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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-SB
REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUER UNDER SECTION 12(g)
OF THE SECURITIES ACT OF 1934
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CORGENIX MEDICAL CORPORATION
(Exact name of small business issuer as specified in its charter)
NEVADA 93-1223466
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
12061 TEJON STREET
WESTMINSTER, COLORADO 80234
(303) 457-4345
(Name, address and telephone number of principal executive office)
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Securities to be registered under Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
CERTAIN TERMS USED HEREIN ARE DEFINED IN THE GLOSSARY THAT FOLLOWS AT THE
END OF THIS PART.
INTRODUCTION
Corgenix Medical Corporation ("Corgenix" or the "Company") is a diagnostic
biotechnology company whose principal focus has been the discovery and
development of novel diagnostic markers for the detection and management of
important immunological disorders. Until May 22, 1998, this business was
conducted by and under the name of REAADS Medical Products, Inc., a Delaware
corporation ("REAADS"). On May 22, 1998, REAADS became a subsidiary of
Corgenix, and its name was changed to Corgenix, Inc., when a wholly owned
subsidiary of the Company merged (the "Merger") with and into REAADS. Prior to
the Merger, the Company had no significant business activity. In connection
with the Merger, the Company issued a total of 6,120,000 shares of the Company's
common stock, $.001 par value (the "Common Stock") and 4,000,000 shares of
contingent Common Stock to the REAADS stockholders, and the REAADS management
assumed the management of the Company. See "Part I. Item 5. Directors,
Executive Officers, Promoters and Control Persons" and "Item 8. Description of
Securities." The Company currently uses the REAADS trademarks and tradenames in
the sale of its products.
The Company's research program has resulted in the successful development
of 23 products currently used in clinical laboratories for the diagnosis and/or
monitoring of four important areas of health care:
- Autoimmune disorders (diseases in which an individual creates
antibodies to one's self, for example systemic lupus erythematosus
("SLE") and rheumatoid arthritis ("RA"));
- Vascular diseases (diseases associated with certain types of
thrombosis or clot formation, for example antiphospholipid syndrome,
deep vein thrombosis, stroke and coronary occlusion);
- Bone and joint diseases (such as osteoporosis and osteoarthritis); and
- Liver diseases (cirrhosis and transplanted organ rejection).
In addition to its current products, the Company is actively developing new
laboratory tests in other important diagnostic testing areas. See "-- Chugai
Strategic Relationship" and "-- Other Strategic Relationships." In this
connection, the Company manufactures and markets to clinical laboratories and
other testing sites worldwide. Its customers include large and emerging health
care companies such as Chugai Diagnostics Science ("Chugai"), a wholly owned
subsidiary of Chugai Pharmaceuticals Co., Ltd. ("Chugai Pharma"), which owns
approximately 4.6% of the Common Stock of the Company. See "-- Chugai Strategic
Relationship."
Corgenix products are based on its patented and proprietary application of
Enzyme Linked ImmunoSorbent Assay ("ELISA") technology, a clinical testing
methodology commonly used worldwide. All of the Company's current products are
based on this platform technology in a delivery format convenient for clinical
testing laboratories. The delivery format ("Microplate") allows the testing of
up to 96 samples per plate, and is one of the most commonly used formats,
employing conventional testing equipment found in virtually all clinical
laboratories. The availability and broad acceptance of ELISA Microplate products
reduces entry barriers worldwide for the Company's new products that employ this
technology and delivery format. Corgenix's products are sold as "kits" that
include all of the materials required to perform the test except for routine
laboratory chemicals and instrumentation. A test using ELISA technology involves
a series of reagent additions into the Microplate triggering a complex
immunological reaction in which a
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resulting color occurs. The amount of color developed in the final step of
the test is directly proportional to the amount of the specific marker being
tested for in the patient or unknown sample. The amount of color is measured
and the results calculated using laboratory instrumentation. The Corgenix
technology allows for the development of more accurate, specific and
easier-to-perform products than the products of the Company's competitors.
Corgenix's diagnostic tests are intended to aid in the identification of
the causes of illness and disease, enabling a physician to select appropriate
patient therapy. Internally and through collaborative arrangements, the Company
is developing additional products that are intended to broaden the range of
applications for its existing products and to result in the introduction of new
products. Corgenix is specifically engaged in the development of a line of
diagnostic products that applies the ELISA technology into a different testing
format. This format involves the addition of a single patient sample into a test
system in which color is developed in a very short period of time with a minimal
number of reagents. This format, unlike the Microplate format, does not require
instrumentation and is better suited for testing outside of a typical testing
laboratory. Testing can be performed by medical personnel such as physicians and
nurses, but also can be designed so that testing can by performed directly by
the patient. This format is referred to as rapid testing ("Rapid Test") as the
results are available in only a few minutes.
Products developed in a Rapid Test format allow the prompt detection of a
variety of medical conditions. Development of this product line will enable the
Company to expand its product base beyond the conventional testing laboratory
into point of care ("POC") market segments, which include physician's office
laboratories ("POL"), and also directly to the medical consumer through retail
distribution, referred to as over-the counter ("OTC").
Since 1990, Corgenix's sales force and distribution partners have sold over
10 million tests worldwide under the REAADS label, as well as labels of other
companies under private label, or original equipment manufacture ("OEM"),
agreements. An integral part of Corgenix's strategy is to work with corporate
partners to develop market opportunities and access important resources. In this
regard, Corgenix has established strategic relationships with a number of
companies, including Chugai, Cambridge Life Sciences ("Cambridge"), a division
of Byk Gulden located in Cambridge, UK, and Helena Laboratories Corporation
("Helena"), a privately held company located in Beaumont, Texas. Corgenix
believes that its relationships with these and other potential partners will
enable Corgenix to enhance its menu of diagnostic products and accelerate its
ability to penetrate the worldwide markets for new products
INDUSTRY OVERVIEW
In vitro diagnostic ("IVD") testing is the process of analyzing the
components of a wide variety of body fluids outside of the body to identify the
presence of markers for diseases or other human health conditions. The worldwide
human health IVD market consists of reference laboratory and hospital laboratory
testing, testing in physician offices and the emerging OTC market, in which
testing is done at home by the consumer.
Traditionally, diagnostic testing has been performed in large, high-volume
commercial or hospital-based laboratories using instruments operated by skilled
technicians. Corgenix products in a Microplate format are designed for such
instrumentation and are marketed to these types of laboratories. The
instrumentation and supportive equipment required to use the Corgenix ELISA
tests is relatively simple, and typically is used by a laboratory for many
different products.
One of the fastest growing segments of the human health IVD market is the
market for highly accurate tests that can be used logistically close to the
point of patient care (such as clinics, physician offices, homes, patient
bedsides and emergency rooms) as well as in laboratories. The growth in this POC
market is primarily due to pressure on health care providers to reduce the
overall cost of health care as well as the availability of technology that
enables health care providers to process tests on-site, rather than sending them
to remote laboratories. POC testing helps to reduce overall health care delivery
costs and can improve patient outcomes by enabling the primary caregiver to
determine a diagnosis
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of the medical condition during the patient's initial visit, minimizing the
time to medical intervention and reducing the need for additional patient
follow-up.
The IVD industry has undergone major consolidation over the last few years.
As a result, the industry is characterized by a small number of large companies
or divisions of large companies that manufacture and sell numerous diagnostic
products incorporating a variety of technologies. In addition, there are many
small diagnostic companies, which generally have limited resources to
commercialize new products. As a result of technological fragmentation and
customer support requirements, Corgenix believes that there may be a substantial
competitive advantage for companies with unique and differentiated technologies
that can be used to generate a broad menu of diagnostic products and that have
developed successful customer support systems.
STRATEGY
Corgenix's primary objective is to apply its proprietary ELISA technology
to the development and commercialization of products for use in a variety of
markets. Corgenix's strategies for achieving this objective include the
following:
APPLY THE COMPANY'S ELISA TECHNOLOGY TO ADDITIONAL DIAGNOSTIC MARKETS.
Corgenix has focused its resources on development of highly accurate tests
in the Microplate format for sale to clinical testing laboratories. The
Company believes it can expand its market focus with the addition of new
tests complementary to the current product line.
DEVELOP A LINE OF RAPID TESTS USING THE COMPANY'S ELISA TECHNOLOGY. The
Company intends to broaden the ELISA application into a line of Rapid Tests
enabling expansion into new market areas including POC and OTC.
EXPAND INTO ADDITIONAL LARGE DIAGNOSTIC MARKET. Corgenix has focused its
product development and sales efforts on the human diagnostic market in
autoimmunity, bone and joint disease, vascular disease, and liver disease.
The Company intends to target other large indication human health
applications (such as cancer, infectious diseases and critical care
diagnostic tests) through both expanded internal research and development
efforts and collaborations with strategic partners.
LEVERAGE SALES AND MARKETING RESOURCES. Corgenix maintains a nationwide
marketing and sales organization, which is experienced in selling
diagnostic tests into the laboratory market. The Company expects to expand
this sales organization, adding distribution channels into the outpatient
market. The Company will also expand its product menu with more high value,
quality products through internal development, acquisition or in-licensing
of complementary products and technologies.
CONTINUE TO DEVELOP STRATEGIC ALLIANCES TO LEVERAGE COMPANY RESOURCES.
Corgenix has developed, and expects to continue to develop, strategic
alliances to access complementary resources (such as proprietary markers,
funding, marketing expertise and research and development assistance), to
leverage its technology, expand its product menu and maximize the use of
its sales force.
PURSUE SYNERGISTIC PRODUCT AND/OR TECHNOLOGY ACQUISITIONS. Corgenix intends
to proactively evaluate strategic acquisitions of companies, technologies
and product lines where the Company identifies a strategic opportunity to
expand its core business while increasing revenues and earnings from these
new technologies.
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PRODUCTS AND MARKETS
Corgenix and its distribution partners are currently selling ELISA tests in
major markets worldwide. To date, Corgenix's sales force and distribution
partners have sold over 10 million tests since Corgenix first received product
marketing clearance from the United States Food and Drug Administration (the
"FDA") for the first anti-cardiolipin antibody ("aCL") test in 1990. Several
peer reviewed medical publications, abstracts and symposia have been presented
on the favorable technical differentiation of Corgenix's tests over competitive
products.
To extend the product offering for current product lines, and to complement
its premium-priced, existing assays, Corgenix will continue to add products from
strategic partners. Corgenix's current product menu, commercialized under the
trademark "REAADS," includes the following:
AUTOIMMUNE DISEASE PRODUCTS
Corgenix's ELISA Autoimmune Disease Product line consists of nine products
including a screening test for antinuclear antibodies (ANA), and specific tests
to measure antibodies to rheumatoid factor, dsDNA, Sm, SM/RNP, SSA, SSB, Jo-1
and anti-Scl-70. The products are used for the diagnosis and monitoring of
autoimmune diseases including RA, SLE, Mixed Connective Tissue Disease,
Sjogren's Syndrome, Dermatopolymyositis and Scleroderma.
The Company's autoimmune disease products are formatted in the ELISA
Microplate format, and are differentiated from the competition by their user
convenience. Historically, diagnostic tests utilized antiquated technologies
that presented significant limitations for the clinical laboratory environment,
including greater labor requirements and the need for a subjective
interpretation of the results. Corgenix's ELISA Autoimmune Tests overcome these
technology shortfalls, permitting a clinical laboratory to automate its tests,
lowering the laboratory's labor costs as well as providing objectivity to test
result interpretation.
ANTIPHOSPHOLIPID ANTIBODY TESTING PRODUCTS
The Company has five products for antiphospholipid antibody testing, which
in 1997 represented over 58% of Corgenix's total product sales. These include
aCL IgG, aCL IgA, aCL IgM, anti-phosphatidylserine ("aPS") IgG and aPS IgM.
These tests are used in the diagnosis of SLE, antiphospholipid syndrome and
thrombosis.
Antiphospholipid antibodies are measured in clinical laboratories primarily
using ELISA technology with cardiolipin as the most commonly used antigen. High
levels of these antibodies are seen in venous and arterial thrombosis,
thrombocytopenia and/or recurrent abortion, now considered the main clinical
criteria for the diagnosis of a clinical entity referred to as the
antiphospholipid syndrome. The antiphospholipid syndrome may be seen in
association with an underlying disease (i.e. autoimmune such as SLE or SLE-like
disease), or may be seen in patients without any obvious or apparent disease.
When high serum levels of antiphospholipid antibodies are found in individuals
without any clinical manifestations, it is regarded as an important risk factor
for the development of antiphospholipid syndrome.
The importance of the antiphospholipid syndrome resides in its association
with serious clinical manifestations such as chronic and recurrent venous (deep
vein) thrombosis, as well as arterial thromboembolic disease including heart
attacks, strokes and pulmonary embolism. Thrombocytopenia has been attributed to
the temporary removal of platelets from circulation during a thrombotic episode
(clot formation).
VASCULAR DISEASE PRODUCTS
The Company markets seven tests for vascular diseases. Three products
(Protein C Antigen ELISA, Protein S Antigen ELISA and von Willebrand Factor
Antigen ELISA) are manufactured by Corgenix, and four others (ABP
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von Willebrand Factor Activity Test, GTI Platelet Factor 4 Test, and the ABS
Thrombus Precursor Protein and Functional Intact Fibrinogen kits) are
manufactured for Corgenix by other companies. These products are useful in
the diagnosis of certain clotting and bleeding disorders including von
Willebrand's Disease (Hemophilia B).
Hemostasis (the normal stable condition in which there is neither excessive
bleeding nor excessive clotting) is maintained in the body by the complex
interaction of the endothelial cells of blood vessels, coagulation cells such as
platelets, coagulation factors, lipids (cholesterol) and antibodies
(autoantibodies). All play important roles in maintaining this hemostasis. In
clinical situations in which an individual demonstrates excessive clotting or
bleeding, a group of laboratory tests is typically performed to assess the
source of the disorder using the tests marketed by the Company.
BONE AND JOINT DISEASE PRODUCTS; LIVER DISEASE PRODUCTS
The Company developed and manufactures the Chugai Hyaluronic Acid
("Hyaluronic Acid" or "HA") Test in a Microplate format in collaboration with
Chugai. This product is currently distributed through the Chugai distribution
network in Japan, and through the Company's United Kingdom subsidiary in the
United Kingdom, and is used in the diagnosis and monitoring of rheumatoid
arthritis and liver cirrhosis.
Hyaluronic Acid is a component of the matrix of connective tissues, found
in synovial fluid of the joints where it acts as a lubricant and for water
retention. It is produced in the synovial membrane and may leak into the
circulation via the lymphatic system where it is quickly removed by specific
receptors located in the liver. Increased serum levels of HA have been described
in patients with rheumatoid arthritis due to increased production from synovial
inflammation, and in patients with liver disease due to interference with the
removal mechanism. Patients with cirrhosis will have the highest serum HA
levels, which correlate with the degree of liver involvement.
TECHNOLOGY
The Corgenix ELISA application technology was developed to provide the
clinical laboratory with a more sensitive, specific, and objective technology to
measure clinically relevant antibodies in patient serum samples. High levels of
these antibodies are frequently found in individuals suffering from various
immunological diseases, and their serologic determination is useful not only for
specific diagnosis but also for assessing disease activity and/or response to
treatment. To accomplish these objectives, the current Corgenix product line
applies the ELISA technology in a 96-Microplate format as a delivery system.
ELISA provides a solid surface to which purified antigens are attached, allowing
their interaction with specific autoantibodies during incubation. This
antigen-antibody interaction is then objectively measured by reading the
intensity of color generated by an enzyme-conjugated secondary antibody and a
chemical substrate added to the system.
The Corgenix technology overcomes two basic problems seen in many other
ELISA systems. First, the material coated onto the plate can be consistently
coated without causing significant alteration of the molecular structure (which
ensures maintenance of immunologic reactivity), and the stability of these
coated antigens on the surface can be maintained (which provides a product shelf
life acceptable for commercial purposes). Corgenix's proprietary immunoassay
technology is useful in the manufacture of ELISA test kits for the detection of
many analytes for the diagnosis and management of immunological diseases. This
same ELISA technology will also be applied to the Rapid Test products allowing
entry into additional market segments.
The Corgenix technology results in products demonstrating performance
characteristics that exceed those of competitive testing procedures. A Corgenix
product typically requires less hands-on time by laboratory personnel and
provides an objective, quantitative or semi-quantitative interpretation to
improve and standardize the clinical significance of results. The Corgenix
proprietary technology will continue to be the mainstay for future Corgenix
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diagnostic products. Most of the products in development will incorporate the
basic Corgenix technology, even in alternate delivery formats (including Rapid
Test products).
Additional technologies may be required for some of the newly identified
tests, particularly for the POC business. Management believes that, in
additional to internal expertise, most technology and delivery system
requirements are available through joint venture or licensing arrangements or
through acquisition.
DELIVERY SYSTEMS
All of the current Corgenix products employ the Microplate delivery system
using ELISA technology. This format is universally accepted in clinical
laboratory testing and requires routine equipment currently available in most
clinical labs.
The Company is developing a line of Rapid Test products configured as
single test delivery systems. These products will be intended for testing by a
physician or other medical personnel at the patient's bedside, for example in an
emergency room setting, a general care unit, or an ICU or specialized treatment
site. In this case a sample is obtained from the patient and applied directly to
a test module so that results can be read immediately. Rapid Tests can also be
configured in a format for home testing for sale directly to the consumer
through OTC retail outlets, such as pharmacies.
SALES AND MARKETING
Corgenix currently markets and sells its products to the traditional
clinical laboratory market, both hospital based and free standing laboratories.
The Company utilizes a diverse distribution program for its products. Corgenix
labeled products are sold directly to testing laboratories in the United States
through 14 sales representatives.
Internationally, Corgenix labeled products are sold through established
diagnostic companies in Austria, Belgium, Canada, Denmark, Egypt, France,
Germany, Greece, Hong Kong, Hungary, India, Israel, Italy, Japan, Korea, Kuwait,
Mexico, Norway, Peoples Republic of China, Peru, Portugal, Saudi Arabia,
Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan and the United
Kingdom. Discussions are underway that are expected to provide access to
additional markets in Europe, South America, Asia and the Pacific Rim.
Corgenix's agreements with its international distribution partners are on terms
that are generally terminable by Corgenix if the distributor fails to achieve
certain sales targets. The Company also has established private labeled product
agreements with several United States and European companies. The Company has
international distribution headquarters in the United Kingdom and will add
direct commercialization and distribution in selected additional countries as
appropriate.
The Company has an active marketing and promotion program for its
diagnostic testing products. Corgenix publishes technical and marketing
promotional materials, which it distributes to current and potential customers.
The Company attends major industry trade shows and conferences, and the
Company's scientific staff actively publishes articles and technical abstracts
in peer review journals.
With the planned expansion into a Rapid Test product line, Corgenix expects
to expand its distribution network to sell into the outpatient primary care
market.
MANUFACTURING
Corgenix's manufacturing process for its products utilizes a semi-automated
production line for the manufacturing, assembly and packaging of its ELISA
Microplate products. Corgenix's current production capacity is 10,000 tests per
day with a single eight-hour shift. Since 1990, Corgenix's manufacturing group
has successfully
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produced over 10 million tests in its Westminster, Colorado facility, and the
Company expects that current manufacturing facilities will be sufficient to
meet expected customer demand for the foreseeable future.
The Company's manufacturing operations are fully integrated and consist of
reagent purification, reagent and Microplate processing, filling, labeling,
packaging and distribution. The Company has considerable experience in
manufacturing its products using its proprietary technology. The Company expects
increases in the demand for its products, and plans to increase its
manufacturing capability while remaining in compliance with regulatory
requirements at acceptable costs to meet that increased demand. The Company also
maintains ongoing investigation of scale-up opportunities for manufacturing to
meet future requirements. Corgenix expects production costs to decline if more
products are added to the product menu in the future, permitting the Company to
achieve greater economies of scale as higher volumes are attained. Corgenix has
registered its facility with the FDA and operates in compliance with the FDA
Quality System Regulations ("QSR") requirements for its products.
The manufacturing process starts with the qualification of raw materials.
The Microplates are then coated and bulk solutions prepared. The components and
the Microplates are checked for performance by the Company's quality control
department and adjustments in the bulk solutions are performed to provide
optimal performance and lot-to-lot consistency. The bulk solutions are then
dispensed and packaged into planned kit configurations. The final packaging step
in the manufacturing process includes kit assembly, where all materials are
packaged into finished product. The final kit has one final kit performance
performed by the Company's quality control department. The final stage before
product release for sale is quality assurance, verification that all quality
control testing and manufacturing processes have been completed, documented and
have met all performance specifications.
The majority of raw materials and purchased components used to manufacture
the Company's products are readily available. The Company has established good
working relationships with its primary vendors, particularly those that supply
unique or critical components for the Company's products. Corgenix mitigates the
risk of a loss of supply by maintaining a sufficient supply of antibodies and
critical components to ensure an uninterrupted supply for at least three months.
Corgenix also believes that it can substitute a new supplier with regard to any
of these components in a timely manner. However, there can be no assurances that
Corgenix will be able to substitute a new supplier in a timely manner, and
failure to do so could have a material adverse effect on Corgenix's business,
financial condition and results of operations.
Corgenix purchases components for six products (anti-Sm, anti-SM/RNP,
anti-SSA, anti-SSB, anti-Jo-1, and anti-Scl-70) from Cambridge and performs
final assembly and shipping at the Company's United Kingdom facility. These
products are warehoused at this facility until shipped directly to customers.
The Company purchases four additional products from other manufacturers. The
von Willebrand Factor Activity Test is manufactured by American Biochemical &
Pharmaceutical Corporation ("ABP"), the Platelet Factor 4 test is
manufactured by GTI, Inc. ("GTI"), and the Thrombus Precursor Protein and
Functional Intact Fibrinogen tests are manufactured by American Biogenic
Science ("ABS").
A significant percentage of the Company's product revenues are derived from
sales outside of the United States. International regulatory bodies often
establish varying regulations governing product standards, packaging and
labeling requirements, import restrictions, tariff regulations, duties and tax
requirements. As a result of the Company's sales in Europe, the Company intends
to obtain ISO certification and to receive a "CE" mark certification, an
international symbol of quality and compliance with applicable European medical
device directives for certain of its products. The Company is currently
preparing for ISO certification and also expects to receive CE mark
certification.
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CHUGAI STRATEGIC RELATIONSHIP
Chugai Diagnostics Science, Co. Ltd. is a wholly owned subsidiary of Chugai
Pharmaceutical Co., Ltd., a Tokyo based pharmaceutical company. The
relationship between Corgenix and Chugai was established in June 1993 with the
execution of a letter of intent to negotiate and execute a series of agreements
including a Manufacturing Memorandum, Stock Purchase Agreement and a
Distribution Agreement. The relationship is a multifaceted strategic
affiliation that can be summarized as follows:
EQUITY OWNERSHIP. In 1993, Chugai Pharma purchased common stock of REAADS
and currently owns approximately 4.6% of the Common Stock. Under the terms of
the September 1, 1993 stock purchase agreement, Chugai has certain rights,
including antidilution rights and rights to a board seat on the Corgenix Board
of Directors.
DISTRIBUTION OF CORGENIX PRODUCTS. In 1993, Corgenix and Chugai executed a
distribution agreement (the "Japanese Distribution Agreement") whereby Corgenix
granted to Chugai certain distribution rights in Japan of Corgenix products. The
distribution rights provide Chugai with non-exclusive rights for certain
existing Corgenix products, and exclusive rights for all future Corgenix
products. The initial term of the Japanese Distribution Agreement is for 7
years, expiring August 26, 2000, with successive one year extension options.
JOINT DEVELOPMENT OF CORGENIX PRODUCTS. In 1993, Corgenix and Chugai
executed a memorandum, which established a joint product development program
whereby Corgenix, in collaboration with Chugai, developed a unique second
generation immunodiagnostic assay for the measurement of HA. The product
replaced a first generation HA product that was being manufactured and
distributed in Japan by Chugai. This product is used to measure HA in serum to
aid in the diagnosis of certain liver diseases and the monitoring of rheumatoid
arthritis patients. In 1997, Corgenix and Chugai executed a contract research
agreement whereby Corgenix and Chugai made certain technical improvements to the
HA product, and Chugai provided certain financial support.
MANUFACTURING OF CORGENIX PRODUCTS. In 1994, Corgenix and Chugai executed a
manufacturing agreement (the "HA Manufacturing Agreement") whereby Corgenix has
the exclusive right to manufacture the HA product for Chugai for sale in Japan.
Corgenix began the manufacture of the HA product in 1995 and sales of the
product were initiated in Japan by Chugai. The HA Manufacturing Agreement has
been amended several times, and Corgenix now manufactures the HA product for
other distribution outlets to be designated by Chugai. In 1997, sales of the HA
product began in the United Kingdom through Corgenix's sales and distribution
channels. In 1995, Corgenix and Chugai executed a letter agreement whereby
Chugai agreed, under certain conditions, to reimburse Corgenix for the purchase
of certain pieces of equipment required for HA manufacturing.
REGULATORY AFFAIRS. In 1995, Corgenix and Chugai executed a regulatory
letter of understanding whereby Corgenix agreed to manage the regulatory
application prosecution of the HA kit in the United States for Chugai. Corgenix
managed the clinical trial testing of the HA product, and has filed a 510(k)
application on the HA product with the FDA on behalf of Chugai. See "--
Regulation."
HA PRODUCT DISTRIBUTION. In 1997, Corgenix and Chugai executed a
distribution agreement (the "UK Agreement") whereby Corgenix was granted
exclusive distribution rights for the Chugai HA product in the United Kingdom.
The UK Agreement is initially for a two-year period expiring on November 17,
1999, with one-year extension rights. The UK Agreement establishes certain
minimum sales target requirements for Corgenix, and provides early cancellation
rights to Chugai if Corgenix does not meet annual sales targets. The UK
Agreement is the only international distribution rights granted by Chugai.
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OTHER STRATEGIC RELATIONSHIPS
In addition to the Chugai strategic relationship, an integral part of
Corgenix's strategy has been and will continue to be entering into other
strategic alliances as a means of accessing unique technologies or resources or
developing specific markets. The primary aspects of Corgenix's corporate
partnering strategy with Chugai and other strategic affiliations include:
- Companies that are interested in co-developing diagnostic tests that
use the Corgenix technology;
- Companies with complementary technologies;
- Companies with complementary products and novel disease markers;
and/or
- Companies with access to distribution channels that supplement
Corgenix's existing distribution channels.
In furtherance of the foregoing strategies, Corgenix has established
strategic relationships with the following companies in addition to Chugai:
CAMBRIDGE LIFE SCIENCES. Cambridge, a division of Byk Gulden and located in
Cambridge, United Kingdom, is a leading manufacturer of immunology and
microbiology diagnostic tests. In 1993, Corgenix and Cambridge entered into an
agreement by which the Company provides to Cambridge certain products that are
sold worldwide under the Cambridge label. These products are primarily sold in
the United Kingdom, and in the remainder of Europe through the Byk Gulden
distribution network. Cambridge also manufactures certain products for Corgenix
under the Corgenix label including the anti-Sm, anti-SM/RNP, anti-SSA, anti-SSB,
anti-Jo-1, and anti-Scl-70, all of which are distributed by Corgenix worldwide.
HELENA LABORATORIES CORPORATION. Helena, a privately held company located
in Beaumont, Texas, is one of the world market leaders in clinical
electrophoresis instrumentation and technology. In 1993, Corgenix and Helena
entered into a development and manufacturing agreement pursuant to which
Corgenix developed a series of vascular disease products for joint distribution.
Three of these received FDA clearance in 1997 and one is currently in
development. Corgenix manufactures these products for worldwide distribution
through the Helena network, as well as under the Corgenix label for distribution
through the Corgenix network. Pursuant to the agreement, Helena has the right to
incorporate several of the Company's current products and technology (both those
jointly developed and also other Corgenix products) into a proprietary Helena
instrumentation for sale to hospitals and clinical laboratories. Corgenix and
Helena have also entered into an agreement under which the Company has agreed to
provide additional products to be sold worldwide under the Helena label. There
can be no assurance that the product development program will be successful, and
if successful, that the products developed will achieve broad market acceptance.
AMERICAN BIOCHEMICAL & PHARMACEUTICAL CORPORATION. ABP is a privately
held company located in Marlton, New Jersey that sells a line of diagnostic
products in coagulation and vascular medicine. In June 1998, Corgenix became a
non-exclusive distributor of ABP's von Willebrand Factor Activity in the United
States. Corgenix distributes this product under the Corgenix label through
Corgenix's distribution network, primarily in the United States. This product
complements Corgenix's expanding line of vascular disease products. The initial
term of the distribution arrangement with ABP will expire in June 2001 and it
may be renewed at Corgenix's election for additional successive one-year terms.
ABP also sells this test under the Corgenix label through its own distribution
network. Under the terms of a separate distribution agreement, ABP will sell the
Corgenix von Willebrand Factor Antigen Kit worldwide under the Corgenix label
through its distribution network.
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AMERICAN BIOGENETIC SCIENCE ("ABS"). ABS is a publicly traded company
located in Boston, Massachusetts that has developed patented antigen-free
technology. In June 1998, Corgenix became a non-exclusive distributor of ABS's
Thrombus Precursor Protein and Functional Intact Fibrinogen products in the
United States, marketing them through the Corgenix distribution network. The
initial term of the distribution agreement with ABS will expire in June 2001 and
it may be renewed at Corgenix's election for additional successive one-year
terms. ABS also sells these tests under their own labeling through a small
network of regional distributors.
GTI, INC. GTI is a privately held company located in Brookfield, Wisconsin
that manufactures ELISA diagnostic products. In April 1998, Corgenix and GTI
signed an agreement by which Corgenix became a co-exclusive distributor of GTI's
Platelet Factor 4 ELISA test kit in the United States. The initial term of the
agreement is one year and may be renewed at Corgenix's option. This product is
also part of Corgenix's vascular disease product strategy.
The Company has established OEMs agreements with several international
diagnostic companies. Under these agreements, Corgenix manufactures selected
products under the partner's label for worldwide distribution. These
partnerships include Meditech-BioPool ( United States), Chromogenix (Sweden),
Medic (Italy), and Schiapparelli Biosystems (The Netherlands).
RESEARCH AND DEVELOPMENT
Corgenix is directing its research and development efforts towards
continuously improving its proprietary platform ELISA technology in the
Microplate format, as well as applying the technology to a Rapid Test format to
address operator ease-of-use and expand the Company's market opportunities. In
that regard, Corgenix has organized its research and development department into
three major areas: (i) new product development, (ii) technology assessment, and
(iii) technical and product support.
The product development group is responsible for research and development
of new clinical diagnostic products for commercialization. This group evaluates
the performance of reagents (prepared internally or purchased commercially),
creates working prototypes of potential products, performs internal studies,
participates in clinical trials, produces pilot lots of new products, produces a
validated method that can be consistently manufactured, creates documentation
required for manufacturing and testing of new products, and works closely with
the Company's quality assurance department to satisfy regulatory requirements
and support regulatory clearance. This group includes individuals skilled in
immunology, assay development, protein biochemistry, biochemistry and basic
sciences. Group leaders are also skilled in planning and project management
under FDA-mandated design control. See "-- Regulation."
The technology assessment group is responsible for assessing the
performance of new technologies and determining the technical feasibility of
their introduction by Corgenix. The technology assessment group investigates
the patent / license issues associated with new technologies. This group
includes individuals skilled in immunology, assay development, protein
biochemistry, biochemistry, basic sciences and intellectual property review.
The technical and product support group are responsible for supporting all
products on the market through scientific investigation, and are responsible for
design transfer to manufacturing for all new products developed. This group
also assesses the performance of and validates all externally-sourced products.
This group includes individuals skilled in immunology, assay development,
protein biochemistry, biochemistry and basic sciences. Corgenix maintains
facilities to support its development efforts at its Westminster, Colorado
headquarters.
PRODUCTS AND TECHNOLOGY IN DEVELOPMENT
Corgenix intends to expand its product menu through internal development,
development in collaboration with strategic partners and acquisition or
licensing of new products and technologies. Corgenix is currently working with
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partners to develop additional tests to supplement the existing product lines.
The following summarizes Corgenix's current product and technology development
programs:
ANTIPHOPHOLIPID ANTIBODY TESTING PRODUCTS
The Company has completed the development of three additional
antiphospholipid products to complement the existing line of five products in
the ELISA Microplate format. These new tests, anti- 2 Glycoprotein I - IgG,
anti- 2 Glycoprotein I - IgM and anti- 2 Glycoprotein I - IgA, will be marketed
for the diagnosis of antiphospholipid syndrome and related immunological
disorders. Corgenix is one of the market leaders in development of innovative
tests in the antiphospholipid market, and these future products will help ensure
the Company's strong position. These new antiphospholipid products have been
found to be more specific for thrombosis and the antiphospholipid syndrome over
the conventional aCL and aPS tests, and will be configured for sale to hospital
based and free-standing independent laboratories. Filing of the 510(k)
application on the new tests is expected during the third quarter of 1998. See
"-- Regulation."
VASCULAR DISEASE TESTS
The Company has entered into a joint development agreement to develop
additional assays for the measurement of selected coagulation factors that are
significant in the diagnosis and treatment of certain clotting and bleeding
disorders. The measurement of Free Protein S using a monoclonal antibody
provides a more direct and specific assay for the functionally active "free"
form of Protein S in the assessment of thrombosis. This project is currently at
the preclinical stage with FDA filing expected during the fourth quarter of
1998. These tests will use the Company's ELISA format and will provide
significant improvement over existing technology in the market. These assays
will also be formatted as Rapid Tests for the POC market. The Company is also
is early stage development of several unique immunological tests to measure risk
of coronary artery disease and stroke. These markers may prove to be far more
specific and functional than conventional cholesterol or lipid testing, and
could significantly change the risk assessment market worldwide.
Two of the products in early stage development are anti-oxidized LDL and
Lp(a). Atherosclerotic cardiovascular disease is the leading cause of death in
the industrialized world and in the United States alone there are over 1.5
million individuals suffering a heart attack every year. Application of Corgenix
technology to the measurement of anti-oxidized LDL antibodies and Lp(a) will
provide more clinically relevant tests compared with current conventional tests
for cholesterol.
RAPID TEST DELIVERY SYSTEM
Corgenix believes that the Rapid Test delivery technology will
significantly expand the POC market opportunity. This technology will allow the
introduction of next generation products, which will require a substantially
shorter period to develop, test and submit for regulatory approval. Each test
piece will contain all of the reagents necessary to conduct the assay, following
the simple step of sample addition. If successful, this technology could enable
the Company to make products that are easier to use and provide immediate
analysis of biological samples. Initial development will focus on qualitative
measurement of markers that aid in the establishment of the diagnosis or
prognosis of disease conditions. Products in early stage development include
tests for pregnancy, diagnosis of certain infectious diseases, and tests to
measure cardiac markers.
LIVER DISEASE MARKERS
The Company has a letter of intent with a medical university that, if
consummated, would grant Corgenix exclusive worldwide marketing rights to a
recently discovered, very sensitive liver enzyme. In early clinical testing,
this
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enzyme appears to be a unique indicator of the pending rejection of a
transplanted liver, and could also be a sensitive indicator of other causes
of cellular damage to liver tissue. Corgenix expects that development of a
diagnostic test for this enzyme, in multiple formats to address many market
segments, may begin in late 1998.
Corgenix's goal is to continue to develop and bring to the marketplace
innovative, unique diagnostic products with significant market potential,
resulting in more effective and less costly health care delivery. The Company
will take advantage of the many advances in biotechnology by developing new
products for the diagnosis and treatment of immunological disease. As discussed
above, future projects will include expansion into additional high growth areas
including infectious diseases.
COMPETITION
Competition in the human medical diagnostics industry is significant. The
Company's competitors range from development stage diagnostics companies to
major domestic and international pharmaceutical companies. Many of these
companies have financial, technical, marketing, sales, manufacturing,
distribution and other resources significantly greater than Corgenix. In
addition, many of these companies have name recognition, established positions
in the market and long standing relationships with customers and distributors.
The diagnostics industry has recently experienced a period of consolidation
during which many of the large domestic and international pharmaceutical
companies have been acquiring mid-sized diagnostics companies, further
increasing the concentration of resources. However, competition in diagnostic
medicine is highly fragmented, with no company holding a dominant position in
autoimmune, vascular diseases or bone and joint disease. There can be no
assurance that new, superior technologies will not be introduced that could be
directly competitive with or superior to Corgenix's technologies.
Corgenix's competitors include Inova Diagnostics, Inc., Sanofi Diagnostics
Pasteur (a licensee of Corgenix technology under a paid up license), INCSTAR
Corporation, Pharmacia Upjohn, Diagnostica Stago, American Bioproducts, Helena
Laboratories Corporation (an existing licensee of Corgenix technology), Organon
Teknika, Helix Diagnostics, Hemagen Diagnostics, Sigma Diagnostics and Diamedix
Corporation. Some of these companies are larger than Corgenix and have
substantial resources and market presence. Corgenix competes against these
companies on the basis of product performance and customer service.
PATENTS, TRADE SECRETS AND TRADEMARKS
Corgenix has built a strong patent and intellectual property position
around its proprietary application of ELISA technology. Corgenix holds five
United States patents that expire beginning in 2004 and ending in 2010. Corgenix
has no pending patent applications. The Hyaluronic Acid product is protected by
U.S., Japanese and European patents held by Chugai. As part of the agreement
with Chugai, Corgenix has a license to use the Chugai patents to manufacture
this product.
Patent applications in the United States are maintained in secrecy until
patents issue. There can be no assurance that Corgenix's patents, and any
patents that may be issued to it in the future, will afford protection against
competitors with similar technology. In addition, no assurances can be given
that patents issued to Corgenix will not be infringed upon or designed around by
others or that others will not obtain patents that Corgenix would need to
license or design around. If the courts uphold existing or future patents
containing broad claims over technology used by Corgenix, the holders of such
patents could require Corgenix to obtain licenses to use such technology. See
"Part I. Item 2. Management's Discussion and Analysis -- Forward-Looking
Statements and Risk Factors -- Uncertainty of Protection of Patents, Trade
Secrets and Trademarks."
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Corgenix has registered its trademark "REAADS" on the principal federal
trademark register and with the trademark registries in many countries of the
world. The Company has a federal trademark registration pending for the name
"Corgenix."
The Company intends to obtain patent protection for its products and
processes, to preserve its trade secrets and to operate without infringing the
proprietary rights of third parties. Corgenix also relies on trade secrets and
proprietary know-how in its manufacturing processes. The Company requires each
of its employees, consultants and advisors to execute a confidentiality
agreement upon the commencement of any employment, consulting or advisory
relationship with the Company. Each agreement provides that all confidential
information developed or made known to the individual during the course of the
relationship will be kept confidential and not disclosed to third parties except
in specified circumstances. In the case of employees, the agreements provide
that all inventions conceived of by an employee shall be the exclusive property
of the Company.
REGULATION
The testing, manufacturing and sale of Corgenix's products are subject to
regulation by numerous governmental authorities, principally the FDA and foreign
regulatory agencies. The FDA regulates the clinical testing, manufacture,
labeling, distribution and promotion of medical devices, which includes
diagnostic products. Corgenix is restricted from marketing or selling diagnostic
products in the United States until clearance is received from the FDA. In
addition, various foreign countries in which Corgenix's products are or may be
sold impose local regulatory requirements. The preparation and filing of
documentation for FDA and foreign regulatory review can be a lengthy, expensive
and uncertain process.
In the United States, medical devices are classified by the FDA into one of
three classes (Class I, II or III) on the basis of the controls deemed necessary
by the FDA to ensure their safety and effectiveness in a reasonable manner.
Class I devices are subject to general controls (e.g., labeling, premarket
notification and adherence to QSR requirements). Class II devices are subject to
general and special controls (e.g., performance standards, post-market
surveillance, patient registries and FDA guidelines). Generally, Class III
devices are those that must receive premarket approval by the FDA to ensure
their safety and effectiveness (e.g., life-sustaining, life-supporting and
implantable devices or new devices that have been found not to be substantially
equivalent to legally marketed devices). All of Corgenix's current products and
products under development are or are expected to be classified as Class I or
Class II devices.
Before a new device can be introduced in the market, the Company must
obtain FDA clearance or approval through either clearance of a 510(k) premarket
notification or approval of a product marketing approval ("PMA") application,
which is a more extensive and costly application. All of the Company's products
have been cleared using a 510(k) application, and the Company expects that most,
if not all, future products will also qualify for clearance using a 510(k)
application.
It generally takes from four to 12 months from submission to obtain 510(k)
premarket clearance but may take longer. The FDA may determine that a proposed
device is not substantially equivalent to a legally marketed device or that
additional information is needed before a substantial equivalence determination
can be made. A "not substantially equivalent" determination, or a request for
additional information, could prevent or delay the market introduction of new
products that fall into this category. For any devices that are cleared through
the 510(k) process, modifications or enhancements that could significantly
affect safety or effectiveness, or constitute a major change in the intended use
of the device, will require new 510(k) submissions. There can be no assurance
that Corgenix will be able to obtain necessary regulatory approvals or
clearances for its products on a timely basis, if at all, and delays in receipt
of or failure to receive such approvals or clearances, the loss of previously
received approvals or clearances, limitations on intended use imposed as a
condition of such approvals or clearances, or failure to comply with existing or
future regulatory
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requirements could have a material adverse effect on Corgenix's business,
financial condition and results of operations. See "Part I. Item 2.
Management's Discussion and Analysis -- Forward-Looking Statements and Risk
Factors -- Governmental Regulation of Diagnostic Products."
Corgenix's customers using diagnostic tests for clinical purposes in the
United States are also regulated under the Clinical Laboratory Information Act
of 1988 (the "CLIA"). The CLIA is intended to ensure the quality and reliability
of all medical testing in laboratories in the United States by requiring that
any health care facility in which testing is performed meets specified standards
in the areas of personnel qualification, administration, participation in
proficiency testing, patient test management, quality control, quality assurance
and inspections. The regulations have established three levels of regulatory
control based on test complexity: "waived," "moderately complex" and "highly
complex." Corgenix's current ELISA tests are categorized as "moderately
complex" tests for clinical use in the United States. Under the CLIA
regulations, all laboratories performing high or moderately complex tests are
required to obtain either a registration certificate or certification of
accreditation from the United States Health Care Financing Administration
("HCFA"). There can be no assurance that the CLIA regulations and future
administrative interpretations of CLIA will not have an adverse impact on the
potential market for Corgenix's future products. Corgenix expects that the to be
developed Rapid Tests will be categorized as CLIA "waived" tests. Laboratories
performing CLIA "waived" tests face less stringent registration and
certification requirements.
Corgenix also is subject to numerous federal, state and local laws relating
to such matters as safe working conditions, manufacturing practices,
environmental protection, fire hazard control and disposal of hazardous or
potentially hazardous substances. There can be no assurance that Corgenix will
not incur significant costs to comply with laws and regulations in the future or
that such laws or regulations will not have a material adverse effect upon
Corgenix's business, financial condition and results of operations.
REIMBURSEMENT
Corgenix's largest market segment is the hospital based and free standing
independent laboratory market. Payment for testing in this segment is largely
based on third party payor reimbursement. The site, which performs the test,
will submit an invoice to the patient's insurance provider (or the patient if
not covered by a program). Each diagnostic procedure (and in some instances,
specific technologies) is assigned a current procedural terminology ("CPT") code
by the American Medical Association. Each CPT code is then assigned a
reimbursement level by HCFA. Third party insurance payors typically establish a
specific fee to be paid for each code submitted. Third party payor reimbursement
policies are generally determined with reference to the reimbursement for CPT
codes for Medicare patients, which themselves are determined on a national basis
by HCFA.
EMPLOYEES
As of June 18, 1998, Corgenix employed 32 employees, 27 full time and 5
part-time. Of these, 6 hold advanced scientific or medical degrees. None of
Corgenix's employees is covered by a collective bargaining agreement. Corgenix
believes that it maintains good relations with its employees.
FACILITIES
Corgenix currently leases approximately 12,000 square feet of space in one
building in Westminster, Colorado, which is used for its administrative offices,
research and development facilities and manufacturing operations. The lease
expires May 30, 2001 with renewal options. Corgenix also leases approximately
1,400 square feet of office space in Peterborough, Cambridgeshire, United
Kingdom under a lease that expires September 25, 2001. Corgenix believes that
suitable additional or alternative space will be available on commercially
reasonable terms as needed, but that its existing facilities will be sufficient
for its operational purposes through the end of the leases.
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LEGAL PROCEEDINGS
Corgenix is not a party to any material litigation or legal proceedings.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with the financial
statements and accompanying notes included elsewhere in this Registration
Statement.
GENERAL
Since the Company's inception, Corgenix has been primarily involved in the
research, development, manufacturing and marketing of diagnostic tests for sale
to clinical laboratories. Corgenix currently markets 23 products covering
autoimmune disorders, vascular diseases, bone and joint diseases and liver
disease. Corgenix's products are sold in the United States through the Company's
marketing and sales organization that includes 14 sales representatives,
internationally through an extensive distributor network, and to several
significant OEM partners.
Corgenix manufactures products for inventory based upon expected sales
demand, shipping products to customers, usually within 24 hours of receipt of
orders. Accordingly, Corgenix does not operate with a backlog, and the Company
anticipates that its inventory will increase significantly in the future.
Except for the fiscal year ending June 30, 1997, the Company has
experienced revenue growth since its inception, primarily from sales of products
and contract revenues from strategic partners. Contract revenues consist of
licensing fees, milestone payments, and royalty payments from research and
development agreements from strategic partners.
Beginning in fiscal year 1996, Corgenix added third-party OEM licensed
products to its diagnostic product line, licensing six diagnostic products from
Cambridge. In 1998, the Company added four additional products to its product
line through OEM licenses from other third party manufacturers. Corgenix expects
to expand its relationship with other companies in the future to gain access to
additional products.
Although Corgenix has experienced growth in revenues every year since 1990
except for 1997, there can be no assurance that, in the future, Corgenix will
sustain revenue growth or achieve profitability. Corgenix's results of
operations may fluctuate significantly from period-to-period as the result of
several factors, including: (i) whether and when new products are successfully
developed and introduced, (ii) market acceptance of current or new products,
(iii) seasonal customer demand, (iv) whether and when Corgenix receives R&D
milestone payments and license fees from strategic partners, (v) changes in
reimbursement policies for the products that Corgenix sells;,(vi) competitive
pressures on average selling prices for the products that Corgenix sells, and
(vii) changes in the mix of products that Corgenix sells.
RESULTS OF OPERATIONS
YEARS ENDED JUNE 30, 1997 AND 1996
NET SALES. From its inception in 1990, the Company has achieved average
annual net sales growth of 36%. Net sales for the year ended June 30, 1997 were
$2.44 million, a 0.9% decline from $2.46 million in 1996. A component of net
sales, product sales, decreased 3.6% to $2.27 million in 1997 from $2.35 million
in 1996. The lack of product sales growth in fiscal 1997 resulted primarily
from: (i) an unforecasted drop in sales of the Hyaluronic Acid product to Chugai
for distribution in Japan, (ii) loss of the Company's largest United States
customer, which was acquired by another laboratory (a loss of $163,000 in
product sales in 1997 from 1996), and (iii) the reduction in purchases from
another United States customer in the amount of $94,000 from 1996 to 1997. Sales
of HA declined 10.2% from $747,000 in 1996 to $671,000 in 1997, due primarily to
a design flaw in a critical raw material component discussed below.
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Also included in net sales are partnership payments from strategic
alliances that increased from $51,000 in 1996 to $200,000 in 1997. Additionally,
royalty income to Corgenix decreased from $60,000 in 1996 to $0 in 1997 as a
licensing agreement was converted to a paid up license.
COST OF SALES. Cost of sales increased 57.6% to $1.32 million in 1997 from
$836,000 in 1996, due primarily to a design flaw in a critical raw material
component used in the HA product. In 1997, an additional $479,000 was charged to
cost of sales because of this problem. The critical component design flaw has
been resolved and management does not anticipate further adverse results from
this design flaw. The gross profit declined from 66% in 1996 to 46% in 1997 due
to this component design flaw. Excluding $479,000 in expense to correct the
design flaw, gross profit would have been relatively unchanged at 65% in 1997.
RESEARCH AND DEVELOPMENT. Research and development expenses increased 14.5%
to $380,000 in 1997 from $332,000 in 1996, primarily due to hiring additional
scientific staff, consulting fees and other costs related to ongoing development
programs.
SELLING AND MARKETING. Selling and marketing expenses increased 24.3% from
$597,000 in 1996 to $742,000 in 1997, primarily due to increased costs
associated with expansion of the Company's sales organization in Europe.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
25.2% to $724,000 in 1997 from $578,000 in 1996, due in part to legal,
accounting and other costs relating to strategic partnering activities,
financing activities and the relocation to the Company's current facility.
OTHER EXPENSES. Other expenses increased 14.6% to $95,000 in 1997 from
$83,000 in 1996 due primarily to higher interest expense resulting from higher
debt levels throughout 1997. Interest expense increased 59.3% to $50,000 in 1997
from $31,000 in 1996, while factoring expenses decreased 12.6% to $45,000 in
1997 from $51,000 in 1996 due to the Company discontinuing factoring accounts
receivable in 1997.
NINE MONTHS ENDED MARCH 31, 1998 AND 1997
NET SALES. Net sales for the nine months ended March 31, 1998 were $1.83
million, a 15.1% increase from $1.59 million in the same period in 1997. This
increase was primarily due to an increase in product sales, which increased
17.8% to $1.79 million in 1998 from $1.52 million in 1997. Sales of the HA
product to Chugai for distribution in Japan increased 35.1% to $519,000 in 1998
from $384,000 in 1997 due to increased marketing focus by Chugai following
resolution of the design flaw in 1997. Product sales in the United States
increased 19.2% to $878,000 in 1998 from $736,000 in 1997. OEM sales (excluding
Chugai) increased 20.3% to $218,000 in 1998 from $181,000 in 1997. Other income
decreased 58.6% to $42,000 in 1998 from $101,000 in 1997 due to timing of
payments from strategic partners.
COST OF SALES. Cost of sales decreased 6.4% to $820,000 in 1998 from
$876,000 in 1997, due primarily to lower production costs resulting from the
resolution of the HA design flaw in 1997. This was offset by higher costs
associated with the transfer of three new Corgenix products into production, and
the conversion of labels and outer boxes for the Chugai HA product. The Chugai
packaging change was required due to the restructuring of Chugai from a division
within Chugai Pharmaceuticals to a wholly owned subsidiary. The gross profit
percentage increased to 55.2% in 1998 from 46.9% in 1997.
RESEARCH AND DEVELOPMENT. Research and development expenses increased 3.7%
to $289,000 in 1998 from $279,000 in 1997 primarily due to hiring additional
scientific staff, consulting fees and other costs related to ongoing development
programs.
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SELLING AND MARKETING. Selling and marketing expenses increased 12.6% to
$538,000 in 1997 from $478,000 in 1997, primarily due to increased costs
associated with the continued expansion of the Company's sales organization in
Europe.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
29.4% to $689,000 in 1998 from $533,000 in 1997, due in part to legal,
accounting and other costs relating to strategic partnering activities and
financing activities.
OTHER EXPENSES. Other expenses increased 78.3% to $121,000 in 1998 from
$68,000 in 1997 due primarily to higher interest expense resulting from higher
debt levels throughout 1997. Interest expense increased to $119,000 in 1998 from
$23,000 in 1997 while factoring expenses decreased to $1,800 in 1998 from
$45,000 in 1997 due to the Company discontinuing factoring accounts receivable
in 1997.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, Corgenix has financed its operations primarily through
private placements of common and preferred stock, raising net proceeds of
approximately $2.7 million from sales of these securities. Corgenix has also
received financing for operations from sales of diagnostic products and
agreements with strategic partners. Through June 30, 1997 and March 31, 1998,
Corgenix had invested $349,000 and $230,000, respectively, (net of accumulated
depreciation) in leasehold improvements, laboratory and computer equipment and
office furnishings and equipment to support its development and administrative
activities.
Corgenix's principal sources of liquidity are short and long term debt
financing, of which $1,111,000 remained outstanding as of March 31, 1998.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards, No. 130, REPORTING COMPREHENSIVE
INCOME ("Statement No. 130"), effective for years beginning after December 15,
1997. Statement No. 130 establishes standards for reporting and displaying
comprehensive income and its components in a full set of general-purpose
financial statements. The Company is not required and therefore has not yet
adopted Statement No. 130. The Company will comply with the reporting and
display requirements under this statement when required.
In June 1997, the FASB issued Statement of Financial Accounting Standards,
No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
("Statement No. 131"), effective for years beginning after December 15, 1997.
Statement No. 131 establishes standards for reporting information about
operating segments and the methods by which such segments were determined. The
Company is not required and therefore has not yet adopted Statement No. 131.
The Company will comply with the reporting requirements under this statement
when required.
In February 1998, the FASB issued Statement of Financial Accounting
Standards No. 132, EMPLOYERS' DISCLOSURES ABOUT PENSIONS AND OTHER
POSTRETIREMENT BENEFITS ("Statement No. 132"), effective for fiscal years
beginning after December 15, 1997. Statement No. 132 revises disclosures about
pension and other postretirement benefit plans. It does not change the
measurement or recognition of those plans. Statement No. 132 standardizes the
disclosure requirements and suggests combined formats for presentations of such
disclosures. The Company is not required and therefore has not yet adopted
Statement No. 132. The Company will comply with the reporting requirements
under this statement when required.
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In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 (the "SOP") REPORTING ON THE COSTS OF START-UP
ACTIVITIES, effective for fiscal years beginning after December 15, 1998 and
encouraging earlier adoption. The SOP broadly defines start-up activities as
those one time activities related to, among other things, opening a new
facility. In general, the SOP requires the Company to expense as incurred those
costs. Currently, the Company expenses such costs.
YEAR 2000 EFFECT
The Year 2000 will impact computer programs written using two digits rather
than four to define the applicable year. Any programs with time-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 operation, including a temporary inability to process
transactions, send invoices or engage in other ordinary activities. This problem
largely affects software programs written years ago, before the issue came to
prominence. Corgenix recently reviewed all of its software for exposure to Year
2000 issues, including network and workstation software, and does not believe
that it has significant risk associated with the problem. Corgenix primarily
uses third-party software programs written and updated by outside firms, each of
whom has stated that its software is Year 2000 compliant. To assure that all
software programs can successfully work in conjunction with each other after the
year 1999, Corgenix plans to test all of its software during the third quarter
of 1998 using a combination of past and future dates. Although no problems are
expected from this test, any problems will be corrected before the end of the
1998 calendar year. The cost of modifying or replacing software to bring
Corgenix into compliance, if necessary, is not expected to be significant.
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
This Registration Statement includes statements that are not purely
historical and are "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1934, as amended, including statements regarding
the Company's expectations, beliefs, intentions or strategies regarding the
future. All statements other than historical fact contained in this
Registration Statement, including, without limitation, statements regarding
future product developments, acquisition strategies, strategic partnership
expectations, technological developments, the availability of necessary
components, research and development programs and distribution plans, are
forward-looking statements. All forward-looking statements included in this
Registration Statement are based on information available to the Company on the
date hereof, and the Company assumes no obligation to update such
forward-looking statements. Although the Company believes that the
assumptions and expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to
have been correct or that the Company will take any actions that may
presently be planned.
Certain factors that could cause actual results to differ materially from
those expected include the following:
LOSSES INCURRED; FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company has incurred operating losses and negative cash flow from
operations for the last two fiscal years and the first nine months of the
current fiscal year. Losses incurred by the Company since its inception have
aggregated over $3 million, and there can be no assurance that the Company will
be able to generate positive cash flow to fund its operations in the near
future. Assuming no significant uses of cash in acquisition activities or other
significant changes, the Company believes it will have sufficient cash to
satisfy its funding needs for at least the next four months. If the Company is
not able to operate profitably and generate a positive cash flow, however, it
may need to raise additional capital to fund its continuing operations. If the
Company needs additional financing to meet its requirements, there can be no
assurance that it will be able to obtain such financing on terms satisfactory to
it, if at all. Alternatively, any additional equity financing may be dilutive
to existing stockholders, and debt financing, if available, may include
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restrictive covenants. If adequate funds are not available, the Company might
be required to limit its research and development activities, which could have a
material adverse effect on the future of the Company's business.
DEPENDENCE ON COLLABORATIVE RELATIONSHIPS AND THIRD PARTIES FOR PRODUCT
DEVELOPMENT AND COMMERCIALIZATION
The Company has entered into licensing and research and development
agreements with collaborative partners, from which it derived a significant
percentage of its revenues in 1997. Pursuant to these agreements, the Company's
collaborative partners have specific responsibilities for the costs of
development, promotion, regulatory approval and/or sale of the Company's
products. The Company will continue to rely on present and future collaborative
partners for the development of products and technologies. There can be no
assurance that the Company will be able to negotiate future such collaborative
arrangements on acceptable terms, if at all, or that current or future
collaborative arrangements will be successful. To the extent that the Company
is not able to establish such arrangements, it could experience increased
capital requirements or be forced to undertake such activities at its own
expense. The amount and timing of resources that any of these partners devotes
to these activities will generally be based on progress by the Company in its
product development efforts. Usually, collaborative arrangements may be
terminated by the partner upon prior notice without cause and there can be no
assurance that any of these partners will perform its contractual obligations or
that it will not terminate its agreement. With respect to any products
manufactured by third parties, there can be no assurance that any third-party
manufacturer will perform acceptably or that failures by third parties will not
delay clinical trials or the submission of products for regulatory approval or
impair the Company's ability to deliver products on a timely basis. See "--
Dependance on Distribution Partners for Sales of Diagnostic Products in
International Markets," "Item 1. Description of Business -- Chugai Strategic
Relationship" and "-- Other Strategic Relationships."
NO ASSURANCE OF SUCCESSFUL OR TIMELY DEVELOPMENT OF ADDITIONAL PRODUCTS
The Company's business strategy includes the development of additional
diagnostic products. The Company's success in developing new products will
depend on its ability to achieve scientific and technological advances and to
translate these advances into commercially competitive products on a timely
basis. Development of new products requires significant research, development
and testing efforts. The Company will have limited resources to devote to the
development of products and, consequently, a delay in the development of one
product or the use of resources for product development efforts that prove
unsuccessful may delay or jeopardize the development of other products. Any
delay in the development, introduction and marketing of future products could
result in such products being marketed at a time when their cost and performance
characteristics would not enable them to compete effectively in their respective
markets. If the Company is unable, for technological or other reasons, to
complete the development and introduction of any new product or if any new
product is not approved or cleared for marketing or does not achieve a
significant level of market acceptance, the Company's results of operation could
be materially and adversely affected. See "Part I. Item 1. Description of
Business -- Products and Markets" and "--Regulation."
COMPETITION IN THE DIAGNOSTICS INDUSTRY
Competition in the human medical diagnostics industry is, and is expected
to remain, significant. The Company's competitors range from development stage
diagnostics companies to major domestic and international pharmaceutical
companies. Many of these companies have financial, technical, marketing, sales,
manufacturing, distribution and other resources significantly greater than those
of the Company. In addition, many of these companies have name recognition,
established positions in the market and long standing relationships with
customers and distributors. Moreover, the diagnostics industry has recently
experienced a period of consolidation, during which many of the large domestic
and international pharmaceutical companies have been acquiring mid-sized
diagnostics companies, further increasing the concentration of resources. There
can be no assurance that technologies will not be introduced
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<PAGE>
that could be directly competitive with or superior to the Company's
technologies. See "Part I. Item 1. Description of Business -- Competition."
GOVERNMENTAL REGULATION OF DIAGNOSTICS PRODUCTS
The testing, manufacture and sale of the Company's products is subject to
regulation by numerous governmental authorities, principally the FDA and certain
foreign regulatory agencies. Pursuant to the Federal Food, Drug, and Cosmetic
Act, and the regulations promulgated thereunder, the FDA regulates the
preclinical and clinical testing, manufacture, labeling, distribution and
promotion of medical devices. The Company will not be able to commence
marketing or commercial sales in the United States of new products under
development until it receives clearance from the FDA. The testing for,
preparation of and subsequent FDA regulatory review of required filings can be a
lengthy, expensive and uncertain process. Noncompliance with applicable
requirements can result in, among other consequences, fines, injunctions, civil
penalties, recall or seizure of products, repair, replacement or refund of the
cost of products, total or partial suspension of production, failure of the
government to grant premarket clearance or premarket approval for devices,
withdrawal of marketing clearances or approvals, and criminal prosecution. See
"Part I. Item 1. Description of Business -- Regulation."
There can be no assurance that the Company will be able to obtain necessary
regulatory approvals or clearances for its products on a timely basis, if at
all, and delays in receipt of or failure to receive such approvals or
clearances, the loss of previously received approvals or clearances, limitations
on intended use imposed as a condition of such approvals or clearances or
failure to comply with existing or future regulatory requirements could have a
material adverse effect on the Company's business.
DEPENDENCE ON DISTRIBUTION PARTNERS FOR SALES OF DIAGNOSTIC PRODUCTS IN
INTERNATIONAL MARKETS
The Company has entered into distribution agreements with collaborative
partners in which Corgenix has granted distribution rights for certain Corgenix
products to these partners within specific international geographic areas.
Pursuant to these agreements, the Company's collaborative partners have certain
responsibilities for market development, promotion, and sales of the products.
If any of these partners fails to perform its contractual obligations or
terminates its agreement, this could have a material adverse effect on the
Company's business, financial condition and results of operation.
Additionally, the Company intends to expand its distribution network into
additional countries and into different market segments including the POC
market. There can be no assurance that Corgenix will be successful in the
expansion of the distribution network, and the failure to do so would have a
material adverse effect on the Company's business, financial condition and
results of operation.
GOVERNMENTAL REGULATION OF MANUFACTURING AND OTHER ACTIVITIES
As a manufacturer of medical devices for marketing in the United States,
the Company is required to adhere to applicable regulations setting forth
detailed good manufacturing practice requirements, which include testing,
control and documentation requirements. The Company must also comply with
Medical Device Report ("MDR") requirements, which require that a manufacturer
report to the FDA any incident in which its product may have caused or
contributed to a death or serious injury, or in which its product malfunctioned
and, if the malfunction were to recur, it would be likely to cause or contribute
to a death or serious injury. The Company is also subject to routine inspection
by the FDA for compliance with QSR requirements, MDR requirements and other
applicable regulations. The FDA has recently implemented new QSR requirements,
including the addition of design controls that will likely increase the cost of
compliance. Labeling and promotional activities are subject to scrutiny by the
FDA and, in certain circumstances, by the Federal Trade Commission. The Company
may incur significant costs to comply with laws and regulations in the
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<PAGE>
future, which may have a material adverse effect upon the Company's business,
financial condition and results of operations.
REGULATION RELATED TO FOREIGN MARKETS
Distribution of diagnostic products outside the United States is subject to
extensive government regulation. These regulations, including the requirements
for approvals or clearance to market, the time required for regulatory review
and the sanctions imposed for violations, vary from country to country. The
Company may be required to incur significant costs in obtaining or maintaining
its foreign regulatory approvals. In addition, the export by the Company of
certain of its products that have not yet been cleared for domestic commercial
distribution may be subject to FDA export restrictions. Failure to obtain
necessary regulatory or the failure to comply with regulatory requirements could
have a material adverse effect on the Company's business, financial condition
and results of operations.
UNCERTAIN AVAILABILITY OF THIRD PARTY REIMBURSEMENT FOR DIAGNOSTIC PRODUCTS
In the United States, health care providers that purchase diagnostic
products, such as hospitals and physicians, generally rely on third party
payors, principally private health insurance plans, federal Medicare and state
Medicaid, to reimburse all or part of the cost of the procedure. Third party
payors are increasingly scrutinizing and challenging the prices charged for
medical products and services and they can affect the pricing or the relative
attractiveness of the Decreases in reimbursement amounts for tests performed
using the Company's diagnostic products, failure by physicians and other users
to obtain reimbursement from third party payors, or changes in government and
private third party payors' policies regarding reimbursement of tests utilizing
diagnostic products, may affect the Company's ability to sell its diagnostic
products profitably. See "Part I. Item 1. Description of Business --
Regulation" and "-- Reimbursement." Market acceptance of the Company's products
in international markets is also dependent, in part, upon the availability of
reimbursement within prevailing health care payment systems.
UNCERTAINTY OF PROTECTION OF PATENTS, TRADE SECRETS AND TRADEMARKS
The Company's success depends, in part, on its ability to obtain patents
and license patent rights, to maintain trade secret protection and to operate
without infringing on the proprietary rights of others. There can be no
assurance that the Company's issued patents will afford meaningful protection
against a competitor, or that patents issued to the Company will not be
infringed upon or designed around by others, or that others will not obtain
patents that the Company would need to license or design around. The Company
could incur substantial costs in defending itself or its licensees in litigation
brought by others or prosecuting infringement claims against third parties. If
the outcome of any such litigation is unfavorable to the Company, the Company's
business could be adversely affected. See "Part I. Item 1. Description of
Business -- Patents, Trade Secrets and Trademarks."
RISKS REGARDING POTENTIAL FUTURE ACQUISITIONS
The Company's growth strategy includes as a material element the desire to
acquire complementary companies, products or technologies. The Company has not
targeted any acquisition candidates and there is no assurance that the Company
will be able to identify appropriate companies or technologies to be acquired,
or to negotiate satisfactory terms for such an acquisition. Moreover, because
of limited cash resources, the Company will be unable to acquire any significant
companies or technologies for cash and the Company's ability to effect
acquisitions in exchange for the Company's capital stock may depend upon the
market prices for the Common Stock. If the Company does complete one or more
acquisitions, a number of risks arise, such as short-term negative effects on
the Company's reported operating results, diversion of management's attention,
unanticipated problems or legal liabilities, and difficulties in the integration
of potentially dissimilar operations. The occurrence of some or all of these
risks could have a material adverse effect
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<PAGE>
on the Company's business, financial condition and results of operations.
See "Part I. Item 1. Description of Business -- Strategy."
NO ASSURANCE OF MARKET ACCEPTANCE OF POINT-OF-CARE DIAGNOSTIC PRODUCTS
Another growth strategy of the Company is to seek to develop, manufacture
and market POC diagnostic products. Presently, the Company has no products used
in the POC market and there is no assurance that it will be successful in
developing and penetrating the POC market for diagnostic testing. Approximately
75% of diagnostic testing is currently performed at large clinical laboratories
rather than POC sites, and there can be no assurance that caregivers,
laboratories or the medical community in general will accept and utilize the POC
testing system in general or products that may be developed in particular.
Market acceptance of any POC products of the Company will depend on the
Company's ability to develop such products and then demonstrate the accuracy and
value of its products and to persuade caregivers to perform the Company's tests
in the caregivers' own facilities rather than send those tests to clinical
laboratories. In addition, market acceptance of new POC products will depend on
all of the factors that affect other new products. See "Part I. Item 1.
Description of Business -- Industry Overview," "-- Strategy" and "-- Products
and Markets."
DEPENDENCE ON SUPPLIERS
The components of the Company's products include chemical and packaging
supplies that are generally available from several suppliers, except certain
antibodies, which the Company purchases from single suppliers. The Company
mitigates the risk of a loss of supply by maintaining a sufficient supply of
such antibodies to ensure an uninterrupted supply for at least six months.
Although the Company believes that it can substitute a new supplier with respect
to any of these components in a timely manner, there can be no assurances that
the Company will be able to substitute a new supplier in a timely manner and
failure to do so could have a material adverse effect on the Company's business,
financial condition and results of operations.
LIMITED MANUFACTURING EXPERIENCE WITH CERTAIN PRODUCTS
Although the Company has manufactured over ten million diagnostic tests
based on its proprietary applications of ELISA technology, certain of the
Company's diagnostic products in development, particularly POC tests,
incorporate technologies with which the Company has no manufacturing experience.
Assuming successful development and receipt of required regulatory approvals,
significant work may be required to scale up production for each new product
prior to such product's commercialization. There can be no assurance that such
work can be completed in a timely manner and that such new products can be
manufactured cost-effectively, to regulatory standards or in sufficient volume.
SEASONALITY OF PRODUCTS; QUARTERLY FLUCTUATIONS IN RESULTS OF OPERATIONS
The Company's revenue and operating results have historically been
minimally subject to quarterly fluctuations. Certain of the Company's
diagnostic products in development, particularly POC tests for infectious
disease, may demonstrate a higher degree of seasonality. There can be no
assurance that such seasonality in the Company's results of operations will not
have a material adverse effect on the Company's business.
DEPENDENCE ON KEY PERSONNEL
Because of the specialized nature of the Company's business, the success of
the Company will be highly dependent upon its ability to attract and retain
qualified scientific and executive personnel. In particular, the Company
believes its success will depend to a significant extent on the efforts and
abilities of Dr. Luis R. Lopez and Douglass T. Simpson, who would be difficult
to replace. There can be no assurance that the Company will be successful in
attracting
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<PAGE>
and retaining such skilled personnel, who are generally in high demand by
other companies. The loss of, inability to attract, or poor performance by
key scientific and executive personnel may have a material adverse effect on
the Company's business, financial condition and results of operations.
PRODUCT LIABILITY EXPOSURE AND LIMITED INSURANCE
The testing, manufacturing and marketing of medical diagnostic devices
entails an inherent risk of product liability claims. To date, the Company has
experienced no product liability claims, but any such claims arising in the
future could have a material adverse effect on the Company's business, financial
condition and results of operations. Potential product liability claims may
exceed the amount of the Company's insurance coverage or may be excluded from
coverage under the terms of the Company's policy. Additionally, there can be no
assurance that the Company's existing insurance can be renewed by the Company at
a cost and level of coverage comparable to that presently in effect, if at all.
In the event that the Company is held liable for a claim against which it is not
insured or for damages exceeding the limits of its insurance coverage, such
claim could have a material adverse effect on the Company's business, financial
condition and results of operations.
LIMITED PUBLIC MARKET; POSSIBLE VOLATILITY IN STOCK PRICES; PENNY STOCK
RULES
There has, to date, been no active public market for the Company's Common
Stock, and there can be no assurance that an active public market will develop
or be sustained. Although the Company's Common Stock has been traded on the
OTC Bulletin Board-Registered Trademark- since February 1998, the trading has
been sporadic with insignificant volume.
Moreover, the over-the-counter markets for securities of very small
companies such as the Company historically have experienced extreme price and
volume fluctuations during certain periods. These broad market fluctuations and
other factors, such as new product developments and trends in the Company's
industry and the investment markets and economic conditions generally, as well
as quarterly variation in the Company's results of operations, may adversely
affect the market price of the Company's Common Stock. In addition, the
Company's Common Stock is subject to rules adopted by the Securities and
Exchange Commission regulating broker-dealer practices in connection with
transactions in "penny stocks." As a result, many brokers are unwilling to
engage in transactions in the Company's Common Stock because of the added
disclosure requirements.
ITEM 3. DESCRIPTION OF PROPERTY
See description set forth in "Part I. Item 1. Description of Business --
Facilities."
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of May 23, 1998 for (a)
each person (or group of affiliated persons) is known by the Company to own
beneficially more than 5% of the Common Stock, (b) each of the Company's
directors, (c) each of the Named Executive Officers (as set forth in "Part I.
Item 6. Executive Compensation"), and (d) all directors and current executive
officers of the Company as a group. Except as otherwise noted, the Company
believes that the persons or entities in this table have sole voting and
investing power with respect to all the shares of Common Stock owned by them.
The information appearing below concerning persons other than officers and
directors of the Company is to the Company's best knowledge based on information
obtained from the Company's transfer agent.
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<PAGE>
<TABLE>
SHARES BENEFICIALLY OWNED
-------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------ --------- -------
<S> <C> <C>
Dr. Luis R. Lopez(1) .............................. 1,460,310 12.07%
Corgenix Medical Corporation
12061 Tejon Street
Westminster, Colorado 80234
Gulf Atlantic Publishing, Inc. .................... 950,000 7.85%
1947 Lee Road
Winter Park, Florida 32789
Raul Diez Canseco ................................. 679,260 5.61%
Corgenix Medical Corporation
12061 Tejon Street
Westminster, Colorado 80234
Jana Hartinger Mazzini ............................ 662,670 5.48%
Corgenix Medical Corporation
12061 Tejon Street
Westminster, Colorado 80234
Leland P. Snyder .................................. 631,350 5.22%
Corgenix Medical Corporation
12061 Tejon Street
Westminster, Colorado 80234
Copprus Capital S.A. .............................. 629,884 5.21%
19 Ozlem Sokak Lefkosa
Mersin 10, Turkey
Brian E. Johnson .................................. 16,620 *
Mike M. Mustafoglu(2) ............................. 153,000 1.26%
Alev T. Lewis ..................................... 0 *
Douglass T. Simpson ............................... 155,340 1.28%
Ann L. Steinbarger ................................ 55,380 *
All directors and current executive officers
as a group (8 persons)(1)(3) .................... 2,014,470 16.65%
</TABLE>
- ------------------
* Less than 1%
(1) Includes 153,000 shares held of record by Transition Partners Limited, as
to which Dr. Lopez has power to vote. Dr. Lopez disclaims beneficial
ownership of such shares.
(2) Consists solely of shares held by TransGlobal Financial Corporation
("TGF"), of which Mr. Mustafoglu is the president and controlling
shareholder. Mr. Mustafoglu disclaims beneficial ownership of such shares.
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<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth certain information with respect to the
executive officers, certain other management, certain consultants to the Company
and members of the Board of Directors of the Company as of May 23, 1998:
<TABLE>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Luis R. Lopez, M.D.(1) 50 Chief Executive Officer and Chairman of the Board
Douglass T. Simpson(1)(2) 50 President, Chief Operating Officer
W. George Fleming, Ph.D.(1)(3) 66 Vice President, International Operations
Ann L Steinbarger(1) 45 Vice President, Sales and Marketing
Taryn G. Reynolds(1) 38 Vice President, Operations
Catherine A. Fink, Ph.D. 33 Executive Scientific Director
Nanci B. Dexter 33 Director of Quality and Regulatory Affairs
Brian E. Johnson(2)(4) 48 Director
Mike M. Mustafoglu(2)(4) 48 Director
Alev T. Lewis 36 Director
Douglass A. Triplett, M.D.(3) 45 Chairman, Scientific Advisor Board
</TABLE>
- --------------------
(1) Executive Officer
(2) Member of the Audit Committee
(3) Consultant to the Company
(4) Member of the Compensation Committee
LUIS R. LOPEZ, M.D., has served as the Chief Executive Officer and Chairman
of the Board of Directors of the Company since May 1998 and of the Company's
operating subsidiary since it was founded in July 1990. From 1987 to 1990, Dr.
Lopez was Vice President of Clinical Affairs at BioStar Medical Products, Inc.,
a Boulder, Colorado diagnostic firm. From 1986 to 1987 he served as Research
Associate with the Rheumatology Division of the University of Colorado Health
Sciences Center, Denver, Colorado. From 1980 to 1986 he was Professor of
Immunology at Cayetano Heredia University School of Medicine in Lima, Peru,
during which time he also maintained a medical practice with the Allergy and
Clinical Immunology group at Clinica Ricardo Palma in Lima. From 1978 to 1980
Dr. Lopez held a fellowship in Clinical Immunology at the University of Colorado
Health Sciences Center. He received his M.D. degree in 1974 from Cayetano
Heredia University School of Medicine in Lima, Peru. He is a clinical member of
the American College of Rheumatology, and a corresponding member of the American
Academy of Allergy, Asthma and Immunology. Dr. Lopez is licensed to practice
medicine in Colorado, and is widely published in the areas of immunology and
autoimmune disease. He currently serves on the Board of Directors of DDx, Inc.,
a Denver, Colorado privately-held biotechnology firm.
DOUGLASS T. SIMPSON has been the President of the Company since May 1998.
Mr. Simpson joined the Company's operating subsidiary as Vice President of
Business Development in 1992, was promoted to Vice President, General Manager in
1995, to Executive Vice President in 1996 and then to President in February
1998. Prior to joining the Company's operating subsidiary, he was a Managing
Partner at Venture Marketing Group in Austin, Texas, a health care and
biotechnology marketing firm, and in that capacity, served as a consultant to
REAADS from 1990 until 1992.
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<PAGE>
From 1984 to 1990 Mr. Simpson was employed by Kallestad Diagnostics, Inc.
(now Sanofi Diagnostics Pasteur), one of the largest diagnostic companies in
the world, where he served as Vice President of Marketing, in charge of all
marketing and business development for this $200 million medical diagnostics
company. Mr. Simpson holds B.S. and M.S. degrees in Biology and Chemistry
from Lamar University in Beaumont, Texas.
W. GEORGE FLEMING, PH.D., has been the Vice President, International
Operations, of the Company pursuant to a consulting agreement since May 1998.
Dr. Fleming joined the Company's operating subsidiary as Director of European
Operations in 1992, after serving as a consultant in international distribution
to REAADS from 1990 to 1992. He was promoted to Managing Director, European
Operations, and in 1996 to Vice President, International. Prior to joining the
Company's operating subsidiary, Dr. Fleming was a director of Unilever's Medical
Products Group in the UK, a L41 million health care company. He joined Oxoid, a
subsidiary of Brooke Bond in 1968, serving in a number of management positions
leading to his appointment as Director of Marketing in 1976, managing their
growth up to L31 million in 1985, when it was acquired by Unilever. Dr. Fleming
received a B.Sc. degree from Queens University, Belfast, Northern Ireland, and a
Ph.D. in Business Administration from Fairfax University, Baton Rouge,
Louisiana.
ANN L. STEINBARGER has been the Vice President, Sales and Marketing, of the
Company since May 1998. Ms. Steinbarger joined the Company's operating
subsidiary in January 1996 as Vice President, Sales and Marketing with
responsibility for its worldwide marketing and distribution strategies. Prior
to joining REAADS, Ms. Steinbarger was with Boehringer Mannheim Corporation,
Indianapolis, Indiana, a $200 million IVD company. At Boehringer from 1976 to
1996, she served in a series of increasingly important sales management
positions. Ms. Steinbarger holds a B.S. degree in Microbiology from Purdue
University in West Lafayette, Indiana.
TARYN G. REYNOLDS has been the Vice President, Operations, of the Company
since May 1998. Mr. Reynolds joined the Company's operating subsidiary in 1992,
serving first as Director of Administration, then as Managing Director, U.S.
Operations, and then from October 1996 onward as Vice President, Operations with
overall management responsibility for the Company's headquarters facility,
including R&D, Quality, Administration and Manufacturing. Prior to joining
REAADS, Mr. Reynolds held executive positions at Brinker International, MJAR
Corporation and M&S Incorporated, all Colorado-based property, operational and
financial management firms.
CATHERINE A. FINK, PH.D., has been the Company's Executive Scientific
Director since May 1998. Dr. Fink joined the Company's operating subsidiary in
1996 as Director of Research and Development with responsibility for product
development, and in 1997 was promoted to Executive Scientific Director with
additional responsibilities for Quality Control. She chairs the Company's
technical committee. Prior to joining REAADS, Dr. Fink was with DDx, Inc., a
Denver, Colorado based privately-held biotechnology firm from 1994 until 1996,
and from 1993 to 1994 was Product Development Manager at Trinity Biotech plc.,
an Irish biotechnology company which develops and manufactures rapid saliva and
blood based diagnostic tests. From 1990 to 1993, she was with Biosyn Ltd.
(Belfast), a manufacturer of diagnostic tests for medical and veterinary
applications. Dr. Fink received a B.Sc. (with Honors) from University College
Dublin, and a Ph.D. in immunology from the National University at Ireland.
NANCI B. DEXTER has been the Company's Director of Quality and Regulatory
Affairs since May 1998. Ms. Dexter joined REAADS as Director of Quality and
Regulatory Affairs in 1997. From 1996 to 1997, she was Director of Regulatory
Affairs and Quality Assurance at In-X Corporation, a Denver based medical device
company, and from 1993 to 1996, was Manager of Quality Assurance and Quality
Control at Cortech, Inc., a Denver biopharmaceutical company. From 1987 to
1993, Ms. Dexter was with Marquest Medical Products, Inc. (Englewood, Colorado)
where she held several positions, including Manager of Corporate Document
Control. She has a BS degree in Business Administration from Colorado State
University (Ft Collins, Colorado), and is a member of numerous professional
organizations including the American Society for Quality Control, Regulatory
Affairs Professionals Society, Society of Quality Assurance and the Colorado
Medical Device Association. Ms. Dexter is a Certified Quality Auditor.
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<PAGE>
BRIAN E. JOHNSON was appointed as a Director of the Company in May 1998.
Mr. Johnson has served as a director of the Company's operating subsidiary since
1993. He served as Senior Vice President -- Field Service and Senior Vice
President -- Dealer Development and Acquisitions at ADT Security Systems, then
the world's largest provider of electronic security services, from 1996 to 1997.
From 1993 to 1995 he was Executive Vice President and Chief Financial Officer of
Alert Centre, Inc., a Denver-based, publicly traded electronic security services
company, which was acquired by ADT in December 1995. From 1990 through 1993 Mr.
Johnson was Managing Partner at Barnes Johnson & Associates, a small investment
banking and consulting firm specializing in corporate finance and acquisitions.
Previously, he served as chief financial officer and a director of two publicly
traded companies involved in oil and gas exploration and cable television. Mr.
Johnson began his career with Arthur Andersen & Company in Denver. He received
a B.A. in Economics from Muskingum College in Ohio, a J.D. from the University
of Colorado School of Law and an LL.M. in Taxation from the University of Denver
Graduate Program in Taxation. Mr. Johnson is a private investor.
MIKE M. MUSTAFOGLU has been a Director of the Company since September 1996.
Mr. Mustafoglu is the President and principal of TGF, a merchant banking firm
engaged in investments in and providing advisory services to emerging small cap
companies. Prior to establishing TGF in 1991, Mr. Mustafoglu served in
executive positions with the Oxbow Group, which is ranked by Forbes as one of
the top 100 privately held companies in the United States. The Oxbow group of
companies are engaged in venture capital investing, commodities trading,
electricity, oil and coal production, petroleum refining and industrial
manufacturing. Prior to joining Oxbow in 1984, Mr. Mustafoglu was with Getty
Oil, where he had executive positions in corporate finance and Planning. Mr.
Mustafoglu was a director of Serv-Tech, Inc., a Nasdaq National Market System
firm engaged in environmental and maintenance services to the petro-chemical
plants worldwide, until its acquisition by Phillips Environmental in July 1997,
and has been a director of TransContinental Waste Industries, Inc. since July 1,
1997. Mr. Mustafoglu has a bachelor's degree in engineering and a masters in
business administration in finance and quantitative science. Mr. Mustafoglu is
the brother of Alev T. Lewis, another director of the Company.
ALEV T. LEWIS has been a Director of the Company since May 1998. Ms. Lewis
has been a Tax Manager with Ernst & Young since 1996, consulting in the areas of
individual taxation, personal finance and estate planning. From 1991 to 1996,
Ms. Lewis was a corporate tax manager for Amwest Insurance, where she handled
all tax matters and compliance functions. Ms. Lewis is the sister of Mike M.
Mustafoglu, another director of the Company.
DOUGLAS A. TRIPLETT, M.D., has been an advisor to the Company's operating
subsidiary since 1991. He is Vice President and Director of Medical Education
and Director of Hematology for Ball Memorial Hospital in Muncie, Indiana. Since
1980 he has also been a Professor of Pathology, and since 1981 Assistant Dean,
of Indiana University School of Medicine. He previously served as the Director
of the Hematopathology Program at Ball Memorial Hospital, Associate Professor of
Pathology at Indiana University School of Medicine and Chief of Pathology at the
Raymond W. Bliss Army Hospital. A graduate of Indiana University School of
Medicine, Dr. Triplett is Chairman of the Coagulation Resource Committee of the
College of American Pathologists and Co-Chairman of the Scientific Subcommittee
of the International Committee on Thrombosis and Hemostasis: Lupus
Anticoagulants. He is certified by the American Board of Pathology in Anatomic
and Clinical Pathology, Hematology and Transfusion Medicine. Dr Triplett
received the 1989 Medal of the American Society of Clinical Pathologists.
TECHNICAL AND SCIENTIFIC ADVISORS
Corgenix periodically draws on the expertise of several advisors and
consultants in fields related to Corgenix's technology and markets. The Company
is establishing a Scientific Advisory Board ("SAB") whose members will be
available to the Company as needed on an individual basis to advise the Company
with respect to clinical medicine and other matters requiring scientific and
clinical expertise. Members of the Scientific Advisory Board who are not
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<PAGE>
employees of the Company will be compensated for their participation on this
board. The Scientific Advisory Board will b chaired by Dr. Triplett.
COMMITTEES
The Audit Committee consists of Messrs. Johnson, Mustafoglu and Simpson.
The Audit Committee makes recommendations to the Board regarding the selection
of independent auditors, reviews the results and scope of the audit and other
services provided by the Company's independent auditors and reviews and
evaluates the Company's audit and control functions.
The Compensation Committee consists of Messrs. Johnson and Mustafoglu. The
Compensation Committee reviews and recommends for Board approval compensation
for executive officers and makes policy decisions concerning salaries and
incentive compensation for employees and consultants of the Company.
DIRECTORS COMPENSATION
Members of the Board of Directors currently do not receive any compensation
for service on the Board of Directors or any committee thereof. Directors may be
reimbursed for certain expenses in connection with attendance at Board and
committee meetings.
EMPLOYMENT AGREEMENTS
The Company has entered into three-year employment agreements with each of
Dr. Luis R. Lopez, Douglass T. Simpson, Ann L. Steinbarger, Taryn G. Reynolds
and Catherine A. Fink, Ph.D., pursuant to which the Company pays annual salaries
of $160,000, $140,000, $100,000, $90,000 and $80,000, respectively, in 1998.
In addition, the Company has executed a three-year consulting contract with Wm.
George Fleming, Ph.D., who serves as the Company's Vice President, International
Operations in consideration for an annual fee of $60,000 in 1998. These
agreements provide for severance payments equal to the salary due during the
term of the agreement if the employment of the individual is terminated without
cause (as defined in the respective agreements).
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company's
operating subsidiary for the three fiscal years ended June 30, 1997, 1996 and
1995 to the Company's Chief Executive Officer and the two other executive
officers whose total annual salary and bonus exceeded $100,000 for services
rendered to the subsidiary during such fiscal years (collectively, the "Named
Executive Officers").
-30-
<PAGE>
<TABLE>
EXECUTIVE COMPENSATION TABLE
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------ ------------
SECURITIES
FISCAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY OPTIONS(1)
<S> <C> <C> <C>
Luis R. Lopez. . . . . . . . . . . . 1997 $143,333 --
Chairman, Chief Executive Officer 1996 133,333 --
1995 120,000 --
Douglass T. Simpson. . . . . . . . . 1997 $123,333 --
President, Chief Operating Officer 1996 113,333 38,766
1995 100,000 --
Ann L. Steinbarger(2). . . . . . . . 1997 $100,000 --
Vice President 1996 50,000 55,380
1995 -- --
</TABLE>
- -------------------
(1) All awards have been adjusted to reflect the number of shares of Common
Stock of the Company received by the optionholder in consideration of the
cancellation of such options in connection with the Merger.
(2) Ms. Steinbarger commenced employment with the Company in 1996.
The Company has employment agreements with each of the Named Executive
Officers. See "Part I. Item 5. Directors, Executive Officers, Promoters and
Control Persons -- Employment Agreements." The Company currently does not have
any equity incentive or stock purchase plans in place.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has the following relationships with certain of its
stockholders, directors and affiliates.
TGF CONSULTING AGREEMENT
The Company is party to a Consulting Agreement dated May 22, 1998 with TGF.
The Consulting Agreement was entered into in connection with closing of the
Merger. The president and controlling shareholder of TGF is Mike M. Mustafoglu,
who also serves as a director of the Company.
Under the terms of the Consulting Agreement, TGF provides advice to the
Company regarding financial and business matters, including but not limited to,
assistance with fundraising to implement the Company's business plans, review
and assessment of capitalization, merger and acquisition prospects, and other
transactions, on an exclusive basis. The Consulting Agreement is effective for
a three-year term ending May 22, 2001. TGF's fee for its financial and business
advisory services is $180,000.00 (payable in 36 monthly installments of $5,000)
plus a transaction fee equal to (i) 5% of any funds committed and available to
the Company in an equity financing secured through TGF and (ii) 3% of any funds
committed and available to the Company in any debt financing secured through
TGF. In addition, in the event TGF represents the Company with respect to a
merger, acquisition or other transaction involving the disposition or exchange
of securities or assets of the Company, TGF is entitled to a transaction fee
equal to 5% of the total market value of the stock, cash, assets or other
property exchanged by the Company or any of its security holders in
connection with the transaction, such fee payable in the same form as the
consideration payable to the Company or its security holders in the
transaction. Finally, in the event TGF introduces the Company to a joint
venture partner or customer and sales develop as a result of the
introduction, TGF is entitled
-31-
<PAGE>
to a fee equal to 5% of the before-tax income generated from the
introduction, such fee payable for the life of the venture or relationship
developed.
In addition to the foregoing fees, TGF is entitled to reimbursement of
its fees and disbursements incurred in providing its advisory services to the
Company, including without limitation, travel, hotels, food and associated
expenses. The Consulting Agreement includes a number of covenants for the
benefit of TGF. The Company agrees to promptly furnish TGF a copy of all
periodic reports filed by the Company with the Securities and Exchange
Commission, a copy of all press releases released by the Company, copies of
financial statements and other periodic or special reports as and when
provided from time to time to holders of any class of the Company's
securities or to its directors and officers. The Company also agrees to
provide such additional documents and information with respect to the Company
as TGF my from time to time reasonably request.
The Consulting Agreement requires the Company to cause two designees
selected by TGF to be elected to the Company's Board of Directors during each
year of the term of the Agreement, and to notify TGF of each meeting of the
Board. In connection with this right, the Company agrees that the Board of
Directors shall number five members, which number will not be changed without
the prior written consent of TGF, and that the Company will schedule not less
than four regular meetings of the Board of Directors. The right to designate
members to the Company's Board of Directors under the Consulting Agreement
terminates upon the issuance by the Company of an aggregate of 250,000 or
more shares of the Company's Series A Preferred Stock and warrants to
purchase in aggregate of 250,000 or more shares of the Company's Common
Stock. Thereafter, TGF is entitled to have an observer designated by it
present at all meetings of the Board of Directors. The Company agrees to
indemnify and hold TGF and its Board representatives harmless against any
claims, damages, costs and expenses arising solely out of attendance and
participation at any Board meeting, and to include such representatives on
any liability insurance policy providing coverage for the acts of the
Company's officers and directors.
During the term of the Consulting Agreement, the Company is required to
obtain the written consent of TGF (not to be unreasonably withheld) prior to
issuing more than 5% of any class of its Common Stock or preferred stock (or
warrants, options or rights to purchase Common Stock or preferred stock).
The Consulting Agreement requires the Company to indemnify and hold TGF
harmless from any and all liabilities, claims, lawsuits or other judgments or
awards which it may become subject to ( a "Claim") insofar as such Claim
arises out of or is in connection with services rendered by TGF under the
Consulting Agreement or any transactions in connection therewith. Such
indemnity excludes, however, indemnification for Claims arising out of the
reckless acts or omissions of TGF. In turn, TGF agrees to indemnify and hold
the Company harmless against any and all Claims which arise out of or are
based upon any misstatement or omission made by the Company in reliance upon
information furnished in writing to the Company by TGF for inclusion in any
registration statement or prospectus in connection with a transaction to
which the Consulting Agreement applies.
OPTION AGREEMENT
The Company also is party to an Option Agreement dated May 22, 1998 with
TGF. Under the Option Agreement, TGF has the option to purchase 1,000,000
units (the "Units"), each unit comprised of one share of the Company's
authorized but unissued Series A 5% Convertible Preferred Stock and one
warrant to purchase one share of Common Stock at an exercise price of $2.00,
for an aggregate purchase price of $1,000,000. The option is exercisable by
written notice to the Company on or prior to the expiration of a period of 90
days after the date on which the Securities and Exchange Commission declares
effective a registration statement covering the Units and the shares of
Common Stock issuable upon conversion or exercise thereof. The option is
assignable, in whole or in part, by TGF; however the option must be exercised
collectively as to all of the Units subject thereto. TGF may not, however,
assign, sell, transfer, pledge or otherwise dispose of any of the Units or
any other securities of the Company without the prior written consent of the
Company.
-32-
<PAGE>
CORPORATE RELATIONS AGREEMENT
The Company is a party to an agreement dated April 14, 1998 with
Corporate Relations Group, a Florida corporation ("CRG"). Pursuant to this
agreement and a related payment agreement, CRG provides corporate relations
services to the Company for a period of one year for a fee of $75,000. In
connection with the execution of this Agreement, Gulf Atlantic Publishing,
Inc., an affiliate of CRG, purchased 950,000 shares of the Company's Common
Stock for total consideration of $50,000. See "Part I. Item 4. Security
Ownership of Certain Beneficial Owners and Management."
ITEM 8. DESCRIPTION OF SECURITIES
The following description of the capital stock of the Company and
certain provisions of the Articles of Incorporation, as amended (the
"Articles"), Bylaws and Certificate of Designation (the "Certificate of
Designation") for the Company's Series A 5% Convertible Preferred Stock (the
"Series A Preferred Stock") is a summary and is qualified in its entirety by
the provisions of the Articles, Bylaws and Certificate of Designation, which
have been filed as exhibits to this Registration Statement.
The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, $0.001 par value per share, and 5,000,000 shares of preferred
stock, $0.001 par value per share, of which 1,000,000 shares have been
designated as Series A 5% Convertible Preferred Stock. No shares of Series A
Preferred Stock are currently outstanding. As of May 23, 1998 there were
approximately 350 record holders of the Company's Common Stock.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share of
record on all matters submitted to a vote of the stockholders. The holders
of Common Stock are not entitled to cumulative voting rights with respect to
the election of directors, and as a consequence, minority stockholders will
not be able to elect directors on the basis of their votes alone. Subject to
preferences that may be applicable to any then outstanding shares of
preferred 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. However, the Company is restricted in its ability to
declare dividends on its Common Stock by several agreements. See "Part II.
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters."
In the event of a liquidation, dissolution or winding up of the Company,
holders of the Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preference of any
then outstanding preferred stock. Holders of 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. All outstanding shares of Common Stock are fully paid and
nonassessable.
PREFERRED STOCK
The Board of Directors has the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of preferred stock, $.001 par
value per share, in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences, sinking
fund terms and the number of shares constituting any series or the
designation of such series, without any further vote or action by
stockholders. Pursuant to such authority, the Board of Directors has
designated the Series A Preferred Stock, shares of which have not been
issued. See "-- Series A Preferred Stock." The issuance of preferred stock
could, and, if and when issued, the terms of the Series A Preferred Stock
will, adversely affect the voting power of holders of Common Stock and the
likelihood that such holders will receive dividend payments and payments upon
liquidation and could have the effect of delaying, deferring or preventing a
change in control of the Company.
-33-
<PAGE>
SERIES A PREFERRED STOCK
The Company has designated 1,000,000 shares of its preferred stock as
Series A 5% Convertible Preferred Stock. None of the Series A Preferred Stock
is currently outstanding. If and when issued, the material terms of the
Series A Preferred Stock will be as follows:
RANKING
With respect to the payment of dividends and amounts upon liquidation,
the Series A Preferred Stock will rank senior to the Common Stock.
DIVIDENDS
Dividends on the Series A Preferred Stock will be cumulative from the
date of original issue and, if and when declared, will be payable quarterly
in arrears on the fifteenth day of each February, May, August and November
(or, if such day is not a business day, the next business day), at the rate
of $.05 per share per annum. The dividend rate will be adjusted commencing
twenty-four (24) months after the original issue date, by increasing such
rate to $.10 per share per annum, and thereafter on each succeeding twelve
(12) month anniversary of the original issue date, the dividend rate will be
increased by $.02 per share per annum. Dividends on the Series A Preferred
Stock will accrue whether or not the company has earnings, whether or not
there are funds legally available for the payment of such dividends and
whether or not such dividends are declared. Accrued and unpaid dividends will
bear interest from the dividend payment date until the date such dividends
are paid in full at an annual rate equal to ten percent (10%).
CONVERSION
Each share of Series A Preferred Stock will be convertible at any time,
and from time to time, at the option of the holder, into such one fully paid
and nonassessable share of Common Stock. The rate at which a share of Series
A Preferred Stock will be convertible into shares of Common Stock is subject
to adjustment upon the happening of an Extraordinary Common Stock Event (as
defined), in the event of certain recapitalizations, reclassifications,
mergers and share exchanges, and upon the issuance by the Company of shares
of Common Stock for less than Fair Market Value (as defined).
LIQUIDATION
The liquidation preference for each share of Series A Preferred Stock
will be $1.10. The liquidation preference will be adjusted commencing twelve
(12) months after the original issue date, by increasing the liquidation
preference to $1.20 per share per annum, and thereafter on each succeeding
twelve (12) month anniversary of the original issue date, the liquidation
preference will be increased by an amount equal to seven percent (7%) of the
liquidation preference for the preceding twelve (12) month period. Upon
liquidation, holders will be entitled to be paid the liquidation preference
plus an amount equal to accrued and unpaid dividends thereon and accrued and
unpaid interest, if any, on any dividends in arrears, out of the assets
available for such payment.
REDEMPTION
The Series A Preferred Stock is not redeemable prior to two years after
the original issue date. On and after such date and until the date that is
four years after the original issue date, the Series A Preferred Stock will
be redeemable at the option of the Company, in whole, at a redemption price
equal to the then applicable liquidation preference, if the average bid price
of the Common Stock exceeds $5.00 per share for the twenty (20) consecutive
trading days immediately preceding the date notice of redemption is given.
On and after the date that is four years after the original issue date, the
Series A Preferred
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<PAGE>
Stock will be redeemable at the option of the Company, in whole, at a
redemption price equal to the then applicable liquidation preference.
VOTING
Holders of Series A Preferred Stock generally will have no voting rights
except as required by law. However, if dividends on the Series A Preferred
Stock are in arrears for two or more quarterly periods, or if the Company
breaches any provision of the Certificate of Designations and such breach
continues for forty-five (45) days after written notice of such breach, the
holders of Series A Preferred Stock will be entitled to vote for the election
of a majority of the Board of Directors of the Company until all such
dividend arrearages are eliminated or, in the case of a breach, such breach
is remedied or less than 250,000 shares of Series A Preferred Stock remain
outstanding. In addition, for a period of twenty-four (24) months after the
original issue date, the holders of the Series A Preferred Stock, voting
separately as one class, have the right to elect two directors to the Board
of Directors of the Company. Such directors will be elected by the vote of
the holders of a majority, and removed by the vote of the holders of
two-thirds (2/3) of the shares of Series A Preferred Stock then outstanding.
-35-
<PAGE>
GLOSSARY
ANTIBODY -- a protein produced by the body in response to contact with
an antigen, and having the specific capacity of neutralizing, hence creating
immunity to, the antigen.
ANTI-CARDIOLIPIN ANTIBODIES (aCL) -- a class of antiphospholipid
antibody which reacts with a negatively-charged phospholipid called
cardiolipin; frequently found in patients with SLE and other autoimmune
diseases; also reported to be significantly associated with the presence of
both arterial and venous thrombosis, thrombocytopenia, and recurrent fetal
loss.
ANTIGEN -- an enzyme, toxin, or other substance, usually of high
molecular weight, to which the body reacts by producing antibodies.
ANTI-PHOSPHATIDYLSERINE ANTIBODIES (aPS) -- a class of antiphospholipid
antibody which reacts to phosphatidylserine; similar to aCL; believed to be
more specific for thrombosis.
ANTI-OXIDIZED LDL CHOLESTEROL ANTIBODIES -- antibodies to the oxidized
form of LDL cholesterol.
ANTIPHOSPHOLIPID ANTIBODIES -- a family of autoantibodies with
specificity against negatively charged phospholipids, that are frequently
associated with recurrent venous or arterial thrombosis, thrombocytopenia, or
spontaneous fetal abortion in individuals with SLE or other autoimmune
disease.
ANTIPHOSPHOLIPID SYNDROME -- a clinical condition characterized by
venous or arterial thrombosis, thrombocytopenia, or spontaneous fetal
abortion, in association with elevated levels of antiphospholipid antibodies
and/or lupus anticoagulant.
ASSAY -- a laboratory test; to examine or subject to analysis.
AUTOANTIBODY -- an antibody with specific reactivity against a component
substance of the body in which it is produced; a disease marker.
AUTOIMMUNE DISEASES -- a group of diseases resulting from reaction of
the immune system against self components.
BETA 2 GLYCOPROTEIN I (B2GPI) -- a serum protein (cofactor) that
participates in the binding of antiphospholipid antibodies.
COAGULATION -- the process by which blood clots.
COFACTOR -- a serum protein that participates in the binding of
antiphospholipid antibodies, for example B2GPI.
HEMOSTASIS -- mechanisms in the body to maintain the normal liquid state
of blood; a balance between clotting and bleeding.
HYALURONIC ACID (HA) -- a polysaccharide found in synovial fluid, serum
and other body fluids and tissues, elevated in certain rheumatological and
hepatic (liver) disorders.
HDL CHOLESTEROL -- high density lipoprotein associated with cholesterol.
IMMUNOASSAY -- a technique for analyzing and measuring the concentration
of disease markers using antibodies; for example, ELISA.
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<PAGE>
IMMUNOGLOBULIN -- a globulin protein that participates in the immune
reaction as the antibody for a specific antigen.
IMMUNOLOGY -- the branch of medicine dealing with (a) antigens and
antibodies, esp. immunity to disease, and (b) hypersensitive biological
reactions (such as allergies), the rejection of foreign tissues, etc.
IN VITRO -- isolated from the living organism and artificially
maintained, as in a test tube.
IN VIVO -- occurring within the living organism.
LDL CHOLESTEROL -- low density lipoprotein associated with cholesterol.
LIPIDS -- a group of organic compounds consisting of the fats and other
substances of similar properties.
Lp(a) -- abnormal form of LDL cholesterol.
OXIDIZED LDL CHOLESTEROL -- chemical modification (oxidized form) of LDL
cholesterol; the most damaging form.
PLATELETS -- small cells in the blood which play an integral role in
coagulation (blood clotting).
PHOSPHOLIPIDS -- a group of fatty compounds found in animal and plant
cells which are complex triglyceride esters containing long chain fatty
acids, phosphoric acid and nitrogenous bases.
PROTEIN C -- normal blood protein that regulates hemostasis; decreased
levels lead to thrombosis.
PROTEIN S -- normal blood protein that regulates hemostasis; decreased
levels lead to thrombosis.
RHEUMATIC DISEASES -- a group of diseases of the connective tissue, of
uncertain cause and including rheumatoid arthritis (RA), rheumatic fever,
etc., usually characterized by inflammation, pain and swelling of the joints
and/or muscles.
SERUM -- the clear yellowish fluid which separates from a blood clot
after coagulation and centrifugation.
SYSTEMIC LUPUS ERYTHEMATOSUS (SLE) -- a usually chronic disease of
unknown cause, characterized by red, scaly patches that tend to produce
scars, frequently affecting connective tissue and involving the kidneys,
spleen, etc.
THROMBIN -- the enzyme of the blood, formed from prothrombin, that
causes clotting by converting fibrinogen to fibrin.
THROMBOCYTOPENIA -- a condition in which there is an abnormally small
number of platelets in the circulating blood.
THROMBOEMBOLISM -- the obstruction or occlusion of a blood vessel by a
thrombus.
THROMBOSIS -- coagulation of the blood within a blood vessel of any
organ, forming a blood clot.
TUMOR MARKERS --- serum proteins or molecules found in high
concentrations in patients with selected cancers.
VASCULAR -- of or pertaining to blood vessels.
VON WILLEBRAND'S FACTOR (vWF) -- normal blood protein that regulates
hemostasis; decreased levels lead to abnormal bleeding and increased levels
may produce thrombosis.
-37-
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
The Common Stock is currently traded on the OTC Bulletin Board
- -Registered Trademark- under the symbol "COGX". From February 27, 1998 until
the Merger on May 22, 1998, the Common Stock was quoted on the OTC Bulletin
Board -Registered Trademark- under the symbol "GRWT." On June 23, 1998, the
last bid price of the Common Stock on the OTC Bulletin Board -Registered
Trademark- as reported by the OTC Bulletin Board -Registered Trademark- was
$1.00.
The following table sets forth, for the periods indicated, the high and
low bid prices of the Common Stock as reported on the OTC Bulletin
Board-Registered Trademark-. The following quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commissions, and may not
represent actual transactions.
<TABLE>
HIGH LOW
YEAR ENDED JUNE 30, 1998 ---- ---
<S> <C> <C>
First Quarter . . . . . . . . . . . . . . . . . . $ -- $ --
Second Quarter . . . . . . . . . . . . . . . . . -- --
Third Quarter . . . . . . . . . . . . . . . . . . -- --
Fourth Quarter (through June 16, 1998) . . . . . $ 1 $0.3125
</TABLE>
On May 23, 1998 there were approximately 350 holders of record of the
Common Stock.
To date, the Company has not paid any dividends on its Common Stock, and
the Board of Directors of the Company does not currently intend to declare
cash dividends on the Common Stock. The Company instead intends to retain
its earnings to support the growth of the Company's business. Any future
cash dividends would depend on future earnings, capital requirements and the
Company's financial condition and other factors deemed relevant by the Board
of Directors. The Company is restricted from paying dividends without the
approval of its financial advisor, pursuant to the terms of the Consulting
Agreement with TGF. See "Part I. Item 7. Certain Relationships and Related
Transactions --Consulting Agreement." In addition, under the terms of a
promissory note in favor of Eagle Bank, the Company is prohibited from paying
dividends on the Common Stock without the consent of Eagle Bank. The Series
A Preferred Stock, if and when issued, also would prohibit the Company from
paying cash dividends on the Company's Common Stock under certain
circumstances.
ITEM 2. LEGAL PROCEEDINGS
Corgenix is not a party to any material litigation or legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In May 1998, the Company issued in a private transaction 6,120,000
shares of Common Stock and 4,000,000 contingent shares of Common Stock in
connection with the merger of a wholly owned subsidiary of the Company with
and into REAADS. Such shares were issued to former securityholders of REAADS
in exchange for all of the outstanding securities of REAADS. Such shares
were issued in reliance upon exemptions from the registration requirements of
Section 5 of the Act provided by Rule 506 of Regulation D under the Act.
-38-
<PAGE>
Also in May 1998, the Company sold in a private placement transaction a
total of 3,950,000 shares of Common Stock at a weighted average price of
$.2532 per share to 28 investors, the majority of which were U.S. persons.
These sales were made in reliance upon exemptions from the registration
requirements of Section 5 of the Act provided by Rule 504 of Regulation D
under the Act.
Also in May 1998, the Company issued 153,000 shares of Common Stock to
TGF, a financial advisor to the Company, in partial consideration of services
rendered to the Company. This sale was made in reliance upon an exemption
from the registration requirements of Section 5 of the Act provided by Rule
506 of Regulation D under the Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws provide that the Company will indemnify its
directors and executive officers and may indemnify its other officers,
employees and agents to the fullest extent not prohibited by Nevada law. The
Company is also empowered under its Bylaws to enter into indemnification
agreements with its directors and officers and to purchase insurance on
behalf of any person it is required or permitted to indemnify.
In addition, the Company's Articles provide that the Company's directors
will not be personally liable to the Company or any of its stockholders for
damages for breach of the director's fiduciary duty as a director or officer
involving any act or omission of any such director or officer. Each director
will continue to be subject to liability for breach of the director's
fiduciary duties to the Company for acts or omissions that involve
intentional misconduct, fraud or a knowing violation of law, or the payment
of dividends in violation of Nevada corporate law. This provision also does
not affect a director's responsibilities under any other laws, such as the
federal securities laws.
There is no pending litigation or proceeding involving a director or
officer of the Company as to which indemnification is being sought, nor is
the Company aware of any pending or threatened litigation that may result in
claims for indemnification by any director or officer.
-39-
<PAGE>
PART F/S
INDEX TO FINANCIAL STATEMENTS
<TABLE>
ITEM PAGE NUMBER
<S> <C>
Independent Auditors' Report F-1
Consolidated Balance Sheets as of March 31, 1998 and June 30, 1997
and 1996 F-2
Consolidated Statement of Operations for the Nine Months Ended
March 31, 1998 and the Year Ended June 30, 1997 and 1996 F-3
Consolidated Statements of Stockholders' Equity (Deficit) for the
Nine Months Ended March 31, 1998 and the Year Ended June 30,
1997 and 1996 F-4
Consolidated Statements of Cash Flows for the Nine Months Ended
March 31, 1998 and the Year Ended June 30, 1997 and 1996 F-5
Notes to Consolidated Financial Statements F-6
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS
REAADS MEDICAL PRODUCTS, INC.:
We have audited the accompanying consolidated balance sheets of REAADS Medical
Products, Inc. and subsidiary (Company) as of March 31, 1998 and June 30, 1997
and 1996, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for the nine months ended March 31, 1998 and for
the years ended June 30, 1997 and 1996. 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 REAADS Medical
Products, Inc. and subsidiary as of March 31, 1998 and June 30, 1997 and 1996,
and the results of their operations and their cash flows for the nine months
ended March 31, 1998 and for the years ended June 30, 1997 and 1996, in
conformity with generally accepted accounting principles.
Boulder, Colorado
June 3, 1998
F-1
<PAGE>
<TABLE>
<CAPTION>
REAADS MEDICAL PRODUCTS, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND JUNE 30, 1997 AND 1996
- --------------------------------------------------------------------------------
ASSETS 1998 1997 1996
- ------ ---- ---- ----
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 19,095 141,086 15,915
Accounts receivable, less allowance for doubtful accounts of
$3,432, $3,432 and $31,648 in 1998, 1997 and 1996,
respectively 298,934 601,939 469,421
Inventories 317,118 234,761 344,646
Prepaid expenses 15,748 12,492 4,220
--------- --------- ---------
Total current assets 650,895 990,278 834,202
--------- --------- ---------
Equipment:
Machinery and laboratory equipment 304,744 368,660 198,843
Furniture, fixtures and office equipment 230,806 224,521 110,433
--------- --------- ---------
535,550 593,181 309,276
Less accumulated depreciation and amortization (305,057) (243,754) (185,770)
--------- --------- ---------
Net equipment 230,493 349,427 123,506
--------- --------- ---------
Intangible assets:
Patents, net of accumulated amortization of $554,559, $498,682
and $426,983 in 1998, 1997 and 1996, respectively 562,985 618,862 690,561
Goodwill, net of accumulated amortization of $28,969, $26,037
and $23,144 in 1998, 1997 and 1996, respectively 29,687 32,619 35,512
--------- --------- ---------
592,672 651,481 726,073
--------- --------- ---------
Due from officer 12,000 12,000 12,000
Other assets 50,849 98,209 72,570
--------- --------- ---------
Total assets $ 1,536,909 2,101,395 1,768,351
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of notes payable $ 240,327 124,703 49,758
Accounts payable 546,765 529,546 303,109
Accrued payroll and related liabilities 102,672 109,038 32,264
Other liabilities 79,708 116,754 125,809
Factor payables - - 128,985
---------- ---------- ---------
Total current liabilities 969,472 880,041 639,925
Notes payable, excluding current portion 870,354 915,641 -
--------- --------- -----
Total liabilities 1,839,826 1,795,682 639,925
--------- --------- ---------
Mandatorily redeemable 12%, Class A Preferred stock, 2,000
shares authorized and 113.2 shares issued and outstanding,
liquidation preference of $424,761 in 1998 424,761 388,431 344,625
Stockholders' equity (deficit):
Common stock, $0.01 par value. Authorized 500,000 shares;
issued and outstanding 164,252 shares in 1998 and 164,000
in 1997 and 1996 1,643 1,640 1,640
Additional paid-in capital 2,354,840 2,337,313 2,337,313
Accumulated deficit (3,084,161) (2,421,671) (1,555,152)
--------- --------- ---------
Total stockholders' equity (deficit) (727,678) (82,718) 783,801
--------- --------- ---------
Commitments and contingencies (notes 1, 4, 5 and 7)
Total liabilities and stockholders' equity (deficit) $ 1,536,909 2,101,395 1,768,351
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
REAADS MEDICAL PRODUCTS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
Nine months
ended Years ended June 30,
March 31, --------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net sales $ 1,830,338 2,435,965 2,456,610
Cost of sales 819,505 1,318,256 836,496
--------- --------- ---------
Gross profit 1,010,833 1,117,709 1,620,114
Operating expenses:
Selling and marketing 538,057 742,200 597,157
Research and development 289,369 379,518 331,513
General and administrative 689,013 723,805 577,940
--------- --------- ---------
1,516,439 1,845,523 1,506,610
--------- --------- ---------
Operating income (loss) (505,606) (727,814) 113,504
Other expenses:
Interest expense, net (118,728) (49,922) (31,333)
Factoring expense (1,826) (44,977) (51,490)
--------- --------- ---------
(120,554) (94,899) (82,823)
--------- --------- ---------
Net income (loss) $ (626,160) (822,713) 30,681
========= ========= =========
Net income (loss) per share basic $ (3.82) (5.02) .19
==== ==== ===
and diluted
Weighted average shares outstanding 164,043 164,000 164,000
basic and diluted
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
REAADS MEDICAL PRODUCTS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
NINE MONTHS ENDED MARCH 31, 1998 AND
YEARS ENDED JUNE 30, 1997 AND 1996
- --------------------------------------------------------------------------------
Total
Additional stockholders'
Common paid-in Accumulated equity
stock capital deficit (deficit)
------ ---------- ------- -------
<S> <C> <C> <C> <C>
BALANCES AT JULY 1, 1995 $ 1,640 2,337,313 (1,580,808) 758,145
Preferred stock dividend
requirement - - (5,025) (5,025)
Net income - - 30,681 30,681
------ ---------- --------- -------
BALANCES AT JUNE 30, 1996 1,640 2,337,313 (1,555,152) 783,801
Preferred stock dividend - - (43,806) (43,806)
requirement
Net loss - - (822,713) (822,713)
------ ---------- --------- -------
BALANCES AT JUNE 30, 1997 1,640 2,337,313 (2,421,671) (82,718)
Preferred stock dividend - - (36,330) (36,330)
requirement
Issuance of common stock 3 7,527 - 7,530
Issuance of common
stock warrants - 10,000 - 10,000
Net loss - - (626,160) (626,160)
------ ---------- --------- -------
BALANCES AT MARCH 31, 1998 $ 1,643 2,354,840 (3,084,161) (727,678)
===== ========= ========= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
REAADS MEDICAL PRODUCTS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
Nine months Years ended June 30,
ended March 31, --------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(626,160) (822,713) 30,681
Adjustments to reconcile net income (loss) to net cash
used by operating activities:
Depreciation and amortization 120,112 132,576 127,119
Common stock issued for services 7,500 - -
Accretion of interest discount 7,375 - -
Provision (credit) for uncollectible accounts receivable - (28,216) 24,167
Changes in operating assets and liabilities:
Accounts receivable 303,005 (104,302) (186,641)
Inventories (82,357) 109,885 (190,637)
Prepaid expenses and other assets 44,104 (33,911) (66,535)
Accounts payable 17,219 226,437 96,870
Accrued payroll and related liabilities (6,366) 76,774 64,552
Other liabilities (37,046) (9,055) 78,640
------- --------- -------
Net cash used by operating activities (252,614) (452,525) (21,784)
------- --------- -------
Cash flows from investing activities:
Purchases of equipment (6,285) (283,905) (65,225)
Proceeds from return of equipment 63,916 - -
------- --------- -------
Net cash provided (used) by investing activities 57,631 (283,905) (65,225)
------- --------- -------
Cash flows from financing activities:
Proceeds from issuance of common stock 30 - -
Proceeds from issuance of notes payable 250,000 1,110,891 70,000
Payments on notes payable (177,038) (120,305) (121,986)
Factor payables - (128,985) 12,504
Decrease in due from officer - - (12,000)
Issuance of preferred stock for cash - - 19,200
-------- ---------- -------
Net cash provided (used) by financing activities 72,992 861,601 (32,282)
-------- ---------- -------
Net increase (decrease) in cash and cash
equivalents (121,991) 125,171 (119,291)
Cash and cash equivalents at beginning of period 141,086 15,915 135,206
------- --------- -------
Cash and cash equivalents at end of period $ 19,095 141,086 15,915
======= ========= =======
Supplemental disclosures:
Cash paid for interest $ 111,353 49,922 31,333
======= ========= =======
Noncash operating and financing activities :
Repayment of accrued payroll and other liabilities
through issuance of preferred stock $ - - 209,705
======== ========== =======
Repayment of notes payable through issuance of
preferred stock $ - - 110,695
======== ========== =======
Common stock warrants issued with note payable $ 10,000 - -
======== ========== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
REAADS MEDICAL PRODUCTS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND JUNE 30, 1997 AND 1996
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS, BASIS OF PRESENTATION AND MERGER
REAADS Medical Products, Inc. (Company) develops, manufactures and
markets diagnostic products for the serologic diagnosis of certain
vascular diseases and autoimmune disorders using proprietary technology.
The Company markets its products to hospitals and free-standing
laboratories worldwide through a network of sales representatives,
distributors and private label (OEM) agreements. The Company's offices
are located in Westminster, Colorado.
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 significantly
from those estimates.
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, REAADS Bio-medical Products
(UK) Limited (REAADS UK). REAADS UK was established as a United Kingdom
company during 1996 to market the Company's products in Europe. The
operations of REAADS UK were not significant for the nine months ended
March 31, 1998 or the years ended June 30, 1997 and 1996.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments, purchased with
maturities of three months to be cash equivalents.
INVENTORIES
Inventories are recorded at the lower of cost or market, using the
first-in, first-out method. The components of inventories as of March
31, 1998 and June 30, 1997 and 1996, are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Raw materials $ 100,836 59,851 103,503
Work-in-process 166,368 138,080 214,922
Finished goods 49,914 36,830 26,221
------- ------- -------
$ 317,118 234,761 344,646
======= ======= =======
</TABLE>
F-6
<PAGE>
REAADS MEDICAL PRODUCTS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EQUIPMENT
Equipment is recorded at cost. Depreciation, which totaled $61,303,
$57,984 and $48,705 for the nine months ended March 31, 1998 and the
years ended June 30, 1997 and 1996, respectively, is calculated
primarily using the straight-line method over the estimated useful lives
of the assets which range from 3 to 7 years.
INTANGIBLE ASSETS
Intangible assets consist of purchased patents and goodwill, which are
amortized using the straight-line method over 15 years.
INCOME TAXES
The Company accounts for income taxes under the provisions of Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes
(SFAS No. 109).
Under the asset and liability method of SFAS No. 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
Under SFAS No. 109, the effect on deferred tax assets and liabilities of
a change in tax rates is recognized in the consolidated statement of
operations in the period that includes the enactment date.
FACTOR PAYABLES
The Company factored accounts receivable during fiscal 1996, but
discontinued these factoring arrangements during fiscal 1997. The
Company's factored accounts receivable were $161,232 at June 30, 1996,
and the Company recorded an offsetting factor payable, equal to the
original accounts receivable, less accrued factoring fees.
REVENUE RECOGNITION
Revenue is recognized upon shipment of products.
RESEARCH AND DEVELOPMENT
Research and development costs and any costs associated with internally
developed patents, formulas or other proprietary technology are expensed
in the year incurred.
F-7
<PAGE>
REAADS MEDICAL PRODUCTS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
EARNINGS PER SHARE
The Company has adopted the requirements for Statement of Financial
Accounting Standards No. 128, Earnings Per Share (SFAS 128) for all
periods presented. SFAS 128 requires that disclosure of "basic" earnings
per share and "diluted" earnings per share. Basic earnings per share is
computed by dividing income (loss) available to common stockholders by
the weighted average number of common shares outstanding. Diluted
earnings per share is computed by dividing income (loss) available to
common stockholders by the weighted average number of common shares
outstanding increased for potentially dilutive common shares outstanding
during the period. The dilutive effect of stock options, warrants, and
their equivalents is calculated using the treasury stock method. The
dilutive effect of the exercise of options and warrants has not been
included in the calculation of diluted earnings per share because the
effect in loss years in antidilutive.
LONG-LIVED ASSETS
The Company accounts for its long-lived assets under the provisions of
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of (SFAS No. 121).
SFAS No. 121 requires that the Company's long-lived assets be reviewed
for impairment whenever events or changes in circumstances indicate that
the carrying amount of such assets may not be recoverable. Events
relating to recoverability may include significant unfavorable changes
in business conditions, recurring losses, or a forecasted inability to
achieve break-even operating results over an extended period. The
Company evaluates the recoverability of long-lived assets based upon
forecasted undiscounted cash flows. Should an impairment in value be
indicated, the carrying value of intangible assets will be adjusted,
based on estimates of future discounted cash flows resulting from the
use and ultimate disposition of the asset.
STOCK-BASED COMPENSATION
The Company accounts for its stock purchase and option plan in
accordance with the provisions of Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. As such, compensation expense is recorded on the date
of grant only if the current market price of the underlying stock
exceeds the exercise price. On January 1, 1996, the Company adopted the
disclosure provisions of SFAS No. 123, Accounting for Stock-Based
Compensation, which permits entities to recognize as expense over the
vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 also allows entities to continue to
apply the provisions of APB Opinion No. 25 and provide pro forma net
income disclosures for employee stock option grants as if the fair value
based method defined in SFAS No. 123 had been applied. The Company has
elected to continue to apply the provisions of APB Opinion No. 25 and
provide the pro forma disclosures required by SFAS No. 123.
F-8
<PAGE>
REAADS MEDICAL PRODUCTS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(2) NOTES PAYABLE
On January 7, 1997, the Company obtained a $1 million, 10-year Small
Business Administration (SBA) term loan from Eagle Bank. The loan bears
interest at New York Prime (8.5% at March 31, 1998) plus 2.75%, adjusted
quarterly. Interest and principal payments are due monthly. The loan is
collateralized by: (a) 51% of the Company's voting common stock, which
has been assigned and pledged by certain officers and other
stockholders; (b) senior security in all patent rights, other
intangibles, equipment and inventories; (c) a second position security
interest in all accounts receivable; and (d) a $1 million key man life
insurance policy on the President of the Company.
Additionally, on January 7, 1997, the Company obtained a $50,000 line of
credit from Eagle Bank. The term of the line of credit was one year,
with interest due monthly at the bank's base lending rate (9.0% at March
31, 1998) plus 2%, with principal due at maturity. During January 1998,
this line of credit was converted to a note with interest adjustable to
Eagle Bank's base rate plus 2.75%, due in monthly installments of $2,000
plus accrued interest beginning January 30, 1998 and a balloon payment
of $40,000 plus accrued interest on June 30, 1998. This note is
collateralized by the Company's accounts receivable.
During September and October 1997, the Company borrowed a total of
$150,000 under a note payable from Novadx International, Inc. This note
is due on demand with interest at 11% per annum.
On November 19, 1997, the Company borrowed $100,000 under a note payable
from a stockholder. This note is due on May 19, 1998 with interest at
12%. The Company also issued 6,660 detachable common stock warrants as
additional interest for this note. These warrants expire eight years
from date of issue and are each exercisable into one share of the
Company's common stock at an exercise price of $30 per share. On
November 19, 1997, the Company recorded $10,000 of interest discount to
record the value of the warrants, and amortized the interest discount,
on the interest method over the life of the note.
Notes payable consist of the following at March 31, 1998, June 30, 1997
and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Note payable to Eagle Bank due in
monthly installments of $14,000 through
February 2006 $ 933,806 976,532 -
Note payable to Eagle Bank due June 30, 1998 44,000 50,000 -
Note payable to Novax International Inc. 35,500 - -
Note payable to stockholder 97,375 - -
Notes payable to officers of the Company with
interest rates ranging from 8% to 22%,
due on demand - 13,812 49,758
---------- --------- ------
1,110,681 1,040,344 49,758
Less current portion (240,327) (124,703) (49,758)
---------- --------- ------
Notes payable, excluding current portion $ 870,354 915,641 -
========= ========= =======
</TABLE>
F-9
<PAGE>
REAADS MEDICAL PRODUCTS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
Aggregate maturities of notes payable as of March 31, 1998, are as
follows:
Years ending March 31:
1999 $ 240,327
2000 70,970
2001 79,380
2002 88,785
2003 99,305
Subsequent to 2003 531,914
---------
$ 1,110,681
=========
The carrying values of notes payable approximate fair market value based
on their terms and interest rates.
(3) COST OF SALES
During the year ended June 30, 1997, the Company charged cost of sales
for $479,000 due to a product design flaw of a raw material component
used in one of the Company's products. A sole source manufacturer in
Japan provided the raw material component. The Company was contractually
obligated to purchase the raw material from this manufacturer through a
contract with the Company's largest customer, Chugai Pharmaceutical Co.,
Ltd. The product design flaw has been resolved to the satisfaction of
the end customer, and the Company's management does not anticipate
further adverse results from this situation.
(4) CLASS A PREFERRED STOCK
On April 30, 1996, the Company issued 113.2 shares of mandatorily
redeemable Class A voting preferred stock, primarily to officers and
employees, at $3,000 per share, totaling $339,600. The Company received
$19,200 in cash and issued the remaining $320,400 as payment for
$170,026 of accrued payroll, $39,679 of accrued interest and $110,695 of
notes payable. The preferred stock was recorded at liquidation value
which approximated fair market value at date of issuance.
The preferred stockholders are entitled to 12% cumulative annual
dividends, compounded and due quarterly beginning June 15, 1996. As of
March 31, 1998, preferred stock dividends in arrears totaled $85,161 or
$752 per share.
The preferred stock has a liquidation preference of $3,000 per share,
plus all dividends in arrears.
To the extent funds are lawfully available, the preferred stock is
mandatorily redeemable by the Company, on a pro rata basis, beginning
June 15, 1996 and ending March 15, 1999. Upon redemption, the preferred
stockholders also receive a common stock purchase warrant
F-10
<PAGE>
REAADS MEDICAL PRODUCTS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
entitling the stockholder to purchase 14 shares of the Company's common
stock, at $30 per common share, for each share of preferred stock
redeemed. These common stock warrants expire on March 15, 2001. As of
March 31, 1998, no preferred shares had been redeemed. As of March 31,
1998, 4,528 common stock warrants would be due upon redemptions.
The preferred stock is convertible at anytime by the preferred
stockholders into the Company's common stock at an initial conversion
price of $30 per common share, and is subject to antidilution
provisions, as provided in the preferred stock agreement.
All preferred stock outstanding shall be automatically converted into
the Company's common stock at a price of not less than $60 per common
share in the event of an initial public offering, generating proceeds of
not less than $5,000,000.
(5) COMMON STOCK AND SIGNIFICANT CUSTOMER
At March 31, 1997, Chugai Pharmaceutical Co., Ltd. (Chugai) owned 18,519
shares (11.3%) of the Company's outstanding common stock. Additionally,
the Company has entered into a stock purchase agreement with Chugai
which provides Chugai the right to participate in future sales of the
Company's common stock, and to maintain ownership of at least 10% of the
Company's common stock.
(6) STOCK PURCHASE AND OPTION PLAN
The Company has a stock purchase and option plan, whereby, the Company
may sell shares of its stock, and/or grant options to purchase shares of
its common stock, to key employees, officers, directors and consultants
as determined by the Company's Board of Directors. Options under this
plan are granted at not less than fair market value as of the date of
grant as determined by the Board of Directors, and are exercisable over
5 to 10 year periods.
The Company applies APB Opinion No. 25 in accounting for its options
and, accordingly, because the Company grants options at fair value no
compensation cost has been recognized for its stock options in the
financial statements. Had compensation cost for the Company's
stock-based compensation plan been determined on the fair value at the
grant dates for awards under the plan consistent with the method of SFAS
No. 123, the Company's net income would have been reduced to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
March 31, 1998 June 30, 1997 June 30, 1997
-------------- ------------- -------------
<S> <C> <C> <C>
Net income (loss):
As reported $(626,160) (822,713) 30,681
Pro forma (630,049) (840,637) 20,104
</TABLE>
F-11
<PAGE>
REAADS MEDICAL PRODUCTS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(6) STOCK PURCHASE AND OPTION PLAN (CONTINUED)
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in the nine months ended
March 31, 1998 and fiscal 1997 and 1996, respectively; no dividend
yield, no volatility, risk-free interest rates of 5.6, 5.6 and 5.6
percent, and expected lives of 1 year, 4 and 4 years for the nine months
ended March 31, 1998 and fiscal 1997 and 1996, respectively.
F-12
<PAGE>
REAADS MEDICAL PRODUCTS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- -------------------------------------------------------------------------
(6) STOCK PURCHASE AND OPTION PLAN (CONTINUED)
A summary of the status of the Company's fixed stock options plan for
the nine months ended March 31, 1998, and the years ended June 30, 1997
and 1996, is presented below:
<TABLE>
<CAPTION>
March 31, 1998 June 30, 1997 June 30, 1996
----------------- ------------------ -----------------
Weighted Weighted Weighted
average average average
exercise exercise exercise
Fixed Options Shares price Shares price Shares price
------------- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of period 47,500 $ 23 44,500 $ 22 35,000 $ 20
Granted 2,425 30 4,300 30 9,800 30
Exercised (2) 15 - - - -
Forfeited (5,598) 23 (1,300) 30 (300) 27
------ -- ------ -- ------ --
Outstanding at end of period 44,325 23 47,500 23 44,500 22
====== ====== ======
Options exercisable at period end 35,825 32,550 27,450
Weighted-average fair value of options
granted during the period $30
</TABLE>
The following table summarizes information about fixed stock options
outstanding at March 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options exercisable
------------------------------------------------------------------------------------------------------
Weighted-
Range of Number average Weighted- Number Weighted-
exercise Outstanding at remaining average exdercisable at average exercise
prices March 31, 1998 contractual life exercise price March 31, 1998 price
------ -------------- ---------------- -------------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
$ 15 17,500 1.3 $ 15 17,500 $ 15
27 12,900 3.8 27 12,900 27
30 13,925 6.3 30 5,425 30
-- ------ --- --- ------- --
$ 15 to 30 44,325 3.6 $ 23 35,825 $ 22
====== ======
</TABLE>
F-13
<PAGE>
REAADS MEDICAL PRODUCTS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- -------------------------------------------------------------------------------
(7) COMMITMENTS AND CONTINGENCIES
ROYALTY AGREEMENT
The Company pays royalties to BioStar Medical Products, Inc. (BioStar)
equal to 5% of certain product sales, up to an aggregate of $600,000 in
royalties. As of March 31, 1998, $467,246 of cumulative royalties have
been paid to BioStar. Royalty expense under this agreement totaled
$65,785 for the nine months ended March 31, 1998.
LEASES
The Company is obligated under various noncancelable operating leases
primarily for its operating facilities and certain office equipment. The
leases generally require the Company to pay related insurance costs,
maintenance costs and taxes. Future minimum lease payments under
noncancelable operating leases with initial or remaining terms in excess
of one year as of March 31, 1998 are as follows:
Years ending March 31:
1999 $ 133,964
2000 133,900
2001 133,956
2002 45,052
-------
Total future minimum lease payments $ 446,872
=======
Rent expense totaled $84,060, $121,235 and $75,070 for the period ended
March 31, 1998 and the years ended June 30, 1997 and 1996, respectively.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with key employees,
certain of whom are also stockholders. In addition to salary and benefit
provisions, these agreements include certain commitments should the
employees/stockholders terminate their employment with or without cause.
(8) INCOME TAXES
At March 31, 1998, the Company has a net operating loss carryforward for
income tax purposes of approximately $2,776,000 expiring during the
period from 2006 to 2013. Research and development tax credit
carryforwards approximate $102,000.
As of March 31, 1998, the Company had a gross deferred tax asset of
approximately $1,046,000 relating primarily to the Company's net
operating losses and research and development credit carryforwards. A
valuation allowance in the amount of the deferred tax asset has been
recorded due to the uncertainty of realization of the carryforwards.
F-14
<PAGE>
REAADS MEDICAL PRODUCTS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- -------------------------------------------------------------------------------
(9) RELATED PARTY TRANSACTIONS
The Company has entered into product development, manufacturing and
distribution agreements with Chugai, which provide certain rights for
Chugai to distribute the Company's products in Japan.
Amounts due from an officer are due on June 6, 1999 and do not bear
interest.
(10) CONCENTRATION OF CREDIT RISK
The Company's customers are principally located in the United States,
although it has some foreign customers. The Company has a distribution
agreement with Cambridge Life Sciences plc to distribute the Company's
products in Europe. The Company performs periodic credit evaluations of
its customers' financial condition but generally does not require
collateral for receivables.
Chugai is the Company's largest customer, accounting for approximately
28% of sales in the nine month period ended March 31, 1998,
approximately 40% of sales in 1997 and 34% in 1996 and approximately
14%, 37% and 45% of accounts receivable at March 31, 1998, June 30,
1997 and 1996, respectively.
(11) SUBSEQUENT EVENT
On May 22, 1998, the Company completed a merger with a subsidiary of
Gray Wolf Technologies, Inc., a shell corporation with no significant
assets or operations, and the resulting merged corporation was renamed
Corgenix, Inc. and the parent corporation was renamed Corgenix Medical
Corporation (Corgenix). Effective with the merger, all previously
outstanding common stock, preferred stock, options and warrants of the
Company were exchanged for common stock of Corgenix, resulting in the
previous securityholders of the Company owning approximately 51% of the
voting stock of Corgenix. Also effective with the merger, 3,000,000
shares of Corgenix common stock were issued or subscribed at a weighted
average price of $.33 per share. Proceeds from this offering are
expected to be approximately $892,300, after deducting commissions and
expenses of approximately $107,700.
Corgenix has also retained investment banking counsel to sell
additional equity securities as well as to introduce and assist in the
evaluation of potential acquisitions and partnering opportunities.
Management expects that these efforts will result in the introduction
of other parties with interests and resources which may be compatible
with that of Corgenix. However, no assurances can be given that
Corgenix will be successful in raising additional capital or entering
into a business alliance.
F-15
<PAGE>
PART III
ITEMS 1. AND 2. INDEX TO AND DESCRIPTION OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
2.1* Agreement and Plan of Merger dated as of May 12, 1998 by and among
Gray Wolf Technologies, Inc., Gray Wolf Acquisition Corp. And REAADS
Medical Products, Inc.
2.2* First Amendment to Agreement and Plan of Merger dated as of May 22,
1998 by and among Gray Wolf Technologies, Inc., Gray Wolf Acquisition
Corp. And REAADS Medical Products, Inc.
2.3* Second Amendment to Agreement and Plan of Merger dated as of June 17,
1998 by and among the Company and TransGlobal Financial Corporation.
3.1* Articles of Incorporation, as amended
3.2* Bylaws
4.1* Certificate of Designations for Series A Preferred Stock
10.1* Manufacturing Agreement dated September 1, 1994 between Chugai
Pharmaceutical Co., Ltd. and REAADS Medical Products, Inc.
10.2* Amendment to the Manufacturing Agreement dated as of January 17, 1995
between Chugai Pharmaceutical Co., Ltd. and REAADS Medical Products,
Inc.
10.3* Amendment Agreement dated November 17, 1997 between Chugai Diagnostic
Science, Co., Ltd. and REAADS Medical Products, Inc.
10.4* Distribution Agreement dated August 26, 1993 between Chugai
Pharmaceutical Co., Ltd. and REAADS Medical Products, Inc.
10.5* Amendment to the Distribution Agreement dated September 7, 1994
between Chugai Pharmaceutical Co., Ltd. and REAADS Medical Products,
Inc.
10.6* Distribution Agreement dated November 14, 1997 between Chugai
Diagnostics Science Co, Ltd. and REAADS Bio-Medical Products (UK) Ltd.
10.7* Product Development and Manufacturing Agreement dated September 12,
1994 between REAADS-Registered Trademark- Medical Products, Inc. and
Helena Laboratories Corporation
10.8* Amendment to Product Development and Manufacturing Agreement effective
December 15, 1997 between REAADS Medical Products, Inc. and Helena
Laboratories Corporation
10.9* Office Lease dated February 6, 1996 between Stream Associates, Inc.
And REAADS Medical Products, Inc.
10.10* Guarantee dated November 1, 1997 between William George Flemming,
Douglass Simpson and Geoffrey Vernon Callen
10.11* Employment Agreement dated May 22, 1998 between Luis R. Lopez and the
Company
10.12* Employment Agreement dated May 22, 1998 between Douglass T. Simpson
and the Company
10.13* Employment Agreement dated May 22, 1998 between Ann L. Steinbarger and
the Company
10.14* Employment Agreement dated May 22, 1998 between Taryn G. Reynolds and
the Company
10.15* Employment Agreement dated May 22, 1998 between Catherine (O'Sullivan)
Fink and the Company
10.16* Consulting Contract dated May 22, 1998 between Wm. George Fleming,
Bond Bio-Tech, Ltd. and the Company
III-1
<PAGE>
10.17* Stock Purchase Agreement dated September 1, 1993 between Chugai
Pharmaceutical Co., Ltd. and REAADS Medical Products, Inc.
10.18* Lead Generation/Corporate Relations Agreement dated April 14, 1998
between the Company and Corporate Relations Group, Inc.
10.19* Note dated January 6, 1997 between REAADS Medical Products, Inc. and
Eagle Bank
10.20* Deed of Guarantee Sterling and Currency dated May 14, 1997 by REAADS
Bio-Medical Products (UK) Limited
10.21* Option Agreement dated as of May 22, 1998 between TransGlobal
Financial Corporation and the Company
10.22* Consulting Agreement dated May 22, 1998 between TransGlobal Financial
Corporation and the Company
21.1* Subsidiaries of the Registrant
23.1* Consent of Certified Public Accountants
27* Financial Data Schedule
- --------------
* Filed herewith.
(b) Financial Statement Schedules
None
III-2
<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.
CORGENIX MEDICAL CORPORATION
By: /s/ Douglass T. Simpson
-------------------------------
Name: Douglass T. Simpson
Title: President
III-3
<PAGE>
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
Agreement entered into as of May 12, 1998 by and among Gray Wolf
Technologies, Inc., a Nevada corporation ("Gray Wolf"), Gray Wolf Acquisition
Corp., a Delaware corporation ("Gray Wolf Subsidiary"), and REAADS Medical
Products, Inc., a Delaware corporation (the "Company"). Gray Wolf, the Gray Wolf
Subsidiary, and the Company are sometimes referred to collectively herein as the
"Parties."
W I T N E S S E T H:
WHEREAS, the Gray Wolf Subsidiary is a wholly-owned subsidiary of Gray
Wolf; and
WHEREAS, the Board of Directors of Gray Wolf, the Gray Wolf Subsidiary and
the Company deem it advisable and in the best interest of the respective
corporations and their respective stockholders that the Gray Wolf Subsidiary be
merged with and into the Company in a transaction whereby the Company will
become a wholly-owned subsidiary of Gray Wolf (the "Merger"), all in accordance
with the terms of this Agreement and applicable provisions of law.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants contained in this Agreement, the Parties do hereby agree as follows.
1. DEFINITIONS.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
reasonable amounts paid in settlement, liabilities, obligations, taxes, liens,
losses, expenses, and fees, including court costs and reasonable attorneys' fees
and expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended.
"CERTIFICATE OF MERGER" has the meaning set forth in
Section 2(c) below.
"CLOSING" has the meaning set forth in Section 2(b)
below.
"CLOSING DATE" has the meaning set forth in Section
2(b) below.
"CODE" means the Internal Revenue Code of 1986, as
amended.
"COMPANY COMMON SHARE" OR "COMPANY COMMON SHARES" means any share or
shares of the Common Stock, $.01 par value per share, of the Company.
"COMPANY DISCLOSURE SCHEDULE" means the disclosure schedule, dated
the date hereof, and attachments thereto delivered by the Company to Gray Wolf
simultaneously with the execution of this Agreement.
"COMPANY FINANCIAL STATEMENTS" has the meaning set
forth in Section 4(e) below.
"COMPANY PREFERRED SHARE" OR "COMPANY PREFERRED SHARES" means any
share or shares of the Preferred Stock, $.01 par value of the Company.
<PAGE>
"COMPANY SHARES" means shares of the Company Common Shares and the
Company Preferred Shares.
"COMPANY SHAREHOLDERS" means the holders of Company Shares as of the
Closing Date.
"CONFIDENTIAL INFORMATION" has the meaning set forth in Section 6(g)
below.
"DELAWARE GCL" means the Delaware General Corporation Law, as
amended.
"EFFECTIVE TIME" has the meaning set forth in Section
2(d)(i) below.
"EMPLOYEE BENEFIT PLAN" OR "EMPLOYEE BENEFIT PLANS" means any
pension, profit sharing, deferred compensation, stock option, employee stock
purchase or other employee benefit plan as defined in Section 4001(a)(3) of
ERISA.
"EMPLOYEE PENSION BENEFIT PLAN" means any "employee pension benefit
plan" as defined under Section 3(2) of ERISA.
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set
forth in ERISA Section 3(1).
"ENVIRONMENTAL HEALTH AND SAFETY REQUIREMENTS" means all federal,
state and local environmental, health and safety laws, codes and ordinances, and
all rules and regulations promulgated thereunder relating to (i) air emissions;
(ii) discharges to surface water or groundwater; (iii) noise emissions; (iv)
solid or liquid waste disposal; (v) the use, generation, storage, transportation
or disposal of toxic or hazardous substances or wastes (which shall include any
and all such materials listed in any federal, state or local law, code or
ordinance and all rules and regulations promulgated thereunder as hazardous or
potentially hazardous); or (vi) other environmental, health or safety matters.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"GRAY WOLF" has the meaning set forth in the preamble
above.
"GRAY WOLF ANTI-DILUTION WARRANTS" has the meaning set
forth in Section 2(d)(vi) below.
"GRAY WOLF COMMON SHARE" OR "GRAY WOLF COMMON SHARES" means any share
or shares of the Common Stock, $.001 par value per share, of Gray Wolf.
"GRAY WOLF DISCLOSURE SCHEDULE" means the disclosure statements,
dated the date hereof, and attachments thereto delivered by Gray Wolf to the
Company simultaneously with the execution of this Agreement.
"GRAY WOLF FINANCIAL STATEMENTS" has the meaning set
forth in Section 5(e) below.
"GRAY WOLF PREFERRED SHARE" OR "GRAY WOLF PREFERRED
SHARES" means any share or shares of the Preferred Stock, $.001
par value per share, of Gray Wolf.
2
<PAGE>
"GRAY WOLF SHARES" means shares of the Gray Wolf Common
Shares and Gray Wolf Preferred Shares.
"GRAY WOLF SUBSIDIARY" has the meaning set forth in
the preamble above.
"IRS" means the Internal Revenue Service.
"INTELLECTUAL PROPERTY" shall mean all patents, patent applications,
trademarks, trademark applications, trade secrets, services marks, trade names,
copyrights, inventions, drawings, designs, customer lists, proprietary know-how
or information, other rights with respect thereto, or any other intangible
property rights.
"KNOWLEDGE" means actual knowledge without independent
investigation.
"LOCK-UP AGREEMENT" has the meaning set forth in Section 2(d)(vi).
"MERGER" has the meaning set forth in Section 2(a) below.
"MERGER CONSIDERATION" has the meaning set forth in Section 2(d)(vi)
below.
"MERGER UNITS" has the meaning set forth in Section 2(d)(vi) below.
"MOST RECENT COMPANY FINANCIAL STATEMENTS" has the meaning set forth
in Section 4(e) below.
"MOST RECENT COMPANY FISCAL YEAR END" has the meaning set forth in
Section 4(e) below.
"MOST RECENT COMPANY FISCAL QUARTER END" has the meaning set forth in
Section 4(e) below.
"MOST RECENT GRAY WOLF FINANCIAL STATEMENTS" has the meaning set
forth in Section 5(e) below.
"MOST RECENT GRAY WOLF FISCAL QUARTER END" has the meaning set forth
in Section 5(e) below.
"MOST RECENT GRAY WOLF FISCAL YEAR END" has the meaning set forth in
Section 5(e) below.
"MULTI-EMPLOYER PLAN" means any "multi-employer plan" as defined
under Section 3(37)(A) of ERISA.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PBGC" means the Pension Benefit Guaranty Corporation.
"PARTIES" has the meaning set forth in the preamble above.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated
3
<PAGE>
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"REPORTABLE EVENT" has the meaning set forth in ERISA Section 4043.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, OTHER THAN (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"SERIES A PREFERRED STOCK" shall mean the Gray Wolf Preferred Shares
designated Series A Convertible Preferred Stock pursuant to the Certificate of
Designations attached as Exhibit H to this Agreement and issuable by the Company
pursuant to Section 8 of this Agreement, which shares are convertible into Gray
Wolf Common Shares.
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"SURVIVING CORPORATION" has the meaning set forth in Section 2(a)
below.
"TAX" OR "TAXES" means any federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Warrant" or "Warrants" means the Warrant or Warrants to purchase
Common Stock in the form annexed hereto as Exhibit I issuable by the Company
under Section 8 of this Agreement.
"UNDERLYING SHARES" means the Common Stock underlying and issuable
upon conversion of the Series A Preferred Stock or exercise of the Warrants
2. THE MERGER.
(a) THE MERGER. Subject to the terms and conditions of this
Agreement, the Gray Wolf Subsidiary will merge with and into the Company (the
"Merger") at the Effective Time. The Company shall be the corporation surviving
the Merger (the "Surviving Corporation").
(b) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Company in
Westminster, Colorado, commencing at 10:00 a.m. local time on that business day
as of which all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby have been satisfied or waived (other than
conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date as the Parties may mutually determine (the
"Closing Date"); provided, however, that the Closing Date shall be no later than
May 15, 1998.
4
<PAGE>
(c) ACTIONS AT THE CLOSING. At the Closing, (i) the Company will
deliver to Gray Wolf the various certificates, instruments, and documents
referred to in Sections 3(a)(i) and 7(a) below, (ii) Gray Wolf will deliver the
certificates and instruments representing the Merger Consideration and the
various certificates, instruments, and documents referred to in Sections
2(d)(viii), 3(b)(i) and 7(b) below, and (iii) the Gray Wolf Subsidiary and the
Company will file with the Secretary of State of the State of Delaware, a
Certificate of Merger in the form attached hereto as Exhibit B (the "Certificate
of Merger").
(d) EFFECT OF MERGER.
(i) GENERAL. The Merger shall become effective at the time (the
"Effective Time") the Gray Wolf Subsidiary and the Company file the Certificate
of Merger with the Secretary of State of the State of Delaware. The Merger shall
have the effect set forth in the Delaware GCL. Gray Wolf may, at any time after
the Effective Time, take any action (including executing and delivering any
document) in the name and on behalf of either the Gray Wolf Subsidiary or the
Company in order to carry out and effectuate the transactions contemplated by
this Agreement.
(ii) NAME CHANGE TO CORGENIX, INC. Pursuant to the Certificate
of Merger, the Surviving Corporation shall change its name to CORGENIX, INC.
(iii) CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of the Company in effect at and as of the Effective Time will
remain the Certificate of Incorporation of the Surviving Corporation without any
modification or amendment in the Merger, except that the Certificate of
Designations filed April 25, 1996 with the Secretary of State of the State of
Delaware relating to the Company Preferred Shares shall be terminated and shall
not be part of the Certificate of Incorporation of the Surviving Corporation.
(iv) BYLAWS. The Bylaws of the Company in effect at and as of
the Effective Time will remain the Bylaws of the Surviving Corporation without
any modification or amendment in the Merger.
(v) DIRECTORS AND OFFICERS. The directors of Gray Wolf in
office at and before the Effective Time ("Original Directors") will vote in
three (3) persons nominated by the Company. All except two (2) Original
Directors and all of the officers of Gray Wolf will resign their positions at
the Effective Time.
(vi) CONVERSION OF COMPANY SHARES. At and as of the Effective
Time, provided that all options, warrants, preferred stock and other convertible
or derivative securities of the Company shall have been previously redeemed by
the Company, or exchanged or converted into Company Common Shares, all 204,000
of the Company Common Shares issued and outstanding immediately prior to the
Effective Time, shall be converted into an aggregate of 6,120,000 Merger Units,
each Merger Unit consisting of one (1) Gray Wolf Common Share and one (1) Common
Stock Purchase Warrant entitling the holder to purchase up to .3268 additional
Gray Wolf Common Shares at an exercise price of $.001 per share in the form
attached as Exhibit C to this Agreement (the "Gray Wolf Anti-Dilution
Warrants"), at an exchange ratio of thirty (30) Gray Wolf Merger Units for each
Company Common Share converted (the "Merger Consideration"). The Company Common
Shares and Anti-Dilution Warrants comprising the Merger Units, and the Company
Common Shares underlying the Anti-Dilution Warrants shall be subject to the
terms and provisions of a Lock-Up Agreement in the form attached as Exhibit D to
this Agreement ("Lock-Up Agreement"). After the Effective Time, no Company
Common Share
5
<PAGE>
shall be deemed to be outstanding or to have any rights other than those set
forth above in this Section 2(d)(vi).
(vii) GRAY WOLF SUBSIDIARY SHARES. At and as of the Effective
Time, all of the Gray Wolf Subsidiary Shares issued and outstanding immediately
prior to the Effective Time shall be converted into one (1) share of Common
Stock of the Surviving Corporation. After the Effective Time, no Gray Wolf
Subsidiary Share shall be deemed to be outstanding or to have any rights other
than those set forth above in this Section 2(d)(vii).
(viii) EXCHANGE OF COMPANY COMMON SHARE CERTIFICATES. At and as
of the Effective Time, each Company Shareholder shall receive in exchange for
the Company Shareholder's certificate or certificates representing the Company
Common Shares upon surrender of such certificate or certificates to Gray Wolf,
certificates (each registered in the name of the exchanging Company Shareholder)
representing the number of Gray Wolf Merger Units into which the Company Common
Shares shall have been converted. After the Effective Time, until surrendered in
exchange, the outstanding certificates for the Company Common Shares shall be
deemed for all purposes, other than the payment of dividends or other
distributions to the stockholder, to represent the number of whole Gray Wolf
Common Shares included in the Merger Units into which such Company Shares shall
have been converted.
(e) CLOSING OF TRANSFER RECORDS. After the close of business on the
Closing Date, transfers of Company Shares outstanding prior to the Effective
Time shall not be made on the stock transfer books of the Surviving Corporation.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
(a) REPRESENTATIONS AND WARRANTIES OF COMPANY. Except as set forth in
the Company Disclosure Schedule, the Company represents and warrants to Gray
Wolf that the statements contained in this Section 3(a) are correct and complete
as of the date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout each subsection of this
Section 3(a)).
(i) AUTHORIZATION OF TRANSACTION. The Company has full power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of the Company, enforceable in accordance with its terms and conditions, except
(A) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application affecting enforcement of creditors' rights
and (B) as limited by the application of general principles of equity. The
Company need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any third party, including any government
or governmental agency in order to consummate the transactions contemplated by
this Agreement, except as provided in Section 3(a)(i) of the Company Disclosure
Schedule.
(ii) NONCONTRAVENTION. Neither the execution and delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Company is subject or any provision
of its charter or bylaws or (B) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, Security Interest, license, instrument, or other
arrangement to which the Company is a party or by which it or any of its assets
is subject.
6
<PAGE>
(iii) BROKERS' FEES. The Company has no liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which Gray Wolf could become
liable or obligated.
(iv) INVESTMENT. Each of the Company Shareholders (A)
understands that Gray Wolf Common Shares and Gray Wolf Anti-Dilution Warrants
have not been, and will not be, registered under the Securities Act, or under
any state securities laws, and are being offered and sold in reliance upon
federal and state exemptions for transactions not involving any public offering,
(B) is acquiring Gray Wolf Common Shares and Gray Wolf Anti-Dilution Warrants
solely for his own account for investment purposes, and not with a view to the
distribution thereof, (C) who is not an accredited investor, either alone or
with his purchaser representative(s), has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of the prospective investment, (D) has received certain information
concerning Gray Wolf and has had the opportunity to obtain additional
information as desired in order to evaluate the merits and the risks inherent in
holding Gray Wolf Common Shares and Gray Wolf Anti-Dilution Warrants, and (E) is
able to bear the economic risk and lack of liquidity inherent in holding Gray
Wolf Common Shares and Gray Wolf Anti-Dilution Warrants.
(v) COMPANY SHARES. Each of the Company Shareholders holds of
record and owns beneficially the number of Company Common Shares, set forth on
Exhibit A attached to this Agreement, free and clear of any restrictions on
transfer (other than restrictions under the Securities Act and state securities
laws), Taxes, Security Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. None of the Company Shareholders or
the Company is a party to any option, warrant, purchase right, or other contract
or commitment that could require the Company to sell, transfer, or otherwise
dispose of any capital stock of the Company (other than this Agreement). None of
the Company Shareholders is a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital stock of
the Company.
(b) REPRESENTATIONS AND WARRANTIES OF GRAY WOLF. Gray Wolf represents
and warrants to the Company that the statements contained in this Section 3(b)
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout each
subsection of this Section 3(b)).
(i) AUTHORIZATION OF TRANSACTION. Gray Wolf has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of Gray Wolf, enforceable
in accordance with its terms and conditions, except (A) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights and (B) as limited by the
application of general principles of equity. Gray Wolf need not give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any third party, including any government or governmental agency in order to
consummate the transactions contemplated by this Agreement, except as provided
in Section 3(b)(i) of the Gray Wolf Disclosure Schedule.
(ii) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Gray Wolf is subject or any provision of
the charter or bylaws of either, or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, Security
7
<PAGE>
Interest, license, instrument, or other arrangement to which Gray Wolf is a
party or by which either is bound or to which any of their respective assets is
subject.
(iii) BROKERS' FEES. Gray Wolf has no liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which any Company Shareholder or
the Company could become liable or obligated.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY. The Company
represents and warrants to Gray Wolf that the statements contained in this
Section 4 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Section 4), except as set forth in the Company Disclosure Schedule.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Company is
a corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. The Company is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required, except where the lack of such
qualification would not have a material adverse effect on the business,
financial condition, operations, results of operations, or future prospects of
the Company. The Company has full corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. Section 4(a) of the Company Disclosure Schedule lists the directors
and officers of the Company.
(b) CAPITALIZATION. The entire authorized capital stock of the
Company consists of 500,000 Company Common Shares, of which 164,215 Company
Common Shares are issued and outstanding and 2,000 shares of Class A Preferred
Stock, of which 113.2 shares are issued and outstanding. All of the issued and
outstanding Company Shares have been duly authorized, are validly issued, fully
paid, and nonassessable. Currently, the Company has outstanding options and
warrants to purchase 44,325 and 34,300 Company Common Shares, respectively.
Effective as of the Closing, there will be outstanding 204,000 Company Common
Shares, no Company Preferred Shares, and no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require the Company to
issue, sell, or otherwise cause to become outstanding any of its capital stock.
Effective as of the Closing, there will be no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights with
respect to the Company.
(c) TITLE TO ASSETS. The Company has good and marketable title to, or
a valid leasehold interest in, the properties and assets used by it, located on
its premises, or shown on the Most Recent Company Balance Sheet or acquired
after the date thereof, free and clear of all Security Interests, except for
properties and assets disposed of in the Ordinary Course of Business since the
date of the Most Recent Company Balance Sheet.
(d) SUBSIDIARIES. The Company has the Subsidiaries set forth on
Section 4(d) of the Company Disclosure Schedule. The Company Disclosure Schedule
sets forth with respect to each Subsidiary (i) the number of shares of
authorized capital stock of each class of its capital stock, (ii) the number of
issued and outstanding shares of each class of its capital stock, and (iv) the
number of shares of its capital stock held in treasury. The Company is the
holder of record of all of the issued and outstanding shares of capital stock of
the Subsidiaries. All of the issued and outstanding shares of capital stock of
the Subsidiaries have been duly authorized and are validly issued, fully paid,
and nonassessable.
8
<PAGE>
(e) FINANCIAL STATEMENTS. Attached hereto as Exhibit E are the
following financial statements (collectively the "Company Financial
Statements"): (i) audited consolidated balance sheets and statements of income,
changes in stockholders' equity, and cash flow as of and for the fiscal years
ended June 30,1995, June 30,1996, and June 30,1997 (the "Most Recent Company
Fiscal Year End") for the Company; and (ii) unaudited consolidated balance
sheets and statements of income, changes in stockholders' equity, and cash flow
as of and for the six (6) months ended December 31, 1997 and as of and for the
eight (8) months ended February 28, 1998 for the Company (the "Most Recent
Company Financial Statements"). The Company's most recent fiscal quarter end
(the "Most Recent Company Fiscal Quarter End") and its most recent fiscal month
end (the "Most Recent Fiscal Month End") are March 31, 1998. The Company
Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby and present fairly the financial condition of the Company as of
such dates and the results of operations of the Company for such periods;
provided, however, that the Most Recent Company Financial Statements are subject
to normal year-end adjustments (which will not be material individually or in
the aggregate) and lack footnotes and other presentation items.
(f) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since the Most
Recent Company Fiscal Year End, there has not been any material adverse change
in the business, financial condition, operations, results of operations, or
future prospects of the Company taken as a whole. Without limiting the
generality of the foregoing, since that date:
(i) The Company has not sold, leased, transferred, or assigned
any material assets, tangible or intangible, outside the Ordinary Course of
Business;
(ii) The Company has not entered into any material agreement,
contract, lease, license or other arrangement outside the Ordinary Course of
Business;
(iii) no party (including the Company) has accelerated,
terminated, made material modifications to, or canceled any material agreement,
contract, lease, or license to which the Company is a party or by which it is
bound;
(iv) The Company has not imposed any Security Interest upon any
of its assets, tangible or intangible;
(v) The Company has not made any material capital expenditures
outside the Ordinary Course of Business;
(vi) The Company has not made any material capital investment
in, or any material loan to, any other Person outside the Ordinary Course of
Business;
(vii) The Company has not created, incurred, assumed, or
guaranteed more than $10,000 in aggregate indebtedness for borrowed money and
capitalized lease obligations;
(viii) The Company has not granted any license or sublicense of
any material rights under or with respect to any Intellectual Property;
(ix) there has been no change made or authorized to be made in
the Certificate of Incorporation or bylaws of the Company;
(x) The Company has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any of its
capital stock;
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(xi) The Company has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
(xii) The Company has not experienced any material
damage, destruction, or loss (whether or not covered by
insurance) to its property and assets;
(xiii) The Company has not made any loan to, or entered into any
other transaction with, any of its stockholders, directors, officers, employees
or Affiliates outside the Ordinary Course of Business;
(xiv) The Company has not entered into any employment contract
or collective bargaining agreement, written or oral, or modified the terms of
any existing such contract or agreement;
(xv) The Company has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xvi) The Company has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Employee Benefit
Plan);
(xvii) The Company has not made any other material change in
employment terms for any of its directors, officers, and employees outside the
Ordinary Course of Business; and
(xviii) The Company has not committed to any of the foregoing.
(g) UNDISCLOSED LIABILITIES. The Company has no material liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due, including any liability for Taxes), except for
(i) liabilities set forth on the face of the balance sheet included in the Most
Recent Company Financial Statements (rather than in any notes thereto) and (ii)
liabilities which have arisen after the Most Recent Company Fiscal Month End in
the Ordinary Course of Business.
(h) LEGAL COMPLIANCE. The Company has complied with all applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to comply, except
where the failure to comply would not have a material adverse effect on the
business, financial condition, operations, results of operations, or future
prospects of the Company.
(i) TAX MATTERS.
(i) The Company has filed all income Tax Returns that it was
required to file, and has paid all income Taxes due and owing, except where the
failure to file income Tax Returns or to pay income Taxes would not have a
material adverse effect on the financial condition of the Company taken as a
whole.
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(ii) Section 4(i) of the Company Disclosure Schedule lists all
income Tax Returns filed with respect to the Company for taxable periods ended
on or after June 30, 1991, indicates those income Tax Returns that have been
audited, and indicates those income Tax Returns that currently are the subject
of audit. The Company has delivered to Gray Wolf correct and complete copies of
all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Company since June 30, 1995.
(iii) The Company has not waived any statute of limitations in
respect of income Taxes or agreed to any extension of time with respect to an
income tax assessment or deficiency.
(iv) The Company is not a party to any income Tax allocation or
sharing agreement.
(v) The Company has not filed a consent under Code Section
341(f). The Company has not made any material payments, nor is the Company
obligated to make any material payments, nor is the Company a party to any
agreement that under certain circumstances could obligate it to make any
material payments that will not be deductible under Code Section 280G. The
Company has not been a United States real property holding corporation within
the meaning of Code Section 897(c)(2) during the applicable period specified in
Code Section 897(c)(1)(A)(ii). The Company is not a party to any tax allocation
or sharing agreement.
(vi) The unpaid income Taxes of the Company (A) did not, as of
the Most Recent Company Fiscal Month End, exceed by any material amount the
reserve for income Tax liability (rather than any reserve for deferred taxes
established to reflect timing differences between book and tax income) set forth
on the face of the Most Recent Company Balance Sheet (rather than in any notes
thereto) and (B) will not exceed by any material amount that reserve as adjusted
for operations and transactions through the Closing Date in accordance with the
past custom and practice of the Company in filing its income Tax Returns.
(j) REAL PROPERTY.
(i) The Company owns no real property.
(ii) Section 4(j)(ii) of the Company Disclosure Schedule lists
all real property leased or subleased to the Company. The Company has delivered
to Gray Wolf correct and complete copies of the leases and subleases listed in
Section 4(j)(ii) of the Company Disclosure Schedule (as amended to date). To the
Knowledge of the Company, each lease and sublease listed in Section 4(j)(ii) of
the Company Disclosure Schedule is legal, valid, binding, enforceable, and in
full force and effect, except where the illegality, invalidity, nonbinding
nature, unenforceability, or ineffectiveness would not have a material adverse
effect on the financial condition of the Company taken as a whole.
(k) INTELLECTUAL PROPERTY.
(i) The Company, to its knowledge, has not interfered with,
infringed upon, misappropriated, or violated any material Intellectual Property
rights of third parties, and, except as provided in Section 4(j) of the Company
Disclosure Schedule, the Company has never received any charge, complaint,
claim, demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that the Company must
license or refrain from using any Intellectual Property rights of any third
party). To the Knowledge of the Company, no third party has interfered with,
infringed upon, misappropriated, or violated any material Intellectual Property
rights of the Company in any material respect.
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(ii) Section 4(k)(ii) of the Company Disclosure Schedule
identifies each patent or registration which has been issued to the Company with
respect to any of its Intellectual Property, identifies each pending patent
application or application for registration which the Company has made with
respect to any of its Intellectual Property, and identifies each material
license, agreement, or other permission which the Company has granted to any
third party with respect to any of its Intellectual Property (together with any
exceptions). The Company has delivered to Gray Wolf correct and complete copies
of all such patents, registrations, applications, licenses, agreements, and
permissions (as amended to date). Section 4(k)(ii) of the Company Disclosure
Schedule also identifies each trademark, service mark and trade name, and each
unregistered trademark, service mark and trade name used by the Company in
connection with any of its businesses. With respect to each item of Intellectual
Property required to be identified in Section 4(k)(ii) of the Company Disclosure
Schedule, the Company possesses all right, title, and interest in and to the
item, free and clear of any Security Interest, license, claim or other
restriction: (A) granted by the Company and (B) to the Company's Knowledge,
asserted by any Person based on a claim of infringement, misappropriation or
similar claim.
(l) CONTRACTS. Section 4(l) of the Company Disclosure Schedule lists
all written contracts and other written agreements to which the Company is a
party the performance of which will involve consideration in excess of $10,000.
The Company has delivered to Gray Wolf a correct and complete copy of each
written contract or other written agreement listed in Section 4(l)of the Company
Disclosure Schedule (as amended to date) and a written summary setting forth the
material terms and conditions of each oral agreement referred to in Section 4(l)
of the Company Disclosure Schedule. With respect to each such agreement: (A) the
agreement is legal, valid, binding, enforceable, and in full force and effect in
all material respects; (B) no party is in material breach or default, and no
event has occurred which with notice or lapse of time would constitute a
material breach or default, or permit termination, modification, or
acceleration, under the agreement; and (C) no party has repudiated any material
provision of the agreement.
(m) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable
of the Company are reflected properly on its books and records, are valid
receivables, and to the Knowledge of the Company, will be collected in
accordance with their terms at their recorded amounts, subject only to the
reserve for bad debts set forth on the face of the Most Recent Company Balance
Sheet (rather than in any notes thereto) as adjusted for operations and
transactions through the Closing Date in accordance with the past custom and
practice of the Company.
(n) INSURANCE. The Company has provided to Gray Wolf a copy of each
material insurance policy (including policies providing property, casualty,
liability, and workers' compensation coverage and bond and surety arrangements)
with respect to which the Company is a party, a named insured, or otherwise the
beneficiary of coverage.
(o) LITIGATION. Section 4(o) of the Company Disclosure Schedule sets
forth each instance in which the Company (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is a party or, to
the Knowledge of the Company, is threatened to be made a party to any action,
suit, proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator; except where the injunction, judgment,
order, decree, ruling, action, suit, proceeding, hearing, or investigation would
not have a material adverse effect on the financial condition of the Company
taken as a whole.
(p) EMPLOYEES. The Company is not a party to or bound by any
collective bargaining agreement, nor has it experienced any strike or material
grievance, claim of unfair
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labor practices, or other collective bargaining dispute within the past three
years. The Company has no Knowledge of any organizational effort presently being
made or threatened by or on behalf of any labor union with respect to employees
of the Company.
(q) EMPLOYEE BENEFITS.
(i) Section 4(q) of the Company Disclosure Schedule lists each
Employee Benefit Plan that the Company maintains or to which the Company
contributes.
A. To the Knowledge of the Company, each
such Employee Benefit Plan (and each related trust, insurance contract, or fund)
complies in form and in operation in all respects with the applicable
requirements of ERISA and the Code, except where the failure to comply would not
have a material adverse effect on the financial condition of the Company taken
as a whole.
B. All contributions (including all employer
contributions and employee salary reduction contributions) which are due have
been paid to each such Employee Benefit Plan which is an Employee Pension
Benefit Plan.
C. Each such Employee Benefit Plan which is
an Employee Pension Benefit Plan has received a determination letter from the
Internal Revenue Service to the effect that it meets the requirements of Code
Section 401(a).
D. As of the last day of the most recent
prior plan year, the market value of assets under each such Employee Benefit
Plan which is an Employee Pension Benefit Plan (other than any Multi-employer
Plan) equaled or exceeded the present value of liabilities thereunder
(determined in accordance with then current funding assumptions).
E. The Company has delivered to Gray Wolf
correct and complete copies of the plan documents and summary plan descriptions,
the most recent determination letter received from the IRS, the most recent Form
5500 Annual Report, and all related trust agreements, insurance contracts, and
other funding agreements which implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that the Company
maintains or ever has maintained or to which any of them contributes, ever has
contributed, or ever has been required to contribute:
A. No such Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than any Multi-employer Plan) has been
completely or partially terminated or been the subject of a reportable event as
to which notices would be required to be filed with the PBGC. No proceeding by
the PBGC to terminate any such Employee Pension Benefit Plan (other than any
Multi-employer Plan) has been instituted.
B. No action, suit, proceeding, hearing, or
investigation with respect to the administration or the investment of the assets
of any such Employee Benefit Plan (other than routine claims for benefits) is
pending, except where the action, suit, proceeding, hearing, or investigation
would not have a material adverse effect on the financial condition of the
Company taken as a whole.
C. The Company has not incurred any
liability to the PBGC (other than PBGC premium payments) or otherwise under
Title IV of ERISA (including any withdrawal liability) with respect to any such
Employee Benefit Plan which is an Employee Pension Benefit Plan.
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(iii) The Company does not contribute to, never has contributed
to, and never has been required to contribute to any Multi-employer Plan or has
any material liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any withdrawal liability, under any Multi-employer Plan.
(r) GUARANTIES. The Company is not a guarantor or otherwise
responsible for any liability or obligation (including indebtedness) of any
other Person.
(s) ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS.
(i) To the Knowledge of the Company, the Company is in
compliance with Environmental, Health, and Safety Requirements, except for such
noncompliance as would not have a material adverse effect on the financial
condition of the Company taken as a whole.
(ii) To the Knowledge of the Company, the Company has not
received any written notice, report or other information regarding any actual or
alleged material violation of Environmental, Health, and Safety Requirements, or
any material liabilities or potential material liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise), including any investigator,
remedial or corrective obligations, relating to the Company or its facilities
arising under Environmental, Health, and Safety Requirements, the subject of
which would have a material adverse effect on the financial condition of the
Company taken as a whole.
(iii) This Section 4(s) contains the sole and exclusive
representations and warranties of the Company with respect to any environmental,
health or safety matters, including without limitation, any arising under any
Environmental Health and Safety Requirements.
(t) CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY. None of the
Company Shareholders has been involved in any material business arrangement or
relationship with the Company within the past 12 months, and no Company
Shareholder owns any material asset, tangible or intangible, which is used in
the business of the Company.
(u) DISCLOSURE. The representations and warranties contained in this
Section 4 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 4 not misleading. Except for general
economic conditions, there is no information known to the Company, but not
disclosed in this Agreement or the Company Disclosure Schedule or Exhibit hereto
that materially adversely affects or with the passage of time could materially
adversely affect the business, properties, assets, prospects, condition,
financial or other, of the Company.
5. REPRESENTATIONS AND WARRANTIES CONCERNING GRAY WOLF. Gray Wolf
represents and warrants to the Company and the Company Shareholders that the
statements contained in this Section 5 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout the subsections of this Section 5), except as set
forth in the Gray Wolf Disclosure Schedule.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Gray Wolf is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. Gray Wolf is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required, except where the lack of such
qualification would not have a material adverse effect on the financial
condition
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of Gray Wolf. Gray Wolf has full corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. Section 5(a) of the Gray Wolf Disclosure Schedule lists the
directors and officers of Gray Wolf.
(b) CAPITALIZATION. The entire authorized capital stock of Gray Wolf
consists of 20,000,000 Gray Wolf Common Shares, of which 1,957,259 Gray Wolf
Common Shares are issued and outstanding, and 5,000,000 Gray Wolf Preferred
Shares, none of which are issued or outstanding. All of the issued and
outstanding Gray Wolf Common Shares have been duly authorized, are validly
issued, fully paid, and nonassessable. There are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require Gray Wolf
to issue, sell, or otherwise cause to become outstanding any of its capital
stock. There are no outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to Gray Wolf. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of Gray Wolf. Effective as of the Closing, but
prior to the issuance of the Merger Units, there will be 5,907,259 Gray Wolf
Common Shares and no Gray Wolf Preferred Shares issued and outstanding.
(c) SUBSIDIARIES. Gray Wolf has no Subsidiaries, other than the Gray
Wolf Subsidiary.
(d) TITLE TO ASSETS. Gray Wolf has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by them, located on
their premises, or shown on the Most Recent Gray Wolf Balance Sheet or acquired
after the date thereof, free and clear of all Security Interests, except for
properties and assets disposed of in the Ordinary Course of Business since the
date of the Most Recent Gray Wolf Financial Statement.
(e) FINANCIAL STATEMENTS. Attached hereto as Exhibit F is the
following financial statement (the "Gray Wolf Financial Statement" and the "Most
Recent Gray Wolf Financial Statement"): an unaudited balance sheet of the
Company as at December 31, 1997 (the "Most Recent Gray Wolf Fiscal Year End").
The Gray Wolf Financial Statement (including the notes thereto) has been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby and presents fairly the financial condition of Gray Wolf
as of such date; provided, however, that the Most Recent Gray Wolf Financial
Statement lacks certain footnotes and other presentation items. Gray Wolf's most
recent fiscal quarter end (the "Most Recent Gray Wolf Fiscal Quarter End") and
its most recent fiscal month end (the "Most Recent Gray Wolf Fiscal Month End")
are March 31, 1998.
(f) EVENTS SUBSEQUENT TO MOST RECENT GRAY WOLF FISCAL YEAR END. Since
the Most Recent Gray Wolf Fiscal Year End, there has not been any material
adverse change in the financial condition of Gray Wolf taken as a whole. Without
limiting the generality of the foregoing, since that date Gray Wolf has not
engaged in any practice, taken any action, or entered into any transaction
outside the Ordinary Course of Business.
(g) UNDISCLOSED LIABILITIES. Gray Wolf has no material liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due, including any liability for Taxes), except for
(i) liabilities set forth on the face of the Most Recent Gray Wolf Financial
Statement (rather than in any notes thereto) and (ii) liabilities which have
arisen after the Most Recent Gray Wolf Fiscal Month End in the Ordinary Course
of Business.
(h) LEGAL COMPLIANCE. Gray Wolf has complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof),
15
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except where the failure to comply would not have a material adverse effect upon
the financial condition, operations, or future prospects of Gray Wolf taken as a
whole.
(i) TAX MATTERS.
(i) Gray Wolf has filed all income Tax Returns that it was
required to file, and has paid all income Taxes shown thereon as owing, except
where the failure to file income Tax Returns or to pay income Taxes would not
have a material adverse effect on the financial condition of Gray Wolf taken as
a whole.
(ii) Section 5(i) of the Gray Wolf Disclosure Schedule lists
all income Tax Returns filed with respect to Gray Wolf for taxable periods ended
on or after December 31, 1993 indicates those income Tax Returns that have been
audited, and indicates those income Tax Returns that currently are the subject
of audit. Gray Wolf has delivered to the Company correct and complete copies of
all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by Gray Wolf since December 31, 1995.
(iii) Gray Wolf has not waived any statute of limitations in
respect of Income Taxes or agreed to any extension of time with respect to an
income Tax assessment or deficiency.
(iv) Gray Wolf is not a party to any income Tax allocation or
sharing agreement.
(j) REAL PROPERTY.
(i) Gray Wolf owns no real property.
(ii) Section 5(j)(ii) of the Gray Wolf Disclosure Schedule lists
all real property leased or subleased to Gray Wolf. Gray Wolf has delivered to
the Company correct and complete copies of the leases and subleases listed in
Section 5(j)(ii) of the Gray Wolf Disclosure Schedule (as amended to date). To
the Knowledge of Gray Wolf, each lease and sublease listed in Section 5(j)(ii)
of the Gray Wolf Disclosure Schedule is legal, valid, binding, enforceable, and
in full force and effect, except where the illegality, invalidity, nonbinding
nature, unenforceability, or ineffectiveness would not have a material adverse
effect on the financial condition of Gray Wolf taken as a whole.
(k) INTELLECTUAL PROPERTY. Except as set forth at Section 5(k) of the
Gray Wolf Disclosure Schedule, Gray Wolf owns no rights to any item of
Intellectual Property.
(l) CONTRACTS. Section 5(l) of the Gray Wolf Disclosure Schedule
lists all written contracts and other written agreements to which Gray Wolf is a
party the performance of which will involve consideration in excess of $10,000.
Gray Wolf has delivered to the Company a correct and complete copy of each
contract or other agreement listed in Section 5(l) of the Gray Wolf Disclosure
Schedule (as amended to date). With respect to each such agreement: (A) the
agreement is legal, valid, binding, enforceable, and in full force and effect in
all material respects, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights and (ii) as limited by the
application of general principles of equity; (B) no party is in material breach
or default,
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and no event has occurred which with notice or lapse of time would constitute a
material breach or default, or permit termination, modification, or
acceleration, under the agreement; and (C) no party has repudiated any material
provision of the agreement.
(m) POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of Gray Wolf.
(n) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable
of Gray Wolf are reflected properly on its books and records, are valid
receivables, and to the Knowledge of Gray Wolf will be collected in accordance
with their terms at their recorded amounts, subject only to the reserve for bad
debts set forth on the face of the Most Recent Gray Wolf Balance Sheet (rather
than in any notes thereto) as adjusted for operations and transactions through
the Closing Date in accordance with Gray Wolf's past custom and practice.
(o) INSURANCE. Gray Wolf has provided to the Company a copy of each
material insurance policy (including policies providing property, casualty,
liability, and workers' compensation coverage and bond and surety arrangements)
with respect to which any of Gray Wolf is a party, a named insured, or otherwise
the beneficiary of coverage.
(p) LITIGATION. Section 5(p) of the Gray Wolf Disclosure Schedule
sets forth each instance in which Gray Wolf (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction, except where the injunction, judgment, order, decree,
ruling, action, suit, proceeding, hearing, or investigation would not have a
material adverse effect on the financial condition of Gray Wolf taken as a
whole.
(q) EMPLOYEES. Gray Wolf is not a party to or bound by any collective
bargaining agreement, nor has it experienced any strike or material grievance,
claim of unfair labor practices, or other collective bargaining dispute within
the past three years. Gray Wolf currently has no employees.
(r) EMPLOYEE BENEFITS.
(i) Gray Wolf maintains no, has never maintained any, and has
never been required by law to maintain any Employee Benefit Plan.
(ii) Gray Wolf does not contribute to, never has contributed to,
and never has been required to contribute to any Multi-employer Plan or has any
material liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due), including any withdrawal
liability, under any Multi-employer Plan.
(s) GUARANTIES. Gray Wolf is not a guarantor or otherwise
responsible for any liability or obligation (including indebtedness) of any
other Person.
(t) ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS.
(i) To the Knowledge of Gray Wolf, Gray Wolf is in compliance
with Environmental, Health, and Safety Requirements, except for such
noncompliance as would not have a material adverse effect on the financial
condition of Gray Wolf taken as a whole.
(ii) To the Knowledge of Gray Wolf, Gray Wolf has not received
any written notice, report or other information regarding any actual or alleged
material violation of
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Environmental, Health, and Safety Requirements, or any material liabilities or
potential material liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any investigator, remedial or corrective
obligations, relating to Gray Wolf or its facilities arising under
Environmental, Health, and Safety Requirements, the subject of which would have
a material adverse effect on the financial condition of Gray Wolf.
(iii) This Section 5(t) contains the sole and exclusive
representations and warranties of Gray Wolf with respect to any environmental,
health, or safety matters, including without limitation any arising under any
Environmental, Health, and Safety Requirements.
(u) CERTAIN BUSINESS RELATIONSHIPS WITH GRAY WOLF. Except as
provided in the Gray Wolf Disclosure Schedule, no Affiliate of Gray Wolf other
than TransGlobal Financial Corporation and Mike M. Mustafoglu has been involved
in any material business arrangement or relationship with Gray Wolf within the
past 12 months and none of Gray Wolf or its Affiliates owns any material asset,
tangible or intangible, which is used in the business of Gray Wolf.
(v) DISCLOSURE. The representations and warranties contained in this
Section 5 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 5 not misleading. Except for general
economic conditions, there is no information known to Gray Wolf, but not
disclosed in this Agreement or the Gray Wolf Disclosure Schedule or Exhibit
hereto that materially adversely affects or with the passage of time could
materially adversely affect the business, properties, assets, prospects,
condition, financial or other, of the Company.
6. COVENANTS. The Parties agree as follows with respect to the period
from and after the execution of this Agreement.
(a) GENERAL. Each of the Parties will use its reasonable business
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in Section 7 below).
(b) NOTICES AND CONSENTS. The Company, on the one hand, and Gray
Wolf, on the other hand, will give any notices to third parties, and will use
its best efforts to obtain any third party consents, and any authorizations,
consents, and approvals of governments and governmental agencies, that the other
may reasonably request in connection with the matters referred to in Section
3(a)(i) and Section 3(b)(i) above.
(c) OPERATION OF BUSINESS. Except as set forth on Schedule 6(c)
attached, neither the Company nor Gray Wolf will engage in any practice, take
any action, or enter into any transaction outside the Ordinary Course of
Business. Without limiting the generality of the foregoing:
(i) neither the Company nor Gray Wolf will authorize or effect
any change in its Certificate of Incorporation or bylaws other than the changes
effected by: (A) Gray Wolf's Certificate of Amendment filing, (B) Gray Wolf's
Certificate of Designations filing and (C) REAADS filing of the
Certificate of Merger;
(ii) neither the Company nor Gray Wolf will grant any options,
warrants, or other rights to purchase or obtain any of its capital stock or
issue, sell, or otherwise dispose of any of its capital stock (except (A) the
issuance by Gray Wolf of up to nine hundred fifty thousand (950,000) Company
Common Shares, and (B) upon the conversion or exercise of
18
<PAGE>
REAADS options, warrants, and other rights currently outstanding and disclosed
in Section 4(b) of this Agreement);
(iii) neither the Company nor Gray Wolf will declare, set aside,
or pay any dividend or distribution with respect to its capital stock (whether
in cash or in kind), or redeem, repurchase, or otherwise acquire any of its
capital stock.
(iv) neither the Company nor Gray Wolf will issue any note,
bond, or other debt security or create, incur, assume, or guarantee any
indebtedness for borrowed money or capitalized lease obligation outside the
Ordinary Course of Business;
(v) neither the Company nor Gray Wolf will impose any Security
Interest upon any of its assets;
(vi) neither the Company nor Gray Wolf will make any capital
investment in, make any loan to, or acquire the securities or assets of any
other Person outside the Ordinary Course of Business;
(vii) neither the Company nor Gray Wolf will make any change in
employment terms for any of its directors, officers, and employees outside the
Ordinary Course of Business; and
(viii) neither the Company nor Gray Wolf will commit to any of
the foregoing.
(d) FULL ACCESS. The Company, on the one hand, and Gray Wolf on the
other hand, will each permit representatives of the other to have full access at
all reasonable times, and in a manner so as not to interfere with the normal
business operations of the other, to all premises, properties, personnel, books,
records (including tax records), contracts, and documents of or pertaining to
the other. Each Party will treat and hold as such any Confidential Information
it receives from the other in the course of the reviews contemplated by this
Section 6(d), will not use any of the Confidential Information except in
connection with this Agreement, and, if this Agreement is terminated for any
reason whatsoever, agrees to return to the source all tangible embodiments (and
all copies) thereof which are in its possession.
(e) NOTICE OF DEVELOPMENTS. Each Party will give prompt written
notice to the other of any material adverse development causing a breach of any
of its own representations and warranties in Section 3, Section 4 or Section 5
above. Following the Closing, no disclosure by any Party pursuant to this
Section 6(e) shall be deemed to amend or supplement its respective Disclosure
Schedule or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
(f) EXCLUSIVITY. The Company will not solicit, initiate, or encourage
the submission of any proposal or offer from any Person relating to the
acquisition of all or substantially all of the capital stock or assets of the
Company (including any acquisition structured as a merger, consolidation, or
share exchange) prior to May 15, 1998. The Company shall notify Gray Wolf
immediately if any Person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing.
(g) CONFIDENTIAL INFORMATION. All copies of financial information,
marketing and sales information, pricing, marketing plans, business plans,
financial and business projections, manufacturing processes and procedures,
formulae, methodologies, inventions, product designs, product specifications and
drawings, and other confidential and/or proprietary information of the Company
or of Gray Wolf disclosed to the other in the course of negotiating
19
<PAGE>
this Agreement or under or pursuant to this Agreement (the "Confidential
Information") will be held in confidence and not used or disclosed by the
receiving party or any of its employees, affiliates or agents. It is agreed that
the Confidential Information will NOT include information that: (a) is proven to
have been known to receiving party prior to receipt of such information from the
disclosing party, as evidenced by documentation in the files of the receiving
party; (b) is disclosed by a third party having the legal right to disclose such
information and who owes no obligation of confidence to the disclosing party;
(c) is now, or later becomes part of the general public knowledge or literature
in the art, other than as a result of a breach of this Agreement by the
receiving party. This provision shall survive the termination of this Agreement
for any reason.
(h) COMPLIANCE WITH CONSULTING AGREEMENT. During the term of the
Consulting Agreement between the Gray Wolf and TransGlobal Financial Corporation
described in Section 7(a)(xi) of this Agreement, the Company and Gray Wolf will
at all time comply with and perform in all respects the covenants, obligations,
agreements and commitments that Gray Wolf is required to perform or comply with
under the Consulting Agreement.
7. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF GRAY WOLF. The obligation of Gray
Wolf to consummate the transactions to be performed by it in connection with
this Agreement is subject to satisfaction of the following conditions:
(i) The Company shall have procured all of the third party
consents specified in Section 3(a)(i) above;
(ii) the representations and warranties set forth in Section 4
above shall be true and correct in all material respects at and as of the
Closing Date;
(iii) The Company shall have performed and complied
with all of its covenants hereunder in all material respects
through the Closing;
(iv) there shall not be any judgment, order, decree,
stipulation, injunction, or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement;
(v) Gray Wolf shall have completed its due diligence of the
Company to its satisfaction;
(vi) The Company shall have delivered to Gray Wolf a
certificate to the effect that each of the conditions specified above in this
Section 7(a) is satisfied in all respects;
(vii) on the Closing Date, no proceeding shall be pending or
threatened before any court or governmental agency in which it is sought to
restrain or prohibit or to obtain damages or other relief in connection with
this Agreement or the consummation of the transactions contemplated hereby, and
no investigation that might eventuate in any such suit, action or proceeding
shall be pending or threatened;
(viii) on the Closing Date, no material adverse change shall
have occurred in the Company's business, assets, including without limitation
any of the Intellectual Property, or in the Company's financial condition, or
prospects, whether such materially adverse change shall have occurred as a
result of litigation, competition, legislation or other change in law, or fire,
explosion, earthquake, disaster, accident, labor dispute, any action by any
20
<PAGE>
governmental authority, flood, drought, embargo, riot, civil disturbance,
uprising, activity of armed forces or act of God or public enemy;
(ix) all issued and outstanding warrants, options and Company
Preferred Shares shall have been canceled, redeemed, exchanged and/or converted
such that as of the Closing Date there shall not be any outstanding warrants,
options or Company Preferred Shares, or any other purchase rights, subscription
rights, conversion rights, exchange rights or other contracts or commitments
that could require the Company to issue, sell or otherwise cause to issue its
capital stock;
(x) 204,000 Company Common Shares shall be outstanding
effective as of the Closing;
(xi) Gray Wolf shall have executed and delivered to
TransGlobal Financial Corporation, the Consulting Agreement substantially in the
form attached as Exhibit G to this Agreement;
(xii) Gray Wolf shall have negotiated employment
agreements satisfactory to it with each of Luis R. Lopez, MD,
Douglass T. Simpson, Ann L Steinbarger, William G. Fleming, Taryn
G. Reynolds, and Catherine O. Fink;
(xiii) Gray Wolf shall have (A) entered into and consummated the
transactions contemplated by certain Subscription Agreements, each among Gray
Wolf and the Purchaser(s) thereto, and (B) obtained aggregate proceeds from sale
of securities pursuant to such agreements of $1,000,000;
(xiv) The Company Shareholders (other than Chugai
Pharmaceutical Corporation) each shall have executed and delivered the Lock-Up
Agreement;
(xv) on the Closing Date, no proceeding shall be pending or
threatened before any court or governmental agency in which it is sought to
restrain or prohibit or to obtain damages or other relief in connection with
this Agreement or the consummation of the transactions contemplated hereby, and
no investigation that might eventuate in any such suit, action or proceeding
shall be pending or threatened;
(xvi) all actions to be taken by the Company in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
Gray Wolf. Without limiting the generality of the foregoing, the Company shall
have delivered the following:
A. A certificate of the corporate secretary
of the Company attaching the Certificate of Incorporation, bylaws, board of
director and shareholder resolutions authorizing the transactions contemplated
hereby, and a statement as to the incumbency of the persons executing this
agreement or any document, certificate or instrument contemplated thereby.
Gray Wolf may waive any condition specified in this Section 7(a) if it
executes a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the
Company to consummate the transactions to be performed by it in connection with
this Agreement is subject to satisfaction of the following conditions:
21
<PAGE>
(i) the representations and warranties set forth in Section 4
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) Gray Wolf shall have performed and complied with all of
its respective covenants hereunder in all material respects through the Closing;
(iii) there shall not be any judgment, order, decree,
stipulation, injunction, or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement;
(iv) Gray Wolf shall have amended its Certificate of
Incorporation to provide for a series of the Gray Wolf Preferred Shares having
the rights, preferences and designations as described on Exhibit H hereto;
(v) The Company shall have completed its due diligence of
Gray Wolf to its satisfaction;
(vi) Gray Wolf shall have delivered to the Company a
certificate to the effect that each of the conditions specified above in this
Section 7(b) is satisfied in all respects;
(vii) Gray Wolf shall have changed its name to
CORGENIX MEDICAL CORPORATION;
(viii) Gray Wolf shall have (A) entered into and consummated the
transactions contemplated by certain Subscription Agreements, each among Gray
Wolf and the Purchaser(s) thereto; (B) obtained aggregate proceeds from sale of
securities pursuant to such agreements of $1,000,000; and (C) deposited the net
proceeds thereof at Eagle National Bank, N.A., in account #0121-898;
(ix) all actions to be taken by Gray Wolf in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Company. Without limiting the generality of the foregoing, Gray Wolf shall have
delivered the following:
A. A certificate of the corporate secretary
of Gray Wolf and of the Gray Wolf Subsidiary attaching with respect to each the
Certificate of Incorporation, bylaws, board of director and shareholder
resolutions authorizing the transactions contemplated hereby, and a statement as
to the incumbency of the persons executing this agreement or any document,
certificate or instrument contemplated thereby.
The Company may waive any condition specified in this Section 7(b) if it
executes a writing so stating at or prior to the Closing.
8. AUTHORIZATION, REGISTRATION AND SALE OF SERIES A PREFERRED STOCK AND
WARRANTS.
(a) ISSUANCE AND SALE. Gray Wolf agrees to authorize and sell an
aggregate of one million (1,000,000) Gray Wolf Preferred Shares, designated as
shares of Series A Preferred Stock, and Warrants to purchase an aggregate of one
million (1,000,000) shares of Common Stock at an exercise price therefore of Two
and No/100 United States ($2.00) Dollars per share. The aggregate purchase price
at which Gray Wolf shall sell the Preferred Stock and Warrants is One Million
and No/100 United States Dollars ($1,000,000), or One and No/100 Dollars ($1.00)
per unit, each unit consisting of one (1) share of Series A Preferred Stock and
one (1) Warrant.
22
<PAGE>
(b) THE SERIES A PREFERRED STOCK. Subject to the terms and conditions
of this Agreement, Gray Wolf has authorized the execution and delivery of one or
more certificates for the Series A Preferred Stock and Warrants as contemplated
by this Section 8. The designations, rights, restrictions and limitations of the
Series A Preferred Stock shall be as set forth in the Certificate of
Designations attached as Exhibit H to this Agreement, which shall be filed by
Gray Wolf with the Nevada Secretary of State prior to or simultaneously with the
consummation of the Merger. The Warrants shall be in the form and shall contain
the terms and conditions set forth in Exhibit I attached to this Agreement.
(c) SECURITIES ACT REGISTRATION. Within thirty (30) days after the
Closing Date, Gray Wolf will file a Registration Statement to register the
Common Stock underlying and issuable upon conversion of the Series A Preferred
Stock or exercise of the Warrants ("Underlying Shares") under the Securities Act
on Form S-1, SB-2 or on another form appropriate for such registration, and use
its best efforts to cause such registration to be declared effective as
expeditiously as possible, and in any event within a period of sixty (60) days
thereafter.
(d) EXCHANGE ACT REGISTRATION. Within thirty (30) days after the
Closing Date, Gray Wolf will file a Registration Statement to register Gray Wolf
under Section 12(g) of the Exchange Act on Form 10 or another form appropriate
for such registration.
(e) NASDAQ SMALL CAP MARKET LISTING. Upon the earlier of sixty (60)
days after the Closing Date, or the date of the first exercise of the Warrants,
Gray Wolf will file an application to list its Common Stock for trading on the
NASDAQ Small Cap Market, and diligently endeavor to perfect such listing as
expeditiously as possible, and in any event within a period of thirty (30) days
thereafter.
(f) RULE 504 OFFERING. In the event the registration of the
Underlying Shares shall not have been declared effective by the United States
Securities and Exchange Commission within a period of six (6) months from the
Closing Date, then Gray Wolf covenants and agrees that it will issue the
Underlying Shares to the purchasers of the Preferred Stock and Warrants, upon
conversion of the Preferred Stock or exercise of the Warrants, without
restrictive legend, stop transfer order or other restriction on transfer,
pursuant to the transactional exemption afforded by Rule 504 of Regulation D
promulgated under the Securities Act.
9. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Company contained in Sections 3(a) and 4
shall survive the Closing hereunder for a period of three (3) years from the
Closing Date, unless the breaching Party had Knowledge of any misrepresentation
or breach of warranty at the time of the Closing, in which event such
representations, warranties and covenants shall continue in full force and
effect (subject only to any applicable statutes of limitations).
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF GRAY Wolf. In the event
the Company, breaches any of the representations, warranties and covenants
contained in Sections 3(a) and 4 of this Merger Agreement, provided that
TransGlobal Financial Corporation makes a written claim for indemnification
against the Company in the manner provided in Section 11(g) below within any
applicable survival period, then the Company agrees to indemnify TransGlobal
Financial Corporation from and against any such Adverse Consequences Gray Wolf
or TransGlobal Financial Corporation shall suffer through and after the date of
the claim for indemnification (but excluding any Adverse Consequences Gray Wolf
or TransGlobal Financial Corporation shall suffer after the end of any
applicable survival period) caused proximately by the breach in the manner
provided in paragraphs (i) - (iii) of this Section 9(b).
23
<PAGE>
(i) LIMITATIONS ON INDEMNITY. The indemnification obligations
of the Company under this Section 9(b) shall be subject to the following
limitations:
(A) DEDUCTIBLE. The Company shall be
obligated to pay indemnity for any Adverse Consequences only to the extent that
such Adverse Consequences exceed $100,000 in the aggregate.
(B) CEILING. The Company shall not be
obligated to pay indemnity for any Adverse Consequences in excess
of $2,000,000.
(ii) PAYMENT OF INDEMNITY. The indemnity by the Company under
this Section 9(b) shall be payable hereunder, at the option of the indemnifying
party, in cash or in Gray Wolf Common Shares in an amount determined in
accordance with paragraph 9(b)(iii) below.
(iii) DETERMINATION OF ADVERSE CONSEQUENCES AND NUMBER OF GRAY
WOLF COMMON SHARES DELIVERABLE. The Parties shall make appropriate adjustments
for tax benefits and insurance coverage in determining Adverse Consequences for
purposes of this Section 9(b). All indemnification payments under this Section
9(b) shall be deemed adjustments to the Merger Consideration. If Gray Wolf
Common Shares are to be delivered as indemnity under this Section 9(b), the
number of Gray Wolf Common Shares to be delivered shall be determined by
dividing the amount of the Adverse Consequences by .3268.
(c) LIQUIDATED DAMAGES FOR BREACH OF CERTAIN PROVISIONS. If
Gray Wolf shall fail to perform its obligations under Sections 8(b)-8(f),
inclusive, of this Agreement, the Company and Gray Wolf, jointly and severally,
shall pay to TransGlobal Financial Corporation, as liquidated damages, and not
as a penalty, $1,000.00 for each day that Gray Wolf has not complied with such
obligations, provided that if the Company shall have failed to comply with more
than one of Sections 8(b) - 8(f), inclusive, of this Agreement, the liquidated
damages shall be multiplied by the number of such Sections with respect to which
Gray Wolf is in default of its obligations.
(d) SPECIFIC ENFORCEMENT. The Parties specifically acknowledge
and agree that TransGlobal Financial Corporation will be entitled to specific
performance and/or injunctive relief because without such remedies the damage to
TransGlobal Financial Corporation will be irreparable and money damages
inadequate in the event that Gray Wolf and/or the Company breaches the
Consulting Agreement between Gray Wolf and the TransGlobal Financial
Corporation.
10. TERMINATION.
(a) TERMINATION OF AGREEMENT. Either of the Company or Gray Wolf may
terminate this Agreement with the prior authorization of its board of directors
(whether before or after stockholder approval) as provided below:
(i) Either of Gray Wolf or the Company may terminate this
Agreement by mutual written consent at any time prior to the Effective Time;
(ii) Gray Wolf may terminate this Agreement by giving written
notice to the Company at any time prior to the Effective Time (A) in the event
the Company has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, Gray Wolf has notified the
Company of the breach, and the breach has continued without cure for a period of
30 days after the notice of breach has been delivered
24
<PAGE>
in accordance with Section 11(g) below or (B) if the Closing shall not have
occurred on or before May 15, 1998, (unless the failure to close results
primarily from Gray Wolf breaching any representation, warranty, or covenant
contained in this Agreement);
(iii) the Company may terminate this Agreement by giving written
notice to Gray Wolf at any time prior to the Effective Time (A) in the event
that Gray Wolf has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Company has notified
Gray Wolf of the breach, and the breach has continued without cure for a period
of 30 days after the notice of breach has been delivered in accordance with
Section 11(g) or (B) if the Closing shall not have occurred on or before May 15,
1998, (unless the failure to close results primarily from the Company breaching
any representation, warranty, or covenant contained in this Agreement);
(b) EFFECT OF TERMINATION. If Gray Wolf or the Company terminates
this Agreement pursuant to Section 10(a) above, all rights and obligations of
the Parties hereunder shall terminate without any liability of any Party to any
other Party (except for any liability of any Party then in breach); provided,
however, that the confidentiality provisions contained in Section 6(g) shall
survive any such termination for a period of three (3) years.
11. GENERAL.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Neither Gray Wolf nor
the Company shall issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written
approval of the other Party; provided, however, that any Party may make any
public disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing Party will use its reasonable best efforts to advise the
other Party prior to making the disclosure).
(b) NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than (i) the Parties, (ii) the Company
Shareholders; (iii) TransGlobal Financial Corporation; and (iv) their respective
successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement, and the other documents
referenced herein, constitute the entire understanding of the parties hereto
with respect to the subject matter hereof, and supersedes any prior
understandings or agreements, oral or written, and no amendment, modification or
alteration of the terms hereof shall be binding unless the same be in writing,
dated subsequent to the date hereof and duly approved and executed by each of
the parties hereto.
(d) BINDING AGREEMENT; NON-ASSIGNABILITY. Each of the provisions and
agreements contained in this Agreement shall be binding upon and inure to the
benefit of the personal representatives, heirs, devisees, successors and assigns
of the respective parties hereto; but none of the rights or obligations
attaching to any party shall be assignable.
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) HEADINGS. The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
25
<PAGE>
(g) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Company:
REAADS Medical Products, Inc.
12061 Tejon Street
Westminster, CO 80234
Attn: President
Copy to:
Steven A. Erickson, Esq.
Hutchinson, Black and Cook, LLC
1215 Spruce Street
Boulder, CO 80302
If to Gray Wolf or TransGlobal Financial Corporation:
14255 U.S. Highway 1
Suite 253
Juno Beach, Florida 33408
Copy to:
John N. Blair, Esq.
Blair & Roach
2645 Sheridan Drive
Tonawanda, New York 14150
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Party notice in the manner herein set forth.
(h) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Delaware without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Delaware.
(i) AMENDMENTS AND WAIVERS. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective boards of directors; provided, however,
that any amendment effected subsequent to stockholder approval will be subject
to the restrictions contained in the Delaware GCL. No amendment of any provision
of this Agreement shall be valid unless the same shall be in writing and signed
by both of the Parties. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall
26
<PAGE>
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(j) SEVERABILITY. If any term, provision, covenant, or condition of
this Agreement, or its application to any person or circumstance, shall be held
by a court of competent jurisdiction to be invalid, unenforceable, or void, the
remainder of this Agreement and such term, provision, covenant or condition as
applied to other persons or circumstances shall remain in full force and effect.
(k) EXPENSES. All expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby will be paid by the Company.
(l) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
(m) GENDER, NUMBER AND TENSE. Throughout this Agreement, as the
context may require, the masculine gender includes the feminine and neuter, and
the neuter gender includes the masculine and feminine.
(n) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
Gray Wolf Technologies, Inc.
By: /s/ Mike M. Mustafogler
--------------------------
Title: President
-----------------------
REAADS Medical Products, Inc.
By: /s/ Douglass T. Simpson
--------------------------
Title: President
-----------------------
27
<PAGE>
EXHIBIT A
<PAGE>
EXHIBIT B
CERTIFICATE OF MERGER
OF
CORGENIX, INC.
(a Delaware corporation)
INTO
REAADS MEDICAL PRODUCTS, INC.
(a Delaware corporation)
Pursuant to Section 252 of
the General Corporation Law
OF THE STATE OF DELAWARE
REAADS Medical Products, Inc., a Delaware corporation, DOES HEREBY
CERTIFY:
1. CORGENIX, INC., the constituent corporation being merged into REAADS
Medical Products, Inc., the surviving corporation, was incorporated under the
laws of the State of Delaware. REAADS Medical Products, Inc., the surviving
corporation, was incorporated under the laws of the State of Delaware.
2. An Agreement and Plan of Merger has been approved, adopted, certified,
executed and acknowledged by each of the constituent corporations, in accordance
with Section 252(c) of the General Corporation Law of the State of Delaware.
3. The name of the surviving corporation shall be CORGENIX, INC.
4. The certificate of incorporation of REAADS Medical Products, Inc. shall
be the certificate of incorporation of the surviving corporation, except that
the certificate of designations filed April 25, 1996 by the Secretary of State
of the State of Delaware relating to the Company Preferred Shares shall be
terminated and shall not be part of the certificate of incorporation of the
surviving corporation.
5. The By-laws of REAADS Medical Products, Inc. shall be the By-laws of
the surviving corporation.
6. The officers of the surviving corporation shall be:
President
Vice President
Secretary
Treasurer
7. The directors of the surviving corporation shall be:
Mike Mustafoglu
8. The original, executed Agreement and Plan of Merger is on file at the
principal place of business of REAADS Medical Products, Inc., 12061 Tejon
Street, Westminster, CO, 80234, a copy of which will be furnished by the
surviving corporation, on request and without any cost to any stockholder of any
constituent corporation.
IN WITNESS WHEREOF, this Certificate of Merger of CORGENIX,
INC. into REAADS Medical Products, Inc. has been executed by the
President of REAADS Medical Products, Inc. thereunto duly
authorized, and the seal of said corporation has been duly
affixed hereto this day of May, 1998.
----
REAADS MEDICAL PRODUCTS, INC.
By:
---------------------------------
, President
ATTEST:
By:
SEAL:
<PAGE>
EXHIBIT C
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THIS WARRANT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF
AN OFFER TO BUY THE WARRANT IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL.
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE MAY NOT BE SOLD,
PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS,
OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF
THE SECURITIES ACT AND UNDER PROVISIONS OF APPLICABLE STATE SECURITIES LAWS; AND
IN THE CASE OF AN EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN OPINION FROM
THEIR COUNSEL THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION OF THE
SECURITIES.
STOCK PURCHASE WARRANT
No.
--
To Purchase Shares of Common Stock of
CORGENIX MEDICAL CORPORATION
THIS CERTIFIES that, for value received, (the
-----------------------------
"Holder"), is entitled, upon the terms and subject to the conditions hereinafter
set forth, at any time on or after May , 1998 and on or prior to May ,
--- ---
2003 (the "Termination Date") but not thereafter, to subscribe for and purchase
from CORGENIX MEDICAL CORPORATION, a corporation incorporated under the laws of
the State of Nevada (the "Company" or "Corgenix"), the number of shares (the
"Warrant Shares") of Common Stock, $.001 par value per share of the Company (the
"Common Stock") provided in Section 3 below. The purchase price of one share of
Common Stock (the "Exercise Price") under this Warrant shall be equal to $.001.
The Exercise Price and the number of shares for which the Warrant is exercisable
shall be subject to adjustment as provided herein. This Warrant is being issued
in connection with an Agreement and Plan of Merger dated May , 1998 (the
---
"Agreement") among the Company, Gray Wolf Acquisition Corp. (a wholly-owned
subsidiary of the Company), and REAADS Medical Products, Inc. Unless otherwise
defined herein, capitalized terms used in this Warrant have the meanings
ascribed to them in the Agreement. This Warrant is one of the Gray Wolf
Anti-Dilution Warrants referenced in the Agreement.
1. TRANSFER OF WARRANT. This Warrant and all rights hereunder are
transferable by gift, will and by operation of the laws of distribution and
descent. Any other transfer shall require the prior written consent of the
Company and its financial adviser TransGlobal Financial Corporation.
<PAGE>
2. AUTHORIZATION OF SHARES. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon such exercise and full payment of the Exercise Price for the
shares so exercised, be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously
with such issue).
3. EXERCISE OF WARRANT.
(a) ACCRUAL EVENTS. The right to exercise and purchase the Warrant
Shares represented by this Warrant shall accrue upon the following events:
(i) The exercise of one or more Corgenix $2.00
Warrants; or
(ii) The conversion of one or more shares of Corgenix Series A
Convertible Preferred Stock to Corgenix Common Stock; or
(iii)On or after November , 1998.
--
(b) ACCRUAL FORMULA. The number of Warrant Shares which shall be
exercisable from time to time under this Warrant (hereafter, the "Accrued
Warrant Shares") shall be determined as follows:
(i) NUMBER OF ACCRUED WARRANT SHARES PRIOR TO NOVEMBER , 1998.
--
The number of Accrued Warrant Shares exercisable at any time prior to November
, 1998 shall be determined according to the following mathematical formula:
- --
(a + b) (n)
------------
- d = Number of Accrued Warrant Shares
2,000,000
where:
a = the number of Corgenix $2.00 Warrants exercised to the date of the
current Accrual Event;
b = the number of shares of Corgenix Common Stock received upon conversion
of Corgenix Series A Convertible Preferred Stock to the date of the current
Accrual Event;
n = (the total number of Warrant Shares represented by this Warrant
----
prior to November , 1998);
--
d = the number of Warrant Shares previously exercised by Holder.
<PAGE>
(ii) NUMBER OF ACCRUED WARRANT SHARES ON OR AFTER NOVEMBER ,
--
1998. The number of Accrued Warrant Shares exercisable at any time on or after
November , 1998 shall be determined according to the following mathematical
--
formula:
m
----------
l - n' - d = Number of Accrued Warrant Shares
$1,000,000
where:
m = the dollar amount of Corgenix Series A Convertible Preferred Stock
sold through November , 1998;
--
n' = (the total number of Warrant Shares represented by this Warrant
---
on or after November , 1998);
--
d = the number of Warrant Shares previously exercised by Holder.
Notwithstanding the foregoing, if as of November , 1998, Accrued Warrant
--
Shares determined under Section 3(b)(i) exist under this Warrant but are
unexercised, the number of Accrued Warrant Shares exercisable under this Section
3(b)(ii) shall not be less than the number of Accrued Warrant Shares determined
under Section 3(b)(i) above.
(c) GENERAL. Accrual Warrant Shares may be purchased at any time or
times, and from time to time, from and after the happening of an Accrual Event,
before the close of business on the Termination Date, or such earlier date on
which this Warrant may terminate as provided in this Warrant, by the surrender
of this Warrant and the Notice of Exercise Form annexed hereto duly executed, at
the office of the Company (or such other office or agency of the Company as it
may designate by notice in writing to the registered holder hereof at the
address of such holder appearing on the books of the Company) and upon payment
of the Exercise Price of the shares thereby purchased; whereupon the holder of
this Warrant shall be entitled to receive a certificate for the number of shares
of Common Stock so purchased. Certificates for shares purchased hereunder shall
be delivered to the holder hereof within three (3) calendar days after the date
on which this Warrant shall have been exercised as aforesaid, or be subject to
the damages set forth in the Agreement. Payment of the Exercise Price may be by
certified check or cashier's check or by wire transfer to an account designated
by the Company in an amount equal to the Exercise Price multiplied by the number
of Warrant Shares. If this Warrant is exercised for less than the full number of
Warrant Shares represented hereby, the Company shall issue to Holder a
substitute Warrant representing the number of Warrant shares remaining
unexercised.
4. FRACTIONAL SHARES. Fractional shares shall be issued as necessary upon
exercise of this Warrant.
5. CHARGES, TAXES AND EXPENSES. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof; and provided further, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
<PAGE>
6. CLOSING OF BOOKS. The Company will not close its shareholder books or
records in any manner which prevents the timely exercise of this Warrant for a
period of time in excess of five (5) trading days per year.
7. NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE. This Warrant does not entitle
the holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise thereof. Upon the surrender of this Warrant and
the payment of the aggregate Exercise Price, the Warrant Shares so purchased
shall be, and be deemed to be, issued to such holder as the record owner of such
shares as of the close of business on the later of the date of such surrender or
payment.
8. ASSIGNMENT AND TRANSFER OF WARRANT. This Warrant may be assigned by the
surrender of this Warrant and the execution of an Assignment Form at the office
of the Company (or such other office or agency of the Company as it may
designate by notice in writing to the registered holder hereof at the address of
such holder appearing on the books of the Company); provided, however, that the
Company may require, as a condition thereto, the payment of a sum sufficient to
reimburse it for any expenses of transfer incidental thereto and that this
Warrant may not be resold or otherwise transferred except (i) in a transaction
registered under the Securities Act of 1933 (the "Securities Act"), or (ii) in a
transaction pursuant to an exemption, if available, from such registration and
whereby, if requested by the Company, an opinion of counsel is obtained by the
holder of this Warrant to the effect that the transaction is so exempt.
9. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. The Company
represents and warrants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
certificate or any stock certificate relating to the Warrant Shares, and in case
of loss, theft or destruction, of indemnity or security reasonably satisfactory
to it, and upon reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of such Warrant or stock
certificate, if mutilated, the Company will make and deliver a new Warrant or
stock certificate of like tenor and dated as of such cancellation, in lieu of
such Warrant or stock certificate.
10. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday in the State of Nevada,
then such action may be taken or such right may be exercised on the next
succeeding day not a legal holiday.
<PAGE>
11. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The number
and kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following.
In case the Company shall (i) declare or pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock or (iv) issue any shares of its capital stock in a
reclassification of the Common Stock, then the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the holder of this Warrant shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such adjustment of the kind and number
of Warrant Shares or other securities of the Company which are purchasable
hereunder, the holder of this Warrant shall thereafter be entitled to purchase
the number of Warrant Shares or other securities resulting from such adjustment
at an Exercise Price per such Warrant Share or other security obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of Warrant Shares purchasable pursuant hereto immediately prior to
such adjustment and dividing by the number of Warrant Shares or other securities
of the Company resulting from such adjustment. An adjustment made pursuant to
this paragraph shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
12. VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company may at any time
during the term of this Warrant, reduce the then current Exercise Price to any
amount and/or extend the Termination Date for any period of time deemed
appropriate by the Board of Directors of the Company.
13. NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares or number
or kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
promptly mail by registered or certified mail, return receipt requested, to the
holder of this Warrant notice of such adjustment or adjustments setting forth
the number of Warrant Shares (and other securities or property) purchasable upon
the exercise of this Warrant and the Exercise Price of such Warrant Shares (and
other securities or property) after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made. Such notice, in absence of
manifest error, shall be conclusive evidence of the correctness of such
adjustment.
14. AUTHORIZED SHARES. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the NASDAQ Small Cap
Stock Market or any domestic securities exchange upon which the Common Stock may
be listed.
<PAGE>
15. TRANSFER RESTRICTIONS REGARDING COMMON STOCK UNDERLYING THE WARRANT.
The certificate or certificates representing the shares of Common Stock to be
issued at any time upon exercise of any part or all of this Warrant, shall be
subject to the following legend restricting transfer under the Securities Act of
1933, such legend to be substantially as follows:
"THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"). THESE
SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED, TRANSFERRED OR ASSIGNED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS, OR IN A
TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF
THE SECURITIES ACT AND UNDER PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS; AND IN THE CASE OF AN EXEMPTION, ONLY IF THE COMPANY
HAS RECEIVED AN OPINION FROM THEIR COUNSEL THAT SUCH TRANSACTION DOES
NOT REQUIRE REGISTRATION OF THE SECURITIES."
16. GENERAL.
(a) ISSUE DATE; JURISDICTION. The provisions of this Warrant shall be
construed and shall be given effect in all respects as if it had been issued and
delivered by the Company on the date hereof. This Warrant shall be binding upon
any successors or assigns of the Company. This Warrant shall constitute a
contract under the laws of the State of Nevada, without regard to its conflict
of law, principles or rules.
(b) RESTRICTIONS. The holder hereof acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
(c) MODIFICATION AND WAIVER. Except as otherwise provided in this
Warrant, this Warrant and any provisions hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by each of the
Company and Investor.
(d) NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof by the Company shall be
delivered or shall be sent by certified or registered mail, postage prepaid, to
each such holder at its address as shown on the books of the Company or to the
Company at the address set forth in the Agreement.
(e) CAPITALIZED TERMS. All capitalized terms not otherwise defined
herein shall have the meaning assigned to them in the Agreement.
<PAGE>
(f) ENTIRE AGREEMENT. This Warrant, together with all documents
referenced herein, embody the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersede all prior
oral or written agreements and understandings relating to the subject matter
hereof. No statement, representation, warranty, covenant or Warrant of in the
Agreement of any kind not expressly set forth in this Agreement shall affect, or
be used to interpret, change or restrict, the express terms and provisions of
this Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officer thereunto duly authorized.
Dated: May , 1998
---
CORGENIX MEDICAL CORPORATION
By:
-------------------------------------
, President
<PAGE>
NOTICE OF EXERCISE
To: CORGENIX MEDICAL CORPORATION
(1) The undersigned hereby elects to exercise warrants to
--------
purchase shares of Common Stock, $.001 par value per share (the "Common Stock")
of CORGENIX MEDICAL CORPORATION pursuant to the terms of the attached Warrant,
and tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
-------------------------------
(Name)
-------------------------------
(Address)
-------------------------------
Dated:
-----------------------------
Signature
<PAGE>
EXHIBIT D
STOCKHOLDER LOCK-UP AGREEMENT
THIS STOCKHOLDER LOCK-UP AGREEMENT ("Agreement") is made effective as of
April 27, 1998, among REAADS Medical Products, Inc., a Delaware corporation
("REAADS"), Gray Wolf Technologies, Inc., a Nevada corporation ("Gray Wolf") and
the undersigned stockholder ("Stockholder").
Gray Wolf and REAADS are party to an Agreement and Plan of Merger,
pursuant to which REAADS will merge with Gray Wolf Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of Gray Wolf (the "Merger"). Pursuant to
the Merger, holders of REAADS common stock will receive 25 shares of Gray Wolf
common stock plus a warrant (the "Protective Warrant") to purchase up to 9.8
shares of Gray Wolf common stock (subject to the occurrence of certain
contingencies) in exchange for each one (1) share of REAADS common stock held at
the effective time of the Merger (the "Merger Consideration"). As a condition to
receipt of the Merger Consideration, each holder of REAADS common stock is
required under the Merger Agreement to execute this Agreement.
As used herein, the term "Restricted Stock" means (i) all Gray Wolf common
stock included in the Merger Consideration, (ii) all Gray Wolf common stock
issued on exercise of the Protective Warrants prior to the one year anniversary
date of the Merger, and (iii) all Gray Wolf common stock issued as a dividend
on, or in exchange for or conversion of, the foregoing.
In consideration of the mutual promises, covenants and conditions set
forth below, the parties mutually agree as follows:
1. RESTRICTED STOCK BOUND. All shares of Restricted Stock acquired by
Stockholder in connection with the Merger, including any shares received upon
exercise of the Protective Warrants, shall be subject to the terms and
restrictions set forth in this Agreement. No shares of Restricted Stock may be
transferred by Stockholder in any manner except in strict accord with the terms
of this Agreement.
2. LOCK-UP. The Stockholder agrees not to effect any sale
or transfer of the Restricted Stock until the one-year
anniversary of the Merger.
3. STOCK HELD BY ESCROW AGENT. To ensure compliance with the terms of this
Agreement, the share certificates representing the Restricted Stock shall be
deposited with Blair & Roach, counsel to Gray Wolf, as escrow agent (or a
substitute escrow agent selected by Gray Wolf), until the one-year anniversary
date of the Merger.
<PAGE>
4. AMENDMENT. This Agreement may be amended or modified only by a written
instrument executed by the parties hereto.
5. WAIVER. Any provision contained in this Agreement may
be waived, either generally or in any particular instance, by
TransGlobal Financial Corporation.
6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties and their respective successors and assigns.
7. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New York.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
REAADS MEDICAL PRODUCTS, INC., GRAY WOLF TECHNOLOGIES, INC.,
a Delaware corporation a Nevada corporation
By: By:
Title: Title:
<PAGE>
EXHIBIT E
<PAGE>
EXHIBIT F
<PAGE>
EXHIBIT G
CONSULTING AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into this day of
-----
May, 1998 by and between TransGlobal Financial Corporation ("TGF"), a Florida
corporation having a place of business at 14255 U.S. Highway 1, Suite 253, Juno
Beach, Florida 33408 and, CORGENIX MEDICAL CORPORATION ("the Company"), a Nevada
corporation having a place of business at 12061 Tejon Street, Westminster,
Colorado 80234.
W I T N E S S E T H:
WHEREAS, the Company desires to obtain general financial advisory and
investment banking services from TGF; and
WHEREAS, TGF desires to perform these services for the
Company on terms and conditions as set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and TGF hereto agree
as follows:
1. ENGAGEMENT OF TGF. Subject to the terms of this Agreement, the Company
does hereby appoint and engage TGF as a consultant and TGF hereby accepts its
appointment and engagement by the Company as a consultant to the Company with
respect to the services specified in paragraph 2 of this Agreement for the
compensation set forth in paragraph 4 of this Agreement.
2. SERVICES.
(a) As mutually determined from time to time by TGF and the Company,
during the term specified in paragraph 3 of this Agreement, TGF shall undertake
to consult with and advise the Company, by telephone or in person, with respect
to financial and business matters, including but not limited to assistance with
fund raising to implement the Company's business plans, implementation of the
Company's efforts to review capitalization, raise funding, or pursue mergers,
acquisitions or divestitures and other transactions, on an exclusive basis.
(b) TGF agrees to spend a reasonable amount of time needed to
accomplish its services under this Agreement, and to be available for telephone
calls, meetings and other matters on as needed basis.
3. TERM.Except as otherwise specified in paragraph 4 hereof, this
Agreement shall be effective for three (3) years from its execution by TGF and
the Company.
<PAGE>
4. COMPENSATION.
(a) As full consideration for the services to be provided pursuant to
paragraph 2 of this Agreement (and in addition to the expenses provided for in
paragraph 5 hereof), the Company shall pay TGF the following fees:
(i) RETAINER FEE. The Company hereby agrees to pay TGF or TGF's
designee(s), an aggregate of One Hundred Eighty Thousand Dollars ($180,000),
payable in thirty-six (36) monthly installments of $5,000 on or before the tenth
(10th) day of each month during the term of this Agreement.
(ii) TRANSACTION FEES.
1. For financing secured on behalf of the
Company by or through TGF on terms and conditions reasonably acceptable to the
Company, the Company will pay TGF cash fees at the closing of such financing in
an amount equal to: (a) five percent (5%) of any and all funds committed and
available to the Company in any equity financing, and (b) three percent (3%) of
any and all funds committed and available to the Company in any debt financing.
2. In the event that TGF represents the
Company with respect to a merger, acquisition, investment, exchange, or other
disposition of securities or assets of the Company and/or a merger or
acquisition candidate, then the Company shall pay TGF a Transaction Fee equal to
5% of the total market value on the day of the closing of stock, cash, assets
and all other property (real or personal) exchanged or received, directly or
indirectly by the Company or any of its security holders in connection with any
such transaction, which Transaction Fee shall be payable by the Company in the
same form in which consideration is payable to the Company or its security
holders pursuant to such merger, acquisition, investment, exchange or other
disposition of securities or assets.
3. In the event TGF introduces the Company
to a joint venture partner or customer and sales develop as a result of the
introduction, the Company hereby agrees to pay a fee of five percent (5%) of the
before tax income generated from this introduction during the life of the
venture following the date of the first sale. For the computation of the before
tax income, sales shall be cash receipts less any applicable refunds, returns,
allowances, credits and shipping charges and monies paid by the Company by way
of settlement or judgment arising out of claims made by or threatened against
the Company. Commission payments shall be paid on the 15th day of each month
following the receipt of customer's payment. In the event any adjustments are
made to the total sales after the commission has been paid, the Company shall be
entitled to an appropriate refund or credit against future payments under this
Agreement.
<PAGE>
(b) All fees to be paid pursuant to this Agreement, except as
otherwise specified, are due and payable to TGF at the closing or closings of
any transaction specified in paragraph 4 hereof. In the event that this
Agreement shall not be renewed or if terminated for any reason, notwithstanding
any such non-renewal or termination, TGF shall be entitled to a full fee as
provided under paragraph 4 and expense reimbursement as provided in paragraph 5
hereof, for any transaction for which the discussions were initiated during the
term of this Agreement and which is consummated within a period of twelve months
after non-renewal or termination of this Agreement.
(c) The Company and TGF mutually agree that the status of TGF is that
of an independent contractor operating at its own risk. TGF agrees that it is
not and will not act, represent, describe or hold itself out in any way,
directly or by implication, as a partner, joint venturer or agent of the Company
and will not describe itself as a representative for the Company, except with
respect to the performance of the services contemplated by paragraph 2 of this
Agreement.
(d) The obligation of the Company to pay the fees described in
subparagraph 4 of this Agreement shall be absolute and unconditional as long TGF
performs its obligations under this Agreement, and shall be payable without
offset, deduction or claim of any kind or character.
(e) The Company hereby acknowledges and consents that TGF may receive
additional fees or other compensation from one or more of the lenders,
subscribers, customers, investors or parties to any transaction described in
paragraph 4(a)(ii), or any sources of funding identified by TGF, for various
services which may include, in part, services related to this Agreement.
5. EXPENSES. In addition to the fees payable hereunder, and regardless of
whether any transaction set forth in paragraph 4 hereof is proposed or
consummated, the Company shall reimburse TGF for all fees and disbursements of
TGF's counsel and TGF's travel and out-of-pocket expenses incurred in connection
with the services performed by TGF pursuant to this Agreement, including without
limitation, hotels, food and associated expenses and long distance calls, but
excluding any expenses incurred by TGF in connection with any action, suit or
proceeding between TGF and the Company relating to the services to be performed
by TGF pursuant to this Agreement.
6. LIABILITY OF TGF.
(a) The Company acknowledges that all opinions and advice (written or
oral) given by TGF to the Company in connection with TGF's engagement are
intended solely for the benefit and use of the Company in considering the
transaction to which they relate, and the Company agrees that no person or
entity other than the Company shall be entitled to make use of or rely upon the
advice of TGF to be given hereunder, and no such opinion or advice shall be used
for any other purpose or reproduced, disseminated, quoted or referred to at any
time, in any manner or for any purpose, nor may the Company make any public
references to TGF, or use TGF's name in any annual reports or any other
statements, reports or releases of the Company without TGF's prior written
consent.
<PAGE>
(b) The Company acknowledges that TGF makes no commitment whatsoever
as to making or causing others to make a market in the Company's securities or
as to recommending or advising its clients to purchase the Company's securities.
Research reports or corporate finance reports that may be prepared by TGF will,
when and if prepared, be done solely on the merits, and will be based upon the
independent judgment and analysis of TGF or any senior corporate finance
personnel of TGF. TGF agrees to use its best efforts to secure the financing
necessary to implement the Company's reasonable business plans.
7. TGF'S SERVICES TO OTHERS. The Company acknowledges that TGF or its
affiliates are in the business of providing financial advisory and investment
banking consulting advice to others. Nothing contained in this Agreement shall
be construed to limit or restrict TGF in conducting such business with others,
or in rendering such advice to others, except to any competitors of the Company.
8. COMPANY INFORMATION.
(a) The Company recognizes and confirms that, in advising the Company
and in fulfilling its engagement hereunder, TGF will use and rely on data,
material and other information furnished to TGF by the Company. The Company
acknowledges and agrees that in performing its services under this Agreement,
TGF may rely upon the data, material and other information supplied by the
Company without independently verifying the accuracy, completeness or veracity
of such data, material or other information.
(b) Except as contemplated by the terms of this Agreement or as
required by applicable law, TGF shall keep confidential all material, non-public
information provided to it by the Company, and shall not disclose such
information to any third party, other than such of its employees and advisors as
TGF determines have a need to know.
9. INDEMNIFICATION.
(a) (i) The Company shall indemnify and hold TGF harmless against any
and all liabilities, claims, lawsuits, including any and all awards and/or
judgments to which it may become subject under the Securities Act of 1933, as
amended (the "Securities Act"), the Securities Exchange Act of 1934, as amended
(the "Exchange Act") or any other federal or state statue, at common law or
otherwise, insofar as said liabilities, claims and lawsuits (including awards
and/or judgments) arise out of or are in connection with the services rendered
by TGF or any transactions in connection with this Agreement, except for any
liabilities, claims and lawsuits (including awards and/or judgments), arising
out of and proximately caused by the reckless acts or omissions of TGF, or with
respect to which TGF is obligated to indemnify the Company under paragraph
9(b)(i) of this Agreement. In addition, the Company shall also indemnify and
hold TGF harmless against any and all costs and expenses, including reasonable
counsel fees, incurred or relating to the foregoing.
<PAGE>
(ii) TGF shall give the Company prompt notice of any such
liability, claim or lawsuit which TGF contends is subject to the Company's
indemnification obligations under this Agreement, and the Company thereupon
shall be granted the right to take any and all necessary and proper action, at
its sole cost and expense, with respect to such liability, claim and lawsuit,
including the right to settle, compromise and dispose of such liability, claim
or lawsuit, excepting therefrom any and all proceedings or hearings before any
regulatory bodies and/or authorities.
(b) (i) TGF shall indemnify and hold the Company harmless against any
and all liabilities, claims and lawsuits, including any and all awards and/or
judgments to which it may become subject under the Securities Act, the Exchange
Act or any other federal or state statue, at common law or otherwise, insofar as
said liabilities, claims and lawsuits (including awards and/or judgments) arise
out of or are based upon an untrue statement or alleged untrue statement of a
material fact required to be stated or necessary to make the statement therein,
not misleading, which statement or omission was made in reliance upon
information furnished in writing to the Company by TGF for inclusion in any
registration statement or prospectus or any amendment or supplement thereto in
connection with any transaction to which this Agreement applies, except for any
liabilities, claims and lawsuits (including awards and/or judgments) with
respect to which the Company is obligated to indemnify TGF under paragraph
9(a)(i) of this Agreement. In addition, TGF shall also indemnify and hold
harmless the Company against any and all costs and expenses, including
reasonable counsel fees, incurred or relating to the foregoing.
(ii) The Company shall give to TGF prompt notice of any such
liability, claim or lawsuit which the Company contends is the subject to TGF's
indemnification obligations under this Agreement, and TGF thereupon shall be
granted the right to take any and all necessary and proper action, at its sole
cost and expense, with respect to such liability, claim and lawsuit, including
the right to settle, compromise or dispose of such liability, claim or lawsuit,
excepting therefrom any and all proceedings or hearings before any regulatory
bodies and/or authorities.
(c) In order to provide for just and equitable contribution under
this Agreement in any case in which (i) any person entitled to indemnification
under this paragraph 9 makes claim for indemnification pursuant hereto but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this paragraph 9 provides for indemnification in
such case, or (ii) contribution under this Agreement may be required on the part
of any such person in circumstances for which indemnification is provided under
this paragraph 9, then, and in each such case, the Company and TGF shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after any contribution from others) in such proportion taking
into consideration the relative benefits received by each party from the
transactions in connection with this Agreement, the parties' relative knowledge
and access to information concerning the matter with respect to which the claim
was assessed, the opportunity to correct and prevent any statement or omission
and other equitable considerations appropriate under the circumstances;
provided, however, that notwithstanding the above, in no event shall TGF shall
be required to contribute any amount in excess of 5% of the public offering
price of any equity securities, and 3% of the public offering price of any debt
securities offered in connection with this Agreement; and provided, that, in any
such case, no person guilty of a fraudulent misrepresentation (within the
meaning of section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
<PAGE>
Within fifteen (15) days after receipt by any party to this Agreement
(or its representative) of notice of the commencement of any action, suit or
proceeding, such party will, if a claim for contribution in respect thereof is
to be made against another party (the "Contributing Party"), notify the
Contributing Party of the commencement thereof, but the omission so to notify
the Contributing Party will not relieve it from any liability which it may have
to any other party other than for contribution hereunder. In case any such
action, suit or proceeding is brought against any party, and such party notifies
a Contributing Party or his or its representative of the commencement thereof
within the aforesaid fifteen (15) days, the Contributing Party will be entitled
to participate therein with the notifying party and any other Contributing Party
similarly notified. Any such Contributing Party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
proceeding effected by such party seeking contribution without the written
consent of the Contributing Party. The indemnification and contribution rights
contained in this paragraph 9 are in addition to any other rights and remedies
which either party hereto may have at law, in equity or otherwise.
10. COVENANTS OF THE COMPANY. The Company covenants and agrees that it
will:
(a) For the duration of this Agreement, furnish to TGF copies of such
financial statements and other periodic and special reports as the Company from
time to time furnish generally to holders of any class of its securities or to
its directors and officers, and promptly furnish TGF (i) a copy of each periodic
report the Company shall be required to file with the Securities and Exchange
Commission ("Commission"), (ii) a copy of every press release and every news
item and article with respect to the Company or its affairs which was released
by the Company, and (iii) such additional documents and information with respect
to the Company or its affairs or any future subsidiaries of the Company, as TGF
may from time to time reasonably request.
(b) Apply the net proceeds from any funding arranged by TGF according
to the "Use of Proceeds" that the Company shall be obligated to prepare prior to
any such funding; and provide to TGF any periodic reports requested by TGF
showing the actual disbursements of funds to monitor whether the "Use of
Proceeds" shall have been complied with. The Company will not apply funds in any
manner inconsistent with such "Use of Proceeds" except with TGF's prior written
consent.
(c) Provide TGF, upon its request, at the Company's sole expense,
with access to daily consolidated financial transfer sheets relating to the
Company's securities.
(d) Cause two (2) designees selected by TGF to be elected to the
Company's Board of Directors (the "Board") during each year of the term of this
Agreement and notify TGF of each meeting of the Board ("Representatives"). The
Representatives shall be entitled to receive reimbursement for all reasonable
costs incurred in attending such meetings. The Company further agrees that,
during the term of this Agreement, the number of seats on the Board shall be
five (5), which number shall not be changed without the prior written consent of
TGF, and the Company shall schedule no less than four (4) formal and in person
meetings of its Board per year, which meetings shall be held quarterly each year
and thirty (30) days advance written notice of such meetings shall be given to
the Representatives. The Company agrees to indemnify and hold TGF and the
Representatives harmless against any and all claims, actions, damages, costs and
expenses, and judgments arising solely out of the attendance and participation
of the Representatives at any such meeting described herein. In the event that
the Company shall maintain a liability insurance policy affording coverage for
the acts of its officers and directors, it shall include the Representatives as
an insured under such policy, if possible.
<PAGE>
(e) Not issue any shares of Common Stock, Preferred Stock or any
warrants, options or other rights to purchase Common Stock or Preferred Stock
exceeding 5% of each class of aforesaid securities, in a single or a series of
related transactions, without the reasonable prior, written consent of TGF.
11. NOTICES. All notices, demands and requests required and permitted to
be given under the provisions of this Agreement shall be deemed duly given if
and when delivered personally or mailed by certified mail, postage prepaid,
addressed as follows or to such other address as The Company or TGF may
hereafter specify in writing:
If to The Company:
CORGENIX MEDICAL CORPORATION
12061 Tejon Street
Westminster, CO 80234
Attention: , President
------------
If to TGF:
TransGlobal Financial Corporation
14255 U.S. Highway 1, Suite 253
Juno Beach, Florida 33408
Attention: Mike M. Mustafoglu, President
12. GENERAL.
(a) This Agreement embodies the entire agreement and understanding
between the Company and TGF with respect to the subject matter hereof and it is
expressly agreed that any prior agreements or understandings between The Company
and TGF relating to the subject matter of this Agreement, whether oral or
written, are canceled by execution of this Agreement
<PAGE>
(b) This Agreement shall be construed and governed in accordance with
the laws of the State of Florida.
(c ) This Agreement shall be binding upon and inure to the benefit of
the Company and TGF and their respective successors and assigns. Neither party
shall have the right to assign this Agreement, however, without the prior
written consent of the other party to this Agreement.
(d) No modifications or waiver of any provisions of this Agreement
shall be valid unless it is in writing and duly executed by the party to be
charged. No waiver at any time of any provision of this Agreement shall be
deemed a waiver of any other provision of this Agreement at that time or a
waiver of that or any other provision of this Agreement at any other time.
IN WITNESS WHEREOF, The Company and TGF have executed this Agreement as of
the day and year first above written.
CORGENIX MEDICAL CORPORATION:
By:
Its:
TransGlobal Financial Corporation:
By:
Mike M. Mustafoglu
President
<PAGE>
EXHIBIT H
CORGENIX MEDICAL CORPORATION
CERTIFICATE OF DESIGNATIONS
OF PREFERENCES OF SERIES A 5%
CONVERTIBLE, PREFERRED STOCK
PURSUANT TO SECTION 78.1955(1) OF THE
GENERAL CORPORATION LAW OF NEVADA
The undersigned Mike Mustafoglu, being the President and the Secretary of
CORGENIX MEDICAL CORPORATION, a Nevada corporation (the "Corporation"), do
hereby make and execute this Certificate of Designations and do hereby certify
on behalf of the Corporation that:
1. They are respectively the duly elected and acting President and
Secretary of the Corporation.
2. On May 7, 1998 the Board of Directors of the Corporation duly adopted
the following resolutions designating shares of the Corporation's Preferred
Stock as Series A 5% Convertible Preferred Stock and fixing the voting powers,
designations, preferences, limitations, restrictions and relative rights
thereof:
RESOLVED, that pursuant to the authority conferred upon the Board of
Directors by Article FOURTH of the Corporation's Certificate of Incorporation
and Section 78.1955(1) of the General Corporation Law of Nevada, there is hereby
established a series of shares of the authorized Preferred Stock of the
Corporation designated "Series A 5% Convertible Preferred Stock" (the "Series A
Preferred Stock"); that the shares constituting such series and to which this
resolution shall apply shall be One Million Five Hundred Thousand (1,500,000)
shares; and that the voting powers, designations, preferences, limitations,
restrictions and relative rights granted to or imposed on the Series A Preferred
Stock shall be as follows:
Section 1.DESIGNATION AND AMOUNT. The shares of such series shall be
designed as "Series A 5% Convertible, Preferred Stock" (herein referred to as
"Series A Preferred Stock"), having a par value per share equal to $.001, and
the number of shares constituting such series shall be 1,500,000.
Section 2.DIVIDENDS.
(a) The holders of Series A Preferred Stock shall be entitled to
receive dividends (the "Preferred Dividend") payable in cash or in shares of
Series A Preferred Stock, at the rate of $.05 per share per annum (the "Dividend
Rate") on a cumulative basis from the actual date of original issue of each
share of Series A Preferred Stock (the "Original Issue Date"), whether or not
declared, out of funds legally available therefore, payable quarterly in arrears
on the fifteenth day of each February, May, August, and November in each year
(each a "Dividend Payment Date"). Payments shall commence on August 15, 1998.
<PAGE>
Each such Preferred Dividend shall be payable to the holders of record of the
Series A Preferred Stock at the close of business on the preceding December 31,
March 31, June 30, and September 30, respectively. Each dividend shall be
declared by the Board of Directors no more than fifteen (15) days prior to its
respective record date. Payments shall equal $.0125 per share on each Dividend
Payment Date or such lesser amount as shall result from any proration in respect
of any partial quarterly period. The amount of Preferred Dividends payable upon
the occurrence of any event described in Sections 3, 5 or 7 hereof shall be
computed by multiplying the applicable Dividend Rate by a fraction, the
numerator of which shall be the number of days since the preceding Dividend
Payment Date to the date of payment of such partial Preferred Dividend and the
denominator of which shall be 360. Any shares of Series A Preferred Stock issued
as a stock dividend shall be valued for purposes of the Dividend Rate at $1.00
per share of Series A Preferred Stock issued.
(b) The Dividend Rate shall be adjusted commencing twenty-four
(24) months after the Original Issue Date, by increasing the Dividend Rate to
$.10 per share per annum, with the quarterly Preferred Dividend being increased
to $.025 per share, and thereafter on each succeeding twelve (12) month
anniversary of the Original Issue Date, the Dividend Rate shall be increased
such that during the fourth and fifth years following the Original Issue Date
the Dividend Rate shall be $.12 and $.14, and the quarterly Preferred Dividend
shall be $.03 and $.035, respectively, and so on until all of the outstanding
shares of Series A Preferred Stock shall have been redeemed or converted as
provided in this Certificate of Designations.
(c) So long as any of the shares of Series A Preferred Stock are
outstanding, no dividends (other than dividends or distributions paid in shares
of or options, warrants or rights to subscribe for or purchase shares of Common
Stock) shall be declared or paid or set apart for payment by the Corporation or
other distribution of cash or other property declared or made directly or
indirectly by the Corporation or any affiliate or any person acting on behalf of
the Corporation or any of its affiliates with respect to any shares of Common
Stock, Preferred Stock or other capital stock over which the Series A Preferred
Stock has preference or priority in the payments of dividends or in the
distribution of assets on any liquidation, dissolution or winding up of the
Corporation ("Junior Stock"), nor shall any shares of Junior Stock be redeemed,
purchased or otherwise acquired (other than a purchase or other acquisition of
Common Stock made for purposes of any employee incentive or benefit plan of the
Corporation or any subsidiary) for any consideration (or any moneys be paid to
or made available for a sinking-fund for the redemption of any shares of any
such stock) directly or indirectly by the Corporation or any affiliate or any
person acting on behalf of the Corporation or any of its affiliates (except by
conversion into or exchange for Junior Stock), nor shall any other cash or other
property otherwise be paid or distributed to or for the benefit of any holder of
shares of Junior Stock in respect thereof, directly or indirectly, by the
Corporation or any affiliate or any person acting on behalf of the Corporation
or any of its affiliates unless in each case (x) the full Preferred Dividends
(including all accumulated, accrued and unpaid dividends) on all outstanding
shares of Series A Preferred Stock shall have been paid or such dividends have
been declared and set apart for payment for the current dividend periods with
respect to the Series A Preferred Stock and (y) sufficient funds shall have been
paid or set apart for the payment of the full Preferred Dividend for the current
dividend period with respect to the Series A Preferred Stock.
<PAGE>
(d) If and whenever a quarterly Preferred Dividend is not paid
on a Dividend Payment Date (whether or not declared), then the amount of such
Preferred Dividend remaining in arrears and unpaid from time to time shall bear
interest from such Dividend Payment Date until the date it is paid in full at an
annual rate equal to ten percent (10%). Interest payable in respect of Preferred
Dividends which are in arrears shall be computed on the basis of twelve (12),
thirty (30) day months and a 360-day year. No payment shall be applied to the
Preferred Dividend due on a Dividend Payment Date unless and until all arrears,
including interest thereon, with respect to accumulated, accrued but unpaid
Preferred Dividends shall have been paid.
Section 3.LIQUIDATION, DISSOLUTION, OR WINDING UP.
(a) In the event of any liquidation, dissolution, or winding up
of the Corporation, whether voluntary or involuntary, the holders of the Series
A Preferred Stock shall be entitled to be paid first out of the assets of the
Corporation available for distribution to holders of the Corporation's capital
stock of all classes and before any sums shall be paid or any assets distributed
among the holders of shares of any other class or series of capital stock of the
Corporation, including Common Stock, an amount per share equal to One and
10/100's Dollar ($1.10) ("Base Preference Amount") plus an amount equal to all
the accrued but unpaid Preferred Dividends (whether or not declared), and the
amount equal to all interest, if any, on any Preferred Dividends in arrears, in
each case to the date of final distribution to such holders (the "Preference
Amount"). The Preference Amount shall be adjusted commencing twelve (12) months
after the Original Issue Date, by increasing the Base Preference Amount to One
and 20/100's Dollars ($1.20), and thereafter on each succeeding twelve (12)
month anniversary of the Original Issue Date the Preference Amount shall be
increased by an amount equal to seven percent (7%) of the Base Preference Amount
in effect for the preceding twelve (12) month period, such that during the
third, fourth and fifth years following the Original Issue Date, the Preference
Amount shall be $1.284, $1.37388, and $1.4700516 respectively, and so on, on
each anniversary of the Original Issue Date until all of the outstanding shares
of Series A Preferred Stock shall have been redeemed or converted as provided in
this Certificate of Designations. Until the holders of the Series A Preferred
Stock have been paid the Preference Amount in full, no payment will be made to
any holder of Junior Stock upon the liquidation, dissolution or winding up of
the Corporation. If the assets of the Corporation shall be insufficient to
permit the payment in full to the holders of the Series A Preferred Stock of the
Preference Amount then the entire assets of the Corporation available for such
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock in proportion to the Preference Amount each such holder is
otherwise entitled to receive. After payment of the Preference Amount shall have
been made in full to the holders of the Series A Preferred Stock or funds
necessary for such payment shall have been set aside by the Corporation in trust
for the account of holders of the Series A Preferred Stock so as to be available
for such payment, holders of the Series A Preferred Stock shall not be entitled
to participate in the distribution of any remaining assets of the Corporation.
<PAGE>
(b) Any consolidation, merger or a statutory share exchange
(other than (i) merger with a wholly-owned subsidiary of the Corporation, (ii) a
mere reincorporation transaction, or (iii) a merger pursuant to which the
Corporation is the surviving entity and the capitalization of the Corporation
remains unchanged) in which the outstanding shares of capital stock of the
Corporation are exchanged for securities or other consideration of or from
another corporation, or a sale of all or substantially all the assets or stock
of the Corporation, shall be deemed to be a liquidation, dissolution, or winding
up of the affairs of the Corporation within the meaning of this Section 3, and
shall entitle the holders of the Series A Preferred Stock to receive on the
effective date of such event the Preference Amount, in cash, securities or other
property; provided, however, that any such event shall not be so regarded as a
liquidation, dissolution, or winding up of the affairs of the Corporation with
respect to the Series A Preferred Stock if the holders of two-thirds (2/3) of
the outstanding shares of the Series A Preferred Stock approve such event or
elect not to have any such event deemed to be a liquidation, dissolution, or
winding up of the affairs of the Corporation by giving written notice thereof to
the Corporation at least ten (10) days prior to the effective date of such
event.
(c) Whenever the distribution provided for in this Section 3
shall be paid in property other than cash, the value of such distribution shall
be the fair value thereof determined in good faith by the Board of Directors of
the Corporation.
Section 4.VOTING RIGHTS.
(a) Except as otherwise required by law, or as specifically
provided herein, the holders of Series A Preferred Stock shall have no voting
rights and powers; provided, however, the holders of Series A Preferred Stock
shall be entitled to vote pursuant to the provisions of Sections 4(b) and 4(c),
which govern the rights of the holders of Series A Preferred Stock with respect
to the election or removal of directors. Notwithstanding the foregoing, the
holders of the Series A Preferred Stock shall be entitled to notice of and to
attend any stockholders' meeting.
(b) For a period of twenty-four (24) months from and after the
Original Issue Date, the holders of the Series A Preferred Stock, voting
separately as one class, shall have the exclusive and special right at all times
to elect two (2) directors (the "Preferred Directors") to the Board of Directors
of the Corporation provided, however, that so long as any shares of Series A
Preferred Stock are outstanding, the Board of Directors shall not consist of
more than five (5) members, unless the Preferred Directors voting as a class,
shall have previously approved any such increase to the Board of Directors
beyond five (5) members. The Preferred Directors shall be elected by the vote of
the holders of a majority, and removed by the vote of the holders of two-thirds
(2/3), of the shares of Series A Preferred Stock then outstanding. The right of
holders of the Series A Preferred Stock contained in this Section 4(b) may be
exercised either at a special meeting of the holders of Series A Preferred Stock
or at any annual or special meeting of the stockholders of the Corporation, or
by written consent of such holders in lieu of a meeting. Upon the written
request of the holders of record of at least a majority of the Series A
Preferred Stock then outstanding, the Secretary of the Corporation shall call a
special meeting of the holders of Series A Preferred Stock for the purpose of
<PAGE>
(i) removing any Preferred Directors elected pursuant to this Section 4(b)
and/or (ii) electing a director to fill a vacancy of the directorship authorized
to be filled by the holders of Series A Preferred Stock pursuant to this Section
4(b). Such meeting shall be held at the earliest practicable date permitted by
law. At any meeting held for the purpose of electing or removing a Preferred
Directors, the presence, in person or by proxy, of the holders of record of a
majority of the Series A Preferred Stock then outstanding shall be required to
constitute a quorum of the Series A Preferred Stock for such election. A vacancy
in the directorship to be elected by the holders of Series A Preferred Stock
pursuant to this Section 4(b) may be filled only by vote or written consent in
lieu of a meeting of the holders of a majority of the shares of Series A
Preferred Stock then outstanding and may not be filled by the remaining
directors.
(c) If and whenever two (2) quarterly dividends (whether or not
consecutive) payable on the Series A Preferred Stock shall be in arrears (which
shall, with respect to any such quarterly dividend, mean that any such dividend
has not been paid in full), whether or not earned or declared, the number of
directors then constituting the Board of Directors shall be increased to a
number which allows for holders of the Series A Preferred Stock to elect a
majority of the entire Board of Directors at a special meeting of stockholders
called as hereinafter provided. Whenever all arrears in dividends on the Series
A Preferred Stock (together with interest on dividends in arrears pursuant to
Section 2(d) above) shall have been paid and dividends thereon for the current
quarterly dividend period shall have been paid or declared and set apart for
payment, then the right of the holders of the Series A Preferred Stock to elect
such additional directors shall cease (but subject always to the same provision
of the vesting of such special voting rights in the case of any similar future
arrearages in two (2) quarterly dividends), and the terms of office of all
persons elected as additional directors by the holders of the Series A Preferred
Stock pursuant to this Section 4(c) shall forthwith terminate and, if necessary,
the number of the Board of Directors shall be reduced accordingly. At any time
after such additional voting power shall have been so vested in the holders of
the Series A Preferred Stock, the Secretary of the Corporation may, and upon the
written request of any holder of Series A Preferred stock (addressed to the
Secretary at the principal office of the Corporation) shall, call a special
meeting of the holders of the Series A Preferred Stock for the election of the
additional directors to be elected by them as herein provided, such call to be
made by notice similar to that provided in the Bylaws of the Corporation for a
special meeting of the stockholders or as required by law. If any such special
meeting required to be called as above provided shall not be called by the
Secretary within twenty (20) days after receipt of any such request, then any
holder of Series A Preferred Stock may call such meeting, upon the notice above
provided, and for that purpose shall have access to the stock books of the
Corporation. The additional Preferred Directors elected at any special meeting
shall hold office until the next annual meeting of the stockholders or special
meeting held in lieu thereof if such office shall not have previously terminated
as above provided. If any vacancy shall occur among the additional Preferred
Directors, a successor shall be elected by the Board of Directors, upon the
nomination of the then remaining Preferred Directors or the successor of such
remaining directors, to serve until the next annual meeting of the stockholders
or special meeting held in place thereof if such office shall not have
previously terminated as above provided.
<PAGE>
Section 5.CONVERSION RIGHTS. The holders of the Series A
Preferred Stock shall have the following conversion rights:
(a) RIGHT TO CONVERT. Each share of Series A Preferred Stock
shall be convertible at any time, and from time to time, at the option of the
holder thereof, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing One Dollar ($1.00) (the "Numerator")
by the Conversion Price (as defined below) in effect at the time of conversion.
The conversion price at which shares of Common Stock shall be deliverable upon
conversion of Series A Preferred Stock without the payment of additional
consideration by the holder thereof (the "Conversion Price") initially shall be
One and No/100 Dollars ($1.00). Such initial Conversion Price, and the rate at
which shares of Series A Preferred Stock may be converted into shares of Common
Stock, shall be subject to adjustment as provided below. The conversion rights
of the holders of Series A Preferred Stock shall terminate (i) in the event of a
liquidation of the Corporation, at the close of business on the first full day
preceding the date fixed for the payment of any amounts distributable on
liquidation to the holders of Series A Preferred Stock; and (ii) in the event
shares of Series A Preferred Stock are called for redemption pursuant to Section
7 hereof, at the close of business on the Redemption Date (as defined in Section
7(a) below), unless the Corporation shall default in making payment in full of
the Redemption Price.
(b) ADJUSTMENT TO CONVERSION PRICE UPON OCCURRENCE OF
EXTRAORDINARY COMMON STOCK EVENT. Upon the happening of an Extraordinary Common
Stock Event (as hereinafter defined), the Conversion Price for the Series A
Preferred Stock, simultaneously with the happening of such Extraordinary Common
Stock Event, shall be adjusted by multiplying the then-effective Conversion
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such Extraordinary Common Stock
Event and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such Extraordinary Common Stock Event, and the
product so obtained thereafter shall be the Conversion Price for the Series A
Preferred Stock. The Conversion Price, as so adjusted, shall be readjusted in
the same manner upon the happening of any successive Extraordinary Common Stock
Event(s). "Extraordinary Common Stock Event" shall mean (i) the issuance of
additional shares of Common Stock as a dividend or other distribution on
outstanding Common Stock, (ii) a stock split or subdivision of outstanding
shares of Common Stock into a greater number of shares of Common Stock, or (iii)
a reverse stock split or combination of outstanding shares of Common Stock into
a smaller number of shares of Common Stock.
(c) RECAPITALIZATION OR RECLASSIFICATION. If the Common Stock
issuable upon the conversion of the Series A Preferred Stock shall be changed
into the same or a different number of shares of any class or classes of stock
of the Corporation, whether by recapitalization, reclassification, or otherwise
(other than a subdivision or combination of shares or stock dividend provided
for in Section 5(b) hereof, or a reorganization, merger, share exchange,
consolidation, or sale of assets provided for in Section 5(d) hereof), then and
in each such event the holder of each share of Series A Preferred Stock shall
have the right thereafter to convert such share into the kind and amount of
shares of stock and other securities and property receivable upon such
recapitalization, reclassification, or other change by holders of the number of
shares of Common Stock into which such share of Series A Preferred Stock might
have been converted immediately prior to such recapitalization,
reclassification, or change, all subject to further adjustment as provided
herein.
<PAGE>
(d) CAPITAL REORGANIZATION, MERGER, SHARE EXCHANGE,
CONSOLIDATION, OR SALE OF ASSETS. If at any time or from time to time there
shall be a capital reorganization of the Common Stock, including a merger, share
exchange, consolidation, or sale of all or substantially all of the assets of
the Corporation (other than a subdivision or combination of shares or stock
dividend provided for in Section 5(b) hereof or a recapitalization or
reclassification provided for in Section 5(c) hereof), then, as a part of such
reorganization, provision shall be made so that the holders of the Series A
Preferred Stock thereafter shall be entitled to receive, upon conversion of each
share of the Series A Preferred Stock, the number of shares of stock or other
securities or property to which a holder of the number of shares of Common Stock
into which such shares of Series A Preferred Stock might have been converted
immediately prior to such capital reorganization would have been entitled to
receive. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 5 with respect to the rights of
the holders of the Series A Preferred Stock after the reorganization to the end
that the provisions of this Section 5 (including adjustment of the Conversion
Price then in effect and the number of shares acquired upon conversion of the
Series A Preferred Stock) shall be applicable after that event in as nearly
equivalent a manner as may be practicable. Notwithstanding the foregoing, in the
case of a consolidation, merger, share exchange, or sale of all or substantially
all the assets of the Corporation, the provisions of Section 3(b) shall apply to
the Series A Preferred Stock, and this Section 5(d) shall not apply, unless, as
provided in Section 3(b) the holders of two-thirds (2/3) of the outstanding
shares of Series A Preferred Stock elect that such event shall not be deemed to
be a liquidation, dissolution, or winding up of the affairs of the Corporation.
(e) CERTAIN DILUTIVE ISSUES.
(i) SPECIAL DEFINITIONS. For purposes of
this Section 5(e), the following definitions apply:
(1) "Options" shall mean rights,
options, or warrants to subscribe for, purchase or otherwise acquire either
Common Stock or Convertible Securities (as defined below), except for (A)
warrants to purchase an aggregate of 2,000,000 shares of Common Stock
outstanding on the Original Issue Date (the "Anti-Dilution Warrants"); (B)
warrants to purchase an aggregate of 1,000,000 shares of Common Stock granted
and reserved for issuance on the Original Issue Date (the "Unit Warrants") and
(C) options to purchase shares of Common Stock of the Corporation pursuant to an
Incentive Stock Plan of the Corporation approved by the holders of shares of
Common Stock and Series A Preferred Stock, voting as classes, provided such
options each are exercisable at a price equal to the fair market value of the
Common Stock on the date such option was granted ("Approved ISOs").
<PAGE>
(2) "Convertible Securities" shall mean
any evidences of indebtedness, shares of stock (other than Common Stock and
Series A Preferred Stock) or other securities convertible into or exchangeable
for Common Stock.
(3) "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued (or deemed to be issued pursuant to
Section 5(e)(iii)) by the Corporation after the Original Issue Date, other than
shares of Common Stock issued or issuable upon (i) conversion of shares of
Series A Preferred Stock or as a dividend or distribution on Series A Preferred
Stock; (ii) the exercise of the Anti-Dilution Warrants; (iii) the exercise of
the Unit Warrants; and (iv) the exercise of the Approved ISO's.
(ii) NO ADJUSTMENT OF CONVERSION PRICE. Any
provision herein to the contrary notwithstanding, no adjustment in the number of
shares of Common Stock into which shares of Series A Preferred Stock is
convertible shall be made, by adjustment in the Conversion Price, unless the
consideration per share (determined pursuant to Section 5(e)(v) hereof) for an
Additional Share of Common Stock issued or deemed to be issued by the
Corporation is less than the Fair Market Value (as defined in Section 5(h)
below) on the date of the issue of such Additional Shares of Common Stock.
(iii)ISSUE OF OPTIONS AND CONVERTIBLE
SECURITIES. In the event the Corporation at any time or from time to time after
the Original Issue Date shall issue any Options or Convertible Securities or
shall fix a record date for the determination of holders of any class of
securities then entitled to receive any such Options or Convertible Securities,
then the maximum number of shares (as set forth in the instrument relating
thereto without regard to any provisions contained therein for a subsequent
adjustment of such number) of Common Stock issuable upon the exercise of such
Options or, in the case of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such issue or, in
case such a record date shall have been fixed, as of the close of business on
such record date, provided that Additional Shares of Common Stock shall not be
deemed to have been issued unless the consideration per share (determined
pursuant to Section 5(e)(v) hereof) of such Additional Shares of Common Stock
would be less than the Fair Market Value (as defined in Section 5(h) below) on
the date of such issue, or such record date, as the case may be, and provided
that in any such case in which Additional Shares of Common Stock are deemed to
be issued:
(1) no further adjustments in the
Conversion Price shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
(2) if such Options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase or decrease in the consideration payable to the Corporation, or
decrease or increase in the number of shares of Common Stock issuable upon the
exercise, conversion or exchange thereof, the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be recomputed to reflect such increase
or decrease insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities, provided, however, that no such
adjustment of the Conversion Price shall affect Common Stock previously issued
upon conversion of shares of Series A Preferred Stock;
<PAGE>
(3) upon the expiration of any such
Options or any rights of conversion or exchange under such Convertible
Securities that shall not have been exercised, the Conversion Price computed
upon the original issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if:
(A) in the case of Convertible
Securities or Options for Common Stock, the only Additional Shares of Common
Stock issued were the shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the consideration
actually received by the Corporation for the issue of all such Options, whether
or not exercised, plus the consideration actually received by the Corporation
upon such exercise, or for the issue of all such Convertible Securities that
were actually converted or exchanged, plus the additional consideration, if any,
actually received by the Corporation upon such conversion or exchange, and
(B) in the case of Options for
Convertible Securities, only the Convertible Securities, if any, actually issued
upon the exercise thereof were issued at the time of issue of such Options, and
the consideration received by the Corporation for the Additional Shares of
Common Stock deemed to have been then issued was the consideration actually
received by the Corporation for the issue of all such Options, whether or not
exercised, plus the consideration deemed to have been received by the
Corporation (determined pursuant to Section 5(e)(v)) upon the issue of the
Convertible Securities with respect to which such Options were actually
exercised;
(4) no readjustment pursuant to Section
5(e)(iii)(2) or (3) above shall have the effect of increasing the Conversion
Price to an amount which exceeds the lower of (a) the Conversion Price prior to
the initial adjustment to which the readjustment applies, or (b) the Conversion
Price that would have resulted from any issuance of Additional Shares of Common
Stock between the date of the initial adjustment date and such readjustment
date; and
(5) in the event of any change in the
number of shares of Common Stock issuable upon the exercise, conversion or
exchange of any Option or Convertible Security, including, but not limited to, a
change resulting from the antidilution provisions thereof, the Conversion Price
then in effect shall forthwith be readjusted to such Conversion Price as would
have been obtained had the adjustment which was initially made upon the issuance
of such unexercised Option or unconverted Convertible Security, been made upon
the basis of such subsequent change, but no further adjustment shall be made for
the actual issuance of Common Stock upon the exercise or conversion of any such
Option or Convertible Security.
<PAGE>
(iv) ADJUSTMENT OF CONVERSION PRICE UPON
ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In the event the Corporation at
any time after the Original Issue Date shall issue Additional Shares of Common
Stock (including Additional Shares of Common Stock deemed to be issued pursuant
to Section 5(e)(iii)), without consideration or for a consideration per share
less than the Fair Market Value (as defined in Section 5(h) below) on the date
of such issue, then and in such event, the Conversion Price shall be reduced to
a price (calculated to the nearest cent) equal to either (A) the per share
consideration for such Additional Shares of Common Stock (or deemed Additional
Shares of Common Stock) pursuant to Section 5(e)(iii), or (B) in the case of
Additional Shares of Common Stock issued (or deemed to have been issued) without
consideration, the par value of the Common Stock. The provisions of this Section
5(e)(iv) do not apply if the provisions of any of Section 5(b), (c) or (d)
apply.
(v) DETERMINATION OF CONSIDERATION. The
consideration received by the Corporation for the issue of any Additional Shares
of Common Stock shall be computed as follows:
(1) CASH, PROPERTY, AND OTHER
CONSIDERATION. Such consideration shall:
A. insofar as it consists of
cash, be computed as the aggregate amount of cash received by the Corporation
excluding amounts paid or payable for accrued interest or accrued dividends;
B. insofar as it consists of
property, services, or other consideration other than cash, be computed at the
fair value thereof at the time of such issue, as determined in good faith by the
Board of Directors; and
C. in the event Additional
Shares of Common Stock are issued together with other shares or securities or
other assets of the Corporation for consideration which covers both, be the
proportion of the consideration so received, computed as provided in clauses (a)
and (b) above, as is determined in good faith by the Board of Directors.
(2) OPTIONS AND CONVERTIBLE
Securities. The consideration per share received by the Corporation for
Additional Shares of Common Stock deemed to have been issued pursuant to Options
and Convertible Securities, shall be deemed to be the sum of the consideration
paid for such Option or Convertible Security, if any, plus the lowest
consideration per share then payable upon the exercise of Options, as set forth
in the instruments relating to such Options or Convertible Securities, without
regard to any provision contained therein designed to protect against dilution.
If Options or Convertible Securities are issued together with other securities
or instruments of the Corporation, the Board of Directors shall determine in
good faith the amount of consideration paid for such Option or Convertible
Securities.
<PAGE>
(f) CERTIFICATE AS TO ADJUSTMENTS. In each case of an adjustment
or readjustment of the Conversion Price of the Series A Preferred Stock, the
Corporation will furnish each holder of the Series A Preferred Stock with a
certificate prepared by the Chief Financial Officer of the Corporation showing
such adjustment or readjustment and stating in detail the facts upon which such
adjustment or readjustment is based.
(g) EXERCISE OF CONVERSION PRIVILEGE. To exercise its conversion
privilege, a holder of Series A Preferred Stock shall surrender the
certificate(s) representing the shares being converted to the Corporation at its
principal office, accompanied by written notice to the Corporation at that
office that such stockholder elects to convert such shares (a "Conversion
Notice"). The Conversion Notice also shall state the name(s) and address(es) in
which the certificate(s) for shares of Common Stock issuable upon such
conversion shall be issued. The certificate(s) for shares of Series A Preferred
Stock surrendered for conversion shall be accompanied by proper assignment
thereof to the Corporation or in blank. The date when the Conversion Notice is
received by the Corporation together with the certificate(s) representing the
shares of Series A Preferred Stock being converted shall be the "Conversion
Date." As promptly as practicable after the Conversion Date, the Corporation
shall issue and deliver to the holder of the shares of Series A Preferred Stock
being converted, or on its written order, such certificate(s) as it may request
of the number of whole shares of Common Stock issuable upon the conversion of
such shares of Series A Preferred Stock in accordance with the provisions of
this Section 5 and cash, as provided in Section 5(h), in respect of any fraction
of a share of Common Stock issuable upon such conversion. Such conversion shall
be deemed to have been effected immediately prior to the close of business on
the Conversion Date, and at such time the rights of the holder as a holder of
the converted shares of Series A Preferred Stock shall cease and the person(s)
in whose name(s) any certificate(s) for shares of Common Stock shall be issuable
upon such conversion shall be deemed to have become the holder(s) of record of
the shares of Common Stock represented thereby.
(h) CASH IN LIEU OF FRACTIONAL SHARES. No fractional shares of
Common Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Series A Preferred Stock. Instead of any fractional
shares of Common Stock that otherwise would be issuable upon conversion of a
series of Series A Preferred Stock, the Corporation shall pay to the holder of
the shares of Series A Preferred Stock that were converted a cash adjustment in
respect of such fractional shares in an amount equal to the same fraction of the
Fair Market Value price per share of the Common Stock at the close of business
on the Conversion Date. "Fair Market Value" shall mean (i) in the case of a
security listed or admitted to trading on any securities exchange, the last
reported sale price, regular way (as determined in accordance with the practices
of such exchange), on such day, or if no sale takes place on such day, the
average of the closing bid and asked prices on such day (and in the case of a
security traded on more than one national securities exchange, at such price or
such average, upon the exchange on which the volume of trading during the last
calendar year was the greatest), (ii) in the case of a security not then listed
or admitted to trading on any securities exchange, the last reported sale price
on such day, or if no sale takes place on such day, the average of the closing
bid and asked prices on such day, as reported by a reputable quotation service
designated by the Corporation, (iii) in the case of a security not then listed
or admitted to trading on any securities exchange and as to which no such
reported sale price or bid and asked prices are available, the average of the
reported high bid and low asked prices on such day, as reported by a reputable
quotation service, or the Wall Street Journal, or if there are no bid and asked
prices on such day, the average of the high bid and low asked prices, as so
reported, on the most recent day (not more than 30 days prior to the date in
question) for which prices have been so reported, and (iv) in the case of a
security determined by the Corporation's Board of Directors as not having an
active quoted market or in the case of other property, such fair market value as
shall be determined by the Board of Directors. The determination as to whether
any fractional shares are issuable shall be based upon the total number of
shares of Series A Preferred Stock being converted at any one time by any holder
thereof, not upon each share of Series A Preferred Stock being converted.
<PAGE>
(i) RESERVATION OF COMMON STOCK. The Corporation at all times
shall reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the shares
of the Series A Preferred Stock, such number of its shares of Common Stock as
from time to time shall be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred Stock.
Section 6.RESTRICTIONS AND LIMITATIONS: HOLDERS OF SERIES A
PREFERRED STOCK VOTING AS A CLASS; AND PREFERRED DIRECTORS VOTING
AS A CLASS.
(a) So long as any shares of Series A Preferred Stock remain
outstanding, in addition to any other vote or consent of stockholders required
by law or the Certificate of Incorporation, neither the Corporation, nor any
subsidiary of the Corporation MUTATIS MUTANDIS, will take any of the following
actions without the affirmative vote or consent (with each share of Series A
Preferred Stock being entitled to one vote) of the holders of at least
two-thirds (2/3) of the outstanding shares of the Series A Preferred Stock
voting as a class, given in writing or by resolution adopted at a meeting called
for such purpose:
(i) amend the Certificate of Incorporation
or Bylaws of the Corporation if such amendment would:
(1) reduce the Dividend Rate on the
Series A Preferred Stock provided for herein, make such dividends noncumulative,
defer the date from which dividends will accrue, cancel accrued and unpaid
dividends, or change the relative seniority rights of the holders of the Series
A Preferred Stock as to the payment of dividends in relation to the holders of
any other capital stock of the Corporation;
(2) reduce the amount payable to the
holders of the Series A Preferred Stock upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, or change the
relative seniority of the liquidation preferences of the holders of the Series A
Preferred Stock;
(3) reduce the Redemption Price
specified in Section 7 hereof with respect to the Series A
Preferred Stock;
(4) cancel or modify the conversion
rights of the Series A Preferred Stock provided for in Section 5
hereof; or
(5) adversely affect any of the rights,
preferences or privileges provided for herein for the benefit of any shares of
Series A Preferred Stock; provided that no issuance of equity securities which
shall have been approved under Section 6(a)(iv) hereof (or which does not
require approval under such Section 6(a)(iv)) shall be deemed to have such an
adverse effect.
(ii) redeem, purchase or otherwise acquire
for value (or pay into or set aside for a sinking fund for such purpose) any
share or shares of Series A Preferred Stock otherwise than by redemption of
Series A Preferred Stock in accordance with Section 7 hereof or by conversion in
accordance with Section 5 hereof;
(iii)redeem, purchase or otherwise acquire
(or pay into or set aside for a sinking fund for such purpose) any share or
shares of Junior Stock, except for a purchase or other acquisition of Common
Stock made for purposes of any employee incentive or benefit plan of the
Corporation or any subsidiary;
<PAGE>
(iv) authorize or issue, or obligate itself
to issue, any other equity security (1) senior to or on a parity with the Series
A Preferred Stock as to dividend rights or redemption rights or liquidation
preferences or (2) which entitles the holders thereof to voting rights equal to
at least twenty percent (20%) of the outstanding voting power of all capital
stock of the Corporation or to elect directors which constitute twenty percent
(20%) or more of the Board of Directors;
(v) effect any sale, lease, assignment,
transfer, or other conveyance of all or substantially all of the assets of the
Corporation or any of its subsidiaries, or any consolidation, merger or a share
exchange involving the Corporation or any of its subsidiaries, except (i) a
merger with a wholly-owned subsidiary of the Corporation, (ii) a mere
reincorporation transaction, (iii) a merger pursuant to which the Corporation is
the surviving entity and the capitalization of the Corporation remains
unchanged, or (iv) upon an election by the holders of Series A Preferred Stock
pursuant to Section 3(b) hereof;
(vi) increase or decrease (other than by
redemption or as a result of the conversion thereof) the total
number of authorized shares of any class or series of capital
stock; or
(vii)effect any change in the rights or
limitations of the Common Stock, or any recapitalization of the
Corporation.
(b) PREFERRED DIRECTORS VOTING AS A CLASS. In addition to any
other rights of approval attaching to the Series A Preferred Stock under this
Certificate of Designations, the approval of the Preferred Directors, voting as
a class, shall be required prior to the Corporation, or any subsidiary of the
Corporation, issuing additional securities, other than securities underlying the
Anti-Dilution Warrants, Unit Warrants or Approved ISO's, entering into a merger,
reorganization, share exchange or acquisition transaction, selling all, or
substantially all of its assets, or incurring additional indebtedness or making
capital expenditures other than in accordance with the Corporation's Business
Plan approved as contemplated by Section 7.9(a) of the 5% Series A Convertible
Preferred Stock Offshore Securities Purchase Agreement among the Corporation and
the holders of shares of Series A Preferred Stock outstanding on the Original
Issue Date ("Securities Purchase Agreement").
(c) SPECIAL VOTING RIGHT. For a period equal to the greater of
(a) twenty-four (24) months from the Original Issue Date or (b) the time when
there shall be less than 250,000 shares of the Series A Preferred Stock issued
and outstanding, in addition to any other remedies available under this
Certificate of Designations, at law or in equity, if the Corporation breaches
any of the provisions of this Certificate of Designations, including without
limitation, the restrictions and limitations set forth in Section 6 of this
Certificate of Designations, and/or breaches any covenant contained in Section 7
of the Securities Purchase Agreement, and such breach shall continue for a
period of forty-five (45) days after written notice of such breach shall have
been sent to the Corporation in accordance with Section 12.12 of the Securities
Purchase Agreement, the holders of shares of Series A Preferred Stock will be
empowered with a number of votes sufficient to elect a majority of the Board of
Directors of the Corporation, which right will be exercisable by TransGlobal
Financial Corporation, as financial advisor to the Corporation and holder of a
voting proxy over each of the shares of Series A Preferred Stock issued by the
Corporation ("Special Voting Right"). The actual number of votes represented by
the Special Voting Right upon the occurrence of any particular breach will be
equal to (A) the total number of the Corporation's common equivalent shares then
outstanding minus (B) the number of shares of Common Stock then held by the
purchasers of shares of Common Stock in the Company's equity offering described
in the Information Statement of REAADS Medical Products, Inc. ("REAADS"), dated
April 8, 1998, as amended by a supplement dated April 23, 1998 describing a
proposed merger relating to REAADS and the Company. The Special Voting Right
will continue until the first to occur of (i) remedy of the noncompliance or
(ii) the date when less than 250,000 shares of Preferred Stock remain
outstanding, and upon each and every vesting of the Special Voting Right, the
Corporation shall reconstitute the Board of Directors in the manner described in
Section 4(c) of the Certificate of Designations.
<PAGE>
Section 7.REDEMPTION.
(a) REDEMPTION AT THE OPTION OF THE CORPORATION. Shares of
Series A Preferred Stock shall not be redeemable by the Corporation at any time
prior to the second anniversary of the Original Issue Date. On and after the
second (2nd) anniversary of the Original Issue Date, at the option of the
Corporation, the Corporation may fix a date (the "Redemption Date") on which it
shall redeem all (but not less than all) of the then outstanding shares of
Series A Preferred Stock by paying in cash, out of funds legally available
therefor, to the holders thereof and in respect of each such share of Series A
Preferred Stock, the Redemption Price (as defined below), (i) at any time prior
to the fourth anniversary of the Original Issue Date but only in the event that
the average bid price of the Common Stock of the Corporation exceeds Five and
No/100 Dollars ($5.00) per share (without giving effect to any stock splits,
stock dividends or recapitalizations after the Original Issue Date), with
respect to each of the twenty (20) consecutive Trading Days (as defined below)
immediately preceding the date of the Redemption Notice (as defined in Section
7(b) below); or (ii) at any time on or after the fourth anniversary of the
Original Issue Date. A holder of Series A Preferred Stock may elect, by written
notice delivered to the Corporation not less than ten (10) days prior to the
Redemption Date, to waive its right to have redeemed all (but not less than all)
of the shares of Series A Preferred Stock held by such holder which are eligible
to be redeemed on such Redemption Date, provided that on such Redemption Date
each such share of Series A Preferred Stock which is not redeemed shall be
converted automatically into shares of Common Stock at the Conversion Price then
in effect on such Redemption Date. The term "Trading Day" shall mean any day
other than Saturday or Sunday on which national securities exchanges are open
for trading and trades in the Corporation's Common Stock occur. The term
"Redemption Price" shall mean an amount per share equal to the Preference Amount
(as the same shall be adjusted from time to time in accordance with Section 3(a)
hereof).
(b) PROCEDURES FOR REDEMPTION OF SERIES A PREFERRED STOCK. At
least thirty (30) days but not more than forty-five (45) days prior to the
Redemption Date the Corporation shall mail a written notice, first class postage
prepaid, to each holder of record at the close of business on the business day
preceding the day on which notice is given, of the Series A Preferred Stock to
be redeemed, at the address last shown on the records of the Corporation for
such holder, notifying such holder of the redemption to be effected, specifying
(i) that all shares of Series A Preferred Stock shall be redeemed from such
holder, (ii) the Redemption Date, (iii) the Redemption Price, (iv) the place at
which payment may be obtained, (v) advising such holder of its right to elect to
waive its right to have all (but not less than all) such shares redeemed and
that, if such election is made, such shares of Series A Preferred Stock which
are not redeemed shall be converted automatically into shares of Common Stock at
the Conversion Price then in effect (setting forth such Conversion Price), and
(vi) calling upon such holder to surrender to the Corporation, in the manner and
at the place designated, its certificate or certificates representing the shares
to be redeemed (the "Redemption Notice"). On or after the Redemption Date, each
holder of Series A Preferred Stock to be redeemed shall surrender to the
Corporation the certificate or certificates representing such shares, in the
manner and at the place designated in the Redemption Notice, and thereupon the
Redemption Price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be canceled. From and after each Redemption
Date, unless there shall have been a default in payment of the Redemption Price,
any shares of Series A Preferred Stock redeemed on such Redemption Date shall
not be entitled to any further rights as Series A Preferred Stock and shall not
be deemed outstanding for any purpose. If the funds of the Corporation legally
available for redemption of shares of Series A Preferred Stock on any Redemption
Date are insufficient to redeem the total number of shares of Series A Preferred
Stock to be redeemed on such date, those funds which are legally available will
be used to redeem the maximum possible number of such shares ratably among the
holders of such shares to be redeemed based upon the number of shares of Series
A Preferred Stock held by each such holder. The shares of Series A Preferred
Stock not redeemed shall remain outstanding and entitled to all the rights and
preferences provided herein. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of shares of Series A
Preferred Stock such funds will be used immediately to redeem the balance of the
shares which the Corporation has become obliged to redeem on any Redemption
Date, but which it has not redeemed, it being understood that any such
redemption shall not constitute a waiver by a holder of Series A Preferred Stock
of any rights arising from the failure to redeem on the Redemption Date.
<PAGE>
Section 8.NO REISSUANCE OF CONVERTIBLE SERIES A PREFERRED STOCK; STATUS OF
STOCK. No share of Series A Preferred Stock acquired by the Corporation by
reason of redemption, purchase, conversion, or otherwise shall be reissued, and
all such shares shall be restored to the status of authorized but unissued
shares of preferred stock, without designation as to rights, limitations or
preferences.
Section 9.NO DILUTION OR IMPAIRMENT. The Corporation will not, by
amendment of its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, share exchange, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the Series A Preferred Stock
set forth herein, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holders of the Series A
Preferred Stock against dilution or other impairment.
Section 10. NOTICES OF RECORD DATE. In the event of any:
(a) taking by the Corporation of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase, or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right; or
(b) capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation,
any merger, consolidation, or share exchange of the Corporation, or any transfer
of all or substantially all the assets of the Corporation to any other
corporation, or any other entity or person; or
(c) voluntary or involuntary dissolution, liquidation, or
winding up the Corporation; then and in each such event the Corporation shall
mail or cause to be mailed to each holder of Series A Preferred Stock a notice
specifying (i) the record date for such dividend, distribution, or right and a
description of such dividend, distribution, or right, (ii) the date on which any
such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, share exchange, dissolution, liquidation, or winding up
is expected to become effective, and (iii) the time, if any, that is to be fixed
as to when the holders of record of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, consolidation, merger, share
exchange, dissolution, liquidation, or winding up. Such notice shall be mailed
at least ten (10) days prior to the date specified in such notice on which such
action is to be taken.
3. This Certificate of Designations, which will constitute an amendment to
the Corporation's Certificate of Incorporation, shall be effective upon filing
by the Secretary of State of Nevada.
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designations has been executed and
acknowledged by the Corporation's President and Secretary, who hereby affirms
and acknowledges that this Certificate of Designations is the act and deed of
the Corporation and that the statements made herein are true under the penalties
of perjury. Dated this day of , 1998.
---- --------
Mike M. Mustafoglu, President and Secretary
STATE OF NEVADA )
) SS.:
COUNTY OF )
On , 1998, personally appeared before me, a Notary Public,
------------
Mike M. Mustafoglu, who acknowledged that he executed the above instrument.
Signature of Notary
<PAGE>
EXHIBIT I
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THIS WARRANT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF
AN OFFER TO BUY THE WARRANT IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL.
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE MAY NOT BE SOLD,
PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS,
OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF
THE SECURITIES ACT AND UNDER PROVISIONS OF APPLICABLE STATE SECURITIES LAWS; AND
IN THE CASE OF AN EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN OPINION FROM
THEIR COUNSEL THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION OF THE
SECURITIES.
STOCK PURCHASE WARRANT
No.
--
To Purchase Shares of Common Stock of
------
CORGENIX MEDICAL CORPORATION
THIS CERTIFIES that, for value received,
---------------------------
(the "Investor"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or after April , 1998 and on or prior
---
to April , 2003 (the "Termination Date") but not thereafter, to subscribe for
---
and purchase from CORGENIX MEDICAL CORPORATION, a corporation incorporated under
the laws of the State of Nevada (the "Company"), ( )
----------------- ---------
shares (the "Warrant Shares") of Common Stock, $.001 par value per share of the
Company (the "Common Stock"). The purchase price of one share of Common Stock
(the "Exercise Price") under this Warrant shall be equal to $2.00. The Exercise
Price and the number of shares for which the Warrant is exercisable shall be
subject to adjustment as provided herein. This Warrant is being issued in
connection with the Securities Purchase Agreement dated April , 1998 (the
---
"Agreement") and is subject to its terms and conditions. In the event of any
conflict between the terms of this Warrant and the Agreement, the Agreement
shall control.
<PAGE>
1. TITLE OF WARRANT. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant together with the Assignment Form annexed hereto properly endorsed.
2. AUTHORIZATION OF SHARES. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant and full
payment of the Exercise Price, be duly authorized, validly issued, fully paid
and nonassessable and free from all taxes, liens and charges in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
3. EXERCISE OF WARRANT. Except as provided in Section 11 of this
warrant, exercise of the purchase rights represented by this Warrant may be made
at any time or times, before the close of business on the Termination Date, or
such earlier date on which this Warrant may terminate as provided in this
Warrant, by the surrender of this Warrant and the Notice of Exercise Form
annexed hereto duly executed, at the office of the Company (or such other office
or agency of the Company as it may designate by notice in writing to the
registered holder hereof at the address of such holder appearing on the books of
the Company) and upon payment of the Exercise Price of the shares thereby
purchased; whereupon the holder of this Warrant shall be entitled to receive a
certificate for the number of shares of Common Stock so purchased. Certificates
for shares purchased hereunder shall be delivered to the holder hereof within
three (3) calendar days after the date on which this Warrant shall have been
exercised as aforesaid, or be subject to the damages set forth in the Agreement.
Payment of the Exercise Price may be by certified check or cashier's check or by
wire transfer to an account designated by the Company in an amount equal to the
Exercise Price multiplied by the number of Warrant Shares.
4. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant.
5. CHARGES, TAXES AND EXPENSES. Issuance of certificates for shares
of Common Stock upon the exercise of this Warrant shall be made without charge
to the holder hereof for any issue or transfer tax or other incidental expense
in respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof; and provided further, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
<PAGE>
6. CLOSING OF BOOKS. The Company will not close its shareholder books
or records in any manner which prevents the timely exercise of this Warrant for
a period of time in excess of five (5) trading days per year.
7. NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE. This Warrant does not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company prior to the exercise thereof. Upon the surrender of this Warrant
and the payment of the aggregate Exercise Price, the Warrant Shares so purchased
shall be, and be deemed to be, issued to such holder as the record owner of such
shares as of the close of business on the later of the date of such surrender or
payment.
8. ASSIGNMENT AND TRANSFER OF WARRANT. This Warrant may be assigned
by the surrender of this Warrant and the Assignment Form annexed hereto duly
executed at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered holder hereof
at the address of such holder appearing on the books of the Company); provided,
however, that the Company may require, as a condition thereto, the payment of a
sum sufficient to reimburse it for any expenses of transfer incidental thereto
and that this Warrant may not be resold or otherwise transferred except (i) in a
transaction registered under the Securities Act of 1933 (the "Securities Act"),
or (ii) in a transaction pursuant to an exemption, if available, from such
registration and whereby, if requested by the Company, an opinion of counsel is
obtained by the holder of this Warrant to the effect that the transaction is so
exempt.
9. LOSS, THEFT, DESTRUCTION OR MUTILATION OF Warrant. The Company
represents and warrants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
certificate or any stock certificate relating to the Warrant Shares, and in case
of loss, theft or destruction, of indemnity or security reasonably satisfactory
to it, and upon reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of such Warrant or stock
certificate, if mutilated, the Company will make and deliver a new Warrant or
stock certificate of like tenor and dated as of such cancellation, in lieu of
such Warrant or stock certificate.
10. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday in the State of Nevada,
then such action may be taken or such right may be exercised on the next
succeeding day not a legal holiday.
11. EFFECT OF CERTAIN EVENTS.
(a) If at any time the Company proposes (i) to sell or otherwise
convey all or substantially all of its assets or (ii) to effect a transaction
(by merger or otherwise) in which more than 50% of the voting power of the
Company is disposed of (collectively, a "Sale or Merger Transaction"), in which
the consideration to be received by the Company or its shareholders consists
solely of cash, the Company shall give the holder of this Warrant thirty (30)
days' notice of such termination and of the proposed effective date of the
transaction, and this Warrant shall terminate if the Warrant has not been
exercised by the effective date of such transaction.
<PAGE>
(b) In case the Company shall at any time effect a Sale or
Merger Transaction in which the consideration to be received by the Company or
its shareholders consists in part of consideration other than cash, the holder
of this Warrant shall have the right thereafter to purchase, by exercise of this
Warrant and payment of the aggregate Exercise Price in effect immediately prior
to such action, the kind and amount of shares and other securities and property
which it would have owned or have been entitled to receive after the happening
of such transaction had this Warrant been exercised immediately prior thereto.
12. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The
number and kind of securities purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following.
In case the Company shall (i) declare or pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock or (iv) issue any shares of its capital stock in a
reclassification of the Common Stock, then the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the holder of this Warrant shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such adjustment of the kind and number
of Warrant Shares or other securities of the Company which are purchasable
hereunder, the holder of this Warrant shall thereafter be entitled to purchase
the number of Warrant Shares or other securities resulting from such adjustment
at an Exercise Price per such Warrant Share or other security obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of Warrant Shares purchasable pursuant hereto immediately prior to
such adjustment and dividing by the number of Warrant Shares or other securities
of the Company resulting from such adjustment. An adjustment made pursuant to
this paragraph shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
13. VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company may at any time
during the term of this Warrant, reduce the then current Exercise Price to any
amount and/or extend the Termination Date for any period of time deemed
appropriate by the Board of Directors of the Company.
14. NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares or
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt requested,
to the holder of this Warrant notice of such adjustment or adjustments setting
forth the number of Warrant Shares (and other securities or property)
purchasable upon the exercise of this Warrant and the Exercise Price of such
Warrant Shares (and other securities or property) after such adjustment, setting
forth a brief statement of the facts requiring such adjustment and setting forth
the computation by which such adjustment was made. Such notice, in absence of
manifest error, shall be conclusive evidence of the correctness of such
adjustment.
<PAGE>
15. AUTHORIZED SHARES. The Company covenants that during the period
the Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of the
Warrant Shares upon the exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the NASDAQ Small Cap
Stock Market or any domestic securities exchange upon which the Common Stock may
be listed.
16. TRANSFER RESTRICTIONS REGARDING COMMON STOCK UNDERLYING THE
WARRANT. The certificate or certificates representing the shares of Common Stock
to be issued at any time prior to forty one days after the issuance of the
Warrant, upon exercise of any part or all of this Warrant, shall be subject to
the following legend restricting transfer under the Securities Act of 1933, such
legend to be substantially as follows:
"THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"). THESE
SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED, TRANSFERRED OR ASSIGNED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS, OR IN A
TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF
THE SECURITIES ACT AND UNDER PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS; AND IN THE CASE OF AN EXEMPTION, ONLY IF THE COMPANY
HAS RECEIVED AN OPINION FROM THEIR COUNSEL THAT SUCH TRANSACTION DOES
NOT REQUIRE REGISTRATION OF THE SECURITIES."
17. GENERAL.
(a) ISSUE DATE; JURISDICTION. The provisions of this Warrant
shall be construed and shall be given effect in all respects as if it had been
issued and delivered by the Company on the date hereof. This Warrant shall be
binding upon any successors or assigns of the Company. This Warrant shall
constitute a contract under the laws of the State of Nevada, without regard to
its conflict of law, principles or rules.
<PAGE>
(b) RESTRICTIONS. The holder hereof acknowledges that the
Warrant Shares acquired upon the exercise of this Warrant, if not registered,
will have restrictions upon resale imposed by state and federal securities laws.
(c) MODIFICATION AND WAIVER. Except as otherwise provided in
this Warrant, this Warrant and any provisions hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by each of the
Company and Investor.
(d) NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof by the Company shall be
delivered or shall be sent by certified or registered mail, postage prepaid, to
each such holder at its address as shown on the books of the Company or to the
Company at the address set forth in the Agreement.
(e) CAPITALIZED TERMS. All capitalized terms not otherwise
defined herein shall have the meaning assigned to them in the Agreement.
(f) ENTIRE AGREEMENT. This Warrant, together with all documents
referenced herein, embody the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior oral or written agreements and understandings relating to the subject
matter hereof. No statement, representation, warranty, covenant or Warrant of in
the Agreement of any kind not expressly set forth in this Agreement shall
affect, or be used to interpret, change or restrict, the express terms and
provisions of this Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated: April , 1998
---
CORGENIX MEDICAL CORPORATION
By:
, President
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form
and supply required information.
Do not use this form to exercise the Warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all
rights evidenced thereby are hereby assigned to
--------------------------------
whose address is
----------------------------------------------.
- ---------------------------------------------------------------
Dated: ,
---------------
Holder's Signature:
-----------------------------
Holder's Address:
-----------------------------
-----------------------------
Signature Guaranteed:
----------------------------------------
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
<PAGE>
REGULATION S NOTICE OF EXERCISE
(To be Executed by the Registered Holder in order for the Company to
Issue Unrestricted Common Stock issued upon exercise of the Warrant)
The undersigned hereby irrevocably elects to have the restrictive legend which
was placed on the shares of Common Stock issued upon exercise of Warrant
------
No. be removed according to the conditions hereof, as of the date written
----
below.
The undersigned represents and warrants that:
(i) The undersigned represents and warrants that all offers and sales by
the undersigned of the shares of Common Stock issued to the undersigned
upon exercise of the Warrant shall be made in compliance with Regulation
S, pursuant to an exemption from registration under the Act, or pursuant
to registration of the Common Stock under the Securities Act of 1933, as
amended (the "Securities Act'), subject to any restrictions on sale or
transfer set forth in the Offshore Securities Subscription Agreement
between the Company and the original holder of the exercised Warrant.
(ii) The undersigned has not engaged in any transaction or series of
transactions that is a part of or a plan or scheme to evade the
registration requirements of the Securities Act.
(iii)The undersigned represents that it is not a U.S. Person, no is this
Warrant being exercised on behalf of a U.S. Person (as this term is
defined in Regulation S).
- ----------------
Date
- ----------------
Signature Name
Address: Delivery of Shares of Common Stock
to:
<PAGE>
EXHIBIT 2.2
FIRST AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
This First Amendment to Agreement and Plan of Merger (the "Amendment") is
dated effective as of May 22, 1998 among Reaads Medical Products, Inc., a
Delaware corporation (the "Company"), Corgenix Medical Corporation, a Nevada
corporation (formerly known as Gray Wolf Technologies, Inc) ("Gray Wolf") and
Gray Wolf Acquisition Corp., a Delaware corporation ("Gray Wolf Subsidiary").
This Amendment amends that certain Agreement and Plan of Merger entered into as
of May 12, 1998 among the Company, Gray Wolf, and Gray Wolf Subsidiary (the
"Merger Agreement"). Unless otherwise defined herein, capitalized terms used in
this Amendment have the meanings given to them in the Merger Agreement.
RECITALS
Under Section 2(d)(vi) of the Merger Agreement, all 204,000 Company Common
Shares outstanding at and as of the Effective Time will be converted into the
right to receive 6,120,000 Merger Units, each Merger Unit consisting of one (1)
Gray Wolf Common Share and one (1) Common Stock Purchase Warrant entitling the
holder to purchase up to .3268 additional Gray Wolf Common Shares at an exercise
price of $.001 per share (such warrant being referred to as the "Gray Wolf
Anti-Dilution Warrant"), at an exchange ratio of thirty (30) Gray Wolf Merger
Units for each one Company Common Share. The Parties hereby desire to remove the
Gray Wolf Anti-Dilution Warrant from the Merger Consideration, and substitute
therefor the "Gray Wolf Contingent Shares", as set forth in this Amendment.
Accordingly, for good and valuable consideration, the Parties do hereby agree as
follows:
AGREEMENT
1. AMENDMENT TO THE TERM "MERGER CONSIDERATION", SUBSTITUTING GRAY WOLF
CONTINGENT SHARES FOR GRAY WOLF ANTI-DILUTION WARRANTS. The term "Merger
Consideration" as defined at Section 2(d)(vi) of the Merger Agreement is hereby
amended and restated in its entirety as follows:
The term "Merger Consideration" shall mean, collectively, (a) 6,120,000
shares of Gray Wolf Common Shares plus (b) the contingent right to
receive up to an additional 4,000,000 Gray Wolf Common Shares, on and
subject to the provisions of Section 2 below (hereafter, the "Gray Wolf
Contingent Shares"). The Merger Consideration shall be allotted to the
aggregate 204,000 Company Common Shares to be outstanding at and as of
the Closing in the following ratio: each one (1) Company Common Share
shall be converted into the right to receive thirty (30) Gray Wolf
Common Shares plus the contingent right to receive up to 19.6078 Gray
Wolf Contingent Shares, on and subject to the provisions of Section 2 of
this Amendment.
2. ISSUANCE OF GRAY WOLF CONTINGENT SHARES. Gray Wolf Contingent Shares
shall be issuable to Company Shareholders on and subject to the following
conditions:
(a) ISSUE EVENTS. Gray Wolf Contingent Shares shall be issued on
each of the following events (each an "Issue Event"):
(i) The exercise of one or more of the warrants which may be issued
in connection with issuance of the Gray Wolf Preferred Shares
(as described at Section 8 (a) of
<PAGE>
the Merger Agreement) (hereafter, the "Gray Wolf Preferred
Warrants"); or
(ii) The conversion of one or more Gray Wolf Preferred
Shares to Gray Wolf Common Shares; or
(iii) On November 23, 1998.
(b) PREFERRED SHARE CONVERSION OR WARRANT EXERCISE ISSUE EVENTS. Upon
each occurrence of an Issue Event occurring after the Effective Time
(excluding specifically the November 23, 1998 Issue Event), Gray Wolf
shall issue Gray Wolf Contingent Shares to Company Shareholders, the
number of shares to be issued being determined according to the
following mathematical formula:
[-- --]
[ (a+b) ]
2,000,000 [ ----------- ] - d = Number of Gray Wolf Contingent Shares
[ 2,000,000 ] Issuable
[-- --]
where:
a = the number of Gray Wolf Common Shares issued on exercise of
Gray Wolf Preferred Warrants to the date of the current Issue
Event;
b = the number of Gray Wolf Common Shares received upon conversion
of Gray Wolf Preferred Shares to the date of the current Issue
Event;
d = the number of Gray Wolf Contingent Shares issued by Gray Wolf
prior to the current Issue Event based on prior Issue Events
OTHER THAN the November 23, 1998 Issue Event.
(c) NOVEMBER 23, 1998 ISSUE EVENT. On November 23, 1998, Gray Wolf shall
issue Gray Wolf Contingent Shares to Company Shareholders, the
number of shares to be issued being determined according to the
following mathematical formula:
[-- --]
[ m ]
4,000,000 [ 1 - ------------- ] - d' = Number of Gray Wolf Contingent
[ $1,000,000 ] Shares Issuable
[-- --]
where:
m = the dollar amount of Gray Wolf Preferred Shares sold through
November 22, 1998;
d' = the maximum number of Gray Wolf Common Shares issuable upon
conversion of all Gray Wolf Preferred Shares issued prior to
November 23, 1998 and exercise of all Gray Wolf Preferred
Warrants issued prior to November 23, 1998.
(d) Upon each occurrence of an Issue Event, the Gray Wolf Contingent
Shares then issuable shall be issued and distributed to the
Company Shareholders pro-rata based on their respective
percentage ownership of Company Common Shares as of the Closing
Date, as set forth on Exhibit A to this Amendment (identified as
"REAADS Shareholders with Conversion and Exchange of REAADS
Stock to Corgenix Stock").
(c) Company Shareholders may not assign, sell, transfer, pledge or
otherwise hypothecate or encumber their right to receive Gray Wolf
Contingent Shares; provided that Company Shareholders may transfer
their right to receive Gray Wolf Contingent Shares by will, gift and
the laws of descent and intestacy.
<PAGE>
(f) Gray Wolf Contingent Shares will, when issued, be duly authorized,
validly issued, fully paid and non-assessable.
(g) The provisions of this Section 2 shall terminate on May 22, 2003;
provided, that such termination shall not affect the obligation of
Gray Wolf to issue and distribute to Company Shareholders any Gray
Wolf Contingent Shares then issuable under this Section 2.
3. Paragraph 8(c) of the Merger Agreement is hereby amended and
restated in its entirety to read as follows:
(c) SECURITIES ACT REGISTRATION. Within thirty (30) days after the
Closing Date, Gray Wolf will file a Registration Statement to register
the Gray Wolf Preferred Shares, the Warrants and the Gray Wolf Common
Shares underlying and issuable upon conversion of the Gray Wolf
Preferred Shares or exercise of the Warrants ("Underlying Shares")
under the Securities Act on Form S-1, SB-2 or on another form
appropriate for such registration, and use its best efforts to cause
such registration to be declared effective as expeditiously as
possible and in any event within a period of sixty (60) days
thereafter.
4. Paragraph 8(d) of the Merger Agreement is hereby amended and restated
in its entirety to read as follows:
(d) EXCHANGE ACT REGISTRATION. Within thirty (30) days after the
issuance of an order by the United States Securities and Exchange
Commission declaring effective the Registration Statement described in
paragraph 8(c) of this Agreement, Gray Wolf will file a Registration
Statement to register Gray Wolf under Section 12(g) of the Exchange
Act on Form 10 or another form appropriate for such registration.
5. Paragraph 8(e) of the Merger Agreement is hereby amended and restated
in its entirety to read as follows:
(e) NASDAQ SMALL CAP MARKET LISTING. Within five (5) days after the date
that Gray Wolf first qualifies for listing on the Nasdaq Small Cap
Market, Gray Wolf will file an application to list its Common Stock
for trading on the Nasdaq Small Cap Market and cause such listing to
be perfected with a period of thirty (30) days thereafter.
6. EXTENSION OF CLOSING DATE. The date by which the Closing must occur
shall be May 22, 1998 and references in Section 10(a)(ii) and 10(a)(iii) to May
15, 1998 are hereby amended to May 22, 1998.
7. OTHER TERMS. Except as specifically set forth in this Amendment, all
other terms and provisions of the Merger Agreement shall remain in full force
and effect.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as of the
date first above written.
GRAY WOLF TECHNOLOGIES, INC.
By: /s/ Mike M. Mustafogler
-------------------------------
Its: President
------------------------------
REAADS MEDICAL PRODUCTS, INC.
By: /s/ Douglass T. Simpson
-------------------------------
Its: President
------------------------------
GRAY WOLF ACQUISITION CORP.
By: /s/ Mike M. Mustafogler
-------------------------------
Its: President
------------------------------
<PAGE>
EXHIBIT 2.3
SECOND AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
This Second Amendment to Agreement and Plan of Merger (the "Amendment") is
dated effective as of June 17, 1998 among Corgenix Medical Corporation, Inc., a
Nevada corporation (formerly known as Gray Wolf Technologies, Inc.) ("Gray
Wolf") and TransGlobal Financial Corporation ("TransGlobal"). This Amendment
amends that certain Agreement and Plan of Merger entered into as of May 12, 1998
among Reaads Medical Products, Inc., a Delaware corporation (the "Company"),
Corgenix and Gray Wolf Acquisition Corp., a Delaware corporation ("Gray Wolf
Subsidiary"), as amended by First Amendment thereto dated effective as of
May 22, 1998 (as so amended, the "Merger Agreement"). Unless otherwise defined
herein, capitalized terms used in this Amendment have the meanings given to them
in the Merger Agreement.
RECITALS
Section 8(c) of the Merger Agreement, as amended, imposes on Gray Wolf the
obligation to file a Registration Statement to register the Gray Wolf Preferred
Shares, the Warrants and the Underlying Shares with the United States Securities
and Exchange Commission under the Securities Act on Form S-1, SB-2 or another
appropriate registration form, such Registration Statement to be filed within 30
days after May 22, 1998, and to use its best efforts to cause such Registration
Statement to be declared effective as expeditiously as possible and in any event
within a period of 60 days thereafter. If Gray Wolf fails to comply with the
provisions of Section 8(c) of the Merger Agreement, it is subject to liquidated
damages payable to TransGlobal of $1,000 for each day that Gray Wolf has not
complied with such obligation. Gray Wolf and TransGlobal now desire to terminate
the obligation under Section 8(c) of the Merger Agreement for Gray Wolf to file
a Registration Statement. Accordingly, for good and valuable consideration, Gray
Wolf and TransGlobal do hereby agree as follows:
AGREEMENT
1. Section 8(c) of the Merger Agreement is hereby deleted in its
entirety. Gray Wolf shall have no obligation to file a Registration Statement
under the Securities Act to register its shares of Gray Wolf Preferred Shares,
Warrants, or Underlying Shares.
2. Section 8(d) of the Merger Agreement is hereby amended and restated
in its entirety to read as follows:
(d) EXCHANGE ACT REGISTRATION. Gray Wolf shall file a Registration
Statement to register Gray Wolf under Section 12(g) of the
Exchange Act on Form 10, Form 10-SB or another form appropriate
for such registration, and Gray Wolf shall use its best efforts
to cause such Registration Statement to be filed as soon as
practicable following the effective date of this Amendment.
<PAGE>
3. Except as specifically set forth in this Amendment, all of the terms
and provisions of the Merger Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as of the
date first above written.
CORGENIX MEDICAL CORPORATION
(f.k.a. Gray Wolf Technologies, Inc.)
/S/ DOUGLASS T. SIMPSON
By: -------------------------------------
Douglass T. Simpson, President
TRANSGLOBAL FINANCIAL CORPORATION
/S/ MIKE M. MUSTAFOGLU
By: -------------------------------------
Mike M. Mustafoglu, President
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
BENJUN CHEMICALS INC.
FIRST. The name of the corporation is:
BENJUN CHEMICALS INC.
SECOND. Its registered office in the state of Nevada is located at 2533
North Carson Street, Carson City, Nevada 89706 that this corporation may
maintain an office, or offices, in such other place within or without the State
of Nevada as may be from time to time designated by the Board of Directors, or
by the By-Laws of said Corporation, and that this Corporation may conduct all
Corporation business of every kind and nature, including the holdings of all
meetings of Directors and Stockholders, outside the State of Nevada as well as
within the State of Nevada.
THIRD. The objects for which this corporation is formed are: To engage
in any lawful activity, including, but not limited to the following:
(A) Shall have such rights, privileges and powers as may be conferred upon
corporations by any existing law.
(B) May at any time exercise such rights, privileges and powers, when not
inconsistent with the purposes and objects for which this corporation is
organized.
1
<PAGE>
(C) Shall have power to have succession by its corporate name for the
period limited in its certificate or articles of incorporation, and when no
period is limited, perpetually, or until dissolved and its affairs wound up
according to law.
(D) Shall have power to sue and be sued in any court of law or equity.
(E) Shall have power to make contracts.
(F) Shall have power to hold, purchase and convey real and personal estate
and to mortgage or lease any such real and personal estate with its franchises.
The power to hold real and personal estate shall include the power to take the
same by devise or bequest in the State of Nevada, or in any other state,
territory or country.
(G) Shall have power to appoint such officers and agents as the affairs of
the corporation shall require, and to allow them suitable compensation.
(H) Shall have power to make By-Laws not inconsistent with the
constitution or laws of the United States, or of the State of Nevada, for the
management, regulation and government of its affairs and property, the transfer
of its stock, the transaction of its business, and the calling and holding of
meetings of its stockholders.
(I) Shall have power to wind up and dissolve itself, or be wound up or
dissolved.
(J) Shall have power to adopt and use a common seal or stamp, and alter
the same at pleasure. The use of a seal or stamp by the corporation on any
corporate documents is not necessary. The corporation may use a seal or stamp,
if its desires, but such use or nonuse shall not in any way affect the legality
of the document.
(K) Shall have power to borrow money and contract debts when necessary for
the transaction of its business, or for the exercise of its corporate rights,
privileges or franchises,
2
<PAGE>
or for any other lawful purpose of its incorporation; to issue bonds, promissory
notes, bills of exchange, debentures, and other obligations and evidences of
indebtedness, payable at a specified time or times, or payable upon the
happening of a specified event or events, whether secured by mortgage; pledge or
otherwise; or unsecured, for money borrowed, or in payment for property
purchased, or acquired, or for any other lawful object.
(L) Shall have power to guarantee, purchase, hold, sell, assign, transfer,
mortgage, pledge or otherwise dispose of the shares of the capital stock of, or
any bonds, securities or evidences of the indebtedness created by, any other
corporation or corporations of the State of Nevada, or any other state or
government, and, while owners of such stock, bonds, securities or evidences of
indebtedness, to exercise all the rights, powers and privileges of ownership,
including the right to vote, if any.
(M) Shall have power to purchase, hold, sell and transfer shares of its
own capital stock, and use therefor its capital, capital surplus, surplus, or
other property or fund.
(N) Shall have power to conduct business, have one or more offices, and
hold, purchase, mortgage and convey real and personal property in the State of
Nevada, and in any of the several states, territories, possessions and
dependencies of the United States, the District of Columbia, and any foreign
countries.
(O) Shall have power to do all and everything necessary and proper for the
accomplishment of the objects enumerated in its certificate or articles of
incorporation, or any amendment thereof, or necessary or incidental to the
protection and benefit of the corporation, and, in general, to carry on any
lawful business necessary or incidental to the attainment of the
3
<PAGE>
objects of the corporation, whether or not such business is similar in nature to
the objects set forth in the certificate or articles of incorporation of the
corporation, or any amendment thereof.
(P) Shall have power to make donations for the public welfare or for
charitable, scientific or educational purposes.
(Q) Shall have power to enter into partnerships, general or limited, or
joint ventures, in connection with any lawful activities.
FOURTH. That the total number of voting common stock authorized that may
be issued by the Corporation is TWENTY-FIVE MILLION (25,000,000) shares of stock
at $.001 par value and no other class of stock shall be authorized. Said shares
without nominal or par value may be issued by the corporation from time to time
for such considerations as may be fixed from time to time by the Board of
Directors.
FIFTH. The governing board of this corporation shall be known as
directors, and the number of director may from time to time be increased or
decreased in such a manner as shall be provided by the By-Laws of this
corporation, providing that the number of directors shall not be reduced to
fewer than one (1).
The name and post office address of the first Board of Directors shall be
(1) in number and listed as follows:
NAME POST OFFICE AND ADDRESS
Betty J. Elpern 2533 North Carson Street
Carson City, Nevada 89706
SIXTH. The capital stock, after the amount of the subscription price, or
par value, has been paid in, shall not be subject to assessment to pay the
debts of the corporation.
4
<PAGE>
SEVENTH. The name and post office address of the Incorporator signing
the Articles of Incorporation is as follows:
NAME POST OFFICE AND ADDRESS
Betty J. Elpern 2533 North Carson Street
Carson City, Nevada 89706
EIGHTH. The resident agent for this corporation shall be:
LAUGHLIN ASSOCIATES, INC.
The address of said agent, and, the registered or statutory address of this
corporation in the state of Nevada, shall be:
2533 North Carson Street
Carson City, Nevada 89706
NINTH. The corporation is to have perpetual existence.
TENTH. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
Subject to the By-Laws, if any, adopted by the Stockholders, to make,
alter or amend the ByLaws of the Corporation.
To fix the amount to be reserved as working capital over and above its
capital stock paid in; to authorize and cause to be executed, mortgages and
liens upon the real and personal property of this Corporation.
By resolution passed by a majority of the whole Board, to designate one
(1) or more committees, each committee to consist of one or more of the
Directors of the Corporation, which, to the extent provided in the resolution,
or in the By-Laws of the Corporation, shall have and may exercise the powers of
the Board of Directors in the management of the business and
5
<PAGE>
affairs of the Corporation. Such committee, or committees, shall have such name,
or names, as may be stated in the By-Laws of the Corporation, or as may be
determined from time to time by resolution adopted by the Board of Directors.
When and as authorized by the affirmative vote of the Stockholders holding
stock entitling them to exercise at least a majority of the voting power given
at a Stockholders meeting called for that purpose, or when authorized by the
written consent of the holders of at least a majority of the voting stock issued
and outstanding, the Board of Directors shall have power and authority at any
meeting to sell, lease or exchange all of the property and assets of the
Corporation, including its good will and its corporate franchises, upon such
terms and conditions as its board of Directors deems expedient and for the best
interests of the Corporation.
ELEVENTH. No shareholders shall be entitled as a matter of right to
subscribe for or receive additional shares of any class of stock of the
Corporation, whether now or hereafter authorized, or any bonds, debentures or
securities convertible into stock, but such additional shares of stock or other
securities convertible into stock may be issued or disposed of by the Board of
Directors to such persons and on such terms as in its discretion it shall deem
advisable.
TWELFTH. No director or officer of the Corporation shall be personally
liable to the Corporation or any of its stockholders for damages for breach of
fiduciary duty as a director or officer involving nay act or omission of any
such director or officer, provided, however, that the foregoing provision shall
not eliminate or limit the liability of a director or officer (i) for acts or
omissions which involve intentional misconduct, fraud or a knowing violation of
law, or (ii) the payment of dividends in violation of Section 78.300 of the
Nevada
6
<PAGE>
Revised Statues. Any repeal or modification of this Article by the stockholders
of the Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director or officer of the Corporation
for acts or omissions prior to such repeal or modification.
THIRTEENTH. This Corporation reserves the right to amend, alter, change or
repeal any provision contained in the Articles of Incorporation, in the manner
now or hereafter prescribed by statute, or by the Articles of Incorporation, and
all rights conferred upon Stockholders herein are granted subject to this
reservation.
7
<PAGE>
I, THE UNDERSIGNED, being the Incorporator hereinbefore named for the
purpose of forming a Corporation pursuant to the General Corporation Law of the
State of Nevada, do make and file these Articles of Incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have hereunto set my hand this 22nd day of April, 1994.
/s/Betty J. Elpern
---------------------------------------
Betty J. Elpern
STATE OF NEVADA )
) SS:
CARSON CITY )
On this 22nd day of April, 1994, in Carson City, Nevada, before me, the
undersigned, a Notary Public in and for Carson City, State of Nevada, personally
appeared:
Betty J. Elpern
Known to me to be the person whose name is subscribed to the foregoing document
and acknowledged to me that he executed the same.
[SEAL]
/s/Becky L. Butler
---------------------------------------
Notary Public
I, Laughlin Associates, Inc. hereby accept as Resident Agent of the previously
named Corporation.
4/22/94 /s/Betty J. Elpern
- -----------------------------------------
Date Service Coordinator
8
<PAGE>
CERTIFICATE AMENDING ARTICLES OF INCORPORATION
OF
BENJUN CHEMICALS INC.
The undersigned, being President and Secretary of BENJUN CHEMICALS,
INC., a Nevada Corporation, hereby certify that by majority vote of the Board of
Directors and majority vote of the stockholders at a meeting held on the 2nd day
of May, 1994, it was agreed by unanimous vote that this CERTIFICATE AMENDING
ARTICLES OF INCORPORATION be filed.
The undersigned further certify that the original Articles of
Incorporation of BENJUN CHEMICALS, INC. were filed with the Secretary of State
of Nevada on the 22nd day of April, 1994. The undersigned further certify that
ARTICLE FOURTH of the original Articles of Incorporation filed on the 22nd day
of April, 1994 herein is amended to read as follows:
ARTICLE FOURTH
That the total number of voting common stock authorized that may be
issued by the Corporation is TWENTY-FIVE MILLION (25,000,000) shares of stock @
$.001 par value with nominal or par value and no other class of stock shall be
authorized. Said shares with a nominal or par value may be issued by the
corporation from time to time for such considerations as may be fixed from time
to time by the Board of Directors.
3
<PAGE>
CERTIFICATE AMENDING ARTICLES OF INCORPORATION
OF
BENJUN CHEMICALS INC.
CONTINUED
The undersigned hereby certify that they have on this 2nd day of May,
1994, executed this Certificate Amending the original Articles of Incorporation
heretofore filed with the Secretary of State of Nevada.
/s/Betty J. Elpern
-----------------------------------------
Vice President
/s/Betty J. Elpern
-----------------------------------------
Vice Secretary
STATE OF NEVADA )
) SS:
COUNTY OF CARSON CITY )
On this 2nd day of May, 1994, before me, the undersigned, a Notary Public in and
for the County of Carson City, State of Nevada, personally appeared: Betty J.
Elpern
Known to me to be the person(s) whose name(s) are subscribed to the foregoing
Certificate Amending Articles of Incorporation and acknowledged to me that they
executed the same.
/s/Beverly Thompson
- --------------------------------
Notary Public
[SEAL]
4
<PAGE>
CERTIFICATE AMENDING ARTICLES OF INCORPORATION
OF
BENJUN CHEMICALS INC.
The undersigned, being President and Secretary of BENJUN CHEMICALS,
INC., a Nevada Corporation, hereby certify that by majority vote of the Board of
Directors and majority vote of the stockholders at a meeting held on March 1,
1996, it was agreed by unanimous vote that this CERTIFICATE AMENDING ARTICLES OF
INCORPORATION be filed.
The undersigned further certify that the original Articles of
Incorporation of BENJUN CHEMICALS, INC. were filed with the Secretary of State
of Nevada on the 22nd day of April, 1994. As of the date of this certificate, NO
stock of the corporation has been issued. The undersigned hereby adopt the
following amendments to the original Articles of Incorporation of this
corporation, Article First and Article Fourth herein is amended to read as
follows:
ARTICLE FIRST
FIRST: The name shall be:
GRAY WOLF TECHNOLOGIES, INC.
ARTICLE FOURTH
FOURTH: This corporation is authorized to issue Twenty-Five Million (25,000,000)
shares of stock as follows: Twenty Million (20,000,000) common shares at One
Tenth of One Cent ($.001) par value and Five Million (5,000,000) preferred
shares at One Tenth of One Cent ($.001) par value rights and privileges to be
set by the Board of Directors and no other class of stock shall be authorized.
All or part of the shares of capital stock may be issued by the corporation from
time to time and for such consideration as may be determined upon and fixed by
the Board of Directors as provided by law.
<PAGE>
The undersigned hereby certify that they have on this 1st day of March,
1996, executed this Certificate Amending the original Articles of Incorporation
heretofore filed with the Secretary of State of Nevada.
/s/Benjamin Kune
-----------------------------------------
Benjamin Kune, President and Secretary
STATE OF CALIFORNIA )
) SS:
COUNTY OF SAN DIEGO )
On this 1st day of March, 1996, before the undersigned, a Notary Public in and
for the County of San Diego, State of California, personally appeared Benjamin
Kune, known to be the person whose name is subscribed to the foregoing
Certificate Amending Articles of Incorporation and acknowledged to me that they
executed the same.
/s/Mary E. Dye
-----------------------------------------
Notary Public
[SEAL]
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION OF
GRAY WOLF TECHNOLOGIES, INC.
The undersigned, being the President and Secretary of GRAY WOLF
TECHNOLOGIES, INC., do hereby certify:
That the Board of Directors at a meeting duly convened and held on the
8th day of May, 1998, adopted a resolution to amend the Corporation's Articles
of Incorporation, to be effective upon filing with the Secretary of State of
Nevada, as follows:
1. Article FIRST of the Articles of Incorporation of GRAY WOLF
TECHNOLOGIES, INC., which sets forth the name of the Corporation, is hereby
amended to read in its entirety as follows:
"FIRST. The name of the Corporation is CORGENIX MEDICAL CORPORATION"
2. Article FOURTH of the Articles of Incorporation of GRAY WOLF
TECHNOLOGIES, INC., which sets forth the number of shares of capital stock the
Corporation has the authority to issue is hereby amended to read in its entirety
as follows:
"FOURTH. The total number of shares of all classes of capital
stock which the Corporation shall have the authority to issue is Twenty-Five
Million (25,000,000) shares divided into two (2) classes, of which Twenty
Million (20,000,00) shares, par value $.001 per share, shall be designated
Common Stock, and Five Million (5,000,000) shares, par value $.001 per share,
shall be designated Preferred Stock. The Board of Directors is expressly vested
with authority to issue the Common Stock and the Preferred Stock from time to
time, in one or more classes and in one or more series of any such classes
subject to the following provisions:
A. ALL CLASSES OF CAPITAL STOCK. The following provisions shall
apply to all classes of the Corporation's capital stock:
Section 1. Acquisition, Redemption and Other Disposition. The
Corporation shall have the power to acquire (by purchase, redemption, or
otherwise), hold, own, pledge, sell,
<PAGE>
transfer, assign, reissue, cancel, or otherwise dispose of the shares of the
Corporation in the manner and to the extent now or hereafter permitted by the
laws of the State of Nevada (but such power shall not imply an obligation on the
part of the owner or holder of any share to sell or otherwise transfer such
share to the Corporation), including the power to purchase, redeem, or otherwise
acquire the it's own shares, directly or indirectly, and without pro rata
treatment of the owners or holders of any class or series of shares, unless,
after giving effect thereto, the Corporation would not be able to pay its debts
as they become due in the usual course of business or the Corporation's total
assets would be less than its total liabilities (and without regard to any
amounts that would be needed, if the Corporation were to be dissolved at the
time of the purchase, redemption, or other acquisition, to satisfy the
preferential rights upon dissolution of stockholders whose preferential rights
are superior to those of the holders of the shares of the Corporation being
purchased, redeemed, or otherwise acquired, unless otherwise expressly provided
with respect to a series of Preferred Stock). Shares of the Corporation
purchased, redeemed, or otherwise acquired by it shall constitute authorized but
unissued shares, unless prior to any such purchase, redemption, or other
acquisition, or within thirty (30) days thereafter, the Board of Directors
adopts a resolution providing that such shares constitute authorized and issued
but not outstanding shares;
Section 2. Reissuance. Preferred Stock of any series that has
been redeemed (whether through the operation of a retirement or sinking fund or
otherwise) or purchased by the Corporation, or which, if convertible, have been
converted into shares of the Corporation of any other class or series, may be
reissued as a part of such series or of any other series of Preferred Stock,
subject to such limitations (if any) as may be fixed by the Board of Directors
with respect to such series of Preferred Stock in accordance with the provisions
of Article FOURTH, Subsection C, of these Articles of Incorporation; and
Section 3. Disposition, Issuance and Sale. The Board of Directors
of the Corporation may dispose of, issue, and sell shares in accordance with,
and in such amounts as may be permitted by, the laws of the State of Nevada and
the provisions of these Articles of Incorporation and for such consideration, at
such price or prices, at such time or times and upon
<PAGE>
such terms and conditions (including the privilege of selectively repurchasing
the same) as the Board of Directors shall determine, without the authorization
or approval by any stockholders of the Corporation. Shares may be disposed of,
issued, and sold to such persons, firms, or corporations as the Board of
Directors may determine, without any preemptive or other right on the part of
the owners or holders of other shares of the Corporation of any class or kind to
acquire such shares by reason of their ownership of such other shares.
B. COMMON STOCK. The following provisions shall apply to the
Common Stock:
Section 1. Voting Rights. Except as otherwise provided by the
General Corporation Law of Nevada and subject to such stockholder disclosure and
recognition procedures (which may include voting prohibition sanctions) as the
Corporation may by action of its Board of Directors establish, shares of Common
Stock shall have unlimited voting rights and each outstanding share of Common
Stock shall, when validly issued by the Corporation, entitle the record holder
thereof to one vote at all stockholders' meetings on all matters submitted to a
vote of the stockholders of the Corporation;
Section 2. Dividends and Distributions. Shares of Common Stock
shall be equal in every respect insofar as their relationship to the Corporation
is concerned, but such equality of rights shall not imply equality of treatment
as to redemption or other acquisition of shares by the Corporation. Subject to
the rights of the holders of any outstanding series of Preferred Stock, the
holders of Common Stock shall be entitled to share ratably in such dividends or
other distributions (other than purchases, redemptions, or other acquisitions of
shares by the Corporation), if any, as are declared and paid from time to time
on the Common Stock at the discretion of the Board of Directors; and
Section 3. Liquidation, Dissolution or Winding Up. In the event
of any liquidation, dissolution, or winding up of the Corporation, either
voluntary or involuntary, after payment shall have been made to the holders of
any outstanding series of Preferred Stock of the full amount to which they shall
be entitled, the holders of Common Stock shall be entitled, to the exclusion of
the holders of Preferred Stock of any and all series, to share, ratably
according to the number of
<PAGE>
shares of Common Stock held by them, in all remaining assets of the Corporation
available for distribution to its stockholders.
C. PREFERRED STOCK. The following provisions shall apply to the
Preferred Stock:
1. Issuance. The Board of Directors is hereby expressly
authorized to provide, out of the unissued shares of Preferred Stock, for one or
more series of Preferred Stock. Before any shares of any such series are issued,
the Board of Directors shall fix, and hereby is expressly empowered to fix, by
adopting and filing in accordance with the General Corporation Law of Nevada, a
Certificate of Designation, after adopting a resolution or resolutions providing
for the issue of such Preferred Stock, and in such resolution or resolutions
providing for the issue of shares of each such class and of each particular
series of any such class. The Board of Directors is also expressly vested with
authority to fix the number of shares constituting any such series of any such
class and to fix the terms of such Preferred Stock or series of Preferred Stock,
including without limitation the following:
(i) the designation of such series, the number of shares
to constitute such series and the stated value thereof if different from the par
value thereof;
(ii) whether the shares of such series shall have voting
rights, and, if so, the terms of such voting rights, which may be general or
limited, may include multiple votes per share and may include the right, under
specified circumstances, to elect additional directors;
(iii) the dividends, if any, payable on such series,
whether any such dividends shall be cumulative, and, if so, from what dates, the
conditions and dates upon which such dividends shall be payable, the preference
or relation which such dividends shall bear to the dividends payable on any
shares of stock of any other class or any other series of Preferred Stock;
(iv) whether the shares of such series shall be subject to
redemption by the Corporation and, if so, the times, prices and other conditions
of such redemption;
<PAGE>
(v) the amount or amounts payable upon shares of such
series upon, and the rights of the holders of such series in, the voluntary or
involuntary liquidation, dissolution or winding up, or upon any distribution of
the assets, of the Corporation;
(vi) whether the shares of such series shall be subject to
the operation of a retirement or sinking fund and, if so, the extent to and
manner in which any such retirement or sinking fund shall be applied to the
purchase or redemption of the shares of such series for retirement or other
corporate purposes and the terms and provisions relative to the operation
thereof;
(vii) whether the shares of such series shall be
convertible into, or exchangeable for, shares or stock of any other class or any
other series of Preferred Stock or any other securities (whether or not issued
by the Corporation) and, if so, the price or prices or the rate or rates of
conversion or exchange and the methods, if any, of adjusting the same, and any
other terms and conditions of conversion or exchange;
(viii) the limitations and restrictions, if any, to be
effective while any shares of such series are outstanding upon the payment of
dividends or the making of other distributions on, and upon the purchase,
redemption or other acquisition by the Corporation of, the Common Stock or
shares of stock of any other class or any other series of Preferred Stock;
(ix) the conditions or restrictions, if any, upon the
creation of indebtedness of the Corporation or upon the issue of any additional
stock, including additional shares of such series or of any other series of
Preferred Stock or of any other class of stock; and
(x) any other powers, preferences and relative,
participating, optional and other special rights, and any qualifications,
limitations and restrictions thereof.
Except to the extent otherwise expressly provided in these Articles of
Incorporation or required by law (i) no share of Preferred Stock shall have any
voting rights other than those which shall be fixed by the Board of Directors
pursuant to this Article FOURTH and (ii) no share of Common Stock shall have any
voting rights with respect to any amendment to the terms of any series of
Preferred Stock, provided however, that in the case of this clause (ii) the
terms of such
<PAGE>
series of Preferred Stock, as so amended, could have been established without
any vote of any shares of Common Stock."
The number of shares of the Corporation outstanding and entitled to vote
on this Certificate of Amendment to the Articles of Incorporation is One Million
Nine Hundred Fifty-Seven Thousand Two Hundred Fifty-Nine (1,957,259), and the
said changes and Certificate of 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.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Amendment this 8th day of May, 1998 and affirm that this Certificate of
Amendment is the act and deed of the Corporation and the statements made herein
are true under the penalties of perjury.
/s/Mike M. Mustafoglu
--------------------------------------------
Mike M. Mustafoglu, President and Secretary
STATE OF KANSAS )
) ss.:
COUNTY OF SHAWNEE )
On May 12, 1998 personally appeared before me, a Notary Public, Mike M.
Mustafoglu, who acknowledged that he executed the above instrument.
/s/Rebecca Lee Plush
--------------------------------------------
Signature of Notary
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
CORGENIX MEDICAL CORPORATION
(A NEVADA CORPORATION)
ADOPTED
--------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I - OFFICES................................................1
SECTION 1 - REGISTERED OFFICE....................................1
SECTION 2 - OTHER OFFICES........................................1
ARTICLE II - CORPORATE SEAL........................................1
SECTION 3 - CORPORATE SEAL.......................................1
ARTICLE III - STOCKHOLDERS' MEETINGS...............................1
SECTION 4 - PLACE OF MEETINGS....................................1
SECTION 5 - ANNUAL MEETING.......................................1
SECTION 6 - SPECIAL MEETINGS.....................................3
SECTION 7 - NOTICE OF MEETINGS...................................4
SECTION 8 - QUORUM...............................................4
SECTION 9 - ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS.........4
SECTION 10 - VOTING RIGHTS.......................................5
SECTION 11 - JOINT OWNERS OF STOCK...............................5
SECTION 12 - LIST OF STOCKHOLDERS................................5
SECTION 13 - ACTION WITHOUT MEETING..............................5
SECTION 14 - ORGANIZATION........................................6
ARTICLE IV - DIRECTORS.............................................7
SECTION 15 - NUMBER AND TERM OF OFFICE...........................7
SECTION 16 - POWERS..............................................7
SECTION 17 - CLASSES OF DIRECTORS................................7
SECTION 18 - VACANCIES...........................................7
SECTION 19 - RESIGNATION.........................................7
SECTION 20 - REMOVAL.............................................8
SECTION 21 - MEETINGS............................................8
(a) Annual Meetings...........................................8
(b) Regular Meetings..........................................8
(c) Special Meetings..........................................8
(d) Telephone Meetings........................................8
(e) Notice of Meetings........................................8
(f) Waiver of Notice..........................................9
SECTION 22 - QUORUM AND VOTING...................................9
SECTION 23 - ACTION WITHOUT MEETING..............................9
SECTION 24 - FEES AND COMPENSATION...............................9
SECTION 25 - COMMITTEES..........................................10
(a) Executive Committee.......................................10
(b) Other Committees..........................................10
(c) Term......................................................10
(d) Meetings..................................................11
SECTION 26 - ORGANIZATION........................................11
ARTICLE V - OFFICERS...............................................11
SECTION 27 - OFFICERS DESIGNATED.................................11
SECTION 28 - TENURE AND DUTIES OF OFFICERS.......................12
(a) General...................................................12
(b) Duties of Chairman of the Board of Directors..............12
(c) Duties of President.......................................12
(d) Duties of Vice Presidents.................................12
(e) Duties of Secretary.......................................12
(f) Duties of Chief Financial Officer.........................12
i
<PAGE>
SECTION 29 - DELEGATION OF AUTHORITY.............................13
SECTION 30 - RESIGNATIONS........................................13
SECTION 31 - REMOVAL.............................................13
ARTICLE VI - EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF
SECURITIES OWNED BY THE CORPORATION................................13
SECTION 32 - EXECUTION OF CORPORATE INSTRUMENTS..................13
SECTION 33 - VOTING OF SECURITIES OWNED BY THE CORPORATION.......14
ARTICLE VII - SHARES OF STOCK......................................14
SECTION 34 - FORM AND EXECUTION OF CERTIFICATES..................14
SECTION 35 - LOST CERTIFICATES...................................15
SECTION 36 - TRANSFERS...........................................15
SECTION 37 - FIXING RECORD DATES.................................15
SECTION 38 - REGISTERED STOCKHOLDERS.............................16
ARTICLE VIII - OTHER SECURITIES OF THE CORPORATION.................16
SECTION 39 - EXECUTION OF OTHER SECURITIES.......................16
ARTICLE IX - DIVIDENDS.............................................17
SECTION 40 - DECLARATION OF DIVIDENDS............................17
SECTION 41 - DIVIDEND RESERVE....................................17
ARTICLE X - FISCAL YEAR............................................17
SECTION 42 - FISCAL YEAR.........................................17
ARTICLE XI - INDEMNIFICATION.......................................18
SECTION 43 - INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS,
OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS.......................18
(a) Directors and Executive Officers..........................18
(b) Other Officers, Employees and Other Agents................18
(c) Expenses..................................................18
(d) Enforcement...............................................19
(e) Non-Exclusivity of Rights.................................19
(f) Survival of Rights........................................19
(g) Insurance.................................................20
(h) Amendments................................................20
(j) Saving Clause.............................................20
(j) Certain Definitions.......................................20
ARTICLE XII - NOTICES..............................................21
SECTION 44 - NOTICES.............................................21
(a) Notice to Stockholders....................................21
(b) Notice to Directors.......................................21
(c) Affidavit of Mailing......................................21
(d) Time Notices Deemed Given.................................21
(e) Methods of Notice.........................................21
(f) Failure to Receive Notice.................................22
(g) Notice to Person with Whom Communication Is Unlawful......22
(h) Notice to Person with Undeliverable Address...............22
ARTICLE XIII - AMENDMENTS..........................................22
ARTICLE XIV - LOANS TO OFFICERS....................................22
SECTION 46 - LOANS TO OFFICERS...................................22
ii
<PAGE>
BYLAWS
OF
CORGENIX MEDICAL CORPORATION
(A NEVADA CORPORATION)
ARTICLE I
OFFICES
SECTION 1 REGISTERED OFFICE. The corporation shall maintain a registered
office in the State of Nevada.
SECTION 2 OTHER OFFICES. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Nevada as the Board of Directors may from time to time
determine or the business of the corporation may require.
I CORPORATE SEAL
SECTION 3 CORPORATE SEAL. The corporate seal shall consist of a die bearing
the name of the corporation and the inscription, "Corporate Seal-Nevada." Said
seal may be used by causing it or a facsimile thereof to be impressed or affixed
or reproduced or otherwise.
I STOCKHOLDERS' MEETINGS
SECTION 4 PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Nevada, as may be designated from time to time by the Board of Directors, or, if
not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5 ANNUAL MEETING.
(a) The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
<PAGE>
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (B) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (C) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not later than the close of
business on the one hundred twentieth (120th) day prior to the first anniversary
of the preceding year's annual meeting; provided, however, that in the event
that no annual meeting was held in the previous year or the date of the annual
meeting has been changed by more than thirty (30) days from the date
contemplated at the time of the previous year's proxy statement, notice by the
stockholder to be timely must be so received not later than the close of
business on the later of the one hundred twentieth (120th) day prior to such
annual meeting or, in the event public announcement of the date of such annual
meeting is first made by the corporation fewer than seventy (70) days prior to
the date of such annual meeting, the close of business on the tenth (10th) day
following the day on which public announcement of the date of such meeting is
first made by the corporation. A stockholder's notice to the Secretary shall set
forth as to each matter the stockholder proposes to bring before the annual
meeting: (i) a brief description of the business desired to be brought before
the annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address, as they appear on the corporation's books,
of the stockholder proposing such business, (iii) the class and number of shares
of the corporation which are beneficially owned by the stockholder, (iv) any
material interest of the stockholder in such business and (v) any other
information that is required to be provided by the stockholder pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the "1934
Act"), in his capacity as a proponent to a stockholder proposal.
Notwithstanding the foregoing, in order to include information with respect to a
stockholder proposal in the proxy statement and form of proxy for a
stockholder's meeting, stockholders must provide notice as required by the
regulations promulgated under the 1934 Act. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at any annual meeting
except in accordance with the procedures set forth in this paragraph (b). The
chairman of the annual meeting shall, if the facts warrant, determine and
declare at the meeting that business was not properly brought before the meeting
and in accordance with the provisions of this paragraph (b), and, if he should
so determine, he shall so declare at the meeting that any such business not
properly brought before the meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the procedures
set forth in this paragraph (c) shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the corporation entitled to vote in the
election of directors at the meeting who complies with the notice procedures set
forth in this paragraph (c). Such nominations, other than those made by or at
the direction of the Board of Directors, shall be made pursuant to timely notice
in writing to the Secretary of the corporation in accordance with the provisions
of paragraph (b) of this Section 5. Such stockholder's notice shall set forth
(i) as to each person, if any, whom the stockholder proposes
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to nominate for election or reelection as a director: (A) the name, age,
business address and residence address of such person, (B) the principal
occupation or employment of such person, (C) the class and number of shares of
the corporation which are beneficially owned by such person, (D) a description
of all arrangements or understandings between the stockholder and each nominee
and any other person or persons (naming such person or persons) pursuant to
which the nominations are to be made by the stockholder, and (E) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the 1934 Act (including without
limitation such person's written consent to being named in the proxy statement,
if any, as a nominee and to serving as a director if elected) ; and (ii) as to
such stockholder giving notice, the information required to be provided pursuant
to paragraph (b) of this Section 5. At the request of the Board of Directors,
any person nominated by a stockholder for election as a director shall furnish
to the Secretary of the corporation that information required to be set forth in
the stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless nominated
in accordance with the procedures set forth in this paragraph (c). The chairman
of the meeting shall, if the facts warrant, determine and declare at the meeting
that a nomination was not made in accordance with the procedures prescribed by
these Bylaws, and if he should so determine, he shall so declare at the meeting,
and the defective nomination shall be disregarded.
(d) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15 (d) of the Exchange Act.
SECTION 6 SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption), and shall be held at such place, on such date, and at
such time as the Board of Directors, shall fix.
(b) If a special meeting is called by any person or persons other
than the Board of Directors, the request shall be in writing, specifying the
general nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the Chairman of the Board of Directors, the Chief Executive
officer, or the Secretary of the corporation. No business may be transacted at
such special meeting otherwise than specified in such notice. The Board of
Directors shall determine the time and place of such special meeting, which
shall be held not less than thirty-five (35) nor more than one hundred twenty
(120) days after the date of the receipt of the request. Upon determination of
the time and place of the meeting, the officer receiving the request shall cause
notice to be given to the stockholders entitled to vote, in accordance with the
provisions of Section 7 of these Bylaws. If the notice is not given within sixty
(60) days after the receipt of the request, the person or persons requesting the
meeting may set the time and place of the meeting
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and give the notice. Nothing contained in this paragraph (b) shall be construed
as limiting, fixing, or affecting the time when a meeting of stockholders called
by action of the Board of Directors may be held.
SECTION 7 NOTICE OF MEETINGS. Except as otherwise provided by law or the
Articles of Incorporation, written notice of each meeting of stockholders shall
be given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder entitled to vote at such meeting, such notice to
specify the place, date and hour and purpose or purposes of the meeting. Notice
of the time, place and purpose of any meeting of stockholders may be waived in
writing, signed by the person entitled to notice thereof, either before or after
such meeting, and will be waived by any stockholder by his attendance thereat in
person or by proxy, except when the stockholder attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Any stockholder so waiving notice of such meeting shall be bound by
the proceedings of any such meeting in all respects as if due notice thereof had
been given.
SECTION 8 QUORUM. At all meetings of stockholders, except where otherwise
provided by statute or by the Articles of Incorporation, or by these Bylaws, the
presence, in person or by proxy duly authorized, of the holders of a majority of
the outstanding shares of stock entitled to vote shall constitute a quorum for
the transaction of business. In the absence of a quorum, any meeting of
stockholders may be adjourned, from time to time, either by the chairman of the
meeting or by vote of the holders of a majority of the shares represented
thereat, but no other business shall be transacted at such meeting. The
stockholders present at a duly called or convened meeting, at which a quorum is
present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Articles of Incorporation or these Bylaws, all
action taken by the holders of a majority of the vote cast, excluding
abstentions, at any meeting at which a quorum is present shall be valid and
binding upon the corporation; provided, however, that directors shall be elected
by a plurality of the votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election of directors. Where a
separate vote by a class or classes or series is required, except where
otherwise provided by the statute or by the Articles of Incorporation or these
Bylaws, a majority of the outstanding shares of such class or classes or series,
present in person or represented by proxy, shall constitute a quorum entitled to
take action with respect to that vote on that matter and, except where otherwise
provided by the statute or by the Articles of Incorporation or these Bylaws, the
affirmative vote of the majority (plurality, in the case of the election of
directors) of the votes cast, including abstentions, by the holders of shares of
such class or classes or series shall be the act of such class or classes or
series.
SECTION 9 ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than
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thirty (30) days or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10 VOTING RIGHTS. For the purpose of determining those stockholders
entitled to vote at any meeting of the stockholders, except as otherwise
provided by law, only persons in whose names shares stand on the stock records
of the corporation on the record date, as provided in Section 12 of these
Bylaws, shall be entitled to vote at any meeting of stockholders. Every person
entitled to vote or execute consents shall have the right to do so either in
person or by an agent or agents authorized by a proxy granted in accordance with
Nevada law. An agent so appointed need not be a stockholder. No proxy shall be
voted after three (3) years from its date of creation unless the proxy provides
for a longer period.
SECTION 11 JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally. If the instrument filed with the Secretary shows that
any such tenancy is held in unequal interests, a majority or evensplit for the
purpose of subsection (c) shall be a majority or evensplit in interest.
SECTION 12 LIST OF STOCKHOLDERS. The Secretary shall prepare and make, not
less than ten (10) nor more than sixty (60) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at said
meeting, arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten (10)
days prior to the meeting, either at a place within the city where the meeting
is to be held, which place shall be specified in the notice of the meeting, or,
if not specified, at the place where the meeting is to be held. The list shall
be produced and kept at the time and place of meeting during the whole time
thereof and may be inspected by any stockholder who is present.
SECTION 13 ACTION WITHOUT MEETING.
(a) Unless otherwise provided in the Articles of Incorporation, any
action required by statute to be taken at any annual or special meeting of the
stockholders, or any action which may be taken at any annual or special meeting
of the stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted.
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(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the corporation in the manner herein
required, written consents signed by a sufficient number of stockholders to take
action are delivered to the corporation by delivery to its registered office in
the State of Nevada, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
(c) Notwithstanding the foregoing, no such action by written consent
may be taken following the closing of the initial public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "1933 Act"), covering the offer and sale of Common Stock of the corporation
(the "Initial Public offering").
SECTION 14 ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
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ARTICLE IV
DIRECTORS
SECTION 15 NUMBER AND TERM OF OFFICE. The authorized number of directors of
the corporation shall be five (5). Such number of directors may be fixed from
time to time by resolution of the Board of Directors. Directors need not be
stockholders unless so required by the Articles of Incorporation. If for any
cause, the directors shall not have been elected at an annual meeting, they may
be elected as soon thereafter as convenient at a special meeting of the
stockholders called for that purpose in the manner provided in these Bylaws.
SECTION 16 POWERS. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Articles of Incorporation.
SECTION 17 CLASSES OF DIRECTORS. Subject to the rights of the holders of
any series of Preferred Stock to elect additional directors under specified
circumstances, directors shall be elected at each annual meeting of stockholders
for a term of one year. Each director shall serve until his successor is duly
elected and qualified or until his death, resignation or removal. No decrease in
the number of directors constituting the Board of Directors shall shorten the
term of any incumbent director.
SECTION 18 VACANCIES. Unless otherwise provided in the Articles of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A vacancy
in the Board of Directors shall be deemed to exist under this Bylaw in the case
of the death, removal or resignation of any director.
SECTION 19 RESIGNATION. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made, it shall
be deemed effective at the pleasure of the Board of Directors. When one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each Director so chosen shall hold office for the unexpired portion of the term
of the Director whose place shall be vacated and until his successor shall have
been duly elected and qualified.
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SECTION 20 REMOVAL.
(a) Subject to the rights of the holders of any series of Preferred
Stock, the Board of Directors or any individual director may be removed from
office at any time (i) with cause by the affirmative vote of the holders of a
majority of the voting power of all the then-outstanding shares of voting stock
of the corporation, entitled to vote at an election of directors (the "Voting
Stock") or (ii) without cause by the affirmative vote of the holders of a
majority of the voting power of all the then-outstanding shares of the Voting
Stock.
(b) Subject to the rights of the holders of any series of Preferred
Stock, any individual director may be removed without cause. Subject to any
limitations imposed by law, the Board of Directors or any individual director
may be removed from office at any time without cause by the affirmative vote of
the holders of a majority of the Voting Stock.
SECTION 21 MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) REGULAR MEETINGS. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Articles of Incorporation, regular meetings of the
Board of Directors may also be held at any place within or without the State of
Nevada which has been designated by resolution of the Board of Directors or the
written consent of all directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the Articles
of Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Nevada whenever called by the
Chairman of the Board, the President or any two of the directors.
(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, facsimile, telegraph or telex, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except
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when the director attends the meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
SECTION 22 QUORUM AND VOTING.
(a) Unless the Articles of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with the Articles of
Incorporation, a quorum of the Board of Directors shall consist of a majority of
the exact number of directors fixed from time to time by the Board of Directors
in accordance with the Articles of Incorporation; provided, however, at any
meeting whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting.
(b) At each meeting of the Board of Directors at which a quorum
is present, all questions and business shall be determined by the affirmative
vote of a majority of the directors present, unless a different vote be required
by law, the Articles of Incorporation or these Bylaws.
SECTION 23 ACTION WITHOUT MEETING. Unless otherwise restricted by the
Articles of Incorporation or these Bylaws, any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 24 FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
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SECTION 25 COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may by
resolution passed by a majority of the whole Board of Directors appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, including without limitation the power or
authority to declare a dividend, to authorize the issuance of stock and to adopt
a certificate of ownership and merger, and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Articles of Incorporation (except that a committee may, to the extent authorized
in the resolution or resolutions providing for the issuance of shares of stock
adopted by the Board of Directors fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, from time to
time appoint such other committees as may be permitted by law. Such other
committees appointed by the Board of Directors shall consist of one (1) or more
members of the Board of Directors and shall have such powers and perform such
duties as may be prescribed by the resolution or resolutions creating such
committees, but in no event shall such committee have the powers denied to the
Executive Committee in these Bylaws.
(c) TERM. Each member of a committee of the Board of Directors
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to the provisions of
subsections (a) or (b) of this Bylaw may at any time increase or decrease the
number of members of a committee or terminate the existence of a committee. The
membership of a committee member shall terminate on the date of his death or
voluntary resignation from the committee or from the Board of Directors. The
Board of Directors may at any time for any reason remove any individual
committee member and the Board of Directors may fill any committee vacancy
created by death, resignation, removal or increase in the number of members of
the committee. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee, and, in addition, in the absence or
disqualification of any member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
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(d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 25 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
SECTION 26 ORGANIZATION. At every meeting of the directors, the Chairman of
the Board of Directors, or, if a Chairman has not been appointed or is absent,
the President, or if the President is absent, the most senior Vice President,
or, in the absence of any such officer, a chairman of the meeting chosen by a
majority of the directors present, shall preside over the meeting. The
Secretary, or in his absence, an Assistant Secretary directed to do so by the
President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
SECTION 27 OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer, the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
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SECTION 28 TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of
the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) DUTIES OF PRESIDENT. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
Unless some other officer has been elected Chief Executive Officer of the
corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform other duties commonly incident to his
office and shall also perform such other duties and have such other powers as
the Board of Directors shall designate from time to time.
(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume
and perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all meetings
of the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial
officer shall keep or cause to be kept the books of account of the corporation
in a thorough and proper manner and shall render statements of the financial
affairs of the corporation in such form and as often as
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required by the Board of Directors or the President. The Chief Financial
Officer, subject to the order of the Board of Directors, shall have the custody
of all funds and securities of the corporation. The Chief Financial Officer
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time. The President may direct the
Treasurer or any Assistant Treasurer, or the Controller or any Assistant
Controller to assume and perform the duties of the Chief Financial Officer in
the absence or disability of the Chief Financial Officer, and each Treasurer and
Assistant Treasurer and each Controller and Assistant Controller shall perform
other duties commonly incident to his office and shall also perform such other
duties and have such other powers as the Board of Directors or the President
shall designate from time to time.
SECTION 29 DELEGATION OF AUTHORITY. The Board of Directors may from time to
time delegate the powers or duties of any officer to any other officer or agent,
notwithstanding any provision hereof.
SECTION 30 RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 31 REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
SECTION 32 EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors may,
in its discretion, determine the method and designate the signatory officer or
officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by
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the Chairman of the Board of Directors, or the President or any Vice President,
and by the Secretary or Treasurer or any Assistant Secretary or Assistant
Treasurer. All other instruments and documents requiring the corporate
signature, but not requiring the corporate seal, may be executed as aforesaid or
in such other manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 33 VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 34 FORM AND EXECUTION OF CERTIFICATES. Certificates for the shares
of stock of the corporation shall be in such form as is consistent with the
Articles of Incorporation and applicable law. Every holder of stock in the
corporation shall be entitled to have a certificate signed by or in the name of
the corporation by the Chairman of the Board of Directors, or the President or
any Vice President and by the Treasurer or Assistant Treasurer or the Secretary
or Assistant Secretary, certifying the number of shares owned by him in the
corporation. If the certificate is signed by (i) a transfer agent other than the
corporation or its employees or (ii) a registrar other than the corporation or
its employees, the signatures on the certificate may be facsimiles. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued with the same effect as if he were such officer, transfer agent, or
registrar at the date of issue. Each certificate shall state upon the face or
back thereof, in full or in summary, all of the powers, designations,
preferences, and rights, and the limitations or restrictions of the shares
authorized to be issued or shall, except as otherwise required by law, set forth
on the face or back a statement that the corporation will furnish without charge
to each stockholder who so requests the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights. Within a reasonable time after the issuance or
transfer of uncertificated stock, the corporation shall send to the registered
owner thereof a written notice containing the information required to be, set
forth
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or stated on certificates pursuant to this section or otherwise required
by law or with respect to this section a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
SECTION 35 LOST CERTIFICATES. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
SECTION 36 TRANSFERS.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the General corporation law of Nevada.
SECTION 37 FIXING RECORD DATES.
(a) In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board of Directors may fix, in advance, a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting. If no record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or if notice is waived, at the close
of business on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
(b) Prior to the Initial Public Offering, in order that the
corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting,
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the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors, and which date shall not be more than 10 days after the
date upon which the resolution fixing the record date is adopted by the Board of
Directors. Any stockholder of record seeking to have the stockholders authorize
or take corporate action by written consent shall, by written notice to the
Secretary, request the Board of Directors to fix a record date. The Board of
Directors shall promptly, but in all events within 10 days after the date on
which such a request is received, adopt a resolution fixing the record date. If
no record date has been fixed by the Board of Directors within 10 days of the
date on which such a request is received, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by
applicable law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation by delivery to its registered office in the State of Nevada, its
principal place of business or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
(c) In order that the corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date shall be not more than
sixty (60) days prior to such action. If no record date is fixed, the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
SECTION 38 REGISTERED STOCKHOLDERS. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Nevada.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39 EXECUTION OF OTHER SECURITIES. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates (covered
in Section 34), may be signed by the Chairman of the Board of Directors, the
President or any Vice President, or such other person as may be authorized by
the Board of Directors, and the corporate seal impressed thereon
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or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 40 DECLARATION OF DIVIDENDS. Dividends upon the capital stock of
the corporation, subject to the provisions of the Articles of Incorporation, if
any, may be declared by the Board of Directors pursuant to law at any regular or
special meeting. Dividends may be paid in cash, in property, or in shares of the
capital stock, subject to the provisions of the Articles of Incorporation.
SECTION 41 DIVIDEND RESERVE. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 42 FISCAL YEAR. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
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ARTICLE X
INDEMNIFICATION
SECTION 43 INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(a) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its directors and executive officers (for the purposes of this Article
XI, "executive officers" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act to the fullest extent not prohibited by the Nevada general
corporation law; provided, however, that the corporation may modify the extent
of such indemnification by individual contracts with its directors and executive
officers and, provided further, that the corporation shall not be required to
indemnify any director or executive officer in connection with any proceeding
(or part thereof) initiated by such person unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the corporation, (iii) such indemnification is provided by
the corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the Nevada general corporation law or (iv) such
indemnification is required to be made under subsection (d).
(b) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation
shall have power to indemnify its other officers, employees and other agents as
set forth in the Nevada general corporation law.
(c) EXPENSES. The corporation shall advance to 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, by reason of the fact that he is or was a director or executive
officer, of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the corporation to an
executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding, or (ii) if such
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, that
the facts known to the decision-making party at the time such determination is
made demonstrate clearly and convincingly that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of the corporation.
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(d) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to directors and
executive officers under this Bylaw shall be deemed to be contractual rights and
be effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
Nevada general corporation law for the corporation to indemnify the claimant for
the amount claimed. In connection with any claim by an executive officer of the
corporation (except in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such executive
officer is or was a director of the corporation) for advances, the corporation
shall be entitled to raise a defense as to any such action clear and convincing
evidence that such person acted in bad faith or in a manner that such person did
not believe to be in or not opposed to the best interests of the corporation, or
with respect to any criminal action or proceeding that such person acted without
reasonable cause to believe that his conduct was lawful. Neither the failure of
the corporation (including its Board of Directors, independent legal counsel or
its stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the Nevada
general corporation law, nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct. In any suit brought by a director or
executive officer to enforce a right to indemnification or to an advancement of
expenses hereunder, the burden of proving that the director or executive officer
is not entitled to be indemnified, or to such advancement of expenses, under
this Article XI or otherwise shall be on the corporation.
(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person
by this Bylaw shall not be exclusive of any other right which such person may
have or hereafter acquire under any statute, provision of the Articles of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Nevada general corporation law.
(f) SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
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(g) INSURANCE. To the fullest extent permitted by the Nevada
general corporation law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Bylaw.
(h) AMENDMENTS. Any repeal or modification of this Bylaw shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Bylaw or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.
(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(i) The term "proceeding" shall be broadly construed and
shall include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(ii) The term "expenses" shall be broadly construed and
shall include, without limitation, court costs, attorneys" fees, witness fees,
fines, amounts paid in settlement or judgment and any other costs and expenses
of any nature or kind incurred in connection with any proceeding.
(iii) The term the "corporation" shall include, in addition
to the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Bylaw with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(iv) References to a "director," "executive officer,"
"officer," "employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
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(v) References, to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to
"serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.
ARTICLE XII
NOTICES
SECTION 44 NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to
any director may be given by the method stated in subsection (a), or by
facsimile, telex or telegram, except that such notice other than one which is
delivered personally shall be sent to such address as such director shall have
filed in writing with the Secretary, or, in the absence of such filing, to the
last known post office address of such director.
(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail, as
above provided, shall be deemed to have been given as at the time of mailing,
and all notices given by facsimile, telex or telegram shall be deemed to have
been given as of the sending time recorded at time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
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(f) FAILURE TO RECEIVE NOTICE. The period or limitation of
time within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Articles of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice
is required to be given, under any provision of law or the Articles of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated.
ARTICLE XIII
AMENDMENTS
SECTION 45 AMENDMENTS. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of a majority of the voting power of all of the
then-outstanding shares of the Voting Stock. The Board of Directors shall also
have the power to adopt, amend, or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
SECTION 46 LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its
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subsidiaries, whenever, in the judgment of the Board of Directors, such loan,
guarantee or assistance may reasonably be expected to benefit the corporation.
The loan, guarantee or other assistance may be with or without interest and may
be unsecured, or secured in such manner as the Board of Directors shall approve,
including, without limitation, a pledge of shares of stock of the corporation.
Nothing in these Bylaws shall be deemed to deny, limit or restrict the powers of
guaranty or warranty of the corporation at common law or under any statute.
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EXHIBIT 4.1
CORGENIX MEDICAL CORPORATION
CERTIFICATE OF DESIGNATIONS
OF PREFERENCES OF SERIES A 5%
CONVERTIBLE, PREFERRED STOCK
PURSUANT TO SECTION 78.1955(1) OF THE
GENERAL CORPORATION LAW OF NEVADA
The undersigned Mike Mustafoglu, being the President and the Secretary
of CORGENIX MEDICAL CORPORATION, a Nevada corporation (the "Corporation"), do
hereby make and execute this Certificate of Designations and do hereby certify
on behalf of the Corporation that:
1. They are respectively the duly elected and acting President and
Secretary of the Corporation.
2. On May 7, 1998 the Board of Directors of the Corporation duly adopted
the following resolutions designating shares of the Corporation's Preferred
Stock as Series A 5% Convertible Preferred Stock and fixing the voting powers,
designations, preferences, limitations, restrictions and relative rights
thereof:
RESOLVED, that pursuant to the authority conferred upon the Board of
Directors by Article FOURTH of the Corporation's Certificate of Incorporation
and Section 78.1955(1) of the General Corporation Law of Nevada, there is hereby
established a series of shares of the authorized Preferred Stock of the
Corporation designated "Series A 5% Convertible Preferred Stock" (the "Series A
Preferred Stock"); that the shares constituting such series and to which this
resolution shall apply shall be One Million Five Hundred Thousand (1,500,000)
shares; and that the voting powers, designations, preferences, limitations,
restrictions and relative rights granted to or imposed on the Series A Preferred
Stock shall be as follows:
Section 1. Designation and Amount. The shares of such series shall be
designed as "Series A 5% Convertible, Preferred Stock" (herein referred to as
"Series A Preferred Stock"), having a par value per share equal to $.001, and
the number of shares constituting such series shall be 1,500,000.
Section 2. Dividends.
(a) The holders of Series A Preferred Stock shall be entitled
to receive dividends (the "Preferred Dividend") payable in cash or in shares of
Series A Preferred Stock, at the rate of $.05 per share per annum (the "Dividend
Rate") on a cumulative basis from the actual date of original issue of each
share of Series A Preferred Stock (the "Original Issue Date"), whether or not
declared, out of funds legally available therefore, payable quarterly in arrears
on the fifteenth day of each February, May, August, and November in each year
(each a "Dividend Payment Date"). Payments shall commence on August 15, 1998.
Each such Preferred Dividend shall be payable to the holders of record of the
Series A Preferred Stock at the close of business on the preceding December 31,
March 31, June 30, and September 30, respectively. Each dividend shall be
declared by the Board of Directors no more than fifteen (15) days prior to its
respective record date. Payments shall equal $.0125 per share on each Dividend
Payment Date or such lesser amount as shall result from any proration in respect
of any partial quarterly period. The amount of Preferred Dividends payable upon
the occurrence of any event described in Sections 3, 5 or 7 hereof shall be
computed by multiplying the applicable Dividend Rate by
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a fraction, the numerator of which shall be the number of days since the
preceding Dividend Payment Date to the date of payment of such partial Preferred
Dividend and the denominator of which shall be 360. Any shares of Series A
Preferred Stock issued as a stock dividend shall be valued for purposes of the
Dividend Rate at $1.00 per share of Series A Preferred Stock issued.
(b) The Dividend Rate shall be adjusted commencing twenty-four
(24) months after the Original Issue Date, by increasing the Dividend Rate to
$.10 per share per annum, with the quarterly Preferred Dividend being increased
to $.025 per share, and thereafter on each succeeding twelve (12) month
anniversary of the Original Issue Date, the Dividend Rate shall be increased
such that during the fourth and fifth years following the Original Issue Date
the Dividend Rate shall be $.12 and $.14, and the quarterly Preferred Dividend
shall be $.03 and $.035, respectively, and so on until all of the outstanding
shares of Series A Preferred Stock shall have been redeemed or converted as
provided in this Certificate of Designations.
(c) So long as any of the shares of Series A Preferred Stock are
outstanding, no dividends (other than dividends or distributions paid in shares
of or options, warrants or rights to subscribe for or purchase shares of Common
Stock) shall be declared or paid or set apart for payment by the Corporation or
other distribution of cash or other property declared or made directly or
indirectly by the Corporation or any affiliate or any person acting on behalf of
the Corporation or any of its affiliates with respect to any shares of Common
Stock, Preferred Stock or other capital stock over which the Series A Preferred
Stock has preference or priority in the payments of dividends or in the
distribution of assets on any liquidation, dissolution or winding up of the
Corporation ("Junior Stock"), nor shall any shares of Junior Stock be redeemed,
purchased or otherwise acquired (other than a purchase or other acquisition of
Common Stock made for purposes of any employee incentive or benefit plan of the
Corporation or any subsidiary) for any consideration (or any moneys be paid to
or made available for a sinking-fund for the redemption of any shares of any
such stock) directly or indirectly by the Corporation or any affiliate or any
person acting on behalf of the Corporation or any of its affiliates (except by
conversion into or exchange for Junior Stock), nor shall any other cash or other
property otherwise be paid or distributed to or for the benefit of any holder of
shares of Junior Stock in respect thereof, directly or indirectly, by the
Corporation or any affiliate or any person acting on behalf of the Corporation
or any of its affiliates unless in each case (x) the full Preferred Dividends
(including all accumulated, accrued and unpaid dividends) on all outstanding
shares of Series A Preferred Stock shall have been paid or such dividends have
been declared and set apart for payment for the current dividend periods with
respect to the Series A Preferred Stock and (y) sufficient funds shall have been
paid or set apart for the payment of the full Preferred Dividend for the current
dividend period with respect to the Series A Preferred Stock.
(d) If and whenever a quarterly Preferred Dividend is not paid
on a Dividend Payment Date (whether or not declared), then the amount of such
Preferred Dividend remaining in arrears and unpaid from time to time shall bear
interest from such Dividend Payment Date until the date it is paid in full at an
annual rate equal to ten percent (10%). Interest payable in respect of Preferred
Dividends which are in arrears shall be computed on the basis of twelve (12),
thirty (30) day months and a 360-day year. No payment shall be applied to the
Preferred Dividend due on a Dividend Payment Date unless and until all arrears,
including interest thereon, with respect to accumulated, accrued but unpaid
Preferred Dividends shall have been paid.
Section 3. Liquidation, Dissolution, or Winding Up.
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(a) In the event of any liquidation, dissolution, or winding up
of the Corporation, whether voluntary or involuntary, the holders of the Series
A Preferred Stock shall be entitled to be paid first out of the assets of the
Corporation available for distribution to holders of the Corporation's capital
stock of all classes and before any sums shall be paid or any assets distributed
among the holders of shares of any other class or series of capital stock of the
Corporation, including Common Stock, an amount per share equal to One and
10/100's Dollar ($1.10) ("Base Preference Amount") plus an amount equal to all
the accrued but unpaid Preferred Dividends (whether or not declared), and the
amount equal to all interest, if any, on any Preferred Dividends in arrears, in
each case to the date of final distribution to such holders (the "Preference
Amount"). The Preference Amount shall be adjusted commencing twelve (12) months
after the Original Issue Date, by increasing the Base Preference Amount to One
and 20/100's Dollars ($1.20), and thereafter on each succeeding twelve (12)
month anniversary of the Original Issue Date the Preference Amount shall be
increased by an amount equal to seven percent (7%) of the Base Preference Amount
in effect for the preceding twelve (12) month period, such that during the
third, fourth and fifth years following the Original Issue Date, the Preference
Amount shall be $1.284, $1.37388, and $1.4700516 respectively, and so on, on
each anniversary of the Original Issue Date until all of the outstanding shares
of Series A Preferred Stock shall have been redeemed or converted as provided in
this Certificate of Designations. Until the holders of the Series A Preferred
Stock have been paid the Preference Amount in full, no payment will be made to
any holder of Junior Stock upon the liquidation, dissolution or winding up of
the Corporation. If the assets of the Corporation shall be insufficient to
permit the payment in full to the holders of the Series A Preferred Stock of the
Preference Amount then the entire assets of the Corporation available for such
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock in proportion to the Preference Amount each such holder is
otherwise entitled to receive. After payment of the Preference Amount shall have
been made in full to the holders of the Series A Preferred Stock or funds
necessary for such payment shall have been set aside by the Corporation in trust
for the account of holders of the Series A Preferred Stock so as to be available
for such payment, holders of the Series A Preferred Stock shall not be entitled
to participate in the distribution of any remaining assets of the Corporation.
(b) Any consolidation, merger or a statutory share exchange
(other than (i) merger with a wholly-owned subsidiary of the Corporation, (ii) a
mere reincorporation transaction, or (iii) a merger pursuant to which the
Corporation is the surviving entity and the capitalization of the Corporation
remains unchanged) in which the outstanding shares of capital stock of the
Corporation are exchanged for securities or other consideration of or from
another corporation, or a sale of all or substantially all the assets or stock
of the Corporation, shall be deemed to be a liquidation, dissolution, or winding
up of the affairs of the Corporation within the meaning of this Section 3, and
shall entitle the holders of the Series A Preferred Stock to receive on the
effective date of such event the Preference Amount, in cash, securities or other
property; provided, however, that any such event shall not be so regarded as a
liquidation, dissolution, or winding up of the affairs of the Corporation with
respect to the Series A Preferred Stock if the holders of two-thirds (2/3) of
the outstanding shares of the Series A Preferred Stock approve such event or
elect not to have any such event deemed to be a liquidation, dissolution, or
winding up of the affairs of the Corporation by giving written notice thereof to
the Corporation at least ten (10) days prior to the effective date of such
event.
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(c) Whenever the distribution provided for in this Section 3
shall be paid in property other than cash, the value of such distribution shall
be the fair value thereof determined in good faith by the Board of Directors of
the Corporation.
Section 4. Voting Rights.
(a) Except as otherwise required by law, or as specifically
provided herein, the holders of Series A Preferred Stock shall have no voting
rights and powers; provided, however, the holders of Series A Preferred Stock
shall be entitled to vote pursuant to the provisions of Sections 4(b) and 4(c),
which govern the rights of the holders of Series A Preferred Stock with respect
to the election or removal of directors. Notwithstanding the foregoing, the
holders of the Series A Preferred Stock shall be entitled to notice of and to
attend any stockholders' meeting.
(b) For a period of twenty-four (24) months from and after the
Original Issue Date, the holders of the Series A Preferred Stock, voting
separately as one class, shall have the exclusive and special right at all times
to elect two (2) directors (the "Preferred Directors") to the Board of Directors
of the Corporation provided, however, that so long as any shares of Series A
Preferred Stock are outstanding, the Board of Directors shall not consist of
more than five (5) members, unless the Preferred Directors voting as a class,
shall have previously approved any such increase to the Board of Directors
beyond five (5) members. The Preferred Directors shall be elected by the vote of
the holders of a majority, and removed by the vote of the holders of two-thirds
(2/3), of the shares of Series A Preferred Stock then outstanding. The right of
holders of the Series A Preferred Stock contained in this Section 4(b) may be
exercised either at a special meeting of the holders of Series A Preferred Stock
or at any annual or special meeting of the stockholders of the Corporation, or
by written consent of such holders in lieu of a meeting. Upon the written
request of the holders of record of at least a majority of the Series A
Preferred Stock then outstanding, the Secretary of the Corporation shall call a
special meeting of the holders of Series A Preferred Stock for the purpose of
(i) removing any Preferred Directors elected pursuant to this Section 4(b)
and/or (ii) electing a director to fill a vacancy of the directorship authorized
to be filled by the holders of Series A Preferred Stock pursuant to this Section
4(b). Such meeting shall be held at the earliest practicable date permitted by
law. At any meeting held for the purpose of electing or removing a Preferred
Directors, the presence, in person or by proxy, of the holders of record of a
majority of the Series A Preferred Stock then outstanding shall be required to
constitute a quorum of the Series A Preferred Stock for such election. A vacancy
in the directorship to be elected by the holders of Series A Preferred Stock
pursuant to this Section 4(b) may be filled only by vote or written consent in
lieu of a meeting of the holders of a majority of the shares of Series A
Preferred Stock then outstanding and may not be filled by the remaining
directors.
(c) If and whenever two (2) quarterly dividends (whether or
not consecutive) payable on the Series A Preferred Stock shall be in arrears
(which shall, with respect to any such quarterly dividend, mean that any such
dividend has not been paid in full), whether or not earned or declared, the
number of directors then constituting the Board of Directors shall be increased
to a number which allows for holders of the Series A Preferred Stock to elect a
majority of the entire Board of Directors at a special meeting of stockholders
called as hereinafter provided. Whenever all arrears in dividends on the Series
A Preferred Stock (together with interest on dividends in arrears pursuant to
Section 2(d) above) shall have been paid and dividends thereon for the current
quarterly dividend period shall have been paid or declared and set apart for
payment, then the right of the holders of the Series A Preferred Stock to elect
such additional directors shall cease (but subject always to the same provision
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of the vesting of such special voting rights in the case of any similar future
arrearages in two (2) quarterly dividends), and the terms of office of all
persons elected as additional directors by the holders of the Series A Preferred
Stock pursuant to this Section 4(c) shall forthwith terminate and, if necessary,
the number of the Board of Directors shall be reduced accordingly. At any time
after such additional voting power shall have been so vested in the holders of
the Series A Preferred Stock, the Secretary of the Corporation may, and upon the
written request of any holder of Series A Preferred stock (addressed to the
Secretary at the principal office of the Corporation) shall, call a special
meeting of the holders of the Series A Preferred Stock for the election of the
additional directors to be elected by them as herein provided, such call to be
made by notice similar to that provided in the Bylaws of the Corporation for a
special meeting of the stockholders or as required by law. If any such special
meeting required to be called as above provided shall not be called by the
Secretary within twenty (20) days after receipt of any such request, then any
holder of Series A Preferred Stock may call such meeting, upon the notice above
provided, and for that purpose shall have access to the stock books of the
Corporation. The additional Preferred Directors elected at any special meeting
shall hold office until the next annual meeting of the stockholders or special
meeting held in lieu thereof if such office shall not have previously terminated
as above provided. If any vacancy shall occur among the additional Preferred
Directors, a successor shall be elected by the Board of Directors, upon the
nomination of the then remaining Preferred Directors or the successor of such
remaining directors, to serve until the next annual meeting of the stockholders
or special meeting held in place thereof if such office shall not have
previously terminated as above provided.
Section 5. Conversion Rights. The holders of the Series A Preferred
Stock shall have the following conversion rights:
(a) Right to Convert. Each share of Series A Preferred Stock
shall be convertible at any time, and from time to time, at the option of the
holder thereof, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing One Dollar ($1.00) (the "Numerator")
by the Conversion Price (as defined below) in effect at the time of conversion.
The conversion price at which shares of Common Stock shall be deliverable upon
conversion of Series A Preferred Stock without the payment of additional
consideration by the holder thereof (the "Conversion Price") initially shall be
One and No/100 Dollars ($1.00). Such initial Conversion Price, and the rate at
which shares of Series A Preferred Stock may be converted into shares of Common
Stock, shall be subject to adjustment as provided below. The conversion rights
of the holders of Series A Preferred Stock shall terminate (i) in the event of a
liquidation of the Corporation, at the close of business on the first full day
preceding the date fixed for the payment of any amounts distributable on
liquidation to the holders of Series A Preferred Stock; and (ii) in the event
shares of Series A Preferred Stock are called for redemption pursuant to Section
7 hereof, at the close of business on the Redemption Date (as defined in Section
7(a) below), unless the Corporation shall default in making payment in full of
the Redemption Price.
(b) Adjustment to Conversion Price Upon Occurrence of
Extraordinary Common Stock Event. Upon the happening of an Extraordinary Common
Stock Event (as hereinafter defined), the Conversion Price for the Series A
Preferred Stock, simultaneously with the happening of such Extraordinary Common
Stock Event, shall be adjusted by multiplying the then-effective Conversion
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such Extraordinary Common Stock
Event and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such
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Extraordinary Common Stock Event, and the product so obtained thereafter shall
be the Conversion Price for the Series A Preferred Stock. The Conversion Price,
as so adjusted, shall be readjusted in the same manner upon the happening of any
successive Extraordinary Common Stock Event(s). "Extraordinary Common Stock
Event" shall mean (i) the issuance of additional shares of Common Stock as a
dividend or other distribution on outstanding Common Stock, (ii) a stock split
or subdivision of outstanding shares of Common Stock into a greater number of
shares of Common Stock, or (iii) a reverse stock split or combination of
outstanding shares of Common Stock into a smaller number of shares of Common
Stock.
(c) Recapitalization or Reclassification. If the Common Stock
issuable upon the conversion of the Series A Preferred Stock shall be changed
into the same or a different number of shares of any class or classes of stock
of the Corporation, whether by recapitalization, reclassification, or otherwise
(other than a subdivision or combination of shares or stock dividend provided
for in Section 5(b) hereof, or a reorganization, merger, share exchange,
consolidation, or sale of assets provided for in Section 5(d) hereof), then and
in each such event the holder of each share of Series A Preferred Stock shall
have the right thereafter to convert such share into the kind and amount of
shares of stock and other securities and property receivable upon such
recapitalization, reclassification, or other change by holders of the number of
shares of Common Stock into which such share of Series A Preferred Stock might
have been converted immediately prior to such recapitalization,
reclassification, or change, all subject to further adjustment as provided
herein.
(d) Capital Reorganization, Merger, Share Exchange,
Consolidation, or Sale of Assets. If at any time or from time to time there
shall be a capital reorganization of the Common Stock, including a merger, share
exchange, consolidation, or sale of all or substantially all of the assets of
the Corporation (other than a subdivision or combination of shares or stock
dividend provided for in Section 5(b) hereof or a recapitalization or
reclassification provided for in Section 5(c) hereof), then, as a part of such
reorganization, provision shall be made so that the holders of the Series A
Preferred Stock thereafter shall be entitled to receive, upon conversion of each
share of the Series A Preferred Stock, the number of shares of stock or other
securities or property to which a holder of the number of shares of Common Stock
into which such shares of Series A Preferred Stock might have been converted
immediately prior to such capital reorganization would have been entitled to
receive. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 5 with respect to the rights of
the holders of the Series A Preferred Stock after the reorganization to the end
that the provisions of this Section 5 (including adjustment of the Conversion
Price then in effect and the number of shares acquired upon conversion of the
Series A Preferred Stock) shall be applicable after that event in as nearly
equivalent a manner as may be practicable. Notwithstanding the foregoing, in the
case of a consolidation, merger, share exchange, or sale of all or substantially
all the assets of the Corporation, the provisions of Section 3(b) shall apply to
the Series A Preferred Stock, and this Section 5(d) shall not apply, unless, as
provided in Section 3(b) the holders of two-thirds (2/3) of the outstanding
shares of Series A Preferred Stock elect that such event shall not be deemed to
be a liquidation, dissolution, or winding up of the affairs of the Corporation.
(e) Certain Dilutive Issues.
(i) Special Definitions. For purposes of this Section
5(e), the following definitions apply:
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(1) "Options" shall mean rights, options, or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities (as defined below), except for (A) warrants to purchase an aggregate
of 2,000,000 shares of Common Stock outstanding on the Original Issue Date (the
"Anti-Dilution Warrants"); (B) warrants to purchase an aggregate of 1,000,000
shares of Common Stock granted and reserved for issuance on the Original Issue
Date (the "Unit Warrants") and (C) options to purchase shares of Common Stock of
the Corporation pursuant to an Incentive Stock Plan of the Corporation approved
by the holders of shares of Common Stock and Series A Preferred Stock, voting as
classes, provided such options each are exercisable at a price equal to the fair
market value of the Common Stock on the date such option was granted ("Approved
ISOs").
(2) "Convertible Securities" shall mean any evidences of
indebtedness, shares of stock (other than Common Stock and Series A Preferred
Stock) or other securities convertible into or exchangeable for Common Stock.
(3) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or deemed to be issued pursuant to Section
5(e)(iii)) by the Corporation after the Original Issue Date, other than shares
of Common Stock issued or issuable upon (i) conversion of shares of Series A
Preferred Stock or as a dividend or distribution on Series A Preferred Stock;
(ii) the exercise of the Anti-Dilution Warrants; (iii) the exercise of the Unit
Warrants; and (iv) the exercise of the Approved ISO's.
(ii) No Adjustment of Conversion Price. Any provision herein
to the contrary notwithstanding, no adjustment in the number of shares of Common
Stock into which shares of Series A Preferred Stock is convertible shall be
made, by adjustment in the Conversion Price, unless the consideration per share
(determined pursuant to Section 5(e)(v) hereof) for an Additional Share of
Common Stock issued or deemed to be issued by the Corporation is less than the
Fair Market Value (as defined in Section 5(h) below) on the date of the issue of
such Additional Shares of Common Stock.
(iii) Issue of Options and Convertible Securities. In the
event the Corporation at any time or from time to time after the Original Issue
Date shall issue any Options or Convertible Securities or shall fix a record
date for the determination of holders of any class of securities then entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares (as set forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such number) of
Common Stock issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided that
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to Section 5(e)(v) hereof) of
such Additional Shares of Common Stock would be less than the Fair Market Value
(as defined in Section 5(h) below) on the date of such issue, or such record
date, as the case may be, and provided that in any such case in which Additional
Shares of Common Stock are deemed to be issued:
(1) no further adjustments in the Conversion Price shall
be made upon the subsequent issue of Convertible Securities or shares of Common
Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
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(2) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase or decrease in
the consideration payable to the Corporation, or decrease or increase in the
number of shares of Common Stock issuable upon the exercise, conversion or
exchange thereof, the Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease insofar
as it affects such Options or the rights of conversion or exchange under such
Convertible Securities, provided, however, that no such adjustment of the
Conversion Price shall affect Common Stock previously issued upon conversion of
shares of Series A Preferred Stock;
(3) upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities that shall not have
been exercised, the Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration, be recomputed
as if:
(A) in the case of Convertible Securities or Options for
Common Stock, the only Additional Shares of Common Stock issued were the shares
of Common Stock, if any, actually issued upon the exercise of such Options or
the conversion or exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by the Corporation for
the issue of all such Options, whether or not exercised, plus the consideration
actually received by the Corporation upon such exercise, or for the issue of all
such Convertible Securities that were actually converted or exchanged, plus the
additional consideration, if any, actually received by the Corporation upon such
conversion or exchange, and
(B) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued upon the exercise
thereof were issued at the time of issue of such Options, and the consideration
received by the Corporation for the Additional Shares of Common Stock deemed to
have been then issued was the consideration actually received by the Corporation
for the issue of all such Options, whether or not exercised, plus the
consideration deemed to have been received by the Corporation (determined
pursuant to Section 5(e)(v)) upon the issue of the Convertible Securities with
respect to which such Options were actually exercised;
(4) no readjustment pursuant to Section 5(e)(iii)(2) or (3)
above shall have the effect of increasing the Conversion Price to an amount
which exceeds the lower of (a) the Conversion Price prior to the initial
adjustment to which the readjustment applies, or (b) the Conversion Price that
would have resulted from any issuance of Additional Shares of Common Stock
between the date of the initial adjustment date and such readjustment date; and
(5) in the event of any change in the number of shares of
Common Stock issuable upon the exercise, conversion or exchange of any Option or
Convertible Security, including, but not limited to, a change resulting from the
antidilution provisions thereof, the Conversion Price then in effect shall
forthwith be readjusted to such Conversion Price as would have been obtained had
the adjustment which was initially made upon the issuance of such unexercised
Option or unconverted Convertible Security, been made upon the basis of such
subsequent change, but
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no further adjustment shall be made for the actual issuance of Common Stock upon
the exercise or conversion of any such Option or Convertible Security.
(iv) Adjustment of Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event the Corporation at any time
after the Original Issue Date shall issue Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant to
Section 5(e)(iii)), without consideration or for a consideration per share less
than the Fair Market Value (as defined in Section 5(h) below) on the date of
such issue, then and in such event, the Conversion Price shall be reduced to a
price (calculated to the nearest cent) equal to either (A) the per share
consideration for such Additional Shares of Common Stock (or deemed Additional
Shares of Common Stock) pursuant to Section 5(e)(iii), or (B) in the case of
Additional Shares of Common Stock issued (or deemed to have been issued) without
consideration, the par value of the Common Stock. The provisions of this Section
5(e)(iv) do not apply if the provisions of any of Section 5(b), (c) or (d)
apply.
(v) Determination of Consideration. The consideration
received by the Corporation for the issue of any Additional Shares of Common
Stock shall be computed as follows:
(1) Cash, Property, and Other Consideration. Such
consideration shall:
(A) insofar as it consists of cash, be computed as the
aggregate amount of cash received by the Corporation excluding amounts paid or
payable for accrued interest or accrued dividends;
(B) insofar as it consists of property, services, or
other consideration other than cash, be computed at the fair value thereof at
the time of such issue, as determined in good faith by the Board of Directors;
and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of the
consideration so received, computed as provided in clauses (a) and (b) above, as
is determined in good faith by the Board of Directors.
(2) Options and Convertible Securities. The consideration
per share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Options and Convertible Securities, shall
be deemed to be the sum of the consideration paid for such Option or Convertible
Security, if any, plus the lowest consideration per share then payable upon the
exercise of Options, as set forth in the instruments relating to such Options or
Convertible Securities, without regard to any provision contained therein
designed to protect against dilution. If Options or Convertible Securities are
issued together with other securities or instruments of the Corporation, the
Board of Directors shall determine in good faith the amount of consideration
paid for such Option or Convertible Securities.
(f) Certificate as to Adjustments. In each case of an adjustment
or readjustment of the Conversion Price of the Series A Preferred Stock, the
Corporation will furnish each
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holder of the Series A Preferred Stock with a certificate prepared by the Chief
Financial Officer of the Corporation showing such adjustment or readjustment and
stating in detail the facts upon which such adjustment or readjustment is based.
(g) Exercise of Conversion Privilege. To exercise its conversion
privilege, a holder of Series A Preferred Stock shall surrender the
certificate(s) representing the shares being converted to the Corporation at its
principal office, accompanied by written notice to the Corporation at that
office that such stockholder elects to convert such shares (a "Conversion
Notice"). The Conversion Notice also shall state the name(s) and address(es) in
which the certificate(s) for shares of Common Stock issuable upon such
conversion shall be issued. The certificate(s) for shares of Series A Preferred
Stock surrendered for conversion shall be accompanied by proper assignment
thereof to the Corporation or in blank. The date when the Conversion Notice is
received by the Corporation together with the certificate(s) representing the
shares of Series A Preferred Stock being converted shall be the "Conversion
Date." As promptly as practicable after the Conversion Date, the Corporation
shall issue and deliver to the holder of the shares of Series A Preferred Stock
being converted, or on its written order, such certificate(s) as it may request
of the number of whole shares of Common Stock issuable upon the conversion of
such shares of Series A Preferred Stock in accordance with the provisions of
this Section 5 and cash, as provided in Section 5(h), in respect of any fraction
of a share of Common Stock issuable upon such conversion. Such conversion shall
be deemed to have been effected immediately prior to the close of business on
the Conversion Date, and at such time the rights of the holder as a holder of
the converted shares of Series A Preferred Stock shall cease and the person(s)
in whose name(s) any certificate(s) for shares of Common Stock shall be issuable
upon such conversion shall be deemed to have become the holder(s) of record of
the shares of Common Stock represented thereby.
(h) Cash in Lieu of Fractional Shares. No fractional shares of
Common Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Series A Preferred Stock. Instead of any fractional
shares of Common Stock that otherwise would be issuable upon conversion of a
series of Series A Preferred Stock, the Corporation shall pay to the holder of
the shares of Series A Preferred Stock that were converted a cash adjustment in
respect of such fractional shares in an amount equal to the same fraction of the
Fair Market Value price per share of the Common Stock at the close of business
on the Conversion Date. "Fair Market Value" shall mean (i) in the case of a
security listed or admitted to trading on any securities exchange, the last
reported sale price, regular way (as determined in accordance with the practices
of such exchange), on such day, or if no sale takes place on such day, the
average of the closing bid and asked prices on such day (and in the case of a
security traded on more than one national securities exchange, at such price or
such average, upon the exchange on which the volume of trading during the last
calendar year was the greatest), (ii) in the case of a security not then listed
or admitted to trading on any securities exchange, the last reported sale price
on such day, or if no sale takes place on such day, the average of the closing
bid and asked prices on such day, as reported by a reputable quotation service
designated by the Corporation, (iii) in the case of a security not then listed
or admitted to trading on any securities exchange and as to which no such
reported sale price or bid and asked prices are available, the average of the
reported high bid and low asked prices on such day, as reported by a reputable
quotation service, or the Wall Street Journal, or if there are no bid and asked
prices on such day, the average of the high bid and low asked prices, as so
reported, on the most recent day (not more than 30 days prior to the date in
question) for which prices have been so reported, and (iv) in the case of a
security determined by the Corporation's Board of Directors as not having an
active quoted market or in the case of other property, such fair market value
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as shall be determined by the Board of Directors. The determination as to
whether any fractional shares are issuable shall be based upon the total number
of shares of Series A Preferred Stock being converted at any one time by any
holder thereof, not upon each share of Series A Preferred Stock being converted.
(i) Reservation of Common Stock. The Corporation at all times
shall reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the shares
of the Series A Preferred Stock, such number of its shares of Common Stock as
from time to time shall be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred Stock.
Section 6. Restrictions and Limitations: Holders of Series A
Preferred Stock Voting as a Class; and Preferred Directors Voting as a Class.
(a) So long as any shares of Series A Preferred Stock remain
outstanding, in addition to any other vote or consent of stockholders required
by law or the Certificate of Incorporation, neither the Corporation, nor any
subsidiary of the Corporation mutatis mutandis, will take any of the following
actions without the affirmative vote or consent (with each share of Series A
Preferred Stock being entitled to one vote) of the holders of at least
two-thirds (2/3) of the outstanding shares of the Series A Preferred Stock
voting as a class, given in writing or by resolution adopted at a meeting called
for such purpose:
(i) amend the Certificate of Incorporation or Bylaws of the
Corporation if such amendment would:
(1) reduce the Dividend Rate on the Series A Preferred
Stock provided for herein, make such dividends noncumulative, defer the date
from which dividends will accrue, cancel accrued and unpaid dividends, or change
the relative seniority rights of the holders of the Series A Preferred Stock as
to the payment of dividends in relation to the holders of any other capital
stock of the Corporation;
(2) reduce the amount payable to the holders of the
Series A Preferred Stock upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, or change the relative seniority
of the liquidation preferences of the holders of the Series A Preferred Stock;
(3) reduce the Redemption Price specified in Section 7
hereof with respect to the Series A Preferred Stock;
(4) cancel or modify the conversion rights of the Series
A Preferred Stock provided for in Section 5 hereof; or
(5) adversely affect any of the rights, preferences or
privileges provided for herein for the benefit of any shares of Series A
Preferred Stock; provided that no issuance of equity securities which shall have
been approved under Section 6(a)(iv) hereof (or which does not require approval
under such Section 6(a)(iv)) shall be deemed to have such an adverse effect.
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(ii) redeem, purchase or otherwise acquire for value (or pay
into or set aside for a sinking fund for such purpose) any share or shares of
Series A Preferred Stock otherwise than by redemption of Series A Preferred
Stock in accordance with Section 7 hereof or by conversion in accordance with
Section 5 hereof;
(iii) redeem, purchase or otherwise acquire (or pay into or
set aside for a sinking fund for such purpose) any share or shares of Junior
Stock, except for a purchase or other acquisition of Common Stock made for
purposes of any employee incentive or benefit plan of the Corporation or any
subsidiary;
(iv) authorize or issue, or obligate itself to issue, any
other equity security (1) senior to or on a parity with the Series A Preferred
Stock as to dividend rights or redemption rights or liquidation preferences or
(2) which entitles the holders thereof to voting rights equal to at least twenty
percent (20%) of the outstanding voting power of all capital stock of the
Corporation or to elect directors which constitute twenty percent (20%) or more
of the Board of Directors;
(v) effect any sale, lease, assignment, transfer, or other
conveyance of all or substantially all of the assets of the Corporation or any
of its subsidiaries, or any consolidation, merger or a share exchange involving
the Corporation or any of its subsidiaries, except (i) a merger with a
wholly-owned subsidiary of the Corporation, (ii) a mere reincorporation
transaction, (iii) a merger pursuant to which the Corporation is the surviving
entity and the capitalization of the Corporation remains unchanged, or (iv) upon
an election by the holders of Series A Preferred Stock pursuant to Section 3(b)
hereof;
(vi) increase or decrease (other than by redemption or as a
result of the conversion thereof) the total number of authorized shares of any
class or series of capital stock; or
(vii) effect any change in the rights or limitations of the
Common Stock, or any recapitalization of the Corporation.
(b) Preferred Directors Voting as a Class. In addition to any
other rights of approval attaching to the Series A Preferred Stock under this
Certificate of Designations, the approval of the Preferred Directors, voting as
a class, shall be required prior to the Corporation, or any subsidiary of the
Corporation, issuing additional securities, other than securities underlying the
Anti-Dilution Warrants, Unit Warrants or Approved ISO's, entering into a merger,
reorganization, share exchange or acquisition transaction, selling all, or
substantially all of its assets, or incurring additional indebtedness or making
capital expenditures other than in accordance with the Corporation's Business
Plan approved as contemplated by Section 7.9(a) of the 5% Series A Convertible
Preferred Stock Offshore Securities Purchase Agreement among the Corporation and
the holders of shares of Series A Preferred Stock outstanding on the Original
Issue Date ("Securities Purchase Agreement").
(c) Special Voting Right. For a period equal to the greater of
(a) twenty-four (24) months from the Original Issue Date or (b) the time when
there shall be less than 250,000 shares of the Series A Preferred Stock issued
and outstanding, in addition to any other remedies available under this
Certificate of Designations, at law or in equity, if the Corporation breaches
any of the provisions of this Certificate of Designations, including without
limitation, the restrictions and
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limitations set forth in Section 6 of this Certificate of Designations, and/or
breaches any covenant contained in Section 7 of the Securities Purchase
Agreement, and such breach shall continue for a period of forty-five (45) days
after written notice of such breach shall have been sent to the Corporation in
accordance with Section 12.12 of the Securities Purchase Agreement, the holders
of shares of Series A Preferred Stock will be empowered with a number of votes
sufficient to elect a majority of the Board of Directors of the Corporation,
which right will be exercisable by TransGlobal Financial Corporation, as
financial advisor to the Corporation and holder of a voting proxy over each of
the shares of Series A Preferred Stock issued by the Corporation ("Special
Voting Right"). The actual number of votes represented by the Special Voting
Right upon the occurrence of any particular breach will be equal to (A) the
total number of the Corporation's common equivalent shares then outstanding
minus (B) the number of shares of Common Stock then held by the purchasers of
shares of Common Stock in the Company's equity offering described in the
Information Statement of REAADS Medical Products, Inc. ("REAADS"), dated April
8, 1998, as amended by a supplement dated April 23, 1998 describing a proposed
merger relating to REAADS and the Company. The Special Voting Right will
continue until the first to occur of (i) remedy of the noncompliance or (ii) the
date when less than 250,000 shares of Preferred Stock remain outstanding, and
upon each and every vesting of the Special Voting Right, the Corporation shall
reconstitute the Board of Directors in the manner described in Section 4(c) of
the Certificate of Designations.
Section 7. Redemption.
(a) Redemption at the Option of the Corporation. Shares of
Series A Preferred Stock shall not be redeemable by the Corporation at any time
prior to the second anniversary of the Original Issue Date. On and after the
second (2nd) anniversary of the Original Issue Date, at the option of the
Corporation, the Corporation may fix a date (the "Redemption Date") on which it
shall redeem all (but not less than all) of the then outstanding shares of
Series A Preferred Stock by paying in cash, out of funds legally available
therefor, to the holders thereof and in respect of each such share of Series A
Preferred Stock, the Redemption Price (as defined below), (i) at any time prior
to the fourth anniversary of the Original Issue Date but only in the event that
the average bid price of the Common Stock of the Corporation exceeds Five and
No/100 Dollars ($5.00) per share (without giving effect to any stock splits,
stock dividends or recapitalizations after the Original Issue Date), with
respect to each of the twenty (20) consecutive Trading Days (as defined below)
immediately preceding the date of the Redemption Notice (as defined in Section
7(b) below); or (ii) at any time on or after the fourth anniversary of the
Original Issue Date. A holder of Series A Preferred Stock may elect, by written
notice delivered to the Corporation not less than ten (10) days prior to the
Redemption Date, to waive its right to have redeemed all (but not less than all)
of the shares of Series A Preferred Stock held by such holder which are eligible
to be redeemed on such Redemption Date, provided that on such Redemption Date
each such share of Series A Preferred Stock which is not redeemed shall be
converted automatically into shares of Common Stock at the Conversion Price then
in effect on such Redemption Date. The term "Trading Day" shall mean any day
other than Saturday or Sunday on which national securities exchanges are open
for trading and trades in the Corporation's Common Stock occur. The term
"Redemption Price" shall mean an amount per share equal to the Preference Amount
(as the same shall be adjusted from time to time in accordance with Section 3(a)
hereof).
(b) Procedures for Redemption of Series A Preferred Stock. At
least thirty (30) days but not more than forty-five (45) days prior to the
Redemption Date the Corporation shall mail a written notice, first class postage
prepaid, to each holder of record at the close of business on the
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<PAGE>
business day preceding the day on which notice is given, of the Series A
Preferred Stock to be redeemed, at the address last shown on the records of the
Corporation for such holder, notifying such holder of the redemption to be
effected, specifying (i) that all shares of Series A Preferred Stock shall be
redeemed from such holder, (ii) the Redemption Date, (iii) the Redemption Price,
(iv) the place at which payment may be obtained, (v) advising such holder of its
right to elect to waive its right to have all (but not less than all) such
shares redeemed and that, if such election is made, such shares of Series A
Preferred Stock which are not redeemed shall be converted automatically into
shares of Common Stock at the Conversion Price then in effect (setting forth
such Conversion Price), and (vi) calling upon such holder to surrender to the
Corporation, in the manner and at the place designated, its certificate or
certificates representing the shares to be redeemed (the "Redemption Notice").
On or after the Redemption Date, each holder of Series A Preferred Stock to be
redeemed shall surrender to the Corporation the certificate or certificates
representing such shares, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price of such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
canceled. From and after each Redemption Date, unless there shall have been a
default in payment of the Redemption Price, any shares of Series A Preferred
Stock redeemed on such Redemption Date shall not be entitled to any further
rights as Series A Preferred Stock and shall not be deemed outstanding for any
purpose. If the funds of the Corporation legally available for redemption of
shares of Series A Preferred Stock on any Redemption Date are insufficient to
redeem the total number of shares of Series A Preferred Stock to be redeemed on
such date, those funds which are legally available will be used to redeem the
maximum possible number of such shares ratably among the holders of such shares
to be redeemed based upon the number of shares of Series A Preferred Stock held
by each such holder. The shares of Series A Preferred Stock not redeemed shall
remain outstanding and entitled to all the rights and preferences provided
herein. At any time thereafter when additional funds of the Corporation are
legally available for the redemption of shares of Series A Preferred Stock such
funds will be used immediately to redeem the balance of the shares which the
Corporation has become obliged to redeem on any Redemption Date, but which it
has not redeemed, it being understood that any such redemption shall not
constitute a waiver by a holder of Series A Preferred Stock of any rights
arising from the failure to redeem on the Redemption Date.
Section 8. No Reissuance of Convertible Series A Preferred Stock; Status
of Stock. No share of Series A Preferred Stock acquired by the Corporation by
reason of redemption, purchase, conversion, or otherwise shall be reissued, and
all such shares shall be restored to the status of authorized but unissued
shares of preferred stock, without designation as to rights, limitations or
preferences.
Section 9. No Dilution or Impairment. The Corporation will not, by
amendment of its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, share exchange, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the Series A Preferred Stock
set forth herein, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holders of the Series A
Preferred Stock against dilution or other impairment.
Section 10. Notices of Record Date. In the event of any:
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(a) taking by the Corporation of a record of the holders of
any class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase, or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right; or
(b) capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation,
any merger, consolidation, or share exchange of the Corporation, or any transfer
of all or substantially all the assets of the Corporation to any other
corporation, or any other entity or person; or
(c) voluntary or involuntary dissolution, liquidation, or
winding up the Corporation; then and in each such event the Corporation shall
mail or cause to be mailed to each holder of Series A Preferred Stock a notice
specifying (i) the record date for such dividend, distribution, or right and a
description of such dividend, distribution, or right, (ii) the date on which any
such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, share exchange, dissolution, liquidation, or winding up
is expected to become effective, and (iii) the time, if any, that is to be fixed
as to when the holders of record of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, consolidation, merger, share
exchange, dissolution, liquidation, or winding up. Such notice shall be mailed
at least ten (10) days prior to the date specified in such notice on which such
action is to be taken.
3. This Certificate of Designations, which will constitute an amendment
to the Corporation's Certificate of Incorporation, shall be effective upon
filing by the Secretary of State of Nevada.
IN WITNESS WHEREOF, this Certificate of Designations has been executed
and acknowledged by the Corporation's President and Secretary, who hereby
affirms and acknowledges that this Certificate of Designations is the act and
deed of the Corporation and that the statements made herein are true under the
penalties of perjury.
Dated this 12 day of May, 1998.
/s/ Mike M. Mustafoglu
------------------------------------
Mike M. Mustafoglu, President and Secretary
STATE OF NEVADA )
) SS.:
COUNTY OF SHAWNEE )
On May 12, 1998, personally appeared before me, a Notary Public,
Mike M. Mustafoglu, who acknowledged that he executed the above instrument.
/s/ Rebecca Lee Plush
----------------------------------
Signature of Notary
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EXHIBIT 10.1
MANUFACTURING AGREEMENT
BETWEEN
REAADS MEDICAL PRODUCTS INC.
AND
CHUGAI PHARMACEUTICAL CO. , LTD.
<PAGE>
TABLE OF CONTENTS
Article 1. Definition...............................................1
1.1 "Product"...........................................1
1.2 "Developed Product".................................1
1.3 "Patent Rights".....................................2
1.4 "Know-How"..........................................2
1.5 "Affiliate".........................................2
1.6 "Effective Date"....................................2
1.7 "Launch Date".......................................2
1.8 "Net Sales".........................................2
Article 2. Development Fee..........................................3
Article 3. License to RMP...........................................3
Article 4. License to Chugai........................................4
Article 5. Bulk Material............................................4
Article 6. Purchase and Delivery ...................................4
6.1 Purchase Orders.....................................4
6.2 Supply Price........................................4
6.3 Compensation........................................5
6.4 Invoices............................................6
6.5 Delivery............................................6
6.6 Forecasts...........................................7
6.7 Rejection...........................................7
6.8 Quality Assurance...................................8
6.9 Labeling and Trademarks.............................8
6.10 Product Warranty....................................8
6.11 Compliance with Law.................................9
Article 7. Royalty Payments.........................................9
Article 8. Assignment..............................................10
Article 9. Confidentiality Requirement.............................10
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Article 10. Regulatory Matters......................................11
10.1 Export/Import Licenses.............................11
10.2 Regulatory Approvals...............................11
Article 11. Technical Support.......................................12
Article 12. Infringement............................................12
Article 13. Shelf Life; Cancellation and Reschedule Changes.........13
13.1 Shelf Life Warranty................................13
13.2 Notices............................................13
13.3 Third Party Claims.................................13
13.4 Cancellation and Reschedule Charges................14
Article 14. Term....................................................14
Article 15. Termination.............................................14
Article 16. Arbitration.............................................15
Article 17. General Provisions......................................15
17.1 Entire Agreement...................................15
17.2 Waiver, Etc........................................16
17.3 Notices............................................16
17.4 Governing Law......................................16
17.5 Relationship Created...............................16
17.6 Authority..........................................17
17.7 Force Majeure......................................17
17.8 Headings...........................................17
Signature..............................................................18
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MANUFACTURING AGREEMENT
This Agreement is entered into as of this First day of September, 1994, by and
between REAADS Medical Products, Inc. , a Delaware corporation having a
principal place of business at 12001 Tejon Street, Suite 120, Westminster,
Colorado 80234, USA (hereinafter referred to as "RMP") and Chugai Pharmaceutical
Co. , Ltd. , a corporation organized and existing under the laws of Japan,
having a principal place of business at 1-9, Kyobashi 2-Chome, Chuo-ku, Tokyo
104, Japan (hereinafter referred to as "Chugai").
WITNESSETH
WHEREAS, Chugai and RMP have entered the Development and Manufacturing
Memorandum on 27th September 1993 to confirm both parties' intention of
improving Chugai's diagnostic kit using RMP's technology and know-how;
WHEREAS, Chugai proposed the Hyaluronic Acid assay from its product line to RMP
as a candidate of such product to be improved, and RMFI conducted the
development of the assay under a collaboration with Chugai;
WHEREAS, Chugai is desirous of marketing such improved Hyaluronic Acid assay kit
worldwide, and RMP is desirous of manufacturing it for export to Japan under the
terms and conditions herein stipulated;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
Article 1. Definition
1.1 "Product" shall mean the Hyaluronic Acid assay developed by Chugai for
quantitation of hyaluronates in human sera, which is currently
manufactured and marketed in Japan by Chugai.
1.2 "Developed Product" shall mean the improved version of Product which was
developed by RMP using RMP's Know-How (defined below, under the
Development and Manufacturing Memorandum.
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1.3 "Patent Rights" shall mean any and all claims made by and all patent
applications and issued patents held by Chugai in the U.S.A. in
connection with the Product, including U.S. Patent No. 5,019,498 issued
on May, 28, 1991, and any and all divisions, continuations,
continuations-in-part, reissues or extensions thereof.
1.4 "Know-How" shall mean the accumulation of skills, processes and
experience, including formulas and specifications, heretofore developed
by RMP pertaining to the REAADS enzyme immunoassay technology,
including, but not limited to, any and all technical information, trade
secrets, test results, studies and analysis, approved vendor list for
any raw materials, preclinical and clinical data, manufacturing data,
formulation or production technology, engineering or assembly methods
and other information necessary or useful in the manufacture, sale and
use of the Developed Product.
1.5 "Affiliate" shall mean and include any individual, corporation,
partnership, limited liability company, joint venture business
association or entity that controls, is controlled by, or is under
common control with the specified party. For purposes of this
definition, "control" shall mean direct or indirect beneficial ownership
of more than fifty percent (50%) of the voting stock or other equity
ownership interest of, and fifty percent (50%) or more interest in the
income of, such entity.
1.6 "Effective Date" shall mean the date as set forth on the first page
hereof, upon which this Agreement shall become effective.
1.7 "Launch Date" shall mean the date upon which the Developed Product is
approved for commercial use in Japan by the Ministry of Health and
Welfare and is officially put into commercial distribution in Japan.
1.8 "Net Sales" shall mean the total invoice or contract price charged by
Chugai or its Affiliates to third parties for the sale of the
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Developed Product, less returns, freight charges, insurance premium and
customary trade discounts actually taken, consumption tax or other taxes
levied and customs duties.
Article 2. Development Fee
Chugai shall compensate RMP pursuant to Article 6.3 hereof in the amount of One
Hundred Fifty Thousand Dollars ($150,000) in full payment for the costs incurred
by RMP in the development of the Developed Product.
Article 3. License to RMP
Subject to the terms and conditions hereinafter set forth, Chugai hereby grants
to RMP a license under the Patent Rights to manufacture the Developed Product
solely for export to Chugai. Such license shall be an exclusive license for ,
period of three (3) years commencing on the Launch Date (the "Three-Year
Period") and shall automatically convert at the end of the Three-Year Period to
a non-exclusive license for the balance of the term of this Agreement; provided,
however, that Chugai may also convert the exclusive license to a non-exclusive
license at any time during the Three-Year Period upon written notice to RMP.
Upon conversion of the exclusive license granted to RMP into a nonexclusive
license, Chugai shall have the rights, pursuant to the license granted to it by
RMP under Article 4 hereof, to manufacture the Developed Product in its
facilities or to have the Developed Product manufactured by any other party.
Chugai shall pay a royalty to RMP in respect of such license equal to three
percent (3%) of its Net Sales of the Developed Product manufactured by a party
other than RMP during the term of this Agreement. In addition, if Chugai elects
to convert the license to a nonexclusive license prior to the end of the
Three-Year Period, Chugai shall pay to RMP, in addition to such three percent
(3%) royalty, a transfer
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fee equal to two percent (2%) of its Net Sales during the Three-Year Period of
the Developed Product manufactured by a party other than RMP, such transfer fee
being intended to compensate RMP for profits that RMP would have realized
through the manufacture of such Developed Product during the entire Three-Year
Period.
Article 4. License to Chugai
Subject to the terms and conditions set forth in Article 3 above, RMP hereby
grants to Chugai an exclusive, perpetual, transferable right and license under
the Know-How to make, use, sell and distribute the Developed Product worldwide
including the right to sublicense.
Article 5. Bulk Material
The bulk materials to be incorporated into the Developed Product may be provided
by Chugai, or be procured by RMP itself if both parties desire so.
Article 6. Purchase and Delivery
6.1 Purchase Orders
All purchase orders and amendments thereto shall be in writing and shall contain
(i) all technical information necessary for RMP to accurately supply the
Developed Product, (ii) quantity, (iii) date of requested delivery, and (iv)
preferred shipping instructions. All such purchase orders shall be deemed
accepted by RMP unless, within one (1) week following receipt of the purchase
order, RMP gives written notice to Chugai of non-acceptance thereof stating the
reasons therefor. Acceptance of purchase orders complying with the terms of this
Agreement may not be withheld by RMP.
6.2 Supply Price
The supply price per kit at which RMP shall sell the Developed Product to Chugai
hereunder ( "Supply Price") shall be negotiated in good faith
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between the parties in view of RMP's cost, Chugai's pricing at the retail level
in Japan and other market conditions. All purchase orders shall be fulfilled at
the Supply Price that is in effect on the date of receipt of the purchase order
by RMP.
The Supply Price shall initially be set by the parties prior to the Launch Date
and shall be adjusted as necessary before December 1 each year, beginning with
the first December 1 following the Launch Date. Such adjusted Supply Price shall
be applied effective January 1 throughout the next calendar year. No adjustment
to the Supply Price shall reflect an increase greater than the rate of increase
in the United States Consumer Price Index - All Urban Consumers, published by
the United States Department of Commerce since the date of the previous
adjustment. The Supply Price shall not exceed twenty-two percent (22%) of
Chugai's retail price in Japan for the Developed Product nor be less than RMP's
fully burdened manufacturing cost plus forty percent (40%).
Should the parties be unable to agree on adjustment of the Supply Price for any
calendar year by December 1 of the prior year, the Supply Price for such prior
year shall continue in effect for the first six (6) months of such following
calendar year. Should the parties remain unable to agree on adjustment of the
Supply Price by June 1, the Supply Price for the last six (6) months of such
year shall be determined by a mutually agreeable conciliator at a mutually
agreeable place.
6.3 Compensation
Notwithstanding the foregoing provisions of this Article 6, in order for RMP to
recover its costs associated with the development of the Developed Product in
accordance with Article 2 hereof, Chugai shall purchase the first ten thousand
(10,000) kits supplied by RMP hereunder at a price per kit equal to the Supply
Price then in effect, as determined pursuant to Article 6.2 hereof, plus Fifteen
Dollars ($15) per kit. If Chugai should elect to utilize a manufacturer for the
Developed Product other than RMP prior to purchasing ten thousand C10,000) kits
from RMP hereunder, Chugai shall satisfy its obligation to RMP in respect of
such development costs by making a lump-sum payment to RMP equal to One Hundred
Fifty Thousand
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Dollars ($150,000) less the aggregate number of kits purchased from RMP times
Fifteen Dollars ($15).
6.4 Invoices
RMP shall invoice Chugai at its address set forth in Article 17.3 below at the
time of each shipment of the Developed Product. Invoices shall not be issued
prior to shipment of all items covered by the invoice. Invoices shall contain
the purchase order number, description of items purchased, price, freight
charges and total. Payment shall be made by Chugai to RMP in US dollars.
6.5 Delivery
RMP shall deliver the Developed Product in accordance with Chugai's shipping
instructions within thirty (30) days following RMP's receipt of Chugai's
purchase order; provided that if the order exceeds by more than 10% the
corresponding six month forecast as provided in Article 6.6, RMP shall have
forty-five (45) days to deliver the requested Developed Product. All the
Developed Product shall be delivered to Chugai in finished and packaged form,
C&F Tokyo International Airport, to the address specified in the applicable
purchase order. RMP shall be responsible for boxing, crating, handling, storage
and all other packaging requirements prior to shipment. Risk of loss shall pass
when the Developed Product are delivered to the carrier in accord with the
Chugai's shipping instructions, and delivery to Chugai shall be considered to
occur at such time. All the Developed Product shall be packed, marked and
otherwise prepared for shipment in a manner which is in accordance with good
commercial practice and adequate to ensure the safe arrival of the Developed
Product.
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If RMP wants to change the scheduled delivery date or the quantity to deliver
which RMP accepted in accordance with the Article 6.1, RMP shall notify Chugai
of the change in writing at least seven (7) days prior to the delivery date
originally scheduled. If, for any reason, other than as expressly provided for
in this Agreement, RMP fails to despatch, without prior notice to Chugai as set
forth hereinabove, all quantities of the Developed Product which Chugai ordered
within five (5) business days after the delivery date originally scheduled, RMP
agrees to pay to Chugai ten percent (10%) of total invoice amount of the order
placed by Chugai.
6.6 Forecasts
Every six (6) months during the term of this Agreement, on or before May 31 and
November 30 of each year, Chugai shall submit to RMP a non-binding forecast of
its estimated requirements of the Developed Product for the corresponding six
(6) month period commencing on the following July 1 and January 1, respectively.
Chugai agrees that all such forecasts shall be prepared in good faith in order
to facilitate RMP's timely manufacture and shipment of the Developed Product in
accordance with the terms and conditions of this Agreement.
6.7 Rejection
All Developed Product shall be subject to inspection and acceptance by Chugai.
In the event that Chugai believes that any of the Developed Product shipped by
RMP to Chugai hereunder do not meet the quality standards and specifications to
be mutually agreed separately in advance of the Launch Date, Chugai shall have
the right to reject such shipment by giving RMP prompt notice thereof. Upon
receipt of any such notice, RMP may at its option obtain samples of the rejected
shipment from Chugai for analysis. At Chugai's option, Chugai may either request
RMP to promptly deliver a new shipment of the Developed Product to replace the
rejected shipment or return the rejected shipment to RMP so that RMP may cure
all defects and deficiencies and deliver the corrected shipment to Chugai within
thirty (30) days after RMP's receipt of such returned shipment. In either event,
RMP shall bear all freight costs in the delivery of the Developed Product
between Chugai and RMP.
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6.8 Quality Assurance
RMP shall strictly adhere to such quality control procedures as may be necessary
to ensure that the Developed Product will be manufactured and perform in
accordance with Chugai's specifications and as may be otherwise necessary to
meet all applicable governmental specifications and requirements for the
manufacture of the Developed Product. RMP shall certify to Chugai with respect
to each such shipment that all such procedures and specifications have been met
and complied with, and shall furnish Chugai with copies of the test results and
other definitive data supporting its certification if requested in writing.
6.9 Labeling and Trademarks
The Developed Product, including labels, packaging and product inserts, shall
bear such trade names, trademarks, designs and logos as may be designated and
supplied by Chugai, subject to the requirements of applicable law.
6.10 Product Warranty
All the Developed Products furnished by RMP to Chugai hereunder shall be
warranted (i) to be manufactured in accordance with applicable product
specifications; (ii) to be manufactured in accordance with good manufacturing
practices as defined by FDA regulations; (iii) to be free from defects in
formulation and manufacture under the normal use and service for which they were
designed; (iv) to be suitable for sale to the public in accordance with the
terms of the Developed Product's labels and inserts; and (v) as to RMP's good
title and conveyance of good title to Chugai; provided, that the foregoing
warranty of good title shall not extend to the defect derived from the Chugai
technology incorporated ir the Developed Product. Such warranties shall run to
Chugai, and its Affiliates, successors, assigns and users of the Developed
Product and shall expressly survive any inspection, delivery, acceptance,
payment, expiration or earlier termination of this Agreement. The warranties of
RMP set forth in this Article 6.10 are the sole and exclusive warranties
provided to Chugai, its successors, assigns and users of the Developed
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Product, and are in lieu of all other warranties, whether written or oral,
implied or statutory. RMP shall not be liable to Chugai for any loss of profits
or other special, indirect or consequential damages suffered by Chugai resulting
from the failure of or a defect in any Developed Product, provided, however,
that no such limitation shall apply with respect to any such damages suffered by
unaffiliated third parties. All the Developed Product labels and product inserts
shall appropriately reflect the product warranties, and limitations thereof,
provided by this Article 6.10. RMP shall not be responsible to Chugai or
Chugai's agents for any breach of warranty hereunder which results solely from
Chugai's willful misconduct or negligence in handling of the Developed Product,
to the extent RMP has theretofore fully disclosed to Chugai the appropriate way
of handling the Developed Product when particular cautions are required in
connection therewith.
6.11 Compliance with Law
RMP shall take all necessary action to comply with all applicable FDA
regulations and other U.S. legal requirements in connection with the manufacture
of the Developed Product. Such obligations shall include, without limitation,
complying with all applicable good manufacturing practices and good laboratory
practices as promulgated under applicable U.S. law, and all other applicable
U.S. federal, state or local low or regulations. Chugai shall have the right
upon reasonable notice to RMP to inspect RMP's manufacturing facilities and
operations and quality control records to review and inspect the manufacture of
the Developed Product, to audit and confirm compliance with the requirements of
this Article 6.11 and to trace production in connection with any recall, product
liability or other problems related to the manufacture. Any such inspection or
right to inspect by Chugai shall in no way relieve RMP of its obligation to
deliver the Developed Product conforming to the terms and specifications set
forth in this Agreement, or Chugai's right to inspect and reject the Developed
Product.
Article 7. Royalty Payments
If any royalty or transfer fee payments shall become payable from Chugai
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to RMP pursuant to Article 3 hereof , Chugai shall remit such payments to RMP,
within ninety (90) days after the close of the calendar quarter to which such
payments relate together with a report of the amount of the Net Sales of the
Developed Product sold by Chugai and its Affiliates, and the amount of royalty
and transfer fee payments due to RMP.
Chugai shall make all payments in the United States Dollars after deduction of
any applicable withholding tax. All amounts due on the Net Sales made in
Japanese Yen shall be converted to United States Dollars on the basis of the
T.T. Selling rate at the Sumitomo Bank in Tokyo on the last business day of the
period for which such payment relates.
Article 8. Assignment
Neither party shall assign this Agreement without the prior written consent of
the other party hereto, except to (i) an Affiliate of such party, (ii) a
transferee of substantially the entire business of such party to which this
Agreement pertains or (iii) a successor to such party by merger or
consolidation. Any assignee shall assume all obligations of its assignor under
this Agreement. No assignment shall relieve any party of responsibility for the
performance of any accrued obligation which such party then has hereunder. This
Agreement shall be binding on and inure to the benefit of the respective
successors and permitted assigns of the parties. Except as expressly provided
herein, no other person shall acquire or have any right under or by virtue of
this Agreement.
Article 9. Confidentiality Requirement
Each party acknowledges that during the course of this Agreement it will become
privy to confidential information of the other party including technology,
business strategy, and other technical, business and financial matters. Each
party further acknowledges that the disclosure of such information to a third
party, or the use of such information for purposes other than the purposes of
this Agreement, would cause irreparable injury to the other party, which injury
might not be compensated for adequately by money damages. Each party accordingly
agrees during the term of this agreement to hold all information provided
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by the other party in strictest confidence and not to disclose any such
information to a third party except as expressly permitted by the other party,
or use such information for any purpose other than the purposes hereof. This
Article shall survive any termination of this Agreement for a period of three
(3) years.
As used herein, the term "confidential information" shall not include
information that (i) is or becomes generally available to the public other than
as a result of disclosure by receiving party, (ii) was available to receiving
party on a nonconfidential basis prior to its disclosure by disclosing party or
(iii) becomes available to receiving party on a nonconfidential basis from a
source other than disclosing party that is not otherwise prohibited from
disclosing such information.
Article 10. Regulatory Matters
10.1 Export/Import Licenses
RMP shall be responsible for obtaining all export licenses or permits required
by the U.S. government for any of the Developed Product and will use its
reasonable business effort to obtain such licenses as expeditiously as possible,
as well as the cost of such licenses and permits. Chugai shall be responsible
for obtaining all licenses and permits required by any governmental authority in
order to import the Developed Product into Japan, as well as the cost of such
licenses and permits. Each party agrees to comply with all applicable laws,
regulations and orders governing the sale, disposition, shipment, import or
export of the Developed Product and maintain in effect all licenses, permits and
authorizations from all government agencies as may be necessary to perform its
obligations hereunder.
10.2 Regulatory Approvals
Chugai shall be responsible for, and shall bear the expense of, filing and
prosecuting any application to obtain the required governmental approvals or
consents necessary to manufacture, test and market the Developed Product in
Japan, RMP shall, however, provide Chugai, at no
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cost to Chugai, with all technical and regulatory documentation and information,
including, without limitation, all clinical data, in RMP's possession or under
its control, or obtainable without unreasonable burden to RMP.
Article 11. Technical Support
RMP shall provide training and technical assistance to Chugai's personnel
necessary for the marketing of the Developed Product. Such technical assistance
and training shall be provided at RMP's facility in Westminster, Colorado, or,
if agreed by the parties, at Chugai's premises. Such technical assistance and
training shall be provided by RMP at no charge to Chugai, except that if the
training is performed at Chugai's premises, Chugai shall reimburse RMP for the
reasonable expenses of RMP's personnel for travel, meals, and lodging upon
submission of documentary evidence thereof. If training is provided at RMP's
facility in Westminster, Colorado, Chugai shall bear all expenses of travel,
meals and lodging for its personnel. All technical assistance and training shall
be performed at times convenient to both parties.
Article 12. Infringement
In the event any claim is brought against RMP or Chugai by any third party
alleging infringement of the third party's patents or other property right for
manufacture, use, or sale of the Developed Product, (a) Chugai will cooperate
with RMP at RMP's cost as reasonably requested by RMP in defense of any such
claims brought against RMP, and (b) RMP will cooperate with Chugai at RMP's cost
in defense of any such claims brought against Chugai.
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Notwithstanding the foregoing, Chugai shall be solely liable for any claim of
infringement involving the Developed Product, which is based solely on Chugai
technology included in the Developed Product, and shall indemnify, defend and
hold harmless RMP from any liability resulting from such claim including
reasonable attorney's fees as incurred, and RMP shall be solely liable for any
claim of infringement involving the Developed Product, which is based solely on
RMP's Know-How, and shall indemnify, defend and hold harmless Chugai from any
liability resulting from such claim including reasonable attorney's fees as
incurred.
Article 13. Shelf Life; Cancellation and Reschedule Changes
13.1 Shelf Life Warranty
RMP warrants that the Developed Product shall have a shelf life, at the time of
receipt by Chugai, of at least eighty percent (80%) of the shelf life stated on
the label or product insert. RMP shall not be liable for any failure to satisfy
the shelf life requirement to the extent such variance is caused by conditions
or events occurring after shipment over which RMP has no control.
13.2 Notices
Should Chugai discover any Developed Product which fails to satisfy the shelf
life warranties contained in Article 13.1, Chugai shall notify RMP in writing
within fifteen (15) business days after such discovery. RMP shall, at Chugai's
election, either refund the portion of the purchase price to Chugai, allocable
to the Developed Product which gives rise to the claim, or correct such defect
by suitable replacement at its own expense. RMP's obligation under this section
shall be conclusively discharged, to the extent permitted under applicable laws,
if RMP does not receive written notification of any defect within fifteen (15)
business days after its discovery.
13.3 Third Party Claims
The provisions of these Articles 13.1 and 13.2 are not applicable to any
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third party claims.
13.4 Cancellation and Reschedule Charges
If, for any reason, other than as expressly provided for in this Agreement,
Chugai (i) cancels all or any part of any order, or (ii) fails to meet any
obligation hereunder, causing cancellation or rescheduling of any order or
portion thereof, or (iii) requests a rescheduling of scheduled shipments of the
Developed Product, and the request is accepted by RMP, Chugai agrees to pay to
RMP the following cancellation/reschedule charges:
CANCELLATION OR RESCHEDULE NOTICE CANCELLATION OR RESCHEDULE
RECEIVED CHARGE
Within 7 days after the date of 20% of invoice amount of the Developed
placing purchase order by Chugai Product not taken
Thereafter up to scheduled delivery 30% of invoice amount of the
Developed Product not taken
The aforementioned charges shall not apply in case that the events described in
the first paragraph of this Article 13.4 are due to events of force majeure as
defined in Article 17.7.
Article 14. Term
Unless earlier terminated by either party, this Agreement shall be effective for
seven (7) years from the Effective Date, and shall be automatically renewed
after the initial term for successive one (l)-year period each unless terminated
by either party as provided in Article 15 hereof.
Article 15. Termination
Either party will have the right to terminate this Agreement if the other
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party; (a) assigns this Agreement or any of these rights hereunder in violation
of the provisions of this Agreement; (b) becomes bankrupt or insolvent; (c)
makes an assignment for the benefit of creditors, or a receiver, trustee in
bankruptcy or similar officer is appointed to take charge of all or part of its
property; or (d) materially breaches its obligations under this Agreement, and
such breach has not been cured within thirty (30) days of written notice thereof
by the non-breaching party. In addition, each party will have the right to
terminate this Agreement at the end of the initial term and of each subsequent
term as provided for in Article 14 above upon six (6) months prior written
notice. The provisions of Articles 4, 6.10, 9, 12, 13.1 and 16 hereof, and the
obligations of the parties to make payments to each other pursuant to any other
provision of this Agreement in respect of transactions accruing prior to the
termination date, shall survive the termination of this Agreement.
Article 16. Arbitration
Any controversy or claim arising under or in relation to this Agreement, except
as otherwise expressly provided below, shall be settled exclusively by
arbitration in accordance with the Intentional Arbitration Rules of the
International Chamber of Commerce (ICC). Arbitration shall take place in Paris,
France. The arbitration shall be conducted in English. The cost incurred by the
arbitration shall be borne equally by the parties except for each attorneys'
fees which shall be borne by each party. The decision of the arbitrators shall
be final and binding on the parties, and judgment upon the award rendered by the
arbitrators may be entered by any court having jurisdiction thereof.
Article 17. General Provisions
17.1 Entire Agreement
This Agreement constitutes the entire agreement between the parties with respect
to the subject matter hereof, and may not be modified unless expressly provided
otherwise herein except by a written agreement or addendum hereto duly signed by
both parties. The terms and conditions of
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this Agreement shall prevail notwithstanding any other terms and conditions on
any order submitted by Chugai.
17.2 Waiver, Etc,
Except where specific time limits are herein provided, no delay on the part of
either party hereto in exercising any power or right hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any power or right
hereunder preclude other or urt er exercise thereof or the exercise of any other
power or right. No waiver, modification or amendment of this Agreement or any
provision hereof shall be enforceable against any party hereto unless in
writing, signed by the party against whom such waiver, modification or amendment
is claimed, and with regard to any waiver, shall be limited solely to the one
event.
17.3 Notices
Any notices or report required or permitted under this Agreement must be in
writing and by mail, registered or certified, postage prepaid addressed to the
other party at address set forth hereinbelow, or to such other address as
designated by written notice given to the other party:
If to RMP: If to Chugai:
Dr. Luis R. Lopez General Manager
President Diagnostics Division
REAADS Medical Products, Inc. Chugai Pharmaceutical Co., Ltd.
12001 Tejon Street, Suite 120 21-1, Nishi-Shinjuku I-Chome
Westminster, Colorado 80234 Shinjuku-ku, Tokyo 160
U.S.A. Japan
17.4 Governing Law
The validity and interpretation of this Agreement shall be governed and
construed according to the laws of the State of Delaware, U.S.A.
17.5 Relationship Created
The parties intend that the relationship between them created by this
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Agreement be that of independent contractors, and nothing in this Agreement
shall be construed as establishing an agency relationship, a joint venture or a
partnership between the parties.
17.6 Authority
Each party hereby represents and warrants that it has full power and authority
to enter into and perform this Agreement, without any governmental approvals,
and that its entering into and performance of this Agreement will not conflict
with any other agreement to which it is party or by which it is bound.
17.7 Force Majeure
Each party shall be relieved of its obligations under this Agreement to the
extent, and only to the extent, that fulfillment of such obligations shall be
prevented by acts of war, labor difficulties, riots, fire, earthquake, flood,
hurricane, windstorm, acts or defaults of common carrier, governmental laws,
acts or regulations, shortages of materials or any other occurrences, whether or
not similar to the foregoing, beyond the reasonable control of the affected
party.
17.8 Headings
The headings of Articles and Sections herein are for convenience of reference
only and shall not affect the meaning or construction of the provisions of this
Agreement.
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IN CONSIDERATION OF the foregoing terms and conditions, Chugai and RMP have
executed this Agreement on the day and year first written above.
REAADS Medical Products, Inc. Chugai Pharmaceutical Co., Ltd.
By /s/ Luis R. Lopez By /s/ Jiro Hada
------------------------------- ----------------------------------
Luis R. Lopez Jiro Hada
President Director and General Manager
Diagnostic Division
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EXHIBIT 10.2
Amendment to the Manufacturing Agreement
This Amendment made and entered by and between REAADS Medical Products, Inc.,
12001 Tejon Street, Suite 120, Westminster, Colorado 80234, U.S.A., and ChugAI
Pharmaceutical Co., Ltd., 1-9 Kyobashi 2-chome, Chuo-ku, Tokyo 104, Japan, to
amend the existing Manufacturing Agreement between the parties dated September
1, 1994 for manufacturing of improved Hyaluronic Acid assay kit as follows:
1. The Article 2 of the Manufacturing Agreement shall be amended in its entirety
to read as follows:
"Chugai shall compensate RMP in the total amount of One Hundred Fifty
Thousand Dollars ($150,000) in two equal installments payment for the
costs incurred by RMP in the development of the Developed Product. The
first installment is due and payable December 1994, and second June
1995."
2. The second paragraph of Article 3 of the Manufacturing Agreement shall be
amended to read as follows:
"Upon conversion of the exclusive license granted to RMP into a
nonexclusive license, Chugai shall have the rights, pursuant to the
license granted to it by RMP under Article 4 hereof, to manufacture the
Developed Product in its facilities or to have the Developed Product
manufactured by any other party. Chugai shall pay a royalty to RMP in
respect of such license equal to three percent (3%) of its Net Sales of
the Developed Product manufactured by a party other than RMP during the
term of this Agreement."
3. The article 6.3 of the Manufacturing Agreement shall be deleted.
In Witness Whereof, the parties hereto have caused this Amendment to be signed
by their respective duly authorized representatives.
REAADS Medical Products, Inc. Chugai Pharmaceutical Co., Ltd.
By: /s/ Luis R. Lopez By: /s/ Jiro Hada
------------------------------- ---------------------------------
Luis R. Lopez, M.D. Jiro Hada
Title: President Title: Director and General Manager
date: January 17, 1995 Date: 22nd December 1994
<PAGE>
EXHIBIT 10.3
AMENDMENT AGREEMENT
This AMENDMENT AGREEMENT is made as of the 17 day of November, 1997.
by and between
Chugai Diagnostics Science Co., Ltd., a Japanese corporation having its
principal office at 3 - 41 - 8 Takada, Toshima-ku, Tokyo, Japan (hereinafter
called "CDS")
and
Reaads Medical Products Inc., a Delaware corporation having its principal office
at 12061 Tejon Street, Westminster, Colorado 80234, USA (hereinafter called
"RMP")
WHEREAS, Chugai Pharmaceutical Co. Ltd., which owns 100% share of CDS,
(hereinafter called the "CSK") and RMP have entered into a Manufacturing
Agreement dated as of September 1st, 1994, providing for manufacturing Developed
Products for export to Japan (hereinafter called the "Original Agreement');
WHEREAS, CSK assigned the Original Agreement to CDS as of the day of October 1,
1997; and
WHEREAS, CDS and RMP desire to amend the Original Agreement to provide that the
export of Products to the third party designated by CDS;
NOW THEREFORE, in consideration of the mutual covenants and promises contained
herein, the parties hereto hereby agree as follows:
1. Definitions
All terms used herein shall have the meanings set forth in the Original
Agreement except as otherwise defined herein.
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2. Amendment
(a) The first paragraph of Article 3 of the Original Agreement is hereby
deleted and a new first paragraph of Article 3 is hereby inserted in its
place to read in its entirety as follows:
Subject to the terms and conditions hereinafter set forth, Chugai hereby
grants to RMP a license under the Patent Right to manufacture the
Developed Product solely for export to Chugai or the third party
designated by Chugai. Such license shall be an exclusive licence for a
period of three (3) years commencing on the Launch Date (the "Three-Year
Period") and shall automatically convert at the end of the Three-Year
Period to a non-exclusive license for the balance of the term of this
Agreement; provided, however, that Chugai may also convert the exclusive
license to a nonexclusive license at any time during the Three-Year
Period upon written notice to RMP.
(b) The first paragraph of Article 6.2 of the Original Agreement is hereby
deleted and a new first paragraph of Article 6.2 is hereby inserted in
its place to read in its entirety as follows:
The supply price per kit at which RMP shall sell the Developed Product
to Chugai or the third party designated by Chugai hereunder ("Supply
Price") shall be negotiated in good faith between the parties in view of
RMP's cost, Chugai's pricing at the retail level in Japan and other
market conditions. All purchase orders shall be fulfilled at the Supply
Price that is in effect on the date of receipt of the purchase order by
RMP.
(c) The first paragraph of Article 6.5 of the Original Agreement is hereby
deleted and I new first paragraph of Article 6.5 is hereby inserted in
its place to read in its entirety as follows:
RMP shall deliver the Developed Product in accordance with Chugai's
shipping instructions within thirty (30) days following RMP's receipt of
Chugai's purchase order; provided that if the order exceeds by more than
10% the corresponding six month forecast as provided in Article 6.6, RMP
shall have forty-five (45) days to deliver the requested Developed
Product. All the Developed Product delivered to
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Chugai shall be delivered in finished and packaged form, C&F Tokyo
International Airport, to the address specified in the applicable
purchase order, and all the Developed Product delivered to the third
patty designated by Chugai shall be delivered in finished and packaged
form, FCA at Denver, to the said third parties' address specified in the
applicable purchase order. RMP shall be responsible for boxing, crating,
handling, storage and all other packaging requirements prior to
shipment. Risk of loss shall pass when the Developed Product are
delivered to the carrier in accord with the Chugai's shipping
instructions, and delivery to Chugai shall be considered to occur at
such time. All the Developed Product shall be packed, marked and
otherwise prepared for shipment in a manner which is in accordance with
good commercial practice and adequate to ensure the safe arrival of the
Developed Product.
(d) Article 6.7 of the Original Agreement is hereby deleted and a new
Article 6.7 is hereby inserted in its place to read in its entirety as
follows:
All Developed Product shall be subject to inspection and acceptance by
Chugai or the-third party designated by Chugai on behalf of Chugai. In
the event that Chugai believes that any of the Developed Product shipped
by RMP to Chugai or the third party designated by Chugai hereunder do
not meet the quality standards and specifications to be mutually agreed
separately in advance of the Launch Date, Chugai shall have the right to
reject such shipment by giving RMP prompt notice thereof. Upon receipt
of any such notice, RMP may at its option obtain samples of the rejected
shipment from Chugai for analysis. At Chugai's option, Chugai may either
request RMP to promptly deliver a new shipment of the Developed Product
to replace the rejected shipment or return the rejected shipment to RMP
so that RMP may cure all defects and deficiencies and deliver the
corrected shipment to Chugai or the third party designated by Chugai
within thirty (30) days after RMP's receipt of such returned shipment.
In either event, RMP shall bear all freight costs in the delivery of the
Developed Product among Chugai, the third party designated by Chugai,
and RMP.
(e) Article 6.10 of the Original Agreement is hereby deleted and a new
Article 6.10 is hereby inserted in its place to read in its entirety as
follows:
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All the Developed Products furnished by RMP to Chugai and the third
party designated by Chugai hereunder shall be warranted (i) to be
manufactured in accordance with applicable product specifications; (ii)
to be manufactured in accordance with good manufacturing practices as
defined by FDA regulations; (iii) to be free from defects in formulation
and manufacture under the normal use and service for which they were
designed; (iv) to be suitable for sale to the public in accordance with
the. terms of the Developed Product's labels and inserts; and (v) as to
RMP's good title and conveyance of good title to Chugai and the third
party designated by Chugai; provided, that the foregoing warranty of
good title shall not extend to the defect derived from the Chugai
technology incorporated in the Developed Product. Such warranties shall
run to Chugai, and its Affiliates, successors, assigns and users of the
Developed Product and shall expressly survive any inspection, delivery,
acceptance, payment, expiration or earlier termination of this
Agreement. The warranties of RMP set forth in this Article 6.10 are the
sole and exclusive warranties provided to Chugai, its successors, users
of the Developed Product, and the third party designated by Chugai, and
are in lieu of all other warranties, whether written or oral, implied or
statutory. RMP shall not be liable to Chugai for any loss of profits or
other special, indirect or consequential damages suffered by Chugai
resulting form the failure of or a defect in any Developed Product,
provided, however, that no such limitation shall apply with respect to
any such damages suffered by unaffiliated third parties. All the
Developed Product labels and product inserts shall appropriately reflect
the product warranties, and limitations thereof, provided by this
Article 6.10. RMP shall not be responsible to Chugai or Chiugai's agents
for any breach of warranty hereunder which results solely from Chugai's
willful misconduct or negligence in handling of the Developed Product,
to the extent RMP has theretofore fully disclosed to Chugai the
appropriate way of handling the Developed Product when particular
cautions are required in connection therewith.
(f) Article 6.11 of the Original Agreement is hereby deleted and a new
Article 6.11 is hereby inserted in its place to read in its entirety as
follows:
RMP shall take all necessary action to comply with all applicable FDA
regulations, other U.S. legal requirements, and UK legal requirement in
connection with the manufacture of the Developed Product. Such
obligations shall include, without limitation, complying with all
applicable good manufacturing practices and good
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laboratory practices as promulgated under applicable U.S. law and UK
law, and all other applicable U.S. federal, state or local law or
regulations, or UK law or regulations. Chugai shall have the right upon
reasonable notice to RMP to inspect RMP's manufacturing facilities and
operations and quality control records to review and inspect the
manufacture of the Developed Product, to audit and confirm compliance
with the requirements of this Article 6.11 and to trace production in
connection with any recall, product liability or other problems related
to the manufacture. Any such inspection or right to inspect by Chugai
shall in no way relieve RMP of its obligation to deliver the Developed
Product conforming to the terms and specifications set forth in this
Agreement, or Chugai's right to inspect and reject the Developed
Product.
(g) Article 13.1 of the Original Agreement is hereby deleted and a new
Article 13.1 is hereby inserted in its place to read in its entirety as
follows:
RMP warrants that the Developed Product shall have a shelf life., at the
time of receipt by Chugai or the third party designated by Chugai, of at
least eighty percent (80%) of the shelf life stated on the label or
product insert. RMP shall not be liable for any failure to satisfy the
shelf life requirement to the extent such variance is caused by
conditions or events occurring after shipment over which RMP has no
control.
(h) Article 13.3 of the Original Agreement is hereby deleted and a new
Article 13.3 is hereby inserted in its place to read in its entirety as
follows:
The provisions of these Articles 13.1 and 13.2 are not applicable to any
third party claims, except the third party designated by Chugai to
deliver Developed Product.
3. Effective Date
This Amendment Agreement shall become effective as of the day and year
first above written.
4. Original Agreement Remains in Full Force and Effect
Except as specifically amended hereby, all the terms and provisions of
the Original Agreement shall remain in full force and effect, and the
Original Agreement as amended by this Amendment Agreement shall, upon
becoming effective in
5
<PAGE>
accordance with Section 3 hereof, read as a single integrated document
incorporating the changes effected by this Amendment Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment Agreement to
be executed by their respective duly authorized representatives as of the, day
and year first written above.
CHUGAI DIAGNOSTICS SCIENCE CO., LTD.
By: /s/ Yoshihito Koike
-------------------------------------
Name: Yoshihito Koike
Title: President and CEO
REAADS MEDICAL PRODUCTS INC.
By: /s/ Luis R. Lopez
-------------------------------------
Name: Luis R. Lopez
Title: President and CEO
6
<PAGE>
EXHIBIT 10.4
DISTRIBUTION AGREEMENT
This Agreement (the "Agreement") is entered into this 26th day of
August, 1993, by and between REAADS Medical Products, Inc., a Delaware
corporation with offices at 12001 Tejon Street, Suite 120, Westminster, Colorado
80234, USA ("RMP") and Chugai Pharmaceutical Co., Ltd., a corporation organized
and existing under the laws of Japan, with offices at 1-9, Kyobashi 2-chome,
Chuo-ku, Tokyo 104, Japan, or one of its affiliated companies ("Chugai").
RECITALS
WHEREAS, RMP is the owner of all rights, title and interest in and to the
"REAADS" enzyme immunoassay product line more particularly described in Article
1.1 hereof (the "Product Line"), including Patent rights (as hereinafter
defined) and/or Know-How (as hereinafter defined) relating thereto, and is
seeking an equity infusion from Chugai, the proceeds of which will be used to
fund research and development of the Vascular Products (as hereinafter defined);
and
WHEREAS, Chugai is engaged in the business of selling and distributing
diagnostic tests and related products in Japan, and desires to obtain from RMP
the rights for distribution of the Product Line in Japan on its own behalf, and
is willing to invest RMP US$500,013 for funding research and development of the
Vascular Products, and desires to purchase such products and sell and distribute
them under Chugai's own label and trademark in Japan; and
WHEREAS, RMP is willing to grant to Chugai the rights to sell and
distribute such products, subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants, representations
and warranties and agreements hereinafter contained, the parties hereto agree as
follows:
AGREEMENT
Article 1. Definitions
1.1 "Product Line" shall mean RMP's Autoimmune Products (defined below)
and Vascular Products (defined below) collectively.
<PAGE>
1.1.1 "Autoimmune Products", which shall mean and include Autoimmune
Disease Detection Products for the determination of analyses useful in the
diagnosis and management of systemic rheumatic and autoimmune disease, which
Products are currently under development or were heretofore developed,
manufactured and/or sold by or on behalf of RMP and are identified in Exhibit A
annexed hereto; and
1.1.2 "Vascular Products", which shall mean and include
Vascular Disease Detection Products for the determination of analyses useful in
the diagnosis of vascular disease, which Products are currently under
development or proposed to be developed and/or sold by or on behalf of RMP
identified in Exhibit B annexed hereto. The list of Products set forth in
Exhibit B may be amended from time to time by mutual agreement of the parties.
1.1.3 "Products" shall mean a group of product(s) Chugai selected
for commercial exploit in Territory in either Autoimmune Products or Vascular
Products.
1.2 "Patent Rights" means any or all patent applications and issued
patents held by RMP in the Territory in connection with the Product Line.
1.3 "Know-How" shall mean the accumulation of skills, processes and
experience, including formulas and specifications, heretofore developed by RMP
pertaining to the Product Line, including, but not limited to, any and all
technical information, trade secrets, test results, studies and analysis,
approved vendor list for any raw materials, preclinical and clinical data,
manufacturing data, formulation or production technology, engineering or
assembly methods and other information necessary or useful in the manufacture,
sale and use of the Product Line.
1.4 "Standard Retail Price" shall mean Chugai's average retail prices of
diagnostic kits in the Territory which generally equals to twenty (20) percent
of the National Health Insurance reimbursement prices for any diagnosis.
1.5 "Territory" shall mean and include Japan.
1.6 "Affiliate" shall mean and include any individual, corporation,
business association or entity that controls, is controlled by, or is under
common control with the specified party. For purposes of this definition,
"Control" shall mean direct or indirect beneficial ownership of more than fifty
percent (50%) of the voting stock or other ownership interest of, and fifty
percent (50%) or more interest in the income of, such entity.
1.7 "Effective Date" shall mean the date as set forth on the first page
hereof.
<PAGE>
Article 2. Sales and Distribution Rights.
2.1 Non-exclusive Rights. Subject to the terms and conditions hereinafter
set forth, RMP hereby grants to Chugai the non-exclusive right to sell and
distribute the Products in Autoimmune Products under Chugai's label and
trademark in the Territory during the term of this Agreement.
2.2 Exclusive Rights. Subject to the terms and conditions hereinafter set
forth, RMP hereby grants to Chugai the exclusive right, with the right to
appoint subdistributors, to sell and distribute the Vascular Products under
Chugai's label and trademark in the Territory during the term of this Agreement.
RMP and Chugai may agree to add new products to Exhibit B during the term of
this Agreement.
2.3 RMP shall not enter into any new agreements for any product in the
Product Line allowing rights to distribution in Japan without prior written
consent of Chugai, except for products which Chugai elects not to commercialize
in Japan as specified in Article 3.2.
Article 3. Selection of Products.
3.1 Review of Projects for Product Development. RMP shall utilize the
investment made by Chugai in the development of Vascular Products. RMP and
Chugai shall review potential projects for such product development on a regular
basis. Chugai's opinion of project importance shall be considered by RMP in the
preparation of priority ranking for RMP's Research and Development schedule.
This review shall occur at least once per year while this Agreement is in
effect, and at least one review shall occur just prior to the preparation of
RMP's annual operating plan and budget. Notwithstanding Chugai's participation
in such reviews, the final decision on incorporation of projects into the RMP
Research and Development program shall be RMP's and shall reflect limitations in
the Research and Development manpower and facility resources.
3.2 Selection of Products for Japanese Market. Chugai shall have the right
to select which Products of the Vascular Products are appropriate for commercial
exploitation in Territory. For product(s) in Vascular Products which Chugai
chooses not to select for commercial distribution in Territory, RMP shall have
the rights to distribute the products in Territory either directly or
indirectly. RMP shall inform Chugai in writing of the availability of a product
before RMP files application of such product to the FDA for approval, and Chugai
shall inform RMP in writing of its acceptance or rejection of such product for
commercial exploitation in Territory within six (6) months after FDA approval
has been received for such product.
<PAGE>
Article 4. Terms and Conditions of Product Sale
4.1 Purchase Orders. All purchase orders and amendments thereto must be in
writing, must reference this Agreement, and should contain (i) all technical
information necessary for RMP to accurately supply the Products, (ii) quantity,
(iii) date of requested delivery, and (iv) preferred shipping instructions. All
such orders are subject to acceptance by RMP and RMP reserves the right not to
accept any purchase order within one (1) week of receipt of the purchase order.
If RMP fails to notify non-acceptance of any order within the aforesaid term by
written notice to Chugai stating the reasons for such non-acceptance, the
purchase order shall be deemed accepted. Acceptance of orders may not be
unreasonably withheld by RMP.
4.2 Prices. The price per unit at which RMP shall sell the Products to
Chugai hereunder shall be negotiated on an annual basis, and will be reflective
of RMP's cost, Chugai's pricing at the retail level in Territory and other
market conditions. The prices for Products purchased hereunder shall be the
prices in effect on the date RMP receives Chugai's purchase order. A price list
in effect until December 1, 1994 is attached as Exhibit A.
The Prices will be adjusted as necessary before December 1 each year,
beginning December 1, 1994, and such adjusted Prices shall be applied for the
next calendar year, provided that the Prices shall not increase by more than the
rate of increase in the United States Consumer Price Index - All Urban
Consumers, published by the United States Department of Commerce. Prices shall
not exceed twenty-five (25) percent of Standard Retail Price for each Product
nor be less than RMP's fully burdened manufacturing cost plus fifty percent
(50%).
Should the parties be unable to agree on adjustment of Prices for the
following calendar year by December 1 of the year before, the Prices of the year
before shall be applied also for the first six (6) months of the following
calendar year. Should the parties be still unable to agree by June 1, the Prices
for the last six (6) months shall be determined by a mutually agreeable
conciliator at a mutually agreeable place.
In any case, RMP shall provide Chugai with pricing no less favorable for
Autoimmune Products than pricing provided by RMP to other companies with
distribution rights to Autoimmune Products in Territory.
4.3 Invoices. RMP shall invoice Chugai at its address set forth below at
the time of each shipment of any Products. Invoices shall not be issued prior to
shipment of all items covered by the invoice. Invoices shall contain the
purchase order number, description of items purchased, price, freight charges
and total. Payment shall be made by Chugai to RMP in US dollars.
<PAGE>
4.4 Delivery. RMP shall deliver such Products in accordance with
Chugai's shipping instructions within thirty (30) days from RMP's receipt of
Chugai's purchase order. All Products shall be delivered to Chugai in finished
and packaged form, C&F Tokyo International Airport, to the address specified in
the applicable purchase order. RMP shall be responsible for boxing, crating,
handling, storage and all other packaging requirements prior to shipment. All
Products shall be packed, marked and otherwise prepared for shipment in a manner
which is in accordance with good commercial practice and adequate to ensure the
safe arrival of the Products.
If RMP wants to change the scheduled delivery date or the quantity to
deliver which RMP accepted in accordance with the Article 4.1, RMP shall notify
Chugai of the change in writing at least seven (7) days prior to the delivery
date originally scheduled. If, for any reason, other than as expressly provided
for in this Agreement, RMP fails to dispatch, without prior notice to Chugai as
set forth hereinabove, all quantities of Products Chugai ordered within five (5)
business days after the delivery date originally scheduled, RMP agrees to pay to
Chugai ten (10) percent of total invoice amount of the order place by Chugai.
4.5 Forecasts. Every six (6) months, on or before May 31 and November 30,
Chugai shall submit a non-binding forecast of its estimated requirements of
Products for the six (6) month periods of July 1 and January 1. Chugai agrees
that all such forecasts shall be prepared in good faith in order to facilitate
RMP's timely manufacture and shipment of the Products in accordance with the
terms of this Agreement. RMP shall provide Chugai with expected availability
dates of new products so that Chugai can include the new products in the
forecast provided to RMP.
4.6 Rejection. All Products shall be subject to inspection and acceptance
by Chugai. In the event that Chugai believes that any of the Products shipped by
RMP to Chugai hereunder do not meet the quality standards and specifications set
forth in this Agreement, Chugai shall have the right to reject such shipment by
giving RMP prompt notice thereof. Upon receipt of any such notice, RMP may at
its option obtain samples of the rejected shipment from Chugai for analysis. At
Chugai's option, Chugai may either request RMP to promptly deliver a new
shipment of the Products to replace the rejected shipment or return the rejected
shipment to RMP so that RMP may cure all defects and deficiencies and deliver
the corrected shipment to Chugai within thirty (30) days after RMP's receipt of
such returned shipment. In either event, RMP shall bear all freight costs in the
delivery of the Products between Chugai and RMP.
4.7 Quality Assurance. RMP shall strictly adhere to the quality control
procedures and specifications for the manufacture and performance of Products or
as may be otherwise necessary to meet applicable governmental specifications for
the manufacture of the Products. RMP shall certify to Chugai with respect to
each such shipment that all such procedures and specifications have been met and
complied with, and shall furnish Chugai with copies of the test results and
other definite data supporting its certification if requested in writing.
<PAGE>
4.8 Labeling and Trademarks. The Products shall bear such trade names,
trademarks, designs and logos as may be designated and supplied by Chugai,
subject to the requirements of applicable law.
4.9 Product Warranty. All Products furnished by RMP to Chugai hereunder
shall be warranted (i) to be manufactured in accordance with applicable product
specifications; (ii) to be manufactured in accordance with good manufacturing
practices (as defined by FDA regulations); (iii) to be free from defects in
formulation and manufacture under the normal use and service for which they were
designed; (iv) to be suitable for sale to the public in accordance with the
terms of the Products' labels and inserts; and (v) as to RMP's good title and
conveyance of good title to Chugai. Such warranties shall run to Chugai, and its
successors, assigns and users of the Products and shall expressly survive any
inspection, delivery, acceptance, payment, expiration or earlier termination of
this Agreement. Except as set forth in Article 10 the warranties of RMP set
forth in this Article 4.9 are the sole and exclusive warranties provided to
Chugai, its successors, assigns and users of the Products, and are in lieu of
all other warranties, whether written or oral, implied or statutory. RMP shall
not be liable to Chugai for any loss of profits or other special, indirect or
consequential damages suffered by Chugai resulting from the failure of or a
defect in any Product, provided, however, that no such limitation shall apply
with respect to any such damages suffered by unaffiliated third parties. All
Product labels shall appropriately reflect the product warranties, and
limitations thereof, provided by this Article 4.9. RMP shall not be responsible
to Chugai or Chugai's agents for any breach of warranties hereunder which
depends solely upon Chugai's willful misconduct or negligence in handling of the
Products, to the extent RMP has theretofore fully disclosed to Chugai the
appropriate way of handling the Products when particular cautions are required
in connection therewith.
4.10 Compliance with Law. RMP shall take all necessary action to comply
with all applicable FDA and other regulatory requirements in connection with the
manufacture of Products. Such obligations shall include, without limitation,
complying with all applicable good manufacturing practices and good laboratory
practices as promulgated under applicable U.S. law, and any material state or
local law or regulation applicable to the manufacture of Products hereunder.
Chugai shall have the right upon reasonable notice to RMP to inspect RMP's
manufacturing facilities and operations and quality control records to review
and inspect the manufacture of Products, to audit and confirm compliance with
the requirements of this Article 4.10 and to trace production in connection with
any recall, product liability or other problems related to the manufacture. Any
such inspection or right to inspect by Chugai shall in no way relieve RMP of its
obligation to deliver Products conforming to the terms and specifications set
forth in this Agreement, or Chugai's right to inspect and reject Products.
4.11 Insurance. RMP shall at all times maintain product liability
insurance, insuring against losses arising out of the manufacture and use of the
Products and all components thereof, naming Chugai as an additional insured
under such policy of insurance. The liability of such policy shall be no less
than Two Million Dollars ($2,000,000) for each occurrence. RMP agrees that it
shall provide within sixty (60) days of execution of this Agreement, a
certificate of insurance evidencing the existence of such insurance and
confirmation of the fact that Chugai is listed as an additional insured.
<PAGE>
Article 5. Assignment
5.1 Assignment. Neither party shall assign this Agreement without the
prior written consent of the other party hereto, except to (i) an Affiliate of
such party, (ii) a transferee of substantially the entire business of such party
to which this Agreement pertains or (iii) a successor to such party by merger or
consolidation, in connection with the transfer or sale of substantially its
entire business to which this Agreement pertains, or in the event of its merger
or consolidation with another company. Any assignee shall assume all obligations
of its assignor under this Agreement. No assignment shall relieve any party of
responsibility for the performance of any accrued obligation which such party
then has hereunder. This Agreement shall be binding on and inure to the benefit
of the respective successors and permitted assigns of the parties. Except as
provided herein, no other person shall acquire or have any right under or by
virtue of this Agreement.
5.2 License to Manufacture. In the event that a change in control of RMP
occurs without Chugai's approval, including, but not limited to, the merger or
consolidation with a third party company, RMP will grant to Chugai a perpetual,
non-exclusive for Autoimmune Products, exclusive for Vascular Products, license
under the Patent Rights and/or the Know-How to make, use and sell the assays in
the Product Line in Territory, and Chugai shall pay to RMP royalty of three (3)
percent on the net sales of Product Line sold by Chugai in Territory.
Chugai shall have the royalty-free right to utilize RMP's Patent Right
and/or Know-How, if for any reason RMP ceases or suspends performance of its
obligations under this Agreement (i) in connection with the manufacture of
Products or (ii) to complete any development effort with respect to Vascular
Products.
5.2.1 Right to Sublicense. In the event that RMP grants Chugai a
license to Manufacture, Chugai shall be entitled to sublicense the rights
conferred upon it under Article 5.2, but only to the extent necessary to allow
third parties to manufacture the Products for and on behalf of Chugai or an
affiliate, and provided that (i) Chugai should give RMP or its assignee thirty
(30) days prior written notice before any such sublicense shall become
effective; (ii) any such sublicense shall be subject in all respects to the
restrictions, exceptions and provisions contained in this Agreement; (iii) no
such sublicense shall relieve Chugai of its obligations hereunder; and (iv)
Chugai and each such sublicensee shall execute documents to the foregoing
effort, a copy of which will be furnished to RMP or its assignee promptly after
execution and delivery.
<PAGE>
Article 6. Performance Standards
6.1 Diligent Efforts. At all times during the term of this Agreement,
Chugai will use its commercially diligent efforts to market the Products in
Territory and will not perform any acts that might jeopardize the reputation of
the Products or of RMP in Territory.
6.2 Confidentiality. Chugai acknowledges that during the course of this
Agreement it will become privy to confidential information of RMP concerning RMP
itself, RMP's business strategy, and other technical, business and financial
matters. Chugai further acknowledges that the disclosure of such information to
a third party, or the use of such information for purposes other than the
purposes of this Agreement, might cause irreparable injury to RMP, which injury
might not be compensated for adequately by money damages. Chugai accordingly
agrees to hold all such information so designated by RMP in strictest confidence
and not to disclose any such information to a third party except as expressly
permitted by RMP, or use such information for any purpose other than the
purposes hereof. This Article shall survive any termination of this Agreement
for a period of three (3) years.
As used herein, the term "confidential information" shall not include
information that (i) is or becomes generally available to the public other than
as a result of disclosure by Chugai, (ii) was available to Chugai on a
nonconfidential basis prior to its disclosure by RMP or (iii) becomes available
to Chugai on a nonconfidential basis from a source other than RMP that is not
otherwise prohibited from disclosing such information.
6.3 Promotion of Product Awareness. Chugai shall bear all expenses for
marketing and promoting Products in Territory.
6.4 Licenses and Permits. RMP shall be responsible for obtaining all
export licenses required by the U.S. government for any of the Products and will
use its best effort to obtain such licenses as expeditiously as possible, as
well as the cost of such licenses and permits. Chugai shall be responsible for
obtaining all licenses and permits required by any governmental authority in
order to import a Product into Territory, as well as the cost of such licenses
and permits. Each party agrees to comply with all applicable laws, regulations
and orders governing the sale, disposition, shipment, import or export of the
Products and maintain in effect all licenses, permits and authorizations from
all government agencies as may be necessary to perform its obligations
hereunder.
<PAGE>
Article 7. Regulatory Compliance
7.1 U.S. Regulatory Approvals. RMP, at its own expense, shall exercise
best efforts with respect to all currently non-FDA approved assays in the
Product Line, to diligently prepare, file and prosecute all necessary
applications as soon as possible to obtain 510(k) approval from the FDA for the
commercial manufacture, use and sale of each such product in the United States,
including, without limitation, submission of all necessary reports, responses to
requests for information, data, samples, test and the like, and the exhaustion
of all administrative remedies available in instances of adverse action by the
regulatory authorities. Subject to the confidentiality provisions of Article
6.2, Chugai shall be given access to all underlying data, reports and summaries
upon which any such applications for FDA approval have been based.
7.2 Japanese Regulatory Approvals. Chugai shall be responsible for, and
shall bear the expense of, filing and prosecuting any application to obtain the
required governmental approvals or consents necessary to manufacture, test and
market Products in Territory. RMP shall, however, provide Chugai, at no cost to
Chugai, with all technical and regulatory documentation and information
(including, without limitation, all clinical data) in RMP's possession or under
its control, or obtainable without unreasonable burden to RMP.
7.3 Customer Complaints. Each party shall immediately notify the other
party in writing should it become aware, through customer complaint or
otherwise, of any defect or condition which may render Products in violation of
law or FDA and/or Japanese equivalent regulations.
Article 8. Technical Support
8.1 Technical Assistance and Training. RMP shall provide training and
technical assistance to Chugai's personnel necessary for the marketing of the
Products. Such technical assistance and training shall be provided at RMP's
facility in Westminster, Colorado, or, if agreed by the parties, at Chugai's
premises. Such technical assistance and training shall be provided by RMP at no
charge to Chugai, except that if the training is performed at Chugai's premises,
RMP's personnel shall be entitled to receive their reasonable expenses of
travel, meals, and lodging upon submission of documentary evidence thereof. If
training is provided at RMP's facility in Westminster, Colorado, Chugai's
personnel shall bear their own expenses of travel, meals and lodging. All
technical assistance and training shall be performed at times convenient to both
parties.
<PAGE>
8.2 Sales Aids. RMP shall provide Chugai with minimum amounts of sample,
sales and promotional material and technical literature developed by it with
respect to the Products. All such material shall be furnished by RMP in English.
Any translations of such material into a language other than English shall be
Chugai's responsibility and expense, but RMP shall be provided with a copy of
such translation. RMP shall have the right at all reasonable times to inspect
and approve all materials, including advertising and packaging, used to sell the
Product where such materials employ the RMP's or a subsidiary's patents, pending
patents, or the servicemark REAADS.
8.3 Manuals. RMP shall provide Chugai on a current basis with instructions
and manuals in English relating to the Products.
Article 9. Intellectual Property
9.1 Right of Use. RMP hereby grants to Chugai the right to use any
trademarks, trade names, service marks, copyrights, logos or labels of RMP
relating to the Products in connection with its marketing and sales of Products
under this Agreement. Chugai will not acquire ownership in such marks, or trade
names, copyrights, logos or labels by virtue of such use.
9.2 Infringement. In the event Chugai becomes aware of any infringement by
any third party of any trademarks, copyrights, patents or other property rights
of RMP, Chugai will promptly notify RMP of such infringement and will cooperate
with RMP as reasonably requested by RMP and at the expenses of RMP in taking
steps to end such infringement.
In the event any claim is brought against RMP or Chugai by any third party
alleging infringement of the third party's patents or other property right for
manufacture, use, or sale of Products, (a) Chugai will cooperate with RMP at
RMP's cost as reasonably requested by RMP in defense of any such claims brought
against RMP, and (b) RMP will cooperate with Chugai at RMP's cost in defense of
any such claims brought against Chugai. Chugai shall be reimbursed by RMP for
any damages paid by Chugai as a result of such claims.
<PAGE>
Article 10. Shelf Life Warranty; Cancellation and Reschedule Changes
10.1 Shelf Life Warranty. RMP warrants that the Products shall have a
shelf life, at the time of receipt by Chugai, of at least 80% of the shelf life
stated on the label or Product insert. RMP shall not be liable for any failure
to satisfy the shelf life requirement to the extent such variance is caused by
conditions or events occurring after shipment over which RMP has no control.
10.2 Notice. Should Chugai discover any Product which fails to satisfy the
shelf life warranties contained in Article 10.1., Chugai shall notify RMP in
writing within fifteen (15) business days after such discovery. RMP shall, at
Chugai's election, either refund the portion of the purchase price to Chugai,
allocable to the Product which gives rise to the claim, or correct such defect
by suitable replacement at its own expense. RMP's obligation under this section
shall be conclusively discharged, to the extent permitted under applicable laws,
if RMP does not receive written notification of any defect within fifteen (15)
business days after its discovery.
10.3 Third Party Claims. The provisions of this Article 10.1. and
Article 10.2. are not applicable to any third party claims.
10.4 Cancellation and Reschedule Charges. If, for any reason, other than
as expressly provided for in this Agreement, Chugai (i) cancels all or any part
of any order, or (ii) fails to meet any obligation hereunder, causing
cancellation or rescheduling of any order or portion thereof, or (iii) requests
a rescheduling of scheduled shipments of Products, and the request is accepted
by RMP, Chugai agrees to pay to RMP the following cancellation/reschedule
charges:
CANCELLATION OR RESCHEDULE CANCELLATION OR RESCHEDULE
NOTICE RECEIVED CHARGE
Within 7 days after the date of
placing purchase order by Chugai 20% of invoice amount of Product not taken
Thereafter up to scheduled delivery 30% of invoice amount of Product not taken
The aforementioned charges shall not apply in case that the events described in
the first paragraph of this Article 10.4 are due to events of force majeure as
defined in Article 16.7.
<PAGE>
Article 11. Effective Date and Term
This Agreement shall become effective upon its execution by both parties
on the Effective Date. Unless earlier terminated by either party, this Agreement
shall be effective for seven (7) years from the Effective Date, and shall be
automatically renewed after the initial term for successive one (1)-year period
each unless terminated by either party as provided in Article 12 hereof.
Article 12. Termination
Either party will have the right to terminate this Agreement if the other
party: (a) assigns this Agreement or any of these rights hereunder in violation
of the provisions of this Agreement; (b) becomes bankrupt or insolvent; (c)
makes an assignment for the benefit of creditors, or a receiver, trustee in
bankruptcy or similar officer is appointed to take charge of all or part of its
property; (d) materially breaches its obligations under this Agreement, and such
breach has not been cured within thirty (30) days of written notice thereof by
the non-breaching party; (e) notwithstanding the foregoing each party will have
the right to terminate this Agreement at the end of the initial term and of each
subsequent term as provided for in Article 11 above by six (6) months prior
written notice.
Notwithstanding the non-exclusive license to manufacture granted to Chugai
as set forth in the Article 5.2, Chugai may terminate this Agreement within
ninety (90) days of written notice in the event there is a significant change in
the control of RMP or in the event of the departure of any director, officer or
other staff of RMP that might be perceived as having a significant negative
impact on the business. Information referring to the above events should be
given to Chugai within fourteen (14) days from such event, and Chugai should
communicate its intentions to RMP within thirty (30) days.
Article 13. Rights and Obligations Upon Termination
In the event of termination of this Agreement for any reason, Chugai shall
cease all use of any trademarks, trade names or other rights licensed hereunder,
and shall return to RMP all sales or promotional material, and all manuals,
instructions and other material relating to the Products which Chugai then has
in its possession, except for copies of manuals and instructions needed to
accompany Products already sold on the termination date or to be sold in
connection with the termination of the distributorship, or if the materials
belong to Chugai.
<PAGE>
Chugai shall not, at any time thereafter, permit the trademarks, trade
names, or other rights to be used in any manner in connection with any business
conducted by it, or in which it may have an interest, or otherwise as
descriptive of or referring to the Products. RMP shall fulfill any orders for
Products placed by Chugai prior to the date of termination. RMP's sole liability
in case of termination shall be to repurchase Chugai's inventory at the prices
set forth in the last applicable purchase order to the extent the same has not
been sold within three (3) months from the termination date. RMP shall not be
obligated to compensate Chugai for any investments made by Chugai or any
goodwill built up by Chugai, or for any losses or damages of whatever nature
incurred by Chugai as a result of such termination. Chugai hereby expressly
assumes all risk for such investments and losses.
Article 14. Arbitration
Any controversy or claim arising under or in relation to this Agreement,
except as otherwise expressly provided below, shall be settled exclusively by
arbitration in accordance with the International Arbitration Rules of the
International Chamber of Commerce (ICC). Arbitration shall take place in Paris,
France. The arbitration shall be conducted in English. The cost incurred by the
arbitration shall be borne equally by the parties except for each attorneys'
fees which shall be borne by each party. The decision of the arbitrators shall
be final and binding on the parties, and judgment upon the award rendered by the
arbitrators may be entered by any court having jurisdiction thereof.
Article 15. Indemnification and Settlement
If RMP wishes to settle a case for which Chugai is liable for
indemnification, RMP shall first obtain the written approval of the Chugai.
Article 16. General Provisions
16.1 Entire Agreement. This Agreement, including the Exhibits, constitutes
the entire agreement between the parties with respect to the subject matter
hereof, and may not be modified (unless expressly provided otherwise herein)
except by a written addendum duly signed by both parties. The terms and
conditions of this Agreement shall prevail notwithstanding any other terms and
conditions on any order submitted by Chugai.
<PAGE>
16.2 Waiver, Etc. Except where specific time limits are herein provided,
no delay on the part of either party hereto in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any power or right hereunder preclude other or further exercise
thereof or the exercise of any other power or right. No waiver, modification or
amendment of this Agreement or any provision hereof shall be enforceable against
any party hereto unless in writing, signed by the party against whom such
waiver, modification or amendment is claimed, and with regard to any waiver,
shall be limited solely to the one event.
16.3 Notices. Any notices or report required or permitted under this
Agreement must be in writing and by mail, registered or certified, return
receipt requested, postage prepaid addressed to the other party at address set
forth hereinbelow, or to such other address as designated by written notice
given to the other party:
If to RMP: If to Chugai:
Dr. Luis R. Lopez General Manager
President Diagnostics Division
REAADS Medical Products, Inc. Chugai Pharmaceutical Co., Ltd.
12001 Tejon Street, Suite 120 21-1, Nishi-Shinjuku 1-Chome
Westminster, Colorado 80234 Shinjuku-ku, Tokyo 160
U.S.A. Japan
16.4 Governing Law. The validity and interpretation of this Agreement
shall be governed and construed according to the laws of the State of Colorado,
U.S.A.
16.5 Relationship Created. Nothing in this Agreement shall be construed as
establishing an agency, joint venture or partnership between the parties. Chugai
is an independent contractor, and shall have sole responsibility for its
employees, even while such employees are receiving training at RMP's facility.
16.6 Authority. Each party hereby represents and warrants that it has full
power and authority to enter into and perform this Agreement, without any
governmental approvals, and that its entering into and performance of this
Agreement will not conflict with any other agreement to which it is party or by
which it is bound.
16.7 Force Majeure. Each party shall be relieved of its obligations under
this Agreement to the extent that fulfillment of such obligations shall be
prevented by acts of war, labor difficulties, riots, fire, earthquake, flood,
hurricane, windstorm, acts or defaults of common carrier, governmental laws,
acts or regulations, shortages of materials or any other occurrences, whether or
not similar to the foregoing, beyond the reasonable control of the affected
party.
<PAGE>
16.8 Headings. The headings of Articles and Sections herein are for
convenience of reference only and shall not affect the meaning or construction
of the provisions of this Agreement.
IN CONSIDERATION OF the foregoing terms and conditions, Chugai and RMP
have executed this Agreement on the day and year first written above.
ATTEST: REAADS Medical Products, Inc.
/s/ Leland P. Snyder
- -------------------------------- By /s/ Luis R. Lopez
Secretary (SEAL) ------------------------------------
Luis R. Lopez, M.D.,
President
ATTEST: Chugai Pharmaceutical Co., Ltd.
/s/ Akira Nagata
- --------------------------------- By /s/ Jiro Hada
Secretary (SEAL) ------------------------------------
Jiro Hada, Director/General Manager
Diagnostics Division
<PAGE>
EXHIBIT A
Autoimmune Disease Detection Products
Product Proposed Transfer Price (USD)
(per 96-well test kit)
IgM-RF $ 90.00
Anti-dsDNA $ 90.00
Anti-Sm $ 90.00
Anti-ENA (Sm/RNP Complex) $ 90.00
IgG/IgM anti-cardiolipin $ 90.00
IgA anti-cardiolipin $ 90.00
ANA $130.00
Anti SSA/SSB Not yet determined
Anti Scl-70 Not yet determined
Anti Histones Not yet determined
<PAGE>
EXHIBIT B
Vascular Disease Detection Products
Anti-endothelial cell antibodies
Anti-neutrophil cytoplasmic antibody
Anti-phosphatidyl serine
Anti-protamine
Antithrombin III
Antitrophoblastic antigen
Beta 2 glycoprotein I antibody
Heparin Cofactor II
Lp(a)
Lupus anticoagulant
Oxidized LDL antibodies
Plasminogen
Plasminogen activator inhibitor - I
Protein C
Protein S
Thrombomodulin
Tissue plasminogen activator
<PAGE>
EXHIBIT C
Existing OEM Relationships with Japanese sales rights
Company Approximate Transfer Price
(per 96-well test kit)
Sanofi Diagnostics Pasteur (US) $110.00
Biopool (US) $150.00
IDS (UK) $ 95.00 (Bulk)
Schiapparelli (Italy) $127.00
Chromogenix (Sweden) $127.00
Sigma (US) $100.00 (Bulk)
<PAGE>
EXHIBIT D
INTERNATIONAL DISTRIBUTION SALES POLICY
TO ORDER Send order to: REAADS Medical Products, Inc.
12001 Tejon Street - Suite 120
Westminster, CA 80234
U.S.A.
Or Telefax t303-457-4519
Telephone: 303-457-4345
MINIMUM ORDER 25 units of any kit, or any combination of kits.
PRICES List prices are in U.S. Dollars, C & F Tokyo. Unless
otherwise agreed upon by REAADS Medical Products, Inc., and
ordering party, all sales are made on C & F basis (as
defined in Incoterms, I.C.C. Publication No. 350).
PAYMENT Sixty (60) day net. Payment will be made by direct wire
transfer to:
Norwest Bank of Denver
1700 Broadway
Denver, Colorado 80217
Telephone: (303) 863-6300
Routing No.: REAADS Medical Products, Inc.
1020 0007 6
Instruct to further credit to:
Norwest Bank of Broomfield
#2 Garden Center
Broomfield, Colorado 80020
Telephone: (303) 466-1801
Account No.: REAADS Medical Products Inc.
#187 0003074
If payment is made via letter of credit, the distributor must request
REAADS's instructions for letters of credit.
SHIPPING Via air freight. Shipments go refrigerated. Kits can
remain in original packaging for only 48 hours. Please
indicate if a Customs Broker should be notified.
RETURNED GOODS No unauthorized returns will be accepted.
WARRANTY There are no warranties which extend beyond the description
and directions set forth on the labeling of our products.
<PAGE>
EXHIBIT 10.5
AMENDMENT TO THE DISTRIBUTION AGREEMENT
BY AND BETWEEN
CHUGAI PHARMACEUTICAL CO., LTD.
AND
REAADS MEDICAL PRODUCTS, INC.
DATED SEPTEMBER 27, 1993
Chugai Pharmaceutical Co., Ltd. ("Chugai") and REAADS Medical Products, Inc.
("RMP") hereby mutually agree to amend the Distribution Agreement dated
September 27, 1993, ("Original Agreement") involving the grant of certain
license and distribution rights to Chugai by RMP, as follows:
1. Amendment of the Assignment
Delete one of doubled phrases starting with "in connection with" and ending with
"to which this Agreement pertains,' in the fourth to sixth line of Article 5,
Section 5.1.
2. Amendment of the License to Manufacture
The first paragraph of Article 5, Section 5.2 is amended as follows:
5.2 License to Manufacture. In the event that a ,change in control of
RMP occurs without Chugai's approval, including, but not limited to, the merger
or consolidation with a third party company, RMP will grant to Chugai a
perpetual, non-exclusive for Autoimmune Products, perpetual, exclusive for
Vascular Products, license under the Patent Rights and/or the Know-How to make,
use and sell the assays in the Product Line in Territory, and Chugai shall pay
to RMP royalty of three (3) percent on the net sales of Product line sold by
Chugai in Territory.
-1-
<PAGE>
3. Miscellaneous
Except as expressly amended herein, all other terms of the Original Agreement
shall remain unchanged.
AGREED TO AND ACCEPTED, effective as of August 29, 1994:
Chugai Pharmaceutical Co., Ltd.
/s/ Jiro Hada
- ----------------------------------
Jiro Hada Date: August 29, 1994
Director and General Manager
Diagnostic Division
REAADS Medical Products, Inc.
/s/ Luis R. Lopez
- ----------------------------------
Luis R. Lopez , M.D. Date: 9/7/94
President
-2-
<PAGE>
EXHIBIT 10.6
DISTRIBUTION AGREEMENT
BETWEEN
CHUGAI DIAGNOSTICS SCIENCE CO., LTD
AND
REAADS BIO-MEDICAL PRODUCTS (UK) LTD
<PAGE>
DISTRIBUTION AGREEMENT
BETWEEN
CHUGAI DIAGNOSTICS SCIENCE CO., LTD
AND
REAADS BIO-MEDICAL PRODUCTS (UK) LTD
<PAGE>
CONTENTS
Clause Heading
1. INTERPRETATION
2. APPOINTMENT
3. SUPPLY OF THE PRODUCT
4. PRICE AND PAYMENT
5. THE DISTRIBUTOR'S OBLIGATIONS
6. THE SUPPLIER'S RIGHTS AND OBLIGATIONS
7. GUARANTEE
8. WARRANTY AND LIABILITY
9. INDEMNITY
10. INTELLECTUAL PROPERTY
11. CONFIDENTIALITY
12. TERMS AND TERMINATION
13. CONSEQUENCES OF TERMINATION
14. FORCEMAJEURE
15. ASSIGNMENT AND SUB-CONTRACTORS
16. MISCELLANEOUS
17. NOTICES
18. GOVERNING LAW AND JURISDICTION
<PAGE>
THIS AGREEMENT is made the 17th day of November, 1997.
BETWEEN
(1) Chugai Diagnostics Science Co., LTD. ("the Supplier") a company
incorporated in Japan whose principal office is at 3-41-8 Takada,
Toshima-ku, Tokyo, Japan.
(2) Reaads Bio-Medical Products (UK) LTD. ("the Distributor") a company
incorporated in United Kingdom whose registered office is at 75 Beoadway,
Peterborough, Pel 1st, UK.
WHEREAS:
(A) The Supplier and Reaads Medical Products, Inc., a Delaware corporation
having a principal place of business at 12061 Tejon Street, Suite 120,
Westminster, Colorado 80234, USA ("RMP"), which owns 100% share of
Distributor, entered into a Manufacturing Agreement ("the Original
Agreement") as of the day of September 1, 1994
(B) RMP manufactures the Products (as defined), and the Supplier import the
Products from RMP and sell the Products in Japan
(C) The Supplier wishes to appoint the Distributor as a distributor of certain
products within the Territory (as defined)
(D) The Distributor has agreed so to act on the terms and conditions set out
below.
NOW, THEREFORE, in consideration of the premises and mutual agreements contained
herein, the parties hereto mutually agree as follows:
1. INTERPRETATION
1.1 In this Agreement the following words and expressions shall bear the
following meaning:
"Contract Year": the 24 month period commencing on the commencement date
set out in Clause 12.1 and each subsequent one year anniversary thereof.
"Products": Products shall mean those items as specified in Schedule A
attached hereto, as amended from time to time by mutual agreement in
writing, and as described in the Patent No. 283779 filed on September 11,
1991 in United Kingdom.
"Territory": The territory to which this Agreement applies shall be
limited to United Kingdom.
<PAGE>
"Associated Companies": Associated companies mean any corporation,
partnership or other entity directly or indirectly owned by, owning, or
under common ownership with the parties hereto at last 50% of its share
having the power to vote for the election of directors.
2. APPOINTMENT
2.1 The Supplier hereby appoints the Distributor to act as its exclusive
distributor for the distribution and resale of the Products throughout the
Territory subject to the terms of this Agreement.
2.2 The Distributor shall for the duration of this Agreement:
(a) not manufacture or distribute goods which compete with any of the
Products and for the sake of clarity competitive products will be
products with similar functions or being able to be used as substitute
or alternative to the Products;
(b) obtain the Products for resale only from the Supplier;
(c) not seek customers for nor establish any branch nor maintain a
distribution depot for the sale of the Products outside the Territory.
2.3 Without prejudice to Clause 2.1, the Supplier shall not appoint any other
person as distributor of the Products in the Territory nor supply the
Products to any other person in the Territory whether for use or resale
nor itself sell the Products in the Territory other than to the
Distributor.
3. SUPPLY OF THE PRODUCT
3.1 The Distributor shall order the Products in writing specifying order
details such as quantity/place of delivery/delivery instructions/price
code of product, etc. No order shall become binding until accepted by the
Supplier. The confirmation of the order will be made by any means
available to Supplier by fax.
3.2 The Distributor shall at quaterly intervals notify the Supplier of its
estimated requirement for the Products for the following 6 months and
shall give the written tentative order before 60 days and the written
firm order before 30 days to the Supplier.
3.3 The Supplier shall use all reasonable efforts to supply the Products to
the Distributor within 45 days of the order, FCA at Denver and in
accordance with the Distributor's orders.
<PAGE>
3.4 Each order for the Products shall once accepted by the Supplier constitute
a separate contract and any default by the Supplier in respect of an order
shall not affect this Agreement or any other orders placed under it.
3.5 All supply of the Products to the Distributor hereunder shall be subject to
the Supplier's standard form terms and conditions of supply as amended and
notified to the Distributor from time to time. Where there is any conflict
between the terms hereof and the Supplier's standard terms and conditions
of supply the terms hereof shall prevail.
4. PRICE AND PAYMENT
4.1 The prices of the Products for the Distributor subject to any agreed
reductions or discounts shall be those specified in the Schedule
attached hereto, excluding VAT and any other sales or similar tax
which shall be added thereto if and to the extent applicable from time
to time. However the Supplier and the Distributor shall annually agree
on the increase or decrease in the prices for the Products according
to market conditions, the margins and the growth of the sector. If the
adjusted prices are not agreed, the prices shall be the prices
currently in force adjusted by the amount by which the Hyaluronic Acid
Retail price changes. The adjustment in the prices for the Products
shall come into force on 1 January each year.
4.2 All duties, taxes or other charges relating to the importation of the
Products into the Territory shall be borne and paid by the
Distributor.
4.3 The Supplier shall issue an invoice for each order for the Products to
be delivered. The original invoice shall be sent to the Distributor.
4.4 Payment for the Products shall be made within 45 days of receipt of
invoice. Any overdue amount will be charged with an interest rate
equivalent to 10% annually.
4.5 Payment shall be made in Japanese YEN((Y)) by bank transfer to the
bank account designated by Supplier.
4.6 It is understood by the parties hereto that time for payment of sums
due shall be of the essence. In addition to any other rights and
remedies the Supplier may have, where any sums have fallen due to the
Supplier and are unpaid by the Distributor.
(a) the Supplier shall be entitled to suspend further deliveries to
the Distributor until all outstanding sums are paid; and
<PAGE>
(b) all sums involved by the Supplier to the Distributor (whether
or not outstanding) shall become immediately due and payable
in full.
4.7 If in any Contract Year the Distributor fails to purchase from the
Supplier and pay for in full at least the Quantity of Products shown
below for the Contract Year in question (The Minimum Purchase Order)
then, the Supplier shall be entitled on giving twenty days written
notice to the Distributor, to be served within three months of the
end of the Contract Year in question, to terminate this agreement
forthwith in which case the provisions of Clause 13 shall apply.
Contract Year Minimum Purchase Order per year
1st year 100kits
2nd year 200kits
In the fourth and subsequent years the Minimum Purchase Order shall be
increased by the Supplier in respect of the previous year in consultation
with the Distributor.
Any purchase amount exceeding the yearly Minimum Purchase Order can be set
off or credited by the Distributor against the Minimum Purchase Order for
the following year.
5. THE DISTRIBUTOR'S OBLIGATIONS
5.1 The Distributor shall:
(a) use its best endeavors to maximize sales of the Products in all
parts of the Products in all parts of the Territory;
(b) advertise the Products within the Territory;
(c) employ staff having adequate training in the promotion,
distribution, sale and servicing of the Products;
(d) maintain an adequate sales network and such other staff as may be
required to promote and sell the Products and ensure that
customers are given proper instructions and information
concerning the purchase and use of the Products and provide a
proper after sales maintenance, repair and guarantee service for
the Products;
(e) make no alteration, modification or addition to the Products and
make no representations nor give any warranty or guarantee on
behalf of the Supplier in relation to the Products other than one
agreed in writing with the Supplier.
<PAGE>
(f) at its own expense ensure that all regulations and all
requirements relating to the import, promotion, distribution and
resale of the Products in the Territory are complied with.
6. THE SUPPLIER'S RIGHTS AND OBLIGATIONS
The Supplier shall provide to the Distributor reasonable quantities of up
to date information concerning the products including technical data,
drawings and catalogues to assist the Distributor in the promotion and
sale of the Products and upon request from the Distributor provide, at a
reasonable rate assistance with training the Distributor's staff to enable
them to carry out the promotion, sale and after-sales servicing of the
Products. Any material so provided by the Supplier may be used by the
Distributor only in the proper performance of its obligations hereunder.
7. GUARANTEE GRANTED BY THE DISTRIBUTOR
The Distributor and the Supplier guarantee and undertake to take all
necessary actions in order to ensure that neither it nor any of its
Associated Companies shall manufacture or distribute goods in the
Territory which compete with or might compete with the Product.
8. WARRANTY AND LIABILITY
8.1 The Supplier warrants that the Products shall be free from defects
in work and materials and shall comply with any written description
or specification given therefor by the Supplier to the Distributor.
The Supplier's entire liability (including any liability for the act
and omission of its employees agents or subcontractors) to the
Distributor in respect of any breach of its contractual obligations
arising hereunder or any representation statement tortuous act or
omission including negligence arising under or in connection with
this agreement or breach of any or all warranties given in this
Clause 8.1 shall be limited in total (no matter how many claims are
made or whatever the basis of such claim) to the replacement of the
Products, or at Supplier's discretion, repayment of the price of the
Products which are the subject of the breach, representation,
statement, tortuous act or omission. The Supplier shall indemnify
the Distributor for all costs, expenses or damages incurred by it as
a result of claim made against the Distributor by third parties for
compensation for personal injury or loss of damage to property
resulting from Products
<PAGE>
supplied by the Supplier hereunder (in the absence of negligence or
breach of this Agreement by the Distributor) not complying with the
specifications referred to above.
8.2 The Supplier shall not be liable to the Distributor for any
indirect, special or consequential loss or damage (including loss of
profits, revenue or goodwill) suffered by the Distributor whether
such loss is caused by the Supplier's breach of its contractual
obligations or by any tortuous act or omission including negligence
or in any other way.
9. INDEMNITY
The Distributor hereby agrees to indemnify the Supplier against all proceedings,
claims, losses, costs (including professional fees), damages and expenses which
may be incurred or suffered by or threatened against the Supplier as a result of
of any use of Products by third parties, except to the extent that such
proceedings, claims, loses, costs any use, damages and expenses have resulted
from the inconformity of Products with Schedule.
10. INTELLECTUAL PROPERTY
10.1 Nothing in this Agreement shall grant the Distributor any right or
license to exploit any copyright, patent or know-how comprised in
the Products.
10.2 The Distributor shall promptly notify the Supplier of any actual or
suspected infringement by any third party of any patent, copyright,
design right or any other intellectual property right comprised in
or associated with the Products and shall assist the Supplier in
taking all such steps as may be necessary to protect or defend such
rights including taking or defending legal proceedings or applying
for a registration of such right.
10.3 Copyright in the packaging and labeling of the Products (including
without limitation those prepared by the Distributor in accordance
of Clause 5.1.e.) shall belong to the Supplier at all time
notwithstanding termination of this agreement for any reason. The
Distributor shall not alter, amend, or obscure any such packaging or
labeling without the written consent of the Supplier.
11. CONFIDENTIALITY
11.1 The Distributor shall treat as confidential any information or
know-how relating to the Products as well as any information
relating to the Supplier's business, sales, marketing methods given
by the Supplier to the Distributor and shall not use or disclose the
same for the proper and necessary purposes
<PAGE>
of this Agreement and any such disclosure shall be made to the
Distributor's employees or to third parties under appropriate
conditions of confidence.
11.2 These obligations of confidentiality shall survive termination of
this Agreement for any reason provided always that they shall not
apply to any information which is:
(a) at the time of disclosure from the Supplier, in the public
domain; or
(b) after disclosure from the Supplier, becomes part of the public
domain, by publication or otherwise, through no fault of the
Distributor; or
(c) at the time of disclosure by the Supplier, already in the
possession of the Distributor, and such possession can be
properly demonstrated by Distributor; or
(d) is rightfully made available to Distributor from sources
independent of Supplier; or
(e) is required by law to be disclosed to any Court or other
regulatory authority.
12. TERMS AND TERMINATION
12.1 This Agreement shall commence on November 17, 1997 and unless
terminated in accordance with the terms hereof shall continue in
force for an initial period of two years and will be renewed for
further 1 year periods with mutual written consent 30 days prior to
the termination of this Agreement.
12.2 The Supplier may terminate this Agreement:
(a) as provided in Clause 4.7 if the Distributor fails to purchase
and pay for the minimum Purchase Order set out therein;
(b) by giving not less than 30 days written notice if there is any
material change in the ownership management or control of the
Distributor;
(c) upon 30 days written notice from the Supplier to the
Distributor of any default in the payment of due invoices;
(d) if the Original Agreement is terminated for whatever reason.
12.3 Either party shall be entitled to terminate this Agreement
immediately on given written notice to the other if the other:
(a) commits a breach of its obligations hereunder or contained in
any order contract made pursuant hereto which in the case of a
breach capable of remedy has been remedied within 30 days of a
notice of the breach requiring its remedy having been given by
the innocent party to the other; or
<PAGE>
(b) holds any meeting with or makes or proposes or enters into or
has proposed to it any arrangement or composition with or for
its creditors; or
(c) is presented with a petition for bankruptcy or has a meeting
convened to consider a resolution for the making of an
administrative order against it, or its winding up, bankruptcy
or dissolution; or
(d) undertakes any action or has any action taken against it
analogous to the foregoing in any jurisdiction.
13. CONSEQUENCES OF TERMINATION
13.1 Upon termination of this Agreement by reason of the Distributor
breaches the Supplier may at its option cancel any orders for the
Products placed by the Distributor prior to termination to the
extent that delivery to the Distributor has not been made;
13.2 Upon termination of this Agreement for any other reason:
(a) for a period of 30 days after the date of termination the
Distributor shall be entitled to fulfill firm orders for the
Products places by customers and accepted by the Distributor
prior to the date of termination from stock already held by
the Distributor and to the extent that stock is not
repurchased by the Supplier for the purposes of any sales
allowed by this terms of this Agreement shall continue to
apply;
(b) all amounts invoiced to the Distributor by the Supplier
(whether before or after termination and whether they have
fallen due or not) for Products delivered shall be payable
immediately;
(c) subject to the rights specifically granted in this Clause 13,
the Distributor shall cease to promote, market or sell the
Products and shall no longer hold itself out as distributor of
the Products;
(d) the Distributor shall within 14 days after termination deliver
to the Supplier or at the Supplier's option destroy all
product samples and sales and marketing material in its
possession or control which related to the Products or which
refer to the Distributor as distributor of the Products.
14. FORCEMAJEURE
14.1 Either party shall be excused from performance of its obligations
hereunder if and to the extent that such performance is prevented
(directly or indirectly)
<PAGE>
by reason of any strike, lock out, labor disturbance, government
action, riot, armed conflict, accident, extremes of weather or event
of nature, unavailability of raw materials or raw materials or of
normal means of transport, act of God or any other matter whatsoever
beyond the reasonable control of the party whose performance is
thereby hindered or prevented.
14.2 Nothing in Clause 14.1 shall operate to excuse the Distributor from
performance of any of its payment obligations under this Agreement
provided that where payment in accordance with the terms hereof is
prevented by an act or event beyond the reasonable control of either
party the Distributor shall make payment into a bank account opened
in the name of the Supplier of any sums due from the Distributor to
the Supplier hereunder and immediately upon the cessation of the
relevant act or event referred to above such sums shall be paid to
the Supplier.
14.3 If either party is prevented for a continuous period of 15 or total
of 30 days in any 365 day period by any reason set out in Clause
14.1 from performing its obligations hereunder to the extent that
the commercial purpose of this Agreement is frustrated then either
party may on 30 days written notice to the other terminate this
Agreement provided that the reason preventing that party's
performance still prevails as at the date of termination.
15. ASSIGNMENT AND SUB-CONTRACTORS
15.1 The Distributor shall not assign or transfer all or any of its
rights or obligations hereunder nor appoint agents, representatives
or sub-distributors without the prior written consent of the
Supplier.
15.2 The Supplier may assign its right and obligations under this
Agreement or may perform any of its obligations hereunder through an
Associates Company.
15.3 This Agreement shall be binding upon and endure to the benefit of
the successors and assigns (if any) of the parties hereto.
16. MISCELLANEOUS
16.1 Nothing contained herein shall be deemed to create any partnership
or joint venture between the parties nor any relationship of
principal and agent.
16.2 Each party hereby confirms that this Agreement sets out the entire
agreement and understanding between the parties in relation to the
subject matter hereof and that it supersedes all previous
agreements, arrangements
<PAGE>
and understandings between them with regard to such subject matter
and that it is not entering into this Agreement in reliance upon any
representation or warranty not expressly set out herein.
16.3 No provision of this Agreement may be amended, modified, discharged
or terminated other than by the express written agreement of the
parties hereto.
16.4 No failure or delay by either party in exercising any right, power
or privilege under this Agreement shall operate as a waiver thereof
nor shall any single or partial exercise by either party of any
right, power or privilege preclude any further exercise of any other
right, power or privilege.
17. NOTICES
17.1 Any notice or other communication given or made under this Agreement
shall be in writing and may be delivered to the relevant party or
sent by facsimile transmission to the address of that party
specified in this Agreement or to that party's facsimile
transmission number thereat that party from time for this purpose
and shall be effectual notwithstanding any other of address not so
notified.
17.2 Unless the contrary shall be proved, each such notice or
communication shall be deemed to have been given or made and
delivered, if by letter on the tenth working day after posting, if
by delivery during working hours when left at the relevant address
and otherwise on the tenth working day after delivery and if by
facsimile during working hours when transmitted and otherwise on the
next working day after transmission.
18. GOVERNING LAW
This agreement shall be construed and the rights and obligations of the parties
hereto shall be determined in accordance with the laws of Japan.
19. ARBITRATION
All disputes arising out of and/or in relation to this agreement shall be
finally settled under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce by one or more arbitrators appointed in
accordance with the said Rules. Such arbitration shall take place in Tokyo,
Japan. The award resulting therefrom shall be final and binding on both parties,
and judgement upon the award rendered by the Arbitrators may be entered in any
court having jurisdiction thereof.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized representatives:
Chugai Diagnostics Science Co. LTD.
By: Yoshito Koike
Position: President
Date:
Reaads Bio-Medical Products (UK) LTD.
By: George Fleming /s/George Fleming
Position: Managing Director
Date:
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SCHEDULE
PRODUCT
HYALURONIC ACID "CHUGAI" 96WELL (Y)33,600
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EXHIBIT 10.7
PRODUCT DEVELOPMENT AND MANUFACTURING AGREEMENT
THIS AGREEMENT IS ENTERED INTO THIS 12 DAY OF SEPTEMBER, 1994, BY AND
BETWEEN REAADS(R) MEDICAL PRODUCTS, INC., A CORPORATION ORGANIZED AND EXISTING
UNDER THE LAWS OF THE STATE OF DELAWARE, U.S.A. AND HAVING ITS PRINCIPAL PLACE
OF BUSINESS AT 12001 TEJON STREET, SUITE 120, WESTMINSTER, COLORADO, U.S.A.
(HEREINAFTER REFERRED TO AS "REAADS"), AND HELENA LABORATORIES CORPORATION, A
CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF TEXAS, U.S.A.
AND HAVING ITS PRINCIPAL PLACE OF BUSINESS AT 1530 LINDBERGH DRIVE, BEAUMONT,
TEXAS, U.S.A. (HEREINAFTER REFERRED TO AS "HELENA").
RECITALS
WHEREAS, REAADS is the owner of all rights, title and interest in and
to the REAADS Technology (as hereinafter defined) including Patent Rights (as
hereinafter defined) and Know-How (as hereinafter defined) relating thereto; and
WHEREAS, Helena is engaged in the business of selling and distributing
diagnostic tests and related products worldwide, and desires to participate with
REAADS in the joint development of selected diagnostic tests ("Joint Products")
(as hereinafter defined) using the REAADS Technology and to obtain from REAADS
the license rights to purchase, manufacture, sell and distribute these products
under Helena's own label and trademark in the Territory defined below, subject
to the terms and conditions set forth herein; and
Whereas, REAADS desires to participate with Helena in the joint
development of Joint Products and is willing to grant to Helena the rights to
purchase, manufacture, sell and distribute such Joint Products in the territory,
subject to the terms and conditions set forth herein, and desires retain the
rights to manufacture, sell and distribute the Joint Products under labels and
trademarks specified by REAADS in the Territory defined below, subject to the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the above recitals, and in
consideration of the mutual covenants and agreements hereinafter set forth,
REAADS and Helena do hereby agree as follows:
AGREEMENT
ARTICLE 1. DEFINITIONS
1.1 "Technology" means the Patent Rights (defined below) and Know-How
(defined below) collectively.
1.1.1 "Patent Rights" means any and all claims made by and all
patent applications and issued patents held by REAADS in
the Territory in connection with the REAADS enzyme
immunoassay technology; and
1.1.2 "Know-How" shall mean the accumulation of skills,
processes and experience, including formulas and
specifications, heretofore developed by REAADS
pertaining to the REAADS enzyme immunoassay technology,
including, but not limited to, any and all technical
information, trade secrets, test results, studies and
analysis, approved vendor list for any raw materials,
preclinical and clinical
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data, manufacturing data, formulation or production
technology, engineering or assembly methods and other
information necessary or useful in the manufacture, sale
and use of the Joint Products.
1.2 "Joint Products" means and includes any product or group of
products developed by REAADS under the terms of this Agreement. Appendix A
attached hereto contains an initial list of the Joint Products to be developed
by REAADS. The list of Joint Products set forth in Appendix A may be amended
from time to time by mutual agreement of the parties.
1.3 "Territory" shall mean and include the following.
1.3.1 For Joint Products configured in Conventional Format
(defined below), which are sold and distributed in Japan
by REAADS, and which are sold and distributed by Helena,
the Territory shall be all the countries of the world,
except Japan.
1.3.2 For Joint Products configured in Conventional Format
(defined below), which are not sold and distributed in
Japan by REAADS, and which are sold and distributed by
Helena, the Territory shall be all the countries of the
world.
1.3.3 For Joint Products configured in Proprietary Format
(defined below) and sold and distributed by Helena, the
Territory shall be all the countries of the world.
1.4 "Conventional Format" shall mean Joint Products configured in a
standard microplate format intended for use with standard microplate equipment
generally available from more than one instrument manufacturer, including, but
not limited to, plate washers and readers.
"Proprietary Format" shall mean Joint Products configured in a
format intended for use with equipment custom designed for or by Helena, and not
available from any other manufacturer.
1.5 "Affiliate" shall mean and include any individual, corporation,
partnership, limited liability company, joint venture, business association or
entity that controls, is controlled by, or is under common control with the
specified party. For purposes of this definition, "Control" shall mean direct or
indirect beneficial ownership of more than fifty percent (50%) of the voting
stock or other equity ownership interest of, or fifty percent (50%) or more
interest in the income of, such entity.
1.6 "Effective Date" shall mean the date this Agreement becomes
effective as set forth on the first page hereof.
1.7 "Transfer Price" for each Joint Product shall mean REAADS' fully
burdened standard manufacturing cost (the "Standard Cost") calculated in
accordance with REAADS' standard cost accounting practice, consistently applied,
based on the standard cost of materials, direct labor and allocable
manufacturing overhead, plus forty percent (40%).
1.8 "Net Sales" shall mean the gross amount invoiced by Helena for the
sale or other disposition of a particular Joint Product, less (a) discounts
actually allowed, (b) credits or price reductions for claims, allowances,
recalls or returns, or for spoiled, damaged or outdated goods, (c)
transportation and insurance charges separately set forth on the invoice for
shipping the Joint Product to the customer, (d) customs duties and similar
governmental charges, and (e) any sales, excise or other taxes or governmental
charges levied on the sale or disposition of the Joint Product.
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1.9 "Japanese Transfer Fee" for each Joint Product shall mean fifty
percent (50%) of the price at which REAADS sells the Joint Product to a Japanese
distributor less REAADS' fully burdened standard manufacturing cost (the
"Standard Cost") calculated in accordance with REAADS' standard cost accounting
practice, consistently applied, based on the standard cost of materials, direct
labor and allocable manufacturing overhead.
ARTICLE 2. DEVELOPMENT OF JOINT PRODUCTS
2.1 SELECTION OF JOINT PRODUCTS. Subject to the terms and conditions
herein set forth, the parties agree to routinely review market opportunities in
order to identify potential projects for joint development.
2.2 EXCHANGE OF GENERAL INFORMATION. Following selection of a project
and written designation as a potential Joint Product, the parties agree to
exchange key information and know-how about the Joint Product to be developed,
including, but not limited to: market expectations, competitor identification,
competitor test kit features and benefits, sources of antibodies, antigens,
standard material and other critical components, sources for clinical samples
and clinical trials, literature references, and names of key contacts and
consultants.
2.3 DEVELOPMENT OF PROJECT SPECIFICATIONS. For each Joint Product to
be developed, REAADS will prepare and submit to Helena for approval written
product specifications including design criteria, cost and time estimates with
milestones, proposed clinical testing requirements, critical component
requirements and regulatory issues. Helena will review the specifications and
either (a) provide written acceptance of the proposed specifications to REAADS,
or (b) promptly notify REAADS in writing of any items in the specifications
which Helena requests changing. In case of disagreement, the two parties will
negotiate in good faith any differences.
2.4 DEVELOPMENT OF JOINT PRODUCT. REAADS shall develop each Joint
Product according to the project specifications. Product development shall occur
in REAADS' R&D laboratories or at other sites designated by REAADS management.
2.5 PROGRESS REPORTS. REAADS will provide written progress reports to
Helena on a routine basis. These reports will include technical updates, any
changes to published milestones, and an revised estimate of total development
expenses to be incurred in the development of the Joint Product.
2.6 APPROVAL OF PROTOTYPE. At the conclusion of product development,
REAADS will provide prototype of the Joint Product to Helena for evaluation and
approval. Helena will analyze the prototype product and either (a) provide
written acceptance of the prototype, or (b) promptly notify REAADS in writing of
details in which, in the opinion of Helena, the prototype fails to meet the
specifications established in Article 2.3. In case of disagreement, the two
parties will negotiate in good faith any differences.
2.7 PAYMENT FOR PROJECT EXPENSES. For each Joint Product to be
developed, each party will contribute fifty percent (50%) of the total cost of
development.
2.7.1 Upon written approval of the project specifications,
Helena will pay to REAADS twenty five percent (25%) of
the REAADS' total estimated development costs.
2.7.2 Upon completion of the development of a Joint Product
and submission by REAADS to the US Food and Drug
Administration (FDA) for approval,
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REAADS will provide to Helena a detailed accounting of
development expenses incurred by REAADS with a statement
of the remaining payment due by Helena for its 50% share
of REAADS' development costs. Helena will review the
expense accounting and either (a) remit payment to
REAADS of the remaining balance due less fifty percent
(50%) of expenses incurred by Helena in the development
of the Joint Product as specified in Article 2.7.3, or
(b) promptly notify REAADS in writing of details in
which, in the opinion of Helena, the final expenses are
incorrect or inappropriate. In case of disagreement, the
two parties will negotiate in good faith any
differences.
2.7.3 For each Joint Product, Helena shall keep a detailed
accounting of R&D expenses incurred by Helena as part of
the development. Upon submission of REAADS final payment
request, Helena shall deduct fifty percent (50%) of
those expenses incurred by Helena from the amount
requested by REAADS. In addition, Helena shall submit a
detailed accounting of its development expenses. REAADS
will review the expense accounting and promptly notify
Helena in writing of details in which, in the opinion of
REAADS, the expenses are incorrect or inappropriate. In
case of disagreement, the two parties will negotiate in
good faith any differences.
2.7.4 Audit. Both parties shall keep sufficient records of its
R&D expenses and shall permit its books and records to
be examined periodically during reasonable business
hours by an independent certified public accountant
selected and compensated by the other party to verify
the calculation of expenses and to otherwise ensure
compliance with the terms of this Agreement.
2.8 REVISION OF TOTAL EXPENSE ESTIMATES. REAADS shall promptly notify
Helena in writing if, during the development of a Joint Product, REAADS
estimates that after completion of the development project, the total
development expense for the Joint Product will exceed by ten percent (10%) the
original total development expense projection as specified in Article 2.3.
Following such determination and notice, the two parties shall negotiate in good
faith a resolution of the problem.
ARTICLE 3. MANUFACTURING OF JOINT PRODUCTS
3.1 REAADS MANUFACTURING RIGHTS. Subject to the terms and conditions
hereinafter set forth, REAADS shall have the exclusive right to make, use and
sell the Joint Products in Conventional Format throughout the world. REAADS
shall only manufacture Joint Products in Proprietary Format at the written
request of Helena. REAADS shall be entitled to sublicense the rights conferred
upon it under this Article 3, but only to the extent necessary to allow third
parties to manufacture Joint Products for and on behalf of REAADS or an
Affiliate, and provided that (i) REAADS shall give Helena thirty (30) days
written notice before any such sublicense shall become effective; (ii) any such
sublicense shall be subject in all respects to the restrictions, exceptions and
provisions contained in this Agreement; (iii) no such sublicense shall relieve
REAADS of its obligations hereunder; and (iv) REAADS and each such sublicensee
shall execute documents to the foregoing effect reasonably acceptable to Helena,
a copy thereof furnished to Helena promptly after execution and delivery.
3.2 QUALITY ASSURANCE. REAADS shall strictly adhere to the quality
control procedures and specifications for the manufacture and performance of
Joint Products as may be necessary to meet applicable governmental
specifications for the manufacture of the Joint Products. Prior to any shipment
of Joint Products by REAADS to Helena, REAADS shall certify to Helena with
respect to each shipment that all such procedures and specifications have to its
knowledge been met and complied with, and shall
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furnish Helena with copies of the test results and other finite data supporting
its certification if so requested in writing.
3.3 REAADS TECHNOLOGY LICENSE. Subject to the terms of this Agreement,
REAADS hereby grants to Helena a perpetual, worldwide (except as limited below),
transferable (subject to Articles 3.5 hereof), non-exclusive, royalty-bearing
license under the Patent Rights and Know-How to make, use and sell the Joint
Products, subject to the following conditions:
3.3.1 Joint Products configured in Conventional Format may be
sold and distributed by Helena as follows:
3.3.1.1. Under one label, worldwide except for Japan.
3.3.1.2. Under one label in Japan should REAADS elect
not to market the Joint Products in Japan.
3.3.2 Joint Products configured in Proprietary Format may be
sold and distributed by Helena worldwide with no
limitation to the number of labels.
3.3.3 Within six (6) months after FDA approval of a Joint
Product, REAADS shall inform Helena in writing of its
intention to market or not to market the Joint Product
in Japan.
3.3.4 Should Helena not be permitted to market a Joint Product
in Conventional Format in Japan, REAADS shall pay to
Helena a Japanese Transfer Fee.
3.3.4.1. All fees shall be payable by REAADS within
thirty (30) days after the end of the calendar quarter
in which the sale giving rise to such fees occurred.
With each payment, or at the time such payment is due,
REAADS shall provide Helena with a report in reasonable
detail itemizing the sales of the Joint Products on
which payments are due. REAADS shall keep accurate books
and records showing sales of Joint Products in
sufficient detail to enable fees payable hereunder to be
determined. REAADS shall permit its books and records to
be examined periodically during reasonable business
hours by an independent certified public accountant
selected and compensated by Helena to verify the
payments under this Agreement and to otherwise ensure
compliance with the terms of this Agreement.
3.3.4.2. All fees due to Helena shall be payable in
United States Dollars.
3.4 TECHNICAL ASSISTANCE. REAADS shall assist Helena in establishing
its own manufacturing operations for the production of the Joint Products.
REAADS shall promptly transfer to Helena the Know-How necessary to produce Joint
Products and provide all reasonable technical assistance requested by Helena to
facilitate the transmission of such Know-How to Helena and to solve such
production problems as may arise in connection with Helena's production of Joint
Products. Such assistance shall include, at Helena's request and on reasonable
notice, the presence of REAADS personnel at Helena's facilities. Helena shall
reimburse REAADS for reasonable travel, meal and lodging expenses incurred by
REAADS and its personnel visiting the facilities of Helena pursuant to this
Article 3.4.
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3.5 RIGHT TO SUBLICENSE. Helena shall be entitled to sublicense the
rights conferred upon it under this Article 3, but only to the extent necessary
to allow third parties to manufacture Joint Products for and on behalf of Helena
or an Affiliate, and provided that (i) Helena shall give REAADS thirty (30) days
written notice before any such sublicense shall become effective; (ii) any such
sublicense shall be subject in all respects to the restrictions, exceptions and
provisions contained in this Agreement; (iii) no such sublicense shall relieve
Helena of its obligations hereunder; and (iv) Helena and each such sublicensee
shall execute documents to the foregoing effect reasonably acceptable to REAADS,
a copy thereof furnished to REAADS promptly after execution and delivery.
3.6 ROYALTIES. For all Joint Products, in either Conventional Format
or Proprietary Format, manufactured by Helena or by another party for Helena as
a sublicensee of Helena, Helena shall pay to REAADS a royalty equal to 2.5% of
Net Sales commencing upon the date of first sale of such Joint Products and
continuing until the payment by Helena in the aggregate of $2,000,000 in
royalties under this Article 3.6.
3.6.1 Statements. All royalty payments shall be payable by
Helena within thirty (30) days after the end of the
calendar quarter in which the sale giving rise to such
payments occurred. With each royalty payment, or at the
time such royalty payment is due, Helena shall provide
REAADS with a report in reasonable detail itemizing the
sales of the Joint Products on which royalties are due
and the calculation of royalties. Helena shall keep
accurate books and records showing sales of Joint
Products in sufficient detail to enable royalties
payable hereunder to be determined. Helena shall permit
its books and records to be examined periodically during
reasonable business hours by an independent certified
public accountant selected and compensated by REAADS to
verify the payments of royalties under this Agreement
and to otherwise ensure compliance with the terms of
this Agreement.
3.6.2 All royalties payable to REAADS hereunder by Helena
shall be payable in United States Dollars. In the case
of sales invoiced by Helena in a currency other than
United States Dollars, royalties shall first be
calculated in such a currency and then converted into
United States Dollars as follows:
(i) At the conversion rate into United States Dollars
established by the exchange control authorities of the
country of which such currency is the national currency
for the last business day of the calendar quarter in
which the pertinent sale was made; or
(ii) If there is no applicable rate so established, at
the selling rate for United States Dollars as published
by leading commercial banks in the major city of the
country of which such currency is the national currency
for the last business day of the calendar quarter in
which the sales was made; or
(iii) If there is no selling rate so published, at the
buying rate for such foreign currency as published by
Citibank, N.A. in New York City for the last business
day of the calendar quarter in which the sale was made.
ARTICLE 4. TERMS AND CONDITIONS OF SALE
4.1 PURCHASE ORDERS. REAADS's Distribution Sales Policy set forth in
Appendix B and other provisions of this Agreement will apply to all purchases of
Joint Products by Helena,
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notwithstanding any variation as may appear on any purchase order submitted by
Helena. All purchase orders and amendments thereto must be in writing and should
contain (i) all technical information necessary for REAADS to accurately supply
the Joint Products, (ii) quantity, (iii) date of requested delivery, and (iv)
preferred shipping instructions. All such orders shall be deemed accepted by
REAADS unless REAADS rejects such purchase order by notice in writing to Helena
within 7 days after receipt of purchase order, stating reasonable grounds for
such rejection.
4.2 PACKAGING. REAADS shall provide the finished product as described
in Appendix A. Each product component shall be unlabeled and must be assembled
into kits by Helena before shipping. Helena shall be responsible for the product
insert and labels for each component and outer box, the outer box and box
insert.
4.3 QC DOCUMENTATION. REAADS shall supply the necessary QC data for
each shipment to support the performance characteristics of the Joint Product.
4.4 CONTRACT OF SALE. A contract of sale shall exist between REAADS and
Helena only upon receipt and acceptance of Helena's purchase order by REAADS as
stated above in Article 4.1. No condition on any purchase order inconsistent
with the terms and conditions of the Agreement shall be deemed valid unless in
writing and properly executed by authorized officers of REAADS and Helena.
ARTICLE 5. PRICE
5.1 TRANSFER PRICE. The Transfer Prices for Joint Products purchased
hereunder shall be the prices according to attached Appendix C. An annual review
of transfer prices will be conducted and prices adjusted as necessary due to
changes in the Standard Cost before December 1 each year, beginning the first
December 1 following completion of the development of each Joint Product. The
maximum price increase per year shall be seven percent (7%). Helena shall
establish its own resale price for each Joint Product. Should the parties be
unable to agree on prices for the following calendar year by December 1 of the
year before, the price of the year before shall be applied also for the first
six months of the following calendar year. If mutually acceptable terms can not
be reached by June 30, Article 16 may be applied.
5.2 AUDIT. REAADS shall keep sufficient records of its Standard Cost
to allow such cost and expenses to be determined. REAADS shall permit its books
and records to be examined periodically during reasonable business hours by an
independent certified public accountant selected and compensated by Helena to
verify the calculation of Standard Cost and to otherwise ensure compliance with
the terms of this Agreement.
ARTICLE 6. CONFIDENTIALITY
6.1 CONFIDENTIALITY OF HELENA. Helena acknowledges that during the
course of this Agreement it will become privy to confidential information of
REAADS concerning REAADS itself, REAADS Technology, REAADS's business strategy,
and other technical, business and financial matters. Helena accordingly agrees
to hold all such information so designated by REAADS in strictest confidence and
not to disclose any such information to a third party except as expressly
permitted by REAADS in writing, or use such information for any purpose other
than the purposes hereof, unless such information was already in the possession
of Helena at the time of receipt from REAADS or such information is or becomes
public knowledge through no fault of Helena or is provided in good faith to
Helena by any independent third party who has the right to disclose such
information. This Article shall survive any termination of this Agreement for a
period of 5 (five) years.
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6.2 CONFIDENTIALITY OF REAADS. REAADS acknowledges that during the
course of this Agreement it will become privy to confidential information of
Helena concerning Helena itself, Helena's business strategy, and other
technical, business and financial matters. REAADS accordingly agrees to hold all
such information so designated by Helena in strictest confidence and not to
disclose any such information to a third party except as expressly permitted by
Helena in writing, or use such information for any purpose other than the
purposes hereof, unless such information was already in the possession of REAADS
at the time of receipt from Helena or such information is or becomes public
knowledge through no fault of REAADS or is provided in good faith to REAADS by
any independent third party who has the right to disclose such information. This
Article shall survive any termination of this Agreement for a period of 5 (five)
years.
ARTICLE 7. OTHER DUTIES OF HELENA
7.1 PRODUCT CLAIMS. At all times during the term of this Agreement,
Helena will not make any claims or representations concerning the Joint Products
other than those representations set forth in the product insert approved by
REAADS.
7.2 REPORTS. Helena agrees to provide REAADS with an initial six
month forecast of Joint Products to be manufactured by REAADS and purchased by
Helena. Further, Helena will provide REAADS with volume forecast requirements
before May 31 and November 30 each year, covering the following 12 month period.
Forecasts referred to shall not be binding and are for planning purposes only.
7.3 LICENSES AND PERMITS. Helena shall be responsible for obtaining
all licenses and permits required by any governmental authority in order to
import a Joint Product into any country in the Territory, as well as the cost of
such licenses and permits.
7.3.1 Authorization. Helena agrees to comply with all
applicable laws regulations and orders governing the sale, disposition,
shipment, import or export of the Joint Products and maintain in effect all
licenses, permits and authorizations from all government agencies as may be
necessary to perform its obligations hereunder.
7.4 REGULATORY DOCUMENTS. To the extent on hand or obtainable without
unreasonable burden or cost, REAADS shall provide at no cost to Helena all
documentation reasonably requested by Helena to obtain the required regulatory
approvals as referred in Article 7.3.
7.5 DEFECTIVE PRODUCT NOTICE. Helena shall immediately notify REAADS
in writing should it become aware of any defect or condition that may render a
Joint Product in violation of the law of any jurisdiction where the Joint
Products are sold, or if the Joint Products deviate in any way from the
specifications or the warranties set forth herein. The parties shall share with
each other all relevant data on Joint Product defects and Joint Product
complaints including, but not limited to, complaints or information regarding
performance and/or allegations or reports of any negative effect from the use or
misuse of the Joint Products as soon as such data is available. Upon receipt of
any such notice, REAADS may at its option obtain samples of the Joint Products
in question from Helena for analysis. REAADS shall at its option either promptly
deliver a new shipment of Joint Products to replace the defective Joint
Products, or credit Helena on the next purchase of Joint Products.
ARTICLE 8. OTHER DUTIES OF REAADS
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8.1 TECHNICAL ASSISTANCE AND TRAINING. REAADS shall to the extent
necessary provide training and technical assistance to Helena's personnel
necessary for the marketing of the Joint Products. Such technical assistance and
training shall be provided at REAADS's facility in Westminster, Colorado, or, if
agreed by the parties, at Helena's premises. Such technical assistance and
training shall be provided by REAADS at no charge to Helena, except that if the
training is performed at Helena's premises, REAADS's personnel shall be entitled
to receive their reasonable expenses of travel, meals, and lodging. If training
is provided at REAADS's facility in Westminster, Colorado, Helena's personnel
shall bear their own expenses of travel, meals and lodging.
8.2 GMP AUDIT. REAADS agrees to receive ualified Helena personnel to
perform an audit of REAADS' GMP process at a convenient time mutually agreed
upon. Other than disclosures otherwise permitted by this Agreement, this audit
will not include the disclosure of trade secrets, know-how, or any other
confidential information not necessary to perform the audit.
8.3 MANUALS. REAADS shall provide Helena on a current basis with
instructions and manuals relating to the Joint Products.
8.4 CONDITIONS TO DELIVERY. REAADS' obligation is to fill and execute
orders within +/- 20% of forecast of annual order supplied by Helena. In the
event that force majeure causes a delay of more than two (2) months, either
party shall have the right to cancel the order by giving written notice to the
other. The parties expressly agree that for the purpose of this Agreement, the
term force majeure shall be deemed to include strike, lockout, flood, fire,
rebellion, war, regulations, requirements or acts of civil or military
authorities, unavailability of materials and allocations or priorities with
respect thereto, civil disorder, acts of God, delays of carriers, and, in
general, any causes beyond REAADS' control.
8.5 DELIVERIES. REAADS shall use reasonable efforts to ship Joint
Products ordered by Helena as specified by the order from Helena. REAADS will
ship the Joint Products within 30 days of receipt of the order. All deliveries
shall be made F.O.B. REAADS' plant in Westminster, Colorado. Freight and
insurance charges shall be borne by Helena. REAADS shall select the delivery
method and the carrier as instructed by Helena. Unless otherwise specified on
Helena's purchase order, insurance shall be provided by the insurer selected by
REAADS to cover risk of loss or damage in the amount of the invoice to Helena.
ARTICLE 9. REGULATORY COMPLIANCE
9.1 U.S. REGULATORY APPROVALS. REAADS shall exercise reasonable
business efforts with respect to each Joint Product, to diligently prepare, file
and prosecute all necessary applications as soon as reasonably possible to
obtain approval from the FDA for the commercial manufacture, use and sale by
REAADS of each such Joint Product in the United States. Helena will be
responsible with respect to each Joint Product, to diligently prepare, file and
prosecute all necessary applications to obtain approval from the FDA for the
commercial manufacture, use and sale of each such Joint Product by Helena in the
United States.
9.2 EXCHANGE AND CONFIDENTIALITY OF DOCUMENTATION. Subject to the
confidentiality provisions of Article 6, Helena shall be given access to all
such underlying data, reports and summaries upon which any such applications to
the FDA by REAADS have been based. REAADS shall provide Helena with a copy of
its annual reports filed with the FDA regarding any Joint Product registrations
and shall otherwise keep Helena generally advised as to the status thereof.
Subject to the confidentiality provisions of Article 6, REAADS shall be given
access to all such underlying data, reports and summaries upon which any such
applications to the FDA by Helena have been based. Helena shall
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provide REAADS with a copy of its annual reports filed with the FDA regarding
any Joint Product registrations and shall otherwise keep REAADS generally
advised as to the status thereof.
9.3 FOREIGN REGULATORY APPROVALS. Each party shall be responsible
for, and shall bear the expense of, filing and prosecuting any application to
obtain the required governmental approvals or consents necessary to manufacture,
test and market Joint Products worldwide, except with respect to the United
States. REAADS shall, however, provide Helena, at no additional cost to Helena,
with all technical and regulatory documentation and information (including,
without limitation, all clinical data) in REAADS' possession or under its
control, or obtainable without unreasonable burden to REAADS.
9.4 CUSTOMER COMPLAINTS. Each party shall immediately notify the
other party in writing should it become aware, through customer complaint or
otherwise, of any defect or condition which may render any Joint Product in
violation of law or FDA and/or any foreign equivalent regulations, or which may
in any way deviate from the approved product specifications.
ARTICLE 10. INTELLECTUAL PROPERTY
10.1 REAADS TECHNOLOGY. Helena shall have no interest in the existing
REAADS Technology used in Joint Products other than the License rights granted
in Article 3.3.
10.2 THIRD PARTY INFRINGEMENT. REAADS and Helena shall each promptly
notify the other party upon learning that a third party is making, using or
selling a product or component of a product which is within the scope of a valid
licensed claim of a patent included within the Patent Rights. REAADS shall have
the right to bring, maintain and settle any suit, action or proceeding involving
any such infringement of the Patent Rights, and shall pay all expenses incurred
in connection therewith. Any amount recovered in any such suit, action or
proceeding whether by judgment or settlement shall be paid to or retained by
REAADS. If within three (3) months of notice of any such infringement, REAADS
shall have failed to either terminate such infringement or to initiate legal
proceedings against the infringer (or in the event that REAADS earlier advises
Helena that it does not intend to take action), Helena shall have the right, at
its own expense, to bring and maintain any suit, action or proceeding involving
any such infringement, which infringement could reasonably be expected to
adversely affect the rights granted to Helena hereunder. If Helena lacks
standing to bring such suit, action or proceeding, then REAADS shall, at the
request of Helena, do so upon Helena's undertaking to indemnify and hold REAADS
harmless (to the extent permitted by law) from all consequent liability and to
promptly reimburse REAADS for all its reasonable expenses (including attorneys'
fees) resulting therefrom. Any amount recovered in any such action, suit or
proceeding brought at Helena's expense, whether by judgment or settlement, shall
be paid to or retained by Helena.
10.3 NEW TECHNOLOGY. All new inventions, whether patentable or not,
utilized in the Joint Products and discovered during the course of development
of the Joint Products shall be owned jointly by REAADS and Helena, with each
owning an undivided one-half interest therein.
10.4 NEGLIGENT PRODUCT HANDLINg. Except for actual third party claims
covered by Article 11 below, neither party shall be responsible to the other
party or the other party's agents for the other party or the other party's
agents negligence in handling of the Joint Product which causes a breach of
warranty.
ARTICLE 11. INDEMNIFICATION
11.1 INDEMNIFICATION BY HELENA. Helena hereby agrees to defend,
indemnify and hold REAADS, its employees, agents and Affiliates harmless against
any and all claims, liabilities, losses,
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damages or expenses, (including, without limitation, attorneys fees), to the
extent resulting from, arising out of, or connected with any inaccuracy, breach
of, or nonfulfillment of any covenant, representation, warranty or agreement
made by or any other obligation of Helena contained in this Agreement.
Notwithstanding the foregoing, REAADS, its employees, agents and Affiliates
shall not be entitled to indemnification for any claim, liability, loss, cost,
damage or expense to the extent caused by its or their own fraud,
misrepresentation, negligence or malfeasance.
11.2 INDEMNIFICATION BY REAADS. REAADS hereby agrees to defend,
indemnify and hold Helena, its employees, agents and Affiliates harmless against
any and all claims, liabilities, losses, damages or expenses, (including,
without limitation, attorneys fees), to the extent resulting from, arising out
of, or connected with (i) any inaccuracy, breach of, or nonfulfillment of any
covenant, representation, warranty or agreement made by or other obligation of
REAADS contained in this Agreement, or (ii) any claim that the use by or on
behalf of Helena of the Patent Rights or Know-How pursuant to this Agreement
infringes upon or violates the patent or other proprietary rights of any third
party. Helena, its employees, agents and Affiliates shall not be entitled to
indemnification for any claim, liability, loss, cost, damage or expense to the
extent caused by its or their own fraud, misrepresentation, negligence or
malfeasance
11.3 DEFENSE, SETTLEMENT. The indemnified party shall give the
indemnifying party reasonably prompt notice of any claims of third parties as to
which it proposes to demand indemnification hereunder. The indemnifying party
shall have the right to assume the good faith defense, compromise or settlement
of any such claim (without prejudice to the right of the indemnified party to
participate in such defense) at its own expense through attorneys reasonably
acceptable to the indemnified party, but may not, without the prior written
consent of the indemnified party agree to (i) any injunctive relief or
restrictions affecting the indemnified party, or (ii) any settlement which would
adversely affect the business or operations of the indemnified party. If the
indemnifying party does not elect to defend such claim or suit within ten (10)
days after having received notice thereof or fails to prosecute its defense
diligently, the indemnified party may at its sole discretion defend against such
claim or suit at the indemnifying party's expense. The indemnified party may
thereafter elect to settle such claim or suit or otherwise enter into a
compromise with the claimant.
11.4 DAMAGES, COSTS. If damages and/or costs are awarded against the
indemnified party in any such claim or suit, whether or not REAADS and/or Helena
conduct the defense of such claim or suit, the indemnifying party shall
indemnify and hold harmless the indemnified party for all such damages and/or
costs. All other costs and/or fees which result from the assertion of any such
claim or suit, including but not limited to attorneys fees, incurred by the
indemnified party in defense of any such claim or suit shall be reimbursed to
the indemnified party by the indemnifying party.
ARTICLE 12. LIMITED WARRANTY
12.1 SHELF LIFE WARRANTY. REAADS warrants that the Joint Products
manufactured by REAADS for Helena shall have a shelf life of no less than 80% of
the total expected shelf life from the date of REAADS' shipment provided that
the Joint Products are stored under conditions set forth by REAADS. REAADS shall
not be liable for any failure to satisfy the shelf life requirement to the
extent such variance is caused by conditions or events occurring after shipment
and/or over which REAADS has no control.
12.2 NOTICE. Should Helena discover any Joint Product manufactured by
REAADS for Helena which fails to satisfy the shelf life warranty contained in
Article 12.1, Helena shall notify REAADS in writing within ten (10) business
days after such discovery. REAADS shall, at its election, either refund the
portion of the purchase price to Helena, allocable to the Joint Product which
gives rise
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to the claim, or correct such defect by suitable replacement at its own expense.
REAADS' obligation under this section with respect to such defective Joint
Product shall be conclusively waived by Helena if REAADS does not receive
written notification of any defect within ten (10) business days after its
discovery.
12.3 THIRD PARTY CLAIMS. The provisions of these Articles 12.1 and
12.2 are not applicable to any third party claims.
12.4 WARRANTIES. The written warranties of REAADS in Article 12 are
the sole exclusive warranties provided to Helena and to consumers and are in
lieu of all other warranties, whether written or oral, implied or statutory.
REAADS warrants the Joint Products against defects in material and workmanship
under the normal use and service for which they were designed, for a period of
90 days after date of shipment, REAADS' obligation under this warranty being
limited, at its option, however, to the replacement or repair of a part or parts
determined by it to be defective, necessary packing and transportation costs for
return of the Joint Products to be paid by Helena. All replacement or repaired
Joint Products will be shipped F.O.B., Westminster, Colorado. REAADS shall under
no circumstances be liable for any special, indirect or consequential damages
owing to failure of the Joint Products.
12.5 CANCELLATION AND RESCHEDULE CHARGES. If for any reason Helena
cancels all or any part of the order or requests a rescheduling of a scheduled
shipment of Joint Products, Helena agrees to pay REAADS, upon verification of
costs incurred, the verified costs but no more than 20% of the total purchase
price if the cancellation/reschedule notice is received more than 60 days of the
scheduled shipment; or no more than 30% of the total purchase price if the
cancellation/reschedule notice is received less than 60 days of the scheduled
shipment.
ARTICLE 13. EFFECTIVE DATE AND TERM
This Agreement shall become effective upon execution by both parties
and shall be deemed effective as of the date first set forth above. This
Agreement shall continue to be in effect unless terminated by either party as
provided in Article 14 hereof.
ARTICLE 14. TERMINATION
Either party will have the right to terminate this Agreement if the
other party: (a) assigns this Agreement or any of its rights hereunder in
violation of the provisions of this Agreement; (b) becomes bankrupt or
insolvent; (c) makes an assignment for the benefit of creditors, or a receiver,
trustee in bankruptcy or similar officer is appointed to take charge of all or
part of its property; (d) materially breaches its obligations under this
Agreement, and such breach has not been cured within thirty (30) days of notice
thereof by the non-breaching party. Information referring to the above events
should be given to the other party within 14 days, and this party should
communicate its intentions to the other party within 30 days. For purposes of
this Article, a material breach on the part of either party includes, but is not
limited to, failure to adhere to the confidentiality provisions and restrictions
on use of information set forth in Articles 6.1 and 6.2, and any failure to pay
royalties or make any payment required hereunder within 30 days of the date due.
ARTICLE 15. RIGHTS AND OBLIGATIONS UPON TERMINATION
15.1 EFFECT OF TERMINATION. Termination, cancellation or abandonment
of this Agreement through any means and for any reason shall not relieve the
parties of any obligation accruing prior
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thereto and shall be without prejudice to the rights and remedies of either
party with respect to any antecedent breach of any of the provisions of this
Agreement.
15.2 SURVIVAL. In the event of termination of this Agreement, the
license rights of Article 3.3, royalty provisions of Article 3.6,
confidentiality provisions of Article 6, indemnification provisions of Article
11, and representations and warranties set forth in Article 12, shall survive,
provided that the license rights of Article 3.3 shall terminate if Helena either
(a) fails to make any royalty payment within 30 days of the date due or (b)
otherwise commits a material breach of this Agreement.
ARTICLE 16. ARBITRATION
Any controversy or claim arising under or in relation to this Agreement,
except as otherwise expressly provided below, shall be settled exclusively by
arbitration in accordance with the International Arbitration Rules of the
American Arbitration Association (AAA). Arbitration shall take place in Denver,
Colorado, U.S.A. before one arbitrator selected by the parties jointly or
failing their agreement, selected pursuant to the rules of the AAA. The
arbitration shall be conducted in English and shall use the U.S. Federal rules
of evidence and the U.S. Federal rules of civil procedure. The substantially
prevailing party shall be entitled to recover its costs and attorneys' fees. The
decision of the arbitrators shall be final and binding on the parties, and
judgment upon the award rendered by the arbitrators may be entered by any court
having jurisdiction thereof. Helena specifically consents to the jurisdiction of
the courts of the State of Colorado, U.S.A., and any other place where it is
located or can be found for purposes of enforcing an award.
ARTICLE 17. GENERAL PROVISIONS
17.1 ENTIRE AGREEMENT. This Agreement, including the Appendices,
constitutes the entire agreement between the parties with respect to the subject
matter hereof, and may not be modified (unless expressly provided otherwise
herein) except in writing duly signed by both parties. The terms and conditions
of this Agreement shall prevail notwithstanding any other terms and conditions
on any order submitted by Helena.
17.2 ASSIGNMENT, WAIVER, SEVERABILITY. Neither party may assign this
Agreement without the prior written consent of the other party. All rights and
remedies conferred under this Agreement or by any other instrument or law shall
be cumulative and may be exercised singularly or concurrently. Failure by either
party to enforce any term hereof shall not be deemed a waiver of future
enforcement of that or any other term. If any provision of this Agreement is
declared void or unenforceable by any judicial, administrative or arbitration
authority, such action will not nullify the remaining provision of this
Agreement.
17.3 GOVERNING LAW. The validity and interpretation of this Agreement
shall be governed and construed according to the laws of the State of Colorado,
U.S.A.
17.4 RELATIONSHIP CREATED. Nothing in this Agreement shall be construed
as establishing an agency, joint venture or partnership between the parties.
Helena is an independent contractor, and shall have sole responsibility for its
employees, even while such employees are receiving training at REAADS' facility.
17.5 COMPLIANCE WITH LAWS. Both parties agree to comply at all times
with all applicable laws.
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17.6 AUTHORITY. Each party hereby represents and warrants that it has
full power and authority to enter into and perform this Agreement, without any
governmental approvals, and that its entering into and performance of this
Agreement will not conflict with any other agreement to which it is party or by
which it is bound.
17.7 NOTICES. All notices, payments, demands, requests, instructions or
other communication required or permitted to be given by any of the provisions
of this Agreement must be in writing and shall be deemed to have been
sufficiently given only if (i) delivered by hand against receipt therefor, (ii)
sent by Federal Express or similar overnight delivery service, or (iii) mailed
by certified or registered mail, postage prepaid, return receipt requested as
follows:
If to REAADS, to it at:
12001 Tejon Street, Suite 120
Westminster CO 80234
Attn: President
If to Helena, to it at:
1530 Lindbergh Drive
Beaumont TX 77704
Attn: President
IN CONSIDERATION OF the foregoing terms and conditions, Helena and
REAADS have executed this Agreement on the day and year first written above.
REAADS Medical Products, Inc.
By /S/ NOT LEGIBLE
-------------------------------------
Its
-------------------------------------
Helena Laboratories Corporation
By /S/ NOT LEGIBLE
-------------------------------------
Its
-------------------------------------
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EXHIBIT 10.8
Amendment to the Product Development and Manufacturing Agreement between
REAADS Medical Products, Inc. and Helena Laboratories Corporation dated
September 12, 1994
APPENDIX A
(effective 12/15/97)
1. Protein C ELISA
2. Protein S ELISA
3. von Willebrands ELISA
4. Monoclonal multi-Free Protein S ELISA
15
<PAGE>
Amendment to the Product Development and Manufacturing Agreement between
REAADS Medical Products, Inc. and Helena Laboratories Corporation dated
September 12, 1994
APPENDIX B
DISTRIBUTION SALES POLICY
TO ORDER Send order to: REAADS Medical Products, Inc.
12061 Tejon Street
Westminster, Colorado 80234
U.S.A.
Or Telefax to: 303-457-4519
Telephone: 303-457-4345
MINIMUM ORDER 100 1-plate kits.
PRICES Transfer prices are in U.S. Dollars, FOB Westminster,
Colorado, U.S.A. as set forth in Appendix C.
PAYMENT Terms: Net 45 days after date of invoice.
Send payment to: REAADS Medical Products, Inc.
12061 Tejon Street
Westminster, Colorado 80234
U.S.A.
PENALTIES Payment received by REAADS' bank after the 60 days terms
will be subject to penalty of 1.5% of total per month.
SHIPPING Via air freight. Shipments go refrigerated.
All outstanding invoices must be current before
any additional shipments are made.
RETURNED GOODS No unauthorized returns will be accepted.
DAMAGES Detection of external damages or shortages, at time of
delivery are the responsibility of Helena and must be
noted on the carrier's delivery receipt and the driver
must countersign that notation. Concealed damages should
be immediately reported by Helena to the carrier by
telephone, telex, or fax. Helena should request the
carrier to inspect damages. It is the responsibility of
Helena to collect from the carrier for any damaged
goods.
WARRANTY There are no warranties which extend beyond the
description and directions set forth on the
labelling of the products.
16
<PAGE>
Amendment to the Product Development and Manufacturing Agreement between
REAADS Medical Products, Inc. and Helena Laboratories Corporation dated
September 12, 1994
APPENDIX C
(effective 12/15/97)
TRANSFER PRICING
1. Protein C ELISA $112.00
2. Protein S ELISA $112.00
3. von Willebrands Factor ELISA $112.00
4. Monoclonal anti-Free Protein S ELISA tbd
Transfer pricing from REAADS to Helena shall be no less favorable than the
transfer pricing provided by REAADS to other companies with distribution rights
to the Joint Partners in the Territory.
17
<PAGE>
EXHIBIT 10.9
OFFICE LEASE
1. THIS LEASE, dated FEBRUARY 6, 1996 is between Stream Associates,
Inc. dba Metro Tech Center Office Park a corporation organized under the laws of
the State of Illinois hereinafter called the Landlord, and REAADS MEDICAL
PRODUCTS, INC.
hereinafter called the Tenant. The Landlord does hereby demise and lease unto
the Tenant the premises known and described as 12061 TEJON (IN ITS ENTIRETY)
in the City of WESTMINSTER, State of Colorado, for the term of 60 MONTHS
TERM
beginning ON THE DATE OF TENANT FINISH COMPLETION/OCCUPANCY and ending on
LAST DAY OF 60TH MONTH unless the term hereof shall be sooner terminated as
hereinafter provided.
RENT
2. IN CONSIDERATION of the rent and the performance of the covenants
and provisions herein, the Tenant agrees to pay to the Landlord as rent for the
full term aforesaid, the sum of $579,560.00 payable as follows:
AS PER ATTACHMENT
which said sums shall be due and payable in advance on the first day of each and
every calendar month during said term at the office of the Landlord at
such location as the Landlord may designate in writing.
SECURITY DEPOSIT
3. The Landlord acknowledges receipt of a security deposit in the
amount of $9000.00, $4000.00 OF WHICH IS ON DEPOSIT FROM EXISTING LEASE.
SERVICES
4. SEE ATTACHMENT #4.
CHARACTER OF OCCUPANCY
5. Tenant agrees that the demised premises shall be used and
occupied only as SEE ATTACHMENT #5 in a careful, safe and proper manner, and
that Tenant will pay on demand for any damage to the premises caused by the
misuse of same by Tenant, or Tenant's agents or employees. Tenant agrees that
Tenant will not use or permit the demised premises to be used for any purposes
prohibited by the laws of the United States or the State of Colorado, or the
ordinances of the City or County in which the property is located.
Tenant will not use or keep any substance or material in or about the
demised premises which may vitiate or endanger the validity of the insurance on
said building or increase the hazard of the risk, or which may prove offensive
or annoying to other tenants of the building.
Tenant will not permit any nuisance in the demised premises.
<PAGE>
ALTERATIONS
6. The Landlord shall have the right AFTER PRIOR NOTICE TO TENANT to
enter the demised premises to examine and inspect the same, or to make such
repairs, additions, or alterations as it may deem necessary or proper for the
safety, improvement or preservation thereof, and shall at all times have the
right, at its election, to make such alterations or changes to other portions of
said building as it may from time to time deem necessary and desirable.
Tenant shall make no alterations in or additions to the demised premises
without first obtaining the written consent of Landlord. Tenant shall permit no
liens to be attached to the property as a result of any alterations. All
additions or improvements made by the Tenant (except only movable office
furniture) mUST BE APPROVED BY LANDLORD.
SUBLETTING
7. Tenant agrees that it will not sublet the demised premises, or
any part thereof, nor assign this Lease, or any interest therein, without first
obtaining the written consent of the Landlord, which consent shall not be
unreasonably withheld.
INSOLVENCY
8. Any assignment for the benefit of creditors or by operation of
law shall not be effective to transfer any rights hereunder to the said assignee
without the written consent of the Landlord first having been obtained. It is
further agreed between the parties hereto that if Tenant shall be declared
insolvent, or if any assignment of Tenant's property shall be made for the
benefit of creditors or otherwise, or if Tenant's leasehold interest herein
shall be levied upon under execution, or seized by virtue of any writ of any
court of law, or a Receiver be appointed for the property of Tenant, whether
under the operation of State or Federal statutes, then and in any such case,
Landlord may, at its option, terminate this Lease and retake possession of said
premises, without being guilty of any manner of trespass or forcible entry or
detainer, and without the same working any forfeiture of the obligations of
Tenant hereunder.
In case the Tenant is adjudicated a bankrupt, or proceeds or is
proceeded against under any State or Federal laws, for relief of debtors, or in
case a receiver is appointed to wind up and liquidate the affairs of the Tenant,
the Landlord, at its election, shall have a provable claim in bankruptcy or
receivership in an amount equal to at least the sum of the last 12 monthly
payments of the rental provided for herein, which sum is fixed and liquidated by
the parties hereto as the minimum amount of the damages sustained by the
Landlord as a result of the bankruptcy or receivership of the Tenant, and the
amount of said damages may be satisfied, at the election of the Landlord, out of
any moneys or securities deposited hereunder as security for the payment by the
Tenant of the rent herein provided for.
<PAGE>
BREACH
9. At the Landlord's option, it shall be deemed a breach of this
Lease if Tenant defaults (a) in the payment of the rent or any other monetary
obligation herein; or (b) in the performance of any other term or condition of
this Lease. Landlord may elect to cure such default and any expenses of curing
may be added to the rent and shall become immediately due and payable. In the
event that Landlord elects to declare a breach of this Lease, Landlord shall
give Tenant three (3) days written notice requiring payment of the rent or
compliance with the other terms or provisions of the lease, or delivery of the
possession of the premises. In the event any default remains uncorrected after
three (3) days written notice, the Landlord, at the Landlord's option, may
declare the term ended, repossess the premises, expel the tenant and remove the
effects of the Tenant, all without being deemed guilty in trespass of a forcible
entry and detainer and without prejudice to any other remedies to which the
Landlord may be entitled. If at any time this Lease is terminated under this
paragraph, the Tenant agrees to peacefully surrender the premises to the
Landlord immediately upon termination, and if the Tenant remains in possession
of the premises, the Tenant shall be deemed guilty of unlawful detention of the
premises. Landlord shall be entitled to recover from the Tenant all damages by
reason of the Tenant's default, including but not limited to the cost to recover
and repossess the premises, the expense of reletting, necessary renovation and
alteration expenses, attorney fees, commissions and the rent for the balance of
the term of this Lease.
SECURITY DEPOSIT
10. The Landlord acknowledges receipt of the aforementioned deposit
to be held by the Landlord for the faithful performance of all of the terms,
conditions and covenants of this Lease. The Landlord may apply the deposit to
cure any default under the terms of this Lease and shall account to the Tenant
for the balance. The Tenant may not apply the deposit hereunder to the payment
of the rent reserved hereunder or the performance of other obligations.
PREMISES VACATED DURING TERM OF LEASE
11. If the Tenant shall abandon or vacate said premises before the
end of the term of this Lease, the Landlord may, at its option, enter said
premises, remove any signs of the Tenant therefrom, and re-let the same, or any
part thereof, as it may see fit, without thereby voiding or terminating this
Lease, and for the purpose of such re-letting, the Landlord is authorized to
make any repairs, changes, alterations or additions in or to said demised
premises, as may, in the opinion of the Landlord, be necessary or desirable for
the purpose of such re-letting, and if a sufficient sum shall not be realized
from such re-letting (after payment of all the costs and expenses and the
collection of rent accruing therefrom), each month to equal the monthly rental
agreed to be paid by the Tenant under the provisions of this Lease, then the
Tenant agrees to pay such deficiency each month upon demand therefor.
<PAGE>
REMOVAL OF TENANT'S PROPERTY
12. If the Tenant shall fail to remove all effects from said premises
upon the abandonment thereof or upon the termination of this Lease, the
Landlord, at its option, may remove the same in any manner and store the said
effects without liability to the Tenant for loss thereof, and the Tenant agrees
to pay the Landlord on demand, any and all expenses incurred in such removal,
including court costs and attorney's fees and storage charges on such effects
for any length of time the same shall be in the Landlord's possession. The
Landlord, at its option, and after 30 days notice to Tenant, may sell said
effects, or any of the same, at private sale and without legal process, for such
prices as the Landlord may obtain, and apply the proceeds of such sale upon any
amounts due under this Lease from the Tenant to the Landlord and upon the
expense incident to the removal and sale of said effects, rendering the surplus,
if any, to the Tenant.
LOSS OR DAMAGE TO TENANT'S PROPERTY
13. All personal property of any kind or description whatsoever in
the demised premises shall be at the Tenant's sole risk, and the Landlord shall
not be held liable for any damage done to or loss of such personal property, or
for damage or loss suffered by the business or occupation of the Tenant arising
from any act or neglect of covenants or other occupants of the building, or of
their employees or the employees of the Landlord or of other persons, or from
bursting, overflowing or leaking of water, sewer or steam pipes, or from heating
or plumbing fixtures, or from electric wires, or from gases, or odors, or caused
in any other manner whatever, except in the case of willful neglect on the part
of the Landlord.
Tenant shall hold Landlord, Landlord's agents and their respective
successors and assigns, harmless and indemnified from all injury, loss, claims
or damage to any person or property while on the demised premises or any other
part of Landlord's property, or arising in any way out of Tenant's business,
which is occasioned by an act or omission of Tenant, its employees, agents,
invitees, licensees or contractors.
LIEN ON TENANT'S FURNISHINGS.
14. THIS SECTION DELETED.
SURRENDER OF POSSESSION
15. The Tenant agrees to deliver up and surrender to the Landlord
possession of said premises at the expiration or termination of this Lease, by
lapse of time or otherwise, in as good repair as when the Tenant obtained the
same at the commencement of said term, excepting only ordinary wear and tear, or
damage by the elements (occurring without the fault of the Tenant or other
persons permitted by the Tenant to occupy or enter the demised premises or any
part thereof), or by act of God, or by insurrection, riot, invasion or
commotion, or of military or usurped power.
<PAGE>
FIRE CLAUSE
16. If the demised premises or said building, shall be so damaged by
fire or other catastrophe as to render said premises wholly untenantable, and if
such damage shall be so great that a competent architect selected by the
Landlord, shall certify in writing to the Landlord and the Tenant that said
premises, with the exercise of reasonable diligence, cannot be made fit for
occupancy within ninety (90) days from the happening thereof, then this Lease
shall cease and terminate from the date of the occurrence of such damage; and
the Tenant thereupon shall surrender to the Landlord said premises and all
interest therein, and the Landlord may reenter and take possession of said
premises and remove the Tenant therefrom. The Tenant shall pay rent, duly
apportioned, up to the time of such termination of this Lease.
If, however, the damage shall be such that such an architect so shall
certify that said demised premises can be made tenantable within such number of
days from the happening of such damage by fire or other catastrophe, then the
Landlord shall repair the damage so done with all reasonable speed, and the rent
shall be abated only for the period during which the Tenant shall be deprived of
the use of said premises by reason of such damage and the repair thereof.
If said demised premises, without the fault of the Tenant, shall be
slightly damaged by fire or other catastrophe but not so as to render the same
untenantable, the Landlord, after receiving notice in writing of the occurrence
of the injury, shall cause the same to be repaired with reasonable promptness;
but in such event, there shall be no abatement of the rent.
In case the building throughout be so injured or damaged, whether by
fire or otherwise (though said demised premises may not be affected) that the
Landlord within sixty (60) days after the happening of such injury, shall decide
to reconstruct, rebuild, or raze said building, and shall enter into a legal and
binding contract therefor, then upon thirty (30) days' notice in writing to that
effect given by the Landlord to the Tenant, this Lease shall cease and terminate
from the date of the occurrence of said damage, and the Tenant shall pay the
rent, properly apportioned, up to such date, and both parties hereto shall be
free and discharged of all further obligations hereunder.
In the event of a condemnation or other taking by any governmental
agency, all proceeds shall be paid to the Landlord hereunder, the Tenant waiving
all right to any such payments.
INSURANCE
17. Tenant shall, at Tenant's expense, obtain and keep in full force,
fire and liability insurance as may be reasonably required by the Landlord.
Tenant shall provide copies of such insurance policies upon the Landlord's
request.
<PAGE>
ACCEPTANCE OF PREMISES BY TENANT
18. The taking possession of said premises by the Tenant shall be
conclusive evidence as against the Tenant that said premises were in good and
satisfactory condition when possession of the same was taken.
WAIVER
19. No waiver of any breach or Default of any one or more of the
conditions or covenants of this Lease by the Landlord shall be deemed to imply
or constitute a waiver of any succeeding or other breach or Default hereunder.
AMENDMENT OR MODIFICATION
20. The Tenant acknowledges and agrees that it has not relied upon
any statements, representations, agreements or warranties, except such as are
expressed herein, and that no amendment or modification of this Lease shall be
valid or binding unless expressed in writing and executed by the parties hereto
in the same manner as the execution of this Lease.
PAYMENTS AFTER TERMINATION
21. No payments of money by the Tenant to the Landlord after the
termination of this Lease, in any manner, or after the giving of any notice
(other than a demand for the payment of money) by the Landlord to the Tenant,
shall reinstate, continue or extend the term of this Lease or affect any notice
given to the Tenant prior to the payment of such money, it being agreed that
after the service of notice or the commencement of a suit or after final
judgment granting the Landlord possession of said premises, the Landlord may
receive and collect any sums of rent due, or any other sums of money due under
the terms of this Lease, and the payment of such sums of money whether as rent
or otherwise, shall not waive said notice, or in any manner affect any pending
suit or any judgment theretofore obtained.
HOLDING AFTER TERMINATION
22. It is mutually agreed that if after the expiration of this Lease
the Tenant shall remain in possession of said premises without a written
Agreement as to such holding, then such holding over shall be deemed to be a
holding upon a tenancy from month to month at a monthly rental equivalent to the
last monthly payment provided herein, payable in advance on the same day of each
month as above provided; all other terms and conditions of this Lease remaining
the same.
ENTRY BY LANDLORD
23. The Landlord shall have the right, by its officers or agents, to
enter the demised premises to inspect and examine the same. SEE ATTACHMENTS
<PAGE>
RULES AND REGULATIONS
24. It is further agreed that the following rules and regulations
shall be and are hereby made a part of this Lease, and the Tenant agrees that
its employees and agents, or any others permitted by the Tenant to occupy or
enter said premises, will at all times abide by said rules and regulations and
that a default in the performance and observance thereof shall operate the same
as any other defaults herein:
(1) The sidewalks, entries, passages, stairways and elevators shall
not be obstructed by the Tenant, or its agents, or used by them
for any purpose other than ingress and egress to and from their
offices.
(2) (a) Furniture, equipment or supplies shall be moved in or out of
the building only upon the elevator designated by Landlord
(if the building is so equipped) and then only during
such hours and in such manner as may be prescribed by
the Landlord.
(b) No safe or article, the weight of which may constitute a
hazard or danger to the building or its equipment, shall be
moved into the premises.
(3) Signs, notices, advertisements, or other inscriptions shall not
be placed upon any part of the building without prior approval of
the Landlord.
(4) The light through the transoms and glass partitions opening into
the halls and other parts of the building shall not be obstructed
in any way by the Tenant.
(5) Restrooms and other water fixtures shall not be used for any
purpose other than that for which the same are intended, and any
damage resulting to the same from misuse on the part of the
Tenant, its agents or employees, shall be paid for by the Tenant.
No person shall waste water by tying back or wedging the faucets,
or in any other manner.
(6) No animals shall be allowed in the offices, halls, corridors and
elevators in the building.
(7) Bicycles or other vehicles shall not be permitted in the offices,
halls, corridors and elevators in the building, nor shall any
obstruction of sidewalks or entrances of the building by such be
permitted.
<PAGE>
(8) No person shall disturb the occupants of this or adjoining
buildings or premises by the use of any radio or musical
instrument or by the making of loud or improper noises.
(9) The Tenant shall not allow anything to be placed on the outside
window ledges of the building, nor shall anything be thrown by
the Tenant, its agents or employees, out of the windows or doors,
or down the courts, elevator shafts, or skylights of the
building,
(10) No additional lock or locks shall be placed by the Tenant on any
door in the building unless written consent of the Landlord shall
first have been obtained. A reasonable number of keys to the
demised premises and to the restrooms will be furnished by the
Landlord, and neither the Tenant, its agents or employees, shall
have any duplicate key made. At the termination of this tenancy,
the Tenant shall promptly return all such keys to the Landlord.
(11) No awnings or window coverings shall be attached to the premises
without prior written approval by the Landlord. Tenant shall pay
for any damage caused by the Tenant to any window coverings
supplied by the Landlord.
(12) The Tenant, before closing and leaving the demised premises at
any time, shall see that all windows are closed, in order to
avoid possible damage from fire, storm or freezing.
(13) The use of oil, gas or flammable liquids for heating, lighting or
any other purpose is expressly prohibited. Explosives or other
articles deemed extra hazardous shall not be brought into the
building.
(14) Any painting or decorating as may be agreed to be done by and at
the expense of the Landlord shall be done during regular working
hours. Should the Tenant desire such work done on Sundays,
holidays or outside of regular working hours, the Tenant shall
pay for the extra cost thereof.
(15) The Tenant shall not mark upon, paint signs upon, cut, drill
into, drive nails or screws into, or in any way deface the walls,
ceilings, partitions or floors of the demised premises or of the
building. Any defacement, damage or injury caused by the Tenant,
its agents or employees, shall be paid for by the Tenant.
(16) The Landlord reserves the right to make such other and further
reasonable rules and regulations as in its judgment may from time
to time be needful and desirable for the safety, care and
cleanliness of the premises and for the preservation of good
order therein.
Additional Provisions: SEE ATTACHMENTS
<PAGE>
QUIET POSSESSION
The Landlord shall warrant and defend the Tenant in the enjoyment and
peaceful possession of the premises during the term aforesaid. All terms,
conditions and covenants to be obsesrved and performed by the parties hereto
shall be applicable to and binding upon their heirs, personal representatives,
successors and assigns. If there are more than one entity or persons which are
the Tenants under this Lease, all covenants and agreements herein to be
observed and performed by the Tenant shall be joint and several.
Should any provision of this Lease violate any federal, state or local
law or ordinance, that provision shall be deemed amended to so comply with such
law or ordinance, and shall be construed in a manner so as to comply.
Executed on February 6, 1996
Attest: /S/ ROBERT J. HARVEY Attest: /S/ DOUGLASS T. SIMPSON
--------------------- ---------------------
Robert J. Harvey Douglass T. Simpson
Stream Associates Reaads Medical Products, Inc.
12041 Tejon 12001 Tejon Suite 120
Westminster, CO 80234 Westminster, CO 80234
<PAGE>
ATTACHMENTS
to Reaads Medical Products, Inc. Lease
#2. RENT SCHEDULE:
First Year SEPT. 1 $109,200 annually $ 9,100.00 / mo. $ 9.10 / sf
Second Year $112,440 annually $ 9,370.00 / mo. $ 9.37 / sf
Third Year $115,800 annually $ 9,650.00 / mo. $ 9.65 / sf
Fourth Year $119,280 annually $ 9,940.00 / mo. $ 9.94 / sf
Fifth Year $122,880 annually $10,240.00 / mo. $10.24 / sf
#4. UTILITIES:
Tenant agrees to pay for electricity, gas and janitorial service for the
demised premises.
#5. FUNCTION:
Landlord and Tenant agree that Tenant shall use the demised premises for
its office headquarters, laboratory research facilities, production
facilities for the manufacture, packaging and distribution of Tenant's
human disease detection products, and other activities related to
Tenant's medical diagnostic business.
Notwithstanding the provisions of the third paragraph of paragraph 5 of
the lease, Landlord acknowledges that Tenant shall be using the demised
premises for the purposes set forth in #5 above and that Tenant may use
and keep on the demised premises such substances (including substances
required by the regulations of the U.S. Food and Drug Administration to
be labeled 'Biological Hazard') as Tenant may reasonably require to
conduct the activities set forth in #5.
#17. INSURANCE:
Tenant shall be responsible for providing insurance on his personal
furnishings, papers, equipment inventory, and other "sets held by his
business and any such liability insurance as he deems appropriate.
Tenant shall not be responsible for any insurance related to structure
or grounds.
#23. LANDLOCKED ACCESS:
(a) It is understood that Landlord shall provide prior notice of the
intent to enter and that any such visit shall occur during normal
business hours.
(b) Landlord shall have the right to show the premises to persons
wishing to lease them at any time within the last sixty days of this
Lease, providing that prior notice be given and that such visits occur
during normal business hours.
#24. LATE PAYMENT PENALTIES:
If rental payments are not received by the 10th day of the month due,
Tenant agrees to pay a late charge equal to ten percent (10%) of the
delinquent amount plus interest on the delinquent amount at ten percent
(10%) per year from the due date, until paid.
#25. OPTION TO EXTEND LEASE:
Tenant shall have the option to / extend the terms of this Lease for one
additional Period of three (3) years. Lease rate shall reflect increases
made as common to other tenants in the complex, not to exceed 5 % in any
given year and adjusted each anniversary.
#26. RIGHT OF FIRST REFUSAL ON OPEN SPACE IN THE COMPLEX:
Tenant shall be informed of any space coming open within the six
buildings on the MetroTech Centre campus. Tenant shall have three (3)
business days to enter into earnest negotiation for the space or to
advise Landlord that they will forego a lease on that specific space.
Page One of Two / Attachments
<PAGE>
#27. INJURY OR DAMAGE:
Tenant covenants and agrees to neither hold nor attempt to hold Landlord
liable for any injury or damage, either proximate or remote, occurring
through or caused by any repairs, alterations, injuries or accident to
the Demised Premises, to adjacent premises or other parts of the
buildings not herein demised, whether by reason of negligence or default
of another Tenant or any other person or otherwise; nor liable for any
injury or damage occasioned by gas, smoke, rain, snow, wind, ice, hail,
or water, however occasioned, lightning, earthquake, war, civil
disorder, strike, defective electrical wiring or the breaking or
stopping of the plumbing or sewage upon or in the building or adjacent
premises, whether said breaking or stoppage results from the freezing or
otherwise. All property kept, stored or in the Demised Premises shall be
at the sole risk of Tenant.
#28. TENANT FINISH REQUIREMENTS:
As required by Tenant and agreed upon by landlord. Final plans to be
attached to this document when available.
In general:
- 14 new walls must be built, totaling approximately 131 feet.
- Demolition of 15 wall areas is required.
- Relocation of 6 or more doors.
- HVAC layout is to be determined and realigned as necessary
- Three sewer/drain lines are to be built or extended.
- Carpet to be replaced and tile to be installed in the
laboratory area.
- Lighting to be realigned as required which may entail
installation of additional units.
It is that this general statement is not intended to define the
specifics of the tenant finish.
Page Two of Two
<PAGE>
EXHIBIT 10.10
THIS GUARANTEE is made the 1 day of November 1997 BETWEEN (1) WILLIAM GEORGE
FLEMMING of The Old Rectory Holme Cambridgeshire and DOUGLASS SIMPSON care of
Reaads Medical Products Inc. 20161 Tejon Street Westminster Colorado 80234 USA
("the Guarantors") and (2) GEOFFREY VERNON CALLEN of 24 Dry Leys Orton
Longueville Peterborough Cambridgeshire and AMIR GULAMHUSSEIN PIRMORAMED of 14
Regency Way Longthorpe Peterborough aforesaid ("the Landlord").
NOW THIS DEED WITNESSES as follows:
1. RECITALS
1.1 THE LEASE
By an Underlease ("the Underlease") dated the 26th day of
September 1995 and made between (1) the said GEOFFERRY VERNON
CALLEN and AMIR GULAMHUSSEIN PIRMOHAMED ("The Landlord") (2)
DAVID SIMON COHEN and SANDRA VIVIENNE COHEN ("the Original
Tenant") the premises known as 75 Broadway Peterborough ("the
Premises") were demised for a term of 6 years commencing on and
including 25th September 1995 ("the Term") subject to the rent
reserved by the Underlease and observance and performance of the
tenant's Covenants and the conditions contained in it.
1.2 DEVOLUTION OF TITLE
The reversion immediately expectant on the determination of the
Term remains vested in the Landlord and the unexpired residue of
the term is now vested in Reaads Bio-Medical Products (UK)
Limited ("the Tenant").
1.3 AGREEMENT TO ENTER INTO GUARANTEE
The Guarantors have agreed with the Landlord to enter into this
deed of guarantee as a condition of the Landlord's consent to
the assignment of the Underlease to the Tenant
2. INTERPRETATION
In this Deed:
2.1 the "Landlord" includes the person in whom the reversion
immediately expectant on the determination of the term is for
the time being vested
1
<PAGE>
2.2 the Original Tenant includes the successors in title of the
Original Tenant
2.3 the Underlease includes all or any Deeds and documents
supplemental to the Underlease whether or not expressed to be so
2.4 except in clause 3.2.3 the term includes any continuation or
extension of the Term and any holding over whether by statute at
common law or otherwise
2.5 the Covenant Commencement date means the date of this Deed
2.6 if any party comprises more than one person, the obligations of
that party are to be the joint and several obligations of those
persons
2.7 any reference to a clause without further designation is to be
construed as a reference to the clause of this Deed so numbered
and
2.8 words importing one gender import any other gender and words
importing the singular import the plural and vice versa.
3. THE GUARANTORS COVENANTS
3.1 NATURE AND DURATION
The Guarantors covenants with the Landlord are each given as
sole or principal debtor or covenanted with the Landlord for the
time being and with all his successors in title without the need
for any express assignment, so that the Guarantors obligations
to the Landlord will last from the Covenant Commencement Date
while the Tenant is bound by the Tenant covenants under the
Underlease
3.2 THE COVENANTS
The Guarantors jointly and severely covenant with the Landlord
to observe and perform the requirements of this Clause 3.2
3.2.1 PAYMENT AND PERFORMANCE
The Tenant must punctually pay the rents reserved by the
Underlease and observe and perform the covenants and
other terms of it, and if at any time during the
(residue of the) term the Tenant defaults in paying the
rents or in observing or performing any of the covenants
or other terms of Underlease then the Guarantor must pay
the rents and observe or perform the covenants or terms
in respect of which the Tenant is in default and make
good to the Landlord on demand, and indemnify the
2
<PAGE>
Landlord against, all liability, damage or loss, awards
of damages or compensation, penalties, costs,
disbursements and expenses resulting from such
non-payment, nonperformance or non-observance
notwithstanding
3.2.1.1 any time or indulgence granted by the Landlord
to the Tenant or any neglect or forbearance of
the Landlord in enforcing the payment of the
rents or the observance or performance of the
covenants or other terms of the Underlease or
any refusal by the Landlord to accept rent
tendered by or on behalf of the Tenant at a time
when the Landlord is entitled, or will after
service of a notice under the Law of Property
Act 1925 section 146 be entitled, to re-enter
the Premises
3.2.1.2 that the terms of the Underlease may have been
varied by agreement between the Landlord and the
Tenant (provided that no variation is to bind
the Guarantors to the extent that it is
materially prejudicial to him)
3.2.1.3 that the Tenant has surrendered part of the
Premises, in which event the liability of the
Guarantors under the Underlease is to continue
in respect of the part of the Premises not
surrendered after making any necessary
apportionments under the Law of Property Act
1925 section 140, and
3.2.1.4 anything else by which, but for this clause
3.2.1, the Guarantors would be released.
3.2.2 NEW UNDERLEASE FOLLOWING DISCLAIMER
If any trustee in bankruptcy or liquidator of the Tenant
disclaims the Underlease, the Guarantors must, if
required by notice served by the Landlord within 60 days
of the Landlord's becoming aware of the disclaimer, take
from the Landlord forthwith a Underlease of the Premises
for the residue of the Term as at the date of the
disclaimer, at the rent then payable under the
Underlease and subject to the same covenants and terms
as in the Underlease
3
<PAGE>
except that the Guarantors need not ensure that any
other person is made a party to that Underlease as
Guarantors-the new Underlease to commence on the date of
the disclaimer. The Guarantors must pay the costs of the
new Underlease and execute and deliver to the Landlord a
counterpart of it.
3.2.3 PAYMENTS FOLLOWING DISCLAIMER
If the Underlease is disclaimed and the Landlord does
not require the Guarantors to accept a new Underlease of
the premises in accordance with clause 3.2.2, the
Guarantors must pay to the Landlord on demand an amount
equal to the difference between any money received by
the Landlord for the use or occupation of the Premises
and the rents reserved by the Underlease for the period
commencing with the date of the disclaimer and ending on
whichever is the earlier of the date 6 months after the
disclaimer, the date, if any, on which the Premises are
relet, and the end of the Term.
4. THE GUARANTORS FURTHER COVENANT
The Guarantors further covenant with the Landlord to pay to the Landlord
on demand, and indemnify the Landlord against, all costs, charges, fees,
disbursements and expenses, including those of professional advisers and
agents and including in each case VAT, incurred by the Landlord in
connection with this deed of guarantee
5. LANDLORD'S COVENANTS
The Landlord covenants with the Guarantors to serve on the Guarantors a
notice in the form prescribed by section 27 of the Landlord and Tenant
(Covenants) Act 1995 for service for the purposes of section 17 of that
Act for recovery of a fixed charge, varied as the circumstances require,
before taking any steps to recover from the Guarantors any sum agreed by
or awarded against the Tenants a result of any breach of covenant by the
Tenant, and agrees that service of such a notice within 6 months of the
agreement or award is to be a condition precedent to the Guarantors'
liability for such sums.
IN WITNESS whereof the parties hereto have hereunto set their hands and seals
the day and year first before written.
4
<PAGE>
Signed as a Deed by the said
WILLIAM GEORGE FLEMMING
in the presence of
Signed as a Deed by the said
DOUGLASS SIMPSON
in the presence of
Signed as a Deed by the said
GEOFFREY VERNON CALLEN
in the presence of
Signed as a Deed by the said
AMIR GULAMHUSSEIN PIRMOHAMED
in the presence of
5
<PAGE>
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
Agreement made as of May 22, 1998, between CORGENIX MEDICAL CORPORATION,
a Nevada corporation ("Corgenix" or the "Company") and LUIS R. LOPEZ, M.D. ("DR.
LOPEZ").
RECITALS
A. DR. LOPEZ currently serves as CHIEF EXECUTIVE OFFICER ("CEO") of REAADS
Medical Products, Inc. ("REAADS"), a wholly owned subsidiary of the
Company.
B. DR. LOPEZ possesses intimate and valuable knowledge of the business and
affairs of REAADS and its policies, procedures, methods and personnel.
C. The Company desires to assure DR. LOPEZ' continued services not only to
REAADS but also to the Company and the Company's other affiliates (as
defined in paragraph 1(a) below).
D. DR. LOPEZ is willing to commit himself to serve the Company and its
affiliates on the terms provided herein.
TERMS AND CONDITIONS
In consideration of the preceding premises and of the respective
covenants and agreements of the parties contained herein, and other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties agree as follows:
1. EMPLOYMENT. The Company agrees to employ DR. LOPEZ, and DR. LOPEZ
agrees to be employed by the Company, for the period beginning as of the date of
this Agreement, and ending upon termination pursuant to paragraph 1(c) hereof
(the "employment period").
(a) SERVICES. During the employment period, DR. LOPEZ will serve
as CEO of the Company and will have general supervision over, and responsibility
for the executive management of the Company, and shall perform such duties
relative thereto and discharge such other responsibilities as the Company or the
Board of Directors shall assign to him, from time to time. DR. LOPEZ shall
report directly to, be accountable to, and be subject to the authority of, the
Board. DR. LOPEZ will devote his best efforts and his full and exclusive
business time and attention (except for vacation periods and reasonable periods
of illness or other incapacity) to the business of the Company and its
affiliates. The Board of Directors of the Company reserves to itself the right
from time to time to designate the officers of the Company and to assign the
duties and responsibilities of the employees and officers of the Company,
including without limitation, the office, if any, held by DR. LOPEZ. In this
regard, the Board of Directors may from time to time assign additional duties to
DR. LOPEZ, and may from time to time assign to other employees or officers of
the Company duties to be discharged by
<PAGE>
DR. LOPEZ. For purposes of this Agreement, the term "affiliates" means any
corporation, partnership, joint venture, trust or unincorporated association
controlled by or under common control with the Company.
(b) SALARY, BONUS AND BENEFITS. During the employment period, the
Company will pay DR. LOPEZ a base salary at the rate of at least $160,000 per
annum or at such higher rate as the Board designates from time to time.
Following the end of each fiscal year, the Board, in its sole discretion, may
award a bonus to DR. LOPEZ, as determined by the Board if in its judgment DR.
LOPEZ has met the goals and objectives approved by the Board for such year. At
the end of each fiscal year of the Company, the Board shall review DR. LOPEZ'
salary and make such adjustments as it deems appropriate, taking into account
DR. LOPEZ' performance and the performance of the Company. DR. LOPEZ' base
salary and bonus, if any, for any partial year will be prorated based upon the
number of days elapsed in such year. In addition to the salary and bonus, if
any, payable to DR. LOPEZ pursuant to this paragraph, DR. LOPEZ will be entitled
to the following benefits during the employment period, unless otherwise altered
by the Board:
(i) health insurance and disability insurance of such
coverage as may be reasonably determined by the Board
and term life insurance in an amount equal to three
times DR. LOPEZ' base salary (excluding bonuses);
(ii) a maximum of three weeks vacation each year with
salary;
(iii) reimbursement for reasonable business expenses incurred
by DR. LOPEZ upon submission of documentation in form
reasonably satisfactory to the Company; and
(iv) reasonable moving and relocation expenses if DR. LOPEZ
is required to relocate by the Board upon submission of
documentation in form reasonably satisfactory to the
Company.
(c) TERMINATION. The employment period will continue until the
first to occur of (i) the third anniversary of the date of this Agreement, (ii)
DR. LOPEZ' resignation, death or Disability (as defined below), (iii) a
determination by the Board in its good faith judgment that termination of DR.
LOPEZ' employment is in the best interests of the Company under circumstances
which would not constitute termination for Cause (in which DR. LOPEZ will be
entitled to severance pay as described at paragraph 1(d) below and such
severance benefits shall be DR. LOPEZ' only remedy with respect to such
termination), or (iv) the date on which DR. LOPEZ is terminated by the Board for
Cause (as defined below). For purposes of this Agreement, the term "Cause" means
(i) the commission of an act by DR. LOPEZ involving fraud, embezzlement or a
felony, (ii) the commission of any act by DR. LOPEZ constituting financial
dishonesty against the Company or any of its affiliates, (iii) the commission by
DR. LOPEZ of any other criminal act
<PAGE>
involving moral turpitude which (a) brings the Company or any of its affiliates
into public disrepute or disgrace or (b) causes, or in the good faith
determination of the Board of Directors of the Company, could cause material
harm to the customer relations, operations or business prospects of the Company
or any of its affiliates, (iv) the violation by DR. LOPEZ of any material
provision of this Agreement, (v) the commission by DR. LOPEZ of any other act
which is contrary to the Company's interests for his personal benefit (and the
failure to remedy such act within 15 days following notification by the Company
to DR. LOPEZ of the occurrence of such act), (vi) willful disobedience to the
lawful directives of the Company and/or the Board of Directors of the Company,
or (vii) failure to adequately perform, in the good faith judgment of the Board
of Directors, the services, duties and responsibilities assigned to DR. LOPEZ by
the Company and/or the Board of Directors of the Company, whether or not such
failure is intentional. "Disability" shall mean the inability of DR. LOPEZ to
perform his normal duties and functions under this Agreement for a continuous
period of at least three months or a recurring illness that is likely to prevent
DR. LOPEZ from performing his normal duties and functions under this Agreement
for more than four months during any 12-month period as determined in the good
faith opinion by a physician selected by the Board.
(d) SEVERANCE PAY. In the event that DR. LOPEZ' employment is
terminated without Cause pursuant to paragraph 1 (c) (iii) above, the Company
will pay to DR. LOPEZ all amounts due to DR. LOPEZ as salary pursuant to
paragraph 1 (b), and maintain for DR. LOPEZ the health and disability insurance
pursuant to paragraph 1 (b) (i), through the first to occur of (i) the second
anniversary of the employment termination date or (ii) the third anniversary of
the date of this Agreement (such salary to be paid in monthly installments
through such third anniversary date) provided that DR. LOPEZ should at all time
honor and comply with the provisions of paragraphs 2,3 and 5 of this Agreement.
2. CONFIDENTIAL INFORMATION. DR. LOPEZ acknowledges that the
information, observations, data, customer and supplier lists, processes,
formulae, product compositions, manufacturing techniques, standards, protocols,
drawings, research and related data, specifications, know-how and trade secrets
(collectively, "Confidential Information") obtained by him during the course of
his performance under this Agreement concerning the business or affairs of the
Company and its affiliates are the property of the Company and its affiliates.
Therefore, DR. LOPEZ agrees that he will not disclose to any unauthorized person
or entity (other than in the ordinary course of business) or use for his own
account or the account of a third party any of such Confidential Information
without the prior written consent of the Board, unless and to the extent that
the aforementioned matters (i) become generally known to and available for use
by the public other than as a result of DR. LOPEZ' acts or omissions to act or
the wrongful acts or omissions to act of another or (ii) such disclosure is
required by court order or force of law. DR. LOPEZ agrees to deliver to the
Company at the termination of his employment, or at any other time the Company
may request, all memoranda, notes, plans, records, reports and other documents
(and
<PAGE>
copies thereof) containing any Confidential Information or relating to the
business of the Company and its affiliates which he may then possess or have
under his control.
3. DISCLOSURE AND ASSIGNMENT OF INTELLECTUAL PROPERTY.
(a) DR. LOPEZ agrees that any Intellectual Property (as hereinafter
defined) that he, alone or with others, may conceive, develop, make or perfect,
in whole or in part, during the term of the employment period and for a period
of twelve (12) months after any termination of the employment period, whichever
shall occur later, which relate to the Company's business, or that he alone or
with others, may conceive, develop, make or perfect, in whole or in part, in the
performance of the duties of his employment by the Company, shall be promptly
and fully disclosed in writing by DR. LOPEZ to the Company. All of the right,
title and interest in and to any Intellectual Property shall be and hereby is
assigned exclusively to the Company or its nominee regardless of whether or not
the conception, development, marketing or perfection of such Intellectual
Property involved the use of the Company's time, facilities or materials and
regardless of where such Intellectual Property may be conceived, made or
perfected, and shall become the sole property of the Company or its nominee. For
purposes hereof, the term "Intellectual Property" shall mean inventions,
discoveries, ideas, concepts, systems, works, trade secrets, know-how,
intellectual property, pharmacological research, pharmacological protocols,
pharmacological documentation, products, processes or improvements or
modifications of current products, processes or designs, or methods of product
development, manufacture, distribution, management or otherwise (whether or not
covered by or able to be covered by a patent or copyright) which relate to the
business of the Company and/or its affiliates.
(b) DR. LOPEZ agrees to execute and deliver all documents and do all
acts which the Company shall deem necessary or desirable to secure to the
Company or its nominee the entire right, title and interest in and to
applications for any United States and/or Foreign Letters Patent or Certificates
of Copyright registration in the name of or for the benefit of the Company or,
in the discretion of the Company, in DR. LOPEZ' name, which patents and
copyrights shall then be assigned by DR. LOPEZ to the Company. Any document
described above which is prepared and filed pursuant to this paragraph, shall be
so prepared and filed at the Company's expense. DR. LOPEZ and the Company agree
that wherever and whenever possible, any such document shall be in the name of
and executed by the Company, but if it is necessary for such document to be in
the name of and executed by DR. LOPEZ and DR. LOPEZ is unwilling or unable to
execute such document, DR. LOPEZ hereby irrevocably appoints the President of
the Company, or his successor, as his attorney-in-fact, with authority to
execute for him and on his behalf, any and all assignments, patent or copyright
applications, or other instruments an documents pursuant to this paragraph 3(b).
(c) Company shall have no obligation to use, attempt to protect by
application for Letters Patent or Certificates of Copyright Registration or
promote any of said Intellectual Property; provided, however, that
<PAGE>
the Company, in its sole discretion, may reward DR. LOPEZ for any especially
meritorious contributions in any manner it deems appropriate or may provide DR.
LOPEZ with full or partial releases as to any subject matter contributed by DR.
LOPEZ in which the Company is not interested.
(d) DR. LOPEZ agrees that the covenants made in this paragraph 3 shall
be construed as an agreement independent of any other provision of this
Agreement, and shall survive the termination of this Agreement. Moreover, the
existence of any claim or cause of action of DR. LOPEZ against the Company, or
an affiliate of the Company, whether or not predicated upon the terms of this
Agreement, shall not constitute a defense to the enforcement of this covenant.
4. OTHER BUSINESSES. During the employment period, DR. LOPEZ agrees
that he will not, except with the prior written consent of the Board, become
engaged in, render services for, or permit his name to be used in connection
with, any business other than the business of the Company and its affiliates.
5. RESTRICTIONS ON RIGHT TO COMPETE. DR. LOPEZ agrees that during
the term of the employment period (as defined in paragraph 1(c)) and until the
first anniversary of the termination of the employment period, he will not,
except with the prior written consent of the Board, directly or indirectly,
either for himself or for any other person, partnership, corporation, joint
venture, business trust, cooperative, limited partnership or other entity,
participate in any enterprise involving the same or similar business or research
and development in which the Company is engaged at any time during DR. LOPEZ'
employment or upon termination. For purposes of this Agreement, the term
"participate" includes any direct or indirect interest in any enterprise,
whether as an officer, director, employee, partner, sole proprietor, agent,
representative, independent contractor, consultant, creditor, owner (other than
by ownership of less than one percent of the stock of a publicly-held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market) or otherwise. The geographical area covered by this
covenant is North America. DR. LOPEZ agrees that this covenant is reasonable
with respect to its duration, geographical area and scope.
6. NOTICES. Any notice provided for in this Agreement must be in
writing and will be deemed to have been given (i) when personally delivered,
(ii) one business day after being sent by Federal Express or other similar
overnight delivery service or (iii) three business days after being mailed by
first class mail, to the recipient at the address below indicated:
To the Company:
CORGENIX MEDICAL CORPORATION
12061 Tejon Street
Westminster CO 80234
Attention: President
<PAGE>
To DR. LOPEZ:
LUIS R. LOPEZ, M.D.
11433 East Yale Place
Aurora CO 80014
or such other address or to the attention of such person as the recipient party
shall have specified by prior written notice to the sending party.
7. SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
8. BLUE LINING. If any court of competent jurisdiction determines
that any of the restrictive covenants in this Agreement, or any part thereof, is
invalid or unenforceable because of the geographic or temporal scope of such
provision, it is the intention and agreement of the parties that such court
shall have the power to reduce the geographic or temporal scope of such
provision, as the case may be, and, in its reduced form, such provision shall
then be enforceable.
9. COMPLETE AGREEMENT. This Agreement embodies the complete
agreement and understanding among the parties with respect to the subject matter
of this Agreement and supersedes and preempts any prior negotiations,
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
10. COUNTERPARTs. This Agreement may be executed on separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
11. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and by enforceable by DR. LOPEZ and the Company and
their respective successors and assigns, except that DR. LOPEZ may not assign
any of his rights or obligations under paragraphs 1,2,3,4 and 5.
12. CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the internal
law, and not the law of conflicts, of the State of Colorado.
13. REMEDIES. Each of the parties to this Agreement will be entitled
to enforce its rights under this Agreement specifically, to recover damages by
reason of breach of any provision of this Agreement and to exercise all other
rights existing in its favor. The parties hereto agree and acknowledge that
money damages may not be an adequate
<PAGE>
remedy for any breach of the provisions of this Agreement and that any party may
in its sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief in order to
enforce or prevent any violations of the provisions of this Agreement.
14. AMENDMENTS AND WAIVERS. Any provision of this Agreement may be
amended or waived only with the prior written consent of the Company and DR.
LOPEZ.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
CORGENIX MEDICAL CORPORATION
By: /S/ DOUGLASS T. SIMPSON
----------------------------
Its: PRESIDENT
----------------------------
/S/ LUIS R. LOPEZ
----------------------------
LUIS R. LOPEZ, M.D.
<PAGE>
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
Agreement made as of May 22, 1998, between CORGENIX MEDICAL CORPORATION,
a Nevada corporation ("Corgenix" or the "Company") and DOUGLASS T. SIMPSON
("MR. SIMPSON").
RECITALS
A. MR. SIMPSON currently serves as President ("President") of REAADS
Medical Products, Inc. ("REAADS"), a wholly owned subsidiary of the
Company.
B. MR. SIMPSON possesses intimate and valuable knowledge of the business
and affairs of REAADS and its policies, procedures, methods and
personnel.
C. The Company desires to assure MR. SIMPSON's continued services not
only to REAADS but also to the Company and the Company's other
affiliates (as defined in paragraph 1(a) below).
D. MR. SIMPSON is willing to commit himself to serve the Company and its
affiliates on the terms provided herein.
TERMS AND CONDITIONS
In consideration of the preceding premises and of the respective
covenants and agreements of the parties contained herein, and other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties agree as follows:
1. EMPLOYMENT. The Company agrees to employ MR. SIMPSON, and
MR. SIMPSON agrees to be employed by the Company, for the period beginning as of
the date of this Agreement, and ending upon termination pursuant to paragraph
1(c) hereof (the "employment period").
(a) SERVICES. During the employment period, MR. SIMPSON will
serve as President of the Company and will have general supervision over, and
responsibility for the business of the Company, and shall perform such duties
relative thereto and discharge such other responsibilities as the Company or the
Board of Directors shall assign to him, from time to time. MR. SIMPSON shall
report directly to, be accountable to, and be subject to the authority of, the
Board. MR. SIMPSON will devote his best efforts and his full and exclusive
business time and attention (except for vacation periods and reasonable periods
of illness or other incapacity) to the business of the Company and its
affiliates. The Board of Directors of the Company reserves to itself the right
from time to time to designate the officers of the Company and to assign the
duties and responsibilities of the employees and officers of the Company,
including without limitation, the office, if any, held by MR. SIMPSON. In this
regard, the Board of Directors may from time to time assign additional duties to
MR. SIMPSON, and may from time to time assign to other employees or officers of
the Company duties to be
<PAGE>
discharged by MR. SIMPSON. For purposes of this Agreement, the term "affiliates"
means any corporation, partnership, joint venture, trust or unincorporated
association controlled by or under common control with the Company.
(b) SALARY, BONUS AND BENEFITS. During the employment period, the
Company will pay MR. SIMPSON a base salary at the rate of at least $140,000 per
annum or at such higher rate as the Board designates from time to time.
Following the end of each fiscal year, the Board, in its sole discretion, may
award a bonus to MR. SIMPSON, as determined by the Board if in its judgment MR.
SIMPSON has met the goals and objectives approved by the Board for such year. At
the end of each fiscal year of the Company, the Board shall review MR. SIMPSON's
salary and make such adjustments as it deems appropriate, taking into account
MR. SIMPSON's performance and the performance of the Company. MR. SIMPSON's base
salary and bonus, if any, for any partial year will be prorated based upon the
number of days elapsed in such year. In addition to the salary and bonus, if
any, payable to MR. SIMPSON pursuant to this paragraph, MR. SIMPSON will be
entitled to the following benefits during the employment period, unless
otherwise altered by the Board:
(i) health insurance and disability insurance of such
coverage as may be reasonably determined by the Board
and term life insurance in an amount equal to three
times MR. SIMPSON's base salary (excluding bonuses);
(ii) a maximum of three weeks vacation each year with
salary;
(iii) reimbursement for reasonable business expenses incurred
by MR. SIMPSON upon submission of documentation in form
reasonably satisfactory to the Company; and
(iv) reasonable moving and relocation expenses if
MR. SIMPSON is required to relocate by the Board upon
submission of documentation in form reasonably
satisfactory to the Company.
(c) TERMINATION. The employment period will continue until the
first to occur of (i) the third anniversary of the date of this Agreement, (ii)
MR. SIMPSON's resignation, death or Disability (as defined below), (iii) a
determination by the Board in its good faith judgment that termination of MR.
SIMPSON's employment is in the best interests of the Company under circumstances
which would not constitute termination for Cause (in which MR. SIMPSON will be
entitled to severance pay as described at paragraph 1(d) below and such
severance benefits shall be MR. SIMPSON's only remedy with respect to such
termination), or (iv) the date on which MR. SIMPSON is terminated by the Board
for Cause (as defined below). For purposes of this Agreement, the term "Cause"
means (i) the commission of an act by MR. SIMPSON involving fraud, embezzlement
or a felony, (ii) the commission of any act by MR. SIMPSON constituting
financial dishonesty against the Company or any of
<PAGE>
its affiliates, (iii) the commission by MR. SIMPSON of any other criminal act
involving moral turpitude which (a) brings the Company or any of its affiliates
into public disrepute or disgrace or (b) causes, or in the good faith
determination of the Board of Directors of the Company, could cause material
harm to the customer relations, operations or business prospects of the Company
or any of its affiliates, (iv) the violation by MR. SIMPSON of any material
provision of this Agreement, (v) the commission by MR. SIMPSON of any other act
which is contrary to the Company's interests for his personal benefit (and the
failure to remedy such act within 15 days following notification by the Company
to MR. SIMPSON of the occurrence of such act), (vi) willful disobedience to the
lawful directives of the Company and/or the Board of Directors of the Company,
or (vii) failure to adequately perform, in the good faith judgment of the Board
of Directors, the services, duties and responsibilities assigned to MR. SIMPSON
by the Company and/or the Board of Directors of the Company, whether or not such
failure is intentional. "Disability" shall mean the inability of MR. SIMPSON to
perform his normal duties and functions under this Agreement for a continuous
period of at least three months or a recurring illness that is likely to prevent
MR. SIMPSON from performing his normal duties and functions under this Agreement
for more than four months during any 12-month period as determined in the good
faith opinion by a physician selected by the Board.
(d) SEVERANCE PAY. In the event that MR. SIMPSON's employment is
terminated without Cause pursuant to paragraph 1 (c) (iii) above, the Company
will pay to MR. SIMPSON all amounts due to MR. SIMPSON as salary pursuant to
paragraph 1 (b), and maintain for MR. SIMPSON the health and disability
insurance pursuant to paragraph 1 (b) (i), through the first to occur of (i) the
second anniversary of the employment termination date or (ii) the third
anniversary of the date of this Agreement (such salary to be paid in monthly
installments through such third anniversary date) provided that MR. SIMPSON
should at all time honor and comply with the provisions of paragraphs 2,3 and 5
of this Agreement.
2. CONFIDENTIAL INFORMATION. MR. SIMPSON acknowledges that the
information, observations, data, customer and supplier lists, processes,
formulae, product compositions, manufacturing techniques, standards, protocols,
drawings, research and related data, specifications, know-how and trade secrets
(collectively, "Confidential Information") obtained by him during the course of
his performance under this Agreement concerning the business or affairs of the
Company and its affiliates are the property of the Company and its affiliates.
Therefore, MR. SIMPSON agrees that he will not disclose to any unauthorized
person or entity (other than in the ordinary course of business) or use for his
own account or the account of a third party any of such Confidential Information
without the prior written consent of the Board, unless and to the extent that
the aforementioned matters (i) become generally known to and available for use
by the public other than as a result of MR. SIMPSON's acts or omissions to act
or the wrongful acts or omissions to act of another or (ii) such disclosure is
required by court order or force of law. MR. SIMPSON agrees to deliver to the
Company at the termination of his employment, or at any other time the Company
may
<PAGE>
request, all memoranda, notes, plans, records, reports and other documents (and
copies thereof) containing any Confidential Information or relating to the
business of the Company and its affiliates which he may then possess or have
under his control.
3. DISCLOSURE AND ASSIGNMENT OF INTELLECTUAL PROPERTY.
(a) MR. SIMPSON agrees that any Intellectual Property (as hereinafter
defined) that he, alone or with others, may conceive, develop, make or perfect,
in whole or in part, during the term of the employment period and for a period
of twelve (12) months after any termination of the employment period, whichever
shall occur later, which relate to the Company's business, or that he alone or
with others, may conceive, develop, make or perfect, in whole or in part, in the
performance of the duties of his employment by the Company, shall be promptly
and fully disclosed in writing by MR. SIMPSON to the Company. All of the right,
title and interest in and to any Intellectual Property shall be and hereby is
assigned exclusively to the Company or its nominee regardless of whether or not
the conception, development, marketing or perfection of such Intellectual
Property involved the use of the Company's time, facilities or materials and
regardless of where such Intellectual Property may be conceived, made or
perfected, and shall become the sole property of the Company or its nominee. For
purposes hereof, the term "Intellectual Property" shall mean inventions,
discoveries, ideas, concepts, systems, works, trade secrets, know-how,
intellectual property, pharmacological research, pharmacological protocols,
pharmacological documentation, products, processes or improvements or
modifications of current products, processes or designs, or methods of product
development, manufacture, distribution, management or otherwise (whether or not
covered by or able to be covered by a patent or copyright) which relate to the
business of the Company and/or its affiliates.
(b) MR. SIMPSON agrees to execute and deliver all documents and do all
acts which the Company shall deem necessary or desirable to secure to the
Company or its nominee the entire right, title and interest in and to
applications for any United States and/or Foreign Letters Patent or Certificates
of Copyright registration in the name of or for the benefit of the Company or,
in the discretion of the Company, in MR. SIMPSON's name, which patents and
copyrights shall then be assigned by MR. SIMPSON to the Company. Any document
described above which is prepared and filed pursuant to this paragraph, shall be
so prepared and filed at the Company's expense. MR. SIMPSON and the Company
agree that wherever and whenever possible, any such document shall be in the
name of and executed by the Company, but if it is necessary for such document to
be in the name of and executed by MR. SIMPSON and MR. SIMPSON is unwilling or
unable to execute such document, MR. SIMPSON hereby irrevocably appoints the
President of the Company, or his successor, as his attorney-in-fact, with
authority to execute for him and on his behalf, any and all assignments, patent
or copyright applications, or other instruments an documents pursuant to this
paragraph 3(b).
(c) Company shall have no obligation to use, attempt to protect by
application for Letters Patent or Certificates of Copyright Registration
<PAGE>
or promote any of said Intellectual Property; provided, however, that the
Company, in its sole discretion, may reward MR. SIMPSON for any especially
meritorious contributions in any manner it deems appropriate or may provide MR.
SIMPSON with full or partial releases as to any subject matter contributed by
MR. SIMPSON in which the Company is not interested.
(d) MR. SIMPSON agrees that the covenants made in this paragraph
3 shall be construed as an agreement independent of any other provision of this
Agreement, and shall survive the termination of this Agreement. Moreover, the
existence of any claim or cause of action of MR. SIMPSON against the Company, or
an affiliate of the Company, whether or not predicated upon the terms of this
Agreement, shall not constitute a defense to the enforcement of this covenant.
4. OTHER BUSINESSES. During the employment period, MR. SIMPSON
agrees that he will not, except with the prior written consent of the Board,
become engaged in, render services for, or permit his name to be used in
connection with, any business other than the business of the Company and its
affiliates.
5. RESTRICTIONS ON RIGHT TO COMPETE. MR. SIMPSON agrees that during
the term of the employment period (as defined in paragraph 1 (c) ) and until the
first anniversary of the termination of the employment period, he will not,
except with the prior written consent of the Board, directly or indirectly,
either for himself or for any other person, partnership, corporation, joint
venture, business trust, cooperative, limited partnership or other entity,
participate in any enterprise involving the same or similar business or research
and development in which the Company is engaged at any time during MR. SIMPSON's
employment or upon termination. For purposes of this Agreement, the term
"participate" includes any direct or indirect interest in any enterprise,
whether as an officer, director, employee, partner, sole proprietor, agent,
representative, independent contractor, consultant, creditor, owner (other than
by ownership of less than one percent of the stock of a publicly-held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market) or otherwise. The geographical area covered by this
covenant is North America. MR. SIMPSON agrees that this covenant is reasonable
with respect to its duration, geographical area and scope.
6. NOTICES. Any notice provided for in this Agreement must be in
writing and will be deemed to have been given (i) when personally delivered,
(ii) one business day after being sent by Federal Express or other similar
overnight delivery service or (iii) three business days after being mailed by
first class mail, to the recipient at the address below indicated:
To the Company:
CORGENIX MEDICAL CORPORATION
12061 Tejon Street
Westminster CO 80234
Attention: President
<PAGE>
To MR. SIMPSON:
DOUGLASS T. SIMPSON
402 Juniper Avenue
Boulder CO 80304
or such other address or to the attention of such person as the recipient party
shall have specified by prior written notice to the sending party.
7. SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
8. BLUE LINING. If any court of competent jurisdiction determines
that any of the restrictive covenants in this Agreement, or any part thereof, is
invalid or unenforceable because of the geographic or temporal scope of such
provision, it is the intention and agreement of the parties that such court
shall have the power to reduce the geographic or temporal scope of such
provision, as the case may be, and, in its reduced form, such provision shall
then be enforceable.
9. COMPLETE AGREEMENT. This Agreement embodies the complete
agreement and understanding among the parties with respect to the subject matter
of this Agreement and supersedes and preempts any prior negotiations,
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
10. COUNTERPARTS. This Agreement may be executed on separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
11. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and by enforceable by MR. SIMPSON and the Company and
their respective successors and assigns, except that MR. SIMPSON may not assign
any of his rights or obligations under paragraphs 1,2,3,4 and 5.
12. CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the internal
law, and not the law of conflicts, of the State of Colorado.
13. REMEDIES. Each of the parties to this Agreement will be entitled
to enforce its rights under this Agreement specifically, to recover damages by
reason of breach of any provision of this Agreement and to exercise all other
rights existing in its favor. The parties
<PAGE>
hereto agree and acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that any party may in its
sole discretion apply to any court of law or equity of competent jurisdiction
for specific performance and/or injunctive relief in order to enforce or prevent
any violations of the provisions of this Agreement.
14. AMENDMENTS AND WAIVERS. Any provision of this Agreement may be
amended or waived only with the prior written consent of the Company and MR.
SIMPSON.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
CORGENIX MEDICAL CORPORATION
By: /S/ LUIS R. LOPEZ
------------------------------
Its: CEO
------------------------------
/S/ DOUGLASS T. SIMPSON
------------------------------
DOUGLASS T. SIMPSON
<PAGE>
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
Agreement made as of May 22, 1998, between CORGENIX MEDICAL CORPORATION,
a Nevada corporation ("Corgenix" or the "Company") and ANN L. STEINBARGER
("MS. STEINBARGER").
RECITALS
A. MS. STEINBARGER currently serves as Vice President, Sales and
Marketing of REAADS Medical Products, Inc. ("REAADS"), a wholly owned
subsidiary of the Company.
B. MS. STEINBARGER possesses intimate and valuable knowledge of the
business and affairs of REAADS and its policies, procedures, methods and
personnel.
C. The Company desires to assure MS. STEINBARGER's continued services not
only to REAADS but also to the Company and the Company's other
affiliates (as defined in paragraph 1(a) below).
D. MS. STEINBARGER is willing to commit herself to serve the Company and
its affiliates on the terms provided herein.
TERMS AND CONDITIONS
In consideration of the preceding premises and of the respective
covenants and agreements of the parties contained herein, and other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties agree as follows:
1. EMPLOYMENT. The Company agrees to employ MS. STEINBARGER, and MS.
STEINBARGER agrees to be employed by the Company, for the period beginning as of
the date of this Agreement, and ending upon termination pursuant to paragraph
1(c) hereof (the "employment period").
(a) SERVICES. During the employment period, MS. STEINBARGER will
serve as Vice President, Sales and Marketing of the Company and will have
general supervision over, and responsibility for the sales and marketing, and
shall perform such duties relative thereto and discharge such other
responsibilities as the Company or the Board of Directors shall assign to her,
from time to time. MS. STEINBARGER shall report directly to, be accountable to,
and be subject to the authority of, the Board. MS. STEINBARGER will devote her
best efforts and her full and exclusive business time and attention (except for
vacation periods and reasonable periods of illness or other incapacity) to the
business of the Company and its affiliates. The Board of Directors of the
Company reserves to itself the right from time to time to designate the officers
of the Company and to assign the duties and responsibilities of the employees
and officers of the Company, including without limitation, the office, if any,
held by MS. STEINBARGER. In this regard, the Board of Directors may from time to
time assign additional duties to MS. STEINBARGER, and may from time to time
assign to other employees or
<PAGE>
officers of the Company duties to be discharged by MS. STEINBARGER. For purposes
of this Agreement, the term "affiliates" means any corporation, partnership,
joint venture, trust or unincorporated association controlled by or under common
control with the Company.
(b) SALARY, BONUS AND BENEFITS. During the employment period, the
Company will pay MS. STEINBARGER a base salary at the rate of at least $100,000
per annum or at such higher rate as the Board designates from time to time.
Following the end of each fiscal year, the Board, in its sole discretion, may
award a bonus to MS. STEINBARGER, as determined by the Board if in its judgment
MS. STEINBARGER has met the goals and objectives approved by the Board for such
year. At the end of each fiscal year of the Company, the Board shall review MS.
STEINBARGER's salary and make such adjustments as it deems appropriate, taking
into account MS. STEINBARGER's performance and the performance of the Company.
MS. STEINBARGER's base salary and bonus, if any, for any partial year will be
prorated based upon the number of days elapsed in such year. In addition to the
salary and bonus, if any, payable to MS. STEINBARGER pursuant to this paragraph,
MS. STEINBARGER will be entitled to the following benefits during the employment
period, unless otherwise altered by the Board:
(i) health insurance and disability insurance of such
coverage as may be reasonably determined by the Board
and term life insurance in an amount equal to three
times MS. STEINBARGER's base salary (excluding
bonuses);
(ii) a maximum of three weeks vacation each year with
salary;
(iii) reimbursement for reasonable business expenses
incurred by MS. STEINBARGER upon submission of
documentation in form reasonably satisfactory to the
Company; and
(iv) reasonable moving and relocation expenses if MS.
STEINBARGER is required to relocate by the Board upon
submission of documentation in form reasonably
satisfactory to the Company.
(c) TERMINATION. The employment period will continue until the
first to occur of (i) the third anniversary of the date of this Agreement, (ii)
MS. STEINBARGER's resignation, death or Disability (as defined below), (iii) a
determination by the Board in its good faith judgment that termination of MS.
STEINBARGER's employment is in the best interests of the Company under
circumstances which would not constitute termination for Cause (in which MS.
STEINBARGER will be entitled to severance pay as described at paragraph 1(d)
below and such severance benefits shall be MS. STEINBARGER's only remedy with
respect to such termination), or (iv) the date on which MS. STEINBARGER is
terminated by the Board for Cause (as defined below). For purposes of this
Agreement, the term "Cause" means (i) the commission of an act by MS.
STEINBARGER involving fraud, embezzlement or a felony, (ii) the commission of
any
<PAGE>
act by MS. STEINBARGER constituting financial dishonesty against the Company or
any of its affiliates, (iii) the commission by MS. STEINBARGER of any other
criminal act involving moral turpitude which (a) brings the Company or any of
its affiliates into public disrepute or disgrace or (b) causes, or in the good
faith determination of the Board of Directors of the Company, could cause
material harm to the customer relations, operations or business prospects of the
Company or any of its affiliates, (iv) the violation by MS. STEINBARGER of any
material provision of this Agreement, (v) the commission by MS. STEINBARGER of
any other act which is contrary to the Company's interests for her personal
benefit (and the failure to remedy such act within 15 days following
notification by the Company to MS. STEINBARGER of the occurrence of such act),
(vi) willful disobedience to the lawful directives of the Company and/or the
Board of Directors of the Company, or (vii) failure to adequately perform, in
the good faith judgment of the Board of Directors, the services, duties and
responsibilities assigned to MS. STEINBARGER by the Company and/or the Board of
Directors of the Company, whether or not such failure is intentional.
"Disability" shall mean the inability of MS. STEINBARGER to perform her normal
duties and functions under this Agreement for a continuous period of at least
three months or a recurring illness that is likely to prevent MS. STEINBARGER
from performing her normal duties and functions under this Agreement for more
than four months during any 12-month period as determined in the good faith
opinion by a physician selected by the Board.
(d) SEVERANCE PAY. In the event that MS. STEINBARGER's employment
is terminated without Cause pursuant to paragraph 1 (c) (iii) above, the Company
will pay to MS. STEINBARGER all amounts due to MS. STEINBARGER as salary
pursuant to paragraph 1 (b), and maintain for MS. STEINBARGER the health and
disability insurance pursuant to paragraph 1 (b) (i), through the first to occur
of (i) the second anniversary of the employment termination date or (ii) the
third anniversary of the date of this Agreement (such salary to be paid in
monthly installments through such third anniversary date) provided that MS.
STEINBARGER should at all time honor and comply with the provisions of
paragraphs 2,3 and 5 of this Agreement.
2. CONFIDENTIAL INFORMATION. MS. STEINBARGER acknowledges that the
information, observations, data, customer and supplier lists, processes,
formulae, product compositions, manufacturing techniques, standards, protocols,
drawings, research and related data, specifications, know-how and trade secrets
(collectively, "Confidential Information") obtained by her during the course of
her performance under this Agreement concerning the business or affairs of the
Company and its affiliates are the property of the Company and its affiliates.
Therefore, MS. STEINBARGER agrees that she will not disclose to any unauthorized
person or entity (other than in the ordinary course of business) or use for her
own account or the account of a third party any of such Confidential Information
without the prior written consent of the Board, unless and to the extent that
the aforementioned matters (i) become generally known to and available for use
by the public other than as a result of MS. STEINBARGER's acts or omissions to
act or the wrongful acts or omissions to act of another or (ii) such disclosure
is
<PAGE>
required by court order or force of law. MS. STEINBARGER agrees to deliver to
the Company at the termination of her employment, or at any other time the
Company may request, all memoranda, notes, plans, records, reports and other
documents (and copies thereof) containing any Confidential Information or
relating to the business of the Company and its affiliates which she may then
possess or have under her control.
3. DISCLOSURE AND ASSIGNMENT OF INTELLECTUAL PROPERTY.
(a) MS. STEINBARGER agrees that any Intellectual Property (as
hereinafter defined) that she, alone or with others, may conceive, develop, make
or perfect, in whole or in part, during the term of the employment period and
for a period of twelve (12) months after any termination of the employment
period, whichever shall occur later, which relate to the Company's business, or
that she alone or with others, may conceive, develop, make or perfect, in whole
or in part, in the performance of the duties of her employment by the Company,
shall be promptly and fully disclosed in writing by MS. STEINBARGER to the
Company. All of the right, title and interest in and to any Intellectual
Property shall be and hereby is assigned exclusively to the Company or its
nominee regardless of whether or not the conception, development, marketing or
perfection of such Intellectual Property involved the use of the Company's time,
facilities or materials and regardless of where such Intellectual Property may
be conceived, made or perfected, and shall become the sole property of the
Company or its nominee. For purposes hereof, the term "Intellectual Property"
shall mean inventions, discoveries, ideas, concepts, systems, works, trade
secrets, know-how, intellectual property, pharmacological research,
pharmacological protocols, pharmacological documentation, products, processes or
improvements or modifications of current products, processes or designs, or
methods of product development, manufacture, distribution, management or
otherwise (whether or not covered by or able to be covered by a patent or
copyright) which relate to the business of the Company and/or its affiliates.
(b) MS. STEINBARGER agrees to execute and deliver all documents and do
all acts which the Company shall deem necessary or desirable to secure to the
Company or its nominee the entire right, title and interest in and to
applications for any United States and/or Foreign Letters Patent or Certificates
of Copyright registration in the name of or for the benefit of the Company or,
in the discretion of the Company, in MS. STEINBARGER's name, which patents and
copyrights shall then be assigned by MS. STEINBARGER to the Company. Any
document described above which is prepared and filed pursuant to this paragraph,
shall be so prepared and filed at the Company's expense. MS. STEINBARGER and the
Company agree that wherever and whenever possible, any such document shall be in
the name of and executed by the Company, but if it is necessary for such
document to be in the name of and executed by MS. STEINBARGER and MS.
STEINBARGER is unwilling or unable to execute such document, MS. STEINBARGER
hereby irrevocably appoints the President of the Company, or his successor, as
her attorney-in-fact, with authority to execute for her and on her behalf, any
and all assignments, patent or copyright applications, or other instruments an
documents pursuant to this paragraph 3(b).
<PAGE>
(c) Company shall have no obligation to use, attempt to protect by
application for Letters Patent or Certificates of Copyright Registration or
promote any of said Intellectual Property; provided, however, that the Company,
in its sole discretion, may reward MS. STEINBARGER for any especially
meritorious contributions in any manner it deems appropriate or may provide MS.
STEINBARGER with full or partial releases as to any subject matter contributed
by MS. STEINBARGER in which the Company is not interested.
(d) MS. STEINBARGER agrees that the covenants made in this paragraph 3
shall be construed as an agreement independent of any other provision of this
Agreement, and shall survive the termination of this Agreement. Moreover, the
existence of any claim or cause of action of MS. STEINBARGER against the
Company, or an affiliate of the Company, whether or not predicated upon the
terms of this Agreement, shall not constitute a defense to the enforcement of
this covenant.
4. OTHER BUSINESSES. During the employment period, MS. STEINBARGER
agrees that she will not, except with the prior written consent of the Board,
become engaged in, render services for, or permit her name to be used in
connection with, any business other than the business of the Company and its
affiliates.
5. RESTRICTIONS ON RIGHT TO COMPETE. MS. STEINBARGER agrees that
during the term of the employment period (as defined in paragraph 1 (c)) and
until the first anniversary of the termination of the employment period, she
will not, except with the prior written consent of the Board, directly or
indirectly, either for herself or for any other person, partnership,
corporation, joint venture, business trust, cooperative, limited partnership or
other entity, participate in any enterprise involving the same or similar
business or research and development in which the Company is engaged at any time
during MS. STEINBARGER's employment or upon termination. For purposes of this
Agreement, the term "participate" includes any direct or indirect interest in
any enterprise, whether as an officer, director, employee, partner, sole
proprietor, agent, representative, independent contractor, consultant, creditor,
owner (other than by ownership of less than one percent of the stock of a
publicly-held corporation whose stock is traded on a national securities
exchange or in the over-the-counter market) or otherwise. The geographical area
covered by this covenant is North America. MS. STEINBARGER agrees that this
covenant is reasonable with respect to its duration, geographical area and
scope.
6. NOTICES. Any notice provided for in this Agreement must be in
writing and will be deemed to have been given (i) when personally delivered,
(ii) one business day after being sent by Federal Express or other similar
overnight delivery service or (iii) three business days after being mailed by
first class mail, to the recipient at the address below indicated:
To the Company:
<PAGE>
CORGENIX MEDICAL CORPORATION
12061 Tejon Street
Westminster CO 80234
Attention: President
To MS. STEINBARGER:
ANN L. STEINBARGER
10635 W. Ontario Place
Littleton CO 80127
or such other address or to the attention of such person as the recipient party
shall have specified by prior written notice to the sending party.
7. SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
8. BLUE LINING. If any court of competent jurisdiction determines
that any of the restrictive covenants in this Agreement, or any part thereof, is
invalid or unenforceable because of the geographic or temporal scope of such
provision, it is the intention and agreement of the parties that such court
shall have the power to reduce the geographic or temporal scope of such
provision, as the case may be, and, in its reduced form, such provision shall
then be enforceable.
9. OMPLETE AGREEMENT. This Agreement embodies the complete agreement
and understanding among the parties with respect to the subject matter of this
Agreement and supersedes and preempts any prior negotiations, understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.
10. COUNTERPARTS. This Agreement may be executed on separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
11. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and by enforceable by MS. STEINBARGER and the Company
and their respective successors and assigns, except that MS. STEINBARGER may not
assign any of her rights or obligations under paragraphs 1,2,3,4 and 5.
12. CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the internal
law, and not the law of conflicts, of the State of Colorado.
<PAGE>
13. REMEDIES. Each of the parties to this Agreement will be entitled
to enforce its rights under this Agreement specifically, to recover damages by
reason of breach of any provision of this Agreement and to exercise all other
rights existing in its favor. The parties hereto agree and acknowledge that
money damages may not be an adequate remedy for any breach of the provisions of
this Agreement and that any party may in its sole discretion apply to any court
of law or equity of competent jurisdiction for specific performance and/or
injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement.
14. AMENDMENTS AND WAIVERS. Any provision of this Agreement may be
amended or waived only with the prior written consent of the Company and MS.
STEINBARGER.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
CORGENIX MEDICAL CORPORATION
By: /S/ DOUGLASS T. SIMPSON
--------------------------------
Its: PRESIDENT
-------------------------------
/S/ ANN L. STEINBARGER MAY 20, 1998
------------------------------
ANN L. STEINBARGER
<PAGE>
REAADS MEDICAL PRODUCTS, INC. LETTERHEAD
May 20, 1998
Ms. Ann Steinbargar
10635 West Ontario Place
Littleton CO 80127
Dear Ms. Steinbargar:
This letter is to acknowledge that the Company is aware that you have an
existing relationship with A.R. Medical Supply ("ARM"), a Littleton based
supplier of durable medical goods, and that such relationship predated your
joining the Company in 1996.
Based on previous discussions regarding AMR, we understand that you are a
partial owner of ARM, but have no involvement in day-to-day operations, and in
any case, ARM and REAADS do not compete either directly or indirectly.
You are hereby authorized to allow your name to continue being used as an
officer of record of ARM. However, should you determine that your involvement
with ARM will increase beyond what you have previously disclosed to the
Company, you must disclose this fact in writing to the REAADS Board of
Directors for their prior written approval.
This letter will serve as an amendment to your Employment Agreement dated
May 20, 1998.
Sincerely,
/S/ DOUGLASS T. SIMPSON
Douglass T. Simpson
President
Acknowledged:
/S/ ANN L. STEINBARGER MAY 20, 1998
- ---------------------- --------------
Ann L. Steinbargar date
<PAGE>
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
Agreement made as of May 22, 1998, between CORGENIX MEDICAL CORPORATION,
a Nevada corporation ("Corgenix" or the "Company") and TARYN G. REYNOLDS
("MR. REYNOLDS").
RECITALS
A. MR. REYNOLDS currently serves as Vice President, Operations of REAADS
Medical Products, Inc. ("REAADS"), a wholly owned subsidiary of the
Company.
B. MR. REYNOLDS possesses intimate and valuable knowledge of the
business and affairs of REAADS and its policies, procedures, methods and
personnel.
C. The Company desires to assure MR. REYNOLDS' continued services not
only to REAADS but also to the Company and the Company's other
affiliates (as defined in paragraph 1(a) below).
D. MR. REYNOLDS is willing to commit himself to serve the Company and
its affiliates on the terms provided herein.
TERMS AND CONDITIONS
In consideration of the preceding premises and of the respective
covenants and agreements of the parties contained herein, and other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties agree as follows:
1. EMPLOYMENT. The Company agrees to employ MR. REYNOLDS, and MR.
REYNOLDS agrees to be employed by the Company, for the period beginning as of
the date of this Agreement, and ending upon termination pursuant to paragraph
1(c) hereof (the "employment period").
(a) SERVICES. During the employment period, MR. REYNOLDS will
serve as Vice President, Operations of the Company and will have general
supervision over, and responsibility for the US operation, and shall perform
such duties relative thereto and discharge such other responsibilities as the
Company or the Board of Directors shall assign to him, from time to time. MR.
REYNOLDS shall report directly to, be accountable to, and be subject to the
authority of, the Board. MR. REYNOLDS will devote his best efforts and his full
and exclusive business time and attention (except for vacation periods and
reasonable periods of illness or other incapacity) to the business of the
Company and its affiliates. The Board of Directors of the Company reserves to
itself the right from time to time to designate the officers of the Company and
to assign the duties and responsibilities of the employees and officers of the
Company, including without limitation, the office, if any, held by MR. REYNOLDS.
In this regard, the Board of Directors may from time to time assign additional
duties to MR. REYNOLDS, and may from time to time assign to other employees or
officers of the Company duties
<PAGE>
to be discharged by MR. REYNOLDS. For purposes of this Agreement, the term
"affiliates" means any corporation, partnership, joint venture, trust or
unincorporated association controlled by or under common control with the
Company.
(b) SALARY, BONUS AND BENEFITS. During the employment period, the
Company will pay MR. REYNOLDS a base salary at the rate of at least $90,000 per
annum or at such higher rate as the Board designates from time to time.
Following the end of each fiscal year, the Board, in its sole discretion, may
award a bonus to MR. REYNOLDS, as determined by the Board if in its judgment MR.
REYNOLDS has met the goals and objectives approved by the Board for such year.
At the end of each fiscal year of the Company, the Board shall review MR.
REYNOLDS' salary and make such adjustments as it deems appropriate, taking into
account MR. REYNOLDS' performance and the performance of the Company. MR.
REYNOLDS' base salary and bonus, if any, for any partial year will be prorated
based upon the number of days elapsed in such year. In addition to the salary
and bonus, if any, payable to MR. REYNOLDS pursuant to this paragraph, MR.
REYNOLDS will be entitled to the following benefits during the employment
period, unless otherwise altered by the Board:
(i) health insurance and disability insurance of such
coverage as may be reasonably determined by the Board
and term life insurance in an amount equal to three
times MR. REYNOLDS' base salary (excluding bonuses);
(ii) a maximum of three weeks vacation each year with
salary;
(iii) reimbursement for reasonable business expenses incurred
by MR. REYNOLDS upon submission of documentation in
form reasonably satisfactory to the Company; and
(iv) reasonable moving and relocation expenses if
MR. REYNOLDS is required to relocate by the Board upon
submission of documentation in form reasonably
satisfactory to the Company.
(c) TERMINATION. The employment period will continue until the
first to occur of (i) the third anniversary of the date of this Agreement, (ii)
MR. REYNOLDS' resignation, death or Disability (as defined below), (iii) a
determination by the Board in its good faith judgment that termination of MR.
REYNOLDS' employment is in the best interests of the Company under circumstances
which would not constitute termination for Cause (in which MR. REYNOLDS will be
entitled to severance pay as described at paragraph 1(d) below and such
severance benefits shall be MR. REYNOLDS' only remedy with respect to such
termination), or (iv) the date on which MR. REYNOLDS is terminated by the Board
for Cause (as defined below). For purposes of this Agreement, the term "Cause"
means (i) the commission of an act by MR. REYNOLDS involving fraud, embezzlement
or a felony, (ii) the commission of any
<PAGE>
act by MR. REYNOLDS constituting financial dishonesty against the Company or any
of its affiliates, (iii) the commission by MR. REYNOLDS of any other criminal
act involving moral turpitude which (a) brings the Company or any of its
affiliates into public disrepute or disgrace or (b) causes, or in the good faith
determination of the Board of Directors of the Company, could cause material
harm to the customer relations, operations or business prospects of the Company
or any of its affiliates, (iv) the violation by MR. REYNOLDS of any material
provision of this Agreement, (v) the commission by MR. REYNOLDS of any other act
which is contrary to the Company's interests for his personal benefit (and the
failure to remedy such act within 15 days following notification by the Company
to MR. REYNOLDS of the occurrence of such act), (vi) willful disobedience to the
lawful directives of the Company and/or the Board of Directors of the Company,
or (vii) failure to adequately perform, in the good faith judgment of the Board
of Directors, the services, duties and responsibilities assigned to MR. REYNOLDS
by the Company and/or the Board of Directors of the Company, whether or not such
failure is intentional. "Disability" shall mean the inability of MR. REYNOLDS to
perform his normal duties and functions under this Agreement for a continuous
period of at least three months or a recurring illness that is likely to prevent
MR. REYNOLDS from performing his normal duties and functions under this
Agreement for more than four months during any 12-month period as determined in
the good faith opinion by a physician selected by the Board.
(d) SEVERANCE PAY. In the event that MR. REYNOLDS' employment is
terminated without Cause pursuant to paragraph 1 (c) (iii) above, the Company
will pay to MR. REYNOLDS all amounts due to MR. REYNOLDS as salary pursuant to
paragraph 1 (b), and maintain for MR. REYNOLDS the health and disability
insurance pursuant to paragraph 1 (b) (i), through the first to occur of (i) the
second anniversary of the employment termination date or (ii) the third
anniversary of the date of this Agreement (such salary to be paid in monthly
installments through such third anniversary date) provided that MR. REYNOLDS
should at all time honor and comply with the provisions of paragraphs 2,3 and 5
of this Agreement.
2. CONFIDENTIAL INFORMATION. MR. REYNOLDS acknowledges that the
information, observations, data, customer and supplier lists, processes,
formulae, product compositions, manufacturing techniques, standards, protocols,
drawings, research and related data, specifications, know-how and trade secrets
(collectively, "Confidential Information") obtained by him during the course of
his performance under this Agreement concerning the business or affairs of the
Company and its affiliates are the property of the Company and its affiliates.
Therefore, MR. REYNOLDS agrees that he will not disclose to any unauthorized
person or entity (other than in the ordinary course of business) or use for his
own account or the account of a third party any of such Confidential Information
without the prior written consent of the Board, unless and to the extent that
the aforementioned matters (i) become generally known to and available for use
by the public other than as a result of MR. REYNOLDS' acts or omissions to act
or the wrongful acts or omissions to act of another or (ii) such disclosure is
required by court order or force of law. MR. REYNOLDS agrees to deliver to the
<PAGE>
Company at the termination of his employment, or at any other time the Company
may request, all memoranda, notes, plans, records, reports and other documents
(and copies thereof) containing any Confidential Information or relating to the
business of the Company and its affiliates which he may then possess or have
under his control.
3. DISCLOSURE AND ASSIGNMENT OF INTELLECTUAL PROPERTY.
(a) MR. REYNOLDS agrees that any Intellectual Property (as hereinafter
defined) that he, alone or with others, may conceive, develop, make or perfect,
in whole or in part, during the term of the employment period and for a period
of twelve (12) months after any termination of the employment period, whichever
shall occur later, which relate to the Company's business, or that he alone or
with others, may conceive, develop, make or perfect, in whole or in part, in the
performance of the duties of his employment by the Company, shall be promptly
and fully disclosed in writing by MR. REYNOLDS to the Company. All of the right,
title and interest in and to any Intellectual Property shall be and hereby is
assigned exclusively to the Company or its nominee regardless of whether or not
the conception, development, marketing or perfection of such Intellectual
Property involved the use of the Company's time, facilities or materials and
regardless of where such Intellectual Property may be conceived, made or
perfected, and shall become the sole property of the Company or its nominee. For
purposes hereof, the term "Intellectual Property" shall mean inventions,
discoveries, ideas, concepts, systems, works, trade secrets, know-how,
intellectual property, pharmacological research, pharmacological protocols,
pharmacological documentation, products, processes or improvements or
modifications of current products, processes or designs, or methods of product
development, manufacture, distribution, management or otherwise (whether or not
covered by or able to be covered by a patent or copyright) which relate to the
business of the Company and/or its affiliates.
MR. REYNOLDS agrees to execute and deliver all documents and do all acts
which the Company shall deem necessary or desirable to secure to the Company or
its nominee the entire right, title and interest in and to applications for any
United States and/or Foreign Letters Patent or Certificates of Copyright
registration in the name of or for the benefit of the Company or, in the
discretion of the Company, in MR. REYNOLDS' name, which patents and copyrights
shall then be assigned by MR. REYNOLDS to the Company. Any document described
above which is prepared and filed pursuant to this paragraph, shall be so
prepared and filed at the Company's expense. MR. REYNOLDS and the Company agree
that wherever and whenever possible, any such document shall be in the name of
and executed by the Company, but if it is necessary for such document to be in
the name of and executed by MR. REYNOLDS and MR. REYNOLDS is unwilling or unable
to execute such document, MR. REYNOLDS hereby irrevocably appoints the President
of the Company, or his successor, as his attorney-in-fact, with authority to
execute for him and on his behalf, any and all assignments, patent or copyright
applications, or other instruments and documents pursuant to this paragraph
3(b).
<PAGE>
(a) Company shall have no obligation to use, attempt to protect
by application for Letters Patent or Certificates of Copyright Registration or
promote any of said Intellectual Property; provided, however, that the Company,
in its sole discretion, may reward MR. REYNOLDS for any especially meritorious
contributions in any manner it deems appropriate or may provide MR. REYNOLDS
with full or partial releases as to any subject matter contributed by MR.
REYNOLDS in which the Company is not interested.
(b) MR. REYNOLDS agrees that the covenants made in this paragraph
3 shall be construed as an agreement independent of any other provision of this
Agreement, and shall survive the termination of this Agreement. Moreover, the
existence of any claim or cause of action of MR. REYNOLDS against the Company,
or an affiliate of the Company, whether or not predicated upon the terms of this
Agreement, shall not constitute a defense to the enforcement of this covenant.
4. OTHER BUSINESSES. During the employment period, MR. REYNOLDS
agrees that he will not, except with the prior written consent of the Board,
become engaged in, render services for, or permit his name to be used in
connection with, any business other than the business of the Company and its
affiliates.
5. RESTRICTIONS ON RIGHT TO COMPETE. MR. REYNOLDS agrees that during
the term of the employment period (as defined in paragraph 1(c)) and until the
first anniversary of the termination of the employment period, he will not,
except with the prior written consent of the Board, directly or indirectly,
either for himself or for any other person, partnership, corporation, joint
venture, business trust, cooperative, limited partnership or other entity,
participate in any enterprise involving the same or similar business or research
and development in which the Company is engaged at any time during MR. REYNOLDS'
employment or upon termination. For purposes of this Agreement, the term
"participate" includes any direct or indirect interest in any enterprise,
whether as an officer, director, employee, partner, sole proprietor, agent,
representative, independent contractor, consultant, creditor, owner (other than
by ownership of less than one percent of the stock of a publicly-held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market) or otherwise. The geographical area covered by this
covenant is North America. MR. REYNOLDS agrees that this covenant is reasonable
with respect to its duration, geographical area and scope.
6. NOTICES. Any notice provided for in this Agreement must be in
writing and will be deemed to have been given (i) when personally delivered,
(ii) one business day after being sent by Federal Express or other similar
overnight delivery service or (iii) three business days after being mailed by
first class mail, to the recipient at the address below indicated:
<PAGE>
To the Company:
CORGENIX MEDICAL CORPORATION
12061 Tejon Street
Westminster CO 80234
Attention: President
To MR. REYNOLDS:
TARYN G. REYNOLDS
7465 Otis
Arvada CO 80003
or such other address or to the attention of such person as the recipient party
shall have specified by prior written notice to the sending party.
7. SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
8. BLUE LINING. If any court of competent jurisdiction determines
that any of the restrictive covenants in this Agreement, or any part thereof, is
invalid or unenforceable because of the geographic or temporal scope of such
provision, it is the intention and agreement of the parties that such court
shall have the power to reduce the geographic or temporal scope of such
provision, as the case may be, and, in its reduced form, such provision shall
then be enforceable.
9. COMPLETE AGREEMENT. This Agreement embodies the complete
agreement and understanding among the parties with respect to the subject matter
of this Agreement and supersedes and preempts any prior negotiations,
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
10. COUNTERPARTS. This Agreement may be executed on separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
11. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and by enforceable by MR. REYNOLDS and the Company and
their respective successors and assigns, except that MR. REYNOLDS may not assign
any of his rights or obligations under paragraphs 1,2,3,4 and 5.
<PAGE>
12. CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the internal
law, and not the law of conflicts, of the State of Colorado.
13. REMEDIES. Each of the parties to this Agreement will be entitled
to enforce its rights under this Agreement specifically, to recover damages by
reason of breach of any provision of this Agreement and to exercise all other
rights existing in its favor. The parties hereto agree and acknowledge that
money damages may not be an adequate remedy for any breach of the provisions of
this Agreement and that any party may in its sole discretion apply to any court
of law or equity of competent jurisdiction for specific performance and/or
injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement.
14. AMENDMENTS AND WAIVERS. Any provision of this Agreement may be
amended or waived only with the prior written consent of the Company and MR.
REYNOLDS.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
CORGENIX MEDICAL CORPORATION
By: /S/ DOUGLASS T. SIMPSON
----------------------------------
Its: PRESIDENT
----------------------------------
/S/ TARYN G. REYNOLDS
----------------------------------
TARYN G. REYNOLDS
<PAGE>
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
Agreement made as of May 22, 1998, between CORGENIX MEDICAL CORPORATION,
a Nevada corporation ("Corgenix" or the "Company") and CATHERINE A. FINK, PH.D
("DR. FINK").
RECITALS
A. DR. FINK currently serves as Scientific Director of REAADS Medical
Products, Inc. ("REAADS"), a wholly owned subsidiary of the Company.
B. DR. FINK possesses intimate and valuable knowledge of the business and
affairs of REAADS and its policies, procedures, methods and personnel.
C. The Company desires to assure DR. FINK's continued services not only to
REAADS but also to the Company and the Company's other affiliates (as
defined in paragraph 1(a) below).
D. DR. FINK is willing to commit herself to serve the Company and its
affiliates on the terms provided herein.
TERMS AND CONDITIONS
In consideration of the preceding premises and of the respective
covenants and agreements of the parties contained herein, and other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties agree as follows:
1. EMPLOYMENT. The Company agrees to employ DR. FINK, and DR. FINK
agrees to be employed by the Company, for the period beginning as of the date of
this Agreement, and ending upon termination pursuant to paragraph 1(c) hereof
(the "employment period").
(a) SERVICES. During the employment period, DR. FINK will serve
as Scientific Director of the Company and will have general supervision over,
and responsibility for technical management, and shall perform such duties
relative thereto and discharge such other responsibilities as the Company or the
Board of Directors shall assign to her, from time to time. DR. FINK shall report
directly to, be accountable to, and be subject to the authority of, the Board.
DR. FINK will devote her best efforts and her full and exclusive business time
and attention (except for vacation periods and reasonable periods of illness or
other incapacity) to the business of the Company and its affiliates. The Board
of Directors of the Company reserves to itself the right from time to time to
designate the officers of the Company and to assign the duties and
responsibilities of the employees and officers of the Company, including without
limitation, the office, if any, held by DR. FINK. In this regard, the Board of
Directors may from time to time assign additional duties to DR. FINK, and may
from time to time assign to other employees or officers of the Company duties to
be discharged by
<PAGE>
DR. FINK. For purposes of this Agreement, the term "affiliates" means any
corporation, partnership, joint venture, trust or unincorporated association
controlled by or under common control with the Company.
(b) SALARY, BONUS AND BENEFITS. During the employment period, the
Company will pay DR. FINK a base salary at the rate of at least $80,000 per
annum or at such higher rate as the Board designates from time to time.
Following the end of each fiscal year, the Board, in its sole discretion, may
award a bonus to DR. FINK, as determined by the Board if in its judgment DR.
FINK has met the goals and objectives approved by the Board for such year. At
the end of each fiscal year of the Company, the Board shall review DR. FINK's
salary and make such adjustments as it deems appropriate, taking into account
DR. FINK's performance and the performance of the Company. DR. FINK's base
salary and bonus, if any, for any partial year will be prorated based upon the
number of days elapsed in such year. In addition to the salary and bonus, if
any, payable to DR. FINK pursuant to this paragraph, DR. FINK will be entitled
to the following benefits during the employment period, unless otherwise altered
by the Board:
(i) health insurance and disability insurance of such
coverage as may be reasonably determined by the Board
and term life insurance in an amount equal to three
times DR. FINK's base salary (excluding bonuses);
(ii) a maximum of three weeks vacation each year with
salary;
(iii) reimbursement for reasonable business expenses
incurred by DR. FINK upon submission of documentation
in form reasonably satisfactory to the Company; and
(iv) reasonable moving and relocation expenses if DR. FINK
is required to relocate by the Board upon submission
of documentation in form reasonably satisfactory to
the Company.
(c) TERMINATION. The employment period will continue until the
first to occur of (i) the third anniversary of the date of this Agreement, (ii)
DR. FINK's resignation, death or Disability (as defined below), (iii) a
determination by the Board in its good faith judgment that termination of DR.
FINK's employment is in the best interests of the Company under circumstances
which would not constitute termination for Cause (in which DR. FINK will be
entitled to severance pay as described at paragraph 1(d) below and such
severance benefits shall be DR. FINK's only remedy with respect to such
termination), or (iv) the date on which DR. FINK is terminated by the Board for
Cause (as defined below). For purposes of this Agreement, the term "Cause" means
(i) the commission of an act by DR. FINK involving fraud, embezzlement or a
felony, (ii) the commission of any act by DR. FINK constituting financial
dishonesty against the Company or any of its affiliates, (iii) the commission by
DR. FINK of any other criminal act involving moral
<PAGE>
turpitude which (a) brings the Company or any of its affiliates into public
disrepute or disgrace or (b) causes, or in the good faith determination of the
Board of Directors of the Company, could cause material harm to the customer
relations, operations or business prospects of the Company or any of its
affiliates, (iv) the violation by DR. FINK of any material provision of this
Agreement, (v) the commission by DR. FINK of any other act which is contrary to
the Company's interests for her personal benefit (and the failure to remedy such
act within 15 days following notification by the Company to DR. FINK of the
occurrence of such act), (vi) willful disobedience to the lawful directives of
the Company and/or the Board of Directors of the Company, or (vii) failure to
adequately perform, in the good faith judgment of the Board of Directors, the
services, duties and responsibilities assigned to DR. FINK by the Company and/or
the Board of Directors of the Company, whether or not such failure is
intentional. "Disability" shall mean the inability of DR. FINK to perform her
normal duties and functions under this Agreement for a continuous period of at
least three months or a recurring illness that is likely to prevent DR. FINK
from performing her normal duties and functions under this Agreement for more
than four months during any 12-month period as determined in the good faith
opinion by a physician selected by the Board.
(d) SEVERANCE PAY. In the event that DR. FINK's employment is
terminated without Cause pursuant to paragraph 1 (c) (iii) above, the Company
will pay to DR. FINK all amounts due to DR. FINK as salary pursuant to paragraph
1 (b), and maintain for DR. FINK the health and disability insurance pursuant to
paragraph 1 (b) (i), through the first to occur of (i) the second anniversary of
the employment termination date or (ii) the third anniversary of the date of
this Agreement (such salary to be paid in monthly installments through such
third anniversary date) provided that DR. FINK should at all time honor and
comply with the provisions of paragraphs 2,3 and 5 of this Agreement.
2. CONFIDENTIAL INFORMATION. DR. FINK acknowledges that the
information, observations, data, customer and supplier lists, processes,
formulae, product compositions, manufacturing techniques, standards, protocols,
drawings, research and related data, specifications, know-how and trade secrets
(collectively, "Confidential Information") obtained by her during the course of
her performance under this Agreement concerning the business or affairs of the
Company and its affiliates are the property of the Company and its affiliates.
Therefore, DR. FINK agrees that she will not disclose to any unauthorized person
or entity (other than in the ordinary course of business) or use for her own
account or the account of a third party any of such Confidential Information
without the prior written consent of the Board, unless and to the extent that
the aforementioned matters (i) become generally known to and available for use
by the public other than as a result of DR. FINK's acts or omissions to act or
the wrongful acts or omissions to act of another or (ii) such disclosure is
required by court order or force of law. DR. FINK agrees to deliver to the
Company at the termination of her employment, or at any other time the Company
may request, all memoranda, notes, plans, records, reports and other documents
(and copies thereof) containing any Confidential Information or relating to the
business of
<PAGE>
the Company and its affiliates which she may then possess or have under her
control.
3. DISCLOSURE AND ASSIGNMENT OF INTELLECTUAL PROPERTY.
(a) DR. FINK agrees that any Intellectual Property (as hereinafter
defined) that she, alone or with others, may conceive, develop, make or perfect,
in whole or in part, during the term of the employment period and for a period
of twelve (12) months after any termination of the employment period, whichever
shall occur later, which relate to the Company's business, or that she alone or
with others, may conceive, develop, make or perfect, in whole or in part, in the
performance of the duties of her employment by the Company, shall be promptly
and fully disclosed in writing by DR. FINK to the Company. All of the right,
title and interest in and to any Intellectual Property shall be and hereby is
assigned exclusively to the Company or its nominee regardless of whether or not
the conception, development, marketing or perfection of such Intellectual
Property involved the use of the Company's time, facilities or materials and
regardless of where such Intellectual Property may be conceived, made or
perfected, and shall become the sole property of the Company or its nominee. For
purposes hereof, the term "Intellectual Property" shall mean inventions,
discoveries, ideas, concepts, systems, works, trade secrets, know-how,
intellectual property, pharmacological research, pharmacological protocols,
pharmacological documentation, products, processes or improvements or
modifications of current products, processes or designs, or methods of product
development, manufacture, distribution, management or otherwise (whether or not
covered by or able to be covered by a patent or copyright) which relate to the
business of the Company and/or its affiliates.
(b) DR. FINK agrees to execute and deliver all documents and do all acts
which the Company shall deem necessary or desirable to secure to the Company or
its nominee the entire right, title and interest in and to applications for any
United States and/or Foreign Letters Patent or Certificates of Copyright
registration in the name of or for the benefit of the Company or, in the
discretion of the Company, in DR. FINK's name, which patents and copyrights
shall then be assigned by DR. FINK to the Company. Any document described above
which is prepared and filed pursuant to this paragraph, shall be so prepared and
filed at the Company's expense. DR. FINK and the Company agree that wherever and
whenever possible, any such document shall be in the name of and executed by the
Company, but if it is necessary for such document to be in the name of and
executed by DR. FINK and DR. FINK is unwilling or unable to execute such
document, DR. FINK hereby irrevocably appoints the President of the Company, or
his successor, as her attorney-in-fact, with authority to execute for her and on
her behalf, any and all assignments, patent or copyright applications, or other
instruments an documents pursuant to this paragraph 3(b).
(c) Company shall have no obligation to use, attempt to protect by
application for Letters Patent or Certificates of Copyright Registration or
promote any of said Intellectual Property; provided, however, that the Company,
in its sole discretion, may reward DR. FINK for any especially meritorious
contributions in any manner it deems appropriate
<PAGE>
or may provide DR. FINK with full or partial releases as to any subject matter
contributed by DR. FINK in which the Company is not interested.
(d) DR. FINK agrees that the covenants made in this paragraph 3 shall be
construed as an agreement independent of any other provision of this Agreement,
and shall survive the termination of this Agreement. Moreover, the existence of
any claim or cause of action of DR. FINK against the Company, or an affiliate of
the Company, whether or not predicated upon the terms of this Agreement, shall
not constitute a defense to the enforcement of this covenant.
4. OTHER BUSINESSES. During the employment period, DR. FINK agrees
that she will not, except with the prior written consent of the Board, become
engaged in, render services for, or permit her name to be used in connection
with, any business other than the business of the Company and its affiliates.
5. RESTRICTIONS ON RIGHT TO COMPETE. DR. FINK agrees that during the
term of the employment period (as defined in paragraph 1 (c)) and until the
first anniversary of the termination of the employment period, she will not,
except with the prior written consent of the Board, directly or indirectly,
either for herself or for any other person, partnership, corporation, joint
venture, business trust, cooperative, limited partnership or other entity,
participate in any enterprise involving the same or similar business or research
and development in which the Company is engaged at any time during DR. FINK's
employment or upon termination. For purposes of this Agreement, the term
"participate" includes any direct or indirect interest in any enterprise,
whether as an officer, director, employee, partner, sole proprietor, agent,
representative, independent contractor, consultant, creditor, owner (other than
by ownership of less than one percent of the stock of a publicly-held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market) or otherwise. The geographical area covered by this
covenant is North America. DR. FINK agrees that this covenant is reasonable with
respect to its duration, geographical area and scope.
6. NOTICES. Any notice provided for in this Agreement must be in
writing and will be deemed to have been given (i) when personally delivered,
(ii) one business day after being sent by Federal Express or other similar
overnight delivery service or (iii) three business days after being mailed by
first class mail, to the recipient at the address below indicated:
To the Company:
CORGENIX MEDICAL CORPORATION
12061 Tejon Street
Westminster CO 80234
Attention: President
<PAGE>
To DR. FINK:
CATHERINE A. FINK, PH.D.
4901 West 93rd Ave., #121
Westminster CO 80030
or such other address or to the attention of such person as the recipient party
shall have specified by prior written notice to the sending party.
7. SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
8. BLUE LINING. If any court of competent jurisdiction determines
that any of the restrictive covenants in this Agreement, or any part thereof, is
invalid or unenforceable because of the geographic or temporal scope of such
provision, it is the intention and agreement of the parties that such court
shall have the power to reduce the geographic or temporal scope of such
provision, as the case may be, and, in its reduced form, such provision shall
then be enforceable.
9. COMPLETE AGREEMENT. This Agreement embodies the complete
agreement and understanding among the parties with respect to the subject matter
of this Agreement and supersedes and preempts any prior negotiations,
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
10. COUNTERPARTS. This Agreement may be executed on separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
11. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and by enforceable by DR. FINK and the Company and their
respective successors and assigns, except that DR. FINK may not assign any of
her rights or obligations under paragraphs 1,2,3,4 and 5.
12. CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the internal
law, and not the law of conflicts, of the State of Colorado.
13. REMEDIES. Each of the parties to this Agreement will be entitled
to enforce its rights under this Agreement specifically, to recover damages by
reason of breach of any provision of this Agreement and to exercise all other
rights existing in its favor. The parties hereto agree and acknowledge that
money damages may not be an adequate
<PAGE>
remedy for any breach of the provisions of this Agreement and that any party may
in its sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief in order to
enforce or prevent any violations of the provisions of this Agreement.
14. AMENDMENTS AND WAIVERS. Any provision of this Agreement may be
amended or waived only with the prior written consent of the Company and DR.
FINK.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
CORGENIX MEDICAL CORPORATION
By: /S/ DOUGLASS T. SIMPSON
----------------------------------
Its: PRESIDENT
----------------------------------
/S/ CATHERINE FINK
----------------------------------
CATHERINE A. FINK, PH.D.
<PAGE>
EXHIBIT 10.16
CONSULTING CONTRACT
Agreement made as of May 22, 1998, between CORGENIX MEDICAL CORPORATION,
a Nevada corporation ("Corgenix" or the "Company") and W. GEORGE FLEMING, PH.D.
("DR. FLEMING"), and BOND BIO-TECH, LTD. ("BBT").
RECITALS
A. DR. FLEMING currently serves as Vice President, International Operations
of REAADS Medical Products, Inc. ("REAADS"), a wholly owned subsidiary
of the Company.
B. DR. FLEMING possesses intimate and valuable knowledge of the business
and affairs of REAADS and its policies, procedures, methods and
personnel.
C. The Company desires to assure DR. FLEMING's continued services not
only to REAADS but also to the Company and the Company's other
affiliates (as defined in paragraph 1(a) below).
D. DR. FLEMING is willing to commit himself to serve the Company and its
affiliates on the terms provided herein.
TERMS AND CONDITIONS
In consideration of the preceding premises and of the respective
covenants and agreements of the parties contained herein, and other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties agree as follows:
1. CONTRACT. The Company agrees to contract the services of
DR. FLEMING through BBT, and DR. FLEMING agrees to be contracted by the Company,
for the period beginning as of the date of this Consulting Contract (the
"Contract"), and ending upon termination pursuant to paragraph 1(c) hereof (the
"Contracted Period").
(a) SERVICES. During the Contracted Period, DR. FLEMING will
serve as Vice President, International Operations of the Company and will have
general supervision over, and responsibility for the Company's international
distribution, and shall perform such duties relative thereto and discharge such
other responsibilities as the Company or the Board of Directors shall assign to
him, from time to time. DR. FLEMING shall report directly to, be accountable to,
and be subject to the authority of, the Board. DR. FLEMING will devote his best
efforts and attention (except for vacation periods and reasonable periods of
illness or other incapacity) to the business of the Company and its affiliates.
The Board of Directors of the Company reserves to itself the right from time to
time to designate the officers of the Company and to assign the duties and
responsibilities of the employees and officers of the Company, including without
limitation, the office, if any, held by DR. FLEMING. In this regard, the Board
of Directors may from time to time assign additional duties to DR. FLEMING, and
may from
<PAGE>
time to time assign to other employees or officers of the Company duties to be
discharged by DR. FLEMING. For purposes of this Contract, the term "affiliates"
means any corporation, partnership, joint venture, trust or unincorporated
association controlled by or under common control with the Company.
(b) COMPENSATION. During the Contracted Period, the Company will
pay BBT an annual fee of USD $60,000 (subject to periodic review). In addition,
BBT will be paid commissions on sales of Company products to international
customers under terms of a separate sales commission program (the "Commission
Program"). In addition to the fee and commissions payable to BBT pursuant to
this paragraph, BBT will be entitled to the following compensation during the
Contracted Period, unless otherwise altered by the Board:
(i) vacation, holiday, and sick and personal leave at the
discretion of the Board;
(ii) reimbursement for reasonable business expenses incurred
by DR. FLEMING upon submission of documentation in form
reasonably satisfactory to the Company; and
(iii) certain other benefits at the discretion of the Board.
(c) TERMINATION. The Contracted Period will continue until the
first to occur of (i) the third anniversary of the date of this Contract, (ii)
DR. FLEMING's resignation, death or Disability (as defined below), (iii) a
determination by the Board in its good faith judgment that termination of DR.
FLEMING's Contract is in the best interests of the Company under circumstances
which would not constitute termination for Cause (in which BBT will be entitled
to severance pay as described at paragraph 1(d) below and such severance
benefits shall be BBT's only remedy with respect to such termination), or (iv)
the date on which DR. FLEMING is terminated by the Board for Cause (as defined
below). For purposes of this Contract, the term "Cause" means (i) the commission
of an act by DR. FLEMING involving fraud, embezzlement or a felony, (ii) the
commission of any act by DR. FLEMING constituting financial dishonesty against
the Company or any of its affiliates, (iii) the commission by DR. FLEMING of any
other criminal act involving moral turpitude which (a) brings the Company or any
of its affiliates into public disrepute or disgrace or (b) causes, or in the
good faith determination of the Board of Directors of the Company, could cause
material harm to the customer relations, operations or business prospects of the
Company or any of its affiliates, (iv) the violation by DR. FLEMING of any
material provision of this Contract, (v) the commission by DR. FLEMING of any
other act which is contrary to the Company's interests for his personal benefit
(and the failure to remedy such act within 15 days following notification by the
Company to DR. FLEMING of the occurrence of such act), (vi) willful disobedience
to the lawful directives of the Company and/or the Board of Directors of the
Company, or (vii) failure to adequately perform, in the good faith
<PAGE>
judgment of the Board of Directors, the services, duties and responsibilities
assigned to DR. FLEMING by the Company and/or the Board of Directors of the
Company, whether or not such failure is intentional. "Disability" shall mean the
inability of DR. FLEMING to perform his normal duties and functions under this
Contract for a continuous period of at least three months or a recurring illness
that is likely to prevent DR. FLEMING from performing his normal duties and
functions under this Contract for more than four months during any 12-month
period as determined in the good faith opinion by a physician selected by the
Board.
(d) SEVERANCE PAY. In the event that DR. FLEMING's Contract is
terminated without Cause pursuant to paragraph 1 (c) (iii) above, the Company
will pay to BBT all amounts due to BBT as fees pursuant to paragraph 1 (b),
(such salary to be paid in monthly installments through such third anniversary
date) provided that DR. FLEMING should at all time honor and comply with the
provisions of paragraphs 2,3 and 5 of this Contract.
2. CONFIDENTIAL INFORMATION. DR. FLEMING acknowledges that the
information, observations, data, customer and supplier lists, processes,
formulae, product compositions, manufacturing techniques, standards, protocols,
drawings, research and related data, specifications, know-how and trade secrets
(collectively, "Confidential Information") obtained by him during the course of
his performance under this Contract concerning the business or affairs of the
Company and its affiliates are the property of the Company and its affiliates.
Therefore, DR. FLEMING agrees that he will not disclose to any unauthorized
person or entity (other than in the ordinary course of business) or use for his
own account or the account of a third party any of such Confidential Information
without the prior written consent of the Board, unless and to the extent that
the aforementioned matters (i) become generally known to and available for use
by the public other than as a result of DR. FLEMING's acts or omissions to act
or the wrongful acts or omissions to act of another or (ii) such disclosure is
required by court order or force of law. DR. FLEMING agrees to deliver to the
Company at the termination of his Contract, or at any other time the Company may
request, all memoranda, notes, plans, records, reports and other documents (and
copies thereof) containing any Confidential Information or relating to the
business of the Company and its affiliates which he may then possess or have
under his control.
3. DISCLOSURE AND ASSIGNMENT OF INTELLECTUAL PROPERTY.
(a) DR. FLEMING agrees that any Intellectual Property (as hereinafter
defined) that he, alone or with others, may conceive, develop, make or perfect,
in whole or in part, during the term of the Contracted Period and for a period
of twelve (12) months after any termination of the Contracted Period, whichever
shall occur later, which relate to the Company's business, or that he alone or
with others, may conceive, develop, make or perfect, in whole or in part, in the
performance of the duties of his Contract by the Company, shall be promptly and
fully disclosed in writing by DR. FLEMING to the Company. All of the right,
title and interest in and to any Intellectual Property
<PAGE>
shall be and hereby is assigned exclusively to the Company or its nominee
regardless of whether or not the conception, development, marketing or
perfection of such Intellectual Property involved the use of the Company's time,
facilities or materials and regardless of where such Intellectual Property may
be conceived, made or perfected, and shall become the sole property of the
Company or its nominee. For purposes hereof, the term "Intellectual Property"
shall mean inventions, discoveries, ideas, concepts, systems, works, trade
secrets, know-how, intellectual property, pharmacological research,
pharmacological protocols, pharmacological documentation, products, processes or
improvements or modifications of current products, processes or designs, or
methods of product development, manufacture, distribution, management or
otherwise (whether or not covered by or able to be covered by a patent or
copyright) which relate to the business of the Company and/or its affiliates.
(b) DR. FLEMING agrees to execute and deliver all documents and do all
acts which the Company shall deem necessary or desirable to secure to the
Company or its nominee the entire right, title and interest in and to
applications for any United States and/or Foreign Letters Patent or Certificates
of Copyright registration in the name of or for the benefit of the Company or,
in the discretion of the Company, in DR. FLEMING's name, which patents and
copyrights shall then be assigned by DR. FLEMING to the Company. Any document
described above which is prepared and filed pursuant to this paragraph, shall be
so prepared and filed at the Company's expense. DR. FLEMING and the Company
agree that wherever and whenever possible, any such document shall be in the
name of and executed by the Company, but if it is necessary for such document to
be in the name of and executed by DR. FLEMING and DR. FLEMING is unwilling or
unable to execute such document, DR. FLEMING hereby irrevocably appoints the
President of the Company, or his successor, as his attorney-in-fact, with
authority to execute for him and on his behalf, any and all assignments, patent
or copyright applications, or other instruments an documents pursuant to this
paragraph 3(b).
(c) Company shall have no obligation to use, attempt to protect by
application for Letters Patent or Certificates of Copyright Registration or
promote any of said Intellectual Property; provided, however, that the Company,
in its sole discretion, may reward DR. FLEMING for any especially meritorious
contributions in any manner it deems appropriate or may provide DR. FLEMING with
full or partial releases as to any subject matter contributed by DR. FLEMING in
which the Company is not interested.
(d) DR. FLEMING agrees that the covenants made in this paragraph 3 shall
be construed as an agreement independent of any other provision of this
Contract, and shall survive the termination of this Contract. Moreover, the
existence of any claim or cause of action of DR. FLEMING against the Company, or
an affiliate of the Company, whether or not predicated upon the terms of this
Contract, shall not constitute a defense to the enforcement of this covenant.
4. OTHER BUSINESSES. During the Contracted Period, DR. FLEMING
agrees that he will inform the Board in writing of the identities and
<PAGE>
specific business of any and all other companies with which BBT has an existing
relationship , and will not, except with the prior written consent of the Board,
become engaged in, render services for, or permit his name to be used in
connection with, any additional business other than the business of the Company
and its affiliates and those previously disclosed to the Board.
5. RESTRICTIONS ON RIGHT TO COMPETE. DR. FLEMING agrees that during
the term of the Contracted Period (as defined in paragraph 1(c)) and until the
first anniversary of the termination of the contracted period, he will not,
except with the prior written consent of the Board, directly or indirectly,
either for himself or for any other person, partnership, corporation, joint
venture, business trust, cooperative, limited partnership or other entity,
participate in any enterprise involving the same or similar business or research
and development in which the Company is engaged at any time during DR. FLEMING's
Contract or upon termination. For purposes of this Contract, the term
"participate" includes any direct or indirect interest in any enterprise,
whether as an officer, director, employee, partner, sole proprietor, agent,
representative, independent contractor, consultant, creditor, owner (other than
by ownership of less than one percent of the stock of a publicly-held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market) or otherwise. The geographical area covered by this
covenant is worldwide. DR. FLEMING agrees that this covenant is reasonable with
respect to its duration, geographical area and scope.
6. NOTICES. Any notice provided for in this Contract must be in
writing and will be deemed to have been given (i) when personally delivered,
(ii) one business day after being sent by Federal Express or other similar
overnight delivery service or (iii) seven business days after being mailed by
first class mail, to the recipient at the address below indicated:
To the Company:
CORGENIX MEDICAL CORPORATION
12061 Tejon Street
Westminster, CO 80234
Attention: President
To BOND BIO-TECH, LTD:
BOND BIO-TECH, LTD.
8 Little Whyte
Ramsey, Huntingdon, CAMBS PE17 1DS
United Kingdom
or such other address or to the attention of such person as the recipient party
shall have specified by prior written notice to the sending party.
7. SEVERABILITY. Whenever possible, each provision of this Contract will
be interpreted in such manner as to be effective and valid
<PAGE>
under applicable law, but if any provision of this Contract is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability will
not affect any other provision or any other jurisdiction, but this Contract will
be reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
8. BLUE LINING. If any court of competent jurisdiction determines
that any of the restrictive covenants in this Contract, or any part thereof, is
invalid or unenforceable because of the geographic or temporal scope of such
provision, it is the intention and agreement of the parties that such court
shall have the power to reduce the geographic or temporal scope of such
provision, as the case may be, and, in its reduced form, such provision shall
then be enforceable.
9. Complete Agreement. This Contract embodies the complete agreement
and understanding among the parties with respect to the subject matter of this
Agreement and supersedes and preempts any prior negotiations, understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.
10. COUNTERPARTS. This Contract may be executed on separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
11. SUCCESSORS AND ASSIGNS. This Contract is intended to bind and
inure to the benefit of and by enforceable by BBT and the Company and their
respective successors and assigns, except that DR. FLEMING may not assign any of
his rights or obligations under paragraphs 1,2,3,4 and 5.
12. CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Contract will be governed by the internal
law, and not the law of conflicts, of the State of Colorado.
13. REMEDIES. Each of the parties to this Contract will be entitled
to enforce its rights under this Contract specifically, to recover damages by
reason of breach of any provision of this Contract and to exercise all other
rights existing in its favor. The parties hereto agree and acknowledge that
money damages may not be an adequate remedy for any breach of the provisions of
this Contract and that any party may in its sole discretion apply to any court
of law or equity of competent jurisdiction for specific performance and/or
injunctive relief in order to enforce or prevent any violations of the
provisions of this Contract.
14. AMENDMENTS AND WAIVERS. Any provision of this Contract may be
amended or waived only with the prior written consent of the Company, DR.
FLEMING and BBT.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Contract on the day
and year first above written.
CORGENIX MEDICAL CORPORATION
By: /S/ DOUGLASS T. SIMPSON
------------------------------
Its: PRESIDENT
------------------------------
W. GEORGE FLEMING
/S/ W. GEORGE FLEMING
------------------------------
BOND BIO-TECH, LTD.
/S/ W. GEORGE FLEMING
------------------------------
<PAGE>
EXHIBIT 10.17
REAADS MEDICAL PRODUCTS, INC.
--------------------------------------
STOCK PURCHASE AGREEMENT
--------------------------------------
SEPTEMBER 1, 1993
<PAGE>
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is entered into as of the 1st day of September, 1993, by
and between REAADS MEDICAL PRODUCTS, INC., a Delaware corporation (the
"Company"), and CHUGAI PHARMACEUTICAL CO. LTD., ("Purchaser").
In consideration of the mutual promises, covenants and conditions set
forth below, the parties mutually agree as follows:
1. PURCHASE AND SALE OF STOCK.
Section 1.1. ISSUANCE AND SALE. Subject to the terms and conditions in
this Agreement, the Company shall issue and sell to Purchaser at Closing a total
of 185.19 shares of its Common Stock, $.01 par value per share (the "Purchased
Stock") at a purchase price of $2,700.00 per share (the "Purchase Price").
2. CLOSING OF PURCHASE AND SALE.
Section 2.1. CLOSING. Subject to the conditions to closing set forth
below, the Company will sell to Purchaser, and Purchaser will purchase from the
Company, 185.19 shares of Purchased Stock at a price per share equal to the
Purchase Price. Closing of the sale and purchase of the Purchased Stock shall
take place (the "Closing") at the offices of Hutchinson Black and Cook on
September 1, 1993, at 12:00 noon or such other place, date and time as may be
mutually agreed to by the Company and Purchaser (the "Closing Date"). At the
Closing, the Company will deliver to Purchaser, upon tender of the purchase
price in immediately available funds or by bank check, stock certificates
representing the shares of Purchased Stock issued to Purchaser under this
Agreement.
3. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
following meanings:
"ACT" shall mean the Securities Act of 1933, as amended.
"COMPANY" shall mean Reaads Medical Products, Inc.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"GOOD ACCOUNTING PRACTICE" shall mean, as to a particular
corporation, such accounting practice as, in the opinion of the independent
certified public accountants regularly retained by such corporation, conforms at
the time to generally accepted accounting
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principles applied on a consistent basis (except for changes in application in
which such accountants concur). Any accounting terms not defined in this
Agreement shall have the respective meanings given to them under Good Accounting
Practice consistent with those applied in the preparation of the Company's
consolidated financial statements.
"MATERIAL ADVERSE EVENT" shall mean an occurrence having a
consequence which in fact is or may be materially adverse, either individually
or when viewed in the aggregate with all occurrences, as to the business,
operations, assets, or financial condition of the Company.
"PERSON" shall mean an individual, a partnership, a corporation,
an association, a joint stock company, a trust, a limited liability company, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PROPRIETARY RIGHTS" shall mean all patents, patent applications,
trademarks, trademark applications, trade secrets, service marks, trade names,
copyrights, inventions, drawings, designs, customer lists, proprietary know-how
or information, other rights with respect thereto, or any other intangible
property rights.
"STOCK PURCHASE AGREEMENT" or "AGREEMENT" shall mean this Stock
Purchase Agreement dated as of the date hereof, and as it may be amended from
time to time, and entered into between the Company and Purchaser.
"SUBSIDIARY" shall mean any corporation or partnership in which
the Company owns more than fifty percent (50%) of the stock having voting power
to elect a majority of the Board of Directors of that corporation or
partnership. "Subsidiary" also includes any partnership in which the Company or
one of its subsidiaries is a general partner or owns more than fifty percent
(50%) of the units of limited partnership.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants for itself as follows:
Section 4.1. REQUISITE POWER AND AUTHORITY. Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and to carry out its provisions. All action on
Purchaser's part required for the lawful execution and delivery of this
Agreement has been or will be effectively taken prior to the Closing Date. Upon
execution and delivery, this Agreement will be a valid and binding obligation of
Purchaser, enforceable in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting
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enforcement of creditors' rights and (ii) as limited by the application of
general principles of equity.
Section 4.2. CONSENTS. All consents, approvals, orders, authorizations
or registration, qualification, designation, declaration or filing with any
governmental or banking authority on the part of Purchaser required in
connection with the consummation of the transactions contemplated in this
Agreement have been or shall have been obtained prior to and be effective as of
the Closing.
Section 4.3. INVESTMENT REPRESENTATIONS. Purchaser understands that the
Purchased Stock has not been registered under the Act. Purchaser also
understands that the Purchased Stock is being offered and sold pursuant to an
exemption from registration contained in the Act based in part upon Purchaser's
representations contained in this Agreement. Purchaser hereby represents and
warrants as follows:
(A) RESTRICTED STOCK. Purchaser understands that the Purchased
Stock has not been registered under the Act, and the Company has no present
intention no registering the Purchased Stock. Purchaser understands that, it has
no registration rights with respect to the Purchased Stock, except as set forth
in Article 8 hereof.
(B) PURCHASER BEARS ECONOMIC RISK. Purchaser is in a position to
bear the economic risk of this investment indefinitely unless the Purchased
Stock is registered pursuant to the Act, or an exemption from registration is
available. Purchaser also understands that, even if available, such exemption
may not allow Purchaser to transfer all or any portion of the Purchased Stock,
if any, under the circumstances, in the amount or at the times Purchaser might
propose.
(C) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the
Purchased Stock for its own account for investment and not with a view toward
its distribution.
(D) PURCHASER CAN PROTECT ITS OWN INTERESTS. Purchaser represents
that by reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transaction contemplated in this Agreement. Purchaser is not a corporation or
partnership specifically formed for the purpose of consummating this
transaction.
(E) ACCREDITED INVESTOR. Purchaser qualifies as an "accredited
investor," as such term is defined in Regulation D under the Act.
(F) ACCESS TO INFORMATION. Purchaser has been given access to all
Company documents, records, and other information, has received physical
delivery of all those which it has requested, and has had adequate opportunity
to ask questions of, and receive
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answers from, the Company's officers, employees, agents, accountants and
representatives concerning the Company's business, operations, financial
condition, assets, liabilities and all other matters relevant to its investment
in the Purchased Stock. Such access to information and any investigation
undertaken by Purchaser shall not constitute a waiver of any representations and
warranties of the Company hereunder.
Section 4.4. RESTRICTIVE LEGEND.
(A) Each certificate representing Purchased Stock shall (unless
otherwise permitted by the provisions of this Agreement) be stamped or otherwise
imprinted with a legend substantially in the form of the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED OR QUALIFIED UNDER ANY FEDERAL OR STATE SECURITIES
LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED,
OR OTHERWISE TRANSFERRED UNLESS SO REGISTERED OR QUALIFIED OR
UNLESS AN EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION
EXISTS. THE AVAILABILITY OF ANY EXEMPTION FROM REGISTRATION OR
QUALIFICATION MUST BE ESTABLISHED BY AN OPINION OF COUNSEL FOR
THE SHAREHOLDER, WHICH OPINION AND COUNSEL MUST BE REASONABLY
SATISFACTORY TO THE COMPANY.
(B) Purchaser hereby consents to the restrictions contained above
and to the notation of "stop-transfer" restrictions in the Company's stock
transfer books relative to its holdings and to assist in the enforcement of the
limitations set forth herein.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as provided in the Schedule of Exceptions attached hereto as
Exhibit A or as otherwise disclosed in this Agreement or any of the Exhibits
attached hereto, the Company represents and warrants to Purchaser as follows:
Section 5.1. CORPORATE ORGANIZATION. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware, with perpetual corporate existence; and has full power and authority
and legal right to conduct its business as presently conducted. The Company is
duly qualified to do business in Colorado as a foreign corporation. The Company
is not required to be licensed or qualified to transact business in any
jurisdiction other than the States of Delaware and Colorado.
Section 5.2. AUTHORIZATION; NO BREACH. The Company has full power,
authority, and legal right to execute and deliver, and to perform and observe
the provisions of, this Agreement. This Agreement has been duly authorized,
executed, and delivered by the Company and constitutes the valid and binding
obligation of the Company enforceable in accordance with its terms except (i) as
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limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors' rights and
(ii) as limited by the application of general principles of equity.
Section 5.3. CAPITALIZATION.
(A) Authorized and Issued. As of the Closing Date, the authorized
and issued capitalization of the Company will consist of:
(1) PREFERRED STOCK. One Thousand (1,000) shares of
preferred stock with par value of one cent ($0.01) per share, none of which was
outstanding prior to the Closing.
(2) COMMON STOCK. Five Thousand (5,000) shares of
common stock, $.01 par value, of which 1,454.44 shares are outstanding, duly and
validly issued, fully paid, and nonassessable.
(B) NO OTHER RIGHTS OUTSTANDING. Except as disclosed in or
contemplated by this Agreement or Exhibit A attached hereto, there are no other
outstanding subscriptions, warrants, options, conversion privileges, rights of
first refusal, or other rights or agreements (whether or not presently
exercisable by their respective terms) providing for the purchase, issuance or
sale of any shares of capital stock of the Company or any preemptive or
contractual rights with respect to issuance of such capital stock.
Section 5.4. FINANCIAL STATEMENTS. The Company has furnished to
Purchaser an unaudited balance sheet of the Company as at June 30, 1992 and the
related statement of income and accumulated deficit for the fiscal year then
ended, together with a compilation report thereon by Ernest E. Heuer Company,
P.C., and an unaudited balance sheet of the Company as at May 31, 1993 and the
related statement of income and accumulated deficit for the eleven months ended
May 31, 1993. All such financial statements, including the schedules thereto,
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis, except that the financial statements omit the
statement of cash flows and substantially all of the footnote disclosures
required by generally accepted accounting principles. Such financial statements
fairly present in all material respects the financial conditions and results of
operations of the Company at the dates and for the periods indicated. The
Company has suffered no Material Adverse Event since May 31, 1993.
Section 5.5. OUTSTANDING INDEBTEDNESS. The Company does not have any
material liabilities or obligations, absolute or contingent. The Company has
performed in all material respects all Obligations heretofore required to be
performed by it and is not in default under, or in breach of, or in receipt of
any claim of default under or breach of, any material agreement. The Company
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has no present expectation or intention of not performing in all material
respects all such obligations and it has no knowledge of any breach or
anticipated breach by other parties. The Company is not a party to any contract
or commitment which, if properly performed by all parties thereto in accordance
with the terms thereof, could constitute a Material Adverse Event affecting the
Company.
Section 5.6. COMPLIANCE. The Company is not in violation of any term of
its Certificate of Incorporation, as amended, any directors or shareholders
resolutions, or Bylaws, or in violation in any material respect, either in any
case or in the aggregate, of any mortgage, indenture, contract, agreement,
instrument, judgment, decree, order, statute, rule or regulation applicable to
the Company. The Company has conducted its business, in compliance with, and is
currently in compliance with, all applicable laws, regulations, orders,
judgments and decrees except for such non-compliances, if any, which in the
aggregate would not have a material adverse effect on the business, assets,
operations or financial condition of the Company. The execution and delivery of
this Agreement by the Company and the consummation of the transactions
contemplated hereby (a) will not violate any provision of the Certificate of
Incorporation or By-Laws of the Company or any resolutions of the Company's
Board of Directors or stockholders, (b) will not violate any statute, rule,
regulation, order or decree of any governmental entity by which the Company or
any of its properties or assets is bound and (c) will not result in a violation
or breach of, or constitute a default under, any material license, franchise,
permit, indenture, agreement or other instrument to which the Company is a party
or by which the Company or any of its assets or properties is bound.
Section 5.7. TITLE TO PROPERTY. Except for leased property listed in
Exhibit A, the Company has good and marketable title to all tangible personal
property, Proprietary Rights, and other assets used in or necessary to the
operation of its business. Such properties and assets are not subject to any
material liens, mortgages, pledges, encumbrances or charges of any kind except
liens for current taxes and assessments not delinquent. All leases by which the
Company leases real or personal property are in good standing, are valid and
effective in accordance with their respective terms, and the Company enjoys
quiet enjoyment under all such leases. All property owned or used by the Company
is in good condition and repair. The Company has complied in all material
respects with all environmental laws and regulations.
Section 5.8. MATERIAL CONTRACTS AND COMMITMENTS. The Company has no
material contracts (including without limitation, any employee benefit plans),
mortgages, agreements, and instruments, other than this Agreement and those
listed in the Exhibit A attached hereto.
Section 5.9. NO PENDING LITIGATION OR PROCEEDINGS. Except as listed in
Exhibit A, there are no actions, suits, investigations or
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proceedings (whether or not purportedly on behalf of the Company) pending,
affecting or, to the best of the Company's knowledge, threatened against the
Company, before or by any governmental instrumentality, domestic or foreign, or
any court, arbitrator or grand jury. The Company is not in default with respect
to any judgment, order, demand, or regulation of any court, arbitrator, grand
jury or of any governmental agency. No event has occurred nor does any condition
exist on the basis of which any litigation, proceeding or investigation might
properly be instituted. Neither the Company nor, to the best knowledge of the
Company, any officer of the Company, is in default with respect to any order,
writ, injunction, decree, ruling or decision of any court, commission, board or
other government agency which default or defaults might constitute, either in
any case or in the aggregate, a Material Adverse Event as to the Company or any
of its properties or assets. The foregoing sentences include, without limiting
their generality, actions pending or threatened (or any basis therefor known to
the Company) involving the prior employment of any of the Company's officers or
employees or their use in connection with the Company Is business of any
information or techniques allegedly proprietary to any of their former
employers.
Section 5.10. BROKERS AND FINDERS. In the event of Closing of the stock
purchase contemplated under this Agreement, the Company will be obligated to pay
cash finder's fees to each of Daiwa America Strategic Advisors Corporation and
Barnes Johnson & Associates. Except for the foregoing parties, the Company has
not retained and is under no obligation to pay any investment banker, broker, or
finder in connection with the transactions contemplated by the Agreement.
Section 5.11. NO REGISTRATION RIGHTS OUTSTANDING. The Company is not
under any obligation to register any of its presently outstanding securities or
any of its securities which may be issued in the future.
Section 5.12. THE BUSINESS PLAN. The Business Plan of the Company dated
April 20, 1992, annexed hereto as Exhibit C, as amended and supplemented by the
additional information contained in Exhibit C, fairly and accurately summarizes
in all material respects the Company's current plans with respect to the conduct
of its business.
Section 5.13. REPRESENTATIONS TRUE AND CORRECT. This Agreement and the
Exhibits attached hereto do not contain any untrue statement of a material fact
or omit any material fact necessary in order to make the statements contained
herein and therein not misleading. Except for general economic or industry
conditions, there is no information known to the Company which has not been
disclosed in this Agreement or any of its Exhibits which materially and
adversely affects, or in the future may (so far as the Company can reasonably
foresee) materially and adversely affect, the business, properties, assets or
condition, financial or other, of the Company.
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Section 5.14. RELATED PARTIES. To the best knowledge of the Company, no
officer, director or key employee of the Company, or of any related party of any
such person, has, either directly or indirectly, (i) an interest in any
corporation, partnership, firm, or other person or entity which furnishes or
sells services or products which are similar to or compete with those furnished
or sold by the Company, or (ii) a beneficial interest in any contract or
agreement to which the Company is a party or by which it may be bound. For
purposes of this Section there shall be disregarded any interest which arises
solely from the ownership of less than two percent (2%) equity interest in a
corporation whose stock is regularly traded on any national securities exchange
or in the over-the-counter market.
Section 5.15. EMPLOYEES. To the best knowledge of the Company, no
employee of the Company is in violation of any term of any employment contract,
patent disclosure agreement, or any other contract or agreement with any Person
due to the relationship of any such employee with the Company and the nature of
the business now conducted or to be conducted by the Company. No officer or, to
the Company's knowledge, employee of the Company is a party to or bound by any
agreement, contract or commitment, or subject to any restrictions, particularly
but without limitation in connection with any previous employment of any such
person, which either in any case or in the aggregate materially and adversely
affects, or in the future may (so far as the Company can reasonably foresee)
materially and adversely affect, the business or operations of the Company or
the right of any such person to participate in the affairs of the Company. To
the best knowledge of the Company, no officer or key employee of the Company has
any present intention of terminating his employment with the Company and the
Company has no present intention of terminating any such employment. All
employees of the Company have executed a Confidential Information, Invention and
Copyright Agreement with the Company substantially in the form annexed hereto as
Exhibit D.
Section 5.16. PROPRIETARY RIGHTS.
(A) The Company owns or possesses adequate ownership of all
Proprietary Rights used in its business, and the same are sufficient to conduct
said business as it has been and is contemplated as being conducted. Exhibit A
contains a list of all patents and patent applications filed by the Company
covering Proprietary Rights used in the conduct of the Company's business.
(B) To the best knowledge of the Company, the current and
proposed operations of the Company do not conflict with nor infringe upon, and
no one has asserted to the Company that such operations conflict with or
infringe upon, any intangible property rights owned, possessed, or used by any
other Person.
(C) There are no facts which would result in any claim which
would have a material adverse effect on the respective condition (financial or
otherwise) of the business, net worth,
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assets, properties, or operations of the Company based on an assertion that it
does not have the unrestricted rights to use, free of any rights or claims of
others, all Proprietary Rights in the development, manufacture, use, sale, or
other disposition of any or all products or services presently being or
contemplated to be used, furnished, or sold in the conduct of business.
(D) There are no outstanding licenses or agreements of any kind
relating to Proprietary Rights, nor is the Company bound by or a party to any
licenses or agreements of any kind relating thereto, nor is the Company bound by
or a party to any licenses or agreements of any kind with respect to the
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and proprietary rights of any Person.
(E) To the best knowledge of the Company, none of its employees
is obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his
best efforts to promote the interests of the Company or that would conflict with
the Company's business as now conducted or presently proposed to be conducted.
To the best knowledge of the Company, except for inventions previously acquired
by the Company, it is not and will not be necessary for the Company to utilize
any inventions of any of its employees made while such employee was an employee
of another Person.
Section 5.17. TRANSACTIONS WITH AFFILIATES. There are no loans, leases
or other continuing transactions between the Company and any Person owning 5% or
more of the common stock of the Company or any member of such stockholder's
immediate family or any corporation or other entity controlled by such
stockholder or by a member of such stockholder's immediate family.
Section 5.18. SUBSIDIARIES. The Company does not own any shares of stock
or any other security or interest in any other Person.
Section 5.19. NO MATERIAL ADVERSE CHANGE. Except as set forth on Exhibit
A, since the date of inception of the Company there has been no occurrence with
respect to the Company that would constitute a Material Adverse Event and there
has been no material adverse change in the Company's financial condition,
operating results, business prospects, employee relations, customer relations or
otherwise.
Section 5.20. AGREEMENTS BETWEEN STOCKHOLDERS. Except as listed in
Exhibit A, there exist no agreements between any stockholder and the Company, or
to the best knowledge of the Company, between any of the stockholders of the
Company, relating to the Company or its capital stock, except for this
Agreement, the Company's Stock Purchase Plan and related common stock options,
and an Employee Stock Restriction Agreement with Leland P. Snyder.
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Section 5.21. GOVERNMENTAL CONSENT. No permit, consent, approval or
authorization of, or declaration to or filing with, any governmental authority
is required in connection with the execution, delivery and performance by the
Company of this Agreement or the other agreements contemplated hereby, or the
consummation by the Company of any of the transactions contemplated hereby or
thereby.
6. CONDITIONS TO PARTIES' OBLIGATIONS.
Section 6.1. CONDITIONS TO PURCHASER'S OBLIGATIONS. Purchaser's
obligation to purchase the Purchased Stock and to otherwise consummate the
transactions contemplated in this Agreement is subject to satisfaction of the
following conditions at the Closing.
(A) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The Company's
representations and warranties in this Agreement and in any certificate or
document delivered pursuant to this Agreement shall be true and correct on and
as of the Closing.
(B) OFFICER'S CERTIFICATE. Purchaser shall have received a
certificate in form acceptable to Purchaser dated as of the Closing Date and
signed by the President and by the Treasurer of the Company to the effect that
the conditions of Subsections 6.1(A) and (F) have been satisfied.
(C) GOOD STANDING CERTIFICATES. The Company shall have delivered
to counsel for Purchaser a good standing certificate for the Company for the
States of Delaware and Colorado.
(D) OPINION OF COMPANY COUNSEL. Purchaser shall have received an
opinion dated as of the Closing Date of Hutchinson Black and Cook, counsel for
the Company, satisfactory to Purchaser and its counsel, to the effect that:
(1) The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware,
with perpetual corporate existence; is duly qualified and in good standing as a
foreign corporation under the laws of the State of Colorado; and has full power
and authority and legal right to conduct its business as presently conducted.
(2) The Company has full power, authority, and legal right
to execute and deliver, and to perform and observe the provisions of, this
Agreement and all other agreements and documents provided for in this Agreement
to which the Company is a party (the "Documents").
(3) The Documents have each been duly authorized,
executed, and delivered by the Company and constitute valid and binding
obligations of the Company enforceable in accordance with their respective terms
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of
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general application affecting enforcement of creditors' rights and (ii) as
limited by the application of general principles of equity.
(4) The execution, delivery, and performance of the
Documents by the Company and the offering, sale and issuance of the Purchased
Stock do not violate the terms of its Certificate of Incorporation, as amended,
directors' or shareholders' resolutions, or Bylaws of the Company.
(5) Immediately following consummation of all transactions
contemplated in the Agreement to be consummated at the Closing, the authorized
capital stock of the Company consists of One Thousand (1,000) shares of
preferred stock with par value of one cent ($0.01) per share, none of which is
outstanding; and Five Thousand (5,000) shares of one class of common stock of
$.01 par value per share, of which 1,639.63 shares are outstanding, duly and
validly issued, fully paid, and nonassessable. The shares of Purchased Stock of
the Company issued to Purchaser pursuant to this Agreement have been duly
authorized for issuance and are validly issued, fully paid, and nonassessable
shares of the common stock of the Company, and have been duly registered in the
names of Purchaser on the books of the Company. The form of stock certificate
for the Purchased Stock has been duly adopted by the Company and conforms to all
applicable legal requirements. Except as disclosed in the Agreement and Exhibit
A attached thereto, to our knowledge, there are no outstanding subscriptions,
options, warrants, rights of first refusal, or other rights with respect to the
purchase, issuance or sale of any capital stock of the Company.
(6) The offer, sale, and issuance of the Purchased Stock
in conformity with the terms of the Agreement constitute transactions exempt
from the registration requirements of the Securities Act.
(7) To the best of Counsel's knowledge and except as set
forth in this Agreement and the Exhibits attached to the Agreement, there are no
actions, proceedings, or investigations pending or threatened against the
Company or its properties which, either in any case or in the aggregate, might
result in any material adverse change in the business or financial condition of
the Company or any of its properties or assets or in any material impairment of
the right or ability of the Company to carry on its business as now conducted or
as proposed to be conducted, or in any material liability on the part of the
Company, and none which questions the validity of the Documents or any action
taken or to be taken in connection therewith.
(8) Without investigation for this purpose other than
reasonable inquiry of the Company's officers and directors, Counsel has become
aware of no facts which would lead it to believe that any employee of the
Company is in violation of any term of any employment contract, patent
disclosure agreement, or any other contract or agreement due to the relationship
of any such employee
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with the Company and the nature of the business now conducted or to be conducted
by the Company.
Such Counsel may base that portion of its opinion pertaining
to factual matters upon certificates or letters signed by the Company or
corporate officers of the Company, and may base that portion of its opinion
pertaining to the laws of any jurisdiction other than the United States and the
State of Colorado upon the opinion of counsel in such other jurisdiction,
provided copies of such certificates, letters, and opinions are furnished to
Purchaser with said opinion, and that Purchaser may rely on such certificates,
letters, and opinions.
(E) PROCEEDINGS AND DOCUMENTS SATISFACTORY. All documents and
proceedings incident to the transaction contemplated by this Agreement shall be
satisfactory in form and substance to Purchaser and their counsel. Purchaser
shall have received all documents or other evidence which Purchaser and its
counsel may have requested in connection with such transaction, including copies
of records of all corporate proceedings in connection with such transaction and
in compliance with the conditions set forth in this Section 6.1 in form and
substance satisfactory to Purchaser.
(F) CERTIFIED CHARTER AND BYLAWS. The Company shall have
delivered to counsel for Purchaser a copy of the Company's Certificate of
Incorporation, as amended, and Bylaws, which copies shall be certified by the
Secretary of the Company to be true and correct as of the Closing Date.
(G) DISTRIBUTION AGREEMENT; DEVELOPMENT AND MANUFACTURING
MEMORANDUM. Purchaser and the Company shall have entered into (i) a Distribution
Agreement substantially in the form of Exhibit E annexed hereto and (ii) a
Development and Manufacturing Memorandum substantially in the form of Exhibit F
annexed hereto.
Section 6.2. CONDITIONS TO THE COMPANY'S OBLIGATIONS. The Company's
obligation to consummate the transactions contemplated in this Agreement is
subject to the satisfaction of the following conditions at the Closing:
(A) ACCURACY OF REPRESENTATIONS AND WARRANTIES. Purchaser's
representations and warranties herein or in any document delivered pursuant to
this Agreement shall be true and correct on and as of the Closing Date.
(B) PROCEEDINGS SATISFACTORY. All corporate and other proceedings
in connection with the transactions contemplated by this Agreement and all
documents incident to it shall be satisfactory in form and substance to the
Company and its counsel, and the Company and its counsel shall have received all
such originals or other copies of such documents as they may reasonably request.
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Section 6.3. FAILURE OF CONDITIONS. In the event any of the conditions
set forth in Sections 6.1 or 6.2 are not satisfied and are not waived by the
appropriate party, this Agreement shall terminate and the parties shall be free
of any rights or obligations hereunder.
7. COVENANTS OF THE COMPANY.
The Company's covenants and obligations as set forth in this Article 7
shall continue in full force and effect so long as any of the Purchased Stock is
outstanding until the first to occur of: (i) the date on which the Company is
required to file a report with the SEC pursuant to Section 13(a) or (15) of the
Exchange Act, by reason of the Company's having registered any of its common
stock pursuant to Section 12(g) of the Exchange Act; (ii) the date on which the
Company consummates the sale of all or substantially all, of its assets; or
(iii) the effective date of a merger, reorganization or consolidation of the
Company (a "Merger") in which the holders of the outstanding voting securities
of the Company immediately prior to such Merger do not hold a majority of the
voting securities of the surviving entity outstanding immediately after such
Merger:
Section 7.1. OFFICE OR AGENCY MAINTAINED. The Company will maintain an
office in Colorado where Purchased Stock may be presented for exchange,
registration, or transfer.
Section 7.2. CORPORATE EXISTENCE. The Company will at all times
maintain, preserve, and renew its corporate existence and its rights, and comply
with all related laws applicable to the Company, but nothing contained in this
Section shall require the Company to maintain, preserve, or renew any right
which, in the opinion of the Board of Directors, is not necessary or desirable
in the conduct of the business of the Company; nor shall anything in this
Section require the Company to comply with any law so long as its validity or
applicability shall be contested in good faith.
Section 7.3. PROPERTIES MAINTAINED. The Company will, insofar as it is
not prevented by causes beyond its control, at all times maintain, preserve,
protect, and keep its property in good repair, working order, and condition. The
Company will make all repairs, renewals, replacements, extensions, additions,
betterments and improvements to its property as are necessary and proper from
time to time, so that the business may be conducted properly and efficiently at
all times, but nothing in this Section shall prevent the Company from selling,
abandoning, or otherwise disposing of any material asset or property, if, in the
opinion of the Board of Directors, such property is no longer of use in the
business of the Company, and such disposition is in the interest of the Company
and not disadvantageous to the holders of the Purchased Stock.
Section 7.4. INSURANCE. The Company will provide for itself insurance
against loss or damage of the kinds customarily insured against by corporations
similarly situated, with reputable insurers
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or with the United States Government, in such amounts, with such deductibles as
shall be necessary for the Company not to become a coinsurer, and by such
methods as shall be adequate for companies of a similar size and character. The
Company will at all times similarly maintain, in full force and effect,
comprehensive general liability insurance against loss or damage to it for
bodily injury or death in or about any premises occupied by it, and liability
insurance against loss or damage to it, for bodily injury or death or injury to
property occurring by reason of its operation of any motor vehicle.
Section 7.5. TAXES, ASSESSMENTS AND OTHER CHARGES PAID. The Company will
duly pay and discharge, as they become due and payable, all taxes, assessments
and governmental and other charges, levies, or claims levied or imposed, which
if unpaid might become a lien or charge upon the franchises, properties, assets,
earnings, or business of the Company, but nothing contained in this Section
shall require the Company to pay and discharge any such tax, assessment, charge,
levy, or claim so long as the Company in good faith shall contest its validity
and shall set aside on its books adequate reserves therefor.
Section 7.6. INDEBTEDNESS PAID. The Company will pay punctually when due
and payable any indebtedness incurred or assumed by it. The Company will also
perform and observe the associated covenants, provisions, and conditions to be
performed and observed by the company, in connection with any mortgage, pledge,
security interest, or other lien existing at any time upon any of the assets of
the Company, but nothing contained in this Section shall require the Company to
pay any such indebtedness or to perform or observe any such covenants,
provisions, and conditions so long as the Company in good faith shall contest
any claim which may be asserted against it in respect of any such indebtedness
or of any such covenants, provisions, and conditions and shall set aside on its
books adequate reserves therefor.
Section 7.7. GOOD ACCOUNTING AND CORPORATE PRACTICE. The Company will at
all times maintain appropriate corporate records, including records of all
directors or shareholders meetings, minutes and all share transactions, and keep
proper books of record and account (including ledgers and order books) in which
full, true, and correct entries will be made of its transactions in accordance
with Good Accounting Practice.
Section 7.8. COMPLIANCE WITH LAWS. The Company will comply with all
applicable statutes, rules, regulations, orders, and restrictions of the United
States of America, foreign countries, states, and municipalities, and of any
governmental agency and instrumentality of the foregoing, and of any court,
arbitrator, or grand jury, applicable to the Company's business and assets,
except those being contested in good faith.
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Section 7.9. INFORMATION RIGHTS.
(A) FINANCIAL STATEMENTS. The Company will furnish to Purchaser
certain financial statements (as set forth below) for so long as Purchaser owns
at least 50 shares of the Purchased Stock:
(1) As soon as practicable after the end of each fiscal
year, and in any event within 90 days thereafter; and
(2) As soon as practicable after the end of each fiscal
quarter of each fiscal year, and in any event within 45 days thereafter.
The financial statements so provided shall include consolidated balance sheets
of the Company as at the end of such period, consolidated statements of income
and surplus for that period, and consolidated statements of cash flow for the
Company for that period. The statements shall be prepared in accordance with
Good Accounting Practice and, in case of the fiscal year end statements, shall
be approved by the Company's Board of Directors.
(B) ANNUAL PLAN. For so long as Purchaser owns at least 50 shares
of Purchased Stock, the Company will also furnish to Purchaser, on or before
June 15 of each fiscal year, a preliminary Proposed Annual Plan and Operations
Budget as approved by the Board of Directors, which shall then be finalized
within ninety (90) days after the end of the fiscal year utilizing the final
results from the previous year. The Annual Plan and Operations Budget shall be a
working document, and shall be in any form chosen by the management of the
Company and acceptable to its Board of Directors.
(C) VISITATION RIGHTS. Subject to nondisclosure obligations with
respect to the Company's confidential information, Purchaser or its employees or
representatives, may from time to time reasonably request the right to visit and
inspect any of the properties of the Company, to examine and make extracts from
the books and records of the Company, and to discuss its affairs, finances and
accounts with its officers, directors, and independent accountants, all at
reasonable times and as often as may be reasonably requested, and the Company
shall comply with such requests. Subject to the same obligation, Purchaser shall
receive timely notice of, shall receive all material distributed in connection
with, and shall have the right to attend as an observer, all meetings of the
Board of Directors of the Company. This right shall apply to Purchaser only so
long as it owns at least 50 shares of Purchased Stock.
Section 7.10. TAXES AND INTEREST PAID BY THE COMPANY.
(A) TAXES. The Company shall pay, and save Purchaser harmless
against, all liability with respect to amounts payable as a result of any
documentary, stamp, use, or similar taxes which may be determined to be payable
in connection with the issuance and delivery of any of the Purchased Stock,
delivery and performance of
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this Agreement, or any modification, amendment, or alteration of the terms of
any of the Purchased Stock.
(B) INTEREST. Provided that Purchaser promptly notifies the
Company of all claims made against it, the Company will pay any interest or
penalties resulting from nonpayment or delay in payment of any tax to be paid
under section 7.10(A) hereof, and any income taxes in respect of any
reimbursement by the Company for any of such taxes, interest or penalties.
Section 7.11. MATERIAL CONTRACTS. The Company will perform and observe
all material covenants and provisions of all material contracts to which it is
party. Nothing in this Section shall require the Company to perform or observe
any such covenant or provision so long as the Company shall in good faith
contest the validity, enforceability, or application to it of any such covenant
or provision.
Section 7.12. NEW DEVELOPMENTS. The Company shall cause all
technological developments, inventions, discoveries or improvements by the
Company's employees to be fully documented in accordance with the best
prevailing appropriate industrial professional standards, cause all key
employees and consultants of the Company to execute appropriate patent
assignment agreements to the Company and, where possible and appropriate, to
file and prosecute United States and foreign patent applications relating to and
protecting such developments on behalf of the Company.
Section 7.13. MATERIAL ADVERSE EVENTs. The Company shall promptly (but
in any event within fifteen (15) days) after the Company's discovery of any
Material Adverse Event affecting the Company, deliver a detailed statement to
Purchaser specifying the nature and period of existence of such Event and what
actions (if any) the Company has taken and/or proposes to take with respect
thereto. For purposes of this Section 7.13, a Material Adverse Event shall
include, without limitation: (i) the filing of any litigation which, if
determined adversely, would have a material effect on the business, financial
condition or prospects of the Company; (ii) the discovery that the Company is
not in compliance with any material provision of this Agreement or its
Certificate of Incorporation, (iii) any notices of material default received by
the Company arising out of any of the Company's banking relationships or
arrangements; (iv) the existence of any dispute between the Company and its
accountants concerning any material item relating to the Company's financial
statements; and (v) the cancellation of a material order or the loss of a
material customer.
Section 7.14. USE OF PROCEEDS. The proceeds received from the issuance
of Purchased Stock, net of the finder's fees referenced in Section 5.9 above,
will be used for working capital and general corporate purposes.
Section 7.15. RIGHT TO PURCHASE ADDITIONAL STOCK. Until such time as the
Company shall have effected a public offering of its
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Common Stock pursuant to the Act, the Company shall afford Purchaser the right
to purchase, in connection with any future issuances of its Common Stock (or
securities convertible into or exchangeable or exercisable for its Common Stock)
(a "Future Stock Sale"), on the same terms as afforded to other investors, up to
such amounts of the offered securities as will enable Purchaser to maintain a
ten percent (10%) interest in the Common Stock of the Company on a fully diluted
basis. The Company shall give Purchaser written notice of the terms and
provisions of any Future Stock Sale, and Purchaser shall have 30 days from the
date of such notice within which to exercise the purchase right granted hereby.
If the Company does not complete the Future Stock Sale within 45 days following
the lapse of the foregoing 30 day purchase right period, the Company shall again
comply with the provisions of this section 7.15.
Section 7.16. BOARD REPRESENTATION. At any time that (a) Purchaser owns
at least ten percent (10%) of the Company's outstanding common stock or (b)
either (i) a Distribution Agreement between the Company and Purchaser
substantially in the form of Exhibit E hereto or (ii) a definitive agreement
regarding the development and manufacture of a specific product by the Company
for Purchaser executed pursuant to the Development and Manufacturing Memorandum
(or any supplement or amendment thereto or replacement therefor) remains in
effect, the Company shall, at Purchaser's request, cause one designee of
Purchaser to be elected to and serve upon the Company's Board of Directors.
8. REGISTRATION RIGHTS
Section 8.1. DEFINITIONS.
As used in this Article 8:
(A) the terms "register", "registered" and registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Act (and any post-effective amendments filed or required to
be filed) and the declaration or ordering of effectiveness of such registration
statement;
(B) the term "Registrable Securities" means the Purchased Stock issued
to Purchaser under this Agreement, any Common Stock of the Company issued as a
dividend or other distribution with respect to, or in exchange for or in
replacement of, the Purchased Stock, and any other shares of Common Stock of the
Company that are acquired by Purchaser from the Company;
(C) the term "Holder" shall mean any holder of Registrable Securities;
(D) "Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Act;
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(E) "Registration Expenses" shall mean all expenses incurred by the
Company in compliance with Section 8.2 hereof, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which shall be paid in any
event by the Company); and
(F) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for each of the Holders.
Section 8.2. COMPANY REGISTRATION.
(A) If the Company shall determine to register any of its securities
either for its own account or for the account of a security holder exercising a
demand registration right, other than a registration relating solely to employee
benefit plans, or a registration relating solely to a transaction of the type
described in Rule 145 under the Act, or any successor to Rule 145, or a
registration on any registration form which does not permit secondary sales or
does not include substantially the same information as would be required to be
included in a registration statement covering the sale of Registrable
Securities, the Company will:
(1) promptly give to each of the Holders a written notice thereof
(which shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such Registrable Securities under the applicable blue sky or
other state securities laws); and
(2) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by the Holders within 20 days after receipt of the written notice
from the Company described in clause (1) above, except as the number of such
Registrable Securities may be limited by Section 8.2 (B) below. Such written
request may specify all or a part of the Holders' Registrable Securities.
(B) UNDERWRITING. If the registration of which the Company gives notice
is for a registered public offering involving an underwriting, the Company shall
so advise each of the Holders as a part of the written notice given pursuant to
Section 8.2 (A) (1). In such event, the right of each of the Holders to
registration pursuant to this Section 8.2 shall be conditioned upon such
Holders' participation in such underwriting and the inclusion of such Holders'
Registrable Securities in the underwriting to the extent provided herein. The
Holders shall (together with the Company and any other shareholders distributing
their securities
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through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for underwriting by the
Company. Notwithstanding any other provision of this Section 8.2, if the
underwriter determines that marketing factors require a limitation on the number
of shares to be underwritten, the underwriter may (subject to the allocation
priority set forth below) exclude from such registration and underwriting some
or all of the Registrable Securities which would otherwise be underwritten
pursuant hereto. The Company shall so advise all Holders of securities
requesting registration, and the number of securities that are entitled to be
included in the registration and underwriting shall be allocated in the
following manner: the number of shares that may be included in the registration
and underwriting by each of the Holders and the other Persons requesting to
participate in such registration (other than the Company, in the case of a
registration for the account of the Company, and other than securities held by
holders who by contractual right demanded such registration) shall be reduced,
on a pro rata basis, by such minimum number of shares as is necessary to comply
with such limitation. If any of the Holders or any Person disapproves of the
terms of any such underwriting, he or it may elect to withdraw therefrom by
written notice to the Company and the underwriter. Any Registrable Securities or
other securities excluded or withdrawn from such underwriting shall be withdrawn
from such registration.
(C) NUMBER. Each of the Holders shall be entitled, pursuant to this
Section 8.2, to have his or its shares included in a maximum of three
registrations which have been declared or ordered effective.
Section 8.3. EXPENSES OF REGISTRATION.
All Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to this Article 8 shall be borne by the
Company, and all Selling Expenses shall be borne by the Holders of the
securities so registered pro rata on the basis of the number of their shares so
registered.
Section 8.4. REGISTRATION PROCEDURES.
In the case of each registration effected by the Company pursuant to
this Article 8, the Company will keep the Holders, as applicable, advised in
writing as to the initiation of each registration and as to the completion
thereof. At its expense, the Company will:
(A) Keep such registration effective for a period of 120 days or
until the Holders, as applicable, have completed the distribution described in
the registration statement relating thereto, whichever first occurs; provided,
however, that (i) such 120-day period shall be extended for a period of time
equal to the period during which the Holders, as applicable, refrain from
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selling any securities included in such registration in accordance with
provisions in Section 8.10 hereof;
(B) Furnish such number of prospectuses and other documents incident
thereto as each of the Holders, as applicable, from time to time may reasonably
request; and
Section 8.5. INDEMNIFICATION.
(A) The Company will indemnify each of the Holders, as applicable, each
of its officers directors and partners, and each person controlling each of the
Holders, with respect to each registration which has been effected pursuant to
this Section 8, and each underwriter, if any, and each Person who controls any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the Act or any
statute, rule or regulation thereunder applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification or compliance, and will reimburse each of the
Holders, each of its officers, directors and partners, and each Person
controlling each of the Holders, each such underwriter and each Person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to any Holder or underwriter or person controlling such Holder or
underwriter to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission based upon
written information furnished to the Company by such Holder or underwriter or
Person controlling such Holder or underwriter and stated to be specifically for
use therein.
(B) Each of the Holders will, if Registrable Securities held by it are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and each underwriter, if any, of the Company's securities covered by
such a registration statement, each Person who controls the Company or such
underwriter within the meaning of the Act and the rules and regulations
thereunder, each other shareholder having securities included in such offering,
and each of their officers, directors, and partners, and each Person controlling
such other shareholder against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such
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registration statement, prospectus, offering circular or other document made by
such Holder, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading by such Holder, and will reimburse the Company and such other
shareholders, directors, officers, partners, Persons, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by such Holder and stated to be specifically for use therein;
provided, however, that the obligations of each of the Holders hereunder shall
be limited to an amount equal to the proceeds to such Holder of securities sold
as contemplated herein.
(C) Each party entitled to indemnification under this Section 8.5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom provided that counsel for the Indemnifying Party,
who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld) and the Indemnified Party may participate in such
defense at such party's expense (unless (i) the employment of counsel by such
Indemnified Party has been authorized by the Indemnifying Party, (ii) the
Indemnified Party shall have reasonably concluded that there may be a conflict
of interest between the Indemnifying Party and the Indemnified Party in the
defense of such action, in each of which cases the fees and expenses of counsel
shall be at the expense of the Indemnifying Party), and provided further that
the failure of any Indemnified Party to give notice as provided herein, if
prejudicial to the Indemnifying Party's ability to defend such action, shall
relieve the Indemnifying Party of its obligations under this Article 8. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with the defense of such claim and
litigation resulting therefrom.
(D) If the indemnification provided for in this Section 8.5 is
held by a court of competent jurisdiction to be unavailable to
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an Indemnified Party with respect to any loss, liability, claim, damage or
expense referred to therein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party thereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such loss, liability,
claim, damage or expense in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and of the Indemnified
Party on the other in connection with the statements or omissions which resulted
in such loss, liability, claim, damage or expense as well as any other relevant
equitable considerations. The relative fault of the Indemnifying Party and of
the Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(E) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in a negotiated
underwriting agreement entered into in connection with the underwritten public
offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall be controlling.
Section 8.6. INFORMATION BY THE HOLDERS.
Each of the Holders holding securities requested to be included in any
registration, shall furnish to the Company such information regarding such
Holder and the distribution proposed by such Holder as the Company may
reasonably request in writing and as shall be reasonably required in connection
with any registration, qualification or compliance referred to in this Article
8.
Section 8.7. RULE 144 REPORTING.
With a view to making available the benefits of certain rules and
regulations of the Commission which may permit the sale of the restricted
securities to the public without registration, the Company agrees to:
(A) Make and keep public information available as those terms are
understood and defined in Rule 144 under the Act, at all times from and after
ninety (90) days following the effective date of the first registration under
the Act filed by the Company for an offering of its securities to the general
public;
(B) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and
(C) So long as the Investor owns any Registrable Securities, furnish to
the Investor upon request, a written statement by the
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Company as to its compliance with the reporting requirements of Rule 144 (at any
time from and after ninety (90) days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed as the Investor may reasonably request in availing itself of any rule
or regulation of the commission allowing the Investor to sell any such
securities without registration.
Section 8.8. "MARKET STAND-OFF" AGREEMENT.
Each of the Holders shall agree, if requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, not to sell or
otherwise transfer or dispose of any Common Stock (or other securities) of the
Company held by such Holder during the one hundred eighty (180) day period
following the effective date of a registration statement of the Company filed
under the Act, provided that such agreement only applies to the first such
registration statement of the Company which includes securities to be sold on
the Company's behalf to the public in an underwritten offering.
Such agreement shall be in writing in a form satisfactory to the Company
and such underwriter. The Company may impose stop-transfer instructions with
respect to the shares (or other securities) subject to the foregoing restriction
until the end of said one hundred eighty (180) day period.
Section 8.9. ASSIGNABILITY OF REGISTRATION RIGHTS.
The Registration Rights granted pursuant to this Article 8 shall be
assignable at the option of each of the Holders, in whole or in part, to any
transferee of Registrable Securities (i) so long as such transferee owns at
least 50% of the Registrable Securities originally purchased by Purchaser from
the Company; or (ii) if the transferee is an affiliate of the transferring
Holder; provided that the Company is given written notice by such Holder at the
time or within a reasonable period of time after said transfer, stating the name
and address of such transferee or assignee and identifying the securities with
respect to which such registration rights are assigned.
Section 8.10. SUBSEQUENT GRANT OF REGISTRATION RIGHTS. If the Company
should subsequent to the date of this Agreement grant registration rights to any
Person holding 185 or fewer shares of Common Stock or securities convertible or
exercisable therefor (appropriately adjusted for stock splits or
recapitalizations occurring after the date hereof), the Company shall so advise
Purchaser in writing, setting forth the terms and provisions of the registration
rights so granted. If Purchaser believes that the registration rights so granted
are more favorable than the registration rights granted to
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Purchaser by this Article 8, then Purchaser shall be entitled to the benefit of
such subsequent registration rights in lieu of the registration rights granted
hereby.
9. MISCELLANEOUS.
Section 9.1. CONFIDENTIAL INFORMATION. All copies of financial
information, marketing and sales information, pricing, marketing plans, business
plans, financial and business projections, manufacturing processes and
procedures, formulae, methodologies, inventions, product designs, product
specifications and drawings, and other confidential and/or proprietary
information of the Company disclosed to Purchaser in the course of negotiating
this Agreement or under or pursuant to this Agreement (the "Company Confidential
Information") will be held in confidence and not used or disclosed by Purchaser
or any of its employees, affiliates or agents. It is agreed that Company
Confidential Information will not include information that: (a) is proven to
have been known to Purchaser prior to receipt of such information from the
Company; (b) is disclosed by a third party having the legal right to disclose
such information and who owes no obligation of confidence to the Company; (c) is
now, or later becomes part of the general public knowledge or literature in the
art, other than as a result of a breach of this Agreement by Purchaser. This
provision shall survive the termination of this Agreement for any reason.
Section 9.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by the Company in this Agreement and in
certificates or other documents delivered pursuant hereto shall survive for a
period of two (2) years following the Closing Date.
Section 9.3. ASSIGNABILITY OF RIGHTS. The Company may not assign any of
its rights under this Agreement without Purchaser's written consent. Subject to
compliance with Section 4.4 hereof, the provisions of this Agreement which are
for Purchaser's benefit as a purchaser or holder of Purchased Stock are also for
the benefit of, and enforceable by any subsequent holder of such Purchased Stock
who is not a competitor of the Company.
Section 9.4. COMMUNICATIONS AND NOTICES. Except as otherwise provided
for in this Agreement, all communications and notices provided for in this
Agreement shall be in writing. They shall become effective when mailed (postage
paid, certified mail, return receipt requested), sent by air courier, hand
delivered (including telecopy or courier service) receipted by the addressee, to
the address as indicated on the signature pages hereto, or to such other address
and for such attention, as any party may from time to time designate by notice
duly given in accordance with the provisions of this Section 9.4.
Section 9.5. LAW GOVERNING. This Agreement shall be construed in
accordance with and governed by the laws of the State of Colorado.
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Section 9.6. SUBSEQUENT INSTRUMENTS AND ACTS. The parties agree that
they will execute any further instruments and perform any acts that may become
necessary to carry out this Agreement.
Section 9.7. SEVERABILITY. If any term, provision, covenant, or
condition of this Agreement, or its application to any person or circumstance,
shall be held by a court of competent jurisdiction to be invalid, unenforceable,
or void, the remainder of this Agreement and such term, provision, covenant, or
condition as applied to other persons or circumstances shall remain in full
force and effect.
Section 9.8. ENTIRE AGREEMENT: AMENDMENTS.
(A) This Agreement and the other Documents delivered pursuant
hereto constitutes the full and entire understanding and agreement among the
parties with respect to the subject hereof and thereof.
(B) This Agreement may not be amended orally. An amendment to
this Agreement, or of any supplement hereto, and of the rights and obligations
of the holders of the Purchased Stock, may be made with the written consent of
the Company and of the holders of not less than a majority of the shares of
Purchased Stock.
Section 9.9. GENDER, NUMBER, AND TENSE. Throughout this Agreement, as
the context may require, the masculine gender includes the feminine and neuter,
and the neuter gender includes the masculine and feminine.
Section 9.10. HEADINGS. The headings of the Articles, Sections and
Subsections of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part of this Agreement.
Section 9.11. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 9.12. DELAYS, OMISSION, AND WAIVERS. No delay or omission to
exercise any right, power or remedy accruing to the Company or to Purchaser upon
any breach or default of any party hereto under this Agreement, will impair any
such right, power or remedy of the Company or Purchaser nor will it be construed
to be a waiver of any such breach or default, or an acquiescence therein, nor
will any similar breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring; nor will any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of the Company or Purchaser of any breach or default under
this Agreement or any waiver on the part of the Company or
25
<PAGE>
Purchaser of any provisions or conditions of this Agreement, must be in writing
and will be effective only to the extent specifically set forth in such writing.
No waiver by Purchaser (or transferees thereof) of any provision of this
Agreement will be effective without a written consent signed by Purchaser (or
transferee thereof) holding at least a majority of the Purchased Stock.
Section 9.13. PURCHASER'S REMEDIES. No waiver of any breach of this
Agreement shall constitute or be construed as a waiver by Purchaser of any
subsequent breach by the Company. No remedy herein conferred upon Purchaser is
intended to be exclusive of any other remedy herein or as provided by law, but
each shall be cumulative and shall be in addition to every other remedy set
forth in this Agreement, the Exhibits, or existing at law, in equity, or by
statute. The parties specifically acknowledge that under certain circumstances
the parties may be entitled to specific performance and/or injunctive relief
where without such remedies the damage to the injured parties may be irreparable
and money damages inadequate. Moreover, in any suit between or among the parties
hereto for such breach of any of the provisions hereof, the prevailing party in
such suit shall be entitled to receive from the breaching party, reasonable
attorneys' fees and disbursements incurred in the prosecution of such suit.
Section 9.14. STOCK SPLITS, RECAPITALIZATION, ETC. Any right,
obligation, covenant or agreement contained in this Agreement which is subject
to or conditioned upon a specific number of shares of Purchased Stock shall be
appropriately adjusted for any stock splits, stock dividends, or
recapitalization of the capital stock of the Company occurring after the date
hereof.
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
THE COMPANY:
REAADS MEDICAL PRODUCTS, INC.,
a Delaware Corporation
By: /S/ LUIS R. LOPEZ
-------------------------------
Luis R. Lopez
President
Address:
12001 Tejon St., Ste. 120
Westminster, CO 80234
Telefax No.: 303-457-4519
AMOUNT
PURCHASER: PURCHASED
CHUGAI PHARMACEUTICAL CO. LTD. $500,013.00
185.19 Purchased Shares
By: /S/ OSAMU NAGAYAMA
--------------------------------------
Osamu Nagayama
President
Address:
1-9, Kyobashi 2-Chome
Chuo-ku, Tokyo 104, Japan
Attention: /S/ DIRECTOR, LEGAL DEPARTMENT
--------------------
Telefax No.: 03-3281-2828
SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT
27
<PAGE>
EXHIBITS CHECKLIST
EXHIBIT TITLE
A Schedule of Exceptions
B Stock Purchase Plan and Form of Stock Option Agreement
C Business Plan and supplement thereto
D Form of Confidential Information, Invention and Copyright
Agreement
E Distribution Agreement
F Development and Manufacturing Memorandum
<PAGE>
EXHIBIT A
SCHEDULE OF EXCEPTIONS
SECTION 5.3 CAPITALIZATION. The Company has outstanding and unexercised common
stock options covering 205 shares of common stock.
SECTION 5.8 MATERIAL CONTRACTS AND COMMITMENTS. The Company is party to the
following material agreements:
I. LICENSE, DISTRIBUTION AND OEM AGREEMENTS.
Pursuant to a License Agreement dated October 19, 1990, the
Company has granted to Sanofi Diagnostics a perpetual,
non-exclusive worldwide license to use the REAADS technology to
manufacture and market certain autoimmune products. Sanofi has
paid certain monies to the Company to date, and continues to pay
a royalty of 5% of net sales until December 31, 1995 or until
total aggregate royalties equal $1.5 million.
OEM agreements have been executed with BioPool International
(U.S./Canada), Alpha Biotech S.P.A. [formerly known as
Schiapparelli Diagnostici Ismunit (Italy)], Schiapparelli
Biosystems B.V. (ElectroNucleonics International) (the
Netherlands), Medic (Italy), IDS (United Kingdom), Chromogenix
(formerly Kabi Diagnostica of Sweden), Sigma Diagnostics (U.S.),
Cambridge Life Sciences plc, and Helena Laboratories (U.S.).
Distributor agreements for marketing the REAADS-labeled product
line have also been executed with Alpha Biotech S.P.A.,
Immuno-Mex (Mexico), Tsu Sheng (Taiwan), Karnataka (India), Zotal
(Israel), Bond Bio-Tech (United Kingdom), Anagen/Promed (United
Kingdom), Cormedica S.A. (Spain), LanganBach Services (Ireland),
Frank Diagnostic (Hungary), and Labor and Technik (Germany).
The Company also has executed a letter of intent dated July 28,
1993 with Helena Laboratories Corporation regarding the
negotiation of a Product Development Agreement concerning
coagulation/vascular disease detection products.
II. EMPLOYMENT AGREEMENTS.
Employment Agreement with Dr. Luis R. Lopez dated December 31,
1990, covering the three-year period ending December 30, 1993.
<PAGE>
Employment Agreement with Leland P. Snyder dated December 30,
1990, covering the three-year period ending December 31, 1993.
Employment Agreement with Douglass Simpson dated February 1,
1993, covering the three-year period ending January 31, 1996.
III. OTHER MATERIAL AGREEMENTS.
Purchase Agreement, dated July 19, 1990, between the Company and
Biostar Medical Products, Inc., pursuant to which the Company is
obligated to pay an aggregate of $600, 000 in royalties to
Biostar at the rate of 5% of net sales of products based upon the
technology purchased by the Company from Biostar under the
Purchase Agreement. An aggregate of $122,698.68 in royalties have
been paid to Biostar through May 31, 1993.
Lease Agreement between the Company and Stream Associates, Inc.
(d/b/a MetroTech Centre Office Park), dated March 13, 1991,
covering the Company's headquarters facilities located at 12001
Tejon Street, Suite 120, Westminster, Colorado 80234.
Lease Agreement between the Company and Stream Associates, Inc.
(d/b/a MetroTech Centre Office Park), dated April 7, 1992,
covering a portion of the Company's research and manufacturing
space.
SECTION 5.9 NO PENDING LITIGATION OR PROCEEDINGS. The Company presently is in
discussions with Medix Biotech, Inc., regarding a dispute over charges for
products supplied by Medix. Medix and the Company have verbally agreed to a
settlement of $30,000.00, pending drafting of a mutually acceptable settlement
agreement and release.
SECTION 5.14 RELATED PARTIES. The Company has an arrangement with Leland P.
Snyder, its vice president and a stockholder, pursuant to which Mr. Snyder will
factor (i.e., finance) Company receivables at a rate more favorable than the
Company can obtain at other commercial factoring organizations. The Company also
maintains a relationship with a commercial factor.
SECTION 5.16(D) PROPRIETARY RIGHTS. Royalty arrangement with Biostar Medical
Products, Inc. referenced in Section 5.8 above.
Please see the License, Distribution and OEM Agreements referenced in Section
5.8 above.
Set forth below is a listing of patents and patent applications pertaining to
Proprietary Rights used in the conduct of the Company's business, specifically
diagnostic testing of autoimmune antibodies, anti-dsDNA antibodies, and
anti-cardiolipin:
<PAGE>
U.S. Patent No. 5,183,735
Issued February 2, 1993
"Method and Diagnostic Test Kit For Detection of Anti-dsDNA Antibodies"
U.S..Application Serial No. 07/743,304
Filed October 23, 1991
"Method and Diagnostic Test Kit For Detection of Anti-Cardiolipin"
Status: On appeal to Board of Patent Appeals & Interferences
EPO Patent Application No. 90904518.9
Filed February 26, 1990
"Method and Diagnostic Test Kit For Detection of Anti-Cardiolipin"
Status: Awaiting substantive examination
U.S. Application Serial No. 07/743,305
Filed October 23, 1991
"Method and Diagnostic Test Kit For Detection of Autoimmune Antibodies"
Status: On appeal to to Bord of Patent Appeals & Interferences
EPO Patent Application No. 90904577.5
Filed February 26, 1990
"Method and Diagnostic Test Kit For Detection of Autoimmune Antibody"
Status: Awaiting substantive examination
<PAGE>
REAADS MEDICAL PRODUCTS, INC.
OFFICERS' CERTIFICATE
The undersigned, Luis R. Lopez and Douglass T. Simpson, certify on
behalf of Reaads Medical Products, Inc. as follows:
1. Luis R. Lopez is the duly elected and acting President of Reaads
Medical Products, Inc., a Delaware corporation (the "Company") and Douglass T.
Simpson is the duly elected and acting Treasurer of the Company.
2. Each of the representations and warranties of the Company made in
the Stock Purchase Agreement (the "Agreement") dated as of September 1, 1993
between the Company and Chugai Pharmaceutical Co. Ltd., is true and correct in
all material respects as of the date hereof, and the Company has fully performed
all of its obligations under the Agreement to be performed at or prior to the
closing.
Dated: September _____, 1993.
REAADS MEDICAL PRODUCTS, INC.
By: /S/ LUIS R. LOPEZ
-------------------------------------
Luis R. Lopez, President
By: /S/ DOUGLASS T. SIMPSON
-------------------------------------
Douglass T. Simpson, Treasurer
<PAGE>
SECRETARY'S CERTIFICATE
I, Leland P. Snyder, Secretary of Reaads Medical Products, Inc., a
Delaware corporation, do hereby certify that the following is a full, true and
correct copy of the resolutions of the Board of Directors of the corporation,
duly adopted by the Board of Directors of the corporation as required by law and
by the Bylaws of the corporation effective as of the date hereof.
"RESOLVED, that the form, terms, and provisions of the
Stock Purchase Agreement between the Corporation and
Chugai Pharmaceutical Co. Ltd. ("Purchaser")
substantially in the form attached hereto as Exhibit A,
and all transactions necessary or proper to effectuate
the same, be and hereby are approved in all respects,
and the officers of the Corporation are hereby
authorized to execute the Stock Purchase Agreement and
all documents and stock certificates required thereunder
for and on behalf of the Corporation; and further
RESOLVED, that upon receipt in full of the consideration
payable by Purchaser under the Stock Purchase Agreement,
the officers of the Corporation be, and they are hereby
are, authorized to issue a stock certificate to
Purchaser representing the 185.19 shares of the
Corporation's Common Stock to be purchased by Purchaser
pursuant thereto at an aggregate purchase price of
$500,013 ($2,700 per common share), which such shares
shall be considered duly authorized, validly issued,
fully paid and nonassessable."
I further certify that the foregoing resolutions are still in full force
and effect and have not been amended or revoked and that the specimen signatures
appearing below are the signatures of the proper officers authorized to sign for
this corporation by consent of the Board of Directors.
AUTHORIZED SIGNATURES:
/S/ LUIS R. LOPEZ /S/ LELAND P. SNYDER
- -------------------------------- -------------------------------
Luis R. Lopez, President Leland P. Snyder, Secretary
/S/ DOUGLASS T. SIMPSON
- --------------------------------
Douglass T. Simpson, Treasurer
I further certify that the Certificate of Incorporation of the
corporation and bylaws of the corporation attached to this Secretary's
Certificate are true and correct copies of the Certificate of Incorporation and
bylaws of the corporation as in effect on the date hereof.
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary, and
affixed the corporate seal of the said corporation, this ____ day of September,
1993.
/S/ LELAND P. SNYDER
-----------------------------
[Corporate Seal] Leland P. Snyder, Secretary
I, Luis R. Lopez, President of Reaads Medical Products, Inc., certify
that Leland P. Snyder is the Secretary of the corporation and that the specimen
signature appearing on the preceding page of this Secretary's Certificate above
his name is the signature of Mr. Snyder.
/S/ LUIS R. LOPEZ
-----------------------------
Luis R. Lopez, President
2
<PAGE>
EXHIBIT 10.18
LEAD GENERATION/CORPORATE RELATIONS AGREEMENT
THIS AGREEMENT is made this 14TH day of APRIL, 1998, between CORPORATE RELATIONS
GROUP, INC., a Florida corporation (hereinafter "CRG"), and CORGENIX MEDICAL
CORPORATION (hereinafter the "Client").
RECITALS
1. The Client wishes to retain CRG to provide corporate relations services to
the Client.
2. CRG is willing to provide such corporate relations services as are more
fully described herein.
NOW THEREFORE, in consideration of the mutual promises contained herein, it is
agreed as follows:
1. FURNISHING OF INFORMATION BY CLIENT. The Client shall furnish to CRG
information about the Client such as copies of disclosure and filing
materials, financial statements, business plans, promotional information
and background of the Client's officers and directors ("Information
Package"). The Client shall update the Information Package on a continuous
basis. The Client understands that the sole purpose for providing CRG with
the Information Package is for utilization in a Lead Generation / Corporate
Relations program. CRG is not obligated to assess the financial viability
of the Client. CRG may rely on, and assume the accuracy of the Information
Package.
2. REPRESENTATIONS AND WARRANTIES OF CLIENT. The Client represents that all
information included in the Information Package furnished to CRG shall
disclose all material facts and shall not omit any facts necessary to make
statements made on behalf of the Client not misleading.
3. COVENANTS OF THE CLIENT. The Client covenants and warrants that any
information submitted for dissemination will be truthful, accurate, and in
compliance with all copyright and all other applicable laws and regulations
and will not be submitted in connection with any improper or illegal act or
deed.
4. For a period of twelve (12) months, pursuant to the terms hereof, CRG's
services shall specifically include making oral representations on behalf
of the Client pursuant to the following procedures:
(a) PREPARATION OF PROOFS. CRG shall prepare proofs and/or tapes of the
agreed upon materials and information, as set for dissemination, for
the Client's review and approval.
(b) CORRECTION AND CHANGES OF PROOFS AND/OR TAPES. CRG shall make all
corrections and changes that the Client may request.
(c) SIGN OFFS. A duly authorized representative of the Client shall sign
all approvals, corrections and change of proofs by the Client. The
Client hereby designates the individual(s) listed in Exhibit "C"
hereof as authorized representatives for purposes of this paragraph
4(a), (b) and (c); and CRG may rely upon this designation.
---,---
Initials
1
<PAGE>
5. COMPENSATION. Refer to Exhibit "B".
6. IT IS UNDERSTOOD AND AGREED BY THE PARTIES THAT THE ABOVE COMPENSATION IN
U.S. CURRENCY, OR FREE TRADING SHARES OF THE COMPANY, SHOULD BE PAID TIMELY
UPON EXECUTION OF THIS AGREEMENT. CRG WILL RETAIN THE OPTION, BUT IS NOT
COMPELLED TO BEGIN ITS PERFORMANCE UNDER THIS AGREEMENT PRIOR TO THE
PAYMENT OF SUCH COMPENSATION IN U.S. CURRENCY OR FREE TRADING SHARES.
7. ASSUMPTION OF LIABILITY AND INDEMNIFICATION. The Client assumes and claims
all responsibility and liability for the content of all information
disseminated on behalf of the Client which have been approved by Client.
The Client shall indemnify and hold CRG, its subsidiaries and parent
Company harmless from and against all demands, claims or liability arising
for any reason due to the context of information disseminated on behalf of
the Client. This indemnity shall include any costs incurred by CRG
including, but not limited to, legal fees and expenses incurred both in
administrative proceedings, at trial and appellate levels, in settlement of
claims and payment of any judgment against CRG.
8. TERMINATION FOR FRAUD OR CRIMINAL ACTS. The client further agrees that CRG
may terminate this Contract without recourse to the Client if the Company
is found to be in violation of rules promulgated by any United States
regulatory agency or of any state regulatory agency. Illegal activity per
se shall include but not be limited to the release by the Company of false
press releases or the payment of any securities or money to brokers. In the
event of such action by the Company, CRG will be entitled to retain any and
all monies prior paid.
9. ASSIGNMENT AND DELEGATION. Neither party may assign any rights or delegate
any duties hereunder without the other party's express prior written
consent.
10. ENTIRE AGREEMENT. This writing contains the entire agreement of the
parties. No representations were made or relied upon by either party, other
than those expressly set forth. Furthermore, the Client understands that
CRG makes no guarantees, assurances or representations in regard to the
results of its corporate relations program. No agent, employee or other
representative of either party is empowered to alter any of the above
terms, unless done in writing and signed by an executive officer of the
respective parties.
11. CONTROLLING LAW AND VENUE. This Agreement's validity, interpretation and
performance shall be controlled by and construed under the laws of the
State of Florida. The proper venue and jurisdiction shall be the Circuit
Court in Orange County, Florida.
12. PREVAILING PARTY. In the event of the institution of any legal proceedings
or litigation, at the trial level or appellate level, with regard to this
Agreement, the prevailing party shall be entitled to receive from the
nonprevailing party all costs, reasonable attorney's fees and expenses.
13. FAILURE TO OBJECT NOT A WAIVER. The failure of either party to this
Agreement to object to, or to take affirmative action, with respect to any
conduct of the other which is in violation of the terms of this Agreement
shall not be construed as a waiver of the violation or breach, or of any
future violation, breach or wrongful conduct.
---,---
Initials
2
<PAGE>
14. NOTICES. All notices or other documents under this Agreement shall be in
writing and delivered personally or mailed by certified mail, postage
prepaid, addressed to the representative or Company as follows:
Company: CORPORATE RELATIONS GROUP, INC.
1947 Lee Road
Winter Park, FL 32789
Attention: Joseph H. Landis, President
CLIENT: CORGENIX MEDICAL CORPORATION
12061 Tejon Street
Westminster, CO 80234
Attention: Dr. Luis Lopez, Chairman/CEO
15. HEADINGS. Headings in this Agreement are for convenience only not be used
to interpret its provisions.
16. TIME. For all intents and purposes, time is of the essence with this
Agreement.
17. AGREEMENT NOT TO HIRE. The Client understands and appreciates that CRG has
invested a tremendous amount of time, energy and expertise in the training
of its employees to be able to provide the very service that Client
desires. Client further understands that should an employee be enticed to
leave, then CRG will be damaged in an amount the parties are incapable of
calculating at this time. Therefore, the Client agrees not to offer
employment to any employee or subcontractor of CRG, nor to allow any
officer or director of Client to offer such employment with Client or any
other Company with whom officers and directors of Client are employed or
hold a financial stake for a period of three (3) years.
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
CORPORATE RELATIONS GROUP, INC.
BY: /S/ JOSEPH H. LANDIS
--------------------------
Joseph H. Landis
President
CORGENIX MEDICAL CORPORATION
BY: /S/ DOUGLASS T. SIMPSON
--------------------------
Douglass T. Simpson
President
3
<PAGE>
EXHIBIT "A"
The Corporate Relations Services to be provided by CRG for a twelve (12) month
period are as follows:
I. ADVERTISING AND PRINTING SERVICES
A. MONEYWORLD MAGAZINE - Lead Generation mailing (300,000 print run
total) A four-color magazine will be created of which a four
page advertorial will be dedicated to the Client.
Junior Page advertorial in four (4) separate issues of
MoneyWorld Magazine.
B. GROWTH INDUSTRY REPORT - Four-page, two-color follow-up mail
pieces designed for additional informational purposes, that is
mailed to MoneyWorld respondents.
C. THE CORE BROKER PROGRAM - CRG will produce a core of 8-10 retail
brokers, market makers and/or money managers who will take
positions in the stock of "Client". This process will begin
immediately upon CRG receiving the payment as stipulated in
Exhibit "B" and will be completed no later than a month before
mailing occurs. Upon completion, selection and approval of the
Core Broker Group, CRG will arrange a Core Broker meeting, which
will include a show and tell from the top management of the
"Client" in training of these Core Brokers. The Client will
cover all expenses of the Core Broker meeting. Client will have
prior approval of all expenses and will arrange the meeting.
D. Public relations exposure to newsletter writers, trade and
financial publications - The Client shall be totally responsible
for all travel expenses for the purpose of due diligence of the
Company by financial newsletter writers and/or brokers. The
Client will have total pre-approval rights on these trips.
E. Inclusion as a featured "Lead Generator of the Month" in
CONFIDENTIAL FAX ALERT, a newsletter transmitted by fax to over
8,000 Brokers -
F. Preparation of a Broker Bullet Sheet to be sent to every broker
who shows interest in working the leads and the stock.
G. Lead Tracking Summary maintained for all response leads
generated and provided to the "Client" upon request.
---,---
Initials
4
<PAGE>
H. Press releases - Up to four (4) press releases included which
may be extended at the option of the Client", at the Client's
expense.
I. Road Shows - Locations to be determined. Client will cover all
expenses of Road Shows. Client will have prior approval of those
expenses.
J. Advertising on MoneyWorld web site for a period of 60 days (the
advertising will parallel the four (4)-page advertorial in
MoneyWorld magazine).
Introduction to our web site company. Additional assistance is
available to the Client related to web site development and
maintenance.
K. CRG will produce and distribute at its cost the due diligence
packages to all inquiring brokers.
L. CRG targets a minimum of 3% return of qualified investor leads
specifically generated for the Company.
M. Assistance in reviewing documentation to be sent to brokers.
N. "Client" agrees to send CRG, DTC sheets on a weekly basis.
O. "Client" agrees to provide CRG with a complete shareholders list
on a semi-annual basis.
P. "Client" agrees to provide CRG with a list of Blue Sky states on
their attorney's letterhead.
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Initials
5
<PAGE>
EXHIBIT "B"
PAYMENT AGREEMENT
made by and between
CORGENIX MEDICAL CORPORATION
and
CORPORATE RELATIONS GROUP, INC.
THIS AGREEMENT is made this 14TH day of APRIL, 1998, and will serve as
confirmation of payment terms for services to be provided CORGENIX MEDICAL
CORPORATION ("CLIENT") whereby CORPORATE RELATIONS GROUP, INC., ("CRG") has
agreed to perform said services as defined in the "Lead Generation / Corporate
Relations Agreement."
TERMS
A. The Client agrees to pay CRG, SEVENTY-FIVE THOUSAND DOLLARS ($75,000 US cy)
due payable thirty (30) days from the signing of this contract.
The parties, Corporate Relations Group, Inc., Gray Wolf Technologies, Inc.,
REAADS Medical Product, Inc., and Corgenix Medical Corporation do hereby
agree that this contract is assignable.
B. This Agreement is subject to compliance with the rules of the Exchanges and
Securities Commissions on which Client is listed and registered.
C. IT IS UNDERSTOOD AND AGREED BY THE PARTIES THAT THE ABOVE COMPENSATION IN
U.S. CURRENCY, OR FREE TRADING SHARES OF THE COMPANY, SHOULD BE PAID TIMELY
UPON EXECUTION OF THIS AGREEMENT. CRG WILL RETAIN THE OPTION, BUT IS NOT
COMPELLED TO BEGIN ITS PERFORMANCE UNDER THIS AGREEMENT PRIOR TO THE
PAYMENT OF SUCH COMPENSATION IN U.S. CURRENCY OR FREE TRADING SHARES.
D. In the event of termination of the Agreement by Client, CRG shall be fully
released and forever discharged by Client from any further obligations or
liabilities with respect to the "Lead Generation / Corporate Relations
Agreement" and any results therefrom, save and except liabilities arising
from CRG's own negligence during the term of this Agreement. Concurrently,
Client shall be fully released and forever discharged by CRG from any and
all obligations of further payments or liabilities with respect to the
"Lead Generation / Corporate Relations Agreement." This release in no way
affects Point #7, Page 2 of the "Lead Generation / Corporate Relations
Agreement."
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Initials
6
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
CORPORATE RELATIONS GROUP, INC.
BY:
-----------------------------
Joseph H. Landis
President
CORGENIX MEDICAL CORPORATION
BY:
-----------------------------
Douglass T. Simpson
President
7
<PAGE>
EXHIBIT "C"
CORGENIX MEDICAL CORPORATION hereby designates the following person or persons
to act on its behalf for purposes of signing off on all copies pursuant to
Paragraph 4 of this Corporation Relations Agreement. CRG may rely upon the
signature of any of the following:
- --------------------------------- ------------------------------------
DIRECTOR (PLEASE SIGN) DIRECTOR (PLEASE PRINT)
- --------------------------------- ------------------------------------
PRESIDENT (PLEASE SIGN) PRESIDENT (PLEASE PRINT)
- --------------------------------- ------------------------------------
VICE PRESIDENT (PLEASE SIGN) VICE PRESIDENT (PLEASE PRINT)
8
<PAGE>
EXHIBIT 10.19
REAADS Medical Products, Inc. SBA LOAN NUMBER
Loan #1821001 GP-986,194-30-02
U.S. Small Business Administration
NOTE
$ 1,000,000.00 (City and State) Broomfield, Colorado
(Date) January 6, 1997
For value received, the undersigned promises to pay to the order of Eagle Bank
at its office in the City of Broomfield, State of Colorado or at holders option,
at such other place as may be designated from time to time by the holder One
Million Dollars, with interest on unpaid principal computed from the date of
each advance to the undersigned at the rate of 11.00 percent per annum, payment
to be made in installments as follows:
NOTE PAYABLE: The interest rate as of the date herein is eleven percent
(11.00%) per annum. Principal and interest are payable in monthly
installments of $13,775 each beginning approximately one month after the date
of the Note, and continuing the same day of each month thereafter until the
expiration of ten years from the date of the Note; at that time the entire
amount of principal and interest remaining unpaid will be payable. Interest
will be calculated on the unpaid principal to the date of receipt of' each
installment. Payments will be credited first to the accrued interest and then
to reduction of principal.
The rate of interest herein shall increase or decrease effective on January
1, April 1, July 1, and October 1 of each year to a rate equal to the minimum
prime lending rate at large U.S. money center commercial banks as published
on the first business day following those dates in the Money Rates section of
the Wall Street Journal plus two and three quarters percent (2.75%) per
annum.
Notwithstanding the foregoing provision for Changes in the rate of interest,
neither the initial rate nor any subsequent interest rate shall exceed the
maximum rate permitted by State Usury Laws or preempting Federal law, if any,
applicable to this loan.
If the undersigned is in default in payment due under the Note and the Small
Business Administration (SBA) purchases its guaranteed portion of the Note
the rate of interest on the entire Note shall become fixed at the rate in
effect as of the initial date of default. If the undersigned is not in
default in payment when SBA purchases its guaranteed portion, then the rate
of interest on the entire Note shall be fixed at the rate in effect as of the
date of purchase by SBA.
The holder hereof has the right to change the amount of the installments due
under the Note to assure that such payments will amortize the Note within the
stated maturity.
Borrower shall provide Lender with written notice of intent to prepay part or
all of the loan at least three (3) weeks prior to tile anticipated prepayment
date. A Prepayment is any payment made ahead of schedule that exceeds twenty
(20) percent of the then outstanding principal balance. If Borrower makes a
prepayment and fails to give at least three weeks advance notice of
1
<PAGE>
intent to prepay, then, notwithstanding any other provision to the contrary
in the Note, or other document, borrower shall be required to pay Lender
three weeks interest on the unpaid principal as of the date of such payment.
If this Note contains a fluctuating interest rate, the notice provision is
not a pre-condition for fluctuation (which shall take place regardless of
notice). Payment of any installment of principal or interest owing on this Note
may be made prior to the maturity date thereof without penalty. Borrower shall
provide lender with written notice of intent to prepay part or all of this loan
at least three (3) weeks prior to the anticipated prepayment date. A prepayment
is any payment made ahead of schedule that exceeds twenty (20) percent of the
then outstanding principal balance. If borrower makes a prepayment and fails to
give at least three weeks advance notice of intent to prepay, then,
notwithstanding any other provision to the contrary in this note or other
document, borrower shall be required to pay lender three weeks interest on the
unpaid principal as of the date preceding such prepayment.
The term "Indebtedness" as used herein shall mean the indebtedness evidenced
by this Note including principal interest and expenses. whether contingent, now
due or hereafter to become due and whether heretofore or contemporaneously
herewith or hereafter contracted The term "Collateral" as used in this Note
shall mean any funds, guaranties or other property or rights therein of any
nature whatsoever or the proceeds thereof which may have been are or hereafter
may be, hypothecated directly or indirectly by the undersigned or others, in
connection with, or as security for, the Indebtedness or any part thereof The
Collateral, and each part thereof, shall secure the Indebtedness and each part
thereof. The covenants and conditions set forth or referred to in any and all
instruments of hypothecation constituting the Collateral are hereby incorporated
in this Note as covenants and conditions of the undersigned with the same force
and effect as though such covenants and conditions were fully set forth herein.
The Indebtedness shall immediately become due and payable, without notice or
demand, upon the appointment of a receiver or liquidator, whether voluntary or
involuntary, for the undersigned or for any of its property, or upon the filing
of a petition by or against the undersigned under the provisions of any State
insolvency law or under the provisions of the Bankruptcy Reform Act of 1978, as
amended, or upon the making by the undersigned of an assignment for the benefit
of its creditors. Holder is authorized to declare all or any part of the
Indebtedness immediately due and payable upon the happening of any of the
following events (1) Failure to pay any part of the Indebtedness when due; (2)
nonperformance by the undersigned of any agreement with, or any condition
imposed by, Holder or Small Business Administration (hereinafter called "SBA");
with respect to the Indebtedness; (3) Holder's discovery of the undersigned's
failure in any application of the undersigned to Holder or SBA to disclose any
fact deemed by Holder to be material or of the making therein or in any of the
said agreements, or in any affidavit or other documents submitted in connection
with said application or the indebtedness, of any misrepresentation by, on
behalf of, or for the benefit of the undersigned; (4) the reorganization (other
than a reorganization pursuant to any of the provisions of the Bankruptcy Reform
Act of 1978, as amended) or merger or consolidation of the undersigned (or the
making of any agreement therefor) without the prior written consent of Holder;
(5) the undersigned's failure duty to account, to Holdees satisfaction, at such
time or times as Holder may require for any of the Collateral or proceeds
thereof, coming into the control of the undersigned; or (6) the institution of
any suit affecting the undersigned deemed by Holder to affect adversely its
2
<PAGE>
interest hereunder in the Collateral or otherwise Holder's failure to exercise
its rights under this paragraph shall not constitute a waiver thereof.
Upon the nonpayment of the Indebtedness, or any part thereof, when due,
whether by acceleration or otherwise, Holder is empowered to sell, assign, and
deliver the whole or any part of the Collateral at public or private sale,
without demand, advertisement or notice of the time or place of sale or of any
adjournment thereof, which are hereby expressly waived. After deducting all
expenses incidental to or arising from such sale or sales, Holder may apply the
residue of the proceeds thereof to the payment of the Indebtedness, as it shall
deem proper, returning the excess, if any, to the undersigned. The undersigned
hereby waives all right of redemption or appraisement whether before or after
sale.
Holder is further empowered to collect or cause to be collected or otherwise
to be converted into money all or any part of the Collateral, by suit or
otherwise, and to surrender, compromise, release, renew, extend, exchange, or
substitute any item of the Collateral in transactions with the undersigned or
any third party, irrespective of any assignment thereof by the undersigned, and
without prior notice to or consent of the undersigned or any assignee. Whenever
any item of the Collateral shall not be paid when due, or otherwise shall be in
default, whether or not the indebtedness, or any part thereof has become due,
Holder shall have the same rights and powers with respect to such item of the
Collateral as are granted in this paragraph in case of nonpayment of the
Indebtedness or any part thereof, when due None of the rights, remedies,
privileges, or powers of Holder expressly provided for herein shall be
exclusive, but each of them shall be cumulative with and in addition to every
other right, remedy, privilege, and power now or hereafter existing in favor of
Holder, whether at law or equity, by statute or otherwise
The undersigned agrees to take all necessary steps to administer, supervise,
preserve, and protect the Collateral; and regardless of any action taken by
Holder, there shall be no duty upon Holder in this respect. The undersigned
shall pay all expenses of any nature, whether incurred in or out of court, arid
whether incurred before or after this Note shall become due at its maturity date
or otherwise, including but not limited to reasonable attorney's fees and costs,
which Holder may deem necessary or proper in connection with the satisfaction of
the Indebtedness or the administration, supervision, presentation, protection of
(including, but not limited to the maintenance of adequate insurance) or the
realization upon the Collateral. Holder is authorized to pay at any time and
from time to time any or all of such expenses, add the amount of such payment to
the amount of the Indebtedness, and charge interest thereon at the rate
specified herein with respect to the principal amount of this Note.
The security rights of Holder and its assigns hereunder shall not be impaired
by Holdees sale, hypothecation or rehypothecation of any note of the undersigned
or any item of the Collateral, or by any indulgence, including but not limited
to (a) any renewal, extension, or modification which Holder may grant with
respect to the Indebtedness or any part thereof, or (b) any surrender,
compromise, release, renewal, extension, exchange, or substitution which Holder
may grant in respect of the Collateral, or (c) any indulgence granted in respect
of any endorser, guarantor, or surety. The purchaser, assignee, transferee, or
pledgee of this Note, the Collateral, and guaranty, and any other document (or
any of them), sold, assigned, transferred, pledged, or repledged, shall
forthwith become vested with and entitled to exercise all the powers and rights
given by this Note and all applications of the undersigned to Holder or SBA, as
if said purchaser, assignee, transferee, or pledgee were
3
<PAGE>
originally named as Payee in this Note and in said application or applications.
This promissory note is given to secure a loan which SBA is making or in
which it is participating and pursuant to Part 101 of the Rules and Regulations
of SBA (13 C F, R 101 l(d)), this instrument is to be construed and (when SBA is
the Holder or a party in interest) enforced in accordance with applicable
Federal law.
REAADS Medical Products, Inc.
/S/ LUIS R. LOPEZ
----------------------------------------
Luis R. Lopez
/S/ DOUGLASS T. SIMPSON
----------------------------------------
Douglass T. Simpson, Secretary
4
<PAGE>
EXHIBIT 10.20
NWB1019JC (Revised May 1995) Deed of Guarantee Sterling and Currency by
Individual(s) or Company
TO NATIONAL WESTMINSTER BANK PLC
In consideration of National Westminster Bank Plc (the Bank) (whose address for
service of any documents relating to this Guarantee is its Branch at
- -------------------------------------------------------------------------------
BEDFORD SECURITIES CENTER, 6 CAULDWELL STREET, BEDFORD MK42 9BX
- -------------------------------------------------------------------------------
or such other address as the Bank may notify the Guarantor of in writing from
time to time) giving time credit banking facilities and/or other accommodation
to
- -------------------------------------------------------------------------------
REAADS BIO-MEDICAL PRODUCTS (UK) LIMITED REG. NO. 3167445 WHOSE
REGISTERED OFFICE IS SITUATE AT 8 LITTLE WHITE RAMSEY, HUNTINGTON,
CAMBRIDGESHIRE, (the Debtor)*
- -------------------------------------------------------------------------------
NOW
- -------------------------------------------------------------------------------
REAADS MEDICAL PRODUCTS INC. WHOSE REGISTERED OFFICE IS SITUATE AT
12061 TEJON STREET, WESTMINSTER, COLORADO 80234, USA, (the Guarantor)
- -------------------------------------------------------------------------------
hereby guarantees payment to the Bank on demand of all liabilities of the Debtor
to the Bank (in whatever currency denominated) howsoever arising whether present
future actual and/or contingent and whether incurred solely severally and/or
jointly and as principal or surety and all legal and other costs and expenses
(on a full indemnity basis) howsoever incurred by the Bank in connection
therewith and so that as against the Guarantor interest shall be deemed to
continue to accrue and be a liability of the Debtor hereby secured
notwithstanding that for any reason interest may have ceased to accrue against
the Debtor provided that the total amount recoverable in relation thereto under
this Guarantee shall not exceed the sum of
- ------------------------------------------------------------TEN THOUSAND Pounds
or the equivalent thereof at the date of demand on the Guarantor in one or more
currencies (the equivalent of any amount not expressed in Sterling being
assessed by reference to the Bank's spot rate of exchange at the time of demand
hereunder)
The Guarantor agrees to pay in addition interest on any amount(s) demanded under
this Guarantee day by day from demand until full discharge such interest to be
chargeable at the rate of interest payable or deemed to be payable by the Debtor
(or if there is no such rate at the annual rate of the Bank's base rate from
time to time plus two per cent) (whether before or after judgment) and the
Bank's costs and expenses (on a full indemnity basis) incurred in connection
with the enforcement of this Guarantee. Such interest will be calculated and
compounded as agreed or in such manner as the Bank may reasonably determine from
time to time.
The costs and expenses referred to herein shall include (for avoidance of doubt)
all amounts the Bank may from time to time require in respect of its internal
management and administrative costs and expenses.
The Guarantor agrees and confirms as follows:
1 Where this Guarantee is entered into by more than one person the agreements
and obligations on the part of the Guarantor herein contained shall take effect
as joint and several agreements and obligations and all references to the
Guarantor shall take effect as references to the said persons or any of them and
none of them shall be released from liability hereunder by reason of this
Guarantee failing or ceasing to be binding as a continuing security on any other
or others of them (whether or not known to the Bank).
* If the Debtor is a firm enter names of partners and trade name (if any)
If the Debtor is a company give registered number
If the Debtor is a trust add "or other the trustee(s) for the time being
of ... [name of trust]"
p1 Rev 5/95
<PAGE>
2 Where there is more than one person comprised in the term 'the Debtor'
reference to the Debtor shall where the context admits take effect as a
reference to such persons or any of them and where the Debtor is a firm shall
include the person or persons from time to time constituting the firm whether or
not under the same style or firm name and generally where the context so admits
the singular will include the plural.
3 The Bank may without giving notice to or obtaining any consent from the
Guarantor and without affecting the Guarantor's liability hereunder renew vary
or determine any accommodation given to the Debtor hold over renew modify or
release any security or guarantee now or hereafter held from the Debtor or any
other person including any other person liable under this Guarantee in respect
of the liabilities hereby secured and/or any liabilities of the Guarantor and
grant time or indulgence to or compound with the Debtor or any such person and
this Guarantee shall not be discharged nor shall the Guarantor's liability under
it be affected by anything which would not have discharged or affected the
Guarantor's liability if the Guarantor had been a principal debtor to the Bank
instead of a guarantor.
4 This Guarantee shall be additional to any other guarantee or security now or
hereafter held in respect of the liabilities hereby secured.
5 This Guarantee shall be a continuing security and shall remain in force
notwithstanding any disability or the death of the Guarantor until determined by
three months notice in writing from the Guarantor or the Personal
Representatives of the Guarantor but notwithstanding such determination the
Guarantor shall remain liable as Guarantor for all the liabilities of the Debtor
outstanding (whether or not due and payable) at the date of the expiration of
the notice.
6 The Guarantor has not taken and will not take without the written consent of
the Bank any security from the Debtor in connection with this Guarantee and any
security so taken shall be held in trust for the Bank and as security for the
liability of the Guarantor to the Bank hereunder.
7 In respect of the Guarantor's liability hereunder the Bank shall have a lien
on all securities or other property of the Guarantor held by the Bank whether
for safe custody or otherwise. The Bank shall further be entitled ( as well
before as after demand hereunder) to set off against any credit balance on any
account of the Guarantor with the Bank (whether current or otherwise or subject
to notice or not) and against any interest accruing thereon any liabilities of
the Guarantor to the Bank whatsoever (whether arising hereunder or otherwise)
and if the liability or any part thereof is in a different currency from a
credit balance against which the Bank seeks to set it off the Bank shall be
entitled to utilise currency of the account in credit for the purchase at its
spot rate or exchange of an amount in the currency of the liability not
exceeding the amount of such liability and also to pay out of the credit balance
any additional sum which the BANK may be required to pay for such currency.
8 (a) This Guarantee shall apply to all of the above mentioned liabilities of
the Debtor to the Bank and shall not be affected by any fluctuation in or
intermediate discharge of such liabilities and until such liabilities have been
discharged in full the Guarantor shall not be entitled to share in any security
held or money received by the Bank on account of such liabilities or to stand in
the place of the Bank in respect of any security or money nor until such
liabilities have been discharged in full shall the Guarantor take any step to
enforce any right or claim against the Debtor in respect of any moneys paid by
the Guarantor to the Bank hereunder or have or exercise any rights as surety in
competition with the Bank.
(b) Any moneys received by the Bank in connection with this Guarantee may be
placed to the credit of a suspense account and such receipt shall not affect the
right of the Bank to claim or prove against the Debtor (or any other person
liable) for the entire amount of the liabilities of the Debtor. Such moneys or
any part thereof may at the Bank's option be applied in or towards discharge of
such liabilities of the Debtor as the Bank may in its absolute discretion
determine.
9 If this Guarantee is determined or called in by demand made by the Bank the
Bank may open a new account or accounts with the Debtor or any other person for
whose liabilities this Guarantee is available as security. If the Bank does not
open a new account it shall nevertheless be treated as if it had done so at the
time of determination or calling in and as from that time all payments made to
the Bank shall be credited or treated as having been credited to the new account
and shall not operate to reduce the amount for which this Guarantee is available
as security at that time.
10 This Guarantee shall not be discharged nor shall the Guarantor's liability be
affected by reason of any failure of or irregularity defect or informality in
any security given by or on behalf of the Debtor in respect of the moneys or
liabilities hereby secured nor by any legal limitation bar or restriction
dissolution disability incapacity or want of any borrowing powers of the Debtor
or want of authority of any director manager official or other person appearing
to be acting for the Debtor in any matter in respect of the moneys or
liabilities hereby secured or by any supervening matters rendering the
performance of the obligations of the Debtor illegal in any jurisdiction and
such moneys or liabilities will be recoverable by the Bank from the Guarantor as
sole or principal debtor.
11 Payment shall be in the currency in which the liabilities of the Debtor were
owing or incurred or (if that currency is other than sterling) at the option of
the Bank in sterling such other currency being converted into sterling at the
spot rate of exchange of the Bank for purchasing such currency with sterling
prevailing on the date of actual payment and the Guarantor hereby agrees to
indemnify the Bank against the full sterling price (including all costs charges
and expenses).
p2 Rev 5/95
<PAGE>
12 The Guarantor irrevocably authorises the Bank to obtain a banker's reference
from the Guarantor's bankers and at the Guarantor's expense at such intervals as
it may think fit and the Guarantor will make best endeavours to ensure that any
such references are provided. The Bank may supply a copy of this Guarantee with
its request by way of evidence of the Guarantor's request and authority to such
bankers to provide a reference.
13 In the absence of manifest error a certificate by an officer of the Bank as
to the amount for the time being due from the Debtor to the Bank and/or as to
the interest after demand from time to time payable hereunder and/or as to its
applicable spot rate of exchange and/or as to the amount of costs and expenses
incurred y the Bank from time to time (including internal costs and expenses)
shall be conclusive evidence (and admissible as such) against and binding upon
the Guarantor.
14 A demand or notice hereunder shall be in writing signed by an officer or
agent of the Bank and may be served on the Guarantor either by hand or post or
by facsimile machine (fax). In the case of a company service by hand may be made
either by delivering the same to any officer of the company at any place or
leaving the same addressed to the company at its registered office or a place of
business last known the Bank. A demand or notice by post or by fax may be
addressed to the Guarantor at the registered office or address or place of
business last known to the Bank and shall be deemed to have been received if
posted two days after the day on which it was posted and if sent by fax at the
time of transmission. It shall be effective notwithstanding it be returned
undelivered and notwithstanding the death of the Guarantor. The Bank may use the
last fax number of the Guarantor known to it and transmission may be proved by
production of an activity or transmission report which purports to indicate the
transmission of a message to such a number.
15 Any settlement discharge or release between the Guarantor and the Bank shall
be conditional upon no security or payment to the Bank by the Debtor or any
other person being avoided or reduced for any reason and the Bank shall be
entitled (subject to any limit in the total amount recoverable under this
Guarantee) to recover the value or amount of any such security or payment from
the Guarantor subsequently as if such settlement discharge or release had not
occurred. Any liability of the Guarantor under this Clause (whether actual or
contingent) shall be a liability in respect of which the Bank may exercise the
rights referred to in Clause 7 hereof.
16 This Guarantee is and will remain the property of the Bank.
17 This Guarantee shall be governed by and construed in accordance with the Laws
of England and for the benefit of the Bank solely the Guarantor irrevocably
submits to the jurisdiction of the courts of England and in relation to this
Guarantee irrevocably appoints N/A of
N/A
as its agent to accept service in relation to such courts and agreed that
service on such agent shall be deemed due service for the purposes of
proceedings in such courts without prejudice to any other mode of service. Such
jurisdiction shall be non-exclusive except to the extent hat such
non-exclusivity prejudices the submission to such jurisdiction.
p3 Rev 5/95
<PAGE>
In Witness whereof this Deed has been executed by the Undersigned
Dated this 14th day of May, 1997
FOR USE BY A COMPANY
Executed as a Deed by the Guarantor acting by
/S/ LUIS R. LOPEZ Director
- ---------------------------------------------------
Name in full
(in block letters) LUIS R. LOPEZ
---------------------------------
/S/ DOUGLASS T. SIMPSON Director/Secretary*
- ---------------------------------------------------
Name in full
(in block letters) DOUGLASS T. SIMPSON
---------------------------------
*delete as applicable
or alternatively:
The Common Seal of
* REAADS MEDICAL PRODUCTS INC.
was hereunto affixed in the presence of:
/S/ LUIS R. LOPEZ
- ---------------------------------------------------Director
/S/ DOUGLASS T. SIMPSON Secretary
- ---------------------------------------------------
FOR USE BY INDIVIDUALS
- -------------------------------------------------------------------------------
IMPORTANT - YOU SHOULD READ THIS CAREFULLY
The Bank strongly recommends that any person signing this document seeks
independent legal advice before signing as you may become liable instead of or
as well as the Debtor.
- -------------------------------------------------------------------------------
Signed and Delivered as a Deed
by the above named
*
in the presence of:
Signature of Witness-----------------------------
Name in full
(in block letters)-------------------------------
Address------------------------------------------
- -------------------------------------------------
Occupation---------------------------------------
*insert name of Guarantor
- -------------------------------------------------------------------------------
IMPORTANT - YOU SHOULD READ THIS CAREFULLY
- -------------------------------------------------------------------------------
p4 Rev 5/95
<PAGE>
- -------------------------------------------------------------------------------
The Bank strongly recommends that any person signing this document seeks
independent legal advice before signing as you may become liable instead of or
as well as the Debtor.
- -------------------------------------------------------------------------------
Signed and Delivered as a Deed
by the above named
*
in the presence of:
Signature of Witness-----------------------------
Name in full
(in block letters)-------------------------------
Address------------------------------------------
- -------------------------------------------------
Occupation---------------------------------------
*insert name of Guarantor
Signed and Delivered as a Deed
by the above named
*
in the presence of:
Signature of Witness-----------------------------
Name in full
(in block letters)-------------------------------
Address------------------------------------------
- -------------------------------------------------
Occupation---------------------------------------
*insert name of Guarantor
Signed and Delivered as a Deed
by the above named
*
in the presence of:
Signature of Witness-----------------------------
Name in full
(in block letters)-------------------------------
Address------------------------------------------
- -------------------------------------------------
Occupation---------------------------------------
*insert name of Guarantor
- -------------------------------------------------------------------------------
IMPORTANT - YOU SHOULD READ THIS CAREFULLY
- -------------------------------------------------------------------------------
p5 Rev 5/95
<PAGE>
- -------------------------------------------------------------------------------
The Bank strongly recommends that any person signing this document seeks
independent legal advice before signing as you may become liable instead of or
as well as the Debtor.
- -------------------------------------------------------------------------------
Signed and Delivered as a Deed
by the above named
*
in the presence of:
Signature of Witness-----------------------------
Name in full
(in block letters)-------------------------------
Address------------------------------------------
- -------------------------------------------------
Occupation---------------------------------------
*insert name of Guarantor
Signed and Delivered as a Deed
by the above named
*
in the presence of:
Signature of Witness-----------------------------
Name in full
(in block letters)-------------------------------
Address------------------------------------------
- -------------------------------------------------
Occupation---------------------------------------
*insert name of Guarantor
**I/We acknowledge receipt of a completed copy of this document.
/S/ LUIS R. LOPEZ
-----------------------------
/S/ DOUGLASS T. SIMPSON
-----------------------------
-----------------------------
-----------------------------
Signature(s)
**If executed by a company the acknowledgement must be signed by a Director or
the Company Secretary
p6 Rev 5/95
<PAGE>
Branch BEDFORD SECURITIES CENTRE
---------------------------------------------
Account REAADS BIO-MEDICAL PRODUCTS (UK) LIMITED
---------------------------------------------
Dated 19
------------------------------------ -------
-----------------------------------------------------
to
NATIONAL WESTMINSTER BANK PLC
-------------------------------
GUARANTEE STERLING AND CURRENCY
By Individual(s) or Company
p8 Rev 5/95
<PAGE>
EXHIBIT 10.21
OPTION AGREEMENT
THIS AGREEMENT ("Agreement") made as of this 22nd day of May, 1998 by and
between CORGENIX MEDICAL CORPORATION ("Optioner"), a Nevada corporation with
principal offices at 12061 Tejon Street, Westminster, CO 80234 and TransGlobal
Financial Corporation ("Optionee"), a Florida corporation with principal offices
located at 14255 U.S. Highway 1, Suite 253, Juno Beach, Florida 33408.
W I T N E S S E T H
WHEREAS, Optioner and Optionee deem it to be in their best interest for the
Optioner to grant to Optionee an exclusive right and option to purchase and
acquire, or facilitate the sale of, in its sole discretion, an aggregate of One
Million (1,000,000) shares of the Company's 5% Series A Convertible Preferred
Stock and Warrants to purchase an aggregate of One Million (1,000,000) shares of
the Company's Common Stock, for an aggregate purchase price of One Million
United States Dollars ($1,000,000) (the "Purchase Price"). The Series A
Preferred Stock and Warrants are collectively referred to as the "Units".
NOW, THEREFORE, in consideration of the mutual covenants and provisions
contained herein, and other good and valuable consideration, the receipt of
which is hereby acknowledged, Optioner and Optionee hereby agree as follows:
1. The Optioner grants to Optionee the exclusive option to purchase and
acquire, or facilitate the sale of, the Units, exercisable by written notice to
Optioner on or prior to the expiration of a period of ninety (90) days from and
after the date of an order from the Securities and Exchange Commission ("SEC")
declaring effective a registration statement covering the Units and the shares
of Common Stock issuable upon exercise of the Warrants ("Underlying Shares").
<PAGE>
2. The purchase price payable by Optionee in the event Optioner purchases
the Units shall be equal to the Purchase Price.
3. In the event Optionee exercises the Option described in paragraph 1 of
this Agreement, the closing of this transaction shall occur within ten (10) days
of the date of the written notice of exercise described in paragraph 1 of this
Agreement. at the offices of Optioner in Westminster, Colorado.
4. In the event Optionee exercises the Option described in paragraph 1 of
this Agreement, the purchase and sale of the Units shall be effected upon the
terms and conditions, including the representations and warranties, covenants
and remedies, contained in the Offshore Securities Purchase Agreement attached
as Exhibit A to this Agreement, mutatis mutandis, to the extent that the Units
shall have been registered with the SEC rather than being sold pursuant to
Regulation S promulgated under the Securities Act of 1933, as amended.
5. Optioner agrees that it will, upon the demand of Optionee, execute or
cause to be executed such assignments, agreements, undertakings or contracts as
may be reasonably requested by Optionee for the purpose of carrying out the
purposes and provisions of this Agreement.
6. Optionee shall have no obligation to exercise its option under this
Agreement.
7. Optioner and Optionee agree that prior to the expiration of this
Agreement, Optioner will take no action to alter Optioner's Certificate of
Designations of Preferences of Series A 5% Convertible, Preferred Stock filed
May 14, 1998, without Optionee's prior written consent.
8. (a) Optionee shall have the right to assign this Agreement and the
rights under this Agreement, in whole or in part, to any other party without the
consent of Optioner.
-2-
<PAGE>
(b) Optioner shall have no right to assign, sell, transfer, pledge or
otherwise dispose of the Units; any other securities of the Optioner; and/or
Optioner's obligations under this Agreement without the prior written consent of
the Optionee.
(c) This Agreement supersedes all prior agreements and understandings
between the parties relating to the subject matter hereto and may not be changed
or terminated orally unless in writing and signed by the party to be charged.
(d) Governing Law. This Agreement shall be governed by the laws of the
State of Florida.
IN WITNESS WHEREOF , Optioner and Optionee have executed this Agreement on
the date first above written.
CORGENIX MEDICAL CORPORATION
/S/ DOUGLASS SIMPSON
-------------------------------------------
(Optioner)
Douglass Simpson, President
TRANSGLOBAL FINANCIAL CORPORATION
/S/ MIKE M. MUSTAFOGLU
-------------------------------------------
(Optionee)
Mike M. Mustafoglu, President
-3-
<PAGE>
EXHIBIT 10.22
CONSULTING AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into this 22nd day of
May, 1998 by and between TransGlobal Financial Corporation ("TGF"), a Florida
corporation having a place of business at 14255 U.S. Highway 1, Suite 253, Juno
Beach, Florida 33408 and, CORGENIX MEDICAL CORPORATION ("the Company"), a Nevada
corporation having a place of business at 12061 Tejon Street, Westminster,
Colorado 80234.
W I T N E S S E T H:
WHEREAS, the Company desires to obtain general financial advisory and
investment banking services from TGF; and
WHEREAS, TGF desires to perform these services for the Company on terms
and conditions as set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and TGF hereto agree
as follows:
1. Engagement of TGF. Subject to the terms of this Agreement, the
Company does hereby appoint and engage TGF as a consultant and TGF hereby
accepts its appointment and engagement by the Company as a consultant to the
Company with respect to the services specified in paragraph 2 of this Agreement
for the compensation set forth in paragraph 4 of this Agreement.
2. Services.
(a) As mutually determined from time to time by TGF and the
Company, during the term specified in paragraph 3 of this Agreement, TGF shall
undertake to consult with and advise the Company, by telephone or in person,
with respect to financial and business matters, including but not limited to
assistance with fund raising to implement the Company's business plans,
implementation of the Company's efforts to review capitalization, raise funding,
or pursue mergers, acquisitions or divestitures and other transactions, on an
exclusive basis.
(b) TGF agrees to spend a reasonable amount of time needed to
accomplish its services under this Agreement, and to be available for telephone
calls, meetings and other matters on as needed basis.
3. Term. Except as otherwise specified in paragraph 4 hereof, this
Agreement shall be effective for three (3) years from its execution by TGF and
the Company.
<PAGE>
4. Compensation.
(a) As full consideration for the services to be provided
pursuant to paragraph 2 of this Agreement (and in addition to the expenses
provided for in paragraph 5 hereof), the Company shall pay TGF the following
fees:
(i) Retainer Fee. The Company hereby agrees to pay TGF or
TGF's designee(s), an aggregate of One Hundred Eighty Thousand Dollars
($180,000), payable in thirty-six (36) monthly installments of $5,000 on
or before the tenth (10th) day of each month during the term of this
Agreement.
(ii) Transaction Fees.
(1) For financing secured on behalf of the Company
by or through TGF on terms and conditions reasonably acceptable
to the Company, the Company will pay TGF cash fees at the closing
of such financing in an amount equal to: (a) five percent (5%) of
any and all funds committed and available to the Company in any
equity financing, and (b) three percent (3%) of any and all funds
committed and available to the Company in any debt financing.
(2) In the event that TGF represents the Company
with respect to a merger, acquisition, investment, exchange, or
other disposition of securities or assets of the Company and/or a
merger or acquisition candidate, then the Company shall pay TGF a
Transaction Fee equal to 5% of the total market value on the day
of the closing of stock, cash, assets and all other property
(real or personal) exchanged or received, directly or indirectly
by the Company or any of its security holders in connection with
any such transaction, which Transaction Fee shall be payable by
the Company in the same form in which consideration is payable to
the Company or its security holders pursuant to such merger,
acquisition, investment, exchange or other disposition of
securities or assets.
(3) In the event TGF introduces the Company to a
joint venture partner or customer and sales develop as a result
of the introduction, the Company hereby agrees to pay a fee of
five percent (5%) of the before tax income generated from this
introduction during the life of the venture following the date of
the first sale. For the computation of the before tax income,
sales shall be cash receipts less any applicable refunds,
returns, allowances, credits and shipping charges and monies paid
by the Company by way of settlement or judgment arising out of
claims made by or threatened against the Company. Commission
payments shall be paid on the 15th day of each month following
the receipt of customer's payment. In the event any adjustments
are made to the total sales after the commission has been paid,
the
-2-
<PAGE>
Company shall be entitled to an appropriate refund or credit
against future payments under this Agreement.
(b) All fees to be paid pursuant to this Agreement, except as
otherwise specified, are due and payable to TGF at the closing or closings of
any transaction specified in paragraph 4 hereof. In the event that this
Agreement shall not be renewed or if terminated for any reason, notwithstanding
any such non-renewal or termination, TGF shall be entitled to a full fee as
provided under paragraph 4 and expense reimbursement as provided in paragraph 5
hereof, for any transaction for which the discussions were initiated during the
term of this Agreement and which is consummated within a period of twelve months
after non-renewal or termination of this Agreement.
(c) The Company and TGF mutually agree that the status of TGF is
that of an independent contractor operating at its own risk. TGF agrees that it
is not and will not act, represent, describe or hold itself out in any way,
directly or by implication, as a partner, joint venturer or agent of the Company
and will not describe itself as a representative for the Company, except with
respect to the performance of the services contemplated by paragraph 2 of this
Agreement.
(d) The obligation of the Company to pay the fees described in
subparagraph 4 of this Agreement shall be absolute and unconditional as long TGF
performs its obligations under this Agreement, and shall be payable without
offset, deduction or claim of any kind or character.
(e) The Company hereby acknowledges and consents that TGF may
receive additional fees or other compensation from one or more of the lenders,
subscribers, customers, investors or parties to any transaction described in
paragraph 4(a)(ii), or any sources of funding identified by TGF, for various
services which may include, in part, services related to this Agreement.
5. Expenses. In addition to the fees payable hereunder, and regardless
of whether any transaction set forth in paragraph 4 hereof is proposed or
consummated, the Company shall reimburse TGF for all fees and disbursements of
TGF's counsel and TGF's travel and out-of-pocket expenses incurred in connection
with the services performed by TGF pursuant to this Agreement, including without
limitation, hotels, food and associated expenses and long distance calls, but
excluding any expenses incurred by TGF in connection with any action, suit or
proceeding between TGF and the Company relating to the services to be performed
by TGF pursuant to this Agreement.
6. Liability of TGF.
(a) The Company acknowledges that all opinions and advice
(written or oral) given by TGF to the Company in connection with TGF's
engagement are intended solely for the benefit and use of the Company in
considering the transaction to which they relate, and the Company agrees that no
person or entity other than the Company shall be entitled to make use of
-3-
<PAGE>
or rely upon the advice of TGF to be given hereunder, and no such opinion or
advice shall be used for any other purpose or reproduced, disseminated, quoted
or referred to at any time, in any manner or for any purpose, nor may the
Company make any public references to TGF, or use TGF's name in any annual
reports or any other statements, reports or releases of the Company without
TGF's prior written consent.
(b) The Company acknowledges that TGF makes no commitment
whatsoever as to making or causing others to make a market in the Company's
securities or as to recommending or advising its clients to purchase the
Company's securities. Research reports or corporate finance reports that may be
prepared by TGF will, when and if prepared, be done solely on the merits, and
will be based upon the independent judgment and analysis of TGF or any senior
corporate finance personnel of TGF. TGF agrees to use its best efforts to secure
the financing necessary to implement the Company's reasonable business plans.
7. TGF's Services to Others. The Company acknowledges that TGF or its
affiliates are in the business of providing financial advisory and investment
banking consulting advice to others. Nothing contained in this Agreement shall
be construed to limit or restrict TGF in conducting such business with others,
or in rendering such advice to others, except to any competitors of the Company.
8. Company Information.
(a) The Company recognizes and confirms that, in advising the
Company and in fulfilling its engagement hereunder, TGF will use and rely on
data, material and other information furnished to TGF by the Company. The
Company acknowledges and agrees that in performing its services under this
Agreement, TGF may rely upon the data, material and other information supplied
by the Company without independently verifying the accuracy, completeness or
veracity of such data, material or other information.
(b) Except as contemplated by the terms of this Agreement or as
required by applicable law, TGF shall keep confidential all material, non-public
information provided to it by the Company, and shall not disclose such
information to any third party, other than such of its employees and advisors as
TGF determines have a need to know.
9. Indemnification.
(a) (i) The Company shall indemnify and hold TGF harmless against
any and all liabilities, claims, lawsuits, including any and all awards and/or
judgments to which it may become subject under the Securities Act of 1933, as
amended (the "Securities Act"), the Securities Exchange Act of 1934, as amended
(the "Exchange Act") or any other federal or state statue, at common law or
otherwise, insofar as said liabilities, claims and lawsuits (including awards
and/or
-4-
<PAGE>
judgments) arise out of or are in connection with the services rendered by TGF
or any transactions in connection with this Agreement, except for any
liabilities, claims and lawsuits (including awards and/or judgments), arising
out of and proximately caused by the reckless acts or omissions of TGF, or with
respect to which TGF is obligated to indemnify the Company under paragraph
9(b)(i) of this Agreement. In addition, the Company shall also indemnify and
hold TGF harmless against any and all costs and expenses, including reasonable
counsel fees, incurred or relating to the foregoing.
(ii) TGF shall give the Company prompt notice of any such
liability, claim or lawsuit which TGF contends is subject to the
Company's indemnification obligations under this Agreement, and the
Company thereupon shall be granted the right to take any and all
necessary and proper action, at its sole cost and expense, with respect
to such liability, claim and lawsuit, including the right to settle,
compromise and dispose of such liability, claim or lawsuit, excepting
therefrom any and all proceedings or hearings before any regulatory
bodies and/or authorities.
(b) (i) TGF shall indemnify and hold the Company harmless against
any and all liabilities, claims and lawsuits, including any and all awards
and/or judgments to which it may become subject under the Securities Act, the
Exchange Act or any other federal or state statue, at common law or otherwise,
insofar as said liabilities, claims and lawsuits (including awards and/or
judgments) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact required to be stated or necessary to make the
statement therein, not misleading, which statement or omission was made in
reliance upon information furnished in writing to the Company by TGF for
inclusion in any registration statement or prospectus or any amendment or
supplement thereto in connection with any transaction to which this Agreement
applies, except for any liabilities, claims and lawsuits (including awards
and/or judgments) with respect to which the Company is obligated to indemnify
TGF under paragraph 9(a)(i) of this Agreement. In addition, TGF shall also
indemnify and hold harmless the Company against any and all costs and expenses,
including reasonable counsel fees, incurred or relating to the foregoing.
(ii) The Company shall give to TGF prompt notice of any
such liability, claim or lawsuit which the Company contends is the
subject to TGF's indemnification obligations under this Agreement, and
TGF thereupon shall be granted the right to take any and all necessary
and proper action, at its sole cost and expense, with respect to such
liability, claim and lawsuit, including the right to settle, compromise
or dispose of such liability, claim or lawsuit, excepting therefrom any
and all proceedings or hearings before any regulatory bodies and/or
authorities.
(c) In order to provide for just and equitable contribution under
this Agreement in any case in which (i) any person entitled to indemnification
under this paragraph 9 makes claim for indemnification pursuant hereto but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of
-5-
<PAGE>
the last right of appeal) that such indemnification may not be enforced in such
case notwithstanding the fact that this paragraph 9 provides for indemnification
in such case, or (ii) contribution under this Agreement may be required on the
part of any such person in circumstances for which indemnification is provided
under this paragraph 9, then, and in each such case, the Company and TGF shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after any contribution from others) in such proportion taking
into consideration the relative benefits received by each party from the
transactions in connection with this Agreement, the parties' relative knowledge
and access to information concerning the matter with respect to which the claim
was assessed, the opportunity to correct and prevent any statement or omission
and other equitable considerations appropriate under the circumstances;
provided, however, that notwithstanding the above, in no event shall TGF shall
be required to contribute any amount in excess of 5% of the public offering
price of any equity securities, and 3% of the public offering price of any debt
securities offered in connection with this Agreement; and provided, that, in any
such case, no person guilty of a fraudulent misrepresentation (within the
meaning of section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
Within fifteen (15) days after receipt by any party to this Agreement
(or its representative) of notice of the commencement of any action, suit or
proceeding, such party will, if a claim for contribution in respect thereof is
to be made against another party (the "Contributing Party"), notify the
Contributing Party of the commencement thereof, but the omission so to notify
the Contributing Party will not relieve it from any liability which it may have
to any other party other than for contribution hereunder. In case any such
action, suit or proceeding is brought against any party, and such party notifies
a Contributing Party or his or its representative of the commencement thereof
within the aforesaid fifteen (15) days, the Contributing Party will be entitled
to participate therein with the notifying party and any other Contributing Party
similarly notified. Any such Contributing Party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
proceeding effected by such party seeking contribution without the written
consent of the Contributing Party. The indemnification and contribution rights
contained in this paragraph 9 are in addition to any other rights and remedies
which either party hereto may have at law, in equity or otherwise.
10. Covenants of the Company. The Company covenants and agrees that it
will:
(a) For the duration of this Agreement, furnish to TGF copies of
such financial statements and other periodic and special reports as the Company
from time to time furnish generally to holders of any class of its securities or
to its directors and officers, and promptly furnish TGF (i) a copy of each
periodic report the Company shall be required to file with the Securities and
Exchange Commission ("Commission"), (ii) a copy of every press release and every
news item and article with respect to the Company or its affairs which was
released by the Company, and (iii) such
-6-
<PAGE>
additional documents and information with respect to the Company or its affairs
or any future subsidiaries of the Company, as TGF may from time to time
reasonably request.
(b) Apply the net proceeds from any funding arranged by TGF
according to the "Use of Proceeds" that the Company shall be obligated to
prepare prior to any such funding; and provide to TGF any periodic reports
requested by TGF showing the actual disbursements of funds to monitor whether
the "Use of Proceeds" shall have been complied with. The Company will not apply
funds in any manner inconsistent with such "Use of Proceeds" except with TGF's
prior written consent.
(c) Provide TGF, upon its request, at the Company's sole expense,
with access to daily consolidated financial transfer sheets relating to the
Company's securities.
(d) Cause two (2) designees selected by TGF to be elected to the
Company's Board of Directors (the "Board") during each year of the term of this
Agreement and notify TGF of each meeting of the Board ("Representatives"). The
Representatives shall be entitled to receive reimbursement for all reasonable
costs incurred in attending such meetings. The Company further agrees that,
during the term of this Agreement, the number of seats on the Board shall be
five (5), which number shall not be changed without the prior written consent of
TGF, and the Company shall schedule no less than four (4) formal and in person
meetings of its Board per year, which meetings shall be held quarterly each year
and thirty (30) days advance written notice of such meetings shall be given to
the Representatives, provided that upon issuance to Consultant, or to purchasers
identified by Consultant, in connection with Consultant's exercise of an Option
of even date herewith, of an aggregate of Two Hundred Fifty Thousand (250,000)
or more shares of the Company's 5% Series A Convertible Preferred Stock and
Warrants to purchase an aggregate of Two Hundred Fifty Thousand (250,000) or
more shares of the Company's Common Stock, Consultant's right to designate
members of the Board shall cease and Consultant shall have a right to have an
observer designated by Consultant present at all meetings of the Board and to
receive notices of Board meetings and copies of any written consents of the
Board of Directors. The Company agrees to indemnify and hold TGF and the
Representatives harmless against any and all claims, actions, damages, costs and
expenses, and judgments arising solely out of the attendance and participation
of the Representatives at any such meeting described herein. In the event that
the Company shall maintain a liability insurance policy affording coverage for
the acts of its officers and directors, it shall include the Representatives as
an insured under such policy, if possible.
(e) Not issue any shares of Common Stock, Preferred Stock or any
warrants, options or other rights to purchase Common Stock or Preferred Stock
exceeding 5% of each class of aforesaid securities, in a single or a series of
related transactions, without the reasonable prior, written consent of TGF.
-7-
<PAGE>
11. Notices. All notices, demands and requests required and permitted to
be given under the provisions of this Agreement shall be deemed duly given if
and when delivered personally or mailed by certified mail, postage prepaid,
addressed as follows or to such other address as The Company or TGF may
hereafter specify in writing:
If to The Company:
CORGENIX MEDICAL CORPORATION
12061 Tejon Street
Westminster, CO 80234
Attention: Douglass T. Simpson, President
If to TGF:
TransGlobal Financial Corporation
14255 U.S. Highway 1, Suite 253
Juno Beach, Florida 33408
Attention: Mike M. Mustafoglu, President
12. General.
(a) This Agreement embodies the entire agreement and
understanding between the Company and TGF with respect to the subject matter
hereof and it is expressly agreed that any prior agreements or understandings
between The Company and TGF relating to the subject matter of this Agreement,
whether oral or written, are canceled by execution of this Agreement
(b) This Agreement shall be construed and governed in accordance
with the laws of the State of Florida.
(c) This Agreement shall be binding upon and inure to the benefit
of the Company and TGF and their respective successors and assigns. Neither
party shall have the right to assign this Agreement, however, without the prior
written consent of the other party to this Agreement.
(d) No modifications or waiver of any provisions of this
Agreement shall be valid unless it is in writing and duly executed by the party
to be charged. No waiver at any time of any provision of this Agreement shall be
deemed a waiver of any other provision of this Agreement at that time or a
waiver of that or any other provision of this Agreement at any other time.
-8-
<PAGE>
IN WITNESS WHEREOF, The Company and TGF have executed this Agreement as
of the day and year first above written.
CORGENIX MEDICAL CORPORATION:
By: /S/ DOUGLASS T. SIMPSON
------------------------------------
Its: President
-----------------------------------
TransGlobal Financial Corporation:
By: /S/ MIKE M. MUSTAFOGLU
------------------------------------
Mike M. Mustafoglu
President
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
SUBSIDIARY JURISDICTION OF ORGANIZATION BUSINESS NAMES
Corgenix, Inc. Delaware REAADS Medical Products
REAADS Bio-Medical United Kingdom REAADS Medical Products
Products (UK) Limited
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS
REAADS MEDICAL PRODUCTS, INC.:
We consent to the inclusion of our report dated June 3, 1998, with respect to
the consolidated balance sheets of REAADS Medical Products, Inc. and Subsidiary
as of March 31, 1998, June 30, 1997 and 1996, and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for the
nine months ended March 31, 1998 and the years ended June 30, 1997 and 1996,
which report appears in the Form 10-SB of Corgenix Medical Corporation dated
June 26, 1998.
/S/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Boulder, Colorado
June 26, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S AUDITED FINANCIAL STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 19,095
<SECURITIES> 0
<RECEIVABLES> 302,366
<ALLOWANCES> 3,432
<INVENTORY> 317,118
<CURRENT-ASSETS> 650,895
<PP&E> 230,493
<DEPRECIATION> 305,057
<TOTAL-ASSETS> 1,536,909
<CURRENT-LIABILITIES> 969,472
<BONDS> 870,354
424,761
0
<COMMON> 1,643
<OTHER-SE> (729,321)
<TOTAL-LIABILITY-AND-EQUITY> 1,536,909
<SALES> 1,830,338
<TOTAL-REVENUES> 1,830,338
<CGS> 819,505
<TOTAL-COSTS> 819,505
<OTHER-EXPENSES> 1,516,439
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 118,728
<INCOME-PRETAX> (626,160)
<INCOME-TAX> 0
<INCOME-CONTINUING> (626,160)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (626,260)
<EPS-PRIMARY> (3.82)
<EPS-DILUTED> (3.82)
</TABLE>
