SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS UNDER THE 1934 ACT
NovaMed, Inc.
---------------
(Name of Small Business Issuer in Its Charter)
Nevada 77-0443643
---------- --------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
623 Hoover Street, Minneapolis, Minnesota 55413
-----------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
612-378-1437
--------------
(Issuer's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Exchange Act: None
Securities to be registered under Section 12(g) of the Exchange Act:
Title of Each Class to be so registered: Common Stock ($0.001 Par Value)
Name of Each Exchange on Which Each Class is to be Registered: N/A
<PAGE>
TABLE OF CONTENTS
Page No.
PART I
Item 1. Description of Business..........................................1
Item 2. Management's Discussion and Analysis or Plan of Operation........9
Item 3. Description of Property........................................ 15
Item 4. Security Ownership of Certain Beneficial Owners and Management..16
Item 5. Directors, Executive Officers, Promoters and Control Persons....17
Item 6. Executive Compensation..........................................18
Item 7. Certain Relationships and Related Transactions..................19
Item 8. Description of Securities.......................................19
PART II
Item 1. Market for Common Equity and Related Stockholder Matters........19
Item 2. Legal Proceedings...............................................20
Item 3. Changes in and Disagreements with Accountants...................21
Item 4. Recent Sales of Unregistered Securities.........................21
Item 5. Indemnification of Directors and Officers.......................22
PART F/S
Consolidated Financial Statements
December 31, 1998 and 1997............................................F-1 - F-14
PART III
Item 1. Index to Exhibits...............................................25
Item 2. Description of Exhibits.........................................27
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
A. Corporate Organization
As used herein the term "Company refers to NovaMed, Inc., its subsidiaries
and predecessors, unless the context indicates otherwise. NovaMed, Inc. was
incorporated in Nevada on November 26, 1996, as Conceptual Technologies, Inc.
The Company was initially incorporated for the purpose of evaluating the merits
of acquiring a company named Monojet, Inc. or the technology of Monojet, Inc.
whose business was the development and prospective manufacture of a motorized
surfboard. On April 9, 1998, the Company changed its name to reflect the
acquisition of the operating subsidiaries of NovaMed Medical Products
Incorporated (NMMP), and the resultant operational focus to the development,
manufacture, and sale of mammary prosthesis devices.
The Company acquired the operating subsidiaries of NMMP, pursuant to a
Stock Purchase and Sale agreement dated February 25, 1998. NMMP was formed as a
Nevada corporation in October of 1994 with the intent of producing a breast
implant that would provide a safe and credible alternative to silicone gel
filled implants. All of the outstanding shares of the three NMMP subsidiaries,
NovaMed Medical Products Manufacturing Inc., NovaMedical Products GmbH and
NovaMed Medical Supplies Corporation were purchased for 6,301,558 shares of the
Company's common stock.
B. Description of Business
The Company is a medical device holding company that develops,
manufactures, and markets hydrogel and saline filled breast implant products
that are used in primary augmentations, revisions, or reconstructive procedures.
(Primary breast augmentation is the process by which breast implants are used to
enhance the size or shape of a woman's breast for aesthetic reasons.)
According to a member survey published by the American Society for Plastic
and Reconstructive Surgeons ("ASPRS"), approximately 132,000 women had
augmentation surgery in 1998, as compared to approximately 32,000 in 1992.
Recipients of breast implants for augmentations are typically women aged 18 to
50. The Company believes that with a large proportion of the U.S. population
currently aged between 25 and 40 that the demand for cosmetic augmentation is
likely to increase.
Breast implant surgery is usually performed in an outpatient operating
room, either in a surgeon's office or at a hospital. If the surgery is for
augmentation purposes, the surgery is typically performed on an outpatient basis
and general anesthesia is most commonly used. Augmentation surgery usually lasts
one to two hours during which the surgeon makes an incision and creates a pocket
for the implant. The implant is placed in the pocket and the incision is closed
with stitches and tape. Reconstructive surgery typically occurs at a hospital
and can often require more than one operation over several months.
Breast reconstructive surgery is the process by which a surgeon recreates
or reconstructs a woman's breast following a mastectomy. According to the ASPRS,
approximately 70,000 reconstruction procedures were performed in 1998, as
compared to approximately 29,000 similar procedures in 1992. The Company
believes that the aging U.S. population and the increased awareness among women
as to the dangers of breast cancer will lead to increased numbers of
mastectomies. The increase will create more demand for reconstructive breast
1
<PAGE>
implants. Further, in October of 1998, the a federal law was passed which
mandates nationwide insurance coverage of reconstructive surgery following a
mastectomy.
C. Description of the Company's Products
The Company manufactures and markets two different pre-filled single lumen
mammary prostheses (breast implants), the NOVAGOLD(TM) and the NOVASALINE(TM) .
These products are designed to address the safety concerns associated with
silicone gel-filled implants, as voiced by the FDA's decision in April of 1992
which mandated that silicone gel implants would thereafter only be available
under controlled clinical studies. Both products are used for routine cosmetic
breast augmentation and for breast reconstruction following either subcutaneous
or modified radical mastectomy. The Company's flagship product is the
NOVAGOLD(TM) breast implant, which utilizes a unique water based filling
material that is designed to be biocompatible and therefore safe for human use.
The Company has further developed an inflatable NOVASALINE(TM) breast implant
product which it plans to begin marketing in the United States by the end of
1999.
The Company produces its own products through wholly owned subsidiaries
located in Minneapolis, Minnesota and Monheim, Germany. Products are
manufactured pursuant to Company owned patents or patents for which the Company
is the exclusive licensee. The Company has 20 full time employees; 12 in
Minnesota and eight in Germany, with four part time employees.
(The products are comprised of two major component parts, the outer shell
and the inner filling material. Shell production is accomplished in Minneapolis,
Minnesota by NovaMed MN. Component parts are then shipped to Monheim, Germany
for final manufacturing and distribution by NovaMed GDR. The Company also
intends to complete, subject to requisite regulatory and manufacturing
approvals, the production process for the pre-filled NOVASALINE(TM) breast
implant from the NovaMed MN facility in Minneapolis by the end of 1999.)
D. Description of Technology
Both the NOVAGOLD(TM) and the pre-filled NOVASALINE(TM) prostheses consist
of a single silicone elastomer (rubber) shell filled with either a water based
gel like material or with sterile saline (salt water). Both may be offered
as either a smooth or textured implant, depending on customer demand. Currently,
the products are offered only as textured implants, meaning that the surface of
the implant's shell is patterned through a patented process (US Patents
# 4,955,909 and # 5,630,844). This textured pattern provides a surface which has
been shown to help reduce the incidence of capsular contracture, best described
as a hardening of the breast as scar tissue forms around the implant. The
textured surface provides a multi planar surface for the scar tissue to form
around, thus reducing the strength of the scar tissue. However, the Company does
intend to offer smooth NOVAGOLD (TM) and NOVASALINE (TM)implants as part of an
expansion of its present product range to meet the demands of physicians.
The inflatable NOVASALINE(TM) prosthesis consists of a single silicone
elastomer shell filled with sterile saline that incorporates a unique one-piece,
self-sealing filling valve/patch assembly. The design eliminates the need for
the physician to manually seal the implant after filling and causes only one
fused area on the shell.
2
<PAGE>
I. NOVAGOLD(TM)
The NOVAGOLD(TM) product is a patented single lumen alternative filling
material breast implant (US Patents # 5,067,965 and # 5,662,708) , developed in
response to demand for a replacement to silicone-gel filled implants. The
filling material is a hydrogel, meaning that is it is a water based gel
material. The current filling material consists of a low molecular weight
polyvinylpyrollidone (PVP, K-17), a rheological control agent, and water. PVP is
a biocompatible polymer which has been used in medical products for decades. PVP
has been used as a plasma expander, as a carrier for pharmaceuticals, and
topically in cosmetics. The rheological control agent is a substance generally
recognized as safe (GRAS) which was added to enhance the feel and thickness of
the gel filling material so that the device would feel more like natural breast
tissue when implanted. Despite the negative health connotations of silicone gel,
the viscosity achieved with silicone is considered the standard by which all
other fill materials are judged. The viscosity of the PVP filling material gives
the NOVAGOLD(TM) breast implant the feel of silicone gel-filled implants,
enabling it to compete successfully where silicone gel breast implants are still
available for use in routine cosmetic augmentations. Like silicone gel,
PVP-hydrogel filling material acts as a lubricant to the outer silicone shell,
potentially decreasing the effect of biomechanical stresses on the shell over
time. These stresses can lead to early degradation of the shell, and early
rupture or leakage of the implant.
The PVP-hydrogel filling material has additional advantageous design
characteristics:
a. Water Based
NOVAGOLD(TM)'s filling material is water based and therefore is expected to
be excreted from the body in the event of a rupture or leakage of the implant.
While silicone gel appears to be inert, silicone gel is not excretable from the
body and has been shown to migrate throughout the body after a rupture. Further,
it is difficult to remove silicone gel from the body in the event that a
ruptured device should need to be removed.
b. Radiolucent
Another advantage that the PVP-hydrogel filling material has over silicone
gel is that the NOVAGOLD(TM)'s filling material appears to be more radiolucent
to X-rays than silicone or saline fill materials. NOVAGOLD(TM)'s PVP-hydrogel
allows transmission of X-rays during routine mammography, something that
silicone gel does not do easily. More X-rays or a high dose of X-ray is required
during mammography of a woman with silicone gel filled implants. Thus
NOVAGOLD(TM)'s increased radiolucency may allow easier or earlier detection of
breast tumors in women that have implanted the NOVAGOLD(TM) versus silicone gel
implants.
c. Osmotically Balanced
The PVP-hydrogel filling material has been demonstrated to be osmotically
balanced with the body; unless a rupture or leak occurs, the implant does not
change volume. The Company's in-house research studies, external clinical
studies, and customer feedback provide evidence for this claim.
II. PRE-FILLED NOVASALINE(TM)
The pre-filled NOVASALINE(TM) breast implant was developed as a product to
be marketed in countries where a demand for breast implants existed, but where
no implants other than those filled with saline are permitted for primary
cosmetic augmentations. Currently, the primary markets or potential markets for
the pre-filled NOVASALINE(TM) implants are the United States and France.
3
<PAGE>
One benefit of the pre-filled NOVASALINE(TM) implant is that it is saline
filled. In the event of rupture, only salt water is released into the body.
Another advantage of the pre-filled NOVASALINE(TM) is that the physician cannot
introduce substances into the device during surgery. Physicians have
independently added steroids and other antibiotics into inflatable prostheses in
the past. The device is sold pre-filled, sealed, and sterilized, thereby
lowering the risk of microbial contamination during surgery.
III. INFLATABLE NOVASALINE(TM)
The inflatable NOVASALINE(TM) breast implant was also developed to be
marketed in countries where a demand for breast implants existed, but where no
implants other than those filled with saline are permitted for primary cosmetic
augmentations. Currently, the primary markets or potential markets for the
inflatable NOVASALINE(TM) implants are the United States and France.
The inflatable NOVASALINE(TM) implant offers advantages best understood by
the physician in connection with the actual surgery. Since the implant is
inflatable, the incision required to perform the procedure is less intrusive.
Physicians are also able to fill individual implants to insure that an equal
balance is realized for each breast, as many patients approach physicians with
complaints related to disproportionate breast sizes. The inflatable
NOVASALINE(TM) is subject to FDA regulatory clearance and is yet to be marketed
in the United States.
E. Marketing
The Company believes that it can acquire 10-20% of the worldwide market for
the sale of breast implants within five years. This goal is predicated upon
receiving FDA clearance of the Company's products in addition to implementation
of the Strategic Alliance Agreement with Inamed Corporation. FDA acceptance
would enable the Company to sell products in the North American market, and the
agreement with Inamed will ensure effective distribution. The Company
anticipates being able to sell the inflatable NOVASALINE(TM) and pre-filled
implants into the United States in 1999 and the NOVAGOLD(TM) implant by 2003.
The Company's immediate marketing strategy is to focus on increasing
NOVAGOLD(TM)'s market share in countries where it is currently approved,
registered directly, or working with its distribution partner Inamed. The
Company plans an increased advertising campaign through direct product mailings
to doctors and distributors in countries where the product is approved. The
Company also plans to advertise through the use of press conferences, television
programs, newspaper articles, advertising in major consumer and medical
journals, and an upgraded Internet site. The Company regularly attends major
scientific meetings and trade show exhibitions throughout the world. The
Company's clinical study investigators have presented their clinical findings at
the annual meeting for Plastic Surgery in Venice, Italy in 1997, the Annual
Meeting of Plastic Surgery in Istanbul, Turkey in 1998, the EQUAM Conference in
Regensburg, Germany in 1998, and the Annual Meeting of Plastic Surgery in
Bochum, Germany in 1998. The Company anticipates that the results of these
studies will be published in major plastic surgery and gynecology journals
worldwide.
F. Regulatory Overview
I. Introduction
The two major global regulatory pathways for medical products are the
United States Food and Drug Administration (FDA) regulatory pathway and the
4
<PAGE>
European/EEA type regulatory pathway, which is based on the ISO system of
quality standards. Both systems are based on an assessment of the risk versus
the benefit of a medical product. The trend is towards harmonization, in
international regulatory pathways, though the FDA does not consider the European
regulatory pathway to be as stringent a system as the FDA system. Most countries
accept either FDA clearance or a CE mark as sufficient evidence that the
manufacturer provides a quality product which conforms to international quality
standards appropriate to the particular product.
II. U.S. FDA Approval
Although most recent scientific studies do not support the FDA's 1992 ban
on silicone breast implants, breast implants in general are still under extreme
scrutiny by the FDA, the media, and the public. FDA scrutiny developed from the
philosophy that the safety and efficacy of a product is related to its final
use. The FDA allows devices which save, support, or prolong life, to be marketed
if the calculated benefit to the patient outweighs the risk to the patient. For
cosmetic devices, the FDA has stated that "no risk" is acceptable, and appears
to consider breast implants as strictly cosmetic devices. In the past, breast
implants did not require Pre-Market Approval (PMA) but rather could make a 510k
application which allows manufacturers to claim substantial equivalency to
products which were established in the US marketplace before 1976.
Unfortunately, that route is now not available for alternative fill breast
implant products.
While the Company obtained a CE Mark (the European equivalent of FDA
approval in the United States) on its breast implant products in 1996 allowing
the manufacturing, marketing and sale of its products in the European Union, the
Company has not yet obtained FDA approval for marketing and selling its breast
implant products in the United States. The Company has three products which it
has submitted to the FDA: (1) the NOVAGOLD(TM) pre filled mammary prosthesis;
(2) the NOVASALINE(TM) saline inflatable mammary prosthesis, and; (3) the
NOVASALINE(TM) saline pre filled mammary prosthesis.
III. NOVAGOLD(TM) Regulatory Pathway
The 510k process is not an option for the NOVAGOLD(TM) mammary prosthesis.
The FDA has informed the Company that NOVAGOLD(TM) is considered an alternative
fill implant. As such, a formal product submission (Investigational Device
Exemption or IDE) must be made and reviewed by FDA. As part of the IDE
submission, the product must be studied in FDA sanctioned and controlled
clinical trials before it can be placed on the market.
After the completion of the clinical study, or after a significant portion
of the study has been completed, the Company must submit a Pre-Market Approval
(PMA) application to the FDA for review. The application consists of all the
scientific data which supports the manufacturer's claims for the product. It
also includes a summary of the device's composition, stability, manufacturing
process and controls, all data collected from animal and human clinical studies,
and all product labeling (including advertising).
The NOVAGOLD(TM) product has been submitted to the FDA for review and
approval under an Investigation Device Exemption ("IDE")/Pre-Market Approval
("PMA") process. The IDE includes the clinical protocol, a risk assessment, and
a strategic plan as to how risks are minimized and handled in the event of
device failure. Upon FDA acceptance of the IDE and the collection of sufficient
clinical data from controlled clinical trials, a PMA summary will be submitted
to the FDA. The FDA reviews the PMA and grants or withholds approval. If
approved, the NOVAGOLD(TM) may be sold freely in the United States. The Company
anticipates that the product could be cleared for full market release in the
U.S. by 2003.
5
<PAGE>
Data collected from worldwide marketing of the NOVAGOLD(TM) and limited
clinical studies in Germany may be referenced as supportive data for the FDA's
consideration of the Company's submission but is not considered determinative in
respect to the FDA's decision making process.
IV. NOVASALINE(TM) Saline Inflatable Breast Implant Regulatory Pathway
The Company plans to enter the US market in 1999 with the development of
the NOVASALINE(TM) saline inflatable breast implant. This product was submitted
to the FDA pursuant to the 510k regulatory pathway. A 510k submission requires
that the manufacturer demonstrate safety and efficacy characteristics that are
substantially similar to a device available in the U.S. prior to 1976. The 510k
process does not require pre market clinical studies, but does require a
rigorous series of non-clinical and pre-clinical tests. As a contingency for
clearing the device for marketing using the 510k mechanism, the Company may be
required to conduct a Post-Market Surveillance Clinical Study of the device.
The Company has received clearance for the NovaSaline(TM) inflatable breast
implant, subject to an FDA audit of the manufacturing facility. The FDA audit of
the Minneapolis facility is anticipated in October of 1999. The Company will
also pursue a CE mark for the saline inflatable product after the 510k has been
submitted and cleared by the FDA. Obtaining a CE mark will allow the Company to
sell the product worldwide.
V. NOVASALINE(TM) Saline Pre Filled Breast Implant Regulatory Pathway
The Company plans to enter the US market in 1999 with the development of
the NOVASALINE(TM) saline pre filled breast implant. This product has been
submitted to the FDA pursuant to the 510k regulatory pathway.
The NOVASALINE(TM) saline pre-filled prosthesis was submitted to the FDA at
the end of May, 1999. Upon accepting a submission of data pursuant to the 510k
process, the FDA has ninety (90) days in which to evaluate the product, in light
of the submission, as it compares to similar products that are available in the
U.S. marketplace. Accordingly, the Company expects clearance of the product,
subject to an FDA audit of the manufacturing facility by October of 1999.
Obtaining FDA clearance can be a long and arduous process. While the
Company has retained experienced professionals to assist in the FDA acceptance
process, there is no assurance that the Company will obtain FDA clearance to
market or obtain FDA approval of its manufacturing facilities. If the Company
does not obtain FDA approval, for one or all of its products presently under
submission, it may not market or sell such breast implant products in the United
States. Inability to sell its breast implant products in the United States will
have a significant adverse impact on the financial future of the Company.
VI. European Union/ European Economic Area
The Company's European regulatory clearance is based upon the European
Medical Device Directive (Council Directive 93/42/EEC, June 14, 1993) which went
into effect on January 1, 1995. This Directive adopted a new classification for
mammary implants. According to this classification, breast implant products are
classified as IIb products. If a manufacturer fulfills all European Union (EU)
guidelines for design, production, and testing of a device and passes a
Certification Audit by a qualified Notified Body, the manufacturer may apply the
CE mark to his product. This Directive was phased in over five years, with a
6
<PAGE>
deadline of June 14, 1998. Medical products manufactured after June 14, 1998 are
not allowed to be distributed in the European Union unless they carry the CE
mark, although medical products manufactured in Europe before June 14, 1998
which do not carry the CE mark may still be distributed until 2001. The
Company's conformity to the Medical Device Directive is monitored by ECM, a
Notified Body (Number 0481) certified by the German government.
The CE mark application and review process for medical products in the IIb
classification requires preparation of a Technical File or "Technical Dossier"
that describes the sum of the knowledge regarding the device, including its
design, manufacturing and sterilization processes, routine and animal testing
results, and clinical experience.
Both the NOVAGOLD(TM) and NOVASALINE(TM) saline pre filled product are
manufactured and distributed in conformance with the EU Medical Device and carry
the "CE" mark. The NOVAGOLD(TM) pre-filled mammary prosthesis has been on the
market since February 1996, when the Company obtained the right to apply a CE
mark to that product.
As part of the CE mark process, the Company agreed to conduct a Post-Market
Surveillance Study of the NOVAGOLD(TM) device. This study is a limited clinical
study conducted at 5-6 sites in Germany. The study examined the rates of
rupture, contracture, and infection for a defined patient group over a two year
post implantation follow-up period. This clinical study was completed at the
end of 1998; final results are to be summarized and presented to ECM. The
NOVASALINE(TM) pre-filled mammary prostheses has been sold since November 1996,
when it obtained the CE mark.
VII. Outside The United States - Non EU/EEA
Outside of the EU, the NOVAGOLD(TM) and NOVASALINE(TM) saline pre filled
mammary prostheses have been sold in countries where they are registered and
approved with the appropriate regulatory agencies. These devices are not yet
approved for sale in the United States, Canada, Australia, or Japan.
VIII. Regulatory Pathway - Other Products
Other related products will be brought to the market as the Company's
grows. These products will generally be regulated as medical products. In Europe
or the European Economic Area, the products must be CE marked. In the US and in
other countries, medical products must also undergo regulatory reviews and
approvals. The level of review depends on the risk-based classification of the
product.
G. Competition
The Company's significant competitors are US based Mentor Corporation and
Inamed Corporation. Combined, these manufacturers account for over three
quarters of the market worldwide and own the majority of FDA approved breast
implant devices. All other major competitors discontinued production of the
breast implants in 1992 largely as the result of regulatory action by the FDA
and the ensuing wave of litigation.
Competition with Inamed is limited to the anticipated sale of the NOVASALINE(TM)
Inflatable breast implant in the US. The Company and Inamed have executed a
Strategic Alliance Agreement for the sale of the Company's NOVAGOLD(TM) implant
internationally and the sale of the NOVASALINE(TM) Pre-Filled in the US, subject
to FDA clearance to market. (For more information on the Company's Strategic
Alliance Agreement, see "Item 2. Management's Discussion and Analysis or Plan of
Operation.")
7
<PAGE>
Internationally, in addition to competing with Mentor, and Inamed in areas
not covered under the Inamed Strategic Alliance Agreement, the Company competes
with several smaller manufacturers including Silimed, Laboratories Sebbin,
L.P.I., PIP and Nagor. Several of these manufacturers have received 510(k)
clearances for the FDA to market saline breast implants in the United States.
The Company believes that the alternative fill NOVAGOLD(TM) product
distinguishes it in the international marketplace enabling effective marketing
against competing manufacturers. The Strategic Alliance Agreement with Inamed
and US clearance of the NOVAGOLD(TM) product in the United States will ensure
the Company a marked presence in the international marketplace.
H. Research & Development
The Company employs qualified staff that work in conjunction with outside
consultants to expand already existent product lines and develop new technical
innovations. The expansion of existing product lines would include the
development of anatomical shells for both the NOVAGOLD(TM) and NOVASALINE(TM)
breast implant products. Technological innovations include research into
different hydrogel filling materials along with new means for sterilization and
packaging processes. New product lines would encompass sizers, expanders, and
other forms of plastic surgery related implants.
I. Raw Material Supply
The Company obtains certain raw materials and components for its products
from single suppliers. In most cases the Company's sources of supply could be
replaced if necessary without undue disruption, but it is possible that the
process of qualifying new materials and/or vendors for certain raw materials and
components could cause a material interruption in manufacture or sales. No
material interruptions have occurred over the last two years.
Although the Company has had no material interruptions in its supply of
raw materials, there can be no assurances that the Company's suppliers will be
able to supply the Company in quantities needed, or that regulatory or other
delays will not cause disruption in sales of affected products. The Company
believes that its supply of raw materials is adequate for the current fiscal
year.
J. Cost of Research & Development
The Company estimates that its R & D expenditures increased to $64,220 for
1998 as compared to $27,320 for 1997 , while as a percentage of sales, R&D
expenses were 5% in 1998 as compared to 2.7% in 1997. The Company expects the
trend towards increased spending related to R&D to continue due to expenses
related to compliance with FDA regulatory requirements, including the initiation
of Post Market Surveillance studies for the inflatable and pre-filled
NOVASALINE(TM) products. Expenses associated with the anticipated NOVAGOLD(TM)
clinical trials are to be absorbed by Inamed Corporation as part of the
agreement to distribute the product. The Company also expects to expend limited
R&D funds on expanding the Company product line and on certain projects related
to plastic surgery in an effort to expand the purview of internal R&D. For more
information on Inamed agreement, see "Item 2. Management's Discussion and
Analysis or Plan of Operation."
8
<PAGE>
K. Reports to Security Holders
The Company's annual report will contain audited financial statements. The
Company is not required to deliver an annual report to security holders and will
not voluntarily deliver a copy of the annual report to the security holders. The
Company intends to, from this date forward, to file all of its required
information with the Securities and Exchange Commission ("SEC"). Prior to this
form being filed there were not other forms filed. The Company plans to file its
10KSB, 10QSB, and all other forms that may be or become applicable to the
Company with the SEC.
The public may read and copy any materials that are filed by the Company
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The statements
and forms filed by the Company with the SEC have also been filed electronically
and are available for viewing or copy on the SEC maintained Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The Internet address
for this site can be found at http://www.sec.gov. Additional information can be
found concerning the company on the Internet at http://www.novamedinc.com.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
A. Forward Looking Statements
The information herein contains certain forward looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended and Section
21E of the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors created thereby. Investors are cautioned that all
forward looking statements involve risks and uncertainty, including, without
limitation, the ability of the Company to continue its expansion strategy,
changes in costs of raw materials, labor and employee benefits, as well as
general market conditions, competition, and pricing. Although the Company
believes that the assumptions underlying the forward looking statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore, there can be no assurance that the forward looking statements
included in the Form 10SB will prove to be accurate. In view of the significant
uncertainties inherent in the forward looking statements included herein, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the Company will be
achieved.
B. General
The Company currently derives all of its sales revenue from the sale of
mammary prosthesis products. The Company expects that sales of such products
will continue to represent a substantial portion of its sales revenue unless and
until the Company develops and markets additional products.
The Company's focus has been that of research and development related to
the creation of innovative breast implant products. The process of development,
within a constrictive budget, has caused heavy expenditures on research and
testing and has permitted only limited emphasis on sales. Current regulatory
approvals for Company products have been obtained according to European
regulatory guidelines and manufacturing practices. Production and sales to date
have been minimal in relation to the worldwide demand for such products. Direct
sales with a small sales force has been confined to certain European countries.
Indirect access to markets has been accomplished through distributors scattered
9
<PAGE>
outside of North America. The Company now boasts a novel product line that it
hopes will establish a new standard in breast implant products.
The Company's first major step in establishing worldwide distribution of
its breast implant products is becoming compliant with US regulatory guidelines.
The US market place accounts for fifty percent (50%) of all sales of breast
implants. In order to capture a portion of the US market share, the Company is
in the process of becoming compliant with US regulatory guidelines.
On January 9, 1999, the Company submitted its IDE application to obtain
clearance from the Food and Drug Administration ("FDA") for the NOVAGOLD(TM)
product. On April 22, 1999, the Company submitted a 510k application to obtain
clearance from the FDA for the NOVASALINE(TM) inflatable product. On June 8,
1999, the Company submitted a 510k application to obtain clearance for the
NOVASALINE(TM) pre-filled product. The Company anticipates the start of
clinicals required under the IDE application before the end of 1999. The Company
has obtained FDA scientific clearance of the NOVASALINE(TM) inflatable product
and is cleared to market subject to an audit of the Company's Minneapolis,
Minnesota facility. The Company expects clearance of the NOVASALINE(TM)
pre-filled product by September of 1999. In addition, the Company's Minneapolis,
Minnesota and Monheim, Germany faciliites are in the process of complying with
FDA appointed manufacuiring guidelines in expectation of producing product for
the US market.
C. Strategic Alliance
On March 25, 1999, the Company entered into a Strategic Alliance Letter
Agreement with Inamed Corporation (the "Agreement"), the world's number one
seller of breast implants. The Agreement is a strategic alliance that requires
Inamed to purchase a minimum number of the Company's NovaGold(TM) alternate fill
and pre-filled NovaSaline breast implant products in order to maintain exclusive
rights to sell these products outside the United States. The Agreement also
provides for Inamed's exclusive sale of the NOVASALINE(TM) pre-filled product in
the United States upon receiving FDA clearance to market. Further, the Agreement
contemplates the formation of a joint venture between the parties for the
manufacture and sale of the NOVAGOLD(TM) product in the United States once the
Company has obtained FDA clearance. Under the Agreement, the parties have agreed
to discuss and if possible, formalize a mutually agreeable basis for
transitioning the Company's business in Germany to Inamed's sales subsidiary in
Germany. The Company will also continue its current distributioon relationships
with third party sales representives until December 31, 2000 in order to avoid
any legal liability from termination of such relationships. The term of the
Agreement is the later of fifteen years from the date of the Agreement or the
expiration of the last significant patent for any of the Company's products.
Pursuant to the Agreement, Inamed is to fund the clinical portion of the
NOVAGOLD(TM) process valued at two million dollars ($2,000,000) and make certain
milestone payments to the Company totaling eight million dollars ($8,000,000).
The milestone payments commence upon the FDA's approval of the Investigative
Device Exemption ("IDE") for NovaGold in the United States. Inamed will pay two
million ($2,000,000) within 30 days after such approval and an additional two
million ($2,000,000) within 30 days after the clinical trials are fully
enrolled. Within 30 days after the FDA approves the Pre-Market Approval
Application ("PMA") for NovaGold, Inamed will pay an additional two million
($2,000,000) dollars. Inamed will make a final payment of two million dollars
($2,000,000) upon the FDA's decision to clear the NOVAGOLD(TM) for market.
The Company anticipates that it will be able to market NovaGold in the
United States by 2003, subject to approval by the FDA.
10
<PAGE>
D. Manufacturing Facilities
The Company has also begun efforts to increase its manufacturing
capabilities, based in part upon an expectation of increased sales as a direct
and indirect result of its new relationship with Inamed Corp. which has caused
the Company to seek government guaranteed loans and grants in the amount of
approximately twelve million seven hundred thousand dollars ($12,700,000). Two
million, five hundred thousand dollars ($2,500,000) of that amount to be offered
as a non repayable grant. The loan program offered by the German state
government of North Rhine Westphalia is designed to attract businesses that
utilize new technologies. The Company's application has been accepted subject to
the review of the government's auditors. Final approval is expected by December
1999. For more information on this facility, see "Item 3. Description of
Property."
E. Results of Operations
Six Months ended June 30, 1999 and June 30, 1998 & Years ended December 31, 1998
and December 31, 1997
Sales
Sales for the six months ended June 30, 1999 increased to $986,127 from
$634,131 for the comparable period in 1998, an increase of 36%. The increase in
revenues were primarily attributable to an increase in the number of implants
sold.
Sales for the year ended December 31, 1998 increased to $1,266,821 from
$1,015,207 for the year ended December 31, 1997, an increase of 25%. The
increase in revenues is primarily attributable to an increase in the number of
implants sold.
International sales have accounted for 100% of total net sales in 1997 and
1998. The accelerated growth of sales in 1999 is due to increased expenditures
on marketing and a growing public perception in European markets that silicone
gel filled implants can result in negative health consequences. Sales of the
NovaGold(TM) breast implant, which competes directly with silicone gel filled
breast implants, continues to dominate realized income, accounting for over 97%
of all Company revenues. The Company expects this percentage to decrease upon US
introduction of the NovaSaline(TM) inflatable and NovaSaline(TM) pre-filled
breast implants. The introductions, subject to FDA clearance, are anticipated
prior to the conclusion of the 1999 fiscal year.
Losses
Net losses for the six months ended June 30, 1999, was $456,547 up from a net
loss of $51,493 for the comparable period in 1998, a change of $405,054. The
increase in losses were primarily attributable to non-cash expenses from the
issuance of common stock in the amount of $347,803.
11
<PAGE>
Net losses for the year ended December 31, 1998 decreased to $213,348 from
$1,097,224 for the year ended December 31, 1997, a decrease of 81%. The
substantial decrease in losses was attributable primarily from a decrease in
administrative costs associated with the sale of the breast implants.
The Company expects to continue to incur losses at least through fiscal
1999 and there can be no assurance that the Company will achieve or maintain
profitability or that its revenue growth can be sustained in the future.
Expenses
Selling, general and administrative expenses for the six months ended June
30, 1999, increased to $647,989 from $214,068 in the comparable period in 1998,
an increase of 468%. The increase in selling, general and administrative
expenses was the result of non-cash expenses related to the issuance of common
stock and options to acquire common stock.
Selling, general and administrative expenses for the year ended December
31, 1998, decreased to $506,204 from $1,442,521 for the year ended December 31,
1997, a decrease of 65%. The substantial decrease in selling general and
administrative expenses was the result of a decreas in adminitrative costs
associated with the sale of the breast implants.
Depreciation and amortization expenses for the six months ended June 30,
1999 and June 30, 1998 were $1,903 and $4,508, respectively. The
decrease was due to fully depreciated equipment.
Depreciation and amortization expenses for the years ended December 31,
1998 and December 31, 199 were $3,523 and $149, respectively. The increase
was due to an increase in equipment and fixtures held by the Company .
The Company expects increases in expenses through 1999 as the Company moves
toward engaging competent management for the anticipated increase in product
manufacturing and the construction of a new manufacturing facility in Germany.
Cost of Sales
The largest factors in the variation from year to year in the cost of sales
as a percentage of net sales are the cost of raw materials and the yield of
finished goods from the Company's manufacturing facilities.
The cost of sales for the six months ended June 30, 1999 were $690,972
compared to $472,154 for the comparable period in 1998. The increase in the cost
of sales was primarily attributable to an increase in sales. Cost of sales as a
percentage of sales for six months ended June 30, 1999 and 1998 respectively,
were 70% and 74%.
The cost of sales have for the year ended December 31, 1998 was $973,965
compared to $669,910 for the year ended December 31, 1997. The increase in the
cost of sales was primarily attributable to an increase in sales. Cost of sales
as a percentage of sales for December 31, 1998 and 1997 respectively, were 77%
and 66%. The Company anticipates that an increase in raw materials purchased as
the result of increased production volume demands will enable the Company to
negotiate reduced pricing on raw materials in the future and thereby decrease
the cost of sales.
12
<PAGE>
F. Income Tax Expense (Benefit)
The Company has an income tax benefit resulting from net operating losses
to offset operating profit.
G. Impact of Inflation
The Company believes that inflation has had a negligible effect on
operations over the past three years. The Company believes that it can offset
inflationary increases in the cost of materials and labor by increasing sales
and improving operating efficiencies.
H. Liquidity and Capital Resources
Six Months ended June 30, 1999 and June 30, 1998 & Years ended December 31, 1998
and December 31, 1997
Historically, the Company has expended significant resources on Research
and Development which includes regulatory compliance expenses. The trend is
likely to continue into the near future as new products seek introduction in the
United States. However, sales are now rising significantly, therefore, the
Company expects a swing from using cash in operating activities to providing
cash from operating activities by the end of 1999.
Cash flow generated by operations were $44,217 for the six months ended
June 30, 1999 as compared to cash flows used in operations of $182,096 for the
comparable period in 1998. Negative cash flows from operating activities for the
six months ended June 30, 1998 are primarily attributable to a decrease in
related party payables and an increase in receivables.
Cash flow generated by operations were a negative $610,303 for the year
ended December 31, 1998, and a positive $5,104 for the year ended December 31,
1997. Negative cash flows from operating activities for the year ended December
31, 1998 are primarily attributable to a decrease in related party payables and
an increase in receivables.
Cash flow generated from financing activities was $55,000 for the six
months ended June 30, 1999 and $733,910 for the comparable period in 1998. The
Company's financing activities primarily consisted of private placements of its
common stock.
Cash flow generated from financing activities was $636,000 for the year
ended December 31, 1998 and $0 for the year ended December 31, 1997. The Company
conducted a private placement offering in 1998 in an effort to improve its
operations.
The Company has funded its cash needs from inception through June 30, 1999
with a series of debt and equity transactions, including several private
placements and a convertible bond issuance. The Company expects its cash needs
to be primarily satisfied from sales of its products over the next twelve
months.
I. Capital Expenditures
The Company made no significant capital expenditures on property or
equipment for six months ended June 30, 1999 or 1998 and made no significant
capital expenditures on property or equipment for the years ended
13
<PAGE>
December 31, 1998 or 1997.
During 1999 and 2000 the Company expects to spend approximately
$10,000,0000 on certain capital projects, including the construction of a new
facility in Germany, management information systems and expanded manufacturing
capabilities. Funding for these capital expenditures are expected through
funding provided pursuant to German government guaranteed loans.
J. Impact of Year 2000
General Description of the Year 2000 Issue and the Nature and Effects of
the Year 2000 on Information Technology (IT) and Non- IT Systems. The Year 2000
Issue is the result of computer programs being written using two digits rather
than four to define the applicable year. Any of the Company's computer programs,
hardware or embedded chips, that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Based on recent assessments, the Company determined that it will be
required to modify or replace portions of its distribution and manufacturing
software and certain hardware so that those systems will properly utilize dates
beyond December 31, 1999. The Company presently believes that with modifications
or replacements of certain existing software and hardware, the Year 2000 Issue
can be mitigated. However, even if such modifications and replacements are not
made, or are not completed in a timely manner, the Year 2000 Issue most likely
will not have a material impact on the operations of the Company.
The Company's plan to resolve any the Year 2000 Issue involves the
following key phases: inventory, assessment, and remediation. The Company has
categorized its systems into several areas: core systems (i.e. distribution and
manufacturing systems), ancillary support systems to those core systems,
embedded systems, products, and third party vendors.
I. Inventory and Assessment
The Company has completed its inventory and assessment of both its domestic
and international core systems, indicating most of the core systems may be
adversely affected. For the ancillary support systems and embedded systems, the
Company has completed its inventory and assessment. This identified two items
that need to be updated. The Company has completed its inventory and assessment
of its product lines and has determined that most of the products it has sold
and will continue to sell do not require remediation to be Year 2000 compliant.
Accordingly, the Company does not believe that the Year 2000 presents a material
exposure as it relates to the Company's products.
II. Status of Progress in Becoming Year 2000 Compliant
For its domestic core system exposures related to its distribution and
manufacturing software, the Company has completed all required remediation. For
other domestic core systems, such as desktop computers, networks, and off-the
shelf application software, the Company has completed the remediation.
The remediation of the identified ancillary and embedded systems is
expected to be complete no later than November 30, 1999.
14
<PAGE>
III. Nature and Level of Importance of Third Parties and their Exposure to the
Year 2000
Other than payroll and its banking relationships, the Company has no other
significant direct interfaces with third party vendors. The Company is in the
process of working with key third party vendors to ensure that the Company's
systems that interface directly with third party vendors are Year 2000 compliant
by December 31, 1999. The Company understands that key vendors are in the
process of making their systems Year 2000 compliant. Each vendor queried by the
Company believed that its system would be Year 2000 compliant by the end of
1999.
The Company is beginning to query its significant suppliers and
subcontractors that do not share information systems with the Company (external
agents). To date, the Company is not aware of any external agent with a Year
2000 issue that would materially impact the Company's results of operations,
liquidity, or capital resources. The Company has no means of ensuring that
external agents will be Year 2000 ready. The inability of external agents to
complete their Year 2000 resolution process in a timely fashion could materially
impact the Company. The effect of non- compliance by external agents is not
determinable at this time.
IV. Costs
The total cost to the Company of the Year 2000 project is estimated at no
more than $ 30,000 and is being funded through operating cash flows. To date,
the Company has incurred costs of approximately $5,000. This amount includes
upgrading its desktop systems and office software to the latest release, which
the Company would do in the normal course of business. The majority of these
costs relate to new hardware and software and are being capitalized.
V. Risks
Management of the company believes it has an effective program in place to
resolve the Year 2000 issue in a timely manner. The Company has not yet
completed all necessary phases of the Year 2000 program. In the event that the
Company does not complete any additional phases, the Company would be
constrained in taking customer orders, and might be unable to manufacture and
ship certain products, or invoice customers. In addition, disruptions in the
economy generally resulting from Year 2000 issues could also materially
adversely affect the Company.
VI. Contingency Plans
The Company currently has no contingency plans in place in the event it
does not complete all phases of the Year 2000 program. The Company plans to
evaluate the status of completion in November 1999 and determine whether such a
plan is necessary.
ITEM 3. DESCRIPTION OF PROPERTY
The Company is headquartered at 623 Hoover St. Northeast, Minneapolis,
Minnesota 55413 where it leases office and manufacturing space totaling 15,000
square feet. The Company leases these facilities for $4,791.67 per month until
the January 31, 2001 at which time the lease payments will increase to $5,208.33
until January 31, 2004 at which time the lease will expire.
The Company also leases office and manufacturing space at Am Kieswerk 4,
D-40789 Monheim, Germany totaling 10,000 square feet. The terms of the lease are
month to month. The Company leases these facilities for $8,108 per month
including utilites.
15
<PAGE>
The Company believes that its current facilities are generally suitable and
adequate to accommodate its current operations. However, the Company anticipates
that increased sales as a result of expected regulatory clearances and
distribution agreements will necessitate the need for additional administrative,
manufacturing, and laboratory space.
Consequently, the Company is in the preliminary stages of obtaining
sufficient financing to build a new turn key facility in Germany. The Company
currently has plans to build a 20,000 square foot research and development and
manufacturing facility in a technology park located in the City of Duisburg that
will accommodate the Company's needs outside of North America. The site is
expected to be constructed on 4,000 square meters of land. The Company has also
negotiated an option to purchase up to an additional 8,000 square meters of land
for future expansions.
The Company is currently in the process of obtaining an estimated
DM22,300,000 ( approximately US$12.7 million) in government financed loans from
the state government of North Rhine Westphlia to construct the Duisburg
facility. The terms of financing are to include DM17,408,000 (approximately
US$10.2 million) in long term fixed rate government guaranteed loans provided by
IKG AG and a non-repayable grant of DM4,496,000 (approximately US$2.5 million)
provided by the state government of North Rhine Westphalia.
The Company expects to receive the loans and grant monies by the Year 2000
and anticipates that the facilities will be fully operational by July, 2000.
Although the Company has entered into the necessary approvals to obtain the
funding and has been tentatively approved to be funded there are several issues
which must be resolved before the Company can obtain the funding. Those issues
include the Company's equity contribution to the German subsidiary that will be
the recipinet of the funding.
In the event the Company does not obtain funding necessary to construct the
new facilities, the Company will consider outsourcing the manufacturing of its
products and will investigate other lease or purchase prospects which will
accommodate the Company's expected increase in sales.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the stock of the Company as of June 30, 1999, by each shareholder
who is known by the Company to beneficially own more than 5% of the outstanding
Common Stock, by each director, and by all executive officers and directors as a
group.
16
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Beneficial Amount and Nature of Percent
Title of Class Ownership Beneficial Ownership of Class
<S> <C> <C> <C>
Common Ruairidh Campbell 150,000 1.0%
Stock
Common Dr. Aydin Dogan 425,000 3.2%
Stock
Common Dr. Howard Bellin 0 0%
Stock
Common Dr. Franz Schain 0 0%
Stock
Common All Executive Officers and 575,000 4.2%
Stock Directors as a Group (1)(2)
(Five persons)
</TABLE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS
The Officers and Directors of the Company as of June 30, 1999 are as follows:
Name Age Position
Ruairidh Campbell 36 President/CEO and Director
Dr. Aydin Dogan 46 Vice President and Director
Dr. Howard Bellin 63 Director
Dr. Franz Schain 49 Director
Ruairidh Campbell has lead the Company since his appointment as President
in 1995. During his tenure as president of the Company, Mr. Campbell has
successfully guided the Company's subsidiaries through product development and
introduction to the international marketplace. Mr. Campbell has a depth of
experience managing and financing public companies, particularily through
start-up phases. He is licensed as an attorney in the State of California with a
Doctor of Jurisprudence from the University of Utah College of Law. Mr. Campbell
sits on the Board of Directors for a number of companies in Canada, the United
States, and Europe.
Dr. Aydin Dogan while acting as the Company's Vice-President also serves as
the President of the Company's German subsidiary, Novamedical Products GmbH.
Prior to his involvement with the Company in 1994, Dr. Dogan was the product
manager for Genetic Laboratories, Inc. of St Paul, Minnesota. He has also held
positions as Sales Marketing Manager and Managing Director of Bioplasty GmbH.
Dr. Dogan holds a Ph.D. in Chemistry from the University of Cologne.
Dr. Franz Schain is a physician who owns a private clinic and Ambulatory
Care Centre in Hanover, Germany. He is a specialist in knee diseases who has
been engaged for his expertise by the national football teams of Bulgaria,
17
<PAGE>
Zimbabwe, and Nepal. Dr. Schain has also owned a foundation for arthroscopy in
Dortmund, Germany. Dr. Schain holds medical degrees from the Universities of
Bonn, Essen, and Muelheim. He is also a member of the American Association of
Arthroscopy.
Dr. Howard Bellin is a board certified plastic and reconstructive
surgeon with 29 years of private practice experience. He has extensive expertise
in breast augmentation, having performed nearly 2,000 of these procedures. He
has participated in three clinical trials of breast implants for FDA submissions
on behalf of breast implant manufacturers. Dr. Bellin has also published on this
subject in the Journal of Plastic and Reconstructive Surgery. Dr. Bellin is a
graduate of Amherst College and New York Medical College. He interned at the
University of California, San Francisco, had a residency in general surgery at
New York Medical College, and trained in plastic surgery at Columbia
Presbyterian Medical Center in New York City. He has taught at Columbia
University's College of Physicians and Surgeons and at New York Medical College.
Dr. Bellin was chief of plastic surgery at Cabrini Medical Center, and for the
past 15 years has owned and directed the CosMedica Plastic Surgery Center in New
York City.
ITEM 6. EXECUTIVE COMPENSATION
The following table provides summary information for the years 1998,
1997 and 1996 concerning cash and noncash compensation paid or accrued by the
Company to or on behalf of president and the only other employee to receive
compensation in excess of $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payout
Restricted Securities
Name and Other Annual Stock Underlying LTIP All Other
Principal Year Salary Bonus Compensation Award(s) Options payout Compensation
Position ($) ($) ($) ($) SARs(#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ruairidh(1) 1998 120,000 - - - - - -
Campbell 1997 61,875 - - - - - -
President 1996 42,500 - - - - - -
Dr. Aydin,(2)
President of 1998 160,000 - - - - - -
Novamedical 1997 160,000 - - - - - -
Products 1996 160,000 - - - - - -
GmbH
</TABLE>
Compensation of Directors
The Company's directors are currently not compensated for their
services as director of the Company.
- ---------------------
1 Ruairidh Campbell received a grant of 55,000 options with an exercise of
$1.30 a share pursuant to the Company's Stock Option Plan on March 19, 1999.
2 Dr. Aydin Dogan received a grant of 100,000 options with an exercise
price of $1.30 a share pursuant to the Company's Stock Option Plan on March 19,
1999.
18
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases one of its facilities from Gunther Biesel, a shareholder
who may have been deemed to be a control person up until July of 1998 at which
time he resigned his position as a Company director. The lease requires monthly
payments of approximately $8,000 per month. Rent expense for the periods ended
December 31, 1998 and 1997 was approximately $96,000 each year. Amounts due
under this lease agreement at December 31, 1998 and 1997 was approximately
$179,400 and $259,350, respectively.
ITEM 8. DESCRIPTION OF SECURITIES
Dividend, Voting and Preemption Rights
The Company only has one class of authorized shares: $.001 par value
common stock. Holders of common stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. For more information on the Company's dividend policy, see
"Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters."
Holders of the Company's common stock are entitled to one vote for each
share held of record on all matters submitted to a vote of the security holders.
At all elections of directors of the Company, each holder of stock possessing
voting power is entitled to as many votes as equal to the number of his or her
shares of stock multiplied by the number of directors to be elected. Such votes
may be cast for a single director, for any two or more directors, or distributed
among the directors as he or she sees fit (cumulative voting).
In the event of a liquidation, dissolution or winding up of the
Company, holders of common stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preference of any
other securities. The common stock has no preemptive or other subscription
rights. There are no redemption of sinking fund provisions applicable to the
common stock. All outstanding shares of common stock are duly authorized, fully
paid, and nonassessable.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS
The Company's common stock is traded on Over the Counter Bulletin Board
under the symbol "NVMD."
The table below sets forth the high and low sales prices for the
Company's Common Stock for each quarter of 1997, 1998 and the first two quarters
of 1999. The quote given for the third quarter in 1998 forward reflects a 1 for
14 reverse split which the Company effected on April 14, 1998. The quotations
below reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions:
19
<PAGE>
Quarter High Low
------- ---- ---
1997 First - -
- ----
Second - -
Third - -
Fourth $4.00 $2.00
Quarter High Low
------- ---- ---
1998 First $4.50 $0.25
- ----
Second $8.00* $1.87*
Third $5.44 $1.78
Fourth $2.38 $0.94
Quarter High Low
1999 First $2.63 $1.06
- ----
Second $2.06 $1.50
*Prices reflect a 1 for 14 reverse split effected by the Company on April 14,
1998.
- --------------------------------------------
Record Holders
As of June 30, 1999 there were approximately 377 shareholders of record
holding a total of 13,845,852 shares of Common Stock. The holders of the Common
Stock are entitled to one vote for each share held of record on all matters
submitted to a vote of stockholders. Holders of the Common Stock have no
preemptive rights and no right to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
Common Stock.
Dividends
The Company has not declared any cash dividends since inception and
does not anticipate paying any dividends in the foreseeable future. The payment
of dividends is within the discretion of the Board of Directors and will depend
on the Company's earnings, capital requirements, financial condition, and other
relevant factors. There are no restrictions that currently limit the Company's
ability to pay dividends on its Common Stock other than those generally imposed
by applicable state law.
ITEM 2. LEGAL PROCEEDINGS
The Company is currently not a party to any pending legal proceeding
20
<PAGE>
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company has had no changes in or disagreements with its accountants
in its two most recent fiscal or any later interim period.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The following is a list of all securities sold by the Company within
the last three years or since its on November 26, 1996 including, where
applicable, the identity of the person who purchased the securities, title of
the securities, and the date sold are outlined below.
On December 6, 1996, the Company issued a total of 1,000,000 shares of
it common stock (Pre 1- for-14 reverse split shares) for $10,000 or $.01 per
share to two individuals pursuant to section 4(2) of the Securities Act of 1933
in an isolated private transaction by the Company which did not involve a public
offering. The two individuals included:
1. Frank J. Weinstock an original incorporator of the Company and
former president and director of the Company was issued
750,000 shares for $7,500.
2. Trish R. Francis an original incorporator of the Company and
former secretary/treasurer and director of the Company was
issued 250,000 shares for $2,500.
On February 3, 1997, the Company issued a total of 1,000,000 shares of
its common stock (pre 1- for-14 reverse split shares) pursuant to Rule 504 of
Regulation D of the Securities Act of 1933 to 35 persons for $40,000 or $.04 per
share. The Company relied on the following facts in determining that Rule 504
Regulation D was available: (a) the Company was not subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act; (b) the Company was
formed for the express purpose of evaluating the merits of acquiring Monojet,
Inc. and therefore, was neither a development stage company with no specific
business plan or purpose nor a company whose plan was to merger with an
unidentified company; (c) the aggregate offering price did not exceed $1,000,000
and (d) the Company filed a Form D within 15 days of the first sale of the
shares subject to the offering. The Company also distributed a disclosure
document to the 35 investors and offered to allow them to inspect the books and
records of the Company.
On July 31, 1997 , the Company issued a total of 20,000 shares of its
common stock .(Pre 1-for-14 reverse split shares) for $800 or $.01 per share to
David Lemburg pursuant to section 4(2) of the Securities Act of 1933 in an
isolated private transaction by the Company which did not involve a public
offering.
On February 25, 1998, the Company entered into a Stock Purchase
Agreement and Sale Agreement with NovaMed Medical Products, Inc. pursuant to
which the Company issued 6,301,558 shares of its commons stock to NovaMed
Medical Products, Inc. in exchange for a 100% interest in the following
entities: (1) NovaMed Medical Products Manufacturing, Inc.; (2) NovaMedical
Products GmbH and (3) NovaMed Medical Supplies Corporation. The Company issued
the 6,301,558 shares (post 1-for-14 reverse split)on April 14, 1998 pursuant to
section 4(2) of the Securities Act of 1933 to NovaMed medical Products, Inc. in
a private transaction not involving a public offering.
On June 30, 1998, the Company issued a total of 7,000,000 shares of it
common stock at $.10 per share pursuant to a Private Placement. The Company
issued the 7,000,000 shares of its common stock pursuant to Rule 504 under
21
<PAGE>
Regulation D of the Securities Act of 1933. The Company issued the 7,000,000
shares to 26 accredited investors who were given a Private Placement Memorandum.
The Company 7,000,000 shares at $0.10 a share to the following individuals. The
Company relied on the following facts in determining that Rule 504 Regulation D
was available: (a) the Company was not subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act; (b) the Company was engaged in the
manufacture and sale of medical products and therefore was neither a development
stage company with no specific business plan or purpose nor a company whose plan
was to merger with an unidentified company; (c) the aggregate offering price did
not exceed $1,000,000 and (d) the Company filed a Form D within 15 days of the
first sale of the shares subject to the offering. The Company also distributed a
Private Placement Memorandum to the 26 investors and offered to allow them to
inspect the books and records of the Company.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws and section 78.751 of the Nevada Revised Statutes
provide for indemnification of the Company's officers and directors in certain
situations where they might otherwise personally incur liability, judgments,
penalties, fines and expenses in connection with a proceeding or lawsuit to
which they might become parties because of their position with the Company.
Section 78.751. Indemnification of officers, directors, employees and
agents; advancements of expenses, states the following:.
1. A corporation may 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, except an action by or in the right of
the corporation, 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, 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 the action, suit or proceeding if he
acted in good faith and in a manner which 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, does 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, and that, with respect to any criminal
action or proceeding, he had reasonable cause to believe that his
conduct was unlawful.
2. A corporation may indemnify an person 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, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him
in connection with the defense or settlement of the action or suit if
he acted in good faith and
22
<PAGE>
in a manner which he reasonably believed to be in or not opposed to the
best interests of the corporation. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudged
by a court of competent jurisdiction, after exhaustion of all appeals
therefrom, to be liable to the corporation or for amounts paid in
settlement to the corporation, unless and only to the extent that the
court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all
the circumstances of the case, the person is fairly and reasonable
entitled to indemnity for such expenses as the court deems proper.
3. 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 referred to in subsections 1
and 2, or in defense of any claim, issue or matter therein, he must be
indemnified by the corporation against expenses, including attorneys'
fees, actually and reasonably incurred by him in connection with the
defense.
4. Any indemnification under subsections 1 and 2, unless
ordered by a court or advanced pursuant to subsection 5, must be made
by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee
or agent is proper in the circumstances. The determination must be
made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a
quorum consisting of directors who were not parties to the act, suit or
proceeding;
(c) If a majority vote of a quorum consisting of
directors who were not parties to the act, suit or proceeding so
orders, by independent legal counsel in a written opinion; or
(d) If a quorum consisting of directors who were not
parties tot he act, suit or proceeding cannot be obtained, by
independent legal counsel in a written opinion.
5. The articles of incorporation, the bylaws or an agreement
made by the corporation may provide that the expenses of officers and
directors incurred in defending a civil or criminal action, suit or
proceeding must be paid by the corporation as they are incurred and in
advance of the final disposition of the action, suit or proceeding,
upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court
of competent jurisdiction that he is not entitled to be indemnified by
the corporation. The provision of this subsection do not affect any
rights to advancement of expenses to which corporate personnel other
than directors or officers may be entitled under any contract or
otherwise by law.
6. The indemnification and advancement of expenses authorized
in or ordered by a court pursuant to this section:
(a) Does not exclude any other rights to which a
person seeking indemnification or advancement of expenses may be
entitled under the articles of incorporation or any bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, for
either an action in his official capacity or an action in another
capacity while holding his office, except that indemnification, unless
ordered by a court pursuant to subsection 5, may not be made to or on
behalf of any director or officer if a final adjudication establishes
that his acts or omissions involved intentional misconduct, fraud or a
knowing violation of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a
director, officer, employee or agent and inures to the benefit of the
heirs, executors and administrators of such a person.
23
<PAGE>
To the extent that indemnification may be related to liability arising
under the Securities Act, the Securities and Exchange Commission takes the
position that indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
PART F/S
The Company's financial statements for the fiscal year ended December
31, 1998 and the interim reports for June 30, 1999 are attached hereto as F-1
through F-14.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY.]
24
<PAGE>
NOVAMED INC.
Index to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Page
Independent auditors' report F-2
Consolidated balance sheet F-3
Consolidated statement of operations F-4
Consolidated statement of stockholders' equity F-5
Consolidated statement of cash flows F-6
Notes to consolidated financial statements F-7
- --------------------------------------------------------------------------------
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Stockholders of NovaMed, Inc.
We have audited the accompanying consolidated balance sheet of NovaMed, Inc. and
Subsidiaries, as of December 31, 1998 and 1997, and the related consolidated
statements of operations, stockholders' equity (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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of NovaMed, Inc. and
Subsidiaries, as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has an accumulated deficit and
has incurred losses since inception. These conditions raise substantial doubt
about its ability to continue as a going concern. Management's plans regarding
those matters also are described in Note 2. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ TANNER + CO.
Salt Lake City, Utah
February 18, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
NOVAMED, INC.
Consolidated Balance Sheet
- -----------------------------------------------------------------------------------------------------------
June 30, 1999 December 31,
------------------------------
Assets (Unaudited) 1998 1997
- ------
----------------------------------------------------
<S> <C> <C> <C>
Current assets:
Cash $ 219,445 $ 129,754 $ 46,465
Receivables, net 371,705 330,826 102,181
Inventories 300,205 483,300 476,062
Prepaid expenses 26,371 1,707 92,341
----------------- ------------- -------------
Total current assets 917,726 945,587 717,049
Property and equipment, net 34,173 36,076 35,956
----------------- ------------- -------------
$ 951,899 $ 981,663 $ 753,005
----------------- ------------- -------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity (Deficit)
<S> <C> <C> <C>
Current liabilities:
Accounts payable $ 358,967 $ 379,202 $ 268,337
Accrued expenses 131,970 62,102 198,200
Related party payables 163,273 179,400 3,479,617
----------------- ------------- --------------
Total current liabilities 654,210 620,704 3,946,154
----------------- ------------- --------------
Commitments and contingencies - - -
Stockholders' equity (deficit):
Common stock, $.001 par value,
50,000,000 shares authorized;
13,845,852, 13,445,852 and
6,301,558
shares issued and outstanding, 13,846 13,446 6,302
respectively
Additional paid-in capital 4,266,480 3,699,077 -
Stock subscription receivable (165,000) - -
Cumulative translation adjustment 75,002 84,528 23,293
Accumulated deficit (3,892,639) (3,436,092) (3,222,744)
------------------ ----------- -----------
Total stockholders' equity (deficit) 297,689 360,959 (3,193,149)
----------------- ----------- -----------
$ 951,899 $ 981,663 $ 753,005
---------------- ------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
NOVAMED, INC.
Consolidated Statement of Operations
- -----------------------------------------------------------------------------------------------------------
Six Months Ended
June 30, Years Ended
(Unaudited) December 31,
----------------------------------------------------------------------
1999 1998 1998 1997
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 986,127 $ 634,131 $ 1,266,821 $ 1,015,207
----------------- ------------ -------------- ---------------
Costs and expenses:
Cost of sales 690,972 472,154 973,965 669,910
Selling, general and
administrative 647,989 214,068 506,204 1,442,521
Research and
development 204,100 - - -
----------------- ------------ -------------- --------------
1,543,061 686,222 1,480,169 2,112,431
----------------- ------------ -------------- ---------------
Operating loss (556,934) (52,091) (213,348) (1,097,224)
Other income 100,387 598 - -
----------------- ------------- --------------- ---------------
Loss before income taxes (456,547) (51,493) (213,348) (1,097,224)
Income taxes - - - -
----------------- ------------- -------------- --------------
Net loss $ (456,547) $ (51,493) $ (213,348) $ (1,097,224)
------------------ ------------- --------------- ---------------
Other comprehensive
income - foreign currency
translation, net of taxes of
$26,000, $22,000, $20,000
and $6,000, respectively 50,470 43,832 40,415 12,395
----------------- ------------ -------------- -------------
Total $ (406,077) $ (7,661) $ (172,903) $ (1,084,829)
------------------ -------------- --------------- ---------------
Loss per common share -
basic and diluted $ (.0) $ (.01) $ (.02) $ (.17)
------------------ ------------- -------------- ---------------
Weighted average shares
- - basic and diluted $ 13,513,000) $ 7,492,000) $ 9,874,000) $ 6,302,000
------------------ --------------- -------------- --------------
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Stockholders' Equity (Deficit)
For the Years Ended December 31, 1998 and 1997
and the Six Months Ended June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
Additional Stock Cumulative
Common Stock Paid-in Subscription Translation Accumulated
Shares Amount Capital Receivable Adjustment Deficit
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 2,000 $ 2 $ - $ - $ 4,513 $ (2,119,220)
Restatement for reverse
acquisition of Conceptual
Technologies, Inc. by
NovaMed Subsidiaries 6,299,558 6,300 - - - (6,300)
Cumulative translation
adjustment - - - - 18,780 -
Net loss - - - - - (1,097,224)
------------ --------- ----------- --------- ----------- ---------------
Balance at
December 31, 1997 6,301,558 6,302 - - 23,293 (3,222,744)
Acquisition of Conceptual
(see note 1) 144,294 144 (144) - - -
Issuance of common stock
for cash 7,000,000 7,000 629,000 - - -
Capital contribution - - 3,070,221 - - -
Cumulative translation
adjustment - - - - 61,235 -
Net loss - - - - - (213,348)
------------ --------- ----------- -------- ----------- ---------------
Balance at
December 31, 1998 13,445,852 13,446 3,699,077 - 84,528 (3,436,092)
Stock issued for:
Services (unaudited) 200,000 200 219,800 - - -
Receivable (unaudited) 200,000 200 219,800 (220,000) - -
Payments on stock
subscription receivable
(unaudited) - - - 55,000 - -
Stock compensation
(unaudited) - - 127,803 - - -
Cumulative translation
adjustment (unaudited) - - - - (9,526) -
Net loss (unaudited) - - - - - (568,602)
------------ --------- ----------- --------- ------------- ---------------
Balance at
June 30, 1999 (unaudited) 13,845,852 $ 13,846 $ 4,266,480 $ (165,000 $ 75,002 $ (4,004,694)
</TABLE>
------------------------------------------------------
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
NOVAMED, INC.
Consolidated Statement of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended
(Unaudited) December 31,
----------------------------------------------------------------
1999 1998 1998 1997
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (456,547) $ (51,493) $ (213,348) $ (1,097,224)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation 1,903 4,508 3,523 149
Stock issued for services 220,000 - - -
Stock based compensation 127,803 - - -
(Increase) decrease in:
Receivables (40,879) (88,287) (228,645) 124,196
Inventories 183,095 81,295 (7,238) 101,116
Prepaid expenses (24,664) 18,915 90,634 27,671
Other - (27,544) - -
Increase (decrease) in:
Accounts payable (20,235) (5,095) 110,865 (443,845)
Accrued expenses 69,868 237,861 (136,098) 123,721
Related party payable (16,127) (352,256) (229,996) 1,169,320
-------------- ----------- ----------- ------------
Net cash provided by
(used in) operating
activities 44,217 (182,096) (610,303) 5,104
------------- ----------- ----------- ------------
Cash flows from investing activities-
purchase of property and equipment - - (3,643) (5,859)
------------- ---------- ----------- ------------
Cash flows from financing activities:
Proceeds from note payable - 97,910 - -
Issuance of common stock 55,000 636,000 636,000 -
------------- ---------- ---------- -----------
Net cash provided by
financing activities 55,000 733,910 636,000 -
------------- ---------- ---------- -----------
Effect of exchange rate changes on cash (9,526) 42,539 61,235 18,780
------------- ---------- ---------- ------------
Net increase in cash 89,691 594,353 83,289 18,025
Cash, beginning of period 129,754 28,440 46,465 28,440
------------- ---------- ---------- ------------
Cash, end of period $ 219,445 $ 622,793 $ 129,754 $ 46,465
---------------- ------------ ----------- ------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
NOVAMED, INC.
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
1. Organization and Presentation
On June 29, 1998, NovaMed, Inc. (formerly Conceptual Technologies, Inc.)
(Conceptual) closed a Stock Purchase and Sale agreement with International
Medical Products, Inc. (formerly NovaMed Medical Products Incorporated) (IMP)
whereby Conceptual purchased all of the issued and outstanding common stock of
IMP's wholly owned subsidiaries, consisting of NovaMed Medical Products
Manufacturing, Inc., NovaMed Medical Supplies Corporation and Novamedical
Products GmbH (the Subsidiaries) (the Company) in exchange for 6,301,553 common
shares of Conceptual, and the commitment to complete a private placement of its
common stock which occurred prior to December 31, 1998. The Company is engaged
primarily in the development, manufacture and sale of mammary prostheses
products. The flagship product is NOVAGOLD, a pre-filled hydrogel textured
single lumen breast implant that utilizes a unique water based filling material
that is designed to be biocompatible, and has been approved for sale in Europe
under the CE Mark regulatory process since February 1996.
The consolidated financial statements at December 31, 1998 and 1997 assumes the
acquisition of Conceptual by the Subsidiaries, occurred January 1, 1997. Because
the shares issued in the acquisition of the Subsidiaries represent control of
the total shares prior to the private placement of Conceptual's common stock
issued and outstanding immediately following the acquisition, the Subsidiaries
are deemed for financial reporting purposes to have acquired Conceptual in a
reverse acquisition. The business combination has been accounted for as a
recapitalization of Conceptual giving effect to the acquisition of 100% of the
outstanding common shares of the Subsidiaries. The surviving entity reflects the
assets and liabilities of Conceptual and the Subsidiaries at their historical
book value and the historical operations of the Company are those of the
Subsidiaries. The issued common stock is that of Conceptual and the accumulated
deficit is that of the Subsidiaries. The statement of operations is that of the
Subsidiaries for the two years ending December 31, 1998 and that of Conceptual
from June 29, 1998 (date of acquisition) through December 31, 1998. Separate
breakout of operations for Conceptual have not been presented as the amounts not
related to the Subsidiaries is immaterial.
- --------------------------------------------------------------------------------
F-7
<PAGE>
NOVAMED, INC.
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
2. Significant Accounting Policies
Going Concern
At December 31, 1998 the Company had, an accumulated deficit of $3,436,092 and
has incurred losses since inception. These conditions raise substantial doubt
about the ability of the Company to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
The Company's ability to continue as a going concern is subject to the
attainment of profitable operations and/or obtaining necessary funding from
outside sources. The Company plans to increase sales from obtaining U.S. Food
and Drug Administration (FDA) clearance for the sale of its products in the
United States. The Company is also currently seeking additional capital through
both private and public sources.
However, there can be no assurance they will be successful.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, and
its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.
Cash Equivalents
For purposes of the statement of cash flows, cash includes all cash and
investments with original maturities to the Company of three months or less.
Inventories
Inventories are recorded at the lower of cost or market, cost being determined
on a first-in, first-out (FIFO) method.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation.
Depreciation and amortization on property and equipment is determined using the
straight-line method over the estimated useful lives of the assets. Expenditures
for maintenance and repairs are expensed when incurred and betterments are
capitalized. Gains and losses on sale of property and equipment are reflected in
operations.
- --------------------------------------------------------------------------------
F-8
<PAGE>
NOVAMED MEDICAL PRODUCTS INCORPORATED
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
2. Significant Accounting Policies Continued
Income Taxes
Deferred income taxes are provided in amounts sufficient to give effect to
temporary differences between financial and tax reporting.
Foreign Currency Translation
Revenues and expenses denominated in foreign currencies are translated at
average monthly exchange rates during the year. Assets and liabilities are
translated into U.S. dollars based upon exchange rates prevailing at the end of
each year. The resulting translation adjustment is a component of shareholders'
deficit.
Revenue Recognition
Revenue is recognized upon shipment of product.
Loss Per Common and Common Equivalent Share The computation of basic earning per
common share is based on the weighted average number of shares outstanding
during each year.
The computation of diluted earnings per common share is based on the weighted
average number of shares outstanding during the year plus the common stock
equivalents which would arise from the exercise of stock options and warrants
outstanding using the treasury stock method and the average market price per
share during the year.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentration of
credit risk consist primarily of trade receivables. In the normal course of
business, the Company provides credit terms to its customers. Accordingly, the
Company performs ongoing credit evaluations of its customers and maintains
allowances for possible losses which, when realized, have been within the range
of management's expectations.
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such account and believes it is not exposed to any significant credit risk on
cash and cash equivalents.
- --------------------------------------------------------------------------------
F-9
<PAGE>
NOVAMED MEDICAL PRODUCTS INCORPORATED
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
2. Significant Accounting Policies Continued
Use of Estimates in the Preparation of Financial Statements 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 differ
from those estimates.
Unaudited Information
In the opinion of management, the accompanying unaudited financial statements
for the six month periods ended June 30, 1999 and 1998 contain all adjustments
(consisting only of normal recurring items) necessary to present fairly the
results of operations and cash flows of the Company for the six month period
ended June 30, 1999 and 1998.
3. Detail of Certain Balance Sheet Accounts
December 31
-----------------------------------
1998 1997
-----------------------------------
Receivables:
Trade receivables $ 225,880$ 102,181
Other receivables 104,946 -
-----------------------------------
$ 330,826$ 102,181
-----------------------------------
Inventories:
Finished goods $ 420,201$ 366,545
Work-in-process 16,849 96,494
Raw materials 46,250 13,023
-----------------------------------
$ 483,300$ 476,062
-----------------------------------
- --------------------------------------------------------------------------------
F-10
<PAGE>
NOVAMED MEDICAL PRODUCTS INCORPORATED
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
4. Property and Equipment
December 31
------------------------------------
1998 1997
------------------------------------
Property and equipment consist of the following:
Equipment and fixtures $ 50,673$ 47,030
Less accumulated depreciation (14,597) (11,074)
------------------------------------
$ 36,076$ 35,956
------------------------------------
5. Related Party Transactions
The Company leases one of its facilities from a shareholder. The lease requires
monthly payments of approximately $8,000 per month. Rent expense for the periods
ended December 31, 1998 and 1997 was approximately $96,000 each year. Amounts
due under this lease agreement at December 31, 1998 and 1997 was approximately
$179,400 and $259,350, respectively.
At December 31, 1997, the Company owed International Medical Products, Inc. (see
Note 1) approximately $3,220,000 related to cash advances made to facilitate
operations. On June 29, 1998, the amounts owed to IMP (totaling $3,070,221) were
contributed to the Company as additional capital.
- --------------------------------------------------------------------------------
F-11
<PAGE>
NOVAMED MEDICAL PRODUCTS INCORPORATED
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
6. Income Taxes
The provision for income taxes is different than amounts which would be provided
by applying the statutory federal income tax rate to loss before the provision
for income taxes for the following reasons:
Years Ended
December 31,
-----------------------------------
1998 1997
-----------------------------------
Federal income tax benefit at
statutory rate $ 73,000 $ 373,000
Change in valuation allowance (73,000) (373,000)
-----------------------------------
$ - $ -
-----------------------------------
At December 31, 1998, the Company has a net operating loss carryforward
available to offset future taxable income of approximately $2,200,000, which
beings to expire in 2010. The amount of net operating loss carryforward that can
be used in any one year will be limited by the applicable tax laws which are in
effect at the time such carryforward can be utilized. The change in ownership of
the Company may reduce the amount of loss allowable.
Deferred tax assets (liabilities) are comprised of the following:
December 31
-----------------------------------
1998 1997
-----------------------------------
Net operating loss carryforward $ 748,000 $ 675,000
Valuation allowance (748,000) (675,000)
-----------------------------------
$ - $ -
-----------------------------------
- --------------------------------------------------------------------------------
F-12
<PAGE>
NOVAMED MEDICAL PRODUCTS INCORPORATED
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
7. Supplemental Cash Flow Information
During the year ended December 31, 1998, a note payable of $3,070,077 was
contributed to capital (see note 5).
Years Ended
December 31
-----------------------------------
1998 1997
-----------------------------------
Interest $ - $ 378
-----------------------------------
Income taxes $ - $ -
-----------------------------------
8. Earnings Per Share
Financial accounting standards requires companies to present basic earnings per
share (EPS) and diluted earnings per share along with additional informational
disclosures. Information related to earnings per share is as follows:
Earnings per share information is as follows:
Years Ended
December 31
-----------------------------------
1998 1997
-----------------------------------
Net loss available to common
stockholders $ (213,348) $ (1,097,224)
-----------------------------------
Average equivalent shares
(basic and diluted) 9,874,000 6,302,000
-----------------------------------
Net loss per share
(basic and diluted) $ (.02) $ (.17)
-----------------------------------
9. Stock Split
As part of the reverse acquisition described under note 1, Conceptual had a
reverse stock split exchange of one share received for every fourteen shares
owned.
The financial statements have been adjusted to reflect the stock split as if it
had occurred January 1, 1997.
- --------------------------------------------------------------------------------
F-13
<PAGE>
NOVAMED MEDICAL PRODUCTS INCORPORATED
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
10. Commitments and Contingencies
The Company may become or is subject to investigations, claims or lawsuits
ensuing out of the conduct of its business, including those related to product
safety and health, product liability, commercial transactions, etc. The Company
is currently not aware of any such items which it believes could have a material
adverse effect on its financial position.
11. Fair Value of Financial Instruments
All financial instruments are held for purposes other than trading. The Company
estimates that the fair value of all financial instruments at December 31, 1998,
does not differ materially from the aggregate carrying values of its financial
instruments recorded in the accompanying consolidated balance sheet. The
estimated fair value amounts have been determined by the Company using available
market information and appropriate valuation methodologies. Considerable
judgement is necessarily required in interpreting market data to develop the
estimates of fair value, and, accordingly, the estimates are not necessarily
indicative of the amounts that the Company could realize in a current market
exchange.
12. Sales
Substantially all sales by the Company were made in Europe for the years ending
December 31, 1998 and 1997.
- --------------------------------------------------------------------------------
F-14
<PAGE>
PART III
ITEM 1. EXHIBITS
(a) Exhibits. Exhibits required to be attached are listed in the Index to
Exhibits beginning on page 27 of this Form 10-SB under "Item 2.
Description of Exhibits."
[THIS SPACE LEFT INTENTIONALLY BLANK]
25
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized, this ?th day of July 1999.
NovaMed, Inc.
Name: Ruairidh Campbell
Title: President, CEO ad Director
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Signature Title Date
August , 1999
Ruairidh Campbell President/CEO and Director
August , 1999
Dr. Aydin Dogan Vice President and Director
August , 1999
Dr. Howard Bellin Director
August , 1999
Dr. Franz Schain Director
26
<PAGE>
Item 2. Description of Exhibits.
INDEX TO EXHIBITS
Exhibit
No. Page No. Description
2(i) 29 Articles of Incorporation of the Company formerly known as
Conceptual Technologies, Inc., a Nevada corporation dated
November 26, 1996.
2(ii) 35 Certificate of Amendment of the Articles of Incorporation of
the Company filed on August 29, 1997 effecting the 1-for-14
reverse split and rounding each fractional share to one whole
share.
2(iii) 38 Certificate of Amendment of the Articles of Incorporation of
the Company changing the name from Conceptual Technologies,
Inc. to NovaMed, Inc.
2(iv) 40 By-laws of the Company adopted on November 12, 1996.
Material Contracts
6(i) 50 Stock Purchase and Sale Agreement between Conceptual Tech-
nologies, Inc. and NovaMed Medical Products, Inc. dated
February 25, 1998, pursuant to which the Company acquired all
of its current operations
6(ii) 68 Letter Agreement-Strategic Alliance between the Company and
Inamed, Inc. dated March 25, 1999 for the sale of the Company's
NOVAGOLD implant internationally and the sale of the NOVASALINE
pre-filled implants.
6(iii) 73 Second Amendment to the Lease Agreement between the Company and
Michelle Realty Company dated October 8, 1998 for the lease of
the Company's office and manufacturing facilities in Minnesota.
6(iv) 74 The Company's Stock Option Plan dated March 19, 1999, reserving
a maximum of 500,000 shares of common stock to provide incent-
ives to officer, and key employees.
6(v) 85 Stock Option Agreement between the Company and Ruiaridh Campbell
dated March 19, 1999, granting him an option to purchase up to
55,000 shares of common stock of the Company for $1.30 per
share.
27
<PAGE>
6(vi) 94 Stock Option Agreement between the Company and Dr. Howard
Bellin dated March 19, 1999, granting him an option to purchase
up to 35,000 shares of common stock of the Company for $1.30
per share.
6(vii) 104 Correspondence between the Company and IKB Deutche Industriebank
dated June 10, 1999 discussing various terms of the loan to
establish a production plant in Duisburg.
28
Exhibit 2(i) ARTICLES OF INCORPORATION
OF
CONCEPTUAL TECHNOLOGIES, INC.
THE UNDERSIGNED person, acting as incorporators under applicable provis
of the Nevada Business Corporation Act, does hereby adopt the following Article
Incorporation for said corporation.
ARTICLE I
NAME
The name of the corporation is CONCEPTUAL TECHNOLOGIES, INC.
ARTICLE II
DURATION
The duration of the corporation is perpetual.
ARTICLE III
PURPOSES
The special purpose for which the corporation is organized is to
evaluate privately held companies whose primary business is the manufacturing,
marketing, and distribution of recreational products with an emphasis on
motorized water vehicles.
a. To engage in any and all activities as may be reasonably
related to the foregoing and following purposes.
29
<PAGE>
b. To enter into leases, contracts and agreements, to open bank
accounts and to conduct financial transactions.
c. To engage in any all other lawful purposes, activities and
pursuits, which are substantially similar to the foregoing, or
which would contribute to accomplishment of the expressed
purposes of the corporation.
d. To change its primary business purpose from time to time as
may be deemed advisable by the Board of Directors.
e. To engage in any other lawful business authorized by the laws
of Nevada or any other state or other jurisdiction in which
the corporation may be authorized to do business.
ARTICLE IV
CAPITAL
The corporation shall have authority to issue Fifty Million
(50,000,000) common shares, one mil (.001) par value. There shall be only one
class of authorized shares, to wit: common voting stock. The common stock shall
have unlimited voting rights provided in the Nevada Business Corporation Act.
None of the shares of the corporation shall carry with them the
pre-emptive right to acquire additional or other shares of the corporation.
There shall be no cumulative voting of shares.
30
<PAGE>
ARTICLE V
INDEMNIFICATION AND NUMBER OF DIRECTORS
No shareholders or directors of the corporation shall be individually
liable for the debts of the corporation or for monetary damages arising from the
conduct of the corporation. The corporation shall consist of no less than two
(2) officers and directors and no more than seven (7) officers and directors.
ARTICLE VI
BY-LAWS
Provisions for the regulation of the internal affairs of the
corporation not provided for in these Articles of Incorporation shall be set
forth in the By-Laws.
ARTICLE VII
RESIDENT OFFICE AND AGENT
The address of the corporation's initial resident office shall be 3230
East Flamingo Road, Suite 156, Las Vegas, NV 89121. The corporation's initial
registered agent at such address shall be Gateway Enterprises, Inc.
I hereby do acknowledge and accept appointment as corporation registered agent:
Gateway Enterprises, Inc.
By:_____________________
31
<PAGE>
ARTICLE VIII
INCORPORATORS
The identity and address of the incorporators are:
Frank J. Weinstock (President)
3525 Sunset Lane
Oxnard, California 93035
Trish R. Francis (Secretary & Treasurer)
3525 Sunset Lane
Oxnard, California 93039
The aforesaid incorporators shall be the initial Directors of the
corporation and shall act as such until the corporation shall have conducted its
organizational meeting or until one or more successors shall have been elected
and accepted their election as directors of the corporation.
------------------------
Frank J. Weinstock
------------------------
Trish R. Francis
IN WITNESS WHEREOF, Frank J. Weinstock and Trish R. Francis, have
executed these Articles of Incorporation in duplicate this 12th day of November,
1996, and say:
The we are the incorporators herein; that we have read the above and
foregoing Articles of Incorporation; that I know the contents thereof and that
the same is true to the best of our
32
<PAGE>
knowledge and belief, excepting as to matters herein alleged on information and
belief, and as to those matters we believe them to be true.
------------------------
Frank J. Weinstock
------------------------
Trish R. Francis
State of Utah }
} ss
County of Salt Lake }
Subscribed and sworn before me this 12th day of November, 1996 by Frank
J. Weinstock and Trish R. Francis.
------------------------
Notary Public
IN WITNESS WHEREOF, Frank J. Weinstock and Trish R. Francis, have
executed these Articles of Incorporation in duplicate this 12th day of November,
1996, and say:
The I am the incorporator herein; that I have read the above and
foregoing Articles of Incorporation; that I know the contents thereof and that
the same is true to the best of my knowledge and belief, excepting as to matters
herein alleged on information and belief, and as to those matters I believe them
to be true.
------------------------
Frank J. Weinstock
------------------------
Trish R. Francis
33
<PAGE>
State of Utah }
} ss
County of Salt Lake }
Subscribed and sworn before me this 12th day of November, 1996 by Frank J.
Weinstock and Trish R. Francis.
------------------------
Notary Public
34
Exhibit 2(ii)
CERTIFICATE
OF
AMENDMENT OF ARTICLES
OF
INCORPORATION
FOR
CONCEPTUAL TECHNOLOGIES, INC.
A Nevada Corporation
(After Issuance of Stock)
We, the undersigned, David Lehmburg, President, and Vicki Williams,
Secretary, of CONCEPTUAL TECHNOLOGIES, INC. (the "Corporation"), a Nevada
Corporation, do hereby certify:
That pursuant to a resolution of the Board of Directors of the
Corporation adopted by a Unanimous Written Consent, dated July 31, 1997, the
original Articles of Incorporation of the Corporation are hereby amended as
follows:
(6) Article I is hereby amended to read as follows:
"ARTICLE I
CAPITAL
(1) The Corporation shall have authority to issue Fifty Million
(50,000,000) common shares, one mil ($.001) par value. There
shall be only one class of authorized shares, to wit: common
voting stock. The common stock shall have unlimited voting
rights provided in the Nevada Business Corporation Act.
(2) None of the shares of the Corporation shall carry with them
the pre-emptive right to acquire additional or other shares of
the Corporation. There shall be no cumulative voting of
shares.
35
<PAGE>
(3) Of the 50,000,000 authorized shares of common stock, 2,000,000
are issued and outstanding on July 31, 1997. It is the
decision of the Board of Directors of the Corporation to
reverse split the outstanding common stock on a basis of 1 for
14, with the rounding up of each fractional share resulting
from the reverse split to a whole share, reducing the
2,000,000 outstanding shares of common stock to 142,858, and
retaining the authorized shares of common stock at 50,000,000
and the par value at one mil ($.001) per share, with
appropriate adjustments being made in the additional paid-in
capital and stated capital accounts of the Corporation.
(4) Before the change described in paragraph 3, the current number
of authorized shares of the Corporation's common stock was
50,000,000, and the par value of each of those shares was one
mil ($.001).
(5) After the change described in paragraph 3 the number of
authorized shares of the Corporation's common stock is
50,000,000, and the par value of each of those shares is one
mil ($.001).
(6) All of the outstanding 2,000,000 shares of the Corporation's
common stock outstanding before the change described in
paragraph 3 have been affected by the change by being reduced
on a basis of 1 for 14, with the rounding up of each
fractional share resulting from the change to a whole share,
so that, after the change, there are 142, 858 shares of the
Corporation's common stock outstanding.
(7) Each fractional share resulting from the change described in
paragraph 3 has been rounded up to a whole share.
(8) This amendment is made pursuant to the N.R.S. 78.383.
36
<PAGE>
(9) Pursuant to N.R.S. 78.390 this amendment and the change
described in paragraph 3 shall become affective upon the
filing of this certificate with the Secretary of State of
Nevada."
The number of shares of the Corporation outstanding and entitled to
vote on an amendment to the Articles of Incorporation is 2,000,000. The said
changes and amendment have been consented to and approved by a majority vote of
the stockholders holding at least a majority of each class of stock outstanding
and entitled to vote thereon.
This Certificate consists of four (4) pages, of which this is page 3
and the following page, containing the notarial acknowledgment is the last.
------------------------
David Lehmburg, President
------------------------
Vicki Williams, Secretary
State of Utah }
} ss
County of Salt Lake }
On 8-5, 1997, personally appeared before me, a Notary Public, DAVID
LEHMBURG and VICKI WILLIAMS, who acknowledged that they executed the above
instrument.
------------------------
Notary Public
Seal/Stamp
37
Exhibit 2(iii)
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
FOR
NOVAMED, INC.
(formerly known as Conceptual Technologies, Inc.)
A Nevada Corporation
(After Issuance of Stock)
The undersigned, as President of NOVAMED, INC., a Nevada corporation
formerly known as Conceptual Technologies, Inc. (the "Corporation"), does hereby
certify:
That pursuant to a resolution of the Board of Directors dated July 31,
1997, the Articles of Incorporation of the Corporation were amended by a
Certificate of Amendment of Articles of Incorporation filed in the office of the
Secretary of State of the State of Nevada on August 29, 1997 (the "First
Certificate of Amendment"); and
That pursuant to a Unanimous Written Consent of the Board of Directors
dated March 25, 1998 and a vote of a majority of the stockholders held at a
meeting of the stockholders of the Corporation on April 9, 1998, the directors
and stockholders of the Corporation ratified the filing of the First Certificate
of Amendment and approved the filing of the Certificate of Amendment to correct
certain errors contained in the First Certificate; and
That pursuant to a Unanimous Written Consent of the Board of Directors
dated March 25, 1998 and a vote of a majority of the stockholders held at a
meeting of the stockholders of the Corporation on April 9, 1998, the directors
and stockholders of the Corporation approved the filing of a Certificate of
Amendment to change the name of the Corporation.
THEREFORE, Article I of the Articles of Incorporation of the
Corporation is herebby amended and restated in its entirety as follows:
"Article I
The name of the Corporation is NOVAMED, INC."
Article IV is hereby amended and restated in its entirety as follows:
The number of shares of the Corporation outstanding and entitled to
vote on an amendment to the Articles of Incorporation is 144,294. The said
changes and amendment have been consented to and approved by a majority vote of
the stockholders holding at least a majority of each class of stock outstanding
and entitled to vote thereon.
38
<PAGE>
Exhibit 2(iii) (continued)
This Certificate consists of two pages, of which this page 2 contains the
notarial acknowledgement.
----------------------------
David Lehmberg, President
----------------------------
G.W. Norman Wareham, Secretary
STATE OF UTAH )
)ss.
COUNTY OF SALT LAKE )
On May ____, 1998, personally appeared before me, David Lehmberg, who
acknowleged that he executed the foregoing Certificate of Amendment of Articles
of Incorporation as President of NOVAMED, INC.
----------------------------
Notary Public
39
Exhibit 2(iv)
BY-LAWS
of
CONCEPTUAL TECHNOLOGIES, INC.
----------------------------------------------------------
ARTICLE I - OFFICES
Section 1. The principal office of the corporation in the State of
California shall be at 3525 Sunset Lane, Oxnard, California 93035. The officer
in charge thereof is Frank J. Weinstock. Section 2. The corporation may have
such other offices within or without the state as the board of directors may
from time to time designate.
ARTICLE II - STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders shall
be held at the corporate office on the third Friday of April of each year
beginning in 1997, at the hour of 10:00 a.m., or at such other time as may be
fixed by the board of directors, for the purpose of electing directors and for
the transaction of such other business as may come before the meeting. If the
election of directors shall not be held on the day designated herein for the
annual meeting 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.
Section 2. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless other3wise prescribed by statute, may be called
by the president or by any director, and shall be called by the president at the
written request of fifteen percent (15%) of all outstanding shares of the
corporation entitled to vote at the meeting. Unless requested by stockholders
entitled to cast a majority or all the votes entitled to be cast at the meeting,
a special meeting need not be called to consider any matter which is
substantially the same as a matter voted on at any meeting of stockholders held
during the preceding twelve months.
40
<PAGE>
Section 3. Place of Meeting. The board of directors may designated any
place, either in the State of Nevada or elsewhere, as the place of any annual or
special meeting of stockholders.
Section 4. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall, unless otherwise prescribed by statute,
be delivered not less than ten (10) not more than fifty (50) days before the
meeting, either personally or by mail, to each stockholder of record entitled to
vote at such meeting. If mailed, such notice shall be deemed to be delivered ten
(10) days after it has been deposited in the United States Mail, addressed to
the stockholder at his address as it appears on the share registry of the
corporation, with postage thereon prepaid.
Section 5. Closing of Transfer Books or Fixing of Record Date. For any
purpose requiring identification of shareholders, the record date shall be
established by the board of directors, and shall be not more than twenty (20)
days from the date on which any such purpose is to be accomplished. Absent a
resolution establishing any such date, the record date shall be deemed to be the
date on which any such action is accomplished.
Section 6. Voting List. The corporation shall maintain a stock ledger
which contains:
(7) The name and address of each stockholder.
(8) The number of shares of stock of each class which the
stockholder holds.
The stock ledger shall be written form and available for visual inspection. The
original or a duplicate of the stock ledger shall be kept at the principal
office of the corporation.
Section 7. Quorum. A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than a majority of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be presented or represented, any
business may be transacted which might have been
41
<PAGE>
transacted at the meeting as originally noticed. The stockholders present at a
duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to reduce the number of
stockholders present to less than a quorum.
Section 8. Proxies. At all meetings of stockholders, a stockholder may
vote in person or by proxy executed in writing by the stockholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting. A proxy shall be void one year
after it is executed unless it shall, prior to the expiration of one year, have
been renewed in writing. All proxies shall be revocable.
Section 9. Voting of Shares. Each outstanding share entitled to vote
shall be entitled to one vote upon each matter submitted to a vote at a meeting
of stockholders.
Section 10. Informal Action by Stockholders. Any action required or
permitted to be taken at a meeting of the stockholders, except matters as to
which dissenting stockholders may hold a statutory right of appraisal, may be
taken without a meeting if a consent in writing, setting forth the action so
take, shall be signed by a majority of the stockholders entitled to vote with
respect to the subject matter thereof. Notice of any such action shall be
provided to stockholders in the manner set forth in Section 4 of these Bylaws,
with ten (10) days of the effective date of the action.
Section 11. Cumulative Voting. There shall be no cumulative voting of
shares.
Section 12. Removal of Directors. At a meeting called expressly for
that purpose, directors may be removed with or without cause, by a vote of the
holders of a majority of the shares entitled to vote at an election of
directors.
ARTICLE III - DIRECTORS
Section 1. The business and affairs of this corporation shall be
managed by its Board of Directors, which may be no less than two (2) nor more
than seven (7) in number. The directors need not be residents
42
<PAGE>
of this state or stockholders in the corporation. They shall be elected by the
stockholders at the annual meeting of stockholder of the corporation. Each
director shall be elected for the term of one (1) year, and until his successor
shall have been elected and accepted his election to the Board in writing.
Section 2. The number of directors may be increased or decreased from
time to time by the vote of a majority of the outstanding shares of the
corporation.
Section 3. Regular Meetings. A regular meeting of the board of
directors shall be held without any notice other than this by-law immediately
after, and at the same place as, the annual meeting of stockholders. The board
of directors may provide, by resolution, the time and place for the holding of
additional regular meetings without notice other than such resolution.
Section 4. Special Meetings. Special meetings of the board of directors may
be called by or at the request of the president or any director. The person or
persons calling any such meeting may fix the time and place of the meeting.
Section 5. Notice. Notice of any special meeting shall be given at least
five (5) days previously thereto by written notice delivered personally, mailed
or delivered by fax to each director at his business address. Notices shall be
deemed to have been delivered when transmitted personally or by fax, and two
days after mailed. Any director may waive notice of any meeting so long as such
waiver is in writing. The business to be conducted at any special meeting may
not be specified in the notice.
Section 6. Quorum. A majority of duly elected board of directors shall
constitute a quorum of the board of directors for the transaction of business at
any meeting of the board of directors.
Section 7. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
Section 8. Informal Action by Directors. Action consented to by a majority
of the board of directors without a meeting is nevertheless board action so long
as (a) a written consent to the action is signed by all the directors of the
corporation and (b) a certificate or resolution detailing the action taken is
43
<PAGE>
filed with the minutes of the corporation. Any one or more directors may
participate in any meeting of the board of directors by means of conference
telephone or other similar communications device which permits all directors to
hear the comments made by the others at the meeting.
Section 9. Executive and other Committees. The board of directors may,
from time to time, as the business of the corporation may demand, delegate its
authority to committees of the board of directors under such terms and
conditions as it may deem appropriate. The appointment of any such committee,
the delegation of authority to it or action by it under that authority does not
constitute of itself, compliance by any director not a member of the committee,
with the standard provided by statute for the performance of duties of
directors.
Section 10. Compensation. By resolution of the board of directors, each
director may be paid his expenses, if any, of attendance at each meeting of the
board of directors, and may be paid a state salary as director or a fixed per
diem for attendance at each such meeting of the board of directors, or both. No
such payments shall preclude any director from serving the corporation in any
other capacity and receiving compensation thereof.
Section 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
action is taken shall be presumed to have assented to the action taken unless he
shall announce his dissent at the meeting and his dissent is entered in the
minutes and he shall forward such dissent by registered mail to the secretary of
the corporation immediately after the adjournment of the meeting.
Section 12. Certificates of Resolution. At any such time as there shall
be only one duly elected and qualified director, actions of the corporation may
be manifest by the execution by such director of a Certificate of Resolution
specifying the corporate action taken and the effective date of such action.
44
<PAGE>
ARTICLE IV - OFFICERS
Section 1. Number. Officers of the corporation shall be a president and
a secretary, each of whom shall be elected by the board of directors. Such other
officers and assistant officers as may be deemed necessary may be elected or
appointed by the board of directors. Any two or more offices may be held by the
same person, except that no officer may act in more than one capacity where
action of two or more officers is required by law.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the board of directors after each annual meeting of
the stockholders. Each officer shall hold office for a period of one (1) year
and until his successor shall have been duly elected and shall have accepted his
election as an officer of the corporation in writing.
Section 3. Removal. Any officer or agent may be removed by the board of
directors whenever in its judgment, the best interests of the corporation will
be served thereby. Election to an office in the corporation shall not create any
contractual right of any type or sort in the person elected.
Section 4. Vacancies. A vacancy in any office may be filled by the
board of directors for the unexpired portion of the term.
Section 5. President. The president shall be a director of the
corporation and shall be the principal executive officer of the corporation, and
subject to the control of the board of directors, shall in general supervise and
control all of the business and affairs of the corporation. The president shall
have authority to institute or defend legal proceedings when the directors are
deadlocked. He shall, when present, preside at all meetings of the stockholders
and of the board of directors. He may sign, with the secretary or any other
proper officer of the corporation thereunto authorized by the board of
directors, certificates for shares of the corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the board of directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the board of directors or by these
by-laws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
45
<PAGE>
duties incident to the office of president and such other duties as may be
prescribed by the board of directors from time to time.
Section 6. Secretary. The secretary shall: (a) keep the minutes of the
proceedings of the stockholders and of the board of directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these by-laws or as required by law; (c) be
custodian of the corporate records and of the seal of the corporation, if any;
(d) keep a register of the post office address of each stockholder which shall
be furnished to the secretary by such stockholder; (e) sign, with the president,
certificates for shares of the corporation, the issuance of which shall have
been authorized by resolution of the board of directors; (f) have general charge
of the stock registry of the corporation; (g) have charge and custody of and be
responsible for all funds and securities of the corporation; (h) receive and
give receipts for moneys due and payable to the corporation and deposit all such
moneys in the name of the corporation in such bank accounts as may be
established for that purposed; and (i) in general, perform all duties incident
to the office of secretary, as well as such duties as generally required upon
treasurers of corporations.
Section 7. Salaries. The salaries of the officers shall be fixed from
time to time by the board of directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V - INDEMNIFICATION OF THE DIRECTORS
AND OFFICERS OF THE CORPORATION
Section 1. The corporation shall indemnify any person who was or is a
party or 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,
against expenses (including attorney's fees), judgements, fines and amounts paid
in settlement actually and reasonably incurred by him in connection
46
<PAGE>
with 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, without more, 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 interest of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
ARTICLE VI - CONTRACTS, LOANS, CHECKS, AND DEPOSITS
Section 1. Contracts. The board of directors may authorize any officer or
officers or agents to enter into any contract or execute and deliver any
instrument, including loans, mortgages, checks, drafts, deposits, deeds and
documents evidencing other transactions, in the name of the corporation. Such
authority may be general or confined to specific instances.
ARTICLE VII - CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of
the corporation shall be in the form approved in the organizational resolutions
of the corporation. They shall be signed by the president and secretary of the
corporation. Each certificate shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares represented
thereby are issued, with the number of shares and date to issue, shall be
entered on each certificate and on the stock registry of the corporation. All
certificates surrendered to the corporation for transfer shall be canceled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and canceled, except in the case of
a lost, destroyed or mutilated certificate, a new one may be issued therefor
upon such terms of indemnity to the corporation as the board of directors may
prescribe.
47
<PAGE>
Section 2. Transfer of Shares. Transfer of shares of the corporation
shall be made only on the stock registry of the corporation by the holder of
record thereof or by his legal representative, who shall furnish proper evidence
of authority to transfer, or by his attorney thereunto authorize by power of
attorney duly executed and filed with the secretary of the corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
ARTICLE VIII - FISCAL YEAR
Section 1. The fiscal year of the corporation shall begin on the first
day of January of each year and expire on the thirty-first day of December each
year.
ARTICLE IX - CORPORATE SEAL
Section 1. Use of the corporate seal adopted by the board of directors
shall be optional with the officer or agent of the corporation signing any
document on behalf of the corporation. No duly executed corporate document shall
be void because it does not bear the imprint of a seal.
ARTICLE X - WAIVER OF NOTICE
Section 1. Whenever any notice is required to be given to any
stockholder or director of the corporation under these By-laws, by provisions of
the Articles of Incorporation, or by the statutes of the State of Nevada, a
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
ARTICLE XI - AMENDMENTS
Section 1. The board of directors shall have the power to make, alter
and repeal by-laws; but by-laws made by the board may be altered or repealed, or
new by-laws made, by the stockholders.
ADOPTED by order of the directors of the corporation on November 12,
1996.
48
<PAGE>
CONCEPTUAL TECHNOLOGIES, INC.
/ s /
Frank J. Weinstock, Director
/ s /
Trish R. Francis, Director
49
Exhibit 6(i)
STOCK PURCHASE AND SALE AGREEMENT
Between Conceptual Technologies, Inc. and
NovaMed Medical Products, Inc.
February 25, 1998
50
<PAGE>
TABLE OF CONTENTS
RECITALS 1
II Purchase and Sale of Property; Release 1
--------------------------------------
1.1 Property 1
--------
1.2 Release 2
-------
II Closing Date; Delivery 2
----------------------
2.1 Closing Date 2
------------
2.2 Deliveries at Closing 2
---------------------
II Representations and Warranties of NovaMed 3
-----------------------------------------
3.1 Organization, Standing and Authority of NovaMed 3
-------------------------------------------
3.2 Organization, Standing and Ownership of the
Subsidiaries 5
-------------------------------------------
3.3 Financial and Operating Status of the Subsidiaries
6
--------------------------------------------------
II Representations and Warranties of CTI 8
-------------------------------------
4.1 Corporate Organization 8
----------------------
4.2 Due Exception and Enforceability 9
--------------------------------
II Conditions to Closing 9
---------------------
5.1 Conditions to Obligations of CTI 9
--------------------------------
5.2 Conditions to Obligations of NovaMed 12
------------------------------------
II Covenants and Agreements of NovaMed 13
-----------------------------------
6.1 Access to Information 13
---------------------
6.2 Conduct of Business Pending the Closing 13
---------------------------------------
II Miscellaneous 15
-------------
7.1 Successors and Assigns 15
----------------------
7.2 Governing Law; Severability 15
---------------------------
7.3 Waivers 15
-------
7.4 Entire Agreement; Modifications 16
-------------------------------
7.5 Notices 16
-------
7.6 Counterparts 17
------------
7.7 Headings; References 17
--------------------
51
<PAGE>
STOCK PURCHASE AND SALE AGREEMENT
THIS STOCK PURCHASE AND SALE AGREEMENT (this "Agreement"), dated
effective as of February 25, 1998, is between Conceptual Technologies, Inc., a
Nevada corporation ("CTI") and NovaMed Medical Products, Inc., a Nevada
Corporation ("NovaMed").
RECITALS
A. NovaMed is the sole shareholder and owner of the following
subsidiaries: NovaMed Medical Products Manufacturing, Inc., a Minnesota
corporation ("NovaMed MN"), NovaMedical Products GmbH, a German corporation
("NovaMed GDR"), and NovaMed Medical Supplies Corporation, a Nevada corporation
("NovaMed NV,"and together with NovaMed MN and NovaMed GR, the "Subsidiaries").
B. NovaMed desires to sell and CTI desires to purchase all of the
outstanding shares of the Subsidiaries pursuant to the terms and conditions of
this Agreement.
AGREEMENT
In consideration of the foregoing recitals and the mutual promises and
benefits contained herein, CTI and NovaMed hereby agree as follows:
1. Purchase and Sale of Property; Release.
1.1 Property. Subject to the terms and conditions of this
Agreement, NovaMed agrees to sell and assign to CTI on the Closing Date (as
defined below), free and clear of all mortgages, security interests, liens,
pledges, adverse claims and other encumbrances, (a) all
52
<PAGE>
of the outstanding shares of stock of each of the Subsidiaries as set forth on
Exhibit A attached hereto (collectively, the "Shares"); and (b) all of NovaMed's
right, title and interest to the trade or business name "NovaMed"(together with
the Shares, the "Property"). In exchange for the Property, CTI agrees to sell
and assign 6,301,558 shares of CTI common stock to NovaMed on the Closing Date.
1.2 Release. As further inducement to CTI's performance under
this Agreement, effective as of the Closing Date, NovaMed hereby releases and
discharges each of the Subsidiaries, their officers, directors, shareholders,
agents and successors from any and all claims, losses, demands, actions,
expenses, obligations or liabilities relating to any matters of any kind,
presently known or unknown which it may have arising from any act, omission,
event or claims relating to or arising out of its association with or investment
in any Subsidiary.
2. Closing Date; Delivery.
2.1 Closing Date. The closing of the purchase and sale of the
Property (the "Closing") will be held at the offices of Manning Curtis Bradshaw
& Bednar, LLC, 370 East South Temple, Suite 200, Salt Lake City, Utah, 84111, at
10:00am on April 14, 1998, or at such earlier date as may be agreed in writing
by CTI and NovaMed (the "Closing Date").
2.2 Deliveries at Closing.
(a) Deliveries of NovaMed to CTI. At the Closing,
if the conditions precedent set forth in Section 5.2 are fulfilled to its
reasonable satisfaction, NovaMed will deliver to CTI (1) stock certificates or
other documents of title representing all of the Subsidiaries' shares of stock
held of record or beneficially owned by NovaMed on the Closing Date, duly
endorsed by NovaMed for transfer to CTI; (2) all of NovaMed's documents of title
pertaining to its rights to and interest in the trade or business name
"NovaMed"; and (3) evidence, effective as of the Closing Date, satisfactory
53
<PAGE>
to CTI that NovaMed has changed its name to a name that does not include the
word "NovaMed" or any derivation thereof, and such other documents as are
reasonably necessary to ensure that CTI has full right and title to the name
"NovaMed" in each of the jurisdictions in which it does business. NovaMed will
also deliver such other documents and instruments as CTI may reasonably request
to confirm that NovaMed has performed all of its obligations and fulfilled all
of the conditions precedent to CTI's performance under this Agreement.
(b) Deliveries of CTI to NovaMed. At the Closing,
if the conditions precedent set forth in Section 5.1 are fulfilled to its
reasonable satisfaction, CTI will deliver to NovaMed stock certificates
representing 6,301,558 shares of CTI's common stock issued in the name of
NovaMed. CTI will also deliver such other documents and instruments as NovaMed
may reasonably request to confirm that CTI has performed all of its obligations
and fulfilled all of the conditions precedent to NovaMed's performance under
this Agreement.
3. Representations and Warranties of NovaMed. NovaMed hereby represents
and warrants to CTI that, except as may be set forth in Schedule 1 attached
hereto (the "Disclosure Schedule"), the matters set forth in this Section 3 are
true and correct:
3.1 Organization, Standing and Authority of NovaMed.
(a) Organization. NovaMed is a corporation duly
organized and validly existing under the laws of the State of Nevada and is in
good standing as a domestic corporation under the laws of said State.
(b) Charter Documents. NovaMed has furnished
counsel for CTI with true and complete copies of its Articles of Incorporation,
as amended to date, and its Bylaws as currently in effect.
54
<PAGE>
(c) Corporate Power. NovaMed has all requisite corp-
orate power to enter into this Agreement and to carry out and perform its
obligations hereunder.
(d) Authorization for Agreement. The execution
and performance of this Agreement by NovaMed has been duly authorized by its
Board of Directors and shareholders. Upon execution and delivery of this
Agreement on behalf of NovaMed, this Agreement will constitute the valid and
legally binding obligation of NovaMed, enforceable in accordance with its terms
and conditions. The execution, delivery and performance of this Agreement and
compliance with the provisions of this Agreement by NovaMed does not conflict
with, or result in a breach or violation of the terms, conditions or provisions
of, or constitute a default under, or result in the creation or imposition of
any lien pursuant to the terms of, NovaMed's Articles of Incorporation, as
amended, NovaMed's current Bylaws, or any statute, law, rule or regulation or
any order, judgment, decree, indenture, mortgage, lease or other agreement or
instrument to which NovaMed is subject.
(c) Financial Statements. The audited consolidated
financial statements of NovaMed and the Subsidiaries as of September 30, 1996
and the unaudited consolidated financial statements of NovaMed and the
Subsidiaries as of December 31, 1996 are attached hereto as Exhibit C (the
"NovaMed Financial Statements"). The NovaMed Financial Statements are complete
and correct in all material respects and present fairly the financial condition
of NovaMed and the Subsidiaries as of the periods covered in conformity with
generally accepted accounting principles applied on a basis consistent with
preceding periods.
(f) Material Changes. Since September 30, 1996, there
have been no material adverse changes in the financial condition of NovaMed or
the Subsidiaries from that shown on the NovaMed Financial Statements as of such
date.
55
<PAGE>
(g) Ecoprogress and Daystar Lonas. As of the Closing
Date, NovaMed has repaid or otherwise satisfied all of its indebtedness to (1)
Ecoprogress International Limited ("Ecoprogress") under that certain Note
executed in connection with the Exclusive License Agreement between Ecoprogress
and NovaMed dated January 1, 1995, as amended May 30, 1996; and (2) DayStar
Partners, Ltd. ("DayStar") under that certain Note executed in connection with
the Purchase Agreement between Daystar and NovaMed dated April 26, 1996.
3.2 Organization, Standing and Ownership of the Subsidiaries.
(a) Organization. NovaMed MN is a corporation duly
organized and validly existing under the laws of the State of Minnesota and is
in good standing as a domestic corporation under the laws of said State. NovaMed
GDR is a corporation duly organized and validly existing under the laws of the
German Democratic Republic and is in good standing as a domestic corporation
under the laws of said Republic. NovaMed NV is a corporation duly organized and
validly existing under the laws of the State of Nevada and is in good standing
as a domestic corporation under the laws of said State.
(b) Charter Documents. NovaMed has furnished counsel
for CTI with true and complete copies of the Articles of Incorporation, as
amended to date, and the Bylaws as currently in effect, of each of the
Subsidiaries.
(c) Corporate Power. Each of the Subsidiaries has
all corporate power and authority to own, lease and operate its properties and
to conduct its business as such is presently conducted.
(d) Capitalization. The authorized, issued and out-
standing capital stock of each of the Subsidiaries is set forth on Exhibit A.
All issued and outstanding shares of
56
<PAGE>
the Subsidiaries are fully paid and nonassessable. There are no outstanding
option, warrants or rights to purchase shares of the capital stock of any
Subsidiary.
(e) Title to Property. NovaMed is the sole share-
holder of each of the Subsidiaries, an downs all right, title and interest in
and to the Property, free and clear of all mortgages, liens or encumbrances of
any nature.
3.3 Financial and Operating Status of the Subsidiaries.
(a) Tax Returns. Each of the Subsidiaries has duly
filed all federal, state and local tax returns required to be filed by it, and
all taxes, assessments and penalties set forth in such returns have been timely
and fully paid or adequately reserved against in the NovaMed Financial
Statements. None of the Subsidiary's tax returns have ever been audited by any
governmental taxing authority.
(b) Contracts and Commitments. None of the Subsidia-
ries has any written or oral contracts or commitments involving any obligation,
consideration or expenditure, except as set forth in the Schedule of Disclosure
or except for purchases of normal inventory items in quantities in accordance
with previous practices. NovaMed has delivered to CTI's counsel true, complete
and correct copies of all such contracts and commitments, together with all
amendments thereto, all of which are listed on the Schedule of Disclosures, and
all such contracts are in full force and effect in the for delivered. NovaMed
has set forth in the Schedule of Disclosures (i) all insurance policies with
respect to any Subsidiary in force on the date of this Agreement; (ii) the names
and locations of all banks and other depositories in which an y Subsidiary has
accounts or safe deposit boxes and the names of persons authorized to sign
checks, drafts or other instruments drawn thereon or to have access thereof;
(iii) all mortgages, promissory notes, deeds of trust, loan or credit agreements
or similar agreements, or modifications thereof, to which any Subsidiary is a
57
<PAGE>
party and all amounts thereof; and (iv) all accounts receivable of any
Subsidiary as of December 31, 1997 and as reflected in the NovaMed Financial
Statements.
(c) Employees. None of the Subsidiaries has any
collective bargaining agreements with any of its employees. No Subsidiary is a
party to any contract with any of its employees, consultants, advisors, sales
representatives, distributors or customers that is not terminable by NovaMed
without liability, penalty or premium on 30 days' notice, except as otherwise
set forth in the Schedule of Disclosures.
(d) Benefits. None of the Subsidiaries has any
health, dental, pension, retirement, or other benefit programs for its employees
or in which its employees participate, except as set forth in the Schedule of
Disclosures.
(e) Inventory. All inventory of the Subsidiaries
is saleable and in good condition, the value of which as of December 31, 1997
has been written down or reserved to amounts not in excess of realizable market
value.
(f) Equipment. All equipment of the Subsidiaries is
in good order and repair except minor defects which do not materially interfere
with the continued
use of such equipment.
(g) Litigation. There is no action, proceeding or
investigation pending or, to the knowledge of NovaMed, threatened against any
Subsidiary, or any Subsidiary's property or assets which might result in any
material and adverse change in the property, assets or financial condition of
any Subsidiary, nor, to the knowledge of NovaMed, is there any basis for any
such action, proceeding or investigation. To the best knowledge of NovaMed and
the
58
<PAGE>
Subsidiaries, the Subsidiaries are in compliance in all material respects with
all laws and regulations applicable to the Subsidiaries, their properties and
their businesses.
4. Representations and Warranties of CTI. CTI hereby represents and
warrants to NovaMed that the matters set forth in the following subsections of
this Section 4 are or will be true and correct on the Closing Date.
4.1 Corporate Organization.
(a) Organization. CTI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada.
(b) Financial Statements. The audited financial state-
ments of CTI as of February 28, 1997 and December 31, 1996 are attached hereto
as Exhibit D (the "CTI Financial Statements"). The CTI Financial Statements are
complete and correct in all material respects and present fairly the financial
condition of CTI as of the periods covered in conformity with generally accepted
accounting principles applied on a basis consistent with preceding periods.
(c) Material Changes. Since February 28, 1997, there
have been no material adverse changes in the financial condition of CTI from
that shown on the CTI Financial Statements as of such date.
4.2 Due Execution and Enforceability. The execution, delivery
and performance of this Agreement and the other agreements between the parties
referred to herein by and on behalf of CTI have been duly and validly authorized
by the Board of Directors and shareholders of CTI. CTI has taken all such other
corporate action necessary or required to enter into, execute and deliver this
Agreement and to perform its obligations hereunder. Upon execution and delivery
of this Agreement on behalf of CTI, this Agreement shall constitute the
59
<PAGE>
valid and legally binding obligation of CTI enforceable in accordance with its
terms and conditions.
5. Conditions to Closing.
5.1 Conditions to Obligations of CTI. The obligations of CTI
to purchase the Property at the Closing and to consummate any other transactions
contemplated by this Agreement are subject to the fulfillment of CTI's
satisfaction on or prior to the Closing Date of the following conditions, any of
which may be waived in whole or in part by CTI:
(a) Representations and Warranties True at Closing.
The representations and warranties made by NovaMed in Section 3 above shall be
true and correct in all materials respects on and as of the Closing Date with
the same force and effect as if they had been made and given on and as of the
Closing Date, and NovaMed shall have performed and complied with all agreements
and obligations to be performed by it under this Agreement on or prior to the
Closing.
(b) Authorization. NovaMed shall have obtained all
Board of Directors and shareholder approvals necessary to authorize its
participation in the transaction described in this Agreement.
(c) No Adverse Change. Prior to the Closing there
shall not have occurred any loss or destruction of any material part of the
assets of NovaMed or and Subsidiary or any material adverse change in the
financial condition, properties, business or operations of any Subsidiary from
that shown on the NovaMed Financial Statements.
(d) 1997 Financial Statements. NovaMed shall have
provided to CTI the unaudited individual financial statements of each of the
Subsidiaries as of December 31, 1997, together with a sworn statement of the
officers and directors of NovaMed that the unaudited
60
<PAGE>
1997 financial statements accurately and completely reflect the financial
condition of NovaMed and the Subsidiaries to the best of their knowledge and
belief.
(e) Due Diligence Satisfactory. CTI has received
all of the information reasonable requested by it from NovaMed in connection
with this transaction, and, based on its due diligence investigation, is
satisfied with the financial and operating condition of the NovaMed
Subsidiaries.
(f) Rule D Private Placement. CTI has completed
a private placement of up to 7,000,000 shares of the Company's common stock at a
price determined to be fair by the Board of Directors, but not less than $0.10
per share, pursuant to Rule D, Section 504 of the 1933 Securities Act, and will
have issued and outstanding shares of common stock equal to 144,294 plus the
shares issued pursuant to the Regulation D private placement (not including the
6,301,558 shares of common stock to be issued to NovaMed at Closing under this
Agreement).
(g) Closing Certificate; Good Standing. At the
Closing, NovaMed will deliver or cause to be delivered to CTI a certificate
executed by the President of NovaMed and the President of each of the
Subsidiaries, dated as of the Closing Date and certifying to the fulfillment of
the condition specified in subparagraphs (a), (b) and (c) above. On or prior to
the Closing Date, NovaMed will deliver to CTI certificates issued by the
Minnesota Secretary of State, the Secretary of State of the German Democratic
Republic (or equivalent governmental authority), and the Nevada Secretary of
State evidencing the corporate and good standing of each of the Subsidiaries as
of the date not more than 30 days prior to the Closing Date.
(h) Rights to NovaMed. NovaMed shall have
obtained such director and shareholder approval and prepared and filed such
documents with the Nevada Secretary of State as are necessary make the name
"NovaMed, Inc." available to CTI as a business name
61
<PAGE>
registered in the State of Nevada and every other jurisdiction in which the
Subsidiaries are authorized to do business.
(i) Documents and Instruments Satisfactory. All
documents and instruments to be provided by NovaMed or the Subsidiaries in
connection with the transactions contemplated by this Agreement must be
satisfactory in form and substance to counsel for CTI.
(j) Opinion of Counsel for NovaMed. At the Closing,
NovaMed will deliver to CTI an opinion of counsel dated as of the Closing Date,
addressed to CTI and in form and substance acceptable to CTI.
5.2 Conditions to Obligations of NovaMed. The obligations of
NovaMed to consummate this Agreement and carry out and perform its obligations
hereunder are subject to the fulfillment to NovaMed's satisfaction on or prior
to the Closing Date of the following conditions, any of which may be waived in
whole or in part by NovaMed:
(a) Representations and Warranties True at Closing.
The representations and warranties made by CTI in Section 4 above shall be true
and correct in all material respects on and as of the Closing Date with the same
force and effect as if they had been made and given on and as of the Closing
Date. CTI shall have performed and complied in all material respects with all
agreements and obligations to be performed by it under this Agreement on or
before the Closing Date.
(b) Authorization. CTI shall have obtained all Board
of Directors and shareholder approvals necessary to authorize its participation
in the transaction described in this Agreement.
62
<PAGE>
(c) No Adverse Change. Prior to the Closing there
shall not have occurred any material adverse change in the financial condition,
properties, business or operations of CTI since the date of this Agreement.
(d) Number of Issued and Outstanding Shares.
CTI's issued and outstanding shares of common stock will be equal to 144,294
plus the shares issued pursuant to the Regulation D private placement (not
including the 6,301,558 shares of common stock to be issued to NovaMed at
Closing under this Agreement).
(e) Closing Certificate; Good Standing. At the
Closing, CTI will deliver or cause to be delivered to NovaMed a certificate
executed by the President of CTI, dated as of the Closing Date and certifying to
the fulfillment of the conditions specified in subparagraphs (a), (b), and (c)
above. On or prior to the Closing Date, CTI will deliver to NovaMed a
certificate issued by the Nevada Secretary of State evidencing the corporate and
good standing of CTI as of the date not more than 30 days prior to the Closing
Date.
(f) Documents and Instruments Satisfactory. All
documents and instruments to be provided by CTI in connection with the
transactions contemplated by this Agreement must be satisfactory in form and
substance to counsel for NovaMed.
(g) Opinion of Counsel for CTI. At the Closing,
CTI will deliver to NovaMed an opinion of counsel dated as of the Closing Date,
addressed to NovaMed and in form and substance acceptable to NovaMed.
6. Covenants and Agreements of NovaMed.
6.1 Access to Information. From and after the date of this
Agreement and until the Closing, NovaMed agrees that the authorized
representatives of CTI will have access during normal business hours to the
properties, facilities, books, records, contracts and documents of the
63
<PAGE>
Subsidiaries, and NovaMed will furnish or cause to be furnished to the
authorized representatives of CTI copies of all documents and all information
with respect to the affairs and businesses of the Subsidiaries that CTI's
representatives may reasonably request.
6.2 Conduct of Business Pending the Closing. Unless expressly
consented to by CTI or otherwise permitted or required under this Agreement,
from and after the date of this Agreement and until the Closing or the
termination or abandonment of this Agreement as provided herein:
(a) Business in the Ordinary Course. Each of the
Subsidiaries (i) will conduct its business only in the ordinary course and in
the same manner as before the date of this Agreement, (ii) will not institute
any unusual or novel methods of manufacture, purchase, sale, lease, service,
accounting or operation, (iii) will not grant any increase in the rate of pay or
other benefits or compensation of any officers or employees, and (iv) will not
enter into, amen or terminate any contract or commitment not in the usual and
ordinary course of business and consistent with such Subsidiary's past practice.
(b) Indebtedness. Each of the Subsidiaries will
not (i) incur or assume
or guarantee any indebtedness other then indebtedness incurred in the usual and
ordinary course of business for goods or services or pursuant to existing
commitments or agreements previously disclosed in writing to CTI under this
Agreement, or (ii) enter into, execute or deliver any agreement or writing to
the release or settlement of claims, except as otherwise provided by this
Agreement.
(c) Corporate Structure. Each of the Subsidiaries
will not (i) amend its articles of incorporation or bylaws or change its
officers or directors, (ii) issue any additional capital stock or other
securities of the Subsidiary or grant any warrants, options or rights to
64
<PAGE>
purchase or acquire any capital stock or other securities of the Subsidiary, or
(iii) merge or consolidate with any other corporation or acquire all or
substantially all of the stock, business or assets of any other person or entity
or sell, assign or transfer substantially all of its assets or outstanding
securities to any other person or entity.
(d) Dividends and Capital Stock. Each of the
Subsidiaries will not (i) declare or pay any dividend or make any stock split or
stock dividend or other distribution with respect to its capital stock, or (ii)
directly or indirectly redeem, purchase or otherwise acquire for value any of
its capital stock.
(e) Banking Relationships. No change will be
made affecting the Subsidiary's banking relationships and the Subsidiary will
open no new bank or other deposit accounts.
(f) Insurance. Each of the Subsidiaries will
maintain in full force and effect all policies of insurance now in effect and
will give all notices and present all claims under all policies in a timely
fashion.
7. Miscellaneous.
7.1 Successors and Assigns. This Agreement and the terms and
conditions contained in this Agreement are binding upon, and will inure to the
benefit of, the parties hereto and their respective representatives, executors,
administrators, heirs, successors and assigns, but, except as otherwise
specifically provided in this Agreement, neither this Agreement nor any rights
or obligations hereunder may be assigned, directly, indirectly, voluntarily, or
involuntarily, except by operation or law, by any party to this Agreement.
7.2 Governing Law; Severability. This Agreement will be
governed by and construed in accordance with the laws of the State of Utah. If
any provision of this Agreement is found to be invalid, illegal or unenforceable
65
<PAGE>
in any respect, such provision will be enforced to the maximum extent possible
and the remaining provisions of this Agreement will continue unaffected.
7.3 Waivers. No waiver by any party hereto of any term or
condition of this Agreement will be effective unless set forth in a writing
signed by such a party. No waiver of any provision of this Agreement will be
deemed a waiver of any other provision, or constitute a continuing waiver unless
otherwise expressly provided in writing by the waiving party. No failure or
delay on the part of any party in exercising any right, power or privilege under
this Agreement will operate as a waiver thereof, nor will a single or partial
exercise thereof preclude any other or further exercise of any other rights,
powers or privileges.
7.4 Entire Agreement; Modifications. This Agreement, together
with the exhibits and schedules attached hereto, each of which is incorporated
herein by this reference, constitutes the entire agreement between the parties
hereto pertaining to the subject matter herein and supersedes in its entirety
all prior and contemporaneous agreements, understandings, negotiations and
discussions between the parties (including without limitation the Letter of
Intent dated February 4, 1998 and executed by CTI and NovaMed in connection with
this Agreement), whether oral or written, with respect to the subject matter of
this Agreement. No supplement, modification or amendment to this Agreement will
be binding unless executed in writing by CTI and NovaMed.
7.5 Notices. All notices and other communications required or
permitted under this Agreement will be in writing and may be hand delivered,
mailed by first-class mail, postage prepaid, or sent via facsimile. Unless
otherwise agreed to in writing by the parties, such notices and other
communications shall be addressed as follows:
66
<PAGE>
If to CTI:
G.W. Norman Warcham
1818-1177 West Hastings Street
Vancouver, British Colombia
Canada V6E2K3
Facsimile: (604) 683-2370
with a copy to:
Brent V. Manning
Manning Curtis Bradshaw & Bedner, LLC
370 East South Temple, Suite 200
Salt Lake City, Utah 84111
Facsimile: (801) 364-5678
If to NovaMed:
Ruairidh Campbell, President
NovaMed Medical Products, Inc.
623 Hoover Street N.E.
Minneapolis, Minnesota 55413
Facsimile: (612) 378-0110
with a copy to:
Thomas L. Steffens
Steffens & Rasmussen
300 Southdale Place
3400 West 66th Street
Edna, Minnesota 55435
Facsimile: (612) 920-2209
7.6 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed on original and all of which
together shall constitute one instrument.
7.7 Headings; References. Headings used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement
on the dates set forth below, to be effective for all purposes as of the date
first written above
CONCEPTUAL TECHNOLOGIES, INC. NOVAMED MEDICAL PRODUCTS, INC
a Nevada corporation, a Nevada corporation
By: ______/s/______________________ By: ________/s/___________________
David Luhmberg, President Ruairidh Campbell, President
Date ________________________, 1998 Date: _________________________, 1998
67
Exhibit 6(ii)
Letter Agreement
Strategic Alliance Between NovaMed Inc. and Inamed Corporation
1. Preamble. This document sets forth the principles governing the strategic
alliance between NovaMed Inc. ("NovaMed") and Inamed Corporation ("Inamed") with
respect to their mutual objectives of obtaining broader regulatory approval for,
and greater sales of, certain breast implant products which are currently
manufactured by NovaMed. Through this strategic alliance it is the parties'
intention to utilize NovaMed's product technology and its regulatory approvals
which are already in place in certain extensive sales and marketing network, to
enhance the sales and profitability of both parties. This document is meant to
provide a framework for the negotiation and execution of binding legal
agreements under which various aspects of the strategic alliance will be
implemented. In the absence of any such formal documentation, it is the parties'
intention to be governed by this statement of principles.
2. Products and Territories Covered. The products included within the strategic
alliance are NovaMed's NovaGold alternate fill breast implant and NovaMed's
pre-filled NovaSaline breast implant, including any improvements or
modifications to these products. Effective immediately, these NovaMed products
will be made available for exclusive marketing, distribution and sale by
Inamed's sales and marketing network on a worldwide basis, with the following
exceptions:
f. a. NovaMed has an existing sales network in Germany,
which will continue to be the exclusive seller of the
products. However, by December 31, 1999 the parties
will seek to discuss and, if possible, formalize a
mutually agreeable basis for transitioning this
NovaMed sales network into Inamed's sales subsidiary
in Germany.
g. b. NovaMed has distribution relationships with third
party sales representatives in certain territories
throughout the world. In order to avoid legal
liability, NovaMed can continue to supply those
representatives on a non-exclusive basis; it being
the parties' intention that NovaMed would terminate
all such third party arrangements by December 31,
2000. The names of such third party representatives
and their territories of operation will be furnished
to Inamed by April 30, 1999.
h. c. In certain countries where NovaMed currently does
business (e.g., Poland and Russia), as well as other
territories where Inamed does not wish to establish
or maintain a sales presence, NovaMed would continue
to sell its products. The parties will mutually agree
from time to time on the territories which fall under
this exception.
i. As used in this document, Inamed's sales and marketing network includes
both direct sales representatives who are employed by Inamed or its
subsidiaries and affiliates, as well as third party distributors with
whom Inamed (either directly or through its subsidiaries or affiliates)
has arranged for the exclusive sale of its products in certain
territories. A list with the names of such third party representatives
and their territories of operation will be furnished to NovaMed by
April 30, 1999; that list will be updated on an annual basis.
II 3. Term and Scope of the Strategic Alliance. The term of the strategic
alliance will be until the later of fifteen years from the date this
statement of principles is signed or the expiration of the last
significant patent for any of the NovaMed products. During the term of
the strategic alliance, so long as the minimum sales thresholds
required to maintain Inamed's exclusive sales and
68
<PAGE>
distribution rights are being met, neither party will discuss,
negotiate or enter into any agreement or understanding with any third
party for the manufacture, sale or distribution of either pre-filled
saline breast implant or an alternate fill breast implant (e.g., a
breast implant meant to contain a filler material that is not either
saline or silicone gel); except that either party can study and conduct
due diligence with respect to alternate fill material concepts pursuant
to existing arrangements, or proposals made by inventors of in the
ordinary course of business, or as an ancillary result of any potential
acquisition of a company for which the alternate fill breast implant
business is not a significant portion.
II 4. Pricing. The NovaMed products will be sold to the Inamed entities
(either directly or through its subsidiaries, affiliates or third party
distributors) on the following terms:
II a. With respect to the NovaGold product (except in the United States)
and pre-filled NovaSaline product, the price charged by NovaMed
will be on a cost plus basis which is designed to ensure that the
Inamed entities receive at least a 50% gross margin for their sales
to healthcare providers. Initially, the per unit (implant) price
will be $300 for NovaGold and $200 for pre-filled NovaSaline. The
parties will review these prices on an annual basis, beginning for
the year 2000, and make appropriate adjustments based on manufact-
uring costs, end-user pricing, the volume to be purchased, and the
competitive environment in the various major marketplaces.
II b. With respect to the NovaGold product in the nited States (which
for purposes of this document also includes Canada and Puerto
Rico), the parties will establish a joint venture entity so that
they can share on a 50/50 basis the profits and losses arising from
the sales of that product. The joint venture entity will contract
with its parents for manufacturing, administrative, regulatory
and sales and marketing services on a cost plus basis which will be
specified and negotiated by the parties prior to the receipt of FDA
approval of the PMA to sell the NovaGold product in the United
States. It is the present intention of the parties that the mark-up
above cost for such manufacturing, administrative, regulatory and
sales and marketing services would be 10%.
II Unless the parties agree otherwise with
respect to a specific product or territory,
all sales under the strategic alliance shall
be paid within 45 days of the invoice date.
The invoice date cannot be any earlier that
the shipment date.
II 5. Volume. The minimum volume of implant products which the Inamed
entities shall purchase under the strategic alliance in order to retain
exclusivity will be:
69
<PAGE>
a. With respect to NovaGold (except in the United States) and pre-filled
NovaSaline products, 12,000 units in year one, 18,000 units in year two,
and 24,000 units in year three. Thereafter, the minimum volume purchase
requirement will be based on a rolling annual average of the prior two
years' sales, but in no event less than 24,000 units per year.
b. With respect to NovaGold product in the United States, assuming that the
FDA approves PMAs for augmentation use of both silicone gel and NovaGold,
12,000 units in year one, 18,000 units in year two, and 24,000 units in
year three. Thereafter, the minimum purchase requirement will be based on a
rolling annual average of the prior two years' sales, but in no event less
than 24,000 units per year. In the event the FDA does not approve a PMA for
silicone gel for augmentation use, the minimum purchase requirements noted
above would be doubled starting in year two.
c. In the event of a failure to meet the minimum volume purchase threshold for
any given year, the Inamed entities shall have the right to make up such
deficiency by paying NovaMed $67.50 per implant needed to reach the minimum
volume level; except that in the event such deficiency payments represent
more that 25% of the target minimum volume (for years one or two), NovaMed
has the option of refusing to accept any deficiency payment and, instead,
terminating the exclusivity rights in the territory in question. From and
after year three, NovaMed's ability to terminate exclusivity rights in the
territory in question will arise if the deficiency payments represent more
than 20% of the target minimum volume for that year.
d. The failure to meet the minimum volume threshold under clause (a) or (b)
above will not affect the exclusivity rights of the Inamed entities under
the clause where the Inamed entities did meet the minimum volume threshold
(whether through actual purchases or through a deficiency payment under
clause (c)), or where the measuring period did not yet begin due to
regulatory issues.
e. For purposes of measuring the unit sales under this section, there will be
a four month ramp-up period from the later of the date of this document and
the receipt of all appropriate regulatory approvals which are necessary to
sell the product in all significant territories. Accordingly, the first
year of any annual measurement period will consist of sixteen months of
sales from the appropriate starting date.
6. Manufacturing. It is the intention of the parties that during the term of the
strategic alliance NovaMed will continue to manufacture the NovaGold and
pre-filled NovaSaline products. The parties will examine that decision from time
to time and mutually agree on the appropriate course of action, based on
NovaMed's manufacturing capacity, financial resources available to expand, and
any costing advantages which may be obtained by allowing the Inamed entities to
manufacture any of those products. In the event
70
<PAGE>
a change of manufacturer is made, the parties will mutually agree on new
financial terms which are consistent to the greatest extent feasible with the
objectives set forth in this document.
7. Joint Venture. No later than January 1, 2001 the parties will agree on the
form and governance of the joint venture entity which will mange the manufacture
and sale of NovaGold for the United States.
8. Regulatory. NovaMed will promptly take all appropriate steps to obtain 510(k)
clearance for the sale of pre-filled NovaSaline in the United States. NovaMed
and Inamed will fully cooperate in obtaining an IDE for NovaGold in the United
States, and following the signing of this document, Inamed will bear all of the
costs of obtaining such regulatory approval (including preparing the PMA and
conducting the clinical trials.) Based on estimates of the third party costs of
obtaining regulatory approval for NovaGold in the United States, the value of
Inamed's agreement to bear those costs is approximately $2 million.
9. Payments by Inamed. In addition to Inamed's payments to NovaMed for products,
and the assumption by Inamed of regulatory costs for NovaGold in the United
States, as outlined above, Inamed shall make the following payments to NovaMed
in consideration for the arrangements which constitute the strategic alliance
between them:
a. Within 10 days after the execution of this
document, Inamed shall pay $100,000 as
non-refundable "earnest money". In the event
Inamed elects to extend the due diligence
period referred to in Section 13 below,
Inamed would be obligated to pay an
additional $100,000 withing 10 days of
making that election, which would also be
non-refundable.
b. Once the FDA grants an IDE for NovaGold in
the United States, Inamed shall pay $2
million within 30 days after the clinical
trial is fully enrolled. Inamed shall
receive a credit against that first $2
million payment for all of the sums paid
under Section 9(a).
c. Within 30 days after the filing of the PMA
for NovaGold in the United States, Inamed
shall pay $2 million.
d. Within 30 days after the FDA approves the
PMA for NovaGold in the United States,
Inamed shall pay $2 million.
e. The parties shall consider the alternative
of Inamed making an equity investment for at
least 10% of NovaMed, under such terms as
the parties (and their respective investment
bankers) may agree. Such an investment may
take the place of the payments specified in
clauses (c) and (d) above.
71
<PAGE>
II 10. Inflatable NovaSaline Product. By May 30, 1999 Inamed will undertake
and complete a technical and marketplace evaluation of the inflatable
NovaSaline product, for which NovaMed has already filed a 510(k)
application with the FDA. By that date Inamed shall have a right of first
refusal to either (a) incorporate this product within the exclusive
distribution rights contemplated by Sections 4(a) and 5(a) of this document
(with minimum target volumes to be agreed upon), or (b) pay NovaMed
$275,000 to shelve the product. In the event Inamed does not exercise
either such right, NovaMed would be entitled to sell and distribute the
inflatable NovaSaline product as it chooses, including in competition with
Inamed's existing inflatable saline breast implant products.
II 11. Liability Insurance. NovaMed and the joint venture, as appropriate,
will carry at least $10 million of product liability insurance for the
NovaMed products which are included within the strategic alliance. Inamed
and NovaMed will be named as an insured party under any such insurance
policies and make such appropriate adjustments as they may mutually agree
upon.
II 12. Labeling on Packages; Intellectual Property. At Inamed's option, the
labeling on the packaging for the products which are included within the
strategic alliance shall include one or more brand names of the Inamed
entities, and will also include NovaMed's name. NovaMed will grant the
appropriate licenses to the Inamed entities to use its intellectual
property in order to carry out the objectives of this document, and will
indemnify Inamed against any third party claims due to manufacturing
defects.
II 13. Due Diligence and Cooperation. The parties agree to use their
respective best efforts to cooperate in implementing the terms of this
document, so that the strategic alliance can fully achieve its objectives.
Toward that end, promptly following the execution of this document, NovaMed
will afford the Inamed entities complete and full due diligence so that it
can become familiar with the current status of the scientific, technical
and regulatory aspects of the products which are included within the
strategic alliance; such initial due diligence period will be completed by
May 15, 1999 and the definitive documentation needed to formalize the first
aspects of the strategic alliance will be completed by June 30, 1999.
However, Inamed can elect to extend the initial due diligence period to
June 30, 1999 (and the deadline for formalizing the definitive
documentation to July 31, 1999), at its sole option, by making the second
payment described in Section 9(a). The confidentiality agreement between
the parties will govern all such discussions and exchanges of information.
II Agreed and accepted as of
II March 25, 1999
II Nova Med, Inc. Inamed Corporation
II ______________________ ________________________
II Ruairidh Campbell Ilan Reich
II President President
72
Exhibit 6(iii) SECOND AMENDMENT TO LEASE
This Second Amendment to Lease, made as of this 8th day of October, 1998, by and
between Michelle Realty Company, a co-partnership as "Lessor", and
Bio-Manufacturing, Inc., a Minnesota corporation and now by Novum Plasty
Manufacturing Corporation a Minnesota corporation by Assignment and Assumption
of Lease dated November 7,1994, as "Lessee".
WITNESSETH:
WHEREAS, Lessor and Lessee have heretofore entered into that certain Lease
Agreement dated September 5, 1990, and as amended September 12, 1995, for
certain premises located at 623 Hoover St, NE, Minneapolis, MN.
WHEREAS, Lessor and lessee mutually desire to amend the aforementioned Lease in
certain particulars.
NOW, therefore, in consideration of One and 00/100 Dollar ($1.00) and other good
and valuable consideration, receipt and sufficiency of which is hereby
acknowledged, Lessor and Lessee mutually agree to the following modifications to
Lease.
I . TERM:
The term of the lease will be extended for one (1) period of five (5) years
commencing on February 1, 1999, and expiring on January 31, 2004.
2. BASE RENT:
Tenant shall pay to Landlord monthly base rent in accordance with the following
schedule:
February 1, 1999 - January 31, 2001 - $4,791.67
February 1. 2001 - January 31, 2004 - $5,208.33
All other terms and conditions of the original Lease, except as amended herein,
are to remain in full force and effect.
IN WITNESS WHEREOF, Lessor and Lessee have caused this FIRST AMENDMENT TO LEASE
to be signed and sealed as of the day and year first above written.
LESSEE: LESSOR:
Novum Plasty Manufacturing Corporation, a Michelle Realty Company,
Minnesota corporation a co-partnership
By /S/ By /S/
its President its Partner
73
Exhibit 6(iv)
NOVAMED,INC
1999 STOCK OPTION PLAN
(Effective March 19 1999)
74
<PAGE>
TABLE OF CONTENTS
1. INTRODUCTION.....................................................1
1.1 Purpose of the Plan.............................................1
1.2 Definitions.....................................................1
2. THE STOCK OPTION PLAN............................................3
2.1 Stock Subject to the Plan.......................................3
2.2 Administration of the Plan......................................4
2.3 Eligibility and Limits..........................................4
3. TERMS OF OPTIONS.................................................4
3.1 General Terms and Conditions....................................4
3.2 Option Price....................................................5
3.3 Option Term.....................................................5
3.4 Exercise of Option..............................................5
3.5 Payment.........................................................6
3.6 Termination and Conservation of ISOs............................6
3.7 Special Provisions for Certain Substitute Options...............6
4. RESTRICTIONS ON STOCK............................................7
4.1 Escrow of Shares................................................7
4.2 Restrictions on Transfer........................................7
4.3 Restrictions on Delivery and Sale of Shares; Legends............8
5. GENERAL PROVISIONS...............................................8
5.1 Withholding.....................................................8
- -----------
5.2 Changes in Capitalization, Merger; Liquidation..................8
- -----------------------------------
5.3 Cash Awards.....................................................9
5.4 Legal Compliance................................................9
5.5 Right to Terminate Employment...................................9
5.6 Non-Alienation of Benefits......................................10
5.7 Termination and Amendment of the Plan...........................10
5.9 Choice of Law...................................................10
5.10 Stock Approval.................................................10
5.11 Effective Date of Plan.........................................10
75
<PAGE>
NOVAMED,INC
1999 STOCK OPTION PLAN
1. INTRODUCTION
1.1 Purpose of the Plan. The Plan is intended to (a) provide
incentive to officers and key employees of the Company and its Affiliates to
stimulate their efforts toward the continued success of the Company and to
operate and manage the business in a manner that will provide for the long-term
growth and profitability of the Company; (b) encourage stock ownership by
officers and key employees by providing them with a means to acquire a
proprietary interest in the Company; and (c) provide a means of obtaining,
rewarding and retaining key personnel and consultants.
1.2 Definitions. Whenever used herein, the masculine pronoun
will be deemed to include the feminine, and the singular to include the plural,
unless the context clearly indicates otherwise, and the following capitalized
words and phrases will have the following meaning:
(a) "Affiliate" means:
(i) an entity that directly or through one or
more intermediaries is controlled by the
Company, and
(ii) any entity in which the Company has
a significant equity interest, as
determined by the Company.
(b) "Board of Directors" means the board of directors
of the Company.
(c) "Code" means the Internal Revenue Code of 1986,
as amended.
(d) "Committee" means the committee appointed by
the Board of Directors to administer1 the Plan, or the Board of Directors if it
does not appoint a committee to administer the Plan. The Board of Directors
shall consider the advisability of whether the members of the Committee shall
consist solely of at least two members of the Board of Directors who are both
"outside directors" as defined in Treas. Reg. ss. 1.162-27(e) as promulgated by
the Internal Revenue Service and "non-employee directors" as defined in Rule
16b-3(b)(3) as promulgated under the Exchange Act.
(e) "Company" means NOVAMED, INC., a Nevada
corporation.
(f) "Disability" has the same meaning as provided
in the long-term disability plan or policy maintained or, if applicable, most
recently maintained, by the Company or, if applicable, any Affiliate of the
Company for the Participant. If no long-term disability plan or policy was ever
maintained on behalf of the Participant or, if the determination of Disability
relates to an Incentive Stock Option, Disability means that condition described
in Code Section22(e)(3). In the event of a dispute, the determination of
Disability will be made by the ommittee and will be supported by advice of a
76
<PAGE>
physician competent in the area to which such Disability relates.
(g) "Exchange Act" means the Securities Exchange Act
of 1934, as amended from time to time..
(h) "Fair Market Value" with regard to a date means:
(i) the average of the high and low prices
at which Stock was sold on that date or the
last trading date prior to that date as
reported by the NASDAQ Stock Market (or, if
applicable, as reported by a national
securities exchange selected by the
Committee on which the shares of Stock are
then actively traded) and published in The
Wall Street Journal,
(ii) if Stock is not traded on a securities
exchange, but is reported by the NASDAQ
Stock Market and market information is
published on a regular basis in The Wall
Street Journal, the average of the published
high and low sales prices for that date of
the last business day prior to that date as
published in The Wall Street Journal,
(iii) if such market information in not
published on a regular basis, the average of
the high bid and low asked prices of Stock
in the over-the-counter market on that date
of the last business day prior to that date,
as reported by the NASDAQ Stock Market, or,
if not so reported, by a generally accepted
reporting service, or
(iv) if Stock is not publicly traded, as
determined in good faith by the Committee
with due consideration being given to the
most recent independent appraisal of the
Company, if such appraisal is not more than
12 months old and the valuation methodology
used in any such appraisal. For purposes of
granting awards other than Incentive Stock
Options, Fair Market Value of the shares of
Stock may be determined by the Committee by
reference to the average market value
determined over a period certain or as of
specified dates, to a tender offer price of
the shares of Stock (if settlement of an
award is triggered by such an event) or to
any other reasonable measure of fair market
value.
(i) "ISO" means an option to purchase Stock in
the Company that qualifies as an "incentive stock option" under Code Section
422(b).
(j) "Non Qualifying Option" means an option to
purchase Stock in the Company that does not qualify as an ISO.
(k) "Option" means a Non-qualified Stock Option
or an ISO.
77
<PAGE>
(1) "Over 10% Owner" means an individual who at
the time an ISO is granted owns Stock possessing more than IO% of the total
combined voting power of the Company or one of its Subsidiaries, determined by
applying the attribution rules of Code Section 424(d).
(m) "Participant" means an Individual who receives
an Option hereunder.
(n) "Plan" means the NovaMed, Inc., 1999 Stock Option
Plan.
(o) "Stock" means the Company's common stock.
(p) "Stock Option Agreement" means an agreement
between the Company and a Participant or other documentation evidencing an
award of an Option.
(q) "Stock Option Program" means a written program
established by the Committee, pursuant to which Options are awarded under the
Plan under uniform terms, conditions and restrictions set forth in such written
program.
(r) "Subsidiary" means any corporation (other than
the Company) in an unbroken chain of corporations beginning with the Company
if, with respect to ISOS, at the time of the granting of the Option, each of
the corporations other than the last corporation in the unbroken chain owns
stock processing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in the chain.
(s) "Termination Of Employment" means the term-
ination of the employee- employer relationship between a Participant and the
Company and its Affiliates, regardless of whether severance or similar payments
are made to the Participant for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, disability or
retirement. The Committee will, in its absolute discretion, determine the effect
of all matters and questions relating to a Termination of Employment, including,
but not by way of limitation, the question of whether a leave of absence
constitutes a Termination of Employment.
2. THE STOCK OPTION PLAN
2.1 Stock Subject to the Plan. Subject to adjustment in
accordance with Section 5.2, 500,000 shares of Stock (the "Maximum Plan Shares")
are hereby reserved exclusively for issuance pursuant to Options. At no time may
the Company have outstanding under the Plan, Options subject to Section 16 of
the Exchange Act and shares of Stock issued in respect of Options under the Plan
in excess of the Maximum Plan Shares. The shares of Stock attributable to the
nonvested, unpaid, unexercised, unconverted or otherwise unsettled portion of
any Option that is forfeited or canceled or expires or terminates for any reason
without becoming vested, paid, exercised, converted or otherwise settled in full
will again be available for purposes of the Plan.
2.2 Administration of the Plan. The Plan is administered by
the Committee the Company or its Affiliates to whom Options will be granted and
the terms and provisions of Options, subject to the Plan. Subject to the
provisions of the Plan, the Committee has full and conclusive
78
<PAGE>
authority to interpret the Plan; to prescribe, amend and rescind rules and
regulations relating to the Plan; to determine the terms and provisions of the
respective Stock Option Agreements and to make all other determinations
necessary or advisable for the proper administration of the Plan. The
Committee's determinations under the Plan need not be uniform and may be made by
it selectively among persons who receive, or are eligible to receive, awards
under the Plan (whether or not such persons are similarly situated). The
Committee's decisions are final and binding on all Participants.
2.3 Eligibility and Limits. Options may be granted only to
officers, directors and key employees and consultants of the Company, or any
Affiliate of the Company; provided, however, that an ISO may only be granted to
an employee of the Company or any Subsidiary. In the case of ISOS, the aggregate
Fair Market Value (determined as at the date an ISO is granted) of stock with
respect to which Options intended to meet the requirements of Code Section 422
become exercisable for the first time by an individual during any calendar year
under all plans of the Company and its Subsidiaries may not exceed $ 1 00,000;
provided further, that if the limitation is exceeded, the ISO(S) which cause the
limitation to be exceeded will be treated as Non-Qualified Option(s).
3. TERMS OF OPTIONS
3.1 General Terms and Conditions.
(a) Number. The number of shares of Stock as to
which an Option may be granted will be determined by the Committee in its sole
discretion, subject to the provisions of Section 2.2 as to the total number of
shares available for grants under the Plan.
(b) Stock Option Agreement. Each Optio will
either be evidenced by a Stock Option Agreement in such form and containing such
terms, conditions and restrictions as the committee may determine to be
appropriate, or be made subject to the terms of a Stock Option Program,
containing such terms, conditions and restrictions as the Committee may
determine to be appropriate. Each Stock Option Agreement or Stock Option Program
is subject to the terms of the Plan and any provisions contained in the Stock
Option Agreement or Stock Option Program that are inconsistent with the Plan are
null and void.
(c) Date Granted. The date an Option is granted
will be the date on which the Committee has approved the terms and conditions of
the Option and has determined the recipient of the Option and the number of
shares covered by the Option, and has taken all such other actions necessary to
complete the grant of the Option.
(d) Previous Option,. Any Option may be granted
in connection with all or any portion of a previously or contemporaneously
granted Option. Exercise or vesting of an Option granted in connection with
another Option may result in a pro rata surrender or cancellation of any related
Option, as specified in the applicable Option Agreement or Option Program.
3.2 Option Price
(a) Non-Qualified Options. The exercise price
per share specified in the agreement relating to each Non-Qualified Option
granted under the Plan shall in no event be less than the lesser or (1) the book
79
<PAGE>
value per share of Common Stock at the end of the fiscal year of the Company
immediately preceding the date of such grant; or (2) 50% of the Fair Market
Value per share of Common Stock on the date of such grant.
(b) ISOS. The exercise price per share specified
in the agreement relating to each ISO granted under the plan shall not be less
than the Fair Market Value per share of Common Stock on the date of such grant.
In the case of an ISO to be granted to an Over 10% Owner, the price per share
specified in the agreement relating to such incentive stock option shall not be
less than I 00% of the fair market value per share of Stock on the date of such
grant.
3.3 Option Term. Subject to earlier termination due to a
Participant's Termination of Employment, death or Disability, each Option shall
expire on the date specified by the Committee, but not more than (a) ten (IO)
years and one day from the date of grant in the case of Non-Qualified Options
(b) ten IO years from the date in the case of ISOs generally, and (c) five (5)
years from the date of grant in the case of ISOs granted to an over 1 0% Owner.
Subject to earlier termination as set forth above, the term of each ISO shall be
the ten-n set forth in the original instrument granting such ISO, except with
respect to any part of such ISO that is converted into a Non-Qualified Option
under this Plan.
3.4 Exercise of Option. Subject to an Option's earlier
termination under the Plan, each Option granted under the Plan shall be
exercisable as follows:
(a) Vesting. The Option shall be either fully
exercisable on the date of grant or shall become exercisable thereafter in such
installments as the Committee may specify. Once an installment becomes
exercisable, it shall remain exercisable until expiration or termination of the
Option, unless otherwise specified by the Committee.
(b) Partial Exercise. Each Option or installment
may be exercised at any time or from time to time, in whole or in part, for up
to the total number of shares with respect to which it is then exercisable.
(c) Acceleration of Vesting. The Committee shall
have the right to accelerate the date of exercise of any installment of any
Option, provided that the Committee shall not, without the consent of an
optionee, accelerate the exercise date of any installment of any Option granted
to any employee as an ISO (and not previously converted into a NonQualified
Option) if such acceleration would violate the annual vesting limitation
contained in Code Section 422(d) as described in Section 2.3.
3.5 Payment. Payment must be made at the time that the Option
or any part thereof is exercised, and no shares may be issued or delivered upon
exercise of an Option until full payment has been made by the Participant. The
holder of an Option, as such, has none of the rights of a stockholder.
3.6 Termination and Conversion of ISOS
(a) termination. With respect to an ISO, in the event of Termination of
Employment of a Participant, the Option or portion thereof held by the
Participant which is unexercised
80
<PAGE>
will expire, terminate, and become unexercisable no later than the expiration of
three (3) months after the date of termination of employment; provided, however,
that in the case of a holder whose termination of employment is due to death or
Disability, one (1) year will be substituted for such three (3) month period;
provided, further that such time limits may be exceeded by the Committee under
the terms of the grant, in which case, the ISO will be a NonQualified Option if
it is exercised after the time limits that would otherwise apply.
(b) Conversion. The Committee, on written request
of any Participant, may in its discretion take such actions as may be necessary
to convert such Participant's ISOs (or any installments or portions of
installments thereof) that have not been exercised on the date of conversion to
Non-Qualified Options at any time prior to the expiration of such ISOS. Such
actions may include, without limitation, extending the exercise period or
reducing the exercise price of the appropriate installments of such Options. At
the time of such conversion, the Committees (with the Participant's consent) may
impose such conditions on the exercise of the resulting Non-Qualified Options as
the Committee in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan. Nothing in this Plan gives any
Participant the right to have his ISOs converted into NonQualified Options, and
no such conversion may occur unless and until the Committee takes appropriate
action.
3.7 Special Provisions for Certain Substitute Options.
Notwithstanding anything to the contrary in this Section 3, any Option issued in
substitution for an option previously issued by another entity, which
substitution occurs in connection with a transaction to which Code Section
424(a) is applicable, may provide for an exercise price computing in accordance
with such Code Section and the regulations thereunder and may contain such other
terms and conditions as the Committee may prescribe to cause such substitute
Option to contain as nearly as possible the same terms and conditions (including
the applicable vesting and termination provisions) as those contained in the
previously issued option being replaced thereby.
3.8 Notice to Company of Disqualifying Disposition . Each
employee who receives an ISO must agree to notify the Company in writing
immediately after the employee makes a Disqualifying Disposition of any Stock
acquired pursuant to the exercise of an ISO. A "Disqualifying Disposition" is
any disposition (including any sale) of such Stock before the later of (a) two
(2) years after the date the employee was granted the ISO, or (b) one (1) year
after the date the employee acquired Stock by exercising an ISO. If the employee
has died before such Stock is sole, these holding period requirements do not
apply, and no Disqualifying Disposition can occur thereafter.
4. RESTRICTIONS ON STOCK
4.1 Escrow in Shares. Any certificates representing the shares
of Stock issued under the Plan will be issued in Participant's name, but, if the
applicable Stock Option Agreement or Stock Option Program so provides, the
shares of Stock will be held by a custodian designated by the Committee (the
"Custodian"). Each applicable Stock Option Agreement or Stock Option Program
providing for transfer of shares of Stock to the Custodian must appoint the
Custodian as the attorney-in-fact for the Participant for the term specified in
the applicable Stock Option Agreement or Stock Option Program, with full power
and authority in the Participant's name, place and stead to transfer, assign and
81
<PAGE>
convey to the Company any shares of Stock held by the Custodian for such
Participant, if the Participant forfeits the shares under the terms of the
applicable Stock Option Agreement or Stock Option Program. During the period
that the Custodian holds the shares subject to this Section, the Participant is
entitled to all rights, except as provided in the applicable Stock Option
Agreement or Stock Option Program, applicable to shares of Stock not so held.
Any dividends declared on shares of Stock held by the Custodian must provide in
the applicable Stock Option Agreement or Stock Option Program, be paid directly
to the Participant or, in the alternative, be retained by the Custodian or by
the Company until the expiration of the term specified in the applicable Stock
Option Agreement or Stock Option Program and shall then be delivered, together
with any proceeds, with the shares of Stock to the Participant or to the
Company, as applicable.
4.2 Restrictions on Transfer. The Participant does not have
the right to make or permit to exist any disposition of the shares of Stock
issued pursuant to the Plan except as provided in the Plan or the applicable
Stock Option Agreement or Stock Option Program. Any disposition of the shares of
Stock issued under the Plan by the Participant not made in accordance with the
Plan or the applicable Stock Option Agreement or Stock Option Program will be
void. The Company will not recognize, or have the duty to recognize, any
disposition not made in accordance with the Plan and the applicable Stock Option
Agreement or Stock Option Program, and the shares so transferred will continue
to be bound by the Plan and the applicable Stock Option Agreement or Stock
Option Program.
4.3 Restrictions on Delivery and Sale of Shares: Legends. Each
Option is subject to the conditions that if at any time the Committee, in it,
discretion, shall determine that the listing, registration or qualification of
the shares covered by such Option upon any securities exchange or under any
state or federal law is necessary or desirable as a condition of or in
connection with the granting of such Option or the purchase or delivery of
shares thereunder, the delivery of any or all shares pursuant to such Option may
be withheld unless and until such listing, registration or qualification shall
have been effected. If a registration statement is not in effect under the
Securities Act of 1933 or any applicable state securities laws with respect to
the shares of Stock purchasable or otherwise deliverable under Options then
outstanding, the Committee may require, as a condition of exercise of any
Option, that the Participant represent in writing, that the shares received
pursuant to the Option are being acquired for investment and not with a view to
distribution and agree that the shares will not be disposed of except pursuant
to an effective registration statement, unless the Company shall have received
an opinion of counsel that such disposition is exempt from such requirement
under the Securities Act of 1933 and any applicable state securities laws. The
Company may include on certificates representing shares delivered pursuant to an
Option such legends referring to the foregoing representations or restrictions
or any other applicable restrictions on resale as the Company, in its
discretion, shall deem appropriate.
5. GENERAL PROVISIONS
5.1 The Company must deduct from all cash distributions under
the Plan any taxes required to be withheld by federal, state or local
government. Whenever the Company proposes or is required to issue or transfer
shares of Stock under the Plan, the Company has the right to require the
recipient to remit to the Company an amount sufficient to satisfy any federal,
state and local withholding
82
<PAGE>
tax requirements prior to the delivery of any certificate or certificates for
such shares. A Participant may pay the withholding tax in cash, or, if the
applicable Stock Option Agreement or Stock Option Program provides, a
Participant may elect to have the number of shares of Stock he is to receive
reduced by the smallest number of whole shares of Stock which, when multiplied
by the Fair Market Value of the shares of Stock determined as of the Tax Date
(defined below), is sufficient to satisfy federal, state and local, if any,
withholding taxes arising from exercise of an Option (a "Withholding Election").
A Participant may make a Withholding Election only if both of the following
conditions are met: (a) the Withholding Election must be made on or prior to the
date on which the amount of tax required to be withheld is determined (the "Tax
Date") by executing and delivering to the Company a properly completed notice of
Withholding Election as prescribed by the Committee; and (b) any Withholding
Election made will be irrevocable except on six months advance written notice
delivered to the Company; however, the Committee may in its sole discretion
disapprove and give no effect to the Withholding Election.
5.2 Changes in Capitalization: Merger; Liquidation.
(a) Capitalization. The number of shares of Stock
reserved for the grant of Options; the number of shares of Stock reserved for
issuance upon the exercise of each outstanding Option; the Exercise Price of
each outstanding Option must be proportionately adjusted for any increase or
decrease in the number of issued shares of stock resulting from a subdivision or
combination of shares or the payment of a stock dividend in shares of Stock to
holders of outstanding shares of Stock or any other increase or decrease in the
number of shares of Stock outstanding effected without receipt of consideration
by the Company.
(b) Merger. In the event of a merger, consolidation
or other reorganization of the Company or tender offer for shares of Stock, the
Committee may make such adjustments with respect to awards and take such other
action as it deems necessary or appropriate to reflect such merger,
consolidation, reorganization or tender offer, including, without limitation,
the substitution of new awards, or the adjustment of outstanding awards, the
acceleration of awards, the removal of restrictions on outstanding awards, or
the termination of outstanding awards in exchange for the cash value determined
in good faith by the Committee of the vested portion of the award. Any
adjustment pursuant to this Section 5.2 may provide, in the Committee's
discretion, for the elimination without payment therefor of any fractional
shares that might otherwise become subject to any Option, but except as set
forth in this Section 5.2 may not otherwise diminish the then value of the Stock
Incentive.
(c) Reorganization, Liquidation. The existence
of the Plan and the Options granted pursuant to the Plan must not affect in any
way the right or power of the Company to make or authorize any adjustment,
reclassification, reorganization or other change in its capital or business
structure, any merger or consolidation of the Company, any issue of debt or
equity securities having preferences or priorities as to the Stock or the rights
thereof, the dissolution or liquidation of the Company, any sale or transfer of
all or any part of its business or assets, or any other corporate act or
proceeding.
5.3 Cash Awards. The Committee may, at any time and in its
discretion, grant to any holder of an Option the right to receive, at such times
and in such amounts as determined by the Committee in its discretion, a cash
amount which is intended to reimburse such person for all or a
83
<PAGE>
portion of the federal, state and local income taxes imposed upon such person as
a consequence of the receipt of the Option or the exercise of rights thereunder.
5.4 Legal Compliance. All ISOs to be granted hereunder are
intended to comply with Code Section 422, and all provisions of the Plan and all
ISOs granted hereunder must be construed in such manner as to effectuate that
intent. The Company's obligation to sell and deliver shares of Stock under this
Plan is subject to the approval of any governmental authority required in
connection with the authorization, issuance or sale of such shares. The
Committee may suspend the exercise Option so long as it determines that
securities exchange listing or registration or qualification under any
securities laws is required in connection therewith and has not been completed
on ten-ns acceptable to the Committee.
5.5 Right to Terminate. Nothing in the Plan or in any Option
confers upon any Participant the right to continue as an employee or officer of
the Company or any of its Affiliates or affect the right of the Company or any
of its Affiliates to terminate the Participant's employment at any time.
5.6 Non-Alienation of Benefits. Other than as specifically
provided with regard to the death of a Participant, no benefit under the Plan
may be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge; and any attempt to do so shall be
void. No such benefit may, prior to receipt by the Participant, be in any manner
liable for or subject to the debts, contracts, liabilities, engagements or torts
of the Participant.
5.7 Termination and Amendment of the Plan. The Board of
Directors at any time may amend or terminate the Plan without stockholder
approval; provided, however, that the Board of Directors may condition any
amendment on the approval of stockholders of the Company if such approval is
necessary to advisable with respect to tax, securities or other applicable laws.
No such termination or amendment without the consent of the holder of an Option
may adversely affect the rights of the Participant under such Option.
5.8 Application of Funds. The proceeds received by the Company
from the sale of shares pursuant to Options granted shall be used for general
corporate purposes.
5.9 Choice of Law. The laws of the State of Nevada govern the
Plan, to the extent not preempted by federal law, without reference to the
principles of conflict of laws.
5.10 Stock Approval. The Plan was submitted to the
stockholders of the Company for their approval on April 9, 1998, which was
within twelve (I 2) months before the adoption of the Plan by the Board of
Directors of the Company.
5.11 Effective Date of Plan. The Plan shall become effective 1999.
NOVAMED, INC., a Nevada corporation
By:_______________________________
Ruairidh Campbell, President
84
Exhibit 6(v) STOCK OPTION AGREEMENT
AGREEMENT made this 19th day of March, 1999, by and between NovaMed, Inc., a
Nevada corporation ("NovaMed"), and Ruairidh Campbell, whose address is 600
Westwood Terrace, Austin, TX 78746 ("Option Holder").
WITNESSETH:
WHEREAS, NovaMed has adopted a Stock Option Plan (the "Plan") whereunder NovaMed
intends to grant to Option Holder an option to purchase shares of NovaMed's
common stock ("Stock"); and WHEREAS, Option Holder is a key employee of NovaMed
and NovaMed desires him/her to remain in such capacity by providing him/her with
an added incentive to work effectively for and in NovaMed's interest and with
the means to acquire or to increase his/her proprietary interest in NovaMed and
to share in its Success. NOW, THEREFORE, in consideration of the mutual
covenants and conditions hereinafter set forth, NovaMed and Option Holder agree
as follows:
1. Grant of Option. Subject to the terms and conditions of the
Plan, a copy of which is attached hereto as Exhibit "A" and by reference made a
part hereof, NovaMed hereby irrevocably grants to Option Holder, as a matter of
separate agreement and not in lieu of salary or any other compensation or
services, the right and option (the "Option") to purchase all or any part of an
aggregate number of Fifty Five Thousand (55,000) shares of authorized but
unissued common stock of NovaMed ("Optioned Shares") on the terms and conditions
hereof.
2. Price. The purchase price of the Optioned Shares shall be
the sum of One US Dollar and Thirty Cents (US$1.30) per share. The parties
acknowledge that the price is not less than One Hundred Percent (100'lo) of the
fair market value, as determined by the Board of Directors of NovaMed, of a
share of stock of NovaMed on the date of the grant of the Option.
3. Date of Exercise. Subject to the provisions of paragraph 7,
the Option may be exercised at any time from and after either of the following
times, whichever shall be the earlier:
a. Option Holder may exercise the Option at any time
and from time to time before two (2) years from the date of grant of the Option.
85
<PAGE>
b. The agreement of NovaMed to sell all or substany-
ially all of its assets or business.
4. Method of Exercise. The Option shall be exercised by written
notice, delivered or mailed by post paid or certified mad, addressed to NovaMed
at it principal offices, specifying the number of Optioned Shares being
purchased. Such notice shall be accompanied by payment, in cash or its
equivalent, of the full price of the Optioned Shares being purchased. In the
event the Option is being exercised pursuant to paragraph 6 below by any person
or persons other than Option Holder, the notice shall be accompanied by
appropriate proof of the right of such person to exercise the Option.
5. Issuance of Shares. The certificate or certificates
representing the shares purchased hereunder shall be issued and delivered by
NovaMed as soon as practical after receipt of the notice of exercise and
required payment. Such certificate or certificates shall be registered in the
name of the person exercising the Option and shall be delivered to or on the
written order of such person.
6. Transfer of Option. The Option shall not be transferable by
Option Holder except by his/her Last Will or the laws of the Holder's domicile
at the time of his/her death relating to intestacy. During his/her lifetime,
Option Holder is the only person who may exercise the Option. More specifically,
without limiting the generality of the foregoing, the Option may not be
assigned, transferred (except as permitted herein) pledged or hypothecated in
any way, whether by operation of law or otherwise, and shall not be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of the Option contrary to the
provisions hereof, and the levy of any attachment or similar process on the
Option shall be null and void and without effect.
7. Termination of Option.
(a) Termination of Employment. The right to
exercise the option shall end: (1) In the
event of voluntary termination by Option
Holder, on the date of notice of such
termination. (2) In the event of involuntary
termination by NovaMed, with cause, on the
date of notice of such termination.
86
<PAGE>
(3) In the event of involuntary termination
by NovaMed, without cause, thirty (30) days
from the date of notice of such termination.
(b) Death. If the Option Holder shall die within the
above mentioned thirty (30) day period, or if he
shall die while in the employ of NovaMed, the Option
will terminate unless the person or persons to whom
the Option shall have been transferred by his/her
Last Will or the laws of intestacy shall have, within
six (6) months from the date of Option Holder's
death, exercised the Option. (c) Proof of Succession.
No transfer of the Option by Option Holder by his/her
just Will or under the laws of intestacy shall be
effective to bind NovaMed unless NovaMed shall have
been furnished with written notice thereof and a copy
of Option Holder's Last Will and /or such other
evidence as the Board of Directors of NovaMed may
deem necessary to establish the validity of the
transfer and the acceptance by the transferee or
transferees of the terms and conditions of the
Option. (d) Notwithstanding any provision of this
Agreement to the contrary, the right to exercise the
Option will terminate on March 19, 2001.
8. Effect of Merger or Consolidation.
(a) Substitution of Shares. After any merger of one
or more corporations into NovaMed, or after any
consolidation of NovaMed and one or more corporation
in which NovaMed shall be the surviving corporation,
Option Holder shall, at not additional cost, be
entitled, upon the exercise of the Option, to
receive, subject to any required action by the
shareholders of NovaMed and in lieu of the number of
shares as to which the Option shall then be so
exercised, the number and class of shares of stock or
securities to which Option Holder would have been
entitled pursuant to the terms of the Agreement of
Merger or Consolidation if at the time of such merger
or consolidation Option Holder had been a holder of
record of
87
<PAGE>
a number of shares of common stock of NovaMed equal
to the number of shares as to which the Option shall
then be so exercised. (b) Future Merger or
Consolidation. Comparable rights shall accrue to
Option Holder in the event of any successive merger
or consolidation of the character above. (c)
Dissolution of NovaMed. Notwithstanding anything
herein to the contrary, upon the dissolution or
liquidation of NovaMed, or upon any merger or
consolidation in which NovaMed is not the surviving
corporation, the Option shall terminate, but Option
Holder shall have the right, immediately prior to
dissolution, liquidation, merger or consolidation to
exercise the Option in full.
9. Shareholder Status. Option Holder, or any transferee of the
Option, shall have no right as a shareholder with respect to any Optioned Share
until he shall have become a shareholder of record of such share. No adjustment
shall be made for dividends or cash distributions, ordinary or extraordinary,
whether in cash, securities or other property, or distributions or other rights
in respect of such share for which the record date is prior to the date on which
Option Holder shall become the holder of record thereof.
10. Reservation of Right to Terminate Employment.
Nothing contained in this Agreement shall restrict the right of NovaMed to
terminate the employment of Option Holder at any time, with or without cause.
ii. Purchase for Investment Only. Option Holder
represents to NovaMed that it is his/her intention to
exercise the Option, and to acquire any stock covered
thereby, for investment and not with a view to the
distribution or resale thereof, and any person who
shall exercise the Option shall be required to so
represent in writing at the time of exercise. Option
Holder further acknowledges that he will not sell or
otherwise dispose of shares covered by the Option
except pursuant to an effective registration
statement under the Securities Act of 1933, as
amended, or except in a transaction which, in the
opinion of counsel for NovaMed, is exempt from
registration under that Act.
88
<PAGE>
12. Registration of Shares. If, at any time, the Board of
Directors of NovaMed shall determine, in its discretion, that the registration
or qualification of any shares covered by the Option is necessary or desirable
under any state or federal law, as a condition of or in connection with the
delivery of such shares on the exercise of the Option, the delivery of such
shares shall be deferred until such registration or qualification shall have
been effected. In the event the Board of Directors of NovaMed determines that
registration or qualification of shares covered by the Option is necessary or
desirable, NovaMed shall, at its expense, take such action as may be required to
effect such registration or qualification.
13. Restriction on Transfer.
(a) Death or Termination of Employment.
(1) Option of NovaMed to Repurchase.
Option Holder hereby grants to NovaMed an
irrevocable right to repurchase, at any time
within one hundred eighty (180) days from
and after his/her death or any termination
of employment, any or all of the shares
acquired hereunder. NovaMed shall exercise
this option by delivering written notice
thereof to the record owner of such shares
together with payment in the sum provided
below. Concurrently with the exercise by
NovaMed of this option, the record owner of
such shares shall deliver to NovaMed all
certificates representing the said shares.
which certificates shall be properly
endorsed in blank. (2) Option to Sell to
NovaMed. Following the full and complete
exercise of the Option and the purchase of
all Optioned Shares described herein,
NovaMed grants to Option Holder an
irrevocable right to sell, at any time
within One Hundred Eighty (180) days from
and after Option Holder's death or any
termination of employment, all of Option
Holder's right, title and interest in and to
the Optioned Shares so purchased. This
option may be exercised only with respect to
all of the shares of NovaMed owned by Option
Holder and cannot be exercised with respect
to any
89
<PAGE>
smaller portion thereof, an is not
assignable to any other person other than
Option Holder's legal representatives in the
event of his/her death. (3) Purchase Price.
The purchase price to be paid by NovaMed in
the event of a sale to or purchase by
NovaMed under either of the foregoing shall
be an amount mutually determined by NovaMed
and Option Holder or his/her legal
representatives. If the parties cannot
mutually agree on an acceptable price, a
qualified appraiser shall be selected by the
parties and the determination of the
appraiser shall be final and binding. If the
parties cannot agree on the identity of an
acceptable appraiser, either of the parties
may petition a court of appropriate
jurisdiction for an order which shall
determine the manner in which the price
shall be ascertained. All costs of any
appraisal and all costs of any legal action,
including any reasonable attorney's fees
incurred by NovaMed in connection therewith,
shall be the exclusive responsibility of
Option Holder and shall be deducted from any
price to be paid by NovaMed hereunder.
Notwithstanding anything herein to the
contrary, the purchase price shall be not
less than the sum of One Dollar ($ 1.00) per
share.
(b) Proposed Disposition of Shares.
(1) Except as set forth in subparagraph 4
below, neither Option Holder nor any vendee,
transferee, successor, assignee, donee or
pledgee of any of the shares acquired
hereunder nor any person or firm that
acquires any interest in any of the said
shares by contract or otherwise shall sell,
encumber, pledge, hypothecate, give or
otherwise transfer any or all of said shares
or any interest therein, voluntarily, by
operation of law or otherwise, without
obtaining a prior written consent of NovaMed
unless Option Holder or such transferee
shall give notice to NovaMed of an intention
to do so. The said notice shall specify the
name of the proposed transferee, the
90
<PAGE>
number of such shares to be transferred, the
price offered per share, payment terms, and
any other material terms or conditions of
the proposed transfer.
(2) At any time within sixty (60) days after receipt
of the above described notice by NovaMed, NovaMed
shall have the right to purchase all or any of the
subject shares for the same price as shall be paid by
the transferee. If the proposed transfer does not
involve or include a price per share, NovaMed shall
pay the fair market value of said shares as the same
shall be determined by the independent certified
public accountant of NovaMed. NovaMed shall pay the
purchase price, by check or in cash, to the owner of
the subject shares and the owner shall deliver to
NovaMed all certificates representing the subject
shares properly endorsed in blank. (3) After the
expiration of the above stated sixty (60) day period,
but prior to the expiration of ninety (90) days after
receipt of the said notice by NovaMed, any of the
subject shares with respect to which NovaMed has not
exercised the right described herein may be
transferred as specified in the said notice. Any
transferee of the subject shares shall hold them
subject to all of the terms and conditions of this
Agreement, including restrictions upon any subsequent
transfer. (4) Notwithstanding the foregoing, any
owner of the shares acquired in compliance with the
terms of this Agreement may make a gift, inter vivos
or testamentary, of such shares to such person's
spouse or issue, or to a trust or other fiduciary
account for the benefit of any of them so long as
such fiduciary account is not also for the benefit of
any other person. Any such donee shall hold such
shares subject to all of the provisions of this
Agreement and shall not sell, encumber, pledge,
hypothecate, give or otherwise transfer any or all of
said shares or any right or interest therein except
in accordance with all the terms and conditions of
this Agreement.
91
<PAGE>
14. Statement on Certificate. The certificate representing any
shares acquired hereunder will bear a legend on the face thereof in
substantially the following form:
These securities have not been registered under the Securities
Act of 1933, and may not be offered, offered for sale, or sold
in the absence of an effective registration statement under
the Act or an opinion of counsel satisfactory to the
corporation that registration is not required. Additionally,
sale, encumbrance, hypothecation, gift or other transfer of
such shares or any interest therein is restricted by and
subject to a Stock Option Agreement dated March 19,1999, a
copy of which may be inspected at the principal offices of the
corporation and all of the provisions of which are
incorporated herein by reference.
15. Life Insurance. NovaMed may procure insurance on the life
of Option Holder, naming itself as beneficiary, in such face amounts as NovaMed
shall determine. The principal purpose of such life insurance shall be to assist
NovaMed in making payment of any obligation due by NovaMed hereunder.
16. Succession. This Agreement shall be binding upon the
parties and their heirs, distributees, legal representatives, successors and
assigns.
17. Amendment. This Agreement may not be altered or amended
except by a written instrument setting forth such changes signed by NovaMed and
Option Holder.
18. Interpretation. Whenever the context so requires, the
singular shall include the plural, the plural shall include the singular, the
whole include and part thereof, and any gender shall include all other genders.
19. Notices. All notices required to be given under this
Agreement shall be in writing, and shall be sufficiently given if personally
delivered, or if mailed, postage prepaid, registered mail, return receipt
requested, as follows:
Name Address
NovaMed, Inc. 623 Hoover Street N.E.
Minneapolis, MN 55413 USA
Ruairidh Campbell 600 Westwood Terrace
Austin, Texas 78746
92
<PAGE>
20. Attorney's Fees. If any party hereto should default in the
performance of any obligation hereunder, any other party shall be entitled to a
reasonable attorney's fee and all costs incurred in connection with the
enforcement of any of the terms and conditions hereof.
21. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Nevada, United States of America and in
the English language. IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date and year first above written.
NovaMed, Inc.
By________________________________
Dr. Howard Bellin, Director
----------------------------------
Ruairidh Campbell
93
Exhibit 6(vi)
STOCK OPTION AGREEMENT
AGREEMENT made this 19th day of March, 1999, by and between NovaMed, Inc., a
Nevada corporation ("NovaMed"), and Dr. Howard Bellin, whose address is 105 East
73d Street, New York City, NY 10021 ("Option Holder").
WITNESSETH:
WHEREAS, NovaMed has adopted a Stock Option Plan (the "Plan") whereunder NovaMed
intends to grant to Option Holder an option to purchase shares of NovaMed's
common stock ("Stock"); and WHEREAS, Option Holder is a key employee of NovaMed
and NovaMed desires him/her to remain in such capacity by providing him/her with
an added incentive to work effectively for and in NovaMed's interest and with
the means to acquire or to increase his/her proprietary interest in NovaMed and
to share in its success.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions hereinafter set forth, NovaMed and Option Holder agree as follows:
1. Grant of Option. Subject to the terms and conditions of the
Plan, a copy of which is attached hereto as Exhibit "A" and by reference made a
part hereof, NovaMed hereby irrevocably grants to Option Holder, as a matter of
separate agreement and not in lieu of salary or any other compensation or
services, the right and option (the "Option") to purchase all or any part of an
aggregate number of Thirty Five Thousand (35,000) shares of authorized but
unissued common stock of NovaMed ("Optioned Shares") on the terms and conditions
hereof
2. Price. The purchase price of the Optioned Shares shall be
the sum of One US Dollar and Thirty Cents (US$1.30) per share. The parties
acknowledge that the price is not less than One Hundred Percent (10O%) of the
fair market value, as determined by the Board of Directors of NovaMed, of share
of stock of NovaMed on the date of the grant of the Option.
94
<PAGE>
3. Date of Exercise. Subject to the provisions of paragraph 7,
the Option may be exercised at any time from and after either of the following
times, whichever shall be the earlier:
a. Option Holder may exercise the Option at any
time and from time to time before two (2) years from the date of grant of the
Option.
b. The agreement of NovaMed to sell all or sub-
stantially all of its assets or business.
4. Method of Exercise. The Option shall be exercised by
written notice, delivered or mailed by post paid or certified mad, addressed to
NovaMed at it principal offices, specifying the number of Optioned Shares being
purchased. Such notice shall be accompanied by payment, in cash or its
equivalent, of the full price of the Optioned Shares being purchased. In the
event the Option is being exercised pursuant to paragraph 6 below by any person
or persons other than Option Holder, the notice shall be accompanied by
appropriate proof of the right of such person to exercise the Option.
5. Issuance of Shares. The certificate or certificates
representing the shares purchased hereunder shall be issued and delivered by
NovaMed as soon as practical after receipt of the notice of exercise and
required payment. Such certificate or certificates shall be registered in the
name of the person exercising the Option and shall be delivered to or on the
written order of such person.
6. Transfer of Option. The Option shall not be transferable by
Option Holder except by his/her Last Will or the laws of the Holder's domicile
at the time of his/her death relating to intestacy. During his/her lifetime,
Option Holder is the only person who may exercise the Option. More specifically,
without limiting the generality of the foregoing, the Option may not be
assigned, transferred (except as permitted herein) pledged or hypothecated in
any way, whether by operation of law or otherwise, and shall not be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of the Option contrary to the
provisions hereof, and the levy of any attachment or similar process on the
Option shall be null and void and without effect.
95
<PAGE>
7. Termination of Option.
(a) Termination of Employment. The right to
exercise the option shall end: (1) In the
event of voluntary termination by Option
Holder, on the date of notice of such
termination. (2) In the event of involuntary
termination by NovaMed, with cause, on the
date of notice of such termination. (3) In
the event of involuntary termination by
NovaMed, without cause, thirty (30) days
from the date of notice of such termination.
(b) Death. If Option Holder shall die within the
above mentioned thirty (30) day period, or if he
shall die while in the employ of NovaMed, the Option
will terminate unless the person or persons to whom
the Option shall have been transferred by his/her
Last Will or the laws of intestacy shall have, within
six (6) months from the date of Option Holder's
death, exercised the Option. (c) Proof of Succession.
No transfer of the Option by Option Holder by his/her
Last Will or under the laws of intestacy shall be
effective to bind NovaMed unless NovaMed shall have
been furnished with written notice thereof and a copy
of Option Holder's Last Will and /or such other
evidence as the Board of Directors of NovaMed may
deem necessary to establish the validity of the
transfer and the acceptance by the transferee or
transferees of the terms and conditions of the
Option. (d) Notwithstanding any provision of this
Agreement to the contrary, the right to exercise the
Option will terminate on March 19, 2001.
96
<PAGE>
8. Effect of Merger or Consolidation.
(a) Substitution of Shares. After any merger of one
or more corporations into NovaMed, or after any
consolidation of NovaMed and one or more corporation
in which NovaMed shall be the surviving corporation,
Option Holder shall, at not additional cost, be
entitled, upon the exercise of the Option, to
receive, subject to any required action by the
shareholders of NovaMed and in lieu of the number of
shares as to which the Option shall then be so
exercised, the number and class of shares of stock or
securities to which Option Holder would have been
entitled pursuant to the terms of the Agreement of
Merger or Consolidation if at the time of such merger
or consolidation Option Holder had been a holder of
record of a number of shares of common stock of
NovaMed equal to the number of shares as to which the
Option shall then be so exercised. (b) Future Merger
or Consolidation. Comparable rights shall accrue to
Option Holder in the event of any successive merger
or consolidation of the character above. (c)
Dissolution of NovaMed. Notwithstanding anything
herein to the contrary, upon the dissolution or
liquidation of NovaMed, or upon any merger or
consolidation in which NovaMed is not the surviving
corporation, the Option shall terminate, but Option
Holder shall have the right, immediately prior to
dissolution, liquidation, merger or consolidation to
exercise the Option in full.
9. Shareholder Status. Option Holder, or any transferee of
the Option, shall have no right as a shareholder with respect to any Optioned
Share until he shall have become a shareholder of record of
97
<PAGE>
such share. No adjustment shall be made for dividends or cash distributions,
ordinary or extraordinary, whether in cash, securities or other property, or
distributions or other rights in respect of such share for which the record date
is prior to the date on which Option Holder shall become the holder of record
thereof.
10. Reservation of Right to Terminate Employment.
Nothing contained in this Agreement shall restrict the right of NovaMed to
terminate the employment of Option Holder at any time, with or without cause.
ii. Purchase for Investment Only. Option Holder
represents to NovaMed that it is his/her intention to
exercise the Option, and to acquire any stock covered
thereby, for investment and not with a view to the
distribution or resale thereof, and any person who
shall exercise the Option shall be required to so
represent in writing at the time of exercise, Option
Holder further acknowledges that he will not sell or
otherwise dispose of shares covered by the Option
except pursuant to an effective registration
statement under the Securities Act of 1933, as
amended, or except in a transaction which, in the
opinion of counsel for NovaMed, is exempt from
registration under that Act.
12. Registration of Shares. If, at any time, the Board of
Directors of NovaMed shall determine, in its discretion, that the registration
or qualification of any shares covered by the Option is necessary or desirable
under any state or federal law, as a condition of or in connection with the
delivery of such shares on the exercise of the Option, the delivery of such
shares shall be deferred until such registration or qualification shall have
been effected. In the event the Board of Directors of NovaMed determines that
registration or qualification of shares covered by the Option is necessary or
desirable, NovaMed shall, at its expense, take such action as may be required to
effect such registration or qualification.
98
<PAGE>
13. Restriction on Transfer.
(a) Death or Termination of Employment.
(1) Option of NovaMed to Repurchase.
Option Holder hereby grants to NovaMed an
irrevocable right to repurchase, at any time
within one hundred eighty (180) days from
and after his/her death or any termination
of employment, any or all of the shares
acquired hereunder. NovaMed shall exercise
this option by delivering written notice
thereof to the record owner of such shares
together with payment in the sum provided
below. Concurrently with the exercise by
NovaMed of this option, the record owner of
such shares shall deliver to NovaMed all
certificates representing the said shares.
which certificates shall be properly
endorsed in blank. (2) Option to Sell to
NovaMed. Following the full and complete
exercise of the Option and the purchase of
all Optioned Shares described herein,
NovaMed grants to Option Holder an
irrevocable right to sell, at any time
within One Hundred Eighty (180) days from
and after Option Holder's death or any
termination of employment, all of Option
Holder's right, title and interest in and to
the Optioned Shares so purchased. This
option may be exercised only with respect to
all of the shares of NovaMed owned by Option
Holder and cannot be exercised with respect
to any smaller portion thereof, an is not
assignable to any other person other than
Option Holder's legal representatives in the
event of his/her death. (3) Purchase Price.
The purchase price to be paid by NovaMed in
the event of a sale to or purchase by
NovaMed under either of the foregoing
99
<PAGE>
shall be an amount mutually determined by
NovaMed and Option Holder or his/her legal
representatives. If the parties cannot
mutually agree on an acceptable price, a
qualified appraiser shall be selected by the
parties and the determination of the
appraiser shall be final and binding. If the
parties cannot agree on the identity of an
acceptable appraiser, either of the parties
may petition a court of appropriate
jurisdiction for an order which shall
determine the manner in which the price
shall be ascertained. All costs of any
appraisal and all costs of any legal action,
including any reasonable attorney's fees
incurred by NovaMed in connection therewith,
shall be the exclusive responsibility of
Option Holder and shall be deducted from any
price to be paid by NovaMed hereunder.
Notwithstanding anything herein to the
contrary, the purchase price shall be not
less than the sum of One Dollar ($1.00) per
share.
(b) Proposed Disposition of Shares.
(1) Except as set forth in subparagraph 4
below, neither Option Holder nor any vendee,
transferee, successor, assignee, donee or
pledgee of any of the shares acquired
hereunder nor any person or firm that
acquires any interest in any of the said
shares by contract or otherwise shall sell,
encumber, pledge, hypothecate, give or
otherwise transfer any or all of said shares
or any interest therein, voluntarily, by
operation of law or otherwise, without
obtaining a prior written consent of NovaMed
unless Option Holder or such transferee
shall give notice to NovaMed of an intention
to do so. The said notice shall specify the
name of the proposed transferee, the number
100
<PAGE>
of such shares to be transferred, the price
offered per share, payment terms, and any
other material terms or conditions of the
proposed transfer. (2) At any time within
sixty (60) days after receipt of the above
described notice by NovaMed, NovaMed shall
have the right to purchase all or any of the
subject shares for the same price as shall
be paid by the transferee. If the proposed
transfer does not involve or include a price
per share, NovaMed shall pay the fair market
value of said shares as the same shall be
determined by the independent certified
public accountant of NovaMed. NovaMed shall
pay the purchase price, by check or in cash,
to the owner of the subject shares and the
owner shall deliver to NovaMed all
certificates representing the subject shares
properly endorsed in blank. (3) After the
expiration of the above stated sixty (60)
day period, but prior to the expiration of
ninety (90) days after receipt of the said
notice by NovaMed, any of the subject shares
with respect to which NovaMed has not
exercised the right described herein may be
transferred as specified in the said notice.
Any transferee of the subject shares shall
hold them subject to all of the terms and
conditions of this Agreement, including
restrictions upon any subsequent transfer.
(4) Notwithstanding the foregoing, any owner
of the shares acquired in compliance with
the term of this Agreement may make a gift,
inter vivos or testamentary, of such shares
to such person's spouse or issue, or to a
trust or other fiduciary account for the
benefit of any of them so long as such
fiduciary account is not also for the
benefit of any other person. Any such donee
shall hold such shares subject to all of the
provisions of this
101
<PAGE>
Agreement and shall not sell, encumber,
pledge, hypothecate, give or otherwise
transfer any or all of said shares or any
right or interest therein except in
accordance with all the terms and conditions
of this Agreement.
14. Statement on Certificate. The certificate representing any
shares acquired hereunder will bear a legend on the face thereof in
substantially the following form:
These securities have not been registered under the Securities
Act of 1933, and may not be offered, offered for sale, or sold
in the absence of an effective registration statement under
the Act or an opinion of counsel satisfactory to the
corporation that registration is not required. Additionally,
sale, encumbrance, hypothecation, gift or other transfer of
such shares or any interest therein is restricted by and
subject to a Stock Option Agreement dated March 19,1999, a
copy of which may be inspected at the principal offices of the
corporation and all of the provisions of which are
incorporated herein by reference.
15. Life Insurance. NovaMed may procure insurance on the life
of Option Holder, naming itself as beneficiary, in such face amounts as NovaMed
shall determine. The principal purpose of such life insurance shall be to assist
NovaMed in making payment of any obligation due by NovaMed hereunder.
16. Succession. This Agreement shall be binding upon the
parties and their heirs, distributees, legal representatives, successors and
assigns.
17. Amendment. This Agreement may not be altered or amended
except by a written instrument setting forth such changes signed by NovaMed and
Option Holder.
18. Interpretation. Whenever the context so requires, the
singular shall include the plural, the plural shall include the singular, the
whole include and part thereof, and any gender shall include all other genders.
19. Notices. All notices required to be given under this
Agreement shall be in writing, and shall be sufficiently given if personally
delivered, or if mailed, postage prepaid, registered mail, return receipt
requested, as follows:
Name Address
NovaMed, Inc. 623 Hoover Street N.E.
Minneapolis, MN 55413 USA
Dr. Howard Bellin 105 East 73d Street
New York City, NY 10021
102
<PAGE>
20. Attorney's Fees. If any party hereto should
default in the performance of any obligation hereunder, any other party shall be
entitled to a reasonable attorney's fee and all costs incurred in connection
with the enforcement of any of the terms and conditions hereof.
21. Governing Law. This Agreement shall be construed
in accordance with the laws of the State of Nevada, United States of America and
in the English language.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
NovaMed, Inc.
By _________________________________
Ruairidh Campbell
------------------------------------
Dr. Howard Bellin
103
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED UNAUDITED AND AUDITED CONDENSED FINANCIAL STATEMENTS FOR THE
PERIOD ENDED JUNE 30, 1999 FILED WITH THE COMPANY'S ANNUAL REPORT ON FORM
10-SB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U. S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-END> DEC-31-1998 JUN-30-1999
<EXCHANGE-RATE> 1 1
<CASH> 129,754 219,445
<SECURITIES> 0 0
<RECEIVABLES> 330,826 371,705
<ALLOWANCES> 0 0
<INVENTORY> 483,300 300,205
<CURRENT-ASSETS> 945,587 917,726
<PP&E> 50,673 50,673
<DEPRECIATION> (145,597) 16,500
<TOTAL-ASSETS> 981,663 951,899
<CURRENT-LIABILITIES> 620,704 654,210
<BONDS> 0 0
0 0
0 0
<COMMON> 13,446 13,826
<OTHER-SE> 347,513 283,843
<TOTAL-LIABILITY-AND-EQUITY> 981,663 951,899
<SALES> 1,266,821 986,127
<TOTAL-REVENUES> 1,266,821 986,127
<CGS> 973,965 690,972
<TOTAL-COSTS> 1,480,169 1,543,061
<OTHER-EXPENSES> 0 (100,387)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (213,348) (456,547)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (213,348) (456,547)
<EPS-BASIC> (.02) (.03)
<EPS-DILUTED> (.02) (.03)
</TABLE>
