SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB
Advanced Business Sciences, Inc.
(Name of Small Business Issuer in its charter)
DELAWARE 87-0347787
(State of incorporation) (IRS Employer Identification No.)
3345 No. 107th Street, Omaha, Nebraska 68134
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (402) 498-2734
Securities to be registered under Section 12(b) of the Act: None.
Securities to be registered under Section 12(g) of the Act:
Common Stock (par value $0.001 per share)
(Title of class)
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TABLE OF CONTENTS
Page
PART I......................................................................1
Item 1 Description of Business..........................................1
(a) Business Development.................................1
(b) Business of Issuer...................................2
(i) Introduction .................................2
(ii) The Electronic Monitoring Market...............3
(iii) Competition....................................4
(iv) Business Strategy..............................4
(v) The Products and Services of the Company.......5
(vi) The Technology.................................6
(vii) Intellectual Property Rights...................8
(viii) Regulation....................................8
(ix) Research and Development.......................9
(x) Customers; Orders Backlog......................9
(xi) Seasonality....................................9
(c) Reports to Security Holders..........................9
Item 2 Management's Discussion and Analysis or Plan of Operation.......10
(a) Revenue ............................................11
(b) Cost of Sales.......................................11
(c) Gross Profit .......................................12
(d) Expenses Research and Development...................12
(e) Sales and Marketing.................................12
(f) General and Administrative .........................13
(g) Profit (loss) from Operations.......................13
(h) Interest Expense....................................13
(i) Asset Abandonment Charge............................14
(j) Net Loss............................................14
(k) Liquidity and Capital Resources.....................14
(l) Impact of Year 2000 Issues..........................14
Item 3 Description of Property.........................................15
Item 4 Security Ownership of Certain Beneficial Owners and Management..16
Item 5 Directors, Executive Officers, Promoters and Control Persons....17
Item 6 Executive Compensation..........................................19
Item 7 Certain Relationships and Related Transactions..................20
Item 8 Description of Securities.......................................20
(a) General.............................................20
(b) Common Shares.......................................20
(c) Preferred Stock.....................................21
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(d) No Preemptive Rights................................21
(e) Delaware Business Combination Statute...............21
(f) Certain Charter Provisions..........................22
(i) General ......................................22
(ii) Number of Directors; Removal; Vacancies ......22
(iii) Classified Board of Directors ................22
(iv) Approval of Repurchases ......................23
(v) Amendments to Bylaws .........................23
(vi) Amendment of the Certificate of Incorporation 23
(g) Limitation of Liability and Indemnification.........23
(h) Transfer Agent and Registrar........................24
PART II..................................................................II-1
Item 1 Market Price of and Dividends on the Company's Common Equity and
Other Shareholder Matters......................................II-1
Item 2 Legal Proceedings..............................................II-1
Item 3 Changes in and Disagreements with Accountants..................II-2
Item 4 Recent Sales of Unregistered Securities........................II-2
Item 5 Indemnification of Directors and Officers......................II-3
PART F/S...................................................................F/S-1
PART III..................................................................III-1
Item 1 Index to Exhibits.............................................III-1
Item 2 Description of Exhibits.......................................III-1
SIGNATURES...............................................................III-1
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PART I.
Item 1. Description of Business
(a) Business Development
ADVANCED BUSINESS SCIENCES, INC. ("ABS" or the "Company") is a development
stage company. The Company develops, produces, markets and supports a broad
product line of solutions relating to the tracking, monitoring and reporting of
individuals and things. ABS products are designed to enhance productivity,
reduce costs, and improve overall response using on-line access to information
previously maintained on a variety of media. Today, the Company primarily
markets to the criminal justice application for house arrest (HA) and continuous
electronic monitoring (CEM). ABS currently serves the criminal justice industry
and individual monitoring within eleven (11) states: Arizona, Minnesota, Iowa,
New Jersey, Ohio, Texas, Wisconsin, Colorado, South Carolina, New York, and
Kansas.
The Company was incorporated under the laws of the State of Colorado on
June 13, 1983 under the name "Sage Institute International, Inc." A Delaware
corporation under the name "Sage Analytics International, Inc." was incorporated
on July 17, 1986; and, on September 2, 1986, the Company was reincorporated as a
Delaware corporation by merging the Colorado corporation with and into the
Delaware corporation.
On December 17, 1997, the shareholders of Advanced Business Sciences,
Inc., a Nebraska corporation, concluded a share exchange with the Company (the
"Share Exchange") whereupon the Nebraska corporation became the wholly-owned
subsidiary of the Company and control of the Company was transferred to the
shareholders of the Nebraska corporation. See "Security Ownership of Certain
Beneficial Owners and Management," "Directors, Executive Officers, Promoters and
Control Persons," and "Recent Sales of Unregistered Securities." The Company
changed its name to Advanced Business Sciences, Inc. on December 18, 1997.
On September 28, 1998, the Company concluded a share exchange with
Comguard Leasing and Financial, Inc., an Illinois corporation, and its
shareholders (the "Comguard Acquisition"). The Comguard Acquisition was
rescinded effective June 1, 1999, and the Company acquired selected assets in
exchange for advances made to Comguard Leasing and Financial, Inc. or its
subsidiary, Comguard, Inc.
(b) Business of Issuer
(i) Introduction
The Company was initially engaged in the commercial application of a
form of decision support technology which incorporated proprietary methodology
and software. This technology was marketed to both government and private
industry. The Company conducted no business operations
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from in or about April, 1996, until the completion of the Share Exchange. Upon
completion of the Share Exchange, the Company commenced operations once again as
described below.
The Company designs, develops, produces, sells and supports wireless
products and services relating to the tracking, monitoring and reporting of
individuals and things. Currently, the Company's business relates to criminal
justice applications for house arrest and electronic monitoring.
The ABS<ComTrak(R) product, which utilizes Global Positioning System
("GPS") technology, wireless communications and proprietary computer software,
provides real time monitoring, tracking and reporting of adult and juvenile
offenders as a criminal justice rehabilitative alternative. Through controlled
monitoring in ABS or customer staffed operations centers, the system tracks the
geographic location of every offender in the system, reports specific activities
and identifies violations against customer-established parameters. This
information is then delivered to the appropriate authorities using various
methods, including telephone calls, paging and internet-based e-mail and
web-based reports. The Company believes use of its system can offer a
substantial cost savings over the cost of incarceration and improve the
efficiency of probation and parole officers. It also offers the backlogged
criminal justice systems a more secure solution to the problems of rapidly
growing criminal populations, overcrowded correctional facilities and more
lenient sentencing alternatives.
In addition to the criminal justice market, the Company has targeted
additional industries where it believes its products and services offer
attractive solutions to current problems.
These markets are as follows:
Industry Applications
-------- ------------
Transportation Automatic vehicle tracking
Payload status
Healthcare Emergency response services
Tracking of infants and Alzheimer's patients
The monitoring and reporting operations of the Company are conducted
through ABS Nebraska, Inc., a Nebraska corporation ("ABS Nebraska"), the direct
subsidiary of the Company. The Company has twenty-two (22) full time employees
and one (1) part-time employee.
(ii) The Electronic Monitoring Market
To date, the Company has focused primarily upon electronic
monitoring in the criminal justice system. In 1980, the total estimated
correctional population was, according the United States Bureau of Justice
Statistics, 1.8 million. In 1996, that number was 5.5 million. This growth has
resulted in obvious stresses on the correctional system in terms of both
management and costs. While this has led to increased use of probation and
parole as alternatives to incarceration, caseworkers are unable to monitor
probationers and parolees effectively. Electronic monitoring enhances the
ability
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of caseworkers to monitor the activities of probationers and parolees, as well
as affording house arrest as an economic alternative to incarceration.
The traditional house arrest application utilizes (1) a fixed
location radio frequency ("RF") device connected to a power source and telephone
line (an "HAU") and (2) a tamper-proof transmitter cuff worn by the offender.
The individual under house arrest must remain within a specified distance of the
HAU. When they leave that proximity, the HAU transmits a notification over the
telephone line to a monitoring center. The monitoring center software and
operators determine if this is a permitted or authorized departure, using tables
of individual schedules provided by the contracting authorities. If they
determine it is a violation of the programmed schedule, a violation notice is
created and the appropriate authorities are contacted using pre-established
protocols. These protocols can include voice calls, paging, faxing, e-mail or
some combination. Additionally, reports are created for transmission as required
by the customer organization.
HAU equipment first became commercially available in 1984. In 1987,
twenty-one (21) states reported using this electronic monitoring as a sentencing
alternative. By 1995, all fifty states were using at least limited amounts of
house arrest electronic monitoring. Experts estimate that as many as 300,000
individuals now incarcerated could be supervised more cost-effectively and
safely using appropriate electronic supervision. There were an estimated 95,000
individuals under electronic house arrest at the beginning of 1998. These
individuals were monitored primarily through third party service providers under
contract to the appropriate local, state and federal agencies.
The Company believes there is a substantial opportunity to provide a
mobile system to monitor offenders in the community environment away from the
fixed HA location. ABS has pioneered the development of a mobile Personal
Tracking Unit ("PTU") system which provides continuous monitoring away from the
fixed location, utilizing GPS locational information and wireless communications
technologies. ABS is a leader in the field deployment of such systems. As of
March 31, 1999, the Company had approximately forty (40) of its PTU's in use in
the criminal justice system in Arizona, Texas, Ohio, Wisconsin and Iowa.
(iii) Competition
Today, there are several companies providing monitoring services on
a nation-wide basis, including BI Incorporated ("BI"), SecurityLink (an
Ameritech company), and General Security Services Corp. In addition, there are
many smaller companies that provide monitoring services on a local basis for
smaller governmental agencies. BI is believed to be the largest company
monitoring offenders in the criminal justice market, with a reported 21,500
active units as of March 31, 1999.
There are also other companies which provide HA equipment and at
least two others with GPS-based systems. BI has historically been the largest
provider of the equipment in use today. However, the Company believes that BI is
no longer offering its equipment for sale except in connection with contracts
which engage it to provide monitoring services. Other companies producing HA
equipment include ElmoTech, Comguard, Digital Products Corporation, and Tracking
Systems Corporation.
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ABS believes that only one other company, Pro Tech Monitoring, Inc.,
has a GPS-based product in the field today. BI, however, has announced plans to
introduce a GPS-based product in 1999.
(iv) Business Strategy
The key elements of the Company's business strategy are:
o Be a leader in applying GPS technology to applications for
tracking people and assets. The Company believes it has a
leadership position today, and has invested substantially in
efforts to improve its products. Improvements in technology
components and communications systems are being constantly
evaluated. The Company intends to incorporate appropriate new
or improved capabilities into its products on an ongoing
basis, and to continue to devote significant resources to the
area of product development.
o Target application opportunities within specific market
niches, to be a supplier of equipment and software to those
end markets. The Company believes that it is a leader in
applying GPS technology today in the criminal justice
marketplace. It intends to capitalize on that position by
targeting the service providers that need additional and
replacement HA equpment and who have a need for GPS-based
systems.
GPS technology, in general, has already gained acceptance in
the automatic vehicle location ("AVL") segment of the
transportation industry and ABS believes that its core product
can be readily adapted to that market. The Company has
targeted the location of untethered trailers as one initial
application niche to serve in the transportation industry. ABS
believes that its products have application within the
healthcare industry and has targeted segments of the newborn
infant care and senior care as initial market opportunities.
Additionally, the Company will maintain the capability to
undertake special projects, funded by specific customers to
meet their unique needs. These special projects will be done
to advance ABS's knowledge in targeted markets and to fund
development within specific application areas.
o Partner with world-class organizations that can assist the
Company in the development and distribution of its products.
The Company will maintain certain core competencies on its
staff, including the senior technology knowledge, and
knowledge specific to managing its production, distribution,
and sales functions. Part of the business strategy is to
identify partner companies in the areas of engineering,
manufacturing, technology, communications and distribution.
These companies will be best-of-class and
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derive their revenue and profit opportunities in application
areas in parallel with ABS.
(v) The Products and Services of the Company
The Company markets the ABS<ComTrak(R) solution. The ABS<ComTrak(R)
solution provides its customers real-time monitoring of any person or thing on
either a continuous or periodic basis, whether the person or object is moving or
is at a fixed location.
The ABS<ComTrak(R) solution consists of four basic components:
A Personal Tracking Unit ("PTU") is worn by or placed near the
subject. The PTU is secured to the subject via a Wireless Cuff ("WC"), which is
about the size of many wrist watches. The WC is waterproof and shockproof; its
case and strap are designed to be tamper resistant. The PTU utilizes information
from the GPS to triangulate the subject's physical position. The PTU then
transmits this and other information to an Operations Center. In addition, the
PTU can be used in a docking station as a Home Arrest Monitor ("HAM").
The PTU monitors the status of the WC and itself and reports
to the Operations Center (see below) the following conditions:
o Status of radiofrequency contact between PTU and HAM,
including proximity violations (i.e. failure to remain within
specified proximity of HAM)
o Tampering with PTU or HAM
o Status of communications between HAM and Operations
Center
o Status of power connection of HAM
o Status of PTU battery
o Exclusion zone violations (i.e., being in an area or location
from which the subject is prohibited)
ABS Nebraska operates an Operations Center (the "OC") 24 hours
per day, 7 days per week. The OC monitors the HAM's and PTU's and provides
technical support to customers.
Each customer maintains a Customer Workstation ("CW") at its
site. The CW is used by the customer to build daily schedules and program
inclusion and exclusion zones. Six levels of service are provided by the Company
to meet the specific needs of its customers.
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(vi) The Technology
(A) Wireless Services and their Regulation
Wireless communications are transmitted through the space via
radiofrequency radiation, one of several types of electromagnetic radiation. The
RF part of the electromagnetic spectrum is generally defined as electromagnetic
radiation with frequencies in the range of 3 kilohertz to 300 gigahertz. One
"hertz" equals one cycle per second. A kilohertz ("kHz") is one thousand hertz,
a megahertz ("mHz") is one million hertz and a gigahertz ("gHz") is one billion
hertz. Microwave radiation is a high-frequency form of RF usually defined as
from about 300 mHz to 300 gHz.
Familiar uses of RF involving telecommunications include AM
and FM radios, television, citizens band radio, hand-held walkie talkies,
amateur radio, short-wave radio, cordless telephones and microwave
point-to-point and ground-to-satellite telecommunications links.
Non-telecommunications applications include microwave ovens and radar.
The manufacture, sale and use of devices which utilize any
part of the RF spectrum are subject to regulation. The Federal Communications
Commission (the "FCC") is the principal agency responsible for such regulation
within the United States. State and local governments, however, exercise some
control respecting the siting of wireless facilities. While many transmitters
(such as radio stations) must be individually licensed, certain low-power
transmitters need not be. These would include such devices as cordless
telephones, baby monitors, garage door openers, wireless home security systems,
and keyless automobile entry systems. Before such a device may be marketed,
however, it must first be tested to determine if the device meets FCC
specifications and then receive authorization from the FCC. The devices which
the Company markets fit within this regulatory scheme.
(B) Global Positioning System
The Global Positioning System ("GPS") consists of at least 24
operational satellites that orbit the earth every 12 hours. Operated by the
Department of Defense, this constellation typically permits from five to eight
satellites to be visible from any point on earth at any given moment in time. A
master control facility located at Schriever Air Force Base in Colorado monitors
signals from the satellites and uploads orbital and clock data. Users of GPS
convert signals from four different satellites to compute position and time.
Only authorized users of GPS with specially equipped receivers
are permitted to use the Precise Positioning System ("PPS"). PPS is accurate
within 22 meters for horizontal position, 27.7 meters for vertical position and
100 nanoseconds time accuracy. On the other hand, civil users of GPS such as the
Company are permitted to use the Standard Positioning Service ("SPS"). The
accuracy of SPS is intentionally degraded by the Department of Defense using a
technique referred to as selective availability. SPS is accurate within 100
meters for horizontal
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position, 156 meters for vertical position and 340 nanoseconds time accuracy.
SPS is available 24 hours per day without charge or restrictions on a worldwide
basis.
To correct the errors created by selective availability,
methods have been developed which are generally referred to as Differential GPS
("DGPS") techniques. DGPS corrects errors at one location with measured bias
errors at a known position. A reference receiver (or base station) computes
corrections for each satellite signal. Corrections may then be transmitted by
radio link or other electronic means. The U.S. Coast Guard, for example,
maintains a network of differential monitors and transmits DGPS corrections over
radiobeacons covering much of the U. S. coastline. Private DGPS services are
also available, some of which require payment of a user fee. PTU's are
configured to use SPS. PTU's may be configured to use DGPS if customers so
desire.
On March 29, 1996, a Presidential directive (the "Presidential
Directive") announced that it is the policy of the U.S. Government that the U.S.
would continue to provide SPS for peaceful civil, commercial and scientific use
on a continuous, worldwide basis, free of direct user fees, but that selective
availability would be discontinued within ten years. On January 25, 1999, the
Vice President announced a budgetary initiative to modernize GPS by adding two
new civil signals to future GPS satellites.
GPS satellites and their ground support systems are complex
electronic systems subject to electronic and mechanical failures and possible
sabotage. The satellites have design lives of 7.5 years and are subject to
damage by the hostile space environment in which they operate. To repair damaged
or malfunctioning satellites is not economically feasible. If a significant
number of satellites were to become inoperable, there could be a substantial
delay before they are replaced with new satellites. A reduction in the number of
operating satellites would impair the current utility of the GPS system and the
growth of current and additional market opportunities. In addition, there can be
no assurance that the U.S. government will remain committed to the operation and
maintenance of GPS satellites over a long period, or that the policies of the
U.S. Government for the use of GPS without charge will remain unchanged.
However, the Presidential Directive marks the first time in the evolution of GPS
that access for consumer, civilian and commercial use has a solid foundation in
law. Because of ever-increasing commercial applications of GPS, other U.S.
Government agencies may become involved in the administration or the regulation
of the use of GPS signals. Any of the foregoing factors could affect the
willingness of buyers of the Company's products to select GPS-based systems
instead of products based on competing technologies. Any resulting change in
market demand for GPS products could have a material adverse effect on the
Company's financial results.
A recent study by the Johns Hopkins University Applied Physics
Laboratory (January, 1999) examined the susceptibility of GPS equipment to
intentional or inadvertent signal interference. This study concluded that only
intentional interference (i.e., jamming) and ionospheric errors and
scintillation represented any significant risk. Such risks, however, could be
reduced using various mitigation techniques; and, moreover, such interference
would most likely be short in duration. Nevertheless, concerns about the
integrity of GPS could translate into reduced demand for the Company's products
and services.
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(vii) Intellectual Property Rights
The Company has three pending U.S. Patent Applications covering its
technology. Two of the patent applications cover a system for remotely
monitoring an individual, and for providing real time notification if that
individual fails to comply with predetermined conditions. The third application
covers a unique antenna for use with the system.
The Company has been granted a nonexclusive, nontransferable
software license from SiRF Technology Incorporated ("SiRF"). SiRF has designed
GPS chip sets and software solutions that allow ABS to embed GPS technology into
its products. This license may be terminated if SiRF loses any of its rights as
to the software products encompassed therein or by either party upon thirty (30)
days written notice in the event of a material breach of the license by the
other party.
The Company has acquired from Electronic Rainbow, Inc. all rights
respecting monitoring software, hardware and firmware developed by Electronic
Rainbow, Inc. The Company has granted Electronic Rainbow, Inc. a nonexclusive
license to use such software, hardware and firmware in connection with the
healthcare industry.
(viii) Regulation
The manufacture, sale and use of RF devices is regulated by the FCC. See
Item 1(b)(vi)(A) of this Part I. Similarly, insofar as GPS remains funded and
controlled by the U. S. government, devices utilizing GPS must conform with
government specifications.
The use of tracking devices as an aid to, or indeed substitute for,
physical surveillance by law enforcement personnel, is subject to federal, state
and local law. Generally stated, tracking devices may be attached to or
installed upon the monitored person or object without court order as long as the
person or object remain in public view. Once the person or object is withdrawn
from public view, a court order is required. But, where a tracking device has
been placed with contraband (e.g., stolen goods), rather than with a lawfully
possessed item, warrantless monitoring can continue to occur even after the
monitored object has been taken onto private premises. As a rule, all persons
presently monitored by the Company are subject to a court order requiring such
monitoring as a condition to their release.
The use of tracking devices by private persons is also subject to
applicable law. The monitoring of persons without their consent or of objects
without their owners' or lawful possessors' consent may be a violation of laws
protecting privacy and property rights.
(ix) Research and Development
During 1997 and 1998, the Company expended $32,065 and $468,563,
respectively, toward research and development. The costs of such research and
development are borne by the Company and not by any of its customers.
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(x) Customers; Orders Backlog
Because the Company is a development stage company, it has to date
sustained significant losses. The loss of any customer could have a material
adverse effect upon the prospects and business of the Company. There is no
material backlog of orders for products of the Company.
(xi) Seasonality
The Company's business is not seasonal.
(c) Reports to Security Holders
The Company is voluntarily filing this Registration Statement on Form
10-SB in order to make information concerning itself more readily available to
the public. Management believes that being a reporting company under the
Securities Exchange Act of 1934 (the "Exchange Act") could provide existing and
prospective investors with additional information concerning the Company. As a
result of filing this Registration Statement, the Company will be obligated to
file interim and periodic reports with the Securities and Exchange Commission
(the "Commission") in accordance with the Exchange Act. The Company intends to
continue to file these periodic reports under the Exchange Act voluntarily even
if its obligation to file such reports is suspended under applicable provisions
of the Exchange Act.
The reports and other information filed by the Company may be inspected
and copied at prescribed rates at the public reference facilities of the
Commission in Washington, D.C. Copies of such material can be obtained from the
Public Reference Section of the Commission, Washington, D.C., 20549, at the
Commission's New York Regional Office located at Seven World Trade Center, Suite
1300, New York, New York 10048, and at its Midwest Regional Office, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Descriptions contained in
this Registration Statement as to the contents of any contract or other document
filed as an exhibit to this Registration Statement are not necessarily complete
and each such description is qualified by reference to such contract or
document. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the Commission (including the Company). The address of this
Web site is http://www.sec.gov.
The Company intends to furnish to its stockholders, after the close of
each fiscal year, an annual report relating to the operations of the Company and
containing audited financial statements examined and reported upon by an
independent certified public accountant. In addition, the Company may furnish to
stockholders such other reports as may be authorized, from time to time, by the
Board of Directors. The Company's year end is December 31.
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Item 2. Management's Discussion and Analysis or Plan of Operation
ABS is a developmental stage company. As such, the financial results of
operations reflect the primary activities of the Company directed toward
development and testing of its GPS products, principally for offender monitoring
in the criminal justice marketplace.
The following table provides a breakdown of selected results of operations
for the three months ended March 31, 1999, and March 31, 1998 and is the basis
for the following discussion of first quarter results.
Selected Results of Operations For the three months
ended:
(Unaudited)
March 31, 1999 March 31, 1998
-------------- --------------
Revenues ......................................... $ 48,869 $ 9,663
Cost of Sales .................................... 38,124 20,832
----------- ------------
Gross Profit Loss) ............................... $ 10,745 ( $11,169 )
Expenses
Research and Development .................... $ 33,184 $ 58,026
Sales and Marketing ......................... 127,126 64,130
General and Administrative .................. 523,761 397,232
----------- ------------
Total Expenses ............................. $ 684,071 519,388
----------- ------------
Loss from Operation ........................ (673,326) (530,557)
Other Income and Expense)
Interest Income ............................. - 0 - - 0 -
Other Income ................................ - 0 - - 0 -
Loss on Sales of Property and Equipment - 0 - ( 349 )
Interest Expense ............................ ( 53,906 ) ( 7,774 )
Asset Abandonment ........................... - 0 - 0 -
----------- ------------
Provision for Income Taxes ................. - 0 - - 0 -
Net Loss .................................. ( 727,232 ) ( $538,680 )
======= ========
(a) Revenue
The Company derives revenue from sale of products, billable services for
monitoring, software license fees, equipment and software leasing, and charges
for maintenance and repair of equipment.
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For the quarter ended March 31, 1999, Revenue increased $39,206, to $48,869, an
increase of 405.7% over the comparable period of 1998 of $9,963. The reasons for
this increase are higher monitoring service fees as a result of more units being
monitored by ABS, and additional lease fees, as a result of more units being
leased in the first quarter of 1999 as compared to the comparable period in
1998. For the twelve months ended December 31, 1998, Revenue increased $23, 253,
or 89.1%, over the comparable period of 1997. The reasons for this increase are
higher monitoring service fees as result of more units being monitored by ABS,
and additional lease fees, as a result of more units being leased in 1998 as
compared to the comparable period in 1997.
(b) Cost of Sales
Cost of Sales represents the direct costs associated with the generation
of revenue, and includes cost of goods for products which are sold, direct costs
of distribution of software and equipment, maintenance expenses on equipment
repaired under service agreements, and the direct variable communications
expenses associated with the monitoring services provided by the Company. For
the three months ended March 31, 1999, Cost of Sales was $38,124, or 78.7% of
revenues, compared with $20,832, or 215.6% of revenue for the comparable period
in 1998. The primary reasons for the lower cost of sales as a percentage of
revenue in the 1999 period were increased utilization of the Company assets in
the field, resulting in higher revenue generation per unit and a lowering of the
fixed communications costs as a percentage of that revenue.
For the twelve months ended December 31, 1998, Cost of Sales was $90,146,
or 182.7% of revenues, compared with $22,867, or 87.6% of revenue for the
comparable period in 1997. The primary reasons for the higher cost of sales as a
percentage of revenue in 1998 were, increased cellular and long distance
telephone expenses, and increased shipping and delivery expenses. These
proportionate increases were due to an increase in the number of customer and
prospect demonstrations and demonstration units deployed by the company in 1998,
as a result of its sales and marketing activities.
(c) Gross Profit
For the first three months of 1999, Gross Profit for the Company increased
$21,914, to $10,475, compared to a negative Gross Profit of $(11,169) in the
comparable period of 1998. The reasons for this increase were the
proportionately lower Cost of Sales in the 1999 period, as discussed above. In
the twelve months ended December 31, 1998, Gross Profit for the Company declined
$44,026, to a loss of $40,793 compared to a positive Gross Profit of $3,233 in
the comparable period of 1997. The reasons for this decline were the
proportionately higher Cost of Sales in 1998, as discussed above.
(d) Expenses Research and Development
Research and Development expenses are the direct costs associated with the
Company's development of its proprietary products. Expenses in this category
include the cost of outside contracted engineering and design, staffing expenses
for the Company's own engineers and software
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developers, and the actual costs of components, prototypes, and testing
equipment and services used in the product development functions. For the first
three months of 1999, Research and Development expenses decreased $24,842 to
$33,184, compared to $58,026 in the comparable period of 1998. The primary
reason for this decrease was the timing for the continuing development of the
Company's ABS COMTRAK unit for criminal justice temporarily reduced expenses in
this category. The Company was in the planning stages for its next product
release, and therefor was not expending as much with its outside suppliers
during the period.
Research and Development expenses increased $217,199 in the twelve month
period ending December 31, 1998 to $500,628, compared to $283,429 in the
comparable period of 1997. The primary reason for this increase was the funding
for the continuing development of the Company's ABS COMTRAK unit for criminal
justice applications and for development of the Company's monitoring center
system. The new device was installed in 1998 for customers and prospects in
Arizona, Texas, Iowa, Wisconsin, New Jersey, and Ohio.
(e) Sales and Marketing
Sales and Marketing expenses represent the costs of the Company's sales
and marketing staff, travel and related expenses associated with sales to the
Company's customers and prospects, the costs of advertising in magazines and
periodicals, attendance at trade shows, and production of marketing and related
collateral material. For the three months ended March 31, 1999, Sales and
Marketing expenses increased $62,996 to $127,126, compared to $64,130 in the
comparable quarter of 1998. The primary reason for this increase was that the
Company increased the sales & marketing staff and payroll over the comparable
period in 1998.
Sales and Marketing expenses increased $43,068 to $427,120 in the twelve
months ended December 31, 1998, compared to $384,052 in the comparable period of
1997. The reason for this increase was the Company's expanded efforts to market
the ABS COMTRAK unit to the criminal justice market place in 1998, and to build
a market image for that product within the criminal justice market.
(f) General and Administrative
General and Administrative expenses are all the indirect and overhead
expenses associated with the operations of the Company, outside of those
expenses described above. These expenses include executive, administrative, and
accounting staff payroll, taxes and benefits, rent on property, all travel not
included in the Sales and Marketing expense, fixed telephone expenses, office
leases and supplies, and recruiting and training expense. For the three months
ended March 31, 1999, General and Administrative expense increased $126,529 to
$523,761, from $397,232 in the comparable period of 1998. The primary reasons
for this increase were increases in administrative and executive staff and
payroll.
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For the twelve months ended December 31, 1998, General and Administrative
expense increased by $628,000 to $2,176,396, from $1,548,396 in the comparable
period of 1997. The primary reasons for this increase were increases in
administrative and executive staff and payroll.
(g) Profit (loss) from Operations
For the three months ended March 31, 1999, Loss from Operations increased
$142,769 to $(673,326), compared to $(530,557) for the same period in 1998. The
reason for this increase was higher expenses in the period, as explained above,
offset by slightly higher gross profits.
For the twelve months ended December 31, 1998, Loss from Operations
increased by $(932,293) to $(3,144,937), compared to an operating loss of
$(2,212,644) in the comparable period of 1997. The reasons for this increase
were higher Research and Development and General and Administrative expense, and
to a lesser extent, higher Sales and Marketing expense, and lower Gross Profit.
(h) Interest Expense
For the three months ended March 31, 1999, Interest expense increased
$46,132 to $53,906, compared to Interest expense of $7,774 in the comparable
period of 1998. This interest expense increase was due to larger outstanding
balances in Company borrowings in 1999 over 1997.
For the twelve months ended December 31, 1998, Interest expense increased
$22,614 to $206,426, compared to Interest expense of $183,812 in the comparable
period of 1997. This interest expense increase was due primarily to larger
outstanding balances in Company borrowings in 1998 over 1997.
(i) Asset Abandonment Charge
For the twelve months ended December 31, 1998, the Company incurred a
charge for Asset Abandonment of $94,300.. This charge was the result of
adjustments to the Company's property and equipment assets to reflect obsolete
or unusable assets.
(j) Net Loss
For the three months ended March 31, 1999, the Company had a Net Loss of
$(727,232) or $(.06) per share, compared to a Net Loss of $(538,680), in the
comparable period of 1998, for the reasons described above.
For the twelve months ended December 31, 1998, the Company had a Net Loss
of $(3,446,012) or $(.37) per share, compared to a Net Loss of $(1,825,259), or
$(.33) per share in the comparable period of 1997, for the reasons described
above.
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(k) Liquidity and Capital Resources
For the three months ended March 31, 1999, the Company used $(1,111,408)
of cash in operating activities and another $(43,909) in investing activities.
It generated $(689,782 in cash from financing activities. The total of all cash
flow activities resulted in a decrease in the balance of cash and cash
equivalents for the three month period of $(365,535).
For the twelve months ended December 31, 1998, the Company used
$(2,863,876) of cash in operating activities and another $(358,581) in investing
activities. It generated $3,599,749 in cash from financing activities. The total
of all cash flow activities resulted in an increase in the balance of cash and
cash equivalents of $377,292 for the 1998 fiscal year. This increase was
primarily the result of an increase in cash provided by financing activities,
and reduced by the increase in cash used in operating and investing activities.
As noted in the accompanying Independent Auditors Report, the Company is a
development stage business and has not yet achieved profitable operations. The
Company lacks sufficient operating capital, and intends to fund its ongoing
development and operations through a combination of additional equity capital
and further borrowings. As of March 31, 1999, the Company did not have
commitments for either debt or share purchases to a meet its planned 1999
operating capital requirements.
(l) Impact of Year 2000 Issues
The Year 2000 issue is related to computer software utilizing two digits
rather than four to define the appropriate year. As a result, any of the
Company's computer programs or any of the Company's suppliers or vendors that
have date sensitive software may incur system failures or generate incorrect
data if "00" is recognized as 1900 rather than 2000.
The Company has been addressing Year 2000 issues throughout fiscal year
1998 and has modified or is in the process of modifying any products or services
that are affected by Year 2000 issues. The Company has a formal comprehensive
Year 2000 readiness plan in place and under the oversight of executive
management.
The Company's greatest risk for a material disruption in services lies in
a potential disruption of telecommunication services due to an external
telecommunication service provider's failure to be Year 2000 compliant and the
resulting impact upon the Company's monitoring services. The Company has
contacted and obtained assurances from its telecommunications providers that
their networks are Year 2000 compliant. In addition, the Company has backup
telecommunication provider connectivity if for any reason the primary carrier
has a disruption in service.
Databases, operating systems and system hardware have been reviewed and
updated as necessary for Year 2000 readiness. A review of the model 1702 GPS PTU
date format revealed that the 4-digit year is being used for all calculations
and Year 2000 issues should affect the model 1702.
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Year 2000 issues were known when the GPS control software was developed and code
was written to comply with these issues.
Reviews of models 100, 101 and 102 firmware of our HA products show that
they are not affected by Year 2000 issues due to the way the information is
processed. The internal hardware components have been reviewed and will not be
affected by Year 2000 issues. Review is currently being done on the HA control
software that reports violations.
In addition to the review of the system, a Year 2000 testing laboratory
was also established. In this laboratory, a monitoring environment was
established that mirrored the current operating environment. As part of our
testing, all monitoring computers and monitoring units were set to December 31,
1999 and allowed to run for three (3) days. Preliminary results show continued
unaffected processing of monitoring information.
The Company believes that, based upon changes and modifications already
made and those that are currently planned for implementation in fiscal year
1999, the impact of Year 2000 issues will not be material. However, to the
extent the Company or third parties on which it relies do not timely achieve
Year 2000 readiness, the Company's results of operations may be adversely
affected.
Item 3. Description of Property
The Company leases approximately 6,212 square feet of office space
located at 3345 No. 107th Street, Omaha, Nebraska. All of the Company's
administrative, sales, service and other business operations are conducted at
this location. This lease is for a term commencing on December 1, 1998, and
ending on November 30, 2001. The base rent is $4,659.00 per month. The lease
also requires the Company to pay $1,099.53 per month as its pro rata share of
the operating expenses respecting the leased premises.
The Company leases computers, office equipment and furniture from
several sources. The rent for such items is in excess of $3,900.00 per month.
In the opinion of the Company's management, the Company's properties
are adequately covered by insurance.
Item 4. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding beneficial
ownership of the Company's common stock, par value $0.001 per share (the "Common
Shares"), as of May 27, 1999, by (i) each stockholder known by the Company to be
a beneficial owner1 of more than five percent
- --------
1A beneficial owner of a security means
(a) Any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise has or shares: (1)
voting power, which includes the power to vote, or to direct the voting
of, such security or (2) investment power, which includes the power to
dispose, or to direct the disposition of, such security.
(b) Any person who, directly or indirectly, creates or uses a trust,
proxy, power of attorney, pooling arrangement, or any other contract,
arrangement or device with the purpose or effect of divesting such person
of beneficial ownership of a security or preventing the vesting of such
beneficial ownership.
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of the Common Shares, (ii) by each of the Company's directors and executive
officers, and (iii) the directors and executive officers as a group. Unless
otherwise indicated, all shares are owned directly and the indicated owner has
sole voting and dispositive power with respect thereto.
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Owner Percent of Class
---------------- ---------------- ----------------
Dennis Anderson 1,017,114 8.31%
135 Lois Avenue
Carroll, Iowa 51401
Robert Badding 773,843 6.32%
304 Timberline Road
Carroll, Iowa 51401
John Gaukel 510,000 4.17%
3854 No. 208th Street
Elkhorn, Nebraska 68022
Roger Kanne2 702,126 5.74%
1311 Amy Avenue
Carroll, Iowa 51401
Benjamin J. Lamb 1,000,000 8.17%
11205 Washington Street
Omaha, Nebraska 68137
Ronald Muhlbauer 705,286 5.76%
222 Pleasant Ridge
Carroll, Iowa 51401
James Pietig 372,574 3.04%
129 Pleasant Ridge
Carroll, Iowa 51401
Rob Rasmussen 282,600 2.31%
13912 Poppleton Circle
Omaha, Nebraska 68144
- --------
2Includes 592,626 Common Shares held directly by Mr. Kanne, 29,358 Common Shares
held by Country Stores, 50,729 Common Shares held by E. T. Videos and 29,413
Common Shares held by K & K Developers. Country, Stores, E.T. Videos and K & K
Developers are affiliates of Mr. Kanne.
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Directors and Executive 5,363,543 43.82%
Officers as a Group (8
persons)
.
Item 5. Directors, Executive Officers, Promoters and Control Persons
The executive officers and directors of the Company and their ages as of
the date of this Registration Statement are as follows:
Name Age Position
- ---- --- --------
Benjamin J. Lamb 57 President and Chief Executive Officer,
Director
Rob Rasmussen 58 Secretary, Director
John Gaukel 54 Vice President, Director
Roger Kanne 58 Treasurer, Director
Dennis Anderson 54 Director
Robert Badding 69 Director
Ronald Muhlbauer 57 Director
James Pietig 56 Director
Benjamin "Jack" Lamb was elected President and Chief Executive Officer of ABS
effective February 1, 1999, and was elected to the Board of Directors. He has a
proven track record for taking programs from concept to business plan, funding
through development, into test and on to production and sales in rapid-growth
technology markets. Mr. Lamb is a graduate of the University of Georgia with a
BA degree in Psychology and he holds an AS Degree in General Science from the
U.S. Army Institute of Technology. He has over 30 years experience in executive
management positions, most notably with Harris Corporation. More recently, Mr.
Lamb was founder and Chief Executive Officer of INTECK Corporation, a privately
held software company.
Rob Rasmussen is Secretary and has been a member of the Board of Directors
of since May, 1997. He has over 30 years of experience as an administrator with
service-oriented companies, including 15 years with Arthur Andersen & Co., an
internationally known CPA firm. Mr. Rasmussen is a graduate of the University of
Denver, Colorado, with a BS degree in Business Administration and he is a
Certified Public Accountant. He was responsible for the preliminary review and
due diligence of ABS leading to the acquisition of majority control of the
Company. Mr. Rasmussen served as Chief Operating Officer from acquisition of the
Company until February, 1999. In that capacity, he had day-to-day responsibility
for the operation of ABS and stabilizing the Company's relationships with
17
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shareholders, banks, suppliers and creditors. Mr. Rasmussen's present
responsibilities include Business Development and Investor Relations.
John Gaukel is Vice President and Chief Technical Officer and has been a member
of the Board of Directors since 1995. He is a graduate of the University of
Nebraska at Omaha, with a BS degree in Physics and a minor in Mathematics. Mr.
Gaukel is the inventor of the patent pending technology of ABS, which has been
assigned to the Company, and he holds three other patents which are unrelated to
ABS's business. He continues to devote his time to the ever-evolving changes and
enhancements to the Company's product lines.
Ronald W. Muhlbauer is Chairman of the Board and has been a member of the Board
of Directors since 1996. He is a Certified Public Accountant and, for the past
27 years, has been a partner with the accounting firm of Olsen, Muhlbauer & Co.,
L.L.P., in Carroll, Iowa. Mr. Muhlbauer is a graduate of Creighton University in
Omaha, Nebraska, with a BS degree in Business Administration.
Roger J. Kanne has been Treasurer and a member of the Board of Directors of ABS
since October, 1997. His business experience stems from his involvement as owner
and operator of several business entities including retail and wholesale
petroleum jobbers, real estate developments, convenience stores and video stores
in an eight state area.
Dennis L. Anderson joined the Board of Directors of ABS in October, 1997. He is
a graduate of Buena Vista University of Iowa and currently serves as
secretary-treasurer of The Farner Bocken Company of Carroll, Iowa, a regional
distributor of food, tobacco and related snack products to locations in a
multi-state area. Mr. Anderson has been active in the management of this closely
held corporation for the past 24 years.
Robert E. Badding joined the Board of Directors of ABS in October, 1997. He is
founder and Chief Executive Officer of Badding Construction, a regional
commercial and residential construction firm. Mr. Badding has been involved in
all levels of the construction management of this multi-state firm.
James L. Pietig joined the ABS Board in December, 1997. Mr. Pietig served
as Chief Executive officer of Pepsi Cola Company of Carroll, Iowa. He currently
manages his investments in a hotel- convention complex and in private and public
land companies and developments.
The Company's certificate of incorporation provides that the Company's
Board of Directors is to be divided into three classes. As a result of the Share
Exchange, however, all directorships will be open to election at the next annual
meeting of the stockholders. It is anticipated that at the next annual meeting
of stockholders such directorships will be divided into three classes with one
class having a term of one year, one class having a term of two years and one
class having a term of three years. At each annual meeting of stockholders
thereafter at which the term of each class of directors expires, successor
directors of such class will be elected for a three-year term.
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Executive officers of the Company are appointed by the Board of Directors
on an annual basis and serve until their successors have been duly elected and
qualified.
The Board of Directors is expected to establish and designate specific
functions and areas of oversight to an Executive Committee, an Audit Committee
and a Compensation Committee on or before October 1, 1999. The Bylaws permit the
creation of additional committees.
Item 6. Executive Compensation
The Company's chief executive officer receives a base salary in the
amount of $150,000 per year. In addition, as a condition of employment, the
chief executive officer received 1,000,000 Common Shares and options to purchase
4,000,000 Common Shares at an exercise price of $0.10 per share. The options are
exercisable and vested as follows: (1) one-third of such options are vested and
exercisable beginning the earlier of December 30, 1999, or when the closing bid
price for the Common Shares exceeds $3.00 per share for at least five
consecutive trading days; (2) one-third of such options are vested and
exercisable beginning the earlier of December 30, 2000, or when the closing bid
price for the Common Shares exceeds $4.00 for at least five consecutive trading
days; and (3) one-third of such options are vested and exercisable beginning the
earlier of December 30, 2001, or when the closing bid price for the Common
Shares exceeds $6.00 per share for at least five consecutive trading days. When
vested, the options are exercisable for a period of three years. All options
shall vest and be immediately exercisable in the event of a sale or merger of
the Company, including a transfer of control. The chief executive officer's
employment by the Company commenced on February 1, 1999 and, therefore, he
received no compensation from the Company prior to that time. No other employee
of the Company received a salary and other compensation that exceeded $100,000
in any year preceding the date hereof. There were no options or stock
appreciation rights outstanding during 1998.
Item 7. Certain Relationships and Related Transactions
On April 6 and 8, 1998, the Company entered into loan agreements with
Commercial Savings Bank and US Bank, each in the principal amount of
$1,000,0000. These loans were unconditionally guarantied by Dennis Anderson,
Robert Badding, Mary Collison, John Gaukel, Martin Halibur, Roger Kanne, Ronald
Muhlbauer, James Pietig, Rob Rasmussen and James DiPrima. In consideration for
giving these guaranties, each of these individuals received 100,000 fully paid,
nonassessable Common Shares.
James Pietig, a director of the Company, and Mary Collison, a stockholder
of the Company, each established a line of credit in the amount of $500,000 with
First Star Bank of Iowa, N.A. (the "lending institution"). These loans were
unconditionally guarantied by Dennis Anderson, Robert Badding and Roger Kanne,
each of whom is an officer and/or director of the Company, and by Martin
Halibur, a stockholder of the Company. The amounts drawn on these lines of
credit bear interest at the lending institution's prime interest rate plus 0.250
percent (the "Regular Rate"). Interest is payable monthly. The entire amount of
unpaid principal and accrued interest is due and payable on January 31, 2000. On
April 30, 1999, the amounts drawn under these lines of credit were loaned by
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<PAGE>
Mr. Pietig and Ms. Collison to the Company. As of the date of this registration
statement, the outstanding principal balance under these lines of credit is
$1,000,000. The Company has agreed to repay the loans under substantially the
same terms as with the lending institution. In the event of default, however,
the Company will pay interest at a rate equal to the Regular Rate plus five
percent (5%). These loans are unsecured. As consideration for entering into this
arrangement, each of the lenders and guarantors received 83,333 fully paid,
nonassessable Common Shares and a warrant to purchase 83,333 Common Shares at an
exercise price of $1.00 per share, exercisable at any time on or before October
31, 2000.
Item 8. Description of Securities
(a) General
The authorized capital stock of the Company consists of 50,000,000 Common
Shares, and 1,000,000 shares of Preferred Stock, par value $0.01 per share (the
"Preferred Stock"). As of May 27, 1999, there were outstanding 12,238,572 Common
Shares held of record by 424 stockholders.
There are no shares of Preferred Stock presently outstanding.
(b) Common Shares
Holders of Common Shares are entitled to one vote per share in all matters
to be voted on by the stockholders. Subject to preferences that may be
applicable to any Preferred Stock outstanding at the time, holders of Common
Shares are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the Board of Directors out of funds legally
available therefor. See "Dividend Policy". In the event of a liquidation,
dissolution or winding up of the Company, holders of Common Shares are entitled
to share ratably in all assets remaining after payment of the Company's
liabilities and the liquidation preference, if any, of any outstanding Preferred
Stock. All of the outstanding shares of Common Shares are fully paid and
non-assessable. The rights, preferences and privileges of holders of Common
Shares are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of Preferred Stock which the Company may
designate and issue in the future.
(c) Preferred Stock
The Board of Directors has the authority, without any further vote or
action by the stockholders, to provide for the issuance of up to 1,000,000
shares of Preferred Stock from time to time in one or more series with such
designations, rights, preferences and limitations as the Board of Directors may
determine, including the consideration received therefor. The Board also has the
authority to determine the number of shares comprising each series, dividend
rates, redemption provisions, liquidation preferences, sinking fund provisions,
conversion rights and voting rights without approval by the holders of Common
Shares. Although it is not possible to state the effect that any issuance of
Preferred Stock might have on the rights of holders of Common Shares, the
issuance of Preferred Stock may have one or more of the following effects (i) to
restrict Common Shares dividends if Preferred Stock dividends have not been
paid, (ii) to dilute the voting power and equity
20
<PAGE>
interest of holders of Common Shares to the extent that any Preferred Stock
series has voting rights or is convertible into Common Shares or (iii) to
prevent current holders of Common Shares from participating in the Company's
assets upon liquidation until any liquidation preferences granted to holders of
Preferred Stock are satisfied. In addition, the issuance of Preferred Stock may,
under certain circumstances, have the effect of discouraging a change in control
of the Company by, for example, granting voting rights to holders of Preferred
Stock that require approval by the separate vote of the holders of Preferred
Stock for any amendment to the Certificate of Incorporation or any
reorganization, consolidation, merger or other similar transaction involving the
Company. As a result, the issuance of such Preferred Stock may discourage bids
for the Common Shares at a premium over the market price therefor, and could
have a materially adverse effect on the market value of the Common Shares. The
Board of Directors does not presently intend to issue any shares of Preferred
Stock.
(d) No Preemptive Rights
No holder of any capital stock of the Company has any preemptive right to
subscribe for or purchase securities of any class or kind of the Company, nor
any redemption or conversion rights.
(e) Delaware Business Combination Statute
The Company will be subject to the provisions of Section 203 of the
Delaware General Corporation Law (the "DGCL"). In general, this law prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date that
the person became an interested stockholder unless (with certain exceptions) the
business combination or the transaction in which the person became an interested
stockholder is approved in a prescribed manner. Generally, a "business
combination" includes a merger, asset or stock sale, or other transaction
resulting in a financial benefit to the stockholder. An "interested stockholder"
is, generally defined as a person who, together with affiliates and associates,
owns (or within three years prior, did own) 15% or more of the corporation's
voting stock. This provision of Delaware law may have the effect of delaying,
deferring or preventing a change of control of the Company without further
action by the stockholder.
(f) Certain Charter Provisions
(i) General
Certain provisions of the Company's Certificate of Incorporation and
Bylaws could make more difficult the acquisition of the Company by means of a
tender offer, a proxy contest or otherwise as well as the removal of incumbent
officers and directors. These provisions are expected to discourage certain
types of coercive takeover practices and inadequate takeover bids and to
encourage persons seeking to acquire control of the Company to first negotiate
with the Company.
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(ii) Number of Directors; Removal; Vacancies
The Certificate of Incorporation and the Bylaws provide that the
number of directors shall be determined from time to time exclusively by a vote
of a majority of the Company's Board of Directors then in office; provided,
however, that the number of Directors shall not be less than three (3) nor more
than fifteen (15). The Certificate of Incorporation also provides that the
Company's Board of Directors shall have the exclusive right to fill vacancies,
including vacancies created by an expansion of the Board. The Certificate of
Incorporation further provides that Directors may be removed with or without
cause upon the affirmative vote of at least two-thirds of all of the shares of
the Company's capital stock then entitled to vote in the election of directors;
provided, however, that if there are one or more Interested Stockholders (as
defined in Article 9 of the Certificate of Incorporation), Directors may be
removed only for cause and, in addition to such two-thirds vote, there must also
be an affirmative vote for removal of not less than a majority of the voting
power of the shares held by stockholders other than such Interested
Stockholders.
(iii) Classified Board of Directors
The Certificate of Incorporation provides for the Company's Board of
Directors to be divided into three classes of directors serving staggered
three-year terms. As a result, approximately one-third of the Company's Board of
Directors will be elected each year. See "Management--Executive Officers and
Directors". This provision could prevent a party who acquires control of a
majority of the outstanding voting stock from obtaining control of the Board of
Directors until the second annual stockholders meeting following the date the
acquiror obtains the controlling stock interest. It could have the effect of
discouraging a potential acquiror from making a tender offer or otherwise
attempting to obtain control of the Company, thus increasing the likelihood that
incumbent directors will retain their position.
(iv) Approval of Repurchases
The Certificate of Incorporation prohibits repurchases by the
Company from a stockholder owning more than 5% of the Company's voting
securities (a "Significant Stockholder") (other than those stockholders
currently meeting such description) who has owned such securities of the Company
for less than two years, unless approved by an affirmative vote of at least a
majority of the total votes entitled to vote generally in the election of
Directors other than the voting power held by the Significant Stockholder.
(v) Amendments to Bylaws
The Certificate of Incorporation provides that the Board of
Directors or the holders of at least two-thirds of all shares of the Company's
capital stock then entitled to vote have the power to amend or repeal the
Company's Bylaws; provided, however, that if there are one or more Interested
Stockholders, the Bylaws may be amended, in addition to such two-thirds vote,
upon the affirmative vote for such action of not less than a majority of the
voting power of the shares held by stockholders other than such Interested
Stockholders.
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(vi) Amendment of the Certificate of Incorporation
Any proposal to amend, alter, change or repeal any provision of the
Certificate of Incorporation requires approval by the affirmative vote of a
majority vote of the voting power of all of the shares of the Company's capital
stock entitled to vote generally in the election of directors; provided,
however, that an affirmative vote of the holders of at least two-thirds of the
total votes eligible to be case is required to amend the provisions described
above.
(g) Limitation of Liability and Indemnification
The Certificate of Incorporation contains certain provisions permitted
under the DGCL relating to the liability of directors. These provisions
eliminate a director's personal liability for monetary damages resulting from a
breach of fiduciary duty, except in certain circumstances involving certain
wrongful acts, such as a breach of a director's duty of loyalty or acts or
omissions that involve intentional misconduct or a knowing violation of law.
These provisions do not limit or eliminate the rights of the Company or any
stockholder to seek non-monetary relief, such as an injunction or rescission, in
the event of a breach of a director's fiduciary duty. These provisions will not
alter a director's liability under federal securities laws. The Certificate of
Incorporation and Bylaws also contain provisions indemnifying the directors and
officers of the Company to the fullest extent permitted by the DGCL. The Company
believes that these provisions will assist the Company in attracting and
retaining qualified individuals to serve as directors.
(h) Transfer Agent and Registrar
The Transfer Agent and Registrar of the Common Shares is Atlas Stock
Transfer Corporation of Salt Lake City, Utah.
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PART II.
Item 1 Market Price of and Dividends on the Company's Common Equity and Other
Shareholder Matters
The Common Shares of the Company are traded on the OTC Bulletin Board
under the trading symbol ABSH (or ABSHE). The following table sets forth the
high and low bid information for each quarter since January, 1998.
Year Quarter High Low
---- ------- ---- ---
1998 1st $2.6250 $1.2500
2nd $4.3750 $1.2500
3rd $4.5000 $1.5000
4th $2.6875 $0.7500
1999 1st $2.1250 $0.7500
The source of the foregoing information is Bloomberg, L.P. Quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.
Prior to January, 1998, the Common Shares were traded under the symbol
SAII; however, the Company does not have any bid information prior to the Share
Exchange.
As of May 27, 1999, there were outstanding 12,238,572 Common Shares held
of record by 424 stockholders. There are no shares of Preferred Stock presently
outstanding.
Item 2. Legal Proceedings
The Company's subsidiary, ABS Nebraska, is a defendant in an action
pending in Montana Eighteenth Judicial District Court, Gallatin County,
captioned Applied Technologies, Inc. v. Advanced Business Sciences, Inc., et
al., No. 98-285. This action was initially filed on September 11, 1998. The
Amended Complaint alleges that ABS Nebraska is in breach of contract under which
the Plaintiff, Applied Technologies, Inc., was to produce prototype and
production parolee tracking devices. The Amended Complaint seeks compensatory
and consequential damages in an amount to be determined at trial, attorney's
fees and such other relief as the court may deem equitable and proper. ABS
Nebraska has denied the allegations, has raised certain affirmative defenses and
has brought a counterclaim alleging, among other things, that the Plaintiff
failed to deliver in a timely manner all documents schematic drawings,
mechanical drawings, computer disks of designs, vendors lists with part numbers
and art work. Management believes that, in the event of an adverse decision
against ABS Nebraska, the maximum liability will not exceed $90,000.
II-1
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Item 3. Changes in and Disagreements with Accountants
[Not applicable]
Item 4. Recent Sales of Unregistered Securities
On December 17, 1997, the Company consummated a plan and agreement of
reorganization with ABS Nebraska and all of the shareholders of ABS Nebraska
(the "ABS Shareholders"). Under this agreement, the Company issued 7,050,000
Common Shares to the ABS Shareholders in exchange for all of the issued and
outstanding shares of ABS Nebraska. An additional 450,000 Common Shares were
issued to finders. Certain ABS Shareholders were also issued warrants to
purchase 574,000 Common Shares at an exercise price of $1.00 per share, which
warrants expire on December 20, 2000. As a result of this transaction, the ABS
Shareholders owned approximately 88% of the then issued and outstanding Common
Shares and ABS Nebraska became the wholly-owned subsidiary of the Company. This
transaction was exempt from the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
under Section 4(2) thereof.
Effective [December 31, 1997], the Company issued 165,000 Common Shares as
payment for certain accounts payable, 82,500 Common Shares for certain services,
and 2,063 Common Shares as payment of bonus compensation to an employee. Each of
these transactions was exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(2) thereof.
On February 1, 1998, the Company issued 1,250,000 units having an
aggregate purchase price of $2,500,000. A unit consisted on one Common Share and
a warrant to purchase one Common Share at an exercise price of (1) $3.00 per
share during the first year, (2) $4.00 per share during the second year and (3)
$5.00 per share during the third year. The warrants expire February 1, 2001. All
but sixteen investors in this offering were accredited investors. The Company's
management believes that this transaction was in substantial compliance with
Rule 506 under the Securities Act; however, the Company has a contingent
liability for the entire offering plus costs associated with any future
litigation respecting this matter.
Effective April 1, 1998, the Company issued 1,000,000 shares to certain
individuals in consideration for these individuals giving their unconditional
guaranty of indebtedness incurred by the Company with Commercial Savings Bank
and US Bank. See "Certain Relationships and Related Transactions." This
transaction was exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(2) thereof.
On August 24, 1998, the Company issued 2,191,145 Common Shares to acquire
Comguard Leasing and Financial, Inc., an Illinois corporation. This transaction
was rescinded effective June 1, 1999. However, 242,500 Common Shares remained
outstanding as consideration for services in consummating the transaction. This
transaction was exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(2) thereof.
II-2
<PAGE>
In 1999, the Company issued 152,000 Common Shares as payment of bonuses to
employees accrued during 1998. Each of these transactions was exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(2) thereof.
On February 1, 1999, the Company agreed to issue 1,000,000 shares of its
Common Shares to Benjamin J. Lamb in consideration for Mr. Lamb entering into an
employment agreement with the Company. This transaction was exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(2) thereof.
On March 15, 1999, the Company issued to certain directors, officers and
stockholders of the Company in the aggregate 500,000 Common Shares and warrants
to purchase in the aggregate 500,000 Common Shares at an exercise price of $1.00
per share. The warrants are exercisable at any time on or before October 31,
2000. These securities were given in consideration for direct loans to the
Company or for giving unconditional guaranties to loans from First Star Bank of
Iowa, N.A. which funded this indebtedness. This transaction was exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(2) thereof.
On June 1, 1999, the Company entered into agreements rescinding the
Comguard Acquisition. To consummate this rescission, the Company issued to
Frederick Bishop 100,000 Common Shares and issued to Michael Reeves a warrant to
purchase 50,000 Common Shares at an exercise price of $1.50 per share, expiring
on June 1, 2004. This transaction was exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(2)
thereof.
Item 5. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware
permits indemnification by a corporation of certain officers, directors,
employees and agents. Consistent therewith, Article 12 of the Company's Restated
Certificate of Incorporation provides that the Company, to the fullest extent
permitted by law, shall indemnify a director, officer, employee or agent of the
Company or a person who is or was serving at the request of the Company as
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
Article VIII of the Company's Restated Bylaws provides that any
indemnification (unless ordered by a court) shall be made by the Company only as
authorized in the specific case upon a determination that indemnification of the
director or officer is proper in the circumstances because such person has met
the applicable standard of conduct, as the case may be. Such determination shall
be made, with respect to a person who is a director or officer at the time of
such determination, (i) by a majority vote of the directors who are not parties
to such action, suit or proceeding, even though less than a quorum, or (ii) by a
committee of such directors designated by a majority vote of such directors,
even though less than a quorum, or (iii) if there are no such directors, or if
such directors so direct, by independent legal counsel in a written opinion or
(iv) by the stockholders. Such determination shall be made, with respect to
former directors and officers, by any person or persons having the authority to
act on the matter on behalf of the Company. To the extent, however, that a
present or former director or officer of the Company has been successful on the
merits or otherwise
II-3
<PAGE>
in defense of any action, suit or proceeding described above, or in defense of
any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith, without the necessity of authorization in the
specific case. including service with respect to an employee benefit plan, who
was or is made (or threatened to be made) a party to a civil, criminal,
administrative or investigative proceeding.
Article VIII of the Company's Restated Bylaws further provides that
expenses incurred by a director or officer in defending any civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by the
Company in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such director or officer to
repay such amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the Company as authorized in Article VIII.
II-4
<PAGE>
PART F/S
The Company's financial statements for the years ended December 31, 1998
and 1997, and for the quarter ended March 31,1999, have been examined to the
extent indicated in their reports by Schvaneveldt and Company, independent
certified accountants, and have been prepared in accordance with generally
accounting principles and pursuant to Regulation S-B as promulgated by the
Commission. These financial statements are included herein on the following 32
pages, in response to Part F/S of this Form 10-SB.
F/S-1
<PAGE>
Advanced Business Sciences, Inc.
(A Development Stage Company)
Financial Statements
March 31, 1999 &
December 31, 1998 & 1997
F/S-2
<PAGE>
Advanced Business Sciences, Inc.
(A Development Stage Company)
Index
Page
Independent Accountants' Audit Report......................................F/S-4
Financial Statements
Balance Sheets....................................................F/S-5-F/S-6
Statements of Operations..........................................F/S-7-F/S-8
Statements of Stockholders' Equity (Deficit).....................F/S-9-F/S-12
Statements of Cash Flows........................................F/S-13-F/S-14
Notes to Financial Statements...................................F/S-15-F/S-28
Supplemental Information
Independent Accountants' Audit Report on Supplemental Information......F/S-30
Schedules of Expenses...........................................F/S-31-F/S-32
F/S-3
<PAGE>
Independent Auditors Report
Board of Directors
Advanced Business Sciences, Inc.
I have audited the accompanying balance sheets of Advanced Business Sciences,
Inc., as of March 31, 1999, December 31, 1998 and 1997, and the related
statements of operations, stockholders' equity, and cash flows for the period
January 1, 1999 to March 31, 1999 and the years ended December 31, 1998 and
1997. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. 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 the significant estimates made by
management, as well as evaluating the overall financial statements presentation.
I believe that my audit provides a reasonable basis for my opinion.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note #15 to the financial
statements, the Company has an accumulated deficit at March 31, 1999. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also discussed
in Note #15. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
In my opinion, the aforementioned financial statements present fairly, in all
material respects, the financial position of Advanced Business Sciences, Inc.,
as of March 31, 1999, December 31, 1998 and 1997, and the results of its
operations and its cash flows for the period January 1, 1999 to March 31, 1999
and the years ended December 31, 1998 and 1997, in conformity with generally
accepted accounting principles.
Salt Lake City, Utah
June 7, 1999
F/S-4
<PAGE>
<TABLE>
Advanced Business Sciences, Inc.
(A Development Stage Company)
Balance Sheets
March 31, 1999, December 31, 1998 and 1997
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current Assets
Cash and Cash Equivalents........................ $ 12,057 $ 377,592 $ 300
Receivables
Trade Accounts ................................ 50,846 13,995 11,461
Employees ..................................... 14,720 26,309 345
Stock Subscription Receivable (note 11) ....... 564,452 599,452 -0-
Inventory ....................................... 654,389 535,055 582,108
Prepaid Expenses................................. 148,830 16,212 5,000
------- ------ -----
Total Current Assets ......................... 1,445,294 1,568,615 599,214
--------- --------- -------
Property and Equipment
Furniture and Equipment (note 4)................. 603,118 571,779 549,514
Leasehold Improvements (note 4).................. 16,326 16,326 77,585
Leased Equipment (note 4)........................ 148,533 194,236 29,039
Intellectual Property (notes 4 & 8).............. 169,000 169,000 -0-
------- ------- -
Total Cost ................................... 936,977 951,341 656,138
Less Accumulated Depreciation and Amortization 398,551 346,277 237,402
------- ------- -------
Net Book Value ............................... 538,426 605,064 418,736
------- ------- -------
Other Assets
Rent and Utility Deposits ....................... 4,073 4,073 11,950
Patents (note 5)................................. 13,631 13,631 15,145
Advance to Comguard (note 9)..................... 88,514 66,992 -0-
Investment in Comguard (note 9).................. 2,191 2,191 -0-
- ----- ----- -
Total Other Assets ........................... 108,409 86,887 27,095
------- ------ ------
Total Assets ................................. $2,092,129 $2,260,566 $1,045,045
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F/S-5
<PAGE>
<TABLE>
Advanced Business Sciences, Inc.
(A Development Stage Company)
Balance Sheets -Continued-
March 31, 1999, December 31, 1998 and 1997
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current Liabilities
Cash in Bank Overdraft............................ $ -0- $ 206,230 $ 17,411
Accounts Payable.................................. 393,208 392,016 439,446
Payroll Taxes Accrued and Withheld (note 6)....... 57,794 220,440 228,739
Accrued Interest.................................. 41,512 19,795 25,019
Accrued Wages..................................... -0- 15,200 41,769
Note Payable Short Term Debt (note 12)............ 2,895,780 2,034,768 87,453
Current Portion of Long-Term Debt (note 12)....... 20,039 25,978 133,948
------ ------ -------
Total Current Liabilities 3,408,333 2,914,427 973,785
--------- --------- -------
Long-Term Liabilities
Long-Term Debt, Less Current Portion (note12)...... 123,364 123,675 80,000
------- ------- ------
Total Liabilities 3,531,697 3,038,102 1,053,785
--------- --------- ---------
Commitments and Contingency (note 17)
Stockholders' Equity (Deficit) (note 14)
Preferred Stock 1,000,000 Shares Authorized at $.01
Par Value; None Issued
Common Stock 50,000,000 Shares Authorized at $.001
Par Value; 13,285,494 12,633,494 and 7,487,099
Shares Issued and Outstanding Respectively
Retroactively Restated........................... 13,286 12,634 7,487
Paid-in Capital.................................... 8,047,094 7,982,546 5,310,477
Deficit Accumulated During the Development Stage... (9,499,948)( 8,772,716) (5,326,704)
Total Stockholders' Equity (Deficit) (1,439,568) ( 777,536) ( 8,740)
---------- --------- ---------
Total Liabilities and Stockholders'
Equity (Deficit) $ 2,092,129 $2,260,566 $1,045,045
============ ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F/S-6
<PAGE>
<TABLE>
Advanced Business Sciences, Inc.
(A Development Stage Company)
Statements of Operations
For the Period January 1, 1999 to March 31, 1999 and
the Years Ended December 31,1998 and 1997 and the
Period from August 11, 1989 (Date of Inception) to March 31, 1999
<CAPTION>
Period Ended Year Ended Year Ended (Inception)
March December December to March
31, 1999 31, 1998 31, 1997 31, 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues............................. $ 48,869 $ 49,353 $ 26,100 $ 173,362
Cost of Sales........................ 38,124 90,146 22,867 185,655
------ ------ ------ -------
Gross Profit (Loss).................. 10,745 ( 40,793) 3,233 ( 12,293)
- -------------------
Expenses
Research and Development.......... 33,184 500,628 283,429 1,468,839
Sales and Marketing............... 127,126 427,120 384,052 1,105,534
General and Administrative........ 523,761 2,176,396 1,548,396 6,956,392
------- --------- --------- ---------
Total Expenses 684,071 3,104,144 2,215,877 9,530,765
------- --------- --------- ---------
Loss from Operations ( 673,326) (3,144,937) (2,212,644) (9,543,058)
Other Income and (Expense)
Interest Income................... -0- -0- 4,172 14,744
Other Income...................... -0- -0- -0- 84,528
Loss on Sale of Property and Equipment -0- (349) (2,876) (9,336)
Interest Expense................. ( 53,906) ( 206,426) ( 183,812) ( 522,427)
Asset Abandonment (note 4)........ -0- ( 94,300) -0- ( 94,300)
- - ------ - ------
Total Other Income and Expense ( 53,906) ( 301,075) ( 182,516) ( 526,791)
------ ------- ------- -------
Loss Before Extraordinary Item and
Provision for Income Taxes ( 727,232) (3,446,012) (2,395,160)(10,069,849)
Extraordinary Item
Gain from Extinguishment of Debt,
Net of Income Taxes (note 16) -0- -0- 569,901 569,901
- - ------- -------
Loss Before Provisions for Income Taxes( 727,232) (3,446,012) (1,825,259) (9,499,948)
Provision for Income Taxes -0- -0- -0- -0-
- - - -
Net Loss ($ 727,232)($3,446,012)($1,825,259)($9,499,948)
========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
F/S-7
<PAGE>
<TABLE>
Advanced Business Sciences, Inc.
(A Development Stage Company)
Statements of Operations
For the Period January 1, 1999 to March 31, 1999 and
the Years Ended December 31,1998 and 1997
<CAPTION>
Period Ended Year Ended Year Ended
March December December
31, 1999 31, 1998 31, 1997
----------- ----------- -----------
<S> <C> <C> <C>
Loss Per Share Before Extraordinary Items ($ .06) ($ .37) ($. 44)
Loss Per Share After Extraordinary Items ( .06) ( .37) ( .33)
Weighted Average Shares Outstanding as
Retroactively Restated 12,935,494 9,391,265 5,405,367
</TABLE>
The accompanying notes are an integral part of these financial statements
F/S-8
<PAGE>
<TABLE>
Advanced Business Sciences, Inc.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
For the Period from January 5, 1992 to March 31, 1999
<CAPTION>
Deficit
Accumulated
During the
Common Stock Paid-in Development
Shares Par Value Capital Stage
------ --------- ------- -----
<S> <C> <C> <C> <C>
Balance, January 5, 1992 -0- $ -0- $ -0- $ -0-
Issuance of Stock for Cash at $0.0012
Per Share Retroactively Restated 3,300,000 3,300 700
Net Loss for Year Ended
December 31, 1992 ( 5,870)
-------------------------------------------------------------------------
Balance, December 31, 1992 3,300,000 3,300 700 ( 5,870)
Net Loss for Year Ended
December 31, 1993 ( 7,734)
------------------------------------------------------------------------
Balance, December 31, 1993 3,300,000 3,300 700 ( 13,604)
Net Income for Year Ended
December 31, 1994 17,924
------------------------------------------------------------------------
Balance, December 31, 1994 3,300,000 3,300 700 4,320
Issuance of Stock for Services and the
Assignment, Rights, Title and Interest
in an Invention Disclosed in the
Company's Patent Application on
January 1, 1995 at $.0012 Per Share
Retroactively Restated 583,688 584 123
Capital Contributed by a Shareholder 3,200
Issuance of Stock through a Private
Placement Memorandum at $3.64
Per Share Retroactively Restated 294,360 294 1,070,106
Cost of Private Placement ( 54,192)
</TABLE>
The accompanying notes are an integral part of these financial statements
F/S-9
<PAGE>
<TABLE>
Advanced Business Sciences, Inc.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)-Continued-
for the Period from January 5, 1992 to March 31, 1999
<CAPTION>
Deficit
Accumulated
During the
Common Stock Paid-in Development
Shares Par Value Capital Stage
------ --------- ------- -----
<S> <C> <C> <C> <C>
Net Loss for the Year Ended
December 31, 1995 ( 659,788)
----------------------------------------------
Balance, December 31, 1995 4,178,048 4,178 1,019,937 ( 655,468)
Issuance of Stock through a Private
Placement Memorandum at $3.64 Per
Share Retroactively Restated 118,140 118 429,482
Cost of Private Placement ( 56,431)
Cancellation of Stock at $.001 Per
Share Retroactively Restated (577,500) ( 577) 577
Issuance of Stock at $.01 Per Share
in Connection with Notes Payable
Retroactively Restated 412,500 412 ( 412)
Issuance of Stock Related to the
Conversion of 10% Convertible
Sub-Ordinate Debenture at $6.06
Per Share Retroactively Restated 41,250 41 249,959
Net Loss for the Year Ended
December 31, 1996 (2,845,977)
----------------------------------------------
Balance, December 31, 1996 4,172,438 4,172 1,643,112 (3,501,445)
Issuance of Stock at $.01 Per Share
in Connection with Notes Payable
Retroactively Restated 165,000 165 ( 165)
Issuance of Stock Related to
Conversion of 10% Convertible
Subordinated Debentures at $6.06
Per Share Retroactively Restated 16,500 17 99,983
</TABLE>
The accompanying notes are an integral part of these financial statements
F/S-10
<PAGE>
<TABLE>
Advanced Business Sciences, Inc.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)-Continued-
for the Period from January 5, 1992 to March 31, 1999
<CAPTION>
Deficit
Accumulated
During the
Common Stock Paid-in Development
Shares Par Value Capital Stage
------ --------- ------- -----
<S> <C> <C> <C> <C>
Cost of Private Placement ( 20,400)
Issuance of Stock for Services at $.01
Per Share Retroactively Restated 82,500 82 ( 72)
Issuance of Stock Related to
Conversion of Sub-Ordinated
Debentures, Notes and Accrued
Interest, Retroactively Restated 1,349,617 1,350 1,871,259
Issuance of Stock Related to Notes
Payable and Accrued Interest
Retroactively Restated (note 7) 799,507 800 1,682,102
Issuance of Stock Related to Notes
Payable and Accrued Interest
Retroactively Restated 12,375 12 29,988
Issuance of Stock Related to
Payments of Bonuses 2,063 2 5,107
Issuance of Shares Related to Finder
Fees for "Reverse Acquisition Takeover"
of Sage Analytical International, Inc. 450,000 450
Shares Issued to Shareholders of Sage
Analytical International, Inc., Prior to
"Reverse Acquisition Takeover" 437,099 437 ( 437)
Net Loss for the Year Ended
December 31, 1997 (1,825,259)
----------------------------------------------
Balance, December 31, 1997 7,487,099 7,487 5,310,477 (5,326,704)
</TABLE>
The accompanying notes are an integral part of these financial statements
F/S-11
<PAGE>
<TABLE>
Advanced Business Sciences, Inc.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)-Continued-
for the Period from January 5, 1992 to March 31, 1999
<CAPTION>
Deficit
Accumulated
During the
Common Stock Paid-in Development
Shares Par Value Capital Stage
------ --------- ------- -----
<S> <C> <C> <C> <C>
Shares Issued for Comguard Leasing
and Financial, Inc., Acquisition 2,191,145 2,191
Consultation Fees Comguard Acquisition
at $0.10 Per Share 242,500 243 24,007
Shares Issued for Employee Bonuses
at $0.10 Per Share 457,750 458 45,317
Private Placement Memorandum
Proceeds at $2.00 Per Share 1,250,000 1,250 2,498,750
Shares Issued for Line of Credit
Guarantor Fees at $0.10 Per Share 1,000,000 1,000 99,000
Shares Sold Pursuant to Warrant
Exercise at $1.00 Per Share 5,000 5 4,995
Loss for Year Ended
December 31, 1998 (3,446,012)
----------------------------------------------
Balance, December 31, 1998 12,633,494 12,634 7,982,546 (8,772,716)
Shares Issued for 1998 Employee
Bonuses at $0.10 Per Share 152,000 152 15,048
Shares Issued for Line of Credit
Guarantor Fees at $0.10 Per Share 500,000 500 49,500
Loss for Period Ended
March 31, 1999 ( 727,232)
----------------------------------------------
Balance, March 31, 1999 13,285,494 $ 13,286 $8,047,094 ($9,499,948)
=================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
F/S-12
<PAGE>
<TABLE>
Advanced Business Sciences, Inc.
(A Development Stage Company)
Statements of Cash Flows
For the Period January 1, 1999 and March 31, 1999
and the Years Ended December 31, 1998 and 1997 Period
from August 11, 1989 (Date of Inception) to March 31, 1999
<CAPTION>
Period Ended Year Ended Year Ended (Inception)
March December December to March
31, 1999 31, 1998 31, 1997 31, 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities
Net Loss ($727,232)($3,446,012)($1,825,259)($9,499,948)
Adjustments to Reconcile Net Loss to Net Cash
Used in Operating Activities
Loss on Assets Write Off -0- 94,300 -0- 94,300
Loss on Inventory Obsolence -0- 202,996 -0- 202,996
Rounding ( 2) -0- -0- -0-
Depreciation and Amortization 52,274 172,221 130,917 462,159
Loss on Sale of Property and Equipment -0- 349 2,876 9,336
Ex enses Paid by Issuance of Stock
in Lieu of Cash 50,000 170,025 5,567 225,592
Gain from Forgiveness of Debt -0- -0- ( 569,901) ( 569,901)
Changes in Operating Assets and Liabilities
(Increase) Decrease in
Trade Accounts Receivable (36,851) (2,534) (5,984) (50,846)
(Increase) Decrease in
Employee Receivables 11,589 (25,964) 4,655 (14,720)
(Increase) Decrease in Inventory ( 73,631) 47,053 (115,467) (654,389)
(Increase) Decrease in Prepaid Expenses (132,618) 11,212 6,314 (148,830)
Increase (Decrease) in Accounts Payable 1,192 (47,430) 110,827 393,208
Increase (Decrease) in Payroll
Taxes Accrued (162,646) (8,299) 206,744 57,794
Increase (Decrease) in Accrued Interest 21,717 (5,224) (18,653) 41,512
I(crease (Decrease) in Accrued Wages ( 15,200) (26,569) (24,113) -0-
(Increase) Decrease in Advances
to Stockholders -0- -0- ( 14,748) -0-
--------------------------------------------------
Net Cash Used In Operating Activities (1,011,408) (2,863,876) (2,106,225) (9,451,737)
Cash Flows from Investing Activities
Proceeds from Sale of Property
and Equipment -0- -0- 30,510 31,160
Purchase of Property and Equipment (22,387) ( 130,466) ( 29,039) ( 775,043)
(Increase) Decrease in Rent and Utility Deposit -0- 7,877 (3,780) (4,073)
(Increase) in Patents -0- -0- ( 4,390) ( 15,145)
Purchase of Intellectual Property ( 169,000) -0- ( 169,000)
Funds Advanced to Comguard (21,522) ( 66,992) -0- ( 88,514)
--------------------------------------------------
Net Cash Used in Investing Activities ( 43,909) ( 358,581) ( 6,699) (1,020,615)
</TABLE>
The accompanying notes are an integral part of these financial statements
F/S-13
<PAGE>
<TABLE>
Advanced Business Sciences, Inc.
(A Development Stage Company)
Statements of Cash Flows
For the Period January 1, 1999 and March 31, 1999
and the Years Ended December 31, 1998 and 1997 Period
from August 11, 1989 (Date of Inception) to March 31, 1999
<CAPTION>
Period Ended Year Ended Year Ended (Inception)
March December December to March
31, 1999 31, 1998 31, 1997 31, 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash Flows from Financing Activities
Increase (Decrease) in Notes Payable Banks -0- 1,970,473 120,100 2,895,780
Proceeds from Long-Term Debt 897,013 ( 87,453) 2,397,000 4,144,081
Repayment of Long-Term Debt (36,001) -0- ( 342,286) -0-
Proceeds from Issuance of Common Stock -0- 2,505,000 -0- 4,009,000
Increase (Decrease) in Banks Overdraft (206,230) (188,819) (63,990) -0-
(Increase) Decrease in Notes Receivable
Stockholders 35,000 ( 599,452) -0- ( 599,452)
Cash Receivable in Note Receivable Stockholder -0- -0- -0- 35,000
- - - ------
Net Cash Provided by Financing Activities 689,782 3,599,749 2,110,824 10,484,409
------- --------- --------- ----------
Increase (Decrease) in Cash
and Cash Equivalents ( 365,535) 377,292 ( 2,100) 12,057
--------- ------- ---------- ------
Cash and Cash Equivalents,
Beginning of Period 377,592 300 2,400 -0-
------- --- ----- -
Cash and Cash Equivalents,
End of Period $ 12,057 $ 377,592 $ 300 $ 12,057
============ ========= ========= =========
Disclosure from Operating Activities
Interest $53,905 $ 206,426 $ 183,812 $ 561,965
Taxes -0- -0- -0- -0-
</TABLE>
The accompanying notes are an integral part of these financial statements
F/S-14
<PAGE>
Advanced Business Sciences, Inc
(A Development Stage Company)
Notes to Financial Statements
NOTE #1 - Organization and Nature of Business
Advanced Business Sciences, Inc., (the Company) was incorporated under the laws
of the state of Colorado on June 13, 1983, under the name "Sage Institute
International, Inc." A Delaware Corporation, using the name Sage Analytics
International, Inc., was incorporated on July 17, 1986 and on September 2, 1986
the Company was reincorporated as a Delaware Corporation by merging the Colorado
Corporation with assets into the Delaware Corporation.
On December 17, 1997, the shareholders of Advanced Business Sciences, Inc., a
Nebraska Corporation, concluded a share exchange with the Company. Following the
exchange of shares the Nebraska Corporation became the wholly owned subsidiary
of the Company and control of the Company was transferred to the shareholders of
the Nebraska Corporation.
The purpose for which the Company is organized is to own, engage in, operate and
carry on any lawful business, and to do all things incidental thereto or
connected therewith which are not forbidden by the laws of the states of
Delaware and Nebraska. The Company designs, develops, produces, sells and
supports wireless products and services relating to the tracking, monitoring,
and reporting of individuals and things. Currently the Company's business
relates to criminal justice applications for house arrest and electronic
monitoring.
The Company is considered to be a development stage company.
NOTE #2 - Significant Accounting Policies
A. The Company uses the accrual method of accounting.
B. Revenues and directly related expenses are recognized in the period when
the goods are shipped to the customer.
C. The Company considers all short term, highly liquid investments that are
readily convertible, within three months, to known amounts as cash
equivalents. The Company currently has no cash equivalents.
D. Primary Earnings Per Share amounts are based on the weighted average
number of shares outstanding at the dates of the financial statements.
Fully Diluted Earnings Per Share shall be shown on stock options and other
convertible issues that may be exercised within ten years of the financial
statement dates.
E. Inventories: Inventories are stated at the lower of cost, determined by
the FIFO method or market.
F. Depreciation: The cost of property and equipment is depreciated over the
estimated useful lives of the related assets. The cost of leasehold
improvements is depreciated (amortized) over the lesser of the length of
the related assets or the estimated lives of the assets. Depreciation is
computed on the straight line method for reporting purposes and for tax
purposes.
F/S-15
<PAGE>
Advanced Business Sciences, Inc
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #2 - Significant Accounting Policies -Continued-
G. Estimates: The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ
from those estimates.
H. New Technical Pronouncements: In 1997, SFAS No. 129, "Disclosure of
Information about Capital Structure" was issued effective for periods
ending after December 15, 1997. The Company has adopted the disclosure
provisions of SFAS No. 129 effective with the fiscal year ended December
31, 1998.
In June 1997, SFAS No. 130, "Reporting Comprehensive Income" was issued
effective for fiscal years beginning after December 31, 1997, with earlier
application permitted. The Company has elected to adopt SFAS No. 130
effective with the fiscal year ended December 31, 1998. Adoption of SFAS
No. 130 is not expected to have a material impact on the Company's
financial statements.
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" was issued for fiscal year beginning after
December 31, 1997, with earlier application permitted. The Company has
elected to adopt SFAS No. 131, effective with the fiscal years ended
December 31, 1998. Adoption of SFAS No. 131 is not expected to have a
material impact on the Company's financial statements.
NOTE #3 - Reverse Takeover and Recapitalization
Pursuant to a Plan and Agreement of Reorganization dated November 3, 1997,
Advanced Business Sciences, Inc., a Nebraska Corporation, (the legal acquiree)
and Sage Analytics International, Inc., a Delaware Corporation, (the legal
acquirer) exchanged common stock to give the shareholders of the legal acquiree
control of the legal acquirer.
Shareholders of the legal acquiree surrendered 100% of the outstanding shares
(80,000 shares) in exchange for 6,600,000 shares of the legal acquirer. Each
share of the legal acquiree was exchanged for 82.5 shares of the legal
acquirer's previously unissued common stock. As part of the agreement the legal
acquirer issued 450,000 shares to persons as finders fees.
Following the exchange the shareholders of the legal acquiree held 6,600,000
shares of the 7,487,099 issued shares of the legal acquirer (88.2%).
On December 18, 1997, Sage Analytics International, Inc., the legal acquirer,
filed a Certificate of Amendment with the Secretary of State of the state of
Delaware changing its name to Advanced Business Sciences, Inc.
F/S-16
<PAGE>
Advanced Business Sciences, Inc
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #3 - Reverse Takeover and Recapitalization -Continued-
The share exchange of a private operating Company, (Advanced Business Sciences,
Inc.) into a non-operating public shell corporation (Sage Analytics
International, Inc.), with no assets or liabilities resulted in the shareholders
of the private company having actual operating control of the combined company
after the transaction, and the shareholders of the former public shell
continuing only as passive investors.
This transaction is considered to be a capital transaction in substance, rather
than a business combination. That is, the transaction is equivalent to the
issuance of stock by the private company for the net monetary assets of the
shell corporation, accompanied by a recapitalization. The accounting is
identical to that resulting from a reverse acquisition, except no goodwill or
other intangible is recorded.
APB No., 16, paragraph 70 states that, "Presumptive evidence of the acquiring
corporation in combinations effected by an exchange of stock is obtained by
identifying the former common stockholder interest of a combined company which
either retains or receives the larger portion of the voting rights of the
combined corporation. That corporation should be treated as the acquirer unless
other evidence clearly indicates that another corporation is the acquirer."
Staff accounting Bulletin Topic 2A affirms the above principle and gives
guidelines that the post reverse-acquisition comparative historical financial
statements furnished for the legal acquirer should be those of the legal
acquiree.
In accordance with this guideline the outstanding shares of Advanced Business
Sciences, Inc., have been retroactively restated on the Balance Sheet, and the
Statement of Stockholders' Equity to give effect to the 82.5 shares for 1 share
exchange. The retroactively restated shares have been used in the Computations
for Earnings (Losses) Per Share to preserve comparability of those figures.
NOTE #4 - Property and Equipment and Depreciation Expenses
The Company capitalized the purchase of equipment for merger purchases in excess
of $500 per item. Capitalized amounts are depreciated over the estimated useful
life of the assets as follows:
Estimated
Property & Equipment Useful Life
Furniture & Equipment 5 to 7 Years
Leasehold Improvements 15 Years
Leased Equipment 2 to 3 Years
F/S-17
<PAGE>
Advanced Business Sciences, Inc
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #4 - Property and Equipment and Depreciation Expenses -Continued-
Property and equipment at cost are as follows: 1999 1998 1997
- ---------------------------------------------- ---- ---- ----
Furniture & Equipment $603,118 $ 571,779 $ 549,514
Leasehold Improvements 16,326 16,326 77,585
Intellectual Property 169,000 169,000 -0-
Leased Equipment 148,533 194,236 29,039
Total Cost 936,977 951,341 656,138
Less Accumulated Depreciation 398,551 346,277 237,402
------- ------- -------
Net Book Value $538,426 $605,064 $418,736
======= ======== ========
Depreciation and Amortization Expenses $52,274 $172,221 $130,917
In 1998, the Company reduced the size of its office and warehouse space in
Omaha, Nebraska. Leasehold improvements and equipment that could not be moved
were written off.
NOTE #5 - Patents
The Company has filed three Petitions to the Commissioner of Patents and
Trademarks on an apparatus and methods for continuous Electronic Monitoring and
Tracking of individuals. The original application was filed on December 30,
1994. In 1997 a new Continuation in Part Patent Application was filed to further
pursue protection for the subject matter presented in the original applications.
NOTE #6 - Payroll Taxes
In January 1999, the Company paid the Internal Revenue Service $162,646 which
represented the balance of the withheld and accrued Federal Withholding, Social
Security and Medicare taxes for the quarterly tax periods ending September 30,
1996, December 31, 1996, March 31, 1997, June 30, 1997 and September 30, 1997.
After the payment the Company owed $57,794 in penalties and interest associated
with the aforementioned quarterly payroll taxes. The Company has requested the
Internal Revenue Service to abate these penalties and interest.
NOTE #7 - Restatement of 1997 Issuance of Shares In Satisfaction of Notes
Payable
In 1997, the Company issued 799,507 shares of its common stock, for satisfaction
of debt in the amount of $1,770,355. In 1998, the Company learned that it had
obligations of $87,453 that required payments in cash and was not settled by the
issuance of the shares of stock. In 1998, the cash obligation was paid and the
issuance of the 799,507 shares of stock for $1,770,355 was restated to 799,507
shares of stock issued for satisfaction of debt of $1,682,902.
F/S-18
<PAGE>
Advanced Business Sciences, Inc
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #8 - Intellectual Property
In 1998, the Company paid $80,000 and incurred $89,000 as an account payable for
the design of the logics and in source code for the software that runs and
displays the support for house arrest monitoring programs. The Company will use
the intellectual property to have manufactured to its specification equipment to
be used in its sales of monitoring and tracking devises. The intellectual
property will be amortized on a per unit basis as the units are purchased.
In 1998, the Company purchased a Software License Agreement with a developer
from California, a license for the software of a technology for use in the
Global Position System Market. The Company paid $4,995 for the software to
operate the license and capitalized it as software with a three-year life. The
License is of an unspecified length of time but the Company feels that the
technology will be outdated with the three-year life period.
NOTE #9 - Acquisition and Rescission of Comguard Leasing and Financial, Inc.
On August 24, 1998, the Company entered into a Plan and Agreement of
Reorganization, pursuant to which the Company acquired all of the issued and
outstanding shares of capital stock of Comguard Leasing and Financial, Inc., an
Illinois Corporation. On June 1, 1999, the Company, Comguard Leasing and
Financial, Inc., and the shareholders of Comguard Leasing and Financial, Inc.,
entered into and agreement whereby the 2,191,145 shares of the Company's shares
issued to acquire Comguard Leasing and Financial, Inc., would be returned to the
Company and the Company would receive a note from Comguard Leasing and
Financial, Inc., in the amount of $109,207 which represents the expenditures
made by the Company on behalf of Comguard Leasing and Financial, Inc.
NOTE #10 - Litigation
The Company has been named as a Defendant in a suit filed in the Montana
Eighteenth Judicial District Court, Gallatin County, Montana. The complaint
against the Company alleges breach of a contract and requests an award of
compensatory and consequential damages in an amount to be determined at trial,
costs and attorney fees as allowed by law.
The Company answered the complaint, has denied all material allegations
contained in the complaint, has asserted eight affirmation defenses and has
asserted a counterclaim.
Insufficient discovery has taken place to make an evaluation of the potential
outcome of the litigation. The company has accrued no amounts due in
contemplation of the outcome of the litigation.
F/S-19
<PAGE>
Advanced Business Sciences, Inc
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #11 -Stock Subscription Receivable
On December 30, 1998, the Company issued to a related party,
(stockholder/officer), 299,726 shares of its common stock at $2.00 per share for
a Stock Subscription Receivable of $599,452. As of June 1, 1999, the Company had
received payment in full of the stock subscription receivable.
NOTE #12 - Short Term and Long Term Debt
The Company has the following short term and long term debt.
<TABLE>
<CAPTION>
Short Term Debt 1999 1998 1997
- --------------- ---- ---- ----
<S> <C> <C> <C>
Term note payable to a commercial bank #1,
due June 1, 1999, Interest Rate 10.50%. $ 1,000,000 $ 1,000,000 $ -0-
Term note, payable to a commercial bank
and others #2, due October 5, 1999,
interest at 8% per annum. 998,767 998,768 -0-
Term note payable to a commercial bank #3,
due January 31, 2000 entered at prime
rate, announced by the bank, plus 2.5%. 897,013 -0- -0-
Note payable to shareholder, non interest, due on
demand. -0- 36,000 87,453
- ------ ------
Total Short Term Debt $2,895,780 $2,034,768 $87,453
========== ========== =======
</TABLE>
On April 1, 1998, the Company issued 1,000,000 shares to certain individuals as
consideration for these individuals giving their unconditional guaranty of
indebtedness incurred by the Company with commercial banks #1 and #2.
On March 15, 1999, the Company issued to certain directors, officers and
stockholders of the Company in the aggregate 500,000 Common Shares and Warrants
to purchase in the aggregate 500,000 Common Shares at an exercise price of $1.00
per share. The warrants are exercisable at any time on or before October 31,
2000. These securities were given in consideration for direct loans to the
Company or for giving unconditional guaranties to such loans.
F/S-20
<PAGE>
Advanced Business Sciences, Inc
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #12 - Short Term and Long Term Debt -Continued-
<TABLE>
<CAPTION>
Long-Term Debt 1999 1998 1997
- -------------- ---- ---- ----
<S> <C> <C> <C>
Capitalized equipment lease, payable
in twelve (12) monthly installments of
$7,605, including imputed interest at 9%,
with a bargain purchase option of $18,
through August 1997. This lease is
currently in default. $ -0- $ -0- $ 33,948
Capitalized equipment lease, payable
in twenty-four (24) to forty-eight (48)
monthly installments of $1,481, and $1,264
respectively, including imputed interest
at 14.73%, through September 1998. 63,403 69,653 -0-
10% convertible subordinated debentures,
due June 2002, convertible into shares
of common stock at $500 per share
(pre-reverse takeover) in accordance
with a Private Placement Memorandum
dated May 15, 1996. 80,000 80,000 180,000
--- ----- ------ ------ -------
Total Long-Term Debt 143,403 149,653 213,948
Less Current Portion 20,039 25,978 133,948
------ ------ -------
Long-Term Debt $ 123,364 $ 123,675 $ 80,000
=========== =========== =========
</TABLE>
The aggregate maturities of long-term debt for the years ending after December
31, 1998 are as follows:
Years Ending
December 31, Amount
------------ ------
1999 $ 25,978
2000 20,039
2001 13,148
2002 90,488
---- ------
Total $ 149,653
===========
F/S-21
<PAGE>
Advanced Business Sciences, Inc
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #13 - Taxes
The Company accounts for income taxes in accordance with SFAS No., 109,
Accounting for Income Taxes, which requires an asset and liability approach to a
financial accounting and reporting for income taxes. Deferred income tax assets
and liabilities are computed annually for differences between the financial
statement and tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted tax laws and rates applicable
to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the tax
payable or refundable for the period plus or minus the change during the period
in deferred tax assets and liabilities.
The Company has net operating losses to carryforward for future tax purposes as
follows:
Year of Loss Amount of Loss Expiration Date
------------------ --------------- ----------------
December 31, 1995 $ 655,468 2015
December 31, 1996 2,845,977 2016
December 31, 1997 1,825,259 2017
December 31, 1998 3,446,012 2018
Net deferred taxes in the accompanying balance sheets include the following
components as of December 31, 1998 and 1997:
1998 1997
-------------- --------------
Deferred Tax Asset $ 2,972,583 $ 1,800,939
Net Operating Loss Carry-
forward Valuation
Allowance ( 2,972,583) (1,800,939)
-------------- ------------
Net Deferred Tax Asset $ -0- $ -0-
============= ---------------
Current Tax Expense $ -0- $ -0-
The Company has established the valuation allowance at 100% of maximum tax
benefit because it is uncertain if the net loss carryforwards will result in tax
asset benefits.
F/S-22
<PAGE>
Advanced Business Sciences, Inc
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #14 - Stockholders' Equity
Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred stock,
$.01 par value, per share.
The Preferred shares may be issued from time to time in one or more
series. The Board of Directors is authorized to fix the number of shares
of any series of Preferred shares and to determine the designation of any
such series. The Board of Directors is also authorized to determine or
alter the rights, preferences, privileges, and restrictions granted to or
imposed upon any wholly, unissued series of Preferred shares and, within
the limits and restrictions stated in any resolution or resolutions of the
Board of Directors originally fixing the number of shares constituting any
series, to increase or decrease (but not below the number of shares of
such series than outstanding) the number of shares of any such series
subsequent to the issue of shares of that series.
No preferred shares are issued.
Common Stock
The Company is authorized to issue 50,000,000 shares of common stock
$0.001 par value, per share.
Common Stock Issued for Services and Other Non-Cash Transactions
The Company issued 583,688 post reverse takeover shares to acquire the
assignment, rights, titles and interest in an invention valued at $707
disclosed in the Company's Patent Application on January 1, 1995.
In 1997, the Company issued 165,000 post reverse takeover shares as
incentive for accounts payable. No value assigned to the shares issued.
In 1997, the Company issued 82,500 post reverse takeover shares for
services rendered valued at $10. An additional 2,063 post reverse takeover
shares were issued to an employee as payment of bonus compensation valued
at $5,103.
Pursuant to the Plan and Agreement of Reorganization between the Company
and Sage Analytics International, Inc., the Company issued 450,000 shares
as finders fees value at $450.
F/S-23
<PAGE>
Advanced Business Sciences, Inc
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #14 - Stockholders' Equity -Continued-
Common shares of the Company's post reverse takeover stock, owned by the
shareholders of Sage Analytics International, Inc., are 437,099 shares.
Pursuant to a Plan and Agreement of Reorganization dated August 24, 1998,
the Company issued 2,191,145 shares of common stock to acquire 100% of
Comguard Leasing and Financial, Inc., an Illinois Corporation, outstanding
stock. An agreement dated June 1, 1999, rescinded the agreement of August
24, 1998 and required the return of the 2,191,145 shares of common stock.
The Company issued 242,500 shares of its common stock as compensation to
outsiders in conjunction with the acquisition of Comguard Leasing and
Financial, Inc. These shares will not be returned to the Company pursuant
to the June 1, 1999, agreement.
The Company issued 457,750 shares of its common stock as payment of
employee bonuses for 1998 valued at $45,775.
The Company issued 1,000,000 shares of its common stock to Guarantor's of
the Companies loans with two Commercial Banks, (bank #1 and bank #2). The
guarantor fees were valued at $100,000.
In 1999, the Company issued 152,000 shares of common stock as payment of
accrued 1998 bonuses to employees valued at $15,200.
In 1999, the Company issued 500,000 shares to the makers and their
Guarantors of the credit line at a Commercial Bank, (bank #3). The
Guarantor's fees were valued at $50,000.
Options and Warrants
Sage Analytics International, Inc., the legal acquirer, (see Note #3) had
2,816,500 options, with exercise prices ranging from a minimum of $0.375
(pre-split) to a maximum of $3.50 (pre-split). All of these options expire
no later than November 2003.
The legal acquirer also had 141,305 warrants issued at the date of
acquisition, each of which entitles the holder thereof to purchase ten
shares of common stock at $0.625 per share of common stock (pre-split).
All warrants expire in or around June 1999.
Pursuant to a Private Placement Memorandum, the Company issued 1,250,000
units during 1998. Proceeds of the units provided the Company $2,500,000.
F/S-24
<PAGE>
Advanced Business Sciences, Inc
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #14 - Stockholders' Equity -Continued-
Each unit issued consisted of one share of common stock $.001 par value
per share and one redeemable common stock purchase warrant. Each warrant
entitles the holder thereof to purchase one share of common stock at a
price of $3.00 during the first year, $4.00 during the second year and
$5.00 during the third year, after which time the exercise period will
expire. The exercise prices are subject to adjustments to prevent
dilution, for three years from the date of the memorandum (February 1,
1998).
The outstanding warrants are redeemable at the Company's option at $.05
each on 30 days prior written notice at any time after the closing price
of common stock has equaled or exceeded 200% of the then effective
exercise price for twenty consecutive trading days.
Prior to the reverse takeover as described in Note #3, the legal acquirer
reverse split its outstanding shares on a one for twenty, basis.
Convertible Debentures and Notes Payable
In 1997, the Company issued 2,177,999 post reverse takeover shares to
settle subordinated debentures, notes payables and accrued interest
totaling $3,772,964.
Deficit Accumulated in the Development Stage
The Company is considered to be a development stage company. Operations
have not produced significant revenues and expenditures for operating
expenses exceed revenues by $9,499,948. This amount is considered to be
the deficit accumulated during the development stage.
NOTE #15 - Going Concern
The accompanying financial statements of Advanced Business Sciences, Inc., have
been prepared on a going-concern basis, which contemplates profitable operations
and the satisfaction of liabilities in the normal course of business. There are
uncertainties that raise substantial doubt about the ability of the Company to
continue as a going concern. As shown in the statements of operations, the
Company has not yet achieved profitable operations. As of March 31, 1999, the
Company has insufficient working capital. These items raise substantial doubt
about the ability of the Company to continue as a going concern.
Management presently believes that the Company is in the final development stage
of its electronic tracking and monitoring devices and the delivery of services
relating to these devices. Although there has been substantial progress in the
development of this technology, the Company does not have any significant sales
and there can be no assurance that the Company will have any significant sales.
F/S-25
<PAGE>
Advanced Business Sciences, Inc
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #15 - Going Concern -Continued-
Management plans to continue financing development of the Company's technology
through the plan described herein.
Advanced Business Sciences, Inc., has been acquired by a public company. The
Plan and Agreement requires the Company stockholders to exchange their common
stock for approximately 90% of the common stock in the public company. The new
public company is proceeding with a private placement offering intended to raise
2.5 million dollars to be used for the elimination of debt, reduction of
outstanding trade accounts payable, product development and working capital.
The Company's continuation as a going concern is dependent upon its ability to
satisfactorily meet its debt obligations, meet its product development goals,
secure new financing and generate sufficient cash flows from operations. The
financial statements do not include any adjustments that might result from
outcome of these uncertainties.
NOTE #16 - Lease Obligations
The Company conducts its operations in leased facilities and has entered into
leases for warehouse and office space. In addition the Company has an operating
lease for a telephone system and voice processing system. The future minimum
lease payments under the three operating leases as of December 31, 1999 are as
follows:
Years Ending Lease
December 31, Amount
------------ ------
1999 $ 76,735
2000 76,735
2001 70,340
---- ------
Total $ 223,810
===========
NOTE #16 - Extinguishment of Debt
The Company was a beneficiary of the stock agreement dated May 6, 1997, between
the majority stockholder, Robert D. Brummels, his son, Tim R. Brummels, and ABS
Holding Co., Inc. The terms and conditions of this stock agreement resulted in
Robert D. Brummels assuming several notes payable to American Interstate Bank
totaling $452,608 including interest. Robert D. Brummels also assumed a term
note payable to Norwest Bank totaling $102,055 including interest. Additionally,
the Company was released of the notes payable to Tim R. Brummels including
interest totaling $108,000.
F/S-26
<PAGE>
Advanced Business Sciences, Inc
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #16 - Extinguishment of Debt -Continued-
In return, the Company released Robert D. Brummels and Tim R. Brummels of their
obligation to the Company totaling $82,981 and $9,781, respectively.
Furthermore, the Company co-signed an ABS Holding Co., Inc., note payable to
Robert D. And Tim R. Brummels in the amount of $300,000. Finally, Robert D., and
Tim R. Brummels resigned their positions as Board of Director members, officers,
agents and employees of the Company. As a result of this stock agreement, the
Company recognized a gain of $569,901 resulting from the extinguishment of debt.
NOTE #17 - Contingencies and Commitments
On February 1, 1998, the Company issued 1,250,000 units having an aggregate
purchase price of $2,500,000. A unit consisted on one Common Share and a warrant
to purchase one Common Share at an exercise price of (1) $3.00 per share during
the first year, (2) $4.00 per share during the second year and (3) $5.00 per
share during the third year. The warrants expire February 1, 2001. All but
sixteen investors in this offering were accredited investors. The Company's
management believes that this transaction was in substantial compliance with
Rule 506 under the Securities Act; however, the Company has a contingent
liability for the entire offering plus costs associated with any future
litigation respecting this matter.
The Company entered into an Agreement with a business executive to act as its
President and Chief Executive Officer on February 1, 1999. Under terms of the
Agreement the executive will act as President, Chief Executive Officer and a
voting Director of the Company.
The Contract will commence on February 1, 1999 and continue through the third
anniversary of that date. Thereafter the contract may be renewed annually and
continue on the same terms and conditions for an indefinite term until
termination in accordance with the terms of the Agreement.
The executive shall be compensated for his services at the rate of $150,000
annually to be paid in accordance with the Company normal payroll practices.
The executive shall be eligible for an annual bonus in accordance with criteria
established by the Board each year.
As discussed in note #18, the executive shall receive 1,000,000 shares of common
stock as a hiring incentive.
The Company has signed and filed with the state of Nebraska UCC, financing
statements attached to the bank #1 loans. This Financing Statement covers the
following types (or items) of property. All inventory, chattel paper, accounts,
equipment and general intangibles; whether any of the foregoing is owned now or
acquired later; all accessions, additions, replacements, and substitutions
relating to any of the foregoing; all records of any kind relating to any of the
foregoing; all proceeds relating to any of the foregoing (including insurance,
general intangibles and other accounts proceeds).
F/S-27
<PAGE>
Advanced Business Sciences, Inc
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #18 - Subsequent Events
On February 1, 1999, the Company contractually committed to its President and
Chief Executive Officer as a hiring incentive to issue the executive 1,000,000
shares of the Company's common stock at no cost. Such shares shall be issued as
registered shares. At the date of this report these shares have not been issued.
F/S-28
<PAGE>
Supplemental Information
F/S-29
<PAGE>
Independent Accountants' Audit Report on Supplemental in Formation
Board of Directors and Stockholders
Advanced Business Sciences, Inc.
Omaha, Nebraska
The audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental information presented hereinafter
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
June 7, 1999
Salt Lake City, Utah
F/S-30
<PAGE>
<TABLE>
Advanced Business Sciences, Inc.
(A Development Stage Company)
Schedules of Expenses
For the Period January 1, 1999 to March 31, 1999 and the Years
Ended December 31,1998 and 1997
<CAPTION>
March December December
31, 1999 31, 1998 31, 1997
-------- -------- --------
<S> <C> <C> <C>
Expenses
Salaries and Wages 194,884 666,650 $ 712,370
Bad Debt -0- -0- 4,011
Bank Charges 345 1,041 4,549
Commissions -0- -0- -0-
Consulting Fees 60,000 380,099 41,103
Contract Labor -0- 43,392 -0-
Depreciation and Amortization 52,274 172,221 130,917
Donations -0- 325 -0-
Dues and Subscriptions 2,911 3,456 9,410
Employee Hiring Costs -0- 2,908 -0-
Equipment Rental 4,720 14,190 14,830
Freight 3,864 13,001 -0-
Insurance:
General 24,614 48,103 45,684
Health 24,514 38,145 41,687
Officer Life 1,075 -0- -0-
Meals and Entertainment 3,155 16,391 4,027
Miscellaneous 13,882 5,382 18,851
Office Supplies 6,952 24,296 3,961
Penalties -0- 58,391 2,556
Postage 715 3,115 -0-
Professional Fees 17,376 154,510 92,040
Rent 17,575 70,337 84,002
Repairs and Maintenance 52 3,266 -0-
Security Expense -0- 1,140 8,749
Supplies -0- 8,429 -0-
Taxes:
Payroll 27,750 51,988 82,356
Other 3,927 25,195 3,539
Telephone 54,756 92,590 92,078
Training -0- -0- 1,035
Travel 5,057 36,933 42,972
Utilities 2,804 14,507 17,003
Vehicle Expense 559 23,399 16,699
</TABLE>
See Independent Accountant's Audit Report on Supplemental Information
F/S-31
<PAGE>
<TABLE>
Advanced Business Sciences, Inc.
(A Development Stage Company)
Schedules of Expenses-Continued
For the Period January 1, 1999 to March 31, 1999
and the Years Ended December 31,1998 and 1997
<CAPTION>
March December December
31, 1999 31, 1998 31, 1997
-------- -------- --------
<S> <C> <C> <C>
Inventory Obsolence -0- 202,996 46,789
Settlement Costs -0- -0- 27,178
- - ------
Total Expenses $ 523,761 $2,176,396 $1,548,396
========== ========== ==========
</TABLE>
See Independent Accountant's Audit Report on Supplemental Information
F/S-32
<PAGE>
<TABLE>
Advanced Business Sciences, Inc.
Expense Schedule
For the Period January 1, 1999 to March 31, 1999 and the Years
Ended December 31, 1998 and 1997
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Research & Development
Salaries $ 19,365 $ 95,219 $ 180,185
Telephone 4,066 55,527 71,179
Materials & Supplies 9,753 299,900 32,065
Testing -0- 49,982 -0-
- ------ -
Total Research & Development $ 33,184 $ 500,628 $ 283,429
========= ========= =========
Sales & Marketing
Con$ultant Fees $ -0- $ -0- $ 98,443
Salaries 46,875 165,985 197,351
Payroll Taxes 1,810 13,796 -0-
Contract Labor 20,468 16,650 -0-
Commissions -0- 948 -0-
Sales Shows Expenses -0- 17,222 10,581
Marketing/Sales Brochures 10,318 46,999 -0-
Advertising 29,712 31,305 10,582
Entertainment -0- 2,715 -0-
Telephone 3,482 18,130 7,672
Office Supplies 2,536 1,814 -0-
Travel 11,925 68,731 28,287
Supplies & Miscellaneous -0- 42,825 31,136
- ------ ------
Total Sales & Marketing $ 127,126 $ 427,120 $ 384,052
========= ========= =========
</TABLE>
See Independent Accountant's Audit Report on Supplemental Information
F/S-33
<PAGE>
PART III.
Item 1. Index to Exhibits
See Item 2 of this Part III.
Item 2. Description of Exhibits
Exhibit
Number Description
------ -----------
3.01 Restated Certificate of Incorporation of the Company
3.02 Restated Bylaws of the Company
4.01 Form of Common Stock Certificate
10.01 Business Office Lease
10.02 Loan Agreement with Commercial Savings Bank
10.03 Loan Agreement with US Bank, N.A.
10.04 Loan Agreement with Mary Collison
10.05 Loan Agreement with James Pietig
10.06 License with SiRF Technology, Inc.
10.07 Employment Agreement by and between the Company and
Benjamin J. Lamb
21.01 Subsidiaries of the Company
23.01 Consent of Schvaneveldt & Associates
27.01 Financial Data Schedules
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
ADVANCED BUSINESS SCIENCES, INC.
By: /s/ Benjamin J. Lamb
------------------------
Date: June 18, 1999 Benjamin J. Lamb
President and Chief Executive Officer
III-1
RESTATED CERTIFICATE OF INCORPORATION
OF
ADVANCED BUSINESS SCIENCES, INC.
The undersigned, Benjamin J. Lamb certifies that he is the President and
Chief Executive Officer of ADVANCED BUSINESS SCIENCES, INC., a corporation
organized and existing under the laws of the State of Delaware, and hereby
certifies as follows:
1. The name of the corporation is "ADVANCED BUSINESS SCIENCES, INC.."
2. The original Certificate of Incorporation was filed with the Secretary of
State of the State of Delaware on July 17, 1986, under the name Sage
Analytics International, Inc.
3. This Restated Certificate of Incorporation of the corporation has been duly
adopted by resolutions of the Board of Directors of the corporation in
accordance with the provisions of Section 245 of the General Corporation Law
of the State of Delaware and, upon filing with the Secretary of State in
accordance with Section 103, shall thenceforth supersede the original
Certificate of Incorporation, as heretofore amended, and shall, as it may
thereafter be amended or supplemented in accordance with its terms and
applicable law, be the Certificate of Incorporation of the corporation.
4. The text of the Certificate of Incorporation of the corporation is hereby
restated to read in its entirety as follows:
ARTICLE 1. NAME
The name of the Corporation is ADVANCED BUSINESS SCIENCES, INC.
ARTICLE 2. REGISTERED OFFICE AND AGENT
The registered office of the Corporation in the State of Delaware is to
located at 220 Continental Drive, City of Newark, County of New Castle; its
registered agent at the address shall be American Guaranty and Trust
Corporation.
ARTICLE 3. PURPOSE
The purpose of the Corporation is to engage in any lawful act of activity for
which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE 4. CAPITAL STOCK
The total number of shares of stock which the corporation shall have
authority to issue is 51,000,000 consisting of 50,000,000 shares of Common
Stock, $.001 par value per share (the "Common Stock"), and 1,000,000 shares of
Preferred Stock, $.01 par value per share (the "Preferred Stock").
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is authorized to fix the number of shares of any series
of Preferred shares and to determine the designation of any of such series. The
Board of Directors is also authorized to determine or alter the rights,
preferences, privileges, and restrictions granted to or imposed upon any wholly
unissued series of Preferred shares and,
<PAGE>
within the limits and restrictions stated in any resolution or resolutions of
the Board of Directors originally fixing the number of shares constituting any
series, to increase or decrease (but not below the number of shares of such
series then outstanding) the number of shares of any such series subsequent to
the issue of shares of that series.
Effective as of December 18, 1997, each twenty (20) outstanding shares of
Common Stock and Preferred Stock will be combined and converted into one (1)
share each of the Common Stock and Preferred Stock, respectively, provided that
no fractional shares shall be issued but shall be rounded up to the nearest
whole number. There shall be no increase or decrease in the corporation's
authorized capital stock or its par value per share, or in the corporation's
capital.
ARTICLE 5. PREEMPTIVE RIGHTS
No stockholder of the Corporation shall have any preemptive rights to
purchase, subscribe for or otherwise acquire any share or other securities of
the Corporation, whether now or hereafter authorized, and any and all preemptive
rights are hereby denied.
ARTICLE 6. DIRECTORS
The corporation shall be under the direction of a board of directors. The
board of directors shall consist of not less than three directors nor more than
15 directors. The number of directors within this range shall be as stated in
the Corporation's by-laws, as may be amended from time to time. The board of
directors shall divide the directors into three classes and, when the number of
directors is changed, shall determine the class or classes to which the
increased or decreased number of directors shall be apportioned; provided, that
the directors in each class shall be as nearly equal in number as possible;
provided, further, that no decrease in the number of directors shall affect the
term of any director then in office.
The classification shall be such that the term of one class shall expire each
succeeding year. The Corporation's board of directors shall initially be divided
into the three classes named Class I, Class II, and Class III, with Class I
initially consisting of one director and Class II and Class III each initially
consisting of two directors. The terms, classifications, qualifications and
election of the board of directors and the filling of vacancies thereon shall be
as provided herein and in the by-laws. The names of those persons of each class
to serve on the board of directors shall be as follows:
Class I:
Term of Office Expires at 1987 annual meeting of stockholders:
Thomas E. Sawyer
Class II:
Term of Office Expires at 1988 annual meeting of stockholders:
R. Keith Jones
Keith Oakes
2
<PAGE>
Class III:
Term of Office Expires at 1989 annual meeting of stockholders:
Kent G. Stephens
Jon D. Stephens
Subject to the foregoing, at each annual meeting of stockholders the
successors to the class of directors whose terms shall then expire shall be
elected to hold office for a term expiring at the third succeeding annual
meeting and until their successors shall be elected and qualified.
Any vacancy occurring in the board of directors, including any vacancy
created by reason of an increase in the number of directors, shall be filled for
the unexpired term by the concurring vote of a majority of the directors then in
office, whether or not a quorum, and any director so chosen shall hold office
for the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified.
Any director may be removed with or without cause by an affirmative vote of
at least two-thirds of the total votes eligible to be cast by stockholders, all
stockholders voting together as a single class, at a duly constituted meeting of
stockholders called expressly for that purpose; provided, however, that if there
are at the time one or more Interested Stockholders (as defined in Article 9
hereof), directors may only be removed with cause and in addition to such
two-thirds vote, there must also be an affirmative vote for removal of not less
than a majority of the voting power of the issued and outstanding shares
entitled to vote thereon held by stockholders other than such Interested
Stockholders.
ARTICLE 7. DIRECTORS' LIABILITY
The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by subsection (7) of subsection (b)
of Section 102 of the General Corporation Law of the State of Delaware, as the
same may be amended or supplemented.
ARTICLE 8. BY-LAWS
The board of directors shall have the power to amend from time to time the
by-laws of the Corporation. Such action by the board of directors shall require
the affirmative vote of at least a majority of the directors then in office at a
duly constituted meeting of the board of directors called for such purpose. The
stockholders may amend by-laws made by the board of directors. Such action by
the stockholders shall require the affirmative vote of at least two-thirds of
the total votes cast at a duly constituted meeting of stockholders called for
such purpose; provided, however, that if there are at the time one or more
Interested Stockholders (as defined in Article 9 hereof), in addition to such
two-thirds vote, there must also be an affirmative vote for such action of not
less than a majority of the voting power of the issued and outstanding shares
entitled to vote thereon held by stockholders other than such Interested
Stockholders.
3
<PAGE>
ARTICLE 9. CERTAIN BUSINESS COMBINATIONS
The votes of stockholders and directors required to approve any Business
Combination shall be as set forth in this Article 9. The term "Business
Combination" is used as defined in subsection 1 of this Article 9. All other
capitalized terms not otherwise defined in this Article 9 or elsewhere in these
Articles of Incorporation are sued as defined in subsection 3 of this Article 9.
Subsection 1. Vote Required for Certain Business Combinations.
A. Higher Vote for Certain Business Combinations. In addition to any
affirmative vote required by law or these Articles of Incorporation, and except
as otherwise expressly provided in subsection 2 of this Article 9:
(i) any merger, consolidation or share exchange of the Corporation or any
Subsidiary (as hereinafter defined) with (a) any Interested Stockholder (as
hereinafter defined) or (b) any other corporation (whether or not itself an
Interested Stockholder) which is, or after the merger, consolidation or share
exchange would be, an Affiliate or Associate (as the terms are hereinafter
defined) of any person who or which was an Interested Stockholder prior to
the transaction; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition other than in the usual and regular course of business ( in one
transaction or a series of transactions in any twelve-month period) to any
Interested Stockholder or any Affiliate or Associate of such Interested
Stockholder, other than the Corporation or any Subsidiary having, measured at
the time the transaction or transactions are approved by the board of
directors of the Corporation, an aggregate book value as of directors of the
Corporation's most recent fiscal quarter of five percent or more of the total
Market Value (as hereinafter defined) of the outstanding shares of the
Corporation or of its net worth as of the end of its most recent fiscal
quarter or;
(iii) the issuance, sale, transfer or other disposition by the
Corporation, or any Subsidiary (in one transaction or a series of
transactions) of any equity securities of the Corporation or any Subsidiary
having an aggregate Market Value of five percent or more of the total Market
Value of the outstanding shares of the Corporation to any Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder,
other than the Corporation or any of its Subsidiaries, except pursuant to the
exercise of warrants, rights or options to subscribe to or purchase
securities offered, issued or granted pro rata to all holders of the Voting
Stock (as hereinafter defined) of the Corporation or any other method
affording substantially proportionate treatment to the holders of Voting
Stock; or
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation or any Subsidiary proposed by or on behalf of
an Interested Stockholder or any Affiliate or Associate of such Interested
Stockholder, other than the Corporation or any of its Subsidiaries; or
(v) any reclassification of securities (including any reverse share
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or other
transaction (whether or not with or into or otherwise involving an Interested
Stockholder) which has the effect, directly or indirectly, in one transaction
or a series of transactions, of increasing the proportionate amount of the
outstanding shares of any class of equity or convertible securities of the
Corporation or
4
<PAGE>
any Subsidiary which is directly or indirectly owned by any Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder,
other than the corporation or any of its Subsidiaries; or
(vi) any agreement, arrangement or understanding providing for any one or
more actions specified in classes (i) through (v) of this Paragraph A of this
Subsection (1); shall be approved by affirmative vote of at least (a) the
holders of two-thirds of the total number of outstanding shares of Voting
Stock and (b) the holders of two-thirds of the voting power of the
outstanding shares of Voting Stock, excluding for purposes of calculating the
affirmative vote and the total number of outstanding shares of voting Stock
under this clause (b), all shares of Voting Stock of which the beneficial
owner is the Interested Stockholder involved in the Business Combination or
any Affiliate or Associate of such Interest Stockholder. Such affirmative
vote shall be required notwithstanding the fact that no vote may be required,
or that a lesser percentage may be specified, by law.
B. Definition of "Business Combination." The term "Business Combination" as
used in this Article 9 shall mean any transaction which is referred to in any
one or more of classes (i) through (v) of paragraph A of this subsection 1.
Subsection 2. When Higher Vote is Not Required.
The provisions of subsection 1 of this Article 9 shall not be applicable to
any particular Business Combination, and such Business Combination shall require
only such affirmative vote as is required by law and any other provision of
these Articles of Incorporation, if all the conditions specified in either of
the foregoing paragraphs A and B are met:
A. Approval of Continuing Directors. The Business Combination shall have
been approved by a majority of the Continuing Directors (as hereinafter
defined).
B. Price and Procedure Requirements. All of the following conditions shall
have been met:
(i) The aggregate amount of the cash and the Market Value as of the
Valuation Date (as hereinafter defined) of the Business Combination of
non-cash consideration to be received per share by holders of common stock in
such Business Combination shall be at least equal to the highest of the
following:
(a) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid
by the Interested Stockholder for any shares of common stock acquired by
it (1) within the two-year period immediately prior to the first public
announcement of the proposal of the Business Combination (the
"Announcement Date") or (2) in the transaction in which it became an
Interested Stockholder, whichever is higher; or
(b) the Market Value per share of common stock of the same class or
series on the Announcement Date or on the date on which the Interested
Stockholder became an Interested Stockholder (such latter date is referred
to in this Article 9 as the "Determination Date"), whichever is higher, or
(c) the price per share equal to the Market Value per share of common
stock of the same class or series determined pursuant to subdivision
(i)(b) hereof, multiplied by the ratio of (1) the
5
<PAGE>
highest per share price (including brokerage commissions, transfer taxes
and soliciting dealer's fees) paid by the Interested Stockholder for any
shares of common stock of the same class or series acquired by it within
the two-year period immediately prior to the Announcement Date, over (2)
the Market Value per share of common stock of the same class or series on
the first day in such two-year period on which the Interested Stockholder
acquired shares of common stock.
(iii) The aggregate amount of the cash and the Market Value as of the
Valuation Date of non-cash consideration to be received per share by holders
of shares of any class or series of outstanding Voting Stock, other than
common stock, shall be at least equal to the highest of the following (it
being intended that the requirements of this paragraph B(ii) shall be
required to be met with respect to every class of outstanding Voting Stock,
whether or not the Interested Stockholder has previously acquired any shares
of a particular class of Voting Stock):
(a) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid
by the Interest Stockholder for any shares of such class or series of
Voting Stock acquired by it: (1) within the two-year period immediately
prior to the Announcement Date or (2) in the transaction in which it
became an Interested Stockholder, whichever is higher; or
(b) (if applicable) the highest preferential amount per share to which
the holders of shares of such class or series of Voting Stock are entitled
in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation; or
(c) the Market value per share of such class or series of Voting Stock
on the Announcement Date or on the Determination Date, whichever is
higher; or
(d) the price per share equal to the Market Value per share of such
class or series of stock determined pursuant to subdivision (ii)(c) hereof
multiplied by the ratio of (1) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid
by the Interested Stockholder for any shares of any class or series of
Voting Stock acquired by it within the two-year period immediately prior
to the Announcement Date over (2) the Market Value per share of the same
class or series of Voting Stock on the first day in such two-year period
on which the Interested Stockholder acquired any shares of the same class
or series of Voting Stock.
(iii) The consideration to be received by holders of a particular class or
series of outstanding Voting Stock shall be in cash or in the same form as
the Interested Stockholder has previously paid for shares of such class or
series of Voting Stock. If the Interested Stockholder has paid for shares of
any class or series of Voting Stock with varying forms of consideration, the
form of consideration for such class or series of Voting Stock shall be
either cash or the form used to acquire the largest number of shares of such
class or series of Voting Stock previously acquired by it.
(iv) After such interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination: (a)
there shall have been no failure to declare and pay the regular date therefor
any full quarterly dividends (whether or not cumulative) on any outstanding
preferred stock of the Corporation; (b) there shall have been (1) no
reduction in the annual rate of dividends paid on any class or series of the
capital stock of the Corporation (except as necessary to reflect
6
<PAGE>
any subdivision of the capital stock), and (2) an increase in such annual
rate of dividends as necessary to reflect any reclassification (including any
reverse share split), recapitalization, reorganization or any similar
transaction which has the effect of reducing the number of outstanding shares
of common stock; and (c) such Interested Stockholder shall have not become
the beneficial owner of any additional shares of capital stock except as part
of the transaction which results in such Interested Stockholder becoming an
Interested Stockholder or by virtue of proportionate stock splits or stock
dividends.
The provisions of subdivisions (iv) (a) and (iv) (b) of this subsection do
not apply if such actions shall have been approved by a majority of the
Continuing Directors and if no Interested Stockholder or an Affiliate or
Associate of the Interested Stockholder voted as a director of the Corporation
in a manner inconsistent with such subdivisions, and the Interested Stockholder,
within ten days after any act or failure to act inconsistent with such
subdivisions, notifies the board of directors of the Corporation in writing that
the Interested Stockholder disapproves thereof and requests in god faith that
the board of directors rectify such act or failure to act.
(v) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the benefit,
directly or indirectly (except proportionately as a stockholder), of any
loans, advances, guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided by the Corporation or any of its
Subsidiaries (whether in anticipation of or in connection with such Business
Combination or otherwise).
(vi) A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange
Act of 1934 and the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations) shall be mailed to
public stockholders of the Corporation at least 25 days prior to the
consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such Act or
subsequent provisions).
SubCertain Definitions.
For the purpose of this Article 9:
A. A "person" shall mean any individual, firm, corporation or other entity.
B. "Interested Stockholder" shall mean any person (other than the Corporation
or any Subsidiary or any other person who at the date of adoption of these
Articles of Incorporation or the date of the Agreement of Merger with Sage
Institute International, Inc., was the beneficial owner, directly or indirectly,
of 10 percent or more of the voting power of the Voting Stock outstanding on
such date ) who or which:
(i) is the beneficial owner, directly or indirectly, of 10 percent or
more of the voting power of the then outstanding Voting Stock; or
(ii) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the
beneficial owner, directly or indirectly, of 10 percent or more of the
voting power of the then outstanding Voting Stock.
7
<PAGE>
C. A "beneficial owner," when used with respect to any Voting Stock, means a
person:
(i) that, individually or with any of its Affiliates or Associates,
beneficially owns Voting Stock directly or indirectly; or
(ii) that, individually or with any of its Affiliates or Associates,
has (a) the right to acquire Voting Stock (whether such right is
exercisable immediately or only after passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants of options, or otherwise; (b) the right
to vote or direct the voting of Voting Stock pursuant to any agreement,
arrangement or understanding; or (c) of Voting Stock pursuant to any
agreement, arrangement or understanding; or
(iii) that, individually or with any of its Affiliates or Associates,
has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of Voting Stock with any other
person that beneficially owns, or whose Affiliates or Associates
beneficially own, directly or indirectly, such shares of Voting Stock.
D. For the purpose of determining whether a person is an Interested
Stockholder pursuant to paragraph B of this subsection 3, the number of shares
of Voting Stock deemed to be outstanding shall include shares deemed owned by
such person through application of paragraph C of this subsection 3 but shall
not include any other shares of Voting Stock which may be issuable pursuant to
any agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
E. "Affiliate" means a person that directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with, a
specified person.
F. "Associate," when used to indicate a relationship with any person, means:
(1) any domestic or foreign corporation or organization, other than the
Corporation or a subsidiary of the Corporation, of which such person is an
officer, director or partner or is, directly or indirectly, the beneficial owner
of ten percent or more of any class of equity securities; (2) any trust or other
estate in which such person has a substantial beneficial interest or as to which
person serves as a trustee or in a similar fiduciary capacity; and (3) any
relative or spouse of such person, or any relative of such spouse who has the
same home as such person or who is a director or officer of the Corporation or
any of its Affiliates.
G. "Subsidiary" means any corporation of which Voting Stock having a majority
of the votes entitled to be cast is owned, directly or indirectly, by the
Corporation.
H. "Continuing Director" means any member of the board of directors of the
Corporation who is unaffiliated with the Interested Stockholder and was a member
of the board of directors of the Corporation prior to the time that the
Interested Stockholder (including any Affiliate or Associate of such Interested
Stockholder) became an Interested Stockholder, and any successor of Continuing
Director who is unaffiliated with the Interested Stockholder and recommended to
succeed a Continuing Director by a majority of Continuing Directors then on the
board of directors of the Corporation.
I. "Market Value" means:
8
<PAGE>
(i) in the case of stock, the highest closing sal price during the 30-day
period immediately preceding the date in question of a share of such stock on
the composite tape for New York Stock Exchange - listed stocks, or, if such
stock is not quoted on the composite tape, or the New York Stock Exchange,
or, if such stock is not listed on such exchange, the principal United States
securities exchange registered under the Securities Exchange Act of 1934 on
which such stock is listed, or, if such share is not listed on any such
exchange, the highest closing sales price or bid quotation with respect to a
share of such stock during the 30-day period preceding the date in question
on the National Association of Securities Dealers, Inc., Automated Quotations
System of any system then in use, or if no such quotations are available, the
fair market value on the date in question of a share of such stock as
determined by the board of directors of the Corporation in good faith; and
(ii) in the case of property other than cash or stock, the fair market
value of such property on the date in question as determined by a majority of
the board of directors of the Corporation in good faith.
J. "Valuation Date" means: (A) For a business combination voted on by
stockholders, the latter of the day prior to the date of the stockholders vote
or the date twenty days prior to the consummation of the Business Combination;
and (B) for a Business Combination not voted upon by the stockholders, the date
of the consummation of the Business Combination.
K. "Voting Stock" means the then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors.
L. In the event of any Business Combination in which the Corporation is the
surviving corporation, the phrase "consideration other than cash to be received"
as used in paragraphs B(i) and B(ii) of subsection 2 of this Article 9 shall
include the shares of common stock and/or the shares of any other class or
series of outstanding Voting Stock retained by the holders of such shares.
Subsection 4. Powers of the Continuing Directors.
A majority of the Continuing Directors shall have the power and duty to
determine for the purpose of this Article 9, on the basis of information known
to them after reasonable inquiry, (A) whether a person is an Interested
Stockholder, (B) the number of shares of Voting Stock beneficially owned by any
person, (C) whether a person is an Affiliate or Associate of another, and (D)
whether the requirements of paragraph B of subsection 2 have been met with
respect to any Business Combination; and the good faith determination of a
majority of the Continuing Directors on such matters shall be conclusive and
binding for all the purposes of this Article 9.
ARTICLE 10. ANTI-GREENMAIL
Any direct or indirect purchase or other acquisition by the Corporation of
any Voting Stock (as defined in Article 9 hereof) from any Significant
Stockholder (as hereinafter defined) who has beneficially owned (as defined in
Article 9 hereof) such Voting Stock for less than two years prior to the date of
such purchase or other acquisition shall, except as hereinafter expressly
provided, require the affirmative vote of the holders of at least a majority of
the total number of the then outstanding shares of Voting Stock, excluding in
calculating such shares all Voting Stock beneficially owned by such Significant
Stockholder. Such affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage may
9
<PAGE>
be specified, by law or any agreement with a national securities exchange or
otherwise, but no such affirmative vote shall be required with respect to any
purchase or other acquisition of Voting Stock made as part of a tender or
exchange offer by the Corporation to purchase Voting Stock on the same terms
from all holders of the same class of Voting Stock and complying with the
applicable requirements of the Securities Exchange Act of 1934 and the rules and
regulations thereunder.
For the purpose of this Article 10:
A. "Significant Stockholder" shall mean any person (other than the
corporation or any corporation of which a majority of any class of Voting Stock
is owned, directly or indirectly, by the Corporation or any other person who at
the date of adoption of these Articles of Incorporation or the date of the
Agreement of Merger with Sage Institute International, Inc., was the beneficial
owner, directly or indirectly, of 5 percent or more of the voting power of the
Voting Stock outstanding on such date) who or which is the beneficial owner,
directly or indirectly, of 5 percent or more of the voting power of the
outstanding Voting Stock.
ARTICLE 11. AMENDMENT OF ARTICLES OF INCORPORATION
Except as set forth in this Article 11 or as otherwise specifically required
by law, no amendment of any provision of these Articles of Incorporation shall
be made unless such amendment has been approved both by the board of directors
of the Corporation and by the stockholders of the Corporation by the affirmative
vote of the holders of at least a majority of the shares entitled to vote
thereon at a duly called annual or special meeting; provided, however, that if
such amendment is to be the provisions set forth in this Article 11 or in
Article 6, 7, 8, 9 or 10 hereof, such amendment must be approved by the
affirmative vote of the holders of at least two-thirds of the shares entitled to
vote thereon rather than a majority; provided, further, that if there are one or
more interested Stockholders (as defined in Article 9 hereof), the provisions
set forth in this Article 11 or in Article 6, 7, 8, 9 or 10 hereof may be
repealed or amended only with the affirmative vote both of (a) the holders of at
least two-thirds of the total number of outstanding shares of Voting Stock (as
defined in Article 9 hereof), and (b) the holders of at least two-thirds of the
total number of outstanding shares of Voting Stock, excluding for purposes of
calculating both the affirmative vote and the number of outstanding shares of
Voting Stock under this clause (b) all the shares of Voting Stock of which the
beneficial owner is an Interested Stockholder or an Affiliate or Associate of
such Interested Stockholder (as such terms are defined in Article 9 hereof).
ARTICLE 12. INDEMNIFICATION
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a part to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, to the fullest extent permitted by law.
IN WITNESS WHEREOF, the corporation has caused this Restated Certificate of
Incorporation to be signed by its President and Chief Executive Officer this
10th day of June, 1999.
10
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ADVANCED BUSINESS SCIENCES, INC.
By: /s/ Benjamin J. Lamb
------------------------
Benjamin J. Lamb
President and Chief Executive Officer
11
RESTATED BYLAWS
OF
ADVANCED BUSINESS SCIENCES, INC.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. OFFICES...........................................................1
Section 1.1 Registered Office ...........................................1
Section 1.2 Other Offices................................................1
ARTICLE II. MEETINGS OF STOCKHOLDERS.........................................1
Section 2.1 Place of Meetings. ..........................................1
Section 2.2 Annual Meetings. ............................................1
Section 2.3 Special Meetings. ...........................................1
Section 2.4 Notice. .....................................................2
Section 2.5 Adjournments. ...............................................2
Section 2.6 Quorum. .....................................................2
Section 2.7 Voting. .....................................................2
Section 2.8 Consent of Stockholders in Lieu of Meeting. .................3
Section 2.9 List of Stockholders Entitled to Vote. ......................3
Section 2.10 Stock Ledger. ..............................................3
Section 2.11 Conduct of Meetings. .......................................4
ARTICLE III. DIRECTORS.......................................................4
Section 3.1 Number and Election of Directors. ...........................4
Section 3.2 Vacancies. ..................................................4
Section 3.3 Duties and Powers. ..........................................4
Section 3.4 Meetings. ...................................................5
Section 3.5 Quorum. .....................................................5
Section 3.6 Actions by Written Consent. .................................5
Section 3.7 Meetings by Means of Conference Telephone. ..................5
Section 3.8 Committees. .................................................6
Section 3.9 Compensation. ...............................................6
Section 3.10 Interested Directors. ......................................6
ARTICLE IV. OFFICERS.........................................................7
Section 4.1 General. ....................................................7
Section 4.2 Election. ...................................................7
Section 4.3 Voting Securities Owned by the Corporation. .................7
Section 4.4 Chairman of the Board of Directors. .........................7
Section 4.5 President. ..................................................8
Section 4.6 Vice Presidents. ............................................8
Section 4.7 Secretary. ..................................................8
Section 4.8 Treasurer. ..................................................9
Section 4.9 Assistant Secretaries. ......................................9
Section 4.10 Assistant Treasurers. ......................................9
Section 4.11 Other Officers. ...........................................10
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ARTICLE V. STOCK............................................................10
Section 5.1 Form of Certificates. ......................................10
Section 5.2 Signatures. ................................................10
Section 5.3 Lost Certificates. .........................................10
Section 5.4 Transfers. .................................................11
Section 5.5 Record Date.................................................11
Section 5.6 Record Owners. .............................................12
ARTICLE VI. NOTICES.........................................................12
Section 6.1 Notices. ...................................................12
Section 6.2 Waivers of Notice. .........................................12
ARTICLE VII. GENERAL PROVISIONS.............................................12
Section 7.1 Dividends. .................................................12
Section 7.2 Disbursements. .............................................13
Section 7.3 Fiscal Year. ...............................................13
Section 7.4 Corporate Seal. ............................................13
ARTICLE VIII. INDEMNIFICATION...............................................13
Section 8.1 Power to Indemnify in Actions, Suits or Proceedings
other than those by or in the Right of the Corporation. ....13
Section 8.2 Power to Indemnify in Actions, Suits or Proceedings
by or in the Right of the Corporation. .....................14
Section 8.3 Authorization of Indemnification. ..........................14
Section 8.4 Good Faith Defined. ........................................14
Section 8.5 Indemnification by a Court. ................................15
Section 8.6 Expenses Payable in Advance. ...............................15
Section 8.7 Nonexclusivity of Indemnification and Advancement
of Expenses. ...............................................15
Section 8.8 Insurance. .................................................16
Section 8.9 Certain Definitions. .......................................16
Section 8.10 Survival of Indemnification and Advancement
of Expenses. ..............................................16
Section 8.11 Limitation on Indemnification. ............................17
Section 8.12 Indemnification of Employees and Agents. ..................17
ARTICLE IX. AMENDMENTS......................................................17
Section 9.1 Amendments. ................................................17
Section 9.2 Entire Board of Directors. .................................17
iii
<PAGE>
RESTATED BYLAWS
OF
ADVANCED BUSINESS SCIENCES, INC.
(hereinafter called the "Corporation")
ARTICLE I. OFFICES
Section 1.1 Registered Office.
The registered office of the Corporation shall be in the City of Newark,
County of New Castle, State of Delaware.
Section 1.2 Other Offices.
The Corporation may also have offices at such other places both within and
without the State of Delaware as the Board of Directors may from time to time
determine.
ARTICLE II. MEETINGS OF STOCKHOLDERS
Section 2.1 Place of Meetings.
Meetings of the stockholders for the election of directors or for any other
purpose shall be held at such time and place, either within or without the State
of Delaware as shall be designated from time to time by the Board of Directors.
Section 2.2 Annual Meetings.
The Annual Meetings of Stockholders for the election of directors shall be
held on such date and at such time as shall be designated from time to time by
the Board of Directors. Any other proper business may be transacted at the
Annual Meeting of Stockholders.
Section 2.3 Special Meetings.
Unless otherwise required by law or by the certificate of incorporation of
the Corporation, as amended and restated from time to time (the "Certificate of
Incorporation"), Special Meetings of Stockholders, for any purpose or purposes,
may be called by either (i) the Chairman, if there be one, or (ii) the
President, (iii) any Vice President, if there be one, (iv) the Secretary or (v)
any Assistant Secretary, if there be one, and shall be called by any such
officer at the request in writing of (i) the Board of Directors, (ii) a
committee of the Board of Directors that has been duly designated by the Board
of Directors and whose powers and authority include the power to call such
meetings or (iii) stockholders owning a majority of the capital stock of the
Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting. At a Special Meeting of
Stockholders, only such business shall be conducted as shall be specified in the
notice of meeting (or any supplement thereto).
Section 2.4 Notice.
Whenever stockholders are required or permitted to take any action at a
meeting, a written notice of the meeting shall be given which shall state the
place, date and hour of the meeting, and, in the case of a special
<PAGE>
meeting, the purpose or purposes for which the meeting is called. Unless
otherwise required by law, the written notice of any meeting shall be given not
less than ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting.
Section 2.5 Adjournments.
Any meeting of the stockholders may be adjourned from time to time to
reconvene at the same or some other place, and notice need not be given of any
such adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. At the adjourned meeting, the
Corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 2.6 Quorum.
Unless otherwise required by law or the Certificate of Incorporation, the
holders of a majority of the capital stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business. A
quorum, once established, shall not be broken by the withdrawal of enough votes
to leave less than a quorum. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, in the manner provided in Section , until
a quorum shall be present or represented.
Section 2.7 Voting.
Unless otherwise required by law, the Certificate of Incorporation or these
Bylaws, any question brought before any meeting of stockholders, other than the
election of directors, shall be decided by the vote of the holders of a majority
of the total number of votes of the capital stock represented and entitled to
vote thereat, voting as a single class. Unless otherwise provided in the
Certificate of Incorporation, and subject to Section
hereof, each stockholder represented at a meeting of stockholders shall be
entitled to cast one vote for each share of the capital stock entitled to vote
thereat held by such stockholder. Such votes may be cast in person or by proxy
but no proxy shall be voted on or after three years from its date, unless such
proxy provides for a longer period. The Board of Directors, in its discretion,
or the officer of the Corporation presiding at a meeting of stockholders, in
such officer's discretion, may require that any votes cast at such meeting shall
be cast by written ballot.
Section 2.8 Consent of Stockholders in Lieu of Meeting.
Unless otherwise provided in the Certificate of Incorporation, any action
required or permitted to be taken at any Annual or Special Meeting of
Stockholders of the Corporation may be taken without a meeting, without prior
notice and without a vote, if a consent or consents in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted and shall be delivered to the Corporation by delivery to
its registered office in the State of Delaware, its principal place of business,
or an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
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Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. Every written consent shall bear the date of
signature of each stockholder who signs the consent and no written consent shall
be effective to take the corporate action referred to therein unless, within
sixty days of the earliest dated consent delivered in the manner required by
this Section hereof to the Corporation, written consents signed by a sufficient
number of holders to take action are delivered to the Corporation by delivery to
its registered office in the State of Delaware, its principal place of business,
or an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing
and who, if the action had been taken at a meeting, would have been entitled to
notice of the meeting if the record date for such meeting had been the date that
written consents signed by a sufficient number of holders to take the action
were delivered to the Corporation as provided above in this section.
Section 2.9 List of Stockholders Entitled to Vote.
The officer of the Corporation who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder of the
Corporation who is present.
Section 2.10 Stock Ledger.
The stock ledger of the Corporation shall be the only evidence as to who are
the stockholders entitled to examine the stock ledger, the list required by
Section hereof or the books of the Corporation, or to vote in person or by proxy
at any meeting of stockholders.
Section 2.11 Conduct of Meetings.
The Board of Directors of the Corporation may adopt by resolution such rules
and regulations for the conduct of the meeting of the stockholders as it shall
deem appropriate. Except to the extent inconsistent with such rules and
regulations as adopted by the Board of Directors, the chairman of any meeting of
the stockholders shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the Board of Directors or
prescribed by the chairman of the meeting, may include, without limitation, the
following: (i) the establishment of an agenda or order of business for the
meeting; (ii) the determination of when the polls shall open and close for any
given matter to be voted on at the meeting; (iii) rules and procedures for
maintaining order at the meeting and the safety of those present; (iv)
limitations on attendance at or participation in the meeting to stockholders of
record of the corporation, their duly authorized and constituted proxies or such
other persons as the chairman of the meeting shall determine; (v) restrictions
on entry to the meeting after the time fixed
3
<PAGE>
for the commencement thereof; and (vi) limitations on the time allotted
to questions or comments by participants.
ARTICLE III. DIRECTORS
Section 3.1 Number and Election of Directors.
The Board of Directors shall consist of not less than one nor more than
fifteen members, the exact number of which shall initially be fixed by the
Incorporator and thereafter from time to time by the Board of Directors. Except
as provided in Section hereof, directors shall be elected by a plurality of the
votes cast at the Annual Meetings of Stockholders and each director so elected
shall hold office until the next Annual Meeting of Stockholders and until such
director's successor is duly elected and qualified, or until such director's
earlier death, resignation or removal. Any director may resign at any time upon
written notice to the Corporation. Directors need not be stockholders.
Section 3.2 Vacancies.
Unless otherwise required by law or the Certificate of Incorporation,
vacancies arising through death, resignation, removal, an increase in the number
of directors or otherwise may be filled only by a majority of the directors then
in office, though less than a quorum, or by a sole remaining director, and the
directors so chosen shall hold office until the next Annual Meeting of
Stockholders and until their successors are duly elected and qualified, or until
their earlier death, resignation or removal.
Section 3.3 Duties and Powers.
The business and affairs of the Corporation shall be managed by or under the
direction of the Board of Directors which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Certificate of Incorporation or by these Bylaws required to be exercised or
done by the stockholders.
Section 3.4 Meetings.
The Board of Directors may hold meetings, both regular and special, either
within or without the State of Delaware. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as may from
time to time be determined by the Board of Directors. Special meetings of the
Board of Directors may be called by the Chairman, if there be one, the
President, or by any director. Notice thereof stating the place, date and hour
of the meeting shall be given to each director either by mail not less than
forty-eight (48) hours before the date of the meeting, by telephone or telegram
on twenty-four (24) hours' notice, or on such shorter notice as the person or
persons calling such meeting may deem necessary or appropriate in the
circumstances.
Section 3.5 Quorum.
Except as otherwise required by law or the Certificate of Incorporation, at
all meetings of the Board of Directors, a majority of the entire Board of
Directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act
4
<PAGE>
of the Board of Directors. If a quorum shall not be present at any meeting of
the Board of Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting of the
time and place of the adjourned meeting, until a quorum shall be present.
Section 3.6 Actions by Written Consent.
Unless otherwise provided in the Certificate of Incorporation, or these
Bylaws, any action required or permitted to be taken at any meeting of the Board
of Directors or of any committee thereof may be taken without a meeting, if all
the members of the Board of Directors or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors or committee.
Section 3.7 Meetings by Means of Conference Telephone.
Unless otherwise provided in the Certificate of Incorporation, members of the
Board of Directors of the Corporation, or any committee thereof, may participate
in a meeting of the Board of Directors or such committee by means of a
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section shall constitute presence in person at such
meeting.
Section 3.8 Committees.
The Board of Directors may designate one or more committees, each committee
to consist of one or more of the directors of the Corporation. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
any such committee. In the absence or disqualification of a member of a
committee, and in the absence of a designation by the Board of Directors of an
alternate member to replace the absent or disqualified member, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such member or members constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any absent or disqualified member. Any committee, to the extent permitted by law
and provided in the resolution establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it. Each
committee shall keep regular minutes and report to the Board of Directors when
required.
Section 3.9 Compensation.
The directors may be paid their expenses, if any, of attendance at each
meeting of the Board of Directors and may be paid a fixed sum for attendance at
each meeting of the Board of Directors or a stated salary as director, payable
in cash or securities. No such payment shall preclude any director from serving
the Corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
Section 3.10 Interested Directors.
5
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No contract or transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers or have a financial interest,
shall be void or voidable solely for this reason, or solely because the director
or officer is present at or participates in the meeting of the Board of
Directors or committee thereof which authorizes the contract or transaction, or
solely because the director or officer's vote is counted for such purpose if (i)
the material facts as to the director or officer's relationship or interest and
as to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (ii) the material facts as to the director or
officer's relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the con
tract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the Board of Directors,
a committee thereof or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
ARTICLE IV. OFFICERS
Section 4.1 General.
The officers of the Corporation shall be chosen by the Board of Directors and
shall include a President, a Secretary and a Treasurer. The Board of Directors,
in its discretion, also may choose a Chairman of the Board of Directors (who
must be a director) and one or more Vice Presidents, Assistant Secretaries,
Assistant Treasurers and other officers. Any number of offices may be held by
the same person, unless otherwise prohibited by law or the Certificate of
Incorporation. The officers of the Corporation need not be stockholders of the
Corporation nor, except in the case of the Chairman of the Board of Directors,
need such officers be directors of the Corporation.
Section 4.2 Election.
The Board of Directors, at its first meeting held after each Annual Meeting
of Stockholders (or action by written consent of stockholders in lieu of the
Annual Meeting of Stockholders), shall elect the officers of the Corporation who
shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board of
Directors; and all officers of the Corporation shall hold office until their
successors are chosen and qualified, or until their earlier death, resignation
or removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of the Board of Directors. Any vacancy occurring in
any office of the Corporation shall be filled by the Board of Directors. The
salaries of all officers of the Corporation shall be fixed by the Board of
Directors.
Section 4.3 Voting Securities Owned by the Corporation.
Powers of attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities owned by the Corporation may be executed in
the name of and on behalf of the Corporation by the President or any Vice
President or any other officer authorized to do so by the Board of Directors and
any such officer may, in the name of and on behalf of the Corporation, take all
such action as any such officer may
6
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deem advisable to vote in person or by proxy at any meeting of security holders
of any corporation in which the Corporation may own securities and at any such
meeting shall possess and may exercise any and all rights and power incident to
the ownership of such securities and which, as the owner thereof, the
Corporation might have exercised and possessed if present. The Board of
Directors may, by resolution, from time to time confer like powers upon any
other person or persons.
Section 4.4 Chairman of the Board of Directors.
The Chairman of the Board of Directors, if there be one, shall preside at all
meetings of the stockholders and of the Board of Directors. The Chairman of the
Board of Directors shall be the Chief Executive Officer of the Corporation,
unless the Board of Directors designates the President as the Chief Executive
Officer, and, except where by law the signature of the President is required,
the Chairman of the Board of Directors shall possess the same power as the
President to sign all contracts, certificates and other instruments of the
Corporation which may be authorized by the Board of Directors. During the
absence or disability of the President, the Chairman of the Board of Directors
shall exercise all the powers and discharge all the duties of the President. The
Chairman of the Board of Directors shall also perform such other duties and may
exercise such other powers as may from time to time be assigned by these Bylaws
or by the Board of Directors.
Section 4.5 President.
The President shall, subject to the control of the Board of Directors and, if
there be one, the Chairman of the Board of Directors, have general supervision
of the business of the Corporation and shall see that all orders and resolutions
of the Board of Directors are carried into effect. The President shall execute
all bonds, mortgages, contracts and other instruments of the Corporation
requiring a seal, under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except that the other
officers of the Corporation may sign and execute documents when so authorized by
these Bylaws, the Board of Directors or the President. In the absence or
disability of the Chairman of the Board of Directors, or if there be none, the
President shall preside at all meetings of the stockholders and the Board of
Directors. If there be no Chairman of the Board of Directors, or if the Board of
Directors shall otherwise designate, the President shall be the Chief Executive
Officer of the Corporation. The President shall also perform such other duties
and may exercise such other powers as may from time to time be assigned to such
officer by these Bylaws or by the Board of Directors.
Section 4.6 Vice Presidents.
At the request of the President or in the President's absence or in the event
of the President's inability or refusal to act (and if there be no Chairman of
the Board of Directors), the Vice President, or the Vice Presidents if there is
more than one (in the order designated by the Board of Directors), shall perform
the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President. Each Vice President
shall perform such other duties and have such other powers as the Board of
Directors from time to time may prescribe. If there be no Chairman of the Board
of Directors and no Vice President, the Board of Directors shall designate the
officer of the Corporation who, in the absence of the President or in the event
of the inability or refusal of the President to act, shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President.
7
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Section 4.7 Secretary.
The Secretary shall attend all meetings of the Board of Directors and all
meetings of stockholders and record all the proceedings thereat in a book or
books to be kept for that purpose; the Secretary shall also perform like duties
for committees of the Board of Directors when required. The Secretary shall
give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors, the Chairman of the Board of
Directors or the President, under whose supervision the Secretary shall be. If
the Secretary shall be unable or shall refuse to cause to be given notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
if there be no Assistant Secretary, then either the Board of Directors or the
President may choose another officer to cause such notice to be given. The
Secretary shall have custody of the seal of the Corporation and the Secretary or
any Assistant Secretary, if there be one, shall have authority to affix the same
to any instrument requiring it and when so affixed, it may be attested by the
signature of the Secretary or by the signature of any such Assistant Secretary.
The Board of Directors may give general authority to any other officer to affix
the seal of the Corporation and to attest to the affixing by such officer's
signature. The Secretary shall see that all books, reports, statements,
certificates and other documents and records required by law to be kept or filed
are properly kept or filed, as the case may be.
Section 4.8 Treasurer.
The Treasurer shall have the custody of the corporate funds and securities
and shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such depositories as
may be designated by the Board of Directors. The Treasurer shall disburse the
funds of the Corporation as may be ordered by the Board of Directors, taking
proper vouchers for such disbursements, and shall render to the President and
the Board of Directors, at its regular meetings, or when the Board of Directors
so requires, an account of all transactions as Treasurer and of the financial
condition of the Corporation. If required by the Board of Directors, the
Treasurer shall give the Corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of the office of the Treasurer and for the restoration
to the Corporation, in case of the Treasurer's death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in the Treasurer's possession or under the Treasurer's control
belonging to the Corporation.
Section 4.9 Assistant Secretaries.
Assistant Secretaries, if there be any, shall perform such duties and have
such powers as from time to time may be assigned to them by the Board of
Directors, the President, any Vice President, if there be one, or the Secretary,
and in the absence of the Secretary or in the event of the Secretary's
disability or refusal to act, shall perform the duties of the Secretary, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Secretary.
Section 4.10 Assistant Treasurers.
Assistant Treasurers, if there be any, shall perform such duties and have
such powers as from time to time may be assigned to them by the Board of
Directors, the President, any Vice President, if there be one, or the Treasurer,
and in the absence of the Treasurer or in the event of the Treasurer's
disability or refusal to act,
8
<PAGE>
shall perform the duties of the Treasurer, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the Treasurer. If
required by the Board of Directors, an Assistant Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of the office of Assistant Treasurer and for the restoration to the
Corporation, in case of the Assistant Treasurer's death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and other property
of whatever kind in the Assistant Treasurer's possession or under the Assistant
Treasurer's control belonging to the Corporation.
Section 4.11 Other Officers.
Such other officers as the Board of Directors may choose shall perform such
duties and have such powers as from time to time may be assigned to them by the
Board of Directors. The Board of Directors may delegate to any other officer of
the Corporation the power to choose such other officers and to prescribe their
respective duties and powers.
ARTICLE V. STOCK
Section 5.1 Form of Certificates.
Every holder of stock in the Corporation shall be entitled to have a
certificate signed, in the name of the Corporation (i) by the Chairman of the
Board of Directors, the President or a Vice President and (ii) by the Treasurer
or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation, certifying the number of shares owned by such stockholder in the
Corporation.
Section 5.2 Signatures.
Any or all of the signatures on a certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if such person were such officer,
transfer agent or registrar at the date of issue.
Section 5.3 Lost Certificates.
The Board of Directors may direct a new certificate to be issued in place of
any certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate, or the owner's legal
representative, to advertise the same in such manner as the Board of Directors
shall require and/or to give the Corporation a bond in such sum as it may direct
as indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed or the
issuance of such new certificate.
Section 5.4 Transfers.
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<PAGE>
Stock of the Corporation shall be transferable in the manner prescribed by
law and in these Bylaws. Transfers of stock shall be made on the books of the
Corporation only by the person named in the certificate or by such person's
attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be cancelled before a new certificate shall be
issued. No transfer of stock shall be valid as against the Corporation for any
purpose until it shall have been entered in the stock records of the Corporation
by an entry showing from and to whom transferred.
Section 5.5 Record Date.
(a) In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
the board of directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors, and which record date shall not be more than sixty nor
less than ten days before the date of such meeting. If no record date is fixed
by the Board of Directors, the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; providing, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the Board of Directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required by
law, shall be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the Corporation by delivery
to its registered office in this State, its principal place of business, or an
officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by law, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting shall be at the close of business on the day on
which the Board of Directors adopts the resolutions taking such prior action.
(c) In order that the Corporation may determine the stockholders entitled to
receive payment of any dividend or other distribution or allotment of any rights
or the stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior to such action. If
no record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
Section 5.6 Record Owners.
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<PAGE>
The Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends, and
to vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise required by law.
ARTICLE VI. NOTICES
Section 6.1 Notices.
Whenever written notice is required by law, the Certificate of Incorporation
or these Bylaws, to be given to any director, member of a committee or
stockholder, such notice may be given by mail, addressed to such director,
member of a committee or stockholder, at such person's address as it appears on
the records of the Corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Written notice may also be given personally or by telegram,
telex or cable.
Section 6.2 Waivers of Notice.
Whenever any notice is required by law, the Certificate of Incorporation or
these Bylaws, to be given to any director, member of a committee or stockholder,
a waiver thereof in writing, signed, by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. Attendance of a person at a meeting, present in person or
represented by proxy, shall constitute a waiver of notice of such meeting,
except where the person attends the meeting for the express purpose of objecting
at the beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE VII. GENERAL PROVISIONS
Section 7.1 Dividends.
Dividends upon the capital stock of the Corporation, subject to the
requirements of the DGCL and the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors at any regular or special
meeting of the Board of Directors (or any action by written consent in lieu
thereof in accordance with Section 3.6 hereof), and may be paid in cash,
in
property, or in shares of the Corporation's capital stock. Before payment of any
dividend, there may be set aside out of any funds of the Corporation available
for dividends such sum or sums as the Board of Directors from time to time, in
its absolute discretion, deems proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
Section 7.2 Disbursements.
All checks or demands for money and notes of the Corporation shall be signed
by such officer or officers or such other person or persons as the Board of
Directors may from time to time designate.
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Section 7.3 Fiscal Year.
The fiscal year of the Corporation shall be fixed by resolution of the Board
of Directors.
Section 7.4 Corporate Seal.
The corporate seal shall have inscribed thereon the name of the Corporation,
the year of its organization and the words "Corporate Seal, Delaware". The seal
may be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE VIII. INDEMNIFICATION
Section 8.1 Power to Indemnify in Actions, Suits or Proceedings other than
those by or in the Right of the Corporation.
Subject to Section 8.3, the Corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director or officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that such
person's conduct was unlawful.
Section 8.2 Power to Indemnify in Actions, Suits or Proceedings by or in the
Right of the Corporation.
Subject to Section 8.3, the Corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director or officer of the Corporation, or is or was a director or officer of
the Corporation serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit if such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Corporation; except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the Corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such
12
<PAGE>
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
Section 8.3 Authorization of Indemnification.
Any indemnification under this Article VIII (unless ordered by a court)
shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in
the circumstances because such person has met the applicable standard of
conduct set forth in Section 8.1 or 8.2 hereof, as the case may be.
Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (i) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (ii) by a committee of such directors
designated by a majority vote of such directors, even though less than a
quorum, or (iii) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion or (iv) by the
stockholders. Such determination shall be made, with respect to former
directors and officers, by any person or persons having the authority to
act on the matter on behalf of the Corporation. To the extent, however,
that a present or former director or officer of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in
connection therewith, without the necessity of authorization in the
specific case.
Section 8.4 Good Faith Defined.
For purposes of any determination under Section 8.3, a person shall be deemed to
have acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the Corporation, or, with respect to
any criminal action or proceeding, to have had no reasonable cause to believe
such person's conduct was unlawful, if such person's action is based on the
records or books of account of the Corporation or another enterprise, or on
information supplied to such person by the officers of the Corporation or
another enterprise in the course of their duties, or on the advice of legal
counsel for the Corporation or another enterprise or on information or records
given or reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term "another
enterprise" as used in this Section shall mean any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise of
which such person is or was serving at the request of the Corporation as a
director, officer, employee or agent. The provisions of this Section 8.4 shall
not
be deemed to be exclusive or to limit in any way the circumstances in which a
person may be deemed to have met the applicable standard of conduct set forth in
Section 8.1 or 8.2, as the case may be.
Section 8.5 Indemnification by a Court.
Notwithstanding any contrary determination in the specific case under
Section 8.3, and notwithstanding the absence of any determination
thereunder any director or officer may apply to the Court of Chancery in
the State of Delaware for indemnification to the extent otherwise
permissible under Sections 8.1 and 8.2 hereof. The basis of such
indemnification by a court shall be a determination by such court that
indemnification of the director or officer is proper in the circumstances
because such person has met the applicable standards of conduct set forth
in Section 8.1 or 8.2 hereof, as the case may be. Neither a contrary
13
<PAGE>
determination in the specific case under Section 8.3 nor the absence
of any
determination thereunder shall be a defense to such application or create a
presumption that the director or officer seeking indemnification has not met any
applicable standard of conduct. Notice of any application for indemnification
pursuant to this Section 8.5 shall be given to the Corporation promptly upon
the
filing of such application. If successful, in whole or in part, the director or
officer seeking indemnification shall also be entitled to be paid the expense of
prosecuting such application.
Section 8.6 Expenses Payable in Advance.
Expenses incurred by a director or officer in defending any civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the Corporation as authorized in
this Article VIII.
Section 8.7 Nonexclusivity of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by or granted
pursuant to this shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
the Certificate of Incorporation, any Bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office, it being the policy of the Corporation that indemnification of the
persons specified in Sections 8.1 and 8.2 hereof shall be made to the fullest
extent
permitted by law. The provisions of this shall not be deemed to preclude the
indemnification of any person who is not specified in Section 8.1 or 8.2 but
whom the
Corporation has the power or obligation to indemnify under the provisions of the
General Corporation Law of the State of Delaware, or otherwise.
Section 8.8 Insurance.
The Corporation may purchase and maintain insurance on behalf of any person
who is or was a director or officer of the Corporation, or is or was a director
or officer of the Corporation serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the Corporation
would have the power or the obligation to indemnify such person against such
liability under the provisions of this Article VIII.
Section 8.9 Certain Definitions.
For purposes of this Article VIII, references to "the Corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors or officers,
so that any person who is or was a director or officer of such constituent
corporation, or is or was a director or officer of such constituent
corporation serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall
stand in the same position under the provisions
14
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of this Article VIII with respect to the resulting or surviving corporation
as such
person would have with respect to such constituent corporation if its
separate existence had continued. For purposes of this Article VIII,
references to "fines" shall include any excise taxes assessed on a person
with respect to an employee benefit plan; and references to "serving at the
request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such director or officer with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in
good faith and in a manner such person reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this Article VIII.
Section 8.10 Survival of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by, or granted
pursuant to, this shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
Section 8.11 Limitation on Indemnification.
Notwithstanding anything contained in this Article VIII to the contrary,
except for
proceedings to enforce rights to indemnification (which shall be governed by
Section 8.5 hereof), the Corporation shall not be obligated to indemnify
any
director or officer in connection with a proceeding (or part thereof) initiated
by such person unless such proceeding (or part thereof) was authorized or
consented to by the Board of Directors of the Corporation.
Section 8.12 Indemnification of Employees and Agents.
The Corporation may, to the extent authorized from time to time by the Board
of Directors, provide rights to indemnification and to the advancement of
expenses to employees and agents of the Corporation similar to those conferred
in this Article VIII to directors and officers of the Corporation.
ARTICLE IX. AMENDMENTS
Section 9.1 Amendments.
These Bylaws may be altered, amended or repealed, in whole or in part, or new
Bylaws may be adopted by the stockholders or by the Board of Directors,
provided, however, that notice of such alteration, amendment, repeal or adoption
of new Bylaws be contained in the notice of such meeting of stockholders or
Board of Directors as the case may be. All such amendments must be approved by
either the holders of a majority of the outstanding capital stock entitled to
vote thereon or by a majority of the entire Board of Directors then in office.
Section 9.2 Entire Board of Directors.
As used in this Article IX and in these Bylaws generally, the term
"entire Board of
Directors" means the total number of directors which the Corporation would have
if there were no vacancies.
15
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Adopted as of the 1st day of March, 1999
16
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF DELAWARE
Advanced Business
Sciences, Inc.
AUTHORIZED CAPITAL STOCK: $50,000,000
$.001 PAR VALUE
688-797800
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT _______________________________________________________
holder of Shares of ADVANCED BUSINESS SCIENCES, INC.
-------------------------
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed.
Dated:
Secretary President
COUNTERSIGNED AND REGISTERED
BY
AUTHORIZED SIGNATURE
<PAGE>
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -- . . . . . Custodian --
.
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of survivorship under Uniform Gifts to
Minors survivorship and not as tenants
Act . . . . . .
in common (State)
Additional abbreviations may also be used though not in the above list.
For Value Received, hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ------------------------------------------
- ------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Shares of the capital stock represented by the within Certificate, and
do hereby irrevocably constitute and appoint
___________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOTICE: The signature in this assignment must
correspond with the name as written upon the
face of the Certificate, in every particular,
without alteration or enlargement, or any
change whatever.
Signature Guaranteed By: . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Please have signature guaranteed by a National Bank
through its officer or by a member firm of a major
stock exchange)
BUSINESS PROPERTY LEASE
THIS LEASE is entered into this 30th dav of November, 1998, between F & J
Enterprises, Inc., Landlord, and Advanced Business Sciences, Inc., Tenant.
PREMISES
1. Landlord leases to Tenant 3343, 3345 and.3347 North 107 1h Street, Omaha,
Nebraska, 68134 - as outlined in red on attached Exhibit "A" Omaha, Douglas
County, Nebraska, (the "Premises"), containing approximately 6,212 square feet
of area, on the following terms and conditions.
TERM
2. This Lease shall be for a term of Three (3) years, beginning on the I" day of
December, 1998 and ending on the 30th day of November, 2001, unless terminated
earlier as provided in this Lease.
If for any reason the Premises are delivered to Tenant on any date before or
after the, term commencement day, rental for the period between the date of
possession and the term commencement date shall be adjusted on a pro rata basis.
Such earlier or later taking of possession shall not change the termination date
of this Lease. This Lease shall not be void or voidable in the event of a late
delivery by Landlord, nor shall Landlord be liable to Tenant for any resulting
loss or damage.
USE OF PREMISES
3. The Premises are leased to Tenant, and are to be used by Tenant, for the
purposes of office, sales and service of semi-conductor/GPS Systems and no other
purpose. Tenant agrees to use the Premises in such a manner as to not interfere
with the right of other tenants in the Real Estate, to comply with all
applicable governmental laws, ordinances, and regulations in connection with its
use of the Premises, to keep the Premises in a clean and sanitary condition, to
keep the Premises and all sidewalks and approaches thereto in a safe condition
free and clear of ice and snow and all other matter which may be dangerous to
the public and free of all obstructions, and to use all reasonable precaution to
prevent waste, damage, or injury to the Premises.
RENT
4. (a) Base Rent. The total Base Rent under this Lease is One Hundred Sixty
Seven Thousand Seven Hundred Twenty-Four and no/100 Dollars ($167,724.00).
Tenant agrees to pay rent to Landlord at 3323 North 107'h Street, Omaha,
Nebraska 68134, or at any other place Landlord may designate in writing, in
lawful money of the United States, in monthly installments in advance, on the
first day of each month, as follows:
For the period from December 1, 1998 to November 30, 2001, $4,659.00 per month.
(b) Operating Expenses. In addition to the Base Rent, Tenant shall pay a pro
rata share of operating expenses of the real estate of which the Premises are
part, parking areas, and grounds ("Real Estate"). "Operating expenses" shall
mean all costs of maintaining and operating the Real Estate, including but not
limited to all taxes and special assessments levied upon the Real Estate,
fixtures, and personal property used by Landlord at the Real Estate, all
insurance costs, all costs of labor, material and supplies for maintenance,
repair, replacement, and operation of the Real Estate, including but not limited
to line painting, lighting, snow removal, landscaping, cleaning, depreciation of
machinery and equipment used in such maintenance, repair and replacement, and
management costs including building superintendents. Operating Expenses shall
not include property additions and capital improvements to the real estate,
alterations made for specific tenants, depreciation of the Real Estate, debt
service on long-term debt or income taxes paid by Landlord.
<PAGE>
"Tenant's pro rata share" shall mean the percentage determined by dividing the
square feel of the Premises as shown in Paragraph 1 by the square feet of store
area of the Real Estate, as defined by the American National Standard published
by Building Owners and Managers Association, which at the date hereof is agreed
to be 30,074 square feet.
Tenant's pro rata share of the Operating Expenses shall be determined on an
annual basis for each calendar year ending on December 31 and shall be prorated
for the number of months Tenant occupied the Premises if Tenant did not occupy
the Premises the full year. Tenant shall pay One Thousand Ninety-Nine and 53/100
Dollars ($1099.53) per month, on the first of each month in advance with rent
for Tenant's estimated pro rata share of the Operating Expenses. Landlord may
change this amount at any time upon written notice to Tenant. At the end of each
year, an analysis of the total year's Operating Expenses shall be presented to
Tenant and Tenant shall pay the amount, if any, by which the Tenant's pro rata
share of the Operating Expenses for the year exceeded the amount of the
Operating Expenses paid by Tenant. Tenant shall pay any such excess charge to
the Landlord within thirty (30) days after receiving the statement. In the event
this lease terminates at any time other than the last day of the year, the
excess Operating Expenses shall be determined as of the date of termination.
Upon termination of this Lease, any overpayment of Operating Expenses by Tenant
shall be applied to the amounts due Landlord from Tenant under this Lease and
any remaining overpayment shall be refunded to Tenant.
(c) Payment of Rent. Tenant agrees to pay the Base Rent as and when due,
together with Tenant's share of the Operating Expenses and all other amounts
required to be paid by Tenant under this Lease. In the event of nonpayment of
any amounts due under this Lease, whether or not designated as rent, Landlord
shall have all the rights and remedies provided in this Lease or by law for
failure to pay rent.
(d) Late Charge. If the Tenant fails to pay the Base Rent together with the
Tenant's share of the Operating Expenses and all other amounts required to be
paid by Tenant under this Lease, on or before the third day after such payments
are due, Tenant agrees to pay Landlord a late charge of Ten (10%) Percent of
Total Base Rent and Operating Expenses.
(e) Security Deposit. As partial consideration for the execution of this Lease,
the Tenant has delivered to Landlord the sum of $5,758.53 as Security Deposit.
The Security Deposit will be returned to Tenant at the expiration of this Lease
if Tenant has fully complied with all covenants and conditions of this Lease.
SERVICES
Landlord shall furnish electricity, Sewer, Water and Gas Lines to the Premises
at Landlord's Expense. Tenant shall be responsible for payment of all bills for
utilities to the Premises during normal business hours, and at such other times
as Landlord may deem necessary or desirable, in the manner customary to the Real
Estate. Landlord shall have the right to discontinue any service during any
period for which rent is not promptly paid by Tenant. Landlord shall not be
liable for damages, nor shall the rental be abated, for failure to furnish, or
delay in furnishing, any service when failure to furnish, or delay in
furnishing, is occasioned in whole or in part by needful repairs, renewals, or
improvements, or by any strike or labor controversy, or by any accident or
casualty whatsoever, or by any unauthorized act or default of any employee of
Landlord, or for any other cause or causes beyond the control of Landlord.
Tenant shall pay when due, all water, gas, electricity, sewer use fees, incurred
at or chargeable to the Premises.
<PAGE>
ASIGNMENT OR SUBLEASE
6. Tenant shall not assign this Lease or sublet the whole or any part of the
Premises, transfer this Lease by operation of law or otherwise, or permit any
other person except agents and employees of Tenant to occupy the Premises, or
any part thereof, without the prior written consent of Landlord. Landlord may
consider the following in determining whether to withhold consent: (a) financial
responsibility of the new tenant, (b) identity and business character of the new
tenant, (c) nature and legality of the proposed use of the Premises.
Landlord shall have the right to assign its interest under this Lease or the
rent reserved hereunder.
TENANT'S IMPROVEMENTS
7. Tenant shall have the right to place partitions and fixtures and make
improvements or other alterations in the interior of the Premises at its own
expense. Prior to commencing any such work, Tenant shall first obtain the
written consent of Landlord for the proposed work. Landlord may, as a condition
to its consent, require that the work be done by Landlord's own employees and/or
under Landlord's supervision, but at the expense of Tenant, and that Tenant give
sufficient security that the Premises will be completed free and clear of liens
and in a manner satisfactory to Landlord. Upon termination of this Lease, at
Landlord's option, Tenant will repair and restore the Premises to its former
condition, at Tenant's expense, or any such improvements, additions, or
alteration installed or made by Tenant, except Tenant's trade fixtures at the
termination of tie Lease provided Tenant is not then in default and provide
further that Tenant repairs any damage cause by such removal.
REPAIRS
8. Landlord agrees to maintain in good condition, and repair as necessary the
foundations, exterior walls and the roof of the Premises. Tenant agrees that it
will make, at its own cost and expense, all repairs and replacements to the
Premises not required to be made by Landlord, including, but not limited to, all
interior and exterior doors, door frames, windows, plate glass, and the heating,
air conditioning, plumbing and electrical systems servicing the Premises. Tenant
agrees to do all redecorating, remodeling, alteration, and painting required by
it during the term of the Lease at its own cost and expense, to pay for any
repairs to the Premises or the Real Estate made necessary by any negligence or
carelessness of Tenant or any of its agents or employees or persons permitted on
the Real Estate by Tenant, and to maintain the Premises in a safe, clean, neat,
and sanitary condition. Tenant shall be entitled to no compensation for
inconvenience, injury, or loss of business arising from the making of any
repairs by Landlord, Tenant, or other tenants to the premises or the Real
Estate.
CONDITION OF PREMISES
9. Except as provided herein, Tenant agrees that no promises, representations,
statements or warranties have been made on behalf of Landlord to Tenant
respecting the condition of the Premises, or the manner of operating the Real
Estate, or the making of any repairs to the Premises. By taking possession of
the Premises, Tenant acknowledges that the Premises were in good and
satisfactory condition when possession was taken. Tenant shall, at the
termination of this Lease, by lapse of time or otherwise, remove all of Tenant's
property and surrender the Premises to Landlord in as good condition as when
Tenant took possession, normal wear excepted.
<PAGE>
PERSONAL PROPERTY AT RISK OF TENANT
10. All personal property in the Premises shall be at the risk of Tenant only.
Landlord shall not be liable for any damage to any property of Tenant or its
agents or employees in the Premises caused by steam, electricity, sewage, gas or
odors, or from water, rain, or snow which may leak into, issue or flow into the
Premises from any part of the Real Estate, or from any other place, or for any
damage done to Tenant's property in moving same to or from the Real Estate or
the Premises. Tenant shall give Landlord, or its agents, prompt written notice
of any damage to or defects in water pipes, gas or warming or cooling apparatus
in the Premises.
LANDLORD'S RESERVED RIGHTS
11. Without notice to Tenant, without liability to Tenant for damage or injury
to property, person, or business, and without effecting an eviction of Tenant or
a disturbance of Tenant's use or possession or giving rise to any claim for
setoff or abatement of rent, Landlord shall have the right to:
Change the name or street address of the Real Estate. Install and maintain
signs on the exterior of the Real Estate.
Have access to all mail chutes according to the rules of the United Sates
Post Office Department. At reasonable times, to decorate, and to make, at its
own expense, repairs, alterations, additions, and
improvements structural or otherwise, in or to the Premises, the Real Estate, or
part thereof, and any adjacent building, land, street, or alley, and during such
operations to take into and through the Premises or any part of the Real Estate
all materials required, and to temporarily close or suspend operation of
entrances, doors, corridors, elevators, or other facilities to do so. (e)
Possess passkeys to the Premises. (f) Show the Premises to prospective tenants
at reasonable times. (g) Take any and all reasonable measures, including
inspections or the making of repairs, alterations, and additions and
improvements to the Premises or to the Real Estate, which Landlord deems
necessary or desirable for the safety, protection, operation, or preservation of
the Premises or the Real Estate. (h) Approve all sources furnishing signs,
painting, and/or lettering to the Premises, and approve all signs on the
Premises prior to installation thereof.
INSURANCE
12. Tenant shall not use or occupy the premises or any part thereof in any
manner which could invalidate any policies of insurance now or hereafter placed
on the real estate or increase the risks covered by insurance on the real estate
or necessitate additional insurance premiums or policies of insurance, even if
such use may be in furtherance of tenant's business purposes. In the event any
policies of insurance are invalidated by acts or omissions of tenant, landlord
shall have the right to terminate this lease or, at landlord's option, to charge
tenant for extra insurance premiums required on the real estate on account of
the increased risk caused by tenant's use and occupancy of the premises. Each
party hereby waives all claims for recovery from the other for any loss or
damage to any of its property insured under valid and collectible insurance
policies to the extent of any recovery collectible under such policies.
Provided, that this waiver shall apply only when permitted by the applicable
policy of insurance.
INDEMNITY
13. Tenant shall indemnify, hold harmless, and defend Landlord from and against,
and Landlord shall not be liable to Tenant on account of, any and all costs,
expenses, liabilities, losses, damages, suits, actions, fines, penalties,
demands, or claims of any kind, including reasonable attorney's fees, asserted
by or on behalf of any person, entity, or governmental authority arising out of
or in any way connected with either (a) a failure by Tenant to perform any of
the agreements, terms or conditions of this Lease required to be performed by
Tenant; (b) a failure by Tenant to comply with any laws, statutes, ordinances,
regulations
<PAGE>
or order of any governmental authority; or (c) any accident, death, or personal
injury, or damage to, or loss or theft of property which shall occur on or about
the Premises, or the Real Estate, except as the same may be the result of the
negligence of Landlord, its employees, or agents.
LIABILITY INSURANCE
14. Tenant agrees to procure and maintain continuously during the entire term of
this Lease, a policy or policies of insurance in a company or companies
acceptable to Landlord, at Tenant's own cost and expense, insuring Landlord and
Tenant from all claims, demands or actions; such comprehensive insurance shall
protect and name the Tenant as the Insured and shall provide coverage of at
least $1,000,000.00 for injuries to any one person, $2,000,000.00 for injuries
to persons in any one accident and $1,000,000.00 for damage to property, made by
or on behalf of any person or persons, firm or corporation arising from, related
to, or connected with the conduct and operation of Tenant's business in the
Premises, or arising out of and connected with the use and occupancy of
sidewalks and other Common Areas by the Tenant. All such insurance shall provide
that the Landlord shall be given a minimum of ten (10) days notice by the
insurance company prior to cancellation, termination or change of such
insurance. Tenant shall provide Landlord with copies of the policies or
certificates evidencing that such insurance is in full force and effect and
stating the term and provisions thereof. If Tenant fails to comply with such
requirements for insurance, Landlord may, but shall not be obligated to obtain
such insurance and keep the same in effect, and Tenant agrees to pay Landlord,
upon demand, the premium cost thereof.
DAMAGE BY FIRE OR OTHER CASUALTY
15. If, during the term of this Lease, the Premises shall be so damaged by fire
or any other cause except Tenant's negligent or intentional act so as to render
the Premises untenantable, the rent shall be abated while the Premises remain
untenantable; and in the event of such damage, Landlord shall elect whether to
repair the Premises or to cancel this Lease, and shall notify Tenant in writing
of its election within sixty (60) days after such damage. In the event Landlord
elects to repair the Premise, the work or repair shall begin promptly and shall
be carried on without unnecessary delay. In the event Landlord elects not to
repair the Premises, the Lease shall be deemed cancelled as of the date of the
damage. Such damage shall not extend the Lease term.
CONDEMNATION
16. If the whole or any part of the Premises shall be taken by public authority
under the power of eminent domain, then the term of this Lease shall cease on
that portion of the Premises so taken, from the date of possession, and the rent
shall be paid to that date, with a proportionate refund by Landlord to Tenant of
such rent as may have been paid by Tenant in advance. If the portion of the
Premises taken is such that it prevents the practical use of the Premises for
Tenant's purposes, then Tenant shall have the right either (a) to terminate this
Lease by giving written notice of such termination to Landlord not later than
thirty (30) days after the taking; or (b) to continue in possession of the
remainder of the Premises, except that the rent shall be reduced in proportion
to the area of the Premises taken. In the event of any taking or condemnation of
the Premises, in whole or in part, the entire resulting award of damages shall
be the exclusive property of Landlord, including all damages awarded as
compensation for diminution in value to the leasehold, without any deduction for
the value of any unexpired term of this Lease, or for any other estate or
interest in the Premises now or hereafter vested in Tenant.
DEFAULT OR BREACH
Each of the following events shall constitute a default or a breach of this
Lease by Tenant:
In Tenant fails to pay Landlord any rent or additional when due hereunder;
If Tenant vacates or abandons the Premises;
<PAGE>
If Tenant files a petition in bankruptcy or insolvency or for
reorganization under any bankruptcy act, or voluntarily takes advantage of any
such act by answer or otherwise, or makes an assignment for the benefits of
creditors;
If involuntary proceedings under any bankruptcy or insolvency act shall be
instituted against Tenant, or if a receiver or trustee shall be appointed of all
or substantially all of the property of Tenant, and such proceedings shall not
be dismissed or the receivership or trusteeship vacated within thirty (30) days
after the institution or appointment; or
If Tenant fails to perform or comply with any other term or condition of
this Lease and if such nonperformance shall continue for a period of ten (10)
days after notice thereof by Landlord to Tenant, time being of the essence.
<PAGE>
EFFECT OF DEFAULT
In the event of any default or breach hereunder, in addition to any other
right or remedy available to Landlord, either at law or in equity, Landlord may
exert, any one or more of the following rights:
Landlord may re-enter the Premises immediately and remove the property and
personnel of Tenant, and shall have the right, but not the obligation to store
such property in a public warehouse or at a place selected by Landlord, at the
risk and expense of Tenant.
Landlord may retake the Premises and may terminate this Lease by giving
written notice of termination to Tenant. Without such notice, Landlord's
retaking will not terminate the Lease. On termination, Landlord may recover from
Tenant all damages proximately resulting from the breach, including the cost of
recovering the Premises and the difference between the rent due for the balance
of the Lease term, as though the Lease had not been terminated, and the
reasonable rental value of the Premises, which sum shall be immediately due
Landlord from Tenant.
Landlord may relet the Premises or any part thereof for any term without
terminating this Lease, at such rent and on such terms as it may choose.
Landlord may make alternations and repairs to the Premises. In addition to
Tenant's liability to Landlord for breach of this lease, Tenant shall be liable
for all expenses of the reletting, for any alterations and repairs made, and for
the rent due for the balance of the lease term, which sum shall be immediately
due Landlord from Tenant. The amount due Landlord will be reduced by the net
rent received by Landlord during the remaining term of this Lease from reletting
the Premises or any part thereof. If during the remaining term of this Lease
Landlord receives more than the amount due Landlord under this subparagraph, the
Landlord shall pay such excess to Tenant, but only to the extent Tenant has
actually made 1,i, payment pursuant to this sub-paragraph.
SURRENDER - HOLDING OVER
19. Tenant shall, upon termination of this Lease, whether by lapse of time or
otherwise, peaceably and promptly surrender the Premises to Landlord. If Tenant
remains in possession after the termination of this Lease, without written Lease
duly executed by the parties, Tenant shall be deemed a trespasser. If Tenant
pays, and Landlord accepts, rent for a period after termination of this Lease,
Tenant shall be deemed to be occupying the Premises only as a Tenant from month
to month, subject to all the terms, conditions, and agreements of this Lease,
except that the rent shall be two times the monthly rent specified in the Lease
immediately before termination.
SUBORDINATION AND ATTORNMENT
20. Landlord reserves the right to place liens and encumbrances on the Premises
superior in lien and effect to this lease, This Lease, and all rights of Tenant
hereunder, shall, at the option of Landlord, be subject and subordinate to any
liens and encumbrances now or hereafter imposed by Landlord upon the Premises or
the Real Estate or any part thereof, and Tenant agrees to execute, acknowledge,
and deliver to Landlord, upon request, any and all instruments that may be
necessary or proper to subordinate this Lease and all rights herein to any such
lien or encumbrance as may be required by Landlord.
In the event any proceedings are brought for the foreclosure of any mortgage on
the Premises, Tenant will attorn to the purchaser at the foreclosure sale and
recognize such purchaser as the Landlord under this Lease. The purchaser, by
virtue of such foreclosure, shall be deemed to have assumed, as substitute
Landlord, the terms and conditions of
<PAGE>
this Lease until the resale or other disposition of its interest. Such
assumption, however, shall not be deemed an acknowledgment by the purchaser of
the validity of any then existing claims of Tenant against the prior Landlord.
Tenant agrees to execute and deliver such further assurances and other
documents, including a new lease upon the same terms and conditions contained
herein, confirming the foregoing, as such purchaser may reasonably request.
Tenant waives any right of election to terminate this Lease because of any such
foreclosure proceedings.
NOTICE
21. Any notice of demands to be given hereunder shall be given in writing and
sent by registered or certified mail to Landlord at Century Development, 3323
North 107th Street, Omaha, Nebraska 68134 and to Tenant at Advanced Business
Sciences, Inc., 3345 North 107 th Street, Omaha, Nebraska 68134 or at such other
address as either party may from time to time designate in writing. Each such
notice shall be deemed to have been given at the time it shall be personally
delivered to such address or deposited in the United States mail in the manner
prescribed herein.
RIGHT TO TERMINATE
22. Landlord shall have the right to terminate this Lease at the end of any
calendar month by giving the Tenant written notice at least six months before
the date of the termination of Landlord's intention to remodel, remove or
demolish the Premises, or to sell, or make a ground lease of the land
thereunder.
RULES AND REGULATIONS
23. Tenant and Tenant's agents, employees and invitees shall fully comply with
all rules and regulations of the Veal Estate, as amended from time to time,
which are made a part of this lease as if fully set forth herein. Landlord shall
have the right to amend such rules and regulations as Landlord deems necessary
or desirable for the safety, care, cleanliness, or proper operation of the
Premises and the Real Estate.
NET LEASE
24. This is a net-net-net Lease and the parties agree and understand that Tenant
shall pay Tenant's proportionate share of the real estate taxes, special
assessments, insurance and all other Operating Expenses as described in
subparagraph 4.b of this Lease.
MISCELLANEOUS
25. (a) Binding on Assigns. All terms, conditions, and agreements of this Lease
shall be binding upon, apply, and inure to the benefit of the parities hereto
and their respective heirs, representatives, successors, and assigns. (b)
Amendment in Writing. This Lease contains the entire agreement between the
parties and may be amended ~i, only by subsequent written agreement. (c) Waiver
- - None. The failure of Landlord to insist upon strict performance of any of the
terms, conditions and agreements of this Lease shall not be deemed a waiver of
any of its rights or remedies hereunder and shall not be deemed a waiver of any
subsequent breach or default of any of such terms, conditions, and agreements.
The doing of anything by Landlord which Landlord is not obligated to do
hereunder shall not impose any future obligation on Landlord nor otherwise amend
any provision of this Lease. (d) No Surrender. No surrender of the Premises by
Tenant shall be effected by Landlord's acceptance of the keys to the Premises or
of the rent due hereunder, or by any other means whatsoever, without Landlord's
written acknowledgment that such acceptance constitutes a surrender. (e)
Captions. The captions of the various paragraphs in this Lease are for
convenience only and do not define, limit, describe, or construe the contents of
such paragraphs. (f) Brokers. Tenant hereby warrants that no real estate broker
has or will represent it in this transaction and that
<PAGE>
no finder's fees have been earned by a third party.
(g) Applicable Law. This Lease shall be governed by and construed in
accordance with the laws of the State of Nebraska.
Until this Lease is executed on behalf of all parties hereto, it shall be
construed as an offer to lease of Tenant to Landlord.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and year
first above written.
F & J Enterprises, Inc.
Landlord
Witness By:____________________
Advanced Business Sciences, Inc.
Tenant
Witness By:_____________________
Commercial Savings Bank FIXED RATE
627 North Adams - P.O. Box 277 REVOLVING OR
Carroll, Iowa 51401-0277 - 712-792-4346 DRAW NOTE
"LENDER"
Borrower
Advanced Business Sciences, Inc.
3345... NORTH 107TH STREET
Omaha, NE 68134
TELEPHONE NO.
IDENTIFICATION NO-. 47-075198
OFFICER INTEREST PRINCIPAL AMOUNT/ FUNDING /
MATURITY CUSTOMER LOAN
INITIALS RATE CREDIT LIMIT AGREEMENT DATE
NUMBER NUMBER
005 8.000% $999,767.13 04/04/99
10/05/99 1-21--534
PURPOSE: REFINANCE NOTE 45697 - OPERATING
PROMISE TO PAY: For value received, Borrower promises to pay to the order of
Lender, indicated above, the principal amount of NINE HUNDRED NINETY-NINE
THOUSAND SEVEN HUNDRED SIXTY-SEVEN AND 13/100 -Dollars ($ 999,767.13) or, if
less, the aggregate unpaid principal amount of all loans or advances made by
Lender to Borrower, plus interest on the unpaid principal balance at the rate
and in the manner described below, until all amounts owing under this Note are
paid in full. All amounts received by Lender shall be applied first to expenses,
late charges, accrued unpaid interest, and then to unpaid principal, or in any
other order as determined by Lender, in Lender's sole discretion, as permitted
by law. REVOLVING OR DRAW FEATURE: x This Note possesses a revolving feature.
Upon satisfaction of all conditions set forth in this Note, Borrower shall be
entitled to borrow up to the full principal amount of the Note and to repay and
re-borrow from time to time during the term of the Note. This Note possesses a
draw feature. Upon satisfaction of all conditions set forth in this Note,
Borrower shall be entitled to make one or more draws under this Note. Any
repayment may not be re-borrowed. The aggregate amount of such draws shall not
exceed the full principal amount of this Note. Information with regard to any
loans or advances under this Note shall be recorded and maintained by Lender in
Its Internal records and such records shall be conclusive of the principal and
interest owed by Borrower under this Note unless there Is a material error in
such records. Lender's failure to record the date and amount of any loan or
advance shall not
<PAGE>
limit or otherwise affect the obligations of Borrower under this Note to repay
the principal amount of the loans or advances together with all interest
accruing thereon. Lender shall not be obligated to provide Borrower with a copy
of the record on a periodic basis. Borrower shall be entitled to inspect or
obtain a copy of the record during Lender's business hours. CONDITIONS FOR
ADVANCES: If there is no default under this Note, Borrower shall be entitled to
borrow monies under this Note (subject to the limitations described above) under
the following conditions:
INTEREST RATE: Interest under this Note shall be computed on the basis of 365
days and the actual number of days per year. So long as there is no default
under this Note, interest on this Note shall be calculated at the fixed rate of
EIGHT AND N0/1000 percent (8.000 %) per annum or the maximum interest rate
Lender is permitted to charge by law, whichever is less. DEFAULT RATE: In the
event of any default under this Note, the Lender may, in its discretion,
determine that all amounts owed to Lender shall bear Interest at the lesser of:
or the maximum interest rate Lender is permitted to charge by law.
PAYMENT SCHEDULE: Borrower shall pay the principal and interest according to the
following schedule:
A SINGLE PAYMENT OF THE UNPAID PRINCIPAL BALANCE PLUS ACCRUED
INTEREST IS DUE AND PAYABLE ON OCTOBER 5, 1999.
All payments will be made to Lender at Its address described above, or at any
other address so designated by Lender, and In lawful currency of the United
States of America.
RENEWAL: If checked, X this Note is a renewal of Loan Number 45697
SECURITY: To secure the payment and performance of obligations incurred under
this Note, Borrower grants Lender a security interest in, and pledges and
assigns to Lender, all of Borrower's rights, title, and interest, in all monies,
Instruments, savings, checking and other deposit accounts of Borrower's,
(excluding IRA, Keogh and trust accounts and deposits subject to tax penalties
If so assigned) that are now or in the future in Lender's custody or control. X
If checked, the obligations under this Note are also secured by a lien on and/or
security interest in the property described in the documents executed in
connection with this Note as well as any other property designated as security
for this Note now or in the future.
PREPAYMENT: This Note may be prepaid In part or in full on or before
its maturity date. If this Note is prepaid in full, there will be:
No minimum finance charge A minimum finance charge of
--------------------. LATE PAYMENT CHARGES: If payment is received more
than n/a days late, Borrower will be charged a late payment charge of:
_________% of the unpaid payment amount; $ or % of the
unpaid payment amount, whichever is greater l less; as
additional interest.
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREE AGREEMENT
SHOULD BE READ CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE
<PAGE>
ENFORCEABLE. NO OTHER TERMS OR ORAL PROMISES NOT CONTAINED IN THIS
WRITTEN CONTRACT MAY BE LEGALLY ENFORCED. BORROWER MAY CHANGE
THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.
THIS NOTICE ALSO APPLIES TO ANY OTHER CREDIT AGREEMENTS (EXCEPT
EXEMPT TRANSACTIONS) NOW IN EFFECT BETWEEN YOU AND THIS LENDER.
BORROWER ACKNOWLEDGES THAT BORROWER HAS READ, UNDERSTANDS, AND AGREES TO TYE
TERMS AND CONDITIONS OF THIS NOTE INCLUDING THE PROVISIONS ON THE REVERSE SIDE;
BORROWER ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS NOTE.
NOTE DATE: APRIL 5, 1999
BORROWER: ADVANCED BUSINESS SCIENCES, INC.BORROWER:
ADVANCED BUSINESS SCIENCES, INC.
BENJAMIN J. LAMB, PRESIDENT & CEO ROGER J. KANNE DIRECTOR &
TREASURER
BORROWER, BORROWER:
BORROWER: BORROWER:
BORROWER: BORROWER:
<PAGE>
TERMS AND CONDITIONS
I - DEFAULT: Borrower will be in default under this Note In the event that
Borrower, any guarantor or any other third party pledging collateral to secure
this Note: (a) falls to make any payment on this Note or any other indebtedness
to Lender when due; (b) falls to perform any obligation or breaches any warranty
or covenant to Lender contained In this Note, any security Instrument, or any
other present or future written agreement regarding this or any other
indebtedness of Borrower to Lender; (c) provides or causes any false or
misleading signature or representation to be provided to Lender; (d) allows the
collateral securing this Note Of any) to be lost, stolen, destroyed, damaged in
any material respect, or subjected to seizure or confiscation; (e) permits the
entry or service of any garnishment, judgment, tax levy, attachment or lien
against Borrower, any guarantor, or any of their property; (Q dies, becomes
legally Incompetent, Is dissolved or terminated, ceases to operate Its business,
becomes insolvent, makes an assignment for the benefit of creditors, falls to
pay debts as they become due, has a material adverse change In its financial
condition, or becomes the subject of any bankruptcy, Insolvency or debtor
rehabilitation proceeding; or (9) causes Lender, in good faith, to believe the
prospect of payment or performance is impaired. 2. RIGHTS OF LENDER ON DEFAULT:
If there Is a default under this Note, Lender will be entitled to exercise one
or more of the following remedies without notice or demand (except as required
by law): (a) to cease making additional advances under this Note; (b) to declare
the principal amount plus accrued Interest under this Note and all other present
and future obligations of Borrower Immediately due and payable In full; (c) to
collect the outstanding obligation of Borrower with or without resorting to
judicial process; (d) to take possession of any collateral in any manner
permitted by law; (e) to require Borrower to deliver and make available to
Lender any collateral at a place reasonably convenient to Borrower and Lender;
(f) to sell, lease or otherwise dispose of any collateral and collect any
deficiency balance with or without resorting to legal process; (g) to set-off
Borrower's obligations against any amounts due to Borrower Including, but not
limited to monies, Instruments, and deposit accounts maintained with Lender; and
(h) to exercise all other rights available to Lender under any other written
agreement or applicable law. Lender's rights are cumulative and may be exercised
together, separately, and In any order. Lender's remedies under this paragraph
are In addition to those available at common law, Including, but not limited to,
the right of set-off. 3. DEMAND FEATURE: If this Note contains a demand feature,
Lender's right to demand payment, at any time, and from time to time, shall be
In Lender's sole and absolute discretion, whether or not any default has
occurred. 4. FINANCIAL INFORMATION: Borrower will at all times keep proper books
of record and account In which full, true and correct entries shall be made in
accordance with generally accepted accounting principles and will upon Lender's
request deliver to Lender, within ninety (90) days after the end of each fiscal
year of Borrower, a copy of the annual financial statements of Borrower relating
to such fiscal year, such statements to include (1) the balance sheet of
Borrower as at the end of such fiscal year and (11) the related income
statement, statement of retained earnings and statement of
<PAGE>
changes in the financial position of Borrower for such fiscal year, which, at
Lender's request, shall be prepared by such certified public accountants as may
be reasonably satisfactory to Lender. Borrower also agrees to deliver to Lender
within fifteen (15) days after filing same, a copy of Borrower's income tax
returns and also, from time to time, such other financial Information with
respect to Borrower as Lender may request. S. MODIFICATION AND WAIVER: The
modification or waiver of any of Borrower's obligations or Lender's rights under
this Note must be contained in a writing signed by Lender. Lender may perform
any of Borrower's obligations or delay or fail to exercise any of its rights
without causing a waiver of those obligations or rights. A waiver on one
occasion will not constitute a waiver on any other occasion. Borrower's
obligations under this Note shall not be affected If Lender amends, compromises,
exchanges, fails to exercise, Impairs or releases any of the obligations
belonging to any co-borrower or guarantor or any of its rights against any
co-borrower, guarantor or collateral. 6. SEVERABILITY/MAXIMUM RATE: If any
provision of this Note is invalid, Illegal or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not In any way be
affected or Impaired thereby. Notwithstanding any reference to highest lawful
rate, maximum Interest rate permitted to be charged by relevant law or other
like terms, such references shall not be deemed to establish a maximum lawful
rate of Interest as contemplated by Iowa Code 9 535.2,2 because the parties have
agreed in writing to a rate of interest pursuant to Iowa Code 111535.2. There
shall be no automatic reduction to the highest lawful rate or other like term a3
to any Borrower or any other party barred by law from availing Itself In any
action or proceedings of the defense of usury, or any Borrower or other party
barred or exempted from the operation of any law limiting the amount of interest
that may be paid for the loan or use of money, or In the event this transaction,
because of its amount or purpose or for any other reason is exempt from the
operation of any statute limiting t6 amount of interest that may be paid for the
loan or use of money. Borrower agrees that any late charge, delinquency charge,
or other like charge shall be interest for the purpose of Iowa Law. 7.
ASSIGNMENT: Borrower will not be entitled to assign any of its rights, remedies
or obligations described In this Note without the prior written consent of
Lender which may be withhold by Lender In Its sole discretion. Lender will be
entitled to assign some or all of its rights and remedies described in this Note
without notice to or the prior consent of Borrower In any manner. The term
*Lender" shall mean the Lender specified in this Agreement, Its successors and
assigns, and subsequent holders of this Note. 8. NOTICE: Any notice or other
communication to be provided to Borrower or Lender under this Note shall be In
writing and sent to the parties at the addresses described In this Note or such
other address as the parties may designate In writing from time to time. 9.
APPLICABLE LAW: This Note shall be governed by the laws of the state of Iowa.
Borrower consents to the jurisdiction and venue of any court located In such
state In the event of any legal proceeding pertaining to the negotiation,
execution, performance or enforcement of any term or condition contained In this
Note or any related loan document and agrees not to commence or seek to remove
such legal proceeding In or to a different court. 10. COLLECTION COSTS: If
Lender hires an attorney to assist in collecting any amount due or enforcing any
right or remedy under this Note, Borrower agrees to pay Lender's reasonable
attorneys' fees and collection costs. 11. MISCELLANEOUS: This Note is being
executed for Commercial purposes. Borrower and Lender agree that time is of the
<PAGE>
essence. Borrower waives presentment, demand for payment, notice of dishonor and
protest. All references to Borrower In this Note shall include all of the
parties signing this Note, and this Note shall be binding upon the heirs,
successors and assigns of Borrower and Lender. If there is more than one
Borrower, their Obligations will be joint and several. This Note and any related
documents represent the complete and integrated understanding between Borrower
and Lender pertaining to the terms and conditions of those documents. 12. JURY
TRIAL WAIVER: BORROWER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY CIVIL
ACTION ARISING OUT OF, OR BASED UPON, THIS NOTE OR THE COLLATERAL SECURING THIS
NOTE. 13. ADDITIONAL TERMS: THIS NOTE IS SECURED BY A LIMITED CONTINUING
GUARANTY DATED APRIL 6, 1998, IN THE AMOUNT OF $285,000 FROM MARY COLLISON AND
BY A LIMITED CONTINUING GUARANTY DATED APRIL 6, 1998, IN THE AMOUNT OF $ 285,000
FROM ROGER J. KANNE AND BY A LIMITED CONTINUING GUARANTY DATED APRIL 6, 1998, IN
THE AMOUNT OF $285,000.00 FROM JANES L. PIETIG AND BY A L IMI TMD CONTINUING
GUARANTY DATED APRIL 6, 1998, IN THE AMOUNT OF $285,000.00 FROM DENNIS L.
ANDERSON AND BY A LIMITED CONTINUING GUARANTY DATED APRIL 6, 1998, IN THE AMOUNT
OF $285,000.00 FROM ROBERT E. BADDING AND BY A LIMITED CONTINUING GUARANTY DATED
APRIL 6, 1998, IN THE AMOUNT OF $285,000.00 FROM MARTIN J. HALBUR.
PROMISSORY NOTE
Principal Loan Date Maturity Loan No. Call Collateral Account
Officer Initials
$1,000,000.00 04/08/1998 06/01/1999 005281 1735062078
CO8
References in the shaded area are for Lender's use only and do not limit
the applicability of this document to any particular loan or item.
Borrower: Advanced Business Sciences, Inc. Lender: U.S. Bank
National Association
3345 N. 107th Street 88th & Center
Omaha, NE 68134 8800 West Center Road
Omaha, NE 68124
Principal Amount: $1,000,000.00 Initial Rate: 10.500% Date of
Note: April 8, 1998
PROMISE TO PAY. Advanced Business Sciences, Inc. ("Borrower") promises
to pay to U.S. Bank National Association ("Lender"), or order, In lawful
money of the United States of America, the principal amount of One Million
& 00/100 Dollars ($1,000,000.00) or so much as may be outstanding, together
with Interest on the unpaid outstanding principal balance of each advance.
Interest shall be calculated from the date of each advance until repayment
of each advance.
PAYMENT. Borrower will pay this loan In one payment of all outstanding principal
plus all accrued unpaid interest on June 1, 1999. In addition, Borrower will pay
regular monthly payments of accrued unpaid Interest beginning May 1, 1998, and
all subsequent interest payments are due on the same day of each month after
that. The annual interest rate for this Note is computed on a 365/360 basis;
that is, by applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to accrued unpaid interest, then to principal, and any remaining
amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is the U.S. Bank National
Association Reference Rate (the "Index"). The Index is not necessarily the
lowest rate charged by Lender on its loans and is set by Lender in its sole
discretion. If the Index becomes unavailable during the term of this loan,
Lender may designate a substitute index after notifying Borrower. Lender will
tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each day. The Index
currently IS 8.500% per annum. The Interest rate to be applied to the unpaid
principal
<PAGE>
balance of this Note will be at a rate of 2.000 percentage points over the
Index, resulting In an Initial rate of 10.500% per annum. NOTICE: Under no
circumstances will the interest rate on this Note be more than the maximum rate
allowed by applicable law.
PREPAYMENT. Borrower may pay all or a portion of the amount owed earlier than it
is due. Early payments will not, unless agreed to by Lender in writing, relieve
Borrower of Borrower's obligation to continue to make payments of accrued unpaid
interest. Rather, they will reduce the principal balance due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Any representation or statement made or furnished to Lender
by Borrower or on Borrower's behalf is false or misleading in any material
respect either now or at the time made or furnished. (d) Borrower becomes
insolvent, a receiver is appointed for any part of Borrower's property, Borrower
makes an assignment for the benefit of creditors, or any proceeding is commenced
either by Borrower or against Borrower under any bankruptcy or insolvency laws.
(e) Any creditor tries to take any of Borrower's property on or in which Lender
has a lien or security interest. This includes a garnishment of any of
Borrower's accounts with Lender. (f) Any guarantor dies or any of the other
events described in this default section occurs with respect to any guarantor of
this Note. (g) A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired. (h) Lender in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender demanding
cure of such default: (a) cures the default within fifteen (15) days; or (b) if
the cure requires more than fifteen (15) days, immediately initiates steps which
Lender deems in Lender's sole discretion to be sufficient to cure the default
and thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note to 5.000
percentage points over the Index. The interest rate will not exceed the maximum
rate permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender that
amount. This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. This Note has been delivered to
Lender and accepted by Lender in the
<PAGE>
State of Nebraska. If there is a lawsuit, Borrower agrees upon Lender's request
to submit to the jurisdiction of the courts of Douglas County, the State of
Nebraska. This Note shall be governed by and construed In accordance with the
laws of the State of Nebraska.
RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's accounts with Lender.
(whether checking, savings, or some other account), including without limitation
all accounts held jointly with someone else and all accounts Borrower may open
in the future, excluding however all IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on this Note against any and all such accounts.
COLLATERAL. This Note is secured by FS/SA all inclusive.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested orally by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing. All
communications, instructions, or directions by telephone or otherwise to Lender
are to be directed to Lender's office shown above. The following party or
parties are authorized to request advances under the line of credit until Lender
receives from Borrower at Lender's address shown above written notice of
revocation of their authority: Rob Rasmussen and Roger Kanne. Borrower agrees to
be liable for all sums either: (a) advanced in accordance with the instructions
of an authorized person or (b) credited to any of Borrower's accounts with
Lender. The unpaid principal balance owing on this Note at any time may be
evidenced by endorsements on this Note or by Lender's internal records,
including daily computer print-outs. Lender will have no obligation to advance
funds under this Note if: (a) Borrower or any guarantor is in default under the
terms of this Note or any agreement that Borrower or any guarantor has with
Lender, including any agreement made in connection with the signing of this
Note; (b) Borrower or any guarantor ceases doing business or is insolvent; (c)
any guarantor seeks, claims or otherwise attempts to limit, modify or revoke
such guarantor's guarantee of this Note or any other loan with Lender; (d)
Borrower has applied funds provided pursuant to this Note for purposes other
than those authorized by Lender; or (e) Lender in good faith deems itself
insecure under this Note or any other agreement between Lender and Borrower.
PURPOSE OF LOAN. Working Capital.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly
<PAGE>
stated in writing, no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly and for any length of
time) this loan, or release any party or guarantor or collateral; or impair,
fail to realize upon or perfect Lender's security interest in the collateral;
and take any other action deemed necessary by Lender without the consent of or
notice to anyone. All such parties also agree that Lender may modify this loan
without the consent of or notice to anyone other than the party with whom the
modification is made.
<PAGE>
04-08-1998 PROMISSORY NOTE
Page 2
Loan No. 005281 (Continued)
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF HIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEGES RECEIPT
OF A COMPLETED COPY OF THE NOTE.
BORROWER:
Advanced Business Sciences, Inc.
BY By:
Ron Muhlbauer, President Rob Rasmussen, Chief Operating Officer
B By:
John Gaukel, Vice President R & D
Roger Kanne, Treasurer
NT
Variable Rate. Line of Credit.
<PAGE>
CHANGE IN TERMS AGREEMENT
Principal Loan Date Maturity Loan No. Call Collateral Account
Officer Initials
$1,000,000.00 08-15-1999 34 3886 1735062078
MEE08
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Borrower:Advanced Business Sciences, Inc.Lender: U.S. Bank National Association
3345 N. 107th Street 88th & Center 8800 West
Center Road
Omaha, NE 68134 Omaha, NE 68124
Principal Amount: $1,000,000.00
Date of Agreement: June 1,1999
DESCRIPTION OF EXISTING INDEBTEDNESS. Revolving Promissory Note dated April
8,1998, in the original amount of $1,000,000.00.
DESCRIPTION OF COLLATERAL. FS/SA all business assets.
DESCRIPTION OF CHANGE IN TERMS. Extend current maturity date of June 1, 1999, to
become due on August 15, 1999, All other terms and conditions shall remain the
same.
PROMISE TO PAY. Advanced Business Sciences, Inc. ("Borrower") promises to pay to
U.S. Bank National Association ("Lender"), or order, in lawful money of the
United States of America, the principal amount of One Million & 00/100 Dollars
($1,000,000.00) or so much as may be outstanding, together with Interest on the
unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid Interest on August 15, 1999. In addition, Borrower will
pay regular monthly payments of accrued unpaid interest beginning July 1, 1999,
and all subsequent Interest payments are due on the same day of each month after
that. The annual interest rate for this Agreement is computed on a 365/360
basis; that is, by applying, the ratio of the annual interest rate over a year
of 360 days, multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to accrued unpaid interest, then to principal,
and any remaining amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to change
from time to time based on changes in an index which is the U.S. Bank National
Association Reference Rate (the "Index"). The Index is not necessarily the
lowest rate charged by Lender on its loans and is set by Lender in its sole
discretion. If the Index becomes unavailable during the term of this loan,
Lender may designate a substitute index after notifying Borrower. Lender will
tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans
<PAGE>
based on other rates as well. The interest rate change will not occur more often
than each day. The Index currently is 7.750% per annum. The interest rate to be
applied to the unpaid principal balance of this Agreement will be at a rate of
2.000 percentage points over the Index, resulting in an initial rate of 9.750%
per annum. NOTICE: Under no circumstances will the interest rate on this
Agreement be more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
of accrued unpaid interest. Rather, they will reduce the principal balance due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this
Agreement or any agreement related to this Agreement, or in any other agreement
or loan Borrower has with Lender. (c) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or misleading
in any material respect either now or at the time made or furnished. (d)
Borrower becomes insolvent, a receiver is appointed for any part of Borrower's
property, Borrower makes an assignment for the benefit of creditors, or any
proceeding is commenced either by Borrower or against Borrower under any
bankruptcy or insolvency laws. (e) Any creditor tries to take any of Borrower's
property on or in which Lender has a lien or security interest. This includes a
garnishment of any of Borrower's accounts with Lender. (f) Any guarantor dies or
any of the other events described in this default section occurs with respect to
any guarantor of this Agreement. (g) A material adverse change occurs in
Borrower's financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired. (h) Lender in good faith deems
itself insecure.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Agreement
within the preceding twelve (12) months, it may be cured (and no event of
default will have occurred) if Borrower, after receiving written notice from
Lender demanding cure of such default: (a) cures the default within fifteen (15)
days; or (b) if the cure requires more than fifteen (16) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be sufficient
to cure the default and thereafter continues and completes all reasonable and
necessary steps sufficient to produce compliance as soon as reasonably
practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Agreement and all accrued unpaid interest immediately due,
without notice, and then Borrower will pay that amount. Upon default, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, increase the variable interest rate on this
Agreement to 5.000 percentage points over the Index. The interest rate will not
exceed the maximum rate permitted by applicable law. Lender may hire or pay
someone else to help collect this Agreement if Borrower does not pay. Borrower
also will pay Lender that amount. This includes, subject to any limits under
applicable law, Lender's attorneys' fees and Lender's legal expenses whether or
not there is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (including
<PAGE>
efforts to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. If not prohibited by applicable
law, Borrower also will pay any court costs, in addition to all other sums
provided by law. This Agreement has been delivered to Lender and accepted by
Lender in the State of Nebraska. If there is a lawsuit, Borrower agrees upon
Lender's request to submit to the jurisdiction of the courts of Douglas County,
the State of Nebraska. This Agreement shall be governed by and construed In
accordance with the laws of the State of Nebraska,
RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including without limitation
all accounts held jointly with someone else and all accounts Borrower may open
in the future, excluding however all IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on this Agreement against any and all such accounts.
LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement may be requested orally by Borrower or by an authorized
person. Lender may, but need not, require that all oral requests be confirmed in
writing. All communications, instructions, or directions by telephone or
otherwise to Lender are to be directed to Lender's office shown above. The
following party or parties are authorized to request advances under the line of
credit until Lender receives from Borrower at Lender's address shown above
written notice of revocation of their authority: Rob Rasmussen and Roger Kanne.
Borrower agrees to be liable for all sums either: (a) advanced in accordance
with the instructions of an authorized person or (b) credited to any of
Borrower's accounts with Lender. The unpaid principal balance owing on this
Agreement at any time may be evidenced by endorsements on this Agreement or by
Lender's internal records, including daily computer print-outs. Lender will have
no obligation to advance funds under this Agreement if: (a) Borrower or any
guarantor is in default under the terms of this Agreement or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Agreement; (b) Borrower or any guarantor
ceases doing business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee of this
Agreement or any other loan with Lender; (d) Borrower has applied funds provided
pursuant to this Agreement for purposes other than those authorized by Lender;
or (e) Lender in good faith deems itself insecure under this Agreement or any
other agreement between Lender and Borrower.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of
the original obligation or obligations, including all agreements evidenced or
securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a satisfaction
of the obligation(s). It is the intention of Lender to retain as liable parties
all makers and endorsers of the original obligation(s), including accommodation
parties, unless a party is expressly released by Lender in writing. Any maker or
endorser, including accommodation makers, will not be released by virtue of
<PAGE>
this Agreement. If any person who signed the original obligation does not sign
this Agreement below, then all persons signing below acknowledge that this
Agreement is given conditionally, based on the representation to Lender that the
non-signing party consents to the changes and provisions of this Agreement or
otherwise will not be released by it. This waiver applies not only to any
initial extension, modification or release, but also to all such subsequent
actions.
PURPOSE OF LOAN. Working Capital.
YEAR 2000. Borrower has reviewed and assessed its business operations and
computer systems and applications to address the "year 2060 problem" (that is,
that computer applications and equipment used by Borrower, directly or
indirectly through third parties, may be unable to properly perform
date-sensitive functions before, during and after January 1, 2000). Borrower
reasonably believes that the year 2000 problem will not result in a material
adverse change in Borrower's business condition (financial or otherwise),
operations, properties or prospects or ability to repay Lender. Borrower
<PAGE>
06-01-1999 CHANGE IN TERMS AGREEMENT
Page 2 (Continued)
Loan NO 34
agrees that this representation will be true and correct on
and shall be deemed made by Borrower on each date Borrower requests any
advance under this Agreement or Note or delivers any information to Lender.
Borrower will promptly deliver to Lender such information relating to this
representation as Lender requests from time to time.
PRIOR NOTE. #34.
MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its rights
or remedies under this Agreement without losing them. Borrower and any other
person who signs, guarantees or endorses this Agreement, to the extent allowed
by law, waive presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Agreement, and unless otherwise expressly
stated in writing, no party who signs this Agreement, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security Interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the party
with whom the modification is made.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL TH RO ISIONS
OF THIS AGREEMENT INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES TO THE TE S 0 THE AGREEMENT AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY
OF THE AGREEMENT.
BORROWER
Advanced Business Sciences,. Inc.
By: By:
Benjamin J. Lamb, President & CEO Rob Rasmussen, Secretary
By: By:
John Gaukel, Vice President R & D Roger Kanne, Treasurer
<PAGE>
NOTICE OF FINAL AGREEMENT
Principal Loan Date Maturity Loan No. Call Collateral Account
Officer Initials
$1,000,000.00 08-15-1999 34 3886 1735062078
MEE08
References in the shaded area are for Lender's use only and do not limit
the applicability of this document to any particular loan or item.
Borrower: Advanced Business Sciences, Inc. Lender:
U.S. Bank National Association
3345 N. 107th Street 88th & Center
Omaha, NE 68134 8800 West Center Road
Omaha, NE 68124
NOTICE - WRITTEN AGREEMENTS. A credit agreement must be in writing to
be enforceable under Nebraska law. To protect you and us from any
misunderstandings or disappointments, any contract, promise, undertaking or
offer to forbear repayment of money or to make any other financial
accommodation in connection with this loan of money or grant or extension
of credit, or any amendment of, cancellation of, waiver of, or substitution
for any or all of the terms or provisions of any instrument or document
executed in connection with this loan of money or grant or extension of
credit must be in writing to be effective.
---------------------------------------------------------------------------
--------------------
By signing this document each Party represents and agrees that: (a) The written
Loan Agreement represents the final agreement between the Parties, (b) There are
no unwritten oral agreements between the Parties, and (c) The written Loan
Agreement may not be contradicted by evidence of any prior, contemporaneous, or
subsequent oral agreements or understandings of the Parties.
As used In this Notice, the following terms have the following meanings:
Loan. The term "Loan" means the following described loan: a Variable
Rate (2.000% over U.S. Bank National Association Reference Rate, making an
initial rate of 9.750%), Nondisclosable Revolving Line of Credit Loan to a
Corporation for $1,000,000.00 due on August 15, 1999. This is a secured
renewal of the following described indebtedness: #34.
<PAGE>
Parties. The term "Parties" means U.S. Bank National Association and any and all
entities or individuals who are obligated to repay the loan or have pledged
property as security for the Loan, including without limitation the following:
Borrower: Advanced Business Sciences, Inc.
Guarantor: Roger J. Kanne, James L. Pietig, Dennis L. Anderson,
Mary M. Collison, Robert Badding, Martin J. Halbur, DDS,
Ronald W. Muhlbauer, James C. DiPrima, John J. Gaukel and
Robin L. Rasmussen
Loan Agreement. The term "Loan Agreement" means one or more promises, promissory
notes, agreements, undertakings, security agreements, deeds of trust or other
documents, or commitments, or any combination of those actions or documents,
relating to the Loan, including without limitation the following:
NECESSARY FORMS
Promissory Note / Change In Terms Agr. Commercial Guaranty
Security Agreement UCC - 1
Disbursement Request and Authorization Notice of Final Agreement
OPTIONAL FORMS
Amortization Schedule
<PAGE>
06-01-1999 NOTICE OF FINAL AGREEMENT
Page 2
Loan NO 34 (Continued)
Each Party who signs below, other than U.S. Bank National Association,
acknowledges, r represents and warrants to U.S. Bank National Association that
It has received, read and understood this Notice of Final Agreement. This Notice
Is dated June 1, 1999.
BORROWER:
Advanced Business Sciences Inc.
By: By:
_____________________________
Benjamin J. Lamb, President & CEO Rob Rasmussen, Secretary
By: ______________________________ By:
- ----------------------------------------
John Gaukel, Vice President R & D Roger Kanne, Treasurer
GUARANTOR:
Roger J. Kanne
James Pletlg
Dennis L Anderson
Mary M. Collison
Robert Baddling
Martin J. Halbur, DDS
Ronald W. Muhlbauer
-
--,-%
James C DiPrima
John J. Gaukel
Robin L. Rasmussen
LENDER:
<PAGE>
U.S. Bank National Association
By:
Authorized Officer
<PAGE>
COMMERCIAL SECURITY AGREEMENT Principal Loan Date Maturity Loan No.
Call Collateral Account Officer Initials $1,000,000.00 04-08-1998
06-01-1999 005281 1735062078 C08 References in the shaded area are for
Lender's use only and do not limit the applicability of this document to
any particular loan or item. Borrower: Advanced Business Sciences, Inc.
Lender: U.S. Bank National Association 334S N. 107th Street 88th & Center
Omaha, NE 68134 8800 West Center Road, Omaha, NE 68124 THIS COMMERCIAL
SECURITY AGREEMENT is entered Into between Advanced Business Sclences, Inc.
(referred to below as "Grantor"); and U.S. Bank National Association
(referred to below as "Lender"). For valuable consideration, Grantor grants
to Lender a security Interest In the Collateral to secure the Indebtedness
and agrees that Lender shall have the rights stated In this Agreement with
respect to the Collateral, In addition to all other rights which Lender may
have by law. DEFINITIONS. The following words shall have the following
meanings when used in this Agreement. Terms not otherwise defined in this
Agreement shall have the meanings attributed to such terms in the Uniform
Commercial Code. All references to dollar amounts shall mean amounts in
lawful money of the United States of America. Agreement. The word
"Agreement" means this Commercial Security Agreement, as this Commercial
Security Agreement may be amended or modified from time to time, together
with all exhibits and schedules attached to this Commercial Security
Agreement from time to time. Collateral. The word "Collateral" means the
following described property of Grantor, whether now owned or hereafter
acquired, whether now existing or hereafter arising, and wherever located:
All Inventory, chattel paper, accounts, equipment and general Intangibles
In addition, the word "Collateral" includes all the following, whether
now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located:
(a) All attachments, accessions, accessories, tools, parts, supplies,
increases, and additions to and all replacements of and substitutions for
any property described above.
(b) All products and produce of any of the property described in this
Collateral section. (c) All accounts, general intangibles,
instruments, rents, monies, payments, and all other rights,
arising out of a sale, lease, or other disposition
of any of the property described in this Collateral section.
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(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property described in this
Collateral section.
(e) All records and data relating to any of the property described in
this Collateral section, whether in the form of a writing, photograph,
microfilm,
microfiche, or electronic media, together with all of Grantor's
right, title, and interest in and to all computer software required to utilize,
create,
maintain, and process any such records or data on electronic media.
Event of Default. The words "Event of Default" mean and include
without limitation any of the Events of Default set forth below in the
section titled "Events of Default."
Grantor. The word "Grantor" means Advanced Business Sciences, Inc.,
its successors and
assigns
Guarantor. The word "Guarantor' means and includes without limitation
each and all of the guarantors'. sureties, and accommodation parties in
connection with the Indebtedness.
Indebtedness. The word "Indebtedness" means the indebtedness evidenced
by the Note, including all principal and interest, together with all other
indebtedness and costs and expenses for which Grantor is responsible under
this Agreement or under any of the Related Documents.
Lender. The word "Lender" means U.S. Bank National Association, its
successors and assigns.
Note. The word "Note" means the note or credit agreement dated April
8, 1998, in the principal amount of $1,000,000.00 from Advanced Business
Sciences, Inc. to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of and substitutions for
the note or credit agreement. I
Related Documents. The words "Related Documents" mean' and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties,, security agreements,
mortgages, deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection with
the Indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender A contractual security interest in
and hereby assigns, conveys, delivers, pledges, and transfers all of Grantor's
right, title and interest in and to Grantor's accounts with Lender (whether
checking, savings, or some other account), including all accounts held jointly
with someone else and all accounts Grantor may open in the future, excluding,
however, all IRA and Keogh accounts, and all trust accounts for which the grant
of a security
<PAGE>
interest would be prohibited by law. Grantor authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all Indebtedness against any
and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
Organization. Grantor is a corporation which is duly organized, validly
existing, and in good standing under the laws of the state of Grantors
incorporation. Grantor has its chief executive office at 3345 N. 107th Street,
Omaha, NE 68134. Grantor will notify Lender of any change in the location of
Grantor's chief executive office.
Authorization. The execution, delivery, and performance of this Agreement by
Grantor have been duly authorized by all necessary action by Grantor and do not
conflict with, result in a violation of, or constitute a default under (a) any
provision of its articles of incorporation or organization, or bylaws, or any
agreement or other instrument binding upon Grantor or (b) any law, governmental
regulation, court decree, or order applicable to Grantor.
Perfection of Security Interest. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by Lender to perfect
and continue Lender's security interest in the Collateral. Upon request of
Lender, Grantor will deliver to Lender any and all of the documents evidencing
or constituting the Collateral, and Grantor will note Lender's interest upon any
and all chattel paper if not delivered to Lender for possession by Lender.
Grantor hereby appoints Lender as its irrevocable attorney-in-fact for the
purpose of executing any documents necessary to perfect or to continue the
security interest granted in this Agreement. Lender may at any time, and without
further authorization from Grantor, file a carbon, photographic or other
reproduction of any financing statement or of this Agreement for use as a
financing statement. Grantor will reimburse Lender for all expenses for the
perfection and the continuation of the perfection of Lender's security interest
in the Collateral. Grantor promptly will notify Lender before any change in
Grantor's name including any change to the assumed business names of Grantor.
This Is a continuing Security Agreement and will continue In effect even though
all or any part of the Indebtedness Is paid In full and even though for a period
of time Grantor may not be Indebted to Lender.
No Violation. The execution and delivery of this Agreement will not Violate any
law or agreement governing Grantor or to which Grantor is a party, and its
certificate or articles of Incorporation and bylaws do not prohibit any term or
condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral consists of accounts,
chattel paper, or general intangibles, the Collateral is enforceable in
accordance with its terms, is genuine, and complies with applicable laws
concerning form, content and manner of preparation and execution, and all
persons appearing to be obligated on the Collateral have authority and capacity
to contract and are in fact obligated as they appear to be on the Collateral. At
the time any account becomes subject to a security interest in favor of Lender,
the account shall be a good and valid account representing an undisputed, bona
fide indebtedness incurred by the account debtor, for merchandise held subject
to delivery instructions or theretofore shipped or delivered pursuant to a
contract of sale, or for services theretofore performed by Grantor with or for
the account debtor;
<PAGE>
there shall be no setoffs or counterclaims against any such account; and no
agreement under which any deductions or discounts may be claimed shall have been
made with the account debtor except those disclosed to Lender in writing.
Location of the Collateral. Grantor, upon request of Lender, will deliver to
Lender in form satisfactory to Lender a schedule of real properties and
Collateral. locations relating to Grantor's operations, including without
limitation the following: (a) all real property owned or being purchased by
Grantor; (b) all real property being rented or leased by Grantor; (c) all
storage facilities owned, rented, leased, or being used by Grantor; and (d) all
other properties where Collateral is or may- be located. Except in the ordinary
course of its business, Grantor shall not remove the Collateral from its
existing locations without the prior written consent of Lender.
Removal of Collateral. Grantor shall keep the Collateral (or to the
extent the Collateral consists of intangible property such as accounts, the
records concerning the Collateral) at Grantor's address shown above, or at
such other locations as are acceptable to Lender. Except in the
04-08-1998 COMMERCIAL SECURITY AGREEMENT
Page 2
Loan No 005281 (Continued)
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ordinary course of its business, including the sales of inventory, Grantor shall
not remove the Collateral from its existing locations without the prior written
consent of Lender. To the extent that the Collateral consists of vehicles, or
other titled property, Grantor shall not take or permit any action which would
require application for certificates of title for the vehicles outside the State
of Nebraska, without the prior written consent of Lender. Transactions Involving
Collateral. Except for inventory sold or accounts collected in the ordinary
course of Grantor's business, Grantor shall not sell, offer to sell, or
otherwise transfer or dispose of the Collateral. While Grantor is not in default
under this Agreement, Grantor may sell inventory, but only in the ordinary
course of its business and only to buyers who qualify as a buyer in the ordinary
course of business. A sale in the ordinary course of Grantor's business does not
include a transfer in partial or total satisfaction of a debt or any bulk sale.
Grantor shall not pledge, mortgage, encumber or otherwise permit the Collateral
to be subject to any lien, security interest, encumbrance, or charge, other than
the security interest provided for in this Agreement, without the prior written
consent of Lender. This includes security interests even if junior in right to
the security interests granted under this Agreement. Unless waived by Lender,
all proceeds from any disposition of the Collateral (for whatever reason) shall
be held in trust for Lender and shall not be commingled with any other funds;
provided however, this requirement shall not constitute consent by Lender to any
sale or other disposition. Upon receipt, Grantor shall immediately deliver any
such proceeds to Lender. Title. Grantor represents and warrants to Lender that
it holds good and marketable title to the Collateral, free and clear of all
liens and encumbrances except for the lien of this Agreement. No financing
statement covering any of the Collateral is on file in any public office other
than those which reflect the security interest created by this Agreement or to
which Lender has specifically consented. Grantor shall defend Lender's rights in
the Collateral against the claims and demands of all other persons.
<PAGE>
Collateral Schedules and Locations. As often as Lender shall require, and
insofar as the Collateral consists of accounts and general intangibles, Grantor
shall deliver to Lender schedules of such Collateral, including such information
as Lender may require, including without limitation names and addresses of
account debtors and agings of accounts and general intangibles. Insofar as the
Collateral consists of inventory and equipment, Grantor shall deliver to Lender,
as often as Lender shall require, such lists, descriptions, and designations of
such Collateral as Lender may require to identify the nature, extent, and
location of such Collateral. Such information shall be submitted for Grantor and
each of its subsidiaries or related companies. Maintenance and Inspection of
Collateral. Grantor shall maintain all tangible Collateral in good condition and
repair. Grantor will not commit or permit damage to or destruction of the
Collateral or any part of the Collateral. Lender and its designated
representatives and agents shall have the right at all reasonable times to
examine, inspect, and audit the Collateral wherever located. Grantor shall
immediately notify Lender of all cases involving the return, rejection,
repossession, loss or damage of or to any Collateral; of any request for credit
or adjustment or of any other dispute arising with respect to the Collateral;
and generally of all happenings and events affecting the Collateral or the value
or the amount of the Collateral. Taxes, Assessments and Liens. Grantor will pay
when due all taxes, assessments, and liens upon the Collateral, its use or
operation, upon this Agreement, upon any promissory note or notes evidencing the
Indebtedness, or upon any of the other Related Documents. Grantor may withhold
any such payment or may elect to contest any lien if Grantor is in good faith
conducting an appropriate proceeding to contest the obligation to pay and so
long as Lender's interest in the Collateral is not jeopardized in Lender's sole
opinion. If the Collateral is subjected to a lien which is not discharged within
fifteen (15) days, Grantor shall deposit with Lender cash, a sufficient
corporate surety bond or other security satisfactory to Lender in an amount
adequate to provide for the discharge of the lien plus any interest, costs,
attorneys' fees or other charges that could accrue as a result of foreclosure or
sale of the Collateral. In any contest Grantor shall defend itself and Lender
and shall satisfy any final adverse judgment before enforcement against the
Collateral. Grantor shall name Lender as an additional obligee under any surety
bond furnished in the contest proceedings. Compliance With Governmental
Requirements. Grantor shall comply promptly with all laws, ordinances, rules and
regulations of all governmental authorities, now or hereafter in effect,
applicable to the ownership, production, disposition, or use of the Collateral.
Grantor may contest in good faith any such law, ordinance or regulation and
withhold compliance during any proceeding, including appropriate appeals, so
long as Lender's interest in the Collateral, in Lender's opinion, is not
jeopardized. Hazardous Substances. Grantor represents and warrants that the
Collateral never has been, and never will be so long as this Agreement remains a
lien on the Collateral, used for the generation, manufacture, storage,
transportation, treatment, disposal, release or threatened release of any
hazardous waste or substance, as those terms are defined in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant to any
of the foregoing. The terms "hazardous waste" and "hazardous substance" shall
also include, without limitation, petroleum and petroleum by-products or any
fraction thereof and asbestos. The representations and warranties contained
herein
<PAGE>
are based on Grantor's due diligence in investigating the Collateral for
hazardous wastes and substances. Grantor hereby (a) releases and waives any
future claims against Lender for indemnity or contribution in the event Grantor
becomes liable for cleanup or other costs under any such laws, and, (b) agrees
to indemnify and hold harmless Lender against any and all claims and losses
resulting from a breach of this provision of this Agreement. This obligation to
indemnify shall survive the payment of the Indebtedness and the satisfaction of
this Agreement. Maintenance of Casualty Insurance. Grantor shall procure and
maintain all risks insurance, including without limitation fire, theft and
liability. coverage together with such other insurance as Lender may require
with respect to the Collateral, in form, amounts, coverages and basis reasonably
acceptable to Lender and issued by a company or companies reasonably acceptable
to Lender. Grantor, upon request of Lender, will deliver to Lender from time to
time the policies or certificates of insurance in form satisfactory to Lender,
including stipulations that coverages will not be cancelled or diminished
without at least ten (10) days' prior written notice to Lender and not including
any disclaimer of the insurer's liability for failure to give such a notice.
Each insurance policy also shall include an endorsement providing that coverage
in favor of Lender will not be impaired in any way by any act, omission or
default of Grantor or any other person. In connection with all policies covering
assets in which Lender holds or is offered a security interest, Grantor will
provide Lender with such loss payable or other endorsements as Lender may
require. If Grantor at any time fails to obtain or maintain any insurance as
required under this Agreement, Lender may (but shall not be obligated to) obtain
such insurance as Lender deems appropriate, including if it so chooses "single
interest insurance," which will cover only Lender's interest in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify Lender of any
loss or damage to the Collateral. Lender may make proof of loss if Grantor fails
to do so within fifteen (15) days of the casualty. All proceeds of any insurance
on the Collateral, including accrued proceeds thereon, shall be held by Lender
as part of the Collateral. If Lender consents to repair or replacement of the
damaged or destroyed Collateral, Lender shall, upon satisfactory proof of
expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost
of repair or restoration. If Lender does not consent to repair or replacement of
the Collateral, Lender shall retain a sufficient amount of the proceeds to pay
all of the Indebtedness, and shall pay the balance to Grantor. Any proceeds
which have not been disbursed within six (6) months after their receipt and
which Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness. Insurance Reserves. Lender may require
Grantor to maintain with Lender reserves for payment of insurance premiums,
which reserves shall be created by monthly payments from Grantor of a sum
estimated by Lender to be sufficient to produce, at least fifteen (15) days
before the premium due date, amounts at least equal to the insurance premiums to
be paid. If fifteen (15) days before payment is due, the reserve funds are
insufficient, Grantor shall upon demand pay any deficiency to Lender. The
reserve funds shall be held by Lender as a general deposit and shall constitute
a non-interest-bearing account which Lender may satisfy by payment of the
insurance premiums required to be paid by Grantor as they become due. Lender
does not hold the reserve funds in trust for Grantor, and Lender is not the
agent of Grantor for payment of the insurance premiums required to be paid by
Grantor. The responsibility for the payment of premiums shall remain Grantor's
sole responsibility. Insurance Reports. Grantor, upon request of Lender, shall
furnish to Lender reports on each existing policy of insurance showing such
information as Lender may reasonably request including the following: (a) the
name, of the insurer; (b) the risks insured; (c) the amount of the policy; (d)
the
<PAGE>
property insured; (e) the then current value on the basis of which insurance has
been obtained and the manner of determining that value; and (f) the expiration
date of the policy. In addition, Grantor shall upon request by Lender (however
not more often than annually) have an independent appraiser satisfactory to
Lender determine, as applicable, the cash value or replacement cost of the
Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and
except as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use It in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantors fight to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral. Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness. Lender at any time has possession of any Collateral, whether
before or after an Event of Default, Lender shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral if Lender
takes such action for that purpose as Grantor shall request or as Lender, in
Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
Indebtedness. EXPENDITURES BY LENDER. If not discharged or paid when due, Lender
may (but shall not be obligated to) discharge or pay any amounts
<PAGE>
04-08-1998COMMERCIAL SECURITY AGREEMENT
Page 3
Loan No 005281 (Continued)
required to be discharged or paid by Grantor under this Agreement, including
without limitation all taxes, liens, security interests, encumbrances, and other
claims, at any time levied or placed on the Collateral. Lender also may (but
shall not be obligated to) pay all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or paid by Lender for
such purposes will then bear interest at the rate charged under the Note from
the date incurred or paid by Lender to the date of repayment by Grantor. All
such expenses shall become a part of the Indebtedness and, at Lender's option,
will (a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (I) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will be
due and payable at the Note's maturity. This Agreement also will secure payment
of these amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon the occurrence of an Event of
Default. EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement: Default on Indebtedness. Failure of Grantor to
make any payment when due on the Indebtedness. Other Defaults. Failure of
Grantor to comply with or to perform any other term, obligation, covenant or
condition contained in this Agreement or in any of the Related Documents or in
any other agreement between Lender and Grantor. False Statements. Any warranty,
representation or statement made or furnished to Lender by or on behalf of
Grantor under this Agreement, the Note or the Related Documents is false or
misleading in any material respect, either now or at the time made or furnished.
Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
documents to create a valid and perfected security interest or lien) at any time
and for any reason. Insolvency. The dissolution or termination of Grantor's
existence as a going business, the insolvency of Grantor, the appointment of a
receiver for any part of Grantor's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any proceeding
under any bankruptcy or insolvency laws by or against Grantor. Creditor or
Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings,
whether by judicial proceeding, self-help, repossession or any other method, by
any creditor of Grantor or by any governmental agency against the Collateral or
any other collateral securing the Indebtedness. This includes a garnishment of
any of Grantor's deposit accounts with Lender. However, this Event of Default
shall not apply if there is a good faith dispute by Grantor as to the validity
or reasonableness of the claim which is the basis of the creditor or forfeiture
proceeding and if Grantor gives Lender written notice of the creditor or
forfeiture proceeding and deposits with Lender monies or a surety bond for the
creditor or forfeiture proceeding, in an amount determined by Lender, in its
sole discretion, as being an adequate reserve or bond for the dispute. Events
Affecting Guarantor. Any of the preceding events occurs with respect to any
Guarantor of any of the Indebtedness or such Guarantor dies or becomes
incompetent. Lender, at its option, may, but shall not be required to, permit
the Guarantor's estate to assume unconditionally the obligations
<PAGE>
arising under the guaranty in a manner satisfactory to Lender, and, in doing so,
cure the Event of Default. Adverse Change. A material adverse change occurs in
Grantor's financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
Right to Cure. If any default, other than a Default on Indebtedness, is curable
and if Grantor has not been given a prior notice of a breach of the same
provision of this Agreement, it may be cured (and no Event of Default will have
occurred) if Grantor, after Lender sends written notice demanding cure of such
default, (a) cures the default within fifteen (15) days; or (b), if the cure
requires more than fifteen (15) days, immediately initiates steps which Lender
deems in Lender's sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps sufficient
to produce compliance as soon as reasonably practical. I RIGHTS AND REMEDIES ON
DEFAULT. If an Event of Default occurs under this Agreement, at any time
thereafter, Lender shall have all the rights of a secured party under the
Nebraska Uniform Commercial Code. In addition and without limitation, Lender may
exercise any one or more of the following rights and remedies: Accelerate
Indebtedness. Lender may declare the entire Indebtedness, including any
prepayment penalty which Grantor would be required to pay, immediately due and
payable, without notice. Assemble Collateral. Lender may require Grantor to
deliver to Lender all or any portion of the Collateral and any and all
certificates of title and other documents relating to the Collateral. Lender may
require Grantor to assemble the Collateral and make it available to Lender at a
place to be designated by Lender. Lender also shall have full power to enter
upon the property of Grantor to take possession of and remove the Collateral. If
the Collateral contains other goods not covered by this Agreement at the time of
repossession, Grantor agrees Lender may take such other goods, provided that
Lender makes reasonable efforts to return them to Grantor after repossession.
Sell the Collateral. Lender shall have full power to sell, lease, transfer, or
otherwise deal with the Collateral or proceeds thereof in its own name or that
of Grantor. Lender may sell the Collateral at public auction or private sale.
Unless the Collateral threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Lender will give Grantor reasonable
notice of the time and place of any public sale, or of the time after which any
private sale or any other intended disposition of the Collateral is to be made.
The requirements of reasonable notice shall be met if such notice is given at
least ten (10) days before the time of the sale or disposition. All expenses
relating to the disposition of the Collateral, including without limitation the
expenses of retaking, holding, insuring, preparing for sale and selling the
Collateral-, shall become a part of the Indebtedness secured by this Agreement
and shall be payable on demand, with interest at the Note rate from date of
expenditure until repaid. Appoint Receiver. To the extent permitted by
applicable law, Lender shall have the following rights and remedies regarding
the appointment of a receiver: (a) Lender may have a receiver appointed as a
matter of right, (b) the receiver may be an employee of Lender and may serve
without bond, and (c) all fees of the receiver and his or her attorney shall
become part of the Indebtedness secured by this Agreement and shall be payable
on demand, with interest at the Note rate from date of expenditure until repaid.
Collect Revenues, Apply Accounts. Lender, either itself or through a receiver,
may collect the payments, rents, income, and revenues from the Collateral.
Lender may at any time in its discretion transfer any Collateral into its own
name or that of its nominee and receive the payments, rents,
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income, and revenues therefrom and hold the same as security for the
Indebtedness or apply it to payment of the Indebtedness in such order of
preference as Lender may determine. Insofar as the Collateral consists of
accounts, general intangibles, insurance policies, instruments, chattel paper,
choses in action, or similar property, Lender may demand, collect, receipt for,
settle, compromise, adjust, sue for, foreclose, or realize on the Collateral as
Lender may determine, whether or not Indebtedness or Collateral is then due. For
these purposes, Lender may, on behalf of and in the name of Grantor, receive,
open and dispose of mail addressed to Grantor; change any address to which mail
and payments are to be sent; and endorse notes, checks, drafts, money orders,
documents of title, instruments and items pertaining to payment, shipment, or
storage of any Collateral. To facilitate collection, Lender may notify account
debtors and obligors on any Collateral to make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining on the
Indebtedness due to Lender after application of all amounts received from the
exercise of the rights provided in this Agreement. Grantor shall be liable for a
deficiency even if the transaction described in this subsection is a sale of
accounts or chattel paper. Other Rights and Remedies. Lender shall have all the
rights and remedies of a secured creditor under the provisions of the Uniform
Commercial Code, as may be amended from time to time. In addition, Lender shall
have and may exercise any or all other rights and remedies it may have available
at law, in equity, or otherwise. Cumulative Remedies. All of Lender's rights and
remedies, whether evidenced by this Agreement or the Related Documents or by any
other writing, shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation of Grantor under this Agreement, after Grantor's failure
to perform, shall not affect Lender's right to declare a default and to exercise
its remedies. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions
are a part of this Agreement: Amendments. This Agreement, together with any
Related Documents, constitutes the entire understanding and agreement of the
parties as to the matters set forth in this Agreement. No alteration of or
amendment to this Agreement shall be effective unless given in writing and
signed by the party or parties sought to be charged or bound by the alteration
or amendment. Applicable Law. This Agreement has been delivered to Lender and
accepted by Lender in the State of Nebraska. If there is a lawsuit, Grantor
agrees upon Lender's request to submit to the jurisdiction of the courts of the
State of Nebraska. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nebraska. Attorneys' Fees; Expenses.
Grantor agrees to pay upon demand all of Lender's costs and expenses, including
attorneys' fees and Lender's legal expenses, incurred in connection with the
enforcement of this Agreement. Lender may pay someone else to help enforce this
Agreement, and Grantor shall pay the costs and expenses of such enforcement.
Costs and expenses include Lender's attorneys' fees and legal expenses whether
or not there is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (and including efforts to modify or vacate any automatic
stay or injunction), appeals, and any anticipated post-judgment collection
services. Grantor also shall pay all court costs
<PAGE>
04-08-1998 COMMERCIAL SECURITY AGREEMENT
Page 4
Loan No 005281 (Continued)
and such additional fees as may be directed by the court.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define the
provisions of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Grantor under this
Agreement shall be joint and several, and all references to Grantor shall mean
each and every Grantor. This means that each of the persons signing below is
responsible for all obligations in this Agreement.
Notices. All notices required to be given under this Agreement shall be given in
writing, may be sent by telefacsimile (unless otherwise required by law), and
shall be effective when actually delivered or when deposited with a nationally
recognized overnight courier or deposited in the United States mail, first
class, postage prepaid, addressed to the party to whom the notice is to be given
at the address shown above. Any party may change its address for notices under
this Agreement by giving formal written notice to the other parties, specifying
that the purpose of the notice is to change the party's address. To the extent
permitted by applicable law, if there is more than one Grantor, notice to any
Grantor will constitute notice to all Grantors. For notice purposes, Grantor
will keep Lender informed at all times of Grantor's current address(es).
Power of Attorney. Grantor hereby appoints Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover all
sums of money or other property which may now or hereafter become due, owing or
payable from the Collateral; (b) to execute, sign and endorse any and all
claims, instruments, receipts, checks, drafts or warrants issued in payment for
the Collateral; (c) to settle or compromise any and all claims arising under the
Collateral, and, in the place and stead of Grantor, to execute and deliver its
release and settlement for the claim; and (d) to file any claim or claims or to
take any action or institute or take part in any proceedings, either in its own
name or in the name of Grantor, or otherwise, which in the discretion of Lender
may seem to be necessary or advisable. This power is given as security for the
Indebtedness, and the authority hereby conferred is and shall be irrevocable and
shall remain in full force and effect until renounced by Lender.
Severability. If a court of competent jurisdiction finds any provision of this
Agreement to be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or validity;
however, if the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects shall remain
valid and enforceable.
<PAGE>
Successor Interests. Subject to the limitations set forth above on transfer of
the Collateral, this Agreement shall be binding upon and inure to the benefit of
the parties, their successors and assigns.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay
or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Grantor, shall constitute a waiver of any of Lender's rights or of
any of Grantor's obligations as to any future transactions. Whenever the consent
of Lender is required under this Agreement, the granting of such consent by
Lender in any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may be
granted or withheld in the sole discretion of Lender.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
COMMERCIAL SECURITY AGREEMENT, AND GRANTOR AGREES TO ITSJERMS. THIS
AGREEMENT IS DATED APRIL 8, 1998.
GRANTOR:
Advanced Business Sciences, Inc.
By: ______________________________ By: __________________________________
Ron Muhlbauer, President Rob Rasmussen, Chief Operating Officer
By: ______________________________ By:
John Gaukel, Vice President R & D Roger Kanne, Treasurer
LENDER:
U.S. Bank National Association
By: ______________________________
Authorized Officer
LOAN AGREEMENT
This Loan Agreement (this "Agreement"), dated as of this 30th day of
April, 1999, by and between Advanced Business Sciences, Inc., a Delaware
corporation,, with its principal place of business and chief executive office at
3345 No. 107th Street, Omaha, Nebraska 68134 (the "Borrower"), and Mary M.
Collison residing at 640 Hidden Valley Road, Carroll, Iowa 51401-3205 (the
"Lender").
WHEREAS, in order to provide funds to the Borrower for working capital and
other purposes, the Borrower desires to borrow up to Five Hundred Thousand
Dollars ($500,000) from the Lender, and the Lender is willing to make a loan to
the Borrower of such amount, upon the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the terms and conditions contained
herein, and of any loans or extensions of credit heretofore, now or hereafter
made to or for the benefit of the Borrower by the Lender, the parties hereto
hereby agree as follows:
1. DEFINITIONS.
1.1 General Terms. When used herein, the following terms shall have the
following meanings:
"Affiliate" shall mean any Person (a) that directly or indirectly, through
one or more intermediaries, controls or is controlled by, or is under common
control with a Person, including, without limitation, the officers and directors
of such Person, (b) that directly or beneficially owns or holds 20% or more of
any equity interest in such Person, excluding the Lender, or (c) 20% or more of
whose voting stock (or in the case of a Person which is not a corporation, 20%
or more of any equity interest) is owned directly or beneficially or held by the
Affiliate. As used herein, the term "control" shall mean possession, directly or
indirectly, of the power to direct the management or policies of a Person,
whether through ownership of securities or otherwise.
"Assets" shall mean assets reflected on a balance sheet prepared in
accordance with Generally Accepted Accounting Principles, except that
investments in or monies due from any Affiliate shall be excluded therefrom.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banks in Omaha, Nebraska, are authorized or required to be closed.
"Default" shall mean an event which through the passage of time or the
service of notice or both would mature into an Event of Default.
"Default Rate" shall mean a rate of interest per annum equal to the
Regular Rate plus five percent.
<PAGE>
"Event of Default" shall mean the occurrence or existence of any one or
more of the following events: (a) the Borrower fails to pay any of its
"Obligations" hereunder upon demand or when such Obligations are due or are
declared due; (b) the Borrower fails or neglects to perform, keep or observe any
of the covenants, conditions or agreements contained in any of the subsections
of this Agreement or in any of the other ; or (c) any warranty or representation
now or hereafter made by the Borrower in connection with this Agreement is
untrue or incorrect in any material respect, or any schedule, certificate,
statement, report, financial data, notice, or writing furnished at any time by
the Borrower to the Lender is untrue or incorrect in any material respect, as of
the date on which the warranty, representation or the facts set forth therein
are stated, certified or deemed made.
"Generally Accepted Accounting Principles" shall mean, as of the date of
any determination with respect thereto, generally accepted accounting principles
as used by the Financial Accounting Standards Board and/or the American
Institute of Certified Public Accountants, consistently applied and maintained
throughout the periods indicated.
"Indebtedness" shall mean at a particular time, (a) indebtedness for
borrowed money or for the deferred purchase price of property or services in
respect of which the Borrower is liable, contingently or otherwise, as obligor
or otherwise or any commitment by which the Borrower assures a creditor against
loss, including contingent reimbursement obligations with respect to letters of
credit, (b) indebtedness guaranteed in any manner by the Borrower, including
guaranties in the form of an agreement to repurchase or reimburse, (c)
obligations under leases which shall have been or should be, in accordance with
Generally Accepted Accounting Principles, recorded as capital leases in respect
of which obligations the Borrower is liable, contingently or otherwise, as
obligor, guarantor or otherwise, or in respect of which obligations the Borrower
assures a creditor against loss, and (d) any unfunded obligation of the Borrower
to a "multiemployer plan" as such term is defined under the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
"Liabilities" shall have the meaning usually given that term in accordance
with Generally Accepted Accounting Principles, and shall include Indebtedness.
"Line of Credit" shall have the meaning ascribed thereto at subsection 2.1
hereof.
"Note" shall mean a promissory note issued by the Borrower in
substantially the form of Exhibit "A" hereto.
"Obligations" shall mean all of the Borrower's obligations, liabilities
and indebtedness to the Lender and/or to any Affiliate of the Lender of any and
every kind and nature arising or existing under this Agreement, whether now or
hereafter owing, arising, due or payable and howsoever evidenced, created,
incurred, acquired, or owing, whether primary, secondary, direct, indirect,
contingent, fixed or otherwise (including obligations of performance).
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, entity, party, or government (whether national, federal, state,
provincial, county, city, municipal or otherwise, including, without limitation,
any instrumentality, division, agency, body or department thereof).
<PAGE>
"Plan" shall mean any employee benefit or other plan maintained for the
employees of the Borrower or to which the Borrower is obligated to contribute
and subject to Title IV of ERISA.
"Regular Rate" shall mean a rate of interest per annum equal to the prime
rate of interest from time to time established by First Star Bank of Iowa, N.A.
plus 25 basis points.
1.2 Accounting Terms. Any accounting terms used in this Agreement which
are not specifically defined herein shall have the meanings customarily given
them in accordance with Generally Accepted Accounting Principles.
1.3 Other Terms Defined in Nebraska Uniform Commercial Code. All other
terms contained in this Agreement (and which are not otherwise specifically
defined herein) shall have the meanings provided in the Uniform Commercial Code
of the State of Nebraska (the "Code") to the extent the same are used or defined
therein.
1.4 Effective Date. All references to "the date hereof," "the date of this
Agreement," "the effective date hereof," "effective as of the date hereof" or
"of even date herewith" contained herein or in the other shall be deemed to
refer to the day and year first above written.
2. CREDIT.
2.1 Line of Credit. Subject to the terms and conditions herein set forth,
Lender agrees to advance funds to Borrower upon its request from time to time
beginning on the date hereof and terminating on January 31, 2000, in such
amounts as the Borrower may from time to time request, in increments of not less
than Ten Thousand Dollars ($10,000), up to but not exceeding Five Hundred
Thousand Dollars ($500,000) at any time outstanding (the "Line of Credit").
Borrower may reborrow any advance once such advance has been repaid in whole or
in part.
2.2 Interest.
(a) So long as no Event of Default has occurred and is continuing, the
Borrower shall pay to the Lender interest on the outstanding principal balance
of the Obligations at the Regular Rate.
(b) Upon delivery of written notice by the Lender to the Borrower of the
occurrence of an Event of Default, the Borrower shall pay to the Lender interest
from the date of such Event of Default to and including the date of cure of such
Event of Default on the outstanding principal balance of the Obligations at the
Default Rate applicable to such Obligations.
2.3 Method of Making Payments. All payments to be made by the Borrower to
the Lender hereunder shall be made to the Lender at its address set forth above
not later than 12:00 noon Omaha time on the date when due in lawful money of the
United States of America and immediately available funds.
2.4 Term of this Agreement. This Agreement shall be effective until all of
the obligations under this Agreement have been finally paid in full; provided,
that even after full and final payment
<PAGE>
of all Obligations hereunder, the Borrower's Obligation to indemnify the Lender
in accordance with the terms hereof shall continue.
2.5 Payment Dates and Basis of Calculation. Any payment due hereunder on
any day other than a Business Day shall be due on the next succeeding Business
Day, and if such payment shall bear interest in accordance herewith, interest
shall accrue to the date of payment. All interest and fees (other than the
prepayment fee) shall be computed (on a daily basis) on the basis of a 360- day
year for the actual number of days elapsed.
2.6 Additional Consideration. As additional consideration for entering
into this Agreement, the Borrower shall issue to the Lender 83,333 fully paid,
nonassessable shares of Borrower's common stock, together with a warrant to
purchase 83,333 shares of such common stock at an exercise price of $1.00 per
share, exercisable at any time on or before October 31, 2000.
3. CONDITIONS TO FUNDING OF LINE OF CREDIT.
The advance of funds under the Line of Credit shall be conditioned upon
the matters set forth below, the delivery of the following documents to the
Lender, in form and substance satisfactory to the Lender, and consummation of
all of the transactions or the satisfaction of each condition contemplated by
each such document.
3.1 Warranties and Representations. All of the warranties and
representations of the Borrower contained herein shall be true and correct in
all material respects on and as of the date hereof.
3.2 No Default. As determined by the Lender, neither a Default nor an
Event of Default shall have occurred and be continuing or will result from such
advance.
3.3 No Litigation. There shall be (i) no litigation, investigation or
proceeding pending or threatened against the Borrower or any officer, director,
or executive (as applicable) of the Borrower (A) in connection with this
Agreement which, in the sole opinion of the Lender, is deemed material or (B)
which, if adversely determined, would, in the sole opinion of the Lender, have a
material adverse effect on the financial condition, business, or results of
operations of the Borrower; and (ii) no injunction, writ, restraining order or
other order of any nature materially adverse to the Borrower issued or
threatened by any court or governmental agency.
4. WARRANTIES.
The Borrower represents and warrants and covenants and agrees that as of
the date of the execution of this Agreement, and continuing so long as any
Obligations remain outstanding, and (even if there shall be no Obligations
outstanding) so long as this Agreement remains in effect:
4.1 Existence. The Borrower is a corporation duly organized, validly
existing and in good standing in the State of Delaware. The Borrower is
qualified to transact business as a foreign
<PAGE>
corporation in, and is in good standing under the laws of, all states in which
the Borrower is required by applicable law to maintain such qualification and
good standing.
4.2 Authority. The Borrower has full power, authority and legal right to
enter into this Agreement. The execution and delivery by the Borrower of this
Agreement: (i) have been duly authorized by all necessary action on the part of
the Borrower (including any required stockholders action); (ii) are not in
contravention of the terms of the Borrower's Articles of Incorporation or Bylaws
or of any indenture, agreement or undertaking to which the Borrower is a party
or by which the Borrower or any of its property is bound; (iii) do not and will
not require any governmental consent, registration or approval; (iv) do not and
will not contravene any contractual or governmental restriction to which the
Borrower or any of its property may be subject; and (v) do not and will not,
except as contemplated herein, result in the imposition of any lien, charge,
security interest or encumbrance upon any property of the Borrower under any
existing indenture, mortgage, deed of trust, loan or credit agreement or other
material agreement or instrument to which the Borrower is a party or by which
the Borrower or any of its property may be bound or affected. The Borrower has
the full corporate authority to own or lease and operate its property and to
conduct the business in which it is currently engaged and in which it proposes
to engage.
4.3 Binding Effect. This Agreement has been duly executed and delivered or
filed, as applicable, by the Borrower, is the legal, valid and binding
obligations of the Borrower and is enforceable against the Borrower in
accordance with their terms.
4.4 Place of Business. As of the execution hereof, the principal place of
business and chief executive office of the Borrower is at 3345 North 107th
Street, Omaha, Nebraska 68134
4.5 Survival of Warranties. All representations and warranties contained
in this Agreement shall survive the execution and delivery of this Agreement and
the termination hereof.
5. DEFAULT, RIGHTS AND REMEDIES OF THE LENDER.
5.1 Obligations. If an Event of Default shall exist or occur, the Lender
may notify the Borrower of its election to terminate this Agreement, the
Obligations shall be accelerated and all of the Obligations shall automatically,
without further notice of any kind, be immediately due and payable.
5.2 Rights and Remedies Generally. Upon acceleration of the Obligations,
the Lender shall have, in addition to any other rights and remedies contained in
this Agreement, all of the rights and remedies under the Code or other
applicable laws, all of which rights and remedies shall be cumulative and
non-exclusive, to the extent permitted by law.
6. OTHER RIGHTS AND OBLIGATIONS.
6.1 Waiver. The Lender's failure, at any time or times hereafter, to
require strict performance by the Borrower of any provision of this Agreement
shall not waive, affect or diminish any right of the Lender thereafter to demand
strict compliance and performance therewith. Any
<PAGE>
suspension or waiver by the Lender of a Default or an Event of Default under
this Agreement shall not suspend, waive or affect any other Default or Event of
Default under this Agreement, whether the same is prior or subsequent thereto
and whether of the same or of a different kind or character. None of the
undertakings, agreements, warranties, covenants and representations of the
Borrower contained in this Agreement and no Default or Event of Default by the
Borrower under this Agreement shall be deemed to have been suspended or waived
by the Lender unless such suspension or waiver is in writing and signed by an
officer of the Lender, and directed to the Borrower specifying such suspension
or waiver. This Agreement may not be modified or amended except in a written
agreement signed by the Borrower and the Lender.
6.2 Reliance by the Lender. All covenants, agreements, representations and
warranties made herein by the Borrower shall, notwithstanding any investigation
by the Lender, be deemed to be material to and to have been relied upon by the
Lender.
6.3 Parties and Assignment. Whenever in this Agreement reference is made
to any of the parties hereto, such reference shall be deemed to include,
wherever applicable, a reference to the successors and assigns of the Borrower
and the Lender. Notwithstanding the foregoing, the Borrower may not sell, assign
or transfer this Agreement, including without limitation its rights, titles,
interests, remedies, powers and/or duties hereunder or thereunder. The Borrower
hereby consents to the Lender's sale, assignment, transfer or other disposition,
at any time and from time to time hereafter, of this Agreement including without
limitation all or any part of the Lender's rights, titles, interests, remedies,
powers and/or duties hereunder or thereunder.
6.4 Applicable Law; Severability. THIS AGREEMENT SHALL BE CONSTRUED IN ALL
RESPECTS IN ACCORDANCE WITH, AND GOVERNED BY, ALL OF THE PROVISIONS OF THE
NEBRASKA UNIFORM COMMERCIAL CODE AND BY THE OTHER INTERNAL LAWS (AS OPPOSED TO
CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NEBRASKA. WHENEVER POSSIBLE, EACH
PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN SUCH A MANNER AS TO BE
EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS AGREEMENT
SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE
INEFFECTIVE ONLY TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF SUCH PROVISIONS OR THE REMAINING PROVISIONS OF
THIS AGREEMENT.
6.5 Submission to Jurisdiction; Waiver of Jury and Bond. THE BORROWER
HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN
THE COUNTY OF DOUGLAS, STATE OF NEBRASKA, AND IRREVOCABLY AGREES THAT, SUBJECT
TO THE LENDER'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS RELATING
TO THIS AGREEMENT SHALL BE LITIGATED IN SUCH COURTS, AND THE BORROWER WAIVES ANY
OBJECTION WHICH IT MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO
THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND WAIVES PERSONAL SERVICE OF
ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE
MADE BY MAIL OR MESSENGER DIRECTED TO IT AT THE ADDRESS SET
<PAGE>
FORTH IN SUBSECTION 6.9 BELOW AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME
SHALL HAVE BEEN POSTED TO THE BORROWER. THE LENDER AND THE BORROWER ACKNOWLEDGE
THAT THE TIME AND EXPENSE REQUIRED FOR TRIAL BY JURY EXCEED THE TIME AND EXPENSE
REQUIRED FOR A BENCH TRIAL AND HEREBY WAIVE, TO THE EXTENT PERMITTED BY LAW,
TRIAL BY JURY, AND WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH
MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE LENDER. NOTHING CONTAINED IN THIS
SUBSECTION 6.5 SHALL AFFECT THE RIGHT OF THE LENDER TO SERVE LEGAL PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE LENDER TO BRING ANY
ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY
OTHER JURISDICTION.
6.6 Marshalling. The Lender shall be under no obligation to marshal any
assets in favor of the Borrower or any other party or against or in payment of
any or all of the Obligations.
6.7 Section Titles. The section titles contained in this Agreement shall
be without substantive meaning or content of any kind whatsoever and are not a
part of the agreement between the parties.
6.8 Continuing Effect. This Agreement shall continue in full force and
effect so long as any Obligations shall be owed to the Lender; provided,
however, that the Borrower's obligations to indemnify the Lender shall continue
notwithstanding any termination of this Agreement.
6.9 Notices. Except as otherwise expressly provided herein, any notice
required or desired to be served, given or delivered hereunder shall be in
writing, and shall be deemed to have been validly served, given or delivered
three (3) days after deposit in the United States mails, with proper postage
prepaid, or upon delivery by courier or upon transmission by telex, telecopy or
similar electronic medium to the addresses set forth in the preamble to this
Agreement or to such other address as each party designates to the other in the
manner herein prescribed.
6.10 Waivers With Respect to Other Instruments. The Borrower waives
presentment, demand and protest and notice of presentment, demand, protest,
default, nonpayment, maturity, release, compromise, settlement, extension, or
renewal of any or all commercial paper, Accounts, contract rights, documents,
instruments, chattel paper and guaranties at any time held by the Lender on
which the Borrower may in any way be liable and hereby ratifies and confirms
whatever the Lender may do regarding the enforcement, collection, compromise, or
release thereof.
6.11 Entire Agreement. This Agreement, including all exhibits and other
documents attached hereto or incorporated by reference herein, constitutes the
entire agreement of the parties with respect to the subject matter hereof and
supersedes all other understandings, oral or written, with respect to the
subject matter hereof.
6.12 Equitable Relief. The Borrower recognizes that, in the event the Borrower
fails to perform, observe or discharge any of its Obligations under this
Agreement, any remedy at law may
<PAGE>
prove to be inadequate relief to the Lender; therefore, the Borrower agrees that
the Lender, if the Lender so requests, shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
6.13 No Fiduciary Relationship. No provision herein and no course of
dealing between the parties shall be deemed to create any fiduciary relationship
between the Lender and the Borrower.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
LENDER: BORROWER:
MARY M. COLLISON ADVANCED BUSINESS SCIENCES, INC.
- ------------------------ By:------------------------------
<PAGE>
Exhibit "A"
<PAGE>
PROMISSORY NOTE
$500,000 April 30, 1999
FOR VALUE RECEIVED, the undersigned, ADVANCED BUSINESS SCIENCES, INC., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to
the order of Mary M. Collison (the "Lender"), at 640 Hidden Valley Road,
Carroll, Iowa 51401-3205, or at such other place as the holder of this
promissory note (this "Note") may from time to time designate in writing, in
lawful money of the United States of America and in immediately available funds,
the principal sum of Five Hundred Thousand Dollars ($500,000) or, if less, the
aggregate unpaid principal amount of all advances made pursuant to subsection
2.1 of the Loan Agreement (as hereinafter defined) at such times as are
specified in and in accordance with the provisions of the Loan Agreement. This
Note is referred to in and was executed and delivered pursuant to that certain
Loan Agreement of even date herewith between the Borrower and the Lender (the
"Loan Agreement"), to which reference is hereby made for a statement of the
terms and conditions under which the loans evidenced hereby were made and are to
be repaid and for a statement of the Lender's remedies upon the occurrence of an
Event of Default(as defined therein). All terms which are capitalized and used
herein (which are not otherwise specifically defined herein) and which are
defined in the Loan Agreement shall be used in this Note as defined in the Loan
Agreement.
The Borrower further promises to pay interest on the outstanding unpaid
principal amount hereof, as provided in the Loan Agreement, from the date hereof
until payment in full hereof at the Regular Rate as determined in accordance
with the Loan Agreement; provided, however, that five (5) days following written
notice by the Lender to the Borrower that an Event of Default has occurred and
is continuing, the Borrower promises to pay the Lender interest from the date of
such Event of Default to and including the date of cure of such Event of Default
on the unpaid principal amount hereof at the Default Rate as determined in
accordance with the Loan Agreement. Interest shall be payable monthly in arrears
on the first day of each calendar month in accordance with the Loan Agreement
and shall be computed on the basis of a 360-day year for the actual number of
days elapsed.
If a payment hereunder becomes due and payable other than on a Business
Day, the due date thereof shall be extended to the next succeeding Business Day
and interest shall be payable thereon during such extension at the applicable
rate specified above. Checks, drafts or similar items of payment received by the
Lender shall not constitute payment, but credit therefor shall, solely for the
purpose of computing interest earned by the Lender, be given in accordance with
the Loan Agreement.
The Lender shall have the exclusive right to apply and to reapply any and
all payments hereunder against the Obligations in the manner set forth in the
Loan Agreement.
The Borrower hereby waives demand, presentment, protest, notice of demand,
presentment, protest and nonpayment.
<PAGE>
THIS NOTE SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE
PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
CONFLICTS OF LAW PROVISIONS) AND DECISIONS OF THE STATE OF NEBRASKA. WHENEVER
POSSIBLE EACH PROVISION OF THIS NOTE SHALL BE INTERPRETED IN SUCH MANNER AS TO
BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS NOTE
SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE
INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS
NOTE. WHENEVER IN THIS NOTE REFERENCE IS MADE TO THE LENDER OR THE BORROWER,
SUCH REFERENCE SHALL BE DEEMED TO INCLUDE, AS APPLICABLE, A REFERENCE TO THEIR
RESPECTIVE SUCCESSORS AND ASSIGNS. THE PROVISIONS OF THIS NOTE SHALL BE BINDING
UPON AND SHALL INURE TO THE BENEFIT OF SUCH SUCCESSORS AND ASSIGNS. THE
BORROWER'S SUCCESSORS AND ASSIGNS SHALL INCLUDE, WITHOUT LIMITATION, A RECEIVER,
TRUSTEE OR DEBTOR IN POSSESSION OF OR FOR THE BORROWER.
ADVANCED BUSINESS SCIENCES, INC.
By:-----------------------------------
LOAN AGREEMENT
This Loan Agreement (this "Agreement"), dated as of this 30th day of
April, 1999, by and between Advanced Business Sciences, Inc., a Delaware
corporation,, with its principal place of business and chief executive office at
3345 No. 107th Street, Omaha, Nebraska 68134 (the "Borrower"), and James L.
Pietig residing at 129 East Pleasant Ridge Drive, Carroll, Iowa 51401- 3211 (the
"Lender").
WHEREAS, in order to provide funds to the Borrower for working capital and
other purposes, the Borrower desires to borrow up to Five Hundred Thousand
Dollars ($500,000) from the Lender, and the Lender is willing to make a loan to
the Borrower of such amount, upon the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the terms and conditions contained
herein, and of any loans or extensions of credit heretofore, now or hereafter
made to or for the benefit of the Borrower by the Lender, the parties hereto
hereby agree as follows:
1. DEFINITIONS.
1.1 General Terms. When used herein, the following terms shall have the
following meanings:
"Affiliate" shall mean any Person (a) that directly or indirectly, through
one or more intermediaries, controls or is controlled by, or is under common
control with a Person, including, without limitation, the officers and directors
of such Person, (b) that directly or beneficially owns or holds 20% or more of
any equity interest in such Person, excluding the Lender, or (c) 20% or more of
whose voting stock (or in the case of a Person which is not a corporation, 20%
or more of any equity interest) is owned directly or beneficially or held by the
Affiliate. As used herein, the term "control" shall mean possession, directly or
indirectly, of the power to direct the management or policies of a Person,
whether through ownership of securities or otherwise.
"Assets" shall mean assets reflected on a balance sheet prepared in
accordance with Generally Accepted Accounting Principles, except that
investments in or monies due from any Affiliate shall be excluded therefrom.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banks in Omaha, Nebraska, are authorized or required to be closed.
"Default" shall mean an event which through the passage of time or the
service of notice or both would mature into an Event of Default.
"Default Rate" shall mean a rate of interest per annum equal to the
Regular Rate plus five percent.
<PAGE>
"Event of Default" shall mean the occurrence or existence of any one or
more of the following events: (a) the Borrower fails to pay any of its
"Obligations" hereunder upon demand or when such Obligations are due or are
declared due; (b) the Borrower fails or neglects to perform, keep or observe any
of the covenants, conditions or agreements contained in any of the subsections
of this Agreement or in any of the other ; or (c) any warranty or representation
now or hereafter made by the Borrower in connection with this Agreement is
untrue or incorrect in any material respect, or any schedule, certificate,
statement, report, financial data, notice, or writing furnished at any time by
the Borrower to the Lender is untrue or incorrect in any material respect, as of
the date on which the warranty, representation or the facts set forth therein
are stated, certified or deemed made.
"Generally Accepted Accounting Principles" shall mean, as of the date of
any determination with respect thereto, generally accepted accounting principles
as used by the Financial Accounting Standards Board and/or the American
Institute of Certified Public Accountants, consistently applied and maintained
throughout the periods indicated.
"Indebtedness" shall mean at a particular time, (a) indebtedness for
borrowed money or for the deferred purchase price of property or services in
respect of which the Borrower is liable, contingently or otherwise, as obligor
or otherwise or any commitment by which the Borrower assures a creditor against
loss, including contingent reimbursement obligations with respect to letters of
credit, (b) indebtedness guaranteed in any manner by the Borrower, including
guaranties in the form of an agreement to repurchase or reimburse, (c)
obligations under leases which shall have been or should be, in accordance with
Generally Accepted Accounting Principles, recorded as capital leases in respect
of which obligations the Borrower is liable, contingently or otherwise, as
obligor, guarantor or otherwise, or in respect of which obligations the Borrower
assures a creditor against loss, and (d) any unfunded obligation of the Borrower
to a "multiemployer plan" as such term is defined under the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
"Liabilities" shall have the meaning usually given that term in accordance
with Generally Accepted Accounting Principles, and shall include Indebtedness.
"Line of Credit" shall have the meaning ascribed thereto at subsection 2.1
hereof.
"Note" shall mean a promissory note issued by the Borrower in
substantially the form of Exhibit "A" hereto.
"Obligations" shall mean all of the Borrower's obligations, liabilities
and indebtedness to the Lender and/or to any Affiliate of the Lender of any and
every kind and nature arising or existing under this Agreement, whether now or
hereafter owing, arising, due or payable and howsoever evidenced, created,
incurred, acquired, or owing, whether primary, secondary, direct, indirect,
contingent, fixed or otherwise (including obligations of performance).
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, entity, party, or government (whether national, federal, state,
provincial, county, city, municipal or otherwise, including, without limitation,
any instrumentality, division, agency, body or department thereof).
<PAGE>
"Plan" shall mean any employee benefit or other plan maintained for the
employees of the Borrower or to which the Borrower is obligated to contribute
and subject to Title IV of ERISA.
"Regular Rate" shall mean a rate of interest per annum equal to the prime
rate of interest from time to time established by First Star Bank of Iowa, N.A.
plus 25 basis points.
1.2 Accounting Terms. Any accounting terms used in this Agreement which
are not specifically defined herein shall have the meanings customarily given
them in accordance with Generally Accepted Accounting Principles.
1.3 Other Terms Defined in Nebraska Uniform Commercial Code. All other
terms contained in this Agreement (and which are not otherwise specifically
defined herein) shall have the meanings provided in the Uniform Commercial Code
of the State of Nebraska (the "Code") to the extent the same are used or defined
therein.
1.4 Effective Date. All references to "the date hereof," "the date of this
Agreement," "the effective date hereof," "effective as of the date hereof" or
"of even date herewith" contained herein or in the other shall be deemed to
refer to the day and year first above written.
2. CREDIT.
2.1 Line of Credit. Subject to the terms and conditions herein set forth,
Lender agrees to advance funds to Borrower upon its request from time to time
beginning on the date hereof and terminating on January 31, 2000, in such
amounts as the Borrower may from time to time request, in increments of not less
than Ten Thousand Dollars ($10,000), up to but not exceeding Five Hundred
Thousand Dollars ($500,000) at any time outstanding (the "Line of Credit").
Borrower may reborrow any advance once such advance has been repaid in whole or
in part.
2.2 Interest.
(a) So long as no Event of Default has occurred and is continuing, the
Borrower shall pay to the Lender interest on the outstanding principal balance
of the Obligations at the Regular Rate.
(b) Upon delivery of written notice by the Lender to the Borrower of the
occurrence of an Event of Default, the Borrower shall pay to the Lender interest
from the date of such Event of Default to and including the date of cure of such
Event of Default on the outstanding principal balance of the Obligations at the
Default Rate applicable to such Obligations.
2.3 Method of Making Payments. All payments to be made by the Borrower to
the Lender hereunder shall be made to the Lender at its address set forth above
not later than 12:00 noon Omaha time on the date when due in lawful money of the
United States of America and immediately available funds.
2.4 Term of this Agreement. This Agreement shall be effective until all of
the obligations under this Agreement have been finally paid in full; provided,
that even after full and final payment
<PAGE>
of all Obligations hereunder, the Borrower's Obligation to indemnify the Lender
in accordance with the terms hereof shall continue.
2.5 Payment Dates and Basis of Calculation. Any payment due hereunder on
any day other than a Business Day shall be due on the next succeeding Business
Day, and if such payment shall bear interest in accordance herewith, interest
shall accrue to the date of payment. All interest and fees (other than the
prepayment fee) shall be computed (on a daily basis) on the basis of a 360- day
year for the actual number of days elapsed.
2.6 Additional Consideration. As additional consideration for entering
into this Agreement, the Borrower shall issue to the Lender 83,333 fully paid,
nonassessable shares of Borrower's common stock, together with a warrant to
purchase 83,333 shares of such common stock at an exercise price of $1.00 per
share, exercisable at any time on or before October 31, 2000.
3. CONDITIONS TO FUNDING OF LINE OF CREDIT.
The advance of funds under the Line of Credit shall be conditioned upon
the matters set forth below, the delivery of the following documents to the
Lender, in form and substance satisfactory to the Lender, and consummation of
all of the transactions or the satisfaction of each condition contemplated by
each such document.
3.1 Warranties and Representations. All of the warranties and
representations of the Borrower contained herein shall be true and correct in
all material respects on and as of the date hereof.
3.2 No Default. As determined by the Lender, neither a Default nor an
Event of Default shall have occurred and be continuing or will result from such
advance.
3.3 No Litigation. There shall be (i) no litigation, investigation or
proceeding pending or threatened against the Borrower or any officer, director,
or executive (as applicable) of the Borrower (A) in connection with this
Agreement which, in the sole opinion of the Lender, is deemed material or (B)
which, if adversely determined, would, in the sole opinion of the Lender, have a
material adverse effect on the financial condition, business, or results of
operations of the Borrower; and (ii) no injunction, writ, restraining order or
other order of any nature materially adverse to the Borrower issued or
threatened by any court or governmental agency.
4. WARRANTIES.
The Borrower represents and warrants and covenants and agrees that as of
the date of the execution of this Agreement, and continuing so long as any
Obligations remain outstanding, and (even if there shall be no Obligations
outstanding) so long as this Agreement remains in effect:
4.1 Existence. The Borrower is a corporation duly organized, validly
existing and in good standing in the State of Delaware. The Borrower is
qualified to transact business as a foreign
<PAGE>
corporation in, and is in good standing under the laws of, all states in which
the Borrower is required by applicable law to maintain such qualification and
good standing.
4.2 Authority. The Borrower has full power, authority and legal right to
enter into this Agreement. The execution and delivery by the Borrower of this
Agreement: (i) have been duly authorized by all necessary action on the part of
the Borrower (including any required stockholders action); (ii) are not in
contravention of the terms of the Borrower's Articles of Incorporation or Bylaws
or of any indenture, agreement or undertaking to which the Borrower is a party
or by which the Borrower or any of its property is bound; (iii) do not and will
not require any governmental consent, registration or approval; (iv) do not and
will not contravene any contractual or governmental restriction to which the
Borrower or any of its property may be subject; and (v) do not and will not,
except as contemplated herein, result in the imposition of any lien, charge,
security interest or encumbrance upon any property of the Borrower under any
existing indenture, mortgage, deed of trust, loan or credit agreement or other
material agreement or instrument to which the Borrower is a party or by which
the Borrower or any of its property may be bound or affected. The Borrower has
the full corporate authority to own or lease and operate its property and to
conduct the business in which it is currently engaged and in which it proposes
to engage.
4.3 Binding Effect. This Agreement has been duly executed and delivered or
filed, as applicable, by the Borrower, is the legal, valid and binding
obligations of the Borrower and is enforceable against the Borrower in
accordance with their terms.
4.4 Place of Business. As of the execution hereof, the principal place of
business and chief executive office of the Borrower is at 3345 North 107th
Street, Omaha, Nebraska 68134
4.5 Survival of Warranties. All representations and warranties contained
in this Agreement shall survive the execution and delivery of this Agreement and
the termination hereof.
5. DEFAULT, RIGHTS AND REMEDIES OF THE LENDER.
5.1 Obligations. If an Event of Default shall exist or occur, the Lender
may notify the Borrower of its election to terminate this Agreement, the
Obligations shall be accelerated and all of the Obligations shall automatically,
without further notice of any kind, be immediately due and payable.
5.2 Rights and Remedies Generally. Upon acceleration of the Obligations,
the Lender shall have, in addition to any other rights and remedies contained in
this Agreement, all of the rights and remedies under the Code or other
applicable laws, all of which rights and remedies shall be cumulative and
non-exclusive, to the extent permitted by law.
6. OTHER RIGHTS AND OBLIGATIONS.
6.1 Waiver. The Lender's failure, at any time or times hereafter, to
require strict performance by the Borrower of any provision of this Agreement
shall not waive, affect or diminish any right of the Lender thereafter to demand
strict compliance and performance therewith. Any
<PAGE>
suspension or waiver by the Lender of a Default or an Event of Default under
this Agreement shall not suspend, waive or affect any other Default or Event of
Default under this Agreement, whether the same is prior or subsequent thereto
and whether of the same or of a different kind or character. None of the
undertakings, agreements, warranties, covenants and representations of the
Borrower contained in this Agreement and no Default or Event of Default by the
Borrower under this Agreement shall be deemed to have been suspended or waived
by the Lender unless such suspension or waiver is in writing and signed by an
officer of the Lender, and directed to the Borrower specifying such suspension
or waiver. This Agreement may not be modified or amended except in a written
agreement signed by the Borrower and the Lender.
6.2 Reliance by the Lender. All covenants, agreements, representations and
warranties made herein by the Borrower shall, notwithstanding any investigation
by the Lender, be deemed to be material to and to have been relied upon by the
Lender.
6.3 Parties and Assignment. Whenever in this Agreement reference is made
to any of the parties hereto, such reference shall be deemed to include,
wherever applicable, a reference to the successors and assigns of the Borrower
and the Lender. Notwithstanding the foregoing, the Borrower may not sell, assign
or transfer this Agreement, including without limitation its rights, titles,
interests, remedies, powers and/or duties hereunder or thereunder. The Borrower
hereby consents to the Lender's sale, assignment, transfer or other disposition,
at any time and from time to time hereafter, of this Agreement including without
limitation all or any part of the Lender's rights, titles, interests, remedies,
powers and/or duties hereunder or thereunder.
6.4 Applicable Law; Severability. THIS AGREEMENT SHALL BE CONSTRUED IN ALL
RESPECTS IN ACCORDANCE WITH, AND GOVERNED BY, ALL OF THE PROVISIONS OF THE
NEBRASKA UNIFORM COMMERCIAL CODE AND BY THE OTHER INTERNAL LAWS (AS OPPOSED TO
CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NEBRASKA. WHENEVER POSSIBLE, EACH
PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN SUCH A MANNER AS TO BE
EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS AGREEMENT
SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE
INEFFECTIVE ONLY TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF SUCH PROVISIONS OR THE REMAINING PROVISIONS OF
THIS AGREEMENT.
6.5 Submission to Jurisdiction; Waiver of Jury and Bond. THE BORROWER
HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN
THE COUNTY OF DOUGLAS, STATE OF NEBRASKA, AND IRREVOCABLY AGREES THAT, SUBJECT
TO THE LENDER'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS RELATING
TO THIS AGREEMENT SHALL BE LITIGATED IN SUCH COURTS, AND THE BORROWER WAIVES ANY
OBJECTION WHICH IT MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO
THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND WAIVES PERSONAL SERVICE OF
ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE
MADE BY MAIL OR MESSENGER DIRECTED TO IT AT THE ADDRESS SET
<PAGE>
FORTH IN SUBSECTION 6.9 BELOW AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME
SHALL HAVE BEEN POSTED TO THE BORROWER. THE LENDER AND THE BORROWER ACKNOWLEDGE
THAT THE TIME AND EXPENSE REQUIRED FOR TRIAL BY JURY EXCEED THE TIME AND EXPENSE
REQUIRED FOR A BENCH TRIAL AND HEREBY WAIVE, TO THE EXTENT PERMITTED BY LAW,
TRIAL BY JURY, AND WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH
MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE LENDER. NOTHING CONTAINED IN THIS
SUBSECTION 6.5 SHALL AFFECT THE RIGHT OF THE LENDER TO SERVE LEGAL PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE LENDER TO BRING ANY
ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY
OTHER JURISDICTION.
6.6 Marshalling. The Lender shall be under no obligation to marshal any
assets in favor of the Borrower or any other party or against or in payment of
any or all of the Obligations.
6.7 Section Titles. The section titles contained in this Agreement shall
be without substantive meaning or content of any kind whatsoever and are not a
part of the agreement between the parties.
6.8 Continuing Effect. This Agreement shall continue in full force and
effect so long as any Obligations shall be owed to the Lender; provided,
however, that the Borrower's obligations to indemnify the Lender shall continue
notwithstanding any termination of this Agreement.
6.9 Notices. Except as otherwise expressly provided herein, any notice
required or desired to be served, given or delivered hereunder shall be in
writing, and shall be deemed to have been validly served, given or delivered
three (3) days after deposit in the United States mails, with proper postage
prepaid, or upon delivery by courier or upon transmission by telex, telecopy or
similar electronic medium to the addresses set forth in the preamble to this
Agreement or to such other address as each party designates to the other in the
manner herein prescribed.
6.10 Waivers With Respect to Other Instruments. The Borrower waives
presentment, demand and protest and notice of presentment, demand, protest,
default, nonpayment, maturity, release, compromise, settlement, extension, or
renewal of any or all commercial paper, Accounts, contract rights, documents,
instruments, chattel paper and guaranties at any time held by the Lender on
which the Borrower may in any way be liable and hereby ratifies and confirms
whatever the Lender may do regarding the enforcement, collection, compromise, or
release thereof.
6.11 Entire Agreement. This Agreement, including all exhibits and other
documents attached hereto or incorporated by reference herein, constitutes the
entire agreement of the parties with respect to the subject matter hereof and
supersedes all other understandings, oral or written, with respect to the
subject matter hereof.
6.12 Equitable Relief. The Borrower recognizes that, in the event the
Borrower fails to perform, observe or discharge any of its Obligations under
this Agreement, any remedy at law may
<PAGE>
prove to be inadequate relief to the Lender; therefore, the Borrower agrees that
the Lender, if the Lender so requests, shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
6.13 No Fiduciary Relationship. No provision herein and no course of
dealing between the parties shall be deemed to create any fiduciary relationship
between the Lender and the Borrower.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
LENDER: BORROWER:
JAMES L. PIETIG ADVANCED BUSINESS SCIENCES, INC.
By:
- ----------------------- -----------------------------------
<PAGE>
Exhibit "A"
<PAGE>
PROMISSORY NOTE
$500,000 April 30, 1999
FOR VALUE RECEIVED, the undersigned, ADVANCED BUSINESS SCIENCES, INC., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to
the order of James L. Pietig (the "Lender"), at 129 East Pleasant Ridge Drive,
Carroll, Iowa 51401-3211, or at such other place as the holder of this
promissory note (this "Note") may from time to time designate in writing, in
lawful money of the United States of America and in immediately available funds,
the principal sum of Five Hundred Thousand Dollars ($500,000) or, if less, the
aggregate unpaid principal amount of all advances made pursuant to subsection
2.1 of the Loan Agreement (as hereinafter defined) at such times as are
specified in and in accordance with the provisions of the Loan Agreement. This
Note is referred to in and was executed and delivered pursuant to that certain
Loan Agreement of even date herewith between the Borrower and the Lender (the
"Loan Agreement"), to which reference is hereby made for a statement of the
terms and conditions under which the loans evidenced hereby were made and are to
be repaid and for a statement of the Lender's remedies upon the occurrence of an
Event of Default(as defined therein). All terms which are capitalized and used
herein (which are not otherwise specifically defined herein) and which are
defined in the Loan Agreement shall be used in this Note as defined in the Loan
Agreement.
The Borrower further promises to pay interest on the outstanding unpaid
principal amount hereof, as provided in the Loan Agreement, from the date hereof
until payment in full hereof at the Regular Rate as determined in accordance
with the Loan Agreement; provided, however, that five (5) days following written
notice by the Lender to the Borrower that an Event of Default has occurred and
is continuing, the Borrower promises to pay the Lender interest from the date of
such Event of Default to and including the date of cure of such Event of Default
on the unpaid principal amount hereof at the Default Rate as determined in
accordance with the Loan Agreement. Interest shall be payable monthly in arrears
on the first day of each calendar month in accordance with the Loan Agreement
and shall be computed on the basis of a 360-day year for the actual number of
days elapsed.
If a payment hereunder becomes due and payable other than on a Business
Day, the due date thereof shall be extended to the next succeeding Business Day
and interest shall be payable thereon during such extension at the applicable
rate specified above. Checks, drafts or similar items of payment received by the
Lender shall not constitute payment, but credit therefor shall, solely for the
purpose of computing interest earned by the Lender, be given in accordance with
the Loan Agreement.
The Lender shall have the exclusive right to apply and to reapply any and
all payments hereunder against the Obligations in the manner set forth in the
Loan Agreement.
The Borrower hereby waives demand, presentment, protest, notice of demand,
presentment, protest and nonpayment.
<PAGE>
THIS NOTE SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE
PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
CONFLICTS OF LAW PROVISIONS) AND DECISIONS OF THE STATE OF NEBRASKA. WHENEVER
POSSIBLE EACH PROVISION OF THIS NOTE SHALL BE INTERPRETED IN SUCH MANNER AS TO
BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS NOTE
SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE
INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS
NOTE. WHENEVER IN THIS NOTE REFERENCE IS MADE TO THE LENDER OR THE BORROWER,
SUCH REFERENCE SHALL BE DEEMED TO INCLUDE, AS APPLICABLE, A REFERENCE TO THEIR
RESPECTIVE SUCCESSORS AND ASSIGNS. THE PROVISIONS OF THIS NOTE SHALL BE BINDING
UPON AND SHALL INURE TO THE BENEFIT OF SUCH SUCCESSORS AND ASSIGNS. THE
BORROWER'S SUCCESSORS AND ASSIGNS SHALL INCLUDE, WITHOUT LIMITATION, A RECEIVER,
TRUSTEE OR DEBTOR IN POSSESSION OF OR FOR THE BORROWER.
ADVANCED BUSINESS SCIENCES, INC.
By:-----------------------------------
BINARY SOFTWARE LICENSE AGREEMENT
THIS BINARY SOFTWARE LICENSE AGREEMENT ("Agreement") is made and entered into as
of the Effective Date, by and between SiRF TECHNOLOGY INCORPORATED, a California
corporation, having offices at 39-10 Freedom Circle, Santa Clara, California
95054 ("SiRF") and the entity identified on the Licensee signature line below
("Licensee").
RECITALS:
A. SiRF has developed and distributes the SiRFstarTM which is a technology for
use in the Global Position System ("GPS") market, which technology includes
Software Products and Documentation (as defined below) which SiRF owns, or has
rights to; and
B. Licensee is purchasing SiRF Chips to develop, have developed or use in
connection with GPS Products, as defined below; and
C. As part of that purchase, SiRF desires to grant to Licensee and Licensee
desires to obtain from SiRF a nonexclusive license to use and sell the Software
Products and Documentation on the terms and conditions of this Agreement:
NOW, THEREFORE, the parties to this Agreement agree as follows:
1. Definitions.
1,1 "Software Products" shall mean the software identified in Exhibit A of this
Agreement and licensed to Licensee under
,this Agreement, together with any Error Corrections that SiRF supplies to
Licensee pursuant to this Agreement.
1.2 "Binary Format" shall mean the object code version of software program
instructions.
1.3 "Documentation" shall mean all manuals, user documentation and other related
materials pertaining to the Software Products that SiRF provides to Licensee for
use in connection with the Software Products.
1.4 "Error Corrections" shall mean all bug fixes, including patches and
work-arounds, to the Software Products.
1.5 "Modifications" shall mean all modifications and additions to the Software
Products other than Error Corrections.
I
<PAGE>
1.6 "SiRF Chips" shall mean integrated circuit products that SiRF sells to
Licensee during the term of this Agreement.
1.7 "Effective Date" shall mean the date set forth on the signature page of this
Agreement.
1.8 "GPS Product" shall mean each product for sale and use in the market in
which the SiRF Chips purchased by Licensee are included.
2.
Grant of Rights to Binary Software Products
SiRF hereby grants to Licensee, and Licensee hereby accepts, subject to the
terms and conditions of this Agreement: a non-exclusive, non-transferable
license to distribute and use the Binary Format Software Products (the "Binary
Software Products") and the related Documentation, solely with SiRF Chips as a
part of GPS Products; and a non-exclusive, non-transferable license to grant
sublicenses to others to do the foregoing.
Licensee shall have no right or license to reproduce, modify, manufacture or
otherwise use the Binary Software Products except as expressly provided above.
Further, notwithstanding Licensees right to sublicense the Binary Software
Products to others for distribution and use with SiRF Chips as a part of GPS
Products, Licensee shall have no right to sublicense or authorize parties to
reproduce, modify, manufacture or otherwise use the Binary Software Product,
without SiRF's prior written permission. Licensee agrees not to attempt to
modify, reverse engineer, disassemble, decompile or trace the execution of the
Binary Software Products, or of any portion thereof.
Licensee shall have no right or license to receive or use source code for the
Software Products, unless such right or license is granted as part of a separate
written agreement between SiRF and Licensee.
3.
Error Corrections and Modifications.
3.1 Error Corrections and Updates. SiRF will have no obligation to make any
Error Corrections to the Software Products. If SiRF does make any Error
Corrections, then it may, at its discretion, elect to provide Licensee with
Error Corrections.
3.2 Modifications by SiRF. SiRF shall be under no obligation to make
Modifications that may be required for Licensee-specific hardware, firmware,
software, or other requirements. All Modifications to the Software Products or
Documentation made by SiRF or its suppliers shall be the sole property of SiRF
or of its suppliers, or both.
4.
GPS Products.
<PAGE>
4.1 Title to Software Products Incorporated in GPS Products. Title to and
ownership of any portion of the Software Products incorporated into a GPS
Product shall at all times remain with SiRF or its suppliers, or both, and
Licensee shall not have any title or ownership interest therein.
4.2 Title to GPS Products. Title to and ownership of any portion of a GPS
Product created by Licensee and not owned by SiRF or its suppliers, or both,
pursuant to Section 4.1 above, shall be held by-Licensee.
4.3 Maintenance of GPS Products. SiRF shall not be required to maintain or
otherwise repair any GPS Product. Any assistance in repairing errors or defects
in the GPS Products which may be provided by SiRF, in its sole discretion, shall
be subject to the terms of a separate agreement under which
[GRAPHIC OMITTED]
<PAGE>
Licensee shall pay SiRF in accordance with SiRF's then-current charges for such
services.
4.4 Products Developed by SiRF. Nothing contained in this Agreement shall be
construed to limit SiRF's rights to modify the Software Products or to develop
other Products which are similar to or offer the same or similar improvements as
GPS Products developed by Licensee.
5.
Protection of Software Products.
5.1 Ownership. Licensee acknowledges that all copies of the Software Products in
any form provided by SiRF or made by Licensee are the sole property of SiRF or
its suppliers, or both. Licensee shall not have any right, title or interest in
or to any Software Products, or copies thereof except as expressly provided in
this Agreement, and further shall secure and protect all Software Products and
Documentation consistent with maintenance of SiRF's proprietary rights therein.
5.2 Additional Sublicensing Restrictions. In addition to other restrictions set
forth in this Agreement, Licensee shall not sublicense a Software Product or any
portion of a Software Product incorporated into a GPS Product without entering
into a written agreement with the sublicensee that imposes the same restrictions
on the sublicensee as are placed on the Licensee by this Agreement.
5.3 ' Inclusion of Proprietary Notice. Licensee agrees to, and shall require any
sublicensees to, include in the user interface for each GPS Product, a pop-up
screen containing SiRF's proprietary notice, in the form provided in Exhibit B
of this Agreement. The pop-up screen shall be similar in frequency and location
of appearance, size, position, clarity and length of time it is visible on the
screen as Licensee's own such proprietary notice screen. SiRF may modify Exhibit
B from time to time upon thirty (30) days notice to Licensee.
5.4 Retention of Proprietary Notices. Licensee agrees not to remove, obliterate,
or cancel from view any copyright, trademark, confidentiality or other
proprietary notice, mark or legend appearing on any of the Software Products or
on output generated by the Software Products and shall include the same on each
copy of the Software Products.
5.5 Mark Ownership. Nothing contained in this Agreement shall be construed as
conferring any license or right with respect to any trademark, trade name, brand
name, or the corporate name of SiRF, or of -any of SiRF's suppliers. Any
goodwill gained from the use of such marks and names will inure to SiRF's
benefit.
6. Confidentiality. "Confidential Information" shall mean any and all technical
and non-technical documents and information including patent, copyright, trade
secret and proprietary information, techniques, algorithms, and software
programs related to SiRF's current, future and proposed products and services,
and includes, without limitation, SiRF's information concerning research,
engineering, financial information, procurement requirements, purchasing,
manufacturing, customer lists, business forecasts, sales and merchandising, and
marketing plans and information.
<PAGE>
Licensee agrees to maintain in confidence SiRF's Confidential Information.
Licensee shall at all times, both during the term of this Agreement and for a
period of five (5) years after its termination, keep in confidence all such
Confidential Information, and shall not use such Confidential Information
without SiRF's written consent except in performance of its duties under this
Agreement. Licensee will not disclose the Confidential Information to any person
except its employees to whom it is necessary to disclose the Confidential
Information for purposes permitted under this Agreement and who have agreed in
writing to receive it under terms at least as restrictive as
<PAGE>
those specified in this Agreement. Licensee will take reasonable measures to
maintain the confidentiality of the Confidential Information, but -not less than
the measures it uses for its confidential information of similar type. Licensee
will immediately give notice to SiRF of any unauthorized use or disclosure of
the Confidential Information. Licensee agrees to assist SiRF in remedying such
unauthorized use or disclosure of the Confidential Information.
This obligation will not apply to the extent that Licensee can demonstrate:
(a) the disclosed information at the time of disclosure is
Part of the public domain; -
(b) the disclosed information became part of the public domain, by publication
or otherwise, except by breach of the provisions of this Agreement;
(c) the disclosed information can be established by written evidence to have
been in the possession of the Licensee at the time of disclosure or to have been
independently developed by Licensee's employees who did 'not have access to the
Confidential Information; or
(d) Licensee received the disclosed information independently of this Agreement
from a third party without any obligation of confidence.
7. Injunctive Relief. Licensee acknowledges that the unauthorized use, transfer,
sublicensing or disclosure of the Software Products, Documentation or copies
thereof may cause irreparable injury to SiRF, and under such circumstances SiRF
shall be entitled to equitable relief, including, but not limited to,
preliminary and permanent injunctive relief and Licensee waives any requirements
that a bond be posted.
8. Limited Warranty; Infringement. SiRF represents and warrants to Licensee that
it is the sole owner of the Software Product, or has procured the Software
Product under valid licenses from the owners thereof, and SiRF represents and
warrants that it has full power and -authority to grant the rights herein
granted without the consent of any other person and as of the date of this
Agreement it has no knowledge that the Software Products or Documentation
infringe or otherwise make unauthorized use of any patent, copyright, trademark
or trade secret of any party.
8.1 Remedy for Infringement. If a court of competent jurisdiction rules that a
Software Product infringes upon the copyright, trademark or trade secret rights
of a third party, SiRF shall, at its option, obtain a license from that third
party, modify or replace the infringing Software Product with non-infringing
software of similar functionality, or accept the return of the Software Product
from Licensee and refund to Licensee all amounts that Licensee paid to SiRF for
the Software Products. This remedy for infringement is Licensee's exclusive
remedy, and Licensee hereby waives all other remedies, rights, causes of actions
and claims against SiRF and its suppliers, whether in contract, tort, by
statute, or otherwise,: as well as any and all damages for infringement and
other indemnity, whether direct, consequential or otherwise. THE WARRANTY AND
INDEMNITY IN THIS SECTION 8 DO NOT APPLY TO USE OF SOFTWARE PRODUCTS IN
COMBINATION WITH ANY OTHER PRODUCTS.
<PAGE>
9.
Disclaimer and Limitation of Liability
9.1 Disclaimer of Warranties. THE SOFTWARE PRODUCTS AND DOCUMENTATION AND ANY
AND ALL UTD_A ES AND MODIFICATIONS TO THE SAME ARE LICENSED "AS IS" AND THE
WARRANTY PROVIDED IN SECTION 8 ABOVE IS THE SOLE AND EXCLUSIVE WARRANTY OFFERED
BY SiRF. SiRF DOES NOT REPRESENT OR WARRANT THAT ERRORS IN THE SOFTWARE PRODUCTS
OR DOCUMENTATION WILL BE CORRECTED OR THAT THE SOFTWARE
<PAGE>
PRODUCTS WILL RUN ERROR-FREE. EXCEPT AS SET FORTH IN SECTION 8 ABOVE, THERE ARE
NO WARRANTIES RESPECTING THE SOFTWARE PRODUCTS, DOCUMENTATION OR SERVICES
PROVIDED UNDER THIS AGREEMENT, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT
LIMITED TO ANY WARRANTY OF DESIGN, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR
PURPOSE, EVEN IF SiRF HAS BEEN INFORMED OF SUCH PURPOSE, OR WARRANTY AGAINST
INFRINGEMENT'. NO AGENT OF SiRF IS AUTHORIZED TO ALTER OR EXCEED THE WARRANTY
OBLIGATIONS OF SiRF AS SET FORTH IN THIS AGREEMENT.
9.2 Limitation of Remedies and Liability . SiRF SHALL NOT BE LIABLE TO LICENSEE
OR TO ANY OF LICENSEE'S SUBLICENSEES, CUSTOMERS, OR END-USERS FOR ANY LOSS OF
PROFIT, INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES
ARISING OUT OF OR RELATING TO THE LICENSING OR USE OF THE SOFTWARE PRODUCTS OR
DOCUMENTATION OR FOR ANY ERROR OR DEFECT IN THE SOFTWARE PRODUCTS OR
DOCUMENTATION. The maximum liability of SiRF arising out of or in connection
with any license, use or other employment of any Software Product delivered to
Licensee under this Agreement, whether such liability arises from any claim
based on breach or repudiation of contract, warranty, tort or otherwise, shall
in no case exceed the greater of Fifty Dollars ($50) or the actual price paid to
SiRF by Licensee for the SiRF Chip whose license, use, or other employment gives
rise to the liability.
10. Licensee's Indemnification. Licensee shall indemnify SiRF and its suppliers
and hold them harmless from any and all liabilities, claims, costs, losses, and
expenses including, but not limited to, reasonable attorneys' fees and costs of
suit incurred by SiRF or its suppliers, or both, arising out of or relating to
Licensee's misuse, modification, upgrade, additions, alteration, sale,
marketing, reproduction, sublicensing or other distribution of the Software
Products or GPS Products.
11.
Term and Termination.
11.1 Term of Agreement. This Agreement shall be effective on the Effective Date
and shall continue in effect until terminated in accordance with the terms and
conditions of this Section 11.
11.2 Termination by SiRF . If SiRF loses any of its rights as to any Software
Product, SiRF may terminate this Agreement with respect to such Software
Product.
11.3 Breach. Either party may terminate this Agreement for material breach by
providing thirty (30) days written notice to the breaching party, unless the
breach is corrected during such
,thirty (30) day period. Material breach on the part of Licensee shall include,
but not be limited to, failure to pay License Fees when due; filing a petition
to declare such party insolvent or bankrupt which is not dismissed within thirty
(30) days; making an assignment or other arrangement for the benefit of
creditors; or being dissolved or liquidated.
<PAGE>
11.4 Obligations on Termination. Upon termination of this Agreement, all rights
granted by this Agreement shall revert to SiRF and Licensee shall cease and
desist all use of the Software Products and Documentation. Licensee shall
destroy or deliver to SiRF within three (3) days of termination all full or
partial copies of the Software Products and Documentation in Licensee's
possession or under its control, other than those properly distributed by
Licensee prior to termination, and will warrant to SiRF such destruction or
delivery. Licensee's failure to comply with the obligations of this Section 11.4
will constitute unauthorized use of the Software Products and Documentation,
entitling SiRF to equitable relief under Section 7 above and damages.
11.5 No Liability. Neither party shall be liable to the other for terminating
this Agreement, other than termination by breach, in accordance with its terms.
<PAGE>
11.6 Survival. The following provisions of this Agreement shall survive its
termination: Sections 4, 5, 6, 7, 8, 9, 10, 11.4, 11.6, 14, 15, 16, 18 and 20.
12. Notices. All notices, requests, and other communications in connection with
this Agreement shall be deemed given (i) five days after being deposited in the
mail, postage pre-paid, certified, or registered, return receipt requested, or
(ii) one day after being sent by overnight courier, charges prepaid, with a
confirming fax; and addressed as set forth below or to such other address as the
party to receive the notice or request so designates by written notice to the
other.
If to SiRF: SiRF Technology Incorporated
3970 Freedom Circle
Santa Clara, California 95054
Attn: Vice President Marketing
Facsimile: (408) 980-4705
If to Licensee: To the address set forth on the Signature Page below
13. Nonassignability. Licensee shall not assign or transfer this Agreement or
all or any part of-its rights hereunder, by operation of law or otherwise,
without the prior written consent of SiRF, except that Licensee may assign and
transfer all its rights under this Agreement solely to a successor-interest in
the event of a merger, consolidation or sale of substantially all of Licensee's
assets or stock. Any unauthorized assignment or transfer shall be null and void
and shall constitute a breach, entitling SiRF to terminate this Agreement under
Section 11 above. This Agreement shall inure to the benefit of and be binding
upon each party's permitted successors and assigns.
14. Governing Law, Jurisdiction and Venue. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of,
the State of California, excluding its conflict of laws principles. The
California state courts of Santa Clara County, California (or, if federal courts
have exclusive jurisdiction, the United States District Court for the Northern
District of California) shall have exclusive jurisdiction and venue over any
dispute arising out of or relating to this Agreement, and Licensee hereby
consents to the jurisdiction and venue of such courts. Licensee shall file any
action arising out of or relating to this Agreement in the appropriate court
within one (1) year from the date that such cause of action accrues.
15. Export Requirements. The Software Products, Documentation and all related
technical information or materials are subject to export controls and are
licensable under the U.S. Government export regulations. Licensee will not
export, re-export, divert, transfer or disclose, directly or indirectly the
Software Products, Documentation and any related technical information or
materials without complying strictly with all legal requirements including
without limitation obtaining the prior approval of the U.S. Department of
Commerce. Licensee will execute and deliver to SiRF such "Letters of Assurance"
as may be required under applicable export regulations. Licensee shall indemnify
SiRF against any loss related to Licensee's failure to conform to these
requirements.
16. Compliance with Laws; Government GPS Limitations. Licensee agrees
that, in the marketing, distributing and sale of the GPS Products, it will
comply with, and that all GPS Products
<PAGE>
(and the Software Products as incorporated therein) will conform to, all
applicable federal, state and local orders, laws, regulations and ordinances,
including specifically United States federal government regulations relating to
GPS technology. Current limitations on GPS technology known to SiRF include
those identified in Exhibit C hereto. Licensee shall defend, indemnify and hold
SiRF harmless against any and all claims, actions, causes of action, loss and
expenses arising out of
- -141.1
[GRAPHIC OMITTED]
<PAGE>
Licensee's failure to abide by this Section 16.
17. U.S. Government Restricted Rights. The Software Products and Documentation
are provided with Restricted Rights. Use, duplication, or disclosure by the
Government is subject to restrictions as set forth in this Agreement, pursuant
to DFARS 227-7202-3 or subparagraphs (c) (i) and (2) of the Commercial Computer
Software-Restricted Rights at 48 CFR 52.227-19, as applicable, or as set forth
in the particular department or agency regulations or rules that provide SiRF
with protection equivalent to or greater than the above-cited clause. The
Manufacturer is SiRF Technology Incorporated, 3970 Freedom Circle, Santa Clara,
California 95054.
18. International Transactions. If the address of Licensee as set forth on the
signature page of this Agreement is outside of the United States or if Licensee
is owned or controlled by an entity whose headquarters or principal place of
business is outside of the United States, then the following additional
provisions shall apply:
18.1 This Agreement is in the English language only, which language shall be
controlling in all respects. Any versions of this Agreement in any other
language shall be for accommodation only and shall not be binding upon either
party. All communications and Documentation to be furnished under this Agreement
shall be in the English language.
18.2 The rights and obligations of each party to this Agreement shall not be
governed by the provisions of the United Nations Convention on Contracts for the
International Sale of Goods, but instead the provisions of Section 14 above
shall apply.
19. Severability. If any provision of this Agreement shall be held by a court of
competent jurisdiction to be illegal, invalid or unenforceable, the remaining
provisions shall remain in full force and effect.
20. Miscellaneous.
20.1 This Agreement contains the entire understanding and agreement between the
parties respecting the subject matter hereof and all prior quotations, invoices,
negotiations, understandings, representations -and agreements of the parties,
whether oral or written, with respect to the subject of this Agreement are
superseded in their entirety.
20.2 This Agreement may not be supplemented, modified, amended, released or
discharged except by an instrument in writing signed by each party's duly
authorized representative or by Licensee opening an envelope delivered by SiRF
containing computer media with the modifying terms written on the outside of the
envelope.
20.3 This Agreement shall supersede in its entirety any purchase order of
Licensee for Software Products or Documentation and all such purchase orders are
subject to acceptance by SiRF. In no event will any additional terms and
conditions on a purchase order be effective unless expressly accepted by SiRF in
writing.
<PAGE>
20.4 If any action at law or in equity, including an action for declaratory
relief or injunctive relief is brought to enforce or interpret the provisions of
this Agreement, the prevailing party shall be entitled to reasonable attorneys,
fees in addition to any other relief to which the party may be entitled.
20.5 All captions and headings in this Agreement are for purposes of convenience
only and shall not affect the construction or interpretation of any of its
provisions.
20.6 Any waiver by either party of any default or breach hereunder shall not
constitute a waiver of any provision of this Agreement or of any subsequent
default or breach of the same or a different kind.
The Effective Date of this Agreement is 11/6/98
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute and deliver this Agreement as of the date first set
forth above.
SiRF TECHNOLOGY INCORPORATED LICENSEE
By
Title Title
Address
Ship Software to:
Contact Name
Company
Address
City, State,Country
Zip (Mail Code)
Telephone
Facsimile
I
<PAGE>
EXHIBIT A
SOFTWARE PRODUCTS
SiRstarTM GSW1 - SiRF's modular GPS receiver software SiRFdemo Windows
Demo Software SirFdemo Windows Demo Software I
<PAGE>
EXHIBIT B
SiRF PROPRIETARY NOTICE
This system includes the SiRFstarTM Global Positioning System
(GPS) solution. Copyright @1995 SiRF Technology, Inc. All rights reserved.
SiRF is a registered trademark and SiRFstar is a trademark of SiRF Technology,
Inc.
<PAGE>
EXHIBIT C
GOVERNMENT GPS LIMITATIONS
as of April 1, 1997
Velocity of less than 1,000 knots
Altitude of less than 60,000 feet
<PAGE>
SOURCE CODE
AMENDMENT TO BINARY SOFTWARE LICENSE AGREEMENT
THIS SOURCE CODE AMENDMENT TO BINARY SOFTWARE LICENSE AGREEMENT
("Amendment") is entered into and effective as of the Effective Date by and
between SiRF TECHNOLOGY INCORPORATED, a California corporation, having offices
at 3970 Freedom Circle, Santa Clara, California 95054 ("SiRF") and the entity
identified on the licensee signature line .("Licensee").
RECITALS
A. SiRF and Licensee have executed and delivered a Binary Software License
Agreement dated 11/10/98 (the "Binary Agreement"), under which SiRF granted I
Licensee a nonexclusive license to distribute the Binary Software Products and
Documentation as defined and on the terms and conditions set forth in such
Agreement.
B. SiRF desires to grant to Licensee and Licensee desires to obtain from
SiRF a non-exclusive license to use the source code for the whole or part of
Software Products as identified in Exhibit A to this Amendment.
NOW THEREFORE, the parties to this Amendment agree as follows:
1. Amendments to Binary Agreement. Subject to the terms and conditions of this
Amendment, SiRF and Licensee hereby modify the Binary Agreement to include the
source code of the Software Products by amending the Binary Agreement to include
the following sections:
"Software Products" in the Binary Agreement shall include source code
as provided hereunder.
All other provisions of the Binary Agreement remain in full force and effect.
2.1 Grant of Rights to Source Code Format. Subject to the terms and conditions
of the Agreement, SiRF hereby grants and Licensee hereby accepts a
non-exclusive, nontransferable license to use and modify the source code for the
Software Products solely to improve the performance and to make the Software
Products compatible with the GPS Product in which the SiRF Chips are included.
Licensee shall have no right to otherwise use or modify the Software Products.
Licensee shall have no right to disclose, sublicense, export, sell or otherwise
distribute the Software Products or any portion thereof in source code format
nor shall Licensee authorize other parties to market, reproduce, have reproduced
or otherwise manufacture the Software Products or GPS Products in source code
format.
2.2 Payment and Delivery of Source Code Software Products. Licensee shall
pay to SiRF within thirty (30) days of the Effective Date of this Amendment, the
License Fee set forth in Exhibit
<PAGE>
B to this Amendment. Within ten (10) days of SiRF's receipt of the applicable
license fee as set forth above, SiRF shall deliver to Licensee the source code
for the applicable Software Products, together with related Documentation. SiRF
shall deliver the foregoing in electronic files or recordable media (for
example, on diskette), at SiRF's option.
5.6 Copies. Licensee shall not copy the source code of the Software Products,
except that Licensee may make one copy of the source code solely for archival or
backup purposes and may make copies of the source code solely for use by
Licensee's employees who have a need to use such source code for the purposes
authorized under this Agreement. All source code of the Software Products shall
remain on Licensee's business premises
6.1 Source Format. Licensee acknowledges and agrees that all source code of the
Software Products is SiRF Confidential Information. However Licensee's
confidentiality obligations for source code of Software Products survive
indefinitely.
The Effective Date of this Amendment is
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute and deliver this Agreement as of the date first set
forth above.
SiRF TECHNOLOGY INCORPORATEDLICENSEE
By By
Title Title
Address
Ship Software to:
Contact Name
Company
Address
City, State, Country
Zip Mail Code)
Telephone
Facsimile
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into this I st day of February 1999, between
Advanced Business Sciences, Inc., a Delaware corporation, ("Company") and
Benjamin J. Lamb, ("Executive").
WITNESSETH:
WHEREAS, Company is engaged in the business (the "Company Business") of
Technology design, monitoring, tracking, and mapping of individuals under the
control of the Criminal Justice Industry, and other market segments as deemed
appropriate, and
WHEREAS, the parties hereto desire to enter into an agreement for Company's
employment of Executive on the terms and conditions contained herein;
NOW THEREFORE, for and in consideration of the premises and the mutual covenants
and agreements contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1 . Employment and Duties. Subject to the terms and conditions of this
Agreement, Company hereby employs Executive, and Executive hereby accepts
employment with Company. Executive will have such duties of an executive nature
as are assigned to him from time to time and will serve as President and CEO of
Company. Executive shall report to the Chairman of the Board of the Company and
shall be appointed and serve as a voting Director of the Company.
2. Term. Executive's employment pursuant to this Agreement shall commence as of
the date hereof and shall continue through the third anniversary of the date
hereof ("the Expiration Date"). After the Expiration Date, Executive's
employment hereunder shall renew annually and continue on the same terms and
conditions for an indefinite term, unless and until terminated in accordance
with Section 7.
3. Time Commitment. During the Term, Executive shall devote substantially all of
his business time, attention and energies to the diligent and faithful
performance of his duties as an executive employee of the Company. Executive
shall not, without the prior written consent of Company, at any time during the
Term: (a) accept employment with, or render services of a business, professional
or commercial nature to, any other Person (as defined below); (b) engage in any
venture or activity which Company may in good faith consider to be competitive
with or adverse to the Company Business, whether alone or with any other Person
as a partner, officer, director, employee, agent, shareholder, consultant sales
representative or otherwise, except that the ownership of not more that 3% of
the shares or other equity interests of any Person which is publicly traded
shall not be deemed a violation of this Section 3; or (c) engage in any venture
or activity which the Board of Directors of Company may in good faith consider
to interfere with Executive's performance of his duties hereunder. As used in
the Agreement, "Person" means any individual, corporation, limited liability
company, bank, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or other entity. Notwithstanding the
foregoing, Company acknowledges and agrees to
<PAGE>
allow Executive to continue his ownership and officer/director roles in INTECK
Corporation, so long as it does not have a material adverse affect on his
obligations in this Agreement.
4.7. Options. Company shall grant to Executive on the date hereof options to
purchase 8.0% Common Stock of the Company as shown on the Company as of February
1, 1999 at a share value of ten cents (.10) per share. An option agreement to
provide for vesting and exercise schedule for these shares shall be:
Block 1: One third of such options shall become vested and exercisable beginning
the earlier of December 30, 1999 or when the closing bid price for the common
shares of ABS exceeds $3.00 per share for at least five consecutive trading
days. The options shall remain exercisable for a period of three years from the
date of vesting.
Block 2: One third of such options shall become vested and exercisable beginning
the earlier of December 30, 2000 or when the closing bid price for the common
shares of ABS exceeds $4.00 per share for at least five consecutive trading
days. The options shall remain exercisable for a period of three years from the
date of vesting.
Block 3: One third of such options shall become vested and exercisable beginning
the earlier of December 30, 2001 or when the closing bid price for the common
shares of ABS exceeds $6.00 per share for at least five consecutive trading
days. The options shall remain exercisable for a period of three years from the
date of vesting.
Any blocks not yet vested would vest and be immediately exercisable upon the
occurrence of a sale or merger of ABS, which includes a transfer of control.
Company will pay the incurred tax liability associated with exercising the
options at each year-end vesting period. If the Executive voluntarily resigns
from the Company during the initial 18 months of this agreement, Company can
repurchase all vested options at the option strike price. The repurchase must be
completed within 30 days of Executive's resignation.
Executive will, if determined in the sole discretion of the Board of Directors,
be eligible to participate in the Company's incentive option program(s) for key
employees as they are instituted from time to time. All options provided for
under this paragraph 4.7 shall become exercisable immediately upon a merger,
consolidation or reorganization of the Company with one or more other
corporations in which the Company is not the surviving corporation, or upon a
sale of substantially all of the assets of the Company to another corporation,
or upon any transaction (including, without limitation, a merger or
reorganization in which the Company is the surviving corporation) approved by
the Board which results in any person or entity (other than persons who are
holders of stock of the Company at the time the plan is approved by the
stockholders and other than an Affiliate) owing 60 percent or more the combined
voting power al all classes of stock of the Company.
3
<PAGE>
5. Covenants of Executive. Executive understands and agrees that the Company
Business is one which makes it crucial for Company to develop and retain trade
secrets customer lists, proprietary techniques, information regarding customer
needs and other confidential information; and acknowledges that Executive will
develop and learn such information in the course of his employment. In light of
these facts and in consideration of Executive's employment with Company and
Company's agreement to compensate Executive on the terms set forth in Section 4
hereof, Executive covenants and agrees with Company as follows:
5.1 Covenant to Protect Confidential Information. Without limiting any other
obligation Executive may have with respect to use or nondisclosure of any
information, Executive shall protect all Company Confidential Information (as
defined below) at all times, both during and after the Term, and shall not
disclose to any Person, or otherwise use, except in connection with his duties
performed in accordance with this Agreement any Company Confidential
Information. For purposes of the Agreement, "Company Confidential Information"
means technical, business and other information of Company, whether or not in
writing, which derives value from not being generally known to the public or to
other Persons who can obtain value from its disclosure or use, including,
without limitation, technical or nontechnical data, compositions, devices,
methods, techniques, drawings, inventions, processes, financial data, financial
plans, product plans, lists or information concerning actual or potential
customers or suppliers, information regarding business plans and operations,
methods and plans of operation, marketing strategies, sales and distribution
plans or strategies, cost information, pricing strategies, and acquisition and
investment plans. Company Confidential Information includes information
disclosed by third parties that Company treats or is obligated to maintain as
confidential. The foregoing provision shall not apply to any confidential
information which is generally available to the public immediately prior to the
time of disclosure. The restrictions of this Section 5.1 shall expire one year
after the Termination Date. As used in this Agreement the "Termination Date"
means the last day Executive is employed by Company, whether separation is
voluntary or involuntary and with or without cause.
5.2 Covenants against Competition. Without limiting any other restrictive
covenant or obligation to which executive may be subject hereunder, under any
other agreement or under applicable law, Executive shall not, except on behalf
of Company or an affiliate of Company, at any time during the period commencing
on the date of this Agreement and continuing for the period set out below after
the Termination Date, whether alone or with any other Persons as a partner,
officer, director, employee, agent, shareholder, consultant sales representative
or otherwise:
(a) for a period of one year following termination from employment, without
cause, Executive shall not engage in any business activity that is competitive
with the business the Company was engaged in at time of Executive's termination.
In consideration of the initial one-year period of noncompetition as described
in this section, Executive shall receive the compensation set out in Paragraph
7.2(c).
<PAGE>
(b) for a period of two years following termination, for any reason, whether
with or without cause, whether voluntary or involuntary, Executive shall not
solicit or assist in the solicitation of any customer who is, at the time of
Executive's termination from employment with Company, for the purpose of
obtaining the patronage of such customer for purposes which are competitive to
those of the Company at the time of Executive's termination.
(c) for a period of one year following termination of employment, for any
reason, whether with or without cause, whether voluntary or involuntary,
Executive shall not solicit or assist in the solicitation of, any Person
employed by Company in any capacity (including without limitation as an employee
or independent contractor), to terminate such employment, whether or not such
Person is employed pursuant to a contract with Company and whether or not such
Person is employed at will.
The foregoing provisions of this Section 5.2 shall not prohibit Executive
from owning, not to exceed 3%, of the outstanding stock on any publicly traded
corporation that might be deemed a competitor of the Company.
6. Inventions, Copyrights, Etc.
6.1 Inventions. - Executive shall disclose promptly to Company (which shall
receive it in confidence), and only to Company, any invention or ideas of
Executive (developed alone or with others) conceived or made during Executive's
employment by Company any such invention or idea in any way connected with
Executive's employment or related to Company's business, research or
development, or demonstrably anticipated research or development, and will
cooperate with Company and sign all documents deemed necessary by Company to
enable it to obtain, maintain, protect and defend patents covering such
inventions and ideas and to confirm Company's exclusive ownership of all rights
in such inventions, ideas and patents, and irrevocably appoints Company as his
agent to execute and deliver any assignments or documents Executive fails or
refuses to execute and deliver promptly, this power and agency being coupled
with an interest and being irrevocable. This constitutes Company's written
notification that this assignment does not apply to an invention for which no
equipment, supplies, facility or trade secret information of Company was used
and which was developed entirely on Executive's own time, unless (a) the
invention relates (i) directly to the business of Company, or (ii) to Company's
actual or demonstrably anticipated research or development, or (b) the invention
results from any work performed by Executive for Company.
6.2 Work for Hire Acknowledgement; Assignment. Executive acknowledges that
Executive's work on and contributions to documents and other expressions in
tangible media relating to the business of the Company (collectively, "Works")
are within the scope of Executive's employment and part of Executive's duties
and responsibilities for Company and its affiliates, and are, and at all times
shall be regarded as, "work made for hire" as that term is used in the United
States Copyright Laws. Without limiting this acknowledgment Executive assigns,
grants and delivers exclusively to Company all rights, titles, and interests in
and to any such Works, and all copies and versions, including all copyrights and
renewals, Executive will execute and deliver to Company, its successors and
assigns, any assignments and documents Company requests for the purpose of
establishing evidencing, and enforcing or defending its complete, exclusive,
perpetual and worldwide ownership of all rights, titles,
<PAGE>
and interest of every kind and nature, including all copyrights, in and to the
Works, and Executive constitutes and appoints Company as its agent to execute
and deliver any assignments or documents Executive fails or refuses to execute
and deliver, this power and agency being coupled with an interest and being
irrevocable.
6.3 Return of Company Documents and Equipment. At the end of employment, or at
any time upon Company's request, Executive shall deliver to Company all material
files, customer lists, price lists, bids, specifications, forms, software
financial data, papers and other documents, including all copies of the
foregoing (including those contained in magnetic media or other forms of
computer storage); all computers, modems, diskettes, samples, credit cards,
keys, security passes, tools, vehicles and equipment and all other materials and
other property in his possession or control that relate to the Company Business
or his employment with Company, all of which at all times shall be the property
of Company unless otherwise agreed by Company in writing.
7.0 Termination.
7.1 By Either Party. Either party may terminate the Executive's employment under
this Agreement, with or without cause, by giving the other party not less than
thirty days advance written notice thereof.
7.2 Other Terminations Without Cause. Executive's employment under this
Agreement shall terminate immediately upon the occurrence of one of the
following events:
(a) the death of Executive;
(b) termination by Company on written notice of termination after Executive
becomes unable to perform his services by reason of illness or which illness or
incapacity results in his failure to discharge his duties under this Agreement
for an aggregate total of 30 days (whether consecutive or nonconsecutive) during
any 90 day period; or
(c) termination of Executive's employment by Company without cause at Company's
sole discretion on written notice of termination, provided that if Company
terminates under this Section 7.2(c) Company shall pay to Executive his regular
salary (as determined by the amount Executive is paid on an annual basis during
his final year of employment) for a period of one year, following termination
from employment. This salary continuation for a period of one year shall be
consideration for enforcement of the nondisclosure provisions of Section 5. and
the noncompetition provisions of Section 5.2(a) and Section 6 hereof. Executive
shall continue to receive his salary for a period of one year from the date of
termination under this Section but without any other employee benefits received
by Executive prior to his termination. The foregoing provision is not intended
to and shall not extend any period during which Executive may be eligible for
any post employment benefits under any benefit plan, applicable law,
<PAGE>
or otherwise, Executive's employment ending and any such period commencing for
all purposes on the Termination Date set forth in Company's notice of
termination under this Section 7.2(c).
7.3 By Executive for Cause. Executive shall have the right to terminate his
employment under this agreement on written notice to Company and receive the
salary set forth in Section 7.2(c) if Company has: (a) failed to make any
payments due to Executive under this Agreement and such failure has not been
cured within thirty days after written notice of such failure from Executive to
Company, or (b) otherwise materially breached this Agreement and such breach, if
capable of cure, has not been cured within thirty days after written notice of
such breach from Executive to Company.
7.4 By Company for Cause. The Executive's employment may be terminated effective
immediately by the Company for "cause" by notice of termination to the
Executive. "Cause" for such termination shall include, but not be limited to,
the following: (i) Dishonesty of the Executive with respect to the Company or
any of its subsidiaries; (ii) Willful misfeasance or nonfeasance of duty
intended to injure or having the effect of injuring the reputation, business or
business relationships of the Company or any of its subsidiaries or any of their
respective officers, directors or employees; (iii) Conviction of the Executive
upon a charge of any crime involving moral turpitude or which could reflect
unfavorably upon the Company or any of its subsidiaries; (iv) Willful or
prolonged absence from work by the Executive (other than by reason of disability
due to physical or mental illness) or failure, neglect or refusal by the
Executive to perform his duties and responsibilities without the same being
corrected upon ten (10) days prior written notice: or (v) Breach by the
Executive of any of the covenants contained in this agreement.
8. Other Employees. Nothing in this Agreement shall limit Company's discretion
to employ other personnel on such terms and conditions and for such position as
may be satisfactory to Company.
9. Insurance. Company may obtain, in the name and for the benefit of Company,
such life, disability, and other insurance policies on Executive as Company may
from time to time determine to be in the interest of Company. Executive shall
take such medical and physical examinations which Company may from time to time
reasonable request, including any examination required to obtain such insurance
policies.
10. No Conflicting Obligations. Executive represents and warrants that he is not
subject to any noncompetition agreement, nondisclosure agreement, employment
agreement, or any other contract of any nature whatsoever, oral or written, with
any Person other than Company, which will cause a breach of or default in or
which is in any way inconsistent with, the terms and provisions of this
Agreement except as noted in Section 3.
11. Notice to Future Employers. If Executive leaves the employ of Company for
any reason, (a) Executive shall, during the two years following termination of
Executive's employment with Company, inform any subsequent employers or business
partners of the existence and provisions of this Agreement and, if requested,
provide a copy of this
<PAGE>
Agreement to such employer or business partner, and (b) Company may, at any
time, notify any future employer or business partner of Executive of the
existence and provisions at the Agreement.
12. Miscellaneous. This Agreement shall inure to the benefit of and be binding
upon Company, and its successors and assigns, and Executive and his heirs,
executors, administrators and personal representatives. This Agreement may not
be assigned by Executive or by Company, except that Company may assign its
rights under this Agreement without the written consent of Executive to any
affiliate of Company providing services to Company or in connection with any
transfer of Company or of any substantial part of the Company Business (and such
assignment shall not constitute a termination of Executive's employment by
Company for purposes of the Agreement); provided, however, that such affiliate
or transferee shall be obligated to perform this Agreement in accordance with
its terms.
12.1 Entire Agreement. This Agreement, including any attachments, contains the
entire agreement between the parties and no statement, promises or inducements
made by either party hereto, or agent of either party hereto, or agent of either
party, which is not contained in this Agreement, shall be valid or binding; and
this Agreement may not be enlarged, amended, modified or altered except in a
writing signed by Company and Executive and specifically referencing this
Agreement. Commencement of Executive's employment hereunder shall constitute,
automatically and without further action by the parties, a termination of any
existing employment agreement between Executive and Company effective on the
date of such event, provided that salary and other rights and obligations of the
parties accrued under any such agreement prior to the effective date hereof
shall not, except as otherwise expressly provided herein, be affected by such
termination and shall be paid or satisfied when due in the ordinary course. The
provisions of this Agreement do not in any way limit or abridge any rights of
Company or any affiliate under the laws of unfair competition, trade secret,
copyright, patent, trademark or any other applicable laws, all of which are in
addition to and cumulative of the rights of Company under this Agreement.
12.2 Provisions Severable. If any provision or covenant, or any part thereof, of
this Agreement should be held by any court to be invalid, illegal or
unenforceable, either in whole or in part, then such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
the remaining provisions or covenants, or any part thereof, of this Agreement,
all of which shall remain in full force and effect. Without limiting the
foregoing, although the parties have, in good faith, used their best efforts to
make the covenants in Section 5 reasonable in all respects and do not anticipate
or intend that any court of competent jurisdiction would conclude otherwise or
would find it necessary or appropriate to reform any such covenant, if any such
covenant is held by a court of competent jurisdiction to be unreasonable,
arbitrary or against public policy, such covenant will be considered to be
divisible with respect to scope, time and geographic area, and such lesser
scope, time, and geographic area, or all of them, as a court of competent
jurisdiction may determine to be reasonable, not arbitrary, and not against
public policy, will be effective, binding and enforceable against Executive.
12.3 Remedies. Executive acknowledges that if he breaches or threatens to breach
his covenants and agreements in this Agreement, then his actions may cause
irreparable harm and damage to Company which could not be adequately compensated
in damages. Accordingly, if Executive breaches or
<PAGE>
threatens to breach this Agreement, then Company shall be entitled to injunctive
relief, in addition to any other rights or remedies of Company hereunder or
otherwise. Upon any breach of this Agreement by Company, Executive shall be
entitled to such rights and remedies as may be allowed by law or in equity.
12.4 Waiver. Failure of either party to insist, in one or more instances, on
performance by the other in strict accordance with the terms and conditions of
this Agreement shall not be deemed a waiver or relinquishment of any right
granted in this Agreement or of the future performance of any such term or
condition or of any other term or condition of this Agreement, unless such
waiver is contained in a writing signed by the party making the waiver and
specifically referencing this Agreement.
12.5 Notices. All notices and other communications required or permitted to be
given or made hereunder shall be in writing and sent by pre-paid first class
certified or registered mail, return receipt requested, or by facsimile
transmission, to the intended recipient thereof at his or its address or
facsimile number set forth below or last designated address and facsimile
number:
If to Company:
Advanced Business Sciences, Inc.
Attention: Chairman of Board
3345 North 107th Street
Omaha, Nebraska 68134
Facsimile No:(402) 498-8812
If to Executive:
Benjamin J. Lamb
609 Olson Drive
Papillion, Nebraska 68046
Facsimile No.(402) 593-7154
Any such notice or communication shall be deemed to have been duly given
immediately (if given by facsimile confirmed by mailing a copy thereof to the
recipient in accordance with this Section 12.6 on the date of such facsimile),
or three days after mailing (if given or made by mail), and in proving same it
shall be sufficient to show that the envelope containing the same was delivered
to the delivery or postal service and duly addressed, or that recipient of a
facsimile was confirmed by the recipient as provided above. Any Person entitled
to notice may change the address(es) or facsimile number(s) to which notices or
other communications to such Person shall be delivered, mailed or transmitted by
giving notice thereof to the parties hereto in the manner provided herein. No
notice or communication to Company shall be deemed complete unless also made to
Advanced Business Sciences, Inc., in accordance with this Section 12.5.
12.6. Survival. Executive's obligations pursuant to Sections 5 and 6 shall
survive the Termination Date and any termination of this Agreement for the
period(s) therein provided. Except as expressly provided above in Section 7.2(c)
or as required by law or the express terms of any employee benefit
<PAGE>
plan in which Executive participates, neither Executive nor his heirs,
executors, administrators or personal representatives, shall be entitled to any
salary, bonus or other compensation or any benefits during or for any period
after the Termination date.
12.7. Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
on such counterpart.
12.8. Headings. Section and other headings contained in this Agreement are for
reference purposes only and are in no way intended to define, interpret,
describe or otherwise limit the scope, extent or intent of this Agreement or any
of its provisions.
12.9. Withholding . Anything in this Agreement to the contrary notwithstanding,
all payments required to be made by Company hereunder to Executive shall be
subject to the withholding of such amounts relating to taxes as Company may
reasonably determine it should withhold pursuant to any applicable law or
regulation.
12.10. Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed and enforced in accordance
with the laws of the State of Nebraska, without regard to its principles of
conflicts of law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
EXECUTIVE
Name - Benjamin J. Lamb
- ------------------------------------------------
- --------------
Signature Date
COMPANY:
Avanced Business Sciences, Inc.
BY___________________________________________
Title Date
SUBSIDIARIES OF COMPANY
ABS NEBRASKA, INC., a Nebraska corporation
Schaneveldt and Company
Certified Public Accountant
275 E. South Temple, Suite 300
Salt Lake City, Utah 84111
(801) 521-2392
I have issued my report dated June 7, 1999, on the financial statements of
Advanced Business Sciences, Inc., for the year ended December 31, 1998. I
consent to the use of our report in the filing of Advanced Business Sciences,
Inc. on Form 10SB. I also consent to the use of my name and the statements with
respect to me as appearing under the heading "PART F/S" in the Registration
Statement.
/s/ Schvaneveldt and Company
Salt Lake City, Utah
June 21, 1999
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