENTS
IN ADDITION TO HISTORICAL INFORMATION, THE FORM 10-SB CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995, AND THE COMPANY DESIRES TO FALL WITHIN THE "SAFE
HARBOR" PROVISIONS THEREOF. THIS STATEMENT IS INCLUDED HEREIN FOR THE EXPRESS
PURPOSE OF AVAILING THE COMPANY OF THE PROTECTIONS OF SUCH SAFE HARBOR WITH
RESPECT TO ALL OF THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN. SUCH FORWARD
LOOKING STATEMENTS REFLECT THE CURRENT VIEWS OF THE COMPANY AND ITS MANAGEMENT
WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE, AND ARE SUBJECT TO
CERTAIN RISKS AND UNCERTAINTIES, WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER
SUBSTANTIALLY FROM HISTORICAL RESULTS OR ANTICIPATED RESULTS. THE WORDS
"ANTICIPATES," "BELIEVES," "EXPECTS," "INTENDS," "FUTURE," "PROJECTED," "PLANS,"
"PLANNED," "OBJECTIVE" AND SIMILAR EXPRESSIONS IDENTIFY FORWARD-LOOKING
STATEMENTS. READERS ARE CAUTIONED TO CONSIDER SPECIFIC RISK FACTORS DESCRIBED
HEREIN AND NOT TO PLACE UNDUE RELIANCE ON THE FORWARD-LOOKING STATEMENTS
CONTAINED HEREIN, WHICH ARE APPLICABLE ONLY AS OF THE DATE HEREOF. THE COMPANY
UNDERTAKES NO OBLIGATION TO PUBLICLY REVISE THESE FORWARD-LOOKING STATEMENTS TO
REFLECT EVENTS OR CIRCUMSTANCES THAT MAY ARISE AFTER THE DATE HEREOF.
April 5, 2000
PART I
ITEM 1. DESCRIPTION OF BUSINESS
SureQuest Systems, Inc. (the "Company") was incorporated under the laws of
the State of Nevada on August 19, 1941. The Company's Articles of Incorporation
were recently amended and restated and filed with the Secretary of State's
office of the State of Nevada on January 5, 2000. The Company's principal place
of business is 13606 TI Boulevard, Dallas, Texas 75243. SureQuest has an
Internet web site designated as www.surequest.com.
HISTORY
On December 4, 1996, Rosegold Corporation, a non-operating Nevada
corporation, issued 12,000,000 shares of its common stock in exchange for all of
the issued and outstanding common shares of SureQuest Systems, Inc., a
corporation incorporated under the laws of the State of Texas on March 15, 1991
and changed its name to SureQuest Systems, Inc.
Prior to its merger with the Rosegold Corporation, SureQuest Systems, Inc.,
had served the healthcare industry since 1984 (although not in an incorporated
form until 1991) with dietary consulting services, dietary software and "hard
copy" menu services. The Company developed its DOS modular software product in
the early 1990's and added Microsoft Windows(R) based software through the
acquisition in June 1998 of the assets of Positive Input, Inc., a Michigan
corporation. The assets of Positive Input, Inc. were purchased for $54,629 in
cash (net of cash assumed), 1,721,050 common shares of the Company and the
assumption of approximately $816,000 in debt.
The Company has not been a party to any bankruptcy, receivership or similar
proceeding.
THE BUSINESS
SureQuest Systems, Inc. is a provider of dietary and food service
management software, menu services and dietary consulting to the institutional
food service industry. Since 1984 (initially in an unincorporated
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form), the Company has focused on developing a client base in healthcare food
service, concentrating on the Long-Term Care (LTC) segment of the industry
represented by nursing homes and assisted living facilities. The Company's
software and other products are also used in other institutional settings
including hospitals, continuing care retirement communities ("CCRC") and
prisons. The Company offers its software product in both a DOS and Windows(R)
operating system format. SureQuest currently serves approximately 700 LTC
facilities in 40 states and Canada.
The Company's proprietary software provides food selection and preparation
assistance, inventory and personnel cost controls, improved operating
efficiencies, and electronic documentation of the meals prepared and served to a
facility's residents to reduce liability exposure and ensure compliance with
government nutritional guidelines.
MARKETING STRATEGY
SureQuest has penetrated the LTC market through strategic alliances,
acquisitions, and direct sales. The Company currently has strategic marketing
alliances or private label agreements with the following companies:
Food Services of America, Inc. -- Food Services of America, Inc. ("FSA"), a
Seattle, Washington based company is one of the largest food distributors in the
United States operating primarily in the Northwest and Midwest. It markets a
software product called FSA FIRSTLINK(TM), a private labeled version of
SureQuest's proprietary Windows(R) food service software application. FSA also
provides a "hard copy" menu service for its customers through the Company under
the private label SIGNATURE SERIES.
Ben E. Keith Company -- The Ben E. Keith Company, located in Fort Worth,
Texas is a major food distributor in the Southwest and has been a significant
customer of the Company for over ten years. Ben E. Keith markets SureQuest
products and services under the private label MENUMANAGE(TM).
Serca Foodservice, Inc. -- Serca Foodservice, Inc., located in Toronto,
Canada is one of Canada's largest food distributors. Serca markets SERCA
SYNERGY(TM), a private labeled version of SureQuest's proprietary Windows(R)
software application to its institutional customers.
Achieve Healthcare, Inc. -- In 1999, the Company entered into a marketing
agreement with Achieve Software Corporation (dba Achieve Healthcare Information
Systems), Eden Prairie, Minnesota, a significant provider of non-dietary
software to the Long Term Care Industry. The Company has been designated as a
"Certified Achieve Partner" ("CAP") and Achieve has agreed to promote and market
the Company's software products to over 3,000 Long Term Care facilities where
Achieve currently has its software.
Health Technologies, Inc. -- In order to meet the expanded demand for the
Company's software products, the Company has recently entered into a strategic
marketing and training agreement with one of the largest dietary consulting
companies in the country. Health Technologies, Inc., Maryland Heights, Missouri,
a dietary consulting company with over 135 Registered Dietitians, has agreed to
market the Company's software products to health care facilities and food
distributors under the private label SMART SOLUTIONS(TM). Health Technologies
also uses the Company's software to produce "hard copy" menus for its consulting
clients. A number of the Registered Dietitians of Health Technologies also serve
as certified trainers of the Company's software.
In 1998, Ben E. Keith, Food Services of America, Inc. and Serca
Foodservices, Inc. provided 23.7%, 16.1% and 16%, respectively, of the Company's
total gross revenues and 21.3%, 19.4% and 6.1%, respectively, of gross revenues
in 1999.
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PRODUCTS AND SERVICES
The Company's primary products and services include Food Service Management
Software, Menu Services and Customer Software Support Services.
FOOD SERVICE MANAGEMENT SOFTWARE
Currently, the Company offers a suite of Microsoft Windows(R) and DOS based
nutritional software programs designed to allow health care institutions,
primarily LTC facilities, hospitals and CCRC's to more effectively and
efficiently serve their residents. The Company's software provides solutions in
the areas of menu management, inventory control, production management,
purchasing and cost control, documentation to reduce liability exposure, and
compliance with Healthcare Finance Administration (HFCA), Hazard Analysis
Critical Control Point (HACCP) and other government nutritional guidelines.
Also, the Company's software allows LTC facilities to more easily comply
with the changes in Federal Government regulations regarding reimbursement of
operational costs and the new electronic reporting requirements.
The software, Three Squares(TM), establishes nutritionally balanced diets
(conforming to government requirements) for the residents in a Long Term Care
facility. The diets are then translated into actual menus containing the proper
foods for the three meals and snacks to be served by the facility for each day.
The software can maintain a menu cycle of 1 to 8 week(s), indicating when
particular meals or food items will be served (for example, the cycle may show
that two weeks from tomorrow, chicken will be served as the main entree). At the
end of the scheduled cycle, the entire menu cycle begins again, allowing the
Company to continue to know what foods will be served in the future.
Institutions typically serve "warming" foods during the Fall/Winter cycle and
lighter, "cooling" foods during the Spring/Summer cycle, hence two menu cycles
per year. The foods can also be tailored to different geographic regions of the
country. The software maintains a list of more than 50 separate nutrients for
each meal item served, such that the facility's dietitian or administrator may
access and report the number of calories, grams of fat, milligrams of vitamin C
that an individual resident consumed for a meal, a day, a week, or any other
time period. The software also tracks the weight of each resident in the
facility.
Another important element of the software is its ability to track each
resident's likes/dislikes, allergies and other health related conditions
requiring special diets. The software currently supports 99 special diet types
such as low-calorie, diabetic or cardiac. More importantly, during meal
preparation and production, the software automatically determines the types and
quantities of food to be produced based on the resident population profiles and
then prints out individual tray tickets that alert kitchen personnel as to the
specific items that should be placed on each tray. The Company's software is
intended to be compliant with the Hazard Analysis Critical Control Point (HACCP)
program guidelines, as incorporated in the U.S. Food Code.
The Company's software is designed to be compatible with two of the popular
computer operating systems: Windows(R) and DOS. The Company believes that its
software programs can be readily adapted to any changes in the aforementioned
operating systems or to new operating systems without significant cost. Any such
changes or updates would be accomplished by "inside" personnel or by outside
independent contractors depending on the complexity of the change or update.
MENU SERVICES
The Federal government regulations require that LTC facilities use a
Registered Dietitian, on either a full time, part time or by consulting
contract, to review the menus and nutritional programs for the LTC residents.
Certain State governments require that each LTC facility in their state
demonstrate a minimum number of dietitian hours to plan and assess the
nutritional needs of the LTC residents. For the facilities that cannot afford
paying separately for these dietitians or for software, the Company has a "hard
copy" menu service program that meets the government requirements. This service
provides menu planning, nutritional analyses,
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production recipe books, spread sheets and posting menus. Over 300 facilities
are using the Company's "hard copy" menu service business.
The Company's staff prepares each menu with attention to every detail of
color, texture, and shape of individual foods to enhance the visual appearance
of the meal. Meals are analyzed for nutrient content and compared to the
Recommended Daily Allowances as established by the National Academy of Sciences.
Menus are certified by either one of the facility's registered dietitians or by
one of the Company's registered dietitians with respect to meeting the
nutritional requirements and standards specified by the facility. Scaled,
quantity recipes included with the menu services are intended to be compliant
with the Hazard Analysis Critical Control Point (HACCP) program guidelines, as
incorporated into the US Food Code.
CUSTOMER SOFTWARESUPPORT SERVICES
The Company provides the following support to its customers at all levels.
Customer Support Center. The Company provides customer software support at
several levels, from answering user questions on the implementation of the
Company's software to technical questions on the database and software
performance. Services are provided 24 hours per day/7 days per week via toll
free telephone number or through the Internet with online support at
www.surequest.com.
Strategic Alliance Training Program. The Company has developed a "train the
trainer" program, where the Company trains strategic alliance personnel capable
of training end users on the use of its dietary software. Health Technologies,
Inc., one of the Company's strategic marketing partners, has identified more
than 20 of its Registered Dietitians to participate in this program. Food
Service of America and Serca Food Service are also participating in this
training program, which allows the Company to support its planned growth in
software sales without significantly increasing training costs.
Audio-Visual Support Aids. The Company plans to develop a self-contained
videocassette that is projected to substantially eliminate the need to contact a
support person at the Company. This will also assist the Company in overcoming
limitations to its growth in software sales due to lack of trainers and support
personnel. It will also assist in managing the continuous training and support
of inexperienced personnel required due to high turnover rates in long term care
kitchen staff.
BUSINESS-TO-BUSINESS INTERNET STRATEGY
As announced in the Company Press Release on December 14, 1999, the Company
has plans to develop a business-to-business Internet site. This Internet
capability will greatly enhance the Company's existing software by allowing
customers to electronically access menu data.
PRICING STRATEGY/METHOD OF COMPENSATION
The Company offers a flexible pricing strategy to meet the financial
requirements of a broad range of clients. To facilitate this strategy, products
and services provided by the Company are offered to clients either through
purchase contracts, lease agreements or monthly rental programs. The Company's
pricing strategy is designed to effectively penetrate targeted markets with
affordable solutions that bring premium value to its clients and accelerate
revenue growth and profitability for the Company.
Software License Fees -- License purchase agreement. The Company provides a
variety of software management solutions in both Windows(R) and DOS operating
systems to clients for an "up front" cash payment to use the software
indefinitely. In addition to the initial license fee, Windows(R) product clients
must participate in the Company's product maintenance and technical support
program (see Maintenance and Support Fees below). License purchase fees for DOS
products range from a one-time payment of $500-$2,000 depending on number of
modules selected. License purchase fees for Windows(R) products range from
$5,000-$30,000 depending on solution type, modules selected, menu type and
number of users. License purchase fees, shown above, are the Company's suggested
list prices and are discounted for multiple license purchases by corporate
clients, including the Company's Strategic Alliance Partners.
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Software License Fees -- License Rental and Lease Agreements. The Company
offers clients the option to select a monthly license rental fee or a variety of
license lease options. The monthly license rental fees for DOS products range
from $75-$245 per month depending on the number of modules selected and whether
SureQuest provides computer hardware. License rental fees and lease options for
Windows(R) products range from $220-$535 per month depending on solution type,
modules selected, menu type, number of users, and lease term. The Company also
offers a Super System Lease Program, which includes software, hardware, support
and maintenance fees, and onsite training. Monthly lease payments for Super
System Lease Program range from $285-$565 per month depending on solution type,
modules selected, menu type, and number of users. All Windows(R) product lease
programs include fully paid license fees ($1 purchase option) after completion
of lease term obligations. Lease clients must continue to participate in the
Company's maintenance and support program after completion of lease term. All
maintenance and support fees are included in rental and lease programs offered
by the Company during the term of the rental or lease agreement. Software
license rentals are offered directly through the Company. License lease
agreements are arranged by the Company through third party leasing companies.
Maintenance & Support Fees -- Software Products. The Company provides
product maintenance and technical support for all software products offered by
the Company. Clients receive 1-2 product updates annually at no extra cost,
unlimited toll free technical support, remote online PC support (Windows(R)
products only) and free consultation with a Registered Dietitian. Windows(R)
product clients, who elect the Company's license purchase agreement option, pay
maintenance and support fees that range between $65-$240 per month depending on
solution type, modules selected, menu type, and number of users. DOS product
clients may elect to participate in the maintenance and support program for
between $75-$195 annually, depending on number of modules selected. Maintenance
and support fees are subject to discounts for multiple license purchases by
corporate clients, including the Company's Strategic Alliance Partners.
Software Training Fees. The Company provides software training, either
onsite at a client facility or at the Company's corporate headquarters in
Dallas, Texas. The Company charges $525 per day for training services and
reasonable travel expenses, when applicable. Corporate clients may elect to
participate in the Company's train the trainer program to help facilitate
implementation for multiple corporate owned facilities.
Menu Service Bureau Fees. The Company's Menu Service Bureau provides a
variety menu products to a broad range of clients. Fees associated with the
Company's menu services range between $55-$260 per month depending on whether
the menu products are for corporate or individual clients, standardized or
custom menu configurations, and the number of periodic menu book deliveries.
Paper Products Pricing. The Company provides custom perforated paper
products for clients to generate tray menus and selective menus for their
healthcare residents and patients. The pricing for these products range from
$16-$79 per case, depending on product type and quantity purchased.
Size of Markets Served. The U.S. population is rapidly aging and the over-65
group is expected to double by the year 2030. LTC facilities will grow, over
time, to meet the demand of this demographic trend and will require use of
dietary software to operate efficiently. The fastest growing market serving
the aging population are the Assisted Living facilities. At present, it is
estimated that only 10% of the LTC facilities in the U.S. use dietary
software.
The following chart sets forth the approximate number of facilities in the
United States as of the end of 1997 (the last year for which industry data is
available):
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MARKETS SERVED # OF FACILITIES
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Nursing Homes.......................................... 17,000(1)
Assisted Living Facilities(3).......................... 12,593(2)
Hospitals.............................................. 6,685(2)
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Total............................................. 36,278
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(1) An Overview of Nursing Home Facilities: Data from the 1997 National Nursing
Home Survey, by the CDC National Center for Health Statistics report number
311, March 1, 2000.
(2) The 1997 Economic Census, Health Care and Social Assistance sector,
published October, 1999.
(3) The January 1, 1998 edition of The Maturing Marketplace estimated that there
were 25,000 assisted living residences, housing up to one million people.
It has been further reported in the 1997 Economic Census (noted in
footnote(2) above) that there are 51,426 Residential Care Facilities in the
United States. Residential Care Facilities are defined by the 1997 Economic
Census as including Nursing Homes, Continuing Care Retirement Communities
(CCRC's), Assisted Living Facilities, Residential Mental Health Retardation
Facilities, Residential Mental Health and Substance Abuse Facilities and Homes
for the Elderly. Included in the definition of Residential Care Facilities are
15,605 Nursing Homes.
The above markets do not include other institutional markets into which the
Company plans to expand in the future, to include correctional facilities,
educational facilities, business and industry and the Government, to include the
Veterans Administration ("VA") and the military.
COMPETITION
Several competing software companies have dietary software that targets the
healthcare industry, including the LTC market. Primary competitors are GeriMenu
located in York, Pennsylvania; Computrition located in Chatsworth, California;
and C-Bord located in Ithaca, New York. The Company's best estimate is that only
10% of the kitchen operations in LTC facilities have dietary software in order
to make these operations more efficient and cost effective. The Company believes
that because of the effect of the Prospective Payment System there is now a much
greater demand for dietary software in the LTC industry and that there will be a
faster penetration in the future of the remaining 90% of the market which is not
computerized. Of the 10% of the market which is computerized, the Company's best
estimate is that the Company has approximately 30% of this penetrated market and
GeriMenu, the Company's primary competition, has approximately 30%. The Company
does not have sufficient information to evaluate the market shares of
Computrition or C-Bord. There are other software companies including Data
Control, Diet Master, DFM, FMG Software Systems, HyperGen, NutriMax, Nutri-Net,
Reliable and UniSoft serving the dietary market, but to the best estimate of the
Company, none has a significant market share.
PATENTS, TRADEMARKS, SERVICE MARKS, LICENSES
The Company has a copyright for its Windows(R) based software product,
Three Squares.(TM) In addition, the Company has applied for but not yet received
a registration for the service mark: Technology that Feeds America.(SM) The
Company has developed other software products including SurePref(TM) which
tracks a resident's food preference and SureWeight(TM) which tracks the weight
gain and loss of each resident in a facility that it treats as proprietary and
as a trade secret.
EFFECT OF GOVERNMENTAL REGULATIONS ON THE BUSINESS
There are no governmental regulations affecting the conduct of the
Company's business other than the normal and usual governmental regulations
affecting all businesses. The primary market for the Company's services is the
LTC industry which is a highly regulated industry. Therefore, the Company's
customers are subject to numerous governmental regulations, including Medicare
and Medicaid, which directly affect the facilities' ability to pay the costs of
the Company's products and services.
Fixed Rate Medicare/Medicaid Reimbursements. The Balanced Budget Act of
1997 adopted a completely new and unique reimbursement system for payment for
services rendered by nursing facilities and other healthcare providers to
Medicare patients. As of July 1, 1998 and thereafter, all healthcare providers
will be paid for services rendered to Medicare patients in accordance with the
Prospective Payment System (PPS). Prior to that date, services provided to
Medicare patients were paid pursuant to a cost-based reimbursement system.
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The PPS reimbursement system is price-based. The prices are set in advance
by the Health Care Financing Administration (HCFA), the government agency
responsible for administration of Medicare. Under PPS the per diem rate paid to
the healthcare provider is all the provider receives, there are no settlements
or adjustments. And the costs incurred by the healthcare provider do not in any
way impact the price HCFA is willing to pay for the services being provided to
Medicare patients.
The practical impact of this change in the Medicare reimbursement system is
that the healthcare providers are being paid substantially less per diem for
each Medicare patient and all healthcare services provided to that patient
(i.e., direct care, indirect care, and all ancillary care) must be paid from
that substantially reduced per diem PPS reimbursement from Medicare. Under the
previous cost-based reimbursement system, the healthcare provider was paid for
each component of care, direct care, indirect care and ancillaries, at cost plus
a small profit. Under the cost-based system, the amount reimbursed by Medicare
would increase or decrease based upon the costs incurred by each healthcare
provider. These increases and decreases applied to both direct care and
ancillary care providers.
Under the PPS reimbursement system the healthcare provider is paid one per
diem price per patient. The per diem reimbursement prices paid by HCFA are
established by a reimbursement formula that is based upon a government study of
patient acuity levels. All patient care, including direct care and ancillary
care, must be paid from that per diem price. The per diem reimbursement under
PPS for all healthcare providers is less than most healthcare providers
previously received on a per diem basis under the cost-based Medicare
reimbursement system. And all healthcare providers (i.e., the nursing facility
and all ancillary providers -- radiology, pharmacy, lab, medical supplies,
therapy, etc.) that provide healthcare services to a Medicare patient must be
paid from that smaller per patient per diem reimbursement. In essence, the
Medicare reimbursement monies became significantly smaller, and all healthcare
providers must now share in that smaller amount of reimbursement monies.
As a result of this new Medicare reimbursement system, all healthcare
providers that provide healthcare services to Medicare patients are doing
everything possible to reduce the costs of their operations. This situation
provides an opportunity for SureQuest. The dietary software sold by SureQuest
can create significant savings for its users.
The savings generated by use of the SureQuest software occurs in both the
dietary department and the nursing department of each facility. The savings are
generated by reductions in food and food preparation costs, food usage, dietary
hours and nursing hours.
Other Healthcare Reimbursement Programs. Other sources of reimbursement
available to healthcare providers include Medicaid, private insurance, HMOs,
Veterans Administration ("VA") and private pay. Medicaid is a federally funded,
state administered health insurance program for low-income individuals. Since
the program is state administered, it varies from state to state. However, there
have been no significant changes in the Medicaid program in recent years. And
because the Medicaid program is the largest healthcare reimbursement program in
terms of dollars reimbursed, the lack of significant changes in the program has
created stability for those healthcare providers that are primarily dependant
upon Medicaid reimbursement.
Other reimbursement programs including private insurance, HMOs, VA and
private pay have experienced few significant changes in recent years. Private
pay residents pay what the LTC facilities normally charge. Private insurance,
HMO's and the VA are still cost-based payors, but, to one extent or another,
these programs are evaluating changing their reimbursement to a per diem price
per patient similar to medicare. Because these programs are still cost based,
residents whose needs are reimbursed by such programs are highly sought after.
As a result, a significant amount of marketing effort is expended to attract
these residents to a LTC facility. The nutritional program (menus and diets) are
an important part of these marketing efforts. Therefore, the Company's software
and menu services products add value to these marketing efforts and the Company
uses the "value added" feature to increase its sales to LTC facilities.
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AMOUNT SPENT ON RESEARCH AND DEVELOPMENT
PRODUCT DEVELOPMENT
The Company has devoted significant resources during the last 18 months to
significantly improve and increase features and functionality of its Windows(R)
based software products. This development work will allow the Company to expand
its market penetration to other institutional food service environments,
including hospitals, continuing care retirement communities, assisted living
facilities and correctional facilities. The 32 bit multi-user version (Version
4.0) of its core Windows(R) based product is in the final stages of beta testing
and is scheduled for release in May 2000. The release of Version 4.0 will also
permit the Company to convert its entire Menu Service Bureau to its Windows(R)
technology, creating significant increases in productivity and providing cost
reductions for that department. The Company expects to release its upgraded
Export/Import utility application in June 2000. With the release of this
product, there will be numerous benefits for corporate clients which have
several, or many, separate operating facilities. Corporate clients will be able
to maintain control over program functions with corporate or regional management
determining what functions their facilities will be able to perform on a day to
day basis and what functions will be retained by the central home office. The
Company believes that through its Export/Import utility application corporate
clients will be able to limit liability risks by having greater standardization
among all of its facilities and will be better equipped to provide greater
quality assurance in their dietary programs. As a result, the Company believes
that this "Export/Import" utility application will provide highly desirable
dining service solutions for large chains and other corporate clients and
increase the Company's penetration in that market sector.
As a result of the Company's development efforts, the Company spent the sum
of $105,406 and $96,088 for research and development in 1998 and 1999,
respectively.
EMPLOYEES
The Company has 21 full-time employees and 2 part-time employees and
retains specialists as consultants in various fields of expertise.
ENVIRONMENTAL COMPLIANCE
As a software Company, SureQuest has not spent any material amounts of
capital or time in compliance with any federal, state or local environmental
laws.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS.
BACKGROUND
The Company has experienced significant operating losses of $2,071,358 and
$1,577,671, respectively, for the years ended December 31, 1998 and 1999 that
have materially affected the working capital position of the Company. These
losses were due to the Company's investment of financial resources in the
development and enhancement of its proprietary software products, the
establishment of national and Canadian marketing food distributor relationships
and the acquisition of a competitor's proprietary software operations through
the payment of $54,629 cash (net of cash assumed), assumption of debt and
issuance of the Company's common stock. The Company financed operations, these
developments and acquisition from the proceeds of debt instruments, issuances of
the Company's stock, and investment by certain officers and shareholders of the
Company in the form of long-term debt. In addition, the Company has outstanding
substantial payroll tax withholding liabilities from the years 1998 and 1999
which totaled $522,362 at December 31, 1999. Management plans to negotiate and
believes that a monthly installment schedule will be accepted by the Internal
Revenue Service and the Company intends to comply with future remittances on a
timely basis. Management further believes that this settlement together with
prospective business brought about by the expanded distribution channels will
provide a significantly improved working capital position for the year 2000. The
Company expects that as new software licenses are sold, the Company's recurring
revenue base will increase due to technical support fees associated with each
license installed and due to the increased need of additional paper supplies.
Sales revenues are expected to increase from 1999 as the Company has extended
8
<PAGE> 11
certain major distributor relationships for an additional three years. In
addition, the Company anticipates that a multi-user version of its software,
presently in beta testing, will be introduced in May 2000.
In the event that a settlement cannot be reached with the Internal Revenue
Service, the Company must continue to procure additional working capital through
debt or equity financing to meet its obligations and sustain operations. As a
result of the Company's significant operating losses, its unfunded payroll taxes
and long term debt ($1,523,138 in 1998 and $1,804,217 in 1999), the Company is
in a negative working capital position and has a shareholders' deficit by virtue
of the fact that the Company's total liabilities exceed total assets. These
financial conditions required the Company's Accountant to issue a "going
concern" opinion as part of the presentation of the Company's financial
statements.
RESULTS OF OPERATIONS
REVENUE
Sales Revenues increased eight percent (8%) from $1,212,823 in 1998 to
$1,315,767 in 1999 primarily due to additions in the Company's menu service
customer base. Cost of revenue increased to $513,016 in 1999 from $422,363 in
1998 which was primarily a result of increased labor costs related to servicing
the aforementioned increase in menu services. The result was that overall gross
profit margins decreased from 65% in 1998 to 61% in 1999. The acquisition of
Positive Input, Inc. assets and liabilities did not in itself significantly
impact the Company's revenues.
GENERAL AND ADMINISTRATIVE EXPENSE
Sales and marketing expenses decreased 42% from $418,692 in 1998 to
$243,582 in 1999 as a result of the Company eliminating two management sales
positions and closing the Michigan office in July 1999 which the Company
acquired as a result of its acquisition of Positive Input, Inc. in June of 1998.
In addition to decreases in sales and marketing costs, the Company decreased its
general and administrative overhead expense from $1,921,542 in 1998 to
$1,313,841 in 1999. The 28.9% decrease was primarily attributable to a
nonrecurring expense in 1998 consisting of $780,550 in common stock and stock
options of the Company being issued for services rendered to the Company which
was partially offset by expense increases in health insurance, communications
and benefits to employees. The Company experienced a substantial increase of
40.7% in its depreciation and amortization expense from $347,740 in 1998 to
$489,171 in 1999. The increase was attributable to the full years depreciation
of certain software acquired by the Company in 1998 in connection with the
Positive Company, Inc. transaction.
NET LOSS FROM OPERATIONS
Net loss from operations in fiscal 1999 was $1,313,841 as compared to a net
loss of $1,921,542 in 1998. The improvement from 1998 to 1999 was primarily due
to the above described issuance of common stock for services rendered to the
Company in 1998.
OTHER INCOME AND EXPENSE
Interest expense increased 20.7% from $136,842 in 1998 to $165,182 in 1999
primarily due to twelve months interest expense resulting from new obligations
arising from the acquisition of Positive Impact, Inc. in June 1998.
LIQUIDITY
During the first quarter of 2000, the Company initiated a Private Placement
under Regulation D, Rule 504 and filed its Form D disclosure with the Securities
and Exchange Commission for the purpose of raising up to $825,000 capital
through the issuance of convertible subordinated debentures. Through March 28,
2000, the Company has received subscriptions and funding for $100,000 of this
offering and a binding commitment for an additional $400,000 to be funded. In
addition, the Company has received in
9
<PAGE> 12
March 2000, $50,000 of a $100,000 subscription receivable for the Company's
stock that was previously issued in 1998. The Company expects to receive the
remaining $50,000 during April 2000.
Other than the withholding tax liability, a significant portion of the
Company's primary debt obligation is to the Company's officers, shareholders and
affiliates. This related party debt provides the Company with flexibility to
defer certain debt and interest payments that may not be available if these
obligations were with unrelated third parties. Accordingly, management believes
that, subject to the successful settlement of the withholding tax issue with the
Internal Revenue Service and with the additional capital received in 2000 from
its Private Placement, together with the receipt of additional capital committed
to the Company, the Company's debt service obligations are manageable.
Management further expects that the Company will incur approximately an
additional $75,000 of programming and equipment costs during the year 2000 to
complete software enhancements to existing software. This amount includes the
development of the multi-user product Version 4.0 to be released in May 2000.
Management believes that the cash flow from operations for the year 2000 and
working capital received during the first quarter of 2000 as a result of the
proceeds received from the Company's Private Placement will be sufficient to
fund this software development.
The Company's business plan is to transform the Company's operations from
being a dietary software products and services only company to a
business-to-business internet enterprise that will greatly enhance the Company's
existing software by allowing its customers to electronically access menu data.
The implementation of the Company's business-to-business capability will require
significant equity/debt capital which the Company is in the process of raising.
Although management is confident that the capital will be secured, there can be
no assurance that such funding will be procured. The Company will not begin
development until such time as sufficient funding is available and will,
nevertheless, continue to pursue its core business of dietary software and
services.
The Company's customers are primarily nursing home facilities that provide
long term care. The nursing home industry is dependent upon federal and state
reimbursement policies to subsidize operations. These reimbursements have been
reduced because the policy is now to reimburse operators on a basis of a formula
under Prospective Payment System ("PPS") rather than the former "cost plus"
system. PPS is requiring the nursing home industry to become more cost conscious
and, as a result, the nursing home industry is experiencing working capital
difficulties. Consequently, the Company operations are affected by aged accounts
receivable issues and facilities that have filed bankruptcy to obtain creditor
relief. Although management believes that the Federal and State governments will
provide solutions to these issues and that the industry realizes that it must
adapt to these new reimbursement guidelines, including implementation of the
Company's products that provide cost containment features for the long term care
industry, there can be no assurance that these solutions will be imminent. The
Company does receive significant revenues directly from food distributors that
license the Company's products and services on a private label basis (55.8% of
revenues in 1998 and 46.8% in 1999). As a result, the Company receives payment
directly from the distributors on a net 30 day basis rather than relying on the
nursing home user of the product.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company operates from a single location as its headquarters located in
Dallas, Texas where it leases approximately 8,300 square feet comprising the
entire one-story building located at 13606 TI Boulevard. The lease is a five
year lease which expires May 30, 2003. As part of its lease obligation, the
Company pays a rental fee plus all applicable property taxes. The Company spent
the sum of $38,773 in 1998 (partial year; June to December) and $66,469 in 1999
in support of its lease obligation. The Company has a right of first refusal on
the sale of the building.
As part of the assets of the Company, the Company owns approximately 31.83
acres of vacant farm land in rural southern Dallas County near Wilmer, Texas.
The land was acquired by the Company in return for 500,000 shares of the
Company's common stock. The property was appraised in 1998 at a market value of
$378,903 against which the Company borrowed the sum of $125,000 from a Texas
national bank using the land to secure the promissory note. As of December 31,
1999, the Company owed a balance of $112,500 on
10
<PAGE> 13
the aforementioned note. The Company currently has no plans for the farm land
other than seeking a potential buyer and does not receive any material rental or
material income from the land. The land is not material to the Company's
operations nor does the Company currently plan to develop a real estate
investment business in the future.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
<TABLE>
<CAPTION>
BENEFICIAL OWNER NUMBER OF SHARES OWNED % OUTSTANDING
- - - - - - - - ---------------- ---------------------- -------------
<S> <C> <C>
C. Scott Sykes, Jr.(1)..................................... 10,524,778 34.6%
Charles S. Sykes Irrevocable Trust(1)...................... 550,000 1.8%
Alma Sudderth(2)........................................... 538,550 1.8%
L. Kent Chapman............................................ 520,000 1.7%
John Nicholson............................................. 345,000 1.1%
Stan Janczyk............................................... 300,000 0.99%
John E. S. Kramar.......................................... 85,000 0.28%
Public Ownership........................................... 17,535,398 57.7%
---------- ----
TOTAL............................................ 30,398,726 100%
</TABLE>
- - - - - - - - ---------------
(1) Mr. Sykes owns directly 160,000 shares of the Company's common stock and
indirectly 10,364,778 shares through VIG Holdings, LLC, a limited liability
company, which as sole member, he beneficially controls. The Charles S.
Sykes Irrevocable Trust was initiated by Mr. Sykes' father and is controlled
by his mother, Kate F. Sykes, as trustee.
(2) Number of shares reflects those owned directly by Ms. Sudderth and by all
immediate family members.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
Officers and Significant Employees
C. Scott Sykes, Jr. 60, Chairman of the Board and President, has over 30
years experience in the health care industry. Mr. Sykes became associated with
the Company when, in January 1998, he bought a controlling interest in the
Company from the two co-founders. From 1994 until 2000, Mr. Sykes has operated a
closely held marketing company and for 1994 until 1999, Mr. Sykes was "of
counsel" to the Chicago law firm of Gardner Carton and Douglas. From 1989 to
1994, Mr. Sykes was Senior Vice President and General Counsel of VHA, Inc.,
Irving, Texas, one of the country's largest healthcare organizations. Mr. Sykes
graduated from The University of Virginia in 1962 with a B.A. and from that same
University in 1965 with a LLB degree. Mr. Sykes is the largest shareholder in
SureQuest Systems, Inc.
John Nicholson 51, Senior Vice President, is responsible for the
Institutional Dietary Services business. Mr. Nicholson assumed a marketing
consulting position with the Company in June 1998, when the Company acquired the
assets and liabilities of Positive Input, Inc., a Michigan Company. Mr.
Nicholson was Director of Business Development for Positive Input, Inc. from
June 1994 until June 1998. He was primarily involved with marketing and sales
responsibilities at Positive Input and for negotiating all contracts with major
clients. From January 1992 until June 1994, Mr. Nicholson was Vice President of
Ambassador Mortgage, Inc., a Virginia Company, involved with all aspects of
retail mortgage financing. From July 1977 until December 1991, Mr. Nicholson was
with Vansco Industries, Inc. a Virginia Corporation, engaged in manufacturing
metal fabricated products. Mr. Nicholson served as President of Vansco
Industries, Inc. from 1986 until his departure in 1991. Mr. Nicholson studied
marketing and business administration while he attended colleges in Maryland and
Arizona after serving in the US Army.
Stan Janczyk 53, Senior Vice President, Chief Financial Officer and
Treasurer, was appointed Chief Financial Officer of the Company in March 2000.
Prior to this office, he maintained a financial consulting and tax practice,
including serving as a consulting Chief Financial Officer to the Company from
1998 to March 2000. He is President of a closely held marketing company in
Dallas, Texas, serving in that capacity from 1995 to 2000. From 1993 to 1995, he
served as President of International Insurance Services, a multi-state
11
<PAGE> 14
insurance brokerage company in Dallas, Texas. From 1990 to 1993, Mr. Janczyk
served as a financial consultant, specializing in the insurance industry. From
1980 to 1989, he was involved as a Principal in the life and health insurance
industry. He received his Certified Public Accountant certificate in Illinois in
1976, having served as manager with the firm of Grant Thornton in Chicago,
Illinois and Oklahoma City, Oklahoma from 1974 to 1979. He graduated from
Indiana University in 1974, receiving a B.S. in Business.
L. Kent Chapman 43, Senior Vice President, is responsible for strategic
planning and the technology development of the Company and has been with the
Company, initially as a consultant, since January, 1998. He operated as an
independent technical consult from August 1997 until he began consulting
exclusively with the Company in January 1998. From March 1996 until July 1997,
he served as President and CEO of Viking Systems, Inc., Dallas, Texas,
developing an Internet-based insurance and banking support system. From 1994
until 1996, he opened the St. Louis office of Systems Engineering Solutions,
Inc. and served as the St. Louis Project Director. From 1990 to 1994, Mr.
Chapman was Senior Systems Engineer with PRC, Inc. where he supported the US
Army's Light Helicopter Program. From 1981 until 1990, he worked at Emerson
Electric in St. Louis as Senior Systems Engineer and was the youngest of the
first four Software Group Engineers responsible for all software development
within Emerson's Electronic and Space Division. He graduated from the University
of Missouri -- Columbia in December 1979 with a B.S. in Electrical Engineering.
John E. S. Kramar 40, Secretary and Director, is a licensed attorney,
practicing in Texas for over 16 years. Mr. Kramer's term as Director commenced
on December 22, 1997. He graduated from the University of North Texas in 1979
with a Bachelor of Science in Economics, and from the University of Houston Law
Center in 1983. In his law practice, Mr. Kramar represents and maintains the
various business interests of diverse corporate clients, working closely with
management as company counsel on matters ranging from corporate records to
contracts to litigation oversight and supervision.
Alma Sudderth 44, Director, began her term as a Director in 1991. Ms.
Sudderth was one of the co-founders of the Company. She has been employed by the
company since 1989 and served as a vice president until January 1998 when Mrs.
Sudderth was named President of the SureQuest Systems Inc., a Texas corporation
and predecessor to the Company. From January, 2000 to the present, Ms. Sudderth
serves as an Industry Market Leader for the Company, and is responsible for
several of the Company's significant strategic alliances. From February 1989
until January 1998, Ms. Sudderth was an Executive Vice-President of the Company.
Ms. Sudderth is a Registered Dietitian. She was graduated from the University of
Tennessee in 1977 with a BS majoring in Dietetics and in 1978 with a Masters of
Science, majoring in Food Science.
12
<PAGE> 15
ITEM 6. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION ------------
------------- NUMBER OF ALL OTHER (2)
NAME AND PRINCIPAL POSITION YEAR SALARY OPTIONS COMPENSATION
- - - - - - - - --------------------------- ---- ------ ------------ -------------
<S> <C> <C> <C> <C>
C. Scott Sykes, Jr.,................................. 1999 $0 0 $100,000
Chairman and President 1998 0 0 100,000
Steve Mills(1)....................................... 1999 0 0 78,500
Chairman and CEO 1998 0 0 100,000
</TABLE>
- - - - - - - - ---------------
(1) Mr. Mills served as the Company's Chairman and CEO until October 13, 1999
when he resigned and was succeeded by Mr. Sykes.
(2) The stockholders of the Company approved an annual salary of $100,000 each
for Mr. Mills and Mr. Sykes which they are permitted to convert into common
stock of the Company at a conversion price equal to the closing price of the
stock at the last business day of the year in which the salary was due. This
arrangement will continue until the Company has sufficient working capital
to pay the salary in cash.
ITEM 7. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS.
RELATED PARTIES
Beginning in February 1998, through a series of advances from Mr. C. Scott
Sykes, Jr. or from VIG Holdings, LLC (a limited liability company whose sole
member is C. Scott Sykes, Jr.), the Company has borrowed certain sums now
totaling $296,872 as of March 28, 2000. The advances are due on demand, and do
not have an interest rate and are secured by the tangible and intangible
personal property of the Company. In accordance with a verbal agreement with the
Company these amounts will not be repaid during 2000.
In June 1998 the Charles S. Sykes Irrevocable Trust loaned to the Company
the sum of $500,000. The Trust was given a secured promissory note for simple
interest at the rate of ten percent (10%) per annum with the principal and all
accrued interest due at maturity on January 1, 2001. The whole amount of the
note is secured by the tangible and intangible personal property of the Company.
Also in September 1998, C. Scott Sykes, Jr. in order to reduce the cash
flow requirements of the Company, personally guaranteed certain indebtedness in
the sum of $93,056 owed to Ms. Dianne Lindahl, a Company employee. As of
December 31, 1999 the balance of the indebtedness was $91,384.
ITEM 8. DESCRIPTIONS OF SECURITIES.
The Company's amended and restated Articles of Incorporation authorizes two
classes of shares, designated common and preferred. Fifty Million (50,000,000)
common shares are authorized at a par value of one tenth of one cent ($0.001).
As of March 24, 2000, there are currently 30,398,726 common shares issued and
outstanding. One million (1,000,000) "blank check" preferred shares are
authorized with a par value of one tenth of one cent ($0.001). There are
currently no preferred shares issued and outstanding.
The Company's stock trades on the NASDAQ OTC:BB market under the symbol
DIETE.
13
<PAGE> 16
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
The principal exchange where the common stock of the Company trades is the
NASDAQ OTC:BB. The high and low sales prices for each quarter during the last
two years is as follows:
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
- - - - - - - - ------------- ----- -----
<S> <C> <C>
March, 1998................................................. $0.56 $0.09
June, 1998.................................................. 0.88 0.17
September, 1998............................................. 0.42 0.18
December, 1998.............................................. 0.29 0.10
March, 1999................................................. 0.13 0.08
June, 1999.................................................. 0.25 0.06
September, 1999............................................. 0.37 0.11
December, 1999.............................................. 0.17 0.07
</TABLE>
HOLDERS
The number of stockholders of record of the Company's common stock, the
only stock outstanding, as of March 24, 2000, was 2033.
DIVIDENDS
The Company has not declared or paid any cash or stock dividends on its
common stock in the last two fiscal years and does not anticipate declaring a
dividend in the foreseeable future as all profits, if any, are likely to be
utilized to grow the Company.
There are currently no restrictions that limit the Company's ability to pay
dividends on its common stock.
ITEM 2. LEGAL PROCEEDINGS.
The Company is currently a defendant in litigation filed in Hennepin
County, Minnesota, entitled Sherman Richter and Edward Roitenberg v. Milton D.
Price, Jr. and SureQuest Systems, Inc., Court file No. CT 99-008061. The
plaintiff's claim that the Company owes them approximately $300,000 as a result
of the transaction whereby SureQuest acquired Rosegold corporation. SureQuest
has responded to the litigation and denies any liability to the plaintiffs. The
Company has reached a tentative confidential settlement with the plaintiffs
subject to execution of a definitive settlement agreement.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
The Company has hired the following Certified Public Accounting firm as its
initial auditors;
King Griffin & Adamson P.C.
14160 Dallas Parkway, Ninth Floor
Dallas, Texas 75240
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
On March 8, 2000 the Company initiated a Private Placement pursuant to
Regulation D, Rule 504 of the Securities Act of 1933. The purpose of the
offering is to raise, on a best efforts basis, up to the sum of $825,000 through
the issuance of convertible subordinated eight percent (8%) five year
debentures. The debentures provide that the principal may be repaid at any time
after ninety (90) days from date of issuance upon payment of all accrued
interest and a sum equal to 125% of the outstanding principal amount of the
debenture. The debentures are convertible at any time after issue at a
conversion price equal to seventy five percent of the average closing bid price
for the preceding three trading days prior to the notice of conversion. The
debentures provide for a minimum bid price of $0.40 or a conversion price of
$0.30 per share.
14
<PAGE> 17
As of March 28, 2000 the Company has received funded subscriptions in the
amount of $100,000 and a binding commitment of an additional $400,000 which has
yet to be funded. Prior to its current offering, the Company had not engaged in
any other private placement for more than twelve (12) months.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation and Bylaws provide that the Company
will indemnify its directors and officers to the fullest extent provide by
Nevada law. In addition, the Articles or Incorporation contain a provision
limiting a director's and officer's liability for monetary damages to the
fullest extent permitted by Nevada law.
Furthermore, Section 78.751 of the Nevada General Corporation Law (the
"NGCL") contains provisions relating to indemnification of officers and
directors. Section 78.751(1) provides that a corporation may indemnify any
person who was or is a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except for an action, suit or proceeding, whether civil, criminal,
administrative or investigative, except for an action by or in right of the
corporation by reason of the fact that he was director, officer, employee or
agent of the corporation. In order to indemnify, it must be shown that he acted
in good faith and in a manner he reasonably believed to be in the best interest
of the corporation. Generally, no indemnification may be made where the person
has been determined to be negligent or guilty of misconduct in the performance
of his duty to the corporation.
Section 78.751(2) of the NGCL further allows the corporation to indemnify
any person who was or is a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgement in its
favor by reason of the fact that he is or was director, officer, employee, or
agent of the corporation, including amounts paid in settlement and attorneys'
fees if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation. Indemnification may not
be made for any clam, issue or matter to which a court of competent jurisdiction
has adjudged an officer or director liable to the corporation, unless and only
to the extent that a court of competent jurisdiction determines that in view of
the circumstances of the case, the person is fairly and reasonably entitled to
indemnify for such expenses.
To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding discussed in the preceding paragraphs, Section 78.751(3) of the NGCL
provide that he must be indemnified by the corporation against expenses,
including attorney's fees, actually and reasonably incurred by him in connection
with the defense.
Except when indemnification is required by a court of competent
jurisdiction, Section 78.751(4) of the NGCL states that the corporation shall
only indemnify upon a determination of (i) the shareholders; (ii) majority vote
of the board that were not parties to the action; (iii) if ordered by a majority
vote of a quorum of directors who were not parties to the action, suit or
proceeding, by independent legal counsel in a written opinion; or (iv) by
independent legal counsel in a written opinion if no quorum or directors who
were not parties to the action may be obtained.
Unless ordered by a court of competent jurisdiction, indemnification may
not be made to or on behalf of any officer or director if a final adjudication
establishes that his acts or omissions involved intentional misconduct, fraud or
a knowing violation of the law and were material to the cause of action.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
person 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 Act
as is therefore unenforceable.
15
<PAGE> 18
PART F/S
PART III
ITEM 1. INDEX TO EXHIBITS
<TABLE>
<S> <C>
(2) Charter and Bylaws
2.1 Restated Articles of Incorporation Page 1
2.2 Bylaws Page 4
(6) Material Contracts
6.1 Business Product Alliance Agreement with Page 23
Achieve Healthcare Information Systems
6.2 Agreement with Ben E. Keith Company Page 32
6.3 Purchase and Software License Agreement with Page 41
Food Services of America
6.4 Marketing and License Agreement with Health Page 64
Technologies, Inc.
6.5 Software License Agreement with Serca Page 89
Foodservice Inc.
</TABLE>
16
<PAGE> 19
SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized
<TABLE>
<S> <C>
SureQuest Systems, Inc., a Nevada Corporation
(Registrant)
Date April 5, 2000 By /s/ C. SCOTT SYKES, JR.
--------------------------------------------------
C. Scott Sykes, Jr. President
/s/ ALMA P. SUDDERTH
---------------------------------------------------
Alma P. Sudderth, Director
</TABLE>
- - - - - - - - ---------------
(1) Print the name and title of the signing officer under his or her signature.
17
<PAGE> 20
SUREQUEST SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
FOR YEARS ENDED DECEMBER 31, 1998 and 1999
<PAGE> 21
TABLE OF CONTENTS
<TABLE>
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS..............................................F-2
FINANCIAL STATEMENTS
Consolidated Balance Sheets...............................................................F-3
Consolidated Statements of Operations.....................................................F-5
Consolidated Statement of Changes in Shareholders' Deficit................................F-6
Consolidated Statements of Cash Flows.....................................................F-7
Notes to Consolidated Financial Statements........................................F-9 to F-20
</TABLE>
F-1
<PAGE> 22
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of SureQuest Systems, Inc.
We have audited the accompanying consolidated balance sheets of SureQuest
Systems, Inc. and subsidiaries as of December 31, 1998 and 1999 and the related
consolidated statements of operations, changes in shareholders' deficit and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting amounts and disclosures in the consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of SureQuest Systems,
Inc. and subsidiaries as of December 31, 1998 and 1999 and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
As described in Note 3, the accompanying consolidated financial statements have
been prepared assuming that the Company will continue as a going concern. The
Company has experienced losses of $2,071,358 and $1,557,767 for 1998 and 1999,
respectively. Additionally, at December 31, 1999, the Company's current
liabilities exceeded its current assets by $1,498,446 and its total liabilities
exceeded its total assets by $1,612,055. At December 31, 1999, total liabilities
include $522,362 of payroll tax obligations and related penalties and interest
relating to 1998 and 1999. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Unless the Company obtains
additional financing, it will not be able to meet its obligations as they come
due and it will be unable to execute its long-term business plan. Management's
plans as they relate to these issues are also explained in Note 3. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
KING GRIFFIN & ADAMSON P.C.
Dallas, Texas
March 31, 2000
F-2
<PAGE> 23
SUREQUEST SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1999
ASSETS
<TABLE>
<CAPTION>
1998 1999
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 71,384 $ 3,795
Note receivable 5,700 5,700
Accounts receivable - trade, less allowance
for doubtful accounts of $22,000 and $54,218
for 1998 and 1999, respectively 80,115 71,704
Prepaid expenses and other current assets 6,452 29,256
----------- -----------
Total current assets 163,651 110,455
PROPERTY AND EQUIPMENT
Office furniture and fixtures 18,166 13,871
Computer equipment 146,836 166,488
Office and other equipment 28,257 28,257
Automobile 23,500 23,500
Leasehold improvements 53,149 60,491
----------- -----------
269,908 292,607
Less: accumulated depreciation and amortization (139,481) (191,377)
----------- -----------
Net property and equipment 130,427 101,230
OTHER ASSETS
Land held for sale 378,903 378,903
Capitalized software development costs, net of
accumulated amortization of $457,677 and $889,000
for 1998 and 1999, respectively 1,584,378 1,153,055
Other 20,947 16,012
----------- -----------
Total other assets 1,984,228 1,547,970
----------- -----------
TOTAL ASSETS $ 2,278,306 $ 1,759,655
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
<PAGE> 24
SUREQUEST SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1999
LIABILITIES AND SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>
1998 1999
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Convertible debentures $ 49,500 $ 52,000
Current portion of notes payable to officers,
shareholders and affiliates 165,535 138,973
Current portion of credit lines and long-term debt 213,266 299,606
Accounts payable - trade 278,596 287,922
Payroll tax obligations 234,441 522,362
Accrued expenses 99,818 122,735
Accrued interest 50,582 121,066
Advances from officers and affiliates 65,169 64,237
----------- -----------
Total current liabilities 1,156,907 1,608,901
CREDIT LINES AND LONG-TERM DEBT, net of current portion 178,222 108,539
NOTES PAYABLE TO OFFICERS, SHAREHOLDERS
AND AFFILIATES, net of current portion 832,976 819,727
LONG-TERM ADVANCES FROM OFFICERS 133,139 437,372
DEFERRED COMPENSATION 218,600 397,171
----------- -----------
Total liabilities 2,519,844 3,371,710
COMMITMENTS AND CONTINGENCIES (Notes 3 and 16) -- --
SHAREHOLDERS' DEFICIT
Preferred Stock - $.001 par value, 1,000,000 shares
authorized, none issued and outstanding
Common Stock - $.001 par value, 50,000,000 shares
authorized, 26,342,160 and 27,196,362 issued and
outstanding at December 31, 1998 and 1999,
respectively 26,342 27,196
Common stock subscriptions receivable (255,000) (180,000)
Additional paid-in capital 3,901,950 4,033,346
Accumulated deficit (3,914,830) (5,492,597)
----------- -----------
Total shareholders' deficit (241,538) (1,612,055)
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 2,278,306 $ 1,759,655
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE> 25
SUREQUEST SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
1998 1999
------------ ------------
<S> <C> <C>
Revenues
Dietary services and supplies $ 448,239 $ 551,032
Software sales and rental 764,584 764,735
------------ ------------
1,212,823 1,315,767
Cost of revenues
Dietary services and supplies 200,824 274,669
Software sales and rental 221,539 238,347
------------ ------------
Total cost of sales 422,363 513,016
------------ ------------
Gross profit 790,460 802,751
Operating expenses
Sales and marketing 418,692 243,582
General and administrative 1,945,570 1,383,839
Depreciation and amortization 347,740 489,171
------------ ------------
Total operating expenses 2,712,002 2,116,592
------------ ------------
Loss from operations (1,921,542) (1,313,841)
Other income (expense)
Interest expense (136,842) (165,182)
Tax penalties (51,992) (59,732)
Other, net 39,018 (39,012)
------------ ------------
Total other expense, net (149,816) (263,926)
------------ ------------
Net loss before income tax provision (2,071,358) (1,577,767)
Income tax provision -- --
------------ ------------
Net loss $ (2,071,358) $ (1,577,767)
============ ============
Basic and diluted net loss per weighted average
share of common stock outstanding $ (0.09) $ (0.06)
============ ============
Weighted average number of shares of basic
and diluted common stock outstanding 23,467,884 26,670,670
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE> 26
SUREQUEST SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
Number Common Common Stock Additional Total
of Issued Stock Subscriptions Paid-In Accumulated Shareholders'
Shares Amount Receivable Capital Deficit Deficit
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1998 19,663,089 $ 19,663 $ -- $ 1,734,438 $(1,843,472) $ (89,371)
Common stock issued for cash 366,846 367 -- 80,233 -- 80,600
Common stock issued for
subscriptions receivable 1,400,000 1,400 (255,000) 253,600 -- --
Common stock issued as pay-
ment for consulting services
and compensation 2,641,171 2,641 -- 708,909 -- 711,550
Common stock issued for
acquisition of assets of
Positive Input, Inc. 1,721,054 1,721 -- 635,000 -- 636,721
Common stock issued for
acquisition of land 500,000 500 -- 374,500 -- 375,000
Common stock issued for
acquisition of Choice
Systems, Inc. 50,000 50 -- -- -- 50
Common stock options issued
to employees below fair market
value recorded as compensation -- -- -- 69,000 -- 69,000
Common stock options issued
with convertible debentures -- -- -- 46,270 -- 46,270
Net Loss for year -- -- -- -- (2,071,358) (2,071,358)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1998 26,342,160 26,342 (255,000) 3,901,950 (3,914,830) (241,538)
Common stock issued as pay-
ment for consulting services
and compensation 685,000 685 -- 99,315 -- 100,000
Convertible debentures
converted to common stock 169,202 169 -- 16,751 -- 16,920
Cash received on common stock
subscriptions receivable -- -- 75,000 -- -- 75,000
Common stock options issued
with convertible debentures -- -- -- 15,330 -- 15,330
Net Loss for year -- -- -- -- (1,577,767) (1,577,767)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1999 27,196,362 $ 27,196 $ (180,000) $ 4,033,346 $(5,492,597) $(1,612,055)
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this
consolidated financial statement.
F-6
<PAGE> 27
SUREQUEST SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
1998 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(2,071,358) $(1,577,767)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 347,740 489,171
Provision for bad debt 14,500 32,218
Loss on disposal of equipment -- 1,966
Common stock options issued for services
and in conjunction with debt 115,270 15,330
Common stock issued for services 711,550 100,000
(Increase) decrease in (net of effects of acquisitions)
Note receivable (5,700) --
Accounts receivable - trade (30,105) (23,807)
Prepaid expenses and other current assets (1,004) (22,804)
Other (5,790) (587)
Increase (decrease) in (net of effects of acquisitions)
Accounts payable (221,918) 9,326
Payroll tax obligation 234,441 287,921
Accrued expenses (150,318) 22,917
Accrued interest 50,206 70,484
Deferred compensation 200,000 178,571
---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (812,486) (417,061)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property and equipment -- 1,900
Purchases of property and equipment (82,012) (26,995)
Cash paid for acquired assets, net of cash assumed (54,629) --
Closing costs in connection with acquisition of land (3,903) --
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (140,544) (25,095)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in advances from officers 175,352 303,301
Proceeds from convertible debentures 49,500 19,420
Proceeds from notes payable to
officers, shareholders and affiliates 500,000 --
Payment of notes payable to officers and affiliates (11,700) (39,811)
Proceeds from long-term debt 251,759 80,235
Payment of long-term debt (21,097) (63,578)
Proceeds from common stock subscribed -- 75,000
Proceeds from sale of common stock 80,600
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,024,414 374,567
---------- ----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 71,384 (67,589)
Cash and cash equivalents at beginning of year -- 71,384
---------- ----------
Cash and cash equivalents at end of year $ 71,384 $ 3,795
========== ==========
SUPPLEMENTAL DISCLOSURES OF INTEREST
AND INCOME TAXES PAID
Interest paid on borrowings $ 44,818 $ 77,448
========== ==========
Income taxes paid $ -- $ --
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-7
<PAGE> 28
SUREQUEST SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
1998 1999
---------- ----------
<S> <C> <C>
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Issuance of common stock for subscriptions receivable $ 255,000 $ --
Issuance of common stock for conversion of notes -- 16,920
Issuance of common stock for land 375,000 --
Issuance of common stock for assets of Positive Input, Inc. 636,671 --
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-8
<PAGE> 29
SUREQUEST SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
NOTE 1 - BACKGROUND AND ORGANIZATION
SureQuest Systems, Inc. (formerly Rosegold Corporation), is a publicly traded
company, and was incorporated under the laws of the State of Nevada on August
19, 1941. SureQuest Systems, Inc. is in the business of providing dietary
services, supplies and private consulting, and developing and selling dietary
proprietary management software products. Primary customers include hospitals,
nursing homes and assisted living facilities in the United States and Canada.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The financial statements include the accounts of SureQuest Systems, Inc. and its
wholly-owned subsidiaries, collectively referred to as "the Company". All
significant intercompany transactions have been eliminated.
Cash and Cash Equivalents
For Statement of Cash Flows purposes, the Company considers all cash in banks,
certificates of deposit and other highly-liquid investments with maturities of
three months or less when purchased, to be cash and cash equivalents.
Accounts Receivable and Revenue Recognition
The Company's revenue recognition policies are consistent with the American
Institute of Certified Public Accountant's Statement of Position (SOP) 97-2,
software revenue recognition, and SOP 98-9 which is a modification of SOP 97-2.
Revenue is recognized at the time services are performed or goods are shipped,
except for revenue from software licenses purchased by "private label"
distributors, which is recognized when payment is received. Certain of the
Company's customers operate under the terms of thirty day open ended rental
agreements cancelable by either party with thirty days notice. In the normal
course of business, the Company extends unsecured credit to virtually all of its
rental and menu form customers. The Company provides for an allowance for bad
debt for those accounts considered doubtful of collection. At December 31, 1998
and 1999, $22,000 and $54,218 is provided as an allowance for doubtful accounts.
F-9
<PAGE> 30
SUREQUEST SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Common Stock Subscriptions Receivable
The Company entered into an agreement to sell 1,400,000 shares to an unrelated
third party under the terms of a subscription agreement (see Note 12). The
outstanding balance is $255,000 and $180,000 at year end December 31, 1998 and
1999, respectively, and is presented as a reduction of shareholders' deficit.
Property and Equipment
Property and equipment is recorded at cost and is depreciated on a straight-line
basis, over the estimated useful life (generally 3 to 10 years) of the
respective asset. Major additions and betterments are capitalized and
depreciated over the remaining estimated useful life of the related assets.
Maintenance, repairs, and minor improvements are charged to expense as incurred.
Depreciation expense for the years ended December 31, 1998 and 1999 was $40,211
and $40,943, respectively. Leasehold improvements are capitalized and amortized
over the shorter of the life of the improvement or the remaining life of the
lease. Amortization expense for the years ended December 31, 1998 and 1999
related to leasehold improvements is $5,243 and $11,382, the respectively.
Capitalized Software Costs
The Company classifies the costs of planning, designing and establishing the
technological feasibility of a computer software product as research and
development costs and charges those costs to expense when incurred. After
technological feasibility has been established, costs of producing a marketable
product and product masters are capitalized and amortized over the estimated
life of the product (5 years). Cost of maintenance and customer support is
charged to expense as incurred.
Long-Lived Assets
The Company accounts for the impairment and disposition of long-lived assets in
accordance with Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be
Disposed Of". In accordance with SFAS No. 121, long-lived assets are reviewed
for events or changes in circumstances which indicate that their carrying value
may not be recoverable. There was no impairment of the value of such assets for
the years ended December 31, 1998 and 1999.
F-10
<PAGE> 31
SUREQUEST SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Income Taxes
The Company utilizes the asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between the financial statements and tax basis
of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense or benefit is the tax payable
or refundable for the period plus or minus the change during the period in
deferred tax assets and liabilities.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could vary from the estimates that were used.
Loss Per Share
Basic loss per share is computed by dividing consolidated net loss by the
weighted average number of shares of common stock outstanding during the year.
The common stock equivalents are not included in the diluted loss per share for
1998 and 1999 as they are antidilutive.
Stock-Based Compensation
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees," and complies with the disclosure
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Under APB
Opinion No. 25, compensation expense for employees is based on the excess, if
any, on the date of grant, between of fair value of the Company's stock over the
exercise price.
The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force
Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services." All transactions in which goods or services are the consideration
received for the issuance of equity instruments are accounted for based on the
fair value of the consideration received or the fair value of the equity
instrument issued, whichever is more reliably measurable. The measurement date
of the fair value of the equity instrument issued is the earlier of the date on
which the counterparty's performance is complete or the date on which it is
probable that performance will occur.
Recent Accounting Pronouncements
The Company adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131") in the fiscal year ended December 31, 1998. SFAS 131 establishes standards
for reporting information regarding operating segments in annual financial
statements and requires selected information for those segments to be presented
in interim financial reports. SFAS 131 also establishes standards for related
disclosures about products and services and geographic areas. Operating segments
are identified as components of an enterprise about which separate discrete
financial information is available for evaluation by the chief operating
decision maker, or decision making group, in making decisions about how to
allocate resources and assess performance. As the Company only has one operating
segment this standard currently does not impact the Company's disclosures.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133", which establishes accounting and reporting standards for
derivative instruments. SFAS No. 137 is effective for all fiscal quarters for
all fiscal years beginning after June 15, 2000. The adoption of SFAS 137 is not
expected to have a significant impact on the Company's results of operations or
disclosures.
NOTE 3 - GOING CONCERN UNCERTAINTY
The consolidated financial statements have been prepared on the assumption that
the Company will continue as a going concern. The Company sustained a net loss
of $2,071,358 and $1,577,767 during the years ended December 31, 1998 and 1999,
respectively. Cash used by operating activities for the same periods aggregated
$812,486 and $417,061 respectively. Current liabilities at December 31, 1999 of
$1,608,901 exceed current assets of $110,455. Total liabilities at December 31,
1999 of $3,371,710 exceed total assets of $1,759,655. The Company's continued
existence depends upon the success of management's efforts to raise additional
capital necessary to meet the Company's obligations as they come due and to
obtain sufficient capital to execute its business plan. The Company intends to
obtain capital primarily through issuances of common stock. There can be no
degree of assurance given that the Company will be successful in completing
additional financing transactions.
F-11
<PAGE> 32
SUREQUEST SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
NOTE 3 - GOING CONCERN - Continued
The consolidated financial statements do not include any adjustments to reflect
the possible effects on the recoverability and classification of assets or
classification of liabilities which may result from the inability of the Company
to continue as a going concern.
NOTE 4 - ACQUISITIONS
On June 16, 1998 the Company completed the acquisition of the assets and certain
liabilities of Positive Input, Inc., a Michigan corporation. The transaction was
accounted for as a purchase with operations being included in the Company's
statement of operations from the acquisition date. The purchase consideration
for this transaction was $54,629 paid in cash (net of cash acquired), assumption
of certain liabilities and the issuance of 1,721,054 shares of the Company's
common stock recorded at the Company's closing stock price on the date of the
acquisition, valued at $636,721.
The summary of the fair value of assets acquired and liabilities assumed is as
follows:
<TABLE>
<S> <C>
Current assets, net of cash acquired ........... $ 35,337
Fixed assets ................................... 4,295
Software acquired .............................. 1,467,926
Current liabilities ............................ (593,547)
Long-term liabilities .......................... (222,711)
-----------
$ 691,300
===========
</TABLE>
The following unaudited pro forma consolidated information for the year ended
December 31, 1998 assumes the acquisition occurred as of January 1, 1998:
<TABLE>
<S> <C>
Revenues ..................................... $ 1,445,193
Net Loss ..................................... $(2,272,198)
Loss per share (basic and diluted) ........... $ (.10)
</TABLE>
During 1998, Company also acquired all of the outstanding common stock of Choice
Systems, Inc. for 50,000 common shares. Choice Systems, Inc. had insignificant
assets, liabilities and operations when it was acquired.
NOTE 5 - CAPITALIZED SOFTWARE COSTS
The Company has two software packages, a DOS based package which was developed
internally, and a Windows based package which was purchased in connection with
the Positive Input, Inc. acquisition. Amortization expense related to its DOS
package is $137,739 for 1998 and 1999, respectively. This package will be fully
amortized during the year 2000. Amortization expense related to the Windows
Package is $159,025 and $293,585 for 1998 and 1999, respectively.
F-12
<PAGE> 33
SUREQUEST SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
NOTE 6 - CREDIT LINES AND LONG-TERM DEBT
<TABLE>
1998 1999
-------- --------
<S> <C> <C>
$21,300 revolving credit line with bank secured by personal guarantee of a
shareholder; minimum monthly payments of 2% of the outstanding principal;
interest at 21.98% per annum $ 20,079 $ 19,048
Revolving credit line with bank secured by the personal guarantee of a
shareholder; minimum monthly payments of 2% of the outstanding principal;
interest 16.99% per annum 7,850 7,395
Revolving credit line with bank secured by the personal guarantee of an
affiliate; interest at 18.65% per annum 7,352 3,873
Revolving credit line with bank secured by the personal guarantee of an
affiliate; interest at 27.07% per annum 4,767 1,258
Promissory note to bank; matures June 17, 2000; quarterly payments of
interest only at 9.75% per annum; principal due at maturity, secured by
land 125,000 112,500
Extended payment terms from two suppliers in the form of unsecured promissory
notes; (1) vendor promissory note of $36,001; monthly installments of principal
and interest of $5,000; interest at 1.5% per month; matures June 2000; (2)
vendor promissory note of $40,390; monthly installments of principal and
interest of $3,587; interest at 15.9%; matures June 2000. -- 60,235
</TABLE>
F-13
<PAGE> 34
SUREQUEST SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
NOTE 6 - CREDIT LINES AND LONG-TERM DEBT - CONTINUED
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Note payable to a bank; collateralized by the Company's receivables,
inventory and equipment; interest at prime plus 2.75% (11.5% at December 31,
1999); payable in monthly installments of principal and interest of $875;
matures September 2001 25,450 16,746
Note payable to a bank; collateralized by the Company's receivables, inventory
and equipment; interest at prime plus 2.75% (11.5% at December 31, 1999); payable
in monthly installments of principal and interest of $856; matures April 2003 35,970 29,302
Note payable to a bank; collateralized by an automobile; interest at 8.75%
per annum; payable in monthly installments of principal and
interest of $470; matures January 2000 6,661 495
Note payable to bank; unsecured; interest at 10% per annum; payable in monthly
installments of principal and interest of $810; matures November 2003 38,327 32,715
Note payable to finance company; secured by equipment; interest at 25.45% per
annum; payable in monthly installments of principal and interest of $171;
matures August 2002 -- 4,406
Unsecured promissory note to third party; interest at 8% per annum; payable in
monthly installments of principal and interest of $5,562; matures April 2001 100,000 84,139
Unsecured promissory note to office lessee for purpose of leasehold
improvements; interest at 10% per annum; payable in monthly installments of
principal and interest of $484; matures September 2003 20,032 16,033
</TABLE>
F-14
<PAGE> 35
SUREQUEST SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
NOTE 6 - CREDIT LINES AND LONG-TERM DEBT - CONTINUED
<TABLE>
<CAPTION>
1998 1999
---------- ----------
<S> <C> <C>
Promissory note; interest rate of 10%; interest payments due monthly;
matures April 9, 2000; secured by principal of the company -- 20,000
---------- ----------
Total long-term debt 391,488 408,145
Less current maturities 213,266 299,606
---------- ----------
Long-term debt $ 178,222 $ 108,539
========== ==========
</TABLE>
NOTE 7 - CONVERTIBLE DEBENTURES
<TABLE>
<CAPTION>
1998 1999
---------- ----------
<S> <C> <C>
Four debentures, were issued during the year ended December 31, 1998 in the
aggregate principal amount of $49,500; terms of the debentures included interest
at 12% and an option to convert to Company's common ranging from $.10 to $.625
per share. $17,500 principal was converted to common stock in 1999; $20,000
additional debentures were issued during 1999 at a $.12 per share conversion
rate, monthly payments of $500 for principal and interest, on $7,000 of
debentures maturing 2001, $45,000 debentures accrue interest with principal and
interest due at maturity, 2001 all amounts unsecured $ 49,500 $ 52,000
========== ==========
</TABLE>
NOTE 8 - NOTES PAYABLE TO OFFICERS, SHAREHOLDERS & AFFILIATES
<TABLE>
<CAPTION>
1998 1999
---------- ----------
<S> <C> <C>
$100,000 unsecured promissory note payable to shareholder affiliate;
interest at 10% per annum payable monthly; principal payable on demand $ 100,000 $ 100,000
$10,000 unsecured promissory note payable to
shareholder affiliate; interest payable semi-annually
at 8% per annum; principal payable on demand 10,000 10,000
$10,000 unsecured demand promissory note payable to
shareholder; interest payable at 10% per annum;
principal payable on demand 5,800 5,800
</TABLE>
F-15
<PAGE> 36
SUREQUEST SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
NOTE 8 - NOTES PAYABLE TO OFFICERS, SHAREHOLDERS & AFFILIATES - Continued
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
$10,000 unsecured demand promissory note payable to shareholder; interest
payable at 10% per annum; principal payable on demand 10,000 10,000
Unsecured promissory note to affiliate; interest at 10%; monthly installments of
principal and interest payments of $806; matures May 2002 25,000 20,705
Promissory note to shareholder affiliate; interest at 10% with total accrued
interest and principal payable at maturity January 2001; security interest in
all assets of the Company subordinated to certain banks and shareholders holding
prioritized liens 500,000 500,000
Promissory note to shareholder; 100,000 shares of Company stock held in escrow as
security; 10% interest with accrued interest and principal payable on demand;
shareholder has verbal agreement with Company not to demand redemption within the
following 12 months 222,711 220,811
Promissory note to shareholder with personal guaranty by Company officer;
secured by software source code and subordinated lien on land; interest at 7.5%
monthly; interest and principal payments of $995; balloon payment at maturity,
September 10, 2001 125,000 91,384
-------- --------
Total notes payable to officers, shareholders and affiliates 998,511 958,700
Less current portion 165,535 138,973
-------- --------
$832,976 $819,727
======== ========
</TABLE>
NOTE 9 - ADVANCES FROM OFFICERS
Advances from officers/shareholders of the Company are non-interest bearing. In
accordance with a verbal agreement with its majority shareholder the Company
will not be expected to repay a portion of this advance during 2000 and
accordingly a portion of the advances are classified as long-term in the
accompanying consolidated financial statements.
F-16
<PAGE> 37
SUREQUEST SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
NOTE 10 - DEFERRED COMPENSATION
Deferred compensation relates to salaries accrued for certain officers, not yet
paid. These amounts are convertible into common stock of the Company determined
on the last business day of each respective year. The amounts are cumulatively
convertible.
NOTE 11 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 "Disclosure About Fair Value
of Financial Instruments", requires disclosure about the fair value of all
financial assets and liabilities for which it is practicable to estimate. At
December 31, 1998 and 1999 the carrying value all of the Company's accounts
receivable, accounts payable and accrued liabilities approximate fair value
because of their short term nature. Convertible debentures, credit lines, notes
payable and long-term debt carrying values approximate fair values based on the
borrowing rates currently available to the Company for loans with similar terms.
NOTE 12 - COMMON STOCK SUBSCRIPTIONS RECEIVABLE
On September 17, 1998 the Company issued 1,400,000 shares of Company common
stock to an unrelated third party at $0.16 per share under terms of a promissory
note agreed to in principle in 1998 and formally executed June 17, 1999. Under
terms of this note, the buyer agreed to remit to Company $255,000 in 3 equal
installments of $85,000 on June 24, July 23 and August 24, 1999, respectively.
In addition, the note provides for an interest payment calculated at 8% per
annum, calculated on the value of the shares within a definable period. The
buyer had an option to redeem the obligation by returning the stock at any time
to the Company for the outstanding subscribed balance owed to the Company.
During the year ended December 31, 1999, the buyer remitted to Company $75,000
of the obligation. At March 22, 2000, the Company agreed to accept a total of
$100,000 in 3 installments as settlement of the remaining obligation with the
first payment of $50,000 received on March 27, 2000. The remaining two payments
of $25,000 are due in April, 2000. Should either of these two remaining
installments default, the agreement will revert to the original principal amount
plus accrued interest due by the buyer less payments previously received. The
outstanding note receivable amounts are classified in the accompanying
consolidated balance sheet as a contra to equity.
F-17
<PAGE> 38
SUREQUEST SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
NOTE 13 - PAYROLL TAX OBLIGATIONS AND INCOME TAXES
The Company has not remitted Federal and State employer and employee payroll
taxes for the years 1998 and 1999. The Company has determined this obligation to
be the actual amounts of the tax withheld from employees and the employer
portion of the Social Security Federal Tax obligation in addition to a 25%
penalty accrual for each of the respective year's obligations. The total
obligation associated with these delinquent amounts due is $234,441 and $522,362
at December 31, 1998 and 1999, respectively and has been reflected in the
accompanying consolidated financial statements as Payroll Tax Obligations.
The Company has not filed Federal Income Tax Returns for the years 1996, 1997,
1998 and 1999. The Company had losses in each of these years and therefore, no
taxes are payable for any of these years.
NOTE 14 - LAND HELD FOR SALE
The Company acquired certain undeveloped land in 1998 in exchange for 500,000
shares of the Company's common stock. The agreement included a one year option
granted to the seller to acquire an additional 250,000 shares at $0.40 per
share. The option was not exercised and expired May 4, 1999. The land was
recorded at estimated fair value based upon the report of an independent
accredited appraiser.
NOTE 15 - INCOME TAXES
Deferred tax assets and liabilities at December 31, 1998 and 1999 consist of
the following:
<TABLE>
<CAPTION>
1998 1999
--------- -----------
<S> <C> <C>
Current deferred tax asset $ 7,480 $ 18,434
Non-Current deferred tax asset 786,571 1,136,826
Non-Current deferred tax liability (538,689) (392,039)
Valuation allowance (255,362) (763,221)
--------- -----------
Net deferred tax asset $ -0- $ -0-
========= ===========
</TABLE>
F-18
<PAGE> 39
SUREQUEST SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
NOTE 15 - INCOME TAXES - CONTINUED
The current deferred tax asset results from the allowance for doubtful accounts.
The non-current deferred tax asset results primarily from the net operating loss
carryforward and deferred compensation. The net operating loss available at
December 31, 1999 amounts to approximately $2,900,000 and begins to expire in
2012. The non-current deferred tax liability results from capitalized software
costs that have previously been expensed for tax purposes. At December 31, 1998
and 1999 the net deferred tax asset has a 100% allowance due to the uncertainty
of the Company generating future taxable income.
The Company's income tax benefit for the years ended December 31, 1998 and 1999
differed from the statutory federal rate of 34% as follows:
<TABLE>
<CAPTION>
1998 1999
--------- ---------
<S> <C> <C>
Statutory rate applied to loss before
income taxes $(704,262) $(536,441)
Increase in income taxes resulting from amounts
not deductible for income tax purposes 66,570 28,582
Deferred tax liabilities acquired 499,095 --
Increase in valuation allowance 138,597 507,859
--------- ---------
Income tax Benefit $ -- $ --
========= =========
</TABLE>
NOTE 16 - COMMITMENTS AND CONTINGENCIES
The Company has operating leases for its office facilities, automobiles, and
certain equipment. Rental expense for operating leases was $95,994 and $111,630
for 1998 and 1999, respectively. Future minimum rental commitments under non
cancelable leases for the succeeding five years are as follows:
<TABLE>
<CAPTION>
Year ended
December 31 Amount
- - - - - - - - ------------------- ---------
<S> <C>
2000 $ 111,275
2001 102,081
2002 85,369
2003 38,727
2004 6,625
---------
$ 344,077
=========
</TABLE>
The Company is currently a defendant in a lawsuit in which the plaintiffs claim
that the Company owes them $300,000 as a result of the original merger with
Rosegold Corporation in 1996. Based upon the advice of its counsel the Company
believes there is little, if any, merit to this lawsuit. The Company is unable
to estimate the possible cost of this litigation. The amount could be material
to the results of operations and financial condition of the Company if the suit
were settled unfavorably.
The Company may be subject to other various legal proceedings and claims that
arise in the ordinary course of business. Management currently believes that
resolving these matter(s) will not have a material adverse impairment on the
Company's financial position or its results of operations.
NOTE 17 - FINANCIAL RISK
During 1998 and 1999 approximately 56% and 46%, respectively, of total revenues
are attributable to three distributors that represent the Company through
private label software products for the respective years. During 1998 the three
distributors accounted for 24%, 16% and 16%, respectively, of the Company's
total revenues. During 1999 the three distributors accounted for 21%, 19% and
6%, respectively of the Company's total revenues.
F-19
<PAGE> 40
SUREQUEST SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
NOTE 18 - STOCK OPTIONS
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," in accounting for all options granted to employees. Had compensation
cost for the Company's stock based compensation Plans been determined consistent
with FASB statement No. 123, "Accounting for Stock Based Compensation," the
Company's net loss and loss per share would have been increased to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
Years ended December 31,
1998 1999
------------ ------------
<S> <C> <C>
Net loss As reported $ (2,058,826) $ (1,577,767)
Pro forma $ (2,103,929) $ (1,581,888)
Net loss per share As reported $ (.09) $ (.06)
Pro forma $ (.09) $ (.06)
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions used for
grants in 1998: dividend yield of 0 percent; expected volatility of 290%; risk
free interest rate of 6%; and an expected life of 1 to 3 years.
A summary of changes in the Company's compensatory options follows:
<TABLE>
<CAPTION>
Employee Stock Options Other Stock Options Combined Total
Weighted Weighted
Average Average
Exercise Options/ Exercise Options/
Options Price Warrants Price Warrants
-------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Outstanding at December 31, 1997 -- $ -- -- $ -- --
Granted 250,000 .17 849,000 .27 1,099,000
Exercised -- -- (400,000) .16 (400,000)
Expired -- -- -- -- --
------- ----- -------- ----- ---------
Outstanding at December 31, 1998 250,000 .17 449,000 .37 699,000
Granted -- -- -- -- --
Exercised -- -- -- -- --
Expired -- -- (270,000) .38 (270,000)
------- ----- -------- ----- ---------
Outstanding at December 31, 1999 250,000 $ .17 179,000 $ .31 429,000
======= ===== ======== ===== =========
</TABLE>
The following table summarizes information about employee stock options
outstanding at December 31, 1999.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------------------------------- -------------------------------
Weighted
Average Weighted
Range of Number remaining average Number Weighted average
exercise prices outstanding contractual life exercise price Exercisable exercise price
---------------- ------------- ----------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
1999 $.15-$.25 250,000 .1 years $.17 250,000 $.17
</TABLE>
The following table summarizes information about other stock options outstanding
at December 31, 1999.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------------------------------- -------------------------------
Weighted
Average Weighted
Range of Number remaining average Number Weighted average
exercise prices outstanding contractual life exercise price Exercisable exercise price
---------------- ------------- ----------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
1999 $.10-$.63 179,000 .6 years $.31 115,000 $.17
</TABLE>
The other stock options were issued with convertible debentures, common stock
sold for cash, the acquisition of land and for services performed.
NOTE 19 - RELATED PARTY TRANSACTIONS
A member of the Company's Board of Directors and an officer also provides legal
services for the Company. The officer does not receive a salary from the Company
but bills for services rendered as an independent contractor. Fees paid were
$9,850 and $6,248 for the years 1998 and 1999.
During the year ended December 31, 1998, the Company issued 500,000 of the
Company's common stock to an officer/principle who arranged debt funding to
accommodate the acquisition of the assets of Positive Input, Inc. As the debt
is due on demand the value of the common stock, $205,000 was expensed during
1998 as a financing fee.
During the year ended December 31, 1999, the Company issued 250,000 of the
Company's common stock to an officer/shareholder of the Company who provided a
personal guaranty in order to extend the maturity of a Company's debt
obligation. The shares were valued at $27,500 which has been recorded as
compensation expense in the accompanying consolidated financial statements.
Certain officers/shareholders of the Company have provided debt funding to the
Company during the years ended December 31, 1998 and 1999 respectively. Terms of
the debt obligations are described in note 8 in the accompanying consolidated
financial statements. No interest has been paid during 1998 or 1999. Accrued
interest related to these obligations is $32,231 and $82,231 at December 31,
1998 and 1999.
F-20
<PAGE> 41
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
(2) Charter and Bylaws
2.1 Restated Articles of Incorporation Page 1
2.2 Bylaws Page 4
(6) Material Contracts
6.1 Business Product Alliance Agreement with Page 23
Achieve Healthcare Information Systems
6.2 Agreement with Ben E. Keith Company Page 32
6.3 Purchase and Software License Agreement with Page 41
Food Services of America
6.4 Marketing and License Agreement with Health Page 64
Technologies, Inc.
6.5 Software License Agreement with Serca Page 89
Foodservice Inc.
</TABLE>
<PAGE> 1
EXHIBIT 2.1
[STAMP] RESTATED ARTICLES OF INCORPORATION OF
SUREQUEST SYSTEMS, INC.
[DATE STAMP]
This is to certify that at a special meeting of the Directors of
SureQuest Systems, Inc. (The "Corporation") held on the 4th day of December,
1998, called pursuant to due and legal notice, all of the Directors were present
or by their signature to the minutes, unanimously adopted the following
resolution:
RESOLVED: that in the opinion of the Board of Directors, it was
advisable to and in the best interests of the Corporation that the
Articles of Incorporation be restated and amended as follows:
ARTICLE FIRST
The name of the Corporation shall be SUREQUEST SYSTEMS, INC.
ARTICLE SECOND
The period of its duration shall be perpetual
ARTICLE THIRD
The purpose for which the corporation is organized is to transact any
and all lawful business for which corporations may be incorporated under the
laws of the State of Nevada, including to buy, sell and deal in personal
property, real property and services.
ARTICLE FOURTH
The Corporation may issue two classes of shares designated Common and
Preferred. The authorized number of Common shares is fifty million (50,000,000)
and the par value of each is one tenth of one cent ($0.001). The authorized
number of Preferred shares is one million (1,000,000) and the par value of each
is one tenth of one cent ($0.001).
Authority is hereby expressly granted to the Board of Directors of the
Corporation (the "Board") to authorize the issuance of one or more series of
Preferred shares and to fix the voting powers, designations, preferences and the
relative, participating, options, redemption, conversion, exchange or other
special rights, qualifications, limitations or restrictions of such series and
the number of shares in each series to the full extent now or hereinafter
permitted by law.
1
<PAGE> 2
ARTICLE FIFTH
No shareholder or other person shall have any pre-emptive right
whatsoever.
ARTICLE SIXTH
There shall be a minimum of three (3) and a maximum of fifteen (15)
directors with the number of directors constituting the Board or to be fixed by
the Board of Directors in the manner provided in the Bylaws.
ARTICLE SEVENTH
To the fullest extent now or hereinafter permitted by applicable law,
no director or officer of the Corporation shall be liable to the Corporation or
its shareholders for monetary damages for an act or omission in such director's
or officer's capacity as a Director or Officer of the Corporation, except that
this Article does not eliminate or limit the liability of a director or officer
of the Corporation for:
1. A breach of such director's or officer's duty of loyalty to the
Corporation;
2. An act or omission not in good faith or that involves intentional
misconduct or a knowing violation of the law;
3. A transaction from which such director or officer received an
improper benefit;
4. An act or omission for which liability of such director or officer
is expressly provided by statute; or
5. An act related to an unlawful stock repurchase or payment of a
dividend.
Indemnification of a director or officer by the Corporation shall be in
the manner as provided by the Bylaws. Any repeal or amendment of this Article by
the shareholders of the Corporation shall be by prospective only and shall not
affect the liability or indemnity by the Corporation for any director or officer
for any act or omission prior to such repeal or amendment.
2
<PAGE> 3
ARTICLE EIGHTH
The vote by which the stockholders holding shares in the corporation
entitling them to exercise at least a majority of the voting power, or such
greater proportion of the voting power as may be required in the case of a vote
by classes or series, or as may be required by the provisions of the articles of
incorporation have voted in favor of the restated articles is: 18,898,402 in
favor and none opposed.
Signatures:
<TABLE>
<S> <C>
/s/ C. SCOTT SYKES, JR. /s/ CRAIG G. ONGLEY
- - - - - - - - ------------------------------------ -----------------------------------
PRESIDENT ASST. SECRETARY
State of: Texas
-----
County of: Dallas
------
This instrument was acknowledged before me on
DECEMBER 28, 1999, by
- - - - - - - - ------------
C. SCOTT SYKES, JR. (Name of Person)
- - - - - - - - -------------------
as PRESIDENT
----------------------------------- [NOTARY SEAL]
as designated to sign this certificate
of SUREQUEST SYSTEMS, INC.
----------------------------------
(name on behalf of whom instrument was executed)
/s/ ANGELA M. LEWANDOWSKI
- - - - - - - - -------------------------------------
Notary Public Signature
</TABLE>
3
<PAGE> 1
EXHIBIT 2.2
BYLAWS
OF
SUREQUEST SYSTEMS, INC
A NEVADA CORPORATION
These are Bylaws of SureQuest Systems, Inc., a Nevada corporation.
ARTICLE 1
OFFICES
1.1 Registered Office. The registered office of SUREQUEST SYSTEMS, INC.
(the "corporation") shall be located at 13606 TI Boulevard, Dallas, Texas 75243.
1.2 Locations of Offices. The corporation may also have offices at such
other places both within and without the states of Nevada, and Texas as the
board of directors may from time to time determine or the business of the
corporation may require.
ARTICLE 2
STOCKHOLDERS
2.1 Annual Meeting. The annual meeting of the stockholders shall be held
within 180 days after the end of the corporation's fiscal year at such time as
is designated by the board of directors and as is provided for in the notice of
the meeting. If the election of directors shall not be held on the day
designated herein for the annual meeting of the stockholders or at any
adjournment thereof, the board of directors shall cause the election to be held
at a special meeting of the stockholders as soon thereafter as may be
convenient.
2.2 Special Meeting. Special meeting of the stockholders may be called at
any time in the manner provided in the Articles of Incorporation. At any time
special meeting of the stockholders, only such business shall be conducted as
shall have been stated in the notice of such special meeting.
2.3 Place of Meetings. The board of directors may designate any place,
either within or without the state of incorporation, as the place of meeting for
any annual meeting or for any special meeting called by the board of director. A
waiver of notice signed by all stockholders entitled to vote at a meeting may
designate any place, either within or without the state of incorporation, as the
place for the holding of such meeting. If no designation is made or if a special
meeting be otherwise called, the place of meeting shall be at the principal
office of the corporation.
2.4 Notice of Meetings. The secretary or assistant secretary, if any, shall
cause notice of the time, place, and purpose or purpose of all meetings of the
stockholders (whether annual or special), to be mailed at least 10 but not more
than 60 days prior to the meeting, to each stockholder of record entitled to
vote.
4
<PAGE> 2
2.5 Waiver of Notice. Any stockholder may waive notice of any meeting of
stockholders (however called or noticed, whether or not called or noticed, and
whether before, during, or after the meeting) by signing a written waiver of
notice or a consent to the holding of such meeting or any approval of the
minutes thereof. Attendance at a meeting, in person or by proxy, shall
constitute waiver of all defects of notice regardless of whether waiver,
consent, or approval is signed or any objections are made, unless attendance is
solely for the purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. All such waivers, consents, or approvals shall be made a part of the
minutes of the meeting.
2.6 Fixing Records Date. For the purpose of (i) determining stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting; (ii) stockholders entitled to receive payment of any dividend
or other distribution or allotment of any rights or entitled to exercise any
rights in respect to any change, conversion, or exchange of stock; or (iii) for
the purpose of any other lawful action, the board of directors may fix in
advance a date as the record date for any such determination of stockholders,
such date in any case to be not more than 60 days and, in case of a meeting of
stockholders, not less than 10 days prior to the date on which the particular
action requiring such determination of stockholders is to be taken. If no record
date is fixed for the determination of stockholders entitled to notice of or to
vote as a meeting, the day preceding the date on which notice of meeting is
mailed shall be the record date. For any other purpose, the record date shall be
the close of business on the date on which the resolution of the board of
directors pertaining thereto is adopted. When a determination of stockholders
entitled to vote at any meeting of stockholders has been made as provided in
this section, such determination shall apply to any adjournment thereof. Failure
to comply with this section shall not affect the validity of any action taken at
a meeting of stockholders.
2.7 Voting Lists. The officers of the corporation shall cause to be
prepared from the stock ledger at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the principal
executive office of the corporation. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof and may be
inspected by any stockholder who is present. The original stock ledger shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by this section, or the books of the corporation, or
to vote in person or by proxy at any meeting of stockholders.
2.8 Quorum. Unless otherwise provided in the Articles of Incorporation,
stock representing a majority of the voting power of all outstanding stock of
the corporation entitled to vote, present in person or represented by proxy,
shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by statute or by the
5
<PAGE> 3
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such reconvened
meeting at which a quorum is present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than 30 days or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
2.9 Vote Required. When a quorum is present at any meeting, the vote of the
holders of stock having a majority of the voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one on which by express provision of the statutes of the
state of Nevada or of the Articles of Incorporation a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
2.10 Voting of Stock. Unless otherwise provided in the Articles of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, subject to the modification of
such voting rights of any class or classes of the corporation's capital stock by
the certificate or incorporation.
2.11 Proxies. At each meeting of the stockholders, each stockholder
entitled to vote shall be entitled to vote in person or by proxy; provided,
however, that the right to vote by proxy shall exist only in case the instrument
authorizing such proxy to act shall have been executed in writing by the
registered holder or holders of such stock, as the case may be, as shown on the
stock ledger of the corporation or by his attorney thereunto duly authorized in
writing. Such instrument authorizing a proxy to act shall be delivered at the
beginning of such meeting to the secretary of the corporation or to such other
officer or person who may, in the absence of the secretary, be acting as
secretary of the meeting. In the event that any such instrument shall designate
two or more persons to act as proxy, a majority of such persons present at the
meeting, or if only one be present, that one shall (unless the instrument shall
otherwise provide) have all of the powers conferred by the instrument on all
persons so designated. Persons holding stock in a fiduciary capacity shall be
entitled to vote the stock so held, and the persons whose shares are pledged
shall be entitled to vote, unless the transfer by the pledgor in the books and
records of the corporation shall have expressly empowered the pledgee to vote
thereon, in which case the pledgee, or his proxy, may represent such stock and
vote thereon. No proxy shall be voted or acted on after three years from its
date, unless the proxy provides for a longer period.
2.12 Nomination of Directors. Only persons who are nominated in accordance
with the procedures set forth in this section shall be eligible for election as
directors. Nominations of persons for election to the board of directors of the
corporation may be made at a meeting of stockholders at which directors are to
be elected only (a) by or at the direction of the board of directors or (b) by
any stockholder of the corporation entitled to vote for the election of
directors
6
<PAGE> 4
at a meeting who complies with the notice procedures set forth in this section.
Such nominations, other than those made by or at the direction of the board of
directors, shall be made by timely notice in writing to the secretary of the
corporation. To be timely, a stockholder's notice must be delivered or mailed to
and received at the principal executive offices of the corporation not less than
30 days prior to the date of the meeting; provided, in the event that less than
40 days' notice of the date of the meeting is given or made to stockholders, to
be timely, a stockholder's notice must be so received not later than the close
of business on the 10th day following the day on which such notice of the date
of the meeting was mailed. Such stockholder's notice shall set forth (a) as to
each person whom such stockholder proposed to nominate for election or
reelection as a director, all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to regulation 14A under the
Securities Exchange Act of 1934, as amended (including each such person's
written consent to serve as a director if elected); and (b) as to the
stockholder giving the notice (i) the name and address of such stockholder as it
appears on the corporation's books, and (ii) the class and number of shares of
the corporation's capital stock that are beneficially owned by such stockholder.
At the request of the board of directors, any person nominated by the board of
directors for election as a director shall furnish to the secretary of the
corporation that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee. No person shall be eligible for
election as a director of the corporation unless nominated in accordance with
the provisions of this section. The officer of the corporation or other person
presiding at the meeting shall, if the facts so warrant, determine and declare
to the meeting that a nomination was not made in accordance with such
provisions, and if such officer should so determine, such officer shall so
declare to the meeting, and the defective nomination shall be disregarded.
2.13 Inspectors of Election. There shall be appointed two inspectors of the
vote. Such inspectors shall first take and subscribe an oath or affirmation
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of their ability. Unless appointed in
advance of any such meeting by the board of directors, such inspectors shall be
appointed for the meeting by the presiding officer. No director or candidate for
the officer of director shall be appointed as such inspector. Such inspectors
shall be responsible for tallying and certifying each vote required to be
tallied and certified by them as provided in the resolution of the board of
directors appointing them or in their appointment by the person presiding at
such meeting, as the case may be.
2.14 Election of Directors. At all meetings of the stockholders at which
directors are to be elected, except as otherwise set forth in any preferred
stock designation (as defined in the Articles of Incorporation) with respect to
the right of the holders of any class or series of preferred stock to elect
additional directors under specified circumstances, directors shall be elected
by a plurality of the votes cast at the meeting. The election need not be by
ballot unless any stockholder so demands before the voting begins. Except as
otherwise provided by law, the Articles of Incorporation, any preferred stock
designation, or these bylaws, all matters other than the election of directors
submitted to the stockholders at any meeting shall be decided by a majority of
the votes cast with respect thereto.
7
<PAGE> 5
2.15 Business at Annual Meeting. At any annual meeting of the stockholders,
only such business shall be conducted as shall have been brought before the
meeting (a) by or at the direction of the board of directors or (b) by any
stockholder of the corporation who is entitled to vote with respect thereto and
who complies with the notice procedures set forth in this section. For business
to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the secretary of
the corporation. To be timely, a stockholder's notice shall be delivered or
mailed to and received at the principal executive offices of the corporation not
less than 30 days prior to the date of the annual meeting; provided, in the
event that less than 40 days' notice of the date of the meeting is given or made
to stockholders, to be timely, a stockholder's notice shall be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of the annual meeting was mailed. A stockholder's notice to
the secretary shall set forth as to each matter such stockholder proposes to
bring before the annual meeting (a) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (b) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (c) the class
and number of shares of the corporation's capital stock that are beneficially
owned by such stockholder, and (d) any material interest of such stockholder in
such business. Notwithstanding anything in these bylaws to the contrary, no
business shall be brought before or conducted at an annual meeting except in
accordance with the provisions of this section. The officer of the corporation
or other person presiding at the annual meeting shall, if the facts so warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with such provisions, and if such presiding
officer should so determine and declare to the meeting that business was not
properly brought before the meeting in accordance with such provisions and if
such presiding officer should so determine, such presiding officer shall so
declare to the meeting, and any such business so determined to be not properly
brought before the meeting shall not be transacted.
2.16 Business at Special Meeting. At any special meeting of the
stockholders, only such business shall be conducted as shall have been stated in
the notice of such special meeting.
2.17 Written Consent to Action by Stockholders. Unless otherwise provided
in the Articles of Incorporation, any action required to be taken at any annual
or special meeting of stockholders of the corporation, or any action which may
be taken at any annual or special meeting of such stockholders may be taken
without a meeting, without prior notice, and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporation action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
2.18 Procedure for Meetings. Meeting of the stockholders shall be conducted
pursuant to such reasonable rules of conduct and protocol as the board of
directors may prescribe or, if no such rules are prescribed, in accordance with
the most recent published edition of ROBERT'S RULES OF ORDER.
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ARTICLE 3
DIRECTORS
3.1 General Powers. The business of the corporation shall be managed under
the direction of its board of directors, which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the Articles of Incorporation or by these bylaws directed or required to be
exercised or done by the stockholders.
3.2 Number, Term, and Qualifications. The number of directors which shall
constitute the board, subject to the limitations set forth in the Articles of
Incorporation, shall be determined by resolution of a majority of the total
number of directors if there were no vacancies (the "Whole Board") or by the
stockholders at the annual meeting of the stockholders or a special meeting
called for such purpose, except as provided in section 3.3 of this article, and
each director elected shall hold office until his successor is elected and
qualified. Directors need not be residents of the state of incorporation or
stockholders of the corporation. Initially the corporation shall have three
directors.
3.3 Vacancies and Newly Created Directorships. Vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum of the Whole Board, or by a sole remaining director, and the directors so
chosen shall hold office until the next annual election and until their
successors are duly elected and qualified. If there are no directors in office,
then an election of directors may be held in the manner provided by statute.
3.4 Regular Meetings. A regular meeting of the board of directors shall be
held without other notice than this bylaw immediately following and at the same
place as the annual meeting of stockholders. The board of directors may provide
by resolution the time and place, either within or without the state of
incorporation, for the holding of additional regular meetings without other
notice than such resolution.
3.5 Special Meetings. special meetings of the board of directors may be
called by or at the request of the president, vice 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 without the state of
incorporation, as the place for holding any special meeting of the board of
directors called by them.
3.6 Meetings by Telephone Conference Call. Members of the board of
directors may participate in a meeting of the board of directors or a committee
of the board of directors by means of conference telephone or similar
communication equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
section shall constitute presence in person at such meeting.
3.7 Notice. Notice of any special meeting shall be given at least 72 hours
prior thereto by written notice delivered personally or sent by facsimile
transmission confirmed by registered mail or certified mail, postage prepaid, or
by overnight courier to each director. Each director shall register his or her
address and telephone number(s) with the secretary for purpose of receiving
notices. Any such notice shall be deemed to have been given as of the date so
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personally delivered or sent by facsimile transmission or as of the day
following dispatch by overnight courier. Any director may waive notice of any
meting. Attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting solely for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. An entry of the service of notice
given in the manner and at the time provided for in this section may be made in
the minutes of the proceedings of the board of directors, and such entry, if
read and approved at a subsequent meeting of the board of directors, shall be
conclusive on the issue of notice.
3.8 Quorum. A majority of the Whole Board shall constitute a quorum for the
transaction of business at any meeting of the board of directors, provided, that
the directors present at a meeting at which a quorum is initially present may
continue to transact business notwithstanding the withdrawal of directors if any
action taken is approved by a majority of the required quorum for such meeting.
If less than a majority is present at a meeting, a majority of the directors
present may adjourn the meeting from time to time without further notice.
3.9 Manner of Acting. The act of a majority of the directors present at a
meeting at which a quorum is present shall be the act of the board of directors,
and individual directors shall have no power as such.
3.10 Compensation. By resolution of the board of directors, the directors
may be paid their expenses, if any, of attendance at each meeting of the board
of directors and may be paid a fixed sum for attendance at each meeting of the
board of directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor.
3.11 Presumption of Assent. A director of the corporation who is present at
a meeting of the board of directors at which action on any corporate matter is
taken shall be presumed to have assented to the action taken unless his dissent
shall be entered in the minutes of the meeting, unless he shall file his written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment thereof, or unless he shall forward such dissent by
registered or certified mail to the secretary of the corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
3.12 Resignations. A director may resign at any time by delivering a
written resignation to either the president, a vice president, the secretary, or
assistant secretary, if any. The resignation shall become effective on giving of
such notice, unless such notice specifies a later time for the effectiveness of
such resignation.
3.13 Written Consent to Action by Directors. Any action required to be
taken at a meeting of the directors of the corporation or any other action which
may be taken at a meeting of the directors or of a committee, may be taken
without a meeting, if a consent in writing, setting forth the action so taken,
shall be signed by all of the directors, or all of the members of the committee,
as the case may be. Such consent shall have the same legal effect as a unanimous
vote of all the directors or members of the committee. Removal. Subject to any
limitations set
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forth in the Articles of Incorporation, at meeting expressly called for that
purpose, one or more directors may be removed by a vote of a majority of the
shares of outstanding stock of the corporation entitled to vote at an election
of directors.
ARTICLE 4
OFFICERS
4.1 Number. The officers of the corporation shall be a president, one or
more vice presidents, as shall be determined by resolution of the board of
directors, a secretary, a treasurer, and such other officers as may be appointed
by the board of directors. The board of directors may elect, but shall not be
required to elect, a chairman of the board, and the board of directors may
appoint a general manager.
4.2 Election, Term of Office, and Qualifications. The officers shall be
chosen by the board of directors annually at its annual meeting. In the event of
failure to choose officers at an annual meeting of the board of directors,
officers may be chosen at any regular or special meeting of the board of
directors. Each such officer (whether chosen at an annual meeting of the board
of directors to fill a vacancy or otherwise) shall hold his office until the
next ensuing annual meeting of the board of directors and until his successor
shall have been chosen and qualified, or until his death until his resignation
or removal in the manner provided in these bylaws. Any one person may hold any
two or more of such offices, except that the president shall not also be the
secretary. No person holding two or more offices shall execute any instrument in
the capacity of more than one office. The chairman of the board, if any, shall
be and remain director of the corporation during the term of his office. No
other officer need be a director.
4.3 Subordinate Officers. The board of directors from time to time may
appoint such other officers or agents as it may deem advisable, each of whom
shall have such title, hold office for such period, have such authority, and
perform such duties as the board of directors from time to time may determine.
The board of directors from time to time may delegate to any officer or agent
the power to appoint any such subordinate officer or agents and to prescribe
their respective titles, terms of office, authorities, and duties. Subordinate
officers need not be stockholders or directors.
4.4 Resignations. Any officer may resign at any time by delivering a
written resignation to the board of directors, the president, or the secretary.
Unless otherwise specified therein, such resignation shall take effect on
delivery.
4.5 Removal. Any officer may be removed from office at any special meeting
of the board of directors called for that purpose or at a regular meeting, by
the vote of a majority of the directors, with or without cause. Any officer or
agent appointed in accordance with the provisions of section 4.3 hereof may also
be removed, either with or without cause, by any officer on whom such power of
removal shall have been conferred by the board of directors.
4.6 Vacancies and Newly Created Offices. If any vacancy shall occur in any
office by reason of death, resignation, removal, disqualification, or any other
cause or if a new office shall
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be created, then such vacancies or newly created offices may be filled by the
board of directors at any regular of special meeting.
4.7 The Chairman of the Board. The chairman of the board, if there be such
an officer, shall have the following powers and duties:
He shall preside at all stockholders' meetings;
He shall preside at all meetings of the board of directors; and
He shall be a member of the executive committee, if any.
4.8 The Chief Executive Officer. The chief executive officer of the
corporation shall have the same powers and duties as the president, as described
below, and, in addition, shall have such powers and duties as may be directed by
the board of directors of the corporation from time to time.
4.9 The President. The president shall have the following powers and
duties:
He shall be the chief executive officer of the corporation and, subject to
the direction of the board of directors, shall have general charge of the
business, affairs, and property of the corporation and general supervision over
its officers, employees, and agents;
If no chairman of the board has been chosen or if such officer is absent or
disabled, he shall preside at meetings of the stockholders and board of
directors;
He shall be a member of the executive committee, if any;
He shall be empowered to sign certificates representing stock of the
corporation, the issuance of which shall have been authorized by the board of
directors; and
He shall have all power and perform all duties normally incident to the
office of a president of a corporation and shall exercise such other powers and
perform such other duties as from time to time may be assigned to him by the
board of directors.
4.10 The Vice-Presidents. The board of directors may, from time to time,
designate and elect one or more vice-presidents, one of whom may be designated
to serve as executive vice-president. Each vice-president shall have such powers
and perform such duties as from time to time may be assigned to him by the board
of directors or the president. At the request or in the absence or disability of
the president, the executive-vice president or, in the absence or disability of
the executive vice-president, the vice-president designated by the board of
directors or (in the absence of such designation by the board of directors) by
the president, as senior vice-president, may perform all the duties of the
president, and when so acting, shall have all the powers of, and be subject to
all the restrictions on, the president.
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4.11 The Secretary. The secretary shall have the following powers and
duties:
He shall keep or cause to be kept a record of all of the proceedings of the
meetings of the stockholders and of the board of directors in books provided for
that purpose;
He shall cause all notices to be duly given in accordance with the
provisions of these bylaws and as required by statute;
He shall be the custodian of the records and of the seal of the
corporation, and shall cause such seal (or a facsimile thereof) to be affixed to
all certificates representing stock of the corporation prior to the issuance
thereof and to all instruments, the execution of which on behalf of the
corporation under its seal shall have been duly authorized in accordance with
these bylaws, and when so affixed, he may attest the same;
He shall see that the books, reports, statements, certificates, and other
documents and records required by statute are properly kept and filed;
He shall have charge of the stock ledger and books of the corporation and
cause such books to be kept in such manner as to show at any time the amount of
the stock of the corporation of each class issued and outstanding, the manner in
which and the time when such stock was paid for, the names alphabetically
arranged and the addresses of the holders of record thereof, the amount of stock
held by each older and time when each became such holder of record; and he shall
exhibit at all reasonable times to any director, on application, the original or
duplicate stock ledger. He shall cause the stock ledger referred to in section
6.4 hereof to be kept and exhibited at the principal office of the corporation,
or at such other place as the board of directors shall determine, in the manner
and for the purpose provided in such section;
He shall be empowered to sign certificates representing stock of the
corporation, the issuance of which shall have been authorized by the board of
directors; and
He shall perform in general all duties incident to the office of secretary
and such other duties as are given to him by these bylaws or as from time to
time may be assigned to him by the board of directors or the president.
4.12 The Treasurer. The treasurer shall have the following powers and
duties:
He shall have charge and supervision over and be responsible for the
monies, securities, receipts, and disbursements of the corporation;
He shall cause the monies and other valuable effects of the corporation to
be deposited in the name and to the credit of the corporation in such banks or
trust companies or with such banks or other depositories as shall be selected in
accordance with section 4.3 hereof;
He shall cause the monies of the corporation to be disbursed by checks or
drafts (signed as provided in section 5.4 hereof) drawn on the authorized
depositories of the corporation, and cause to be taken and preserved property
vouchers for all monies disbursed;
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He shall render to the board of directors or the president, whenever
requested, a statement of the financial condition of the corporation and of all
of his transactions as treasurer, and render a full financial report at the
annual meeting of the stockholders, if called on to do so;
He shall cause to be kept correct books of account of all the business and
transactions of the corporation and exhibit such books to any directors on
request during business hours;
He shall be empowered from time to time to require from all officers or
agents of the corporation reports or statements giving such information as he
may desire with respect to any and all financial transactions of the
corporation;
He shall perform in general all duties incident to the office of treasurer
and such other duties as are give to him by these bylaws or as from time to time
may be assigned to him by the board of directors or the president; and
He shall, in the absence of the designation to the contrary by the board of
directors, act as the chief financial officer and/or principal accounting
officer of the corporation.
4.13 Salaries. The salaries or other compensation of the officers of the
corporation shall be fixed from time to time by the board of directors, except
that the board of directors may delegate to any person or group of persons the
power to fix the salaries or other compensation of any subordinate officers or
agents appointed in accordance with the provisions of section 4.3 hereof. no
officer shall be prevented from receiving any such salary or compensation by
reason of the fact that he is also a director of the corporation.
4.14 Surety Bonds. In case the board of directors shall so require, any
officer or agent of the corporation shall execute to the corporation a bond in
such sums and with such surety or sureties as the board of directors may direct,
conditioned on the faithful performance of his duties to the corporation,
including responsibility for negligence and for the accounting of all property,
monies, or securities of the corporation which may come into his hands.
ARTICLE 5
EXECUTION OF INSTRUMENTS, BORROWING OF MONEY,
AND DEPOSIT OF CORPORATE FUNDS
5.1 Execution of Instruments. Subject to any limitation contained in the
Articles of Incorporation or these bylaws, the president or any vice-president
may, in the name and on behalf of the corporation, execute and deliver any
contract or other instrument authorized in writing by the board of directors.
The board of directors may, subject to any limitation contained in the Articles
of Incorporation or in these bylaws, authorize in writing any officer or agent
to execute and deliver any contract or other instrument in the name and on
behalf of the corporation; any such authorization may be general or confined to
specific instances.
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5.2 Loans. No loan or advance shall be contracted on behalf of the
corporation, no negotiable paper or other evidence of its obligation under any
loan or advance shall be issued in its name, and no property of the corporation
shall be mortgaged, pledged, hypothecated, transferred, or conveyed as security
for the payment of any loan, advance, indebtedness, or liability of the
corporation, unless and except as authorized by the board of directors. Any such
authorization may be general or confined to specific instances.
5.3 Deposits. All monies of the corporation not otherwise employed shall be
deposited form time to time to its credit in such banks or trust companies or
with such bankers or other depositories as the board of directors may select or
as from time to time may be selected by any officer or agent authorized to do so
by the board of directors.
5.4 Checks, Drafts, Etc. All notes, drafts, acceptances, checks,
endorsements, and, subject to the provisions of these bylaws, evidences of
indebtedness of the corporation shall be signed by such officer or officers or
such agent or agents of the corporation and in such manner as the board of
directors from time to time may determine. Endorsements for deposits to the
credit of the corporation in any of its duly authorized depositories shall be in
such manner as the board of directors from time to time may determine.
5.5 Bonds and Debentures. Every bond or debenture issued by the corporation
shall be evidenced by an appropriate instrument which shall be signed by the
president or a vice president and by the secretary and sealed with the seal of
the corporation. The seal may be a facsimile, engraved or printed. Where such
bond or debenture is authenticated with the manual signature of an authorized
officer of the corporation or other trustee designated by the indenture of trust
or other agreement under which such security is issued, the signature of any of
the corporation's officers named thereon may be a facsimile. in case any officer
who signed or whose facsimile signature has been used on any such bond or
debenture shall cease to e an officer of the corporation for any reason before
the same has been delivered by the corporation, such bond or debenture may
nevertheless be adopted by the corporation and issued and delivered as through
the person who signed it or whose facsimile signature has been used thereon had
not ceased to be such officer.
5.6 Sale, Transfer, Etc. of Securities. Sales, transfers, endorsements, and
assignments of stocks, bonds, and other securities owned by or standing in the
name of the corporation and the execution and delivery on behalf of the
corporation of any and all instruments in writing incident to any such sale,
transfer, endorsement, or assignment shall be effected by the president or by
any vice-president and the secretary or assistant secretary, or by any officer
or agent thereunto authorized by the board of directors.
5.7 Proxies. proxies to vote with respect to stock of other corporations
owned by or standing in the name of the corporation shall be executed and
delivered on behalf of the corporation or by any officer or agent thereunder
authorized by the board of directors.
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ARTICLE 6
CAPITAL STOCK
6.1 Stock Certificates. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by the president or any vice-president
and the secretary or assistant secretary, and sealed with the seal (which may be
a facsimile, engraved or printed) of the corporation, certifying the number and
kind, class, or series of stock owned by him in the corporation; provided,
however, that where such a certificate is countersigned by (a) a transfer agent
or an assistant transfer agent, or (b) registered by a registrar, the signature
of any such president, vice-president, secretary, or assistant secretary may be
a facsimile. In case any officer who shall have signed or whose facsimile
signature or signatures shall have been used on any such certificate shall cease
to be such officer of the corporation, for any reason, before the delivery of
such certificate by the corporation, such certificate may nevertheless be
adopted by the corporation and be issued and delivered as though the person who
signed it or whose facsimile signature or signatures shall have been used
thereon has not ceased to be such officer. Certificates representing stock of
the corporation shall be in such form as provided by the statutes of the state
of incorporation. There shall be entered on the stock books of the corporation
at the time of issuance of each share, the number of the certificate issued, the
name and address of the person owning the stock represented thereby, the number
and kind, class, or series of such stock, and the date of issuance thereof.
Every certificate exchanged or returned to the corporation shall be marked
"canceled" with the date of cancellation.
6.2 Transfer of Stock. Transfers of stock of the corporation shall be made
on the books of the corporation by the holder of record thereof or by his
attorney thereunto duly authorized by a power of attorney duly executed in
writing and filed with the secretary of the corporation or any of its transfer
agents, and on surrender of the certificate or certificates, properly endorsed
or accompanied by proper instruments or transfer, representing such stock.
Except as provided by law, the corporation and transfer agents and registrars,
if any, shall be entitled to treat the holder of record of any stock as the
absolute owner thereof for all purposes, and accordingly shall not be bound to
recognize any legal, equitable, or other claim to or interest in such stock on
the part of any other person whether or not it or they shall have express or
other notice thereof.
6.3 Regulations. Subject to the provisions of the Articles of
Incorporation, the board of directors may make such rules and regulations as
they may deem expedient concerning the issuance, transfer, redemption, and
registration of certificates for stock of the corporation.
6.4 Maintenance of Stock Ledger at Principal Place of Business. A stock
ledger (or ledgers where more than one kind, class, or series of stock is
outstanding) shall be kept at the principal place of business of the
corporation, or at such other place as the board of directors shall determine,
containing the names alphabetically arranged of original stock holders of the
corporation, their addresses, their interest, the amount paid on their shares,
and all transfers thereof and the number and class of stock held by each. Such
stock ledgers shall at all reasonable hours be subject to inspection by persons
entitled by law to inspect the same.
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6.5 Transfer Agents and Registrars. The board of directors may appoint one
or more transfer agents and one or more registrars with respect to the
certificates representing stock of the corporation and may require all such
certificates to bear the signature of either or both. The board of directors may
from time to time define the respective duties of such transfer agents and
registrars. No certificate for stock shall be valid until countersigned by a
transfer agent, if at the date appearing thereon the corporation had a transfer
agent for such stock, and until registered by a registrar, if at such date the
corporation had a registrar for such stock.
6.6 Closing of Transfer Books and Fixing of Record Date.
The board of directors shall have power to close the stock ledgers of the
corporation for a period of not to exceed 60 days preceding the date of any
meeting of stockholders, the date for payment of any dividend, the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining the
consent of stockholders for any purpose.
In lieu of closing the stock ledgers as aforesaid, the board of directors
may fix in advance a date, not less than 10 days and not exceeding 60 days
preceding the date of any meeting of stockholders, the date for the payment of
any dividend, the date for the allotment of rights, the date when any change or
conversion or exchange of capital stock shall go into effect, a date in
connection with obtaining any such consent, as a record date for the
determination of the stockholders entitled to a notice of, and to vote at, any
such meeting and any adjournment thereof, entitled to receive payment of any
such dividend, to any such allotment of rights, to exercise the rights in
respect of any such change, conversion or exchange of capital stock, or to give
such consent.
If the stock ledgers shall be closed or a record date set for the purpose
of determining stockholders entitled to notice of, or to vote at, a meeting of
stockholders, such books shall be closed for or such record date shall be at
least ten days immediately preceding such meeting.
6.7 Lot or Destroyed Certificates. The corporation may issue a new
certificate for stock of the corporation in place of any certificate theretofore
issued by it, alleged to have been lost or destroyed, and the board of directors
may, in its discretion, require the owner of the lost or destroyed certificate
or his legal representatives to give the corporation a bond in such form and
amount as the board of directors may direct and with such surety or sureties as
may be satisfactory to the board, and to indemnify the corporation and its
transfer agents and registrars, if any, against any claims that may be made
against it or any such transfer agents and registrars, if any, against any
claims that may be made against it or any such transfer agent or registrar on
account of the issuance of such new certificate. A new certificate may be issued
without requiring any bond when, in the judgment of the board of directors, it
is proper to do so.
ARTICLE 7
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
7.1 Executive Committee. the board of directors, by resolution adopted by a
majority of the Whole Board, may appoint from its membership an executive
committee of not less than
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three members (whose members shall include the chairman of the board if any, and
the president, one of whom shall act as chairman of the executive committee, as
the board may designate). The board of directors shall have the power at any
time to dissolve the executive committee, to change the membership thereof, and
to fill vacancies thereon. When the board of directors is not in session, the
executive committee shall have and may exercise all of the powers vested in the
board of directors, except the following powers: to fill vacancies in the board
of directors; to declare dividends or other distributions to stockholders; to
adopt, amend, or repeal the Articles of Incorporation or these bylaws' to
approve any action that also requires stockholder approval; to amend or repeal
any resolution of the board of directors which by its express terms is not so
amendable or repealable; to fix the compensation of directors for serving on the
board of directors or on any committee; to adopt an agreement of merger or
consolidation under any provision of applicable law, to recommend to the
stockholders the sale, lease, or exchange of all or substantially all of the
Corporation's property and assets; to recommend to stockholders a dissolution of
the Corporation or a revocation of a dissolution; to recommend to stockholders
an amendment of bylaws; to authorize the issuance of stock (provided that the
executive committee may determine the number of shares of stock not in excess of
the number of authorized to be issued by the board of directors and the amount
of consideration for which such shares shall be issued); and to enter into any
merger into or with another entity as permitted by applicable law.
7.2 Other Committees. The board of directors, by resolution adopted by a
majority of the Whole Board, may appoint such other committees as it may, from
time to time, deem proper and may determine the number of member, frequency of
meetings, and duties thereof.
7.3 Proceedings. The executive committee and such other committees as may
be designated hereunder by the board of directors may fix their own presiding
and recording officer or officers and may meet at such place or places, at such
time or times, and on such notice (or without notice) as it shall determine from
time to time. Each committee may make rules for the conduct of its business as
it shall from time to time deem necessary. It will keep a record of its
proceedings and shall report such proceedings to the board of directors at the
meeting of the board of directors next following.
7.4 Quorum and Manner of Acting. At all meetings of the executive committee
and of such other committees as may be designated hereunder by the board of
directors, the presence of members constituting a majority of the total
authorized membership of the committee shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the act of a majority
of the members present at any meeting at which a quorum is present shall be the
act of such committee. The members of the executive committee and of such other
committees as may be designated hereunder by the board of directors shall act
only as a committee, and the individual members thereof shall have no powers as
such.
7.5 Resignations. Any member of the executive committee and of such other
committees as may be designated hereunder by the board of directors may resign
at any time by delivering a written resignation to either the president, the
secretary, or assistant secretary, or to the presiding officer of the committee
of which he is a member, if any shall have been appointed and shall be in
office. Unless otherwise specified therein, such registration shall take effect
on delivery.
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7.6 Removal. The board of directors may, by resolution adopted by a
majority of the Whole Board, at any time remove any member of the executive
committee or of any other committee designated by it hereunder either for or
without cause.
7.7 Vacancies. If any vacancy shall occur in the executive committee or of
any other committee designated by the board of directors hereunder, by reason of
disqualification, death, resignation, removal, or otherwise, the remaining
members shall, until the filling of such vacancy, constitute the then total
authorized membership of the committee and continue to act, unless such
committee consisted of more than one member prior to the vacancy or vacancies
and is left with only one member as a result thereof. Such vacancy may be filled
at any meeting of the Whole Board.
7.8 Compensation. The Whole Board may allow a fixed sum and expenses of
attendance to any member of the executive committee, or of any other committee
designated by it hereunder, who is not an active salaried employee of the
corporation for attendance at each meeting of the said committee.
ARTICLE 8
INSURANCE AND OFFICER AND DIRECTOR CONTRACTS
8.1 Indemnification: Third-Party Actions. The corporation shall indemnify
any person 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 (other than an action by or in the
right of the corporation), by reason of the fact that he is or was a director or
officer of the corporation (and, in the discretion of the board of directors,
may so indemnify a person by reason of the fact that he is or was an employee,
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise), against expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him in connection with any such action,
suit, or proceeding, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit, or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation, ad
with respect to any criminal action or proceeding, he had reasonable cause to
believe that his conduct was unlawful.
8.2 Indemnification: Corporate Actions. The corporation shall indemnify any
persons who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director or officer of the
corporation (and, in the discretion of the board of directors, may so indemnify
a person by reason of the fact that he is
19
<PAGE> 17
or was an employee or agent of another corporation, partnership, joint venture,
trust, or other enterprise), against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made in respect of any
claim, issue, or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses as
the court deems proper.
8.3 Determination. To the extent that a director, officer, employee, or
agent of the corporation has been successful on the merits or otherwise in
defense of any action, suit, or proceeding referred to in sections 8.1 and 8.2
hereof, or in defense of any claim, issue, or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith. Any other indemnification under
sections 8.1 or 8.2 hereof, unless ordered by a court, shall be made by the
corporation only in the specific case on a determination that indemnification of
the director, officer, employee, or agent is proper in the circumstances because
he has met the applicable standard or conduct set forth in sections 8.1 or 8.2
hereof. Such determination shall be made either (i) by the board of directors by
a majority vote of a quorum consisting of directors who were not parties to such
action, suit, or proceeding, (ii) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in written opinion, or (iii) by the stockholders by a majority
vote of a quorum of stockholders at any meeting duly called for such purpose.
8.4 Advances. Expenses incurred by an officer or director in defending a
civil or criminal action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit, or proceeding on receipt
of an undertaking by or on behalf of such director or officers to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized by this section. Such expenses
incurred by other employees and agents may be so paid on such terms and
conditions, if any, as the board of directors deems appropriate.
8.5 Scope of Indemnification. The indemnification and advancement of
expenses provided by, or granted pursuant to, sections 8.1, 8.2 and 8.4:
Shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled, under any bylaw,
agreement, vote of stockholders or disinterested directors, or otherwise, both
as to action in his official capacity and as to action in another capacity while
holding such office; and
Shall, unless otherwise provided when authorized or ratified, continue as
to a person who ceased to be a director, officer, employee, or agent of the
corporation and shall inure to the benefit of the heirs, executors, and
administrators of such a person.
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<PAGE> 18
8.6 Insurance. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee, or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against any
such liability.
8.7 Officer and Director Contracts. No contract or other transaction
between the corporation and one or more of its directors or officers or between
the corporation and any corporation, partnership, association, or other
organization in which one or more of the corporation's directors or officers are
directors, officers, or have a financial interest, is either void or voidable
solely on the basis of such relationship or solely because any such director or
officer is present at or participates in the meeting of the board of directors
or a committee thereof which authorizes the contract or transaction or solely
because the vote or votes of each director or officer are counted for such
purpose, if:
The material facts of the relationship or interest are disclosed or known
to the board of directors or committee and the board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a majority of
the disinterested directors even though the disinterested directors be less than
a quorum;
The material facts of the relationship or interest is disclosed or known to
the stockholders and they approve or ratify the contract or transactions in good
faith by a majority vote of the shares voted at a meeting of stockholders called
for such purpose or written consent of stockholders holding a majority of the
shares entitled to vote (the votes of the common or interested directors or
officers shall be counted in any such vote of stockholders); or
The contract or transaction is fair as to the corporation at the time it is
authorized, approved, or ratified by the board of directors, a committee
thereof, or the stockholders.
ARTICLE 9
FISCAL YEAR
The fiscal year of the corporation shall be determined by the board of
directors of the corporation.
ARTICLE 10
DIVIDENDS
The board of directors may from time to time declare, and the corporation
may pay, dividends on its outstanding stock in the manner and on the terms and
conditions provided by the Articles of Incorporation and bylaws.
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<PAGE> 19
ARTICLE 11
AMENDMENTS
All bylaws of the corporation, whether adopted by the board of directors or
the stockholders, shall be subject to amendment, alteration, or repeal, and new
bylaws may be made, except that:
No bylaw adopted or amended by the stockholders shall be altered or
repealed by the board of directors; and
No bylaw shall be adopted by the board of directors which shall require
more than the stock representing a majority of the voting power for a quorum at
a meeting of stockholders or more than a majority of the votes cast to
constitute action by the stockholders, except where higher percentages are
required by law; provided, however, that
If any bylaw regulating an impending election of directors is adopted or
amended or repealed by the board of directors, there shall be set forth in the
notice of the next meeting of the stockholders for the election of directors,
the bylaws so adopted or amended or repealed, together with a concise statement
of the changes made; and
No amendment, alteration, or repeal of this article XI shall be made except
by the stockholders.
CERTIFICATE OF SECRETARY
The undersigned does hereby certify that he is the assistant secretary of
SUREQUEST SYSTEMS, INC., a corporation duly organized and existing under and
virtue of the laws of the state of Nevada; that the above and foregoing bylaws
of said corporation were duly and regularly adopted as such by the board of
directors of said corporation at a duly convened meeting of the board of
directors of the corporation held on December 30, 1998, and that the above and
foregoing bylaws are now in full force and effect and supersede ad replace any
prior bylaws of the corporation.
DATED this 30th day of December, 1998.
/s/ CRAIG G. ONGLEY
----------------------------------------
Craig G. Ongley
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<PAGE> 1
EXHIBIT 6.1
BUSINESS PRODUCT ALLIANCE AGREEMENT
This agreement ("Agreement") is made between Achieve Healthcare Information
Systems, an Indiana corporation ("Achieve") and SureQuest Systems, Inc., a
Nevada corporation ("Company"), and is effective as of the date of execution and
delivery by both parties ("Contract Date").
RECITALS
1. Achieve has developed and markets a suite of software products known as
PathLinks (the "Software") for use by the long term care ("LTC") industry,
including skilled nursing facilities, subacute care facilities, assisted living
facilities, and retirement housing facilities ("Facilities"). Achieve is a
leading provider of software products and related services addressing the unique
needs of the LTC industry, and has established customer relationships with LTC
organizations and Facilities throughout the United States which use Achieve's
software products and/or have contracted with Achieve to acquire the right to
use the Software (all such organizations and Facilities having established
customer relationships with Achieve, "Achieve Clients").
2. The Company is a provider of a suite of software products which Achieve
has determined through market research to be useful to meeting the needs of
Achieve Clients and the LTC industry, such product or products being as follows:
dietary software (Windows version), as described in Exhibit A attached hereto
(the "Products").
3. Achieve wishes to incorporate the Products as a part of the "Enterprise
Solution" to be made available to Achieve Clients and the LTC Industry, and for
that purpose wishes to enter into a business alliance with the Company to
cooperate in marketing and the establishment/maintenance of an interface between
the Software and the Products.
4. Each party welcomes the opportunity to cooperate with the other as a
means of expanding sales of its products and services to the LTC industry.
Nothing in this agreement restricts either party from entering into
arrangements with other companies for any purpose.
5. Achieve has established a program designated as the "Certified Achieve
Partner" ("CAP") program to identify and market to Achieve Clients and the LTC
industry the products and services of superlative companies operating on a
cooperative basis with Achieve to provide, in tandem with Achieve's Software,
comprehensive systems for addressing the information technology ("IT") needs of
Achieve Clients and the LTC industry. An essential element of the CAP program is
that Achieve and each CAP, by formally recognizing the other as a provider of
high-quality goods and services which make an excellent "fit" with one another's
products and services, benefit from and add to the other's established
reputation and goodwill. Those CAPs which furnish products as well as services,
as opposed to CAPs which are strictly service providers, are designated within
the CAP program as "Business Product Allies" ("BPAs"). By this agreement, the
Company will participate as a BPA within Achieve's CAP program.
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<PAGE> 2
TERMS
1. Qualification. The Company and Achieve have each had the opportunity to
become familiar with one another's reputation and products so as to be satisfied
that establishing joint marketing efforts is mutually beneficial.
2. Interface Development. Achieve will create, based on information
provided by the Company, an interface between the Products and the Software
(the "Interface") sufficient to enable Facilities using both the Software and
the Products to obtain the maximum feasible benefit from the integration of such
software products. The Company will provide Achieve with information as
necessary for this purpose.
A. The Company will furnish Achieve with updated database
specifications as necessary hereafter to enable Achieve to maintain and modify
the Interface on a continuous basis, as the Software is hereafter modified,
without interruption of the functionality of the Interface.
B. The parties will take all appropriate action to create, test, and
implement the Interface as soon as possible. The parties will jointly solicit
Achieve Clients to act as beta sites for testing the Product and the Interface;
participating facilities will be asked to sign the standard Achieve beta
agreement.
3. Integrated Offering. After the Interface is functional, Achieve will
establish an "icon" on the "tool bar" of the launch pad screen of the Software
for the Products purchased by Achieve clients. Further, Achieve will make
specific reference on the "drop down list" as to the availability of the
Products and will use best efforts as to where to locate the reference. Further,
Achieve will promote the Products to Achieve Clients and the LTC industry as
part of a comprehensive Enterprise Solution anchored by the Software. The
purpose of the Enterprise Solution is to provide synergies between the Software
and BPA products integrated with the Software.
4. Joint Marketing. Achieve may from time to time propose joint marketing
efforts. Development of joint marketing plans and materials (and the sharing of
marketing expenses) will be subject to further agreement. Such marketing plans,
materials, cost and cost sharing to be mutually agreed upon by the Company and
Achieve.
5. Installation, Training And Support Services. The Company will market and
sell its Products to Achieve Clients and, when acceptable to an Achieve Client,
license the particular part of the Products which best meets the needs of that
Client (the portion of the Products selected by an Achieve Client is referred to
hereafter as the "Program"), on either an up front one-time payment basis or
pursuant to monthly payments. After the Program is installed at an Achieve
Client, the Company will provide training and support services as necessary for
the Achieve Client to utilize the Company's Program. Terms and charges for
provision of such services may be established by the Company in its discretion.
Achieve will have no financial involvement or interest in the
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<PAGE> 3
business relationship between the Company and the Facilities using the Products
("End Users"), however, the Company agrees to inform Achieve of the existence of
and terms of its contractual relationships with all Achieve Clients, including
without limitation the provision of a list of the names and addresses of all
Achieve Clients using the Products, to be updated as the Products are installed.
Once a Product is installed at an Achieve Client and the Company has developed a
support and business relationship with that Client, Achieve agrees that it will
not do anything to interfere with that business relationship.
6. Marketing Cooperation.
A. FAQs. To assist Achieve in promoting the Product, the Company will
provide Achieve (as soon as possible after the Contract Date, and on an updated
basis as necessary thereafter to reflect changes which may occur) with a list of
the ten most frequently asked questions on the part of users of the Product,
together with the answers to such questions.
B. Sales Leads. To the extent that current or prospective Achieve
Client express serious interest in the Products, Achieve will notify the Company
of such expressions of interest and the pertinent facts concerning such
prospective End Users as are known to Achieve and deemed likely to be useful to
the Company in pursuing such possible sales. The Company will provide Achieve
with a sales lead form to be used for collecting and providing such information
to the Company. The Company will provide training to the Achieve sales force on
the sales features and benefits of the Products and will provide a sales
commission to any Achieve salesperson who closes or refers a sale with a
prospective client to license to use the Products from the Company. Such
commission will be 10% of the gross price received by the Company for any sale
of the Product closed by Achieve or closed by the Company after a referral by
Achieve; provided, that if the terms of the sale provide for the Company to
receive installment payments, the commission will be paid in nine (9) equal
monthly installments, starting sixty (60) days after the date of sale, the total
of such installments being 10% of the normal price for the Products sold in such
sale if such Products had been sold on a cash-up-front basis for the Company's
normal price for a cash sale as of the date of the sale. All commissions will be
paid to Achieve, accompanied by written identification of the purchaser, the
date and amount of the sale, and the Achieve sales representative involved;
Achieve will be responsible for making payment to the sales representative. If
Company closes a sale without a specific referral or sales assistance from
Achieve, then no sales commission shall be paid to Achieve. Further, if the
Company provides a specific referral or sales assistance that results in closing
an Achieve PathLinks sale, then the Company shall be paid a referral fee or
commission as follows: In the USA, generally, there will be no compensation paid
except for certain situations to be determined in advance and negotiated on a
case by case basis. In Canada, the Company shall be paid 5% of site license fee
only for each sale where Company provides the principal and specific referral
and direct sales assistance except, the Company will be paid 2% of the site
license fee for sales made through or by Serca Foodservice, a major food
supplier in Canada, if an arrangement between Serca Foodservice and Achieve is
reached as a direct result of introductions made by the Company.
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<PAGE> 4
C. Marketing And Sales Guidance. Achieve will use its best efforts to
advise the Company how the Products can best be marketed and sold to the LTC
industry. Without limitation, Achieve will inform the Company of the reaction of
Achieve Clients and others in the LTC industry to the Company's Products, and
will, subject to the consent of Achieve Clients, provide the Company with
information about the needs, structure and style of LTC organizations.
D. Achieve Marketing. Achieve will continue to nurture its national
posture as a provider of software products and related services to the LTC
industry through attendance at key conferences and exposure through major public
relations vehicles (e.g., industry publications). In so doing, Achieve will
publicize its relationship with the Company and the value of the Product as part
of the Enterprise Solution anchored by the Achieve Software. The Company may be
requested to participate in joint promotional events, and will use its best
efforts to do so. Achieve will also include the Company as a Certified Achieve
Partner, in the Business Product Alliance category, in its advertising and
marketing materials, including its Internet home page.
E. Company Marketing. The Company will publicize its standing as an
Achieve BPA in advertising and marketing directed to Achieve Clients and the LTC
industry, and shall include the "Achieve CAP" logo in its advertising and
marketing materials, including its Internet home page and published advertising,
marketing brochures, and collateral materials directed to the LTC industry where
mutually beneficial to Company and Achieve.
F. Case Study. The Company will participate with Achieve in the
development of at lease one case study to be used in sales materials and for
possible publication in magazines, newsletters, and other media.
G. Internet Links. Each party will provide, on its Internet home page,
a link to the other's web site.
7. Non-solicitation. Each party agrees not to knowingly employ or utilize
as an independent contractor, directly or indirectly, on a full-time or
part-time basis, any person employed by or utilized as an independent contractor
by the other party with whom the first party has had contact in the course of
such person's duties on behalf of the other party. This prohibition shall extend
for a period of one year following termination of any such person's employment
by or contracted activities on behalf of the other party and, for persons
employed by a party when this Agreement is terminated, for one year following
termination of this Agreement. Any waiver of this provision shall be effective
only if given in writing, signed by the party waiving the right, prior to any
solicitation by the other party of the employee or agent in question, or the
commencement of any employment of such individual by such other party. This
restriction shall not apply to any individual whose employment or contractual
relationship with a party is terminated upon the initiative of such party.
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<PAGE> 5
8. Relationship Description. Neither party shall be an agent of the other.
This Agreement does not create a partnership or joint venture. Neither party
shall hold itself out as a partner or joint venturer with the other. Each party
may describe the relationship as a "strategic business alliance."
9. Notices. All notices, authorizations, consents, or the communications
required or permitted to be given hereunder shall be made in writing and shall
be deemed effective when delivered by certified mail or recognized overnight
carrier or by facsimile (followed by delivery via certified mail or recognized
overnight carrier) as follows:
if to the Company:
SureQuest Systems, Inc.
13606 TI Blvd.
Dallas, TX 75243
Attn: President
Fax: 972-238-7733
if to Achieve: with a copy to:
Achieve Healthcare Achieve Healthcare
7690 Golden Triangle Dr. 315 W. Jefferson Blvd.
Eden Prairie, MN 55344 South Bend, IN 46601
Attn: Chief Operating Officer Attn: General Counsel
Fax: 612-995-9735 Fax: 219-232-5123
Any party hereto may change its address for purposes hereof by so notifying the
other party.
10. Full Agreement, Merger, etc. This Agreement contains the whole
understanding of the parties with respect to the subject matter hereof and
supersedes all prior oral or written representations and agreements between the
parties relating thereto except for the Confidentiality and Non-Disclosure
Agreement executed by Achieve on January 28, 1999 and by the Company on January
30, 1999. This Agreement may not be varied except by a writing duly executed by
both parties. If any clause or provision of this Agreement shall be deemed
illegal, invalid or unenforceable under present or future laws effective during
the term of this Agreement, the remainder of this Agreement shall not be
affected by such illegality, invalidity or unenforceability, and in lieu of each
clause or provision of this Agreement that is illegal, invalid or unenforceable,
there shall be added as a part of this Agreement a clause or provision as
similar in terms to such illegal, invalid or unenforceable clause or provision
as may be possible and be legal, valid and enforceable.
11. Assignment. Neither party to this Agreement may assign its rights or
obligations under this Agreement without the express written consent of the
other party, which consent shall not be unreasonably withheld, except that
obligations under this Agreement may be provided or fulfilled by any parent,
subsidiary, affiliate, successor corporation, or subcontractor of a party, and
the rights of a party may be assigned thereto,
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<PAGE> 6
so long as such party retains full responsibility for such obligations. For
purposes hereof, successor corporation" shall include any corporation,
partnership or business entity acquiring substantially all the assets or stock
of a party to this Agreement, provided that the "successor corporation" is not a
competitor of the other party.
12. Ownership Of Software And Products. Each party hereby acknowledge that
the Software and the Products are the property of Achieve and the Company,
respectively, and incorporate valuable copyrights and trade secrets of such
parties and that each party shall have exclusive proprietary rights in the
Software and the Products and in all modifications and additions thereto and
versions thereof, including all copyrights, trade secrets and other proprietary
concepts, ideas, know-how and information incorporated therein. Neither party
will attempt to reverse engineer, disassemble, decompose, modify, amend, or
similarly manipulate all or any portion of the Software or the Products or any
property rights of the other, provided that the parties may create an interface
between the Software and the Products as set forth in Section 2 above, but may
not otherwise incorporate the software systems of the other into their own
software. Neither party will do or suffer to be done at any time any act or
thing which may in any way adversely affect any rights of the other.
13. Term Of This Agreement.
A. This Agreement shall become effective as of the Contract Date and
shall continue in effect for a period of five (5) years from the Contract Date
("Initial Term") and from year to year thereafter so long as neither party
terminates this Agreement in accordance with its terms.
B. Either party may terminate this Agreement with or without cause by
giving written notice at least ninety (90) days prior to the termination of the
Initial Term or prior to the termination of any renewal term thereafter.
C. The termination of this Agreement shall not affect the rights or
obligations of either Achieve or the Company under any executed license
agreement, which either may have with an Achieve Client.
14. Amendments. This Agreement may not be amended or modified by the
parties except be a further written agreement.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to conflicts of
law principles.
16. Dispute Resolution. All disputes arising under this agreement shall be
resolved in accordance with the following provisions.
All disputed matters shall be referred first to an officer of Achieve and
an officer of the Company who can contractually commit their respective
companies. In the event such officers cannot resolve a dispute, either party may
request the matter to be submitted to binding arbitration in Dallas, Texas, if
Achieve is the requesting party, and in
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<PAGE> 7
and conditions of this Agreement; and (iv) may require such procedures as
discovery and the submission of written briefs;
B. Require the testimony to be transferred;
C. Require the award to be accompanied by findings of fact and a
statement of reasons for the decision, and
D. Require the award to include reasonable attorney's fees and costs.
Judgment upon any award made in such arbitration may be entered and enforced in
any court of competent jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement upon
the date first written above.
SUREQUEST SYSTEMS, INC. ACHIEVE SOFTWARE CORPORATION
d/b/a ACHIEVE HEALTHCARE
INFORMATION SYSTEMS
By: /s/ C. SCOTT SYKES JR. By: /s/ J. CHRISTIAN HAWVER
-------------------------- ----------------------------
C. Scott Sykes Jr. J. Christian Hawver
President Chief Marketing Officer
Date: July 16, 1999 Date: July 30, 1999
-------------------------- ----------------------------
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EXHIBIT A
<TABLE>
<S> <C> <C>
PRODUCT NAME: Three Squares(R)
DEVELOPMENT SYSTEM: Centura's Scalable Application Language (SAL) using
Gupta SQL Windows (16 bit single user) Centura Team
Developer (32 bit multi-user)
DATABASE ENGINE: Centura's SQL Base
PRODUCT DESCRIPTION: SureQuest's Three Squares(R) is a Microsoft
Windows(R) based software program that provides a
total management solution for healthcare and other
institutional food service environments. Three
Squares is available as single function group modules
and as a fully integrated series of modules designed
to offer a complete suite of solutions for dietary
and food service professionals.
PRODUCT FEATURES: o Completely integrated modules
o Meets all resident food preferences
o Generates food specific tray menus
o Provides complete nutritional analysis
o Active weight change alerts and history
o Maintains perpetual inventories
o Budget to expenditure comparison
o Automatically generates purchase orders
o Evaluates menu, recipe and meal cost
o Interfaces with most food distributors
</TABLE>
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<PAGE> 9
ACHIEVE HEALTHCARE INFORMATION SYSTEMS
SUREQUEST SALES LEAD FORM
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FACILITY INFORMATION===================================================================================
Check here if
Facility Name [ ] Part of Chain? (complete Corporate Information below)
--------------------------------
Address City State Zip
--------------------------------------- ------------------ --------- --------------
Telephone Fax Web Site
------------------------------------ ------------------ ------------------------
Facility Type: [ ]LTC [ ]Assisted Living [ ]CCRC [ ]Acute [ ]Other
------------------------
No. Beds Menu Type(s) [ ]Non-Select [ ]Select [ ]Cafeteria [ ]Catering [ ]Meals on Wheels
------
Contact Person Title
------------------------------------- -------------------------------------------
Telephone [ ]Same Ext. Email
--------------------------- ------------------ ----------------------------
Other Contact Title
------------------------------------- -------------------------------------------
Telephone [ ]Same Ext. Email
--------------------------- ------------------ ----------------------------
Does facility currently use a Dietary Program? [ ] No [ ] Yes - Product
-------------------------
What priority benefits is client seeking?
--------------------------------------------------------------
Existing Achieve Client? [ ] Yes [ ] No Achieve Product
--------------------------------------------
CORPORATE INFORMATION==================================================================================
Corporate/Owner Name [ ]Same
------------------------------------------------------------------------
Address City State Zip
--------------------------------------- ------------------ --------- --------------
Corporate Contact Person Title
------------------------------- ---------------------------------------
Telephone Ext. Fax
------------------------------------ ------------------ ----------------------------
Additional Facilities Owned/Managed: Number Type
--------------------------- ---------------------------
ACHIEVE SALES PERSON INFORMATION=======================================================================
Lead Submitted by Date Submitted
----------------------------------------------------- -----------------
Comments
-----------------------------------------------------------------------------------------------
- - - - - - - - -------------------------------------------------------------------------------------------------------
- - - - - - - - -------------------------------------------------------------------------------------------------------
- - - - - - - - -------------------------------------------------------------------------------------------------------
</TABLE>
PLEASE FAX COMPLETED SALES LEAD FORM TO: SUREQUEST SYSTEMS, 972-238-5479
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<PAGE> 1
EXHIBIT 6.2
[SUREQUEST LETTERHEAD]
PROPOSAL:
BEN E. KEITH COMPANY
Service Bureau for Healthcare
Provided by:
SUREQUEST CUSTOM SOLUTIONS
INITIALIZATION FEE: (One-Time Fee) $18,000
Master Ben E. Keith Product/Ingredient File*
Master Recipe File
Master Menu File
* This proposal is contingent on the premise that all branches use the
same standardized item numbers to identify products.
* This proposal is contingent on participation of all (7) Ben E. Keith
branches.
TRAINING: TWO (2) Sessions (1 day each) "Train the Trainer" Program
To be conducted at Ben E. Keith's Corporate Training Center or at a
location(s)* chosen by Ben E. Keith.
* Training conducted outside of Dallas or Tarrant County(s) will
require reimbursement to SureQuest for trainers' travel and expenses.
Representation from each branch (Maximum 2 per branch)
** Additional training as needed; where needed @ $300.00/day plus
trainers' travel and expenses.
BRANCH FOOD SHOWS:
In order to facilitate a closer working relationship with sales
personnel and promote the marketing effort of the service provided,
SureQuest will participate in ONE Branch Food Show Per Year per Branch.
There will be no additional charges to Ben E. Keith Company for these
events. There should be no charge to SureQuest for "booth space" at
these shows.
SALES MEETINGS: "WORK-WITH" ARRANGEMENTS: SPECIAL PRESENTATIONS:
Scheduled as needed @ $300/day plus trainers' travel & expenses. If a
branch does not hold a Food Show or so chooses, the branch may elect to
substitute a "No Charge Work-With", etc. for the "No Charge Food Show".
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<PAGE> 2
TRADE SHOWS:
SureQuest will participate in TWO major "Trade Show" events of Ben E.
Keith Company's choice per year. There will be no charge to Ben E.
Keith Company for SureQuest's participation. Additional "Trade Shows"
requested by Ben E. Keith Company will be charged at a fee of $300/day
plus travel and expenses incurred. There should be no charges to
SureQuest for booth or other trade show expenses.
================================================================================
MONTHLY SERVICE CHARGES:
BRANCH MAINTENANCE/SERVICE CHARGE: /mo/Branch
The minimum combined Branch Maintenance/Service charge will be no less than
/month.)
Maintain Branch Recipe & Menu Files
Maintain Branch Price updates
Maintain (800) Information Line
Submit a "Buying Worksheet" Listing
(As required by Account/Plan)
Deliver Print-Outs to Branches
(Monthly or as Required by Plan)
ACCOUNT CHARGES: (See Detail on Attached Sheet)
Standard Menu Plan /mo/Account
Flex Menu Plan /mo/Account
Custom Menu Plan /mo/Account
All "Menu Plans" are based on 28 Day Menu Cycle, changed and printed
semi-annually. All "Menu Plans" include NUTRITIONAL ANALYSIS, COST ANALYSIS,
DAILY MENU GUIDES FOR DIET MODIFICATIONS AND A PRODUCTION RECIPE BOOK.
OPTIONAL ACCOUNT SERVICES & CHARGES:
Monthly Print Outs /mo/Account
Individualized Order Guide /mo/Account
Individualized Daily Production Guide /mo/Account
Include Snacks in Menu /mo/Account
Menus for Holidays & Special Days /mo/Account
Extra Diet Modifications* Ea/mo/Account
* Not available on "Standard Plan"
CUSTOM NUTRITIONAL ANALYSIS SERVICE: (See Attached for Details)
General Menu /Day/Account
Diet Modifications (after General) /Diet/Day/Account
Recipes /Recipe/Account
33
<PAGE> 3
The above listed prices shall remain in force for one calendar year (12 months)
from the date of this agreement. SureQuest will have the option of increasing
these prices at the end of calendar year by an amount not to exceed TEN PERCENT
(10%) per annum per item.
ADMINISTRATION
DELIVERY:
Menus & supporting materials for each account will be packaged and identified
and delivered to the appropriate Ben E. Keith Branch a minimum of five delivery
days prior to the end of each month. It will be Ben E. Keith's responsibility to
insure the delivery of the materials to each account prior to the end of the
month. Time is of the essence in this contract. Failure of Ben E. Keith to
deliver prior to the end of the month which necessitates delivery by SureQuest
to an account will result in charge to the responsible branch office of a $50.00
"reprint fee" plus shipping charge(s).
TERMS:
Initialization Fee is to be paid to SureQuest upon agreement and before work can
begin on building Master Files.
Branch Monthly Service/Maintenance Fees are due on the first day of the month
following the date of the agreement. In the event the date of the agreement
falls within the last ten days of the month of the agreement, the first monthly
fees will be due on the first day of the second month following the date of the
agreement. All subsequent monthly fees are due on the first of each month.
The first month's Account Service Fees are due upon submission of the account to
SureQuest for Service. All subsequent monthly account fees are due on the first
of the month following the first month's service. With the exception of the
"Standard Menu Plan" a MINIMUM of THREE MONTHS service charges will be required
for each account.
A "Re-Instatement Fee" will be charged to any account which
"discontinues" the service within a six month cycle, and wishes to
resume the service within a ONE YEAR PERIOD. The re-instatement fee
will the equivalent of the monthly fees that would have been charged
during that cycle.
All material provided to the Ben E. Keith Company by SureQuest remains the
property of SureQuest and may not be reproduced or distributed without the
knowledge and written consent of SureQuest. This is not to limit an account
"registered" with SureQuest from the ability to reproduce the materials as
needed to perform daily operations.
SureQuest will invoice each Ben E. Keith Branch individually for the amounts due
each month.
34
<PAGE> 4
INDEMNITY:
SureQuest warrants that all data pertaining to the nutritional value of foods
used within the system has been obtained or will be obtained from nutritional
databases maintained and warranted by the manufacturer of third party software
sources, manufacturers of food items, governments publications on the
nutritional value of foods, independent laboratory analysis or from such other
sources which in the opinion of SureQuest are recognized as credible, and that
to the best of SureQuest's knowledge, information and belief, all such data is
accurate and current. SureQuest further warrants that all nutrient information
pertaining to manufacturers' food items, including tradename items, have been
obtained from manufacturers's published information on the nutrient values and
were assumed to be public domain. Brand names are used only to help in food
identification and not to promote or endorse products.
In no event will SureQuest be liable for any injury due to the negligence of Ben
E. Keith Company and/or any Account of Ben E. Keith Company subscribing to this
service. Ben E. Keith agrees that it will indemnify and hold harmless SureQuest
from any action for negligence or in tort or contract and that the Ben E. Keith
Company will provide a defense which shall include all attorney fees, direct and
indirect expenses incurred because of any said claims for negligence arising
pursuant to this agreement. It is not, however, the intention or agreement of
the parties that Ben E. Keith Company indemnify or hold harmless SureQuest from
such part of any injuries, liability or damages which is attributable to its own
(i.e. SureQuest's own) negligence.
SERVICE INTERRUPTION:
In order to secure Ben E. Keith against interruption of service, SureQuest
agrees to provide to Ben E. Keith and maintain current one copy of the
"SureQuest System", which is defined as all software, firmware, data, databases,
source code, algorithms, printed instructions, procedure manuals, operating
manuals, technical manuals, technical specifications and other materials which
are (1) used or to be used by SureQuest in providing to Ben E. Keith the
services and goods contracted for herein or which are (2) necessary for the
operation of, utilization of, understanding of, or full or efficient operation,
utilization or understanding of the materials set forth in the preceding item.
All software, firmware, data, and data bases shall be provided upon machine-
readable magnetic media in the format used by SureQuest. The following materials
shall not, however, be provided as part of the SureQuest System:
(A) any non-proprietary materials, if the assignment to Ben E. Keith or
licensing to Ben E. Keith of those materials would be a violation of
any copyright, patent, trademark or other law or agreement, provided
however that a written list will be provided to Keith and kept current
of any materials which would be provided to Keith
35
<PAGE> 5
but for this clause and such list shall contain a sufficient
description of the materials by function, name of materials, name,
address and telephone number of owner or licensing agent, version or
release number, and the like, sufficient for Ben E. Keith to be able to
precisely identify both the materials and the owner or licensing agent
thereof and provided further that this exception shall not apply to any
materials in which SureQuest has any degree of ownership or proprietary
interest, or
(B) any hardware, provided, however, that a written list will be
provided to Keith and kept current of the brand names, configuration
and technical specifications of all computers, printers, and other data
processing hardware, if any, used by SureQuest in it operations for
providing services to Ben E. Keith.
The obligation of SureQuest maintain the SureQuest System in a current form
shall not require updating such material more often than one time per calendar
month. There shall be no obligation on the part of SureQuest to update such
material which has not changed during the prior calendar month. SureQuest shall
be under no obligation to provide any part of the SureQuest System to Ben E.
Keith until after the first delivery of menus and supporting materials to Ben E.
Keith. The SureQuest System will be delivered to Keith within NINETY (90) days
after the first delivery of menus and supporting materials, and shall be
delivered into the care of Keith's Data Processing Department at 601 East
Seventh Street, Fort Worth, Texas 76102 (mailing address P.O. Box 2628, Fort
Worth, Texas 76113). All update materials shall be provided to keith's Data
Processing Department at that address or to such other address as may hereafter
be provided to SureQuest by Keith. No charge will be made to Keith by SureQuest
for providing or keeping current the SureQuest System.
Ben E. Keith Company is hereby granted a nonexclusive, nontransferable license
for the possession of the SureQuest System, but such license shall be limited to
the right to possess the SureQuest System and Ben E. Keith Company shall have no
right to use the SureQuest System for any purpose (other than to verify its
existence and completeness) except in the event that SureQuest fails or becomes
unable at any time to fulfill its obligations under this contract or any
extension or renewal hereof. In the event that SureQuest fails or becomes unable
at any time to fulfill its obligations under this contract or any extension or
renewal hereof (and without regard to whether such failure or inability
constitutes a breach of contract), then Ben E. Keith Company may at no charge or
cost to Ben E. Keith both possess and use the SureQuest System to continue to
provide the services to the customers of Ben E. Keith which would have otherwise
been provided by SureQuest under the terms hereof, together with such new or
additional customers which Keith desires to add, renew or reinstall. Failure by
SureQuest to perform the services under this agreement due to a breach by Ben E.
Keith Company, does not entitle
36
<PAGE> 6
Ben E. Keith Company to the use and continued possession of the SureQuest
System. In such an event, all copies of the SureQuest System will be returned to
SureQuest. Ben E. Keith will cease all use of the SureQuest System should
SureQuest fully resume its obligations under the contract prior to the final
expiration or termination thereof.
In the event that Ben E. Keith should, under the provisions of the preceding
paragraph, become authorized hereby to use the SureQuest System, then Ben E.
Keith may make such modification and alternations to and make such copies and
installations of the SureQuest System as are required in the sole judgment of
Ben E. Keith to enable Ben E. Keith to make efficient use of such System.
Nothing in this paragraph is intended, however, to allow Ben E. Keith to
transfer or assign its license to any other person, or to use the SureQuest
System for any other purpose than for which it was intended under the terms of
this agreement.
Upon final expiration or termination of this contract without breach or default
by SureQuest, the current copy and all supporting materials which make up the
SureQuest System, excluding any data which belongs to Ben E. Keith, shall be
returned to SureQuest and no copies of the System shall be retained by Ben E.
Keith.
NON DISCLOSURE:
Ben E. Keith and SureQuest shall at all times keep strictly confidential the
proprietary business information of the other party, including without
limitation item, price, and customer information provided to SureQuest by Keith
and including without limitation the source code, algorithms, and other
technical specifications relating to the SureQuest System provided by SureQuest
to Keith. Neither Ben E. Keith nor SureQuest shall release proprietary
information belonging to the other part to any person not an employee or
contractor of their respective companies without the knowledge and written
consent of the owner of such information.
37
<PAGE> 7
Term of This Agreement:
This agreement will remain in force for a minimum of TWELVE (12) months and
continue "open-ended" after that time. Either party may cancel this agreement by
written notification given SIXTY (60) days prior to the effective date of such
cancellation, but no such notice may reduce the initial term of this contract to
less than TWELVE (12) months.
Submitted: Accepted:
/s/ T. J. SUDDERTH /s/ ALMA SUDDERTH /s/ J. MICHAEL ROACH
- - - - - - - - ------------------------------------- ---------------------------
T. J. Sudderth (Signature)
SureQuest Systems J. Michael Roach
201 Bellmeade Dr. ---------------------------
Garland, Texas 75040 (Name)
Senior Vice President
---------------------------
(Title)
Ben E. Keith Company
P.O. Box 2628
Fort Worth, Texas 76113
March 30, 1990 March 30, 1990
- - - - - - - - -------------- --------------
(Date) (Date)
38
<PAGE> 8
[BEN E. KEITH FOODS LOGO]
BEN E. KEITH OFFERS: SUREQUEST SYSTEMS
MENU & FOOD COST CONTROL SERVICE
================================
<TABLE>
<CAPTION>
==================================================================================
STANDARD MENU PLAN FLEX MENU PLAN CUSTOM MENU PLAN
------------------ -------------- ----------------
CYCLE CHANGED SEMI-ANNUALLY
- - - - - - - - ----------------------------------------------------------------------------------
<S> <C> <C>
28 DAY MENU CYCLE 28 DAY MENU CYCLE 28 DAY MENU CYCLE
NUTRITIONAL ANALYSIS NUTRITIONAL ANALYSIS NUTRITIONAL ANALYSIS
COST ANALYSIS COST ANALYSIS COST ANALYSIS
DAILY MENU GUIDES FOR DAILY MENU GUIDES FOR DAILY MENU GUIDES FOR
DIET MODIFICATIONS DIET MODIFICATIONS DIET MODIFICATIONS
RECIPE BOOK (25/50/100) RECIPE BOOK (CHOICE) RECIPE BOOK (CUSTOM)
------------------
ALLOWS CLIENT TO ------------------------
CHANGE: COMPLETELY CUSTOMIZED
MENU ITEMS TO CLIENT'S REQUIREMENTS
RECIPES ------------------------
DIET MODIFICATIONS
------------------
- - - - - - - - ----------------------------------------------------------------------------------
OPTIONAL ADDITIONAL SERVICES
- - - - - - - - ----------------------------------------------------------------------------------
MONTHLY PRINT OUTS MONTHLY PRINT OUTS MONTHLY PRINT OUTS
(STANDARD - SEMI-ANNUAL) (STANDARD - SEMI-ANNUAL) (STANDARD - SEMI-ANNUAL)
INDIVIDUALIZED ORDER INDIVIDUALIZED ORDER INDIVIDUALIZED ORDER
GUIDE GUIDE GUIDE
INDIVIDUALIZED INDIVIDUALIZED INDIVIDUALIZED
DAILY PRODUCTION DAILY PRODUCTION DAILY PRODUCTION
GUIDES GUIDES GUIDES
INCLUDE SNACKS IN MENU INCLUDE SNACKS IN MENU INCLUDE SNACKS IN MENU
MENUS FOR MENUS FOR MENUS FOR
HOLIDAYS / SPECIALS HOLIDAYS / SPECIALS HOLIDAYS / SPECIALS
ADD DIET MODIFICATIONS ADD DIET MODIFICATIONS
==================================================================================
SUREQUEST SYSTEMS ALMA SUDDERTH, MS, RD
P.O. BOX 450083 TIM SUDDERTH
GARLAND, TEXAS 75045
(214)495-6765 OR (800)383-1999 [SUREQUEST SYSTEMS LOGO]
==================================================================================
</TABLE>
39
<PAGE> 9
[BEN E. KEITH FOODS LOGO]
OFFERS:
SUREQUEST SYSTEMS
MENU & FOOD COST CONTROL SERVICE
================================
- - - - - - - - --------------------------------------------------------------------------------
CLIENT:
-------------------------------------------------------
CONTACT PERSON:
-------------------------------------------------------
ADDRESS:
-------------------------------------------------------
CITY, STATE, ZIP:
-------------------------------------------------------
PHONE: DATE:
---------------------------------- --------------
================================================================================
NUMBER OF RESIDENTS:
DIET TYPES: NUMBER FED
================================================================================
GENERAL REGULAR
- - - - - - - - --------------------------------------------------------------------------------
MECHANICAL
- - - - - - - - --------------------------------------------------------------------------------
BLAND
- - - - - - - - --------------------------------------------------------------------------------
PUREED
- - - - - - - - --------------------------------------------------------------------------------
NO ADDED SALT
- - - - - - - - --------------------------------------------------------------------------------
2 GM SODIUM
- - - - - - - - --------------------------------------------------------------------------------
LOW FAT - LOW CHOLESTEROL
- - - - - - - - --------------------------------------------------------------------------------
1000 CAL ADA
- - - - - - - - --------------------------------------------------------------------------------
1200 CAL ADA
- - - - - - - - --------------------------------------------------------------------------------
1500 CAL ADA
- - - - - - - - --------------------------------------------------------------------------------
1800 CAL ADA
- - - - - - - - --------------------------------------------------------------------------------
2000 CAL ADA
- - - - - - - - --------------------------------------------------------------------------------
- - - - - - - - --------------------------------------------------------------------------------
- - - - - - - - --------------------------------------------------------------------------------
- - - - - - - - --------------------------------------------------------------------------------
INDICATE TYPE OF MENU PLAN & OPTIONS:
<TABLE>
<S> <C> <C>
[ ] STANDARD MENU PLAN [ ] FLEX MENU PLAN [ ] CUSTOM MENU PLAN
[ ] Monthly Print Outs [ ] Individualized Order Guide [ ] Individualized
Daily Production Guide
[ ] Include Snacks in Menu [ ] Holidays / Specials Menus [ ] Additional Diet
Modifications
</TABLE>
SEE ATTACHED FOR DESCRIPTIONS OF INDIVIDUAL PLANS
FOR ADDITIONAL INFORMATION CALL:
JANET HENDRIX, MS, RD, LD AT BEN E. KEITH COMPANY (817)332-9171
OR ALMA (RICE) SUDDERTH, MS, RD, LD AT SUREQUEST SYSTEMS (800)383-1999
40
<PAGE> 1
EXHIBIT 6.3
AMENDMENT TO
PURCHASE AND SOFTWARE LICENSE AGREEMENT
This Amendment, dated October 1, 1999, (the "Amendment") amends and supplements
the Purchase and Software License Agreement, dated July 27, 1998 (the "Original
Agreement"), by and between Food Services of America, Inc., a Delaware
Corporation located at 4025 Delridge Way, S.W., Suite 400, Seattle, Washington
98106 ("FSA"), and SureQuest Systems, Inc. a Nevada Corporation located at 13606
TI Blvd., Dallas, TX 75243 ("SureQuest").
WHEREAS, the Original Agreement recited that FSA would provide
SureQuest's Service Bureau to at least ___________________ accounts and
SureQuest's pricing, in the Original Agreement, for the Service Bureau
business was based on this commitment; and
WHEREAS, FSA was actually only able to provide SureQuest's Service
Bureau to approximately ________________ accounts; and
WHEREAS, FSA and SureQuest agree that SureQuest will waive FSA's
inability to provide the Service Bureau to ____________________
accounts, if FSA agrees to acquire additional software licenses in each
of the next three (3) years.
NOW, THEREFORE, in consideration of the mutual promises and
undertakings herein after set forth, FSA and SureQuest hereby agree as
follows:
Section 1. The term "Agreement" as used in the Original Agreement is hereby
amended to mean the Original Agreement, as amended and supplemented by this
Amendment. All other capitalized terms used in this Amendment shall have the
meanings ascribed to them in the Original Agreement.
Section 2. The paragraph entitled "Additional licenses" on page 5 of the
Original Agreement is hereby amended in its entirety to read as follows:
"Additional Licenses:
FSA hereby agrees as follows:
(a) To acquire, on or before October 15, 1999, twenty-five (25)
licenses of the FirstLink Software at a license fee of ______________
_________________________________ per license, for a Total Purchase
Price of _________________________________________, plus taxes, if
applicable, subject to the following terms:
Terms: FSA agrees to wire transfer or send a check in the
amount of ________________________________________ to be
applied to the Total Purchase Price, such that the funds are
received by SureQuest on or before October 15, 1999. FSA
further agrees to pay the remaining balance of the Total
Purchase Price, ____________________________________, plus
taxes, if applicable, such that the funds are received by
SureQuest on or before January 5, 2000.
41
<PAGE> 2
(b) FSA further agrees to acquire additional licenses of the FirstLink Software
at a license fee of ________________________________________________ per
license, plus taxes, if applicable, as follows:
<TABLE>
<CAPTION>
Placement Year Minimum Commitment Required Payment Date
-------------- --------------------- ---------------------
<S> <C> <C>
10/15/00-10/14/01 30 FirstLink Systems 10/15/00
10/15/01-10/14/02 30 FirstLink Systems 10/15/01
10/15/02-10/14/03 30 FirstLink Systems 10/15/02
</TABLE>
FSA may acquire the above licenses, one or more at a time, and payment shall be
made in accordance with the Original Agreement for each such acquisition;
provided, however, that full payment shall have been made and received by
SureQuest for each year's commitment no later than the Required Payment Date (as
defined above). FSA shall endeavor to place in operation, during the Placement
Year subsequent to the required Payment Date, the licenses acquired and paid for
by such Required Payment Date. If FSA acquires more than ___________ FirstLink
Software systems prior to the Required Payment Date of each year, the
acquisition price for each system in excess of ___________ shall be _____
_______________________________________________, equal to a ___ percent (___)
discount off the ______ license price.
If FSA does not acquire all ___________ additional licenses by the Required
Payment Date of each year, the failure to do so shall not constitute a default
under the Original Agreement but, because of that failure, the license fee of
the FirstLink Software for that year's commitment shall increase to SureQuest's
then retail "list" price for the Three Squares(R) product (currently, the retail
list price is _______________________________________________________________
for the non-select menu Three Squares(R) product and ____________________
_______________________________________ for the select menu Three Squares(R)
product). To the extent that FSA did acquire some licenses for ______________
_____________________________________, but did not acquire all ___________
licenses in such Acquisition Year to retain the ________________________________
___________________ price, FSA shall pay to SureQuest, no later than the
applicable Required Payment Date, the difference between the _________________
_________________________________ license fee and SureQuest's then retail list
price, at October 1 of the appropriate year, for each license so acquired at the
____________________________________________________ price.
Furthermore, if FSA does not acquire all ___________ licenses by the Required
Payment Date, then FSA agrees as follows: (i) that FSA shall pay to SureQuest
__________________________________________ for ___________________ Service
Bureau accounts even if FSA does not have ___________________ Service Bureau
account customers. Any amounts paid by FSA to SureQuest for Service Bureau
Services pursuant to Section 8 of the Original Agreement shall be included in
this amount, as the intent of this provision is to have FSA pay for three
not acquire all of the additional software licenses committed to above; and (ii)
that SureQuest
42
<PAGE> 3
shall no longer be required to support and maintain the FirstLink
Software as a private label product and that all software systems
acquired by FSA as FirstLink shall be converted to SureQuest's Three
Squares(R) software product and SureQuest shall support and maintain
the Three Squares(R) product as it did the FirstLink Software".
Section 3. The paragraph entitled "Software Support" on page 6 of the Original
Agreement is hereby amended in its entirety to read as follows:
"Software Support. SureQuest agrees to provide, for all licenses
acquired by FSA pursuant to this Agreement, software support for FSA
and/or FSA customers, including semi-annual database updates for each
Branch, upgrades (as available from time to time) and technical support
pursuant to a toll free line. The cost to have these services available
(even if some are not actually used) is ______________________________
______ per month per license acquired; provided that this monthly price
is conditioned on FSA's customers having the appropriate hardware and
dataline (see Section 10 below). The charge for these services shall
commence in the month following the date of acquisition and shall be
payable on or before the tenth (10th) day of that and every succeeding
month during the Term (as defined in Section 15); provided, however,
that for the additional licenses acquired by FSA pursuant to Section 2
of this Amendment, FSA shall pay the above support fee as follows:
(a) for each license acquired pursuant to subparagraph (a) of Section 2
above, FSA shall commence payment of the support fees as each FirstLink
Software is placed in operation with an FSA customer but in any event
the support fees for all ________________ licenses so acquired shall
commence on March 1, 2000 and be payable on the first of every
succeeding month thereafter during the Term even if all such
________________ licenses are not placed in operation with an FSA
customer.
(b) for each license acquired pursuant to subparagraph (b) of Section 2
above, FSA shall commence payment of the support fees in the month
following the date that each FirstLink Software is placed in operation
with an FSA customer and such support fees for such "placed" Software
shall be payable on or before the tenth (10th) day of that and every
succeeding month during the Term. If all ___________ licenses are not
acquired by FSA the October 15 of the Acquisition Year or if all such
___________ licenses are so acquired but not all ___________ are placed
in operation with an FSA customer by March 1 of the succeeding
Acquisition Year, FSA shall nevertheless commence payment of the
support fees on all ___________ licenses on March 1 of the succeeding
Acquisition Year, just as if all such licenses had been acquired or
placed in operation by that date.
Section 4. The first two sentences in the paragraph entitled "Existing Accounts"
in Section 8 of the Original Agreement are hereby amended in their entirety to
read as follows:
43
<PAGE> 4
"Existing Accounts. FSA has at least ________ , _________ food service
customers which could be benefit from SureQuest's Service Bureau. FSA
agrees to provide, as a value-added service and for the duration of the
Agreement, the Service Bureau to at least __________________
(_____________ ) accounts."
Section 5. All other provisions of the Original Agreement shall continue in full
force and effect.
IN WITNESS WHEREOF the parties hereto have caused this Amendment to be
duty executed by their respective officers, who are duty authorized, as of the
date first written above.
FOOD SERVICES OF AMERICA, INC. SUREQUEST SYSTEMS, INC.
By: /s/ DOUGLAS HUTTENSTINE By: /s/ C. SCOTT SYKES JR
---------------------------- -----------------------
Douglas Huttenstine C. Scott Sykes Jr
---------------------------- -----------------------
Name Name
V.P Business Development President
---------------------------- -----------------------
Title Title
44
<PAGE> 5
SUREQUEST SYSTEMS, INC.
[LOGO]
================================================================================
PURCHASE & SOFTWARE
LICENSE AGREEMENT
PREPARED FOR
================================================================================
FOOD SERVICES OF
AMERICA, INC.
- - - - - - - - --------------------------------------------------------------------------------
45
<PAGE> 6
PURCHASE AND SOFTWARE LICENSE AGREEMENT
This Purchase and Software License Agreement (the "Agreement") is
entered into this 27th day of July 1998, by and between Food Services of
America, Inc., a Delaware Corporation located at 4025 Delridge Way, S.W., Suite
400, Seattle, Washington 98106 ("FSA"), and SureQuest Systems, Inc, a Nevada
Corporation located at 13606 Floyd Rd., Dallas, TX 75243 ("SureQuest").
WHEREAS, SureQuest has acquired the assets and business of Positive
Input, Inc, a Michigan corporation (now known as PIC of Michigan, Inc.) (such
assets and business so acquired by SureQuest is herein known as "PIC"); and
WHEREAS, PIC has developed, and SureQuest has acquired, a nutrition
management software program known generally as "Three Squares(R)"; and
WHEREAS, SureQuest, prior to the acquisition of PIC, also provided and
still provides a nutrition management software program and provides a leading
menu service; and
WHEREAS, FSA desires to offer various levels of nutrition management
software programs and menu services for use by FSA customers as a value-added
service and desires to license the Software defined below.
NOW, THEREFORE, in consideration of the mutual promises and
undertakings hereinafter set forth, FSA and SureQuest do hereby agree as
follows:
Section 1. Definitions. Unless specifically stated otherwise, for the
purposes of this Agreement, the following terms shall be defined as follows:
Branch. Branch means one of the FSA geographic service areas generally
known as, and containing the current territories as set forth on
Schedule 1. The parties understand that FSA may have a geographic
service area, that while not designated as a Branch, may receive, and
be billed for, Software and Service Bureau services under this
Agreement but will not have separate menus or data bases.
PIC Software. The PIC Software which is the subject of this Agreement
includes the single-user versions of the "Non-Select Menu Management
Module" and the "Inventory/Purchase Control Module", which are
components of PIC's Three Squares(R) food service nutrition management
software program, whether sold under Three Squares(R) or another name.
46
<PAGE> 7
SureQuest Software. The SureQuest Software, which is the subject of
this Agreement, includes the single-user version of SurePref(TM) and
SureMenu(TM) with Nourishments.
Software. Software means, collectively, the PIC Software and the
SureQuest Software.
SureQuest. SureQuest means, collectively, the (i) SureQuest
organization as it existed before and continues after the acquisition
of PIC and (ii) the assets, business and personnel of PIC which has
been acquired by SureQuest.
Service Bureau. The Service Bureau is the SureQuest menu service
provided prior to the acquisition of PIC. (Service Bureau may factor in
mutually agreed on features from PIC Service Bureau.)
Licensed Materials. Licensed Materials shall mean the User's Manual and
such other documentation as is generally provided, in written and
electronic medium, by SureQuest for use with the Software and the
Service Bureau.
Maintenance. Changes to the Software that SureQuest deems necessary to
maintain and enhance its performance and "fixes" that FSA identifies.
Section 2. Summary of Business Relationships. FSA and SureQuest hereby
enter into a five (5) year business relationship, which shall be deemed to begin
July 27, 1998 and continue through and including July 26, 2003, unless
terminated earlier as provided below (See Section 15). FSA agrees to pay
SureQuest a one-time license fee of _______________________________________
__________, less _______________________________________ previously paid to PIC,
for the development of a private label software product and certain other
services and benefits (See Section 3). FSA also agrees to purchase licenses for
___________ copies of the PIC Software at a discounted price and further agrees
to purchase an additional ___________ licenses at a further discounted price as
set forth below during the Term of this Agreement (see Section 4). In addition,
SureQuest has agreed to provide two (2) levels of its SureQuest Software
pursuant to a monthly payment arrangement (see Section 5) and to provide several
different levels of its Service Bureau to certain of FSA's Branches (See Section
8). Also included in this Agreement are technical support, maintenance, data
base management, training and, to the extent requested by FSA, custom
programming.
Section 3. FirstLink and Other Services. At the time of execution and
delivery of this Agreement (the "Closing"), FSA shall pay to SureQuest, by
either corporate check or wire transfer, a one time license fee of ___________
______________________________________, less _____________________________
_________ previously paid to PIC, for a net amount due at Closing of ___________
__________________________ ("FirstLink License Fee"). The payment of this amount
entitles FSA to receive, and SureQuest hereby agrees to provide, the following:
47
<PAGE> 8
FirstLink. SureQuest shall license, on a non-exclusive basis, the PIC
Three Squares(R) program to be used by FSA as a private label product
under the name FirstLink (the "FirstLink Software"). FSA shall have the
right to place "FirstLink" with its food service customers and the
placement by FSA of the FirstLink product shall be called the
"Signature Level". The private labeling of the Three Squares(R)
software and Licensed Materials to become the FirstLink Program shall
be completed within thirty (30) days of the Closing and shall contain
the features of the PIC Software. The name FirstLink shall be owned by
FSA. FSA agrees that no other software program or service bureau which
competes with the Software or Service Bureau shall be given the name
FirstLink.
ServiceLink. SureQuest also agrees to provide the interface between the
FirstLink Software and FSA's ServiceLink direct order program
("ServiceLink") provided that FSA acts as the intermediary and obtains
SPS's (owner of ServiceLink) requirements, and all other technical
information required, to provide the interface with FirstLink. After
receiving all of the necessary information, SureQuest agrees to
complete the interface within ninety (90) days.
National Scope. Except as provided in this Agreement, FSA may use the
FirstLink Software and offer Service Bureau services, without
additional charges or limitations, anywhere in the United States.
Database Development. SureQuest agrees to create and maintain the
databases for each Branch by entering FSA food item codes, menu designs
and diet types. Each of the existing FSA Branches can specify to
SureQuest the item codes it wants in the database for the customers in
that Branch. The above payment of the FirstLink License Fee covers
providing the database input services for these existing Branches.
Additional Branches will be charged the following for these database
services: either (i) a one-time payment at the beginning of the
services of _____________________________ per Branch or (ii) a one-time
payment at the beginning of the services of _________________________
__________________________ and ___________________________________
______ per month per Branch. FSA agrees to provide, and SureQuest's
duties are subject to receiving, the information needed by SureQuest to
create these databases in accordance with a time schedule to be agreed
to by FSA and SureQuest.
Demonstration Software. As provided in Section 4 below, FSA
will purchase licenses to use the PIC Software for use by FSA
customers. Subsequent to this initial purchase, SureQuest shall provide
to each of the eight (8) FSA Health Care Specialists a "full use" copy
of the FirstLink Software for demonstration, testing and back-up
purposes. (As long as Health Care Specialists are trained, no support
fees will be charged for Health Care Specialist's "full use" license.)
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Upon the request of FSA, SureQuest shall also provide FSA with
one (1) "full use" copy of the FirstLink Software (with limited FSA
database information) to be used by Branch Sales Managers and qualified
prospective FSA customers evaluating the FirstLink product (the
"Evaluation Demo"). This Evaluation Demo shall have a thirty (30) day
expiration built-in and shall not be duplicated by FSA.
Marketing Plans/Materials. FSA and SureQuest will co-develop a
marketing plan for the Software and Service Bureau. The parties will
agree within thirty (30) days after the Closing and outline the
schedule for developing this plan, to include responsibilities and time
deadlines. The beginning of this planning program will start at the
three (3) day training program referenced in Section 6 below.
SureQuest will assist FSA in developing marketing materials for
the FirstLink program, to include customer mailings, a quarterly
newsletter, and a computer based slide presentation for use by the FSA
sales force and their customers. The parties will agree within thirty
(30) days after the Closing to develop the plan for producing these
marketing materials, to include responsibilities and time schedules;
provided, however, that the FirstLink License Fee mentioned above shall
include the cost of one mailing by SureQuest to all FSA's targeted
healthcare customers and for SureQuest's developing the quarterly
newsletter.
Food/Trade Shows. SureQuest agrees that SureQuest personnel will be
available to attend one (1) FSA Food Show or healthcare show per year
for each Branch and to attend the annual Regional Trade Shows in order
to explain/support the FirstLink product and the Service Bureau
services. FSA agrees to give SureQuest at least ninety (90) days prior
written notice of any such Food or Trade Shows. FSA further agrees to
reimburse, within ten (10) days after invoice, SureQuest's out of
pocket reasonable costs for travel, hotel and Fifty Dollars ($50) per
diem per person for attending these shows.
Monthly Billings. For the payment of the FirstLink License Fee, FSA
shall be entitled to receive the SureQuest Software and Service Bureau
pursuance to a monthly billing arrangement set forth in Sections 5 and
8 below.
Section 4. Acquisition of PIC Software Licenses.
Required Licenses. Simultaneously with the execution and delivery of
this Agreement, FSA purchases, and SureQuest licenses to FSA, ______
____ individual user licenses for the PIC Software, to be used as the
FirstLink Software, at a fee of ______________________________________
___________ per license, for a total license fee of _______________
____________________ plus taxes, if applicable. (This price includes
second day shipping. The cost of expedited one-day shipping will be
borne by FSA.) Heretofore, FSA has acquired from PIC, five (5) licenses
(the "Prior Licenses") for the PIC Software which have not been
designated the
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<PAGE> 10
FirstLink Software but which shall be credited towards the __________
required licenses, leaving a remaining ____________ to be acquired at
the time of Closing. Therefore, at Closing, FSA shall pay SureQuest
___________________________________________________ plus taxes, if
applicable. SureQuest shall private label the five (5) prior licenses
FSA has previously acquired by December 31, 1998 as FirstLink products.
Additional Licenses. FSA hereby agrees to acquire, on or before January
1, 2000, an additional ___________ licenses, one or more at a time, of
the FirstLink Software at a license fee of ___________________________
________________________ per license plus taxes. If FSA acquires all of
these twenty (20) additional licenses by January 1, 2000, FSA shall
have the right to acquire all subsequent licenses for the duration of
this Agreement for __________________________________________________
per license. If FSA does not acquire all of these ___________________
additional licenses by January 1, 2000, the failure to do so shall not
constitute a default under this Agreement but, because of that failure,
the license fee of the FirstLink Software shall increase to SureQuest's
then retail "list" price for the Three Squares(R) product (currently,
the retail list price is _____________________________________________
___________________) and, to the extent that FSA did acquire some
licenses for _________________________________________________, but did
not acquire all ___________ licenses to retain the ____________________
______________________________ price, FSA shall pay to SureQuest, no
later than January 15, 2000, the difference between the _______________
__________________________________ license fee and SureQuest's then
retail list price, at January 1, 2000, for each license so acquired at
the _________________________________________________ fee.
FSA may also acquire the license to acquire the select menu program for
the PIC Software when FSA also acquires one of the licenses mentioned
in one of the two (2) immediately preceding paragraphs. The acquisition
price for this select menu program is _________________________________
per copy (which is in addition to the license fee mentioned in one for
the two immediately preceding paragraphs) and, when so acquired, the
name of this select menu product shall be "FirstLinkSelect."
If, during the Term of this Agreement, FSA acquires __________________
PIC and/or SureQuest Software licenses (which may include, and are not
in addition to the __________ PIC Software licenses mentioned in the
preceding paragraphs), SureQuest agrees to pay FSA, within thirty (30)
days after the Term of this Agreement as set forth in Section 15,
___________________________________ and, in that event and if the
parties agree to extend the Term of this Agreement, then FSA shall have
the right to acquire additional PIC Software licenses for the duration
of the extended Agreement for ________________________________________
________________________ per license.
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Licensed Materials. Each license acquired shall include one (1) copy of
the Licensed Material. Additional manuals may be purchased for ________
______________________ each.
Software Support. SureQuest agrees to provide, for all licenses
acquired by FSA pursuant to this Agreement, software support for FSA
and/or FSA customers, including semi-annual database updates for each
Branch, upgrades (as available from time to time) and technical support
pursuant to a toll free line. The cost to have these services available
(even if some are not actually used) is _______________________________
______ per month per license acquired; provided that this monthly price
is conditioned on FSA's customers having the appropriate hardware and
dataline (see Section 10 below). The charge for these services shall
commence in the month following the date of acquisition and shall be
payable on or before the tenth (10th) day of that and every succeeding
month during the Term (as defined in Section 15.
Relocated Software. If FSA relocates the FirstLink Software from one
site to a different customer's site, FSA shall so notify SureQuest and
SureQuest shall provide FSA a new install disk at ___________________
_____ per disk and new Licensed Materials for _______________________
______ per manual. This fee for new install disks and manuals may
increase, from time to time, if SureQuest increases these fees for
other SureQuest client's for replacement software or additional
manuals. The new install disk will contain the latest databases. Before
SureQuest will provide the new disk and manual, FSA agrees to return to
SureQuest the superceded program disk and manual and the security
device (dongle) applicable to that software program.
Section 5. SureQuest Software. In addition to the acquisition of PIC
licenses, FSA shall also have the right to license certain levels of the
DOS-based SureQuest Software as follows (the "SureQuest Licenses"):
SurePref(TM) with Nourishments. For _________________________ per month
per license, FSA can acquire the license to use SureQuest SurePref(TM)
with Nourishments program. This is a Tray Ticket printing program
(non-selective) with Service Bureau menus for FSA pre-loaded,
nourishment labels, computerized resident/patient cardex and production
sheets (the program does not include the nutritional diet spread
sheets). This will be called the "Pride Level". The use of the software
still requires any level of the Service Bureau to meet Government
requirements.
SureMenu(TM) with Nourishments. For _____________________________
______ per month per license, FSA can acquire the license to use
SureQuest's SureMenu(TM) with Nourishments. This is a select or
non-select Menu printing program with
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Service Bureau menus for FSA pre-loaded, computerized, resident/patient
cardex, nourishment control and pre-prep and production sheets. This
will be called the "Elite Level". The use of this software still
requires any level of the Service Bureau to meet Government
requirements.
Miscellaneous. The SureQuest Software mentioned above will not be a
private label product for FSA and the above monthly charges will
include software technical support from SureQuest for FSA and/or FSA
customers (via a toll free line). Billing will be on the first of the
month after installation and invoices will be payable within ten (10)
days of receipt of invoice.
Section 6. Training. SureQuest shall provide a three (3) day training
program on the PIC Software and on the SureQuest Software and Service Bureau for
FSA corporate staff and each FSA Branch's Health Care Specialist or their
respective designees to begin on July 28, 1998 at SureQuest's corporate
headquarters in Dallas, Texas. FSA agrees to pay SureQuest, within ten (10) days
of receipt of an invoice, ________________________________ for this three (3)
day training program. SureQuest also agrees to provide special training
programs, at least twice a year, for the FSA Branch's Health Care Specialists
and for the FSA field sales force at a time and place to be agreed upon.
SureQuest also agrees to provide additional training programs for either FSA
personnel or for clients of FSA on the Software operations. The cost of any of
this training will be ___________________________ a day plus reimbursement for
reasonable out of pocket travel, lodging and ______________________ per diem per
person. These costs shall be paid by FSA within ten (10) days of receipt of an
invoice.
Section 7. Custom Programming. Upon the written agreement of FSA and
SureQuest, SureQuest shall perform custom software programming for FSA. In this
event, the parties shall develop, and agree upon, a work plan, time schedule and
estimated budget for any custom programming. SureQuest's charges for any custom
programming shall be _________________________ per hour (subject to increases).
SureQuest agrees to a fifteen percent (15%) cap on budget overrides. Custom
programming expenses will be billed by SureQuest as incurred, and each invoice
shall be paid by FSA within ten (10) days after receipt of each invoice.
Section 8. Menu Service Bureau.
Existing Accounts. FSA currently has at least ___________________ food
service customers which could benefit from SureQuest's Service Bureau. FSA
agrees to provide, as a value-added service and for the duration of the
Agreement, the Service Bureau to at least ___________________ of these accounts.
FSA further agrees that the Service Bureau shall be the only service of its kind
offered by FSA to its clients during the term of this Agreement except where
otherwise required of FSA by a customer.
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Service Bureau Options. SureQuest agrees to provide FSA several options
on the level of Service Bureau service as follows:
Base Level -- This level of service is described on Schedule 2.
This service is priced at _________________________________
________ a month per FSA customer site.
Secondary Level -- This level is described on Schedule 2 and is
priced at __________________________________ per month FSA
customer site.
Custom Level -- This level is described on Schedule 2 and is
priced at _____________________________________ per month per
FSA customer site.
Payments. The invoices for the appropriate level of Service Bureau
shall be mailed monthly on the first of the month preceding the month in which
installation is scheduled (and on the first of the month for each month
thereafter) to the appropriate FSA Branch and will be based on the number of FSA
clients using the different levels of service. Billing for FSA's accounts which
use the Fall/Winter menu cycle will begin on September 1, 1998 for installation
in October, 1998. Billing for FSA's accounts which use the Winter/Spring menu
cycle will begin on December 1, 1998 for installation in January, 1999. FSA
agrees to pay all such invoices within ten (10) days of the receipt of the
invoice.
Section 9. License.
All licenses for the Software, the Licensed Materials and other
software discussed herein (the "Licensed Property") are non-exclusive, single
user licenses and are limited to be used only with FSA food service customers.
This Agreement does not create in FSA any ownership or title rights to the
Licensed Property. FSA further agrees not to network multiple users on a single
licensed software. Subject to receiving SureQuest's prior written approval, FSA
shall have the right to sublicense others to use, consistent with this
Agreement, the Licensed Property for their intended purpose of providing
Healthcare facilities with computer assisted menu management, nutrition
information and patient tracking. FSA shall only have the right to use as many
copies of the Licensed Property as are covered by the license fees paid
hereunder. FSA hereby agrees to use exclusively the Software with FSA customers
who request these services and FSA shall not use SureQuest's competitors'
software, except where required by a FSA customer.
Section 10. Hardware and Data Line.
In order for FSA and FSA's customers to receive full benefit from, and
to allow SureQuest to provide the appropriate software support, it is necessary
that FSA and its customers have appropriate hardware and dedicated data lines.
Schedule 3 lists the appropriate hardware and back-up and printer specifications
and UPS requirements which are currently necessary for the PIC Software. The
parties agree that hardware
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specifications may change in the future to accommodate updated software and that
FSA and its customers may have to upgrade hardware in these instances. Also, FSA
and each FSA customer shall have a dedicated, direct modem line for the
computers.
Section 11. Customer/User list.
In order to allow SureQuest to know which FSA customers are entitled to
support pursuant to this Agreement, FSA shall initially provide to SureQuest a
complete list of its customers (by FSA Branch, with addresses, contact person,
phone numbers, etc.) that are currently using and are going to use the PIC
Software, the SureQuest Software and/or the Service Bureau. SureQuest shall
maintain the list and provide it to FSA monthly for FSA to update it and make it
current as FSA customers are added or deleted from one or more of these
programs. The parties agree to develop a system to correct any discrepancies
between the information in the FSA and SureQuest files.
Section 12. Representations and Warranties.
WARRANTIES and REPRESENTATIONS of SUREQUEST
a) SureQuest warrants and represents that SureQuest is the lawful
owner of the Software, and that it has full power and
authority to license the Software to FSA and that the Software
is free and clear of all liens and encumbrances.
b) SureQuest warrants and represents the Software does not
infringe upon any patent, copyright, license, trade secret or
other proprietary right of any third party. In the event the
Software is adjudicated to be in violation of the above
non-infringement warranty or is enjoined as a result of a suit
based on any claim of infringement, SureQuest at its own
expense will:
i) Negotiate a license or other agreement with the
claimant so that the Software is no longer subject to
the injunction.
ii) Replace the infringing components of the Software with
compatible, non-infringing components of equal or
better performance and quality subject to the approval
of FSA.
iii) Modify the Software so that it becomes non-infringing
without materially affecting the performance or
usability of the Software.
iv) Procure a license for FSA that allows FSA continued
use of the Software without additional expense to FSA.
Payments by SureQuest to procure such license could
include: license fee(s); royalties, attorney's fees
and other related costs. If SureQuest, in a good faith
effort, determines that none of the above options are
practical, then FSA will return the Software to
SureQuest within three (3) months of FSA's receipt of
such determination. SureQuest, upon receipt of the
Software, will refund to FSA all license fees paid by
FSA less depreciation at the rate of fifteen percent
(15%) per year based upon the date the Software
license was first acquired by FSA.
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v) SureQuest will indemnify FSA, its directors, officers,
and employees from and against any claims or damages
awarded against FSA which result from the actual
infringement by SureQuest of any such patent,
copyright, license, trade secret or other proprietary
right of any third party. Indemnification of FSA by
SureQuest is subject to the following conditions:
o FSA must promptly notify SureQuest in writing of
any such claim, or significant threat thereof;
o FSA must give SureQuest the right to control the
defense of all such claims, lawsuits, and other
proceedings;
o FSA will not settle any such claim, lawsuit, or
proceeding without SureQuest's prior written
approval.
c) SureQuest represents that it is implementing a program to make
the Software year 2000 compliant by July 1, 1999. Specifically,
this means that the Software will continue to operate correctly
at least through 2070. It will perform all date-related
arithmetic and logical operations correctly, including
operations which cross the century boundary, sort date-related
information in correct chronological order, correctly recognize
the year 2000 as a "leap-year", and store internal,
date-related information (including all interim date-related
results) in a manner that is unambiguous as to century.
d) SureQuest warrants and represents FSA will have quiet and
peaceful enjoyment of the use of the Software for the duration
of this Agreement until and unless this Agreement is properly
and lawfully terminated, ended, or otherwise declared
ineffective, as specified herein.
e) SureQuest warrants the Software will conform to published
specifications and documentation (e.g. user and technical
manuals) and to be free from defects in materials or
manufacture under normal use for a period of 90 days from the
date of receipt of the Software by FSA. Programs found to have
a defect in the medial or that do not comply with published
specifications will be fixed and provided at no extra charge to
FSA.
f) SureQuest agrees to offer Software support subsequent to the
warranty period pursuant to Section 4 above.
SureQuest warrants for ninety (90) days that the Software will perform
in accordance with the written documentation and specifications of the SureQuest
software programs as presented to FSA. Should any of the Software delivered to
FSA not function during this period in accordance with the documentation and
specifications, after written notice to SureQuest and reasonable opportunity for
SureQuest to correct nonconformance, FSA shall be entitled to a refund of any
and all money paid to SureQuest with respect to the non-conforming Software, and
this Agreement with respect to the non-conforming Software (but not as to any
other part of the Agreement) shall terminate. Any demand for refund pursuant to
this Section must be received in writing by SureQuest within six (6) months from
the time when the opportunity to correct the nonconformance has expired.
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SureQuest does not make any representation or warranty that the Software as
delivered to FSA or to an FSA customer fulfills any particular State's
nutritional or operational requirements. Each individual customer of FSA which
uses the Software is responsible for advising FSA and SureQuest of its State's
nutritional requirements so that this information can be loaded by SureQuest
into the database for the facilities in that State. Each FSA customer is also
responsible to advise in writing FSA and SureQuest of (i) the necessary updates
of data to ensure that the Software remains in compliance with said customer's
State's nutritional and/or operational standards and (ii) any other special
nutritional information or needs. FSA agrees to advise its customers of these
obligations.
If any modifications are made without written authorization of SureQuest to the
Software by either FSA or a customer of FSA during the warranty period, this
warranty shall immediately terminate. Modifications for difficulties or defects
traceable to FSA's or FSA's customer's errors or systems changes shall be billed
at SureQuest's standard time and materials charges.
Section 13. Proprietary Information.
Non-Disclosure. Without the other party's prior written consent, and then only
to the extent reasonably necessary for each to perform its obligations under
this Agreement, neither party shall, directly or indirectly, furnish or disclose
to any person or entity or use in any way for its or any third party's benefit
any proprietary or confidential information of the other, except information
which may:
(a) be required to be disclosed or divulged by law or
regulation, or
(b) become part of the public domain, except by an act or
omission of the disclosing party, or
(c) be received by either party from a third party having
legal right to transmit same to such recipient.
Restriction. FSA shall not copy, reverse engineer, decompile or disassemble the
Software, or copy or reproduce the Licensed Materials accompanying the Software
or Service Bureau without SureQuest's written consent. FSA agrees to take
appropriate and reasonable actions to prevent the use of the Software on more
computers than have paid-up licenses.
Reservation. Nothing in this Agreement shall be construed to grant either party
any rights with respect to the other's copyrights, trademarks, trade names,
service marks, or other intellectual property except the narrowest such rights
necessary for each to perform its obligations hereunder.
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Intellectual Property Notices. FSA will ensure that all copyright, patent,
proprietary and trade secret notices of SureQuest or PIC will remain on the
Software in any form and on all Licensed Materials.
Remedy for Breach. Each party acknowledges that compliance with the restrictive
covenants contained in this section are necessary to protect the other's
substantial investment in proprietary information. Each party recognizes the
irreparable harm and continual damage that would result from a breach of these
covenants for which money damages may not be adequate. In the event either party
breaches, threatens to breach or willfully violates any of the covenants
contained herein, the other shall be entitled to any legal or equitable relief
available, including, without limitation, specific performance, immediate
preliminary and/or permanent injunctive relief, and money damages insofar as
they can be determined.
This Section shall survive termination of this Agreement
Section 14. Mediation and Indemnification.
Mediation. If any claim arising out of this Agreement (other than a claim for
injunctive relief which shall not be covered by this provision) cannot be
settled by the parties, such claim shall be settled by mediation, in a neutral
geographic location. The parties shall mutually agree on this geographic
location and a mediator. To the extent they cannot agree on the location or the
mediator, each party shall name a mediator and these two mediators shall choose
a third mediator. Decisions (including the decision on the neutral geographic
location) will be made by a majority of the three mediators hearing the claim or
dispute. The parties shall bear their own costs and fees, and shall each pay
one-half (1/2) of any mediator's fees.
Indemnification and Hold Harmless. FSA shall indemnify and hold SureQuest and
its shareholders, directors, officers, agents and employees harmless from any
and all claims; causes of action, loss, damage, costs and expenses, judgments,
orders, civil and criminal penalties, forfeitures and assessments arising from
or related to (i) the failure of FSA to perform as required by this Agreement;
or (ii) any services rendered by FSA or any employee of FSA pursuant to this
Agreement.
SureQuest shall indemnify and hold FSA and its shareholders, directors,
officers, agents and employees harmless from any and all claims, causes of
action, loss, damage, costs and expenses, judgments, orders, civil and criminal
penalties, forfeitures and assessments arising from or related to (i) the
failure of SureQuest to perform as required by this Agreement; or (ii) any
services rendered by SureQuest or any employee of SureQuest pursuant to this
Agreement.
Attorney's Fees. In the event of the commencement of suit to enforce any of the
terms or conditions of this Agreement, prevailing party's attorney fees will be
paid by the nonprevailing party.
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Section 15. Term. This Agreement shall be for a five (5) year term
commencing on July 27, 1998 and continuing through and including July 26, 2003.
At the termination of this Agreement, FSA shall continue to have the right to
use the same number of FirstLink Software licenses which were acquired prior to
the termination of this Agreement, upon payment to SureQuest of a monthly
maintenance fee to be agreed to in writing, at that time, between FSA and
SureQuest. The parties shall also agree in writing for the period after the
termination of the Agreement on the terms and costs of any software updates,
technical support and other appropriate matters, including access to the
SureQuest Software and the Service Bureau.
SECTION 16. LIMITATION OF DAMAGES. FOR ANY BREACH OR DEFAULT BY
SUREQUEST IN CONNECTION WITH THIS AGREEMENT, EVEN FOR A BREACH OF FUNDAMENTAL
CONDITION, FSA'S EXCLUSIVE REMEDY SHALL BE PAYMENT BY SUREQUEST OF FSA'S
DAMAGES TO A MAXIMUM AMOUNT EQUAL TO THE AMOUNT PAID BY FSA UNDER THIS
AGREEMENT.
IN NO EVENT SHALL SUREQUEST'S LIABILITY FOR DAMAGES EXCEED THE AMOUNT PAID BY
FSA UNDER THIS AGREEMENT. IN NO EVENT SHALL SUREQUEST BE LIABLE FOR ANY
SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES OF ANY NATURE WHATSOEVER, INCLUDING,
BUT NOT LIMITED TO, LOST PROFITS, LOST DATA, LOSS OF COMPUTER TIME, FAILURE TO
ATTAIN ONE OR MANY OBJECTIVES (ECONOMICAL OR OTHER).
Section 17. Assignment/Transfers Prohibited.
Except as may be otherwise provided herein, this Agreement may not be
assigned nor may any of the rights and obligations of the parties under the
terms of this Agreement, including the license rights, be assigned,
subcontracted or otherwise transferred. Any such assignment, subcontract or
other transfer shall be null and void, ab initio.
Section 18. Notices.
All notices and other communications provided for in this Agreement
shall be in writing and shall be deemed to have been given or made when sent by
certified mail, return receipt requested, as follows:
<TABLE>
<S> <C>
If to FSA, addressed to: Food Services of America, Inc.
4025 Delridge Way, S.W., Suite 400
Seattle, WA 98106
Attn: JoAnne Weldon, R.D., C.D.
If to SureQuest or PIC, addressed to: SureQuest Systems, Inc.
13606 Floyd Rd.
Dallas, TX 75243
Attn: Kent Chapman, COO
</TABLE>
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Section 19. Severability.
Each provision of this Agreement shall be construed in such a manner as
to give such provision the fullest force and effect permissible at law or in
equity. To the extent that any provision herein, or part thereof, is held to be
unenforceable or invalid by court of competent jurisdiction, such
unenforceability or invalidity shall not affect the enforceability or validity
of the remaining provisions of this Agreement which shall remain in full force
and effect, nor shall such unenforceability or invalidity render such provision
inapplicable to other facts in the context of which such provision or part
thereof, would be held legally enforceable or valid.
Section 20. Waiver or Modification.
It is agreed that no waiver or modification of this Agreement or of any
covenant, condition or limitation herein contained shall be valid unless made in
writing and duly executed by the party to be charged therewith.
No waiver by either of the parties of any breach by the other party or
of compliance with any condition or provision of this Agreement shall be deemed
to be a waiver of any other provisions or conditions of this Agreement or of any
further breach or non-compliance so waived.
Section 21. Default and Termination. This Agreement and any rights
granted hereunder can be terminated as follows:
(a) by the mutual written consent of the parties hereto; or
(b) if either party fails to perform its obligations as set
out in this Agreement and such failure to perform is not
corrected within thirty (30) days after written
notification of such failure from the other, this
Agreement may be terminated upon thirty (30) days
written notice of termination to the defaulting party.
Any such termination of this Agreement shall be without prejudice to any other
remedies which either party may have against the other arising out of each
breach or default and shall not affect any rights or obligations of either party
arising under this Agreement prior to such termination.
Section 22. Governing Law.
The parties hereto agree that it is their intention and covenant that
this Agreement and the mutual and respective performance thereof and all
litigation and special proceedings hereunder be construed in accordance with and
under and pursuant to the laws of the State of Texas and that in any action,
special proceeding or other proceeding
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that may be brought arising out of; in connection with, or by reason of this
Agreement, the laws of the State of Texas shall be applicable and shall govern
to the exclusion of the law of any other forum, without regard to the
jurisdiction in which any action or special proceeding may be instituted.
Section 23. Miscellaneous.
Software Title/Governmental Fees. SureQuest retains title and all ownership
rights to the PIC and SureQuest Software, the FirstLink Software (other than the
name) and all other software described herein. FSA agrees to pay all fees and
taxes imposed by the federal, state or local government regarding the use,
possession or ownership of its license thereof.
Technical Support Availability. In order to provide timely technical support,
SureQuest personnel will be available 24 hours a day, seven days a week, via
toll free line. This toll free line will be manned from Monday to Friday,
excluding holidays (New Years Day, Memorial Day, July 4th, Labor Day,
Thanksgiving Day and Christmas Day) during the hours of 8:00 a.m. through 6:00
p.m. Central Time. At all other days and times, such personnel will be available
via pager. Response time to a page will not exceed thirty (30) minutes in order
to assess if situation is "critical" in nature. Response to non-critical "downs"
will be less than ten (10) hours.
Users Changing Food Distributors. If an FSA customer no longer qualifies for FSA
delivery services and FSA retrieves the Software from this customer, FSA agrees
that the data relating to that customer continues to be the property of that
institution and SureQuest may continue to do business with that institution for
either Software or Service Bureau service, or both, and, if the institution
agrees, to have access to that institution's data. SureQuest agrees that if it
continues in a business relationship with a former customer of FSA, SureQuest
will not give that customer the FirstLink product nor will that institution have
the favorable pricing set forth herein for FSA customers. FSA data, menus, items
and prices could be replaced in the customer's system with the installation of
the Three Squares Software.
Payment Terms. Payments due SureQuest or PIC pursuant to Section 3 (Food/Trade
Shows), Section 4 (Software Support), Section 5 (Miscellaneous), Section 6
(Training), Section 7 (Custom Programming) and Section 8 (Payments) of this
Agreement which are not received on time are subject to and will be assessed
late charges equal to one and one half (1.5%) percent per month calculated daily
from the date of invoice. Failure to make timely payment for the SureQuest
Software or for the Service Bureau services may result, in SureQuest's sole
discretion, in terminating such services without violating this Agreement.
SureQuest agrees, however, not to terminate such services unless it shall have
first given written notice to FSA of the default in payment and full payment
(including any late charges) is not made within ten (10) days from the date of
such notice.
Force Majeure. Neither party to this Agreement shall be liable to the other for
failure to perform its part of this Agreement, when such failure is due to a
breakdown of
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transportation, explosion, storm, fire, flood, war, riot, civil disorder,
vandalism, sabotage, labor dispute, Act of God or any other cause beyond the
control of the parties of this Agreement.
US Government Restricted Rights. The Software and License Materials are provided
with RESTRICTED RIGHTS. Use, duplication or disclosure by the Government is
subject to restrictions as set forth in subparagraph (c)(1)(ii) of The Rights
in Technical Data and Computer Software clause at 48 CFR {252.227-7013.
Contractor/manufacturer is SureQuest Systems, Inc., 13606 Floyd Road, Dallas,
Texas 75243.
Sales Incentives. The parties agree that it is in their mutual best interest to
place as many Software programs and Service Bureau services with FSA customers.
To this extent, the parties agree that SureQuest can develop appropriate
incentives for FSA's Health Care Specialists and FSA sales force to market,
promote and place as many Software programs and Service Bureau services as
possible with FSA customers with FSA Branch Sales Manager's coordination and
approval.
Promotional Material. FSA and SureQuest may make reference to the other party
and to this business relationship in promotional material, press releases,
disclosure documents and other appropriate documents provided that the other
party reviews and approves such references prior to the dissemination thereof
except as otherwise required by law.
Entire Agreement. This Agreement constitutes the entire agreement between the
parties pertaining to the subject matter and supersedes all other
contemporaneous Agreements between the parties in connection with the subject
matter. No supplement shall be binding, unless executed in writing by the
parties to this Agreement. Further, this Agreement shall be binding upon FSA and
SureQuest and shall inure to the benefit of FSA and SureQuest and to their
respective heirs, successors and assigns provided, however, the term "assigns"
shall not be deemed to permit an assignment of this Agreement except as
expressly provided herein.
Captions. The captions of this Agreement are for convenience of reference only
and shall not define or limit any of the terms or provisions hereof.
Mutual Duties and Obligations. The parties agree that, upon the request of the
other, each shall promptly execute, swear to, acknowledge under oath and/or
deliver such further documents and instruments, information and other further
assurances and promptly perform further acts as may be necessary, appropriate or
incidental to carry out the intent and purpose of this Agreement.
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IN WITNESS WHEREOF, the parties hereto caused this Agreement to be duly
executed by their respective officers, thereunto duly authorized, as of the date
first above written.
FOOD SERVICES OF AMERICA, INC. SUREQUEST SYSTEMS, INC.
By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
-------------------------------- -----------------------------
Title: V.P. Business Development Title: Chairman
----------------------------- --------------------------
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SCHEDULE 2
MENU SERVICES - A packet of information in `hard-copy' form consisting of
Week-at-a-Glance summaries/Posting Menus, Daily Diet spreadsheets, a per Patient
Day Generic Costing summary, a Generic Production Spreadsheet, a Grocery
List/Purchase Guide based on one of the eight item code databases, Quantified
Recipes, and daily, weekly and cycle Nutritional Analysis with weekly average
values compared to average RDA's is provided twice-per-year on either a
Spring/Summer, Fall/Winter cycle or a Summer/Fall, Winter/Spring cycle. (Two
master menus per cycle(s) are maintained.)
BASE LEVEL - Packet is based on one of two Regional four (4) or five (5) week
cycle `base' menus established/altered by FSA at cycle change, but not alterable
by FSA's customers or by FSA at other times. FSA establishes a set of
Therapeutic Diets and a set of Quantification Levels for each of the two
Regional Base Menus.
SECONDARY LEVEL - Packet is based on one of two Regional four (4) or five (5)
week cycle menus established/altered by FSA's at cycle change customers may make
reasonable changes to the menus to `personalize' the content to match facility
needs, change up to five (5) of the established Therapeutic Diets, and select up
to three Recipe Quantification levels at cycle change time.
CUSTOM LEVEL - Packet is based on one of two Regional four (4) or five (5) week
cycle menus established/altered by FSA or may be based on customer developed
menus. Menus may be altered/changed at no additional charge on a monthly basis
and will be sent directly to the FSA client site by the first of the month
before the month of usage.
CORPORATE MENUS - Corporate Customers may have their own menus and diet
requirements. These are available and will need to be handled on a case-by-case
basis.
HOLIDAY AND THEME MEALS - A meal menu with quantified recipes, but not
including nutritional or therapeutic analysis or spreadsheets, for up to twelve
(12) specific meals per year.
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EXHIBIT 6.4
MARKETING AND LICENSE AGREEMENT
FOR
COMPUTER SOFTWARE
AGREEMENT made as of this 1st day of May, 1999 (the "Effective Date")
by and between SureQuest Systems Inc. ("SureQuest"), a Nevada corporation,
having an office at 13606 TI Blvd. Dallas, Texas 75243 and Health Technologies,
Inc. ("HTI") a Missouri corporation, having an office at 13801 Riverport Dr.,
Ste 100 Maryland Heights, Missouri 63043.
A. HTI is a national dietary consulting company with approximately
seven hundred eighty (780) customers, primarily long term care facilities and
food distributors. HTI chooses to have a suite of software programs to recommend
and sell to their customers to implement their consulting advice.
B. SureQuest has a national business of providing a suite of
proprietary software programs in both DOS and Microsoft Windows platforms
("SureQuest Dietary System") and operates a menu services, and serves among
other types of institutions, long term care facilities and food distributors.
C. HTI and SureQuest choose to enter into this Marketing and License
Agreement ("the Agreement") pursuant to which SureQuest will license its
SureQuest Dietary System to HTI for sublicense by HTI to HTI End User (defined
below) customers and SureQuest will train HTI personnel to train others to use
the SureQuest Dietary System to support HTI's business and SureQuest's other
business, all subject to the terms, conditions and limitations set forth in this
Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
2. Definitions. For the purposes of this Agreement, the following terms
shall be defined as indicated:
(a) "Licensed Programs" shall mean the computer programs for
the
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SureQuest Dietary System listed in Schedule 1(a) attached hereto including
associated documentation, and all updates and modifications hereafter made to
the Licensed Programs.
(b) "End User" shall mean a HTI customer which has been licensed to use
the Licensed Programs for its own internal use, with no rights to sublicense,
resell or otherwise transfer the Licensed Programs. SureQuest's standard License
Agreement (which will be a part of the User Manual) is attached on Schedule
1(c).
(c) "End User License Agreement" shall mean the executed order and the
user agreement be executed by HTI and an End User.
(d) "Equipment" shall mean the types of computer terminals and
peripherals described on Schedule 1 (d).
(e) "License Fees" shall mean the amounts which HTI shall pay SureQuest
for each license granted to an End User by HTI for the use of the Licensed
Programs as set forth on Schedule 1 (e).
(f) "Problems or Defects" shall mean any failure of the Licensed
Programs to operate in substantial conformance with the Specifications (as such
term is hereafter defined).
(g) "Specifications" shall mean the descriptions of the Licensed
Programs set forth in the User Manuals listed in Schedule 1 (a) to this
Agreement.
(h) "Support Services" shall mean the maintenance services and support
service to be provided to an End User by SureQuest as described in Schedule 7 to
this Agreement.
(i) "Support Services Fees" shall mean those fees for Support Services
set forth on Schedule 1 (e).
(j) Training shall mean those services described in Section 6.
(k) "Training Fees" shall mean those fees for Training Services set
forth on
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Schedule 1 (k).
(3) License and Grant of Right to Sublicense and Distribute the
Licensed Programs.
(a) In consideration for HTI's agreement to market the
Licensed Programs, as described herein, SureQuest hereby licenses to HTI to
sublicense the Licensed Programs only, to End Users only, subject to the terms,
conditions and limitations set forth in this Agreement. The license granted by
SureQuest hereunder to HTI for the SureQuest Dietary System is limited to
relicensing to End Users in the United States of America, and is non-exclusive
and non-transferable and may not be assigned by HTI except as provided in
paragraph 25(g). HTI agrees that the sublicense agreements to End Users shall
include at least the same restrictions on sublicenses as are imposed on HTI in
this Agreement, as the license. Because the license granted herein is limited to
End Users (which cannot themselves relicense the Licensed Programs), this
Agreement would not apply to HTI's ability to license the Licensed Programs to a
food distributor or other entity which, in turn, would relicense the Licensed
Programs. SureQuest and HTI agree to enter into a separate agreement for each
such situation.
(b) HTI will actively market and promote the SureQuest Dietary
System to End Users and to potential End Users. HTI agrees that for the
duration of the Agreement the SureQuest Dietary System shall be the only service
of its kind offered, marketed and promoted by HTI to its End Users unless a
potential End User justifies in writing why it must use a different dietary
software program. HTI also agrees, where appropriate, to substitute the
SureQuest Dietary System for the Source Tech dietary system currently being used
by some of HTI's customers, provided that SureQuest can meet or better the
pricing, service and quality of the Source Tech dietary system and that the
customer agrees to the change.
(c) SureQuest agrees that it will not develop another private
label for the software products set forth on Schedule 1(a) for another dietary
consulting company similar to HTI for use in the states of Missouri, Illinois,
Arkansas, Alabama, Georgia, Kansas, Ohio and Indiana so long as HTI meets or
exceeds the following performance standards: (a) for the first year of
operations (June 1, 1999 to May 30, 2000), HTI shall have finalized and
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SureQuest shall have received money for the sale of __________ Licensed Programs
and for each year thereafter (June 1 to May 30), HTI shall have finalized and
SureQuest shall have received the money for the sale or placement of
_________________ Licensed Programs.
(d) HTI hereby acknowledges that the Licensed Programs are
the property of SureQuest and incorporate valuable copyrights and trade secrets
of SureQuest and that SureQuest shall have exclusive proprietary rights in the
Licensed Programs and in all modifications and upgrades thereto and versions
thereof, including all copyrights, trade secrets and other proprietary concepts,
ideas, know-how and information incorporated therein. HTI will not, nor will it
allow any End User to, reverse engineer, disassemble, decompose, modify, amend,
or similarly manipulate all or any portion of the Licensed Programs, provided
that HTI or SureQuest may create an interface between other software programs of
End Users and the Licensed Programs but may not otherwise incorporate the
Licensed Programs into these other software programs. HTI will not do or
suffer to be done at any time any act or thing which may in any way adversely
affect any rights of SureQuest in and to the Licensed Programs.
SureQuest agrees to make one (1) copy of the current version
of the Licensed Programs for End Users that enter into an End User License
Agreement. To do so, HTI agrees to provide to SureQuest, in advance at least
monthly and in an agreed-upon electronic format, the data (to include diets and
menus) which SureQuest will merge into the Licensed Programs before the Licensed
Program is distributed to the End User. This data will be kept confidential by
SureQuest and may be used by SureQuest, together with similar data from other
SureQuest customers, for its general business purposes. This last sentence will
survive the termination of this Agreement.
4. Terms of License and This Agreement.
(a) This Agreement and the licenses granted hereunder shall
become effective as of the Effective Date and shall continue in effect for a
period of five (5) years from the Effective Date ("Initial Term") and from year
to year thereafter so long as neither party terminates this Agreement in
accordance with its terms.
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(b) Either party may terminate this Agreement with or without
cause by giving written notice at least ninety (90) days prior to the
termination of the Initial Term or prior to the termination of any renewal term
thereafter, provided, however there shall be no termination until each party
shall have fully complied with each of its obligations hereunder.
(c) The termination of this Agreement shall not affect the
obligations of HTI or SureQuest under any executed End User License Agreement,
and each such End User License Agreement shall continue in effect as though this
Agreement had not been terminated. Upon the termination of this Agreement,
SureQuest shall be substituted as the Licensor under the End User License
Agreement and for two (2) years after such termination, HTI and SureQuest will
continue to provide Support Services as set forth in Schedule 7 hereto and
SureQuest shall continue to receive the fees for such services in accordance
with this Agreement. This paragraph 4(c) shall survive the termination of the
Agreement. A copy of the executed End User License shall be furnished to
SureQuest within fifteen (15) days of execution.
5. Acquisition of Software Licenses.
(a) HTI shall have the right to acquire software licenses
from SureQuest for the single user and multi-user versions of the Licensed
Programs at the prices set forth on Schedule 1(e). The base prices set forth in
such Schedule may not be increased until April 15, 2000 and thereafter only once
annually and any increase shall not exceed the percentage increase in the
consumer price Index ("CPI") for the twelve (12) months preceding the date of
the price increase, as such CPI is published by the Bureau of Labor Statistics.
In the event SureQuest reduces its current list price for one or more of its
products below those established by SureQuest on May 1, 1999, the base price
established for HTI for that product on Schedule 1(e) shall be reduced by a
similar percentage and SureQuest shall so notify HTI to that effect. For those
Licensed Programs which are acquired on other than a monthly basis, HTI shall
pay for each license within thirty (30) days after invoice by SureQuest, as
follows: fifty percent (50%) at the time of signing the acquisition order and
fifty percent (50%) at the time the Licensed Program is installed. HTI shall
also have the right to acquire SureQuest Dietary Systems by paying the monthly
fees set forth on Schedule 1(e) provided that HTI shall commit to make the
monthly payments upon the following
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terms: for 1 to 74 Licensed Programs, a minimum of nine (9) months; for 75 to
149 Licensed Programs, a minimum of six (6) months; and for at least 150
Licensed Programs, a minimum of three (3) months; provided, however, that HTI
shall continue to pay the monthly fee for each Licensed Program acquired on a
monthly basis until SureQuest receives in its possession any such Licensed
Program for which HTI wishes to cease payments on.
SureQuest shall look solely to HTI for receiving these License
Fee payments and all monthly License Fees shall continue to be paid for each
Licensed Program until SureQuest receives written assurance that the Licensed
Program has been removed from the End User's hardware and receives in its
possession any such Licensed Program for which HTI wishes to cease payments on,
regardless of when the End User has stopped using such Licensed Program.
(b) HTI shall be free to set its own prices to End Users,
provided that such prices shall not exceed those base prices listed on Schedule
1(e) or on SureQuest's established price list which HTI, upon request, has a
right to obtain, unless HTI receives the written consent from SureQuest to
charge otherwise for the sublicense to an End User. HTI agrees not to network,
nor allow End Users to network, multiple users on a single licensed software.
HTI shall only have the right to use as many copies of the Licensed Property
as are covered by license fees paid hereunder The prices set forth herein do not
include sales, use or similar taxes not based on income which also shall be paid
by HTI to SureQuest. Each license acquired shall include one (1) copy of the
users manual. Additional user manuals may be purchased for _______________
________) each.
(c) HTI shall provide to SureQuest, in writing, at the
beginning of each month its best estimate of the types of Licensed Programs to
be acquired that month and the names and addresses of the facilities which are
expected to use such programs. This is not a commitment to acquire these
Licensed Programs but only to give SureQuest advance notice so that it can
prepare accordingly. HTI shall notify SureQuest within fifteen (15) days after
it enters into an End User License Agreement which includes the Licensed
Programs, and shall provide a copy of the End User License to SureQuest within
that fifteen (15) day period. Such End User License shall be in substantially
the forms agreed to in writing by HTI and SureQuest unless the parties otherwise
agree in writing.
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(d) SureQuest will ship the appropriate Licensed Program and
related materials directly to the End User for which SureQuest has received an
End User License Agreement at regular UPS ground rates within fifteen (15)
working days of receiving a copy of such agreements (with the name and address
of the appropriate institution) and notice of the date such institution is to be
trained, and the name of the HTI trainer who will do the installation and
training.
6. Training Services.
(a) Train The Trainer. SureQuest will train those HTI
registered dietitians and other qualified individuals identified by HTI to train
End-Users and other potential users designated by SureQuest on how to install,
operate, use and support the Licensed Programs. Such "train the trainer" program
shall be conducted pursuant to the "SureQuest Trainer Certification Program" set
forth on Schedule 6 (a). Each individual, so properly trained and qualified,
shall receive a certification by SureQuest that they are qualified to train End
Users on the use of the Licensed Programs and to support the Licensed Programs.
Such trainers shall attend annual training updates presented by SureQuest, at
HTI's expense, to qualify for annual re-certification.
SureQuest has explained to HTI the importance of getting
HTI personnel trained as quickly as possible to become trainers. HTI
understands the importance for both HTI's business and SureQuest's business to
expedite this training program and, therefore, agrees that at least fifteen (15)
qualified HTI individuals, with appropriate geographic distribution, will be
trained as certified trainers within the first ninety (90) days following the
date of this Agreement. SureQuest and HTI will develop, as soon as possible, a
training schedule with dates and locations and numbers of attendees to meet this
training schedule.
(b) Training End Users. When requested by HTI, and after
appropriate notice of at least thirty (30) days, SureQuest shall train End-Users
on the use of the Licensed Programs. The parties agree that no software
installation shall be arranged with an End User unless first a Training date has
been set with the End User. The End User training requirements are set forth on
Schedule 1(b).
(c) Training HTI Personnel to Market and Sell. SureQuest
agrees to train the appropriate HTI personnel designated by HTI and approved by
SureQuest on how to
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market, sell, and demonstrate the Licensed Programs to potential End Users and
to other SureQuest clients. HTI and SureQuest will meet within the first thirty
(30) days after signing this Agreement to develop a plan to implement such
training. The parties also agree to enter into a separate Marketing Agreement to
provide for those situations where HTI requests SureQuest to market, sell and
demonstrate the Licensed Programs, without the participation of an HTI
representative, to potential HTI End User and, conversely, where SureQuest
requests HTI to market, sell and demonstrate the Licensed Programs, without the
participation of a SureQuest representative, to a potential SureQuest customer
which will not become an HTI EndUser. HTI also agrees to include SureQuest
personnel to describe the Licensed Programs as part of the formal agenda of the
annual consultants meeting of the HTI dietitians.
(d) HTI agrees that SureQuest is the best qualified to provide
the training described in 6 (a) and (c) above and, therefore, in order to
provide consistency in training and to maintain quality control over the
training, HTI agrees that it will not directly provide such training to its
personnel. Also, each HTI individual trained by SureQuest to conduct on one or
more of the activities listed in 6 (a) or (c) above shall agree in writing that
they are independent contractors, not agents, of SureQuest, and, if they are
working with a SureQuest client which is not an HTI customer, they agree they
will not offer to sell any other product or program, will not discuss or try to
change any food distribution agreement which the customer may have or take any
other action with that customer other than to train, market or sell the Licensed
Programs.
(e) Training Fees. HTI and SureQuest agree that the Training
Fees are those fees set forth on Schedule 1 (k). For training by HTI of HTI End
User and of SureQuest clients on how to operate and use the Licensed Programs,
SureQuest agrees that HTI shall receive 75% of the Training Fees set forth in
paragraphs 3 and 4 on Schedule 1(k) for those institutions for which HTI
provides such training. Whenever HTI provides such training, it shall provide in
writing to SureQuest, within five (5) days of such training the following
information: (1) the name of the institution and the names of the people so
trained and whether or not it is an HTI End User or a SureQuest client; (2) the
date(s) of the training; (3) the name of the "contact" person at the
institution; (4) the name of the HTI trainer and (5) the amount of the out of
pocket expenses (including supporting documentation) incurred by the HTI
trainer.
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For HTI End Users, HTI shall invoice the institution so
trained within ten (10) days of the training (with a copy thereof to SureQuest),
and shall remit to SureQuest the 25% of the Training Fees within thirty (30)
days of such invoice.
For SureQuest clients for which HTI provides training,
SureQuest agrees to send an invoice for such training to that institution within
ten (10) days of receiving such information from HTI. Such invoice shall include
the out-of-pocket expenses incurred by HTI for such training and SureQuest
agrees to remit to HTI 75% of the Training Fees and all moneys received from
that institution for the payment of such HTI out of pocket expenses. Also
SureQuest agrees in its invoice to the institution to make it clearly understood
by the institution that the invoice relates to training services provided by HTI
but that payments are to be made to SureQuest.
7. Maintenance and Support Services.
(a) The Support Services to be provided to an End User are set
forth in Schedule 7 of this Agreement. HTI shall provide all initial telephone
and help line support to the End User (defined on Schedule 7 as "first tier"
support) and shall direct to SureQuest only those technical questions and issues
which require resolution by SureQuest (defined on Schedule 7 as "second tier"
support. The Support Fees set forth in Schedule 1 (e) do not contemplate that
SureQuest will provide "first tier" support to HTI's End Users. SureQuest shall
correct all Problems and Defects so that the SureQuest Dietary System and
Licensed Programs comply with the Specifications. HTI shall promptly report to
SureQuest in writing all Problems and Defects of which it becomes aware.
(b) The charge for the maintenance and support services shall
commence in the month following the date of acquisition by HTI of the license
(whether on a monthly basis or otherwise) and shall be payable on or before the
thirtieth (30) of that month and every succeeding month during the term of this
Agreement.
(c) SureQuest shall provide to HTI, from time to time, a
copy of all modifications and updates and related documentation which are made
to the SureQuest Dietary System.
(d) In order to inform SureQuest of those HTI End Users who
are entitled to maintenance and Support Services, HTI will provide to SureQuest
in writing the names
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and addresses (and contact person) of End Users as each enters into an End User
License Agreement. From this information provided to it, SureQuest agrees to
provide to HTI monthly a list of those End Users which are using the Licensed
Programs and which Program they are so using. Such monthly list shall indicate
new End Users and any End Users which have given notice to HTI that it intents
to (or has) discontinued the use of any Licensed Program. HTI agrees to give to
SureQuest promptly a copy of the completed "discontinuance form" which HTI
receives from an End User wishing to terminate the service and the date of such
termination and SureQuest's receipt of such form will be notice to it that such
End User has indicated that it wishes to discontinue the use of the Licensed
Programs and the termination date.
(e) In the case of Support Service Fees, HTI shall pay
SureQuest the relevant Fee set forth in Schedule 1 (e), unless the parties agree
otherwise, for Support Services provided by SureQuest to HTI or to End Users.
Such Fees shall be billed by SureQuest monthly on the first of each month for
the Fees for each succeeding month. Such Fees shall be paid by HTI within thirty
(30) days after receipt of an invoice therefore by SureQuest.
8. Demonstration Materials / Marketing Materials
Until a multi-user Windows product is available, SureQuest
shall provide to HTI one (1) license free copy of the single-user Licensed
Programs for each HTI staff member (including dietitians) who has been certified
by SureQuest to provide training or customer support for the Licensed Programs
or for demonstration, testing and back-up purposes only (as long as each HTI
staff member continues to be qualified as a certified trainer or marketer or to
provide support services). SureQuest shall not charge HTI for maintenance and
Support Fees for these copies of the Licensed Programs. SureQuest shall also
provide marketing assistance to HTI in the development of an initial marketing
brochure and other printed material relating to the Licensed Programs. The
actual cost of and production of the marketing materials (exclusive of any
reasonable staff time) and the production of any demonstration diskettes of the
Licensed Programs shall be billed to and payable by HTI to SureQuest AT
SureQuest's cost (time and materials), plus 15%. SureQuest agrees to give to
HTI, in advance of beginning the work, a written estimate of the cost to
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produce such marketing materials and demonstration diskettes.
9. Interface Development / Customization.
SureQuest agrees to provide, at the written request of the End
User, any necessary interface for an End User to integrate the Licensed Programs
into the End User's other software programs. These services shall be provided on
a time and materials basis and will be based upon a not to exceed estimate
provided by SureQuest to the End User. SureQuest also agrees to provide any
customization to the licensed Programs for use by HTI or End Users, upon terms
mutually agreeable to the parties.
10. Private Label/Product Development.
SureQuest and HTI hereby agree that SureQuest shall develop a private label
product for HTI, to be known as "Smart Solutions," for SureQuest's DOS-based and
Microsoft Windows-based software programs described on Schedule 1 (a).
SureQuest's price for developing this private label for all
these software programs is, in the aggregate, ________________________________
which HTI agrees to pay as follows: (i) ______________________________________
shall be paid at the time of the execution and delivery of this Agreement; (ii)
_________________________________ shall be paid with the completion and delivery
to HTI of the private label for the DOS-based and the Three Squares(R) software
programs; and (iii) ______________________________ shall be paid with the
completion and delivery to HTI of the private label for the yet to be developed
"Square 1" and "Square 2" windows-based software. The _______________________
and the ____________________ payments shall be paid to SureQuest within ten (10)
days after invoice.
SureQuest agrees that the above fee for the private label
product shall include cost of SureQuest's providing the necessary interface with
the direct ordering software for the following food distributors:
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HTI agrees that no other software program or service bureau (other than
the one operated by HTI) shall be given the name "Smart Solutions".
11. Pilot Program.
In order to test the Licensed Programs in the operations of HTI End
Users, SureQuest agrees that HTI may use, for a 60 day period, SurePref as (the
DOS based software) in two (2) HTI End Users and Three Squares(R) the
Windows-based software in one (1) HTI End User. SureQuest agrees that HTI shall
have use of the DOS based software free of charge for this sixty (60) day pilot
program but agrees to pay the License Fee for these two Licensed Programs after
such sixty (60) day pilot program. The Windows-based software shall consist of
the Three Squares program and shall be installed in the River Bluff Care Center,
Rockford, IL. River Bluff has already paid SureQuest ______ as one-half of the
acquisition price for such Three Squares program and will pay the balance of the
acquisition price upon invoice from SureQuest. This acquisition price includes
training for the software. River Bluff is an HTI End User and HTI will get
credit for the River Bluff sale for the purpose of the HTI discounts set forth
on Schedule 1(e). SureQuest also agrees to provide the installation and training
for these software programs for their pilot period at SureQuest's list prices.
These fees for the SurePref software will be invoiced and paid to SureQuest
within thirty (30) days of the installation and training. If, after this 60 day
pilot program, HTI is not pleased with the results of the software it shall
provide to SureQuest, in writing, the deficiencies in the operation of the
software (as opposed to additional features which HTI would like in the software
but which are not currently present in the software). SureQuest agrees to
evaluate such deficiencies and to correct them, in a commercially reasonable
time, to HTI's satisfaction. If HTI is not satisfied, it shall give notice to
that effect and the reasons for the dissatisfaction. SureQuest and HTI agree to
meet and to use their best efforts to work out HTI's dissatisfaction within (30)
day period. If after the thirty (30) day period, HTI is still not satisfied, HTI
may give written notice to terminate this Agreement and HTI shall reimburse
SureQuest for any out of pocket costs it may have incurred in connection with
this Agreement.
12. Menu Service Business. HTI represents that it has approximately ___
customers which are receiving "hard copy" menus from HTI. At this time, HTI is
not
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interested in having SureQuest provide "hard copy" menus to these customers, but
HTI does desire to use SureQuest's Licensed Programs to support this menu
service business. SureQuest agrees to provide HTI Licensed Programs for HTI's
menu service business provided that HTI pays SureQuest, on a quarterly basis and
within thirty (30) days of invoice, as follows: (i) from May 1, 1999 until
SureQuest completes and delivers to HTI the changes to the Licensed Programs set
forth on Schedule 12 (the "Software Delivery Date"), _____ per HTI menu service
customer per calendar quarter (the first period for payment shall be May 1 until
June 30, 1999 and then the calendar quarters shall commence on July 1, 1999);
(ii) from the Software Delivery Date until June 30, 2000, _____ per HTI menu
service customer per calendar quarter (beginning with the calendar quarter
commencing after the Software Delivery Date); and (iii) beginning with the
calendar quarter commencing on July 1, 2000 and for each calendar quarter
thereafter, _____ per HTI menu service customer per calendar quarter. In each
case, when calculating the menu service customers, it shall include all such
customers added after the date of this Agreement. These payments shall
constitute the license fee for the use of the Licensed Programs for this
purpose. In the event that the number of HTI customers using HTI's "hard copy"
menus falls below ___ for whatever reason, HTI agrees nevertheless to continue
to pay SureQuest on the basis that there are ___ such customers. HTI agrees to
provide SureQuest, in writing, within ten (10) days after the close of each
calendar quarter, a list of its hard copy menu service customers and any
additions or deletions from the previous list. If is determined that HTI does
not have at least ___ menu service customers at the time of the execution of
this Agreement, HTI agrees that SureQuest shall be entitled to adjust upwards
the quarterly fee mentioned above.
13. Database Input/Data Conversions. SureQuest agrees to input the
original databases for HTI by entering HTI custom recipes, menu designs and diet
types. SureQuest's cost to provide this data input service shall vary depending
upon a number of factors, including the form that the data is in, the quality of
the data and the time allotted to perform the work. Therefore it is difficult to
determine, in advance, what these costs are and therefore the cost for data
input shall be agreed to by SureQuest and HTI before the work commences.
SureQuest also agrees to convert data for HTI or an End User
upon the conversion by an End User from a DOS-based product to a Windows-based
product.
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Again, the parties shall agree in advance on the fees to be paid to SureQuest to
perform these services.
14. Hardware and Data Line. In order for HTI's customers to receive
full benefit from, and to allow SureQuest to provide the appropriate software
support, it is necessary that HTI's End Users have appropriate hardware and
dedicated data lines. Schedule 1(d) lists the appropriate hardware requirements
which are currently necessary to operate the Licensed Programs properly and
SureQuest's Support Fees are based on the assumption that all End Users will
have the appropriate Equipment. The parties agree that hardware specifications
may change in the future to accommodate updated software and that HTI's End User
may have to upgrade hardware in these instances. Also, each HTI End User shall
have a dedicated, direct modem line for certain of the Licensed Programs.
15. Relocated Software. If HTI relocates the SureQuest Dietary System
from one site or facility to another site or facility, HTI shall so notify
SureQuest and SureQuest shall provide HTI (to be provided to the new End User) a
new install disk and a new user manual for a total cost of _____________________
_________. This fee for new install disks and user manuals may increase, from
time to time, if SureQuest increases these fees for other SureQuest clients for
replacement software or additional manuals. The new install disk will contain
the latest databases. Before SureQuest will provide the new disk and manual, HTI
shall return to SureQuest the superceded program disk and manual.
16. Potential Business Conflicts.
(a) The parties agree that the facilities listed on Schedule
16 are the only facilities with which both SureQuest and HTI currently have a
business interest and, to that extent, the parties wish to define the working
relationship for such facilities.
With respect to such facilities listed on Schedule 16, HTI may
sell to these facilities additional SureQuest Licensed Programs under the HTI
private label "Smart Solutions" and HTI will get credit for any such sales for
purposes of the percentage discounts set forth on Schedule 1(e). HTI will
provide "first tier" support for these new Licensed Programs at HTI's usual
compensation for such services. With respect to the Licensed Programs which are
already installed in such facilities (as specified on Schedule 16),
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HTI agrees to provide "first tier" support for these existing Licensed Programs
for no additional compensation to HTI with the understanding that SureQuest
will invoice HTI for support of such existing Licensed Programs, at
SureQuest's current billing rates to such facilities, and HTI will pay
SureQuest the total amount of such invoices within thirty (30) days of invoice.
(b) If HTI "sells" a monthly arrangement for the use of new
Licensed Programs to such facilities under the "Smart Solutions" private label,
HTI agrees that SureQuest will receive the total monthly payments and that
HTI will provide the "first tier" support for such Licensed Facilities at no
additional compensation.
17. Confidentiality of Agreement and use of Trademarks.
(a) The Fees and all other terms and conditions of this
Agreement are confidential and shall not be disclosed to third parties,
including End Users without the written agreement of both parties.
Notwithstanding the foregoing, either party may disclose the existence and the
terms of this Agreement to potential investors, dietary advisors, attorneys or
accountants in connection with any investment in or acquisition of a party, but
only after written notice has been given to the other party and such persons
agree to keep such information confidential and not to use it except in
connection with such investment or acquisition. The parties agree that each may
refer to the other and to this business relationship in promotional material,
press releases and disclosure documents, provided that the other party reviews
and approves such references prior to dissemination thereof, except as may be
required by law.
(b) Either party may use the trademarks, tradenames,
copyrights or other proprietary rights or trade designations of the other in any
promotional or other written materials for general dissemination to End Users or
otherwise, provided that the form of such usage shall be approved by the other
party in writing. In no event however shall HTI remove any copyright or other
proprietary rights or identifying legend of SureQuest from the Licensed
Programs.
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18. Proprietary Information.
(a) Both parties acknowledge that in the course of performing
their respective obligations hereunder, they shall be receiving information
which is proprietary and confidential to the disclosing party and which the
disclosing party wishes to protect from public disclosure ("Proprietary
Information"). Proprietary Information as used herein includes without
limitation all information disclosed at any time before, after, or at the time
of execution of this Agreement between the parties relating to the Licensed
Programs, and any other confidential information or trade secrets disclosed
between the parties relating to their respective businesses, customers,
products, marketing and sales plans, financial status, product development
plans, strategies and the like.
(b) Each party (i) shall hold such Proprietary Information in
confidence and not disclose it, except to its employees or representatives to
whom disclosure is necessary to effect the purposes of this Agreement and who
are similarly bound to hold the Proprietary Information in confidence; (ii)
shall use its best efforts to prevent inadvertent or unauthorized disclosure of
any Proprietary Information; (iii) shall not make any use of any Proprietary
Information except to the extent necessary to carry out the intent of this
Agreement; and (iv) shall use reasonable care, but in any event not less than
the care it uses to protect its own proprietary information, to protect the
other party's Proprietary Information.
(c) Nothing in this Agreement shall be interpreted as placing
any obligation of confidence and non-use on a party with respect to any
Proprietary Information that (i) can be demonstrated to have been in the public
domain as of the effective date of this Agreement or comes into the public
domain during the duration of this Agreement through no fault of such party, or
(ii) can be demonstrated to have been independently developed by such party, or
(iii) is rightfully received by such party from a third party not under an
obligation of confidence to the other party hereto.
19. Default.
(a) In addition to the termination provisions contained in
paragraph 4, this Agreement may be terminated if either party is in default of
any of its material obligations hereunder, and has not commenced cure within ten
(10) days and effected cure of such
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default within thirty (30) days of receipt of written notice of default from the
other party, unless the default is not able to be cured within a thirty (30) day
period, then it shall be cured within a commercially reasonable time.
(b) Subject to the provisions of paragraph 4(c) above relating
to the sublicenses granted to End Users, within ten (10) days after the
termination of this Agreement for any reason, HTI shall return all copies of
the Licensed Programs or portions thereof and related documentation and manuals,
as specified by SureQuest, and shall certify in writing to SureQuest that all
copies of the Licensed Programs or portion thereof in any form have been
returned to SureQuest, and that all software has been removed from all HTI and
End User computers.
20. Patent, Copyright and Trade Secret Indemnity.
(a) SureQuest represents and warrants that it has the right to
grant the licenses granted to HTI hereunder.
(b) SureQuest will defend and indemnify HTI for all costs
(including reasonable attorneys fees) arising from a claim that the Licensed
Programs infringes an existing United States patent, or a copyright, or trade
secret right of a third party, provided that (i) HTI notifies SureQuest of any
such claim in writing within 30 days of the claim, (ii) SureQuest has sole
control of the defense and all related settlement negotiations, and (iii) HTI
provides SureQuest with the assistance, information and authority necessary to
perform the above (reasonable out-of-pocket expenses incurred by HTI in
providing such assistance will be reimbursed by SureQuest).
(c) SureQuest shall have no liability for any claim of
infringement hereunder based on (i) use of a superseded or altered release of
the Licensed Programs if such infringement would have been avoided by the use of
a current unaltered release of the Licensed Programs that SureQuest provides to
HTI, or (ii) the combination, operation or use of the Licensed Programs
furnished under this Agreement with other programs, data or equipment not
provided or approved by SureQuest.
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(d) In the event the Licensed Programs are held or believed by
SureQuest to infringe, SureQuest shall have the option, at its expense, to (i)
modify the Licensed Programs to make them non-infringing, (ii) obtain for HTI
a license to continue relicensing the Licensed Programs, (iii) substitute the
Licensed Programs with other software reasonably suitable to HTI, or (iv) if
none of the foregoing remedies are commercially reasonable, terminate the
license for the infringing Licensed Programs and refund the license fees paid by
an End User for those Licensed Programs, prorated in accordance with the terms
of the End User License Agreements then in effect.
21. Product Warranty.
(a) SureQuest warrants to HTI that the Licensed Programs
unless modified by HTI, and the accompanying media, will perform the functions
described in its Specifications in all material respects when operated on the
hardware platform and dedicated data line as specified in Schedule 14. Any claim
submitted under this warranty must be submitted in writing together with the
media and End User data to SureQuest. SureQuest's obligation for warranty claims
shall be, at its option, to (i) replace the defective Licensed Programs or media
with the Licensed Programs or media that conforms to the above warranty, (ii)
provide a workaround, or (iii) return the applicable Fees paid to SureQuest
which must be returned to any End User due to the breach by SureQuest of the
warranty provided in this paragraph. HTI agrees not to modify in any way the
Licensed Programs except to the extent necessary to provide the interface
referenced in Paragraph 3(c) above, which interface shall be reviewed and
approved in writing by SureQuest.
(b) SureQuest warrants that, not later than July 1, 1999, the
Licensed Programs shall (i) properly execute with all date data, whether from
years in the same century or different centuries, and across century boundaries,
including by yielding correct results in arithmetic operations, comparisons and
sorting of date fields, (ii) not abnormally cease to execute or return an
erroneous error message to date related processing; and (iii) correctly
recognize and process the date of February 29, and any related date data, during
leap years, including the leap year occurring in the year 2000;
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(c) SureQuest warrants that, using commercially available
off-the-shelf software to confirm this warranty, the Licensed Programs contains
no computer virus or other contaminants, including any codes or instruction that
may be used to access, modify, delete (other than an intended operation), damage
or disable Licensee's computer system, including but not be limited to security
or expiration codes.
(d) THE WARRANTIES ABOVE ARE EXCLUSIVE AND IN LIEU OF
ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
22. Limited Liability.
NEITHER PARTY SHALL, IN ANY EVENT, BE LIABLE TO THE OTHER
PARTY OR ITS EMPLOYEES, AGENTS, AFFILIATES OR SUBLICENSES, FOR ANY LOSS OF
PROFIT, GOODWILL OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES SUFFERED BY
THE OTHER PARTY OR ITS EMPLOYEES, AFFILIATES, AGENTS OR SUBLICENSES, EVEN IF THE
PARTY AGAINST WHOM THE CLAIM IS BEING MADE HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH LOSS OR DAMAGE.
23. Escrow Source Code.
An escrow is being established to assure HTI's ability to
provide maintenance to the Licensed Programs and to continue to offer it to its
customers should Surequest become unable or unwilling to perform under this
Agreement to such a material extent that its inability or unwillingness
jeopardizes the maintenance of the Licensed Programs or HTI's ability to offer
the Licensed Programs to its customers. Should any such event happen, HTI
agrees to give SureQuest written notice of any such inability or unwillingness
which HTI reasonably believes jeopardizes the maintenance of the Licensed
Programs or HTI's ability to offer the Licensed Programs to its customers.
SureQuest shall have thirty (30) days to respond in writing to the alleged
inability or unwillingness. If the parties are not able to resolve the dispute,
the matter shall be submitted to arbitration as
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provided in Section 26 (b) below. The final decision of the arbitration shall
determine whether HTI shall receive a copy of the source code of the Licensed
Properties or whether SureQuest shall eliminate its inability or unwillingness
to perform its obligations under this Agreement.
Within sixty (60) days following execution of this Agreement,
SureQuest shall place into escrow an executable copy of the Licensed Programs
and a copy of the source code and, within thirty (30) days of release to HTI
of any maintenance, upgrades or modifications to the Licensed Programs which
required changes to the source codes shall place into escrow an updated
executable copy of the Licensed Programs and copy of the source code. The
parties shall share equally the responsibility for payment of all fees charged
by the escrow agent. SureQuest's contribution to such fees may take the form of
a credit against billing to HTI.
The escrow agent shall be fort Knox and the escrow shall be
established, maintained, and dissolved according to the terms of the escrow
agreement to be agreed to consistent with the terms of this Agreement.
Should HTI acquire the source code from the escrow, HTI
shall be granted a non-transferable, irrevocable, non-exclusive license to use
the source code only to support its license to use, and license its customers to
use, the Licensed Property only pursuant to this Agreement and any other
agreement between HTI and SureQuest. Ownership of the source code, and all
intellectual property rights, including, but not limited to, copyright, trade
secret, and patent rights, in the source code and any modifications and
additions thereto, by whomever made, shall remain vested in SureQuest. HTI
shall not use, or permit others to use, the source code or its license to
complete in any manner with SureQuest.
24. Payment Provisions.
For the license fee and services provided to by SureQuest to
HTI and to HTI End Users, SureQuest will submit invoices to HTI and HTI
agrees to remit payment to SureQuest within thirty (30) business days from the
date of invoice. Payments due and not received by SureQuest in accordance with
the terms of this Agreement are subject to and
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may be assessed interest charges equal to one (1.0%) per cent per month on the
unpaid balance.
25. Force Majeure.
SureQuest and HTI shall not be held liable for any delay or
failure in performance of any part of this Agreement nor pursuant to an Order or
License Agreement under this Agreement caused by fire, embargo, war, a labor
dispute, government requirement, act of God or by the public enemy, or causes
beyond its control, whether or not similar to the foregoing.
26. General Provisions.
(a) Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Texas, without giving effect to the
principles of the conflicts of law.
(b) Arbitration. Except as otherwise provided in this
Agreement, all disputes, claims and controversies between the parties arising
out of or related to this Agreement, hereinafter designated "Disputed Matter",
shall be referred first to an officer of HTI and an officer of SureQuest who
can contractually commit their respective companies. In the event such officers
cannot resolve a Disputed Matter, either party may request the matter to be
submitted to binding arbitration in Dallas, if HTI is the requesting party,
and in St. Louis, MO, if SureQuest is the requesting party. Such arbitration
shall be conducted in accordance with the commercial arbitration rules of the
American Arbitration Association then prevailing. The party requesting the
arbitration shall request the American Arbitration Association to:
(A) Appoint an arbitrator who: (i) is familiar with the
computer software industry; (ii) will follow substantive rules of law; (iii)
will abide by the terms and conditions of this Agreement; and (iv) may require
such procedures as discovery and the submission of written briefs;
(B) Require the testimony to be transcribed;
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(C) Require the award to be accompanied by findings of fact
and a statement of reasons for the decision; and
(D) Judgment upon any award made in such arbitration may be
entered and enforced in any court of competent jurisdiction.
(E) Each party shall be responsible for payment of their costs
and attorney fees.
(c) Entire Agreement. This Agreement and the schedules and
exhibits attached hereto contain the entire understanding of the parties with
respect to the matter contained herein. There are no promises, covenants or
undertakings contained in any other writing or oral communication. In the event
of any conflict between or among the documents comprising this Agreement, the
later or latest shall prevail.
(d) Written Modifications. This Agreement may not be modified
except in a writing signed by authorized representatives of the parties.
(e) Notices. Any notices required or permitted to be sent
hereunder shall be delivered by hand; by a recognized international courier
service; or sent by Certified or Registered Mail, Return Receipt Requested.
Notices shall be sent to the addresses first set forth below or to such other
address as a party may designate by notice pursuant hereto. Notices to SureQuest
or HTI shall be sent "Attention: President". Notices shall be effective upon
the date when delivery is either effected or refused.
(f) Waiver. A waiver of a breach or default under this
Agreement shall not be a waiver of any subsequent default. Failure of either
party to enforce compliance with any term or condition of this Agreement shall
not constitute a waiver of such term or condition.
(g) Assignment. This Agreement may not be assigned by either
party without the written consent of the other party except to a third party
which acquires all or substantially all of the outstanding shares or all or
substantially all of assets of the assigning
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party, provided that the party seeking to assign this Agreement shall provide
not less than thirty (30) days prior notice of such intention to the other
party, and shall not make such assignment if within ten (10) days after it has
sent such notice it is notified that the proposed assignee is a competitor of
the other party.
(h) Non-Compete. HTI agrees that for the duration of this
Agreement HTI shall not, within the United States, acquire, develop, or enter
into an agreement with a third party regarding a dietary software program
similar to the SureQuest Dietary System. HTI also agrees that for two (2)
years after the termination of this Agreement, HTI shall not solicit, propose
or otherwise encourage any End Users which are using the License Program to
terminate the use of such Licensed Program.
(i) Invalid Agreement. If any term, provision covenant or
condition of this Agreement is held by a court of competent jurisdiction to be
invalid or unenforceable, the remainder of the provisions shall remain in full
force and effect and not be affected, impaired or invalidated thereby.
(j) Captions. The captions of this Agreement are for the
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
(k) Mutual Duties and Obligations. The parties agree that,
upon the request of the other, each shall promptly execute, swear to,
acknowledge under oath and/or deliver such further documents and instruments,
information and other further assurances and promptly perform further acts as
may be necessary, appropriate or incidental to carry out the intent and purpose
of this Agreement.
(l) Shipping Charges. The parties agree that where expedited
delivery of the Licensed Programs is required, the party responsible for the
need for expedited delivery shall pay all charges relating to such delivery
method. For purposes of clarity only, for example, if expedited delivery is
required due to SureQuest's failure to act in a timely manner, SureQuest shall
pay all shipping charges, but if it is required due to a non-SureQuest
precipitated emergency of HTI, HTI shall pay such shipping charges.
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IN WITNESS THEREOF, the parties hereto have executed this Agreement as of the
date first above written.
Health Technologies, Inc. SureQuest Systems Inc.
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- - - - - - - - ------------------------------ ------------------------------
By By
Title President Title President
------------------------- -------------------------
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SCHEDULE 6(a) Page 2
TRAINER TRAINING REQUIREMENTS
Effective training is absolutely essential to provide optimal use of the
software products. It is essential for each trainer to be able to effectively
use the software programs and be able to relay this knowledge to the End User.
To provide the best training possible, the following outlines the time
requirements for training the trainer for each program. (Due to growing
functionality of the programs, these times may change. Required means Required
to insure accurate and/or optimum use of the program/system.) As new programs
are developed, the training requirements will likewise be established and
included in the train the trainer program.
- - - - - - - - - SUREPREF(TM) - (1 day) - 1 day training required including trainer test
- plus an End User training to be scheduled at a
later date.
- - - - - - - - - SUREWEIGHT(TM) - 1/2 day training required including trainer test.
- - - - - - - - - SUREASSESS(TM) - 1/2 day training required including trainer test.
- - - - - - - - - SUREMENU(TM) - (3 days) - 2 days plus 1 day for review and testing at least 1
week later.
- Plus 1 day End User training with certified trainer
observing to be scheduled at a later date.
- - - - - - - - - 3 SQUARES(R)- (9 days) - 3 days initial Base Module/Select/Special
Events/Catering and all Associated Reports.
- 3 days for Inventory/Purchasing/Budget
- 3 days for training completion, review and trainer
test.
- Give End User training under observation ("student
teaching") of all modules per End User requirements.
It is recommend that there be at least 1 week between each of the above
training sessions when divided into multiple sessions to allow time to review
and practice each area. The foregoing training requirements are subject to
future adjustments to better meet End User needs and/or to take advantage of
technology for a portion of the training needs.
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EXHIBIT 6.5
SOFTWARE LICENSE AGREEMENT
THIS AGREEMENT is entered into this 28th day of August, 1998, by and
between SERCA FOODSERVICE INC., its subsidiaries and affiliates, an Ontario
corporation located at 302 The East Mall, Etobicoke, Ontario, Canada M9B 6B8
("SERCA") and SUREQUEST SYSTEMS, INC., a Nevada corporation located at 401 South
Sherman Street, Suite 305, Richardson, Texas, U.S.A. 75081 ("Surequest").
WHEREAS, SureQuest, owns and markets several nutrition management software
programs, including one known generally as "Three Squares(R)"; and
WHEREAS, SERCA desires to offer to its customers a nutrition management
software program under the name "SERCA Synergy" for use by its customers as a
value-added service;
NOW, THEREFORE, in consideration of the mutual promises and undertakings
hereinafter set forth, SureQuest and SERCA do hereby agree as follows:
SECTION 1. DEFINITIONS. Unless specifically stated otherwise, for the
purposes of this Agreement the following terms shall be defined as set forth
below:
1.1 Software. "Software" is the inventory and select menu management
modules of SureQuest's single-user or multi-user Microsoft Windows based "Three
Squares" nutrition management program, in object code format, including any
enhancements, modifications or updates to those modules.
1.2 Equipment. "Equipment" shall mean the types of computer terminals and
peripherals described in Schedule C.
1.3 Licensed Materials. "Licensed Materials" shall mean the SureQuest
User's Manual, its User Guide, and such other system documentation as provided
in written and electronic medium, by SureQuest for use with the Software.
1.4 Source Code. "Source Code" shall mean the source code for the Software
with programmer's comments and notes relating thereto.
1.5 SERCA Service Area. SERCA's service area is the country of Canada.
1.6 Technical Support. Assistance to SERCA personnel who may be
encountering difficulty operating the Software or who may be advising end-users
as to proper use of the Software.
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1.7 Maintenance. Changes to the Software which SureQuest deems necessary to
maintain Software performance in accordance with the Licensed Materials.
1.8 Updates. Releases of new or enhanced features deemed desirable by
SureQuest.
1.9 Currency. All prices, costs, fees, etc. are expressed in U.S. dollars.
1.10 Enhancements. "Enhancements" shall mean and include upgrades and
substantial additions to the capability of the Software, and also later versions
of the Software developed by SureQuest and provided generally to SureQuest
supported customers.
SECTION 2. LICENSE. Subject to the terms and conditions of this Agreement,
SureQuest hereby grants to SERCA a non-exclusive, perpetual license to use, and
to license others to use, the Software and Licensed Materials in the SERCA
Service Area. SERCA agrees that the sublicense agreements shall include at least
the same restrictions on sublicensees as are imposed in this Agreement on SERCA
as the licensee.
2.1 SERCA may use in the SERCA Service Area, and may sub-license others to
use in the SERCA Service Area, the Software and Licensed Materials for SERCA's
intended purpose of providing software to its customers to facilitate
computer-assisted menu planning, nutrition information and patient tracking.
SERCA shall have the right to make as many copies of the Licensed Materials as
are covered by the license fees set out below as well as such backup and
archival copies of the Software as are required by normal business practice.
SECTION 3. PURCHASE OF SOFTWARE LICENSES. During the first thirty-nine (39)
months of the term of this Agreement, SERCA may acquire Software licenses from
SureQuest at a price equal to ___________________ of SureQuest's suggested
retail price; details of the single user product pricing are attached as
Schedule A and details of the multi-user product pricing are attached as
Schedule B. Software licenses above the minimum required in each year by Section
8.1 may be acquired in that year at a price equal to ___________________ of
SureQuest's suggested retail price reduced by an additional Ten percent (10%) of
the discounted price. The suggested retail price for purposes of this Agreement
may not be increased more often than annually, and any increase shall not exceed
the percentage increase in the CONSUMER PRICE INDEX ("CPI")-- ALL ITEMS FOR
CANADA as published by Statistics Canada for the 12 month period preceding the
increase. Following the first thirty-nine (39) months, and subject to the
parties agreeing (as provided in Section 8.1) on the number of licenses to be
acquired in subsequent years to maintain exclusivity, SERCA may acquire software
licenses at ___________________ of SureQuest's suggested retail price, as
established from time to time.
SECTION 4. DEMONSTRATION MATERIALS. SureQuest shall provide to SERCA one
(1) copy of the Software for each SERCA health care specialist (or other
designated representative operating in a similar capacity) for demonstration
purposes. SureQuest shall provide assistance to SERCA in the development of
brochures and other printed material
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relating to the Software, including demonstration diskettes of the Software, at
SureQuest's cost plus Fifteen percent (15%).
SECTION 5. TECHNICAL SUPPORT, MAINTENANCE, AND UPDATES. SureQuest shall
provide SERCA with ninety (90) days of free Technical Support, Maintenance,
Enhancements and Updates on behalf of each SERCA customer that sublicenses the
Software. Thereafter, continuing Technical Support, Maintenance, Enhancements
and Updates will cost _____________________________ (the "support fee") per
month per customer, billed to SERCA quarterly and payable in advance. The
support fee may not be increased more often than annually, and SureQuest agrees
that during the first three (3) years of the term of this Agreement such
increase shall not exceed the percentage increase in the CPI-- ALL ITEMS FOR
CANADA as published by Statistics Canada for the 12 month period preceding the
increase.
The support fee is payment only for support provided to SERCA; SERCA will
undertake direct support of its customers. For support provided directly to
SERCA's customers, SureQuest will be paid ____________ billed to SERCA in 1/10
hour increments. However, SERCA shall not be obligated to pay any such charges
for customer support which was not pre-approved by SERCA.
In order that Technical Support, Maintenance and Updates may properly be
provided, SERCA will provide to SureQuest the names and addresses of its
customers as each acquires a license and the date of acquisition of each
license, and a quarterly update indicating each customer's status with respect
to licensing and Technical Support.
5.1 Technical Support Availability. In order to provide timely technical
support, SureQuest personnel will be available to SERCA personnel via toll
telephone line from Monday to Friday, excluding U.S. holidays, during the hours
of 8:00 a.m. through 6:00 p.m. Central time. At all other days and times,
SureQuest personnel will be available to SERCA personnel via pager.
5.2 Indemnification. In no event shall SureQuest be liable for any harm
caused directly or indirectly by technical support provided by SERCA to its
customers, and SERCA will indemnify and hold SureQuest harmless against any such
claims made by SERCA or its customers.
SECTION 6. INTERFACE DEVELOPMENT; OTHER REQUESTED MODIFICATIONS; TRAINING.
6.1 Interface Development. SERCA agrees that the interface is complete and
satisfactory as of the date of execution of this Agreement. Upon receipt of an
invoice, SERCA shall pay to SureQuest ________________________________________
__________ for development of the interface with SERCA's existing systems.
6.2 Other Requested Modifications. The parties shall negotiate the fees and
terms by which requested modifications to the Software, associated manuals and
other materials may be made by SureQuest. Any such fees must be agreed to by
both parties before commencement of any modifications.
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6.3 Training. At SERCA's reasonable request SureQuest shall provide
additional training to SERCA at SureQuest's then current prevailing rates
(including expenses) (see Schedule A), increasable during the first three (3)
years of the term of this agreement not more than annually and by no more than
the percentage increase in the CPI-- ALL ITEMS FOR CANADA as published by
Statistics Canada for the 12 month period preceding the increase.
SECTION 7. PAYMENT OF FEES. For the support fee (referred to in paragraph
5) and training (referred to in paragraph 6.3) and other products and services
rendered under this Agreement, SureQuest will submit invoices to SERCA and SERCA
agrees to remit payment to SureQuest within thirty (30) calendar days from the
date of invoice. With respect to payments for Software licenses, SERCA shall pay
for each license when ordered, except that when ten or more licenses are ordered
at one time, ___________________ of the total price of each such multiple order
shall be paid at the time the order is made, and the remaining _____________
_____ shall be paid when the Software license is received by SERCA. Payments due
and not received by SureQuest in accordance with the terms of this Agreement are
subject to and may be assessed interest charges equal to one and one half
(1.50%) percent per month on the unpaid balance.
SECTION 8. EXCLUSIVE MARKETING. As long as SERCA fulfills the minimum
acquisition requirements set forth below and does not market competitive
software to its customers or to others, SureQuest shall not, during the term of
this Agreement, enter into an agreement permitting a competing food distributor
or food purchasing group to offer the Software to the health care industry in
SERCA's Service Area. SERCA shall not be considered to be marketing competitive
software in breach of this Section either by continuing to offer SPS and/or
Access software or by providing otherwise competitive software to a particular
customer at that customer's insistence. If the SPS or Access software is
enhanced beyond its current functionality to provide software services
substantially equivalent to those provided by the Software (the "Competitive
Services"), SERCA agrees not to market or sell any such Competitive Service of
SPS or Access to the health care industry during the term of this exclusive
marketing agreement.
8.1 Minimum Purchase. During months one (1) through twelve (12) of this
Agreement, SERCA shall purchase not less than ________________ Software
licenses. SureQuest acknowledges that SERCA has met its year one minimum
acquisition obligations. During months thirteen (13) through twenty-four (24),
SERCA shall acquire not less than __________ Software licenses; SERCA will use
its best efforts to acquire these licenses as quickly as can be arranged. During
months twenty-five (25) through thirty-nine (39), SERCA shall acquire not less
than ___________ Software licenses, and thereafter the number of licenses to be
acquired by SERCA shall be established by good-faith negotiation between the
parties. Should such negotiations fail to result in agreement, then the
exclusive marketing arrangement shall terminate.
8.2 Non-competing Marketing. Nothing in this Section 8 shall be construed
to limit SureQuest's right to market, or license others to market, the Software
in the SERCA Service Area except as provided in Section 8.0.
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8.3 Limited Affect of Insufficient Acquisitions. Failure to meet the above
minimum acquisition requirements may, on written notice from SureQuest, cause
the exclusive arrangement described by this Section 8 to terminate, but will not
affect the remainder of this Agreement, except that the acquisition price for
additional licenses shall be seventy percent (70%) of SureQuest's suggested
retail price as established from time to time. SERCA shall have thirty (30) days
from receipt of written notice from SureQuest to acquire the balance of the
necessary Software licenses to meet minimums necessary to retain the exclusive
arrangement described in Section 8.
8.4 Reciprocity. SERCA shall not knowingly offer or license the Software
outside the SERCA Service Area and shall immediately cease and desist such
activity upon written demand by SureQuest, whether or not such activity was
knowingly begun. Should SERCA fail within thirty (30) days to comply with any
such demand, SureQuest may refuse to provide further licenses to SERCA and
terminate the exclusive marketing arrangement of this Section 8.
SECTION 9. ESCROW OF SOURCE CODE.
9.1 The escrow is being established to assure SERCA's ability to provide
maintenance of the Software, and continue to offer it to its customers, should
SureQuest become unable or unwilling to perform under this Agreement to such a
material extent that its inability or unwillingness jeopardizes the Maintenance
of the Software or SERCA's ability to offer it to its customers. Should any such
event happen, SERCA agrees to give SureQuest written notice of any such
inability or unwillingness which SERCA reasonably believes jeopardizes Software
maintenance or SERCA's ability to offer the Software to its customers. SureQuest
shall have thirty (30) days to respond in writing to the alleged inability or
unwillingness. If the parties are not able to resolve the dispute, the matter
shall be submitted to arbitration as provided in Section 13 below. While the
dispute is in arbitration, SERCA shall have the right to have the escrow agent
release from escrow a sufficient number of executable copies of the Software to
allow SERCA to provide maintenance of the Software and continue to offer it to
its customers. The final decision of the arbitration shall determine whether
SERCA shall continue to have access to the executable copy or shall receive a
copy of the Source Code or whether SureQuest shall eliminate its inability or
unwillingness to perform its obligations under this Agreement.
9.2 Within thirty (30) days following execution of this Agreement,
SureQuest shall place into escrow an executable copy of the Software and a copy
of the Source Code and, within thirty (30) days of release to SERCA of any
Maintenance, Updates or Enhancements to the Software which required changes to
the Source Code shall place into escrow an updated executable copy of the
Software and copy of the Source Code. The parties shall share equally the
responsibility for payment of all fees charged by the escrow agent. SureQuest's
contribution to such fees shall take the form of a credit against billing to
SERCA. Furthermore, the parties agree that if the Software does not meet the
millennium compliance requirements as specified in Section 10.2 below by July
31, 1999, SERCA shall have the right to have the escrow agent release the Source
Code to SERCA so that SERCA can make the necessary changes to assure that the
Software meets such millennium compliance requirements.
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9.3 The escrow agent shall be Fort Knox and the escrow shall be
established, maintained, and dissolved according to the terms of the escrow
agreement to be agreed to by SERCA and SureQuest, provided that the terms of the
escrow agreement shall be consistent with the terms of this Agreement.
9.4 Should SERCA acquire the Source Code through escrow, SERCA shall be
granted a non-transferable, irrevocable, non-exclusive license to use the Source
Code only to support its license to use, and license its customers to use, the
Software in the SERCA Service Area. Ownership of the Source Code, and all
intellectual property rights, including, but not limited to, copyright, trade
secret, and patent rights, in the Source Code and any modifications and
additions thereto, by whomever made, shall remain vested in SureQuest. Except as
specifically set forth in this Section 9.4, SERCA shall not use the Source Code
or its license to compete in any manner with SureQuest.
SECTION 10. REPRESENTATIONS AND WARRANTIES.
10.1 SureQuest warrants that the Software will perform in accordance with
the Licensed Materials and the written documentation and specifications provided
to SERCA provided that the users of the Software use at least the Equipment
specified on Schedule C. Should any of the Software delivered to SERCA not
perform in accordance with the Licensed Materials or written documentation and
specifications provided to SERCA, following receipt of written notice and
reasonable opportunity to correct nonconformance, SERCA shall be entitled to a
refund of any and all money paid to SureQuest which relates to the
non-performing Software, and this Agreement shall, at SERCA's option, terminate.
Any demand for refund pursuant to this Section must be received in writing by
SureQuest.
10.2 SureQuest represents and warrants that at the time of delivery the
Software and all Updates and Enhancements shall be free of known viruses and
bombs. Apart from difficulties resulting directly from third party hardware or
unrelated software in use on hardware also running the Software, SureQuest
warrants that on or before July 31, 1999 all the current production versions of
the Software will fully comply with the following millennium compliance
statements when configured and used according to the documented instructions.
The definition of "comply" is the ability to:
-- correctly handle date information before, during and after 1 January
2000, accepting date input, providing date output and performing
calculation on dates or portions of dates;
-- function according to the Documentation before, during and after 1
January 2000, without changes in operation resulting from the advent
of the new century assuming correct configuration;
-- where appropriate, respond to two digit date input in a way that
resolves the ambiguity as to century in a disclosed, defined and
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predetermined manner, store and provide output of date information in
ways that are unambiguous as to century; and
-- manage the leap year occurring in the year 2000, following the
quad-centennial rule.
10.3 SureQuest represents and warrants that it is the sole owner of the
Source Code and Software and all proprietary and other rights associated with
the Source Code and Software, except for certain components embedded in the
Software which may be owned by a third party, but for which SureQuest has the
non-exclusive right to use and distribute to others.
10.4 SureQuest makes no warranty that the Software as delivered fulfills
any particular local, territorial, provincial, or national nutritional
requirements; each individual customer of SERCA who uses the Software is
responsible for incorporating into its particular Software all data relating to
said customer's governmental nutritional requirements. Each customer is also
responsible for the necessary updates of data to ensure that the Software
remains in compliance with said customer's governmental nutritional and/or
operational standards.
10.5 SureQuest represents and warrants that no changes, Upgrades or
Enhancements will be made to the Software that interfere with the functioning of
the interface between the Software and SERCA's ordering system.
SECTION 11. INFRINGEMENT.
11.1 SureQuest shall, at its own expense, indemnify and hold SERCA harmless
and defend or settle any action brought against SERCA based on a claim that the
Software infringes any patent or copyright and will pay all costs and damages
finally awarded against SERCA in any such action, provided SERCA promptly
notifies SureQuest when it receives any notice of such claim or allegation of
infringement, and SureQuest has the sole control of the defense of any such
claim.
11.2 In the event a claim of infringement is proven, SureQuest shall
replace the infringing software with a substantially compatible and functionally
equivalent computer program or modify the Software to avoid the infringement or,
if neither of these alternatives is reasonably available to SureQuest, SERCA may
return all copies of the Software to SureQuest against SureQuest's refund of the
license fees less a reasonable amount commensurate with the use already made of
the Software, on the basis of a reasonable life of three (3) years for the
Software (that is, 1/36 of the fees per month).
11.3 SureQuest shall not be liable for any infringement or claim thereof
based upon the use of the Software or any element of it in combination with
programs or hardware not approved by SureQuest, or upon any modifications to the
Software made by SERCA should SERCA become able to make such changes.
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SECTION 12. NON-DISCLOSURE OF PROPRIETARY INFORMATION.
12.1 Unless the other party's prior written consent is secured, which shall
not be unreasonably or unduly withheld, neither party shall, directly or
indirectly, furnish or disclose to any person (except each parties' respective
officers, employees or agents with a demonstrable need to know and who have been
informed of the restrictions of this Section) or entity or use in any way, any
proprietary or confidential information of the other, except information which
may:
(a) be required to be disclosed or divulged by law or regulation, or
(b) become part of the public domain, except by an act or omission of the
disclosing party, or
(c) be received by either party from a third party having legal right to
transmit same to such recipient.
12.2 Restriction. Neither SERCA nor its sublicensees shall modify, copy,
reverse engineer, decompile or disassemble the Software, or copy or reproduce
the Licensed Materials accompanying the Software without SureQuest's written
permission, except as noted in paragraph 2.1. Neither SERCA nor its sublicensees
shall attempt in any manner to defeat, remove, or circumvent any security
routines or devices designed to prevent unauthorized use of the Software.
SureQuest warrants that supplied security control devices should not hamper
normal authorized operation of the Software and agrees to either correct or to
remove such devices within a reasonable time following written notice that such
a condition exists.
12.3 Reservation. Nothing in this Agreement shall be construed to grant
either party any rights with respect to the other's copyrights, trademarks,
trade names, service marks, or other intellectual property, except the narrowest
such rights necessary for each to perform its obligations hereunder and to
accomplish the purposes of this Agreement.
12.4 Intellectual Property Notices. SERCA will ensure that all copyright,
patent, proprietary and trade secret notices of SureQuest will remain on the
Software in any form, and on all Licensed Materials. The use of a copyright
notice on the Software and Licensed Materials shall not be taken to indicate
that they have been published.
12.5 Remedy for Breach. Each party acknowledges that compliance with the
restrictive covenants contained in this section are necessary to protect the
other's substantial investment in proprietary information. Each party recognizes
the irreparable harm and continual damage that would result from a breach of
these covenants for which money damages may not be adequate. In the event either
party breaches or threatens to breach any of the restrictive covenants contained
herein, the other shall be entitled to any legal or equitable relief available,
including, without limitation, specific performance, immediate preliminary
and/or permanent injunctive relief, and money damages insofar as they can be
determined.
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12.6 This section 12 shall survive termination of this Agreement.
SECTION 13. ARBITRATION AND INDEMNIFICATION.
13.1 Arbitration. If any claim or dispute arising out of this Agreement
cannot be settled by the parties, such claim or dispute shall be settled by
arbitration, in Dallas, Texas, in accordance with the commercial rules of the
American Arbitration Association then in effect, and judgment on the award may
be entered in any court having jurisdiction.
13.2 Indemnification and Hold Harmless. Unless due to the negligence of
SureQuest, SERCA shall indemnify and hold SureQuest and its shareholders,
directors, officers, agents and employees harmless from any and all claims,
causes of action, loss, damage, costs and expenses, judgments, orders, civil and
criminal penalties, forfeitures and assessments arising from or related to (i)
the failure of SERCA to perform as required by this Agreement; or (ii) any
services rendered by SERCA or any employee or agent of SERCA pursuant to this
Agreement.
Unless due to the negligence of SERCA, SureQuest shall indemnify and hold
SERCA and its shareholders, directors, officers, agents and employees harmless
from any and all claims, causes of action, loss, damage, costs and expenses,
judgments, orders, civil and criminal penalties, forfeitures and assessments
arising from or related to (i) the failure of SureQuest to perform as required
by this Agreement; or (ii) any services rendered by SureQuest or any employee or
agent of SureQuest pursuant to this Agreement.
13.3 Attorney's Fees. In the event of the commencement of suit to enforce
any of the terms or conditions of this Agreement, the parties shall be
responsible for payment of their own costs and attorney's fees.
13.4 This section 13 shall survive termination of this Agreement.
SECTION 14. LIMITATION OF DAMAGES. FOR ANY BREACH OR DEFAULT BY SUREQUEST
IN CONNECTION WITH THIS AGREEMENT, EVEN FOR A BREACH OF FUNDAMENTAL CONDITION,
SERCA'S EXCLUSIVE REMEDY SHALL BE PAYMENT BY SUREQUEST OF SERCA'S DAMAGES TO A
MAXIMUM AMOUNT EQUAL TO THE AMOUNT PAID BY SERCA UNDER THIS AGREEMENT.
IN NO EVENT SHALL SUREQUEST'S LIABILITY FOR DAMAGES EXCEED THE AMOUNT PAID
BY SERCA UNDER THIS AGREEMENT. IN NO EVENT SHALL SUREQUEST BE LIABLE FOR ANY
SPECIAL INDIRECT DAMAGES, INCLUDING BUT NOT LIMITED TO LOST PROFITS, LOST DATA,
LOSS OF COMPUTER TIME, FAILURE TO ATTAIN ONE OR MANY OBJECTIVES (ECONOMICAL OR
OTHER), AND THIS EVEN IF SUREQUEST HAS BEEN ADVISED OF THE POSSIBILITY OF ANY OF
THESE DAMAGES.
IN NO EVENT SHALL SERCA'S LIABILITY FOR DAMAGES EXCEED THE AMOUNT PAID BY
SERCA UNDER THIS AGREEMENT. IN NO EVENT SHALL SERCA BE LIABLE FOR ANY SPECIAL
INDIRECT DAMAGES, INCLUDING BUT NOT LIMITED TO LOST PROFITS, LOST DATA, LOSS OF
COMPUTER TIME, FAILURE TO ATTAIN ONE OR MANY
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OBJECTIVES (ECONOMICAL OR OTHER), AND THIS EVEN IF SERCA HAS BEEN ADVISED OF THE
POSSIBILITY OF ANY OF THESE DAMAGES.
SECTION 15. SUCCESSORS AND ASSIGNS. Except as may be otherwise provided
herein, this Agreement may not be assigned nor may any of the rights and
obligations of the parties under the terms of this Agreement be assigned or
otherwise transferred without the prior written consent of the other. Any such
assignment or other transfer shall be null and void, ab initio. Notwithstanding
the foregoing, SERCA or SureQuest, respectively, may assign or otherwise
transfer its rights and obligations under this Agreement: (a) as part of the
sale of all or substantially all of its assets or stock to another entity or (b)
as part of a merger, consolidation or other corporate reorganization, or (c) to
a subsidiary or related corporation, provided that SERCA or SureQuest must give
at least ten (10) days notice to the other of its intent to assign or otherwise
transfer and any assignee or transferee must agree in writing to be bound by the
terms of this Agreement.
15.1 The covenant contained in this Section 15 shall supersede and control
over all other clauses on assignment of this Agreement and the License contained
herein.
SECTION 16. NOTICES. All notices and other communications provided for in
this Agreement shall be in writing and shall be sent by registered or certified
mail, return receipt requested and:
If to SERCA addressed to: SERCA Foodservice Inc.
302 The East Mall
Etobicoke, Ontario, Canada
M9B 6B8
Attn: Vice-President -- IT
Fax Number: 416-234-7050
If to SureQuest, addressed to: SureQuest Systems, Inc.
401 South Sherman Street
Suite 305
Richardson, Texas, U.S.A. 75081
Attn: President
Fax Number: 970-238-7733
In the event of threatened or actual postal disruption, any notice or
communication must be given either personally or by facsimile transmission.
SECTION 17. SEVERABILITY. Each provision of this Agreement shall be
construed in such a manner as to give such provision the fullest force and
effect permissible at law or in equity. To the extent that any provision herein,
or part thereof, is held to be unenforceable or invalid by a court of competent
jurisdiction, such unenforceability or invalidity shall not affect the
enforceability or validity of the remaining provisions of this Agreement which
shall remain in full force and effect, nor shall such unenforceability or
invalidity render such
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provision inapplicable to other facts in the context of which such provision, or
part thereof, would be held legally enforceable or valid.
SECTION 18. WAIVER OR MODIFICATION.
18.1 It is agreed that no waiver or modification of this Agreement or of
any covenant, condition or limitation herein contained shall be valid unless
made in writing and duly executed by the party to be charged therewith.
18.2 No waiver by either of the parties of any breach by the other party or
of compliance with any condition or provision of this Agreement shall be deemed
to be a waiver of any other provisions or conditions of this Agreement or of any
further breach or non-compliance.
SECTION 19. BREACH/DEFAULT.
19.1 Breach by SERCA. SERCA shall be in default hereunder if it fails to
pay when due any part of the fees and payments for Software licenses payable
hereunder or is otherwise in default hereunder. In the event of such default by
SERCA, which default is not cured within thirty (30) days after receipt by SERCA
of written notice of default, SureQuest may refuse to provide further licenses
to SERCA, the whole under reserve of all its other rights and recourses.
Notwithstanding the foregoing, failure to pay support fees shall entitle
SureQuest to cease provision of Technical Support, Maintenance, Updates and
Enhancements and shall not entitle it to terminate this License.
19.2 Breach by SureQuest. SureQuest shall be in default hereunder if it
fails to make timely delivery of any part of the Software or of any Licensed
Materials, or there is a failure of the warranties made by it or SureQuest
becomes bankrupt (which shall not of itself terminate this License). SureQuest
shall also be in default hereunder it if fails to provide the Technical Support,
Maintenance and Updates required by this Agreement or it is otherwise in default
hereunder.
Should SureQuest fail to remedy the default complained of within thirty
(30) days after written notice, SERCA may terminate this Agreement, claim
damages by reason of such default, and/or exercise its rights pursuant to
Section 9. In the event SERCA opts to terminate this Agreement, it shall send a
further written notice that the default has not been remedied within the said
period of thirty (30) days and SureQuest shall immediately repay to SERCA the
full fees previously paid hereunder which relate to the particular default at
issue, the whole under reserve of all SERCA's other rights and recourses.
SECTION 20. GOVERNING LAW. The parties hereto agree that it is their
intention and covenant that this Agreement and the mutual and respective
performance thereof and all litigation and special proceedings hereunder be
construed in accordance with and under and pursuant to the laws of the State of
Texas, U.S.A. and that in any action, special proceeding or other proceeding
that may be brought arising out of, in connection with, or by reason of this
Agreement, the laws of the State of Texas, U.S.A. shall be applicable and
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shall govern to the exclusion of the law of any other forum, without regard to
the jurisdiction in which any action or special proceeding may be instituted.
SECTION 21. TERM OF AGREEMENT. The term of this Agreement shall commence
upon January 1, 1997 and shall remain in force unless terminated as provided
herein, or by agreement of the parties. The parties acknowledge that based upon
the facts known to each as of the date of execution of this Agreement neither
party is in breach of this Agreement in any manner.
SECTION 22. MISCELLANEOUS.
22.1 Force Majeure. Neither party to this Agreement shall be liable to the
other for failure to perform its part of this Agreement, when such failure is
due to a breakdown of transportation, explosion, storm, fire, flood, war, riot,
civil disorder, vandalism, sabotage, labor dispute, Act of God or any other
cause beyond the control of the parties of this Agreement.
22.2 Entire Agreement. This Agreement constitutes the entire agreement
between the parties pertaining to the subject matter and supersedes all prior
Agreements between the parties in connection with the subject matter. No
supplement shall be binding, unless executed in writing by the parties to this
Agreement. Further, this Agreement shall be binding upon SERCA and SureQuest and
shall inure to the benefit of SERCA and SureQuest and to their respective heirs,
successors and assigns provided, however, the term "assigns" shall not be deemed
to permit an assignment of this Agreement except as expressly provided herein.
22.3 Captions. The captions of this Agreement are for the convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.
22.4 Mutual Duties and Obligations. The parties agree that, upon the
request of the other, each shall promptly execute, swear to, acknowledge under
oath and/or deliver such further documents and instruments, information and
other further assurances and promptly perform further acts as may be necessary,
appropriate or incidental to carry out the intent and purpose of this Agreement.
22.5 Shipping Charges. The parties agree that where expedited delivery of
the Software is required, the party responsible for the need for expedited
delivery shall pay all charges relating to such delivery method. For purposes of
clarity only, for example, if expedited delivery is required due to SureQuest's
failure to act in a timely manner, SureQuest shall pay all shipping charges, but
if it is required due to a non-SureQuest precipitated emergency of SERCA, SERCA
shall pay such shipping charges.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers, thereunto duly authorized, as of the
date first above written.
SERCA FOODSERVICE, INC. SUREQUEST SYSTEMS, INC.
BY: /s/ C.A. SIMPSON By: /s/ C. SCOTT SYKES, JR.
--------------------------- ---------------------------
C.A. Simpson C. Scott Sykes, Jr.
TITLE: VICE PRESIDENT -- I.T Title: President
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SCHEDULE B
MULTI USER PRICING
To be determined by SureQuest
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FIRST AMENDMENT TO
SOFTWARE LICENSE AGREEMENT
This Amendment, dated as of March 1, 2000, (the "Amendment") amends and
supplements the Software License Agreement, dated August 28, 1998 (the "Original
Agreement"), by and between Serca Foodservice, Inc., its subsidiaries and
affiliates, a Ontario corporation located at 302 The East Mail, Etobicoke,
Ontario, Canada M9B 6B8 ("Serca"), and SureQuest Systems, Inc., a Nevada
corporation located at 13606 TI Boulevard, Dallas, Texas 75243 ("SureQuest").
WHEREAS, the Original Agreement recited that Serca would acquire from
SureQuest at least ________________________ licenses for Serca's
Software at _________________________________________________________
_________________, US currency, per license before March 31, 2000 (not
including the initial acquisition of ________________ licenses from
Positive Input, Inc.); and
WHEREAS, the original Agreement is approaching its expiration date and,
therefore, Serca and SureQuest have now agreed to amend and supplement
the Original Agreement regarding, among other matters, Serca's
acquisition of additional licenses in the future and the price thereof;
NOW, THEREFORE, in consideration of the mutual promises and undertakings
hereinafter set forth, the parties hereby agree as follows:
1. DEFINITIONS. The following term shall be defined as follows for purposes of
the Original Agreement and this Amendment:
1.1. AGREEMENT. "Agreement," as used within the Original Agreement and this
Amendment, shall mean the Original Agreement, including all
supplements and amendments thereto (including this Amendment).
2. Section 3 of the Original Agreement is hereby amended in its entirety to read
as follows:
"SECTION 3. PURCHASE OF SOFTWARE LICENSES. In order for Serca to maintain
the exclusive marketing arrangement set forth in Section 8 of the Original
Agreement, Serca shall be obligated as follows:
(a) In lieu of paying the balance of the amount due to SureQuest
pursuant to Section 8.1 of the Original Agreement, Serca shall
acquire _______________ licenses of the Software at the price of
______________________________________________________________
___________ US currency and shall pay such amount in two (2)
installments: (x) an installment of ________________________
__________________ US currency, on or about January 14, 2000,
which SureQuest hereby acknowledges receiving; and (y) a second
installment of _____________________________________________
_________________________________________________ US currency
which is due and payable to SureQuest on or before May 15, 2000;
and
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(b) To acquire ___________________ additional Software licenses as follows:
<TABLE>
<CAPTION>
YEAR # OF LICENSES PRICE PER SINGLE-USER LICENSE
---- ------------- -----------------------------
<S> <C> <C>
One--(6/1/00--5/31/01) 1--60 $_____
Two--(6/1/01--5/31/02) 61--160 $_____
Three--(6/1/02--5/31/03) 161--300 $_____
</TABLE>
As Serca acquires these additional licenses and the price per license
decreases, there shall be no retroactive adjustment on the per license
price for previously acquired licenses. For example, when the sixty-first
license is paid for at ______, there is no downward adjustment in the per
license price for licenses 1 to 60.
Furthermore, there is no obligation to acquire more than _____________
_____ licenses to maintain exclusivity, but if Serca does acquire more than
___________________ licenses, the per license price for each license above
___________________ is ______.
The price for the multi-user (three ((3)) simultaneous users) Software is
______ added to the applicable pricing for the year acquired. For each user
over three (3) using the multi-user Software license, the price shall
increase ________________________________ per each additional user.
From time to time SERCA may present SureQuest with a request to reduce the
per license fee, specified above, in order to satisfy the financial
requirements of certain chain accounts. SureQuest agrees to reduce the per
license fee for chain accounts to ____________________________________ for
ten to nineteen (10-19) licenses or ______________________________
__________ for twenty (20) or more licenses, if the following criteria is
met: i) Serca will provide SureQuest with a written request indicating name
of corporate account, number of requested licenses, names of individual
facilities and planned installation date(s) no later than twenty five (25)
business days prior to initial installation date; ii) Serca agrees to pay
at one time for all of these licenses at the reduced fee within 30 days of
receiving program disks from SureQuest. Any amount so paid shall reduce
proportionately the amounts due on the next succeeding Payment Dates set
forth below in section 8.1 of the Original Agreement.
Serca and SureQuest further agrees that the reduced license fees for chain
accounts, under this provision, will reduce the minimum annual purchase
requirements specified above as follows: i) prior to May 31, 2001 or until
__ licenses are acquired, whichever comes first, reduced license fees of
____________________________________ will reduce the minimum license
purchase requirement for Year One by four fifths (4/5) of a license for
every license acquired and reduced license fees of ___________________
_____________________ will reduce minimum license purchase requirements for
Year One by two thirds (2/3) of a license for every license acquired; ii)
prior to May 31, 2002 or until ___ licenses are acquired, whichever comes
first, reduced license fees of ____________________________________ will
reduce the minimum license
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purchase requirement for Year Two by five sixths (5/6) of a license for
every license acquired and reduced license fees of ___________________
_______ US will reduce minimum license purchase requirements for Year Two
by three forths (3/4) of a license for every license acquired; iii) after
May 31, 2002 or when ___ licenses are acquired by Serca under this
Agreement, whichever comes first, reduced license fees for chain accounts
will reduce minimum license purchase requirements by one license for every
license acquired by Serca under this paragraph."
3. Section 8.1 of the Original Agreement is hereby amended in its entirety to
read as follows:
"8.1 MINIMUM PURCHASE. Serca shall make the following payments in acquiring
the Software licenses mentioned in Section 8, of the Original Agreement, as
amended:
<TABLE>
<CAPTION>
Total # of Licenses Payment*
Year For Year # of Licenses Dates Amount
---- -------- ------------- ----- ------
<S> <C> <C> <C> <C>
One (6/1/00 -- 5/31/00) __ __ 12/15/00 _____
__ 5/15/01 _____
Two (6/1/01 -- 5/31/02) ___ __ 8/31/01 _______
__ 11/31/01 _______
__ 2/28/02 _______
__ 5/31/02 _______
Three (6/1/02 -- 5/31/03) ___ __ 8/31/02 ________
__ 11/31/02 ________
__ 2/28/03 ________
__ 5/31/03 ________
TOTAL ___
</TABLE>
*Payment Dates may be extended 3 months. See Section 5 below.
**TBD -- To Be Determined: The amount of the December 15, 2000 payment
shall be determined, and reported to SureQuest, by Serca no later than
August 31, 2000 and shall in no event be less than _______. The amount
of the May 15, 2001 payment shall equal ________ less than the amount
actually paid by Serca on December 15, 2000.
The above payments are only necessary for Serca to maintain exclusivity;
they are not otherwise required. If, however, Serca does not make all of
the above payments on the scheduled dates, Serca will lose the
exclusivity referenced in Section 8 of the Original Agreement and will
be further penalized as follows: the acquisition price of all licenses
acquired after such date of default shall increase to ______ per license
and shall, in each instance, only be acquired in quantities of ten (10)
or more. The above payments are also due on such dates regardless if
Serca has actually placed the licenses purchased with end-users. As
licenses are acquired, the payment terms of the Original Agreement,
except as, modified by this Amendment, shall apply and all amounts so
paid in advance of Payment Date set forth above shall reduce the amounts
due on the next succeeding Payment Dates as set forth above."
4. Section 16 of the Original Agreement is hereby amended to correct the mailing
address of SureQuest to be "13606 TI Boulevard, Dallas, Texas 75243.
105
<PAGE> 18
5. Section 21 of the Original Agreement is hereby amended in its entirety to
read as follows:
"SECTION 21. TERM OF AGREEMENT. The term of the Agreement, as amended
by the First Amendment, shall be extended from March 31, 2000 to May
31, 2000 and thereafter a new three (3) year agreement incorporating
the terms of this Amendment shall commence on June 1, 2000 and
terminate on May 31, 2003; provided however, that if Version 4.0 to the
Software is not "performing satisfactorily" and does not adequately
contain the updated Canadian Nutrient File (Release _______) each by
June 1, 2000, and Exhibit H is not agreed to by Serca and SureQuest by
March 15, 2000, the commencement of the new three (3) year agreement
shall be extended from June 1, 2000 to September 1, 2000 (3 month
extension). If this extension actually takes effect, then all payment
dates set forth in Section 3 above shall be extended three (3) months,
with the exception of payments scheduled for May 15, 2000 and December
15, 2000 which shall nevertheless be paid on such dates. For the
purpose of this Section, "performing satisfactorily" shall mean Version
4.0 shall be delivered to Serca no later than May 1, 2000, after
completion of Beta testing, and that Version 4.0 will be free of bugs,
known by SureQuest prior to completion of Beta test period, and that
Version 4.0 functionality performs as described in Exhibit A: "Release
Notes for Version 4.0. In addition, "performing satisfactorily" means
that the Import/Export System is compatible with Version 4.0 as more
fully described in Exhibit A."
IN WITNESS WHEREOF the parties hereto have caused this Amendment to be duly
executed by their respective officers, who are duly authorized, as of the date
first written above.
<TABLE>
<CAPTION>
SERCA FOODSERVICE, INC. SUREQUEST SYSTEMS, INC.
<S> <C>
By: /s/ CRAIG A. SIMPSON By: /s/ [ILLEGIBLE]
------------------------------ ------------------------------
Craig A. Simpson [ILLEGIBLE]
------------------------------ ------------------------------
Name Title
Vice President Chairman
------------------------------ ------------------------------
Name Title
</TABLE>
106
