SUBJECT TO COMPLETION, DATED APRIL 16, 1999
REGISTRATION NO. _________
- -------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------------
PANORAMIC CARE MANAGER, INC.
(Exact name of small business issuer as specified in its charter)
COLORADO 7232 84-1165714
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
5181 WARD ROAD 5181 WARD ROAD JILL S. FLATELAND
WHEAT RIDGE, CO 80033 WHEAT RIDGE, CO 80033 11350 W. 72ND PLACE
(303) 422-3886 (303) 422-3886 ARVADA, CO 80005
(Address and telephone (Address of principal (303))422-4918
number of principal place of business (Name, address and telephone
executive offices) number of agent for service)
------------------------------
Copies to:
LESTER R. WOODWARD, ESQ.
DAVIS, GRAHAM & STUBBS LLP
370 SEVENTEENTH STREET, SUITE 4700
DENVER, COLORADO 80202
(303) 892-9400
------------------------------
APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
- -------------------------
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration for the same offering. | |
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. | |
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. | |
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. | |
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to Offering Price Aggregate Amount of
Securities to be Registered Registered Per Share(1) Offering Price(1) Registration Fee
<S> <C> <C> <C> <C>
Common Stock, par value $.001
per share.....................3,466,800 $1.00 $3,466,800 $970.00
</TABLE>
(1)Estimated solely for the purpose of calculating the registration fee, based
upon the expected price at which the shares of common stock, $.001 par
value, are to be offered.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
EXPLANATORY NOTE
This registration statement covers (a) the primary public offering by
Panoramic of 1,265,000 shares (the "Public Shares") of common stock, $.001 par
value, which includes 165,000 shares issuable pursuant to an over-allotment
option, (b) 110,000 shares paid to the placement agent, Canaccord, as a
corporate finance fee, (c) 165,000 shares underlying a warrant paid to Canaccord
in consideration of Canaccord's commitment to sell all of the shares in the
offering, and (d) the concurrent offering on a delayed basis of 1,926,800 shares
of common stock by certain selling stockholders of Panoramic. The primary
prospectus (the "Company Prospectus") covers Public Shares being offered by
Panoramic. An alternate prospectus (the "Selling Prospectus") will be used by
the Selling Stockholders in connection with an offering by them for their
accounts of up to 1,926,800 shares of common stock held by such Selling
Stockholders. The Selling Stockholder Prospectus is identical to the Company
Prospectus, except for (1) alternate front and back cover pages, which alternate
cover pages are noted in the registration statement, (2) the sections entitled
"Summary," "Use of Proceeds" and "Plan of Distribution," which alternate
sections are indicated in the registration statement, (3) the sections entitled
"Determination of Offering Price" and "Dilution" which sections shall appear
only in the Company Prospectus.
-2-
<PAGE>
[COVER PAGE FOR PUBLIC OFFERING]
PROSPECTUS
1,100,000 Shares
THIS INFORMATION IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT DELIVER THESE
SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
[LOGO]
PANORAMIC CARE MANAGER, INC.
Common Stock, $.001 par value
------------------------------
This offering consists of 1,100,000 shares of common stock of Panoramic
Care Manager, Inc., a corporation organized under the laws of the State of
Colorado. Canaccord Capital Corporation, Panoramic's agent, has committed to
sell all of the stock in the public offering to non-U.S. persons in Canada only,
at a price of $1.00 per share, for aggregate gross proceeds of $1,100,000.
Panoramic has paid Canaccord a sponsorship fee of $10,000, granted to Canaccord
an over-allotment option to solicit and accept subscriptions for up to an
additional 165,000 shares of common stock at a price of $1.00 per share and
granted to Canaccord a warrant entitling it to purchase up to 165,000 shares of
common stock at a price of $1.00 per share at any time up to one year from the
date the shares commence trading on the Vancouver Stock Exchange and at a price
of $1.15 per share at any time up to two years after the shares commence trading
on the Vancouver Stock Exchange. Panoramic will pay Canaccord a commission of
$.075 per share of common stock sold in the offering or sold pursuant to the
exercise of the over-allotment option, plus a corporate finance fee of 110,000
shares of common stock. The shares comprising the corporate finance fee and the
shares of common stock underlying Canaccord's warrant are being registered
pursuant to this registration statement. If Canaccord exercises the
over-allotment option in full, then the total agent's fee will be $94,875 and
110,000 shares of common stock and the net proceeds of the offering before
expenses will be $1,080,125 before expenses.
There is currently no trading market for common stock of Panoramic Care
Manager, Inc. Although Panoramic will apply to be listed for trading on the
Vancouver Stock Exchange, there can be no assurance that an active public market
will develop after the completion of this offering, or that, if developed, it
will be sustained.
------------------------------
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" LOCATED AT PAGES 11 TO 17.
------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is __, 1999
-3-
<PAGE>
[COVER PAGE FOR SELLING STOCKHOLDERS]
PROSPECTUS
1,926,800 Shares
THIS INFORMATION IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT DELIVER THESE
SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
[LOGO]
PANORAMIC CARE MANAGER, INC.
Common Stock, $.001 par value
------------------------------
All 1,926,800 shares of common stock of Panoramic Care Manager, Inc.
offered hereby are being offered for sale by the Selling Stockholders identified
herein. See "Selling Stockholders." Panoramic will not receive any proceeds from
the sale of the common stock by the Selling Stockholders.
There is currently no trading market for common stock of Panoramic Care
Manager, Inc. Although Panoramic has applied for the shares to be listed for
trading on the Vancouver Stock Exchange, there can be no assurance that an
active public market will develop after the completion of this offering, or
that, if developed, it will be sustained.
------------------------------
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" LOCATED AT PAGES 11 TO 17.
------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The common stock may be offered and sold from time to time by the Selling
Stockholders through underwriters, dealers, agents, or directly to one or more
purchasers in fixed price offerings, in negotiated transactions, at market
prices prevailing at the time of sale or at prices related to such market
prices. The terms of the offering and sale of common stock in respect of which
this Prospectus is being delivered, including any initial public offering price,
any discounts, commissions, or concessions allowed or paid to underwriters,
dealers, or agents, the purchase price of the common stock and the proceeds to
the Selling Stockholders, and any other material terms shall be set forth in a
Prospectus Supplement.
The date of this Prospectus is __, 1999
-4-
<PAGE>
TABLE OF CONTENTS
PAGE
SUMMARY......................................................................6
RISK FACTORS................................................................11
DESCRIPTION OF PANORAMIC....................................................17
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................33
DESCRIPTION OF SECURITIES...................................................36
PLAN OF DISTRIBUTION........................................................38
SELLING STOCKHOLDERS........................................................40
PLAN OF DISTRIBUTION........................................................44
DILUTION....................................................................45
USE OF PROCEEDS.............................................................46
DIRECTORS AND SENIOR OFFICERS...............................................49
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............................51
EXECUTIVE COMPENSATION......................................................52
CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING STATEMENTS..................53
DIVIDEND RECORD AND POLICY..................................................53
AUDITORS....................................................................53
LEGAL MATTERS...............................................................53
WHERE YOU CAN FIND MORE INFORMATION.........................................54
PART II INFORMATION
NOT REQUIRED IN PROSPECTUS..........................................1
-5-
<PAGE>
[Summary For Public Offering Only]
SUMMARY
This summary highlights selected information from this document and may
not contain all of the information that is important to you. To better
understand the offering, you should read this entire document and the documents
we have referred you to. See "Where You Can Find More Information" on page 54.
Unless otherwise indicated, all dollar amounts are expressed in U.S. dollars.
PANORAMIC: Panoramic was incorporated under the laws of the State of
Colorado on September 4, 1990 under the name FreeStyle
Publications, Inc. Panoramic changed its name to Panoramic
Care Manager, Inc. on December 8, 1998. [On April __, 1999,
Panoramic was reincorporated under the laws of the State
of Delaware and the name was changed to Panoramic Care
Systems, Inc.] The authorized share capital of Panoramic
consists of 50,000,000 shares of common stock.
BUSINESS
OF PANORAMIC: Panoramic is a software development company that creates and
markets software products to standardize and consolidate
clinical, financial, quality and administrative management
for patients in care settings outside of hospitals.
Panoramic has recently designed a line of software known as
Panoramic Care Manager(TM)(the "PCM Software") which
provides software and Internet integration for the
post-acute healthcare industry. The PCM Software is designed
to provide healthcare professionals with automated patient
management tools.
Panoramic started out by producing educational materials for
critical care programs. This was followed by the development
of intensive patient management tools in printed format
under the trade name STATpath(TM). STATpath materials are
the foundation for the PCM Software.
OFFERING: The offering consists of 1,100,000 shares of common stock to
be offered to the public by Panoramic's agent, Canaccord
Capital Corporation, at a price of $1.00 per share for
aggregate gross proceeds of $1,100,000. Panoramic has paid
Canaccord a sponsorship fee of $10,000, and has granted
Canaccord an option which will permit Canaccord to solicit
and accept subscriptions for up to 165,000 additional
shares, also at a price of $1.00 per share. Panoramic will
pay Canaccord a commission of $0.075 per share for each
share sold in the offering or sold pursuant to the exercise
of the over-allotment option, and a corporate finance fee of
110,000 shares of common stock. See "Plan of Distribution."
The shares of common stock comprising the corporate finance
fee are being registered pursuant to this registration
statement.
-6-
<PAGE>
COMMITMENT TO SELL: Canaccord has committed to sell all of the stock in the
offering to non-U.S. persons in Canada only. If all of the
shares offered, other than those subject to issuance under
the over-allotment option, have not been subscribed for by
the conclusion of the offering, then Canaccord will
purchase the remaining shares.
AGENT'S WARRANT: In consideration of Canaccord's commitment to sell all of
the stock in the offering, Panoramic has granted Canaccord a
non-transferable warrant entitling it to purchase up to
165,000 shares of common stock at a price of $1.00 per share
at any time up to one year from the date the shares commence
trading on the Vancouver Stock Exchange and thereafter at a
price of $1.15 per share at any time up to that date which
is two years after the date the shares commence trading on
the Vancouver Stock Exchange, at which time Canaccord's
warrant will expire. The shares underlying the warrant are
being registered pursuant to this registration statement.
USE OF PROCEEDS: The gross proceeds from this offering will be $1,100,000
(assuming the over-allotment option is not exercised). From
these proceeds, Panoramic will pay an aggregate commission
of $82,500 to Canaccord. After deducting the commission and
prior to the payment of expenses, the net proceeds from this
offering will be $1,017,500. Panoramic's working capital, as
of March 31, 1999, was approximately $75,000. The net
proceeds from the offering plus the working capital totals
approximately $1,092,500 before expenses.
Panoramic will spend the funds available to it upon the
completion of this offering to further Panoramic's business
objectives. See "Description of Business" and "Use of
Proceeds." Specifically, Panoramic hopes to be able to bring
to market its initial PCM Software products and to begin
development and testing of new PCM Software products.
Panoramic's central objective is to apply a majority of the
proceeds from the offering to its sales and marketing
efforts and to its research and development efforts so as to
expand its market profile and, in so doing, establish itself
as a major industry force in the post-acute health care
software field.
SELECTED FINANCIAL
INFORMATION: The information below for the years ended December 31, 1998
and 1997 was extracted from the audited financial statements
of Panoramic contained in this Prospectus. Reference should
be made to the financial statements, and the notes thereto,
to put the following summary in context.
-7-
<PAGE>
Fiscal Year Ended December 31
---------------------------
1998 1997
---------- ----------
Revenues ..................................... $ 51,507 $ 78,763
Salaries and management fees ................. 148,958 217,500
Product development costs .................... 3,221 2,342
Consulting Fees .............................. 61,650 --
General and administrative expenses .......... 24,995 16,193
Net earnings (loss) .......................... (187,317) (157,212)
Net earnings (loss) per Common Share ......... (0.09) (0.08)
-8-
<PAGE>
[Summary for Selling Stockholder Offering Only]
SUMMARY
This summary highlights selected information from this document and may
not contain all of the information that is important to you. To better
understand the offering, you should read this entire document and the documents
we have referred you to. See "Where You Can Find More Information" on page 54.
PANORAMIC: Panoramic was incorporated under the laws of the State of
Colorado on September 4, 1990 under the name FreeStyle
Publications, Inc. Panoramic changed its name to Panoramic
Care Manager, Inc. on December 8, 1998. [On April __, 1999,
Panoramic was reincorporated under the laws of the State
of Delaware and the name was changed to Panoramic Care
Systems, Inc.] The authorized share capital of Panoramic
consists of 50,000,000 shares of common stock.
BUSINESS
OF PANORAMIC: Panoramic is a software development company that creates and
markets software products to standardize and consolidate
clinical, financial, quality and administrative management
for patients in care settings outside of hospitals.
Panoramic has recently designed a line of software known as
Panoramic Care Manager(TM)(the "PCM Software") which
provides software and Internet integration for the
post-acute healthcare industry. The PCM Software is designed
to provide healthcare professionals with automated patient
management tools.
Panoramic started out by producing educational materials for
critical care programs. This was followed by the development
of intensive patient management tools in printed format
under the trade name STATpath(TM). STATpath materials are
the foundation for the PCM Software.
SELECTED FINANCIAL
INFORMATION: The information below for the years ended December 31, 1998
and 1997 was extracted from the audited financial statements
of Panoramic contained in this Prospectus. Reference should
be made to the financial statements, and the notes thereto,
to put the following summary in context.
Fiscal Year Ended December 31
-------------------------
1998 1997
---------- ----------
Revenues ......................................... $ 51,507 $ 78,763
Salaries and management fees ..................... 148,958 217,500
Product development costs ........................ 3,221 2,342
Consulting Fees .................................. 61,650 --
General and administrative expenses .............. 24,995 16,193
Net earnings (loss) .............................. (187,317) (157,212)
Net earnings (loss) per Common Share.............. (0.09) (0.08)
-9-
<PAGE>
THE OFFERING:
Common Stock
Offered by the
Selling Stockholders: 1,926,800 Shares
Use of Proceeds: All proceeds from the offering will be received by
the Selling Stockholders.
SELLING STOCKHOLDERS:
The Selling Stockholders are founders of Panoramic or purchased their
shares in a private placement pursuant to an exemption provided by Regulation D
under the Securities Act of 1933, as amended.
-10-
<PAGE>
RISK FACTORS
An investment in Panoramic common stock involves certain risks.
Prospective investors should carefully consider the following risk factors, in
addition to all of the other information in this Prospectus, in determining
whether to purchase shares of Panoramic stock.
SUFFICIENCY OF WORKING CAPITAL
Since inception, Panoramic has financed its operations primarily through
the private placement of equity securities, bank loans, stockholder loans, and
minimal sales from the STATpath line of products. From inception, Panoramic has
raised approximately $600,000 in net proceeds from private equity financing.
Panoramic currently anticipates that the proposed first year expenditures
associated with general and administrative, sales and marketing, and product
development functions will be approximately $2,765,000 for fiscal year 1999.
These proposed expenditures exceed the funds available from the proceeds of this
offering and Panoramic's working capital. There is no assurance that Panoramic
will be able to generate the sales necessary to produce the cash flow that is
required to cover the expense for any projects that are not proposed to be
funded by the proceeds of the offering and from Panoramic's working capital. If
sales revenues are not generated as planned, Panoramic will be required to
reduce overhead expenses or obtain additional funding by debt or equity
financing. There can be no assurance that Panoramic would be able to obtain such
financing on attractive terms.
The amount of the offering was determined by Panoramic based on
Panoramic's intention during the next year to expand its research and
development and its sales and marketing expenditures. There can be no assurance
that cash flow contributions from operations, together with working capital and
net proceeds from this offering, will be sufficient to fully fund the planned
expansion of research and development, sales and marketing activities, and other
expenditures. See "Use of Proceeds" and "Description of Business--Marketing Plan
and Strategies."
WE HAVE A LIMITED OPERATING AND SALES HISTORY
Panoramic has a limited history of operations that has consisted primarily
of research and development, consulting and initial sales of STATpath. Panoramic
has generated only limited revenues from sales of STATpath and does not have
experience in manufacturing, selling or marketing its products in large,
commercial quantities. The PCM Software has not gained significant market
exposure or demonstrable market acceptance. Given the absence of clear market
acceptance with respect to this line of products, there can be no assurance as
to the achievability of projected market penetration rates and associated sales
revenues. See "Description of Business--History of PCM Software Development" and
"Description of Business--Status of PCM Software Development."
WE OPERATE IN A HIGHLY COMPETITIVE MARKET
The medical software industry is subject to intense competition. The
market for software products designed to standardize and consolidate clinical,
financial, quality and administrative data for patients is highly competitive,
and Panoramic expects competition to increase. Accordingly, Panoramic's future
success will depend in part on its ability to respond quickly to changes in
reimbursement levels and requirements, medical and technological change and user
preference through the development and introduction of high quality products
that address the post-acute healthcare market requirements. Most of Panoramic's
competitors and potential competitors have greater financial, research and
development, manufacturing and sales, and marketing resources than Panoramic. In
addition, some of Panoramic's
-11-
<PAGE>
competitors and potential competitors sell additional lines of products, and
therefore can bundle products to offer higher discounts, rebates or other
incentive programs to gain a competitive advantage. Panoramic's inability to
compete effectively against existing or future competitors would have a material
adverse effect on its business, financial condition and results of operations.
WE RELY ON KEY PERSONNEL
Panoramic's future success depends in significant part upon the continued
service of certain key technical and management personnel and its continuing
ability to attract and retain highly qualified technical and managerial
personnel. Key employees of Panoramic include William M. Hunter (President and
Chief Executive Officer), Jill Flateland (Executive Vice President and Chief
Operating Officer), and Byron Flateland (Chief Technical Officer). Competition
for such personnel is intense, and there can be no assurance that Panoramic can
retain its key technical and managerial personnel or that it can attract,
assimilate or retain other highly qualified technical and managerial personnel
in the future. The loss of key personnel, especially if without advance notice,
or the inability to hire or retain qualified personnel, could have a material
adverse effect upon Panoramic's business, financial condition and results of
operations.
PROJECT MANPOWER
Current development by Panoramic is restricted by financial and personnel
resources. Without the addition of management and staff, some of Panoramic's
development projects may not be completed in a timely manner. There is no
assurance that qualified individuals will be hired in a timely manner. The
relationship with M1 Software provides Panoramic access to a firm with technical
resources, however, M1 Software has many clients that offer its substantially
more revenue then Panoramic and hence its consistent attention to this project
remains uncertain beyond its intention to complete its agreement with Panoramic.
WE MUST DEVELOP AND SELL NEW PRODUCTS
Panoramic's business and financial plan focuses on a product line which is
relatively new. There can be no assurance that Panoramic will successfully
develop new products or that projected sales levels can be achieved. The medium
and long-term financial success of Panoramic is dependent on the ability to
successfully develop and implement the PCM Software product line in a timely
manner. Internal cash generated by operations may not permit the level of
research and development spending required to maintain the stream of new product
improvements anticipated, and outside financing may not be available.
RELIANCE ON MAJOR PRODUCT/ACCOUNT
Historically, Panoramic has marketed its products through distribution
channels. The Center for Health Education has accounted for a significant
portion of Panoramic's product sales and royalty revenue on the STATpath
product. The Center for Health Education does not market software and has phased
out the STATpath product in 1999. The ability of Panoramic to secure new sources
of revenues for new products remains an area of risk.
WE HAVE LIMITED SALES AND MARKETING EXPERIENCE
Panoramic's proposed products have not been proven in a commercial
environment and there is no assurance that it will be able to build successful
marketing distribution channels. Panoramic has only limited experience selling
and marketing the PCM Software in the post-acute segment of the market, and
-12-
<PAGE>
does not have any experience selling and marketing its software in commercial
quantities. Panoramic intends to sell the PCM Software in the United States to
post-acute medical facilities through strategic partners, distributors, and
through healthcare consulting organizations. Market acceptance of the PCM
Software will also require Panoramic to demonstrate that the cost of its
products is competitive with currently available alternatives.
WE MAY BE ADVERSELY AFFECTED BY YEAR 2000 COMPLIANCE ISSUES
The Year 2000 ("Y2K") computer problem refers to the potential for system
and processing failures of date-related data as a result of computer-controlled
systems using two digits rather than four to define the applicable year. For
example, computer programs that have time-sensitive software may recognize a
date represented as "00" as the year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions of operations,
including among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Panoramic's PCM Software product is being developed to be fully Year 2000
compliant, although the effectiveness of present efforts to address the Year
2000 issue cannot be assured. In addition, Panoramic has implemented programs
designed to ensure that all software and hardware used in connection with the
design of its PCM Software and the provision of services to its customers and
suppliers and its internal operations will manage and manipulate data involving
the transition of dates from 1999 to 2000 without functional or data
abnormality. Panoramic has sought information from third parties, including
their customers and suppliers, with respect to compliance with Year 2000 issues.
If the present efforts to address the Year 2000 issue are unsuccessful, or if
other third parties with which Panoramic conducts business do not successfully
address the Year 2000 issue, the business and financial condition of Panoramic
could be adversely affected.
PROTECTION OF OUR INTELLECTUAL PROPERTY IS LIMITED; RISK OF THIRD PARTY CLAIMS
OF INFRINGEMENT
The patent, trademark, copyright and trade secret positions of medical
software companies, including those of Panoramic, are uncertain and involve
complex and evolving legal and factual questions. The coverage sought in a
patent application either can be denied or significantly reduced before or after
the patent is issued. Consequently, there can be no assurance that any patents
from any future patent application will be issued, that the scope of the patent
protection will exclude competitors or provide competitive advantages to
Panoramic, that any of Panoramic's patents will be held valid if subsequently
challenged or that others will not claim rights in or ownership of the patents
and other proprietary rights held by Panoramic. In addition, there can be no
assurance that competitors, many of which have substantial resources, will not
seek to apply for and obtain patents that will prevent, limit or interfere with
Panoramic's ability to make, use or sell its products either in the United
States or in international markets. Litigation or regulatory proceedings, which
could result in substantial cost and uncertainty to Panoramic, may also be
necessary to enforce patent or other intellectual property rights of Panoramic
or to determine the scope and validity of other parties' proprietary rights.
There can be no assurance that Panoramic will have the financial resources to
defend its patents, trademarks and copyrights from infringement or claims of
invalidity.
Panoramic also relies upon unpatented proprietary technology, and no
assurance can be given that others will not independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to or
disclose Panoramic's proprietary technology or that Panoramic can meaningfully
protect its rights in such unpatented proprietary technology. Panoramic's policy
is to require each of its employees, consultants, investigators and advisors to
execute a confidentiality agreement upon the commencement of an employment or
consulting relationship with Panoramic. These agreements generally provide that
all inventions conceived by the individual during the term of the
-13-
<PAGE>
relationship shall be the exclusive property of Panoramic and shall be kept
confidential and not be disclosed to third parties except in specified
circumstances. There can be no assurance, however, that these agreements will
provide meaningful protection for Panoramic's proprietary information in the
event of unauthorized use or disclosure of such information.
WE DEPEND ON KEY SUPPLIERS
Panoramic currently uses M1 Software to produce limited quantities of
software products for sales. Panoramic has no experience manufacturing its
products in the volumes or with the margins that will be necessary for Panoramic
to achieve significant commercial sales, and there can be no assurance that
Panoramic can establish high volume manufacturing capacity or, if established,
that Panoramic will be able to manufacture its products in high volumes with
commercially acceptable margins. While Panoramic believes that its current
relationship with M1 Software will be adequate to support its commercial
manufacturing activities in the near term, Panoramic may be required to expand
its manufacturing facilities to commence large-scale manufacturing. Panoramic's
inability to successfully manufacture or commercialize its devices in a timely
matter could have a material adverse effect on Panoramic's business, financial
condition and results of operations.
OUR SUCCESS DEPENDS ON STRATEGIC AND DISTRIBUTOR RELATIONSHIPS
Panoramic's future success will depend, in part, on its ability to enter
into and successfully develop strategic relationships and distributor
relationships with other parties with respect to the marketing and distribution
of its products. Panoramic is currently seeking to enter into strategic or
distributor relationships in the United States. The success of Panoramic's
relationship with future strategic or distributor relationships will depend on
the other parties' interests in the specific products involved and their
willingness and ability to perform the role contemplated by Panoramic. Panoramic
may have limited or no control over the resources that any particular strategic
party or distributor devotes to its relationship with Panoramic. Moreover, there
can be no assurance that Panoramic will be successful in locating qualified
parties with whom to enter into additional strategic or distributor
relationships or that any such relationships can be maintained or will
ultimately beneficial to Panoramic. In the event Panoramic is not successful in
developing such additional relationships, or if such relationships were not
successful, Panoramic's business, financial condition and results of operations
would be materially adversely affected.
WE MUST DEVELOP AND SELL NEW PRODUCTS IN ORDER TO KEEP UP WITH TECHNOLOGICAL
CHANGES
The medical software industry is characterized by rapid and significant
technological change. Many software applications have a life cycle of under
twelve months. Panoramic's future success will depend in large part on
Panoramic's ability to continue to respond to such changes. There can be no
assurance that Panoramic will be able to respond to such changes or that new or
improved competing products will not be developed that render the PCM Software
non-competitive. Product research and development will require substantial
expenditures and will be subject to inherent risks and there can be no assurance
that Panoramic will be successful in developing or improving products that have
the characteristics necessary to effectively meet the needs of the post-acute
segment of the managed care market, or that any new products introduced will be
successfully commercialized. Panoramic's products may face competition from, or
be rendered obsolete by, new products which have yet to be launched.
-14-
<PAGE>
WE DO NOT HAVE INSURANCE
Panoramic's business involves the risk of product liability claims.
Although Panoramic has not experienced any product liability claims to date, any
such claims could have a material adverse effect on Panoramic. Panoramic does
not have product liability insurance. If Panoramic were to determine that such
insurance was necessary or desirable, there can be no assurance that it would be
available on commercially acceptable terms, or at all. Furthermore, even if
Panoramic obtains product liability insurance, there can be no assurance that it
would prove adequate or that a product liability claim, insured or uninsured,
would not have a material adverse effect on Panoramic's business, financial
condition, and results of operations. Even if a product liability claim is not
successful, the time and expense of defending against such a claim may adversely
affect Panoramic's business, financial condition and results of operations.
MANAGEMENT WILL HAVE DISCRETION TO ALLOCATE THE OFFERING PROCEEDS
Of the approximately $1.1 million net proceeds ($817,500 after offering
costs) from the offering (based upon an assumed initial public offering price of
$1.00 per share), 100% of the funds will be used by Panoramic to fund day to day
operations. The forecast expenses for the 1999 fiscal year are approximately
$2,764,336 million, and the proceeds of the offering will be used to bridge cash
flow until net operating profits can fund the operations of Panoramic. Panoramic
expects to raise additional capital in the first quarter of 2000. If sales of
Panoramic are not successful, they could adversely affect Panoramic's business,
financial condition and results of operations. In addition, the amounts
allocated for specific uses may vary significantly depending on numerous
factors, including the progress of Panoramic's clinical trials and actions
relating to regulatory matters, and the costs and timing of expansion of sales
and marketing and manufacturing activities.
OUR STOCK HAS NEVER BEEN PUBLICLY TRADED; POSSIBLE VOLATILITY OF STOCK; DILUTION
There has been no public market for the common stock of Panoramic, and
there can be no assurance that an active trading market will develop and be
sustained upon the completion of the offering, or that the market price of the
shares will not decline below the initial public offering price. The initial
public offering price of the shares has been determined by negotiations between
Panoramic and Canaccord. As such, the initial public offering price is not
necessarily related to Panoramic's net worth or any other established criteria
of value and may not bear any relationship to the market price of the shares
following the completion of the offering. The market prices for securities of
healthcare software companies have historically been highly volatile.
Announcements of technological innovations or new products by Panoramic or its
competitors, developments concerning proprietary rights, including patents and
litigation matters, and changes in financial estimates by securities analysts or
failure of Panoramic to meet such estimates and other factors may have a
significant impact on the market price of the shares. In addition, Panoramic
believes that fluctuations in its operating results may cause the market price
of its shares to fluctuate, perhaps substantially.
REVENUE PROJECTIONS
Revenue growth projections of Panoramic are not yet supported by sales
contracts or by firm sales opportunities. There is no assurance that Panoramic
will be able to achieve competitive pricing for its planned products or a
significant volume of sales.
-15-
<PAGE>
WE CANNOT BE SURE THAT FUTURE CAPITAL WILL BE AVAILABLE
Panoramic has expended and will continue to expend substantial funds for
research and development, testing, capital expenditures, manufacturing and
marketing of its products. The timing and amount of such spending is difficult
to predict accurately and will depend upon several factors, including the
progress of research and development efforts and competing technological and
market developments, commercialization of products currently under development
and market acceptance and demand for Panoramic's products. To the extent
required, Panoramic may seek additional funds through equity or debt financing,
through collaborative or other arrangements with other companies and from other
sources. If additional funds are raised by issuing equity securities, further
dilution to shareholders could occur. There can be no assurance that additional
financing will be available when needed or on terms acceptable to Panoramic. If
adequate funds are not available, Panoramic could be required to delay
development or commercialization of the PCM Software, to license to third
parties the rights to commercialize certain products or technologies that
Panoramic would otherwise seek to commercialize for itself or to reduce the
marketing, customer support or other resources devoted to certain of its
products, each of which could have a material adverse effect on Panoramic's
business, financial condition and results of operations. See also "Management's
Discussion and Analysis of Operating Results--Capital Resources and Liquidity."
WE HAVE NEVER PAID DIVIDENDS
Panoramic has not paid dividends in the past and does not anticipate
paying dividends in the near future. Panoramic expects to retain its earnings to
finance further growth and, when appropriate, retire debt.
-16-
<PAGE>
DESCRIPTION OF PANORAMIC
Panoramic was incorporated under the laws of the State of Colorado on
September 4, 1990 under the name "FreeStyle Publications, Inc." Panoramic
changed its name from "FreeStyle Publications, Inc." to "Panoramic Care Manager,
Inc.," effective as of December 8, 1998. [On April __, 1999, Panoramic was
reincorporated under the laws of the State of Delaware and the name was changed
to Panoramic Care Systems, Inc.]
Panoramic's principal office is located at 5181 Ward Road, Wheat Ridge,
Colorado 80033. Panoramic's registered agent is located at 11350 West 72nd
Place, Arvada, Colorado 80005. Panoramic has no subsidiaries.
INTRODUCTION AND BUSINESS HISTORY
Initially, Panoramic's focus was on the provision of educational materials
for a variety of facilities and institutions within the healthcare industry.
More specifically, Panoramic developed and marketed educational materials for
critical care health providers.
In 1991, Panoramic began the development of a set of paper-based patient
management tools under the name STATpath. STATpath is currently comprised of 32
binder-size printed volumes that cover 364 medical diagnoses and are based on
220 standards of practice. Panoramic's STATpath procedures take standard
diagnoses and apply a critical path analysis to assure the right treatment is
given at the right time to the right patient. STATpath "pathways" outline the
specific treatments and procedures that should be followed given a particular
diagnosis for each patient. Unlike traditional approaches, where a medical
diagnosis is the basis of the pathway to be followed, Panoramic has developed a
methodology and process--through computerization of STATpath components--where
individual patient signs and symptoms trigger a treatment plan (often referred
to as "interventions")--are the primary basis of determining the pathway to
follow. This patient-driven clinical path approach was unique to STATpath. The
same concept is being used in the development of the PCM Software. The STATpath
product line is presently available in printed copy or on CD-ROM.
PRODUCT LINE AND SERVICES
Health Design Consultants
Following the market acceptance of the STATpath printed material, (over
500 copies of STATpath have been issued to date), Panoramic developed a
consulting practice to assist customers in implementing the STATpath
methodology. This practice resulted in the management of Panoramic providing
consulting services under the business name "Health Design Consultants," which
became a service mark of Panoramic on August 12, 1997.
STATpath sales and consulting fees related to sales totaled over
$1,000,000. There are over 500 healthcare facilities using STATpath, many of
which requested computerization of the product.
PCM Software
In 1997, Panoramic's management realized that the STATpath paper-based
product was reaching the peak of its commercial life cycle. Recognizing that the
information could be more easily accessed on a computer system, Panoramic began
developing a personal computer-based software application, the PCM Software,
using the large amount of procedural and practice data developed within
STATpath. The focus of the PCM Software was a personal computer-based software
application that initially could be used by post-acute healthcare providers such
as those working in nursing homes.
-17-
<PAGE>
The PCM Software is aimed, in part, at providing medical professionals
with automated patient management tools. In this regard, the PCM Software is
meant to assist these users in quickly, efficiently and accurately identifying,
estimating and managing direct and indirect costs related to the provision of
patient care services in North American extended healthcare facilities. During
1999, Panoramic is targeting the PCM Software at post-acute healthcare
providers. Over the medium to long-term, Panoramic wants to create additional
software applications in the patient management area (referred to as disease
management) as well as in the home health marketplace.
Panoramic has been developing PCM Software with the aim of: (i) automating
access to all pertinent guidelines; (ii) providing standardized guidance as to
when and where to most appropriately deliver each service a patient requires;
and (iii) automating the documentation to assure timely reimbursement and
compliance.
Panoramic is attempting to achieve four goals with PCM Software:
1. Minimize costs by effectively managing the clinical services
delivered;
2. Reduce the administrative time associated with regulatory and
guideline compliance;
3. Provide users with the ability to accurately diagnose and track
services delivered to assist in delivering adequate quality of care,
efficiently; and
4. Enable the sharing of information between care-giving facilities.
HISTORY OF PCM SOFTWARE DEVELOPMENT
Development of the PCM Software initially began in 1997. In August of
1998, Panoramic began beta testing the screening modules of the PCM Software at
Alpine Living Center in Thornton, Colorado. In November of 1998, Panoramic also
began beta testing its post-acute module for skilled nursing facilities at
Crestmount North in Lakewood, Ohio. Testing continues at Crestmount North with
data being gathered regarding functionality and usability.
In order to complete the development of the first commercial release of
the PCM Software for the second quarter of 1999, Panoramic has entered into a
letter of engagement with M1 Software, Inc. of Santa Monica, California. M1 has
been retained by Panoramic to test and debug the initial version of the PCM
Software as well as undertake all of the technical work necessary to create the
next version of the PCM Software and the additional planned software
applications. This work will be done under the guidance and direction of
Panoramic.
STATUS OF PCM SOFTWARE DEVELOPMENT
Panoramic currently plans to release the product, "Panoramic Care - Post
Acute Manager," in the second quarter of 1999 and plans to release its second
product, "PCM for Disease Management," in the first quarter of 2000.
The PCM Software has been developed from approximately 50 software
libraries (libraries are a collection of tables or clinical data files such as a
list of lab tests, medical diagnoses, billing codes, nursing care interventions,
patient education, etc.). Panoramic's definition of its database elements and
objects is referred to by management as the PCM Software's "Clinical Information
Infrastructure" ("CII").
-18-
<PAGE>
To create the CII, Panoramic has used standard computer and software
development tools in defining the appropriate interrelationships among the
various data elements. This work involved approximately eight years of
development. Approximately 400 healthcare professionals (comprised of
physicians, nurses, therapists, social workers, dieticians, pharmacists, and
radiology and lab technicians) were consulted in compiling the STATpath and CII,
which means that the PCM Software has been constructed upon a broad base of
extensive data, information, procedures and, most importantly, the
interrelationships between all of these elements. For example, one of the
principal libraries of information itself contains 533 medical diagnoses, and
elements of many of the CII libraries are each linked to one or more of these
diagnoses.
Other PCM Software libraries include financial components such as billing
codes for diagnoses, billing codes for treatments, billing codes for medications
and prescreening calculators.
Clinical libraries include medications, interventions for eight different
disciplines, patient education, consults, diagnostic studies, diets, and
treatments. Administrative libraries include follow-up questions for patients,
discharge planning, and transfer, discharge and referral criteria.
Quality libraries include variance tracking, expected outcomes for each
acuity level, safety issues and national quality indicators.
The PCM Software has been designed to interrelate so that the various
software libraries can be linked and a large number of relationships can be
established based on different care situations and markets. Panoramic plans for
PCM Software to be used on stand-alone workstations, intranets and over the
Internet.
Version 1.0 of PCM is designed for one facility to use the software.
Panoramic plans to broaden the type of development for version two of its PCM
Software by having M1 Software use Microsoft Corporation's Visual Basic 6.0(TM),
"middle ware" technologies such as Microsoft Transaction Service, DCOM & COM and
Microsoft Corporation's SQL Server 7.0(TM). This will allow the software to be
shared between facilities. A client server can be located at corporate
headquarters and several nursing homes can access the program.
PCM SOFTWARE PRODUCT LINE
Panoramic proposes to develop a number of software products that address
the requirements of different sectors of the post-acute market. Panoramic's
initial development projects are described below.
Panoramic Care - Post Acute Manager
Panoramic Care - Post Acute Manager ("PC-PaM") has been undergoing beta
testing since mid 1998. M1 software will be responsible for completing the
development of this product under the guidance and direction of the management
of Panoramic. The core functions of PC-PaM are described below:
o PC-PaM meets Health Care Finance Administration (the US Government
agency responsible for administering Medicare) requirements for
assessing a long term care patient's ability to function and perform
activities of daily living. Under the U.S. federal government's new
balanced budget, a Prospective Payment System initiative began to be
phased in on July 1, 1998 for skilled nursing facilities. The
Prospective Payment System means that skilled nursing facilities
will receive a fixed amount of payment for their services provided
to a patient. This fundamental change means that cost estimating of
-19-
<PAGE>
patients at the start of their stay is becoming critical as the
Prospective Payment System is phased in over the next 60 months. Not
only does PC-PaM estimate the cost of care, but it also estimates
reimbursement rates. An integral part of estimating reimbursement
rates is the ability of facilities to properly complete the Minimum
Data Set, which is a standardized assessment tool required by the
Health Care Finance Administration. A Minimum Data Set assessment
must be completed at admission and at various times throughout a
resident's stay. The PCM Software includes the major components of
the MDS form and provides an admission assessment. Caregivers using
the PCM Software need only collect the required information once.
The software application automates the patient's plan of care
(clinical pathway) and documents the initial patient assessment and
treatment delivered, and transmits the Minimum Data Set for each
patient.
o PC-PaM has a built-in form and reimbursement calculator so that care
managers are able to determine the exact amount of reimbursement
that can be expected for each patient during a specified time frame.
The care manager can now better understand the probable financial
results of admitting a patient which allows the care manager to more
quickly and accurately determine whether to accept such a patient.
PC-PaM calculates the estimated cost of care to be delivered and
compares the cost to the reimbursement rate calculated.
o PC-PaM automatically creates an interdisciplinary plan of care
(referred to many healthcare professionals as the "clinical path").
Upon identification of a key patient problem, the PCM Software
automatically proposes to the care giver a plan of care that is
customized for the patient.
o PC-PaM documents all services delivered by each discipline and lists
expected outcomes. Upon developing the clinical path, the PCM
Software enables clinical staff members to check off the services as
they are given and completed. The PCM software also creates a list
of expected outcomes for each day in order to assist in assessing
the patient's actual medical progress.
The prototype was tested by Crestmont North, a skilled nursing facility in
Lakewood, Ohio. All beta testing was successfully completed and Crestmont North
is now scheduled to be the first installation of the finished product.
PCM for Disease Management
A beta prototype of this PCM Software product has been developed by
Panoramic. The core functions of PCM for Disease Management are described below:
o PCM for Disease Management software provides tools and staging
criteria based on each patient's assessment. This allows care to be
individualized for each patient. The patient's symptoms trigger
expected key problems and the software gauges the severity of each
problem according to certain defined criteria.
o The PCM for Disease Management software assists in automating
patient follow-up by creating and managing a schedule of patients
due for follow-up. During telephone interviews, the PCM for Disease
Management software provides a list of questions to ask the patient,
based upon the patient's key problems and stages, and collects the
information the patient provides. Based upon the answers received,
the PCM for Disease Management software is able to produce a list of
interventions or an additional set of
-20-
<PAGE>
questions to help the interviewer assess severity. The PCM for
Disease Management software's questions and responses are built from
medical and procedural tools frequently used in emergency
departments. Three levels of referrals are built from each of the
four algorithms for each disease process.
o The PCM for Disease Management software contains more than 200
patient education topics that can be provided directly to the
patient.
FUTURE DEVELOPMENTS
PCM for Home Health Care
Panoramic plans to develop a line of PCM Software to assist with home
health care. The core functions of PCM for Home Health Care are described below:
o The PCM for Home Health Care's admission form incorporates the
necessary forms and answers questions in such a fashion that
information is automatically inserted into the appropriate document
and/or form. Regulatory follow-up assessments are required in 60
days, and the PCM for Home Health Care compares the new information
to the admission assessment baseline and highlights any changes for
reporting to the appropriate regulatory bodies. The analyzed
assessment is also performed and provided at discharge.
o The PCM for Home Health Care generates proposed reimbursement rates,
clinical paths and care plans at the time of patient admission. All
further information regarding the patient is documented by the PCM
for Home Health Care with clinical paths, interventions, expected
outcomes and patient education based on home health visits instead
of daily rates.
o The PCM for Home Health Care includes an assessment sheet for each
care manager, such as registered nurses, social services, dietary
services, physical therapists and speech therapists.
The estimated cost to develop PCM for Home Health Care is $250,000.
MARKET
As a result of the Balanced Budget Act of 1997, growth in Medicare
spending between 1998 and 2002 is expected to slow. Under the Balanced Budget
Act, effective July 1, 1998, a Medicare Prospective Payment System and a new,
more complex, billing system was introduced to skilled nursing facilities in the
United States, resulting in a shift in the way skilled nursing facilities
operate and how payments would be made for post-acute healthcare facilities.
Effective with cost reporting periods beginning on or after July 1, 1998,
post-acute healthcare facilities will no longer be paid on a reasonable cost
basis, but rather on a Prospective Payment System. The Prospective Payment
System payment rates will be implemented on a per diem basis, and will cover all
costs related to the services and treatment provided. Recognizing this as an
unmet need in a market segment that Panoramic had already established a presence
in with the STATpath product line, Panoramic embarked on a path to develop a
software system that would satisfy that unmet need.
-21-
<PAGE>
Reimbursement under Medicare is now determined by multiplying the case
weight associated with the area by an average standardized per-case payment
rate. The payment rate is set by the Medicare program and is modified according
to the geographic location, urban or rural setting, and prevailing labor costs
of a hospital. Case weight represents the average costs of patients in an area
relative to the average costs of patients in all areas. By basing reimbursement
on utilization patterns, the Medicare program hopes to give hospitals a
financial incentive to use fewer resources.
Panoramic estimates that the total potential market in the United States
for PCM Software is in excess of $2,000,000,000 calculated as follows:
Number of Average Total
Facilities Sale/Facility Potential Sale
------ -------- --------------
Sub-acute ................ 6,000 $ 22,500 $ 132,000,000
Nursing Homes ............ 17,600 $ 22,500 $ 387,200,000
Disease Management ....... 26,750 $ 50,000 $1,337,500,000
Home Health Care ......... 24,000 $ 25,000 $ 600,000,000
TOTAL .................... $2,456,700,000
Source: "Official National Nursing Home Industry Directory," "Hospital's Blue
Book" and "Home Health Industry Directory" published by Billian's HealthDATA
Group, Atlanta, Georgia.
HEALTHCARE INDUSTRY
Over the past five years, the healthcare industry in the U.S. has seen a
trend towards cost cutting and consolidation. This trend has created
opportunities for information technology firms to provide hospitals and other
health care providers with software and computer systems that improve operating
efficiency. In addition to the cost cutting and consolidation trend, the
healthcare industry has seen a move towards managed care, forcing healthcare
providers to minimize costs while improving the quality of care in an effort to
decrease follow-up visits.
The focus of medical software companies has been: identification of
problems to reduce severity; insurance coverage tracking; processing of
referrals to laboratories and specialists; creating paperless medical records;
and submitting bills electronically.
Table No. 1 (below) outlines the Hospitals and Post-acute Units Status Under
The Prospective Payment System:
TABLE NO. 1
HOSPITAL AND POST-ACUTE STATUS UNDER THE PROSPECTIVE PAYMENT SYSTEM
Total hospitals .................................................... 6,345
HOSPITALS UNDER PPS ................................................ 5,233
Hospitals receiving special consideration .......................... 800
Regional referral centers .......................................... 129
Sole community hospitals ........................................... 671
NON-PPS HOSPITALS .................................................. 1,112
Categorically exempt ............................................... 1,049
Psychiatric ........................................................ 675
All other non short-stay ........................................... 374
Short-stay hospitals in waiver states or demonstrations ............ 50
Short-stay hospitals in outlying areas ............................. 4
-22-
<PAGE>
Cancer hospitals ................................................... 9
TOTAL EXCLUDED UNITS ............................................... 2,257
Psychiatric ........................................................ 1,426
Rehabilitation ..................................................... 831
Source: Health Care Finance Administration Online Survey, Certification and
Report, Winter 1997, Volume 19, Number 2.
In the United States, total spending for health care is projected to
increase from $1.0 trillion in 1996 to $2.1 trillion in 2007, averaging annual
increases of 6.8%. Over this period, health spending as a share of gross
domestic product ("GDP") is estimated to increase from 13.6% to 16.6%.
(Projections reported in "The Next Ten Years of Health Spending: What Does the
Future Hold?" published in the September/October 1998 issue of Health Affairs.
The projections were produced by the Health Care Financing Administration's
Office of the Actuary).
National health spending growth is expected to accelerate beginning in
1998, growing at an average annual rate of 6.5% between 1998 and 2001. This
compares to 5.0% average annual growth from 1993-1996. Source: Health Spending:
The Next Decade, September/October 1996, p. 264.
Real per capita public sector health spending growth is expected to
decelerate between 1998 and 2002, primarily as a result of the Balanced Budget
Act and its effect on Medicare. The introduction of prospective payment systems
for different services and cutbacks in payment formulas are expected to slow the
rate of increase in Medicare expenditures. However, growth in Medicare managed
care enrollment as a result of the Balanced Budget Act is not expected to reduce
growth in overall Medicare spending.
Patterns of growth will differ substantially across types of services.
While all health providers will be affected by rising costs, hospitals are
expected to continue to face relatively slow growth in labor compensation as
downsizing in this sector continues. Hospital growth is projected to lag
increasingly behind growth in drugs and physician and other professional
services as the trend away from the inpatient setting towards ambulatory care
settings is reinforced by the movement of Medicare beneficiaries into managed
care. The management of Panoramic believes that the rapid rise in outpatient
hospital services will increase as the potential for further substitution for
inpatient services declines.
Medical Software
Dorenforest & Associates of Chicago, Illinois, a health care information
system consulting company, estimated the U.S. healthcare information services
market to be $13.6 billion in 1997, growing at an average annual rate of 16%
from a level of $7.5 billion in 1993. Meta Group Inc., a market research firm
based in Stamford, Connecticut predicts that medical software will see 15% to
20% annual 24 growth. According to Meta Group Inc., healthcare providers spend
on average 1.5% to 2% of their operational budgets on information technology. A
recent study by Deloitte & Touche estimated that the healthcare industry spends
$2,800 per year per employee on information technology in comparison with $5,700
by retailers and $10,400 by banks. Source: Everett Dorenforest, 1997 HIMMS
Conference, 1997 (Los Angeles, California).
Home Health Care
The first home care agencies were established in the 1880s. Their number
grew to some 1,100 by 1963 and to more than 20,000 currently. Home health
agencies, home care aide organizations, and hospices are known collectively as
"home care organizations."
-23-
<PAGE>
Home care in the United States is a diverse and rapidly growing service
industry. According to the National Association for Home Care, the largest
association in the United States serving home care agencies, hospices and home
care aide organizations, in 1996 there were 20,215 providers delivering home
care services. These home care services were provided to approximately 7 million
patients suffering from acute illness, long-term health conditions, permanent
disability, or terminal illness. Annual expenditures for home care exceeded $42
billion in 1997.
The 20,215 home care organizations in the United States and its
territories identified by the National Association for Home Care as of December
1996 consisted of 10,027 Medicare-certified home health agencies, 2,154
Medicare-certified hospices and 8,034 home health agencies, home care aide
organizations, and hospices that do not participate in Medicare. Source: Health
Care Finance Administration Medicaid Online Data System.
TABLE NO. 3
HOME CARE AGENCIES: MEDICARE-CERTIFIED AND OTHERS, 1989-1996
Year Total Home Health Hospices Other
------ -------- ----------- -------- -----
1989 11,097 5,676 597 4,824
1990 11,765 5,695 774 5,296
1991 12,433 5,780 898 5,755
1992 12,497 6,004 1,039 5,454
1993 13,959 6,497 1,223 6,239
1994 15,027 7,521 1,459 6,047
1995 18,874 9,120 1,857 7,897
1996 20,215 10,027 2,154 8,034
Source: Health Care Finance Administration, Certification and Report, Winter
1997, Volume 19, Number 2.
MARKETING PLAN AND STRATEGIES
Panoramic plans to market the PCM Software product line primarily through
strategic alliances with pharmaceutical organizations, practice management
companies and consulting firms. Panoramic will also market its products in the
U.S. directly to national and regional chains that operate a number of health
care facilities. Panoramic's sales and marketing staff will be comprised of a
number of individuals with clinical, technical, and financial backgrounds in
order to assess aspects of a potential client's decision-making process.
Panoramic will focus its PCM Disease Management marketing efforts on
managed care organizations, independent physician associations and physician
practice management companies.
Initially Panoramic plans to market its products through indirect channels
(including large pharmaceutical organizations) and direct contact by sales
representatives with management, consulting and professional organizations.
Panoramic will support its direct sales professionals with marketing support
employees specializing in the clinical, technical, and financial aspects of PCM
Software application.
Panoramic will also attempt to generate brand awareness through attendance
at key health industry trade shows and through offering educational seminars on
various topics related to using clinical, financial and administrative
information in the post-acute healthcare industry.
-24-
<PAGE>
BUSINESS OBJECTIVES AND MILESTONES
1. Panoramic intends to release a commercial version of Panoramic Care - Post
Acute Manager in the second quarter of 1999 and to complete and release a
pilot version of PCM for Disease Management by the first quarter of 2000.
In order to attain these objectives, the following milestones will have to
occur:
o complete testing and debugging of the Panoramic Care - Post Acute
Manager and release a commercial version in the second quarter of
1999 at an estimated cost of $52,000; and
o complete the initial development of PCM for Disease Management to
the pilot testing stage in the first quarter of 2000 at an estimated
cost (including cost of medical consultant to be retained) of
$178,000.
The total estimated cost for these expenditures is $230,000 and is
accounted for as part of Panoramic's proposed Research and Development
expenses, as set out below. This cost has been allocated from the proceeds
of this offering. See "Use of Proceeds--Product Development."
2. Panoramic intends to develop a sales and marketing structure that it
expects will assist in the development of marketing channels and result in
increased sales. In order to attain this objective, the following
milestones will have to occur:
o select independent distributor groups to represent Panoramic's PCM
Software products in Colorado, Wyoming, New Mexico and Arizona;
o select one pharmacy based distributor group to represent Panoramic's
PCM Software products;
o select one consultant group to represent Panoramic's PCM Software
products in Ohio, Pennsylvania, Michigan add Illinois;
o produce multi-media materials to be used by sales representatives,
distributors and customers; and
o implement remaining elements of the marketing plan including
editorial articles, press releases and speaking engagements.
The total estimated cost for these expenditures is $326,250 and is
accounted for as part of Panoramic's proposed Sales and Marketing expenses, as
set out below. This cost has been allocated from the proceeds of this offering.
See "Use of Proceeds: Sales and Distribution Channel Development."
3. Panoramic proposes to increase its internal sales and marketing staff, to
be comprised of individuals with clinical, technical and financial
backgrounds, in order to allow Panoramic to begin the process of creating
strategic alliances with potential customers and resellers. In order to
achieve this objective, the following milestones will have to occur:
o hire and train one technical support representative in the third
quarter of 1999; and
o hire and train one clinical support representative in each of the
first and third quarters of 1999.
-25-
<PAGE>
The total estimated annual cost for these expenditures (including
recruitment costs and annual salaries) is $170,000 and is accounted for as
part of Panoramic's proposed Sales and Marketing Expenses, as set out
below. This cost has been allocated from the proceeds of this offering.
See "Use of Proceeds: Management and Staff Recruitment and Hiring--Sales
and Marketing."
4. Panoramic intends to improve management depth by hiring management with
experience managing publicly listed companies. In order to achieve this
objective, Panoramic will have to hire a Vice President/Chief Financial
Officer in the second quarter of 1999.
The total estimated cost for this expenditure is $120,000 and is
accounted for as part of Panoramic's proposed General and Administrative
expenses, as set out below. This cost has been allocated from the proceeds
of this offering. See "Use of Proceeds: Management and Staff Recruitment
and Hiring--Management."
5. Panoramic has recently entered into a lease for a 2,856 square foot
facility in Wheat Ridge, Colorado which it proposes to use to establish a
permanent operations office. The lease terminates on September 15, 2000
with an option to renew for one year. Panoramic believes that this
facility is adequate to meet its current and reasonably anticipated future
requirements. In order to prepare the facility for the projected growth
and increase in staffing, Panoramic will have to acquire computers and
office equipment for these facilities.
The total estimated cost for these expenditures is $83,000 and is
accounted for as part of Panoramic's proposed General and Administrative
expenses, as set out below. This cost has been allocated from the proceeds
of this offering. See "Use of Proceeds: Capital Equipment Purchases and
Establishment of Permanent Office Facilities."
The proposed first year expenses associated with Panoramic's general and
administrative, sales and marketing and product development functions
generally, including, but not limited to, the Business Objectives and Milestones
described above, are as follows:
General and Administrative $ 659,256
Sales and Marketing $ 1,318,080
Product Development $ 787,000
Total: $ 2,764,336
These proposed expenditures exceed the Funds Available. There is no
assurance that Panoramic will be able to generate the sales necessary to produce
the cash flow which is required to cover the expense for any projects which are
not proposed to be funded by the proceeds of this offering. If sales revenues
are not generated as planned, Panoramic will be required to reduce its overhead
expenses or to obtain additional funding by debt or equity financing. See "Risk
Factors."
Management anticipates that the total administrative, product
development, and sales and marketing expenses that will be incurred in order to
meet the foregoing objectives over the period referred to will be approximately
$659,256, $787,000, and $1,318,080, respectively. These break down as follows:
-26-
<PAGE>
ADMINISTRATIVE EXPENSES:
Expense Monthly Cost in $ Twelve Month Cost in $
- -------------------------------- ------------- ----------------
Management Salaries ............ 26,666 319,992
Administrative Salaries ........ 5,000 60,000
Payroll and Employment Taxes ... 4,272 51,264
Consulting Fees - BVP .......... 6,000 18,000(1)
Rent ........................... 3,500 42,000
Telephone / Supplies ........... 2,000 24,000
Computer software / lease ...... 6,000 72,000
Travel ......................... 6,000 72,000
Total .......................... 59,438 659,256
(1) For consulting services in March, April, and May, 1999
PRODUCT DEVELOPMENT EXPENSE:
Expense Monthly Cost in $ Twelve Month Cost in $
- -------------------------------- ------------- ----------------
Salaries........................ 17,917 215,000
Payroll Taxes and Benefits...... 3,583 43,000
Outside Software Development.... 38,417 461,000
Travel.......................... 5,667 68,000
Total........................... 787,000
SALES AND MARKETING EXPENSE:
Expense Monthly Cost in $ Twelve Month Cost in $
- -------------------------------- ------------- ----------------
Salaries........................ 16,917 203,000
Payroll Taxes and Benefits...... 3,383 40,600
Commissions..................... 50,000 600,000
Travel Expenses................. 13,965 167,580
Office Expenses................. 1,408 16,900
Advertising and Public Relations 16,667 200,000
Convention Expenses............. 7,500 90,000
Total........................... 1,318,080
COMPETITION
The software market outside of hospitals is highly fragmented. Many
companies offer only a single product for a single task which forces
organizations to purchase a variety of software solutions for financial,
clinical, quality and administrative requirements. Panoramic's PCM Software
integrates these requirements.
At the beginning of 1998, most post-acute software was still available
only for DOS or UNIX based computer operating systems, although some were
converting to Microsoft Windows during 1998. Many small DOS-based companies are
finding it prohibitively expensive to upgrade their customer base to a
Windows-based product. None of the major software suppliers in the acute care
arena have made a serious attempt to enter the post-acute market.
-27-
<PAGE>
Skilled Nursing Facilities
There are three major competitors in the skilled nursing industry:
QuickCare, Care Computer Systems and OmniCare.
QUICKCARE. QuickCare is a Windows-based integrated clinical and financial
software package and is privately owned with headquarters in Dallas. It was
founded in 1992 and its first product was a DOS-based clinical system released
in October, 1995. In 1996 QuickCare rewrote its package to become
Window/NT-based and merged with a financial software company to provide services
to long-term care facilities and assisted living centers. They have grown the
business in four major locations - Dallas, TX; Cleveland, OH; Los Angeles, CA;
and Tampa, FL. Their installed base is about 600 facilities.
QuickCare provides the minimum requirements for the Prospective Payment
System and builds the plan of care based on the patient's medical diagnosis.
There is also a pre-screening tool for determining reimbursement, but it does
not connect to the calculator system (used by the Prospective Payment System) so
the amounts need to be manually coordinated. The plan of care includes a
long-term goal for each problem identified but there is no progression of
outcomes so variances for quality assurance are not easily tracked. There is no
clinical path component to lay out day-to-day or week-by-week care and there is
no quality component.
CARE COMPUTER SYSTEMS. Care Computer Systems is a privately held company
headquartered in Bellevue, WA. The Care Computer Systems product is designed for
subacute, long-term and home health care. The product includes Prospective
Payment System requirements, care plans for 33 disease categories, cost analysis
with payroll, general ledger, accounts receivable, accounts payable and dietary
management. Home health does not yet include the required OASIS, which is an
assessment tool used by the Health Care Financing Administration to determine
the functionality of Medicare patients that require home healthcare. Care
Computer is in the process of converting the system from DOS to Windows NT. Care
Computer has the largest market penetration with just over 3000 facilities using
their product. (a 6.3% market penetration.)
OMNICARE. OmniCare is the only publicly held company in the post-acute
market. OmniCare is a leading provider of professional pharmacy and related
consulting services for nursing homes, retirement centers and other
institutions. Of the four products acquired by OmniCare, two are written in DOS,
one in FoxPro and one in Visual Basic.
PATENTS, TRADEMARKS AND COPYRIGHTS
Copyrights
Panoramic holds copyrights on various STATpath clinical path volumes filed
with the United States Copyright Office on January 31, 1994, March 7, 1994, June
17, 1994 and July 22, 1994. Panoramic also holds registered copyrights on 26
audio cassette courses.
Service Marks
Health Design Consultants became a service mark of Panoramic on August 12,
1997. The service number is 75-036,975 and the registration number is 2,088,282.
-28-
<PAGE>
Trademarks
STATpath is a non-registered trademark of Panoramic and has been in use
since 1991. On March 2, 1998, Panoramic Care Manager was filed as a registered
trademark of Panoramic, serial number 75/323044.
Patents
Panoramic holds no patents, nor are any patents pending as of the date of
this Prospectus. Panoramic's management has obtained a preliminary opinion of
legal counsel that its PCM Software may be able to be patented. The degree and
extent to which such a patent would be available is uncertain as of the date of
this Prospectus. See "Risk Factors" located at pages 12 to 17.
Non-Disclosure Agreements
Panoramic typically requires non-disclosure agreements with companies that
are involved in reviewing or assisting with the development of the PCM Software.
Panoramic is currently a party to a number of such non-disclosure agreements.
MANAGEMENT
William M. Hunter
Mr. Hunter, age 55, is the President, Chief Executive Officer and a
director of Panoramic and is employed by Panoramic on a full time basis. Mr.
Hunter has served Panoramic in this capacity since March 1, 1999.
Mr. Hunter has over 28 years of experience in the healthcare industry, and
has been a consultant to start-up ventures in the healthcare industry for the
past two years. Prior to that he was the President and CEO of Gynecare, Inc. a
company he took public on Nasdaq National Market through an initial public
offering in 1995. Gynecare, Inc. was later sold to Johnson & Johnson. Before
that, Mr. Hunter's positions have included: Director of Worldwide Marketing for
the Valleylab Division of Pfizer, a medical device company located in Boulder,
Colorado; International Marketing Manager for the Ohmeda Anesthesia Division of
British Oxygen; and UK Sales Manager for the Technicare Division of Johnson &
Johnson. Mr. Hunter holds a BS from Boston State College and an MBA from the
University of Connecticut.
On March 1, 1999, Panoramic and Mr. Hunter entered into an employment
agreement that extends for a term of 12 months. Under the terms of the
agreement, Panoramic is obligated to pay Mr. Hunter the sum of $10,000 per
month. The agreement includes a non-competition provision that extends for 12
months following the termination of Mr. Hunter's employment with Panoramic. The
agreement also includes non-disclosure provisions which extend indefinitely
following the termination of Mr. Hunter's employment with Panoramic.
Jill Flateland
Ms. Flateland, age 48, is the Executive Vice-President, Chief Operating
Officer and a director of Panoramic and is employed by Panoramic on a full time
basis. Ms. Flateland has served Panoramic in this capacity since March 1, 1999.
From September 4, 1990 until March 1, 1999 Ms. Flateland was President and CEO.
-29-
<PAGE>
Prior to and co-incident with working with Panoramic, Ms. Flateland was
with Columbia North Suburban Medical Centre, a health care facility in Thornton,
Colorado, where she served as Director of Integrated Management for 3 years. Ms.
Flateland also served as Supervisor of the Intensive Care Unit/ Critical Care
Unit of Columbia North Suburban Medical Centre for two years from April 1990 to
June 1992. Ms. Flateland holds a Bachelor of Science (Nursing) degree from the
University of North Dakota in 1972 and an MBA degree from Regis University in
1986.
On January 1, 1999, Panoramic and Ms. Flateland entered into an employment
agreement that extends for a term of 12 months. Under the terms of the
agreement, Panoramic is obligated to pay Ms. Flateland the sum of $8,133 per
month. The agreement includes a non-competition provision that extends for 12
months following the termination of Ms. Flateland's employment with Panoramic.
The agreement also includes non-disclosure provisions which extend indefinitely
following the termination of Ms. Flateland's employment with Panoramic.
Byron Flateland
Mr. Flateland, age 48, is the Secretary, Chief Technical Officer and a
director of Panoramic and is employed by Panoramic on a full time basis. Mr.
Flateland has served Panoramic in this capacity since June, 1995.
Prior to joining Panoramic, Mr. Flateland was with InfoNow Corp., a
computer software marketing company located in Denver, Colorado, where he served
as Vice-President, Marketing for one year. Mr. Flateland has also been employed
by Destron-Fearing Corp. an electronic identification company located in St.
Paul, Minnesota, where he served as Director, Business Development for 5 years
from May 1989 to November 1994.
Mr. Flateland holds a BSEE (Bachelor of Science, Electrical Engineering)
degree and an MSEE (Master of Science, Electrical Engineering) degree from the
University of North Dakota in 1972 and 1973 respectively, an MBA degree from the
University of North Colorado in 1978 and an MCIS degree from the University of
Denver in 1994.
On January 1, 1999, Panoramic and Mr. Flateland entered into an employment
agreement that extends for a term of 12 months. Under the terms of the
agreement, Panoramic is obligated to pay Mr. Flateland the sum of $8,133 per
month. The agreement includes a non-competition provision that extends for 12
months following the termination of Mr. Flateland's employment with Panoramic.
The agreement also includes non-disclosure provisions which extend indefinitely
following the termination of Mr. Flateland's employment with Panoramic.
Scott Sanders
Mr. Sanders, age 42, is Vice President, Marketing and Sales and is
employed by Panoramic on a full time basis. Mr. Sanders has served Panoramic in
this capacity since February, 1999.
Prior to joining Panoramic, Mr. Sanders was with Boston Scientific
Schneider/Namic, a diagnostic cardiology company located in Minneapolis,
Minnesota, where he served as Director, Group Sales from 1997 to February 1999.
Mr. Sanders has also been employed by Pfizer Valleylab, a medical device company
located in Boulder, Colorado from 1990 to 1997, initially as Director of
Marketing from 1990 to 1994, and as Manager of Corporate Sales from 1994 to
1997. Mr. Sanders holds a BA in Biology (Bachelor of Arts, Biology) from the
University of Denver in 1978.
-30-
<PAGE>
On February 22, 1999, Panoramic and Mr. Sanders entered into an employment
agreement that extends for a term of 12 months. Under the terms of the
agreement, Panoramic is obligated to pay Mr. Sanders the sum of $7,500 per
month. The agreement includes a non-competition provision that extends for 12
months following the termination of Mr. Sanders' employment with Panoramic. The
agreement also includes non-disclosure provisions which extend indefinitely
following the termination of Mr. Sanders' employment with Panoramic.
Kent Nuzum
Mr. Nuzum, age 32, is the Chief Financial Officer of Panoramic and
contracts his services to Panoramic on a part time basis. Mr. Nuzum devotes
approximately 50% of his time to Panoramic, and has served Panoramic in this
capacity since October 6, 1998.
Mr. Nuzum has been employed by Bolder Venture Partners LLC since November
1, 1998. Bolder Venture Partners is a venture capital company and a consultant
to Panoramic under a Consulting Agreement made December 7, 1998 and amended
March 1, 1999. Mr. Nuzum was formerly employed by Daryl Yurek since January
1997. Mr. Nuzum was previously employed with Bank One as Assistant
Vice-President, Commercial Loans, from August 1990 to January 1997. Mr. Nuzum
holds a B.S. in Economics from Arizona State University in 1989 and is currently
enrolled in the CIS - Masters program at the University of Denver.
Mr. Nuzum has not entered into a non-competition or non-disclosure
agreement with Panoramic.
PERSONNEL
As of March 15, 1999, Panoramic had a total of 7 full-time employees, 1
part-time employee, and 3 part-time consultants. Of these, 2 employees and 1
consultant serve in a management and administration capacity, 2 employees and 1
consultant serve in a research and development capacity, 3 employees serve in a
marketing and sales capacity and 1 consultant serves in a marketing capacity.
These employees and consultants operate out of Panoramic's office facility or,
in the case of consultants, the consultant's own office facilities.
The initial management team has been hired, with the exception of the
Chief Financial Officer. Panoramic expects to fill this position in the second
quarter of 1999. Additional personnel will be added as and when circumstances
warrant and profits or additional funding permits.
DEPENDENCY ON SUPPLIERS
The computers and software that Panoramic utilizes to develop its software
are widely available in the market place. Panoramic has the ability to obtain
such goods from a wide range of prospective suppliers, depending upon pricing,
delivery, quality assurance and related considerations.
DEPENDENCY UPON SPECIFIC CUSTOMERS
Panoramic does not expect to enter into any supply relationship in the
year subsequent to listing that would make it unusually dependent upon any one
customer for future sales. Instead Panoramic anticipates that its customer base
will consist of a diversified array of private sector businesses, primarily
located in the United States. As Panoramic's market exposure increases and brand
recognition grows, we expect that a still broader market base will be
established.
-31-
<PAGE>
OFFICES
Until March 15, 1999 Panoramic operated from a home office facility owned
by the founders of Panoramic, Jill Flateland and Byron Flateland. Panoramic
currently leases 2,856 square feet of office space at 5181 Ward Road, Wheat
Ridge, Colorado 80033.
-32-
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read together with Panoramic's
financial statements and accompanying notes included elsewhere in this
Prospectus.
INTRODUCTION
For the fiscal years ended December 31, 1996 to 1998 Panoramic's revenues
have been received from sale of the STATpath product and from related consulting
services. Royalty revenues represent royalties received from the sale of
STATpath by Citation, a software company in Saint Louis, Missouri and the Center
for Health Education, a non-profit organization. The Center for Health
Education's Board of Directors consists of Jill Flateland and Byron Flateland.
Royalties have represented 61.5%, 63.9% and 30.8% of total revenues for the
fiscal years ended December 31, 1998 to 1996, respectively. For the year ended
December 31, 1998 product royalties declined to just over $27,000 as Panoramic
focused its efforts on PCM Software product development as opposed to marketing.
Over the three years ended December 31, 1998 Panoramic's revenues have
decreased 44%. Revenues have decreased as Panoramic has focused primarily on PCM
Software product development as the STATpath product has reached the peak of its
commercial life cycle. Accordingly, consulting revenue has decreased from
$92,305 in the year ended December 31, 1996 to $23,180 in the year ended
December 31, 1998. Consulting revenues are principally derived from the services
of Jill Flateland and Byron Flateland. Consulting revenues are almost entirely
associated with implementing the STATpath method of care in an organization.
Selling, general and administrative expenses, as a percentage of total
revenue, have fluctuated significantly over the past three years. In fiscal year
1998, selling, general and administrative expenses, as a percentage of total
revenue reached its highest point of 134.9% of total revenue as overall revenue
growth slowed. In fiscal year 1997 selling, general and administrative expenses
fell to 46.1% of total revenue from 88.2% of total revenue for the fiscal year
1996.
Panoramic does not capitalize research and development expenses. For the
fiscal years 1998, 1997 and 1996 Panoramic directly expensed $3,221, $2,342 and
$2,743 respectively as product development. These costs do not include the
estimated value of services provided by officers as discussed below.
For the year ended December 31, 1998, Panoramic completed on or near
December 15, 1998 a series of private placements totaling $508,000 that was
undertaken at $0.50 per share. The private placements were undertaken in order
to provide the funds necessary to further PCM Software product development.
Historically, Panoramic has operated with limited working capital,
however, as of December 31, 1998, Panoramic had working capital of $449,522 due
to a private placement of common stock in December 1998, which compared to
working capital of $384 as of December 31, 1997.
FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1997
Royalty income for 1998 decreased $26,192, or 48.6%, to $27,613 from
$53,805 for 1997. This decrease is due to decreased sales of STATpath and audio
tape products by CHE as Panoramic focused more of its efforts on product
development during 1998. Consulting fees for 1998 increased $3,576, or 18.2%, to
$23,180 from $19,604 for 1997. This increase is primarily due to a contract with
Life Source
-33-
<PAGE>
Services to assist in administrative and patient care practices with respect to
Medicare reimbursement issues in 1998. Total revenues for 1998 decreased $27,256
or 34.6%, to $51,507 from $78,763 for 1997.
Total operating expenses for 1998 increased $2,789, or 1.2%, to $238,824
from $236,035 for 1997. Salaries decreased by $74,222 due to the capitalization
of $75,000 in salaries as software development costs in 1998. As described in
Note 4 to the financial statements, Panoramic records as a capital contribution
the difference between the estimated value of services provided by its officers
and the actual amounts paid to the officers. This capital contribution, which is
a non-cash expense, amounted to $152,193 and $165,112 for 1998 and 1997,
respectively. Management fees increased by $5,680, or 32.4%, to $23,180 for 1998
from $17,500 for 1997, primarily due to higher accounting costs related to the
increased level of corporate activity in 1998. Panoramic incurred consulting
fees of $61,650 in 1998 under a consulting agreement with Bolder Venture
Partners. This amount includes a non-cash expense of $51,000 representing the
fair value of warrants issued under the consulting agreement. Other general and
administrative costs increased by $8,802, or 54.4%, to $24,995 for 1998 from
$16,193 for 1997. This increase was primarily due to a $9,029 increase in travel
costs related to product development and corporate development.
CAPITAL RESOURCES AND LIQUIDITY
Panoramic has incurred capital losses since inception. In addition to
having to rely upon cash generated from operations, Panoramic has had to rely
upon the sale of equity securities for cash required for administration,
research and development, capital improvements, sales and marketing programs and
advertising, among other things.
In preparation for the introduction of a new product line (PCM Software),
Panoramic has entered into various commitments including an office lease,
consulting agreement, and employment agreements. Furthermore, Panoramic has
incurred significant expenses for software development, and sales of Panoramic's
existing product line have essentially been discontinued. Panoramic believes
that its resources, together with financings that it expects to complete
(including the offering described in this Prospectus), and anticipated revenue
from operations will be sufficient to meet Panoramic's financial requirements
for the next year. If, however, cash flow is insufficient to cover cash
expenditures, Panoramic will have to continue to rely upon equity and debt
financing during such period. There can be no assurance that financing, whether
debt or equity, will always be available to Panoramic in the amount required at
any particular time or for any particular period or, if available, that it can
be obtained on terms satisfactory to Panoramic. Other than as described under
"Business Objectives and Milestones" and "Use of Proceeds," Panoramic does not
have any commitments for material capital expenditures over either the near or
long term and none are presently contemplated over normal operating
requirements.
Panoramic currently has 455,000 stock options and 550,000 warrants
outstanding. All of the options and 350,000 of the warrants are exercisable at
$1.00 per share. The remaining 200,000 warrants are exercisable at a price of
$0.25 per share and expire on the business day prior to the day a final receipt
is issued for this Prospectus by the British Columbia Stock Exchange. If all of
the stock options and warrants are exercised, Panoramic would receive proceeds
of $855,000. All of these funds would be available to Panoramic as working
capital. See also "Options to Purchase and Agreements to Issue Securities."
YEAR 2000 PROBLEM
The Year 2000 ("Y2K") computer problem refers to the potential for system
and processing failures of date-related data as a result of computer-controlled
systems using two digits rather than four to define the applicable year. For
example, computer programs that have time-sensitive software may
-34-
<PAGE>
recognize a date represented as "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
State of Readiness
All Panoramic products and upgrades will be Y2K compliant. Panoramic,
however, may be affected by Y2K issues related to non-compliant internal systems
developed by third party vendors. Panoramic has reviewed its internal systems,
including its accounting system, and have found them to be Y2K compliant.
Panoramic is not currently aware of any Y2K problem relating to any of its
internal, material systems. Panoramic does not believe that it has any material
systems that contain embedded chips that are not Y2K compliant.
Management believes that absent a systemic failure outside the control of
Panoramic, such as a prolonged loss of electrical or telephone service, Y2K
problems at third parties will not have a material impact on Panoramic.
Panoramic has no contingency plan for systemic failures such as loss of
electrical or telephone services. Panoramic's contingency plain in the event of
a non-systemic failure is to establish relationships with alternative suppliers
or vendors to replace failed suppliers or vendors. Panoramic has no other
contingency plans or intention to create other contingency plans.
Cost Associated With Y2K Compliance
Panoramic does not separately track expenditures relating to Y2K
compliance. Such expenditures are primarily absorbed within the product
development organization. Based on its overall development expenditure and the
amount of time people in the organization are spending on Y2K compliance,
Panoramic believes that its spending on compliance to date has not been
material.
Any failure of Panoramic to make its products Y2K compliant could result
in a decrease in sales of its products, an increase in allocation of resources
to address Y2K problems of its customers without additional revenue commensurate
with such dedication of resources, or an increase in litigation costs relating
to losses suffered by Panoramic's customers due to such year 2000 problems.
Failure of Panoramic's internal systems could temporarily prevent it from
processing orders, issuing invoices, and developing products, and could require
is to devote significant resources to correcting such problems. To Panoramic's
knowledge, however, the internal accounting systems have attested by the
suppliers as Y2K compliant. Due to the general uncertainty inherent in the Y2K
computer problem, resulting from the uncertainty of the Y2K readiness of third
party suppliers and vendors, Panoramic is unable to determine at this time
whether the consequences of Y2K failures will have a material impact on its
business, results of operations, and financial condition.
-35-
<PAGE>
DESCRIPTION OF SECURITIES
STOCK CAPITAL
The authorized capital stock of Panoramic consists of 50,000,000 common
shares of common stock with a par value of $0.001 per share. There are
approximately 47 holders of Panoramic common stock and as of the date of this
Prospectus, Panoramic had a total of 3,260,300 shares issued and outstanding.
All of the issued shares of Panoramic common stock are fully paid and not
subject to any future call or assessment. There is currently no public trading
market for Panoramic common stock.
Under Panoramic's Articles of Incorporation, all of the common shares rank
equally as to voting rights, participation in a distribution of the assets of
Panoramic on a liquidation, dissolution or winding-up of Panoramic and the
entitlement to dividends. The holders of the common shares are entitled to
receive notice of all meetings of shareholders and to attend and vote the shares
at the meetings. Each share of common stock carries with it the right to one
vote.
In the event of the liquidation, dissolution or winding-up of Panoramic or
other distribution of its assets, the holders of the common shares will be
entitled to receive, on a pro rata basis, all of the assets remaining after
Panoramic has paid out its liabilities. Distribution in the form of dividends,
if any, will be set by the board of directors.
Provision as to the modification, amendment or variation of the rights
attached to the capital of Panoramic are contained in Panoramic's Articles of
Incorporation and the Colorado Business Corporation Act. Generally speaking,
substantive changes to the share capital require the approval of the
shareholders by special resolution (at least 75% of the votes cast).
STOCK OWNERSHIP
The following are the shareholdings of the directors, senior officers and
promoters of Panoramic and of any other shareholders which, to the knowledge of
Panoramic, beneficially own, directly or indirectly, more than five percent of
the issued common shares of Panoramic:
<TABLE>
<CAPTION>
Number of Percentage of Issued
Common Shares Percentage of Share Capital After
Name and Municipality of Beneficially Issued Share the Completion of
Residence of Shareholder Owned Capital This Offering
- ----------------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Jill S. Flateland and Byron B. Flateland (1)... 2,150,000 65.94% 49.31%
Arvada, Colorado
Daryl Yurek.................................... 258,000(2) 7.91% 5.92%
Boulder, Colorado
Kent A. Nuzum.................................. 132,000(3) 4.05% 3.03%
Boulder, Colorado
Directors, Senior Officers..................... 2,340,000 71.77% 53.67%
and Promoters as a Group
</TABLE>
(1) Byron B. Flateland holds 830,000 shares individually, Jill S. Flateland
holds 1,170,000 individually, and Byron and Jill hold 150,000 shares
jointly.
(2) Includes 108,000 shares that may be acquired prior to the public offering
by exercise of a warrant held by Bolder Venture Partners LLC, of which Mr.
Yurek is a member.
(3) Includes 92,000 shares that may be acquired prior to the public offering by
exercise of a warrant held by Bolder Venture Partners LLC, of which Mr.
Nuzum is a member.
-36-
<PAGE>
OPTIONS TO PURCHASE AND AGREEMENTS TO ISSUE SECURITIES
Panoramic has granted stock options pursuant to which up to 455,000
shares may be issued in the future, and warrants pursuant to which up to
550,000 shares may be issued in the future.
-37-
<PAGE>
[Section For Public Offering Only]
PLAN OF DISTRIBUTION
OFFERING AND APPOINTMENT OF AGENT
By an agreement dated for reference the 24th day of March, 1999 (the
"Agency Agreement"), Panoramic appointed Canaccord Capital Corporation as its
Agent to offer a total of 1,100,000 shares to non-U.S. persons in Canada through
the facilities of the Vancouver Stock Exchange. The shares will be offered at a
price of $1.00 per share on a day (the "Offering Day"), as determined by
Canaccord and Panoramic, with the consent of the Vancouver Stock Exchange, which
is not more than 90 days following the date of the receipt issued by the British
Columbia Securities Commission for this Prospectus. In accordance with Vancouver
Stock Exchange rules, Panoramic will receive the net proceeds of the offering
within ten business days of the Offering Day. The offering will be made in
accordance with the rules and policies of the Vancouver Stock Exchange.
Under the terms of the Agency Agreement, Panoramic has agreed to pay to
Canaccord a commission of $0.075 per share for each share sold from this
offering including shares sold by Canaccord, if any, pursuant to the
Over-Allotment Option described below.
An application has been made to conditionally list the securities being
offered herein on the Vancouver Stock Exchange. Listing is subject to Panoramic
fulfilling the listing requirements of the Vancouver Stock Exchange, including
prescribed distribution and financial requirements.
Canaccord has reserved the right to offer selling group participation in
the normal course of the brokerage business to selling groups of other licensed
broker-dealers, brokers and investment dealers who may or may not be offered
part of the commissions or Agent's Warrant (described below).
Panoramic has granted Canaccord a right of first refusal to provide
further public equity financing to Panoramic for a period of twelve months from
the effective date of this Prospectus.
The obligations of Canaccord under the Agency Agreement may be terminated
prior to the opening of the market on the day (the "Listing Date") Panoramic's
shares are to commence trading on the Vancouver Stock Exchange at the discretion
of Canaccord on the basis of its assessment of the state of the financial
markets. The Agency Agreement may also be terminated at any time upon the
occurrence of certain stated events.
AGENT'S GUARANTEE AND AGENT'S WARRANT
Canaccord has agreed to purchase the balance of any shares remaining
unsold on the Offering Day (the "Agent's Guarantee"). In consideration of the
Agent's Guarantee, Canaccord has been granted the Agent's Warrant.
The Agent's Warrant entitles Canaccord to purchase up to 165,000 shares at
a price of $1.00 per share at any time up to 5:00 p.m. on the first anniversary
of the Listing Date and thereafter at a price of $1.15 per share at any time up
to 5:00 p.m. on the second anniversary of the Listing Date. The Agent's Warrant
is non-transferable and will contain, among other things, anti-dilution
provisions and provision for appropriate adjustment for the class, number and
price of shares issuable pursuant to any exercise thereof upon the occurrence of
certain events, including any subdivision, consolidation or reclassification of
the shares or the payment of stock dividends or the amalgamation of Panoramic.
-38-
<PAGE>
Additionally, as consideration for services provided to Panoramic by
Canaccord, including providing advice with respect to the structure, timing and
price of the offering, Panoramic paid Canaccord a sponsorship fee of $10,000,
and Panoramic will pay Canaccord a corporate finance fee of 110,000 shares.
The shares of common stock comprising the corporate finance fee and the
shares underlying the Agent's Warrant are being registered pursuant to this
registration statement.
OVER-ALLOTMENT OPTION
Panoramic has granted Canaccord an option which will permit Canaccord to
solicit and accept subscriptions for up to 165,000 additional shares at a price
of $1.00 per share ("Over-Allotment Option"). The number of shares subject to
the Over-Allotment Option will be determined on or before the Listing Date and
will be the lesser of 165,000 shares or the actual number of shares subscribed
for by way of oversubscription.
In order to exercise the Over-Allotment Option, Canaccord must give notice
to Panoramic within 60 calendar days of the Offering Day. Canaccord is not
obliged to cover the over-allotment of this Offering by exercising the
Over-Allotment Option. Canaccord may, in its discretion, cover the
over-allotment by purchasing shares in the open market.
DETERMINATION OF OFFERING PRICE
The initial offering price on the Vancouver Stock Exchange of $1.00 per
share was arrived at by negotiation between Panoramic and Canaccord, and
represents their independent assessment of the value of the shares being
offered.
-39-
<PAGE>
[Section for Selling Stockholder Offering Only]
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of Panoramic's common stock as of April 6, 1999, and as
adjusted to reflect the sale of shares being offered hereby, for each of the
Selling Stockholders. Except as otherwise noted, the persons or entities in this
table have sole voting and investing power with respect to all of the shares
owned by them.
<TABLE>
Shares Shares
Beneficially Beneficially Post-Offering
Owned Pre- Shares Offered Owned Post- %
Name and Address Offering in the Offering Offering Ownership
- ----------------------------------- ------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Jill Flateland (Executive V.P. and 1,170,000 -0- 1,170,000 26.83%
Chief Operating Officer)
5181 Ward Rd.
Wheat Ridge, CO 80033
Byron Flateland (Chief Technical 830,000 250,000 580,000 13.30%
Officer)
5181 Ward Rd.
Wheat Ridge, CO 80033
Jill Flateland and Byron Flateland, 150,000 -0- 150,000 3.44%
JTWROS
5181 Ward Rd.
Wheat Ridge, CO 80033
Jane Abou-Chedid 20,000 20,000 -0- -0-
1849 Holdens Arbor Run
Westlake, OH 44145
James Richard Anderson 20,000 20,000 -0- -0-
5820 Cantrell Road
Richmond, BC V7C 3H1
Paul A. Chalmers 10,000 10,000 -0- -0-
c/o Canaccord Capital Corporation
2200 609 Granville St.
Vancouver, BC V7Y 1H2
Channing Investments Corporation 100,000 100,000 -0- -0-
800 - 1450 Creekside Dr.
Vancouver, BC V6J 5B3
Jeanette Clark 20,000 20,000 -0- -0-
2515 Amber Court
Coquitlam, BC V3E 3K8
Kenneth & Mary Cooper 8,000 8,000 -0- -0-
4001 Bradley Road
Westlake, OH 44145
Anthony M. Coury 15,000 15,000 -0- -0-
8183 Creekside Trace
Broadview Hts., OH 44147
David Coury 15,000 15,000 -0- -0-
247 Arundel Road
Rocky River, OH 44116
</TABLE>
-40-
<PAGE>
<TABLE>
Shares Shares
Beneficially Beneficially Post-Offering
Owned Pre- Shares Offered Owned Post- %
Name and Address Offering in the Offering Offering Ownership
- ----------------------------------- ------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Ghazi J. Faddoul & Bernadette C. 10,000 10,000 -0- -0-
Faddoul
27982 Forestwood Pkwy
North Olmsted, OH 44070
Oscar Flateland 2,000 2,000 -0- -0-
P.O. Box 116
Oklee, MN 56742
Patricia A. Gibbs 4,000 4,000 -0- -0-
6874 Smith Road
Middleburg Hts., OH 44130
Debra G. Hafemeister 4,000 4,000 -0- -0-
1626 West 6th Ave.
Oshkosh, WI 54901
Joanne T. Kelly 18,000 18,000 -0- -0-
1237 Meadowlark Drive
Boulder, CO 80303
Terrence McDonald & Deborah 10,000 10,000 -0- -0-
McDonald
3645 Chrisfield Drive
Rocky River, OH 44116
Clifford B. Mah 50,000 50,000 -0- -0-
2005 289 Drake St.
Vancouver, BC V6B 5Z5
Keith Maitland 8,000 8,000 -0- -0-
31415 Turtle Drive
Bay Village, OH 44140
Mary Murphy 60,000 60,000 -0- -0-
c/o Canaccord Capital Corporation
2200 609 Granville Street
Vancouver, BC V7Y 1H2
Kent Nuzum (Chief Financial 132,000(1) 300,590 -0- -0-
Officer)
c/o 1919 14th St., Suite 800
Boulder, CO 80302
C. Michael O'Brien 12,000 12,000 -0- -0-
895 Fairmile Road
West Vancouver, BC V7S JR4
Brian Lawrence O'Brien 50,000 50,000 -0- -0-
1826 West 13th Ave.
Vancouver, BC V6J 2H3
James Oleynick 40,000 40,000 -0- -0-
Pacific International Securities Inc.
1900 666 Burrard Street
Vancouver, BC V6C 3N1
</TABLE>
-41-
<PAGE>
<TABLE>
Shares
Beneficially Beneficially Post-Offering
Owned Pre- Shares Offered Owned Post- %
Name and Address Offering in the Offering Offering Ownership
- ----------------------------------- ------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Lorraine Rose Rumberg 40,000 40,000 -0- -0-
14189 25A Avenue
White Rock, BC V4P 2G4
Daniel Seighman 10,000 10,000 -0- -0-
6024 Forest Ridge Drive
North Olmsted, OH 44107
Mary Spooner 10,000 10,000 -0- -0-
19706 Echo Drive
Strongsville, OH 44136
Union Securities Ltd. 100,000 100,000 -0- -0-
609 Granville St., Suite 900
Vancouver BC V7Y 1H4
Vera E. Williams 10,000 10,000 -0- -0-
6393 Decorah Bch
Oshkosh, WI 54901
Darryl Yea 12,000 12,000 -0- -0-
5294 Keith Road
West Vancouver BC V7W 2N1
Daryl F. Yurek 258,000(2) 455,910 -0- -0-
7 St. Paul, Suite 1600
Baltimore, MD 21202
574733 B.C. Ltd. 26,000 26,000 -0- -0-
Stikeman, Elliott
1700 666 Burrard St.
Vancouver BC V6C 2X8
Christine and Don Marcellus 46,000 46,000 -0- -0-
1147 Piedmont Avenue
Boulder, CO 80303
Christine Marcellus 10,000 10,000 -0- -0-
1147 Piedmont Avenue
Boulder, CO 80303
Gregory Pavlich and Ann Mygatt 8,000 8,000 -0- -0-
2350 Panorama
Boulder, CO 80304
Don G. Parker 8,000 8,000 -0- -0-
6244 Simmons Drive
Boulder, CO 80303
Connie K. Packard 4,000 4,000 -0- -0-
6244 Simmons Drive
Boulder, CO 80303
James C. Curley 2,000 2,000 -0- -0-
8773 W. Arbor Avenue
Littleton, CO 80123
</TABLE>
-42-
<PAGE>
<TABLE>
Shares
Beneficially Beneficially Post-Offering
Owned Pre- Shares Offered Owned Post- %
Name and Address Offering in the Offering Offering Ownership
- ----------------------------------- ------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Ronald Smaron 14,000 14,000 -0- -0-
4567 Sandpiper Ct.
Boulder, CO 80301
Howard William Morse II 2,000 2,000 -0- -0-
2509 Belmont Blvd.
Nashville, TN 37212-5505
Matthew Albert Pascal 14,000 14,000 -0- -0-
5550 Flower St.
Arvada, CO 80002
Philip W. Robinson 8,000 8,000 -0- -0-
912 Pontiac St.
Denver, CO 80220
Garth R. Albright 30,000 30,000 -0- -0-
4397 Cheviot Road
North Vancouver, BC V7R 3T3
Bruce Bragagnolo 15,000 15,000 -0- -0-
3477 West 28th Ave.
Vancouver, BC V6S 1R8
Linda M. Smith 15,000 15,000 -0- -0-
3595 Princess Ave.
North Vancouver, BC V7N 2E4
M1 Software 60,300 60,300 -0- -0-
1639 11th Street
Suite 200
Santa Monica, CA 90404
TOTAL 3,460,300 1,926,800 -0- -0-
</TABLE>
(1) Includes 92,000 shares that may be acquired prior to the public offering by
exercise of a warrant held by Bolder Venture Partners, LLC, of which Mr. Nuzum
is a member. Shares Beneficially Owned Pre-Offering excludes warrants to
purchase up to 168,590 shares exercisable after the public offering and expiring
five years from the date the shares are listed for public trading on the
Vancouver Stock Exchange, but Shares Offered in the Offering includes such
warrant shares.
(2) Includes 150,000 shares in the name of Solomon Smith Barney IRA FBO Daryl F.
Yurek, of which Daryl F. Yurek is the sole owner, and 108,000 shares that may be
acquired prior to the public offering by exercise of a warrant held by Bolder
Venture Partners, LLC, of which Mr. Yurek is a member. Shares Beneficially Owned
Pre-Offering excludes warrants to purchase up to 197,910 shares exercisable
after the public offering and expiring five years from the date the shares are
listed for public trading on the Vancouver Stock Exchange, but Shares Offered in
the Offering includes such warrant shares.
-43-
<PAGE>
[Section for Selling Stockholder Offering Only]
PLAN OF DISTRIBUTION
The common stock offered hereby may be sold from time to time to
purchasers directly by the Selling Stockholders. Alternatively, the Selling
Stockholders may from time to time offer the shares through underwriters,
dealers or agents, who may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling Stockholders and/or the
purchasers of the shares for whom they may act as agent. The Selling
Stockholders and any underwriters, dealers or agents that participate in the
distribution of the shares may be deemed to be underwriters and any profit on
the sale of the shares by them and any discounts, commissions or concessions
received by any such underwriters, dealers or agents might be deemed to be
underwriting discounts and commissions under the Securities Act. At the time a
particular offer of shares is made, to the extent required, a Prospectus
Supplement will be distributed that will set forth the specific shares to be
sold and the terms of the offering, including the name or names of any
underwriters or dealer agents, any discounts, commissions and other items
constituting compensation from the Selling Stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers.
The shares may be sold from time to time in one or more transactions at a
fixed offering price that may be changed or at varying prices determined at the
time of sale or negotiated prices.
Panoramic has paid substantially all of the expenses incident to the
offering of the shares, other than commissions and discounts of underwriters,
dealers or agents and the fees and expenses of counsel to the Selling
Stockholders.
-44-
<PAGE>
[Section for Public Offering Only]
DILUTION
The following sets forth the dilution per share (as at December 31, 1998)
after giving effect to this offering:
<TABLE>
<S> <C> <C>
Effective price of Common Shares offered hereunder: $1.00
Net tangible book value before the offering:(1) $0.14
Increase in net tangible book value attributable to the offering: $0.15
Net tangible book value after the offering: $0.29 $0.29
Dilution to investor: $0.71
Dilution to investor (as a percentage): 71%
</TABLE>
(1) This table does not give effect to the issuance of 184,000 shares of common
stock after December 31, 1998 at $0.50 per share, or to the proposed
exercise by Bolder Venture Partners of outstanding warrants to purchase
200,000 shares of common stock at $0.25 per share, which is anticipated to
occur prior to completion of the offering. The issuance of these shares
would have a less than $0.01 per share effect on the dilution calculated
above.
There are a number of outstanding securities and agreements pursuant to
which shares may be issued in the future. If these shares are issued, this will
result in further dilution to Panoramic's shareholders.
-45-
<PAGE>
[Section for Public Offering Only]
USE OF PROCEEDS
The gross proceeds from this offering will be $1,100,000 (assuming the
Over-Allotment Option is not exercised). From these proceeds, Panoramic will pay
an aggregate commission of $82,500 to Canaccord. After deducting the commission
and prior to expenses of the offering, the net proceeds from this offering will
be $1,017,500. Panoramic's working capital, as of March 31, 1999 was
approximately $75,000. The net proceeds from the offering plus the working
capital totals approximately $1,092,500 before expenses (the "Funds Available")
which will be used as follows:
Funds Available: $ 1,092,500
============
Proposed Uses:
Costs of this Offering:
Legal Fees $ 170,000
Accounting Fees $ 18,000
Registration Fees $ 2,000
Listing Fees $ 3,000
Transfer Agent Fees $ 2,000
Printing $ 5,000
Sales and Distribution Channel Development(1): $ 326,250
Capital Equipment Purchases and Establishment of
Permanent Office Facilities(1): $ 83,000
Management and Staff Recruitment and Hiring(2):
Management: $ 20,000
Sales and Marketing: $ 170,000
Product Development(1): $ 230,000
Working Capital to Fund Ongoing Operations(3)(4)(5): $ 63,250
------------
$ 1,092,500
============
(1)Expenditures for Sales and Distribution Channel Development, Capital
Equipment Purchases and Product Development will occur over 12 months
following the Listing Date.
(2)The compensation that Panoramic proposes to pay to its executive officers is
fixed for 12 months from the date of the offering. See "Executive
Compensation--Proposed Compensation."
(3)During this period any proceeds from the exercise of warrants or of stock
options and any proceeds generated from internal cash flow will be added to
working capital.
(4)Panoramic completed a $600,000 private placement in February 1998, the
proceeds of which were added to Panoramic's working capital.
(5)Including salaries not provided for under "Management and Staff Recruitment
and Hiring" and $35,000 in annual rent.
Panoramic will spend the funds available to it upon completion of this
offering to further Panoramic's business objectives set out in "Description of
Business."
The use of proceeds described above represents Panoramic's best estimate
of its allocation of the Funds Available based upon the current state of its
business operations, its current plans and current economic and industry
conditions. There may be circumstances where, for sound business reasons, a
reallocation of funds may be necessary in order for Panoramic to achieve its
business objectives.
-46-
<PAGE>
If Canaccord exercises its option to solicit and accept subscriptions for
up to 165,000 additional shares at a price of $1.00 per share, Panoramic will
receive additional gross proceeds of up to $165,000 and pay an aggregate
commission of up to $12,375 to Canaccord. If the over-allotment option is
exercised, the net proceeds from the sale of those shares, after deducting the
commission payable in respect thereof, will be added to Panoramic's working
capital. If Canaccord exercises its warrant to purchase up to 165,000 shares at
a price of $1.00 per share, Panoramic will receive additional proceeds of up to
$165,000 if exercised at any time up to one year from the Listing Date and
thereafter up to $189,750 if exercised at any time up to that date which is two
years after the Listing Date. If Canaccord exercises the warrant, the proceeds
will also be added to Panoramic's working capital.
-47-
<PAGE>
[Section for Selling Stockholder Offering Only]
USE OF PROCEEDS
Panoramic will not receive any of the proceeds from the offering. All of
such proceeds will be received by the Selling Stockholders.
-48-
<PAGE>
DIRECTORS AND SENIOR OFFICERS
DIRECTORS AND SENIOR OFFICERS
The following is a list of the current directors and senior officers of
Panoramic, and their municipalities of residence, current positions with
Panoramic, and principal occupations during the past five years:
<TABLE>
Name and Municipality of Residence Principal Occupation for Previous Five Years
- ---------------------------------- ---------------------------------------------
<S> <C>
William M. Hunter President and a director of Panoramic since March 1, 1999; prior
Lafayette, Colorado to that he was consulting with various start-up ventures; prior to
President, Chief Executive that he was President and Chief Executive Officer of Gynecare,
Officer and Director Inc., a medical device company in Menlo Park, California, from
Age: 55 June 1994 to July 1996. From September 1985 to June 1994, he
was employed by the Valleylab medical device
division of Pfizer, lastly as the Director of
Worldwide Marketing.
Jill S. Flateland President and a director of Panoramic since August of 1990; prior
Arvada, Colorado to that she was Director of Integrated Management at Columbia
Executive Vice-President, Chief North Suburban Medical Centre, a health care facility in Thornton,
Operating Officer, Chairman of Colorado, from June 1992 to November, 1995; prior to that she was
Board of Directors Supervisor of the Intensive Care Unit/Critical Care Unit at
Age: 48 Columbia North Suburban Medical Centre from April 1990 to June
1992. Ms. Flateland is married to Byron B. Flateland.
Byron B. Flateland Secretary and a director of Panoramic since August, 1990; Chief
Arvada, Colorado Technical Officer of Panoramic since October 6, 1998; prior to that he
Chief Technical Officer, was Vice-President, Marketing of InfoNow Corp., a software
Secretary and Director development company located in Denver, Colorado, from
Age: 48 November 1994 to June 1995; prior to that he was Director of
Business Development for Destron-Fearing Corporation, an
electronic identification company located in St. Paul, Minnesota,
from May 1989 to November 1994. Mr. Flateland is married to
Jill S. Flateland.
Frank L. Poggio Director of Panoramic since March 1, 1999; Principal of Kelzon
Chesterfield, Missouri Healthcare Consulting Group, a company providing strategic and
Director operational consulting services to the healthcare industry, since
Age: 52 July, 1996; prior to that he was President and Chief Operating
Officer (January 1995 to July 1996) and Executive
Vice-President (December 1992 to January 1995) of
CITATION Computer Systems Inc., a company
specializing in the delivery of client server
based systems for healthcare; prior to that he
was President of Health Micro Data Systems, Inc.,
a firm specializing in microcomputer software
systems and consulting services to the healthcare
industry since 1980. Health Micro Data Systems,
Inc. merged with CITATION Computer Systems, Inc.
in December 1992.
</TABLE>
-49-
<PAGE>
Other than receiving stock options from time to time, the directors of
Panoramic are not compensated for serving as directors. See "Principal Holders
of Securities" for particulars of the shares held by the directors and senior
officers.
Other Associations
During the past five years, the principals of Panoramic have served as
principals of the following reporting issuers during the periods and in the
capacities noted below:
<TABLE>
Principal Reporting Issuer Capacity Period
- ------------------- ------------------------- ------------- -------------
<S> <C> <C> <C>
Kent Nuzum eSoft, Inc. Director 9/97-3/98
Frank Poggio CITATION Computer Systems Director 12/92-Present
William M. Hunter Gynecare, Inc. Director 6/94-7/96
</TABLE>
-50-
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Consulting Agreement
The Company is party to a consulting agreement (the "Consulting
Agreement") with Bolder Venture Partners L.L.C. ("Bolder") made December 7, 1998
and amended March 1, 1999. Bolder Venture Partners is a limited liability
company incorporated under the laws of the State of Colorado and is owned 90% by
Daryl Yurek, the Promoter of this offering, and 10% by Kent Nuzum, Chief
Financial Officer of the Company.
Under the terms of the Consulting Agreement, Bolder agrees to provide
consulting services to the officers of Panoramic relating to matters of
corporate development, strategic planning, raising of capital and other
financial matters, and to assist with certain private placements and public
offerings of Panoramic's securities, including this offering.
In consideration of these services, Panoramic agrees to pay Bolder a
monthly retainer of $6,000 per month, an advisory fee in an amount equal to 7.5%
of the gross proceeds raised in any private placements and share purchase
warrants to acquire 550,000 common shares of Panoramic. 200,000 of the warrants
are exercisable at a price of $0.25 until that day which is one business day
prior to the date a final receipt for a prospectus is issued by the British
Columbia Securities Commission. 350,000 of the warrants are exercisable at a
price of $1.00 for a period of 5 years from the date the warrants are issued.
The term of the Consulting Agreement ends on May 31, 1999 unless extended
by the written consent of both parties. The Consulting Agreement requires Bolder
not to disclose any confidential information relating to the Company for a
period of 5 years following the termination of the Consulting Agreement.
-51-
<PAGE>
EXECUTIVE COMPENSATION
The following table is a summary of the compensation paid to the two most
highly paid executive officers of Panoramic during the most recently completed
financial year for services rendered to Panoramic:
<TABLE>
Long Term
Compensation
-------------------
Annual Compensation Awards Payouts
--------------------------------------- -------- ---------
Options/
Name and SARs
Principle Other Annual Granted LTIP(1) All other
Position Period Salary Bonus Compensation (#) Payouts Compensation
- ---------------- ------------ ---------- ----- ------------ -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jill Flateland,(2) Year ended $23,904(3) N/A N/A N/A N/A N/A
President Dec. 31,
1998
Byron Flateland Year ended $23,904(3) N/A N/A N/A N/A N/A
Secretary, Chief Dec. 31,
Technical Officer 1998
</TABLE>
(1) "LTIP" or "long term incentive plan" means any plan which provides
compensation intended to serve as incentive for performance to occur over a
period longer than one financial year, but does not include option or stock
appreciation right plans.
(2) Ms. Flateland served as the President and chief executive officer of
Panoramic from September 4, 1990 until March 1, 1999, at which time she
began serving as the Executive Vice-President and Chief Operating Officer
of Panoramic. On March 1, 1999, William M. Hunter accepted the position of
President and chief executive officer at an annual salary of $120,000.
(3) Ms. Flateland and Mr. Flateland were the sole shareholders of Panoramic in
1998, and provided services to Panoramic at salaries below the fair market
value of such services. For accounting purposes, Panoramic imputed salaries
of $100,000 to each of Ms. Flateland and Mr. Flateland; $23,904 of which
was paid to each in cash, and the remaining $76,096 of which was recorded
as a capital contribution on Panoramic's financial statements for 1998.
The Chief Executive Officer, Chief Operating Officer, Chief Technical
Officer, the Vice Presidents, and all Director level employees are eligible to
participate in Panoramic's Senior Management Bonus Plan for Fiscal Year 1999.
For the achievement of certain specified levels of total company sales, eligible
individuals may receive from 10% to 35% of their base salary as bonus.
-52-
<PAGE>
CAUTIONARY STATEMENT CONCERNING
FORWARD LOOKING STATEMENTS
We have made certain forward-looking statements in this document and in
the documents referred to in this document which are subject to risks and
uncertainties. These statements are based on the beliefs and assumptions of the
management of the companies and on the information currently available to such
management. Forward-looking statements include information concerning possible
or assumed future results of Panoramic. These statements may be preceded by,
followed by, or otherwise include the words "believes," "expects,"
"anticipates," "intends," "plans," "estimates" or similar expressions.
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. The future results and stockholder values
of Panoramic may differ materially from those expressed in these forward-looking
statements. Many of the factors that will determine these results and values are
beyond our ability to control or predict. Investors are cautioned not to put
undue reliance on any forward-looking statements. Except for their ongoing
obligations to disclose material information as required by the federal
securities law, we do not have any intention or obligation to update forward-
looking statements after this prospectus is delivered, even if new information,
future events or other circumstances have made them incorrect or misleading. For
those statements, we claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.
You should understand that various factors, in addition to those discussed
elsewhere in this document and in the documents referred to in this document,
could affect the future results of the combined company following the merger and
could cause results to differ materially from those expressed in such
forward-looking statements.
DIVIDEND RECORD AND POLICY
Panoramic has not paid any dividends since incorporation and it has no
plans to pay dividends in the immediate future. Panoramic expects to retain its
earnings to finance further growth and, when appropriate, retire debt. The
directors of Panoramic will determine if and when dividends should be declared
and paid in the future based on Panoramic's financial position at the relevant
time. All of the shares of Panoramic are entitled to an equal share in any
dividends declared and paid.
EXPERTS
The auditors of Panoramic are Hein + Associates LLP, Certified
Public Accountants, 717 - 17th Street, Suite 1600, Denver, Colorado, U.S.A.
80202. The financial statements of Panoramic Care Manager, Inc., as of and
for each of the two years in the period ended December 31, 1998 included in
this Prospectus have been audited by Hein + Associates LLP, Certified Public
Accountants, to the extent and for the periods set forth in their report
appearing elsewhere herein, and are included herein in reliance upon such
report given upon the authority of said firm as experts in auditing and
accounting.
-53-
<PAGE>
LEGAL MATTERS
There are no material pending legal proceedings to which Panoramic is or
is likely to be a party or of which any of its properties are or
are likely to be the subject.
Campney & Murphy, Barristers and Solicitors, 2100, 1111 West Georgia
Street, Vancouver, British Columbia, Canada, V7X 1K9 has served as legal counsel
of Panoramic in connection with the offering of the securities in Canada on the
Vancouver Stock Exchange.
The validity of the securities offered will be passed upon for Panoramic
by Davis, Graham & Stubbs LLP, Denver, Colorado.
WHERE YOU CAN FIND MORE INFORMATION
You may read and copy any reports, statements or other information that we
file with the Securities and Exchange Commission at the SEC's public reference
rooms in Washington, D.C.; New York, New York; and Chicago, Illinois. Please
call the Securities and Exchange Commission at 1 (800) SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available to
the public from commercial document retrieval services and at the web site
maintained by the Securities and Exchange Commission at "http://www.sec.gov."
-54-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
INDEPENDENT AUDITOR'S REPORT................................................F-2
BALANCE SHEETS - December 31, 1998 and 1997.................................F-3
STATEMENTS OF OPERATIONS - For the Years Ended December 31, 1998 and
1997........................................................................F-4
STATEMENTS OF STOCKHOLDERS' EQUITY - For the Years Ended December 31,
1998 and 1997...............................................................F-5
STATEMENTS OF CASH FLOWS - For the Years Ended December 31, 1998 and
1997........................................................................F-6
NOTES TO FINANCIAL STATEMENTS...............................................F-7
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Panoramic Care Manager, Inc.
Arvada, Colorado
We have audited the accompanying balance sheets of Panoramic Care Manager, Inc.
as of December 31, 1998 and 1997, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Panoramic Care Manager, Inc. as
of December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
HEIN + ASSOCIATES LLP
Denver, Colorado
March 4, 1999
F-2
<PAGE>
PANORAMIC CARE MANAGER, INC.
BALANCE SHEETS
<TABLE>
December 31,
--------------------------
1998 1997
----------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 350,122 $ 336
Stock subscriptions receivable 99,400 --
Royalties receivable -- 9,640
Other -- 48
----------- -----------
Total current assets 449,522 10,024
SOFTWARE DEVELOPMENT COSTS 75,000 --
PROPERTY AND EQUIPMENT, net of accumulated depreciation
of $35,011 and $25,481, respectively 10,271 15,160
----------- -----------
TOTAL ASSETS $ 534,793 $ 25,184
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES -
Accounts payable and accrued liabilities $ 32,257 $ --
COMMITMENTS (Notes 2, 6, and 7)
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; 50,000,000 shares authorized,
3,016,000 and 2,000,000 shares issued and outstanding, respectively 3,016 2,000
Additional paid-in capital 1,202,765 539,112
Accumulated deficit (703,245) (515,928)
----------- -----------
Total stockholders' equity 502,536 25,184
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 534,793 $ 25,184
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-3
<PAGE>
PANORAMIC CARE MANAGER, INC.
STATEMENTS OF OPERATIONS
For the Years Ended
December 31,
--------------------
1998 1997
--------- ---------
REVENUES:
Royalties $ 27,613 $ 53,805
Consulting fees 23,180 19,604
License fees 714 5,354
--------- ---------
Total revenues 51,507 78,763
OPERATING EXPENSES:
Salaries 125,778 200,000
Management fee 23,180 17,500
Product development costs 3,221 2,342
Consulting fees 61,650 -
Other general and administrative 24,995 16,193
--------- ---------
Total operating expenses 238,824 236,035
--------- ---------
NET LOSS $(187,317) $(157,272)
========= =========
NET LOSS PER COMMON SHARE $ (0.09) $ (0.08)
========= =========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 2,043,000 2,000,000
========= =========
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-4
<PAGE>
PANORAMIC CARE MANAGER, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
Common Stock Additional
---------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
--------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
BALANCES, January 1, 1997 2,000,000 $ 2,000 $ 374,000 $ (358,656) $ 17,344
Contributed services -- -- 165,112 -- 165,112
Net loss -- -- -- (157,272) (157,272)
--------- ---------- ---------- ---------- ----------
BALANCES, December 31, 1997 2,000,000 2,000 539,112 (515,928) 25,184
Contributed services -- -- 152,193 -- 152,193
Issuance of common stock in
private placement, net of
offering costs of $46,524 1,016,000 1,016 460,460 -- 461,476
Warrants issued for
consulting fees -- -- 51,000 -- 51,000
Net loss -- -- -- (187,317) (187,317)
--------- ---------- ---------- ---------- ----------
BALANCES, December 31, 1998 3,016,000 $ 3,016 $1,202,765 $ (703,245) $ 502,536
========= ========== ========== ========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-5
<PAGE>
PANORAMIC CARE MANAGER, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended
December 31,
-----------------------
1998 1997
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(187,317) $(157,272)
Adjustments to reconcile net loss to net cash
from operating activities:
Contributed services 77,193 165,112
Warrants issued for services 51,000 --
Depreciation expense 9,578 10,339
(Increase) decrease in royalty receivable 9,640 (9,640)
Increase in accounts payable 32,257 --
--------- ---------
Net cash provided by (used in) operating activities (7,649) 8,539
CASH FLOWS FROM INVESTING ACTIVITIES -
Purchase of property and equipment (4,641) (8,268)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 508,000 --
Offering costs (46,524) --
Stock subscriptions receivable (99,400) --
--------- ---------
Net cash provided by financing activities 362,076 --
NET INCREASE IN CASH AND EQUIVALENTS 349,786 271
CASH AND EQUIVALENTS, beginning of year 336 65
--------- ---------
CASH AND EQUIVALENTS, end of year $ 350,122 $ 336
========= =========
NON-CASH INVESTING AND FINANCING ACTIVITIES -
Contributed services included in software
development costs $ 75,000 $ --
========= =========
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-6
<PAGE>
PANORAMIC CARE MANAGER, INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND NATURE OF OPERATIONS - Panoramic Care Manager, Inc. (the
"Company") was originally incorporated in 1990 as Free Style Publications,
Inc. The name of the Company was changed to Panoramic Care Manager, Inc.
in December 1998. The Company is engaged in providing patient management
systems to the post-acute health care industry. The products have been
provided in printed and CD-ROM format. The Company is now transforming the
products into software products designed to standardize and systemize the
delivery of health care.
USE OF ESTIMATES - The preparation of the Company's financial statements
in conformity with generally accepted accounting principles requires the
Company's management to make estimates and assumptions that affect the
amounts reported in these financial statements and accompanying notes.
Actual results could differ from those estimates.
The Company's financial statements are based on a number of estimates,
including the value assigned to contributed services and the carrying
value of software development costs. It is reasonably possible that these
estimates could change in the forthcoming year and such revisions could be
material.
CASH EQUIVALENTS - The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to
be cash equivalents.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation of property and equipment is calculated using the
straight-line method over the estimated useful lives (ranging generally 3
years) of the respective assets. The cost of normal maintenance and
repairs is charged to operating expenses as incurred. Material
expenditures which increase the life of an asset are capitalized and
depreciated over the estimated remaining useful life of the asset. The
cost of properties sold, or otherwise disposed of, and the related
accumulated depreciation or amortization are removed from the accounts,
and any gains or losses are reflected in current operations.
SOFTWARE DEVELOPMENT COSTS - The Company capitalizes costs of producing
software to be sold, leased, or otherwise marketed, incurred subsequent to
establishing technological feasibility in accordance with Statement of
Financial Accounting Standards No. 86.
Amortization of capitalized software development costs is computed on a
product-by-product basis. The annual amortization is the greater of the
amount computed using the ratio of current gross revenue for a product to
the total of current and anticipated future gross revenue for that product
or the straight-line method, not to exceed 3 years. Amortization had not
commenced at December 31, 1998 because the product was not yet available
for market release. In addition, management periodically compares the
unamortized capitalized costs for each product to the net realizable value
of that product. If the unamortized capitalized costs exceed the net
realizable value, the excess will be charged to operations.
F-7
<PAGE>
PANORAMIC CARE MANAGER, INC.
NOTES TO FINANCIAL STATEMENTS
Costs incurred in researching, designing and planning for the development
of new software are charged to operations as incurred.
IMPAIRMENT OF LONG-LIVED ASSETS - Management of the Company assesses
impairment whenever events or changes in circumstances indicate that the
carrying amount of a long-lived asset may not be recoverable. If the net
carrying value exceeds the net cash flows, then impairment will be
recognized to reduce the carrying value to the estimated fair value.
EARNINGS PER SHARE - Net loss per common share is presented in accordance
with the provisions of Statement of Financial Accounting Standards No.
128, Earnings Per Share (FAS 128). FAS 128 replaces the presentation of
primary and fully diluted earnings per share (EPS), with a presentation of
basic EPS and diluted EPS. Under FAS 128, basic EPS excludes dilution for
potential common shares and is computed by dividing the net loss by the
weighted average number of common shares outstanding for the year. Diluted
EPS reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into
common stock and resulted in the issuance of common stock. Basic and
diluted EPS are the same in 1998 and 1997 as there were no potential
common shares.
INCOME TAXES - The Company accounts for income taxes under the liability
method, which requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included
in the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined based on the difference between
the financial statement and tax bases of assets and liabilities using
enacted tax rates.
REVENUE RECOGNITION - The Company recognizes royalty income when sales are
made by the licensee. Consulting fees are recognized when the services are
performed.
Revenue from the sale of the Company's proprietary software will be
recognized when the software is delivered and the Company has
substantially performed all material obligations relating to the sale
agreement and collectibility is deemed probable by management.
2. RELATED PARTY TRANSACTIONS:
The Company has entered into a marketing agreement with Center for Health
Education (CHE), a non-profit organization. Under this agreement, the
Company granted to CHE a non-exclusive license to market the Company's
STATpaths and audio courses. CHE pays a royalty to the Company of 15% of
gross income from sales of these products. The Company's president is also
the president of CHE. Total royalties received from CHE for 1998 and 1997
were $27,613 and $53,805, respectively. This agreement expired as of
December 31, 1998, and the Company does not expect future revenues for the
sale of their products.
The Company pays a management fee under an informal agreement for cost
sharing to an entity which is owned by the two major stockholders of the
Company. This fee represents reimbursement for expenses such as rent,
utilities, and accounting costs. Management fees paid
F-8
<PAGE>
PANORAMIC CARE MANAGER, INC.
NOTES TO FINANCIAL STATEMENTS
for 1998 and 1997 were $23,180 and $17,500, respectively. This agreement
expired as of
December 31, 1998.
3. INCOME TAXES:
The temporary differences between the tax basis and book basis of assets
and liabilities are primarily due to depreciation, warrants issued for
services, and the use of cash basis of accounting for income tax purposes.
Such differences were not material for 1998 or 1997.
4. STOCKHOLDERS' EQUITY:
In December 1998, the Company completed the first tranche of a private
placement of 1,016,000 shares of common stock for a total of $508,000,
less offering costs of $46,524, of this amount, $99,400 was received after
year-end. In February 1999, the Company completed the second tranche
consisting of 184,000 shares of common stock for a total of $92,000, less
offering costs of $20,025.
In December 1998, the Board of Directors approved an increase in the
authorized shares to 50,000,000, a reduction in the par value of each
share to $.001, and a 2,000 for 1 stock split. All share and per share
amounts in the financial statements have been restated to reflect the
stock split.
The Company has recorded as a capital contribution the difference between
the estimated value of services provided by its officers who are major
shareholders and the actual amounts paid to the officers. The estimates
are based upon the salaries paid commencing in 1999. In 1998, $75,000 of
the contributed services was recorded as software development costs, based
on the number of hours worked by the chief technical officer subsequent to
the establishment of technological feasibility of the product.
5. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATIONS
OF CREDIT RISKS:
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts of cash and
equivalents, accounts receivable, and accounts payable approximate fair
value due to the short maturity of these items.
These fair value estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore, cannot be
determined with precision. Changes in assumptions could significantly
affect these estimates.
CONCENTRATIONS OF CREDIT RISK - Credit risk represents the accounting loss
that would be recognized at the reporting date if counterparties failed
completely to perform as contracted. Concentrations of credit risk
(whether on or off balance sheet) that arise from financial
F-9
<PAGE>
PANORAMIC CARE MANAGER, INC.
NOTES TO FINANCIAL STATEMENTS
instruments exist for groups of customers or counterparties when they have
similar economic characteristics that would cause their ability to meet
contractual obligations to be similarly effected by changes in economic or
other conditions. The Company operates primarily in the health care
industry.
At December 31, 1998, the Company had an investment in a single money
market mutual fund of $300,000, which is not covered by Federal insurance.
6. COMMITMENTS:
In December 1998, the Company entered into a consulting agreement with an
entity (the "Consultant") to provide consulting services regarding capital
raisings corporate development and other financial matters, including the
private placement which was completed in 1998 and the proposed public
offering (see Note 7). The Consultant is to receive a fee of $6,000 per
month through May 1999. The Consultant also received warrants to purchase
200,000 shares of stock at $.25 per share, expiring immediately prior to
the Company's proposed public offering. The Company has recorded the fair
value of these warrants of $51,000 as an expense in 1998. At the
completion of the private placement, the Consultant received an advisory
fee of $45,000 and warrants to purchase 240,000 shares of stock at $1.00
per share, exercisable for five years. Upon completion of the public
offering, the Consultant will receive warrants to purchase 10% of the
number of shares issued in the offering, at an exercise price equal to the
public offering price, expiring five years from issuance.
7. SUBSEQUENT EVENTS:
In January 1999, the Company entered into an agreement with an underwriter
for a proposed public offering of up to $1,100,000 on the Vancouver
(Canada) stock exchange (assuming the Over-Allotment Option is not
exercised). The underwriter will receive fees totaling approximately
$30,000, plus a commission of 7.5% of the offering proceeds. In addition,
the underwriter will receive 110,000 shares of common stock and warrants
to purchase 15% of the number of shares issued in the public offering,
exercisable at the public offering price for one year and at 115% of the
public offering price for one additional year.
In February 1999, the Company entered into an office lease agreement which
requires monthly rental payments of approximately $2,900 from March 15,
1999 through September 15, 2000.
8. LIQUIDITY:
The Company has incurred operating losses from inception, primarily due to
non-cash expenses for services contributed by major stockholders. In late
1998 and early 1999, the Company entered into various commitments
including an office lease, consulting agreement, and employment
agreements, and has incurred significant expenditures for software
development
F-10
<PAGE>
PANORAMIC CARE MANAGER, INC.
NOTES TO FINANCIAL STATEMENTS
costs. In addition, sales of the Company's existing product line has
essentially been discontinued. Management believes that revenues from the
Company's new software products, along with the proceeds of the Company's
proposed public offering, will be sufficient to fund operations for the
coming year. If revenues from the software products are less than
anticipated, or if the proposed public offering is not completed, the
Company will be required to reduce its overhead expenses or seek
additional equity or debt financing.
F-11
<PAGE>
Until ________________, 1999 (90 days after the date of this
Prospectus), all dealers effecting transactions in the registered securities,
whether or not participating in this distribution, may be required to deliver a
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) As permitted by the Colorado General Corporation Law, the Amended and
Restated Articles of Incorporation of Panoramic eliminates the liability of
directors to Panoramic or its shareholders for monetary damages for breach of
fiduciary duty as a director, except to the extent otherwise required by the
Colorado General Corporation Law.
(b) The Amended and Restated Articles of Incorporation provides that
Panoramic will indemnify each person who was or is made a party to any
proceeding by reason of the fact that such person is or was a director or
officer of Panoramic against all expense, liability and loss reasonably incurred
or suffered by such person in connection therewith to the fullest extent
authorized by the Colorado General Corporation Law. Panoramic's Bylaws provide
for a similar indemnity to directors and officers of Panoramic to the fullest
extent authorized by the Colorado General Corporation Law.
(c) The Amended and Restated Articles of Incorporation also gives
Panoramic the ability to enter into indemnification agreements with each of its
directors and officers. Panoramic has entered into indemnification agreements
with each of its directors and officers (see "Other Material Facts--Other
Agreements"), which provide for the indemnification of directors and officers of
Panoramic against any and all expenses, judgments, fines, penalties and amounts
paid in settlement, to the fullest extent permitted by law.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Legal Fees $ 170,000
Accounting Fees $ 18,000
Registration Fees $ 2,000
Listing Fees $ 3,000
Transfer Agent Fees $ 2,000
Printing $ 5,000
------------
$ 200,000
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
During the period from Panoramic's incorporation through to the date of
this Prospectus, Panoramic has issued the following shares, after giving effect
to the December 4, 1998 stock split of 2,000 to 1:
Number of Price Per Total
Issued Shares Share Consideration
------------- -------- --------------
Prior sales: 2,000,000 $0.0005 $ 1,000
1,200,000 $0.50 $ 600,000
II-1
<PAGE>
The particulars of these share issuances are as follows:
1. Panoramic issued 1,000 shares to its subscribers on incorporation for cash
consideration of $1,000. These shares were subject to a 2,000:1 share
split effective December 4, 1998.
2. Panoramic issued 1,200,000 shares to a total of 45 individuals at a price
of $0.50 per share to raise seed capital of $600,000.
3. Panoramic issued all presently outstanding shares in exempt transactions
under Section 4(a) of the Securities Act of 1933 and Regulation D, as no
public offering was involved.
ITEM 27. EXHIBITS
Exhibit
Number Description of Exhibit
- ----------- ----------------------------------------------------------------
1 Agency Agreement dated March 24, 1999 between Panoramic Care
Manager, Inc. and Canaccord Capital Corporation
3.1 Amended and Restated Articles of Incorporation of FreeStyle
Publications, Inc.
3.2 Bylaws
5. Legal Opinion of Davis, Graham & Stubbs LLP [to be provided by
amendment]
10.1 Amended Consulting Agreement dated as of March 1, 1999 between
Panoramic Care Manager, Inc. and Bolder Venture Partners, L.L.C.
10.2 Letter of Engagement dated February 7, 1999 between
Panoramic Care Manager, Inc. and M1 Software
10.3 Form of Nondisclosure Agreement between FreeStyle Publications,
Inc. (n/k/a Panoramic Care Manager, Inc.) and various entities
10.4 Sponsorship Agreement dated February 16, 1999 between Panoramic
Care Manager, Inc. and Canaccord Capital Corporation
10.5 Lease effective as of March 15, 1999 between Panoramic Care
Manager, Inc. and Jefferson Park West (landlord) for property
located at Jefferson Park West, Bldg. 4, 5181 Ward Road, Arvada,
Colorado, USA 80005. [To be provided by amendment]
10.6 Software Distribution Agreement dated January 28, 1999 between
Panoramic Care Manager, Inc. and InterCare Network.
10.7 Stock Option Plan
10.8 Senior Management Bonus Plan
10.9 Form of Employment Agreement
23 Consent of certified public accountant
27 Financial Data Schedule
II-2
<PAGE>
UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act") may be permitted to directors, officers and
controlling persons of Panoramic pursuant to Panoramic's Bylaws or Articles of
Incorporation, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is therefore unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Act shall be deemed to be part of this registration statement as of
the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) It will file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Wheat
Ridge, State of Colorado, on the 8th day of April, 1999.
Panoramic Care Manager, Inc.
By: /s/William M. Hunter
-------------------------------------
Name: William M. Hunter
Title: President and Chief Executive
Officer
In accordance with the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/William M. Hunter
- ------------------------------- Chief Executive Officer, President and April 8, 1999
William M. Hunter Director
/s/Jill S. Flateland
- ------------------------------- Executive Vice President and Chief April 8, 1999
Jill S. Flateland Operating Officer and Director
/s/Byron B. Flateland
- ------------------------------- Chief Technical Officer, Secretary and April 8, 1999
Byron B. Flateland Director
/s/Kent A. Nuzum
- ------------------------------- Chief Financial Officer April 8, 1999
Kent A. Nuzum
/s/Frank L. Poggio
- ------------------------------- Director April 8, 1999
Frank L. Poggio
</TABLE>
II-4
AGENCY AGREEMENT
Panoramic Care Manager Inc. ____________, 1999
11350 West 72nd Place
Arvada, Colorado
U.S.A. 80005
Attention: Ms. Jill Flateland, Chief Executive Officer
Mr. Byron Flateland, Chief Technical Officer
RE: INITIAL PUBLIC OFFERING
Dear Sirs:
We, Canaccord Capital Corporation (the "Agent"), understand that Panoramic Care
Manager Inc. (the "Company") proposes to undertake an initial public offering to
raise gross proceeds of up to US $1,100,000 (the "Offering") through the
sale of common shares of the Company (the "Shares") at a price of US $1.00 per
common share (the "Offering Price"). The funds raised from the Offering will be
used for the purpose of, among other things, funding expansion of the Company's
software development and internet integration for disease management in the
post-acute healthcare industry. We provide this letter to confirm the terms and
conditions upon which we are prepared to act as your agent to offer and sell the
Shares on your behalf. By signing a copy of this letter, you are confirming that
we have entered into a binding agreement (the "Agreement") pursuant to which you
will have appointed us as your exclusive agent to use our reasonable best
efforts to offer and sell the Shares on the terms and conditions contained
herein.
The additional terms and conditions of this Agreement are set forth below.
1. DEFINITIONS
1.1 In this Agreement, including any schedules forming a part of this
Agreement:
(a) "Act" means the Securities Acts or equivalent securities regulatory
legislation of the Qualifying Jurisdictions and "Act" means the
Securities Act or equivalent securities regulatory legislation or a
specified Qualifying Jurisdiction;
(b) "Additional Shares" means any shares issued pursuant to the Greenshoe
Option which will be the lesser of 15% of the Offering or the actual
number of additional shares for which subscriptions have been
received;
(c) "Administrative Fee" means an administrative fee of Can. $4,000 +
G.S.T. to be paid by the Company to the Agent on final closing of the
Offering or termination of this Agreement;
(d) "Agent's Commission" means the commission payable to the Agent by the
Company upon the Closing Date for the sale of the Shares, being 7.5%
of the gross proceeds of the Offering, payable in lawful U.S.
currency. In addition, a commission will be payable to the Agent by
the Company on any shares issued pursuant to the exercise of the
Greenshoe Option on "Settlement" of the Greenshoe Option;
<PAGE>
- 2 -
(e) "Agent's Expenses" means the expenses of the Agent incurred on the
Company's behalf in connection with the Offering and the review,
preparation and filing of the Prospectuses, including, without
limitation, the reasonable fees and expenses of the Agent's
solicitors;
(f) "Agent's Fee" means a corporate finance fee of 110,000 common shares
of the Company payable to the Agent upon the Closing Date;
(g) "Agent's Warrant" means a warrant entitling the Agent to purchase
common shares of the Company equivalent to 15% of the number of Shares
sold in the Offering, exercisable in whole or in part during the two
year period following the Listing Date at the Offering Price during
the first year and at the Offering Price plus 15% during the second
year;
(h) "Agent's Warrant Shares" means the Shares which will issued by the
Company to the Agent upon exercise of the Agent's Warrant as partial
consideration for its services hereunder;
(i) "Agent's Shares" means the 110,000 common shares of the Company to be
issued by the Company to the Agent in payment of the Agent's Fee;
(j) "Applicable Securities Laws" means in respect of the Offering, the
Acts and Regulations having application and the rules, policies,
notices and orders issued by the applicable Regulatory Authorities
having application;
(k) "Closing Date" means a day within 10 business days from the Offering
Day agreed upon by the Company and the Agent for the closing of the
Offering;
(l) "Commission" means the securities regulatory bodies (other than stock
exchanges) of the Qualifying Jurisdictions and "Commissions" means the
securities regulatory bodies of a specified Qualifying Jurisdiction;
(m) "common shares" means the class of shares of the Company designated as
common shares without par value;
(n) "Conditional Listing" has occurred when the Exchange advises that the
common shares of the Company have been conditionally listed;
(o) "distribution" or ("distribute" as derived therefrom), "material
change", "material fact", "misrepresentation" and "trade" have the
meanings given to those terms in the Securities Act (British
Columbia);
(p) "Effective Date" means the date on which a final receipt for the
Prospectus is issued by the Commissions of the Qualifying
Jurisdictions;
(q) "Exchange" means the Vancouver Stock Exchange;
(r) "Final Listing Submission" means the final submission (which will be
in the form of a submission letter and may or may not include a long
form of wrap-around listing application) filed with the Exchange to
secure the Conditional Listing and, upon the satisfaction of those
conditions, to secure the Full Listing;
(s) "Final Prospectus" means the final prospectus filed with the Exchange
and with the Commission for the purpose of qualifying the distribution
of the Qualified Securities;
<PAGE>
- 3 -
(t) "Final Receipt" means the receipt issued by the Commission for the
Final Prospectus;
(u) "Full Listing" has occurred when the common shares of the Company have
been listed, and when the issued common shares of the Company have
been called for trading on the Exchange, as evidenced by a notice
issued by the Exchange;
(v) "Greenshoe Option" means an option granted by the Company to the Agent
to solicit and accept subscriptions for additional shares;
(w) "Listing Date" means the day on which the Full Listing occurs;
(x) "Listing Submissions" means the Preliminary Listing Submission and the
Final Listing Submission;
(y) "Offered Securities" means the Shares;
(z) "Offering Day" means the day on which the Agent offers and sells the
Shares through the facilities of, and in accordance with the rules and
policies of the Exchange;
(aa) "Preliminary Listing Submission" means the submission (which will be
in the form of a submission letter and may or may not include a long
form or wrap-around listing application) filed with the Exchange to
obtain comfort that the Conditional Listing will be secured;
(bb) "Preliminary Prospectus" means the preliminary offering prospectus
filed with the Exchange and with the Commission for the purpose of
qualifying the distribution of the Qualified Securities;
(cc) "Prospectuses" means the Preliminary Prospectus and the Final
Prospectus;
(dd) "Purchaser" means a person who subscribes for and purchases some of
the Shares from the Offering;
(ee) "Qualified Securities" means the Shares, the Agent's Shares, the
Agent's Warrants, the Agent's Warrant Shares, and any Additional
Shares issued pursuant to the exercise of the Greenshoe Option;
(ff) "Qualifying Jurisdictions" means the Provinces of British Columbia and
such other jurisdictions as the Agent and the Company may agree upon;
(gg) "Regulations" means the securities rules or regulations proclaimed
under the Acts and "Regulation" means the securities rules or
regulations proclaimed under a specified Act;
(hh) "Regulatory Authorities" means the Commissions and the Exchange; and
(ii) "Time of Closing" means at 9:00 a.m. (Vancouver Time) on the Closing
Date.
2. NATURE OF THE TRANSACTION
2.1 The Company appoints the Agent as its exclusive agent for the
Offering, and the Agent hereby agrees to act as the exclusive agent of
the Company to use its reasonable best efforts to offer and sell the
Shares in the Qualifying Jurisdictions to potential Purchasers
resident in the Qualifying Jurisdictions.
<PAGE>
- 4 -
2.2 If in the opinion of the Agent it is necessary, the Agent will
form, manage and participate in a group of registered securities
dealers (the "Selling Group") to offer and sell the Shares as provided
for hereunder. In the event that a Selling Group is formed, the Agent
will manage the Selling Group to the extent customary in the
securities industry in Canada and require each member of the Selling
Group to conduct the Offering on the terms and conditions set forth in
this Agreement. Each member of the Selling Group shall be
appropriately registered under the Applicable Securities Laws of the
Qualifying Jurisdictions in which such member of the Selling Group
offers and sells the Shares so as to permit it to lawfully offer and
sell the Shares in such jurisdiction.
2.3 The Company covenants and agrees with the Agent that it will:
(a) prepare and file with the Commissions under the Applicable Securities
Laws of the Qualifying Jurisdictions, a Preliminary Prospectus,
together with the required supporting documents, to permit the Agent
to solicit expressions of interest for the Offering;
(b) use its reasonable best efforts to address, as expeditiously as
possible, the comments made in respect of the Preliminary Prospectus
by the Commissions;
(c) prepare and file, as soon as practicable after all of the comments
referred to in subparagraph (b) above have been addressed, under the
Applicable Securities Laws of the Qualifying Jurisdictions, the Final
Prospectus, together with the required supporting documents, and use
its reasonable best efforts to obtain the Final Receipt on or before
June 15, 1999 or such other date as agreed to by the Company and the
Agents, .and take all other steps and proceedings that may be
necessary in order to qualify, under the Applicable Securities Laws of
the Qualifying Jurisdictions, the distribution of the Qualified
Securities;
(d) prior to the Effective Date, apply to the Exchange for a conditional
listing of its common shares, and prepare and file with the Exchange,
using its reasonable best efforts to do so, a Preliminary Listing
Submission, together with the required supporting documents, to obtain
comfort that the Conditional Listing will be secured; and
(e) use its reasonable best efforts to address, as expeditiously as
possible, the comments made in respect of the Preliminary Listing
Submission by the Exchange.
2.4 Following the Effective Date and after consulting with the Exchange,
the Company and the Agent will set the Offering Day.
2.5 The Offering Day will be on or before the earlier of the day which is:
(a) 90 days after the Effective Date; and
(b) 12 months after the date of issue by the Commission of the
preliminary receipt for the Prospectus.
2.6 The Offering will be made through the facilities of an in accordance
with the rules and policies of the Exchange.
2.7 After the Offering has been completed, the Company and the Agent will
file any documents required by the Exchange in order to remove the
conditional listing and to list and commence trading of the common
shares of the Issuer on the Exchange.
<PAGE>
- 5 -
2.8 The Agent will advise the Company and its counsel in writing when the
distribution under the Prospectus is complete.
2.9 The Agent will purchase all of the Shares for which subscriptions have
not been received by the Offering Day. In consideration for the
Agent's guarantee to purchase unsubscribed Shares, the Company will
issue the Agent's Warrant to the Agent, or to members of the Agent's
selling group as directed by the Agent. The Agent's Warrant will be
exercisable for a period of two years from the Listing Date at a price
equal to the Offering Price during the first year and at a price equal
to the Offering Price plus 15% during the second year. The form of
Agent's Warrant will be provided to the Company by the Agent and the
terms and conditions contained therein will include, among other
things, provisions for the appropriate adjustment in the class, number
and price of the shares to be issued under the Agent's Warrant upon
the occurrence of certain events, including any subdivision,
consolidation or reclassification of the shares, the payment of stock
dividends or the amalgamation of the Company.
2.10 The Company will use its best efforts to assist the Agent in placing
the Shares, and in this regard will provide the Agent with a
"President's List" of all persons, whether brokerage firms,
institutional investors or others who have expressed interest in
participating in any financing to be carried out by the Company, and
to direct to the Agent any and all unsolicited inquiries regarding
this Offering. It is agreed that the Agent will have the right but not
the obligation to place the President's List
3. GREENSHOE OPTION
3.1 The Agent may solicit and accept subscriptions for additional shares
up to a maximum of 15% of the Offering (the "Greenshoe Option").
3.2 The number of additional shares subject to the Greenshoe Option will
be the lesser of 15% of the Offering and the actual number of
additional shares for which subscriptions have been received.
3.3 The Agent will advise the Company and the Exchange of the number of
shares subject to the Greenshoe Option within five business days after
the Offering Day and before the shares of the Company are listed and
commence trading on the Exchange.
3.4 On receipt of notice in writing from the Agent given within 60
calendar days of the Offering Day, the Company will issue and deliver
to the Agent forthwith, at the Offering Price, the number of shares
subject to the Greenshoe Option.
3.5 Nothing in this Agreement will prevent the Agent form purchasing
additional shares on the Exchange in order to fill subscriptions for
additional shares.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 The Company represents and warrants to the Agent, and acknowledges
that the Agent will be relying upon such representations and
warranties in entering into this Agreement, that:
(a) the Company is a valid and subsisting corporation duly incorporated
and in good standing under the laws of the jurisdictions in which it
is incorporated, continued, or amalgamated;
<PAGE>
- 6 -
(b) the Company has no subsidiaries;
(c) the authorized and issued share capital of the Company is, and, except
as provided for herein, will be immediately prior to the Time of
Closing, as set forth on Schedule "A" to this Agreement;
(d) the issued shares of the Company (the "Issued Shares") are validly
issued and outstanding fully paid and non-assessable common shares of
the Company registered in the names of, and, to the best of its
knowledge, beneficially owned by, those individuals (the
"Shareholders") as provided for on Schedule "B" to this Agreement,
free and clear of all voting restrictions, trade restrictions, and, to
the best of its knowledge, liens, charges or encumbrances of any kind
whatsoever;
(e) to the best of its knowledge and except as may be disclosed in the
Prospectuses, there are no, nor will there be immediately prior to the
Time of Closing, options, agreements or rights of any kind whatsoever
to acquire all or any part of the Company's Issued Shares or any
interest in them from the Shareholders or any one of them;
(f) except for the Issued Shares, the securities referred to herein and
the securities and agreements described on Schedule "A" hereto, if
any, there are no, nor will there be immediately prior to the Time of
Closing, documents, instruments or other writings of any kind
whatsoever which constitute a "security" (as that term is defined in
the British Columbia Act) of the Company, or agreements of any kind
whatsoever to issue a security;
(g) upon their issuance, the Shares, the Agent's Shares and any Additional
Shares issued pursuant to the exercise of the Greenshoe Option will be
validly issued and outstanding fully paid and non-assessable common
shares of the Company registered in the names of the Purchasers
thereof or the Agent, as the case may be, free and clear of all voting
restrictions, trade restrictions and, except as may be created by the
Purchasers thereof, liens, charges or encumbrances of any kind
whatsoever;
(h) upon its issuance, the Agent's Warrant will be validly created and
issued by the Company and the certificate representing the Agent's
Warrant Shares will, upon delivery by the Company to the Agent,
constitute a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms;
(i) upon the exercise of the Agent's Warrant in accordance with its terms,
the Agent's Warrant Shares issued upon such exercise will be validly
issued and outstanding fully paid and non-assessable common shares of
the Issuer free and clear of all voting restrictions, trade
restrictions and, except as may be created by the purchasers thereof,
any liens, charges or encumbrances of any kind whatsoever;
(j) all of the material transactions of the Company have been promptly and
properly recorded or filed in or with its minute book or records and
the Company's minute book contain all records of the meetings and
proceedings of its directors, shareholders and other committees, if
any, since its incorporation;
(k) the Company holds all material licenses and permits required for
carrying on its business in the manner in which such business has been
carried on and has the corporate power and capacity to own the assets
owned by it and, to the best of the Company's knowledge,
<PAGE>
- 7 -
to carry on the business carried on by it and is duly qualified to
carry on business in all jurisdictions in which it carries on
business;
(l) the Company has good and marketable title to its assets free and clear
of all material liens, charges and encumbrances of any kind whatsoever
save and except as will be disclosed in the Prospectuses;
(m) the Company has no trademarks or patents save and except as will be
disclosed in the Prospectuses, such disclosure to include all material
particulars in respect of their registrations and status;
(n) the Company will ensure that any contractor performing work on its
behalf carries insurance for insurable risks and in amounts which are
reasonable with regard to the nature of the work being carried on the
Company's behalf, including but not limited to worker's compensation
insurance and reasonable insurance with respect to public liability,
and that all of the policies in respect of such insurance coverage are
in good standing in all respects and are not in default in any
respects;
(o) the financial statements of the Company which will form part of the
Preliminary Prospectus (attached to Schedule "C" to this Agreement)
accurately reflect the financial position of the Company as at the
date of the financial statements and there have been no adverse
material changes in the financial position of the Company since that
date, except as fully and plainly disclosed in the Prospectus, and
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis;
(p) the books and records of the Company disclose all of its material
financial transactions and such transactions have been fairly and
accurately recorded;
(q) except as disclosed in its financial statements or as will be
disclosed in the Prospectuses:
(i) the Company is not indebted to any of its directors, officers or
promoters (collectively the "Principals"), other than in respect
of accrued but unpaid compensation, or to any of the Shareholders
(other than the Principals);
(ii) none of the Principals or Shareholders is indebted or under
obligation to the Company on any account whatsoever; and
(iii) the Company has not guaranteed or agreed to guarantee any debt,
liability or other obligation of any kind whatsoever of any
person, firm or corporation of any kind;
(r) there are no material liabilities of the Company, whether direct,
indirect, absolute, contingent or otherwise which are not disclosed or
reflected in its financial statements except those incurred in the
ordinary course of its business since December 31, 1998;
(s) since December 31, 1998, there has not been any adverse material
change of any kind whatsoever in the financial position or condition
of the Company, or any damage, loss or other change of any kind
whatsoever in circumstances materially affecting its business or
assets or the right or capacity to carry on its business, such
business having been carried on in the ordinary course;
<PAGE>
- 8 -
(t) the directors, officers and key employees of the Company and their
compensation arrangements with the Company, whether as directors,
officers or employees of, or as independent contractors or consultants
to, the Company will, if material, be disclosed in the Prospectuses,
and, except as disclosed therein, there will be no pensions, profit
sharing, group insurance or similar plans or other deferred
compensation plans of any kind whatsoever affecting the Company;
(u) all of the material contracts and agreements (collectively the
"Material Contracts") of the Company will be disclosed in the
Prospectuses, such disclosure to provide all material particulars
thereof including the status of those Material Contracts;
(v) all tax returns, reports, elections, remittances and payments of the
Company required by law to have been filed or made, have been filed or
made (as the case may be) and are substantially true, complete and
correct and all taxes of the Company and of its Subsidiaries have been
paid or they have been accrued in the Financial Statements;
(w) the Company:
(i) has been assessed for all applicable taxes and has received all
appropriate refunds;
(ii) has made adequate provision for taxes payable for the current
period for which tax returns are not yet required to be filed;
and
(iii) is not aware of any contingent tax liability of the Company;
(x) to the best of its knowledge, the Company has not:
(i) made any election under Section 85 of the Income Tax Act (Canada)
(the "Tax Act") with respect to the acquisition or disposition of
any property; or
(ii) acquired any property from a non-arm's length person with whom it
was not dealing with at arm's length for proceeds greater than
the fair market value thereof, or disposed of anything to a
non-arm's length person for proceeds less than the fair market
value thereof;
(y) to the best of its knowledge, there are no actions, suits, judgments,
investigations or proceedings of any kind whatsoever outstanding,
pending or threatened against or affecting the Company or its
Principals, at law or in equity or before or by any Federal,
Provincial, Municipal or other governmental department, commission,
board, bureau or agency of any kind whatsoever and, to the best of its
knowledge, there is no basis therefor;
(z) to the best of its knowledge, the Company and its Principals are not
in breach of any law, ordinance, statute, regulation, by-law, order or
decree of any kind whatsoever;
(aa) the Company has good and sufficient right and authority to enter into
this Agreement and complete its transactions contemplated under this
Agreement on the terms and conditions set forth herein; and
(bb) to the best of its knowledge, the execution and delivery of this
Agreement, the performance of its obligations under this Agreement and
the completion of its transactions contemplated under this Agreement
will not conflict with, or result in the
<PAGE>
- 9 -
breach of or the acceleration of any indebtedness under, or constitute
default under, the constating documents of the Company or any
indenture, mortgage, agreement, lease, license or other instrument of
any kind whatsoever to which the Company is a party or by which it is
bound, or any judgment or order of any kind whatsoever of any Court or
administrative body of any kind whatsoever by which it is bound.
4.2 The representations and warranties of the Company contained in this
Agreement shall be true at the Time of Closing as though they were
made at the Time of Closing and they shall survive the completion of
the transactions contemplated under this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE AGENT
5.1 The Agent represents and warrants to the Company, and acknowledges
that the Company will be relying upon such representations and
warranties in entering into this Agreement, that:
(a) the Agent holds all licenses and permits that are required for
carrying on its business in the manner in which such business has been
carried on and the Agent has the corporate power and capacity to carry
on the business carried on by it and the Agent is duly qualified to
carry on business in the Qualifying Jurisdictions;
(b) the Agent has good and sufficient right and authority to enter into
this Agreement and complete its transactions contemplated under this
Agreement on the terms and conditions set forth herein;
(c) the Agent is, and will remain so until the completion of the Offering,
appropriately registered under Applicable Securities Laws so as to
permit it to lawfully fulfill its obligations hereunder and the Agent
is, and will remain so until the completion of the Offering, a member
in good standing of the Exchange; and
(d) the Agent will fulfill all legal requirements (including, without
limitation, compliance with Applicable Securities Laws) to be
fulfilled by it to act as the Company's agent in undertaking the
Offering in the Qualifying Jurisdictions.
5.2 The representations and warranties of the Agent contained in this
Agreement shall be true at the Time of Closing as though they were
made at the Time of Closing and they shall survive the completion of
the transactions contemplated under this Agreement.
6. ADDITIONAL COVENANTS OF THE COMPANY
6.1 The Company covenants and agrees with the Agent that it will:
(a) with respect to the filing of the Prospectuses as contemplated herein,
fulfill all legal requirements to be fulfilled by the Company in
connection therewith, in each case in form and substance satisfactory
to the Agent as evidenced by the Agent's execution of the certificates
attached thereto;
(b) prior to the filing of each of the Prospectuses, allow the Agent to
review each Prospectus and conduct all due diligence which the Agent
may reasonably require in order to fulfill its obligations as a
statutory underwriter and in order to enable it to execute, acting
prudently and responsibly, the certificates required to be executed by
the Agent in such documents;
<PAGE>
- 10 -
(c) during the period prior to the completion of the Offering, promptly
notify the Agent in writing of any material change (actual or
proposed) in the business, affairs, operations, assets or liabilities
(contingent or otherwise) or capital of the Company, or of any change
which is of such a nature as to result in a misrepresentation in
either of the Prospectuses or any amendment thereto and:
(i) the Company will, within any applicable time limitation, comply
with all filing and other requirements under the Applicable
Securities Laws of the Qualifying Jurisdictions, and with the
rules of the Exchange, applicable to the Company as a result of
any such change; and
(ii) notwithstanding the foregoing, the Company will not file any
amendment to the Prospectuses or any other material supplementary
to the Prospectuses (all such amendments and material being the
"Supplementary Material") without first obtaining the approval of
the Agent as to the form and content thereof, which approval will
not be unreasonably withheld and which will be provided in a
timely basis;
and, in addition to the foregoing, the Company will, in good faith,
discuss with the Agent any change in circumstances (actual or
proposed) which is of such a nature that there is or ought to be
consideration given by the Company as to whether notice in writing of
such change need be given to the Agent pursuant to this subparagraph.
(d) deliver to the Agent duly executed copies of any Supplementary
Material required to be filed by the Company in accordance with
subparagraph (c) above and if any financial or accounting information
is contained in any of the Supplementary Material, an additional
Comfort Letter to that required by subparagraph (h)(i) below;
(e) from time to time and without charge to the Agent, deliver to the
Agent as many copies of each of the Prospectuses and any amendments
thereto, if any, as the Agent may reasonably request, and such
delivery will constitute the Company's consent to the Agent's use of
the documents in connection with the Offering;
(f) by the act of having delivered each of the Prospectuses and any
amendments thereto to the Agent, have represented and warranted to the
Agent that all material information and statements (except information
and statements relating solely to the Agent) contained in such
documents, at the respective dates of initial delivery thereof, comply
with the Applicable Securities Laws of the Qualifying Jurisdictions
and are true and correct in all material respects, do not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in light of the
circumstances in which they were made, not misleading, and that such
documents, at such dates, contain no misrepresentation and together
constitute full, true and plain disclosure of all material facts
relating to the Company as required by the Applicable Securities Laws
of the Qualifying Jurisdictions;
(g) with respect to the filing of the Listing Submissions as contemplated
herein, fulfill all of the requirements of the Exchange required to be
fulfilled by the Company in connection therewith;
(h) deliver to the Agent:
<PAGE>
- 11 -
(i) at the time of execution of the Final Prospectus by the Agent, a
comfort letter (the "Comfort Letter") of the Company's auditors
addressed to the Agent and to the directors of the Company and
dated as of the date of the Final Prospectus, in form and content
acceptable to the Agent, acting reasonably, relating to the
verification of the financial information and accounting data
contained in the Final Prospectus and to such other matters as
the Agent may reasonably require, which Comfort Letter will be
based upon a review of the auditors having a cut-off date not
more than two business days prior to the date of the Final
Prospectus and shall be in addition to any comfort letter which
must be filed with the Regulatory Authorities;
(ii) at the time of the execution of the Final Prospectus by the Agent
and, if requested by the Agent, at the Time of Closing as well,
such legal opinions (the "Legal Opinions") of the Company's
various legal counsel, addressed to the Agent and its legal
counsel and dated as of the date in question, in form and content
acceptable to the Agent, acting reasonably relating to the Final
Prospectus and the Final Listing Submission, the trade and
distribution of the Qualified Securities and to such other
matters a the Agent may reasonably require;
(iii) at the time of the execution of the Final Prospectus by the
Agent and, if requested by the Agent, at the Time of Closing as
well, a certificate (the "Officers' Certificate") of the Company,
addressed to the Agent and its legal counsel and dated as of the
date in question, in form and content acceptable to the Agent,
acting reasonably, relating to the Final Prospectus and the Final
Listing Submission, the trade and distribution of the Qualified
Securities and to such other matters as the Agent may reasonably
require; and
(iv) at the time of the execution of the Final Prospectus by the Agent
and, if requested by the Agent, at the Time of Closing as well,
such other materials (the "Closing Materials") as the Agent may
reasonably require and as are customary in a transaction of this
nature, and the Closing Materials will be addressed to the Agent
and to such parties as may be reasonably directed by the Agent
and will be dated as of the date in question or such other date
as the Agent may reasonably require;
(i) from and including the date of this Agreement through to and including
the completion of the Offering, do all such acts and things reasonably
necessary to ensure that all of the representations and warranties of
the Company contained in this Agreement or any certificates or
documents delivered by it pursuant to this Agreement remain materially
true and correct and not do any such act or thing that would render
any representation or warranty of the Company contained in this
Agreement or any certificates or documents delivered by it to this
Agreement materially untrue or incorrect.
7. ADDITIONAL COVENANTS OF THE AGENT
7.1 The Agent covenants and agrees with the Company that it will:
(a) upon being satisfied, acting reasonably, that each of the Prospectuses
and any amendments thereto is in a form satisfactory for filing with
the Exchange and the Commissions (having regard to its obligations
referred to in subparagraph 5.1(b) of this Agreement), execute each of
the Prospectuses and any amendments thereto, as the case may be,
presented to the Agent for execution, and the Agent will use its
reasonable best
<PAGE>
- 12 -
efforts to assist the Company in obtaining the requisite approvals of
the Regulator Authorities in connection with the preparation and
filing of such documents;
(b) use its reasonable best efforts to complete the distribution of the
Shares as soon as reasonably practicable after the issuance of the
Final Receipts; and
(c) within five business days of the Offering Day and, in any event, prior
to the Time of Closing, provide to the Company and to the Exchange
either a letter confirming that the Exchange's initial distribution
requirements have been met.
8. CONDITIONS PRECEDENT
8.1 The following are conditions to the obligations of the Agent to
complete the transactions contemplated in this Agreement:
(a) all actions required to be taken by or on behalf of the Company,
including the passing of all requisite resolutions of directors of the
Company, will have been taken so as to approve the Prospectuses and to
validly allot, issue, grant, sell and deliver, as applicable, the
Qualified Securities and, if applicable, any common shares that may be
issued on the exercise of any of the Qualified Securities, and to such
other matters as the Agent may reasonably require;
(b) if required by the Regulatory Authorities or by the Agent, certain of
the Company's shareholders (including founders, management and certain
investors) will have entered into any pooling or escrow agreements
required by the Regulatory Authorities or by the Agent in connection
with the transactions contemplated herein;
(c) the Company will have made all necessary filings with and obtained all
necessary approvals, consents and acceptances of the Regulatory
Authorities for the Prospectuses, the Listing Submissions and to
permit the Company to complete its obligations hereunder;
(d) the Conditional Listing will have been secured;
(e) the Company will have, within the required time, delivered the
required Comfort Letters, Legal Opinions, Officers' Certificates and
other Closing Materials as the Agent may reasonably require;
(f) no order ceasing or suspending trading in any securities of the
Company, or ceasing or suspending trading by the directors, officers
or promoters of the Company, or any one of them, or prohibiting the
trade or distribution of any of the securities referred to herein will
have been issued and no proceedings for such purpose, to the knowledge
of the Company, will be pending or threatened;
(g) the Company will have, as of the time of Closing, complied with all of
its covenants and agreements contained in this Agreement;
(h) the representations and warranties of the Company contained in this
Agreement will be true and correct as of the Time of Closing as if
such representations and warranties had been made as of the Time of
Closing; and
(i) no material adverse changes having occurred to the Company, its
principals, business or offices prior to Closing.
<PAGE>
- 13 -
9. AGENT'S FEES AND EXPENSES
9.1 In consideration of the services to be rendered by the Agent to the
Company hereunder, the Company agrees to pay the Agent, at the time
and in the manner specified herein, the Agent's Commission, the
Agent's Fee, the Agent's Warrant and the Administrative Fee.
9.2 The Company will pay all of the Agent's Expenses in relation to the
transactions contemplated herein including, without limitation, the
reasonable fees and expenses of the Agent's solicitors.
9.3 The Company will pay the Agent's Expenses even if the transactions
contemplated herein are not completed or this Agreement is terminated,
unless the failure of completion or the termination is the result of
the breach of this Agreement by the Agent.
9.4 The Agent may, from time to time, render, or cause to be rendered, to
the Company, accounts for the Agent's Expenses and the Company will
pay those accounts on or before the dates set out therein.
9.5 The Agent's Shares to be issued in payment of the Agent's Fee
will be validly created, issued and outstanding common shares of the
Company registered in the name of the Agent (or as the Agent may so
direct), free and clear of all voting restrictions, trade
restrictions and, except as may be created by the holders thereof,
liens, charges or encumbrances of any kind whatsoever. The Company
will qualify the distribution of the Agent's Shares under the Final
Prospectus to the extent permitted by the Regulatory Authorities.
9.6 The fees and expenses set out in this Part 9 of the Agreement are in
addition to the sponsorship fee of US $10,000 plus G.S.T. and related
expenses which are to be paid by the Company to the Agent pursuant to
a Sponsorship Agreement dated February 16, 1999 between the Company
and the Agent.
10. CLOSING
10.1 In this Section:
(a) "Certificates" means the certificates representing the Shares in
the names and denominations reasonably requested by the Agent and
the certificates representing the Agent's Shares and the Agent's
Warrants;
(b) "Proceeds" means the gross proceeds of the Offering, less:
(i) that portion of the Agent's Commission payable in cash;
(ii) the Administrative Fee;
(iii) the expenses of the Agent in connection with the Offering
which have not been repaid by the Issuer;
(iv) any amount which has been attached by garnishing order or
other form of attachment; and
(v) any amount already received by the Company.
<PAGE>
- 14 -
10.2 The Company will, within 10 business days of the Offering Day, deliver
the Certificates, through its registrar and transfer agent, to the
Agent against payment of the Proceeds.
10.3 If the Company has satisfied all of its obligations under this
Agreement, the Agent will, within 10 business days of the Offering
Day, pay the Proceeds to the Company through its registrar and
transfer agent, against delivery of the Certificates.
10.4 The obligation of the Agent to pay the Proceeds to the Company shall
be subject to the following conditions precedent:
(a) the Company shall have performed or complied with each covenant
and obligation herein provided on its part to be performed or
complied with;
(b) each of the representations and warranties of the Company herein
shall continue to be true, and the Officer's certificate shall
contain certification to that effect;
(c) the Company shall have made, within the time limited, each of the
deliveries provided for herein; and
(d) the Company shall have, to the satisfaction of the Agent's
counsel, taken or caused to be taken all steps and proceedings
which may be required under the Act to qualify the distribution
of the Shares to the public in British Columbia through
registrants who have complied with the provision of the Act
including the filing and obtaining of receipts for the
Prospectus.
10.5 The closing of the transactions contemplated under this Agreement (the
"Closing") will be completed at the offices of Campney & Murphy, Suite
2100 - 1111 West Georgia Street, Vancouver, B.C., at the Time of
Closing on the Closing Date.
10.6 The Company acknowledges that the Agent is not the agent of the
Purchasers and that by agreeing to serve as the Company's agents for
the purpose of filing the Prospectuses it in no way assumes any
liability to the Purchasers.
10.7 Nothing in this Agreement shall prevent the parties from agreeing to
amend any of the terms or conditions of this Part 11 of the Agreement
should they mutually agree in writing to do so.
11. RIGHT OF FIRST REFUSAL
11.1 The Company will notify the Agent of the terms of any future debt or
equity financing, that the Company requires or proposes to obtain
during the 12 months following the Closing Date and the Agent will
have the right of first refusal to provide any such financing.
11.2 The right of first refusal must be exercised by the Agent within 30
days following receipt of the notice by notifying the Company that it
will provide such financing on the terms set out in the notice.
11.3 If the Agent fails to give notice within the 30 days that it will
provide such financing upon the terms set out in the notice, the
Company will then be free to make other arrangement to obtain
financing from another source on the same terms or on terms no less
favourable to the Company, subject to obtaining the acceptance of the
Regulatory Authorities.
<PAGE>
- 15 -
11.4 The right of first refusal will not terminate if, on receipt of any
notice from the Company under this Part 11 of the Agreement, the Agent
fails to exercise the right. However, the right of first refusal will
terminate if the Agent terminates this Agreement without completing
the Offering provided for hereunder.
12. INDEMNITY
12.1 The Company agrees to indemnify and hold harmless the Agent and each
of the Agent's directors, officers, employees, agents and advisors and
its subsidiaries and each of their respective directors, officers,
employees, agents and advisors (collectively the "Indemnified
Persons") against all losses, claims, costs, damages or liabilities
(collectively the "Losses") whether joint or several, (including the
aggregate amount paid in reasonable settlement of any such actions,
suits, proceedings or claims), and the reasonable fees and expenses of
counsel that may be incurred in advising with respect to and/or
defending any claim to which any Indemnified Person may become subject
or otherwise involved in any capacity under any statute or common law
or otherwise insofar as such Losses arise out of or are based,
directly or indirectly, upon the performance of services in connection
or relating to the services provided by the Agent hereunder, except to
the extent that such Losses result from the Agent's gross negligence
or bad faith in performing such services. The Losses include but are
not limited to Losses caused by or arising directly or indirectly by
reasons of:
(a) an untrue statement (or a statement alleged to be untrue) contained in
the Prospectuses, the Listing Submissions, any amendments thereto, or
other written or oral representation made by the Company to a
Purchaser or potential Purchaser of the Shares or by reason of the
omission to state any fact necessary to make statements not misleading
(except for information and statements referring solely to the Agent);
(b) the failure by the Company to obtain the requisite approvals, consents
and acceptances of the Regulatory Authorities for the Prospectuses,
Listing Submissions and the Offering;
(c) a material breach by the Company of any of the terms of this
Agreement;
(d) any representation or warranty made by the Company herein being
materially untrue or ceasing, in a material way, to be true prior to
the Time of Closing;
(e) any order made by any regulatory authority that trading in or
distribution of any of the Company's securities is to cease or be
suspended, or that trading by the directors, officers or promoters of
the Company, or any one of them, shall cease or be suspended,
including an order prohibiting the trade or distribution of any of the
securities referred to herein;
(f) the failure or inability of the Company to allot, issue and deliver
any or all of the certificates representing the Shares, the Agent's
Shares, the Agent's Warrant and the Agent's Warrant Shares as the
Agent may reasonably require for the completion of the transactions
referred to herein; and
(g) a determination made by any competent authority setting aside the
trade or distribution of any of the securities referred to herein.
12.2 If any matter contemplated by paragraph 12.1 is asserted in any action
or claim against any one or more of the Indemnified Persons in respect
of which matter indemnity may be sought against the Company pursuant
to this Agreement, or any potential action or claim
<PAGE>
- 16 -
comes to their knowledge, the Indemnified Person will notify the
Company as soon as possible in writing of the nature of the action or
claim and the Company will be entitled to (but not required to) assume
the defense of that action or claim, including the employment of legal
counsel (satisfactory to the Indemnified Person, acting reasonably)
and assume payment of the expenses in relation thereto. Each
Indemnified Person will have the right to employ separate legal
counsel in any action or claim and to participate in the defense
thereof, but the fees and expenses of that counsel will be at the
expense of the Indemnified Person and not of the Company unless:
(h) the employment of that legal counsel has been specifically authorized
in writing by the Company in connection with the defense of the action
or claim;
(i) the Company has not, within five business days after having received
written notice of the action or claim from the Indemnified Person,
employed legal counsel to have conduct of the defense of the action or
claim; or
(j) the named parties to any action or claim (including any added, third
or impleaded parties) include both the Indemnified Person and the
Company, and such Indemnified Person has been advised by counsel that
there may be defenses available to the Indemnified Person which are
different from or additional to those available to the Company (in
which case the Company will not have the right to assume or direct the
defense of action or claim on behalf of the Indemnified Person).
Notwithstanding the foregoing, no settlement may be made by the
Indemnified Person concerned without the prior written consent of the
Company which consent will not be unreasonably withheld.
12.3 The Company will not make any claim for, and hereby irrevocably waives
any right of statute or common law to, contribution against the Agent
or any of the Agent's directors, officers, employees, agents or
solicitors in the event of any action or claim brought against the
Company as a result of any misrepresentation or alleged
misrepresentation other than a misrepresentation or alleged
misrepresentation relating solely to the Agent.
12.4 The right to indemnity herein provided will be in addition to and not
in derogation of any other right to indemnity or contribution which
any Indemnified Person may have by statute or otherwise at law.
12.5 The indemnity provided by this Agreement will remain in full force and
effect until all possible liability of the Agent arising out of the
transactions contemplated by this Agreement is extinguished by the
operation of law and will not be limited to or affected by any other
indemnity obtained by the Agent from any other person.
13. TERMINATION OF AGREEMENT
13.1 In addition to any other remedies which may be available to the Agent,
this Agreement may be terminated by the Agent at any time up to the
Time of Closing in the event that:
(a) an adverse material change in the affairs of the Company occurs or is
announced by the Company;
(b) there should develop, occur, or come into effect any catastrophe of
national or international consequences or accident, governmental law,
or regulation or other
<PAGE>
- 17 -
occurrence of any nature which, in the opinion of the Agent, seriously
affect the financial markets or the business of the Company or any
subsidiary of the Company or the ability of the Agent to perform its
obligations under this Agreement;
(c) the Shares cannot, in the opinion of the Agent, be profitably sold due
to the state of the financial markets generally;
(d) any order to cease or suspend trading in any of the securities of the
Company, including an order which would prohibit the trade or
distribution of any of the securities referred to herein, or an order
to cease or suspend trading by a director, officer or promoter of the
Company, or any one of them, is issued by any competent regulatory
authority;
(e) the Company is in material breach of any term of this Agreement;
(f) the Agent determines that any of the representations or warranties
made by the Company in this Agreement are materially false or have
become materially false;
(g) an inquiry or investigation (whether formal or informal) in relation
to the Company, or the Company's directors, officers or promoters, is
commenced or threatened by an officer or official of any competent
authority; or
(h) the Final Receipt for the Final Prospectus has not been obtained on or
before June 15, 1999, the Conditional Listing has not been obtained on
or before March 30, 1999, or the Full Listing has not been obtained
within the time required by the Regulatory Authorities as disclosed in
the Final Prospectus.
The right of the Agent to terminate this Agreement is in addition to
such other remedies a Purchaser may have in respect of any default,
misrepresentation, act or failure to act of the Company in respect of
any of the transactions contemplated by this Agreement.
13.2 Any such termination shall be effected by notice in writing to the
Company at any time prior to the Time of Closing. In the event that
the Agent terminates this Agreement after having been paid the Agent's
Commission, it will repay the Agent's Commission (but not the Agent's
Expenses) to the Company forthwith.
14. GENERAL
14.1 Time and each of the terms and conditions of this Agreement shall be
of the essence of this Agreement and any waiver by the parties of this
paragraph 14.1 or any failure by them to exercise any of their rights
under this Agreement shall be limited to the particular instance and
shall not extend to any other instance or matter in this Agreement or
otherwise affect any of their rights or remedies under this Agreement.
14.2 The Schedules to this Agreement incorporated by reference and the
recitals to this Agreement constitute a part of this Agreement.
14.3 This Agreement constitutes the entire Agreement between the parties
hereto in respect of the matters referred to herein and there are no
representations, warranties, covenants or agreements, expressed or
implied, collateral hereto other than as expressly set forth or
referred to herein.
14.4 The headings in this Agreement are for reference only and do not
constitute terms of the Agreement.
<PAGE>
- 18 -
14.5 The provisions contained in this Agreement which, by their terms,
require performance by a party to this Agreement subsequent to the
Closing Date of this Agreement shall survive the Closing Date of this
Agreement.
14.6 No alteration, amendment, modification or interpretation of this
Agreement or any provision of this Agreement shall be valid and
binding upon the parties hereto unless such alteration, amendment,
modification or interpretation is in written form executed by the
parties hereto.
14.7 Whenever the singular or masculine is used in this Agreement the same
shall be deemed to include the plural or the feminine or the body
corporate as the context may require.
14.8 The parties hereto shall execute and deliver all such further
documents and instruments and do all such acts and things as any party
may reasonably require in order to carry out the full intent and
meaning of this Agreement.
14.9 This Agreement may not be assigned by any party hereto without the
prior written consent of all of the parties hereto.
14.10 This Agreement shall be subject to, governed by, and construed in
accordance with the laws of the Province of British Columbia.
14.11 This Agreement may be signed by the parties in as many counterparts
as may be deemed necessary and by facsimile transmission, each of
which so signed shall be deemed to be an original, and all such
counterparts together shall constitute one and the same instrument.
14.12 Any notice to be Given hereunder will be in writing and may be given
by telecopier or by hand delivery and will, in the case of notice to
the Company, be addressed and telecopied or delivered to:
Panoramic Care Manager Inc.
11350 West 72nd Place
Arvada, Colorado
U.S.A. 80005
ATTENTION: Ms. Jill Flateland, Chief Executive Officer
Mr. Bryan Flateland, Chief Technical Officer
Tel: (303) 422-4918
Fax: (303) 422-4674
with a copy to:
Campney & Murphy
2100 - 1111 West Georgia Street
Vancouver, British Columbia V7X 1K9
ATTENTION: Kevin Hisko
Tel: (604) 688-8022
Fax: (604) 688-0829
<PAGE>
- 19 -
and in the case of the Agent, be addressed and telecopied or
delivered to:
Canaccord Capital Corporation
Stock Exchange Tower
2200 - 609 Granville Street
Vancouver, British Columbia
V7Y 1H2
ATTENTION: Clifford Mah
Tel: (604) 643-7035
Fax: (604) 643-7733
with a copy to:
Stikeman, Elliott
Suite 1700, Park Place
666 Burrard Street
Vancouver, British Columbia
V6C 2X8
ATTENTION: Neville McClure
Tel: (604) 631-1324
Fax: (604) 681-1825
The Company and the Agent may change their respective addresses for
notice by notice given in the manner referred to above.
If the foregoing is in accordance with your understanding and agreed to by you,
please signify your acceptance on the accompanying counterpart of this letter
and return same to the Agent whereupon this letter as so accepted will
constitute an agreement between the Company and the Agent enforceable in
accordance with its terms.
Yours truly,
CANACCORD CAPITAL CORPORATION
Per:
________________________________
Authorized Signatory
<PAGE>
- 20 -
The foregoing is accepted and agreed to on the _______ day of _________, 1999,
effective as of the date appearing on the first page of this Agreement.
Yours truly,
PANORAMIC CARE MANAGER INC.
Per:
________________________________
Authorized Signatory
<PAGE>
===============================================================================
SCHEDULE "A" TO THE AGENCY AGREEMENT
MADE BETWEEN PANORAMIC CARE MANAGER INC.
AND CANACCORD CAPITAL CORPORATION
FULLY DILUTED SHARE CAPITAL
===============================================================================
<PAGE>
===============================================================================
SCHEDULE "B" TO THE AGENCY AGREEMENT
MADE BETWEEN PANORAMIC CARE MANAGER INC.
AND CANACCORD CAPITAL CORPORATION
SHAREHOLDERS' LIST
===============================================================================
<PAGE>
===============================================================================
SCHEDULE "C" TO THE AGENCY AGREEMENT
MADE BETWEEN PANORAMIC CARE MANAGER INC.
AND CANACCORD CAPITAL CORPORATION
FINANCIAL STATEMENTS
===============================================================================
<PAGE>
===============================================================================
SCHEDULE "D" TO THE AGENCY AGREEMENT
MADE BETWEEN PANORAMIC CARE MANAGER INC.
AND CANACCORD CAPITAL CORPORATION
AGENT'S WARRANT
===============================================================================
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
FREESTYLE PUBLICATIONS, INC.
The following articles ("these Articles of Incorporation")
constitute the Amended and Restated Articles of Incorporation of FreeStyle
Publications, Inc. a Colorado corporation (the "Corporation"). These Articles of
Incorporation were adopted by the shareholders of the Corporation by unanimous
written consent in lieu of a meeting effective December 4, 1998 and, in
compliance with the applicable provisions of the Colorado Business Corporation
Act, Section 7-110- 106(f), Colorado Revised Statutes, the Corporation hereby
states that the number of votes cast for these Articles of Incorporation by each
voting group entitled to vote separately on the amendment was sufficient for
approval by that voting group. These Articles of Incorporation correctly set
forth the provisions of the Corporation's articles of incorporation, as amended,
and supersede the Corporation's original articles of incorporation and all
amendments thereto.
ARTICLE I
The name of the Corporation is Panoramic Care Manager, Inc.
ARTICLE II
The Corporation is incorporated under the Colorado Business
Corporation Act (the "Act").
ARTICLE III
The period of duration of the Corporation shall be perpetual.
ARTICLE IV
The purposes for which the Corporation is organized and its powers
are as follows:
4.1 To acquire or produce courses on multi-media for resale;
to acquire fixed assets, equipment or other property to lease to small
companies, and to engage in the transaction of all lawful business and to
pursue any and all lawful purposes for which a corporation may be
incorporated pursuant to the laws of the State of Colorado.
ARTICLE V
5.1 The Corporation shall have authority to issue a total of
fifty million (50,000,000) shares of stock with a par value $.001, all of
which shall be designated "common stock" with voting rights. Cumulative
voting of shares is not authorized.
5.2 Shareholders shall have no preemptive rights to acquire
unissued or treasury shares of the Corporation, securities convertible
into shares or carrying a right to subscribe for or acquire shares, or
stock options.
- 1 -
<PAGE>
ARTICLE VI
6.1 The business and affairs of the Corporation shall be
managed by a board of directors ("Board") which shall be elected at annual
meetings of the shareholders or at special meetings called for that
purpose. The Board shall have and exercise all the powers of the
Corporation and shall make, subject to the limitations contained in these
Articles or the ByLaws of the Corporation, rules and regulations for the
governing of the Corporation, the management of its affairs and the
election of its Officers; and the Board may repeal, alter or amend,
subject to any limitations contained in these Articles or the ByLaws, such
bylaws, rules and regulations as the Board deems proper for the management
of the affairs of the Corporation.
6.2 The number of Directors shall be provided in the ByLaws
and may be changed as provided in the ByLaws, but no decrease in the
number shall have the effect of shortening the term of any incumbent
director.
ARTICLE VII
The registered office of the Corporation shall be 11350 W. 72nd
Place, Arvada, Colorado 80005 and the registered agent at such address shall be
Jill S. Flateland.
ARTICLE VIII
No contract or other transaction between the Corporation and one or
more of its directors or any other corporation, partnership, joint venture,
trust, association, other entity, or employee benefit plan in which one or more
of the Corporation's directors or officers are directors or officers or are in
any similar managerial or fiduciary position or are financially interested shall
be either void or voidable solely because of such relationship or interest or
solely because such directors or officers are present at the meeting of the
board of directors or a committee thereof which authorizes, approves, or
ratifies such contract or transaction or solely because their votes are counted
for such purpose, so long as such contract or transaction satisfies the
requirements explicitly set forth in the Colorado Corporation Code for contracts
between a corporation and its directors.
ARTICLE IX
A director of the Corporation shall not be personally liable to the
Corporation or to its shareholders for monetary damages for breach of fiduciary
duty as a director; except that this provision shall not eliminate or limit the
liability of a director to the Corporation or to its shareholders for monetary
damages otherwise existing for: (i) any breach of the director's duty of loyalty
to the Corporation or to its shareholders; (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) acts specified in Section 7-108- 403 of the Colorado Corporation Code; or
(iv) any transaction from which the director directly or indirectly derived any
improper personal benefit. If the Colorado Corporation Code hereafter is amended
to eliminate or limit further the liability of a director, then, in addition to
the elimination and limitation of liability provided by the preceding sentence,
the liability of each director shall be eliminated or limited to the fullest
extent permitted by the Colorado Corporation Code as so amended. Any repeal or
modification of this Article IX shall not adversely affect any right or
protection of a director of the Corporation under this Article IX, as in effect
immediately prior to
- 2 -
<PAGE>
such repeal or modification, with respect to any liability that would have
accrued, but for this Article IX, prior to such repeal or modification.
ARTICLE X
The Corporation shall indemnify any person and that person's estate
and personal representative against all liability and expense incurred by reason
of that person being or having been a director or officer of the Corporation to
the full extent and in any manner that directors may be indemnified under the
Colorado Corporation Code, as in effect at any time. The Corporation shall also
indemnify any person who is serving or has served the Corporation as director,
officer, employee, or agent, and that person's estate and personal
representative, to the extent and in the manner provided in any bylaw,
resolution of the shareholders or directors, contract, or otherwise, so long as
such provision is legally permissible.
- 3 -
BYLAWS
OF
PANORAMIC CARE MANAGER, INC.
ARTICLE I - OFFICES
1.1 PRINCIPAL OFFICE. The principal offices of Panoramic Care
Manager, Inc. (the "Corporation") shall initially be at 11350 W. 72nd Place,
Arvada, Colorado 80005, but the Corporation may, in the discretion of the board
of directors, maintain offices wherever the business of the Corporation may
require.
1.2 REGISTERED OFFICE AND AGENT. The Corporation shall continuously
maintain in the State of Colorado a registered office and a registered agent
whose business office is identical with the registered office. The initial
registered office and the initial registered agent are specified in the original
Articles of Incorporation for the Corporation. The Corporation may change its
registered office, its registered agent, or both, upon filing a statement as
specified by law in the office of the Secretary of State of Colorado.
ARTICLE II - SHAREHOLDERS
2.1 TIME AND PLACE. Any meeting of the shareholders may be held at
such time and place, within or outside the State of Colorado, as may be fixed by
the board of directors or as shall be specified in the notice or waiver of
notice of the meeting. If the place for a meeting is not fixed by the board of
directors, such meeting shall be held at the Corporation's principal office.
2.2 ANNUAL SHAREHOLDERS' MEETING. The annual shareholders' meeting
shall be held on the date and at the time and place fixed from time to time by
the board of directors; provided, however, that the first annual meeting shall
be held on a date that is within six months after the close of the first fiscal
year of the Corporation, and each successive annual meeting shall be held on a
date that is within the earlier of six months after the close of the last fiscal
year or fifteen months after the last annual meeting.
2.3 SPECIAL SHAREHOLDERS' MEETING. A special shareholders meeting
for any purpose or purposes, may be called by the board of directors or the
president. The Corporation shall also hold a special shareholders meeting in the
event it receives, in the manner specified in Section 8.3, one or more written
demands for the meeting, stating the purpose or purposes for which it is to be
held, signed and dated by the holders of shares representing not less than fifty
percent (50%) of all of the votes entitled to be cast on any issue to be
determined at the meeting. Special meetings shall be held at the principal
office of the Corporation or at such other place as the board of directors or
the president may determine.
<PAGE>
2.4 RECORD DATE FOR DETERMINATION OF SHAREHOLDERS.
(a) In order to make a determination of shareholders entitled
to (i) notice of or to vote at any shareholders' meeting or at any adjournment
of a shareholders' meeting, (ii) demand a special shareholders meeting, (iii)
take any other action or (iv) receive payment of a share dividend or a
distribution, or for any other purpose, the board of directors may fix a future
date as the record date for such determination of shareholders. The record date
may be fixed not more than seventy days before the date of the proposed action.
(b) Unless otherwise specified when the record date is fixed,
the time of day for determination of shareholders of record shall be as of the
Corporation's close of business on the record date.
(c) A determination of shareholders entitled to be given
notice of or to vote at a shareholders' meeting is effective for any adjournment
of the meeting unless the board of directors fixes a new record date, which the
board shall do if the meeting is adjourned to a date more than one hundred
twenty days after the date fixed for the original meeting.
(d) If no record date is otherwise fixed, the record date for
determining shareholders entitled to be given notice of and to vote at an annual
or special shareholders' meeting is the day before the first notice is given to
shareholders.
(e) The record date for determining shareholders entitled to
take action without a meeting pursuant to Section 2.11 is the date a writing
upon which the action is taken is first received by the Corporation.
2.5 VOTING LIST.
(a) After a record date is fixed for a shareholders meeting,
the secretary shall prepare a list of the names of all its shareholders who are
entitled to be given notice of the meeting. The list (i) shall be arranged by
voting groups and within each voting group by class or series of shares, (ii)
shall be alphabetical within each class or series and (iii) shall show the
address of, and the number of shares of each such class and series that are held
by, each shareholder.
(b) The shareholders' list shall be available for inspection
by any shareholder, beginning the earlier of ten days before the meeting for
which the list was prepared or two business days after notice of the meeting is
given and continuing through the meeting, and any adjournment thereof, at the
Corporation's principal office or at a place identified in the notice of the
meeting in the city where the meeting will be held.
-2-
<PAGE>
(c) The secretary shall make the shareholders list available
at the meeting, and any shareholder or agent or attorney of a shareholder is
entitled to inspect the list at any time during the meeting or any adjournment
thereof.
2.6 NOTICE TO SHAREHOLDERS.
(a) The secretary shall give notice to shareholders of the
date, time, and place of each annual and special shareholders meeting no fewer
than ten nor more than sixty days before the date of the meeting; except that,
if the articles of incorporation are to be amended to increase the number of
authorized shares, at least thirty days notice shall be given. Except as
otherwise required by the Colorado Business Corporation Act (the "Act"), the
secretary shall be required to give such notice only to shareholders entitled to
vote at the meeting.
(b) Notice of an annual shareholders meeting need not include
a description of the purpose or purposes for which the meeting is called unless
a purpose of the meeting is to consider an amendment to the articles of
incorporation, a restatement of the articles of incorporation, a plan of merger
or share exchange, disposition of substantially all of the property of the
Corporation, consent by the Corporation to the disposition of property by
another entity, or dissolution of the Corporation.
(c) Notice of a special shareholders meeting shall include a
description of the purpose or purposes for which the meeting is called.
(d) Notice of a shareholders meeting shall be in writing and
shall be given:
(i) by deposit in the United States mail, properly
addressed to the shareholder's address shown in the Corporation's current record
of shareholders, first class postage prepaid, and, if so given, shall be
effective when mailed; or
(ii) by telegraph, teletype, electronically transmitted
facsimile, electronic mail, mail, or private carrier or by personal delivery to
the shareholder, and, if so given, shall be effective when actually received by
the shareholder.
(e) If an annual or special shareholders meeting is adjourned
to a different date, time, or place, notice need not be given of the new date,
time, or place if the new date, time, or place is announced at the meeting
before adjournment; provided, however, that, if a new record date for the
adjourned meeting is fixed pursuant to Section 2.4, notice of the adjourned
meeting shall be given to persons who are shareholders as of the new record
date.
-3-
<PAGE>
(f) If three successive notices are given by the Corporation,
whether with respect to a shareholders meeting or otherwise, to a shareholder
and are returned as undeliverable, no further notices to such shareholder shall
be necessary until another address for the shareholder is made known to the
Corporation.
2.7 QUORUM. Shares entitled to vote as a separate voting group may
take action on a matter at a meeting only if a quorum of those shares exists
with respect to that matter. A majority of the votes entitled to be cast on the
matter by the voting group shall constitute a quorum of that voting group for
action on the matter. If a quorum does not exist with respect to any voting
group, the president or any shareholder or proxy that is present at the meeting,
whether or not a member of that voting group, may adjourn the meeting to a
different date, time, or place, and (subject to the next sentence) notice need
not be given of the new date, time, or place if the new date, time, or place is
announced at the meeting before adjournment. If a new record date for the
adjourned meeting is or must be fixed pursuant to Section 2.4, notice of the
adjourned meeting shall be given pursuant to Section 2.6 to persons who are
shareholders as of the new record date. At any adjourned meeting at which a
quorum exists, any matter may be acted upon that could have been acted upon at
the meeting originally called; provided, however, that, if new notice is given
of the adjourned meeting, then such notice shall state the purpose or purposes
of the adjourned meeting sufficiently to permit action on such matters. Once a
share is represented for any purpose at a meeting, including the purpose of
determining that a quorum exists, it is deemed present for quorum purposes for
the remainder of the meeting and for any adjournment of that meeting unless a
new record date is or shall be set for that adjourned meeting.
2.8 VOTING ENTITLEMENT OF SHARES. Except as stated in the articles
of incorporation, each outstanding share, regardless of class, is entitled to
one vote, and each fractional share is entitled to a corresponding fractional
vote, on each matter voted on at a shareholders meeting.
2.9 PROXIES, ACCEPTANCE OF VOTES AND CONSENTS.
(a) A shareholder may vote either in person or by proxy.
(b) An appointment of a proxy is not effective against the
Corporation until the appointment is received by the Corporation. An appointment
is valid for eleven months unless a different period is expressly provided in
the appointment form.
(c) The Corporation may accept or reject any appointment of a
proxy, revocation of appointment of a proxy, vote, consent, waiver, or other
writing purportedly signed by or for a shareholder, if such acceptance or
rejection is in accordance with the provisions of Sections 7-107-203 and
7-107-205 of the Colorado Business Corporation Act.
-4-
<PAGE>
2.10 WAIVER OF NOTICE.
(a) A shareholder may waive any notice required by the
Colorado Business Corporation Act, the articles of incorporation or these
Bylaws, whether before or after the date or time stated in the notice as the
date or time when any action will occur or has occurred. The waiver shall be in
writing, be signed by the shareholder entitled to the notice and be delivered to
the Corporation for inclusion in the minutes or filing with the corporate
records, but such delivery and filing shall not be conditions of the
effectiveness of the waiver.
(b) A shareholder's attendance at a meeting (i) waives
objection to lack of notice or defective notice of the meeting, unless the
shareholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting because of lack of notice or defective
notice and (ii) waives objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the meeting
notice, unless the shareholder objects to considering the matter when it is
presented.
2.11 ACTION BY SHAREHOLDERS WITHOUT A MEETING. Any action required
or permitted to be taken at a shareholders' meeting may be taken without a
meeting if all of the shareholders entitled to vote thereon consent to such
action in writing. Action taken pursuant to this Section 2.11 shall be effective
when the Corporation has received writings that describe and consent to the
action, signed by all of the shareholders entitled to vote thereon. Action taken
pursuant to this Section 2.11 shall be effective as of the date the last writing
necessary to effect the action is received by the Corporation, unless all of the
writings necessary to effect the action specify another date, which may be
before or after the date the writings are received by the Corporation. Such
action shall have the same effect as action taken at a meeting of shareholders
and may be described as such in any document. Any shareholder who has signed a
writing describing and consenting to an action taken pursuant to this Section
2.11 may revoke such consent by a writing signed by the shareholder describing
the action and stating that the shareholder's prior consent thereto is revoked,
if such writing is received by the Corporation before the effectiveness of the
action.
2.12 MEETINGS BY TELECOMMUNICATIONS. Any or all of the shareholders
may participate in an annual or special shareholders meeting by, or the meeting
may be conducted through the use of, any means of communication by which all
persons participating in the meeting may hear each other during the meeting. A
shareholder participating in a meeting by this means is deemed to be present in
person at the meeting.
-5-
<PAGE>
ARTICLE III - DIRECTORS
3.1 AUTHORITY OF THE BOARD OF DIRECTORS. The corporate powers shall
be exercised by or under the authority of, and the business and affairs of the
Corporation shall be managed under the direction of, a board of directors.
3.2 NUMBER. The number of directors shall be fixed by resolution of
the board of directors from time to time and may be increased or decreased by
resolution adopted by the board of directors from time to time, but no decrease
in the number of directors shall have the effect of shortening the term of any
incumbent director.
3.3 QUALIFICATION. Directors shall be natural persons at least
eighteen years old but need not be residents of the State of Colorado or
shareholders of the Corporation.
3.4 ELECTION. The board of directors shall be elected at the annual
meeting of the shareholders or at a special meeting called for that purpose.
3.5 TERM. Each director shall be elected to hold office until the
next annual meeting of shareholders and until the director's successor is
elected and qualified.
3.6 RESIGNATION. A director may resign at any time by giving written
notice of his or her resignation to any other director or (if the director is
not also the secretary) to the secretary. The resignation shall be effective
when it is received by the other director or secretary, as the case may be,
unless the notice of resignation specifies a later effective date. Acceptance of
such resignation shall not be necessary to make it effective unless the notice
so provides.
3.7 REMOVAL. Any director may be removed by the shareholders, with
or without cause, at a meeting called for that purpose. The notice of the
meeting shall state that the purpose, or one of the purposes, of the meeting is
removal of the director. A director may be removed only if the number of votes
cast in favor of removal exceeds the number of votes cast against removal.
3.8 VACANCIES.
If a vacancy occurs on the board of directors, including a
vacancy resulting from an increase in the number of directors:
(a) The shareholders may fill the vacancy at the next annual
meeting or at a special meeting called for that purpose; or
-6-
<PAGE>
(b) The board of directors may fill the vacancy; or
(c) If the directors remaining in office constitute fewer than
a quorum of the board, they may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office.
3.9 MEETINGS. The board of directors may hold regular or special
meetings within or outside of Colorado. A regular meeting shall be held without
notice immediately after and at the same place as the annual meeting of the
shareholders. The board of directors may, by resolution, establish other dates,
times and places for additional regular meetings, which may thereafter be held
without further notice. Special meetings may be called by the president or by
any two directors and shall be held at the principal office of the Corporation
unless otherwise specified in the notice of the meeting. At any time when the
board consists of a single director, that director may act at any time, date, or
place without notice.
3.10 NOTICE OF SPECIAL MEETING. Notice of a special meeting shall be
given to every director at least twenty four hours before the time of the
meeting, stating the date, time, and place of the meeting. The notice need not
describe the purpose of the meeting. Notice may be given orally to the director,
personally or by telephone or other wire or wireless communication. Notice may
also be given in writing by telegraph, teletype, electronically transmitted
facsimile, electronic mail, mail, or private carrier. Notice shall be effective
at the earliest of (a) the time it is received; (b) five days after it is
deposited in the United States mail, properly addressed to the last address for
the director shown on the records of the Corporation, first class postage
prepaid or (c) the date shown on the return receipt if mailed by registered or
certified mail, return receipt requested, postage prepaid, in the United States
mail and if the return receipt is signed by the director to which the notice is
addressed.
3.11 QUORUM. Except as provided in Section 3.8, a majority of the
number of directors fixed in accordance with these Bylaws shall constitute a
quorum for the transaction of business at all meetings of the board of
directors. The act of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the board of directors, except as
otherwise specifically required by law.
3.12 WAIVER OF NOTICE.
(a) A director may waive any notice of a meeting before or
after the time and date of the meeting stated in the notice. Except as provided
by Section 3.12(b), the waiver shall be in writing and shall be signed by the
director. Such waiver shall be delivered to the secretary for filing with the
corporate records, but such delivery and filing shall not be conditions of the
effectiveness of the waiver.
-7-
<PAGE>
(b) A director's attendance at or participation in a meeting
waives any required notice to him or her of the meeting unless, at the beginning
of the meeting or promptly upon his or her later arrival, the director objects
to holding the meeting or transacting business at the meeting because of lack of
notice or defective notice and does not thereafter vote for or assent to action
taken at the meeting.
3.13 MEETINGS BY TELECOMMUNICATIONS. One or more directors may
participate in a regular or special meeting by, or conduct the meeting through
the use of, any means of communication by which all directors participating may
hear each other during the meeting. A director participating in a meeting by
this means is deemed to be present in person at the meeting.
3.14 DEEMED ASSENT TO ACTION. A director who is present at a meeting
of the board of directors when corporate action is taken shall be deemed to have
assented to all action taken at the meeting unless
(a) The director objects at the beginning of the meeting, or
promptly upon his or her arrival, to holding the meeting or transacting business
at the meeting and does not thereafter vote for or assent to any action taken at
the meeting;
(b) The director contemporaneously requests that his or her
dissent or abstention as to any specific action taken be entered in the minutes
of the meeting; or
(c) The director causes written notice of his or her dissent
or abstention as to any specific action to be received by the presiding officer
of the meeting before adjournment of the meeting or by the secretary (or, if the
director is the secretary, by another director) promptly after adjournment of
the meeting.
The right of dissent or abstention pursuant to this Section 3.14 as to a
specific action is not available to a director who votes in favor of the action
taken.
3.15 ACTION BY DIRECTORS WITHOUT A MEETING. Any action required or
permitted by law to be taken at a board of directors meeting may be taken
without a meeting if all members of the board consent to such action in writing.
The action shall be deemed to have been so taken by the board at the time the
last director signs a writing describing the action taken, unless, before such
time, any director has revoked his or her consent by a writing signed by the
director and received by the president or the secretary or any other person
authorized by board of directors to receive such a revocation. Such action shall
be effective at the time and date it is so taken unless the directors establish
a different effective time or date. Such action has the same effect as action
taken at a meeting of directors and may be described as such in any document.
-8-
<PAGE>
ARTICLE IV - COMMITTEES OF THE BOARD OF DIRECTORS
4.1 AUTHORITY OF THE BOARD OF DIRECTORS TO DESIGNATE COMMITTEES.
Subject to the provisions of section 7-109-106 of the Act, the board of
directors may create one or more committees and appoint one or more members of
the board of directors to serve on them. The creation of a committee and
appointment of members to it shall require the approval of a majority of all the
directors in office when the action is taken, whether or not those directors
constitute a quorum of the board.
4.2 COMMITTEE PROCEDURES. The provisions of these bylaws governing
meetings, action without meeting, notice, waiver of notice, and quorum and
voting requirements of the board of directors apply to committees and their
members as well.
4.3 COMMITTEE POWERS AND AUTHORITY. To the extent specified by
resolution adopted from time to time by a majority of all the directors in
office when the resolution is adopted, whether or not those directors constitute
a quorum of the board, each committee shall exercise the authority of the board
of directors with respect to the corporate powers and the management of the
business and affairs of the Corporation, except that a committee shall not:
(a) authorize distributions;
(b) approve or propose to shareholders action that the
Colorado Business Corporation Act requires to be approved by shareholders;
(c) fill vacancies on the board of directors or on any of its
committees;
(d) amend the articles of incorporation pursuant to section
7-110-102 of the Colorado Business Corporation Act;
(e) adopt, amend, or repeal bylaws;
(f) approve a plan of merger not requiring shareholder
approval;
(g) authorize or approve reacquisition of shares, except
according to a formula or method prescribed by the board of directors; or
(h) authorize or approve the issuance or sale of shares, or a
contract for the sale of shares, or determine the designation and relative
rights, preferences, and limitations of a class or series of shares, except that
the board of directors may authorize a
-9-
<PAGE>
committee or an officer to do so within limits specifically prescribed by the
board of directors.
4.4 STANDARD OF CONDUCT. The creation of, delegation of authority
to, or action by, a committee does not alone constitute compliance by a director
with applicable standards of conduct.
ARTICLE V - OFFICERS
5.1 GENERAL. The Corporation shall have as officers a president, a
secretary, and a treasurer, who shall be appointed by the board of directors.
The board of directors may appoint as additional officers a chairman and other
officers of the board. The board of directors, the president, and such other
subordinate officers as the board of directors may authorize from time to time,
acting singly, may appoint as additional officers one or more vice presidents,
assistant secretaries, assistant treasurers, and such other subordinate officers
as the board of directors, the president, or such other appointing officers deem
necessary or appropriate. The officers of the Corporation shall hold their
offices for such terms and shall exercise such authority and perform such duties
as shall be determined from time to time by these Bylaws, the board of
directors, or (with respect to officers whom are appointed by the president or
other appointing officers) the persons appointing them; provided, however, that
the board of directors may change the term of offices and the authority of any
officer appointed by the president or other appointing officers. Any two or more
offices may be held by the same person. The officers of the Corporation shall be
natural persons at least eighteen years old.
5.2 TERM. Each officer shall hold office from the time of
appointment until the time of removal or resignation pursuant to Section 3.6 or
until the officer's death.
5.3 REMOVAL AND RESIGNATION. Any officer appointed by the board of
directors may be removed at any time by the board of directors. Any officer
appointed by the president or other appointing officer may be removed at any
time by the board of directors or by the person appointing the officer. Any
officer may resign at any time by giving written notice of resignation to any
director (or to any director other than the resigning officer if the officer is
also a director), to the president, to the secretary or to the officer who
appointed the officer. Acceptance of such resignation shall not be necessary to
make it effective, unless the notice so provides.
5.4 CHAIRMAN OF THE BOARD. The board of directors may at their
discretion elect a chairman of the board. If a chairman of the board has been so
elected, the chairman of the board shall preside at all meetings of
shareholders, and at all meetings of the
-10-
<PAGE>
board of directors, and shall carry out such other duties and have such
responsibilities as may be specified by the board of directors.
5.5 PRESIDENT. The president shall be the chief executive officer of
the Corporation. In the absence or disability of the chairman of the board, or
if there is no chairman of the board then in office, he shall preside at
meetings of the shareholders and the board of directors. Subject to the
direction and control of the board of directors, the president shall be the
chief executive officer of the Corporation and, as such, shall have
responsibility for the general and active management of the business of the
Corporation and see that the business of the Corporation is conducted in
accordance with the directions of the board of directors. The president may
negotiate, enter into and execute contracts, deeds and other instruments on
behalf of the Corporation as are necessary and appropriate to the conduct of the
business and affairs of the Corporation, or as directed by the board of
directors. The president shall have such additional authority and duties as are
appropriate and customary for the office of president and chief executive
officer, except as the same may be expanded or limited by the board of directors
from time to time.
5.6 VICE PRESIDENT. The vice president, if any, or, if there are
more than one, the vice presidents in the order determined by the board of
directors or the president (or, if no such determination is made, in the order
of their appointment), shall be the officer or officers next in seniority after
the president. Each vice president shall have such authority and duties as are
prescribed by the board of directors or the president. Upon the death, absence,
or disability of the president, the vice president, if any, or, if there are
more than one, the vice presidents in the order of seniority as determined
above, shall have the authority and duties of the president.
5.7 SECRETARY. The secretary shall be responsible for the
preparation and maintenance of minutes of the meetings of the board of directors
and of the shareholders and of the other records and information required to be
kept by the Corporation under section 7-116-101 of the Act and for
authenticating records of the Corporation. The secretary shall also give, or
cause to be given, notice of all meetings of the shareholders and special
meetings of the board of directors, keep the minutes of such meetings, have
charge of the corporate seal and have authority to affix the corporate seal to
any instrument requiring it (and, when so affixed, it may be attested by the
secretary's signature), be responsible for the maintenance of all other
corporate records and files and for the preparation and filing of reports to
governmental agencies (other than tax returns), and have such other authority
and duties as are appropriate and customary for the office of secretary, except
as the same may be expanded or limited by the board of directors from time to
time.
5.8 TREASURER. The treasurer shall have control of the funds and the
care and custody of all stocks, bonds, and other securities owned by the
Corporation, and shall be responsible for the preparation and filing of tax
returns. The treasurer shall receive all
-11-
<PAGE>
moneys paid to the Corporation and, subject to any limits imposed by the board
of directors, shall have authority to give receipts and vouchers, to sign and
endorse checks and warrants in the Corporation's name and on the Corporation's
behalf, and give full discharge for the same. The treasurer shall also have
charge of disbursement of funds of the Corporation, shall keep full and accurate
records of the receipts and disbursements, and shall deposit all moneys and
other valuable effects in the name and to the credit of the Corporation in such
depositories as shall be designated by the board of directors. The treasurer
shall have such additional authority and duties as are appropriate and customary
for the office of treasurer, except as the same may be expanded or limited by
the board of directors from time to time.
5.9 COMPENSATION. Officers shall receive such compensation for their
services as may be authorized or ratified by the board of directors. Election or
appointment of an officer shall not of itself create a contractual right to
compensation for services performed as such officer.
ARTICLE VI - INDEMNIFICATION
6.1 DEFINITIONS. As used in this Article VI:
(a) "Corporation" includes any domestic or foreign entity that
is a predecessor of the Corporation by reason of a merger or other transaction
in which the predecessor's existence ceased upon consummation of the
transaction.
(b) "Director" means an individual who is or was a director of
the Corporation or an individual who, while a director of the Corporation, is or
was serving at the Corporation's request as a director, officer, partner,
trustee, employee, fiduciary or agent of another domestic or foreign corporation
or other person or of an employee benefit plan. A director is considered to be
serving an employee benefit plan at the Corporation's request if his or her
duties to the Corporation also impose duties on, or otherwise involve services
by, the director to the plan or to participants in or beneficiaries of the plan.
"Director" includes, unless the context requires otherwise, the estate or
personal representative of a director.
(c) "Expenses" includes counsel fees.
(d) "Liability" means the obligation incurred with respect to
a proceeding to pay a judgment, settlement, penalty, fine, including an excise
tax assessed with respect to an employee benefit plan, or reasonable expenses.
(e) "Official capacity" means, when used with respect to a
director, the office of director in the Corporation and, when used with respect
to a person other than a director as contemplated in Section 6.7, the office in
the Corporation held by the officer or
-12-
<PAGE>
the employment, fiduciary or agency relationship undertaken by the employee,
fiduciary or agent on behalf of the Corporation. "Official capacity" does not
include service for any other domestic or foreign corporation or other person or
employee benefit plan.
(f) "Party" includes a person who was, is or is threatened to
be made, a named defendant or respondent in a proceeding.
(g) "Proceeding" means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal.
6.2 AUTHORITY TO INDEMNIFY DIRECTORS.
(a) Except as provided in Section 6.2(d), the Corporation
shall indemnify a person made a party to a proceeding because the person is or
was a director against liability incurred in the proceeding if:
(i) The person conducted himself or herself in good
faith; and
(ii) The person reasonably believed:
(A) In the case of conduct in an official capacity
with the Corporation, that his or her conduct was in the Corporation's best
interests; and
(B) In all other cases, that his or her conduct was
at least
not opposed to the Corporation's best interests; and
(iii) In the case of any criminal proceeding, the person
had no reasonable cause to believe his or her conduct was unlawful.
(b) A director's conduct with respect to an employee benefit
plan for a purpose the director reasonably believed to be in the interests of
the participants in or beneficiaries of the plan is conduct that satisfies the
requirement of Section 6.2(a)(ii)(B). A director's conduct with respect to an
employee benefit plan for a purpose that the director did not reasonably believe
to be in the interests of the participants in or beneficiaries of the plan shall
be deemed not to satisfy the requirements of Section 6.2(a)(i).
(c) The termination of a proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent is
not, of itself, determinative that the director did not meet the standard of
conduct described in this Section 6.2.
(d) Except to the extent authorized by a court as provided in
Section 6.5, the Corporation may not indemnify a director under this Section
6.2:
-13-
<PAGE>
(i) In connection with a proceeding by or in the right
of the Corporation in which the director was adjudged liable to the Corporation;
or
(ii) In connection with any other proceeding charging
that the director derived an improper personal benefit, whether or not involving
action in an official capacity, in which proceeding the director was adjudged
liable on the basis that he or she derived an improper personal benefit.
(e) Indemnification permitted under this Section 6.2 in
connection with a proceeding by or in the right of the Corporation is limited to
reasonable expenses incurred in connection with the proceeding.
6.3 MANDATORY INDEMNIFICATION OF DIRECTORS. The Corporation shall
indemnify a person who was wholly successful, on the merits or otherwise, in the
defense of any proceeding to which the person was a party because the person is
or was a director, against reasonable expenses incurred by him or her in
connection with the proceeding.
6.4 ADVANCE OF EXPENSES TO DIRECTORS.
(a) The Corporation shall pay for or reimburse the reasonable
expenses incurred by a director who is a party to a proceeding in advance of
final disposition of the proceeding if:
(i) The director furnishes to the Corporation a written
affirmation of the director's good faith belief that he or she has met the
standard of conduct described in Section 6.2.
(ii) The director furnishes to the Corporation a written
undertaking, executed personally or on the director's behalf, to repay the
advance if it is ultimately determined that he or she did not meet the standard
of conduct; and
(iii) A determination is made that the facts then known
to those making the determination would not preclude indemnification under this
Article VI.
(b) The undertaking required by Section 6.4(a)(ii) shall be an
unlimited general obligation of the director but need not be secured and may be
accepted without reference to financial ability to make repayment.
(c) Determinations and authorizations of payments under this
Section 6.4 shall be made in the manner specified in Section 6.6.
6.5 COURT-ORDERED INDEMNIFICATION OF DIRECTORS. A director who
is or was a party to a proceeding may apply for indemnification to the court
conducting the
-14-
<PAGE>
proceeding or to another court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court considers necessary,
may order indemnification in the following manner:
(a) If it determines that the director is entitled to
mandatory indemnification under Section 6.3, the court shall order
indemnification, in which case the court shall also order the Corporation to pay
the director's reasonable expenses incurred to obtain court-ordered
indemnification.
(b) If it determines that the director is fairly and
reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not the director met the standard of conduct set forth
in Section 6.2(a) or was adjudged liable in the circumstances described in
Section 6.2(d), the court may order such indemnification as the court deems
proper; except that the indemnification with respect to any proceeding in which
liability shall have been adjudged in the circumstances described in Section
6.2(d) is limited to reasonable expenses incurred in connection with the
proceeding and reasonable expenses incurred to obtain court ordered
indemnification.
6.6 DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION OF
DIRECTORS.
(a) Except to the extent authorized by a court as provided in
Section 6.5, the Corporation shall not indemnify a director under Section 6.2
unless authorized in the specific case after a determination has been made that
indemnification of the director is permissible in the circumstances because the
director has met the standard of conduct set forth in Section 6.2. The
Corporation shall not advance expenses to a director under Section 6.4 unless
authorized in the specific case after the written affirmation and undertaking
required by Section 6.4(a)(i) and 6.4(a)(ii) are received and the determination
required by Section 6.4(a)(iii) has been made.
(b) The determinations required by Section 6.6(a) shall be
made:
(i) By the board of directors by a majority vote of
those present at a meeting at which a quorum is present, and only those
directors not parties to the proceeding shall be counted in satisfying the
quorum; or
(ii) If a quorum cannot be obtained, by a majority vote
of a committee of the board of directors designated by the board of directors,
which committee shall consist of two or more directors not parties to the
proceeding; except that directors who are parties to the proceeding may
participate in the designation of directors for the committee.
(c) If a quorum cannot be obtained as contemplated in
Section 6.6(b)(i), and a committee cannot be established under Section
6.6(b)(ii), or even if a
-15-
<PAGE>
quorum is obtained or a committee is designated, if a majority of the directors
constituting such quorum or such committee so directs, the determination
required to be made by Section 6.6(a) shall be made:
(i) By independent legal counsel selected by a vote of
the board of directors or the committee in the manner specified in Section
6.6(b)(i) or 6.6(b)(ii), or, if a quorum of the full board cannot be obtained
and a committee cannot be established, by independent legal counsel selected by
a majority vote of the full board of directors; or
(ii) By the shareholders.
(d) Authorization of indemnification and advance of expenses
shall be made in the same manner as the determination that indemnification or
advance of expenses is permissible; except that, if the determination that
indemnification or advance of expenses is required or permissible is made by
independent legal counsel, authorization of indemnification and advance of
expenses shall be made by the body that selected such counsel.
6.7 INDEMNIFICATION OF OFFICERS, EMPLOYEES, FIDUCIARIES, AND
AGENTS.
(a) The Corporation shall indemnify and advance expenses to an
officer to the same extent as a director.
(b) The Corporation may indemnify and advance expenses to an
employee, fiduciary or agent of the Corporation to the same extent as to a
director.
(c) The Corporation may also indemnify and advance expenses to
an officer, employee, fiduciary or agent who is not a director to a greater
extent than is provided in these Bylaws, if not inconsistent with public policy,
and if provided for by general or specific action of its board of directors or
shareholders or by contract.
6.8 INSURANCE. The Corporation may purchase and maintain insurance
on behalf of a person who is or was a director, officer, employee, fiduciary or
agent of the Corporation, or who, while a director, officer, employee, fiduciary
or agent of the Corporation, is or was serving at the request of the Corporation
as a director, officer, partner, trustee, employee, fiduciary or agent of
another domestic or foreign corporation or other person or of an employee
benefit plan, against liability asserted against or incurred by the person in
that capacity or arising from his or her status as a director, officer,
employee, fiduciary or agent, whether or not the Corporation would have power to
indemnify the person against the same liability under Section 6.2, 6.3, or 6.7.
Any such insurance may be procured from any insurance company designated by the
board of directors, whether such insurance company is formed under the laws of
this state or any other jurisdiction of the
-16-
<PAGE>
United States or elsewhere, including any insurance company in which the
Corporation has an equity or any other interest through stock ownership or
otherwise.
6.9 NOTICE TO SHAREHOLDERS OF INDEMNIFICATION OF DIRECTOR. If the
Corporation indemnifies or advances expenses to a director under this Article VI
in connection with a proceeding by or in the right of the Corporation, the
Corporation shall give written notice of the indemnification or advance to the
shareholders with or before the notice of the next shareholders meeting. If the
next shareholder action is taken without a meeting at the instigation of the
board of directors, such notice shall be given to the shareholders at or before
the time the first shareholder signs a writing consenting to such action.
ARTICLE VII - SHARES
7.1 CERTIFICATES. Certificates representing shares of the capital
stock of the Corporation shall be in such form as is approved by the board of
directors and shall be signed by the chairman or vice chairman of the board of
directors (if any), or the president or any vice president, and by the secretary
or an assistant secretary or the treasurer or an assistant treasurer. All
certificates shall be consecutively numbered, and the names of the owners, the
number of shares and the date of issue shall be entered on the books of the
Corporation. Each certificate representing shares shall state upon its face:
(a) that the Corporation is organized under the laws of the
State of Colorado;
(b) the name of the person to whom the shares are issued;
(c) the number and class of the shares and the designation of
the series, if any, that the certificate represents;
(d) the par value, if any, of each share represented by the
certificate;
(e) if the Corporation is then authorized to issue different
classes of shares or different series within a class, on the front or the back,
(i) a summary of the designations, preferences, limitations, and relative rights
applicable to each class, the variations in preferences, limitations, and rights
determined for each series, and the authority of the board of directors to
determine variations for future classes or series; or (ii) a conspicuous
statement that the Corporation will furnish to the shareholder, on request in
writing and without charge, information concerning the designations,
preferences, limitations, and relative rights applicable to each class, the
variations in preferences, limitations, and rights determined for each series,
and the authority of the board of directors to determine variations for future
classes or series; and
-17-
<PAGE>
(f) any restrictions imposed by the Corporation upon the
transfer of the shares represented by the certificate.
7.2 FACSIMILE SIGNATURES. Where a certificate is signed (a) by a
transfer agent other than the Corporation or its employee, or (b) by a registrar
other than the Corporation or its employee, any or all of the officers'
signatures on the certificate required by Section 7.1 may be facsimile. If any
officer, transfer agent or registrar who has signed, or whose facsimile
signature or signatures have been placed upon, any certificate, shall cease to
be such officer, transfer agent or registrar, whether because of death,
resignation, or otherwise, before the certificate is issued by the Corporation,
it may nevertheless be issued by the Corporation with the same effect as if he
or she were such officer, transfer agent or registrar at the date of issue.
7.3 TRANSFERS OF SHARES. Transfers of shares shall be made on the
books of the Corporation only upon presentation of the certificate or
certificates representing such shares properly endorsed by the person or persons
appearing upon the face of such certificate to be the owner, or accompanied by a
proper transfer or assignment separate from the certificate, except as may
otherwise be expressly provided by the statutes of the State of Colorado or by
order of a court of competent jurisdiction. The officers or transfer agents of
the Corporation may, in their discretion, require a signature guaranty before
making any transfer. Except to the extent the Corporation otherwise provides
pursuant to Section 7.5 and except for the assertion of dissenters' rights to
the extent provided in Article 113 of the Colorado Business Corporation Act, the
Corporation shall be entitled to treat the person in whose name any shares are
registered on its books as the owner of those shares for all purposes and shall
not be bound to recognize any equitable or other claim or interest in the shares
on the part of any other person, whether or not the Corporation shall have
notice of such claim or interest.
7.4 SHARES HELD FOR ACCOUNT OF ANOTHER. The board of directors may
adopt by resolution a procedure whereby a shareholder of the Corporation may
certify in writing to the Corporation that all or a portion of the shares
registered in the name of such shareholder are held for the account of a
specified person or persons. The resolution shall set forth:
(a) the classification of shareholders who may certify;
(b) the purpose or purposes for which the certification may
be made;
(c) the form of certification and the information to be
contained therein;
-18-
<PAGE>
(d) if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or the
closing of the stock transfer books within which the certification must be
received by the Corporation; and
(e) such other provisions with respect to the procedure as are
deemed necessary or desirable. Upon receipt by the Corporation of a
certification complying with the procedure, the persons specified in the
certification shall be deemed, for the purpose or purposes set forth in the
certification, to be the holders of record of the number of shares specified in
place of the shareholder making the certification.
ARTICLE VIII - MISCELLANEOUS
8.1 CORPORATE SEAL. The board of directors may adopt a seal,
circular in form and bearing the name of the Corporation and the words "SEAL"
and "COLORADO," which, when adopted, shall constitute the seal of the
Corporation. The seal may be used by causing it or a facsimile of it to be
impressed, affixed, manually reproduced or rubber stamped with indelible ink.
8.2 FISCAL YEAR. The board of directors may, by resolution,
adopt a fiscal year for the Corporation.
8.3 RECEIPT OF NOTICES BY THE CORPORATION. Notices, shareholder
writings consenting to an action, and other documents or writings shall be
deemed to have been received by the Corporation when they are received:
(a) at the registered office of the Corporation in the State
of Colorado;
(b) at the principal office of the Corporation (as that office
is designated in the most recent document filed by the Corporation with the
Secretary of State for the State of Colorado designating a principal office)
addressed to the attention of the secretary of the Corporation;
(c) by the secretary of the Corporation wherever the
secretary may be found; or
(d) by any other person authorized from time to time by the
board of directors, the president or the secretary to receive such writings,
wherever such person is found.
-19-
<PAGE>
8.4 AMENDMENT OF BYLAWS. These Bylaws may at any time and from time
to time be amended, supplemented or repealed by the board of directors.
* * * * *
The undersigned, as the Secretary of the Corporation, hereby
certifies that the foregoing Bylaws are the Bylaws of the Corporation in effect
on ____________ ___, 1998.
By:_____________________________________
Secretary
-20-
AMENDED CONSULTING AGREEMENT
This Amended Consulting Agreement (the "Agreement") is entered into as of
March 1, 1999 between Panoramic Care Manager, Inc., (formerly named FreeStyle
Publications, Inc.) a Colorado corporation with its principal place of business
at 11350 West 72nd Place, Arvada, Colorado 80005, (the "Company") and Bolder
Venture Partners, LLC, a Colorado limited liability company with its principal
place of business at 1919 14th Street, Suite 800, Boulder, Colorado 80302, (the
"Consultant").
RECITALS
A. The Company and the Consultant have entered into a letter of intent,
dated September 14, 1998, (the "LOI"), pursuant to which the Consultant has
provided and is providing consulting services to the Company.
B. The Company has amended its Articles of Incorporation and effected a
Stock Split, as contemplated by the LOI, so that there are presently outstanding
2,000,000 shares of Common Stock, $.001 par value per share, and the name of the
Corporation has been changed to Panoramic Care Manager, Inc., and Consultant has
furnished consulting services to the Company as contemplated in the LOI.
C. To formalize the consulting arrangements contemplated in the LOI, the
Company and the Consultant entered into a Consulting Agreement dated as of
December 7, 1998.
D. The Company proposes to make a public offering of its shares on the
Vancouver Stock Exchange ("VSE") and has been advised that, in order to comply
with certain of the requirements of the VSE, certain of the terms of the
Consulting Agreement should be modified, and the Company and the Consultant have
therefore agreed upon amended terms as set forth herein.
AGREEMENT
In consideration of the mutual promises contained herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Effective Date. This Agreement shall be deemed to be effective from
December 1, 1998 (the "Effective Date"), and it supersedes the LOI, the original
Consulting Agreement, and any other agreements between the Consultant and the
Company relating to consulting services to be furnished by the Consultant to the
Company and all such previous agreements shall hereafter be deemed terminated
for all purposes.
2. Consulting Services. The Consultant shall be reasonably available
during the period from the Effective Date through May 31, 1999 (the "Consulting
Period"), unless the term of this Agreement is renewed pursuant to Section 7, to
consult with the officers of the Company with
<PAGE>
respect to matters of corporate development, capital raising and other financial
matters. Such consultation may include but shall not be limited to the
following:
(a) INTERIM FINANCING. The Consultant shall advise and assist with
respect to a private placement of the Company's Common Stock to raise up to
$600,000 of equity capital. The Consultant has been furnishing advise with
respect to such private placement since the Effective Date, and the private
placement has been completed.
(b) PUBLIC OFFERING. The Consultant shall advise and assist the
Company in preparation for a public offering of its Common Stock with the
intention to raise approximately $1,000,000 to $1,250,000 gross proceeds to the
Company, depending on market conditions. It is presently anticipated that such
offering would be effected through the facilities of the Vancouver Stock
Exchange in Vancouver, British Columbia and that the Common Stock would be
priced at approximately $1.00 per share to the public. The Consultant shall
assist the Company in selecting and engaging investment bankers to represent the
Company as an underwriter or agent in connection with the public offering with
Common Stock and otherwise to complete the offering.
(c) OTHER DUTIES; COORDINATION AND REPORTING. The Consultant shall
cause its principals to be available at reasonable times for consultation with
respect to strategic planning for the Company, including financial and capital
raising matters, both related to and in addition to those specific consultant
assignments described in the proceeding paragraphs of this Section 2. In
performing its services hereunder, the Consultant shall coordinate closely with
the officers and directors and other agents and advisers of the Company and
shall keep the officers of the Company fully advised at all times about the
status of all discussions with third parties concerning any of the services
provided by the Company hereunder. The Consultant shall furnish such reports
concerning its consulting activities at such intervals as the Company may from
time to time reasonably request.
3. Independent Contractor. The parties acknowledge that the
Consultant is acting as an independent contractor in furnishing the services
provided for hereunder and that neither the Consultant nor any of its officers
or agents is an employee of the Company or subject to the supervision and
direction of the Company in the performance of its services. Nothing herein
shall be deemed to create a partnership, joint venture or other relationship
between the Consultant and the Company other than the consulting relationship
described above.
4. Consulting Fees and Expenses.
(a) CONSULTING FEE. In consideration for the services to be
provided by the Consultant hereunder, the Consultant shall receive Warrants to
purchase shares of Common Stock of the Company (the "Consulting Fee") upon the
following terms:
(i) Concurrently with the execution of this
Agreement, the Company has granted to the Consultant Warrants to purchase up to
200,000 shares of Common Stock of the Company at an exercise price of $.25 per
share. The Warrants shall be immediately
2
<PAGE>
exercisable, and expire at the close of business the day prior to the offering
of shares in the Public Offering referred to in Section 3(b) above, but no later
than September 30, 2003.
(ii) Upon completion of the Private Placement, the
Company shall
grant to the Consultant Warrants to purchase 240,000 shares of Common Stock of
the Company with an exercise price of $1.00 per share. The Warrants shall be
exercisable beginning 90 days after the Company's shares are listed, posted, and
called for trading on the Vancouver Stock Exchange (the "Listing Date"), or on
December 31, 1999, whichever is earlier, and shall expire five (5) years after
that date.
(iii) Upon completion of the initial Public Offering,
the Company
shall grant to the Consultant Warrants to purchase a number of shares equal to
10% of the number of shares of Common Stock of the Company issued in the initial
Public Offering with an exercise price equal to the price per share received by
the Company in the initial Public Offering, for the first year after the Listing
Date, increased by 15 percent for the remainder of the term of the Warrants. The
Warrants shall become exercisable six months after the Listing Date and shall
remain exercisable for five years after the Listing Date.
(iv) The Warrants provided for in the preceding
paragraphs shall be evidenced by Warrant Agreements in form satisfactory to the
Company and the Consultant.
b. Cash Compensation. In addition to the compensation provided for
under Section 3 (a), during the Consulting Period the Company shall pay the
Consultant a monthly retainer of $6,000, and upon completion of the Private
Placement, the Company shall pay to the Consultant cash compensation in an
amount equal to 7.5% of the gross proceeds received by the Company in the
Private Placement.
c. Expense Reimbursement. The Company shall reimburse the
Consultant, in accordance with the Company's expense reimbursement policies, for
reasonable out-of-pocket expenses incurred in connection with the services
provided pursuant to this Agreement upon presentation of an itemized accounting
of such expenses with reasonable supporting data.
5. Trade Secrets and Confidential Information. During the term of
this Agreement and for a period of five (5) years following the termination of
Consultant's services hereunder, the Consultant shall not, directly or
indirectly, use, disseminate, or disclose for any purpose other than at the
specific written request of the Company, any of the Company's Confidential
Information, unless such disclosure is compelled in a judicial or governmental
proceeding or is required by law; PROVIDED, HOWEVER, that the Consultant shall
give the Company written notice of the Confidential Information to be so
disclosed or produced as far in advance of its disclosure or production as is
practicable and shall use his best efforts to obtain, to the greatest extent
practicable, an order or other reliable assurance that confidential treatment
will be accorded to such Confidential Information so required to be disclosed or
produced. All documents, records, notebooks, and similar repositories of records
containing information relating to any Confidential Information now in the
3
<PAGE>
Consultant's possession or control, whether prepared by him or by others, shall
be left with the Company or returned to the Company upon its request.
Consultant agrees that any violation by the Consultant of the agreements
contained in Section 5 are likely to cause irreparable damage to the Company and
the Consultant therefore agrees that if there is a breach or threatened breach
by the Consultant of the provisions of said sections, the Company shall be
entitled to an injunction restraining the Consultant from such breach. Nothing
herein shall be construed as prohibiting the Company from pursuing any other
remedies for such breach or threatened breach.
6. Reliance on Company Information; Indemnification and Limitation
of Liability. The Company recognizes and confirms that in the performance of its
services hereunder: (i) Consultant may rely upon information provided by the
Company without independent verification and (ii) Consultant does not assume
responsibility for the accuracy or completeness of such information, whether or
not it makes an independent investigation to verify such information. In no
event shall Consultant be liable for acting in accordance with instructions from
the Company or any entity authorized to act on its behalf.
(a) In consideration of Consultant's services as provided
herein, the Company agrees to indemnify and hold harmless Consultant and its
members, managers, officers, agents and employees against any loss, claim,
damage, liability, or expense, including reasonable counsel fees and expenses
("Losses") arising out of or to which Consultant may become subject in
connection with this engagement, unless such Loss results from Consultant's
willful misfeasance, bad faith or gross negligence.
(b) Consultant shall indemnify, defend and hold harmless the
Company and each of its directors, officers and employees against Losses arising
out of (i) any material misrepresentation about the Company that is inconsistent
with written information furnished to the Consultant by the Company, or (ii) or
any action by the Consultant in connection with its performance of services
hereunder which constitutes willful misfeasance, bad faith or gross negligence
by the Consultant.
(c) If any third party threatens to commence or commences any
action for which one party (the "indemnifying party") may be required to
indemnify another person hereunder, (the "indemnified party"), the indemnified
party shall promptly give notice thereof to the indemnifying party. The
indemnifying party shall be entitled, at its own expense and without limiting
its obligation to indemnify the indemnified party to assume control of the
defense of such action, with counsel selected by the indemnifying party and
reasonably satisfactory to the indemnified party. If the indemnifying party
assumes control of the defense, the indemnified party may participate in the
defense of such claim at its own expense. Without the prior written consent of
the indemnified party, which consent shall not be unreasonably withheld, the
indemnifying party may not settle or compromise the liability of the indemnified
party in any such action, or consent to or permit the entry of any judgment in
respect thereof, unless in connection with such settlement, compromise or
4
<PAGE>
consent, each indemnified party received from such claimant an unconditional
release from all liability in respect of such claim.
7. Termination; Renewal. This Agreement and the Consultant's
obligations to perform services hereunder shall terminate at the end of the
Consulting Period unless extended by the written consent of both the Consultant
and the Company.
8. Nonassignability; Successors. This Agreement provides for
personal services by the Consultant and its obligations hereunder may not be
assigned or delegated. The rights and obligations of the Company, and the rights
of the Consultant hereunder, shall bind and inure to the benefit of the
successors of the Consultant and the Company (including, in the case of the
Company, any successor to the business of the Company, whether by merger,
consolidation, acquisition of assets or any other transaction).
9. Entire Agreement. This Agreement is the entire agreement between
the parties and no representations, warranties or other statements or promises
have been made by either party to the other in connection with this Agreement.
10. Applicable Law. This Agreement shall be interpreted and
construed in accordance with the laws of the State of Colorado.
IN WITNESS WHEREOF, the Consultant and the Company have caused this
Agreement to be executed and delivered as of the first date mentioned above.
THE COMPANY:
PANORAMIC CARE MANAGER, INC.
By:__________________________________
President
THE CONSULTANT:
BOLDER VENTURE PARTNERS, LLC
By:__________________________________
Manager
5
M1 Letter of Engagement
PARTIES INVOLVED
This letter constitutes an agreement to develop software between M1
Software (M1) and Panoramic Care Manager, Inc. (CLIENT).
SCOPE OF WORK
M1 will provide the following software consulting services (the "Services")
to CLIENT:
o Software development and technical assistance to CLIENT developers;
and
o Software architectural development, preparation of software
specifications, and related activities, and assistance thereon;
PAYMENT AND BILLING INFORMATION
M1's discounted hourly rate Software Engineers under this engagement is
$80.00. M1 is entering this contract on a time and materials hourly basis.
In return for services, CLIENT shall pay a retainer to M1 in the amount of
$30,000.00 upon project inception. M1 will bill our hourly rate against
this retainer until it is 50% depleted and then apply the balance to the
final invoice. During the course of the project, M1 shall submit invoices
to CLIENT on a regular basis. These invoices will indicate date, developer,
hours worked, and work accomplished. These invoices are payable on Net 10
day terms.
As additional compensation for services, CLIENT will grant to M1 60 SHARES
OF COMMON STOCK FOR EACH HOUR of Services provided to CLIENT to a maximum
of 50,000 shares.
CONFIDENTIALITY
In connection with this engagement, M1 shall have access to or possession
of CLIENT's written procedural, and CLIENT's manual and data processing
business systems all of which are descriptive of CLIENT's proprietary
practices and methods of doing business on as needed basis. M1 understands
that all such CLIENT documentation, accounting information and business
systems are the property of CLIENT and shall be of a confidential nature
and shall be deemed trade secrets of CLIENT. M1 shall not disclose such
information or material to, or utilize such information or material for,
any other party. M1 agrees to return to CLIENT materials furnished by
CLIENT, or created by M1 for CLIENT, at anytime at CLIENT's request upon
receipt of payment for any unbilled services requested by CLIENT and
completed by M1. M1 agrees to keep CLIENT information and material in a
secure place, under access and user restrictions designed to
<PAGE>
prevent disclosure or copying of the software to unauthorized persons in a
manner not less strict that those applicable to CLIENT's trade secrets.
OWNERSHIP
M1 will develop the using its library of software tools, code and
expertise in the course of the development of the application. The
software, source code and documentation created by M1 for CLIENT, shall be
wholly owned by CLIENT.
EMPLOYMENT SOLICITATION
CLIENT agrees not to solicit for employment, to hire, or to contract with
M1's employees, agents or other personnel utilized by either party during
the period work is being performed pursuant to this Agreement or any
Schedule thereunder or for a period of twenty-four (24) months thereafter
without the prior written permission of M1. Termination of this Agreement
or any Schedule hereunder shall not relieve CLIENT of the restrictions
contained in this Section. Any breach of this covenant will result in a
penalty of four times the compensation paid to M1's employees, agents or
other personnel utilized by either party during the period work is being
performed pursuant to this Agreement or any Schedule thereunder.
UNRELATED PROBLEMS
M1 will not alter any of the CLIENT's system configuration settings
outside of the scope as determined by the specification resulting from
this engagement, and so will not be responsible for system-related
problems except where related to M1-produced code. These problems may
include, but are not limited to, Windows and operating system
configuration errors, printer drivers, speed of the software, hardware
failures, network specific problems of any sort, and user errors. All
programming environment and software tools contain certain errors and
omissions. These problems are not within the control of M1.
SOFTWARE SPEED
M1 Software will make every effort to optimize the speed of the software
resulting from this agreement. We strive for fast software. Factors
affecting speed may include, but are not limited to, Windows and operating
system configuration, printer drivers, speed of hardware and network
configuration. These problems are not within the control of M1.
FAIR USE
CLIENT agrees to allow M1 Software to use images and descriptions of the
software developed as a result of this agreement to demonstrate our level
of workmanship and
<PAGE>
quality that we provide our customers in slick sheets, CD-ROM and other
media. M1 will ensure that no confidential CLIENT information is revealed
with these samples.
LIMITATION OF LIABILITY
The entire and exclusive liability and remedy for breach of this software
agreement shall be limited to the amount paid to M1 under terms of this
contract, and shall not include or extend to any other damages, including
but not limited to, loss of profit, data, incidental or consequential
damages. In no event will M1 software's liability for any damages to the
CLIENT ever exceed the actual compensation received by M1 regardless of
the form of the claim. However, CLIENT shall be entitled to injunction
relief in connection with a breach of confidentiality of CLIENT systems
and materials.
WARRANTY
M1 will warrant software produced for CLIENT for a period of 90 days past
acceptance of the Release Candidate. M1 reserves the right to determine
whether or not bugs found are caused by M1 produced code, or not. M1 will
be fair and equitable in the determination of the cause of any ensuing
problems during the warranty period. If it is determined that problems
identified are not the result of M1 code, M1 will undertake to resolve the
problem on a time and materials basis if the CLIENT requests it. During
the warranty period, CLIENT must make earnest efforts to rigorously employ
the application, and identify any bugs.
MISCELLANEOUS
If any portion of this agreement is found void or unenforceable, the
remainder will remain valid and enforceable according to its terms. This
statement shall be construed, interpreted, and governed by the laws of the
State of California, USA. M1 Software reserves all rights not specifically
granted in this document.
M1 warrants infringement against trade secrets, trademark, copyright,
patent or other proprietary rights of other parties.
<PAGE>
SIGNED:
M1 Software Panoramic Care Manager, Inc.
1639 11th Street, Suite 200 11350 W. 72nd Place
Santa Monica, CA 90404 Arvada, CO 80005
______________________________________ _____________________________________
(Sign) (Sign)
______________________________________ _____________________________________
Name (Print) Name (Print)
______________________________________ _____________________________________
Title Title
______________________________________ _____________________________________
Date Date
CONFIDENTIAL DISCLOSURE AGREEMENT
In order to facilitate the exchange of information between Freestyle
Publications, Inc. (DBA Health Design Consultants) and:
_______________________________
Company Name
_______________________________
Address
_______________________________
City, State, Zipcode
the parties agree as follows:
1. Any information which is proprietary to one party to this Agreement and is
transmitted by said one party to the other party to this Agreement and
which is identified as confidential or proprietary at the time of its
transmission to the other party will be received and held in confidence in
accordance with paragraph 2 (ii) for a period of four (4) years from the
date of such transmittal. Proprietary information transmitted in writing
shall be marked "Confidential" or "Proprietary" by the transmitting party.
Proprietary information transmitted orally or visually which is to be
protected under the terms of this Agreement shall be so designated at the
time of disclosure followed by a subsequent reduction to documentary form
marked as proprietary, and submitted to the receiving party within thirty
(30) days from the date of initial presentation. It is agreed that unless
prior written approval is obtained from the divulging party, information
received and accepted in confidence will not be disclosed to others without
the written permission of the divulging party.
2. Notwithstanding the provisions of paragraph one of this Agreement:
(i) The parties shall not be required to maintain confidential or be
restricted in their use of any information which:
(a) was in the public domain at the date of disclosure;
(b) becomes public knowledge during the terms of this Agreement
without default by the receiving party;
(c) the receiving party can show was in its possession prior to
disclosure by divulging party;
<PAGE>
(d) is independently developed by the receiving party by persons
not having access to the proprietary information of the
disclosing party, or
(e) is legally acquired by the receiving party from a third party
without restriction.
(ii) For the purpose of protecting proprietary information received from
a party hereunder, the parties will use efforts commensurate with
those they employ for the protection of corresponding information of
their own; but a receiving party shall not be liable for any
unauthorized disclosure of proprietary information received
hereunder which occurs in spite of such efforts.
3. Any information or other material supplied under the terms of this
Agreement remains the sole property of the company supplying it and
nothing contained herein constitutes a conveyance of any rights other than
those specifically set forth.
4. Neither of the parties hereto will imply in any manner that the other
party hereto endorses or takes any position regarding any information
exchanged under this Agreement.
5. Neither of the parties is committed to disclose any information or to
undertake any activity hereunder. Either party shall be free to elect
whether or not any disclosure or activity shall be conducted by it and the
extent of activity undertaken.
6. If it is determined that there is any interest in the information
exchanged hereunder it is contemplated that a supplemental cooperative
agreement will be negotiated to determine the future relationship of the
parties. Any resulting cooperative agreement would govern the handling of
information transmitted hereunder.
7. Should any portion of this Agreement be held to be void or otherwise not
enforceable, such lack of enforceability shall not affect the other
portions of this Agreement and the parties will continue to abide by the
terms of such remaining portions.
8. This Agreement can be terminated by either of the parties upon written
notice to the other. Such notice of termination shall be effective thirty
(30) days after the receipt of such notice and shall be effective to
terminate this Agreement as regards information received after effective
termination, but shall not affect the parties' rights and obligations as
to information received before that date. Notice of termination or other
written notices of confidentiality are effective after posting if sent by
first class mail unless actually received at an earlier date.
-2-
<PAGE>
FREESTYLE PUBLICATIONS, INC. __________________________________________
Company Name
________________________________ __________________________________________
Signature Signature
________________________________ __________________________________________
Printed Name Printed Name
________________________________ __________________________________________
Title Title
________________________________ __________________________________________
Date Date
-3-
- --------------------------------------------------------------------------------
SPONSORSHIP AGREEMENT
- --------------------------------------------------------------------------------
THIS AGREEMENT dated February 16, 1999, is made
BETWEEN
CANACCORD CAPITAL CORPORATION, a member of the Vancouver Stock
Exchange (the "Exchange"), of Suite 2200 - 609 Granville Street,
Vancouver, British Columbia, V7Y 1H2
(the "Member");
AND
PANORAMIC CARE MANAGER, INC., a company incorporated under the law of
Colorado, of 11350 West 72nd Place, Arvada, Colorado, 80005
(the "Issuer").
WHEREAS:
A. The Issuer has not previously carried out a distribution of its securities
to the public, and intends to file a conditional listing application to list its
common shares (the "Shares") on the Vancouver Stock Exchange (the "Exchange")
(the "Transaction");
B. Pursuant to Exchange Policy No. 4 as amended ("Policy No. 4"), the
Exchange requires that the Issuer obtain a member to act as its sponsor within
the meaning of Policy No. 4 as a condition of approval of the Transaction;
<PAGE>
-2-
THE PARTIES to this Agreement therefore agree:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Agreement:
(a) "Act" means the Securities Act, (British Columbia), R.S.B.C. 1996, as
amended, the regulations and rules made thereunder and all
administrative policy statements, blanket orders, notices, directions
and rulings issued by the Commission;
(b) "Approval Date" means the date the Shares commence trading on the
Exchange;
(c) "Business" means the corporate undertaking of the Issuer;
(d) "Canadian Securities Acts" means the securities legislation in force
in each of the provinces of Canada;
(e) "Commission" means the British Columbia Securities Commission;
(f) "Control Block" means a holding of Shares or other securities of the
Issuer or both held by a person or combination of persons acting
jointly or in concert to which are attached more than 20% of the
voting rights attached to all outstanding Voting Securities;
(g) "Exchange" has the meaning assigned above;
(h) "Exchange Policy" means a policy listed in the Exchange's Corporate
Finance Services Policy and Procedures Manual;
(i) "Issuer" has the meaning assigned above and includes any wholly-owned
or partially-owned subsidiaries of the Issuer;
(j) "Material Change" has the meaning defined in the Act;
(k) "Member" has the meaning assigned above;
<PAGE>
-3-
(l) "Proceeds" means the proceeds from the Public Offering, if any;
(m) "Public Offering" means the offering of the Issuer's securities
contemplated to be made by the Member as agent contemporaneously with
or after the closing of the Transaction, if any;
(n) "Quarterly Report" means a report of the Issuer in Form 61 to the Act;
(o) "Reports" means any business plans, engineering reports, geological
reports, technical reports, valuation opinions or similar documents
concerning the Business;
(p) "Transaction" has the meaning assigned in Recital A; and
(q) "Voting Security" means a security of the Issuer that carries a voting
right under all circumstances.
2. INVESTIGATION BY MEMBER
2.1 The Issuer shall at all times afford full access to the Member and its
authorized representatives to all properties, books, contracts, commitments and
other corporate records, and shall furnish the Member with copies thereof and
such other information concerning the Business as the Member may request, in
order that the Member may undertake an investigation of the Issuer and the
Business.
2.2 The Issuer shall forthwith provide the Member with:
(a) the most recent audited financial statements concerning the Issuer,
and unaudited financial statements, prepared as of a date satisfactory
to the Member in draft if the financial statements have not been
finalized;
(b) such information as necessary so as the Member can prepare a
Pre-Listing Application and Fact Sheet in the form required by the
Exchange;
(c) a draft disclosure document (prospectus or filing statement)
appropriate to the Transaction;
<PAGE>
-4-
(d) fully completed and executed personal information forms in Form 4B to
the Act for all directors and officers;
(e) copies of all Reports which are available, in final form or in draft
if such Reports have not been finalized;
(f) questionnaires, in the form provided by the Member, completed in full
by each of its directors and each member of its senior management;
(g) copies of all relevant material contracts.
2.3 Upon conclusion of its investigation, the Member shall give notice to
the Issuer whether it has decided to act as the Issuer's sponsor with regard to
the Transaction.
3. TERM
This Agreement shall be effective from the date hereof until:
(a) if the Member gives notice to the Issuer that it has decided not to
act as the Issuer's sponsor with regard to the Transaction, the date
such notice is given; or
(b) if the Member gives notice to the Issuer that it has decided to act as
the Issuer's sponsor with regard to the Transaction, the close of
business on that day falling one year from the Approval Date;
unless it is terminated earlier by the Member in accordance herewith.
4. FEE
4.1 The Issuer will pay the Member a fee of U.S. $10,000.00 (plus
G.S.T.) (PAID) in consideration of the Member acting as the Issuer's sponsor
with regard to the Transaction. The Fee will be due as to (a) 50% upon execution
of this Agreement and; (b) 50% upon acceptance of the Issuer's Application by
the Pre-Listing Advisory Committee of the Exchange.
The Member's G.S.T. Number is 133567545.
<PAGE>
-5-
4.2 The Issuer's obligation to pay the above fee earned by the Member up
to the date of termination of this Agreement shall survive the termination of
this Agreement.
5. COVENANTS OF THE ISSUER
5.1 If, during the term of this Agreement, a Material Change in the
assets, liabilities (contingent or otherwise), business, operations or capital
of the Issuer should occur, or be anticipated or threatened, the Issuer shall
notify the Member immediately, in writing, with full particulars of the change.
5.2 If the Issuer is not certain as to whether a Material Change has
occurred, the Issuer shall promptly notify the Member in writing of the full
particulars of the event giving rise to the uncertainty, and shall consult with
the Member as to whether such event constitutes a Material Change.
5.3 The Issuer shall provide the Member with copies of all Reports
forthwith upon preparation or receipt of same.
5.4 The Issuer shall notify the Member of:
(a) any change proposed to be made in the Business;
(b) any proposed issuance of a Control Block;
(c) any proposed sale or other disposition of any outstanding shares in
the capital of any Subsidiaries wholly or partially owned by the
Issuer;
forthwith upon the proposal of such change, issuance, sale or disposition.
5.5 The Issuer shall notify the Member of any proposed change to the
constitution of the Board of Directors of the Issuer, or to the membership of
senior management of the Issuer, forthwith upon the proposal of such a change.
Forthwith after giving such notification, the Issuer shall provide the Member
with a questionnaire in the form provided by the Member, completed in full by
the proposed candidate. The Issuer shall promptly notify the Member, in writing
of any
<PAGE>
-6-
resignations, terminations or departures of members of the Board of Directors or
senior management.
5.6 The Member reserves its right to terminate this Agreement, resign as
sponsor and to notify the Exchange of its decision to resign should it object to
any of the proposed changes set forth in Subsections 5.4 and 5.5.
5.7 The Issuer shall provide the Member with copies of all Quarterly
Reports, press releases, promotional materials, material change reports,
materials prepared in connection with the Issuer's annual general meeting and
any special meetings of shareholders, annual reports, and financial statements
prepared by or for the Issuer forthwith upon preparation or receipt of the same.
5.8 The Issuer shall notify the Member of any circumstances where the
Issuer does not expect to comply with a filing deadline imposed by regulatory
authorities. Where possible, such notification shall be provided at least 10
business days before the deadline.
5.9 If the Issuer sells Shares or other securities to the public during
the Member's term as sponsor, then, commencing the last day of the month in
which such sale closes, the Issuer will, upon request by the Member, provide the
Member with quarterly sources and uses of funds statements within 15 days
of each month's end. Such statements will illustrate variances with the use of
proceeds set out in the prospectus prepared in connection with the sale of
Shares or other securities.
5.10 The Issuer shall at all times use its best efforts to assist the
Member in carrying out its duties as sponsor.
5.11 The Issuer acknowledges that it has appointed Jill Flateland as its
officer responsible for carrying out its reporting obligations to the Member
hereunder, and agrees that the Member may direct and address all inquiries and
submit all notices hereunder to the attention of Jill Flateland.
<PAGE>
-7-
5.12 Nothing in this Agreement is or shall be construed as a fetter on the
discretion of the directors of the Issuer.
5.13 All information relating to the Issuer provided by the Issuer to the
Member shall be directed to the corporate finance department of the Member, and
the Issuer will not disclose to any other person associated with the Member any
information relating to the Issuer which is not publicly available.
6. ACKNOWLEDGEMENTS OF ISSUER
6.1 The Issuer acknowledges that the Member has informed the Issuer and
its directors and management of their responsibilities concerning continuous and
timely disclosure under the Act, and in particular, without limitation, of the
Issuer's responsibility to issue a press release, and file a material change
report, in the event of a Material Change in the business, operations, assets or
ownership of the Issuer. The Issuer further acknowledges in this regard that it
has been made aware by the Member of the services offered by commercial news
disseminators.
6.2 The Issuer acknowledges that the Member has advised the Issuer
concerning the Exchange's on-going requirements concerning the minimum
distribution of the Shares.
7. REPRESENTATIONS, WARRANTIES AND INDEMNIFICATIONS OF THE ISSUER
7.1 The Issuer warrants and represents to the Member, and acknowledges
that the Member has relied on such warranties and representations in entering
into this Agreement, that:
(a) the responses in all questionnaires completed by the directors and
senior management personnel of the Issuer and provided to the Member
pursuant to this Agreement shall be accurate and complete;
(b) the descriptions of the assets and the liabilities of the Issuer set
out in the balance sheets of the Issuer, including the notes thereto,
to be provided to the Member will be true and correct, will accurately
and fairly present the financial position and condition of the Issuer
as at the respective dates thereof, will reflect all liabilities
<PAGE>
-8-
(absolute, accrued, contingent or otherwise) of the Issuer at the
respective dates thereof and will be prepared in accordance with
generally accepted accounting principles, applied on a consistent
basis;
(c) the statement of earnings, retained earnings and changes in financial
position of the Issuer, including the notes thereto, to be provided to
the Member will in each case accurately and fairly present the results
of the operations of the Issuer for the respective periods covered
thereby and will be prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout such
period;
(d) the financial position of the Issuer as at the date hereof is no less
favourable than that disclosed in the latest draft balance sheets
provided to the Member;
(e) the information concerning the Business which will be provided to the
authors of the Reports will be accurate, complete and fair, and the
Reports, to the best of the knowledge of the Issuer, will be fair and
accurate in all particulars;
(f) to the extent that they are required to do so, the authors of the
Reports will possess all of the qualifications required by the
Exchange and the Commission of authors of such reports;
(g) the information contained in the sources and uses of funds statements
to be provided to the Member hereunder will be accurate and complete;
(h) the execution of this Agreement by the Issuer does not and will not
conflict with, and does not and will not result in a breach of, or
constitute a default under, any agreement or instrument to which the
Issuer is a party, or by which the Issuer is bound, or the terms of
the incorporating documents of the Issuer;
(i) the execution of this Agreement has been authorized by all necessary
corporate action on the part of the Issuer;
<PAGE>
-9-
(j) as of the date hereof:
(i) there has not been any Material Change in the assets,
liabilities or obligations (absolute, accrued, contingent or
otherwise) of the Issuer;
(ii) there has not been any Material Change in the capital or
long-term debt of the Issuer;
(iii) there has not been any Material Change in the Business, business
prospects, condition (financial or otherwise) or results of the
operation of the Issuer;
from those disclosed in the most recent [consolidated] draft financial
statements provided to the Member of which the Member has not been
made aware by the Issuer;
(k) since the date of the most recent financial statements provided
to the Member, the Issuer has carried on the Business in the
ordinary course;
(l) the Issuer is duly registered and licensed to carry on business
in the jurisdictions which it carries on business or owns
property;
(m) no order suspending the sale of or ceasing the trading in the
Shares or other securities of the Issuer has been issued and not
rescinded, revoked or withdrawn by any securities commission,
regulatory authority or stock exchange in any jurisdiction, and
no proceedings for that purpose have been instituted or are
pending or are, to the knowledge of the directors or senior
management of the Issuer, contemplated or threatened by any
securities commission, regulatory authority or stock exchange;
(n) no enquiry or investigation, formal or informal, in relation to
the Issuer or the Issuer's directors or senior management, has
been commenced or threatened by any official or officer of any
securities commission, regulatory authority or stock exchange;
<PAGE>
-10-
7.2 The representations and warranties of the Issuer set forth in
Subsection 7.1 hereof shall continue to be true and accurate throughout the term
of this Agreement.
7.3 The Issuer shall indemnify and save harmless the Member, and each
director, officer, employee or agent of the Member (collectively, the
"Indemnified Parties"), from and against all losses, claims, damages,
liabilities, costs or expenses caused or incurred by the Indemnified Parties
arising or resulting from any breach by the Issuer of any of the terms of this
Agreement.
7.4 If any action or claim is brought against an Indemnified Party in
respect of which indemnity may be sought from the Issuer pursuant to this
Agreement, the Indemnified Party will promptly notify the Issuer in writing.
7.5 The Issuer will assume the defense of the action or claim, including
the employment of counsel and the payment of all expenses.
7.6 The Indemnified Party will have the right to employ separate counsel,
and the Issuer will pay the fees and expenses of such counsel.
7.7 The indemnity provided for in this Section will not be limited or
otherwise affected by any other indemnity obtained by the Indemnified Party from
any other person in respect of any matters specified in this Agreement and will
continue in full force and effect until all possible liability of the
Indemnified Party arising out of this Agreement has been extinguished by the
operation of law.
7.8 If indemnification under this Agreement is found in a final judgment
(not subject to further appeal) by a court of competent jurisdiction not to be
available for reason of public policy, the Issuer and the Indemnified Parties
will contribute to the losses, claims, damages, liabilities or expenses (or
actions in respect thereof) for which such indemnification is held unavailable
in such proportion as is appropriate to reflect the relative benefits to and
fault of the Issuer, on the one hand, and the Indemnified Parties on the other
hand, in connection with the matter giving rise to such losses, claims, damages,
liabilities or expenses (or actions in respect thereof). No person found liable
for a fraudulent misrepresentation (within the meaning of applicable securities
laws)
<PAGE>
-11
will be entitled to contribution from any person who is not found liable
for such fraudulent misrepresentation.
7.9 To the extent that any Indemnified Party is not a party to this
Agreement, the Member will obtain and hold the right and benefit of this section
in trust for and on behalf of such Indemnified Party.
8. RIGHT OF FIRST REFUSAL
8.1 The Issuer will notify the Member of the terms of any equity
financing that it requires or proposes to obtain during the term of this
Agreement, and the Member will have the right of first refusal to provide any
such financing.
8.2 The right of first refusal must be exercised by the Member within 15
days following the receipt of the notice referred to in Subsection 8.1 by
notifying the Issuer that it will provide the financing on the terms set out in
the notice.
8.3 If the Member fails to give notice within the time provided for in
Subsection 8.2, the Issuer shall then be free to make other arrangements to
obtain the financing from another source on the same terms or on terms no less
favourable to the Issuer.
8.4 The Member's right of first refusal will not terminate if, on receipt
of any notice from the Issuer under this Section, the Member fails to exercise
the right.
8.5 The right of first refusal granted under this Section shall terminate
one year from the Approval Date.
9. TERMINATION
9.1 The Member may terminate this Agreement in any of the following
events:
(a) if an adverse Material Change (actual, anticipated or threatened) in
the assets, liabilities (contingent or otherwise), business operations
or capital of the Issuer should occur;
<PAGE>
-12-
(b) if, after completion of the Transaction, any order is made suspending
trading in the Shares on the Exchange, or any order to cease or
suspend trading in the Shares is made pursuant to any of the Canadian
Securities Acts or is made by any other regulatory authority, and is
not rescinded, revoked or withdrawn within 30 days of the making
thereof;
(c) if any enquiry or investigation (whether formal or informal) in
relation to the Issuer or the Issuer's directors or senior management,
is commenced or threatened by an officer or official of any securities
regulatory authority in Canada or by any officer or official of any
other competent authority;
(d) if the Issuer shall at any time be in breach of any of the terms of
this Agreement;
(e) if the Issuer determines to take a course of action referred to in
Subsections 5.4 or 5.5 to which the Member has notified the Issuer in
writing it objects;
(f) if the Member determines that any representation or warranty made by
the Issuer in this Agreement is false or has become false.
9.2 Any termination by the Member hereunder shall be made by notice in
writing to the Issuer. Notwithstanding the giving of any notice of termination
hereunder, the expenses and fees agreed to be paid by the Issuer incurred up to
the time of the giving of such notice shall be paid by the Issuer as herein
provided.
9.3 The Issuer acknowledges and agrees that, if the Member terminates this
Agreement, the Member shall comply with all applicable provisions of Policy No.
4 relating to termination of sponsorship, including the filing of a letter
explaining the termination with the Exchange. In such event, the Member may
disclose to the Exchange such information concerning the Issuer as the Member in
its sole discretion considers to be necessary to fulfill its obligations to the
Exchange and the requirements of Policy No. 4, including any information which
the Issuer has disclosed to the Member on a privileged or confidential basis.
<PAGE>
-13-
9.4 The rights of the Member to terminate this Agreement are in addition
to such other remedies as it may have in respect of any default,
misrepresentation, act or failure of the Issuer in respect of any of the matters
contemplated by this Agreement.
9.5 The Issuer may terminate this Agreement upon giving 30 days written
notice to the Member.
10. EXPENSES OF MEMBER
10.1 The Issuer will pay all of the expenses reasonably incurred by the
Member in connection herewith, including, without limitation, the fees and
expenses of any solicitors which might be retained by the Member in connection
herewith.
10.2 The Member may, from time to time, render accounts for such expenses
to the Issuer for payment on the dates set out in such accounts.
10.3 The Issuer's covenant to pay the Member's expenses shall survive
termination of this Agreement.
11. NOTICE
11.1 Any notice under this Agreement will be given in writing and must be
delivered, sent by facsimile transmission or mailed by prepaid post and
addressed to the party to which notice is to be given at the address indicated
above, or at another address designated by such party in writing.
11.2 If notice is sent by facsimile transmission or is delivered, it will
be deemed to have been given at the time of transmission or delivery.
11.3 If notice is mailed, it will be deemed to have been received 48 hours
following the date of mailing of the notice.
11.4 If there is an interruption in normal mail service due to strike,
labour unrest or other cause at or prior to or within 48 hours of the time a
notice is mailed the notice will be sent by facsimile transmission or will be
delivered.
<PAGE>
-14-
12. TIME
Time is of the essence of this Agreement and will be calculated in accordance
with the provisions of the Interpretation Act (British Columbia).
13. LANGUAGE
Wherever a singular or masculine expression is used in this Agreement, that
expression is deemed to include the plural, feminine or the body corporate where
required by the context.
14. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and cancels and supersedes any prior
understandings and agreements between the parties hereto with respect thereto.
15. COUNTERPARTS
This Agreement may be executed in two or more counterparts and may be delivered
by telecopier. Each executed counterpart will be deemed to be an original, and
all of them will constitute one agreement, effective as of the reference date
given above.
16. HEADINGS
The headings in this Agreement are for convenience of reference only and do not
affect the interpretation of this Agreement.
17. ENUREMENT
This Agreement enures to the benefit of and is binding on the parties to this
Agreement and their successors.
18. LAW
This Agreement is governed by the law of British Columbia, and the parties
hereto irrevocably attorn and submit to the jurisdiction of the courts of
British Columbia with respect to any dispute related to this Agreement.
<PAGE>
-15-
The common seal of )
CANACCORD CAPITAL CORPORATION )
was hereunto affixed in the )
presence of: )
)
)
- ----------------------- )
Authorized Signatory ) c/s
)
)
- ----------------------- )
Authorized Signatory )
)
)
The common seal of )
PANORAMIC CARE MANAGER, INC. )
was hereunto affixed in the )
presence of: )
)
)
- ----------------------- )
Authorized Signatory ) c/s
)
)
- ----------------------- )
Authorized Signatory )
OFFICE LEASE
<PAGE>
TABLE OF CONTENTS
PAGE
TABLE OF CONTENTS.......................................................i & ii
OFFICE LEASE SUMMARY.........................................................1
ARTICLE I DESCRIPTION-TERM-RENT-USE.....................................2
ARTICLE II OPERATING COSTS...............................................2
ARTICLE III INSURANCE.....................................................4
ARTICLE IV LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS................4
ARTICLE V REPAIRS AND MAINTENANCE OF PREMISES-SURRENDER OF
PREMISES-WASTE................................................4
ARTICLE VI COMPLIANCE WITH LAW AND INSURANCE REQUIREMENTS................6
ARTICLE VII CHANGES AND ALTERATIONS BY TENANT.............................6
ARTICLE VIII DAMAGE OR DESTRUCTION.........................................4
ARTICLE IX CONDEMNATION..................................................8
ARTICLE X CONDITIONS OF WORK FOR REPAIRS ALTERATIONS....................8
ARTICLE XI MECHANICS' LIENS..............................................8
ARTICLE XII LANDLORD'S RIGHT TO ENTER PREMISES............................9
ARTICLE XIII ASSIGNMENT AND SUBLETTING.....................................9
ARTICLE XIV RIGHTS OF MORTGAGEE..........................................10
ARTICLE XV INDEMNIFICATION OF LANDLORD-NO REPRESENTATIONS BY
LANDLORD.....................................................11
ARTICLE XVI DEFAULT PROVISIONS-REMEDIES OF LANDLORD-WAIVER OF
JURY TRIAL...................................................11
ARTICLE XVII HOLDING OVER.................................................13
-i-
<PAGE>
ARTICLE XVIII INVALIDITY OF PARTICULAR PROVISIONS..........................13
ARTICLE XIX NOTICES......................................................14
ARTICLE XX QUIET ENJOYMENT..............................................14
ARTICLE XXI LIMITATION OF LANDLORD'S LIABILITY...........................14
ARTICLE XXII ESTOPPEL CERTIFICATE BY TENANT...............................15
ARTICLE XXIII CUMULATIVE REMEDIES-NO WAIVER-NO ORAL CHANGE.................15
ARTICLE XXIV BROKERAGE....................................................16
ARTICLE XXV SECURITY DEPOSIT.............................................16
ARTICLE XXVI MISCELLANEOUS PROVISIONS.....................................17
SIGNATURE PAGE...............................................19
EXHIBIT A DESCRIPTION OF PREMISES......................................20
EXHIBIT B FLOOR PLAN...................................................21
RULES AND REGULATIONS.......................................................22
EXHIBIT C ESTOPPEL CERTIFICATE.........................................24
-ii-
<PAGE>
INDUSTRIAL LEASE
THIS LEASE is dated for reference purposes only the 22nd day of February,
1999 and is between Jefferson Park West, having a place of business at 6425 West
52nd Avenue, Arvada, CO 80002 (the "Landlord"), and Panoramic Care Manager,
having a place of business at 5181 Ward Road, #206, Wheat Ridge, CO 80033 (the
"Tenant").
DEFINITIONS
Section 1.1 - Building Location: 5181 Ward Road, Wheat Ridge, Colorado 80033
Total Building Square Feet: 16,690
Number of Square Feet in Premises: 2,856
Unless expressly stated to the contrary, all references to square
feet in this Lease shall refer to rentable square feet.
Section 1.2 - Lease Term: 1 Year 6 Months
Commencement: 3/15/1999 Expiration: 9/15/2000
Section 1.3 - Base Rent: (Including Tenant's Expense Stop defined in
Section 2.1)
Period Monthly Base Rent
------ -----------------
3/15/1999 through 3/31/1999 $ 742.56
4/1/1999 through 2/28/2000 2,856.00
March 2000 2,913.12
4/1/2000 through 8/31/2000 2,970.24
9/1/2000 through 9/15/2000 1,485.12
----------
$ - TOTAL LEASE AMOUNT
Section 1.4 - Use of Premises: Computer Software Office
Section 2.1 - Tenant's Pro Rata Share (of Building Operating Costs, payable as
Additional Rent): 17.11%
Tenant's Expense Stop:
As Defined in Operating Costs $4.24 per rentable square foot -
Year 1
$4.41 per rentable square foot -
Year 2
Section 24.1 -Brokerage: Commercial Design/Build Realty, LLC is acting as
Landlord's Broker and Keys, Whiteside and Hart is acting as
Tenant's Broker.
Section 25.1 -Security Deposit: $2,856.00
<PAGE>
WITNESSETH:
ARTICLE I
DESCRIPTION-TERM-RENT-USE
SECTION 1.1 The Landlord, in consideration of the rents, covenants and
agreements does lease unto the Tenant, and the Tenant does hereby take the space
(the "Premises") described on Exhibit A attached hereto in the building located
at the place specified in the Definitions section of this Lease (the
"Building"). So long as this Lease remains in effect and Tenant is not in
default of any of its obligations under the Lease, Tenant shall have the license
to non-exclusively use spaces in any parking area designated for use by tenants
of the Building, subject to such parking control program as Landlord, in its
sole discretion, may implement from time to time.
SECTION 1.2 The term of this Lease shall be as specified in the Definitions
section of this Lease (unless sooner terminated as herein provided).
SECTION 1.3 Tenant agrees and covenants to pay to Landlord during the term of
this Lease, at the place specified by Landlord, the Base Rent specified and
Additional Rent without deduction or setoff. All amounts owing by Tenant to
Landlord under this Lease, other than Base Rent, shall be Additional Rent, and
upon Tenant's failure to timely pay, Landlord shall have the same remedies as
for Tenant's failure to pay Base Rent. (Base Rent and Additional Rent may
collectively be referred to as Rent). Base Rent shall be paid in advance on the
first day of each calendar month during the term of this Lease, except that the
first month's rent shall be due and payable when this Lease is executed by
Tenant. If the term does not commence on the first day of a month, Base Rent
shall be prorated and paid on the date of such commencement. Interest at the
rate of two (2%) percent per month will be charged retroactive to the first day
of the month for rents not paid by the fifth (5th) day of the month until all
monies are paid.
SECTION 1.4 The Tenant agrees that it will use and occupy the Premises only for
the purposes set forth in the Definitions section of this Lease.
ARTICLE II
OPERATING COSTS
SECTION 2.1 In addition to Base Rent, Tenant shall pay Tenant's Pro Rata Share
of Building Operating Costs in excess of Tenant's Expense Stop as defined in
Section 2.1 (Definitions section of this Lease.) Building Operating Costs shall
mean all expenses, costs and disbursements (in excess of Tenant's Expense Stop
defined in the Definitions section of this Lease) which Landlord shall pay or
become obligated to pay because of, or in connection with, the maintenance,
repair and operation of the Building, including, but not limited to: real estate
taxes and assessments, use, sales, or any other taxes (except income taxes)
based on rents, personal property taxes on personal property used in the
operation of the Building; Landlord's insurance; utilities and water not
separately metered to individual tenants; costs of leasing or amortization of
energy reduction devices and systems; maintenance; janitorial service for any
common areas of the Building; operating supplies; properly management; Building
services; snow removal; landscaping; costs of leasing or amortizing plants,
shrubs, trees, or flowers and normal maintenance thereof; costs of rubbish
removal for any common areas of the Building; tools and equipment used for the
daily operation of the Building; air conditioning, ventilation and heating;
elevator repair and maintenance; resurfacing and restriping of parking areas;
repair and replacement of signage; security; and wages, payroll taxes, and
benefits reasonably incurred in the operation of the Building. [Items excluded
in building operations are costs related to enforcing leases and eviction costs
against other Tenants].
-2-
<PAGE>
Notwithstanding the foregoing, Building Costs shall not include monies spent for
income tax, accounting, interest, depreciation, or expenditures of a capital
nature (except to the extent that such expenditures are required due to a change
in a law or are reasonably anticipated to cause a reduction in the cost of
services; in such case, that part of the capital expense attributable to the
lease year under good accounting practices shall be included in the Building
Operating Costs )
SECTION 2.2 Landlord's reasonable best estimate as to the amount of Tenant's
Pro-Rata Share of Building Operating Costs shall be payable monthly, together
with the monthly installment of Base Rent and any other Additional Rent due and
payable to Landlord. Within one hundred twenty (120) days after the beginning of
each calendar year, commencing with the year immediately following the date of
this Lease, Landlord shall give Tenant a statement of Landlord's reasonable
estimate of Building Operating Costs for the calendar year just started
("Building Operating Costs Estimate"), which shall be based upon a determination
of past and estimated future operating cost data, together with a statement
setting forth the Building Operating Costs incurred by the Landlord during the
calendar year just ended ("Actual Cost Statement"). Landlord's failure to give
the Building Operating Costs Estimate or Actual Cost Statement within said one
hundred twenty (120) day period shall not release in any manner Tenant's
obligations under this Lease, and Landlord may render said Estimate or Statement
at any time thereafter. In the event that the date of this Lease is not January
1, then the Base Operating Costs and the Building Operating Costs shown in the
first Actual Cost Statement shall both be multiplied by a fraction (the
numerator of which is the number of days that this Lease was in effect during
its first calendar year and the denominator of which is 365) to determine if
Tenant owes Building Operating Costs for the first partial calendar year. The
obligation of Tenant for its Pro Rata Share of Operating Expenses for the last
partial calendar year of the Lease shall be similarly calculated. Landlord may
revise the monthly operating cost payment provided for herein upward or downward
to reflect more accurately the newly estimated Building Operating Costs, which
revision shall be separately set forth in Landlord's Building Operating Costs
Estimate. All payments due at least thirty (30) days after Landlord gives the
Building Operating Costs Estimate or Actual Cost Statement shall be made at the
monthly rate set forth therein. In addition, if the Actual Cost Statement
reveals that Tenant made underpayments or overpayments of Building Operating
Costs during the calendar year just ended, Tenant shall pay Landlord the amount
of any underpayment within thirty (30) days of Landlord's giving the Actual Cost
Statement and any overpayment shall be credited against the next payments by
Tenant of its Pro Rata Share of Operating Expenses coming due.
SECTION 2.3 The obligations of Tenant to pay Building Operating Costs and any
other Additional Rent for the term or any extended term of this Lease, and to
maintain and repair the Premises as required by this Lease, shall survive any
termination or expiration of this Lease.
ARTICLE III
INSURANCE
SECTION 3.1 The Tenant, at its sole cost and expense, shall maintain for the
mutual benefit of Landlord and Tenant general public liability insurance against
claims for personal injury, death or property damage occurring upon, in or about
the Premises or any elevators or escalators therein and on, in or about the
adjoining streets and passageways, if any, such insurance to afford protection
to the limits of not less than the following amounts: $1,000,000.00 in respect
-------------
of injury or death of a single person, $1,000,000.00 in respect of any one
-------------
occurrence, and $1,000,000 in respect to property damage.
----------
SECTION 3.2 All policies of insurance shall be in a form and substance
satisfactory to the Landlord, shall be written with companies having a rating of
not less than A- in Best's Guide, and shall provide that they shall not be
cancelable on less than thirty (30) days' notice to the Landlord or holder of
any mortgage.
-3-
<PAGE>
Certificates of insurance shall be furnished to the Landlord prior to Tenant's
commencing occupancy and at least thirty (30) days prior to the expiration of
any policy. Tenant's policies shall name Landlord and its designees as an
additional insureds. Nothing herein shall preclude Landlord from obtaining such
insurance as it deems advisable with respect to the Building, and the cost
thereof shall be included in the Operating Costs.
ARTICLE IV
LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS
SECTION 4.1 If there shall be an Event of Default under this Lease, the Landlord
may, but shall not be obligated to, and without further notice or demand and
without waiving or releasing the Tenant from any obligation of the Tenant under
this Lease, make any payment or perform such other act to the extent the
Landlord may deem desirable. All sums so paid by the Landlord and all expenses
including attorneys' fees and costs, together with interest thereon at the rate
of one percent (1%) per month, shall be Additional Rent and be payable to Tenant
to the Landlord on demand.
ARTICLE V
REPAIRS AND MAINTENANCE OF PREMISES-SURRENDER OF
PREMISES-WASTE
SECTION 5.1 Except for obligations of Landlord expressly imposed upon it in this
paragraph, Tenant covenants at the Tenant's sole expense to keep the Premises in
a clean, orderly condition and free of debris, materials and rubbish, and to
maintain in good order and condition and to promptly repair the Premises
including, but not limited to, ceilings, floors, walls, woodwork, paint, doors
and glass (ordinary wear and tear excepted). Unless maintenance or repair is
required as the result of the conduct of Tenant, its agents, representatives,
employees or contractors, Landlord shall maintain the plumbing, plumbing
fixtures, heating/air conditioning, hot water systems, electrical systems,
mechanical systems and Building equipment located in or serving the Premises.
Landlord shall also be obligated at its expense to maintain and repair (or
improve) the portions of the Building not occupied by tenants in good order and
condition. All costs incurred by Landlord in performing its obligations
hereunder shall be included in Operating Costs.
SECTION 5.2 Tenant covenants that upon expiration or termination of this Lease
for any reason whatsoever the Tenant will surrender the Premises to the Landlord
together with all improvements, alterations and replacements thereto in good
order, condition and repair, except for ordinary wear and tear, provided that if
Landlord requests Tenant to remove any such improvements, alterations or
replacements, the Tenant shall remove same and restore the Premises to their
prior condition at Tenant's expense. Request for removing such improvements
shall be made in writing prior to lease term and will not be requested following
termination of lease. Upon expiration or termination, Tenant shall remove, to
Landlord's satisfaction, all petroleum, hazardous wastes and substances
generated or stored at the Premises by Tenant.
SECTION 5.3 Tenant covenants not to do or suffer any waste, damage or injury the
Premises, or overloading of the Premises' floors.
SECTION 5.4 Notwithstanding any provision of this Lease to the contrary, Tenant
shall be solely responsible for obtaining and paying the cost of janitorial
services for the Premises, trash removal services concerning trash generated at
the Premises and all utilities and telephone services other than water. Landlord
shall not be obligated to Tenant in any manner whatsoever if any of the
utilities and other services to the Premises are disrupted, it being understood
and agreed upon by the parties that Tenant shall obtain at its own expense such
business interruption insurance as it deems advisable to protect it against such
risks. Nothing in this paragraph shall be construed to permit Tenant to make any
change or alteration to the Premises without complying with the provisions of
Article VII of this Lease.
-4-
<PAGE>
SECTION 5.5 Tenant acknowledges that it may be doing business with various
business entities which may deliver, or cause to be delivered, various materials
to Tenant. Tenant covenants and agrees that it shall, without forty-five (45)
days after occurrence, repair damages to foundation, roof, overhead doors, door
jambs, entryways, and exterior walls of the Building where the Premises is
located, which were caused by the act or omission of Tenant, Tenant's agents,
employees, customers, invitees and suppliers, their agents, employees or
delivery services.
SECTION 5.6 Prior to the expiration or termination of this Lease, Tenant shall
remove stains or deposits of grease, oil, tar, paint, or any other material used
by Tenant such as to restore the Premises to its original condition (ordinary
wear and tear excepted). Tenant shall not store any motor vehicles at the
Premises.
ARTICLE VI
COMPLIANCE WITH LAW AND INSURANCE REQUIREMENTS
SECTION 6.1 Tenant covenants, at the Tenant's sole expense, to comply with all
laws, ordinances and requirements of governmental agencies, legislative bodies
and courts of competent jurisdiction, of whatever kind and nature, whether now
existing or hereafter enacted, amended or modified (including, but not limited
to, any laws, ordinances and requirements as related to protection of the
environment and environmental policy) which may be applicable to the Premises.
SECTION 6.2 Tenant shall not permit the Premises to be used or operated in any
manner such that the Premises may or do become contaminated by an hazardous
substance or environmental pollutant in violation of any federal, state or local
environmental statute or ordinance, including without limitation, violation of
the Comprehensive Environmental Response, Compensation and Liability Act, as
amended from time to time ("CERCLA").
SECTION 6.3 If the presence of hazardous substances on the Premises caused or
permitted by Tenant results in contamination of the Premises, or if
contamination of the Premises by hazardous materials otherwise occurs to the
extent caused by any act or omission of Tenant, then Tenant shall indemnify,
defend and hold Landlord harmless from any and all claims, judgments, damages
penalties, fines, costs, liabilities or losses (including, without limitation,
diminution in value of the Premises, damages for the loss or restriction on use
of rentable or usable space or of any amenity of the Premises, damages, arising
from any adverse impact on marketing of space, and sums paid in settlement of
claims, court costs, attorneys' fees, consultant fees, investigation costs and
expert fees) which arise during or after the Lease term as a result of such
contamination in violation of any federal, state or location environmental
statutes or ordinances, including, but not limited to, violations of CERCLA.
This indemnification of Landlord by Tenant includes, without limitation, costs
incurred in connection with any investigation of site conditions or any cleanup,
remedial, removal, or restoration work required by an federal, state, or local
governmental agency or political subdivision because of hazardous material
present in the soil or ground water on or under the Premises. Without limiting
the foregoing, if the presence of any hazardous material on the Premises caused
or permitted by Tenant results in any contamination of the Premises, Tenant
shall promptly take all actions at its sole expense as are necessary to return
the Premises to the condition existing prior to the introduction of any such
hazardous material to the Premises; provided that Landlord's approval of such
actions shall first be obtained, which approval shall not be unreasonably
withheld so long as such actions would not potentially have any material adverse
effect on the Premises.
-5-
<PAGE>
ARTICLE VII
CHANGES AND ALTERATIONS BY TENANT
SECTION 7.1 Tenant shall not make any changes or alternations, structural or
otherwise, to the Premises without the Landlord's prior written consent, which
shall not be unreasonably withheld. Structural changes to the Premises may be
disapproved by Landlord for any reason in the sole and absolute discretion of
Landlord. Landlord's consent to nonstructural changes or alterations will not be
unreasonably withheld, but Tenant acknowledges and agrees that among other
reasons, Landlord may withhold its consent to such nonstructural changes or
alterations if such changes or alterations would adversely affect any insurance
policy. In addition, and among other things, Landlord may condition any such
consent to Landlord obtaining adequate insurance from the Tenant that the costs
of removing the changes or alterations prior to the expiration of the Lease are
secured to Landlord's reasonable satisfaction and that Landlord is protected
against liens being filed against the Building.
SECTION 7.2 Subject to the provisions of Section 5.2, all repairs, improvements,
fixtures, changes or alterations made or installed by the Tenant shall become
the property of the Landlord immediately upon completion of installation without
payment by the Landlord.
ARTICLE VIII
DAMAGE OR DESTRUCTION
SECTION 8.1 Tenant covenants and agrees that in case of damage to or destruction
of the Premises by fire or other casualty, Tenant shall promptly give written
notice thereof to Landlord, and the Landlord, to the extent of any insurance
proceeds actually received, shall repair and rebuild the same as nearly as
possible to the condition the Premises were in immediately prior to such damage
or destruction, except that Landlord shall not be required to rebuild, repair or
replace any part of the partitions, fixtures, additions or other improvements
which may have been placed in, on or about the Premises by Tenant over and above
any tenant finish provided at that inception of this Lease. Provided however,
that in the event the damage or destruction is due to Tenant's act, omission or
negligence, Tenant shall pay the cost of such repairing and rebuilding. Tenant
may repair or rebuild at its expense to the extent not required to be done by
Landlord under this paragraph, but subject to Tenant's complying with the
provisions of Article VII.
SECTION 8.2 Rent shall abate proportionately on such part of the Premises as may
have been rendered wholly untenantable until such time as such part shall be fit
for occupancy, after which time the full amount of Rent shall be payable. Tenant
hereby waives the provisions of any law now or hereafter in effect which would
relieve the Tenant from any obligation to pay Base Rent or Additional Rent under
this Lease, except to the extent provided by this Section. Tenant acknowledges
that it may obtain business interruption insurance to insure itself in the event
of damage or destruction, which insurance shall be the sole expense of Tenant.
SECTION 8.3 Notwithstanding Section 8.1, if the Premises or Building shall be
substantially damaged (substantially is defined as thirty percent (30%) or more
of the usable square feet in the Premises or in the Building) or destroyed by
fire or otherwise, Landlord shall have the option of terminating this lease as
of the date of such damage or destruction by giving Tenant at least thirty (30)
days' written notice. If tenant can not occupy space due to substantial damage
and Landlord can not provide comparable space within ten days of damage, tenant
may terminate lease by giving thirty (30) days' written notice.
SECTION 8.4 Waiver of Subrogation. Tenant and Landlord each hereby release and
relieve the other, and waive their entire right or recovery against the other
for loss or damage arising out of or incident to the perils insured against
which perils occur in, on or about the Premises, whether due
to the negligence of Landlord or Tenant or their agents, employees, contractors
and/or invitees. Tenant and Landlord shall, upon obtaining the policies of
insurance required give notice to the insurance carrier or carriers that the
foregoing mutual waiver of subrogation is contained in this Lease.
-6-
<PAGE>
ARTICLE IX
CONDEMNATION
SECTION 9.1 If the whole or any part of the Premises shall be taken under the
power of eminent domain, or shall be sold by the Landlord under threat of
condemnation proceedings (which shall be deemed to exist upon formal or informal
notification from any condemning authority), then this Lease shall terminate as
to the part so taken or sold on the day when Tenant is required to yield
possession thereof. Landlord shall make such repairs and alterations as may be
necessary in order to restore the part not taken or sold to useful condition,
and Base Rent and Tenant's Pro Rata Share shall be abated as to the portions of
the premises so taken or sold. Provided however, that Landlord shall not be
required to expend more on the repair of the Premises than it receives in
condemnation proceedings. If more than thirty percent (30%) of the Premises is
so taken or sold so as to impair substantially the usefulness of the Premises,
then Tenant shall have the option to terminate this Lease as of the date when
Tenant is required to yield possession. All compensation awarded or paid for any
such taking or sale shall belong to and be the property of the Landlord. In the
event of any such taking, however, Tenant will have the right to assert a claim
against the condemning authority in a separate action, so long as Landlord's
award is not otherwise reduced, for Tenant's moving expenses and leasehold
improvements owned by Tenant.
SECTION 9.2 Notwithstanding Section 9.1, if a portion of the Premises shall be
taken or sold in any proceeding or upon threat of any proceeding, Landlord shall
have the option of terminating this Lease upon at least thirty (30) days'
written notice to Tenant.
ARTICLE X
CONDITIONS OF WORK FOR REPAIRS ALTERATIONS
SECTION 10.1 All work for repairs as required by Section 5.1, compliance with
laws, ordinances, regulations or requirements as required by Section 6.1 and for
changes or alterations permitted by Section 7.1, shall be done in all cases
subject to reasonable conditions which the Landlord may impose and in a good and
workmanlike manner.
ARTICLE XI
MECHANICS' LIENS
SECTION 11.1 Tenant shall not suffer nor permit any mechanics' or other liens to
be filed against the Building, the Premises, or against Tenant's leasehold
interest in the Premises by reason of work, labor, services or materials
supplied or claimed to have been supplied to the Tenant or anyone holding the
Premises or any part thereof through or under the Tenant. The Landlord shall
have the right at all times to post any notices which the Landlord may deem to
be necessary or advisable for the protection of the Landlord and the Building
from mechanics' liens. If a mechanics' lien shall be filed against the Premises,
Tenant shall discharge it within twenty (20) days after the filing date, except
that if Tenant desires to contest such lien, it will comply with such statutory
procedures as may be available to release the lien within twenty (20) days after
its filing date. If a final judgment establishing the validity or existence of a
lien for any amount is entered, Tenant will pay and satisfy the same at once. If
Tenant fails to pay any charge for which a mechanics' lien has been filed, or
has not complied with such statutory procedures as may be available to release
the lien, then, in addition to any other rights or remedies available, Landlord
may, but shall not be obligated to, discharge the amount claimed to be due or
cause the lien to be released in any other manner. Any amount paid by the
Landlord with respect thereto, and all attorneys' fees and costs of the
Landlord, with interest at the rate of two percent (2%) per month, shall upon
demand be paid by the Tenant to the Landlord.
-7-
<PAGE>
ARTICLE XII
LANDLORD'S RIGHT TO ENTER PREMISES
SECTION 12.1 Tenant agrees to permit the Landlord and its representatives, upon
reasonable written notice, to enter the Premises at all times during usual
business hours or at any other time in case of emergency, to inspect the same
and the Landlord may, but shall not be obliged to, make any repairs deemed
necessary by the Landlord and to perform any work in the Premises deemed
necessary by the Landlord to comply with any laws, ordinances, regulations or
requirements of any governmental authority or the recommendations of any
insurer. During the progress of any such work, the Landlord may keep and store
upon the Premises all necessary materials, tools and equipment. The Landlord
shall not in any event be liable for inconvenience, annoyance, disturbance, loss
of business or other damage to Tenant.
SECTION 12.2 Tenant agrees to permit the Landlord and its representatives, upon
reasonable written notice, to enter the Premises during usual business hours to
exhibit the same for the purpose of sale, mortgage or lease. During the final
six (6) months of the term of this Lease, or in the case of default, Landlord
may display "For Sale" or "For Lease" signs.
ARTICLE XIII
ASSIGNMENT AND SUBLETTING
SECTION 13.1 Tenant shall not, without Landlord's prior written consent, which
consent will not be unreasonably withheld: (a) assign, convey, mortgage, pledge,
encumber or otherwise transfer (whether voluntarily or otherwise) this Lease or
any interest under it (in the event Tenant is a corporation, any transfer, sale,
pledge, or other disposition cumulatively of more than fifty (50%) of the
corporate stock or voting securities of Tenant shall be deemed an assignment);
(b) allow any transfer thereof or any lien upon the Tenants' interest by
operation of law; (c) sublet the Premises or any part thereof, or (d) permit the
use or occupancy of the Premises or any part thereof by anyone other than the
Tenant. In no event shall Landlord be held responsible for monetary damages for
the withholding of consent. Notwithstanding any provision of this Lease to the
contrary, Tenant shall not be released from any of its obligations hereunder as
a result of any assignment or subletting, the acceptance of rent from any
unapproved assignee or subtenant shall not constitute Landlord's consent to any
such assignment or subletting, the consent to any assignment or subletting shall
not be deemed a consent to any subsequent assignment or subletting, and no
option to renew or extend this Lease or any other option that may be granted to
Tenant in this Lease shall be exercisable by any assignee or subtenant, as
Tenant agrees that all of such options to Tenant are personal to Tenant and may
be exercised by any other party. Landlord's consent to any assignment or
subletting may be conditioned upon, among other things, the financial
capabilities of the proposed assignee or subtenant. Under no circumstances shall
Landlord be required to consent to the assignment or subletting to any party
whose business Landlord determines is more likely to utilize hazardous
substances or is more likely to adversely effect any insurance policy respecting
the property.
SECTION 13.2 Tenant agrees to pay to Landlord, on demand, reasonable fees
incurred by Landlord in connection with any request by Tenant for Landlord to
consent to any assignment or subletting Tenant.
SECTION 13.3 If this Lease is assigned, or if the Premises or any part thereof
by sublet or otherwise is occupied by anyone other than Tenant, Landlord may
collect Rent from any such assignee, subtenant or occupant and apply the net
amount collected to the Rent herein reserved, but no such assignment,
subletting, occupancy or collection of Rent shall be deemed a waiver of any of
Tenant's covenants contained in this Lease, or a release of Tenant from further
performance of Tenant's covenants including, but not limited to, Tenant's
covenant to pay Rent.
-8-
<PAGE>
SECTION 13.4 Upon assignment, subletting or other occupancy of the Premises,
Tenant shall pay to Landlord monthly as Additional Rent, the excess of
consideration received or to be received during such month over the Rental
reserved for such month in this Lease which is applicable to such portion of the
Premises so assigned, sublet or occupied.
SECTION 13.5 In the event Tenant, with Landlord's prior written consent,
subleases to a third party, the subtenant shall be subject to and comply with
all requirements of this Lease.
ARTICLE XIV
RIGHTS OF MORTGAGEE
SECTION 14.1 The rights of Tenant hereunder are and shall be, at the election of
any mortgagee, subject and subordinate to the lien of any deeds of trust,
mortgages, the encumbrance of any leasehold financing, or the lien resulting
from any other method of financing or refinancing, of or hereafter in force
against the Building, and to all advances made or hereafter to be made upon the
security thereof (the "Superior Instruments"). With respect to any Superior
Instrument filed of record after the execution of this Lease, Landlord will
request in writing that the holder thereof give a nondisturbance agreement to
the Tenant. Tenant acknowledges and agrees that any such nondisturbance
agreement may be on a standard form utilized by the holder. Tenant shall be
solely responsible for seeking to negotiate satisfactory terms of such
nondisturbance agreement. However, if the holder refuses to propose any
nondisturbance agreement or a proposed nondisturbance agreement contains terms
and conditions not satisfactory to Tenant, such circumstances shall not
constitute a default by Landlord under this Lease. Rather, Landlord's sole
obligation with respect to any such nondisturbance agreement shall be to request
the same in writing as described above.
ARTICLE XV
INDEMNIFICATION OF LANDLORD-NO REPRESENTATIONS BY LANDLORD
SECTION 15.1 Landlord shall not be liable to Tenant or to Tenant's employees,
agents or visitors, or to any other person or entity, for any injury to person
or damage to or loss of property in or about the Premises or the Building caused
by the act, omission or negligence of Tenant, its employees, subtenants,
licenses or concessionaires, or of any other person entering the Building under
the express or implied invitation of Tenant, or arising out of the use of the
Premises by Tenant and the conduct of its business therein, or arising out of
any breach of default by Tenant in the performance of its obligations hereunder
or resulting from any other cause except Landlord's gross negligence, and Tenant
hereby agrees to indemnify Landlord and hold it harmless from any loss, expenses
(including attorneys' fees) or claims arising out of such damage or injury
except for Landlord's negligence.
SECTION 15.2 Landlord has made no representations in connection with the
condition of the Premises, and Tenant's commencement of occupancy of the
Premises shall constitute Tenant's agreement that the Premises are in good
condition.
ARTICLE XVI
DEFAULT PROVISIONS-REMEDIES OF LANDLORD-WAIVER OF JURY TRIAL
SECTION 16.1 The following events shall be deemed to be Events of Default by
Tenant under this Lease:
(a) Tenant shall fail to pay any installment of Base Rent or amount of
Additional Rent when due. Tenant shall have five (5) days to cure default
following written notice by Landlord.
-9-
<PAGE>
(b) Tenant shall (i) apply for or consent to the appointment of a
receiver, trustee or liquidator of the Tenant or of all or a substantial part of
its assets, (ii) become insolvent or admit in writing its inability to pay its
debts as they come due, (iii) make a general assignment for the benefit of
creditors, (iv) file a petition or an answer seeking reorganization or
arrangement with creditors or to take advantage of any insolvency law, or
otherwise become the subject of any proceeding under any such law, or (v) make a
transfer in fraud of creditors.
(c) Tenant shall abandon or vacate for more than thirty (30) days any
substantial portion of the Premises.
(d) Tenant shall fail to comply with any term, provision or covenant of
this Lease (other than the foregoing provisions of this Section 16.1) and shall
not cure such failure within twenty (20) days after written notice thereof to
Tenant.
(e) Tenant shall fail to comply with the requirements of Section 11.1 of
this Lease.
SECTION 16.2 If an Event of Default occurs, then Landlord may either:
(a) Give Tenant written notice of Landlord's intention to terminate this
Lease, in which event Landlord may proceed to recover possession of the Premises
by any lawful means. The obligation of Tenant to pay and the right of Landlord
to recover all Rent, including accrued rent and all future rent and other
charges owed for what would have been the remaining [THE] term of the Lease,
together with the costs of collection, including attorneys' fees, shall survive
termination of the Lease.
(b) Unless required by law, without further notice, reenter and take
possession of the Premises, or any part thereof, and repossess the same as
Landlord's former estate, and expel Tenant and those claiming through or under
Tenant and remove the effects of either or both without being deemed guilty of
any manner of trespass, without being deemed to have elected to terminate this
Lease, and without prejudice to any remedies for arrears of Rent and preceding
breaches of covenants. After reentering and repossessing the Premises without
terminating this Lease, Landlord may, from time to time, without terminating
this Lease, relet the Premises or any part thereof on behalf of Tenant for such
term or terms and at such rent or rents, and upon such other terms and
conditions as Landlord may deem advisable in its sole discretion (including
concessions, free rent and payment of commissions), with the right to make
alterations and repairs to the Premises.
In the event Landlord does not elect to terminate this Lease, but on the
contrary elects to take possession, then such repossession shall not relieve
Tenant of its obligations and liability under this Lease, all of which shall
survive such repossession. In the event of such repossession, Tenant shall pay
to Landlord as Rent all Rent which would be payable hereunder if such
repossession had not occurred, less the net proceeds, if any, of any reletting
of the Premises after deducting all of Landlord's expenses in connection with
such reletting, including, but not limited to, all repossession costs, brokerage
commissions, legal expenses, expenses of employees, costs of alterations,
expenses of preparation for reletting, rental concessions and free rent. Tenant
shall pay such Rent to Landlord on the days on which the Rent would have been
payable hereunder if possession had not been retaken.
Any damage or loss sustained by Landlord following Landlord's election to
reenter and repossess the Premises without terminating this Lease may be
recovered by Landlord, at such time and from time to time as Landlord
determines.
-10-
<PAGE>
In the event this Lease is terminated pursuant to the provisions of this
Section, Tenant shall remain liable to Landlord for damages in an amount equal
to the Rent and other sums which would have been owing by Tenant hereunder for
the balance of the term had this Lease not been terminated plus all amounts
incurred by Landlord in order to obtain possession of the Premises and relet the
same, including attorneys' fees, reletting expenses, alterations and repair
costs, brokerage commissions and all other like amounts. Landlord shall be
entitled to collect such damages from Tenant monthly on the days on which the
Rent and other amounts would have been payable hereunder if this Lease had not
been terminated, and Landlord shall be entitled to receive the same from Tenant
on each such day. Alternatively, at the option of Landlord, in the event this
Lease is terminated, Landlord shall be entitled to recover forthwith against
Tenant in addition to damages owing to Landlord for any period prior to the
termination date, as damages for loss of the bargain and not as a penalty, an
amount equal to the worth, at the time of award by the court having jurisdiction
thereof, of the amount by which the unpaid Rent for the balance of the Term
after the time of such award exceeds the amount of such Rental loss for the same
period that Tenant proves could be reasonably avoided, plus all amounts incurred
by Landlord in order to obtain possession of the Premises and relet the same,
including attorneys' fees, reletting expenses, alterations and repair costs,
brokerage commissions and all other like amounts.
All rights and remedies of Landlord under this Lease shall be cumulative and
shall not be exclusive of any other rights and remedies provided to Landlord
under applicable law.
SECTION 16.3 Landlord and Tenant hereby waive trial by jury in any action,
proceeding or counterclaim brought by either party against the other on any
matters arising out of or in connection with this Lease, the relationship of
Landlord and Tenant thereunder, the Premises or Tenant's use or occupancy
thereof. The terms "enter or "entry" as used in this Lease are not restricted to
their technical legal meaning. In the event of litigation under this Lease, the
prevailing party shall be awarded its costs incurred therewith, including
reasonable attorneys' fees. Notwithstanding any provision of this Lease to the
contrary, in no event shall Landlord be deemed to terminate this Lease unless
Landlord expressly declares such termination in writing. Specifically, but not
by any way of limitation, Landlord's service of any paper under the applicable
forcible entry and detainer statute shall not constitute a termination of the
Lease unless Landlord expressly states therein that it is terminating the Lease.
ARTICLE XVII
HOLDING OVER
SECTION 17.1 Tenant covenants that it shall vacate the Premises immediately upon
the expiration or sooner termination of this Lease. If the Tenant retains
possession of the Premises or any part thereof after the termination of the
term, the Tenant shall pay the Landlord rent at one and one-half (1 1/2) the
monthly rate specified in Section 1 for the time Tenant thus remaining in
possession and, in addition thereto, shall pay the Landlord for all damages,
consequential as well as direct, sustained by reason of the Tenant's retention
of possession. The provisions of this Section do not exclude the Landlord's
rights of re-entry or any other right hereunder, including without limitation,
the right to refuse one and one-half (1 1/2) the monthly rent and instead to
remove Tenant through proceedings pursuant to Colorado statutes for holding over
beyond the expiration of the term of this Lease.
-11-
<PAGE>
ARTICLE XVIII
INVALIDITY OF PARTICULAR PROVISIONS
SECTION 18.1 If any covenant, agreement or condition of this Lease shall to any
extent be invalid or unenforceable, the remainder of this Lease shall not be
affected thereby. Each covenant, agreement or condition of this Lease shall be
valid and enforceable to the fullest extent permitted by law.
ARTICLE XIX
NOTICES
SECTION 19.1 Notices, demands and requests which may or are required to be given
by either party to the other shall be in writing and shall be deemed given when
hand delivered, or one business day after delivery to an overnight delivery
carrier that gives receipts for delivery, or two business days after return
receipt received from the United States Postal Service for delivery by United
States Certified Mail, return receipt requested, postage prepaid, (a) if for the
Tenant, addressed to the Tenant at the Premises or at such other place as the
Tenant may from time to time designate by written notice to the Landlord, or (b)
if for the Landlord, addressed to the Landlord at 6425 W. 52nd Avenue, Arvada,
Colorado 80002 or at such other place as the Landlord may from time to time
designate by written notice to the Tenant. "Business day" means Monday through
Friday, excluding days on which national banks are closed in Colorado.
SECTION 19.2 Tenant shall promptly deliver to the Landlord, (i) copies of any
documents received from the United States Environmental Protection Agency and/or
any state, county or municipal environmental or health agency concerning the
Tenant's operations upon the Premises; and (ii) copies of any documents
submitted by the Tenant to the United States Environmental Protection Agency
and/or any state, county or municipal environmental or health agency concerning
its operations on the Premises.
ARTICLE XX
QUIET ENJOYMENT
SECTION 20.1 The Landlord covenants and agrees that the Tenant, upon paying the
Base Rent and Additional Rent required under this Lease and performing the
covenants, agreements and conditions of this Lease on the Tenant's part to be
performed and fulfilled, shall lawfully and quietly hold, occupy and enjoy the
Premises during the term of this Lease, subject, however, to the provisions of
this Lease.
ARTICLE XXI
LIMITATION OF LANDLORD'S LIABILITY
SECTION 21.1 The term "Landlord" as used in this Lease shall be limited to the
owner or owners of the Landlord's interest in this Lease at the time in
question, and in the event of any transfer or transfers of such interest, the
Landlord herein named (and in case of any subsequent transfer, the then
transferor) shall be automatically relieved from and after the date of such
transfer of all liability on the part of the Landlord contained in this Lease
thereafter to be performed, provided that any funds in the hands of such
Landlord or the then transferor at the time of such transfer, including but not
limited to the security deposit, in which the Tenant has an interest shall be
turned over to the transferee and upon any such transfer, the Landlord shall be
released from any liability for such funds. The transferee shall be deemed to
have assumed, subject to the limitations of this Section, all of the covenants,
agreements and conditions in this Lease contained in this Lease on the part of
the Landlord, it being intended hereby that the covenants and agreements
contained in this Lease on the part of the Landlord to be performed shall be
binding on the Landlord, its successors and assigns, only during and in respect
of their respective periods of ownership.
-12-
<PAGE>
Notwithstanding any provision of this Lease to the contrary, the liability of
Landlord for Landlord's obligations under this Lease shall not exceed and shall
be limited to Landlord's interest in the Building and Tenant shall not look to
any other property or assets of Landlord either to enforce Landlord's
obligations under this Lease or to satisfy a judgment for Landlord's failure to
perform such obligations. Neither the shareholders, directors, officers,
partners, or any other individual representative of the Landlord or any
individual owning an interest in the Landlord shall be liable for the
performance of any obligation of Landlord under this Lease.
ARTICLE XXII
ESTOPPEL CERTIFICATE BY TENANT
SECTION 22.1 At any time and from time to time upon not less than ten (10) days'
prior request by the Landlord, Tenant agrees to execute, acknowledge and deliver
to Landlord a statement in writing certifying (a) that this Lease is unmodified
and in full force and effect or if there have been modifications, that the same
is in full force and effect as modified and identifying the modifications, (b)
the dates to which the Base Rent and Additional Rent have been paid, and (c)
that the Landlord is not in default under any provisions of this Lease, or if
Tenant claims a default by Landlord, then Tenant shall so state and specify the
claimed default. If Tenant fails to provide an estoppel certificate in a timely
manner, then Tenant shall be deemed to have admitted all of the matters
specified above as may be stated in an estoppel certificate prepared by Landlord
on behalf of Tenant. It is intended that any such statement may be relied upon
by any person proposing to acquire the Landlord's interest in this Lease or any
prospective mortgagee of, or assignee of any mortgage upon, such interest.
ARTICLE XXIII
CUMULATIVE REMEDIES-NO WAIVER-NO ORAL CHANGE
SECTION 23.1 The specified remedies to which the Landlord may resort under the
terms of this Lease are cumulative and are not intended to be exclusive of any
other remedies or means of redress to which the Landlord may be entitled, either
at law or in equity, in case of any Event of Default. The failure of the
Landlord to insist in any one or more cases upon the strict performance or
observance of any of the covenants, agreements or conditions of this Lease or to
exercise any option herein contained shall not be construed as a future waiver
of such covenant, agreement, condition or option. A receipt by the Landlord of
Rent with knowledge of the breach of any covenant, agreement or condition hereof
shall not be deemed a waiver of such breach, and no waiver by the Landlord of
any covenant, agreement or condition of this Lease shall be deemed to have been
made unless expressed in writing and signed by the Landlord. In addition to the
other remedies in this Lease, the Landlord shall be entitled to the restraint by
injunction of the violation, or attempted or threatened violation, of any of the
covenants, agreements or conditions of this Lease. No receipt of monies by
Landlord from Tenant after the termination or cancellation of this Lease shall
reinstate, continue or extend the term hereof, or affect any notice given to
Tenant, or operate as a waiver of the right of the Landlord to enforce the
payment of Rent then due or thereafter falling due, or operate as a waiver of
the right of Landlord to recover possession of the Premises by proper suit,
action, proceedings or other remedy. It is agreed that after the service of
notice to terminate or cancel this Lease, or after the commencement of suit,
action or summary proceedings or of any other remedy, or after a final order or
judgment for the possession of the Premises, Landlord may demand, receive and
collect any monies then due, or thereafter becoming due, without in any manner
affecting such notice, proceeding, suit, action, order or judgment, and any and
all such monies so collected shall be deemed to be payments on account for the
use and occupancy of the Premises, or at the election of Landlord, on account of
Tenant's liability hereunder. Acceptance of the keys to the Premises or any
similar act by Landlord or any agent or employee of Landlord shall not be deemed
to be an acceptance of a surrender of the Premises unless Landlord has expressly
consented in writing.
-13-
<PAGE>
SECTION 23.2 This Lease constitutes the entire agreement between the parties.
This Lease shall not be amended or modified except in writing signed by the
party against whom enforcement of the amendment or modification is sought.
ARTICLE XXIV
BROKERAGE
SECTION 24.1 Tenant and Landlord represent and warrant that it has dealt with no
broker, agent or other person concerning this transaction, other than the broker
specified in the Definitions Section of this Lease, and Tenant agrees to
indemnify and hold Tenant and Landlord harmless from and against any claims
(including attorneys' fees incurred by Landlord in defending such claims), by
any other broker, agent or person claiming a commission or other form of
compensation by virtue of having dealt with Tenant with regard to this leasing
transaction. The provisions of this Article shall survive the termination or
expiration of this Lease.
ARTICLE XXV
SECURITY DEPOSIT
SECTION 25.1 Tenant has deposited with Landlord the sum specified in the
Definitions Section of this Lease as security for the return of the Premises in
good order and condition (ordinary wear and tear excepted) and the full
performance of every provision of this Lease to be performed by Tenant. The
security deposit shall not be applied to the payment of Rent, provided however,
that if Tenant defaults with respect to any provision of this Lease, Landlord
may use, apply or retain all or any part of this security deposit for the
payment of any Base Rent and Additional Rent in default, or for the payment of
any other amount which Landlord may spend or become obligated to spend by reason
of Tenant's default, or to compensate Landlord for any other loss, cost or
damage which Landlord may suffer by reason of Tenant's default. If any portion
of said deposit is so used or applied, Tenant shall, within ten (10) days after
written demand, deposit cash with Landlord in any amount sufficient to restore
the security deposit to its original amount. For full security deposit
reimbursement the following conditions must be met:
a) walls must be clean and free of holes.
b) Any overhead door must be free of any broken panels, cracked lumber or
dented panels. The overhead door springs, rollers, tracks, motorized
door operator, and all other items pertaining to the overhead door
must also be in good working condition.
c) All floors must be clean and free of excessive dust, dirt, grease, oil
and stains.
d) No ceiling tiles shall be missing or damaged.
e) All trash must be removed from both inside and outside of the
Building.
f) All light bulbs and ballast's must be working.
g) The Premises must otherwise be in good condition, reasonable wear and
tear excepted.
In the event Tenant has complied with the above conditions, Landlord shall
return the security deposit (without interest) to Tenant within sixty (60) days
after either the termination or expiration of this Lease, or the surrender and
acceptance by Landlord of the Premises.
-14-
<PAGE>
Notwithstanding the foregoing, Landlord may retain the security deposit for
non-payment of Base Rent or Additional Rent' utility charges, costs incurred
relating to abandonment of the Premises, repairs, work contracted for by the
Tenant or any other charge due under this Lease by Tenant to Landlord. Landlord
shall retain only the portion of security deposit to cover any expense related
to and described in this lease agreement. The remaining portion of the security
deposit shall be returned to tenant.
ARTICLE XXVI
MISCELLANEOUS PROVISIONS
SECTION 26.1 Tenant shall not place on the outside of the Building any sign,
advertisement, illumination or projection without Landlord's prior written
consent. In multi-tenant buildings, Tenant shall pay for and comply with
Landlord's uniform signage requirements.
SECTION 26.2 This Lease shall be construed and enforced in accordance with the
substantive laws of the State of Colorado. Time is of the essence with respect
to Tenant's performance of its obligations under this Lease.
SECTION 26.3 The parties hereto agree that the covenants and agreements herein
contained shall bind and inure to the benefit of the Landlord, the Tenant, and
their respective successors and assigns.
SECTION 26.4 If any of Tenant's checks fail to clear its bank Landlord may
demand all future Rent payments to be either in the form of cash, certified
check, money order, wire transfer or cash equivalent funds.
SECTION 26.5 "Reasonable wear and tear" is hereby defined as that degree of wear
and tear which would normally occur in the permitted use of the Premises, but
notwithstanding the foregoing or any other provision of this Lease, it shall not
include any physical damage to the floors, walls, or ceiling of the Premises,
nor any damage caused thereto through operation of machinery, office equipment
or other equipment used in the operation of Tenant's business. Additionally, if
Tenant's use, by reason of fumes discharged or liquids used by Tenant, should
cause damage to the Premises, either interior or exterior, said damages shall
not be deemed "reasonable wear and tear," and Tenant shall be liable for the
complete restoration of the Premises to the condition existing at Tenant's lease
commencement.
SECTION 26.6 FIRST RIGHT OF REFUSAL TO LEASE ADDITIONAL SECOND FLOOR SPACE.
Tenant and Landlord hereby agree that Tenant shall have the first right of
refusal to lease any space that is not renewed by an existing tenant on the
second floor of this building at the then prevailing market rate for that space
for the balance of term of this lease.
SECTION 26.7 Landlord shall recarpet, at Landlord's expense, the three existing
offices in this lease space which are damaged and taped. Landlord shall also
shampoo all remaining carpet in this lease space.
SECTION 26.8 Tenant, at Tenant's sole cost, shall install a Local Area Network
and a sink/drain system in this space. All plans for these items shall first be
submitted to Landlord for approval and all work for these items shall be done in
a good and workman like manner with proper permits taken out to perform the work
in accordance with the governmental regulations.
-15-
<PAGE>
Damage which does not come within the scope of "reasonable wear and tear" shall
include, but not be limited to, damaged, rusting or corroded walls, floors,
ceilings, doors windows, metal bar joists, steel decks, or roof vents or stacks.
In Witness Whereof, the Landlord and the Tenant have executed this Lease on the
dates specified below.
Landlord:
Jefferson Park West, a Joint Venture
-------------------------------------------
By: /s/Allan R. Ojala
----------------------------------------
Allan R. Ojala
Title: Managing Joint Venturer
-------------------------------------
Date: 2/22/99
--------------------------------------
TENANT:
Panoramic Care Manager
-------------------------------------------
By: /s/Jill S. Flateland
----------------------------------------
Jill S. Flatelend
Title: President
-------------------------------------
Date: 2/22/99
--------------------------------------
-16-
<PAGE>
EXHIBIT A
DESCRIPTION OF PREMISES
Jefferson Park West Building #4
Suite #206
5181 Ward Road
Wheat Ridge, Colorado 80033
See attached floor plan, Exhibit B.
Offices marked 1, 6, and 11 shall be the offices that are to be recarpeted by
the Landlord at Landlord's expense.
-17-
<PAGE>
EXHIBIT B
FLOOR PLAN
-18-
<PAGE>
RULES AND REGULATIONS
1. The sidewalks and driveways will not be obstructed by any of the Tenants
or used by them for any purpose other than for the ingress and egress to
and from their respective premises.
2. All Tenants shall adhere to and obey all such parking control measures as
may be placed into effect by the Landlord through the use of signs
identifying decals or other instructions.
3. Any electric wiring that the Tenant desires to introduce into his premises
must be connected as directed by the Landlord. No boring or cutting of
wires will be allowed except with a specific consent of the Landlord. The
location of electrical appliances, call boxes, and so forth shall be
prescribed by the Landlord.
4. The Tenant shall not change locks or install other locks on doors without
the written consent of the Landlord.
5. The Tenant shall give prompt notice to the building of any accidents to or
defects in plumbing, electrical fixtures or heating apparatus so that the
same may be attended to properly.
6. The Tenant shall not permit or suffer the demised premises to be occupied
or used in a manner offensive or objectionable to the Landlord or other
occupants of the building by reason of noise, odors, or vibrations or
interfere in any way with other Tenants or those having business therein,
nor shall any animals or birds be kept in or about the building.
7. No cooking shall be done or permitted by Tenant on the demised premises
nor shall offices of the building be used, nor any part thereof permitted
to be used for lodging. Notwithstanding the foregoing, Tenant shall be
permitted to use a microwave oven on the premises.
8. Each Tenant upon the termination of the tenancy shall deliver to the
Landlord all keys of the offices, rooms and toilet rooms which shall have
been furnished to Tenant.
9. Tenants shall see that doors of the premises are closed and securely
locked before leaving the building at the end of the day and must
observe strict care not to leave such doors and so forth open and
exposed to the weather or other elements, and each Tenant shall
exercise care and caution that all water faucets or water apparatus
are entirely shut off before Tenant or Tenant's employees leave the
building, and that all electricity, gas and air conditioning shall
likewise be carefully shut off, so as to prevent waste or damage,
where controlled by Tenant; notwithstanding the foregoing, Tenant
shall be permitted to keep facsimile machines, computers and other
office equipment turned on and running, and shall be permitted to keep
the air conditioning turned on as reasonably necessary for the
maintenance and operation of such equipment, during the evening, on
weekends and holidays and otherwise after normal business hours.
10. The Landlord reserves the right, at any time, to rescind any one or more
of these rules and regulations as in the Landlord's judgment may from time
to time be necessary for the safety, care, and cleanliness of the
premises, and for the preservation of order therein.
ACCEPTED, this 18th day of February, 1999.
---- -------- ----
By:/s/Jill S. Flateland
--------------------------------------
Tenant
-19-
<PAGE>
EXHIBIT A
DESCRIPTION OF PREMISES
Jefferson Park West Building #4
Suite #206
5181 Ward Road
Wheat Ridge, Colorado 80033
See attached floor plan, Exhibit B
Offices marked 1, 6, and 11 shall be the offices that are to be recarpeted by
the Landlord at the Landlord's expense.
-20-
<PAGE>
EXHIBIT B
FLOOR PLAN
-21-
<PAGE>
RULES AND REGULATIONS
1. The sidewalks and driveways will not be obstructed by any of the Tenants or
used by them for any purpose other than for the ingress and egress to and
from their respective premises.
2. All Tenants shall adhere to and obey all such parking control measures as
may be placed into effect by the Landlord through the use of signs
idenifying decals or other instructions.
3. Any electric wiring that the Tenant desires to introduce into his premises
must be connected as directed by the Landlord. No boring or cutting of
wires will be allowed except with a specific consent of the Landlord. The
location of electrical appliances, call boxes, and so forth shall be
prescribed by the Landlord.
4. The Tenant shall not change locks or install other locks on doors without
the written consent of the Landlord.
5. The Tenant shall give prompt notice to the building of any accidents to or
defects in plumbing, electrical fixtures or heating apparatus so that the
same may be attended to properly.
6. The Tenant shall not permit or suffer the demised premises to be occupied
or used in a manner offensive or objectionable to the Landlord or other
occupants of the building by reason of noise, odors, or vibrations of
interfere in any way with other Tenants or those having business therein,
nor shall any animals or birds be kept in or about the building.
7. No cooking shall be done or permitted by Tenant on the demised premises nor
shall offices of the building be used, nor any part thereof permitted to be
used for lodging. Notwithstanding the foregoing, Tenant shall be permitted
to use a microwave oven on the premises.
8. Each Tenant upon the termination of the tenancy shall deliver to the
Landlord all keys of the offices, rooms and toilet rooms which shall have
been furnished to Tenant.
9. Tenants shall see that doors of the premises are closed and securely locked
before leaving the building at the end of the day and must observe strict
care not to leave such doors and so forth open and exposed to the weather
or other elements, and each Tenant shall exercise care and caution that all
water faucets or water apparatus are entirely shut off before Tenant or
Tenant's employees leave the building, and that all electricity, gas and
air conditioning shall likewise be carefully shut off, so as to prevent
waste or damage, where controlled by Tenant; notwithstanding the foregoing,
Tenant shall be permitted to keep facsimile machines, computers and other
office equipment turned on and running, and shall be permitted to keep the
air conditioning turned on as reasonably necessary for the maintenance and
operation of such equipment, during the evening, on weekends and holidays
and otherwise after normal business hours.
-22-
<PAGE>
10. The Landlord reserves the right, at any time, to rescind any one or more of
these rules and regulations as in the Landlord's judgment may from time to
time be necessary for the safety, care, and cleanliness of the premises,
and for the preservation of order therein.
ACCEPTED, this _________ day of ________________, 1999.
By:
------------------------------------
Tenant
-23-
<PAGE>
EXHIBIT C
ESTOPPEL CERTIFICATE
DAN BARTHOLOMEU
2121 SOUTH ONEIDA STREET, SUITE 600
DENVER, CO 80224
Attention: MR. BARTHOLOMEU
Re: Tenant: PANORAMIC CARE MANAGER
Address: 5181 WARD ROAD, #206
WHEAT RIDGE, CO 80033
Leased Area:2,856 Square Feet
Gentlemen:
You have advised that CALHOUN STREET PARTNERS, is planning to purchase the
property described above, in which the undersigned presently occupies space
under a lease dated FEBRUARY 22, 1999 (the "Lease") between the undersigned (the
"Tenant") and JEFFERSON PARK WEST (the "Landlord").
In connection with such purchase, and at your request, we hereby certify as
follows:
(1) Tenant, as of the date of this letter, is the holder of then tenant's
interest under the Lease, and the Lease has not been modified, amended or
supplemented in any manner except for:
NONE
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(2) The term of the Lease is presently scheduled to expire on 9-15-2000. If
there are any rights of extension or renewal remaining under the terms of
the Lease, the same have not, as of the date of this letter, been
exercised.
(3) Tenant is in occupancy of all the premises covered by the Lease
("Premises") and is actively conducting its business therein, which
business is the use stipulated by the Lease in accordance with the
requirements of the Lease, and the Lease is in full force and effect.
(4) The undersigned is current in payment of all fixed rent and other charges
due to be paid under the Lease, with minimum rent paid, in full, for the
period ending 3-31-1999.
(5) The monthly minimum (i.e., fixed) rent for the current lease year is
$2,856.00. Monthly additional rent for the current lease year is
$0.00. No rent or other sum payable under the Lease is being paid in
arrears, and no rent or other sums under the Lease have been paid in
advance of the due date thereof. Tenant will not pay any minimum rent
or other sum due to be paid under the Lease more than fifteen (15)
days in advance of the due date thereof.
(6) All of the obligations on the part of the Landlord under the Lease for the
performance of any work or installation of any equipment have been fully
carried out, and the undersigned has no claim against Landlord for any
incomplete work or any defective work. As of the date hereof, neither the
Tenant nor the Landlord has failed to make any payment or to perform any
other obligation which each has to the other.
-24-
<PAGE>
(7) The Tenant has made a security deposit to Landlord in the amount of
$2,856.00.
(8) There are no options granted under the Lease except: None.
(9) Tenant has not subleased any, or all, or a part of the Premises, or
assigned the Lease.
(10) There are no actions, voluntary or otherwise, pending or to the best
knowledge of the undersigned, threatened against the undersigned Tenant
under Bankruptcy reorganization, moratorium or similar laws of the United
States, any State thereof, or any jurisdiction.
(11) The Tenant has no claims, counterclaims, defenses or set-offs against the
Landlord.
(12) The Tenant has no expansion rights, or right of first refusal other than:
NONE.
(13) The Tenant acknowledges that the Landlord will be assigning its rights
under the Lease to a new Purchaser, including, without limitation, the
right to receive rents, and Tenant agrees upon receipt of a demand letter
for rent, accompanied by a letter from the Landlord to the effect the
closing has taken place; that Tenant will make all payments of rent and
common area maintenance and other expenses which may be chargeable to the
Tenant to the new Landlord.
The Tenant understands that the new Purchaser and its Lender will rely on the
certifications set forth above and that all such certifications shall inure to
the benefit of the new Landlord as well as its Lender, as well as the benefit of
each of their successors and assigns, and shall be binding upon the undersigned,
its successors, heirs, legal representatives, and assigns.
The undersigned intends to be legally bound hereby and acknowledges that
Purchaser will be relying upon this letter and on the Tenant's agreements set
forth herein in proceeding with the purchase of the Property.
Very truly yours,
PANORAMIC CARE MANAGER
By: /s/Jill S. Flateland
---------------------------------
Dated March 8, 1999.
-25-
SOFTWARE DISTRIBUTION AGREEMENT
This Software Distributorship Agreement (Agreement) dated as of JANUARY
28, 1999 is between InterCare Network, located at 601 Clague Parkway, Bay
Village, Ohio 44140 (InterCare), and Freestyle Publications (a.k.a. Panoramic
Care Manager) (PCM), located at 11350 W. 72nd Place, Arvada, CO 80005.
Whereas, PCM is engaged in the development of health care software for
screening patients, minimum data set production and transmission patient
assessment, care plan development and clinical pathway development. PCM will
later develop software for the use of disease state management.
Whereas, InterCare and associated company, Bay Pharmacy, is a managed care
network of long term care facilities and supplier of pharmacy services to
nursing facilities in Ohio.
Whereas, PCM desires to have InterCare be its exclusive distributor of its
software products in the state of Ohio and InterCare desires to provide such
distribution to nursing facilities and any other applicable customers in the
state of Ohio.
Therefore, in consideration of the mutual covenants contained herein and
for the reliance of the parties hereto, PCM and InterCare agree as follows.
SECTION 1
RESPONSIBILITIES OF INTERCARE
1.1 Will be responsible for exclusively marketing and selling PCM software in
Ohio.
1.2 Will provide adequate nursing and technical support for PCM for training
and installation of PCM.
1.3 Will continue to act as a pilot sight for future PCM releases if so desired
by PCM.
1.4 Will act as a reference for PCM potential customers in other states.
1.5 Will sell 18 copies of PCM in 1999 and 20 in 2000 to keep annual renewal of
this contract after the end of its term.
SECTION 2
RESPONSIBILITIES OF PCM
2.1 To have no other sales or distribution arrangements other than InterCare in
the state of Ohio for the entire term of this Agreement.
2.2 To provide 24-hour back-up phone support for software problems related to
PCM.
<PAGE>
SOFTWARE DISTRIBUTION AGREEMENT
2.3 To support InterCare with PCM marketing literature for current and new
releases (some reasonable amount needs to be determined by PCM).
2.4 To include InterCare in marketing and sales planning of PCM (i.e.
involvement in sub committees or future planning).
SECTION 3
FINANCIAL ARRANGEMENTS
3.1 BILLING. PCM shall bill InterCare directly for all sales performed by
InterCare. InterCare will be responsible for all billing and collections
from the end user.
3.2 PRICING. InterCare's software price will be $22,000 and remain at this
price for the term of this contract.
SECTION 4
TERM
4.1 INITIAL AND RENEWAL TERMS. The term of the Agreement will commence on April
1, 1999 or when PCM and InterCare agree on Version 1 of PCM is at
commercial level. The term of this Agreement is for two (2) years. If
InterCare meets the sales quote established in this Agreement, InterCare
will maintain its exclusivity for the following year.
4.2 PCM will have the right to renegotiate price after year 2 of this Agreement
for the purpose of bringing InterCare to the average price of all other
contracted distributors.
PCM INTERCARE
___________________________________ _______________________________________
Signature David J. Coury, President
___________________________________ _______________________________________
Name & Title Date
___________________________________
Date
PANORAMIC CARE MANAGER, INC.
STOCK OPTION PLAN
ARTICLE I
PURPOSE
The purpose of the Panoramic Care Manager, Inc. Stock Option Plan (the
"Plan") is to attract and retain directors, officers, other employees and
consultants of Panoramic Care Manager, Inc. and its Subsidiaries and to provide
such persons with incentives to continue in the long-term service of the Company
and to create in such persons a more direct interest in the future success of
the operations of the Company by relating incentive compensation to increases in
stockholder value.
ARTICLE II
DEFINITIONS
As used in this Plan:
"10% Stockholder" shall mean the owner of stock (as determined under
Section 424(d) of the Code) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Subsidiary.
"Award" shall mean a grant of Stock Options made under the Plan.
"Board" shall mean the Company's Board of Directors.
"Change in Control" shall mean a change in ownership or control of the
Company effected through any of the following transactions:
(i) the acquisition, directly or indirectly by any person or group
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, of beneficial ownership (within the
meaning of Rule 13d-3 of the Exchange Act) of securities possessing more
than thirty percent (30%) of the total combined voting power of the
Company's outstanding securities;
(ii) a change in the composition of the Board over a period of
eighteen (18) consecutive months or less such that fifty percent (50%) or
more of the Board members have neither (A) been directors continuously
since the beginning of such period nor (B) been unanimously elected or
nominated by the Board for election as directors during such period;
<PAGE>
(iii) a stockholder-approved merger or consolidation to which the
Company is a party and in which (A) the Company is not the surviving
entity or (B) securities possessing more than thirty percent (30%) of the
total combined voting power of the Company's outstanding securities are
transferred to a person or persons different from the persons holding
those securities immediately prior to such transaction; or
(iv) the sale, transfer or other disposition of all or substantially
all of the Company's assets in complete liquidation or dissolution of the
Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" shall mean the Plan Committee and shall also include the
Employee Committee, if established, when reference is made to functions that may
be performed by the Employee Committee.
"Common Stock" shall mean the Company's common stock, $.001 par value.
"Company" shall mean Panoramic Care Manager, Inc.
"Date of Grant" shall mean the date specified by the Committee on which a
grant of an Award shall become effective, which shall not be earlier than the
date on which the Committee takes action with respect thereto.
"Employee" shall mean an individual who is in the employ of the Company
or any Subsidiary.
"Employee Committee" shall mean a committee composed of at least one
member of the Board of Directors who may, but need not, be a Non-Employee
Director, which, if established, shall be empowered hereunder to grant Awards to
Employees who are not directors or "officers" of the Company as that term is
defined in Rule 16a-1(f) of the Exchange Act nor "covered employees" under
Section 162(m) of the Code, and to establish the terms of such Awards at the
time of grant, but shall have no other authority with respect to the Plan or
outstanding Awards except as expressly granted by the Plan.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" of a share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time listed on any stock exchange,
or traded on the Nasdaq National Market, or any other securities trading
market that reports daily the closing selling price per share of Common
Stock, the Fair Market Value shall be deemed equal to the closing selling
price per share of Common Stock on the date in question on the stock
exchange or other securities trading market determined by the
-2-
<PAGE>
Committee to be the primary market for the Common Stock, as such price is
officially quoted on such exchange or trading market.
(ii) If there is no closing selling price for the Common Stock on
the date in question, or if the Common Stock is neither listed on a stock
exchange or traded on a securities trading market that reports daily the
closing selling price per share of the Common Stock, then the Fair Market
Value shall be deemed to be the average of the representative closing bid
and asked prices on the date in question as reported by the Nasdaq Stock
Market or other reporting entity selected by the Committee.
(iii) In the event the Common Stock is not traded publicly, the Fair
Market Value of a share of Common Stock shall be determined, in good
faith, by the Committee after such consultation with outside legal,
accounting and other experts as the Committee may deem advisable, and the
Committee shall maintain a written record of its method of determining
such value.
"Statutory Stock Option" shall mean a Stock Option that (i) qualifies as
an "incentive stock option" under Section 422 of the Code or any successor
provision and (ii) is intended to be treated for purposes of federal income tax
treatment as an option that is so qualified.
"Non-Employee Director" shall mean a director of the Company who meets the
definition of (i) a "non-employee director" set forth in Rule 16b-3 under the
Exchange Act, as amended, or any successor rule and (ii) an "outside director"
set forth in Treasury Regulation 1.162-27, as amended, or any successor rule.
"Non-Statutory Option" shall mean a Stock Option that (i) does not qualify
as an "incentive stock option" under Section 422 of the Code or any successor
provision or (ii) is not intended to be an incentive stock option.
"Optionee" shall mean the person so designated in an agreement evidencing
an outstanding Stock Option.
"Option Price" shall mean the purchase price payable by a Participant upon
the exercise of a Stock Option.
"Participant" shall mean a person who is selected by the Committee to
receive benefits under this Plan and (i) is at that time a director, officer or
other Employee of the Company or any Subsidiary, (ii) is at that time a
consultant or other independent advisor who provides services to the Company or
a Subsidiary, or (iii) has agreed to commence serving in any capacity set forth
in (i) or (ii) of this definition.
"Plan" shall mean the Company's Stock Option Plan as set forth herein.
-3-
<PAGE>
"Plan Committee" shall mean a committee consisting entirely of two or more
Non-Employee Directors, who are empowered hereunder to take all action required
in the administration of the Plan and the grant and administration of Awards
hereunder. The Plan Committee shall be so constituted at all times as to permit
the Plan to comply with Rule 16b-3 or any successor rule promulgated under the
Exchange Act. Members of the Plan Committee shall be appointed from time to time
by the Board, shall serve at the pleasure of the Board and may resign at any
time upon written notice to the Board. Notwithstanding the foregoing, at any
time the Plan Committee is not composed as specified above, or when no Plan
Committee has been appointed by the Board, all powers of the Plan Committee
shall be vested in and exercised by in the Board.
"Plan Effective Date" shall mean March 1, 1999, the date on which this
Plan was approved by the Company's Board of Directors.
"SEC" shall mean the U.S. Securities and Exchange Commission and any
successor thereto.
"Stock Option" shall mean a right granted under the Plan to a Participant
to purchase Common Stock at a stated price for a specified period of time.
"Subsidiary" shall mean a corporation, partnership, joint venture,
unincorporated association or other entity in which the Company has a direct or
indirect ownership or other equity interest; provided, however, for purposes of
determining whether any person may be a Participant for purposes of any grant of
Statutory Stock Options, "Subsidiary" means any subsidiary corporation of the
Company as defined in Section 424(f) of the Code.
"Term" shall mean the length of time during which a Stock Option may be
exercised.
ARTICLE III
ADMINISTRATION OF THE PLAN
A. DELEGATION TO THE COMMITTEE. This Plan shall be administered by the
Plan Committee. Members of the Plan Committee and the Employee Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The action of a majority of the members of the Plan
Committee and the Employee Committee present at any meeting, or acts unanimously
approved in writing, shall be the acts of the Plan Committee and the Employee
Committee, respectively.
B. POWERS OF THE COMMITTEE. The Plan Committee shall have full power and
authority, subject to the provisions of this Plan, to establish such rules and
regulations as it may deem appropriate for proper administration of this Plan
and to make such determinations under, and issue interpretations of, the
provisions of this Plan and any outstanding Awards as it may deem necessary or
advisable. In addition, the Plan Committee shall have full power and
-4-
<PAGE>
authority to administer and interpret the Plan and make modifications as it may
deem appropriate to conform the Plan and all actions pursuant to the Plan to any
regulation or to any change in any law or regulation applicable to this Plan.
C. ACTIONS OF THE COMMITTEE. All actions taken and all interpretations and
determinations made by the Committee in good faith (including determinations of
Fair Market Value) shall be final and binding upon all Participants, the Company
and all other interested persons. No director or member of the Committee shall
be personally liable for any action, determination or interpretation made in
good faith with respect to the Plan, and all directors and members of the
Committee shall, in addition to their rights as directors, be fully protected by
the Company with respect to any such action, determination or interpretation.
D. AWARDS TO OFFICERS AND DIRECTORS.
1. All Awards to officers shall be granted by the Plan Committee. If
the Plan Committee is not composed as prescribed in the definition of Plan
Committee in Article II, the Board may take such action with respect to any
Award to an officer as it deems necessary or advisable to comply with Rule 16b-3
of the Exchange Act and any related rules, including but not limited to seeking
stockholder ratification of such Award or restricting the sale of any shares of
Common Stock underlying the Award for a period of six-months.
2. Discretionary Awards to Non-Employee Directors, if any, shall be
granted by the Board.
ARTICLE IV
ELIGIBILITY AND SELECTION
A. ELIGIBILITY. The persons eligible to participate in the
Discretionary Stock Option Grant Program are as follows:
1. Employees of the Company or a Subsidiary;
2. Members of the Board; and
3. Consultants and other independent advisors who provide services to
the Company or a Subsidiary.
B. SELECTION. The Committee shall from time to time determine the
Participants to whom Awards shall be granted pursuant to the Discretionary Stock
Option Grant Program.
-5-
<PAGE>
ARTICLE V
SHARES AVAILABLE UNDER THE PLAN
A. MAXIMUM NUMBER. The number of shares of Common Stock issued or
transferred and covered by outstanding Awards granted under this Plan shall not
in the aggregate exceed 900,000 shares of Common Stock, which may be Common
Stock of original issuance or Common Stock held in treasury, or a combination
thereof. Shares of Common Stock that may be issued upon the exercise of Stock
Options shall be applied to reduce the maximum number of shares remaining
available for use under the Plan. The Company shall at all times during the term
of the Plan and while any Stock Options are outstanding retain as authorized and
unissued Common Stock, or as treasury Common Stock, at least the number of
shares of Common Stock required under the provisions of this Plan, or otherwise
assure itself of its ability to perform its obligations hereunder.
B. UNUSED AND FORFEITED STOCK. The following shares of Common Stock shall
automatically become available for use under the Plan: (i) any shares of Common
Stock that are subject to an Award under this Plan that are not used because the
terms and conditions of the Award are not met, including any shares of Common
Stock that are subject to a Stock Option that expires or is terminated for any
reason, and (ii) any shares of Common Stock withheld by the Company in
satisfaction of the withholding taxes incurred in connection with the exercise
of a Non-Statutory Option.
C. CAPITAL CHANGES. If any change is made to the Common Stock by reason of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Company's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan, (ii) the number and/or class of securities for which any one
person may be granted Awards under this Plan per calendar year, (iii) the number
and/or class of securities for which grants are subsequently to be made pursuant
to Article V of this Plan, and (iv) the number and/or class of securities and
the Option Price per share in effect under each outstanding option under this
Plan. Such adjustments to the outstanding options are to be effected in a manner
that shall preclude the enlargement or dilution of rights and benefits under
such options. The adjustments determined by the Committee shall be final,
binding and conclusive.
ARTICLE VI
DISCRETIONARY STOCK OPTION GRANT PROGRAM
A. DISCRETIONARY GRANT OF STOCK OPTIONS TO PARTICIPANTS. The Committee may
from time to time authorize grants to Participants of options to purchase shares
of Common Stock upon such terms and conditions as the Committee may determine in
accordance with the following provisions (in connection with any grants under
this paragraph VI.A to Non-Employee Directors, "Committee" shall mean the entire
Board of Directors):
-6-
<PAGE>
1. Each grant shall specify the number of shares of Common Stock to
which it pertains;
2. Each grant shall specify the Option Price per share, which shall be
not less than the average of the closing prices of the Common Stock
on the Vancouver Stock Exchange on the ten trading days immediately
preceding the date on which the Award of the Stock Option is
announced;
3. Each grant shall specify that the consideration to be paid in
satisfaction of the Option Price shall be paid in cash in the form
of currency or check or other cash equivalent acceptable to the
Company;
4. Any grant may provide for deferred payment of the Option Price from
the proceeds of sale through a broker of some or all of the shares
of Common Stock to which the exercise relates;
5. Any grant may provide that shares of Common Stock issuable upon the
exercise of a Stock Option shall be subject to restrictions whereby
the Company has the right or obligation to repurchase all or a
portion of such shares if the Participant's service to the Company
is terminated before a specified time, or if certain other events
occur or conditions are not met;
6. Successive grants may be made to the same Participant regardless of
whether any Stock Options previously granted to the Participant
remain unexercised;
7. Each grant shall specify the conditions to be satisfied before the
Stock Option or installments thereof shall vest or become
exercisable, including a period of at least two years of
continuous service by the Optionee to the Company or any
Subsidiary before an option shall be 100% vested, provided that
it may vest in equal installments over such period, and which
conditions may also include the attainment of specified
performance goals and objectives, or the occurrence of specified
events; as may be established by the Committee with respect to
such grant;
8. All Stock Options that meet the requirements of the Code for
"incentive stock options" shall be Statutory Stock Options unless
(i) the option agreement clearly designates the Stock Options
granted thereunder, or a specified portion thereof, as a
Non-Statutory Option, or (ii) a grant of Statutory Stock Options to
the Participant would be prohibited under the Code or other
applicable law;
9. Each grant shall specify the Term of the Stock Option, which Term
shall not be greater than 5 years from the Date of Grant; and
-7-
<PAGE>
10. Each grant shall be evidenced by an agreement, which shall be
executed on behalf of the Company by any officer thereof and
delivered to and accepted by the Optionee and shall contain such
terms and provisions as the Committee may determine consistent with
this Plan.
B. SPECIAL TERMS APPLICABLE TO STATUTORY STOCK OPTIONS. The following
additional terms shall be applicable to all Statutory Stock Options granted
pursuant to this Plan. Stock Options that are specifically designated as
Non-Statutory Options shall not be subject to the terms of this paragraph VI.B.
1. Statutory Stock Options shall be granted only to Employees of the
Company or a Subsidiary;
2. In addition to the requirements in paragraph VI.A.2, above, the
Option Price per share shall not be less than the Fair Market Value
per share of Common Stock on the Date of Grant;
3. The aggregate Fair Market Value of the shares of Common Stock
(determined as of the respective Date(s) of Grant) with respect
to which Statutory Stock Options granted to any Employee under
the Plan (or any other plan of the Company or a Subsidiary) are
exercisable for the first time during any one calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). To
the extent the Employee holds two (2) or more such Stock Options
that become exercisable for the first time in the same calendar
year, the foregoing limitation on the treatment of such Stock
Options as Statutory Stock Options shall be applied on the basis
of the order in which such Stock Options are granted; and
4. If any Employee to whom a Statutory Stock Option is granted is a 10%
Stockholder, then the Option Price per share shall not be less than
one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the Date of Grant.
ARTICLE VII
TERMINATION OF SERVICE
The following provisions shall govern the exercise of any Stock Options
held by any Employee whose employment is terminated:
1. If the Optionee's employment, service on the Board or consultancy
with the Company is terminated for any reason other than such
Optionee's death or disability, all Statutory Stock Options held by
the Optionee shall be exercisable, to the extent that such Stock
Options were exercisable on the date the Optionee's
-8-
<PAGE>
employment terminated, for a period of one (1) month following such
termination of employment.
2. If the Optionee's employment with the Company is terminated because
of such Optionee's death or disability within the meaning of Section
22(e)(3) of the Code, all Stock Options held by the Optionee shall
become immediately exercisable and shall be exercisable for a period
of twelve (12) months following such termination of employment.
3. In no event may any Stock Option remain exercisable after the
expiration of the Term of the Stock Option. Upon the expiration of
any one (1) or twelve (12) month exercise period, as applicable, or,
if earlier, upon the expiration of the Term of the Stock Option, the
Stock Option shall terminate and shall cease to be outstanding for
any shares for which the Stock Option has not been exercised.
ARTICLE VIII
NONTRANSFERABILITY OF STOCK OPTIONS
During the lifetime of the Optionee, Stock Options shall be exercisable
only by the Optionee and shall not be assignable or transferable. In the event
of the Optionee's death prior to the end of the Term, any Stock Option may be
exercised by the personal representative of the Optionee's estate, or by the
person(s) to whom the option is transferred pursuant to the Optionee's will or
in accordance with the laws of descent and distribution.
ARTICLE IX
STOCKHOLDER RIGHTS
The holder of a Stock Option shall have no stockholder rights with respect
to the shares subject to the Stock Option until such person shall have exercised
the Stock Option, paid the Option Price and become a holder of record of the
purchased shares of Common Stock.
ARTICLE X
ACCELERATION OF VESTING
The Committee may, at any time in its sole discretion, accelerate the
vesting of any Award made pursuant to this Plan by giving written notice to the
Participant. Upon receipt of such notice, the Participant and the Company shall
amend the agreement relating to the Award to reflect the new vesting schedule.
The acceleration of the exercise period of an Award shall not affect the
expiration date of such Award.
-9-
<PAGE>
ARTICLE XI
CHANGE IN CONTROL
In the event of a Change in Control of the Company, all Awards outstanding
under the Plan as of the day before the consummation of such Change in Control
shall automatically accelerate for all purposes under this Plan so that each
Stock Option shall become fully exercisable with respect to the total number of
shares subject to such Stock Option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock as of such date, without regard to
the conditions expressed in the agreements relating to such Stock Option.
ARTICLE XII
CANCELLATION AND REGRANT OF OPTIONS
The Committee shall have the authority, at any and from time to time, with
the consent of the affected Optionees, to effect the cancellation of any or all
outstanding Stock Options and grant in substitution new Stock Options covering
the same or different number of shares of Common Stock. In the case of such a
regrant of a Stock Option, the Option Price shall be set in accordance with
Article VI on the new Date of Grant.
ARTICLE XIII
FINANCING
The Committee may, in its sole discretion, authorize the Company to
arrange or guaranty loans to a Participant by a third party in connection with
the exercise of a Stock Option.
ARTICLE XIV
TAX WITHHOLDING
A. TAX WITHHOLDING. The Company's obligation to deliver shares of Common
Stock upon the exercise of Stock Options under the Plan shall be subject to the
satisfaction of all applicable federal, state and local income and employment
tax withholding requirements.
B. SURRENDER OF SHARES. The Committee may, in its discretion, provide any
or all holders of Non-Statutory Options under the Discretionary Stock Option
Grant Program with the right to use shares of Common Stock in satisfaction of
all or part of the taxes incurred by such holders in connection with the
exercise of such Stock Options. Such right may be provided to any such holder in
either or both of the following formats:
1. The election to have the Company withhold, from the shares of Common
Stock otherwise issuable upon the exercise of such Non-Statutory
Option, a portion of
-10-
<PAGE>
those shares with an aggregate Fair Market Value less than or equal
to the amount of taxes due as designated by such holder; or
2. The election to deliver to the Company, at the time the
Non-Statutory Option is exercised, one or more shares of Common
Stock previously acquired by such holder with an aggregate Fair
Market Value less than or equal to the amount of taxes due as
designated by such holder.
ARTICLE XV
EFFECTIVE DATE AND TERM OF THE PLAN
This Plan shall become effective on the Plan Effective Date. This Plan
shall terminate upon the earliest of (i) ten (10) years after the Plan Effective
Date or (ii) the termination of all outstanding Awards in connection with a
Change in Control. Upon such plan termination, all outstanding Awards shall
thereafter continue to have force and effect in accordance with the provisions
of the documents evidencing such Awards.
ARTICLE XVI
AMENDMENT OF THE PLAN
A. The Plan Committee may recommend that the Plan be amended or modified
in any or all respects and submit such amendments or modifications for
stockholder approval. No such amendment or modification shall adversely affect
the rights and obligations with respect to Awards outstanding under the Plan at
the time of such amendment or modification, unless the Participant consents to
such amendment or modification.
ARTICLE XVII
REGULATORY APPROVALS
The implementation of the Plan, the granting of any Award under the Plan
and the issuance of any shares of Common Stock under any Award shall be subject
to the Company's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the Awards granted pursuant to
the Plan and the shares of Common Stock issued pursuant to any Award under the
Plan. No Stock Option shall be exercisable and no shares of Common Stock or
other assets shall be issued or delivered under the Plan, unless and until there
shall have been compliance with (i) all applicable requirements of Federal and
state securities laws, including, if applicable, the filing and effectiveness of
a registration statement on Form S-8 under the Securities Act of 1933, as
amended, covering the shares of Common Stock issuable under the Plan, and (ii)
all applicable listing requirements of any stock exchange or securities trading
market on which the shares of Common Stock are listed or traded.
-11-
<PAGE>
ARTICLE XVIII
NO EMPLOYMENT/SERVICE RIGHTS
Nothing in this Plan shall confer upon any Participant any right to
continue in service for any period or specific duration or interfere with or
otherwise restrict in any way the rights of the Company (or any Subsidiary
employing or retaining such person) or of the Participant, which rights are
hereby expressly reserved by each, to terminate such person's service at any
time for any reason, with or without Cause.
-12-
PANORAMIC CARE MANAGER, INC.
SENIOR MANAGEMENT BONUS PLAN
FY 1999
The purpose of the Senior Management Bonus Plan (SMBP) is to provide the senior
management team with an incentive for the achievement of certain company and
individual goals.
1. The senior management of the company includes the CEO, COO, CTO, Vice
Presidents, and Director level employees.
2. It does not include members of the Board of Directors unless they are
employed in one of the positions listed in 1.
3. The SMBP will be approved by the Compensation Committee of the Board of
Directors, and may be amended or changed as they see fit.
4. For FY 1999 the SMBP is as follows:
a. For the achievement of total company sales of $2.0 million, a bonus
of 10% of base salary will be paid.
b. For the achievement of total company sales of $2.5 million, a bonus
of 15% of base salary will be paid.
c. For the achievement of total company sales of $3.0 million, a bonus
of 25% of base salary will be paid.
d. For the achievement of total company sales of $3.5 million, a bonus
of 35% of base salary will be paid.
e. For the achievement of total company sales of $4.0 million and
over, a bonus of 50% of base salary will be paid.
5. The bonus will be paid in the first quarter of 2000, after the total
company sales figures and individual goals have been reviewed and approved
by the Board of Directors.
6. The individual goals for senior managers of the company are attached in
Appendix A.
PANORAMIC CARE MANAGER, INC.
FORM OF
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), effective as of __________________
is entered into by and between Panoramic Care Manager, Inc., a Colorado
corporation (hereinafter "PANORAMIC") and __________________ (hereinafter
"Employee") who resides at
__________________________________________.
PANORAMIC desires to demonstrate its interest in the continued services
of Employee, in the capacity described below, on the terms and conditions, and
subject to the rights of termination hereinafter set forth, and Employee is
willing to accept employment on such terms and conditions.
In consideration of the mutual understandings hereinafter set forth,
Employee and PANORAMIC do hereby agree as follows:
1. EMPLOYMENT. PANORAMIC does hereby employ, engage and hire
Employee as ______________________________ of PANORAMIC, and Employee does
hereby accept and agree to such hiring, engagement and employment. Employee's
duties during the Employment Period shall be formulating systems necessary to
ensure quality and other duties as PANORAMIC shall from time to time prescribe.
Employee will devote full time, energy and skill to the performance of duties
for PANORAMIC and for the benefit of PANORAMIC, reasonable vacations authorized
by PANORAMIC's President or Board of Directors and reasonable absences because
of illness excepted. Furthermore, Employee will exercise due diligence and care
in the performance of duties to PANORAMIC under this Agreement.
2. EMPLOYMENT PERIOD.
(a) INITIAL TERM. Employee shall be employed by PANORAMIC for
the duties set forth in Section 1 for a one year term commencing as of
__________________, and ending __________________, (the "Initial Term"), unless
Employee is terminated earlier for "cause" pursuant to subsection 8(a) or,
alternatively, voluntarily elects to terminate employment prior to such date
pursuant to Section 9.
(b) RENEWAL EMPLOYMENT PERIOD DEFINED. The Parties hereto
presently intend this Agreement to renew automatically for additional periods of
one year each (the "Renewal Terms") on the same terms and conditions, but
neither PANORAMIC nor Employee is under any obligation to agree to such
extensions and may refuse the extension or renewal of this Agreement for any or
no reason. This Agreement shall automatically renew for one year Renewal Terms
on ____________ of each year unless either Party provides notice of termination
to the other Party no later than 30 days preceding the next Renewal Term. In the
event such notice of termination is given, this Agreement will terminate
following such notice. The period of time
<PAGE>
commencing as of the date hereof and ending on the effective date of the
termination of employment under this or a successor Agreement shall be referred
to as the "Employment Period."
3. COMPENSATION.
(a) BASE SALARY. PANORAMIC shall pay Employee and Employee agrees
to accept from PANORAMIC in full payment for services and promises to PANORAMIC
(specifically including the "Covenant Not to Compete" as set forth in Section 11
and Proprietary information restrictions as set forth in Section 12) a base
salary at the rate and payment schedule set forth in Appendix A, attached hereto
and incorporated herein by this reference. In connection with the renewal of
this Agreement, either or both Parties may request the renegotiation of the
salary and/or benefit provisions set forth in Appendix A by giving notice to the
other Party no later than 60 days preceding the next Renewal Term. If
renegotiation result in a revised Appendix A that is satisfactory to both
Parties, such revised Appendix A shall be attached hereto and incorporated
herein by this reference. In the absence of such notice of renegotiation, this
Agreement will automatically renew for the next renewal term and will be subject
to the provisions of Appendix A in effect prior to for the previous "Employment
Period."
(b) INCENTIVE COMPENSATION. Employee may receive incentive
compensation in accordance with PANORAMIC'S "Incentive Compensation Plan." The
amount of incentive compensation, if any, payable to Employee shall be
calculated and paid in accordance with the provisions of PANORAMIC's "Incentive
Compensation Plan."
4. FRINGE BENEFITS. Employee is entitled to the benefits provided by
PANORAMIC as set forth in Appendix A, attached hereto and incorporated herein by
this reference. Employee shall be entitled to participate in any benefit
programs adopted from time to time by PANORAMIC for the benefit of its employees
to the extent provided in such programs, and Employee shall receive such other
fringe benefits as may be granted to him/her from time to time by PANORAMIC's
Board of Directors.
5. VACATION. Employee is entitled to vacation, the terms of which
are set forth in Appendix A attached hereto and incorporated herein by this
reference. Such vacation is to be scheduled and taken in accordance with
PANORAMIC's standard vacation policies.
6. BUSINESS EXPENSES. PANORAMIC will reimburse Employee for any
preapproved and necessary, customary and usual expenses which are properly
receipted in accordance with PANORAMIC policies and are incurred by Employee on
behalf of PANORAMIC.
7. DEATH OR DISABILITY.
(a) TERMINATION OF EMPLOYMENT. If Employee becomes physically or
mentally disabled while employed by PANORAMIC and as a result thereof becomes
unable to continue the proper performance of duties hereunder, Employee's
employment shall automatically cease and terminate. In the case of disability
PANORAMIC's obligation to pay Employee's base
-2-
<PAGE>
salary pursuant to Section 3(a) shall cease as of the date of Employee's last
day of active employment. PANORAMIC's obligation to pay incentive compensation
to Employee, or Employee's estate in the event of Employee's death, shall be
determined in accordance with PANORAMIC's "Incentive Compensation Plan."
(b) DEFINITION OF DISABLED. Employee shall be considered to be
"disabled" for purposes of this Section 7, if in the judgment of a licensed
physician selected by the Board of Directors of PANORAMIC, Employee is unable to
perform his customary duties under this Agreement because of a physical or
mental impairment. The determination by said physician shall be binding and
conclusive for all purposes.
8. TERMINATION BY PANORAMIC.
(a) TERMINATION FOR CAUSE. PANORAMIC may terminate Employee at
any time before the last day of the Initial Term, or the last day of any Renewal
Term if this Agreement is renewed on mutual Agreement of the Parties, for
"cause." The term "cause" as used herein shall mean:
(1) The failure of Employee to discharge or perform
duties and obligations under this Agreement with
due diligence and care;
(2) The refusal of Employee to implement or adhere to
policies or directives of the Board of Directors of
PANORAMIC;
(3) Conduct of a criminal nature which may have an
adverse impact on PANORAMIC's reputation and
standing in the community;
(4) Conduct which is in violation of Employee's common
law duty of loyalty to PANORAMIC;
(5) Fraudulent conduct in connection with the business
affairs of PANORAMIC, regardless of whether said
conduct is designed to defraud PANORAMIC or others;
(6) Conduct by Employee which is in violation of any
provision of this Agreement;
(7) The permanent termination of Employee's position
with PANORAMIC pursuant to a general reduction in
force or reorganization of PANORAMIC; or
(8) Significant economic losses or decline in the
revenues of PANORAMIC which necessitate the
termination of Employee's services, as determined
by PANORAMIC; or
-3-
<PAGE>
(9) If and when the Employee alters or changes in any
way any one of the documents with which PANORAMIC
does business such as contracts, agreements, forms,
proposals, pricing information, applications, etc.
without the expressed written consent of the Board
or the Majority Shareholders of PANORAMIC.
The existence of cause shall be conclusively determined by the Board, or
Majority Shareholder of PANORAMIC or its duly appointed agent. If Employee's
employment is terminated for any of the reasons specified in paragraphs (1),
(2), (3), (4), (5), (6) or (9) of this subsection (a), Employee's employment may
be terminated immediately without any advance written notice and without
severance pay. If Employee's employment is terminated for any of the reasons
stated in paragraph (7) or (8) of this subsection (a), Employee shall be
entitled to receive fourteen (14) days advance written notice of the
termination. Alternatively, PANORAMIC may terminate Employee immediately and pay
fourteen (14) days of base salary in lieu of providing notice of such
termination.
(b) FAILURE TO RENEGOTIATE AGREEMENT. As provided in Section
3(a), PANORAMIC may request the renegotiation of the salary and/or benefit
provisions set forth in Appendix A by giving Employee notice no later than 60
days preceding the next Renewal Term. If renegotiation of the salary and/or
benefit provisions do not result in revised Appendix A that is satisfactory to
PANORAMIC, then PANORAMIC shall have the option to terminate this Agreement as
of the upcoming renewal date following such notice of renegotiation by giving
Employee notice of termination two weeks prior to renewal date or thereafter.
(c) FINAL COMPENSATION PAYMENTS. PANORAMIC's obligation to pay
Employee's base salary pursuant to Section 3(a) shall terminate as of the last
day of the Initial Term, or as of the last day of any Renewal Term if this
Agreement is properly specified in any notice of termination issued pursuant to
any of the preceding subsections of this Section 8. Employee shall not be
entitled to receive incentive compensation pursuant to Section 3(b) for fiscal
year in which employment is terminated if employment is terminated for cause
pursuant to subsection (a) of this Section 8.
9. TERMINATION BY EMPLOYEE. Employee shall have right to terminate
this Agreement any time during the Initial Term or any Renewal Term. Employee
agrees to provide PANORAMIC fourteen (14) days prior written notice of any such
termination. If Employee has requested renegotiation of salary and/or benefit
provisions provided in Section 3(a), and such renegotiations do not result in
revised Appendix A that satisfactory to Employee, Employee shall have the right
to terminate this Agreement as of two weeks following such renegotiation notice
by giving PANORAMIC notice of termination two weeks in advance. PANORAMIC's
obligation to pay Employee's base salary pursuant to Section 3(a) shall cease
when Employee's employment is terminated pursuant to this Section 9 shall be
determined in accordance with PANORAMIC's "Incentive Compensation Plan."
-4-
<PAGE>
10. EFFECT OF TERMINATION. Upon the proper termination of this
Agreement by PANORAMIC or the Employee, this Agreement shall thereupon become
and be void and of no further force or effect, except that the "Covenant Not to
Compete" as set forth in Section 11 and the Proprietary Information provisions
(Section 12) shall survive any said termination and shall continue to bind
Employee for the period of time stated therein and the Arbitration provisions of
Section 18 shall continue to govern any disputes arising hereunder. Any payments
due pursuant to terms of this Agreement for services rendered prior to the
termination shall be made as provided in this Agreement.
11. "COVENANT NOT TO COMPETE". Employee acknowledges that he/she is
__________________ (Title) of PANORAMIC and in such capacity Employee will be
PANORAMIC's representative with the clients and potential clients of PANORAMIC.
Employee also acknowledges that he/she will have access to confidential
information about PANORAMIC and its clients and that he/she will have access to
other "proprietary information" (as defined in Section 12) acquired by PANORAMIC
at the expense of PANORAMIC for use in its business. Employee has substantial
experience, skills and knowledge. Employee's expertise in the industry,
educational and training background and other services to PANORAMIC are special,
unique and extraordinary; and the success or failure of PANORAMIC is dependent
upon Employee's discharge of duties and obligations. Accordingly, by execution
of this Agreement:
(a) DURATION OF COVENANT. Employee agrees that during the
Employment Period and for a period of one (1) year following Employee's
termination of employment for any reason (whether termination be voluntary or
involuntary), Employee shall not violate the provisions of subsection (b),
below. Employee agrees that the one (1) year period referred to in the preceding
sentence shall be extended by the number of days included in any period of time
during which Employee is or was engaged in activities constituting a breach of
subsection (b), below.
(b) PROHIBITED COMPETITIVE ACTIVITIES. During the time period
specified in subsection (a), above, Employee shall not:
(1) Directly or indirectly own, operate, manage,
consult with, control, participate in the
management or control of, be employed by, maintain
or continue any interest whatsoever in any business
or service that competes directly or indirectly
with PANORAMIC;
(2) Directly or indirectly solicit any competitive
business from any client, individual or entity of
said company of which business was obtained while
employed by PANORAMIC;
(3) Directly or indirectly solicit any business for a
competitor of the company which is or was solicited
by Employee on behalf of PANORAMIC.
-5-
<PAGE>
(c) NEED FOR COVENANT, LEGAL REMEDIES. Employee expresses, agrees
and acknowledges that this "Covenant Not to Compete" is necessary for PANORAMIC
because of the nature and scope of PANORAMIC's business and Employee's position
with and services for PANORAMIC. Further, Employee acknowledges that, in the
event of breach of "Covenant Not to Compete," money damages will not
sufficiently compensate PANORAMIC for injury caused thereby, and Employee
accordingly agrees that in addition to such money damages Employee may be
restrained and enjoined from any continuing breach of this "Covenant Not to
Compete" without any bond or other security being required by any court.
Employ acknowledges that any breach of this "Covenant Not to Compete" would
result in irreparable damage to PANORAMIC.
(d) ACKNOWLEDGMENTS BY EMPLOYEE. Employees expressly agrees and
acknowledges as follows:
(1) This "Covenant Not to Compete" is reasonable as to
time and does not place any unreasonable burden
upon Employee;
(2) The general public will not be harmed as a result
of enforcement of this "Covenant Not to Compete."
(3) Employee has been encouraged to consult with
personal legal counsel regarding this "Covenant Not
to Compete" and has had the opportunity to do so if
desired.
(4) Employee understands and hereby agrees to every
term and condition of this "Covenant Not to
Compete."
12. PROPRIETARY INFORMATION.
(a) RETURN OF PROPRIETARY INFORMATION. Upon termination of this
Agreement for any reason, Employee shall immediately turn over to PANORAMIC any
"proprietary information" as defined below. Employee shall have no right to
retain any copies of any material qualifying as "proprietary information" for
any reason whatsoever after termination of employment hereunder without the
expressed written consent of PANORAMIC.
(b) NON-DISCLOSURE. It is understood and agreed that, in the
course of employment hereunder and through activities for and on behalf of
PANORAMIC, Employee will receive, deal with and have access to PANORAMIC's
"proprietary information" and that Employee holds PANORAMIC's "proprietary
information" in trust and confidence for PANORAMIC. Employee agrees not, during
the term of this Agreement or thereafter; in any fashion, form or manner,
directly or indirectly, retain, make copies of, divulge, disclose or communicate
to any person, in any manner whatsoever, except when necessary or required in
the normal course of Employee's employment hereunder and for the benefit of
PANORAMIC or with the expressed written consent of PANORAMIC, any of PANORAMIC's
"proprietary information" or any
-6-
<PAGE>
information of any kind, nature or description whatsoever concerning any matters
affecting or relating to PANORAMIC's business.
(c) PROPRIETARY INFORMATION DEFINED. For purposes of this
Agreement, "proprietary information" means and includes the following: the
identity of clients or customers or potential clients or customers of PANORAMIC;
any written, typed or printed lists or other materials identifying the clients
or customers of PANORAMIC; any financial or other information supplied by
clients or customers of Panoramic; any and all data or information involving the
techniques, programs, methods or contacts employed by PANORAMIC in the conduct
of its business; any lists, documents, manuals, records, forms, or other
materials used by PANORAMIC in the conduct of its business; any descriptive
materials describing the methods and procedures employed by PANORAMIC in the
conduct of its business; any other secret or confidential information concerning
PANORAMIC's business or affairs. The terms "list," "document," or their
equivalent, as used in this Section 12, are not limited to a physical writing or
compilation but also include any and all information whatsoever regarding the
subject matter of the "list" or "document" whether or not such compilation has
been reduced to writing.
13. TERMINATION OF PRIOR AGREEMENTS. This Agreement terminates and
supersedes any and all prior Agreements and understandings between the Parties
with respect to employment or with respect to the compensation of Employee by
PANORAMIC.
14. ASSIGNMENT. This Agreement is personal in its nature and neither
of the parties hereto shall; without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder; provided that,
in the event of the merger, consolidation or transfer or sale of all or
substantially all of the assets of PANORAMIC with or to any other individual or
entity, this Agreement shall, subject to the provisions hereof, be binding upon
and inure to the benefit of such successor and such successor shall discharge
and perform all the promises, covenants, duties and obligations hereunder.
15. GOVERNING LAW. This Agreement and the legal relations thus
created between the Parties hereto shall be governed by and construed under and
in accordance with the laws of the State of Colorado and the County of
Jefferson.
16. ENTIRE AGREEMENT. This Agreement embodies the entire Agreement of
the Parties respecting the matters within its scope and may be modified only in
writing.
17. WAIVER. Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver of such term,
covenant or condition, nor shall any waiver or relinquishment of, or failure to
insist upon strict compliance with, any right or power hereunder at any one or
more times be deemed a waiver or relinquishment of such right or power at any
other time or times.
18. ARBITRATION. All claims, disputes and other matters in question
between the Parties arising out of the employment relationship, including the
"Covenant Not to Compete" of Section 11 and the Proprietary information
provisions of Section 12 of this Agreement, shall be
-7-
<PAGE>
decided by arbitration in accordance with the rules of the American Arbitration
Association ("AAA"), unless the Parties mutually agree otherwise. An Arbitrator
shall be selected from the panels of Arbitrators of the AAA, pursuant to the
procedure set out in the AAA Commercial Arbitration Rules. The award by the
arbitrator shall be final, and judgment may be entered upon it in accordance
with applicable law in any Texas or Federal court having jurisdiction thereof.
Nothing in this clause shall be construed to prevent PANORAMIC from asking a
court of competent jurisdiction to enter appropriate equitable relief to enjoin
a violation of the "Covenant Not to Compete" of Section 11 and the Proprietary
information provisions of Section 12 of this Agreement. PANORAMIC shall have the
right to seek such relief in connection with or apart from the Parties' rights
under this clause to arbitrate all disputes. The Arbitrator shall, in its award,
allocate between the Parties the costs of arbitration, which shall include
reasonable attorneys' fees of the Parties, as well as the Arbitrator's fees and
expenses, in such proportions as the Arbitrator deems just.
19. SEVERABILITY. In the event that a court of competent jurisdiction
determines that any portion of this Agreement is in violation of any statute or
public policy, then only the portions of this Agreement which violate such
statute or public policy shall be stricken. All portions of this Agreement which
do not violate any statue or public policy shall continue in full force and
effect. Further, any court order striking any portion of this Agreement shall
modify the stricken terms to give as much effect as possible to the intentions
of the Parties under this Agreement.
20. DOCUMENT CHANGES. This document is among the master documents of
PANORAMIC and is copyrighted as such. The master document of this text is
maintained in security by PANORAMIC, and any changes to the internal, printed
text of this document which deviates in any way from the master document renders
this document invalid.
-8-
<PAGE>
IN WITNESS WHEREOF, PANORAMIC has caused this Agreement to be executed by its
duly authorized officer, and Employee has hereunto signed this Agreement on the
______ day of __________________.
The Company:
By:___________________________________ ___________________________________
Authorized Signature ("Employee")
and:__________________________________
Chief Executive Officer,
Panoramic Care Manager, Inc.
This "Employment Agreement" is not a valid document until and unless all three
signatures have been affixed on the appropriate lines above this notation.
Inserts:
1.
2.
3.
4.
5.
-9-
<PAGE>
APPENDIX A
1. Employee shall receive $__________ per month ($__________ annually) in
compensation.
2. Employee shall be entitled to vacation in accordance to Company policies
on vacation.
3. Employee shall be assigned to the __________________ Department.
-10-
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in the Registration Statement and Prospectus of Panoramic
Care Manager, Inc. of our report dated March 4, 1999, accompanying the financial
statements of Panoramic Care Manager, Inc. contained in such Registration
Statement, and to the use of our name and the statements with respect to us, as
appearing under the heading "Experts" in the Prospectus.
/s/Hein + Associates LLP
HEIN + ASSOCIATES LLP
Denver, Colorado
April 9, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 350,122
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 449,522
<PP&E> 45,282
<DEPRECIATION> 10,271
<TOTAL-ASSETS> 534,793
<CURRENT-LIABILITIES> 32,257
<BONDS> 0
0
0
<COMMON> 3,016
<OTHER-SE> 499,520
<TOTAL-LIABILITY-AND-EQUITY> 534,793
<SALES> 27,613
<TOTAL-REVENUES> 51,507
<CGS> 0
<TOTAL-COSTS> 238,824
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (187,317)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (187,317)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
