<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 21, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
---------------------
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FLORIDA 7373 59-3389871
(State or other jurisdiction Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number Identification No.)
</TABLE>
101 SOUTHHALL LANE, SUITE 210
MAITLAND, FLORIDA 32751
(407) 875-9991
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
MITCHEL J. LASKEY, PRESIDENT
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
101 SOUTHHALL LANE, SUITE 210
MAITLAND, FLORIDA 32751
(407) 875-9991
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
COPIES TO:
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<S> <C>
RICHARD N. BERNSTEIN, ESQ. AND PAUL BERKOWITZ, ESQ. AND
KAREN Z. ROSEN, ESQ. JOSEPH A. MARINELLO, ESQ.
COHEN, BERKE, BERNSTEIN, GREENBERG, TRAURIG, HOFFMAN,
BRODIE & KONDELL, P.A. LIPOFF, ROSEN & QUENTEL, P.A.
2601 SOUTH BAYSHORE DRIVE, SUITE 1900 1221 BRICKELL AVENUE
MIAMI, FLORIDA 33133 MIAMI, FLORIDA 33131
TEL: (305) 854-5900 TEL: (305) 579-0500
FAX: (305) 857-9322 FAX: (305) 579-0717
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /X/
---------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED OFFERING PRICE REGISTRATION FEE
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<S> <C> <C>
Common Stock, $0.01 par value.................................. $30,187,500(1)(2) $6,038.00
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Representatives' Warrants...................................... $1,575,000 $315.00
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Common Stock, $0.01 par value(3)............................... -- (4)
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933 on the basis of
the average high and low sales prices of the Company's Common Stock on
August 19, 1996, as reported by Nasdaq.
(2) Includes 750,000 shares of Common Stock which may be purchased by the
Underwriters pursuant to an over allotment option.
(3) Represents shares of Common Stock issuable upon exercise of the
Representatives' Warrants together with such indeterminate number of
securities as may be issuable by reason of the anti-dilution provisions
contained therein.
(4) Pursuant to Rule 457(i), no fee is being paid.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM LOCATION IN PROSPECTUS
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<S> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus.............. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Page of
Prospectus.................................. Inside Front and Outside Back Cover Pages
of Prospectus; Available Information
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges................... Prospectus Summary; Risk Factors
4. Use of Proceeds............................... Use of Proceeds
5. Determination of Offering Price............... Outside Front Cover Page of Prospectus;
Underwriting
6. Dilution...................................... Not Applicable
7. Selling Security Holders...................... Principal and Selling Shareholders
8. Plan of Distribution.......................... Outside Front Cover Page; Underwriting
9. Description of Securities to be Registered.... Description of Capital Stock; Shares
Eligible for Future Sale; Dividend Policy
10. Interest of Named Experts and Counsel......... Legal Matters
11. Information with Respect to the Registrant
(a) Description of Business.................. Prospectus Summary; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Financial Statements
(including the Notes thereto)
(b) Description of Property.................. Business -- Facilities
(c) Legal Proceedings........................ Business -- Legal Proceedings
(d) Common Shares Price Range and Dividends.. Risk Factors; Underwriting; Dividend
Policy
(e) Financial Statements..................... Financial Statements (including the Notes
thereto)
(f) Selected Financial Data.................. Prospectus Summary -- Summary Consolidated
Financial Data; Selected Consolidated
Financial Data
(g) Supplemental Financial Information....... Prospectus Summary -- Summary Consolidated
Financial Data
(h) Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
(i) Changes in and disagreements with
accountants............................ Not Applicable
(j) Directors and Officers of Registrant..... Management
(k) Compensation of Directors and Officers... Management -- Executive Compensation
(l) Security Ownership of Certain Beneficial
Owners and Management.................. Principal and Selling Shareholders
(m) Interest of Management in Certain
Transactions........................... Management -- Certain Transactions
12. Disclosure of Commission Position on
Indemnification for Securities Act Not Applicable
Liabilities.................................
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION DATED AUGUST 21, 1996
5,000,000 SHARES
[LOGO] DYNAMIC HEALTHCARE TECHNOLOGIES
COMMON STOCK
------------------------
Of the 5,000,000 shares of common stock, par value $0.01 per share (the
"Common Stock"), offered hereby, 4,000,000 shares are being issued and sold by
Dynamic Healthcare Technologies, Inc. (the "Company") and 1,000,000 shares are
being sold by certain shareholders of the Company (the "Selling Shareholders").
The Company will not receive any proceeds from the sale of Common Stock by the
Selling Shareholders. See "Principal and Selling Shareholders."
The Company has made an application to list the Common Stock on the Nasdaq
National Market under the trading symbol "DHTI." The Common Stock is currently
traded on the over-the-counter market and is quoted on the Nasdaq SmallCap
Market under the symbol "DHTI." On August 19, 1996 the last reported sales price
for the Common Stock was $5.00.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
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PROCEEDS
PRICE TO PROCEEDS TO TO SELLING
PUBLIC UNDERWRITING COMPANY(2) SHAREHOLDERS(3)
DISCOUNTS AND
COMMISSIONS(1)
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<S> <C> <C> <C> <C>
Per Share....................... $ $ $ $
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Total(3)........................ $ $ $ $
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</TABLE>
(1) Does not include additional compensation to the Representatives of
Representatives' Warrants entitling the Representatives to purchase up to
250,000 shares of Common Stock. The Company and the Selling Shareholders
have agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses payable by the Company estimated to be $500,000.
(3) The Company and the Selling Shareholders have granted the Underwriters a
30-day option to purchase up to 750,000 additional shares of Common Stock on
the same terms and conditions as the securities offered hereby, solely to
cover over-allotments, if any. If such option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions, Proceeds to
Company and Proceeds to Selling Shareholders will be $ , $ ,
$ , and $ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters named
herein, subject to prior sale, when, as and if delivered to and accepted by
them, and subject to certain other conditions including the right of the
Underwriters to withdraw, cancel, modify or reject any order in whole or in
part. It is expected that delivery of the shares will be made on or about
, 1996 at the offices of Raymond James & Associates, Inc., St.
Petersburg, Florida.
RAYMOND JAMES & ASSOCIATES, INC. VECTOR SECURITIES INTERNATIONAL, INC.
The date of this Prospectus is , 1996
<PAGE> 4
[Color Photographs]
[The color photograph is of three screens appearing on a computer monitor using
DynamicVision Clinical Workstation.]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH MAY STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE NASDAQ MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMPANY'S COMMON STOCK ON THE NASDAQ MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITING."
This Prospectus may contain trademarks and servicemarks of other parties.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated, all financial
information and share data in this Prospectus (i) have been adjusted to reflect
the conversion of all outstanding shares of the Company's Series A Preferred
Stock into 968,750 shares of Common Stock and all outstanding shares of the
Company's Series B Preferred Stock into 3,750,000 shares of Common Stock
concurrently with the consummation of this Offering, and (ii) assume no exercise
of the Underwriters' over-allotment option. Investors should carefully consider
the information set forth under the heading "Risk Factors."
THE COMPANY
Dynamic Healthcare Technologies, Inc. ("Dynamic" or the "Company") is a
leading provider of enterprise-wide, patient-centered healthcare information
systems. These systems enable hospitals, physician practice groups and
integrated delivery networks to capture, store, archive and retrieve clinical,
financial and administrative patient information. The Company's products enhance
productivity, reduce costs and improve the quality of patient care by providing
on-line access to patient information previously maintained on a variety of
media, including paper, X-ray film, magnetic disk, and video and audio
recordings. The Company's current product lines include clinical information
systems for use in laboratory, radiology, anatomic pathology and anesthesiology
applications, and imaging and electronic health record solutions. The Company
provides support for all of its systems and provides systems integration and
other consulting services.
The Company currently serves over 250 customers in 44 states. Key customers
include the University of California at Los Angeles Medical Center, University
of Illinois at Chicago Medical Center, Methodist Hospital of Memphis, Memorial
Sloan-Kettering Cancer Center, Ohio State University Hospital, Columbia/HCA,
Greater Dayton Area Hospital Association, Advocate Health Care, Temple
University Hospital, UniHealth and Orlando Regional Health System.
Utilizing the Company's healthcare information experience, imaging
technologies and customer input, the Company is focusing on a new product
strategy for electronic health records. The Company's new electronic health
record product, DynamicVision, provides connectivity and enabling technologies
that integrate clinical and imaging information systems to create an open
architecture, multi-media clinical workstation. DynamicVision provides prompt
and simultaneous on-line access to information stored in various systems and
data repositories located at multiple sites. This information can include
documents, medical images such as X-rays, MRIs and CAT scans, and video and
audio recordings. DynamicVision is currently being beta-tested and is scheduled
for general availability by the end of 1996.
The healthcare information industry is undergoing rapid and significant
change. Cost containment pressures, industry consolidation, the movement toward
managed care and rising standards of healthcare quality represent fundamental
trends in today's healthcare operating environment. Increasingly, the key to
effective cost control and quality management lies in the collection,
availability and analysis of medical records in order to assess treatment
patterns, resource utilization and outcomes. As a result, the information
demands in the healthcare industry are rapidly increasing for caregivers,
managers and third party payors. Total healthcare information technology
spending in the United States was estimated to be $8.5 billion in 1994, and is
projected to reach $13.0 billion by 1997 and $20.0 billion by 2000.
The Company's new product development, including DynamicVision, employs
technical designs based on open architecture at all levels of data capture,
information management and workflow, application software and connectivity,
which permits platform independence and plug and play capability. Dynamic's
strategy to utilize open architecture leverages its own technology with
capabilities of leading technology companies, enabling the Company to focus its
research and development on healthcare software applications. The Company has
entered into strategic relationships with several leading technology developers,
including International Business Machines Corporation ("IBM"), Wang
Laboratories, Inc. ("Wang") and others, to gain access to certain technologies
that are integrated into the Company's systems. The Company's platform
3
<PAGE> 6
independent systems run on a variety of operating systems, including UNIX,
Windows 95/NT, IBM AS/400 and other proprietary platforms. Dynamic's systems are
developed using Internet/Intranet standards and protocols, are fully scaleable
and preserve the customers' investment in existing systems. The Company believes
its technical designs and strategic relationships enable it to respond more
rapidly to changes in core technologies at a lower cost than companies utilizing
proprietary information systems.
The Company's objective is to be the leading provider of enterprise-wide,
patient-centered healthcare information systems that enable the efficient
capture, storage, archival and retrieval of electronic health information and
the secure sharing of this information across the continuum of care throughout a
patient's lifetime. To achieve this objective, the Company intends to employ the
following strategies: (i) aggressively expand its position in the rapidly
growing electronic health record market through the commercial availability of
DynamicVision; (ii) focus on cross-selling additional applications and services
to existing and new customers; (iii) provide solutions utilizing open
architecture that offer cost-effective and flexible information solutions; (iv)
maintain its technological advantage by investing in proprietary research and
development for healthcare software applications while integrating
state-of-the-art technology through strategic relationships with industry
leading technology companies; and (v) acquire complementary businesses, products
and technologies.
The Company was originally incorporated in California in 1977,
reincorporated in Nebraska in 1982 and subsequently reincorporated in Florida in
1996. The Company's executive offices are located at 101 Southhall Lane, Suite
210, Maitland, Florida 32751, its telephone number is (407) 875-9991 and its
World Wide Web address is http://www.dht.com.
THE OFFERING
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<S> <C>
Common Stock Offered by the Company..................... 4,000,000 shares
Common Stock Offered by the Selling Shareholders........ 1,000,000 shares
Common Stock to be Outstanding after the Offering....... 15,400,536 shares(1)
Use of Proceeds......................................... Repayment of indebtedness;
expansion of sales, marketing and
distribution; research and
development; general corporate
purposes, including working
capital; and potential
acquisitions. See "Use of
Proceeds."
Nasdaq Symbol........................................... DHTI
</TABLE>
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(1) Does not include 1,918,190 shares issuable upon the exercise of outstanding
options and warrants.
4
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------------------------- ---------------------------------
1993 1994(1) 1995 1995 1996
------ ------- --------------------- ------ ------------------------
ACTUAL PRO FORMA(2) ACTUAL ACTUAL(3) PRO FORMA(2)
------ ------------ ------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total operating revenues... $9,688 $ 6,987 $8,886 $ 14,150 $4,502 $ 6,317 $ 7,323
Operating income (loss).... 253 (3,559) (162) (219) (503) (417) (1,537)
Net earnings (loss)........ 246 (4,307) (513) (646) (706) (522) (1,632)
Earnings (loss) per common
share.................... $ 0.05 $ (0.78) $(0.08) $ (0.10) $(0.11) $ (0.08) $ (0.25)
Weighted average common
shares outstanding....... 5,363 5,536 6,443 6,443 6,295 6,619 6,619
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------
ACTUAL AS ADJUSTED(4)
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<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................... $ 771 $ 16,210
Working capital..................................................... 122 15,561
Total assets........................................................ 11,040 26,479
Long-term obligations, net of current maturities.................... 2,922 234
Series A preferred stock............................................ 10 --
Series B preferred stock............................................ 38 --
Total shareholders' equity.......................................... 3,597 21,797
</TABLE>
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(1) Includes the operating results and related financial information since the
acquisition of Dynamic Technical Resources, Inc. on August 23, 1994,
accounted for by the purchase method.
(2) Gives effect to the acquisition of Dimensional Medicine, Inc. ("DMI") as if
the acquisition occurred on January 1, 1995. See "Pro Forma Condensed
Consolidated Statement of Operations."
(3) Includes the operating results and related financial information since the
acquisition of DMI on May 1, 1996, accounted for by the purchase method.
(4) Adjusted to give effect to the sale of 4,000,000 shares of Common Stock
offered by the Company and the application of the estimated net proceeds
therefrom. See "Use of Proceeds."
5
<PAGE> 8
RISK FACTORS
Prospective investors should carefully consider the specific factors set
forth below, as well as the other information contained in this Prospectus
before deciding to invest in the Common Stock offered hereby.
This Prospectus contains certain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") which represent the Company's expectation or beliefs
including, but not limited to, statements regarding growth in sales of the
Company's products, profit margins and the sufficiency of the Company's cash
flow for its future liquidity and capital resource needs. For this purpose, any
statements contained in this Prospectus that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, words such as "may," "will," "expect," "believe," "anticipate,"
"intend," "estimate" or "continue" or the negative or other variations thereof
or comparable terminology are intended to identify forward-looking statements.
These statements by their nature involve substantial risks and uncertainties,
and actual results may differ materially depending on a variety of factors,
including those described below.
RECENT LOSSES; POTENTIAL NEED FOR ADDITIONAL FINANCING
The Company has in recent periods incurred operating losses. The Company
incurred a net loss of $513,000 for the year ended December 31, 1995 and a net
loss of $522,000 for the six months ended June 30, 1996. There can be no
assurance that the Company will be able to achieve or maintain profitability on
a quarterly or annual basis or that it will be able to sustain or increase
revenue growth. The Company believes that the net proceeds from this Offering,
together with funds from operations, will be sufficient to finance the Company's
foreseeable cash requirements for at least the next twelve months. If the
Company requires additional funds, there can be no assurance that additional
financing can be obtained on acceptable terms, if at all. The inability to
obtain such financing, if necessary, could have a material adverse effect on the
Company. If additional funds are raised by issuing equity securities, dilution
to existing shareholders may result. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
UNCERTAINTY OF MARKET DEVELOPMENT, DELIVERY AND ACCEPTANCE OF THE COMPANY'S
SYSTEMS
The market for electronic health record systems and clinical information
systems is relatively new and may not develop as the Company expects, which
could have a material adverse effect on the Company. The Company's success is
dependent upon market acceptance of its systems. The Company's future success
and financial performance will depend in large part on the Company's ability to
continue to meet the increasingly sophisticated needs of its customers through
the timely development and successful introduction of enhanced versions of its
existing systems, complementary systems and new systems. There can be no
assurance that the Company will successfully complete, develop, introduce and
market new systems or system enhancements, or that systems or system
enhancements currently in development or that may be developed by the Company in
the future will meet the requirements of healthcare providers and achieve market
acceptance. The Company has experienced delays from time to time in completing
the development of new or enhanced systems and may experience additional delays
in the future. The inability of the Company to develop and deliver new systems
on a timely basis could have a material adverse effect on the Company. Changing
prices of computer hardware could have a material effect on the cost of products
sold and the related selling price of software and hardware sales.
VARIABILITY OF QUARTERLY OPERATING RESULTS; EXTENDED SALES CYCLE
The Company's revenues and operating results may vary significantly from
quarter to quarter as a result of a number of factors, many of which are outside
the Company's control. These factors include, among others, the magnitude of
customer agreements; unpredictability in the number and timing of systems sales;
length of the sales cycle; possible delays in the installation process; and
changes in the customer's financial condition or budget. The Company's systems
may be implemented in several phases, in some cases over several years. The
decision by a healthcare provider to replace, substantially modify or upgrade
its information systems involves a large capital commitment and an extended
review and approval process. The sales cycle for
6
<PAGE> 9
the Company's systems is typically six to eighteen months from initial contact
with a customer to execution of a master sales agreement with the Company.
During this period, the Company may expend substantial time, effort and funds
preparing proposals and negotiating a master sales agreement with no certainty
of an agreement being reached.
The Company's revenue recognition policies vary depending upon the source
of revenue and recognition does not necessarily coincide with payment. As a
result of many factors, including the timing of system sales and installations,
there may be significant variations in operating results from quarter to
quarter. In the past, customers have delayed installations from the originally
scheduled installation date and have modified the original system configuration.
There can be no assurance that customers will not cancel all or portions of
master sales agreements in the future. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
DEPENDENCE UPON THIRD PARTIES
The Company enters into strategic relationships for the non-exclusive use
of information management technologies of leading technology developers. Among
others, the Company has entered into agreements with IBM for its Medical
RecordsPlus imaging software and with Wang for its Physician Workstation and
OPEN/software products. There can be no assurance that these companies will
continue these strategic relationships with the Company or that the Company will
obtain rights to newly developed technologies of these companies or other
technology developers. The Company's products are based upon industry adherence
to open architecture systems. In the event that a non-open architecture standard
is developed and widely accepted, the Company may need to change its interfaces
or develop its own information management technology. There can be no assurance
that the Company's efforts to develop such technology would be successful or
that there would be adequate funds available for such effort. Furthermore, there
can be no assurance that the Company's relationship with IBM, Wang or others
will be successful or that any similar relationships will develop or be
successful. See "Business -- Strategic Relationships" and "Business --
Competition."
ABILITY TO MANAGE GROWTH
The Company is currently experiencing a period of rapid growth and
expansion which has placed, and could continue to place, a significant strain on
the Company's service and support operations, sales and administrative personnel
and other resources. In order to serve the needs of its existing and anticipated
customer base, the Company believes that it will have to increase its workforce
substantially, which will require the Company to attract, train, motivate,
manage and retain highly qualified employees. The Company's ability to manage
its planned growth also will require the Company to continue to expand its
operational, management and financial systems and controls, all of which may
significantly increase its operating expenses. If the Company fails to achieve
its growth as planned or is unsuccessful in managing growth that does occur,
there could be a material adverse effect on the Company. See "Use of Proceeds"
and "Business -- Strategy."
DEPENDENCE UPON KEY PERSONNEL
The Company's business is dependent upon the performance of its senior
executives. The loss of the services of one or more of those individuals or the
Company's inability to attract, motivate and retain highly qualified employees
in the future could have a material adverse effect on the Company. The Company
maintains key man life insurance policies in the amount of $2.0 million on the
lives of each of Mitchel J. Laskey and David M. Pomerance. See "Management."
7
<PAGE> 10
COMPETITION; RAPID CHANGES IN TECHNOLOGY
The market for information technology in the healthcare industry is
intensely competitive. Many of the Company's competitors have significantly
greater financial, research and development, technical and marketing resources
than the Company. Competitors vary in size and in the scope and breadth of the
products and services they offer. The Company's systems compete both with other
technologies and with similar systems developed by other companies. Other major
information management companies, including the companies with whom the Company
has strategic relationships, may enter the markets in which the Company
competes. Competitive pressures and other factors, such as new system
introductions by the Company's competitors, may result in significant pricing
pressures that could have a material adverse effect on the Company. In addition,
in the professional and technical consulting segment, the Company competes with
the consulting divisions of national accounting firms as well as national and
regional healthcare specialty consulting firms.
The computer and information systems industries are characterized by rapid
technological advances in both software and hardware, frequent new product
introductions and enhancements as well as changes in customer needs. New
developments of software or hardware could have a material adverse effect on the
Company's sales or render the Company's systems non-competitive or obsolete. To
respond to rapidly changing technology, the Company will be required to make
substantial continuing investments in research and development, and there can be
no assurance that its efforts will be successful or that there will be adequate
funds available for such efforts. During the period from January 1, 1994 through
June 30, 1996, the Company spent $5.0 million on software development. The
Company believes that to sustain its growth it must continue to devote
substantial resources to its product development efforts, including
DynamicVision, PACsPlus+ and Monitrax, and the maintenance and enhancement of
its existing products. See "Business -- Strategy" and "Business -- Competition."
RESTATED FINANCIAL REPORTS
In July 1994, David M. Pomerance, a non-employee director, was appointed
Chief Executive Officer and President of the Company, and James Terrano, the
former Chief Executive Officer and President of the Company, was appointed
Executive Vice President. In August 1994, the Company merged with Dynamic
Technical Resources, Inc. ("DTR"). Following the merger, Mitchel J. Laskey, the
former chief executive officer and principal shareholder of DTR, was appointed
the Company's President. In September 1994, the Company's Chief Financial
Officer was dismissed and replaced by Paul S. Glover. In October 1994, Messrs.
Laskey, Pomerance and Glover ("New Management") discovered possible
misapplication and errors in the application of generally accepted accounting
principles relating to the Company's method of income recognition in its
previously issued financial statements. In November 1994, the Company's Audit
Committee authorized an independent internal investigation which revealed that
the Company's financial statements during certain periods prior to September 30,
1994 had improperly recognized income and recommended that the Company restate
and amend its previously reported financial statements for the years ended
December 31, 1992 and 1993 and for the quarters ended March 31, June 30, and
September 30, 1994. Effective December 2, 1994, Mr. Terrano's employment was
terminated and his resignation as a director was accepted. The Company no longer
employs any of the 12 senior managers who held such positions in July 1994. Of
the 90 employees of the Company in July 1994, 84 are no longer associated with
the Company. In January 1995, restated financial statements were filed with the
Securities and Exchange Commission ("SEC") and Nasdaq. Shortly thereafter, the
Company's prior auditors were dismissed and its current auditors were retained.
In April 1995, the SEC commenced an investigation related to the Company's
previous revenue recognition practices. The Company has fully cooperated with
the SEC's investigation, has not received any substantive correspondence from
the SEC with respect to the investigation since December 1995 and does not
believe that it or New Management is the target of any SEC proceeding. There can
be no assurances, however, that an SEC proceeding will not be commenced against
the Company, New Management or prior management, or, if commenced, will not
result in substantial fines and penalties that could have a material adverse
effect on the Company. In addition, while the Company has received no
notification of any claims arising from the financial statements discussed
above, and while the Company believes that the statute of limitations has
expired with respect to any material potential claims, there can be no
assurances that actions will not be brought and that such actions, if determined
adversely to the Company, would not have a material adverse effect on the
Company.
8
<PAGE> 11
POSSIBLE VOLATILITY OF STOCK PRICE
The Company's stock price has experienced significant volatility over the
past several years. Moreover, the stock market has from time to time experienced
extreme price and volume fluctuations, particularly in the high technology
sector, which may be unrelated to the operating performance of particular
companies. Market fluctuations and factors, such as announcements of
technological innovations or new products by the Company, its competitors or
third parties, as well as market conditions in the computer software or hardware
industries and healthcare reform measures, may have a significant effect on the
market price of the Company's Common Stock. Since the Company recognizes
revenues for certain products upon the completion of identified milestone
conditions, delays in meeting such conditions could result in the shift of
revenue recognition from one quarter to another. Any such shift could adversely
impact the results of operations for a particular quarter, which in turn could
cause fluctuations in the Company's stock price. See "Price Range of Common
Stock."
DEPENDENCE UPON PROPRIETARY SOFTWARE
The Company's healthcare information systems consist primarily of the
Company's software integrated with third party hardware and software. The
Company does not hold any patents nor has it filed copyrights with respect to
any of its software systems. To protect its proprietary rights, the Company
primarily relies upon trade secrets, copyright laws and confidentiality
agreements with employees and customers. These safeguards provide only limited
protection, and competitors may imitate the Company's systems and attempt to
integrate the same or similar third party systems into systems competitive with
those licensed by the Company. Furthermore, there can be no assurance that
others will not independently develop systems similar or superior to those of
the Company. There has been substantial litigation regarding intellectual
property rights in the computer industry. Although no such litigation is pending
or threatened against the Company, there can be no assurance that third parties
will not assert infringement claims against the Company in the future. Moreover,
the Company may need to initiate litigation from time to time to enforce or
protect the Company's intellectual property rights and to determine the validity
and scope of the proprietary rights of others. Such litigation could result in
substantial costs and diversion of resources, which could have a material
adverse effect on the Company. See "Business -- Intellectual Property."
UNCERTAINTY RELATED TO ACQUISITIONS
The Company may pursue the acquisition of complementary businesses,
products or technologies. Acquisitions involve a number of risks that could
adversely affect the Company's operating results, including the diversion of
management's attention, the assimilation of the operations and personnel of the
acquired companies, the amortization of acquired intangible assets and the
potential loss of key employees of the acquired companies. There can be no
assurance that the Company will consummate future acquisitions on satisfactory
terms, if at all, that adequate financing will be available on terms acceptable
to the Company, if at all, or that any acquired operations will be successfully
integrated. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and
"Business -- Strategy."
UNCERTAINTY IN HEALTHCARE INDUSTRY; GOVERNMENT REGULATION
The healthcare industry is undergoing significant and rapid changes,
including the consolidation of hospitals and other healthcare providers to form
integrated delivery networks as well as market-driven and government initiatives
to reform healthcare, which the Company anticipates will affect the operation
and procurement process of healthcare providers. The increased bargaining power
of such combined enterprises and their focus on cost containment could force the
Company to reduce prices for its systems, which could have a material adverse
effect on the Company. As the number of hospitals and other healthcare providers
decreases due to further industry consolidation, each potential sale of the
Company's systems becomes more significant and competition for each sale will be
greater. Such consolidation also creates the possibility that the Company's
customers could cancel their master sales agreements if the other healthcare
information providers involved in the consolidation have installed or selected a
competing or potentially incompatible information
9
<PAGE> 12
system. Further, healthcare providers may react to proposed federal and state
reform measures and cost containment pressures by curtailing or delaying
investments, including those for the Company's systems and related services.
Although the effects of federal and state initiatives for healthcare reform are
unknown, the Company believes that competitive factors in the healthcare
industry will continue to drive reform of healthcare delivery. The Company
cannot predict with any certainty what impact, if any, such market and
government initiatives might have on the Company.
The United States Food and Drug Administration ("FDA") has issued a draft
guidance document addressing the regulation of certain computer products as
devices under the Federal Food, Drug, and Cosmetic Act (the "FFDCA"). To the
extent that computer software is classified as a device under the applicable
regulations, the manufacturers of such products could be required, depending
upon the product, to: (i) register and list their products with the FDA; (ii)
notify the FDA and demonstrate substantial equivalence to other products on the
market before marketing such products; or (iii) obtain FDA clearance by filing a
pre-market application that establishes the safety and effectiveness of the
product. Compliance with these requirements can be burdensome, time consuming
and expensive and there can be no assurance that the Company will ultimately be
able to obtain the required FDA approvals to market its products. The Company
has two products considered devices under the FFDCA. Failure to obtain or
maintain required approvals could result in withdrawal of the products from the
market, which could have a material adverse effect on the Company. See
"Business -- Government Regulation."
POTENTIAL LIABILITY TO CUSTOMERS OR THIRD PARTIES
Certain of the Company's systems provide access to patient information used
by physicians and other medical personnel in providing medical care. The medical
care provided by physicians and other medical personnel is subject to numerous
medical malpractice risks and other claims. The Company may be subject to claims
by parties who may seek damages from any or all persons or entities connected to
the process of delivering patient care. Although the Company maintains liability
insurance to protect against certain claims associated with the use of its
systems, there can be no assurance that the Company will not be subject to
product liability or other claims and that its insurance coverage and the
contractual limitations on liability typically contained in master sales
agreements will provide adequate protection. A successful claim brought against
the Company, or unsuccessful claims causing a substantial expenditure of funds
and a diversion of management's time and resources, could have a material
adverse effect on the Company. While the Company has been able to obtain
liability insurance, there can be no assurance that the Company will be able to
maintain such insurance or that it will continue to be available on terms
acceptable to the Company or at all.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of shares of Common Stock in the public market
after this Offering or the perception that such sales could occur may adversely
affect the market price of the Common Stock. Upon completion of this Offering,
the Company will have 15,400,536 shares of Common Stock outstanding. All
5,000,000 shares offered hereby will be freely tradeable. In a registration
statement which is intended to become effective concurrently with the
registration statement of which this Prospectus is a part, 6,278,746 shares of
Common Stock are being registered by certain shareholders of the Company, which
will result in all of the shares of Common Stock outstanding and underlying
options and warrants being registered. The holders of substantially all the
shares of Common Stock being offered in the concurrent offering have agreed with
the Underwriters not to sell or otherwise dispose of any of such shares for a
period of 180 days after the closing of the Offering. Of the shares of Common
Stock outstanding and underlying options and warrants, 4,979,596 shares are held
by persons deemed "affiliates" of the Company as such term is defined in Rule
144 and are subject to the "manner of sale" restrictions under Rule 144. See
"Principal and Selling Shareholders," "Description of Capital
Stock -- Registration Rights," "Shares Eligible for Future Sale" and
"Underwriting."
10
<PAGE> 13
EFFECTS OF AUTHORIZED BUT UNISSUED STOCK AND CERTAIN ANTI-TAKEOVER
CONSIDERATIONS
The Company's Board of Directors has the authority to issue 10,000,000
shares of preferred stock and to fix the rights, preferences, privileges and
restrictions, including voting rights, of those shares without any further vote
or action by the Company's shareholders. There are 1,055,938 shares of Series A
Preferred Stock authorized, of which 968,750 shares are outstanding and
4,384,375 shares of Series B Preferred Stock authorized, of which 3,750,000
shares are outstanding. All outstanding shares of Series A Preferred Stock and
Series B Preferred Stock are being mandatorily converted to shares of Common
Stock on a one-to-one basis concurrently with the consummation of this Offering.
The rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of any preferred stock that may
be issued in the future. The issuance of additional preferred stock, as well as
certain provisions of the Company's Articles of Incorporation and By-laws and of
Florida law, could have the effect of delaying, deferring or preventing a change
in control of the Company or removal of management and may limit the price
certain investors may be willing to pay in the future for shares of Common
Stock. See "Description of Capital Stock."
BROAD DISCRETION IN USE OF PROCEEDS
The Company intends to use the net proceeds of this Offering to finance the
expansion of the Company's sales and marketing force, for research and
development, to repay outstanding indebtedness and for other general corporate
purposes, including working capital. A portion of the net proceeds may also be
used for acquisitions of complementary businesses, products and technologies,
although the Company currently has no agreements or commitments with respect to
any such transactions. Accordingly, the Company will have broad discretion as to
the application of such proceeds. An investor will not have the opportunity to
evaluate the economic, financial and other relevant information which will be
utilized by the Company in determining the application of such proceeds. See
"Use of Proceeds."
NO DIVIDENDS
The Company intends to retain future earnings for use in its business and
does not anticipate paying any cash dividends on shares of its Common Stock in
the foreseeable future. See "Dividend Policy."
11
<PAGE> 14
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 4,000,000 shares of
Common Stock offered by the Company hereby, after deducting underwriting
discounts and commissions and estimated offering expenses, assuming a public
offering price of $5.00 per share, are estimated to be $18.2 million
(approximately $21.0 million if the Underwriters' over-allotment option is
exercised in full). The Company intends to use the net proceeds to expand its
sales, marketing and distribution channels by hiring additional sales and
marketing personnel, to expand research and development, to repay outstanding
indebtedness and for general corporate purposes, including working capital. The
indebtedness intended to be repaid consists of the principal amount and accrued
interest outstanding under (i) a $2.8 million promissory note (the "Bank Note")
and (ii) unsecured promissory notes ("Unsecured Notes") in the aggregate amount
of $1.0 million payable to certain officers, directors and other parties
affiliated with the Company. The Bank Note bears interest at the lender's prime
rate plus two percent per annum and matures on March 31, 1998. As of July 31,
1996, the rate of interest on the Bank Note was 10 1/4% per annum. The Unsecured
Notes bear interest at a rate of 13% per annum and mature upon the earlier of
the completion of this Offering or November 14, 1996. See "Certain
Transactions." A portion of the net proceeds may also be used for acquisitions
of complementary businesses, products and technologies, although the Company
currently has no agreements or commitments with respect to such transactions.
Pending application of the net proceeds to the Company from this Offering,
the Company intends to invest in United States government securities, United
States government guaranteed obligations, short-term certificates of deposit or
other investment grade securities.
The expected use of the net proceeds from this Offering is subject to
change based upon factors such as competing technologies, market developments
and the cost of sales and marketing. The Company believes that the proceeds of
the Offering, in addition to operating cash flow, will be sufficient to finance
the Company's planned growth and cash requirements for at least the next twelve
months. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
The Company will not receive any proceeds from the sale of the 1,000,000
shares of Common Stock by the Selling Shareholders. See "Principal and Selling
Shareholders."
12
<PAGE> 15
CAPITALIZATION
The following table sets forth as of June 30, 1996, (i) the actual
capitalization of the Company, (ii) the pro forma capitalization of the Company
to reflect the conversion of the Company's Series A Preferred Stock and Series B
Preferred Stock into Common Stock upon consummation of this Offering, and (iii)
the pro forma capitalization of the Company as adjusted to reflect the sale of
4,000,000 shares of Common Stock by the Company (at an offering price of $5.00
per share) and the application of the net proceeds therefrom as described under
"Use of Proceeds." The table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's Financial Statements and Notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
------------------------------------
(IN THOUSANDS)
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED(2)
------- --------- --------------
<S> <C> <C> <C>
Long-term obligations........................................ $ 2,922 $ 2,922 $ 234
------- -------- --------
Shareholders' equity:
Series A preferred stock, $0.01 par value (liquidating
preference of $792,438); 1,055,938 shares authorized;
968,750 shares outstanding actual; none outstanding, pro
forma and pro forma as adjusted......................... 10 -- --
Series B preferred stock, $0.01 par value (liquidating
preference of $3,067,500); 4,384,375 shares authorized;
3,750,000 shares outstanding actual; none outstanding,
pro forma and pro forma as adjusted..................... 37 -- --
Common stock, $0.01 par value, 20,000,000 shares
authorized; 6,681,886 shares outstanding actual;
11,400,536 pro forma and 15,400,536 pro forma as
adjusted(1)............................................. 67 114 154
Additional paid-in capital................................. 12,955 12,955 31,115
Deficit.................................................... (9,472) (9,472) (9,472)
------- -------- --------
Total shareholders' equity............................ 3,597 3,597 21,797
------- -------- --------
Total capitalization............................. $ 6,519 $ 6,519 $ 22,031
======= ======= ========
</TABLE>
- ---------------
(1) Excludes approximately 1,918,190 shares issuable upon the exercise of stock
options to be outstanding upon consummation of this Offering.
(2) Adjusted to give effect to the sale of 4,000,000 shares of Common Stock
offered by the Company and the application of the net proceeds therefrom.
See "Use of Proceeds."
13
<PAGE> 16
PRICE RANGE OF COMMON STOCK
The Common Stock is quoted on the Nasdaq SmallCap Market under the symbol
"DHTI." The following table sets forth the range of quarterly high and low bid
quotations per share for the Common Stock for the periods indicated, as reported
by Nasdaq.
<TABLE>
<CAPTION>
COMMON STOCK
---------------
HIGH LOW
------ ------
<S> <C> <C>
1996:
Third Quarter (through August 19).......................................... $6.375 $3.750
Second Quarter............................................................. 7.375 2.250
First Quarter.............................................................. 2.375 1.625
1995:
Fourth Quarter............................................................. $2.313 $1.000
Third Quarter.............................................................. 1.125 0.625
Second Quarter............................................................. 1.000 0.875
First Quarter.............................................................. 1.375 0.875
1994:
Fourth Quarter............................................................. $2.000 $1.000
Third Quarter.............................................................. 1.875 1.500
Second Quarter............................................................. 2.125 1.750
First Quarter.............................................................. 2.750 2.000
</TABLE>
The latest reported sale price of the Common Stock as reported on the
Nasdaq SmallCap Market on August 19, 1996 was $5.00 per share. The number of
registered record holders of Common Stock at August 5, 1996 was 453. The Company
believes that there are in excess of 1,500 beneficial owners of the Common
Stock.
DIVIDEND POLICY
No cash dividends have been paid on Common Stock to date, and none are
anticipated in the foreseeable future. Any future determination concerning the
payment of cash dividends will depend upon the Company's results of operations,
financial condition, capital requirements and other factors deemed relevant by
the Company's Board of Directors. In addition, the loan agreement between the
Company and its primary lender prohibits the payment of dividends under certain
conditions.
14
<PAGE> 17
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Except for the pro forma information, the following selected consolidated
financial data for the years ended December 31, 1991, 1992, 1993, 1994 and 1995
was derived from the financial statements of the Company which have been audited
by the Company's independent auditors. The following selected consolidated
financial data for the six months ended June 30, 1995 and 1996, have been
derived from the unaudited consolidated financial statements of the Company,
which in the Company's opinion include all adjustments (consisting of only
normal recurring adjustments) necessary for a fair presentation of the
information set forth therein. This data should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the financial statements, related notes and other financial
information included herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------------------------------------------------- ---------------------------------
1995 1995 1996
--------------------- ------ ------------------------
1991 1992 1993 1994(1) ACTUAL PRO FORMA(2) ACTUAL ACTUAL(3) PRO FORMA(2)
------ ------- ------ ------- ------ ------------ ------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Operating revenues:
Computer system equipment
sales and support....... $4,472 $ 3,712 $3,961 $1,873 $1,101 $ 2,619 $ 742 $ 1,592 $ 2,037
Application software
licenses................ 2,828 3,066 3,578 1,849 2,429 4,477 1,547 1,306 1,339
Software support.......... 1,387 1,633 2,149 2,550 3,731 4,898 1,696 2,295 2,728
Services and other........ -- -- -- 715 1,625 2,156 516 1,124 1,217
------ ------ ------ ------ ------ ------ ------ ------ ------
Total operating
revenues.......... 8,687 8,411 9,688 6,987 8,886 14,150 4,501 6,317 7,321
------ ------ ------ ------ ------ ------ ------ ------ ------
Costs and expenses:
Cost of products sold..... 3,181 2,850 3,159 1,547 881 1,887 659 1,359 1,738
Client services
expenses................ 852 1,236 1,437 2,601 2,825 4,386 1,365 2,003 2,567
Software development
costs................... 1,043 1,388 1,425 1,775 1,643 3,024 915 827 1,242
Sales and marketing....... 1,450 1,655 2,032 1,718 1,931 2,689 1,118 1,536 1,744
General and
administrative.......... 1,084 1,358 1,382 2,219 1,768 2,383 948 1,009 1,568
Loss from discontinuance
of product line(4)...... -- 2,000 -- -- -- -- -- -- --
Restructuring costs(5).... -- -- -- 686 -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
Total costs and
expenses.......... 7,610 10,487 9,435 10,546 9,048 14,369 5,005 6,734 8,859
------ ------ ------ ------ ------ ------ ------ ------ ------
Operating income (loss)..... 1,077 (2,076) 253 (3,559 ) (162 ) (219) (504 ) (417) (1,538)
Other income (expense)...... (7) (42) (7) (748 ) (351 ) (427) (203 ) (105) (95)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net earnings (loss)......... $1,070 $(2,118) $ 246 $(4,307) $(513 ) $ (646) $(707 ) $ (522) $ (1,633)
====== ====== ====== ====== ====== ====== ====== ====== ======
Earnings (loss) per common
share..................... $ 0.22 $ (0.40) $ 0.05 $(0.78 ) $(0.08) $ (0.10) $(0.11) $ (0.08) $ (0.25)
====== ====== ====== ====== ====== ====== ====== ====== ======
Weighted average common
shares outstanding........ 4,882 5,266 5,363 5,536 6,443 6,443 6,295 6,619 6,619
</TABLE>
- ---------------
(1) Includes the operating results and related financial information since the
acquisition of Dynamic Technical Resources, Inc. on August 23, 1994,
accounted for by the purchase method.
(2) Gives pro forma effect to acquisition of DMI assuming such transaction
occurred on January 1, 1995. See "Pro Forma Condensed Consolidated
Statement of Operations."
(3) Includes the operating results and related financial information since the
acquisition of Dimensional Medicine, Inc. on May 1, 1996, accounted for by
the purchase method.
(4) The Company recorded a one time charge of $2.0 million relating to the
estimated losses and write downs associated with the discontinuance of a
product line operating on the Prime computer platform, which was no longer
commercially available.
(5) See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and Note F of the December 31, 1995 financial statements
included herein.
15
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RECENT HISTORY
During the period from July 1994 through December 1994, the Company
underwent a significant management restructuring which included a change in all
senior management personnel. During this process, the Company retained a new
senior management team comprised of Messrs. David M. Pomerance, Mitchel J.
Laskey and Paul S. Glover ("New Management"). During the year ended December 31,
1995, the Company completed a restructuring plan (the "Restructuring Plan")
begun during 1994 and developed and executed a refinancing plan (the
"Refinancing Plan"). In addition, the Company changed its name to Dynamic
Healthcare Technologies, Inc. and re-engineered its project strategy to provide
the healthcare industry with a comprehensive electronic health record solution
which included the announcement of its new DynamicVision product.
The Restructuring Plan resulted in the closing of the Company's Lincoln,
Nebraska facility, the relocation of sales, marketing, accounting and
administrative personnel to Orlando, Florida and the organization of a national
support center based in Orlando, Florida. Throughout the restructuring process,
New Management maintained a commitment to preserving its customer base by
improving customer satisfaction. The Restructuring Plan included a
re-engineering of the Company's laboratory product line, enhancement of product
quality control processes and standards, the timely delivery of scheduled
installations and a commitment to meeting all outstanding customer contract
obligations. During the restructuring process, New Management determined that
additional financing was required. The Company was in default of certain
financial covenants contained in the loan agreement with its primary lender, and
was delisted from the Nasdaq stock market system for failing to meet the
continuing maintenance requirements of such listing.
In July 1995, the Company completed the private placement of Subordinated
Convertible Notes (the "Notes"), with detachable warrants, for an aggregate
consideration of $775,000. In November 1995, the Notes were converted into an
aggregate of 968,750 shares of the Company's newly designated Series A Preferred
Stock. In December 1995, the Company completed the private placement of
3,750,000 shares of Series B Preferred Stock for an aggregate consideration of
$3,025,000. The final phase of the Refinancing Plan included the restructuring
of the Company's $3,500,000 demand line of credit into a long-term $2,800,000
note, payable in monthly installments, based upon a 17 1/2 year amortization and
a balloon payment in March 1998. The Company subsequently regained listing on
the Nasdaq SmallCap Market in December 1995.
Following the completion of the Restructuring Plan and the Refinancing
Plan, the Company shifted its focus to new product development. Utilizing the
Company's healthcare information experience, document imaging technologies and
customer input, the Company focused on a new product strategy for electronic
health records. The Company's new electronic health record product,
DynamicVision, provides connectivity and enabling technologies that integrate
clinical and imaging information systems to create an open architecture,
multi-media clinical workstation. In February 1996, the Company demonstrated
DynamicVision at a major industry trade show. As a direct result of that
demonstration, the Company signed a beta-site agreement with an existing
customer. The beta-site installation commenced in July 1996.
In May 1996, the Company completed the acquisition of Dimensional Medicine,
Inc. ("DMI") in order to strategically expand its customer base as well as the
Company's clinical information systems product offerings. The DMI office in
Minnetonka, Minnesota was subsequently converted into the Company's radiology
technology center.
On June 10, 1996, the Company announced the appointment of Nikhil A. Bhatt
as Senior Vice President and Chief Technical Officer. In addition, David M.
Pomerance was named Chairman of the Board and Mitchel J. Laskey was named Chief
Executive Officer in addition to retaining his positions as President and
Treasurer.
16
<PAGE> 19
OVERVIEW
The Company's revenues are derived from (i) computer equipment sales and
support, (ii) application software licenses, (iii) software support and (iv)
services and other revenues. The Company generally recognizes revenues from
computer equipment sales at the time the products are shipped. Computer system
equipment sales and support revenues include hardware support contracts for a
specific period from which revenue is recognized ratably over the corresponding
contract period. Application software license revenues are recognized when
application software is delivered to the customer. Installation and training
service revenues, included with application software licenses, are recognized as
the services are performed. Software support revenues principally include
contracts for remote dial-up problem diagnosis, maintenance and corrective
support services, each of which covers a specified period for which revenue is
recognized ratably over the corresponding contract period. Services and other
revenues include project management, training, consulting, custom programming
services, post-contract support obligations and other services, which are
provided under separate contract and are recognized as services are performed.
Revenues from professional services and maintenance and support services
typically increase as the number of installed systems increases.
Cost of products sold includes the cost of hardware sold, costs of third
party software licenses and hardware support subcontracts. Client service
expense includes the direct and indirect costs associated with implementation
and support personnel. Software development costs include the direct and
indirect salaries and wages of software research and development personnel,
direct research and development expenses, and software amortization expense,
reduced by capitalized software development costs. Software development costs
are expensed until such time as technological feasibility is established and
then are capitalized in compliance with Statement of Financial Accounting
Standards No. 86 "Accounting for Costs of Computer Software to be Sold, Leased
or Otherwise Marketed." Sales and marketing costs include direct and indirect
salaries, commissions, joint marketing costs, advertising, trade show costs,
user group costs and travel and entertainment expenses related to the sale and
marketing of the Company's products and services. General and administrative
expenses include salaries and expenses for corporate administration, financial,
legal and human resources.
The sales cycle for the Company's systems is typically six to eighteen
months from initial contact to contract signing. The product delivery cycle is
variable. Based on the customer's implementation plan, product delivery may take
two or more years, particularly with enterprise-wide electronic healthcare
record solutions involving significant and continuing customer service
requirements. Accordingly, the product delivery cycle depends upon the
combination of products purchased and the implementation plan defined by the
customer in the master sales agreement. Each customer contract is separately
negotiated. The installation schedule for a clinical information systems, or
departmental electronic healthcare record implementations, typically require six
to twelve months. Under its standard master sales agreement, the Company
generally receives a partial payment upon execution of the agreement, a hardware
installment payment upon delivery of hardware, installation progress payments
upon the completion of defined milestones and final payment, which may vary with
each contract.
17
<PAGE> 20
RESULTS OF OPERATIONS
The following table sets forth, for each of the periods indicated, certain
selected statement of operations data expressed as a percentage of revenues:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------- ---------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Operating revenues:
Computer system equipment sales and
support............................... 40.9% 26.8% 12.4% 16.5% 25.2%
Application software licenses............ 36.9 26.5 27.3 34.4 20.7
Software support......................... 22.2 36.5 42.0 37.7 36.3
Services and other....................... -- 10.2 18.3 11.4 17.8
----- ----- ----- ----- -----
Total operating revenues......... 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Costs and expenses:
Cost of products sold.................... 32.6 22.1 9.9 14.7 21.5
Client services expenses................. 14.8 37.2 31.8 30.3 31.7
Software development costs............... 14.7 25.4 18.5 20.3 13.1
Sales and marketing...................... 21.0 24.6 21.7 24.8 24.3
General and administrative............... 14.3 31.8 19.9 21.1 16.0
Restructuring costs...................... -- 9.8 -- -- --
----- ----- ----- ----- -----
Total costs and expenses......... 97.4 150.9 101.8 111.2 106.6
----- ----- ----- ----- -----
Operating income (loss).................... 2.6 (50.9) (1.8) (11.2) (6.6)
Other income (expense)..................... (0.1) (10.7) (4.0) (4.5) (1.7)
----- ----- ----- ----- -----
Net earnings (loss)........................ 2.5% (61.6)% (5.8)% (15.7)% (8.3)%
===== ===== ===== ===== =====
</TABLE>
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Operating Revenues. The Company's total consolidated operating revenues
were $6,317,000 for the first six months of 1996, as compared to $4,502,000 for
the corresponding period in 1995, representing an increase of $1,815,000 or
40.3%. This increase was primarily attributable to the inclusion of $1,380,000
in revenues for the two months ended June 30, 1996 resulting from the May 1996
acquisition of DMI. The balance of this increase was primarily attributable to
growth in laboratory system sales and upgrades, new imaging systems sales and
increased services and software support revenues.
Computer system equipment and sales support revenues were $1,592,000 for
the first six months of 1996, as compared to $742,000 for the corresponding
period in 1995, representing an increase of $850,000 or 114.6%. This increase
was primarily due to systems sales for laboratory migrations, imaging and
radiology.
Application software license revenues were $1,306,000 for the first six
months of 1996, as compared to $1,547,000 for the corresponding period in 1995,
representing a decrease of $241,000 or 15.6%. The Company had no new LabPro 2000
system sales during the first six months of 1996. LabPro 2000 installations
during the first six months of 1996 consisted solely of migrations converting
from the Prime computer platform to the IBM AS/400 platform, for which the
Company did not charge any application license fees. However, during the first
six months of 1996, $527,000 of radiology system application license revenues
were recognized and $343,000 of imaging software revenues were recognized, with
no such corresponding revenues recognized for the corresponding period in 1995.
Software support revenues were $2,295,000 for the first six months of 1996,
as compared to $1,696,000 for the corresponding period in 1995, representing an
increase of $599,000 or 35.3%. This increase was primarily due to radiology
systems support revenues attributable to DMI, LabPro 2000 support revenues from
the completion of system deliveries and revenues from the software support of
imaging and health information systems.
18
<PAGE> 21
Services and other revenues for the first six months of 1996 were
$1,124,000, as compared to $516,000 for the corresponding period in 1995,
representing an increase of $608,000 or 117.8%. This increase was primarily
attributable to a shift of resources to billable professional services from
non-billable customer support stabilization undertaken as part of the
Restructuring Plan, as well as additional revenues from professional services
efforts related to complex systems integrations and implementations.
Cost of Products Sold. The cost of products sold was $1,359,000 for the
first six months of 1996, as compared to $659,000 for the corresponding period
in 1995, representing an increase of $700,000 or 106.2%. This increase was
primarily attributable to a higher percentage of revenues associated with
hardware sales and the payment of licensing fees to IBM with respect to the
imaging software licenses.
Client Services Expenses. Client services expenses were $2,003,000 for the
first six months of 1996, as compared to $1,365,000 for the corresponding period
in 1995, representing an increase of $638,000 or 46.7%. This increase was
largely attributable to DMI and its client services expenses for the two months
ended June 30, 1996, as well as increased professional staffing in anticipation
of professional services requirements associated with the DMI consolidation and
the general availability of DynamicVision and PACsPlus+.
Software Development Costs. Software development costs were $827,000 for
the first six months of 1996, as compared to $915,000 for the corresponding
period in 1995, representing a decrease of $88,000 or 9.6%. This decrease was
primarily attributable to an increase in capitalized software development costs
during 1996. During the first six months of 1996, $604,000 of software
development costs were capitalized, as compared to $447,000 of software
development costs capitalized during the first six months of 1995.
Sales and Marketing Expenses. The Company's sales and marketing expenses
were $1,536,000 for the first six months of 1996, as compared to $1,118,000 for
the corresponding period in 1995, representing an increase of $418,000 or 37.4%.
This increase was primarily attributable to additional sales and marketing
personnel hired or employed in anticipation of the general availability of
DynamicVision, PACsPlus+ and imaging products. This increase was also
attributable to sales and marketing expenses related to DMI.
General and Administrative Expenses. General and administrative expenses
were $1,009,000 for the first six months of 1996, as compared to $948,000 for
the corresponding period in 1995, representing an increase of $61,000 or 6.4%.
As a percentage of total revenues, general and administrative expenses were
16.0% for the six months ended June 30, 1996, as compared to 21.1% for the six
months ended June 30, 1995.
Other Income (Expense). The Company's total other expense for the first
six months of 1996 was $105,000, as compared to $203,000 for the corresponding
period in 1995, representing a decrease of $98,000 or 48.3%. This decrease was
primarily attributable to a decrease in interest expense and financing charges
resulting from the restructuring of the Company's demand line of credit into a
long-term note.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Operating Revenues. The Company's total operating revenues for 1995 were
$8,886,000, as compared to $6,987,000 for 1994, representing an increase of
$1,899,000 or 27.2%. Computer system equipment sales and support revenues for
1995 were $1,101,000, as compared to $1,873,000 for 1994, representing a
decrease of $772,000 or 41.2%. Application software license revenues for 1995
were $2,429,000, as compared to $1,849,000 for 1994, representing an increase of
$580,000 or 31.4%. Although the Company had fewer system placements of its
laboratory product line during 1995, these variances were primarily the result
of an increased focus on installing software sales contracted for in 1994 which
were completed during 1995. Software support revenues for 1995 were $3,731,000,
as compared to $2,550,000 for 1994, representing an increase of $1,181,000 or
46.3%. The increase was principally attributed to increased laboratory system
installations, the acquisition in August 1994 of Dynamic Technical Resources,
Inc. ("DTR") and revenues associated with a contract with IBM for support of
Medical RecordsPlus software installations. Services and other revenues for 1995
were $1,625,000, as compared to $715,000 for 1994, representing an increase of
$910,000 or 127.3%. This increase was primarily attributable to the acquisition
of DTR, which expanded the Company's custom programming, technical consulting
and other professional services revenues.
19
<PAGE> 22
Cost of Products Sold. The cost of products sold during 1995 was $881,000,
as compared to $1,547,000 during 1994, representing a decrease of $666,000 or
43.1%. This decrease was primarily attributable to a decrease in hardware sales.
Client Services Expenses. Client services expenses for 1995 were
$2,825,000, as compared to $2,601,000 for 1994, representing an increase of
$224,000 or 8.6%. This increase was primarily attributable to the inclusion of a
full year of related client services expenses for 1995 following the acquisition
of DTR in August 1994.
Software Development Costs. Software development costs for 1995 were
$1,643,000, as compared to $1,775,000 for 1994, representing a decrease of
$132,000 or 7.4%. This decrease was principally attributable the effects of
restructuring and the reassignment of the Company's technical personnel to
product delivery and support installation activities. Capitalized software
development activities initially slowed during the restructuring process in
early 1995, but increased at the end of 1995 as a result of development work on
LabPro 2000, Monitrax and DynamicVision. Capitalized software expenses were
$796,000 for 1995, as compared to $854,000 for 1994. Software amortization
expenses were $563,000 for 1995, as compared to $506,000 for 1994, reflecting
the inclusion of DTR for the full year.
Sales and Marketing Expenses. Sales and marketing expenses were $1,931,000
for 1995, as compared to $1,717,000 for 1994, representing an increase of
$214,000 or 12.5%. This increase was principally attributable to an increase in
sales and marketing personnel and associated costs. This increase began in the
fourth quarter of 1995 as a result of the Company's new product introductions.
In addition, during 1995, the Company changed its corporate name and incurred
expenses in developing sales and marketing materials involving its new corporate
image.
General and Administrative Expenses. General and administrative expenses
for 1995 were $1,768,000, as compared to $2,219,000 for 1994, representing a
decrease of $451,000 or 20.3%. This decrease resulted from the centralization of
administrative functions after the DTR merger and a reduction in executive and
administrative salaries and personnel expenses. Amortization of goodwill
increased from $55,000 in 1994 to $155,000 in 1995 in direct proportion to the
periods of amortization occurring each year. As a percentage of total revenues,
general and administrative expenses were 19.9% for 1995, as compared to 31.7%
for 1994.
Restructuring Costs. During 1994, $686,000 of restructuring costs were
incurred, as compared to no restructuring costs in 1995. These expenses resulted
from consolidation of sales, marketing, accounting, administration and national
support functions to Orlando, Florida, from Lincoln, Nebraska, as well as the
re-engineering of the laboratory product line. These expenses were recognized in
order to write down assets to net realizable value and to record costs
associated with the Company's Restructuring Plan.
Other Income (Expense). The Company's total other expense for 1995 was
$351,000, as compared to $748,000 for 1994, representing a decrease of $397,000
or 53.1%. The decrease was attributable to a $610,000 charge to operations in
1994 as a result of the issuance of an additional 610,000 shares of Common
Stock, with a market value of $1.00 per share, as an adjustment to the
consideration paid to former DTR shareholders pursuant to the DTR merger which
the Company's Board of Directors determined was required due to breaches by the
Company of representations and warranties (the "Acquisition Contingency").
Notwithstanding this decrease, interest expense and financing charges for 1995
were $378,000, as compared to $143,000 for 1994, representing an increase of
$235,000 or 164.3%. This increase was primarily attributable to debt financing
required to fund the Restructuring Plan and pay interest on the Notes.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Operating Revenues. The Company's total operating revenues for 1994 were
$6,987,000, as compared to $9,688,000 for 1993, representing a decrease of
$2,701,000 or 27.9%. This reduction was primarily attributable to significantly
lower revenues from the sale of computer systems equipment and support as well
as the reduction in application software licenses. During 1994, the Company sold
significantly fewer laboratory information systems, as compared to 1993, and a
significant percentage of customers purchased hardware from sources other than
the Company. Computer system equipment sales and support revenues for 1994 were
20
<PAGE> 23
$1,873,000, as compared to $3,961,000 for 1993, representing a decrease of
$2,088,000 or 52.7%. This was the result of fewer customer sales of new systems
and an increase in customers who purchased computer systems directly from IBM or
an IBM authorized dealer. Application software license revenues for 1994 were
$1,849,000, as compared to $3,578,000 for 1993, representing a decrease of
$1,729,000 or 48.3%. This decrease was primarily attributable to fewer new
customer sales and increased customer discounts. Software support revenues for
1994 were $2,550,000, as compared to $2,149,000 for 1993, representing an
increase of $401,000 or 18.7%. This increase was primarily attributable to
customers having completed the installation process and thereupon commencing
support and maintenance services. Services and other revenues for 1994 were
$715,000, as compared to no corresponding revenues for 1993. The services
revenues increase was related solely to the acquisition of DTR in August 1994.
Cost of Products Sold. The cost of products sold during 1994 was
$1,547,000, as compared to $3,159,000 during 1993, representing a decrease of
$1,612,000 or 51.0%. This decrease was attributable to a decrease in computer
system equipment sales. This, in part, reflected the competitive marketplace for
hardware systems, as well as competitive pricing as a result of re-marketer
sales.
Client Services Expenses. Client services expenses for 1994 were
$2,601,000, as compared to $1,437,000 for 1993, representing an increase of
$1,164,000 or 81.0%. This increase was primarily attributable to two factors.
First, the inclusion of client services expenses attributable to DTR reflected
$415,000 for the four months during 1994 following the Company's merger with
DTR. Second, and more significantly, personnel costs and operational
inefficiencies that existed in the Company's laboratory product line required
extensive resources during the latter part of 1994 to effect product
re-engineering and restructuring.
Software Development Costs. Software development costs for 1994 were
$1,775,000, as compared to $1,425,000 for 1993, representing an increase of
$350,000 or 24.6%. The cost of producing software product masters subsequent to
establishing technological feasibility was capitalized whereas all other
development and research costs were expensed. Capitalized software development
costs were amortized primarily over a five-year estimated economic life, and
$854,000 was capitalized in 1994, as compared to $887,000 capitalized in 1993.
In addition, during 1994, and as part of the Restructuring Plan, New Management
took a charge to operations of approximately $122,000 for the carrying value of
certain software products after a determination of net realizable value.
Sales and Marketing Expenses. Sales and marketing expenses for 1994 were
$1,717,000, as compared to $2,032,000 for 1993, representing a decrease of
$315,000 or 15.5%. This decrease was primarily the result of reduced joint
marketing costs due to the Company directly marketing to its customers and not
relying upon former business partners to market its systems. These actions were
caused primarily as a result of two of the Company's largest business partners
being merged into other companies and the joint marketing agreements with the
Company being terminated.
General and Administrative Expenses. General and administrative expenses
for 1994 were $2,219,000, as compared to $1,382,000 for 1993, representing an
increase of $837,000 or 60.6%. This increase was primarily attributable to the
replacement of the entire management and the retention of New Management during
the third and fourth quarters of 1994, the merger of DTR and the inclusion of
related consolidated costs, including amortization of goodwill, and increased
legal and accounting costs, as well as expenses attributable to the restatement
of prior period financial statements. As a percentage of total revenues, general
and administrative expenses were 31.7% for 1994, as compared to 14.3% for 1993.
Other Income (Expense). The Company's total other expense for 1994 was
$748,000, as compared to $7,000 for 1993, representing an increase of $741,000.
This increase was attributable to a $610,000 charge to operations resulting from
the Acquisition Contingency. This increase was also attributable to increased
interest expense and financing charges resulting from increases in the Company's
line of credit to effect borrowings necessary to implement the Restructuring
Plan and to continue operations.
21
<PAGE> 24
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain quarterly financial data for the
four quarters during the fiscal year ended December 31, 1995, and the two
quarters ended March 31, 1996 and June 30, 1996. This quarterly information is
unaudited, has been prepared on the same basis as the annual financial
statements and, in the opinion of the Company's management, reflects all
normally recurring adjustments necessary for fair presentation of the
information for the periods presented. Operating results for any quarter are not
necessarily indicative of results of any future period. See "Risk
Factors -- Variability of Quarterly Operating Results; Extended Sales Cycle."
<TABLE>
<CAPTION>
1995 1996
------------------------------------------------- -----------------------
FIRST SECOND THIRD FOURTH FIRST SECOND
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total operating revenues............ $2,234,190 $2,267,300 $2,213,396 $2,171,450 $2,309,838 $4,007,551
Operating income (loss)............. (366,291) (136,478) 251,646 89,825 (323,458) (93,066)
Net earnings (loss)................. (443,037) (262,402) 148,313 44,502 (366,911) (155,208)
Earnings (loss) per common share.... $ (0.07) $ (0.04) $ 0.02 $ 0.01 $ (0.06) $ (0.02)
Weighted average common shares
outstanding....................... 6,003,871 6,582,883 6,589,071 6,589,316 6,611,646 6,626,733
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $772,000 for the six months
ended June 30, 1996. Net cash used in investment activities was $2,234,000 for
the six months ended June 30, 1996, principally as a result of the DMI
acquisition. Net cash used in financing activities for the six months ended June
30, 1996 was $57,000, reduced principally as a result of $110,000 paid as
dividends on preferred stock, repayments under bank indebtedness and lease
obligations, offset by proceeds of stock sales and the exercise of stock options
in the amount of $165,000.
Net cash used in operating activities for the twelve months ended December
31, 1995 was $25,000, principally attributable to increases in accounts
receivable, and offset by decreases in unbilled receivables and decreases in
accounts payables. Net cash used in investing activities was $1,102,000 for the
twelve months ended December 31, 1995, principally as a result of capitalization
of software development costs, purchases of property and equipment, and a
restricted cash deposit associated with the DMI acquisition. Net cash received
from financing activities for the twelve months ended December 31, 1995 was
$3,407,000, principally the result of the proceeds from the sale of Series B
Preferred Stock, warrants and the conversion of convertible notes into Series A
Preferred Stock.
The Company currently has a long-term promissory note payable to a bank in
the original principal amount of $2.8 million, with interest at the lender's
prime rate plus 2% per annum. As of July 31, 1996, the rate of interest on this
note was 10.25% per annum. This note is payable on a 17.5 year amortization
schedule, matures on March 31, 1998 and is secured by substantially all of the
assets of the Company. The Company does not currently have an available working
capital line of credit facility. On August 16, 1996, the Company executed
unsecured notes in an aggregate amount of $1.0 million payable to certain
officers, directors and other parties affiliated with the Company. These notes
provide for payment, in full, at the earlier of the completion of this Offering
or November 14, 1996, together with interest at a rate of 13% per annum. See
"Certain Transactions."
As of December 31, 1995 the Company had net operating loss carryforwards
for federal income tax purposes of approximately $9.8 million, which can be used
to offset taxable income in future years. Future equity offerings combined with
sales of the Company's equity during the preceding years may cause changes in
ownership under Section 382 of the Internal Revenue Code of 1986, as amended,
which will limit the use of the Company's net operating loss carryforward
existing as of the date of the ownership change. In the event the Company has
taxable income in the future, a change of ownership under Section 382 may result
in the application of such limitations and could have a material adverse effect
on the Company.
22
<PAGE> 25
Due primarily to the DMI acquisition in May 1996, the Company has recently
experienced a depletion in its working capital. The Company's future capital
needs will include requirements for office facilities and office equipment, as
personnel increases for sales, marketing and research and development.
Short-term borrowings, a restructured credit facility or modification of the
terms of the Unsecured Notes will be required to meet necessary liquidity needs
in the event that this Offering is not completed.
The Company believes that the proceeds of the Offering, in addition to
operating cash flow, will be sufficient to finance the Company's planned growth
and cash requirements for at least the next twelve months. The Company's ability
to meet its cash obligations on a long-term basis will depend upon achieving
profitable operations and the consistent and timely collection of accounts
receivable.
INFLATION
The Company believes that the general state of the economy and inflationary
trends have only a limited effect on its business. Historically, inflation has
not had a material effect on the Company. Changing prices of computer hardware
could have a material effect on the cost of materials sold and the related
selling price of software and hardware sales.
23
<PAGE> 26
BUSINESS
GENERAL
The Company is a leading provider of enterprise-wide, patient-centered
healthcare information systems. These systems enable hospitals, physician
practice groups and integrated delivery networks to capture, store, archive and
retrieve clinical, financial and administrative patient information. The
Company's products enhance productivity, reduce costs and improve the quality of
patient care by providing on-line access to patient information previously
maintained on a variety of media, including paper, X-ray film, magnetic disk and
video and audio recordings. The Company's current product lines include clinical
information systems for use in laboratory, radiology, anatomic pathology and
anesthesiology applications, and imaging and electronic health record solutions.
The Company provides support for all of its systems and provides systems
integration and other consulting services.
The Company currently serves over 250 customers in 44 states. Key customers
include the University of California at Los Angeles Medical Center, University
of Illinois at Chicago Medical Center, Methodist Hospital of Memphis, Memorial
Sloan-Kettering Cancer Center, Ohio State University Hospital, Columbia/HCA,
Greater Dayton Area Hospital Association, Advocate Health Care, Temple
University Hospital, UniHealth and Orlando Regional Health System.
Utilizing the Company's healthcare information experience, imaging
technologies and customer input, the Company is focusing on a new product
strategy for electronic health records. The Company's new electronic health
record product, DynamicVision, provides connectivity and enabling technologies
that integrate clinical and imaging information systems to create an open
architecture, multi-media clinical workstation. DynamicVision provides prompt
and simultaneous on-line access to information stored in various systems and
data repositories located at multiple sites. This information can include
documents, medical images such as X-rays, MRIs and CAT scans, and video and
audio recordings. DynamicVision is currently being beta-tested and is scheduled
for general availability by the end of 1996.
INDUSTRY
The healthcare information industry is undergoing rapid and significant
change. Cost containment pressures, industry consolidation, the movement toward
managed care and rising standards of healthcare quality represent fundamental
trends in today's healthcare operating environment. Increasingly, the key to
effective cost control and quality management lies in the collection,
availability and analysis of medical records in order to assess treatment
patterns, resource utilization and outcomes. As a result, the information
demands in the healthcare industry are rapidly increasing for caregivers,
managers and third party payors. Total healthcare information technology
spending in the United States was estimated to be $8.5 billion in 1994, and is
projected to reach $13.0 billion by 1997 and $20.0 billion by 2000.
Cost containment and quality management efforts in the healthcare industry
have historically been hampered by a lack of integrated clinical and financial
information and the fact that a large amount of healthcare information exists on
paper and is not accessible by computer. The paper based storage of patient
information creates costly information management problems including: (i) delays
in accessing information; (ii) space and personnel costs to store paper-based
records; (iii) lost and misfiled documents; (iv) single user access to relevant
data; and (v) errors in entering and reading information. As reimbursement is
shifting more toward risk sharing and capitation, providers and payors need to
better manage risk by controlling costs, demonstrating quality, measuring
outcomes and influencing utilization.
Healthcare providers have recently begun to view information systems
technology as a viable alternative for increasing productivity and efficiency,
measuring and managing costs, and improving the quality of services delivered.
The 1996 Annual Healthcare Information Management and Systems Society ("HIMSS")/
Hewlett Packard Leadership Survey showed that 63% of its respondents indicated
that their healthcare information systems budgets will increase by 20% or more
over the next two years. In addition, 45% of respondents indicated that the most
important advantage of computer technology for healthcare providers is the
ability to access current patient information across the enterprise.
24
<PAGE> 27
As the need for readily accessible information throughout the healthcare
enterprise continues to grow, hospitals, providers and payors of all sizes are
faced with the challenge of implementing healthcare information management
systems that are scaleable, capable of working with existing multiple legacy
information systems and flexible to adapt to changes in the healthcare
marketplace. Also, such systems must be patient-centered, integrating all
aspects of managing the healthcare process, such as clinical care, financial
management and administrative decision support.
Industry changes are resulting in fewer but larger healthcare entities and
the emerging organizational model is the integrated delivery network ("IDN"). An
IDN is a network of healthcare organizations that assumes and manages healthcare
risk, provides coordinated care and is held financially and clinically
accountable for the health of the population it serves. The 1996 HIMSS/Hewlett
Packard Leadership Survey indicated that 83% of the respondents are now or will
soon be part of an IDN.
IDNs require innovative information systems infrastructure to support their
multi-entity, multi-site environments. Their information systems must contribute
to making the delivery of healthcare services more efficient and effective
across the continuum of care. They must deliver tangible cost reductions and
measurable productivity and quality improvements, making the availability of
complete, timely and cost-effective patient-centered information essential.
The Company believes that one of the most significant changes in healthcare
information needs will be the development and implementation of the electronic
health record. Electronically capturing, storing, indexing, archiving and
disseminating information enables physicians, health information managers,
clinicians, claims processors and others across an entire healthcare enterprise
to share centralized comprehensive patient information. The Company believes
that the electronic health record will be an essential part of information
systems that support IDNs.
25
<PAGE> 28
STRATEGY
The Company's objective is to be the leading provider of enterprise-wide,
patient-centered healthcare information systems that enable the efficient
capture, storage, archival and retrieval of electronic patient health
information and the secure sharing of this information across the continuum of
care throughout a patient's lifetime. To achieve this objective, the Company
intends to employ the following strategies:
AGGRESSIVELY EXPAND ITS POSITION IN THE ELECTRONIC HEALTH RECORD
MARKET. The Company believes the rapidly growing electronic health record
market represents a significant growth opportunity. The Company believes
DynamicVision, its new electronic health record product, provides an
opportunity to capture a significant share of this emerging and potentially
large market. As such, the Company plans to aggressively market
DynamicVision to existing and new customers through a combination of direct
sales, strategic relationships, trade shows and other forums.
FOCUS ON CROSS-SELLING TO EXISTING AND NEW CUSTOMERS. The Company
believes its customer relationships with key decision makers, many of whom
may have only purchased systems for one department, provide it with a
significant opportunity to sell existing and new systems and services.
Furthermore, the addition of new products, such as DynamicVision, better
leverages the Company's sales and marketing expenditures. Accordingly, the
Company intends to focus its sales and marketing efforts on increased
penetration of existing customers and broad penetration of new accounts.
PROVIDE SOLUTIONS UTILIZING OPEN ARCHITECTURE. The Company's strategy
is to continue to develop systems utilizing open, client/server
architecture. The Company believes that this strategy provides distinct
advantages over competitive product offerings in the marketplace. The
Company's new product development, including DynamicVision, employs
technical designs based on open architecture at all levels of data capture,
information management and workflow, application software and connectivity,
which permits platform independence and plug and play capability. This
capability is critical to customers because it protects their investment in
existing information systems. In addition, the Company's use of open
architecture provides its customers with the flexibility to acquire
incrementally, or upgrade to, new state-of-the-art information solutions as
they become available without incurring the substantial expenses that may
be required with closed or "proprietary" system solutions.
MAINTAIN TECHNOLOGICAL ADVANTAGE BY LEVERAGING TECHNOLOGY OF INDUSTRY
LEADERS. The Company's commitment to open architecture leverages its own
technology with capabilities of leading technology companies, enabling the
Company to invest in research and development for its healthcare software
applications. The Company has entered into strategic relationships with
industry leaders, including IBM, Wang and others. The Company believes its
technical designs enable it to respond more rapidly to changes in core
technologies at a lower cost than companies utilizing proprietary
information systems.
ACQUIRE COMPLEMENTARY BUSINESSES, PRODUCTS AND TECHNOLOGIES. The
Company believes it is well positioned to capitalize on the significant
consolidation opportunities which exist in the healthcare information
systems industry. For example, the Company recently completed its
acquisition of DMI, a radiological information and imaging software company
which is now a wholly-owned subsidiary of the Company. The Company will
continue to evaluate potential acquisitions and strategic relationships
which are consistent with its business strategy, complementary to its
product line or which incorporate new technologies.
26
<PAGE> 29
PRODUCTS AND SERVICES
The Company has a broad offering of products and services that are based
upon a strategic mix of applications and technologies that support the
restructuring of healthcare delivery information systems backed by
implementation and support services. The Company's products are organized into
two areas: electronic health record and imaging solutions, and clinical
information systems.
<TABLE>
<CAPTION>
SITES/
PRODUCT TYPE OF SOLUTION STATUS DESCRIPTION
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ELECTRONIC HEALTH RECORD AND IMAGING SOLUTIONS
DynamicVision.................. Electronic Health Record Beta Site An enterprise-wide multi-media electronic
System health records clinical workstation and system
Medical RecordsPlus............ Enterprise-wide Document 45 Based on IBM's ImagePlus/400 image processing
Imaging System system, enables authorized caregivers to access
centralized repositories of document images
Professional Access
Facility(1).................... OS/2 based Workstation 22 Enables authorized caregivers to review and
complete charts
Open Image Server.............. Enterprise-wide Document Available Based on Wang OPEN/software, enables authorized
Imaging System First Half caregivers to access centralized repositories
1977 of document images
Maxiview....................... Diagnostic Image Graphics 20 An advanced imaging and graphic workstation
Workstation that enables two- and three-dimensional image
processing
PACsPlus+...................... Diagnostic Image Management Beta Site Enables physicians and caregivers to access and
and Distribution System review images from local and remote locations
- -----------------------------------------------------------------------------------------------------------------------
CLINICAL INFORMATION SYSTEMS
LabPro 2000.................... Laboratory Information 92 Manages clerical and administrative functions
System in the laboratory including monitoring and
controlling specimens, ordering, tracking, and
results reporting
Transfusion Service
Manager(2)..................... Blood Bank System 33 Manages specialized result entry, blood
storage, patient history storage, and product
inventory
Maxifile....................... Radiology Information System 63 Manages clerical and administrative functions
of radiology department including patient
scheduling and film tracking
OPTIMA(3)...................... Radiology Mammography 21 Manages clerical and administrative functions
Manager for mammography services
ANSIRS......................... Anatomic Pathology System 27 Manages clerical and administrative functions
of cytology/pathology department
Monitrax....................... Perioperative Information Available Facilitates the collection and presentation of
System Second Half vital patient, surgical and anesthesia data
1997 through the perioperative process
Physician's Workstation........ Point-of-Care Patient Available A Wang product that facilitates real time data
Record System First Half capture of patient information which the
1997 Company intends to incorporate into its systems
solutions
---------------
(1) Professional Access Facility is an add-on component which may be used only in conjunction with Medical RecordsPlus.
(2) Transfusion Service Manager is an add-on component which may be used only in conjunction with LabPro 2000.
(3) OPTIMA is an add-on component which may be used only in conjunction with Maxifile.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 30
ELECTRONIC HEALTH RECORD AND IMAGING SOLUTIONS
DynamicVision, the Company's electronic health record, is a universal,
clinical workstation which provides enterprise-wide connectivity through a
master patient index to systems and data repositories existing in the healthcare
environment, giving physicians, caregivers and other authorized individuals
prompt and simultaneous access to both current and historical health
information. DynamicVision enables physicians, clinicians and other technical
professionals to: (i) view records, report results and worklist assignments;
(ii) display and manipulate document and diagnostic images; (iii) handle the
analysis and assignment of chart deficiencies and electronically sign records;
(iv) play video and audio recordings; and (v) participate in video
consultations. DynamicVision provides business process and workflow automation
that streamlines the flow of tasks and information throughout an enterprise. In
addition, system administration capabilities include security profiling and
specific permissions for the enterprise. DynamicVision provides the connectivity
and enabling technologies that integrate Dynamic's imaging and clinical
information systems, as well as those from other companies, into a virtual
healthcare information systems environment. DynamicVision is currently being
beta-tested and is scheduled for general availability by the end of 1996.
Medical RecordsPlus is an industry leading, enterprise-wide document
imaging solution based on IBM's ImagePlus/400 image processing system. Medical
RecordsPlus gathers information from scanned or faxed paper documents or
directly from existing provider systems which enables physicians, medical
records personnel and other authorized individuals to access centralized
electronic health record information operating on IBM AS/400.
Professional Access Facility is an OS/2 based clinical workstation which is
used with Medical RecordsPlus to enable physicians, clinicians and other
technical professionals to view records and worklist assignments, display and
manipulate document images, handle the analysis and assignment of record
deficiencies and electronically sign records.
Open Image Server is an open architecture, platform independent,
enterprise-wide document imaging solution based on Wang's Enterprise Work
Management software (OPEN/workflow, OPEN/image and OPEN/COLD) and is available
for both UNIX and Windows NT environments. Open Image Server enables physicians,
medical records personnel and other authorized individuals to access centralized
electronic health record information. Open Image Server gathers information from
scanned or faxed paper documents or directly from existing provider systems.
Maxiview is an advanced imaging and graphics workstation which accommodates
two- and three-dimensional image processing and is compatible with imaging
equipment from all major manufacturers. It enables a physician to observe
interrelationships of soft tissue and bone, precisely locate lesions and tumors
and perform a variety of measurements. See " -- Government Regulation."
PACsPlus+ is an enterprise-wide, diagnostic image management and
distribution system. It provides physicians and caregivers local and remote
access to review quality or diagnostic quality images from cost effective,
standard workstations. PACsPlus+ provides remote access to diagnostic images
across a network already functioning at the customer's location.
CLINICAL INFORMATION SYSTEMS
LabPro 2000 is a clerical and administrative laboratory information system
that allows the laboratory to monitor and control the flow of specimens through
the department. It computerizes the process of ordering, tracking and reporting
results of procedures performed by the clinical laboratory. Patient and
management reporting capabilities provide support for diagnostic and therapeutic
decision making. Multiple LabPro 2000 laboratory systems may be linked,
providing economies of scale through specialized testing stations.
28
<PAGE> 31
Transfusion Service Manager is a blood bank system which manages
specialized blood test result entries, blood product inventory, blood storage
and patient transfusion histories. Transfusion Service Manager may be used only
in conjunction with LabPro 2000. In addition, management reports enable the
department to evaluate the effectiveness of transfusion services provided.
Transfusion Service Manager is an FDA regulated product for which approval is
pending. See "-- Government Regulation."
Maxifile is a radiology information system that computerizes the clerical
and administrative functions of the radiology department. Modular in design,
Maxifile applications include patient scheduling and tracking, film management,
statistical reporting, quality control and patient billing. Maxifile schedules
patient appointments and automatically generates documents which are available
when the patient arrives. The system monitors the patient throughout the
radiology process and offers time and status reports. Film management tracks
film movement among departments, film libraries, clinics and off-site locations.
Diagnostic reports can be approved electronically and then printed, communicated
via a network or automatically faxed through Maxifile's AutoFAX capability.
Primary markets include hospitals, clinics and independent diagnostic imaging
centers.
OPTIMA is a radiology mammography manager which performs clerical and
administrative functions for mammography services, including American College of
Radiology compliance. OPTIMA may be used only in conjunction with Maxifile.
OPTIMA displays an on-line patient history, including breast diagrams.
ANSIRS is an anatomic pathology system that functions independently, or
with LabPro 2000, to manage clerical and administrative functions within
cytology/pathology departments. ANSIRS provides on-line workstation access for
cytologists/histologists, medical secretaries and pathologists. Major functional
areas include report transcription and word processing, quality assurance,
regulatory requirements and on-line access to patient history.
Monitrax is designed to be a point-of-care clinical information system that
will allow the collection and presentation of vital patient, surgical and
anesthesia data through each phase of the perioperative process. The portable
hardware platform will allow for entry of vital signs, drugs, fluids and notes
from any location. Monitrax will capture the data collected during the
perioperative process, organize it, and display it in real-time to facilitate
both clinical and management decision making. The anesthesia record will be
available to become a part of the patient electronic health record. The data
elements are designed to be stored in a repository of clinical information
available for query and outcome reporting.
Physician's Workstation, a Wang product, is a scaleable, point-of-care
patient record application designed by physicians and intended to be
incorporated into the Company's systems solutions. Physician's Workstation
communicates with existing information systems to provide for the real-time
capture of clinical and administrative information and build a comprehensive
electronic health record. Information can be scanned, received by fax or updated
by the physician during the delivery of care.
CONSULTING, SYSTEMS INTEGRATION AND OTHER SERVICES
The Company provides a full range of professional consulting services
including project management, implementation planning, training and education.
The Company's technical services include network design, implementation and
support, custom software development, interfaces and modifications and systems
integration. The Company also provides support services including 24 hour
telephone support, and software maintenance and enhancements.
RESEARCH AND DEVELOPMENT
The Company's research and development program is designed to extend the
capabilities of existing products and develop new healthcare software
applications. The Company believes that a substantial and sustained commitment
to product development is important to the long term success of its business. As
of July 31, 1996, 23 professional employees were engaged in research and
development activities. During the years ended December 31, 1993, 1994 and 1995,
the Company spent $1,984,000, $2,068,000 and $1,862,000, respectively, on
research and development. The Company's research and development is influenced
by
29
<PAGE> 32
customer input and user group forums. Currently, the Company's research and
development efforts are primarily focused on the DynamicVision, PACsPlus+ and
Monitrax product lines.
SALES AND MARKETING
As of July 31, 1996, the Company had five sales representatives focusing on
new business development reporting to the Vice President -- New Business Sales
and four account executives focusing on existing customers reporting to the Vice
President -- Customer Sales. New business sales and existing customer sales are
supported by six product specialists who cover the entire United States. The
compensation of the Company's sales employees is substantially dependent on the
achievement of individual sales targets. In addition, a ten person sales support
group provides telemarketing, proposal development, demonstration coordination
and administrative support. The Company's marketing department consists of four
individuals who develop product competitive analyses, sales collateral, audio
and video products and coordinate trade shows, advertising and public relations
activities.
The Company's sales cycle is typically six to eighteen months and includes
several steps: (i) initial contact and qualification; (ii) development of
proposal in response to request for a proposal or direct sales lead; (iii)
business problem requirements definition; (iv) product demonstrations; (v) site
visits; and (vi) contract preparation and negotiations. Members of the Company's
professional services, product management and sales support departments, and
members of executive management assist the sales force in completing the
proposal, conducting demonstrations and analyzing the requirements. In support
of the sales efforts, the Company advertises in trade journals, participates in
trade shows, publishes articles and provides speakers for industry shows and
conferences. In addition, the Company receives qualified leads as well as
support in proposal development, demonstrations and site visits from its
strategic business partners, which include IBM, Wang and others.
STRATEGIC RELATIONSHIPS
The Company has entered into strategic relationships with several leading
technology developers, including IBM, Wang and others, to gain access to certain
technologies that are integrated into the Company's systems. In addition,
through these strategic relationships the Company is able to cross-market its
internally developed or acquired technologies to customers of its business
partners.
In November 1994, the Company signed a non-exclusive agreement with IBM to
market, support and enhance Medical RecordsPlus. The Company is responsible for
providing maintenance, support, product shipment and product enhancements and
offers customers a wide range of additional services including telephone and
remote diagnostic assistance, problem resolution, implementation, training and
consulting services. A fee based on IBM's then current list price, less certain
allowances, is paid to IBM by the Company for licenses sold by the Company. IBM
has retained the right to market the product and, pursuant to the terms of the
Agreement, pays a license fee to the Company for sales of the product by IBM.
In March 1996, the Company signed non-exclusive agreements with Wang. This
relationship provides open systems, core imaging technology and business process
automation capabilities to the Company through Wang's suite of OPEN/software
products which includes OPEN/image, OPEN/workflow, and OPEN/ COLDplus. In
addition, Physician's Workstation provides the Company with a scaleable,
point-of-care patient record application which facilitates the real-time capture
of clinical and administrative information and the construction of a
comprehensive patient health record. The agreements also provide for the mutual
sharing of technology and permits the Company to market these products, for
which the Company pays a fee to Wang.
CUSTOMERS
The Company currently supports over 250 customers in 44 states. The Company
generates revenues almost exclusively through sales to the healthcare industry
located in the United States. Due to this concentration, substantially all
receivables of the Company are from healthcare institutions which may be
similarly affected by changes in economic, regulatory or other industry related
conditions. Key customers
30
<PAGE> 33
include the University of California at Los Angeles Medical Center, University
of Illinois at Chicago Medical Center, Methodist Hospital of Memphis, Memorial
Sloan-Kettering Cancer Center, Ohio State University Hospital, Columbia/HCA,
Greater Dayton Area Hospital Association, Advocate Health Care, Temple
University Hospital, UniHealth Hospital and Orlando Regional Health System.
COMPETITION
The market for information technology in the healthcare industry is
intensely competitive. Many of the Company's competitors have significantly
greater financial, research and development, technical and marketing resources
than the Company. Competitors vary in size and in the scope and breadth of the
products and services they offer. The Company's systems compete both with other
technologies and with similar systems developed by other companies. Other major
information management companies, including the companies with whom the Company
has strategic relationships, may enter the markets in which the Company
competes. Competitive pressures and other factors, such as new system
introductions by the Company's competitors, may result in significant pricing
pressures that could have a material adverse effect on the Company. In addition,
in the professional and technical consulting segment, the Company competes with
the consulting divisions of national accounting firms as well as national and
regional healthcare specialty consulting firms.
GOVERNMENT REGULATION
The FDA has issued a draft guidance document addressing the regulation of
certain computer products as devices under the FFDCA. To the extent that
computer software is classified as a device under applicable regulations, the
manufacturers of such products could be required, depending upon the product,
to: (i) register and list their products with the FDA, (ii) notify the FDA and
demonstrate substantial equivalence to other products on the market before
marketing such products or (iii) obtain FDA clearance by filing a pre-market
application that establishes the safety and effectiveness of the product. The
Company has two products considered devices under the FFDCA: Maxiview and
Transfusion Service Manager. As a result of the characterization of certain of
the Company's products as devices, the Company's manufacturing facilities are
registered with the FDA and its manufacturing operations regarding devices are
required to be in compliance with the FDA's rules and regulations. The FDA
conducted on-site inspections at the Maitland facility in May 1996 and at the
Minnetonka facility in June 1996. Both inspections were concluded without
incident. There can be no assurance that the Company will ultimately be able to
obtain or maintain required FDA approvals to market its products. Of the
Company's two regulated products, Maxiview cleared as substantially equivalent
to a predicate device by the FDA in December 1995 and the 510(k) submission to
demonstrate substantial equivalence for the Transfusion Service Manager was
submitted to the FDA in March 1996 and is pending.
INTELLECTUAL PROPERTY
The Company primarily relies upon trade secrets, copyright laws and
confidentiality agreements with employees and customers to protect its rights in
its software technology. The Company does not hold any patents nor has it filed
copyrights with respect to any of its software technology. Due to the rapid pace
of innovation within the software industry, the Company believes that patent,
trade secret and copyright protection are less significant than the Company's
ability to further develop, enhance and modify its current products and other
clinical information systems through the technological and creative skills of
its personnel. To minimize the possibility of third parties imitating the
Company's systems, the Company only licenses object code and does not license or
otherwise distribute source code.
The Company's employees are required to enter into confidentiality
agreements which prohibit the disclosure of confidential information and require
employees to report and assign to the Company all concepts, developments,
discoveries and inventions conceived during their employment.
The Company has federal trademark registration for Maxifile(R) and has
applied for federal trademark registration for DynamicVision, Monitrax,
PACSPlus+, ASAP, OPTIMA and Maxiview.
There can be no assurance that the legal protections and precautions taken
by the Company will be adequate to prevent misappropriation of the Company's
technology. In addition, these protections do not
31
<PAGE> 34
prevent independent third-party development of functionally equivalent or
superior technologies or services. The Company does not believe that its
operations or products infringe on the intellectual property rights of others.
There can be no assurance that others will not assert infringement or trade
secret claims against the Company with respect to its current or future products
or that the Company will be successful in defending any such claim.
EMPLOYEES
As of July 31, 1996, the Company had 135 full time employees, of which 23
were employed in the research and development department, 72 were involved in
client services, 18 performed general and administrative functions and 22 were
engaged in sales and marketing. None of the Company's employees is represented
by a labor union or subject to a collective bargaining agreement. The Company
has never experienced a work stoppage and believes that its employee relations
are good.
LEGAL PROCEEDINGS
In February 1996, the Company instituted an action against James A.
Terrano, the Company's former President and Chief Executive Officer, in the
District Court of Lancaster County, Nebraska, alleging that Mr. Terrano (i) made
fraudulent and negligent representations to the Company's Board of Directors,
which resulted in the Company's acceptance of a handwritten memorandum modifying
Terrano's employment agreement, (ii) breached his fiduciary duty to the Company
and (iii) breached his obligations under his employment agreement with the
Company. The Company is seeking to recover damages in the amount of at least
$50,000 in addition to the declaratory judgment determining that no severance
pay is due Mr. Terrano and that the handwritten memorandum is invalid and
unenforceable and does not modify the employment agreement. Mr. Terrano has
counter-claimed that he has been defamed by the Company. The Company is a
defendant in an action in which Mr. Terrano has a demand for $280,000 in
severance pay together with two years worth of benefits unquantified to include
the use of an automobile, club dues and insurance policies. The Company is
vigorously contesting this case.
The Company is a defendant in an action filed by a former Vice-President in
March, 1995 in the District Court of Lancaster County, Nebraska, alleging that
the Company did not lawfully terminate her for cause, and, therefore, breached
her employment agreement. The former employee is seeking severance payment. The
Company is vigorously contesting this case.
The Company is a defendant in a claim by a customer for $250,000 for
compensatory damages and unspecified punitive damages alleging that the Company
breached express and implied warranties and committed fraud in connection with
the sale of a laboratory information system. The Company intends to vigorously
contest the allegations. The Company continues to provide software support
services on an ongoing basis to this customer.
The above cases are in the early stages of discovery and the Company
believes that it is not possible to evaluate the likelihood of a favorable or
unfavorable outcome of either case at this time. As of the date hereof, there
are no other material legal proceedings pending against the Company.
FACILITIES
The Company's corporate headquarters are located at 101 Southhall Lane,
Suite 210, in Maitland, Florida 32751. The Maitland location consists of
approximately 20,000 square feet of office space under a lease which expires
March 31, 1999. The Company also maintains an office at 10901 Bren Road East,
Minnetonka, Minnesota 55343 (the former DMI facility) as the Company's radiology
technology center. The Minnetonka location consists of approximately 13,000
square feet under lease which expires on July 31, 1999. The Company considers
its existing facilities to be adequate for its foreseeable needs.
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<PAGE> 35
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
Certain information is set forth below concerning the directors and
executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---------------------------- --- -----------------------------------------------------------
<S> <C> <C>
David M. Pomerance.......... 51 Chairman of the Board and Secretary
Mitchel J. Laskey........... 46 President, Chief Executive Officer, Treasurer and Director
Nikhil A. Bhatt............. 43 Senior Vice President and Chief Technical Officer
Paul S. Glover.............. 37 Vice President -- Finance and Chief Financial Officer
Jerry L. Carson............. 55 Director
Thomas J. Martinson......... 46 Director
Bret R. Maxwell............. 37 Director
Daniel Raynor............... 36 Director
Richard W. Truelick......... 55 Director
</TABLE>
Certain information is set forth below concerning additional key employees
of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---------------------------- --- -----------------------------------------------------------
<S> <C> <C>
Steven J. Akerson........... 46 Vice President -- Clinical Products
Philip R. Kneeland.......... 39 Vice President -- Technical Operations
Mary Lu Lander.............. 55 Vice President -- Marketing
Matthew P. Lawton........... 52 Vice President -- Customer Sales
Linda A. Moline............. 40 Vice President -- Professional Services
Bruce B. Sherr.............. 57 Vice President -- Sales
</TABLE>
DAVID M. POMERANCE has been Chairman of the Board of Directors since May
1996, Secretary of the Company since August 1994 and a director since 1991. Mr.
Pomerance served as Chief Executive Officer of the Company from July 1994 to May
1996 and was President from July 1994 through August 1994. He is the managing
general partner of Martin Magnetic Imaging, Ltd., a magnetic resonance imaging
(MRI) facility in Stuart, Florida. From 1990 through 1994, and from 1985 through
1989, Mr. Pomerance was a principal in various private businesses. During 1989
and 1990, Mr. Pomerance was the president of the Healthcare Systems Division of
UNISYS Corporation. From 1983 through 1985, Mr. Pomerance was the president of
the Dynamic Control Division of Baxter International. From 1974 until its sale
to Baxter International in 1983, he was the president and controlling
shareholder of Dynamic Control Corporation, a healthcare information systems
company which he founded.
MITCHEL J. LASKEY has been Chief Executive Officer since May 1996,
President, Chief Operating Officer and Treasurer since August 1994 and a
director since December 1994. From 1992 to 1994, Mr. Laskey was chairman and
chief executive officer of DTR, which was acquired by the Company in August
1994. From 1985 through 1991, Mr. Laskey was a principal or managing partner in
various entrepreneurial investments and also acted as a volunteer officer for a
not-for-profit social agency. From 1983 through 1985, Mr. Laskey was executive
vice president of the Dynamic Control Division of Baxter International and from
1980 until its sale to Baxter International in 1983 was the executive vice
president of Dynamic Control Corporation, a healthcare information systems
company. Mr. Laskey has been a licensed certified public accountant since 1974
and is a member of the American and Florida Institutes of Certified Public
Accountants.
NIKHIL A. BHATT has been Senior Vice President and Chief Technical Officer
of the Company since June 1996. From January 1989 to May 1996, Mr. Bhatt was
senior vice president and chief technical officer of IMNET Systems, Inc. Mr.
Bhatt has more than 20 years experience in the image processing industry,
specializing in software development, engineering and research and development.
Mr. Bhatt was directly responsible for the design and development of the IMNET
MegaSAR(R) Microfilm Jukebox and personally holds numerous patents, including 15
in image processing and seven in biomedical engineering.
33
<PAGE> 36
PAUL S. GLOVER has been Vice President -- Finance and Chief Financial
Officer of the Company since December 1994 and was Director of Financial
Operations from August 1994 through December 1994. Mr. Glover was the executive
vice president of Uniprompt Microsystems, Inc. and president of its wholly owned
subsidiary, Unisoft, Inc., from August 1990 through July 1994. Mr. Glover served
as a certified public accountant with the national accounting firms of Main
Hurdman and Company (now part of KPMG Peat Marwick LLP) and Deloitte, Haskins
and Sells (now part of Deloitte & Touche LLP).
JERRY L. CARSON has been a director of the Company since January 1993. Mr.
Carson has been executive vice president and chief financial officer of Evans
Enterprises, a property management and real estate development firm in Bedford,
New Hampshire, since 1990. Mr. Carson was executive vice president and chief
financial officer of Playboy Enterprises, Inc. from 1988 to 1990 and held the
positions of vice president of corporate development and treasurer of Baxter
International from 1980 to 1986.
THOMAS J. MARTINSON has been a director of the Company since 1986. He also
was the Company's Chairman of the Board from 1986 until 1996 and Secretary from
1986 until 1994. Mr. Martinson has been president of Martinson & Company, Ltd.
of Wayzata, Minnesota, an investment banking firm, since 1985. In March 1996,
Mr. Martinson became the chairman of the board of directors of Interventional
Innovations Corporation of St. Paul, Minnesota.
BRET R. MAXWELL has been a director of the Company since May 1996. Mr.
Maxwell is a managing director of First Analysis Corporation, a securities
investment firm which he joined in 1982. Mr. Maxwell is also a director of
Continental Waste Industries, Inc. and numerous privately held companies.
DANIEL RAYNOR has been a director of the Company since May 1996. Mr. Raynor
has been a managing partner of The Argentum Group, a private investment firm,
since November, 1987, and chairman of the general partner of Argentum Capital
Partners, L.P., a small business investment company, since its organization in
February 1990.
RICHARD W. TRUELICK has been a director of the Company since May 1996. Mr.
Truelick is the sole owner of Truelick Associates, a merger consulting and
investment firm, where he has been employed since 1988. From 1979 through 1988,
Mr. Truelick was a partner in Adler-Truelick Associates, also a merger
consulting and investment firm. Mr. Truelick was vice president corporate
development for Beatrice Foods Company from 1968 through 1979.
STEVEN J. AKERSON has been Vice President -- Clinical Products of the
Company since March 1996. Mr. Akerson was the Company's Director of Product
Development from 1994 until March 1996. From 1983 to 1994, Mr. Akerson was
employed by IBAX Healthcare Systems in various management and director level
positions in the product development area.
PHILIP R. KNEELAND has been Vice President -- Technical Operations of the
Company since August 1994. From 1992 to 1994 Mr. Kneeland was vice president of
development of DTR. From 1983 to 1992, Mr. Kneeland was employed by IBAX
Healthcare Systems in capacities related to healthcare data processing
consulting and facilities management with emphasis in developing and
implementing new service products. Mr. Kneeland is married to Ms. Moline.
MARY LU LANDER has been Vice President -- Marketing of the Company since
September 1994. From 1991 to 1994 Ms. Lander was president of Health Practice
Services, a re-marketer of physician practice management systems. Prior to 1991,
Ms. Lander was director of marketing services for Unisys Corporation, Healthcare
Systems Division.
MATTHEW P. LAWTON has been Vice President -- Customer Sales of the Company
since August 1994. Mr. Lawton was Director of Sales and Marketing for DTR from
1992 to 1994. He has significant healthcare systems experience with multiple
healthcare information system vendors, including IBAX Healthcare Systems, where
he held the position of vice president of product development.
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<PAGE> 37
LINDA A. MOLINE has been Vice President -- Professional Services of the
Company since August 1994. From 1992 to 1994 Ms. Moline held the position of
director of customer services for DTR. Ms. Moline, who is a registered records
administrator, was development manager of application design for IBAX Healthcare
Systems, where she was employed from 1985 to 1992. Ms. Moline is married to Mr.
Kneeland.
BRUCE B. SHERR has been Vice President -- Sales of the Company since
October 1995. Prior to joining the Company in 1995 and during 1994, Mr. Sherr
was vice president of sales and marketing for Biovation, a laboratory
information systems company. During 1993 and 1994, Mr. Sherr was vice president
of sales for the Western Division of First Data Corporation, Health System
Group. Mr. Sherr was vice president of sales for Micro Health Systems during
1992 and 1993, and was director of sales for Critikon, a division of Johnson &
Johnson, from 1990 to 1992.
Officers of the Company serve at the pleasure of the Board of Directors,
subject to the terms of any employment agreements with the Company. The term of
office of each director of the Company ends at the next annual meeting of the
Company's shareholders or when their successor is duly elected and qualified.
Other than Mr. Kneeland and Ms. Moline, there are no family relationships among
any of the Company's officers and directors. See "Management -- Employment
Agreements."
COMPENSATION OF DIRECTORS
Non-employee directors are compensated at the rate of $500 plus expenses
for each Board meeting attended in person and receive a five-year warrant for
25,500 shares of Common Stock upon their election to the Board of Directors. The
exercise price of the warrant is equal to the average of the closing bid and ask
prices of Common Stock on the date of issuance. Prior to June 14, 1995, these
warrants vested one-third upon issuance and one-third upon each of the first and
second anniversaries of issuance. After June 13, 1995, these warrants were
issued to vest 40% upon issuance and 20% on each of the next three
anniversaries. In addition, warrants to purchase 5,000 shares of Common Stock
are issued annually to non-employee directors starting at the beginning of that
director's third consecutive term in office. Each warrant has a five year term
and an exercise price equal to the average of the closing bid and ask prices of
Common Stock on the date of issuance. Prior to June 14, 1995, these warrants
vested fully upon issuance. After June 13, 1995 these warrants were issued to
vest 40% upon issuance and 20% on each of the next three anniversaries. With
certain exceptions, all outside director warrants expire upon the termination of
that director's service to the Company as a director. See "-- Director and
Management Stock Warrant and Option Plan."
No director receives any additional compensation for services as a member
of any committee of the Board of Directors.
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<PAGE> 38
EXECUTIVE COMPENSATION
The following table is a summary of the annual, long-term and other
compensation of the Company's Chief Executive Officer and each other corporate
officer whose total salary and bonus during the fiscal year ended December 31,
1995 exceeded $100,000 (collectively, the "Named Officers.")
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION --------------------
------------------------ AWARDS PAYOUTS
OTHER ANNUAL -------- ------- ALL OTHER
NAME AND COMPENSATION OPTIONS/ LTIP COMPENSATION
PRINCIPAL POSITION YEAR SALARY (1) SARS PAYOUTS (2)
------------------ ---- -------- ------------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
David M. Pomerance............... 1995 $151,750 $ 7,800 -- -- $2,772
Chairman of the Board 1994 73,365 2,600 250,000(3) -- 804
and Secretary
Mitchel J. Laskey................ 1995 151,750 7,800 -- $50,000 2,772
President, Chief Executive 1994 50,000 2,600 250,000(3) 20,833(4) 924
Officer and Treasurer
Philip R. Kneeland............... 1995 100,000 7,800 25,000(5) -- 2,772
Vice President -- Technical 1994 33,333 2,600 -- -- 920
Operations
Matthew P. Lawton................ 1995 100,000 -- 10,000(5) -- --
Vice President -- Customer 1994 31,667 -- -- -- --
Sales
</TABLE>
- ---------------
(1) Includes amounts paid as car allowances.
(2) Includes Company contributions to the individual employee's 401(k)
Retirement Plan.
(3) Options awarded during 1994 to Messrs. Pomerance and Laskey were in addition
to compensation paid under their respective employment agreements.
(4) Represents amounts paid under a deferred compensation agreement with Mitchel
J. Laskey assumed in connection with the acquisition of DTR which is
payable in monthly installments of $4,167. As of July 31, 1996, $50,004 was
owed to Mr. Laskey under this agreement.
(5) Options awarded under the 1993 Incentive Stock Option Plan.
STOCK OPTION INFORMATION
The following table sets forth information relative to stock options
granted to the Named Officers. The Company has not granted any stock
appreciation rights.
OPTION GRANTS DURING 1995
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE
----------------------------------------------- AT ASSUMED ANNUAL
PERCENT OF RATES OF STOCK
NUMBER OF TOTAL PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERMS
OPTIONS EMPLOYEES PRICE EXPIRATION -----------------
NAME GRANTED IN 1995 PER SHARE DATE 5% 10%
- -------------------------------------- --------- ---------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Mitchel J. Laskey..................... 250,000(1) 38.00% $1.00 8/23/99 $15,131 $68,524
David M. Pomerance.................... 250,000(2) 38.00 1.00 7/06/99 13,484 64,737
Philip R. Kneeland.................... 25,000(2) 3.80 1.00 6/13/05 13,177 35,791
Matthew P. Lawton..................... 10,000(3) 1.52 1.00 6/13/05 5,271 14,316
</TABLE>
- ---------------
(1) Represents previously granted employment contract options covering 250,000
shares as to which the option price was reduced to $1.00 from $1.6875 per
share of Common Stock on September 13, 1995.
(2) Represents previously granted employment contract options covering 250,000
shares as to which the option price was reduced to $1.00 from $1.875 per
share of Common Stock on September 13, 1995.
(3) Options awarded under the 1993 Incentive Stock Option Plan.
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<PAGE> 39
The following table sets forth information relative to stock options
exercised by the Named Officers and values of stock options held by those
officers that were outstanding at year end. No options were exercised by any
executive officer of the Company during 1995.
AGGREGATED OPTION EXERCISES AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT YEAR END OPTIONS AT YEAR END
-------------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
David M. Pomerance..................... 180,500 100,000 $ 213,282 $ 140,625
Mitchel J. Laskey...................... 180,500 100,000 210,938 140,625
Philip R. Kneeland..................... -- 25,000 -- 35,156
Matthew P. Lawton...................... -- 10,000 -- 14,063
</TABLE>
EMPLOYMENT AGREEMENTS
In August 1994, the Company entered into an employment agreement with
Mitchel J. Laskey to serve as the Company's President and Chief Operating
Officer. The agreement is for a term of three years, which automatically renews
for two successive one-year periods, unless terminated by either party not less
than 60 days prior to end of the initial, or renewal term, as the case may be.
The agreement provides for an annual base salary of $150,000, which is to be
reviewed annually by the Board of Directors. In March 1996, the Board of
Directors approved an increase in the base salary of Mr. Laskey to $187,500,
effective March 1, 1996. If the employment agreement is terminated without
cause, one year of Mr. Laskey's annual base salary as of the date of
termination, in addition to all other benefits and other compensation, if any,
shall accrue and be paid. The agreement contains a covenant not to compete for
two years after termination.
In June 1996, the Company entered into an employment agreement with Nikhil
A. Bhatt to serve as the Company's Senior Vice President and Chief Technical
Officer. The agreement is for a term of three years, which automatically renews
for three successive one-year periods, unless terminated by the Company not less
than 60 days prior to the commencement of any renewal period. The agreement
provides for an annual base salary of $155,000, which is to be reviewed annually
by the Board of Directors and is subject to increases based on the Consumer
Price Index. If the employment agreement is terminated without cause, the
Company fails to renew the contract or Mr. Bhatt elects to terminate for "good
reason," Mr. Bhatt is to receive on the termination date a lump sum cash payment
equal to one year of Mr. Bhatt's annual base salary, in addition to all other
benefits and other compensation to which he would be entitled if he were an
employee during the one-year period. The agreement contains a covenant not to
compete for a period of 18 months after termination.
In August 1994, the Company entered into an employment agreement with David
M. Pomerance, which was amended effective August 1, 1996. Pursuant to the
amended agreement, Mr. Pomerance serves as Chairman of the Board and a part-time
consultant to the Company. The agreement, as amended, is for a term of one year
commencing August 1, 1996 and automatically renews for successive one-year
periods unless terminated by written notice from either party within 60 days
prior to the commencement of any renewal term. The agreement provides for a
one-time payment of approximately $10,000 on August 1, 1996, monthly payments of
$1,500 for his services as Chairman of the Board and per diem payments of
$2,500, with a non-cumulative minimum of five days per month, for his part-time
services as a consultant. The agreement, as amended, also provides that Mr.
Pomerance shall be reimbursed for all reasonable expenses incurred by him in the
performance of his duties. Mr. Pomerance has waived participation in the MIC
Plan and in all vacation and sick day benefit programs. In consideration for Mr.
Pomerance entering into the amendment, the Company agreed (i) to pay Mr.
Pomerance a bonus of $12,500 per quarter for four calendar quarters commencing
August 1, 1996, and (ii) that certain unvested options held by Mr. Pomerance to
purchase an aggregate of 50,000 shares of Common Stock be deemed vested as of
August 1, 1996.
37
<PAGE> 40
MANAGEMENT INCENTIVE COMPENSATION PLAN
The Company has a Management Incentive Compensation ("MIC") Plan pursuant
to which cash distributions may be made annually based on the Company's earnings
growth and on each participating officer's contributions to the Company's
profits and other corporate goals. Distributions are made from a pool, the
amount of which is established by the Company's Board of Directors, annually as
a percentage of targeted increases in net earnings. Individual distributions
from the pool are determined by the Compensation Committee based on
recommendations from the Company's President and Chief Executive Officer. With
respect to 1996, the Board of Directors has established $1,000,000 as the target
of pre-tax net income before any amount is paid pursuant to the MIC Plan.
Maximum bonuses to be paid for 1996 will not be greater than 20% of pre-tax net
income. No amounts were accrued or paid under the MIC Plan based on the
Company's operating results in 1995.
1983 INCENTIVE STOCK OPTION PLAN
The Company had an incentive stock option plan which expired March 1993
("1983 Plan"). Under the 1983 Plan as of July 31, 1996, there are 9,000 shares
of Common Stock underlying unexpired outstanding incentive options. Options may
be exercised for periods up to ten years from date of grant or, in the case of
holders of ten percent or more of the Company's Common Stock five years from
date of grant. The expiration of the 1983 Plan does not effect the right of the
holders to exercise unexpired options under such plan.
1993 INCENTIVE STOCK OPTION PLAN
The Company adopted an incentive stock option plan in 1993 ("1993 Plan").
As of July 31, 1996, there were 392,190 shares of Common Stock underlying
unexpired outstanding options granted under the 1993 Plan. The exercise price of
the options granted under the Plan may not be less than 100% of the fair market
value of the Company's Common Stock on the grant date or, in the case of holders
of ten percent or more of the Company's Common Stock, 110% of the fair market
value of the Company's Common Stock at grant date. Options may be exercised to
acquire 40% of the shares underlying the option after one year, 30% after two
years and 30% after three years. The terms and vesting schedule of options
granted under both the 1983 Plan and 1993 Plan are the same. All full-time
permanent Company employees have been eligible to participate under both plans.
Options may be exercised either by payment of cash or, at the discretion of the
Compensation Committee, delivery of shares of Common Stock.
DIRECTOR AND MANAGEMENT STOCK WARRANT AND OPTION PLAN
The Company adopted the director and management stock warrant and option
plan in 1993 ("D&M Plan") for the issuance of stock purchase warrants and stock
options to directors, officers and key management employees of the Company.
Grants under this plan are made under the direction of the Company's
Compensation Committee. The purpose of the plan is to attract and retain
talented directors, officers and key management employees of the Company.
The Company has reserved 250,000 shares of its Common Stock for issuance
upon the exercise of warrants and options granted under the D&M Plan. As of July
31, 1996, there were 157,000 shares of Common Stock underlying unexpired
outstanding warrants granted under the D&M Plan. Under the D&M Plan, warrants to
directors are to be issued with an exercise price equal to the average of the
closing bid and ask prices of the Company's Common Stock on the date of
issuance. Options to employees and officers are to be issued with an exercise
price of no less than 85% of the fair market value of the Company's Common Stock
on the date of issuance.
EMPLOYEE STOCK PURCHASE PLAN
The Company adopted the Employee Stock Purchase Plan in 1993 for the
purpose of encouraging full-time employees to become shareholders in the
Company. The Company has reserved 200,000 shares of its Common Stock for
issuance pursuant to purchases under this plan. As of July 31, 1996, 50,666
shares have been issued under the Employee Stock Purchase Plan.
38
<PAGE> 41
The price for stock purchased under the Employee Stock Purchase Plan is the
lesser of 85% of the average bid and ask prices of the Company's Common Stock at
the beginning of and at the end of each six month purchase period. Employees pay
for the shares through payroll deductions. This Plan qualifies for favorable tax
treatment to employees under Sections 421 and 423 of the Internal Revenue Code.
CERTAIN TRANSACTIONS
During 1993, 1994 and 1995, the Company incurred $0, $55,000 and $65,000,
respectively, of airline transportation charges from DDK Enterprises LLC ("DDK")
on terms which management believes approximate fair market value. DDK is
majority owned by Mr. David Pomerance, Chairman of the Board. Effective August
1, 1996 the Company will no longer incur such expenses.
In each of 1993, 1994 and 1995, Thomas Martinson received $12,000 plus
reimbursement of expenses for his services as the Company's Chairman of the
Board. In addition, Martinson & Company, Ltd., which is wholly-owned by Mr.
Martinson, provides financial, consulting and advisory services to the Company.
The Company incurred $18,500 plus expenses to Martinson & Company, Ltd. for
these services in 1995. The Company has not paid Martinson & Company, Ltd. for
financial consulting and advisory services in 1996 and does not anticipate
incurring fees for such services in the future.
In connection with the private placement offering of subordinated
convertible notes in June 1995 David M. Pomerance, Mitchel J. Laskey and Thomas
J. Martinson purchased notes in the principal amount of $100,000, $100,000 and
$50,000, respectively, and received warrants to purchase 20,000, 20,000 and
10,000 shares of Common Stock, respectively. See "Description of
Securities -- Warrants." These notes were converted into Series A Preferred
Stock on November 28, 1995 at $0.80 per share.
In December 1995, in connection with the private placement of Series B
Preferred Stock, The Argentum Group was paid a financial consulting fee of
$175,000 and purchased warrants to purchase 210,000 shares of Common Stock for
$25,000. Daniel Raynor is managing partner of The Argentum Group.
On August 16, 1996, Messrs. Pomerance, Laskey, Maxwell and certain other
shareholders of the Company made unsecured loans to the Company in an aggregate
amount of $1,000,000, pursuant to which the Company executed the Unsecured
Notes. The Unsecured Notes provide for payment, in full, at the earlier of the
completion of this Offering or November 14, 1996, together with interest at a
rate of 13% per annum.
39
<PAGE> 42
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information concerning the beneficial
ownership of Common Stock as of July 31, 1996 by (i) each person (or group of
affiliated persons) known by the Company to be the beneficial owner of five
percent or more of the outstanding Common Stock, (ii) each director and current
executive officer, (iii) the Selling Shareholders, and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO SHARES BENEFICIALLY
OFFERING(2) OWNED AFTER OFFERING
----------------------- NUMBER OF SHARES -----------------------
NAME(1) NUMBER PERCENT BEING OFFERED NUMBER PERCENT
- ----------------------------------- --------- ------- ---------------- --------- -------
<S> <C> <C> <C> <C> <C>
Mitchel J. Laskey(3)............... 938,255 8.1% -- 938,255 6.0%
David M. Pomerance(4).............. 437,900 3.8 -- 437,900 2.8
Nikhil A. Bhatt(5)................. 60,000 * -- 60,000 *
Paul S. Glover(6).................. 10,000 * -- 10,000 *
Daniel Raynor(7)................... 2,186,450 18.9 5,000 1,866,450 12.0
Bret R. Maxwell(8)................. 2,103,950 18.4 5,000 1,768,950 11.5
Thomas J. Martinson(9)............. 177,500 1.6 15,000 162,500 1.1
Richard W. Truelick(10)............ 102,700 * 10,000 92,700 *
Jerry L. Carson(11)................ 40,500 * -- 40,500 *
Philip R. Kneeland(12)............. 349,401 3.1 25,000 321,901 2.1
Linda Ann Moline(13)............... 349,401 3.1 2,500 321,901 2.1
Matthew P. Lawton(14).............. 67,690 * 5,000 62,690 *
Walter Barandiaran(15)............. 2,245,000 19.7 16,000 1,914,000 12.4
First Analysis Corporation(16)..... 2,062,500 18.1 -- 1,732,500 11.2
Oliver Nicklin(17)................. 2,062,500 18.1 -- 1,732,500 11.2
Environmental Private Equity Fund
II, L.P.(18)..................... 1,031,250 9.0 165,000 866,250 5.6
The Productivity Fund, III,
L.P.(19)......................... 1,031,250 9.0 165,000 866,250 5.6
Argentum Capital Partners,
L.P.(20)......................... 938,750 8.2 150,000 788,750 5.1
Okabena Partnership, K(21)......... 500,000 4.4 43,950 456,050 3.0
First Bank System, Inc. ........... 499,600 4.4 -- 499,600 3.2
Charles Richard Johnson(22)........ 255,120 2.2 75,000 180,120 1.2
Advisors Trust(23)................. 93,750 * 15,000 78,750 *
Robert Goldstein(24)............... 93,750 * 15,000 78,750 *
Joseph Cooper(25).................. 82,500 * 10,000 72,500 *
Ronald J. Adams(26)................ 72,500 * 62,500 10,000 *
Charles Farrow(27)................. 72,500 * 62,500 10,000 *
David Moore(28).................... 72,500 * 62,500 10,000 *
Don Aron(29)....................... 62,500 * 10,000 52,500 *
Mathers Associates, L.P.(30)....... 62,500 * 10,000 52,500 *
Edward M. Sellian(31).............. 62,500 * 10,000 52,500 *
Robert L. Frome(32)................ 43,750 * 7,000 36,750 *
Sherwin Family Trust(33)........... 36,250 * 36,250 -- *
Arnold and Sandra Raynor(34)....... 31,250 * 5,000 26,250 *
Richard Fields(35)................. 30,000 * 4,800 25,200 *
Benjamin M. Fishman(36)............ 27,500 * 2,000 25,200 *
Steven Wolosky(37)................. 18,750 * 3,000 15,750 *
Robert Grossman(38)................ 12,500 * 2,000 10,500 *
All executive officers and
directors as a group (nine
persons)......................... 5,026,005 41.2 515,000 4,511,005 27.9
</TABLE>
- ---------------
* Less than 1.0%
40
<PAGE> 43
(1) The address for each of the officers and directors is 101 Southhall Lane,
Suite 210, Maitland, Florida 32751. The other addresses are as follows: Mr.
Raynor, c/o The Argentum Group, 405 Lexington Avenue, 54th Floor, New York,
NY 10174; Mr. Maxwell, c/o First Analysis Corporation, The Sears Tower,
Suite 9500, 233 South Wacker Drive, Chicago, IL 60606; Mr. Carson, Venetian
Tower Place, PH 302, 2971 Gulf Shore Boulevard N., Naples, FL 33940, Mr.
Martinson, c/o Martinson & Company, 140 Barry Avenue North, Wayzata, MN
55391; Mr. Truelick, c/o Truelick Associates, 167 Regatta Drive, Jupiter,
FL 33477; The Productivity Fund, III, L.P., 233 South Wacker Drive, Suite
9500, Chicago, IL 60606; Environmental Private Equity Fund II, L.P., 233
South Wacker Drive, Suite 9500, Chicago, IL 60606; Argentum Capital
Partners, L.P., 405 Lexington Avenue, 54th Floor, New York, NY 10174; First
Analysis Corporation, 233 South Wacker Drive, Suite 9500, Chicago, IL
60606; Mr. Barandiaran, 245 East 93rd Street, Apt. 26D, New York, NY 10128;
Mr. Nicklin, 233 South Wacker Drive, Suite 9500, Chicago, IL 60606; Okabena
Partnership, K, 5140 Norwest Center, Minneapolis, MN 55402; First Bank
System, Inc., 601 Second Avenue South, Minneapolis, MN 55402; Mr. Moore,
2814 S.E. Dune Drive, #2211, Stuart, FL 34996; Mr. Farrow, 47 North River
Road, Stuart, FL 34996; Mr. Adams, 395 Golf Brook Circle, #111, Longwood,
FL 32779; Sherwin Family Trust, 17166 Pocato Way, San Diego, CA 92128; Mr.
Fishman, c/o The Argentum Group, 405 Lexington Avenue, 54th Floor, New
York, NY 10174; Mr. Grossman, 420 East 70th Street, Apt. 8Q, New York, NY
10021; Advisors Trust, c/o Mr. Tessler, c/o Fusion Systems Corp., 7600
Standish Place, Rockville, MD 20855; Mr. Goldstein, c/o Equity Group Profit
Sharing Plan & Trust, 919 Third Avenue, 18th Floor, New York, NY 10022;
Mathers Associates, L.P., 160 East 65th Street, Apt. 23F, New York, NY
10021; Mr. Cooper, 415 Northern Boulevard, Great Neck, NY 10021; Mr.
Sellian, 6794 S.E. Isle Way, Stuart, FL 34996; Mr. Fields, c/o Allen &
Company, 711 Fifth Avenue, 9th Floor, New York, NY 10022; Mr. Frome, c/o
Olshan, Grundman, Frome & Rosenweig, 505 Park Avenue, 16th Floor, New York,
NY 10022-1170; Mr. Wolosky, c/o Olshan, Grundman, Frome & Rosenweig, 505
Park Avenue, 16th Floor, New York, New York 10022-1170; Mr. and Mrs.
Raynor, c/o Shapiro & Lobel, 111 West 40th Street, New York, NY 10018; Mr.
Aron, c/o The Aron Companies, 1400 Post Oak Blvd., Suite 500, Houston, TX
77056 and Mr. Johnson, 124 Meadow Boulevard, Sanford, FL 32771.
(2) Shares not actually outstanding are deemed to be beneficially owned by an
individual and outstanding if such individual has the right to acquire the
shares within 60 days.
(3) Includes 125,000 shares of Series A Preferred Stock and 220,000 shares of
Common Stock that Mr. Laskey may acquire within 60 days upon the exercise
of stock purchase warrants. Does not reflect the occurrence of the
following events that took place after July 31, 1996: (i) on August 15,
1996, Mr. Laskey transferred 125,000 shares of Series A Preferred Stock to
the Laskey Family Irrevocable Trust, with respect to which he exercises no
control and disclaims any beneficial ownership interest; and (ii) on August
15, 1996, the Board of Directors granted Mr. Laskey options to purchase
50,000 shares of Common Stock at an exercise price equal to the offering
price set forth on the cover of this Prospectus, 40% of which vested on the
date of the grant, and 20% of which will vest on each of three successive
anniversaries thereafter.
(4) Includes 125,000 shares of Series A Preferred Stock and 225,000 shares of
Common Stock that Mr. Pomerance may acquire within 60 days upon the
exercise of stock purchase warrants.
(5) Includes 60,000 shares of Common Stock that Mr. Bhatt may acquire within 60
days upon the exercise of stock options.
(6) Includes 10,000 shares of Common Stock that Mr. Glover may acquire within
60 days upon the exercise of stock purchase warrants.
(7) Includes 31,250 shares of Series B Preferred Stock owned by Mr. Raynor. In
addition, by reason of Mr. Raynor's status as controlling person of
Argentum Capital Partners, L.P. ("ACP"), The Argentum Group ("TAG") and the
general partner of Environmental Private Equity Fund II, L.P. ("EPEF"), Mr.
Raynor may be deemed to be the indirect beneficial owner of 1,970,000
shares of Series B Preferred Stock owned by ACP and EPEF, and 175,000
additional shares of Common Stock which may be acquired by TAG within 60
days upon the exercise of stock purchase warrants.
(8) Includes 2,062,500 shares of Series B Preferred Stock owned by The
Productivity Fund III, L.P. ("PFIII") and EPEF. By reason of his status as
the ultimate general partner, Mr. Maxwell may be deemed to be the indirect
beneficial owner of PFIII and EPEF.
(9) Includes 10,000 shares attributed to him through ownership by Joan
Martinson, his spouse. Also includes 62,500 shares of Series A Preferred
Stock and 30,000 shares of Common Stock that Mr. Martinson may acquire
within 60 days upon exercise of stock purchase warrants.
(10) Includes 62,500 shares of Series A Preferred Stock and 20,200 shares of
Common Stock that Mr. Truelick may acquire within 60 days upon the exercise
of stock purchase warrants.
(11) Includes 35,500 shares of Common Stock that Mr. Carson may acquire within
60 days upon the exercise stock purchase warrants.
(12) Includes 33,590 shares of Common Stock attributed to him through ownership
by Ms. Moline, his spouse. Also, includes 10,000 shares of Common Stock
that Ms. Moline may acquire, and 10,000 shares that Mr. Kneeland may
acquire, within 60 days upon the exercise of stock purchase warrants.
(13) Includes 295,811 shares of Common Stock attributed to her through ownership
by Mr. Kneeland, her spouse. Additionally, includes 10,000 shares of Common
Stock that Mr. Kneeland may acquire, and 10,000 shares of Common Stock that
Ms. Moline may acquire, within 60 days upon the exercise of stock purchase
warrants.
(14) Includes 4,000 shares of Common Stock that Mr. Lawton may acquire within 60
days upon the exercise of stock purchase warrants.
(15) Includes 50,000 shares of Series B Preferred Stock owned by Mr. Barandiaran
through his individual retirement account and 50,000 shares of Series B
Preferred Stock held by an individual retirement account for the benefit of
his spouse and controlled by Mr. Barandiaran pursuant to a power of
attorney. In addition, by reason of Mr. Barandiaran's status as a
controlling person of ACP, TAG and a general partner of EPEF, includes
1,031,250 shares of Series B Preferred Stock owned by EPEF, 938,570 shares
of Series B Preferred Stock owned by ACP and 175,000 shares of Common Stock
which may be acquired by TAG within 60 days upon the exercise of stock
purchase warrants.
(16) Includes 1,031,250 shares of Series B Preferred Stock owned by EPEF and
1,031,250 shares of Series B Preferred Stock owned by PFIII. By reason of
First Analysis Corporation's ("FAC") status as a general partner of PFIII
and EPEF, FAC may be deemed to be the indirect beneficial owner of PFIII
and EPEF.
41
<PAGE> 44
(17) Includes 1,031,250 shares of Series B Preferred Stock owned by EPEF and
1,031,250 shares of Series B Preferred Stock owned by PFIII. By reason of
Mr. Nicklin's status as the majority shareholder of FAC, the ultimate
general partner of PFIII and EPEF, Mr. Nicklin may be deemed to be the
indirect beneficial owner of PFIII and EPEF.
(18) Includes 1,031,250 shares of Series B Preferred Stock.
(19) Includes 1,031,250 shares of Series B Preferred Stock.
(20) Includes 938,750 shares of Series B Preferred Stock.
(21) Includes 125,000 shares of Series A Preferred Stock and 20,000 shares of
Common Stock that Okabena Partnership, K may acquire within 60 days upon
the exercise of stock purchase warrants.
(22) Includes 400 shares of Common Stock that Mr. Johnson may acquire within 60
days upon the exercise of stock purchase warrants.
(23) Includes 93,750 shares of Series B Preferred Stock.
(24) Includes 93,750 shares of Series B Preferred Stock.
(25) Includes 62,500 shares of Series B Preferred Stock and 20,000 shares of
Common Stock that Mr. Cooper may acquire within 60 days upon the exercise
of stock purchase warrants.
(26) Includes 62,500 shares of Series A Preferred Stock and 10,000 shares of
Common Stock that Mr. Adams may acquire within 60 days upon exercise of
stock purchase warrants.
(27) Includes 62,500 shares of Series A Preferred Stock and 10,000 shares of
Common Stock that Mr. Farrow may acquire within 60 days upon exercise of
stock purchase warrants.
(28) Includes 62,500 shares of Series A Preferred Stock and 10,000 shares of
Common Stock that Mr. Moore may acquire within 60 days upon exercise of
stock purchase warrants.
(29) Includes 62,500 shares of Series B Preferred Stock.
(30) Includes 62,500 shares of Series B Preferred Stock.
(31) Includes 62,500 shares of Series B Preferred Stock.
(32) Includes 43,750 shares of Series B Preferred Stock.
(33) Includes 31,250 shares of Series A Preferred Stock and 5,000 shares of
Common Stock that the Sherwin Family Trust may acquire within 60 days upon
exercise of stock purchase warrants.
(34) Includes 31,250 shares of Series B Preferred Stock.
(35) Includes 30,000 shares of Series B Preferred Stock.
(36) Includes 5,625 shares of Series B Preferred Stock owned by Mr. Fishman
through his individual retirement account and 6,875 shares of Series B
Preferred Stock owned by Mr. Fishman. Also includes 15,000 shares of Common
Stock that Mr. Fishman may acquire within 60 days upon exercise of stock
purchase warrants.
(37) Includes 18,750 shares of Series B Preferred Stock.
(38) Includes 5,625 shares of Series B Preferred Stock owned by Mr. Grossman
through his individual retirement account and 6,875 shares of Series B
Preferred Stock owned by Mr. Grossman.
42
<PAGE> 45
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company is authorized to issue up to 20,000,000 shares of Common Stock,
par value $0.01 per share. The holders of Common Stock have the following
rights: (i) to share ratably in the distribution of dividends as and when
declared by the Board of Directors out of funds legally available therefor; (ii)
to cast one vote per share on all matters voted on by shareholders, generally;
and (iii) in the event of liquidation, dissolution or winding up of the Company,
to share ratably in all assets remaining after payment of liabilities, subject
to the prior distribution rights of preferred stock, if any, then outstanding.
The shares of Common Stock are not redeemable and do not carry any preemptive
rights to subscribe for or purchase any additional shares of any class of stock.
PREFERRED STOCK
General
Under the Company's Articles of Incorporation, the Board of Directors of
the Company has the authority to divide the 10,000,000 authorized shares of
preferred stock, $0.01 par value, into series and to fix the rights and
preferences of any series so established. Variations between different series
may be created by the Board of Directors with respect to such matters as voting
rights, if any, the rate of dividend, the priority of payment thereof, and the
right to cumulation thereof, if any, redemption terms and conditions, and the
right of conversion, if any. The holders of preferred stock have no preemptive
right to subscribe to any additional securities which may be issued by the
Company, except as provided below.
The Board of Directors has adopted a Certificate of Designation of the 9%
Cumulative Convertible Preferred Stock, Series A (the "Series A Preferred
Stock") and the 9% Cumulative Convertible Preferred Stock, Series B (the "Series
B Preferred Stock"). The 968,750 outstanding shares of Series A Preferred Stock
and 3,750,000 outstanding shares of Series B Preferred Stock will be
automatically converted into shares of Common Stock on a one-to-one basis on the
effectiveness of the Registration Statement of which this Prospectus is a part.
Series A Preferred Stock and Series B Preferred Stock have certain dividend,
liquidation, redemption, voting, conversion and pre-emptive rights. See Note E
to the December 31, 1995 financial statements included herein.
The following summary of the terms and provisions of the Series A Preferred
Stock and Series B Preferred Stock does not purport to be complete and is
qualified in its entirety by reference to the pertinent sections of the
Certificate of Designation, a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
WARRANTS
The Company has outstanding the following warrants as of June 30, 1996: (i)
warrants to purchase up to 155,000 shares of Common Stock exercisable at a price
of $1.00 per share at any time prior to July 31, 2000; (ii) warrants to purchase
up to 210,000 shares of Common Stock exercisable at a price of $1.00 per share
at any time prior to December 4, 2002; (iii) warrants to purchase up to 35,000
shares of Common Stock exercisable at a price of $4.32 per share at any time
prior to December 12, 1996; and (iv) warrants to purchase 157,000 shares of
Common Stock at exercise prices ranging from $1.00 to $6.025 issued pursuant to
the D&M Plan. See "Management."
REGISTRATION RIGHTS
An aggregate of 5,680,500 shares of the Common Stock outstanding or
issuable upon exercise of certain warrants and options or upon conversion of the
Series A Preferred Stock and Series B Preferred Stock have certain registration
rights. All of such shares of Common Stock are either being offered hereby or
registered in a registration statement being filed concurrently with the
registration statement of which this Prospectus is a part.
43
<PAGE> 46
CERTAIN FLORIDA LEGISLATION
The State of Florida has enacted legislation that may deter or frustrate
takeovers of Florida corporations. The Florida Control Share Act generally
provides that shares acquired in excess of certain specified thresholds will not
possess any voting rights unless such voting rights are approved by a majority
of a corporation's disinterested shareholders. The Florida Affiliated
Transactions Act generally requires super-majority approval by disinterested
shareholders of certain specified transactions between a public corporation and
holders of more than ten percent of the outstanding voting shares of the
corporation (or their affiliates).
Florida law and the Company's Articles of Incorporation also authorize the
Company to indemnify the Company's directors, officers, employees and agents. In
addition, Florida law and the Company's Articles of Incorporation presently
limit the personal liability of corporate directors for monetary damages, except
where the directors (i) breach their fiduciary duties, and (ii) such breach
constitutes or includes certain violations of criminal law, a transaction from
which the directors derived an improper personal benefit, certain unlawful
distributions or certain other reckless, wanton or willful acts or misconduct.
The Company may also indemnify any person who was or is a party to any
proceeding by reason of the fact that he is or was a director, officer, employee
or agent of such corporation (or is or was serving at the request of such
corporation in such a position for another entity) against liability if he acted
in good faith and in a manner he reasonably believed to be in the best interests
of such corporation and, with respect to criminal proceedings, had no reasonable
cause to believe his conduct was unlawful.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
The authorized but unissued shares of Common Stock and Preferred Stock are
available for future issuance without shareholder approval. These additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans.
The existence of authorized but unissued and unreserved shares of Common
Stock and Preferred Stock may enable the Board of Directors to issue shares to
persons friendly to current management which would render more difficult or
discourage an attempt to obtain control of the Company by means of a proxy
contest, tender offer, merger or otherwise, and may thereby protect the
continuity of the Company's management.
TRANSFER AGENT
The Company's transfer agent is Norwest Bank Minnesota, N.A.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have 15,400,536 shares
of Common Stock outstanding. All 5,000,000 shares offered hereby will be freely
tradeable. In a registration statement which is intended to become effective
concurrently with the registration statement of which this Prospectus is a part,
6,278,746 shares of Common Stock are being registered by certain shareholders of
the Company, which will result in all of the shares of Common Stock outstanding
and underlying options and warrants being registered. The holders of
substantially all the shares of Common Stock being offered in the concurrent
offering have agreed with the Underwriters not to sell or otherwise dispose of
any of such shares for a period of 180 days after the closing of the Offering.
Of the shares of Common Stock outstanding and underlying options and warrants
4,979,596 shares are held by persons deemed "affiliates" of the Company as such
term is defined in Rule 144 and are subject to the "manner of sale" restrictions
under Rule 144.
44
<PAGE> 47
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their representatives,
Raymond James & Associates, Inc. and Vector Securities International, Inc. (the
"Representatives"), have severally agreed to purchase from the Company and the
Selling Shareholders the following respective numbers of shares of Common Stock
at the public offering price less the underwriting discounts and commissions set
forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Raymond James & Associates, Inc. .........................................
Vector Securities International, Inc. ....................................
-------
TOTAL...........................................................
=======
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by their counsel
and to certain other conditions. The Underwriters are obligated to take and pay
for all shares of Common Stock offered hereby (other than those covered by the
over-allotment option described below) if any such shares are purchased.
The Underwriters through the Representatives, propose to offer part of the
shares of Common Stock directly to the public at the public offering price set
forth on the cover page of this Prospectus and part of the shares to certain
dealers at a price which represents a concession not in excess of $ per
share under the public offering price. The Underwriters may allow, and such
dealers may re-allow, a concession not in excess of $ per share to certain
other dealers. The Representatives of the Underwriters have advised the Company
that the Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Certain of the Underwriters and the selling group members that currently
act as market makers for the Common Stock of the Company may engage in "passive
market making" in the Common Stock on the Nasdaq National Market in accordance
with the Rule 10b-6A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Rule 10b-6A permits, upon satisfaction of certain conditions,
underwriters and selling group members participating in a distribution that are
also Nasdaq market makers in the security being distributed to engage in limited
market making activity when Rule 10b-6A would otherwise prohibit such activity.
Rule 10b-6A prohibits underwriters and selling group members engaged in passive
market
45
<PAGE> 48
making generally from entering a bid or affecting a purchase at a price that
exceeds the highest bid for those securities displayed on Nasdaq by a market
maker that is not participating in the distribution of the Common Stock. Each
underwriter or selling group member engaged in passive market making is subject
to a daily net purchase limitation equal to 30% of such entity's average daily
trading volume during the two full consecutive calendar months immediately
preceding the date of the filing of the Registration Statement of which this
Prospectus forms a part.
The Company and the Selling Shareholders have granted the Underwriters
options exercisable not later than 30 days after the date of this Prospectus, to
purchase up to an aggregate of 750,000 additional shares of Common Stock, at the
public offering price, less the underwriting discounts and commissions set forth
on the cover page of this Prospectus. Of the shares subject to this option,
600,000 shares will be sold by the Company and 150,000 shares will be sold by
the Selling Shareholders. To the extent that the Underwriters exercise such
options, each of the Underwriters will have a firm commitment to purchase
approximately the same percentage thereof which the number of shares of Common
Stock to be purchased by it shown in the above table bears to the total shown,
and the Company and the Selling Shareholders will be obligated, pursuant to the
options, to sell such shares to the Underwriters. The Underwriters may exercise
their options only to cover over-allotments made in connection with the sale of
the shares of Common Stock offered hereby. If purchased, the Underwriters will
sell such additional shares on the same terms as those on which the shares are
being offered.
The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against, and to contribute to losses arising out of, certain civil
liabilities, including liabilities under the Securities Act.
The Company, each of its officers and directors and certain shareholders
have agreed not to sell without the consent of the Representatives any shares of
Common Stock to the public, other than shares offered hereby, for a period 180
days following the closing of this Offering. This restriction does not apply to
certain issuances of Common Stock by the Company pursuant to its stock option
plans. See "Shares Eligible for Future Sale."
The Company has agreed to sell to the Representatives or their designees
for an aggregate of $100, warrants (the "Representatives' Warrants") to purchase
up to 250,000 shares of Common Stock for a period of three years commencing one
year from the date of this Prospectus (the "Warrant Exercise Term") at 120% of
the public offering price. The Representatives' Warrants may not be transferred
for one year from the date of the Prospectus, except to the officers, employees
and shareholders of the Representatives. During the Warrant Exercise Term, the
holders of the Representatives's Warrants are given, at nominal cost, the
opportunity to profit from a rise in the market price of the Common Stock. Any
profit realized by the Representatives on the sale of the Representatives'
Warrants or the underlying shares of Common Stock may be deemed additional
underwriting compensation.
The foregoing includes a summary of the principal terms of the Underwriting
Agreement and does not purport to be complete. Reference is made to the copy of
the Underwriting Agreement which is on file as an exhibit to the Registration
Statement of which this Prospectus is a part.
The Company has applied for the Common Stock to be listed on the Nasdaq
National Market under the symbol DHTI.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Cohen, Berke, Bernstein, Brodie & Kondell, P.A., Miami,
Florida. Certain legal matters in connection with the underwriting will be
passed upon by Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.,
Miami, Florida, counsel for the Underwriters. Mr. Richard N. Bernstein, a
principal in the law firm of Cohen, Berke, Bernstein, Brodie & Kondell, P.A. is
the trustee of the Laskey Family Irrevocable Trust, which is the owner of
125,000 shares of Series A Preferred Stock.
46
<PAGE> 49
EXPERTS
The financial statements and schedule of Dynamic Healthcare Technologies,
Inc. as of December 31, 1994 and 1995, and for each of the years then ended,
have been included herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
With respect to the unaudited interim financial information for the periods
ended June 30, 1995 and 1996, included herein, the independent certified public
accountants have reported that they applied limited procedures in accordance
with professional standards for a review of such information. However, the
separate report included herein for the six months ended June 30, 1995 and 1996,
states that they did not audit and they do not express an opinion on that
interim financial information. Accordingly, the degree of reliance on their
report on such information should be restricted in light of the limited nature
of the review procedures applied. The accountants are not subject to the
liability provisions of Section 11 of the Securities Act for their report on the
unaudited interim financial information because that report is not a "report" or
a "part" of the Registration Statement prepared or certified by the accountants
within the meaning of Sections 7 and 11 of the Securities Act.
The financial statements of Terrano Corporation, the previous corporate
name of the Company, for the year ended December 31, 1993 included in this
Prospectus and the related financial statement schedule for the year ended
December 31, 1993 included elsewhere in the Registration Statement have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports appearing herein and elsewhere in the Registration Statement, and are
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing.
The financial statements of DMI as of March 31, 1995 and 1996 and for each
of the years then ended included in this Prospectus and the Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of said firm as experts in
accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files, reports, proxy statements and other
information with the SEC. These materials can be inspected and copied at the
public reference facilities of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, DC 20549, and at the following Regional Offices
of the Commission: 7 World Trade Center, 13th Floor, New York, New York 10048
and Northwestern Atrium Center, 500 West Madison Street, 14th Floor, Chicago,
Illinois 60661. Copies of these materials may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, DC
25049 at prescribed rates. The Company's Common Stock is quoted on Nasdaq.
Reports, proxy statements and other information concerning the Company may be
inspected at the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, DC 20006.
A Registration Statement on Form S-1 relating to the Common Stock offered
hereby has been filed by the Company with the SEC in Washington, DC. This
Prospectus does not contain all the information set forth in the Registration
Statement and the exhibits and schedules thereto. Statements contained in this
Prospectus as to the contents of any contract or any other document referred to
are not necessarily complete and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. For further information with respect to the Company and the Common
Stock offered hereby, reference is hereby made to the Registration Statement and
the exhibits and schedules thereto. A copy of the Registration Statement may be
inspected by anyone without charge and may be obtained at prescribed rates from
the SEC at the Public Reference Section of the SEC maintained at its principal
office located at 450 Fifth Street, N.W., Washington, DC 25049, the New York
Regional Office located at 75 Park Place, Room 1228, New York, New York 10007,
or the Chicago Regional Office located at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 or Internet Address:
http://www.sec.gov.
47
<PAGE> 50
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
Independent Auditors' Report -- KPMG Peat Marwick LLP............................... F-2
Independent Auditors' Report -- Deloitte & Touche LLP............................... F-3
Balance Sheets as of December 31, 1994 and 1995..................................... F-4
Statements of Operations for the Years Ended December 31, 1993, 1994 and 1995....... F-5
Statements of Shareholders' Equity for the Years Ended December 31, 1993, 1994 and
1995............................................................................. F-6
Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995....... F-7
Notes to Financial Statements....................................................... F-8
Independent Auditors' Review Report -- KPMG Peat Marwick LLP........................ F-19
Condensed Consolidated Balance Sheet as of June 30, 1996 (Unaudited)................ F-20
Condensed Consolidated Statement of Operations for the Six Months Ended
June 30, 1995 and 1996 (Unaudited)............................................... F-21
Condensed Consolidated Statement of Cash Flows for the Six Months Ended
June 30, 1995 and 1996 (Unaudited)............................................... F-22
Notes to Condensed Consolidated Financial Statements (Unaudited).................... F-23
DIMENSIONAL MEDICINE, INC.
Independent Auditors' Report -- Ernst & Young LLP................................... F-27
Balance Sheets as of March 31, 1995 and 1996........................................ F-28
Statements of Operations for the Years Ended March 31, 1995 and 1996................ F-29
Statements of Shareholders' Equity for the Years Ended March 31, 1995 and 1996...... F-30
Statements of Cash Flows for the Years Ended March 31, 1995 and 1996................ F-31
Notes to Financial Statements....................................................... F-32
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Basis of Presentation............................................................... F-38
Pro Forma Condensed Consolidated Statements of Operations........................... F-38
Notes to Pro Forma Condensed Consolidated Statements of Operations.................. F-39
</TABLE>
F-1
<PAGE> 51
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Dynamic Healthcare Technologies, Inc.:
We have audited the accompanying balance sheets of Dynamic Healthcare
Technologies, Inc. as of December 31, 1994 and 1995, and the related statements
of operations, shareholders' equity, and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 1994 and 1995 financial statements referred to above
present fairly, in all material respects, the financial position of Dynamic
Healthcare Technologies, Inc. as of December 31, 1994 and 1995, and the results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
--------------------------------------
KPMG PEAT MARWICK LLP
Orlando, Florida
March 6, 1996
F-2
<PAGE> 52
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
Terrano Corporation:
We have audited the statements of operations, shareholders' equity, and
cash flows of Terrano Corporation for the year ended December 31, 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. Our audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the 1993 financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Terrano Corporation for the year ended December 31, 1993, in conformity with
generally accepted accounting principles.
The accompanying financial statements for the year ended December 31, 1993
have been restated.
/s/ DELOITTE & TOUCHE LLP
--------------------------------------
DELOITTE & TOUCHE LLP
Orlando, Florida
March 16, 1994
(January 11, 1995 as to the 1993 restated financial statements)
F-3
<PAGE> 53
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................... $ 10,173 $ 2,290,366
Restricted cash (Note K).................................................... -- 50,000
Accounts receivable, net of allowance for doubtful accounts of $250,000 and
$140,837 in 1994 and 1995, respectively................................... 2,166,813 2,811,711
Unbilled receivables........................................................ 528,372 307,693
Other current assets........................................................ 199,651 141,569
----------- -----------
Total current assets................................................. 2,905,009 5,601,339
Property and equipment, net (Notes B and C)................................... 1,212,969 1,119,278
Capitalized software development costs, net of accumulated amortization of
$1,273,095 and $1,835,701 in 1994 and 1995, respectively (Note A)........... 1,821,917 2,040,727
Goodwill, net of accumulated amortization of $54,787 and $209,479 at December
31, 1994 and 1995, respectively (Note A).................................... 1,028,050 873,358
Other assets.................................................................. 32,171 24,408
----------- -----------
$ 7,000,116 $ 9,659,110
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Borrowings under line of credit (Note C).................................... $ 2,788,401 $ --
Accounts payable and accrued expenses (Note F).............................. 1,182,450 852,515
Deferred revenue............................................................ 1,452,895 1,818,871
Advance billings............................................................ 351,835 80,260
Bank note payable -- current maturities..................................... -- 73,285
----------- -----------
Total current liabilities............................................ 5,775,581 2,824,931
Bank note payable (Note C).................................................... -- 2,726,715
Accrued liability -- Acquisition contingency (Note G)......................... 610,000 --
Other (Note J)................................................................ 112,569 43,053
----------- -----------
Total liabilities......................................................... 6,498,150 5,594,699
----------- -----------
Shareholders' equity (Note E):
Series A preferred stock, $0.01 par value (liquidation preference of
$782,992); authorized 1,055,938 shares; issued and outstanding 968,750
shares as of December 31, 1995............................................ -- 9,688
Series B preferred stock, $0.01 par value (liquidation preference of
$3,023,062); authorized 4,384,375 shares; issued and outstanding 3,750,000
shares as of December 31, 1995............................................ -- 37,500
Common stock, $0.01 par value, authorized 20,000,000 shares; issued and
outstanding 5,967,819 and 6,611,646 shares in 1994 and 1995,
respectively.............................................................. 59,678 66,116
Additional paid-in capital.................................................. 8,879,296 12,900,738
Deficit..................................................................... (8,437,008) (8,949,631)
----------- -----------
Total shareholders' equity........................................... 501,966 4,064,411
----------- -----------
$ 7,000,116 $ 9,659,110
============ ============
</TABLE>
See notes to financial statements.
F-4
<PAGE> 54
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
---------- ----------- ----------
<S> <C> <C> <C>
Operating revenues (Note A):
Computer system equipment sales
and support........................................ $3,961,164 $ 1,873,393 $1,101,017
Application software licenses......................... 3,577,868 1,848,522 2,428,928
Software support...................................... 2,148,675 2,549,761 3,731,149
Services and other.................................... -- 715,466 1,625,242
---------- ----------- ----------
Total operating revenues...................... 9,687,707 6,987,142 8,886,336
Costs and expenses:
Cost of products sold................................. 3,158,671 1,547,453 880,639
Client services expense............................... 1,437,204 2,600,913 2,824,987
Software development costs............................ 1,425,083 1,774,897 1,642,825
Sales and marketing................................... 2,031,869 1,717,973 1,931,178
General and administrative............................ 1,381,973 2,218,807 1,768,005
Restructuring costs (Note F).......................... -- 686,439 --
---------- ----------- ----------
Total costs and expenses...................... 9,434,800 10,546,482 9,047,634
---------- ----------- ----------
Operating income (loss)....................... 252,907 (3,559,340) (161,298)
---------- ----------- ----------
Other income (expense):
Acquisition contingency (Note G)...................... -- (610,000) --
Interest expense and financing costs.................. (18,615) (143,412) (378,043)
Miscellaneous......................................... 11,392 5,252 26,718
---------- ----------- ----------
Total other expense........................... (7,223) (748,160) (351,325)
---------- ----------- ----------
Earnings (loss) before income taxes..................... 245,684 (4,307,500) (512,623)
Income taxes (Note H)................................... -- -- --
---------- ----------- ----------
Net earnings (loss)..................................... $ 245,684 $(4,307,500) $ (512,623)
========== =========== ==========
Earnings (loss) per common share........................ $ (0.05) $ (0.78) $ (0.08)
========== =========== ==========
Weighted average common shares outstanding.............. 5,362,625 5,536,202 6,443,294
</TABLE>
See notes to financial statements.
F-5
<PAGE> 55
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
ADDITIONAL
SERIES A SERIES B COMMON PAID-IN
PREFERRED PREFERRED STOCK CAPITAL DEFICIT
--------- --------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992................ $ -- $ -- $52,713 $ 7,532,617 $(4,375,192)
Exercise of stock options............... -- -- 65 6,435 --
Net earnings............................ -- -- -- -- 245,684
------ ------- ------- ----------- -----------
Balance, December 31, 1993................ -- -- 52,778 7,539,052 (4,129,508)
Common stock issued to effect merger.... -- -- 6,000 1,194,000 --
Exercise of stock options............... -- -- 822 135,142 --
Employee stock purchase plan............ -- -- 78 11,102 --
Net loss................................ -- -- -- -- (4,307,500)
------ ------- ------- ----------- -----------
Balance, December 31, 1994................ -- -- 59,678 8,879,296 (8,437,008)
Common stock issued to resolve
acquisition contingency.............. -- -- 6,100 603,900 --
Conversion of subordinated convertible
notes................................ 9,688 -- -- 760,062 --
Issuance of Series B preferred stock.... -- 37,500 -- 2,601,005 --
Issuance of warrants.................... -- -- -- 25,000 --
Exercise of stock options............... -- -- 50 4,950 --
Employee stock purchase plan............ -- -- 288 26,525 --
Net loss................................ -- -- -- -- (512,623)
------ ------- ------- ----------- -----------
Balance, December 31, 1995................ $ 9,688 $ 37,500 $66,116 $12,900,738 $(8,949,631)
====== ======= ======= =========== ===========
</TABLE>
See notes to financial statements.
F-6
<PAGE> 56
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)..................................... $ 245,684 $(4,307,500) $ (512,623)
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization...................... 677,441 1,036,740 1,081,694
Acquisition contingency............................ -- 610,000 --
Changes in assets and liabilities:
Accounts receivable.............................. (634,020) (1,096,151) (644,898)
Unbilled receivables............................. -- 1,949,552 220,679
Other............................................ 19,891 (17,844) 65,845
Accounts payable and accrued expenses............ 80,360 (95,206) (329,935)
Deferred revenue................................. 291,140 99,940 365,976
Advance billings................................. -- (45,236) (271,575)
----------- ----------- -----------
Net cash provided by (used in) operating
activities.................................. 680,496 (1,865,705) (24,837)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Dynamic Technical Resources, Inc....... -- 286,586 --
Capitalized software development costs................ (943,595) (796,024) (781,416)
Purchases of property and equipment................... (237,238) (445,065) (270,705)
Restricted cash deposit............................... -- -- (50,000)
----------- ----------- -----------
Net cash used in investing activities......... (1,180,833) (954,503) (1,102,121)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (repayments) under line of credit, net..... 239,000 1,874,401 (2,788,401)
Borrowings under bank note payable.................... -- -- 2,800,000
Proceeds from issuance of common stock................ 6,500 147,144 31,813
Other................................................. (46,392) 20,084 (5,250)
Proceeds from issuance of subordinated convertible
notes.............................................. -- -- 775,000
Proceeds from issuance of Series B preferred stock.... -- -- 2,638,505
Proceeds from issuance of warrants.................... -- -- 25,000
Principal payments on long-term debt and capital lease
obligations........................................ -- (311,390) (69,516)
----------- ----------- -----------
Net cash provided by financing activities..... 199,108 1,730,239 3,407,151
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents.... (301,229) (1,089,969) 2,280,193
Cash and cash equivalents, beginning of year............ 1,401,371 1,100,142 10,173
----------- ----------- -----------
Cash and cash equivalents, end of year.................. $ 1,100,142 $ 10,173 $ 2,290,366
========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW:
Interest paid......................................... $ 16,284 $ 102,354 $ 375,434
========== ========== ==========
Income taxes paid (received).......................... $ (3,823) $ 0 $ 0
========== ========== ==========
</TABLE>
See notes to financial statements.
F-7
<PAGE> 57
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business -- Dynamic Healthcare Technologies, Inc. (formerly Terrano
Corporation) develops, markets and supports clinical information systems and
electronic health record solutions in the healthcare industry. The specific
market segments in which the Company participates include Clinical Workstations,
Document Imaging, Diagnostic Imaging, Laboratory Information Systems, Radiology
Information Systems, and Perioperative (Anesthesiology) Information Systems. All
of the Company's products are complementary to and contribute to the creation
and maintenance of the electronic health record.
Property and Equipment -- Property and equipment is stated at cost less
accumulated depreciation and amortization. The cost of property and equipment is
depreciated and amortized over the estimated useful lives of the related assets,
ranging from five to ten years, using the straight-line method.
Software Development Costs -- Costs incurred to establish the technological
feasibility of computer software products are research and development costs and
are charged to expense as incurred. Costs of producing product masters
subsequent to establishing technological feasibility, including coding and
testing, are capitalized. Capitalization of computer software costs ceases when
the product is available for general release to customers. Amortization of
capitalized Software Development Costs for the years ended December 31, 1993,
1994 and 1995 were $384,569, $505,613 and $562,606, respectively, and write
downs to net realizable value of $0, $121,535 and $0, respectively. Capitalized
software development costs are amortized using either the straight-line method
over the estimated economic life of the product (currently five years) or the
ratio of current revenues to current and anticipated revenues for the product
whichever results in the greater amount of amortization. Unamortized capitalized
costs of a computer software product in excess of its net realizable value of
that asset are expensed.
Goodwill -- Goodwill is stated at cost less accumulated amortization.
Goodwill is amortized using the straight line method over a period of seven
years. The Company assesses the recoverability of goodwill based upon projected
operations over a period which represents the approximate remaining life of
goodwill. The Company evaluates the recoverability of goodwill based on this
forecast of future operations and income, and using a discount rate that
reflects the Company's average cost of funds.
Revenues -- Revenues are derived from the sale of computer hardware,
licensing and sub-licensing of software, professional and technical consulting
services, and maintenance and support services. Each customer contract is
negotiated separately. Application software licenses and computer system
equipment revenues are recorded when hardware and application software are
delivered. Installation and training revenues, which are included with
application software licenses revenues in the statements of operations are
recognized as the services are performed. Software support revenues principally
include contracts for continuing support services which cover a specific period,
and from which revenue is recognized ratably over the period of the contract.
Also included in software support revenue are revenues from other significant
continuing obligations and post contract support obligations, which are
typically under separate contract and are recognized as the services are
performed. Services revenues are recognized as the services are performed.
Employee Benefit Plan -- The Company has a 401(k) savings plan covering all
full-time employees. Eligible employees may elect to defer 20% of their
compensation up to the maximum allowed by the Internal Revenue Code. Company
contributions are made at the discretion of the Board of Directors and amounted
to $52,576, $75,545 and $63,390 in 1993, 1994 and 1995, respectively.
Stock-Based Employee Compensation Plans -- The Company's employee stock
option plans are accounted for under APB Opinion 25, Accounting for Stock Issued
to Employees, and related interpretations.
Income Taxes -- Deferred income taxes are provided on items that are
recognized in different reporting periods for financial accounting and income
tax purposes using the then enacted tax rates.
F-8
<PAGE> 58
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Earnings Per Share -- Earnings per share is computed on the basis of the
weighted average number of shares outstanding plus the common stock equivalents
which would arise from the exercise of stock options and warrants if dilutive.
Fully diluted earnings per share do not differ significantly from primary
earnings per share.
Cash Equivalents -- For purposes of the statement of cash flows, the
Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Concentration of Credit Risk -- The Company generates revenue primarily
through sales to the healthcare industry located throughout the United States.
Due to this concentration, substantially all receivables at December 31, 1994
and 1995, are from healthcare institutions which may be similarly affected by
changes in economic, regulatory or other conditions. The Company performs
ongoing credit evaluations of its customers and generally does not require
collateral. The Company maintains reserves for potential credit losses and such
losses have been within management's expectations.
The Company invests its excess cash in deposits with major financial
institutions, in U.S. government agency securities and in commercial paper of
companies with strong credit ratings. Generally, the investments mature within
90 days and, therefore, are subject to little risk. The Company has not
experienced losses related to these investments.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of the Company's financial instruments. The fair value of cash and cash and
equivalents approximates its carrying amounts because of the short maturity of
those instruments. The fair value of bank note payable is estimated based on the
current rates available to the Company for debt of the same remaining maturities
and approximates its carrying amount.
NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The Statement,
which is effective for fiscal years beginning after December 15, 1995, provides
that an entity review long-lived assets and certain identifiable intangibles, to
be held and used, for impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable. The
Company will adopt this standard in 1996 and does not expect compliance with
such standard to have a material effect, if any, on the Company's financial
position or results of operations.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation. The Statement, which is effective for fiscal years beginning after
December 15, 1995, provides that companies must either charge the value of stock
options granted to their income statement or provide pro forma equivalent
information in a footnote disclosure. The Company will adopt this standard in
1996 by providing pro forma equivalent information in a footnote disclosure.
Reclassifications -- Certain prior year balances have been reclassified to
conform to the 1995 presentation.
F-9
<PAGE> 59
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
B. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1995
---------- ----------
<S> <C> <C>
Furniture and fixtures...................................... $ 264,424 $ 208,434
Equipment................................................... 2,778,373 2,696,946
Leasehold improvements...................................... 110,150 48,559
---------- ----------
3,152,947 2,953,939
Less accumulated depreciation and amortization.............. 1,939,978 1,834,661
---------- ----------
$1,212,969 $1,119,278
========== ==========
</TABLE>
C. BANK NOTE PAYABLE
On December 8, 1995 the Company entered into a $2,800,000 promissory note
payable to a bank (the "Note"), and discharged its line of credit. The line of
credit was due on demand with accrued interest payable monthly at the bank's
prime plus one percent per annum. The terms of the Note require fixed monthly
payments of principal and interest of $29,911 beginning January 1, 1996, and a
balloon payment equal to the remaining unpaid principal balance and accrued
interest on March 31, 1998. Principal payments are anticipated to approximate
$73,000, $76,000, and $2,651,000 during the years ending December 31, 1996, 1997
and 1998, respectively. Interest on the outstanding principal balance accrues at
the bank's prime rate plus two percent per annum (10.5% as of December 31,
1995). Under the applicable credit agreement, the bank has a security interest
in all of the assets of the Company.
D. LEASES
The Company leases certain equipment and office space under noncancelable
operating leases. The leases call for monthly payments over terms of three to
five years and include renewal options. With respect to the equipment leases,
the Company is liable for all taxes, repairs and insurance. Total rent expense
on all operating leases was $204,000, $208,000 and $161,835 for the years ended
December 31, 1993, 1994 and 1995, respectively.
The future minimum rental payments under operating leases as of December
31, 1995 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
--------------------------------------------------------------------------
<S> <C>
1996............................................................... $257,026
1997............................................................... 240,718
1998............................................................... 249,390
1999............................................................... 62,890
--------
Total.............................................................. $810,024
========
</TABLE>
E. CAPITAL STOCK, WARRANTS AND OPTIONS
During 1993, the Company's Board of Directors adopted and the shareholders
approved a stock warrant and option plan for directors and management employees
(the "D&M Plan"), whereby 250,000 shares of Common Stock are reserved for
issuance. Under the D&M Plan directors' warrants are five year warrants which
vest under varying terms and are issued at an exercise price equal to the market
price of the Company's Common Stock on the date of grant. Management employee
options expire ten years after the first anniversary of the date of issuance and
are issued at an exercise price of no less than 85% of the market price of the
Company's Common Stock on the date of grant. During 1995, the shareholders
approved an amendment to
F-10
<PAGE> 60
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
the D&M Plan to conform the terms of vesting to 40% upon grant plus 20% per year
for each of three years thereafter, and to provide for early vesting upon death
or employment termination without cause for all future options granted under the
D&M Plan. Additionally, annual warrants are issued to non-employee directors at
the beginning of that director's third consecutive term in office. Each annual
warrant is for 5,000 shares of the Company's Common Stock, has a five year term,
has an exercise price equal to the average of the closing bid and ask prices of
the Company's Common Stock on the date of issuance and is fully vested upon
issuance. At December 31, 1995, the Company had stock warrants and options
outstanding to purchase shares of its Common Stock under the D&M Plan as
follows:
<TABLE>
<CAPTION>
NUMBER PRESENTLY PRICE YEAR EXPIRATION
OF SHARES EXERCISABLE PER SHARE GRANTED DATE
--------- ----------- --------- ------- -------------
<S> <C> <C> <C> <C> <C>
Directors'
Warrants: 25,500 25,500 $3.06 1991 May 1996
5,000 5,000 2.25 1993 June 1998
25,500 25,500 2.06 1993 January 1998
15,000 15,000 1.93 1994 June 1999
5,000 5,000 2.25 1994 June 1999
15,000 15,000 1.00 1995 June 2000
Management
Employees'
Options: -- --
------ ------
91,000 91,000
====== ======
</TABLE>
As part of a public offering of Common Stock in December 1991, the Company
granted warrants to an underwriter of its offering for 35,000 shares of Common
Stock. As of December 31, 1995, these underwriter warrants are exercisable at
$4.32 per share and will expire, if unexercised, in December 1996.
The Company's Board of Directors adopted and the shareholders approved an
incentive stock option plan in 1983 (the "1983 Plan") for key employees whereby
400,000 shares of common stock were reserved for issuance. Options granted vest
40%, 30% and 30% on the first, second and third anniversaries of their issuance,
respectively and expire ten years after the date of grant. At December 31, 1995,
the Company had granted options of 355,040 shares, of which options for 104,240
shares had been exercised and options for 19,000 shares were exercisable at
between $1.00 and $1.9375 a share. No new options will be granted under the
terms of the 1983 Plan.
During 1993, the Company's Board of Directors adopted and the shareholders
approved an incentive stock option plan (the "1993 Plan") for employees whereby
100,000 shares of Common Stock were reserved for issuance. The terms of the 1993
Plan are similar to the 1983 Plan. During 1995, the Company's Board of Directors
adopted and the shareholders approved increasing shares issuable pursuant to the
1993 Plan to 600,000. At December 31, 1995, the Company had granted options of
177,750 shares, no options had been exercised, 13,700 options were terminated
and options for 14,670 shares were exercisable between $1.93 and $2.25 a share.
Under both the 1983 Plan and the 1993 Plan, the exercise price for stock options
may not be less than the market price of the Company's Common Stock at date of
grant.
F-11
<PAGE> 61
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Incentive stock option activity under the 1983 and 1993 Plans and price
information follows:
<TABLE>
<CAPTION>
STOCK OPTION
SHARES PRICE RANGE
-------- -------------
<S> <C> <C>
Balance at December 31, 1992............................... 321,050 $1.00 - $3.06
Exercised................................................ (6,500) 1.00
Granted.................................................. 58,500 2.25
Canceled................................................. (2,000) 1.53
--------
Balance at December 31, 1993............................... 371,050 1.00 - 3.06
Exercised................................................ (56,750) 1.00 - 2.25
Granted.................................................. 34,575 1.94
Canceled................................................. (246,125) 1.00 - 3.06
--------
Balance at December 31, 1994............................... 102,750 1.00 - 2.25
Exercised................................................ (5,000) 1.00
Granted.................................................. 143,000 1.00 - 1.13
Canceled................................................. (57,700) 1.00 - 2.25
--------
Balance at December 31, 1995............................... 183,050 1.00 - 2.25
========
</TABLE>
During 1993, the Company's Board of Directors and the shareholders approved
an employee stock purchase plan effective for a five year period beginning
January 1, 1994. The Company reserved 200,000 shares of Common Stock for
issuance under this plan. This plan operates in one or more phases of six months
each and is open for enrollment by employees working at least 20 hours per week
and who have completed at least five months of service. A summary of plan
activity is as follows:
<TABLE>
<CAPTION>
PHASE PHASE ENDING DATE SHARES ISSUED PRICE
-------- ----------------- ------------- -----
<S> <C> <C> <C>
1.............................................. June 30, 1994 5,274 $1.65
2.............................................. December 31, 1994 2,535 0.98
3.............................................. June 30, 1995 6,256 0.93
4.............................................. December 31, 1995 22,575 0.93
------
36,640
======
</TABLE>
On July 6, 1994, the Company's Board of Directors, in connection with an
employment agreement, granted options to David M. Pomerance, covering 250,000
shares of Common Stock. The options are exercisable through July 6, 1999 in
accordance with a vesting schedule of 40% upon grant plus 20% per year for each
of three years thereafter at an exercise price of $1.875 per share, the fair
market value on the date of the grant. On August 23, 1994, the Company's Board
of Directors, in connection with an employment agreement, granted options to
Mitchel J. Laskey, covering 250,000 shares of Common Stock under similar terms
at an exercise price of $1.6875 per share, the fair market value on the date of
the grant. Both option agreements provide for early vesting upon death or
employment termination without cause. On September 13, 1995, the Company's Board
of Directors reduced the exercise price on these employment options to $1.00 per
share.
The Articles of Incorporation authorize 10,000,000 shares of $0.01 par
value preferred stock, in such series and variations in the relative rights and
preferences, including voting rights, if any, among series as the Board of
Directors shall determine.
On November 15, 1995 the Company was authorized by the Board of Directors
to reserve for issuance 1,055,938 Shares of 9% Series A Cumulative Convertible
Preferred Stock $0.01 par value ("Series A
F-12
<PAGE> 62
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Preferred Stock"), and 4,384,375 shares of 9% Series B Cumulative Convertible
Preferred Stock $0.01 par value ("Series B Preferred Stock"), (collectively,
"Preferred Stock"), with the following attributes:
(1) Rank. The Preferred Stock, with respect to dividend rights and
voluntary or involuntary liquidation, winding-up, dissolution, merger and
combination, rank prior to all classes of Common Stock.
(2) Dividends. The holders of record of any outstanding shares of
Preferred Stock are entitled to cumulative dividends on a pari passu basis
at the rate per share of nine (9%) percent per annum payable quarterly in
arrears, on March 31, June 30, September 30 and December 31 of each year.
(3) Liquidation Rights. Upon the liquidation, dissolution or winding
up of the Company, whether voluntary or involuntary, the holders of the
Preferred Stock are entitled to receive and to be paid out of the assets of
the Company available for distribution a liquidation distribution in cash
in an amount equal to $0.80 per share plus accrued and unpaid dividends
thereon to the date of such distribution.
(4) Conversion Rights. The holders of shares of Preferred Stock have
the rights, at their option, to receive on a share for share basis, Common
Stock of the Company plus any dividends accrued and unpaid on any shares of
Preferred Stock surrendered for conversion.
(5) Mandatory Conversion. Each share of Series A Preferred Stock will
automatically be converted into one share of Common Stock if (i) the
Company's Common Stock shall have traded above $1.20 for 20 consecutive
trading days on any nationally recognized stock exchange or Nasdaq and (ii)
the underlying common shares have been registered under the Securities Act
of 1933, as amended (the "Securities Act").
Each share of Series B Preferred Stock shall automatically be
converted into one share of Common Stock if (i) the Company's Common Stock
shall have traded above $2.80 for 20 consecutive trading days on any
nationally recognized stock exchange or Nasdaq and (ii) the average weekly
trading volume during such 20 consecutive trading days is equal to or
greater than 150,000 shares of Common Stock and (iii) either the underlying
Common Stock have been registered under the Securities Act or eligible to
be sold by the Series B Preferred Stock holders pursuant to Rule 144
promulgated under the Securities Act.
(6) Redemption. The shares of the Series A Preferred Stock are not
subject to redemption on or prior to June 30, 1998, or if any Series B
Preferred Stock is outstanding. After June 30, 1998 the Series A Preferred
Stock is redeemable in whole or in part, at any time at the option of the
Company, at the following redemption prices: (i) $0.90 per share, if
redeemed on or before June 30, 1999, and (ii) $0.80 per share thereafter,
plus an amount in cash equal to all accrued and unpaid dividends thereon to
the date fixed for redemption. If less than all of the outstanding shares
of Series A Preferred Stock are to be redeemed, the Company will redeem
such shares on a pro rata basis. Redemption of Series B Preferred Stock is
at the option of the holder(s) upon the occurrence of a liquidating
consolidation or merger, or a sale of substantially all of the Company's
assets. There is no mandatory redemption or sinking fund obligation with
respect to the Preferred Stock.
(7) Voting Rights. The holders of shares of the Series A Preferred
Stock are not entitled to any voting rights except as required by law or as
described below. In the event quarterly dividends are in arrears for two
calendar quarters the holder of shares of the Series A Preferred Stock
shall have the same voting rights as if such shares of Series A Preferred
Stock had been converted into shares of Common Stock.
The holders of shares of Series B Preferred Stock are entitled to vote on
all matters, in the same manner and with the same effect as holders of Common
Stock as one class. Additionally, the Company requires approval of two-thirds of
the Series B Preferred Stock holders voting as a separate class with respect to
certain matters, including (i) to authorize, alter, create or issue any class or
series of capital stock; (ii) merge or consolidate with and or into any other
entity; or (iii) permit the occurrence of a change in control as defined.
F-13
<PAGE> 63
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On July 31, 1995 the Company completed a private placement offering of
$775,000 of subordinated convertible notes, bearing simple interest at 9% per
annum, together with detachable warrants to purchase 155,000 shares of the
Company's Common Stock ("Debt Warrants") (see also Note I). The Debt Warrants
are exercisable at $1.00 per common share, and are exercisable for five years
from the date of issuance (70,000 in June 1995 and 85,000 in July 1995). On
November 28,1995 all of the subordinated convertible notes were converted into
968,750 shares of Series A Preferred Stock.
On December 5, 1995 the Company issued 3,375,000 shares of Series B
Preferred Stock for $2.7 million, and on December 29, 1995 issued 375,000 shares
of Series B Preferred Stock for an additional $300,000 in a Private Placement
transaction.
In connection with the private placement of the shares of Series B
Preferred Stock, the Board of Directors of the Company authorized the issuance
on December 8, 1995 of warrants to purchase 210,000 shares of the Company's
common stock for $1.00 per share to a financial consultant ("Series B Warrants")
for $25,000. The Series B Warrants are exercisable for seven years from the date
of issuance.
As of December 31, 1995 no dividends had been declared, and arrearages on
Series A and Series B Preferred Stock were $6,394 and $18,450, respectively.
Additionally, as of December 31, 1995 none of the Debt Warrants or the Series B
Warrants had been exercised.
F. RESTRUCTURING
On November 15, 1994 the Company adopted a plan to restructure certain of
its operations and to re-evaluate certain other activities. The Company's plan
included reduction in the workforce, restructuring of the sales compensation
program, relocation of the corporate office and the closing of the Lincoln,
Nebraska operation. Accordingly, the Company provided or incurred $686,439
during the year ended December 31, 1994 to write down assets to the net
realizable value and to cover the costs associated with the restructuring. The
costs associated with this action have been identified as "Restructuring Costs"
in the Statement of Operations for the year ended December 31, 1994, and are
summarized as follows:
<TABLE>
<CAPTION>
ACCRUAL ACCRUAL
NOVEMBER 15, PAID OR ACCRUAL DECEMBER 31,
1994 INCURRED ADJUSTMENTS 1994
------------ --------- ----------- ------------
<S> <C> <C> <C> <C>
Excess costs attributable to exit
activities............................ $254,430 $(213,930) $ -- $ 40,500
Noncancelable lease termination costs... 206,357 (28,738) -- 177,619
Involuntary employee termination
benefits.............................. 95,060 (68,215) -- 26,845
Employee costs after operations cease... 130,592 (54,592) -- 76,000
-------- --------- -------- --------
$686,439 $(365,475) $ -- $320,964
======== ========= ======== ========
</TABLE>
<TABLE>
<CAPTION>
ACCRUAL ACCRUAL
DECEMBER 31, PAID OR ACCRUAL DECEMBER 31,
1994 INCURRED ADJUSTMENTS 1995
------------ --------- ----------- ------------
<S> <C> <C> <C> <C>
Excess costs attributable to exit
activities............................ $ 40,500 $ -- $ (40,500) $ --
Noncancelable lease termination costs... 177,619 (187,375) 9,756 --
Involuntary employee termination
benefits.............................. 26,845 (23,235) (3,610) --
Employee costs after operations cease... 76,000 (110,354) 34,354 --
-------- --------- -------- --------
$320,964 $(320,964) $ -- $ --
======== ========= ======== ========
</TABLE>
The Company completed the plan of restructure during the second quarter of
1995, and all employee groups were restructured. As of December 31, 1995 actual
involuntary termination benefits of $91,450 were paid to 31 terminated
employees.
F-14
<PAGE> 64
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
G. ACQUISITION CONTINGENCY/RESTATEMENT
In connection with the acquisition of Dynamic Technical Resources, Inc.
("DTR") in August 1994, due principally to breaches in the representations and
warranties contained in the applicable merger agreement, the Company's Board of
Directors determined that an adjustment to the consideration given to the former
DTR shareholders was required. On March 5, 1995, the Board of Directors agreed
to issue an aggregate of 610,000 additional shares of Common Stock of the
Company to be distributed among the former shareholders of DTR on a pro-rata
basis, with the same rights, privileges and restrictions as the original
consideration received by such shareholders in connection with the acquisition.
Such former DTR shareholders, in turn, agreed to release the Company from any
claims they may have against the Company, its current officers and directors and
to cooperate and assist the Company in the event the Company elects to file a
civil lawsuit against any professional or other third parties for damages
resulting from the events and matters that led to the Company's restated
financial statements. The additional shares were issued on March 27, 1995. A
charge to operations for the year ended December 31, 1994 in the amount of
$610,000 was recorded representing market value of the additional shares at the
date of issuance. As a result of review by and consultation with the staff of
the Securities and Exchange Commission, the Company restated its 1994
consolidated financial statements to reflect an accrual for this acquisition
settlement in the amount of $610,000. The amount of $610,000 represents the
market value of the additional shares at the date of their issuance. The
recorded cost of the acquired enterprise was not affected by the issuance of
these additional shares.
H. INCOME TAXES
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
-------- ----------- ---------
<S> <C> <C> <C>
Current income tax expense (benefit) before
operating
loss carry forward................................ $ 3,000 $(1,523,000) $(281,000)
Tax effects of temporary differences................ 96,000 44,000 76,000
Non-recognition of benefits of operating loss
carry forward..................................... -- 1,479,000 205,000
Benefits of operating loss carry forward............ (99,000) -- --
-------- ----------- ---------
$ -- $ -- $ --
======== ========== =========
</TABLE>
Deferred income taxes reflect the net tax effects of operating loss and tax
credit carryforwards and temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes
F-15
<PAGE> 65
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
and the amounts used for income tax purposes. The tax effects of significant
items comprising the Company's net deferred tax as of December 31, 1994 and
1995, are as follows:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Deferred tax asset:
Operating loss carryforwards............................ $ 3,365,000 $ 3,920,000
Tax credit carryforwards................................ 701,000 717,000
Other................................................... 85,000 57,000
----------- -----------
4,151,000 4,694,000
Deferred tax liabilities:
Capitalized software development costs.................. (729,000) (816,000)
Other................................................... (46,000) --
----------- -----------
Net deferred tax asset.................................... 3,376,000 3,878,000
Valuation allowance....................................... (3,376,000) (3,878,000)
----------- -----------
Net deferred tax.......................................... $ -- $ --
=========== ===========
</TABLE>
The net deferred tax asset is reduced by a valuation allowance due to the
uncertainty associated with the realization of the net deferred tax asset. The
valuation allowance increased $502,000 from the allowance of $3,376,000 at
January 1, 1995.
The provisions for Federal income taxes differs from the amount computed by
applying the statutory rate to net earnings (loss) before income taxes for each
of the three years in the period ended December 31, 1995, as follows:
<TABLE>
<CAPTION>
AMOUNT OF TAX
----------------------------------
1993 1994 1995
-------- ----------- ---------
<S> <C> <C> <C>
Computed expected tax expense (benefit)............. $ 84,000 $(1,465,000) $(174,000)
State taxes, net of federal benefit................. 15,000 (222,000) (31,000)
Acquisition consideration not deductible for tax.... -- 208,000 --
Non-recognition of benefits of operating loss
carryforward...................................... -- 1,479,000 205,000
Benefits of operating loss carryforward............. (99,000) -- --
--------- ----------- --------
$ -- $ -- $ --
========= =========== ========
</TABLE>
At December 31, 1995 the Company had unused operating loss carryforwards
for tax and alternative minimum tax purposes of approximately $9,801,000 and
$9,423,000, respectively, and unused tax credits of approximately $717,000.
These operating loss carryforwards and tax credits expire in varying amounts
during 1996 through 2009.
F-16
<PAGE> 66
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
I. UNAUDITED QUARTERLY INFORMATION
Quarterly information is summarized as follows (in thousands, except per
share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31*
-------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
1994
Total operating revenues.......................... $2,254 $ 1,401 $1,676 $1,656
Operating income (loss)........................... (198) (674) (706) (1,981)
Net earnings (loss)............................... (204) (691) (737) (2,676)
Net earnings (loss) per share..................... (0.04) (0.13) (0.13) (0.48)
Shareholders' equity.............................. 3,298 2,652 3,133 502
1995
Total operating revenues.......................... $2,234 $ 2,267 $2,213 $ 2,172
Operating income (loss)........................... (366) (136) 252 89
Net earnings (loss)............................... (443) (262) 148 44
Net earnings (loss) per share..................... (0.07) (0.04) 0.02 0.01
Shareholders' equity.............................. 674 417 566 4,064
</TABLE>
- ---------------
* Results reported for the fourth quarter of 1994 include the fluctuations
resulting from the accrual of restructuring costs and the acquisition
contingency. See also Notes F and G.
J. RELATED PARTY TRANSACTIONS
In connection with the private placement offering of subordinated
convertible notes David M. Pomerance (CEO and Director), Mitchel J. Laskey
(President, COO and Director) and Thomas J. Martinson (Chairman) purchased
$100,000, $100,000 and $50,000, respectively and received 20,000, 20,000 and
10,000 Debt Warrants, respectively. These notes were converted into Series A
Preferred Stock on November 28, 1995 at $0.80 per share.
Included in other non-current liabilities is an installment obligation
payable in connection with a deferred compensation agreement with the Company's
current President assumed in connection with the acquisition of DTR, which is
payable in 19 remaining monthly installments of $4,167 at an imputed interest
rate of 8.25%.
The Company expensed airline transportation charges from DDK Enterprises
LLC ("DDK") on terms which approximate fair market value of $65,000 during the
year ended December 31, 1995. DDK is majority owned by Mr. Pomerance.
K. SUBSEQUENT EVENT/RESTRICTED CASH
On December 8, 1995 the Company signed a letter of intent agreeing in
principle to acquire all of the outstanding common shares of Dimensional
Medicine, Inc. ("DMI") located in Minnetonka, Minnesota. As of December 31, 1995
restricted cash of $50,000 represents an escrow deposit on the transaction
pursuant to this letter of intent.
On February 6, 1996 the Company signed a definitive merger agreement (the
"Agreement") with DMI. Under the terms of the Agreement, the Company will
acquire through a wholly owned newly created subsidiary DMI Acquisition
Corporation, on or before May 17, 1996, all of the outstanding common shares of
DMI and retire $600,000 of DMI's senior debt. The transaction is subject to
approval of the shareholders of
F-17
<PAGE> 67
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DMI scheduled for April 29, 1996. The Company and DMI are coordinating joint
management of DMI operations through the anticipated closing. DMI develops and
markets radiology information management solutions for hospitals, clinics, and
independent diagnostic imaging centers. DMI's two major products are
Maxifile(R), which computerizes the clerical and administrative functions in the
radiology department, and Maxiview(TM), an advanced imaging and graphics
workstation.
DMI also sells an image review workstation, Maxiview Powerstation (MVP),
which allows a physician to access and review images from a remote location.
Remote access to the images may be obtained either through the use of a modem or
through a network that may already be functioning at the installation's site.
DMI is publicly traded on the over-the-counter market under the symbol
DIMM. As reported in DMI's unaudited Form 10-Q for the nine months ended
December 31, 1995, DMI reported a $64,000 net loss on revenues of $3,700,000.
F-18
<PAGE> 68
INDEPENDENT AUDITORS' REVIEW REPORT
The Board of Directors and Shareholders
Dynamic Healthcare Technologies, Inc.
We have reviewed the condensed consolidated balance sheet of Dynamic
Healthcare Technologies, Inc. and subsidiary as of June 30, 1996, and the
related condensed consolidated statements of operations and cash flows for the
six month periods ended June 30, 1995 and 1996. These condensed consolidated
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
/s/ KPMG PEAT MARWICK LLP
--------------------------------------
KPMG Peat Marwick LLP
Orlando, Florida
July 30, 1996
F-19
<PAGE> 69
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................................... $ 771,186
Accounts receivable, net of allowance for doubtful accounts of $283,739....... 2,914,653
Unbilled receivables.......................................................... 322,860
Lease receivables............................................................. 197,873
Other current assets.......................................................... 437,284
-------------
Total current assets.................................................. 4,643,856
Property, equipment and leasehold improvements, net of accumulated depreciation
of $2,045,490................................................................. 1,412,438
Capitalized software development costs, net of accumulated amortization of
$2,202,179.................................................................... 3,907,092
Goodwill, net of accumulated amortization of $286,825........................... 796,012
Lease receivables............................................................... 256,489
Other assets.................................................................... 24,609
-------------
$ 11,040,496
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses......................................... $ 2,444,019
Deferred revenue.............................................................. 1,546,026
Advance billings.............................................................. 257,436
Notes payable -- current maturities........................................... 273,958
-------------
Total current liabilities............................................. 4,521,439
Notes payable................................................................. 2,914,939
Other......................................................................... 6,855
-------------
Total liabilities..................................................... 7,443,233
-------------
Shareholders' equity:
Series A preferred stock, $0.01 par value (liquidation preference of
$792,438); authorized 1,055,938 shares; issued and outstanding 968,750
shares..................................................................... 9,688
Series B preferred stock, $0.01 par value (liquidation preference of
$3,067,500); authorized 4,384,375 shares; issued and outstanding 3,750,000
shares..................................................................... 37,500
Common stock, $0.01 par value; authorized 20,000,000 shares; issued and
outstanding 6,681,586 shares............................................... 66,816
Additional paid-in capital.................................................... 12,955,009
Deficit....................................................................... (9,471,750)
-------------
Total shareholders' equity............................................ 3,597,263
-------------
$ 11,040,496
==========
</TABLE>
See notes to condensed consolidated financial statements.
F-20
<PAGE> 70
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------
1995 1996
---------- ----------
<S> <C> <C>
Operating revenues:
Computer system equipment sales and support..................... $ 742,442 $1,592,474
Application software licenses................................... 1,546,902 1,305,582
Software support................................................ 1,696,422 2,295,014
Services and other.............................................. 515,724 1,124,319
---------- ----------
Total operating revenues................................ 4,501,490 6,317,389
---------- ----------
Costs and expenses:
Cost of products sold........................................... 658,939 1,359,361
Client services expense......................................... 1,364,883 2,002,877
Software development costs...................................... 915,123 826,879
Sales and marketing costs....................................... 1,117,632 1,536,152
General and administrative expense.............................. 947,682 1,008,644
---------- ----------
Total costs and expenses................................ 5,004,259 6,733,913
---------- ----------
Operating income (loss)........................................... (502,769) (416,524)
---------- ----------
Other income (expense):
Interest expense and financing costs............................ (167,623) (179,657)
Loss on sale of fixed assets.................................... (62,283) --
Miscellaneous................................................... 27,236 74,062
---------- ----------
Total other income (expense)............................ (202,670) (105,595)
---------- ----------
Net earnings (loss) before income taxes........................... (705,439) (522,119)
Income taxes...................................................... -- --
---------- ----------
Net earnings (loss)............................................... $ (705,439) $ (522,119)
========== ==========
Net earnings (loss) per share..................................... $ (0.11) $ (0.08)
========== ==========
Weighted average number of common and common equivalent shares
outstanding..................................................... 6,294,977 6,619,190
</TABLE>
See notes to condensed consolidated financial statements.
F-21
<PAGE> 71
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------
1995 1996
--------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)................................................ $(705,439) $ (522,119)
Adjustments to reconcile net earnings (loss) to net cash provided
by
(used in) operating activities:
Depreciation and amortization................................. 536,805 654,653
Loss on sale of fixed assets.................................. 62,283 --
Changes in assets and liabilities:
Accounts receivable......................................... 508,932 467,894
Unbilled receivables........................................ (70,640) 183,498
Lease receivables........................................... -- 36,737
Other current assets........................................ 74,790 207,196
Accounts payable and accrued expenses....................... 55,440 451,509
Other current liabilities................................... -- (250,000)
Deferred revenues........................................... (417,785) (362,004)
Advance billings............................................ (105,482) (98,702)
Other assets................................................ 3,113 3,559
----------- ----------
Net cash provided by (used in) operating activities...... (57,983) 772,221
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capitalized software development costs............................. (447,121) (604,321)
Purchases of property and equipment................................ (232,693) (280,260)
Proceeds from sale of fixed assets................................. 26,646 --
Restricted cash released from escrow............................... -- 50,000
Purchase of net assets of Dimensional Medicine, Inc................ -- (1,399,389)
----------- ----------
Net cash used in investing activities.................... (653,168) (2,233,970)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit....................................... 611,599 --
Repayments of bank note payable.................................... -- (38,669)
Proceeds from subordinated convertible notes payable............... 350,000 --
Repayments of lease obligations.................................... -- (37,535)
Repayment of other long term debt.................................. (35,559) (36,198)
Proceeds from issuance of common stock............................. -- 28,683
Proceeds from exercise of incentive stock options.................. 10,818 136,070
Payment of preferred stock dividends............................... (109,782)
----------- ----------
Net cash flows provided by (used in) financing
activities............................................. 936,858 (57,431)
----------- ----------
Net increase (decrease) in cash and cash equivalents..... 225,707 (1,519,180)
Cash and cash equivalents, beginning of period..................... 10,173 2,290,366
----------- ----------
Cash and cash equivalents, end of period........................... $ 235,880 $ 771,186
=========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
F-22
<PAGE> 72
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(A) UNAUDITED FINANCIAL STATEMENTS:
The accompanying unaudited Condensed Consolidated Balance Sheet as of June
30, 1996, Condensed Consolidated Statements of Operations and of Cash Flows for
the six month periods ended June 30, 1995 and 1996, have been prepared by
management in conformity with generally accepted accounting principles for
interim financial statements and with instructions to Form 10-Q and Regulation
S-X. Accordingly, they do not include all the disclosures required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments and accruals considered necessary for fair
presentation of financial information have been included. Operating results for
the six month period ended June 30, 1996, are not necessarily indicative of the
operating results which may be expected for the year ending December 31, 1996.
(B) PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of Dynamic
Healthcare Technologies, Inc. and DMI Acquisition Corporation, its newly formed
wholly owned subsidiary from inception of May 1, 1996 (collectively hereafter
referred to as the "Company" or "Registrant"). All significant intercompany
transactions and accounts have been eliminated in consolidation.
(C) ACQUISITION OF DIMENSIONAL MEDICINE, INC.:
On May 1, 1996, Dimensional Medicine, Inc. ("DMI") was purchased by and
merged into DMI Acquisition Corporation ("DMIAC"), a newly formed wholly-owned
subsidiary of the Registrant. The transaction was consummated by purchasing all
of the outstanding common stock, and retiring and assuming certain debt
obligations of DMI. The funds used for the purchase of DMI were obtained from
available cash and cash equivalents of the Registrant. Components of the payment
for the purchase of DMI on May 1, 1996 were:
<TABLE>
<S> <C>
Purchase of Common Stock......................................... $ 550,200
Satisfaction of DMI debt Obligations............................. 879,636
----------
Cash Paid........................................................ 1,429,836
Less: Cash Acquired.............................................. (30,447)
----------
Purchase of DMI, net of cash acquired.................. $1,399,389
==========
</TABLE>
F-23
<PAGE> 73
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The acquisition has been accounted for using the purchase method. The
purchase price was allocated to assets and liabilities presented in the
accompanying condensed consolidated balance sheet based upon their estimated
fair values. A summary of these allocations on May 1, 1996 is as follows:
<TABLE>
<S> <C>
Accounts receivable, net of allowance for doubtful accounts
of $142,902................................................... $ 570,836
Unbilled receivables............................................ 198,665
Lease receivables-current....................................... 205,981
Other current assets............................................ 502,911
-----------
Total current assets.................................. 1,478,393
Property & equipment............................................ 223,729
Capitalized software development costs.......................... 1,628,522
Lease receivables............................................... 285,118
Other assets.................................................... 3,760
-----------
Total assets acquired................................. 3,619,522
-----------
Accounts payable and accrued expenses........................... (1,139,995)
Deferred revenue................................................ (89,159)
Advanced billings............................................... (275,878)
Notes payable -- current maturities............................. (458,858)
-----------
Total current liabilities............................. (1,963,890)
Notes payable................................................... (256,243)
-----------
Net liabilities assumed............................... (2,220,133)
-----------
Purchase of DMI, net of cash acquired........................... $ 1,399,389
==========
</TABLE>
(D) UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION:
The unaudited pro forma combined financial information, for the six months
ended June 30, 1995 and 1996, presented below (in thousands, except for per
share information), gives effect to the acquisition of DMI, as though it were
effective at the beginning of those periods. The pro forma information may not
be indicative of the results that would have occurred if the acquisition had
been effective on these dates, or of results that may be obtained in the future.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
------------------
1995 1996
------ -------
<S> <C> <C>
Total operating revenues.............................. $7,242 $ 7,323
Operating income (loss)............................... (475) (1,537)
Net income (loss)..................................... (733) (1,632)
Net income (loss) per share........................... (0.12) (0.25)
</TABLE>
F-24
<PAGE> 74
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(E) LEASE RECEIVABLES:
Prior to the merger date of May 1, 1996, DMI financed the sale of computer
equipment under lease contracts on behalf of certain of its customers. These
leases provided for monthly principal and interest payments and typically
provided for an initial five year term. Lease receivables, as shown in the
accompanying condensed consolidated balance sheet, represent the minimum lease
payments receivable less unearned interest. The future minimum lease payments to
be received (including interest) are summarized as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING JUNE 30, AMOUNT
--------------------------------------------------------------- --------
<S> <C>
1997........................................................... $225,160
1998........................................................... 171,973
1999........................................................... 81,236
2000........................................................... 11,094
2001 and thereafter............................................ --
--------
$489,468
========
</TABLE>
(F) NOTES PAYABLE:
Notes payable consists of the following:
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------
(IN THOUSANDS)
<S> <C>
First Union note payable.................................... $2,761
Other notes payable......................................... 428
-------
3,189
Less -- current maturities.................................. (274)
-------
$2,915
===========
</TABLE>
The First Union note payable is payable in fixed monthly payments of
principal and interest of $29,911, and a balloon payment equal to the remaining
unpaid principal balance and accrued interest on March 31, 1998. Interest on the
outstanding principal balance accrues at First Union's prime rate plus two
percent per annum (10.25% as of June 30, 1996). Under the applicable credit
agreement, First Union has a security interest in all of the assets of the
Company.
Other notes payable represent installment obligations payable in monthly
amounts of between $2,300 and $10,000 each. The notes bear fixed rate interest
ranging from 7.3% -- 11% and are secured by assignments of the lease
receivables. (See also Note E).
Maturities of long-term debt at June 30, 1996 are anticipated to
approximate the following:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING JUNE 30,
--------------------------------------------------------------- AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
1997........................................................... $ 274
1998........................................................... 2,853
1999........................................................... 51
2000........................................................... 11
2001 and thereafter............................................ --
-------
$3,189
===========
</TABLE>
F-25
<PAGE> 75
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(G) PREFERRED DIVIDENDS:
On May 21, 1996 the Company's Board of Directors declared and paid the
March 31, 1996 accumulated dividends on Series A Preferred Stock and Series B
Preferred Stock of $17,438 and $67,500, respectively. As of July 31, 1996, the
June 30, 1996 accumulated dividend preferences on Series A Preferred Stock and
Series B Preferred Stock of $17,438 and $67,500, respectively, had not been
declared by the Company's Board of Directors.
(H) SUBSEQUENT EVENT:
On July 29, 1996 the Registrant merged with and into DHT Florida, Inc., a
newly formed Florida corporation, then a wholly-owned subsidiary of the
Registrant. In connection with the merger, DHT Florida, Inc. changed its name to
Dynamic Healthcare Technologies, Inc. Each share of the Registrant's Common
Stock, Series A Preferred Stock and Series B Preferred Stock outstanding
immediately prior to the merger was converted into one share of fully paid and
non-assessable similar stock in the surviving corporation upon identical terms
and conditions. The purpose of the merger was to effect a reincorporation in the
State of Florida for the Registrant as authorized by shareholders at the
Company's Annual Shareholders' Meeting held on May 21, 1996.
F-26
<PAGE> 76
INDEPENDENT AUDITORS REPORT
To the Stockholders of
Dimensional Medicine, Inc.
We have audited the accompanying balance sheets of Dimensional Medicine,
Inc. as of March 31, 1995 and 1996, and the related statements of operations,
shareholders' equity and cash flows for each of the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Dimensional Medicine, Inc.
at March 31, 1995 and 1996, and the results of its operations and its cash flows
for each of the years then ended, in conformity with generally accepted
accounting principles.
/s/ ERNST & YOUNG LLP
Minneapolis, Minnesota
May 24, 1996
F-27
<PAGE> 77
DIMENSIONAL MEDICINE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
---------------------------
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................... $ 71,215 $ 153,425
Accounts receivable, less allowance for doubtful accounts of
$29,181 and $138,715 at March 31, 1995 and 1996,
respectively................................................. 1,356,298 566,458
Unbilled and other receivables.................................. 344,296 244,057
Tax benefit receivable.......................................... 172,044 64,627
Short-term lease receivables.................................... 111,960 101,677
Inventory....................................................... 186,720 71,028
Other current assets............................................ 119,126 68,360
----------- -----------
Total current assets.................................... 2,361,659 1,269,632
----------- -----------
Property.......................................................... 2,335,358 2,412,952
Accumulated depreciation.......................................... (2,060,015) (2,175,102)
----------- -----------
275,343 237,850
Other assets:
Capitalized software............................................ 470,893 460,787
Long-term tax benefit receivable................................ -- 119,542
Long-term lease receivables..................................... 284,876 182,032
----------- -----------
Total assets............................................ $ 3,392,771 $ 2,269,843
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Borrowings under line of credit................................. $ 500,000 $ 500,000
Accounts payable and other accrued expenses..................... 543,424 504,568
Due to NCS...................................................... 81,691 126,527
Accrued salaries and benefits................................... 157,169 100,879
Deferred revenue................................................ 164,269 111,098
Customer deposits............................................... 59,715 106,625
Advance billings................................................ 45,835 108,583
Government overpayments......................................... 193,419 193,419
Rent abatement.................................................. 106,683 35,561
Current portion -- note payable to NCS.......................... 200,000 541,983
Current portion capital leases.................................. 7,032 19,104
Current portion other long-term debt............................ 96,173 104,466
----------- -----------
Total current liabilities............................... 2,155,410 2,452,813
----------- -----------
Long-term note payable to NCS..................................... 655,000 --
Long-term note payable............................................ 257,891 153,426
Income taxes payable.............................................. 68,875 --
Rent abatement long-term.......................................... 35,561 --
Capital leases.................................................... 2,287 10,972
----------- -----------
1,019,614 164,398
----------- -----------
Shareholders' equity:
Common Stock, $0.15 par value
Authorized shares -- 50,000,000
Issued and outstanding shares -- 32,533,460 -- 1995 and 1996.... 4,880,019 4,880,019
Additional paid-in capital...................................... 8,633,407 8,633,407
Deficit......................................................... (13,295,679) (13,860,794)
----------- -----------
Total shareholders' equity.............................. 217,747 (347,368)
----------- -----------
Total liabilities and shareholders' equity.............. $ 3,392,771 $ 2,269,843
=========== ===========
</TABLE>
See accompanying notes.
F-28
<PAGE> 78
DIMENSIONAL MEDICINE, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
-------------------------
1995 1996
---------- ----------
<S> <C> <C>
Revenues:
Hardware revenue.................................................. $1,198,860 $ 778,186
Hardware support revenue.......................................... 993,894 672,012
Software application revenue...................................... 2,012,618 1,438,753
Software support revenue.......................................... 1,150,216 1,192,924
Other revenue..................................................... 585,996 421,600
---------- ----------
5,941,584 4,503,475
Costs and expenses:
Cost of products sold............................................. 1,190,871 950,680
Client service expense............................................ 1,879,067 1,583,591
Software development.............................................. 1,259,858 1,128,751
Sales and marketing............................................... 845,876 715,016
General and administrative........................................ 534,050 846,892
---------- ----------
Total costs and expenses............................................ 5,709,722 5,224,930
---------- ----------
Operating income (loss)............................................. 231,862 (721,455)
Other income (expense):
Interest expense.................................................. (129,649) (116,088)
Other............................................................. 37,641 23,662
---------- ----------
(92,008) (92,426)
---------- ----------
Income (loss) before income taxes................................... 139,854 (813,881)
Income tax benefit.................................................. 34,610 248,766
---------- ----------
Net income (loss)................................................... $ 174,464 $ (565,115)
========= =========
Net income (loss) per share......................................... $ 0.01 $ (0.02)
========= =========
Weighted average number of shares outstanding during the year....... 32,553,460 32,553,460
</TABLE>
See accompanying notes.
F-29
<PAGE> 79
DIMENSIONAL MEDICINE, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
----------------------- PAID-IN ESOP
SHARES AMOUNT CAPITAL DEFICIT RECEIVABLE TOTAL
---------- ---------- ---------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31,
1994.................... 32,533,460 $4,880,019 $8,690,454 $(13,470,143) $ (96,847) $ 3,483
ESOP allocation......... -- -- (57,047) -- 96,847 39,800
Net income.............. -- -- -- 174,464 -- 174,464
---------- ---------- ---------- ------------ ---------- ---------
Balance at March 31,
1995.................... 32,533,460 4,880,019 8,633,407 (13,295,679) -- 217,747
Net loss................ -- -- -- (565,115) -- (565,115)
---------- ---------- ---------- ------------ ---------- ---------
Balance at March 31,
1996.................... 32,533,460 $4,880,019 $8,633,407 $(13,860,794) $ -- $(347,368)
========= ========= ========= =========== ======== =========
</TABLE>
See accompanying notes.
F-30
<PAGE> 80
DIMENSIONAL MEDICINE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------
1995 1996
--------- ---------
<S> <C> <C>
Operating activities:
Net income (loss).................................................... $ 174,464 $(565,115)
Adjustments to reconcile to net cash provided by operating
activities:
Depreciation and amortization..................................... 285,986 297,103
Changes in operating assets and liabilities:
Decrease in receivables......................................... 114,539 991,081
(Increase) decrease in inventories and other current assets..... (67,805) 166,458
(Decrease) increase in accounts payable and accrued expenses.... 415,359 (119,185)
Other........................................................... (285,834) (50,196)
--------- ---------
Net cash provided by operating activities.............................. 636,709 720,146
--------- ---------
Investing activities:
Purchases of property, plant and equipment........................... (151,957) (44,646)
Capitalization of software development costs......................... (167,927) (171,910)
--------- ---------
Net cash used in investing activities.................................. (319,884) (216,556)
--------- ---------
Financing activities:
Principal payments on notes payable and capitalized lease
obligations....................................................... (285,233) (421,380)
--------- ---------
Net cash used in financing activities.................................. (285,233) (421,380)
--------- ---------
Increase in cash and cash equivalents.................................. 31,592 82,210
Cash and cash equivalents at beginning of year......................... 39,623 71,215
--------- ---------
Cash and cash equivalents at end of year............................... $ 71,215 $ 153,425
========= =========
</TABLE>
See accompanying notes.
F-31
<PAGE> 81
DIMENSIONAL MEDICINE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Dimensional Medicine, Inc. ("DMI") designs, develops and markets
application software and imaging workstations for the radiology medical market.
The Company sells its products throughout the United States.
REVENUE RECOGNITION
System Sales: Contracts for the sale of the Company's Maxifile systems
generally require modification of the systems to meet customer requirements, may
take up to twelve months to complete and require periodic progress payments
throughout the contract by the customer. Revenue is recognized based on
completion of contract milestones measured by the delivery of contractual
elements. Sales of the Company's Maxiview system are recognized upon delivery.
Costs of products sold include the estimated costs of post contract support.
Service and Support: Agreements for service and support are recognized
over the period in which support services are provided. The costs of providing
these services are presented in the costs and expenses section of the statement
of operations.
Other: All other revenue is recognized upon the performance of services.
WARRANTIES
Software products generally carry an initial 90 day warranty. Initial
hardware warranties are provided by the original manufacturer. An additional
warranty is available in the form of maintenance contracts for both software and
hardware. Revenue for these contracts is recognized over the contract life on a
straight-line basis.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market. The inventory balances at March 31, 1995 and 1996 were comprised of raw
materials and component parts.
SOFTWARE
Software costs capitalized include the cost of the Maxifile software system
purchased from NCS on March 31, 1987 (original cost of $1,275,000). The Company
amortizes the software costs based on the greater of the ratio of current
revenues to total expected revenues or the straight-line method over the
estimated economic life. Accumulated amortization was $1,204,000 and $1,280,000
at March 31, 1995 and 1996, respectively.
The Company capitalized software production costs related to additional
products of $168,000 and $172,000 in 1995 and 1996, respectively. The ongoing
assessment of recoverability of these costs requires considerable judgment by
management with respect to certain external factors, including, but not limited
to, anticipated future gross product revenue, estimated economic life and
changes in software and hardware technology. Amortization of these costs is
based on the greater of the ratio of current revenues to total estimated
revenues or the straight-line method over the estimated economic life, but not
to exceed five years. Accumulated amortization was $551,000 and $657,892 at
March 31, 1995 and 1996, respectively.
Amortization of software charged to cost of products sold in 1995 and 1996
was $140,000 and $182,016, respectively.
F-32
<PAGE> 82
DIMENSIONAL MEDICINE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
LEASE RECEIVABLES
Lease receivables represent product sold under sales-type leases with a
five-year term. The lease receivables are carried at their fair market value.
In addition, the Company has sold leases without recourse to NCS and other
financial institutions, subject to limited obligations by the Company. Customers
are in compliance with the lease contracts at March 31, 1996. At March 31, 1996,
$221,510 remains outstanding on these sold leases.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated on the basis of cost. The Company
provides for amortization and depreciation at rates calculated to amortize the
cost of the property over its estimated useful life (ranging from 3 to 10 years)
using the straight-line method.
LOSS/EARNINGS PER SHARE
Loss/earnings per share is computed by dividing the net loss/income for the
period by the weighted average number of common shares outstanding during the
period.
USE OF ESTIMATES
The preparation of 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 the estimates.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company will record impairment losses on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount.
STOCK-BASED COMPENSATION
The Company follows Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees (APB 25) and related interpretations in accounting
for its stock options. Under APB 25, when the exercise price of stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." The Company has not determined the impact of the new statement on
its financial statements.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform to the 1996
presentation.
2. FINANCIAL CONDITION AND RELATIONSHIP WITH NATIONAL COMPUTER
SYSTEMS, INC.
During recent periods, National Computer Systems, Inc. (NCS) has provided
substantial financial support to the Company in the form of debt financing and
extended payment terms on payables to NCS. On December 20, 1993, NCS converted
$3,752,746 of notes and accounts payable into 27,533,441 common
F-33
<PAGE> 83
DIMENSIONAL MEDICINE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
shares of the Company, increasing NCS's ownership from 3% to 85%. Certain other
indebtedness to NCS was replaced by a $1,105,000 long-term note payable. The
Company's bank line of credit is guaranteed by NCS.
3. TRANSACTIONS WITH NATIONAL COMPUTER SYSTEMS, INC.
In June 1992, under a Debt Restructuring Agreement ("the 1992 Agreement")
with NCS, two outstanding promissory notes totaling $3,900,000 were replaced by
a single Promissory Note. Interest on the new note was charged at an annual rate
of 3%, such rate increasing to 8% if an event of default occurred (no interest
was charged on the Promissory Notes in the year ended March 31, 1992). The
Company defaulted on the principal and interest payments due April 30, 1993,
making the entire amount due on demand with an 8% interest rate after that date.
On December 20, 1993, the remaining balance on this note was part of a
restructuring under which NCS acquired 27,533,441 shares of the Company's common
stock in exchange for indebtedness totaling $3,752,746. Of the total amount
remaining after the forgiveness ($1,169,627), $1,105,000 was converted to a
long-term note. The note was due in quarterly installments of $50,000 plus
interest at 6% beginning March 31, 1994 through September 30, 1995, with the
balance due December 31, 1995. This note was replaced at March 31, 1995 with a
new note in the amount of the existing principal of $855,000. The note is due in
quarterly installments of $50,000 plus interest at 6% with the balance due on
April 30, 1996.
In connection with the 1993 stock purchase agreement with NCS, the Company
obtained concessions from third party vendors on accounts payable of
approximately $342,000. Under the 1992 Agreement, NCS agreed to forgive, against
accounts payable delinquent at the Agreement date ($464,000), an amount equal to
15% of the payables currently arising and due in a given month if such payables
were paid on a timely basis. Approximately $342,000 of such forgiveness was
included in the statement of operations as extraordinary gains in 1994.
In February 1993, NCS exercised its right under the 1992 Agreement to have
all cash received in the Company's bank lockbox account transferred to a
collateral account under the control of NCS. Through March 31, 1996, NCS
continues to advance monies to the Company from the collateral account receipts.
NCS provides field engineering services and other services to the Company
at specified fees, which are not significantly different from the fees charged
to unrelated parties. Fees for field engineering services provided by NCS for
maintenance of hardware for all installed systems totaled approximately $429,000
and $234,000 in 1995 and 1996, respectively.
The components of the amounts owed National Computer Systems, Inc. are as
follows:
<TABLE>
<CAPTION>
MARCH 31,
-------------------
1995 1996
-------- --------
<S> <C> <C>
Due to National Computer Systems, Inc.:
Current portion of note payable................................ $200,000 $541,983
Accounts payable............................................... 81,691 126,527
Net receivable for income tax benefit (Note 8)................. (103,169) (184,169)
-------- --------
$178,522 $484,341
======== ========
Long-term note payable........................................... $655,000 $ --
======== ========
</TABLE>
The promissory note and accounts payable to NCS are secured by
substantially all assets of the Company.
Total interest paid, including interest paid on capital leases, for the
years ended March 31, 1995 and 1996 was approximately $130,000 and $116,000,
respectively.
F-34
<PAGE> 84
DIMENSIONAL MEDICINE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. NOTES PAYABLE
The Company has obtained a bank line of credit through June 30, 1996 with a
total credit facility of $500,000. The outstanding balance at March 31, 1996 was
$500,000. This line is unsecured, bears interest at the bank's base rate and is
guaranteed by NCS.
The Company has a note payable to a finance company with a balance of
$257,892 at March 31, 1996 (current portion of $104,466). The note has an
effective interest rate of 8.3%, is payable in monthly installments of $10,163
through July 1998, is secured by the proceeds of a customer financing lease and
is guaranteed by NCS.
5. CAPITALIZED LEASE OBLIGATIONS
The Company has entered into lease agreements for various computer and
office equipment.
The present value of future minimum lease payments required on the leases
is as follows:
<TABLE>
<S> <C>
1997....................................................................... $19,104
1998....................................................................... 10,972
-------
$30,076
=======
</TABLE>
6. STOCK OPTIONS
Under the Company's stock option plans, options to acquire up to 1,000,000
shares of the Company's Common Stock may be granted to officers and key
employees at no less than 100% of the fair market value on the grant date.
Additionally, the Company has granted non-qualified stock options outside of the
plans to a director and a former president. Information concerning options
outstanding is as follows:
<TABLE>
<CAPTION>
OPTIONS
OUTSTANDING PRICE PER SHARE
----------- ----------------
<S> <C> <C>
Balance March 31, 1994................................. 728,082 $0.125 to $0.531
Options granted...................................... -- --
Options canceled..................................... (130,833) 0.250 to 0.531
--------
Balance March 31, 1995................................. 597,249 0.125 to 0.500
Options granted...................................... -- --
Options canceled..................................... (360,999) 0.125 to 0.500
--------
Balance March 31, 1996................................. 236,250 $0.250 to $0.344
========
</TABLE>
At March 31, 1996, outstanding options covering 236,250 shares were
exercisable at $0.250 to $0.344 per share (566,863 shares at $0.125 to $0.500
per share at March 31, 1995). At March 31, 1996, 600,500 shares remain available
for grant.
A total of 836,750 shares were reserved for options at March 31, 1996.
7. OPERATING LEASE
The Company leases office space and manufacturing facilities under a
non-cancelable operating lease having a remaining term through July 1996. The
lease provided for an abatement of base rent payments through January 1992 and
an abatement of the lessee's share of real estate taxes and operating expenses
through July 1991. The Company is recognizing the benefit of these abatements on
a straight-line basis over the life of the lease. In addition, the Company has
entered into other operating leases for office equipment.
F-35
<PAGE> 85
DIMENSIONAL MEDICINE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum base rental payments under these operating leases consist of
the following at March 31, 1996:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31:
----------------------------------------------------------------
<S> <C>
1997..................................................... $94,000
1998..................................................... 2,000
------
$96,000
======
</TABLE>
Total rental expense to unrelated third parties for the years ended March
31, 1995 and 1996 was approximately $267,000 and $272,000, respectively.
8. INCOME TAXES
As a result of the issuance of stock to NCS in December 1993, the Company
had a change in ownership under the net operating loss limitation rules. Net
operating losses incurred through the change in ownership date are no longer
available to offset future taxable income.
Subsequent to December 20, 1993, the Company is included in the
consolidated income tax return of NCS. Under a tax sharing agreement between the
Company and NCS, the Company will be reimbursed for its share of tax return
savings resulting from the use of its operating losses. Pursuant to the
agreement, NCS owes the Company $65,000 on or before October 15, 1996 and
$120,000 before October 15, 1997.
Deferred income taxes are due to temporary differences between the carrying
values of certain assets and liabilities for financial reporting and income tax
purposes. Significant components of deferred taxes are as follows:
<TABLE>
<CAPTION>
MARCH 31,
--------------------
1995 1996
-------- ---------
<S> <C> <C>
Deferred assets:
Accrued vacation.............................................. $ 36,000 $ 31,000
Rental abatement.............................................. 50,000 12,000
Allowance for doubtful accounts............................... 10,000 49,000
Inventory reserve............................................. 134,000 195,000
Other......................................................... 35,000 --
-------- ---------
265,000 287,000
Deferred liabilities:
Capitalized software.......................................... 165,000 161,000
Other......................................................... 18,000 11,000
-------- ---------
183,000 172,000
-------- ---------
Net deferred tax assets before valuation allowance.............. 82,000 115,000
Valuation allowance for net deferred tax assets................. (82,000) (115,000)
-------- ---------
Net deferred taxes.............................................. $ -- $ --
======== =========
</TABLE>
9. EMPLOYEE STOCK OWNERSHIP PLAN
Effective September 28, 1990, the Dimensional Medicine, Inc. Employee Stock
Ownership Plan and Trust was established. Employees who have completed six
consecutive months of employment and have met other criteria are eligible to
participate. Prior to March 31, 1995, officers, certain members of senior
management and commission based salespersons were not eligible to participate.
The Plan was amended at March 31, 1995 to allow participation by these employee
groups.
F-36
<PAGE> 86
DIMENSIONAL MEDICINE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Contributions to the Plan are at the discretion of the Company and may be
in the form of cash or Company stock. There were 300,000 shares allocated to the
Plan in prior years, with no contributions to the Plan in 1996. Shares held by
the ESOP are included in the weighted average shares outstanding for purposes of
computing earnings per share.
If Company securities are not readily tradeable on an established market,
Plan participants have the right to require the Company to repurchase shares at
book value.
10. SIGNIFICANT CUSTOMERS
Revenues under contracts with U.S. Government facilities approximated 11%
and 9% of total revenues in fiscal 1995 and 1996, respectively.
11. SUBSEQUENT EVENTS
On April 29, 1996, the shareholders of the Company voted to merge with
Dynamic Healthcare Technologies, Inc. The shareholders of the Company received
$550,000 in exchange for all of the outstanding shares of the Company's common
stock.
Effective April 29, 1996, the Employee Stock Ownership Plan and Trust
(ESOP) of Dimensional Medicine, Inc. will terminate and the Plan shall
distribute to each participant his or her ESOP account in a single lump sum
following the effective date of the merger between DMI and Dynamic Healthcare
Technologies, Inc.
F-37
<PAGE> 87
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
The following unaudited pro forma condensed consolidated statements of
operations have been prepared based upon certain pro forma adjustments to the
historical financial statements of the Company set forth elsewhere in this
Prospectus, as described below. The pro forma condensed consolidated statements
of operations should be read in conjunction with the notes thereto and the
historical financial statements and notes of Dynamic Healthcare Technologies,
Inc. and DMI included elsewhere in this prospectus.
The historical information for the year ended December 31, 1995 combines
operating information of Dynamic Healthcare Technologies, Inc. for its year
ended December 31, 1995 with operating information of DMI for the first nine
months ended December 31, 1995 (of its fiscal year ended March 31, 1996), and
the fourth quarter of its fiscal year ended March 31, 1995. The historical
consolidated operating information for the six months ended June 30, 1996
combines the first two quarters of unaudited consolidated financial information
of Dynamic Healthcare Technologies, Inc., the fourth quarter of DMI's fiscal
year ended March 31, 1996, and DMI's operations from April 1, 1996 until May 1,
1996 (the acquisition date).
The Pro Forma Condensed Consolidated Statements of Operations for the year
ended December 31, 1995 and for the six months ended June 30, 1996 give effect
to the acquisition of DMI as if the acquisition occurred on January 1, 1995.
These statements do not purport to be indicative of the results of operations
which actually would have occurred had the acquisition of DMI occurred on
January 1, 1995, or which may be expected to occur in the future.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------------------
PRO FORMA NOTE
HISTORICAL ADJUSTMENTS REF. PRO FORMA
---------- ----------- ----- -----------
<S> <C> <C> <C> <C>
Operating revenues:
Computer system equipment sales and support.......................... $2,619,414 $ -- $ 2,619,414
Application software licenses........................................ 4,477,008 -- 4,477,008
Software support..................................................... 4,897,441 -- 4,897,441
Services and other................................................... 2,155,693 -- 2,155,693
----------- --------- -----------
Total revenues................................................. 14,149,556 -- 14,149,556
----------- --------- -----------
Costs and expenses:
Cost of products sold................................................ 1,886,565 -- 1,886,565
Client services expense.............................................. 4,434,250 (48,000) (2) 4,386,250
Software development costs........................................... 2,897,358 126,000 (2&3) 3,023,358
Sales and marketing.................................................. 2,704,437 (15,000) (2) 2,689,437
General and administrative........................................... 2,404,174 (21,000) (2) 2,383,174
----------- --------- -----------
Total costs and expenses....................................... 14,326,784 42,000 14,368,784
----------- --------- -----------
Operating income (loss)................................................ (177,228) (42,000) (219,228)
Other income (expense)................................................. (515,018) 88,000 (4) (427,018)
----------- --------- -----------
Net earnings (loss) before income taxes................................ (692,246) 46,000 (646,246)
Provision for income taxes benefit (cost).............................. 180,969 (180,969) (5) --
----------- --------- -----------
Net earnings (loss).................................................... $ (511,277) $(134,969) $ (646,246)
=========== ========= ===========
Net earnings (loss) per share.......................................... $ (0.10)
===========
Weighted average number of common shares............................... 6,443,294
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
-----------------------------------------------
PRO FORMA NOTE
HISTORICAL ADJUSTMENTS REF. PRO FORMA
----------- ----------- ----- -----------
<S> <C> <C> <C> <C>
Operating revenues:
Computer system equipment sales and support......................... $ 2,037,491 $ -- $ 2,037,491
Application software licenses....................................... 1,468,036 (128,610) (1) 1,339,426
Software support.................................................... 2,728,458 -- 2,728,458
Services and other.................................................. 1,217,164 -- 1,217,164
----------- --------- -----------
Total revenues................................................ 7,451,149 (128,610) 7,322,539
----------- --------- -----------
Costs and expenses:
Cost of products sold............................................... 1,737,748 -- 1,737,748
Client services expense............................................. 2,583,459 (16,000) (2) 2,567,459
Software development costs.......................................... 1,200,429 42,000 (2&3) 1,242,429
Sales and marketing................................................. 1,749,377 (5,000) (2) 1,744,377
General and administrative.......................................... 1,574,639 (7,000) (2) 1,567,639
----------- --------- -----------
Total costs and expenses...................................... 8,845,652 14,000 8,859,652
----------- --------- -----------
Operating income (loss)............................................... (1,394,503) (142,610) (1,537,113)
Other income (expense)................................................ (139,151) 44,000 (4) (95,151)
----------- --------- -----------
Net earnings (loss) before income taxes............................... (1,533,654) (98,610) (1,632,264)
Provision for income taxes benefit (cost)............................. 293,884 (293,884) (5) --
----------- --------- -----------
Net earnings (loss)................................................... $(1,239,770) $(392,494) $(1,632,264)
=========== ========= ===========
Net earnings (loss) per share......................................... $ (0.25)
===========
Weighted average number of common shares.............................. 6,619,190
</TABLE>
See notes to pro forma condensed consolidated statements of operations.
F-38
<PAGE> 88
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
The Pro Forma Condensed Consolidated Statements of Operations give effect
to the following pro forma adjustments:
(1) Reflects an adjustment to conform the revenue recognition
principles of DMI to those of the Company.
(2) Reflects the decrease in depreciation expense resulting from the
change in the depreciable basis of the assets assumed acquired on January
1, 1995.
(3) Reflects the increase in the amortization of software development
costs resulting from the increased basis in the assets assumed acquired on
January 1, 1995.
(4) Reflects the elimination of interest expense from interest bearing
debt extinguished by the assumed purchase of DMI, net of the elimination of
interest earned on cash equivalents used by the assumed purchase.
(5) Reflects the elimination of the income tax benefit previously
recognized by DMI through a tax sharing agreement with DMI's previous
majority owner.
F-39
<PAGE> 89
[Color Photographs Inside back cover page]
[The color photograph is of a diagram of the technical architectural
environment relating to Registrant's healthcare information systems]
<PAGE> 90
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS; ANY
INFORMATION OR REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY OF THE SECURITIES COVERED BY THIS PROSPECTUS BY THE COMPANY IN
ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE COMPANY TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 12
Capitalization........................ 13
Price Range of Common Stock........... 14
Dividend Policy....................... 14
Selected Consolidated Financial
Data................................ 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 16
Business.............................. 24
Management............................ 33
Certain Transactions.................. 39
Principal and Selling Shareholders.... 40
Description of Capital Stock.......... 43
Shares Eligible for Future Sale....... 44
Underwriting.......................... 45
Legal Matters......................... 46
Experts............................... 47
Available Information................. 47
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
5,000,000 SHARES
DYNAMIC HEALTHCARE TECHNOLOGIES (LOGO)
COMMON STOCK
------------------------
PROSPECTUS
------------------------
RAYMOND JAMES &
ASSOCIATES, INC.
VECTOR SECURITIES
INTERNATIONAL, INC.
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 91
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with
the issuance and distribution of the securities being registered, all of which
are being borne by the Registrant:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee....................... $ 6,353
NASD filing fee........................................................... 3,677
Legal fees and expenses................................................... 200,000
Accounting fees and expenses.............................................. 75,000
Printing fees............................................................. 150,000
Blue Sky qualification fees and expenses.................................. 10,000
Miscellaneous............................................................. 54,970
----
TOTAL........................................................... $500,000
====
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Company's Articles of Incorporation, Bylaws and applicable state
law, the Company will indemnify its directors, officers, employees and agents
against all expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement which are actually and reasonably incurred in connection with
any threatened, pending or actually completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, to which any such
person becomes subject as a result of having served in such role, as an employee
or agent of the Company, or at the Company's request as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise. However, except as described below, such indemnification will
be made only if such person acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her 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 will not, of itself, create a
presumption that such person did not act in good faith and in a manner which he
or she reasonably believed to be in or not opposed to the best interests of the
Company, or with respect to any criminal action or proceeding, did not have
reasonable cause to believe that his or her conduct was unlawful.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following transactions were considered exempt from the registration
requirements of the 1933 Act under Section 4(2):
On June 2, 1996, the Company granted Nikhil Bhatt options to purchase
150,000 shares of Common Stock in accordance with a vesting schedule, in
consideration of services to be provided pursuant to his employment
agreement.
On December 5, 1995 and December 29, 1995, the Company sold 3,750,000
shares of Series B Preferred Stock to private investors for aggregate
consideration of $3,000,000 and, in connection therewith, warrants to
purchase 210,000 shares of the Company's common stock for an aggregate of
$25,000.
On August 23, 1994, the Company granted each of Mitchel J. Laskey and
David M. Pomerance options to purchase 250,000 shares of Common Stock in
accordance with a vesting schedule in consideration of services to be
provided pursuant to their employment agreements.
On August 23, 1993, a total of 600,000 shares were issued to the
shareholders of Dynamic Technical Resources, Inc. ("DTR") in connection
with the merger of DTR into the Company. On March 15, 1995, 610,000 shares
of Common Stock were issued to the shareholders of DTR to resolve an
acquisition contingency.
II-1
<PAGE> 92
During the period from January 1, 1993 through the present, warrants
to purchase an aggregate of 157,000 shares of Common Stock have been
granted to the Company's directors in consideration for their service as
such, 51,000 of which have been purchased upon exercise of these warrants
for aggregate consideration to the Company of $122,655.
The transactions were considered exempt from the registration requirement
of the 1933 Act under Sections 4(2) and 3(a)(9), respectively:
On July 31, 1995, the Company sold $775,000 of Subordinated
Convertible Notes, together with warrants to purchase 155,000 shares of the
Company's common stock, for aggregate consideration of $775,000. On
November 28, 1995 all of the Subordinated Convertible Notes were converted
into 968,750 shares of Series A Preferred Stock.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------ ---------------------------------------------------------------------------------
<C> <S> <C>
1.01 -- Form of Underwriting Agreement*
1.02 -- Form of Selected Dealer Agreement*
1.03 -- Form of Agreement Among Underwriters*
2.01 -- Agreement and Plan of Merger, dated July 29, 1996***
3.01 -- Articles of Incorporation of Registrant***
3.02 -- Amendment to Articles of Incorporation***
3.03 -- Bylaws of Registrant***
4.01 -- Specimen of Common Stock Certificate**
4.02 -- Form of Representatives' Warrant*
5.01 -- Opinion of Cohen, Berke, Bernstein, Brodie & Kondell, P.A.*
10.01 -- Revolving Credit and Security Agreement, dated October 12, 1994, between First
Union National Bank of Florida and Registrant*
10.02 -- Amendment to Revolving Credit and Security Agreement, dated February 9, 1995*
10.03 -- Second Amendment to Revolving Credit and Security Agreement, dated December 8,
1995*
10.04 -- Employment Agreement, dated August 23, 1994, between Registrant and Mitchel J.
Laskey*
10.05 -- Employment Agreement, dated August 23, 1994, between Registrant and David M.
Pomerance*
10.06 -- Amendment to the Employment Agreement, dated effective August 1, 1996, between
Registrant and David M. Pomerance*
10.07 -- Employment Agreement, dated May 16, 1996, between Registrant and Nikhil Bhatt*
10.08 -- Sublease Agreement, dated January 31, 1995, between Registrant and John Alden
Life Insurance Company*
10.09 -- Amendment to Sublease Agreement, dated as of October 27, 1995, between Registrant
and John Alden Life Insurance Company*
10.10 -- Lease Agreement, dated July 2, 1996, between Registrant and MBP Partners*
21.01 -- Subsidiaries*
23.01 -- Consent of Cohen, Berke, Bernstein, Brodie & Kondell, P.A. (included in Exhibit
5.01)*
23.02 -- Consents of KPMG Peat Marwick LLP*
23.03 -- Consent of Deloitte & Touche LLP*
23.04 -- Consent of Ernst & Young LLP*
24.01 -- Reference is made to the Signature section of this Registration Statement for the
Power of Attorney contained therein*
</TABLE>
- ---------------
* Filed herewith
** To be filed by amendment
*** Incorporated by Reference in Form 8-B, filed by Registrant on August 9, 1996
II-2
<PAGE> 93
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona-fide
offering thereof.
The undersigned registrant hereby undertakes that:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
1. For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
2. For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona-fide offering thereof.
II-3
<PAGE> 94
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Maitland,
Florida on the day of August, 1996.
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
By: /s/ PAUL S. GLOVER
------------------------------------
Paul S. Glover,
Vice President of Finance, Chief
Financial Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears below
hereby makes, constitutes and appoints Mitchel J. Laskey or David M. Pomerance
each acting alone, with full powers of substitution in his name or stead, his
true and lawful attorney, with full power to sign for such person and in such
person's name and capacity indicated below any and all amendments to this
Registration Statement, including any post-effective amendments, and any
registration statement filed pursuant to Rule 462(b) of the Securities Act
prepared in connection herewith, hereby ratifying and confirming such person's
signature as it may be signed by said attorney to any and all amendments.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------- ----------------
<C> <S> <C>
/s/ DAVID M. POMERANCE Chairman of the Board and
- --------------------------------------------- Secretary
David M. Pomerance
/s/ MITCHEL J. LASKEY President, Chief Executive
- --------------------------------------------- Officer, Treasurer and
Mitchel J. Laskey Director
/s/ PAUL S. GLOVER Vice President of Finance,
- --------------------------------------------- Principal Financial Officer
Paul S. Glover and Principal Accounting
Officer
/s/ THOMAS J. MARTINSON Director
- ---------------------------------------------
Thomas J. Martinson
/s/ JERRY L. CARSON Director
- ---------------------------------------------
Jerry L. Carson
/s/ BRET R. MAXWELL Director
- ---------------------------------------------
Bret R. Maxwell
/s/ DANIEL RAYNOR Director
- ---------------------------------------------
Daniel Raynor
/s/ RICHARD W. TRUELICK Director
- ---------------------------------------------
Richard W. Truelick
</TABLE>
II-4
<PAGE> 95
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT PAGE
------ --------------------------------------------------------------------------- ----
<C> <S> <C> <C>
1.01 -- Form of Underwriting Agreement*
1.02 -- Form of Selected Dealer Agreement*
1.03 -- Form of Agreement Among Underwriters*
2.01 -- Agreement and Plan of Merger, dated July 29, 1996***
3.01 -- Articles of Incorporation of Registrant***
3.02 -- Amendment to Articles of Incorporation***
3.03 -- Bylaws of Registrant***
4.01 -- Specimen of Common Stock Certificate**
4.02 -- Form of Representatives' Warrant*
5.01 -- Opinion of Cohen, Berke, Bernstein, Brodie & Kondell, P.A.*
10.01 -- Revolving Credit and Security Agreement, dated October 12, 1994, between
First Union National Bank of Florida and Registrant*
10.02 -- Amendment to Revolving Credit and Security Agreement, dated February 9,
1995*
10.03 -- Second Amendment to Revolving Credit and Security Agreement, dated December
8, 1995*
10.04 -- Employment Agreement, dated August 23, 1994, between Registrant and Mitchel
J. Laskey*
10.05 -- Employment Agreement, dated August 23, 1994, between Registrant and David
M. Pomerance*
10.06 -- Amendment to the Employment Agreement, dated effective August 1, 1996,
between Registrant and David M. Pomerance*
10.07 -- Employment Agreement, dated May 16, 1996, between Registrant and Nikhil
Bhatt*
10.08 -- Sublease Agreement, dated January 31, 1995, between Registrant and John
Alden Life Insurance Company*
10.09 -- Amendment to Sublease Agreement, dated as of October 27, 1995, between
Registrant and John Alden Life Insurance Company*
10.10 -- Lease Agreement, dated July 2, 1996, between Registrant and MBP Partners*
21.01 -- Subsidiaries*
23.01 -- Consent of Cohen, Berke, Bernstein, Brodie & Kondell, P.A. (included in
Exhibit 5.01)*
23.02 -- Consents of KPMG Peat Marwick LLP*
23.03 -- Consent of Deloitte & Touche LLP*
23.04 -- Consent of Ernst & Young LLP*
24.01 -- Reference is made to the Signature section of this Registration Statement
for the Power of Attorney contained therein*
</TABLE>
- ---------------
* Filed herewith
** To be filed by amendment
*** Incorporated by Reference in Form 8-B, filed by Registrant on August 9, 1996
<PAGE> 1
EXHIBIT 1.01
5,000,000 SHARES
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
COMMON STOCK
____________________
UNDERWRITING AGREEMENT
St. Petersburg, Florida
[September] __, 1996
Raymond James & Associates, Inc.
Vector Securities International, Inc.
As Representatives of the Several Underwriters
c/o Raymond James & Associates, Inc.
880 Carillon Parkway
St. Petersburg, Florida 33716
Ladies and Gentlemen:
Dynamic Healthcare Technologies, Inc., a Florida corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell an aggregate of 4,000,000 shares of common stock, $.01 par value
per share (the "Common Stock"), of the Company, to the several Underwriters
named in Schedule I hereto (the "Underwriters"), and certain shareholders of
the Company named in Schedule II hereto (the "Selling Shareholders") propose,
subject to the terms and conditions stated herein, to sell to the Underwriters
an aggregate of 1,000,000 shares of the Common Stock (such 5,000,000 aggregate
shares to be sold by the Company and the Selling Shareholders are hereinafter
referred to as the "Firm Shares"). In addition, the Company and certain of the
Selling Shareholders, have agreed to sell to the Underwriters, upon the terms
and conditions set forth herein, up to an additional 750,000 shares (the
"Additional Shares") of the Common Stock to cover over-allotments by the
Underwriters, if any. The Firm Shares and the Additional Shares are
hereinafter collectively referred to as the "Shares."
The Company and the Selling Shareholders wish to confirm as follows
their agreement with you and the other several Underwriters, on whose behalf
you are acting, in connection with the several purchases of the Shares from the
Company and the Selling Shareholders.
1. (a) REGISTRATION STATEMENT AND PROSPECTUS. The Company
has prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Act"), a registration statement on Form S-1 (File No.
333-____), including a prospectus subject to completion, relating to the
Shares. Such registration statement, as amended at the time when it becomes
effective and as thereafter amended by post-effective
<PAGE> 2
amendment, is referred to in this Agreement as the "Registration Statement."
The prospectus in the form included in the Registration Statement, or, if the
prospectus included in the Registration Statement omits information in reliance
upon Rule 430A under the Act and such information is included in a prospectus
filed with the Commission pursuant to Rule 424(b) under the Act or as part of a
post-effective amendment to the Registration Statement after the Registration
Statement becomes effective, the prospectus as so filed, is referred to in this
Agreement as the "Prospectus." The prospectus subject to completion in the
form included in the Registration Statement at the time of the initial filing
of such Registration Statement with the Commission and as such prospectus is
amended from time to time until the date of the Prospectus are collectively
referred to in this Agreement as the "Prepricing Prospectus."
(b) In addition, the Company has prepared and filed with
the Commission in accordance with the provisions of the Act an additional
registration statement (the "Additional Registration Statement") to register
certain shares of the Company's common stock for the sole benefit of certain
shareholders (the "Registering Shareholders") of the Company.
2. AGREEMENTS TO SELL AND PURCHASE. The Company and the Selling
Shareholders (in accordance with Schedule II hereof) hereby agree, severally
and not jointly, to sell the Firm Shares to the Underwriters and, upon the
basis of the representations, warranties and agreements of the Company and the
Selling Shareholders herein contained and subject to all the terms and
conditions set forth herein, each Underwriter agrees, severally and not
jointly, to purchase from the Company and the Selling Shareholders at a
purchase price of $____ per Share (the "purchase price per Share"), the number
of Firm Shares set forth opposite the name of such Underwriter in Schedule I
hereto (or such number of Firm Shares as adjusted pursuant to Section 11
hereof).
The Company and certain Selling Shareholders (in accordance with
Schedule II hereof) hereby also agree, severally and not jointly, to sell to
the Underwriters, and upon the basis of the representations, warranties and
agreements of the Company and the Selling Shareholders herein contained and
subject to all the terms and conditions set forth herein, the Underwriters
shall have the right for 30 days from the date of the Prospectus to purchase
from the Company and certain Selling Shareholders) (in accordance with Schedule
II hereof) up to 750,000 Additional Shares at the purchase price per Share for
the Firm Shares. The Additional Shares may be purchased solely for the purpose
of covering over-allotments, if any, made in connection with the offering of
the Firm Shares. If any Additional Shares are to be purchased, each
Underwriter, severally and not jointly, agrees to purchase the number of
Additional Shares (subject to such adjustments as you may determine to avoid
fractional shares) which bears the same proportion to the total number of
Additional Shares to be purchased by the Underwriters as the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule I hereto (or
such number of Firm Shares as adjusted pursuant to Section 11 hereof) bears to
the total number of Firm Shares.
3. TERMS OF PUBLIC OFFERING. The Company and the Selling
Shareholders have been advised by you that the Underwriters propose to make a
public offering of their respective portions of the Shares as soon after the
Registration Statement and this Agreement have become effective as in your
judgment is advisable and initially to offer the Shares upon the terms set
forth in the Prospectus.
4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Certificates in
definitive form for the Shares to be purchased by each Underwriter hereunder,
and in such denominations and registered in such names as Raymond James &
Associates, Inc. may request upon at least 48 hours prior notice to the
Company, shall be delivered by or on behalf of the Company and the Selling
Shareholders to the Underwriters for the account of such Underwriter, against
payment by such Underwriter on its behalf as provided herein. Payment shall be
made (i) with respect to the purchase price for the Firm Shares and any
Additional Shares purchased from the Company if any Additional Shares are
purchased hereunder, to the Company by official bank check or checks payable to
the order of the Company, in next day available funds against delivery of the
certificates for the Firm Shares or Additional Shares purchased from the
Company, as the case may be, and (ii) with respect to the purchase price for
Firm Shares sold by the Selling Shareholders to the Custodian (as defined in
the last paragraph of Section 7 hereof) by official bank check or checks
payable to the order of the Custodian, in next day available funds against
delivery of the certificates for the Firm
2
<PAGE> 3
Shares purchased from Selling Shareholders. The closing of the sale and
purchase of the Shares shall be held at the offices of Raymond James &
Associates, Inc., 880 Carillon Parkway, St. Petersburg, Florida 33716 (the
"Representative's Office"), or at such location in Miami, Florida as the
Representatives may designate, except that physical delivery of certificates
for the Shares shall be made at the direction of the Underwriters either at the
Representative's Office or shall be made to The Depository Trust Company
("DTC"), 55 Water Street, New York, New York 10041, for the account of the
Underwriters or for such other accounts as the Underwriters shall specify to
DTC.
Delivery to the Underwriters of and payment for any Additional Shares
to be purchased by the Underwriters shall be made at the offices of Raymond
James & Associates, Inc., 880 Carillon Parkway, St. Petersburg, Florida, at
10:00 a.m., St. Petersburg, Florida time, on such date or dates (the
"Additional Closing Date") (which may be the same as the Closing Date but shall
in no event be earlier than the Closing Date nor earlier than three nor later
than ten business days after the giving of the notice hereinafter referred to)
as shall be specified in a written notice from you on behalf of the
Underwriters to the Company and certain Selling Shareholders (in accordance
with Schedule II hereof) of the Underwriters' determination to purchase a
number, specified in such notice, of Additional Shares. Such notice may be
given to the Company and the Selling Shareholders by you at any time within 30
days after the date of the Prospectus. The place of closing for the Additional
Shares and the Additional Closing Date may be varied by agreement among you and
the Company.
5. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company
covenants and agrees with the several Underwriters as follows:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereto to become effective,
if it has not already become effective, and will advise you promptly
and, if requested by you, will confirm such advice in writing (i) when
the Registration Statement has become effective and when any
post-effective amendment thereto becomes effective, (ii) if Rule 430A
under the Act is employed, when the Prospectus has been timely filed
pursuant to Rule 424(b) under the Act, (iii) of any request by the
Commission for amendments or supplements to the Registration
Statement, any Prepricing Prospectus or the Prospectus or for
additional information, (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement
or of the suspension of qualification of the Shares for offering or
sale in any jurisdiction or the initiation of any proceeding for such
purposes and (v) within the period of time referred to in Section 5(e)
below, of any change in the Company's condition (financial or other),
business, prospects, properties, net worth or results of operations,
or of any event that comes to the attention of the Company that makes
any statement made in the Registration Statement or the Prospectus (as
then amended or supplemented) untrue in any material respect or that
requires the making of any additions thereto or changes therein in
order to make the statements therein not misleading in any material
respect, or of the necessity to amend or supplement the Prospectus (as
then amended or supplemented) to comply with the Act or any other law.
If at any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, the Company will make
every reasonable effort to obtain the withdrawal or lifting of such
order at the earliest possible time.
(b) The Company will furnish to you, without charge, two
signed duplicate originals of each of (i) the Registration Statement
as originally filed with the Commission and of each amendment thereto,
including financial statements and all exhibits thereto and (ii) the
Additional Registration Statement, and will also furnish to you,
without charge, such number of conformed copies of the Registration
Statement as originally filed and of each amendment thereto as you may
reasonably request.
(c) The Company will not file any amendment to the
Registration Statement or make any amendment or supplement to the
Prospectus unless (i) you shall have previously been advised thereof
and given a reasonable opportunity to review such filing, amendment or
supplement, and (ii) you have not reasonably objected to such filing,
amendment or supplement after being so advised.
3
<PAGE> 4
(d) Prior to the execution and delivery of this
Agreement, the Company has delivered or will deliver to you, without
charge, in such quantities as you have requested or may hereafter
reasonably request, copies of each form of the Prepricing Prospectus.
The Company consents to the use, in accordance with the provisions of
the Act and with the securities or Blue Sky laws of the jurisdictions
in which the Shares are offered by the several Underwriters and by
dealers, prior to the date of the Prospectus, of each Prepricing
Prospectus so furnished by the Company.
(e) As soon after the execution and delivery of this
Agreement as is practicable and thereafter from time to time for such
period as in the reasonable opinion of counsel for the Underwriters a
prospectus is required by the Act to be delivered in connection with
sales by any Underwriter or a dealer, and for so long a period as you
may request for the distribution of the Shares, the Company will
deliver to each Underwriter and each dealer, without charge, as many
copies of the Prospectus (and of any amendment or supplement thereto)
as they may reasonably request. The Company consents to the use of
the Prospectus (and of any amendment or supplement thereto) in
accordance with the provisions of the Act and with the securities or
Blue Sky laws of the jurisdictions in which the Shares are offered by
the several Underwriters and by all dealers to whom Shares may be
sold, both in connection with the offering and sale of the Shares and
for such period of time thereafter as the Prospectus is required by
the Act to be delivered in connection with sales by any Underwriter or
dealer. If at any time prior to the later of (i) the completion of
the distribution of the Shares pursuant to the offering contemplated
by the Registration Statement or (ii) the expiration of prospectus
delivery requirements with respect to the Shares under Section 4(3) of
the Act and Rule 174 thereunder, any event shall occur that in the
judgment of the Company or in the opinion of counsel for the
Underwriters is required to be set forth in the Prospectus (as then
amended or supplemented) or should be set forth therein in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary to
supplement or amend the Prospectus to comply with the Act or any other
law, the Company will forthwith prepare and, subject to Sections 5(a)
and 5(c) hereof, file with the Commission and use its best efforts to
cause to become effective as promptly as possible an appropriate
supplement or amendment thereto, and will furnish to each Underwriter
who has previously requested Prospectuses, without charge, a
reasonable number of copies thereof.
(f) The Company will cooperate with you and counsel for
the Underwriters in connection with the registration or qualification
of the Shares for offering and sale by the several Underwriters and by
dealers under the securities or Blue Sky laws of such jurisdictions as
you may reasonably designate and will file such consents to service of
process or other documents as may be reasonably necessary in order to
effect and maintain such registration or qualification for so long as
required to complete the distribution of the Shares; provided that in
no event shall the Company be obligated to qualify to do business in
any jurisdiction where it is not now so qualified or to take any
action which would subject it to general service of process in suits,
other than those arising out of the offering or sale of the Shares, in
any jurisdiction where it is not now so subject. In the event that
the qualification of the Shares in any jurisdiction is suspended, the
Company shall so advise you promptly in writing.
(g) The Company will make generally available to its
security holders a consolidated earnings statement (in form complying
with the provisions of Rule 158), which need not be audited, covering
a twelve month period commencing after the effective date of the
Registration Statement and ending not later than 15 months thereafter,
as soon as practicable after the end of such period, which
consolidated earnings statement shall satisfy the provisions of
Section 11(a) of the Act.
(h) During the period ending five years from the date
hereof, the Company will furnish to you and, upon your request, to
each of the other Underwriters, (i) as soon as available, a copy of
each proxy statement, quarterly or annual report or other report of
the Company mailed to shareholders or filed with the Commission, the
National Association of Securities Dealers, Inc. (the "NASD") or The
Nasdaq Stock Market or any securities exchange and (ii) from time to
time such other information concerning the Company as you may
reasonably request.
4
<PAGE> 5
(i) If this Agreement shall terminate or shall be
terminated after execution pursuant to any provision hereof (except
pursuant to a termination under Section 11 hereof) or if this
Agreement shall be terminated by the Underwriters because of any
inability, failure or refusal on the part of the Company or any of the
Selling Shareholders to perform any agreement herein or to comply with
any of the terms or provisions hereof or to fulfill any of the
conditions of this Agreement, the Company agrees to reimburse you and
the other Underwriters for all out-of-pocket expenses (including
travel expenses and reasonable fees and expenses of counsel for the
Underwriters but excluding wages and salaries paid by you) incurred by
you in connection herewith.
(j) The Company will apply the net proceeds from the sale
of the Shares to be sold by it hereunder in accordance in all material
respects with the statements under the caption "Use of Proceeds" in
the Prospectus.
(k) If Rule 430A under the Act is employed, the Company
will timely file the Prospectus pursuant to Rule 424(b) under the Act.
(l) For a period of 180 days after the date of the
Prospectus first filed pursuant to Rule 424(b) under the Act, without
your prior written consent, the Company will not, directly or
indirectly, issue, sell, offer or contract to sell or otherwise
dispose of or transfer any shares of Common Stock or securities
convertible into or exchangeable or exercisable for shares of Common
Stock (collectively, "Company Securities") or any rights to purchase
Company Securities, except (i) to the Underwriters pursuant to this
Agreement, (ii) pursuant to and in accordance with the Company's 1983
Incentive Stock Option Plan, 1993 Incentive Stock Option Plan,
Director and Officer Management Stock Warrant and Option Plan or
Employee Stock Purchase Plan, each of which is referenced in the
Registration Statement under the caption "Management -- Other
Compensation Plans," or (iii) pursuant to the Warrants contemplated by
Section 5(r) hereof.
(m) Prior to the Closing Date or the Additional Closing
Date, as the case may be, the Company will furnish to you, as promptly
as possible, copies of any unaudited interim consolidated financial
statements of the Company and its subsidiaries for any period
subsequent to the periods covered by the financial statements
appearing in the Prospectus.
(n) The Company will comply with all provisions of any
undertakings contained in the Registration Statement.
(o) The Company will not at any time, directly or
indirectly take any action designed, or which might reasonably be
expected to cause or result in, or which will constitute,
stabilization or manipulation of the price of the shares of Common
Stock to facilitate the sale or resale of any of the Shares.
(p) The Company will use its best efforts to qualify or
register its Common Stock for sale in non-issuer transactions under
(or obtain exemptions from the application of) the Blue Sky laws of
each state where necessary to permit market making transactions and
secondary trading, and will comply with such Blue Sky laws and will
continue such qualifications, registrations and exemptions in effect
for a period of five years after the date hereof.
(q) For so long as the Company's Common Stock is
qualified for trading on the National Association of Securities
Dealers Automated Quotation National Market System ("NMS"), the
Company will comply with the filing and other requirements of NMS.
(r) On the Closing Date, and subject to the closing of
the sale of the Firm Shares hereunder, the Company shall execute and
deliver to Raymond James & Associates, Inc. and to Vector Securities
International, Inc. warrants to purchase an aggregate of 250,000
shares of the Company's Common
5
<PAGE> 6
Stock, which warrants shall be in the form attached as Exhibit A
hereto (such warrants are referred to herein as the "Warrants").
(s) The Company will cause the Shares to be duly included
for trading on NMS at each time of delivery and maintain such status
on NMS or be listed on a national securities exchange, on a continuous
basis for at least three years from the date hereof.
(t) If at any time during the period beginning on the
date the Registration Statement becomes effective and ending on the
later of (A) the date 25 days after such effective date (or, if the
Underwriter's option granted pursuant to Section 2 hereof has not
been exercised by such date, then 30 days after such effective date)
or (B) the date that is the earlier of (l) the date on which the
Company first files with the Commission a Quarterly Report on Form
10-Q after such effective date and (2) the date on which the Company
first issues a quarterly financial report to shareholders after such
effective date, any rumor, publication or event relating to or
affecting the Company shall occur as a result of which, in the
reasonable opinion of the Underwriters, the market price of the Common
Stock has been or is likely to be materially affected (regardless of
whether such rumor, publication or event necessitates an amendment of
or supplement to the Prospectus), the Company will, after written
notice from the Representatives advising the Company to the effect set
forth above, forthwith prepare, consult with the Representatives
concerning the substance of, and consult with Company counsel to
determine whether or not it is advisable, under the circumstances, to
disseminate a press release or other public statement, reasonably
satisfactory to the Representatives, responding to or commenting on
such rumor, publication or event.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SHAREHOLDERS. The Company and the Selling Shareholders hereby jointly and
severally represent and warrant to each Underwriter on the date hereof, and
shall be deemed to represent and warrant to each Underwriter on the Closing
Date and the Additional Closing Date, that:
(a) Each Prepricing Prospectus included as part of the
Registration Statement as originally filed or as part of any amendment
or supplement thereto, or filed pursuant to Rule 424(a) under the Act,
complied when so filed in all material respects with the provisions of
the Act, except that this representation and warranty does not apply
to statements in or omissions from such Prepricing Prospectus (or any
amendment or supplement thereto) made in reliance upon and in
conformity with information relating to any Underwriter furnished to
the Company in writing by or on behalf of any Underwriter through you
expressly for use therein. The Commission has not issued any order
preventing or suspending the use of any Prepricing Prospectus.
(b) Each of the Registration Statement and the Additional
Registration Statement, in the forms in which they become effective
and also in such form as either of them may be when any post-effective
amendment thereto shall become effective, and the Prospectus, and any
supplement or amendment thereto when filed with the Commission under
Rule 424(b) under the Act, will comply in all material respects with
the provisions of the Act and will not at any such times contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except that this representation and warranty
does not apply to statements in or omissions from the Registration
Statement or the Prospectus (or any amendment or supplement thereto)
made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by or on behalf of
any Underwriter through you expressly for use therein.
(c) The capitalization of the Company is and will be as
set forth in the Prospectus as of the date set forth therein. All the
outstanding shares of Common Stock of the Company have been, and as of
the Closing Date will be, duly authorized and validly issued, are
fully paid and nonassessable and are free of any preemptive or similar
rights; except as set forth in the Prospectus, the Company is not a
party to or bound
6
<PAGE> 7
by any outstanding options, warrants, or similar rights to subscribe
for, or contractual obligations to issue, sell, transfer or acquire,
any of its capital stock or any securities convertible into or
exchangeable for any of such capital stock; the Shares to be issued
and sold to the Underwriters by the Company hereunder and the shares
of Common Stock issuable pursuant to the Warrants (the "Warrant
Shares") have been duly authorized and, when issued and delivered to
the Underwriters (or to other permitted purchasers under the Warrants)
against payment therefor in accordance with the terms hereof or
thereof, as the case may be, will be validly issued, fully paid and
nonassessable and free of any preemptive or similar rights; the
capital stock of the Company conforms to the description thereof in
the Registration Statement and the Prospectus (or any amendment or
supplement thereto); and the delivery of certificates for the Shares
against payment therefor pursuant to the terms of this Agreement, and
the delivery of certificates for the Warrant Shares against payment
therefor pursuant to the terms of the Warrants, will pass valid title
to the Shares and the Warrant Shares, as the case may be, free and
clear of any claim, encumbrance or defect in title, to the several
Underwriters (or to other permitted purchasers under the Warrants)
purchasing such shares in good faith and without notice of any lien,
claim or encumbrance. The certificates for the Shares are in valid
and sufficient form.
(d) All offers and sales of the Company's capital stock
prior to the date hereof were at all relevant times duly registered
under the Act or exempt from the registration requirements of the Act
and were duly registered or the subject of an available exemption from
the registration requirements of the applicable state securities or
Blue Sky laws, and the Company has taken all actions reasonably
necessary for it to assure that such exemptions from registration
would continue to be operative during all applicable periods of time
required by law.
(e) The Company does not have any subsidiaries other than
Dimensional Medicine, Inc. (the "Subsidiary"), and does not own a
material interest in or control, directly or indirectly, any other
corporation, partnership, joint venture, association, trust or other
business organization.
(f) The Company is a corporation duly organized and
validly existing as a corporation in good standing under the laws of
the State of Florida with full power and authority to own, lease and
operate its properties and to conduct its business as presently
conducted and as described in the Registration Statement and the
Prospectus (and any amendment or supplement thereto), and is duly
registered and qualified to conduct its business and is in good
standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration
or qualification, except where the failure to so register or qualify
does not have a material adverse effect on the condition (financial or
other), business, properties, net worth, results of operations or
prospects of the Company and the Subsidiary taken as a whole (a
"Material Adverse Effect").
(g) The Subsidiary is a corporation duly organized, with
full corporate power and authority to own, lease and operate its
properties and to conduct its business as presently conducted and as
described in the Registration Statement and the Prospectus (and any
amendment or supplement thereto), and is duly registered and qualified
to conduct its business and is in good standing in each jurisdiction
or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the
failure to so register or qualify does not have a Material Adverse
Effect. All of the outstanding shares of capital stock of the
Subsidiary have been duly authorized and validly issued, are fully paid
and nonassessable, and are owned by the Company, free and clear of any
lien, adverse claim, security interest, equity or other encumbrance.
(h) There are no legal or governmental proceedings
pending or threatened against the Company or the Subsidiary or to
which the Company or the Subsidiary or any of their respective
properties is subject, that are required to be described in the
Registration Statement or the Prospectus (or any amendment or
supplement thereto) but are not described as required. Except as
described in the Prospectus, there is no action, suit, inquiry,
proceeding, or investigation by or before any court or governmental or
other regulatory
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<PAGE> 8
or administrative agency or commission pending or, to the best
knowledge of the Company, threatened against or involving the Company
or the Subsidiary, which might individually or in the aggregate
prevent or adversely affect the transactions contemplated by this
Agreement or result in a Material Adverse Effect, nor is there any
basis for any such action, suit, inquiry, proceeding, or
investigation.
(i) There are no agreements, contracts, indentures,
leases or other instruments that are required to be described in the
Registration Statement or the Prospectus (or any amendment or
supplement thereto) or to be filed as an exhibit to the Registration
Statement that are not described or filed as required by the Act. All
such contracts to which the Company or the Subsidiary is a party have
been duly authorized, executed and delivered by the Company or the
Subsidiary, as the case may be, constitute valid and binding
agreements of the Company or the Subsidiary, as the case may be, and
are enforceable against the Company or the Subsidiary, as the case may
be, in accordance with the terms thereof, and neither the Company nor
the Subsidiary, as the case may be, nor to the best of the Company's
knowledge, any other party, is in breach of or default under any of
such contracts.
(j) Neither the Company nor the Subsidiary is in
violation of its respective articles of incorporation or bylaws or any
law, ordinance, administrative or governmental rule or regulation
applicable to the Company or the Subsidiary or of any decree of any
court or governmental agency or body having jurisdiction over the
Company or the Subsidiary, or in default in any material respect in
the performance of any obligation, agreement or condition contained in
(i) any bond, debenture, note or any other evidence of indebtedness,
or (ii) any material agreement, indenture, lease or other material
instrument to which the Company or the Subsidiary is a party or by
which any of their respective properties may be bound; and there does
not exist any state of facts which constitutes an event of default on
the part of the Company or the Subsidiary as defined in such documents
or which, with notice or lapse of time or both, would constitute such
an event of default.
(k) The Company's execution and delivery of this
Agreement and the Warrants and the performance by the Company of its
obligations under this Agreement and the Warrants have been duly and
validly authorized by the Company, and this Agreement has been, and
the Warrants will be, duly executed and delivered by the Company, and
this Agreement constitutes (assuming execution of this Agreement by
the Representatives), and the Warrants when so executed and delivered
will constitute, valid and legally binding agreements of the Company,
enforceable against the Company in accordance with their respective
terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other similar laws relating to or affecting enforcement
of creditors' rights generally or by general equitable principles.
(l) Neither the issuance and sale of the Shares, the
execution, delivery or performance of this Agreement and the Warrants
by the Company nor the consummation by the Company of the transactions
contemplated hereby or thereby (i) requires any consent, approval,
authorization or other order of or registration or filing with, any
court, regulatory body, administrative agency or other governmental
body, agency or official (except such as may be required for the
registration of the Shares under the Act and compliance with the
securities or Blue Sky laws of various jurisdictions, all of which
will be, or have been, effected in accordance with this Agreement),
(ii) conflicts with or will conflict with or constitutes or will
constitute a breach of, or a default under, the articles of
incorporation or bylaws of the Company or any agreement, indenture,
lease or other instrument to which the Company is a party or by which
any of its properties may be bound, (iii) violates any statute, law,
regulation, ruling, filing, judgment, injunction, order or decree
applicable to the Company or any of its properties, or (iv) results in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company.
(m) Except as described in the Prospectus, the Company
does not have outstanding and at the Closing Date (and the Additional
Closing Date, if applicable) will not have outstanding any options to
purchase, or any warrants to subscribe for, or any securities or
obligations convertible into, or any contracts
8
<PAGE> 9
or commitments to issue or sell, any shares of Common Stock or any
such warrants or convertible securities or obligations. Except for
the common stock to be registered by means of the Additional
Registration Statement, no holder of securities of the Company has
rights to the registration of any securities of the Company as a
result of or in connection with the filing of the Registration
Statement or the consummation of the transactions contemplated hereby
that have not been satisfied or heretofore waived in writing.
(n) Each of the firms of KPMG Peat Marwick L.L.P.,
Deloitte & Touche, LLP and Ernst & Young, LLP the certified public
accountants who have certified the financial statements filed as part
of the Registration Statement and the Prospectus (or any amendment or
supplement thereto) are, to the Company's knowledge, independent
public accountants as required by the Act.
(o) The financial statements, together with related
schedules and notes, included in the Registration Statement and the
Prospectus (and any amendment or supplement thereto), present fairly
the consolidated financial position, results of operations and changes
in financial position of the Company and the Subsidiary on the basis
stated in the Registration Statement at the respective dates or for
the respective periods to which they apply; such statements and
related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; and the
other financial and statistical information and data set forth in the
Registration Statement and Prospectus (and any amendment or supplement
thereto) is accurately presented and prepared on a basis consistent
with such financial statements and the books and records of the
Company. No other financial statements or schedules are required to
be included in the Registration Statement.
(p) Except as disclosed in the Registration Statement and
the Prospectus (or any amendment or supplement thereto), subsequent to
the respective dates as of which such information is given in the
Registration Statement and the Prospectus (or any amendment or
supplement thereto), (i) neither the Company nor the Subsidiary has
incurred any material liabilities or obligations, indirect, direct or
contingent, or entered into any transaction which is not in the
ordinary course of business or which could result in a material
reduction in the future earnings of the Company and the Subsidiary
taken as a whole; (ii) neither the Company nor the Subsidiary has
sustained any material loss or interference with its business or
properties from fire, flood, windstorm, accident or other calamity,
whether or not covered by insurance; (iii) the Company has not paid or
declared any dividends or other distributions with respect to its
capital stock and the Company is not in default under the terms of any
class of capital stock of the Company or any outstanding debt
obligations; (iv) there has not been any change in the authorized or
outstanding capital stock of the Company or any material change in the
indebtedness of the Company (other than in the ordinary course of
business); and (v) there has not been any material adverse change, or
any development involving or which may reasonably be expected to
involve a potential future material adverse change, in the condition
(financial or otherwise), business, properties, net worth, results of
operations or prospects of the Company.
(q) Each of the Company and the Subsidiary has good and
marketable title to all property (real and personal) described in the
Prospectus as being owned by it, free and clear of all liens, claims,
security interests or other encumbrances except (i) such as are
described in the financial statements included in, or elsewhere in,
the Prospectus or (ii) such as are not materially burdensome and do
not interfere in any material respect with the use of the property or
the conduct of the business of the Company and the Subsidiary taken as
a whole. All property (real and personal) held under lease by each of
the Company and the Subsidiary is held by it under valid, subsisting
and enforceable leases with only such exceptions as in the aggregate
are not materially burdensome and do not interfere in any material
respect with the conduct of the business of the Company and the
Subsidiary taken as a whole.
(r) The Company has not distributed and will not
distribute any offering material in connection with the offering and
sale of the Shares other than the Prepricing Prospectus, the
Prospectus, or other offering material, if any, as permitted by the
Act.
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<PAGE> 10
(s) The Company has not taken, directly or indirectly,
any action which constituted, or any action designed, or which might
reasonably be expected to cause or result in or constitute, under the
Act or otherwise, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares
or for any other purpose.
(t) The Company is not an "investment company," an
"affiliated person" of, or "promoter" or "principal underwriter" for
an investment company within the meaning of the Investment Company Act
of 1940, as amended.
(u) Each of the Company and the Subsidiary has all
permits, licenses, franchises, approvals, consents and authorizations
of governmental or regulatory authorities (hereinafter "permit" or
"permits") as are necessary to own its respective properties and to
conduct its respective business in the manner described in the
Prospectus, subject to such qualifications as may be set forth in the
Prospectus, except where the failure to have obtained any such permit
has not and will not have a Material Adverse Effect; each of the
Company and the Subsidiary has fulfilled and performed in all material
respects all of its obligations with respect to each such permit and
no event has occurred which allows, or after notice or lapse of time
would allow, revocation or termination of any such permit or result in
any other material impairment of the rights of the holder of any such
permit, subject in each case to such qualification as may be set forth
in the Prospectus; and, except as described in the Prospectus, such
permits contain no restrictions that are materially burdensome to the
Company or the Subsidiary, as the case may be.
(v) Each of the Company and the Subsidiary has complied
and will comply in all material respects with wage and hour
determinations issued by the U.S. Department of Labor under the
Service Contract Act of 1965 and the Fair Labor Standards Act in
paying its employees' salaries, fringe benefits, and other
compensation for the performance of work or other duties in connection
with contracts with the U.S. government. Each of the Company and the
Subsidiary has complied and will comply in all material respects with
the terms of all certifications and representations made to the U.S.
government in connection with the submission of any bid or proposal or
any contract. Each of the Company and the Subsidiary has complied and
will comply in all material respects with the requirements of the
Americans with Disabilities Act of 1990, the Family and Medical Leave
Act of 1993, the Employee Retirement Income Security Act, the Civil
Rights Act of 1964 (Title VII), as amended, the Age Discrimination in
Employment Act and other applicable federal and state employment and
labor laws.
(w) Each of the Company and the Subsidiary maintains a
system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance
with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or
specific authorizations; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(x) Neither the Company nor the Subsidiary has, directly
or indirectly, at any time during the past five years (i) made any
unlawful contribution to any candidate for political office, or failed
to disclose fully any contribution in violation of law, or (ii) made
any payment to any federal, state or foreign governmental official, or
other person charged with similar public or quasi-public duties, other
than payments required or permitted by the laws of the United States
or any jurisdiction thereof or applicable foreign jurisdictions.
(y) Each of the Company and the Subsidiary has obtained
all required permits, licenses, and other authorizations, if any,
which are required under federal, state, local and foreign statutes,
ordinances and other laws relating to pollution or protection of the
environment, including laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants,
chemicals, or industrial, hazardous,
10
<PAGE> 11
or toxic materials or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, land surface, or
subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, chemicals, or
industrial, hazardous, or toxic materials or wastes, or any
regulation, rule, code, plan, order, decree, judgment, injunction,
notice, or demand letter issued, entered, promulgated, or approved
thereunder ("Environmental Laws"), except where the failure to obtain
any such permit, license or other authorization has not resulted in
and will not result in a Material Adverse Effect. Each of the Company
and the Subsidiary is in material compliance with all terms and
conditions of all required permits, licenses, and authorizations, and
are also in material compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables contained in the Environmental
Laws. There is no pending or, to the best knowledge of the Company
after due inquiry, threatened civil or criminal litigation, notice of
violation, or administrative proceeding relating in any way to the
Environmental Laws (including but not limited to notices, demand
letters, or claims under the Resource Conservation and Recovery Act of
1976, as amended ("RCRA"), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the
Emergency Planning and Community Right to Know Act of 1986, as amended
("EPCRA"), the Clean Air Act, as amended ("CAA"), or the Clean Water
Act, as amended ("CWA") and similar federal, foreign, state, or local
laws or regulations (including, without limitation, laws and
regulations promulgated by the United States Food and Drug
Administration), involving the Company or the Subsidiary. There have
not been and there are not any past, present, or foreseeable future
events, conditions, circumstances, activities, practices, incidents,
actions, or plans which may interfere with or prevent continued
compliance, or which may give rise to any common law or legal
liability, or otherwise form the basis of any claim, action, demand,
suit, proceeding, hearing, study, or investigation, based on or
related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling, or the emission, discharge,
release, or threatened release into the environment, of any pollutant,
contaminant, chemical, or industrial, hazardous, or toxic material or
waste, including, without limitation, any liability arising, or any
claim, action, demand, suit, proceeding, hearing, study, or
investigation which may be brought, under RCRA, CERCLA, EPCRA, CAA,
CWA or similar federal, foreign, state or local laws.
(z) Each of the Company and the Subsidiary owns and has
full right, title and interest in and to, or has valid licenses to
use, each material trade name, trademark or service mark under which
the Company or the Subsidiary conducts all or any material part of its
business, and neither the Company nor the Subsidiary has created any
lien or encumbrance on, or granted any right or license with respect
to, any such trade name, trademark or service mark; there is no claim
pending against the Company or the Subsidiary with respect to any
trade name, trademark or service mark and neither the Company nor the
Subsidiary has received notice or otherwise become aware that any
trade name, trademark or service mark which it uses or has used in the
conduct of its business infringes upon or conflicts with the rights of
any third party.
(aa) All offers, sales, conversions and redemptions of the
Company's and the Subsidiary's capital stock and other securities
through the date hereof and hereafter, have been or will be made in
compliance with the Act and all other applicable state and federal
laws or regulations.
(bb) The Shares have been duly approved for listing on NMS
under the symbol "DHTI" subject to notice of issuance of the Shares
being sold by the Company, and upon consummation of the offering
contemplated hereby the Company will be in compliance with the
designation and maintenance criteria applicable to NMS issuers.
(cc) All federal, state, local and foreign tax returns
required to be filed by or on behalf of the Company or the Subsidiary
with respect to all periods ended prior to the date of this Agreement
have been filed (or are the subject of valid extension) with the
appropriate federal, state, local and foreign authorities and all such
tax returns, as filed, are accurate in all material respects. All
federal, state, local and foreign
11
<PAGE> 12
taxes (including estimated tax payments) required to be shown on all
such tax returns or claimed to be due from or with respect to the
business of the Company or the Subsidiary have been paid or reflected
as a liability on the consolidated financial statements of the Company
for appropriate periods, except for those taxes or claims therefor
which are being contested by the Company in good faith and for which
appropriate reserves are reflected in the Company's financial
statements. All deficiencies asserted as a result of any federal,
state, local or foreign tax audits have been paid or finally settled
and no issue has been raised in any such audit which, by application
of the same or similar principles, reasonably could be expected to
result in a proposed deficiency for any other period not so audited.
There are no outstanding agreements or waivers extending the statutory
period of limitation applicable to any federal, state, local or
foreign tax return for any period. On the Closing Date, and each
Additional Closing Date, if any, all stock transfer and other taxes
which are required to be paid in connection with the sale of the
Shares to be sold by the Company to the Underwriters will have been
fully paid by the Company and all laws imposing such taxes will have
been complied with.
(dd) Except as set forth in the Prospectus, there are no
transactions with "affiliates" (as defined in Rule 405 promulgated
under the Act) or any officer, director or security holder of the
Company (whether or not an affiliate) which are required by the Act
and the applicable rules and regulations thereunder to be disclosed in
the Registration Statement.
(ee) The Company has procured the written agreement of
each of the Selling Shareholders, each of the officers and directors
of the Company and each of the Registering Shareholders not to
directly or indirectly sell, offer or contract to sell or otherwise
dispose of or transfer any shares of Common Stock or securities of the
Company convertible into or exchangeable or exercisable for Common
Stock (collectively, "Company Securities") or any rights to purchase
Company Securities owned or controlled by such persons now or
hereafter for a period of 180 days after the date of the Prospectus
first filed pursuant to Rule 424(b) under the Act (the "Restriction
Period"), without your prior written consent.
(ff) The Company (i) does not conduct business or have
affiliates which conduct business in or with Cuba, (ii) does not plan
to commence doing business in or with Cuba after the effective date of
the Registration Statement, and (iii) is not required by Florida law
to report a material change in information previously reported to the
State of Florida regarding business conducted in or with Cuba.
(gg) All outstanding shares of the Company's Series A 9%
Cumulative Convertible Preferred Stock and Series B 9% Cumulative
Convertible Preferred Stock shall have been converted, on or before
the Closing Date into 968,750 shares of Common Stock and 3,750,000
shares of Common Stock, respectively.
7. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS.
Each of the Selling Shareholders Stet hereby severally represents and warrants
to each Underwriter on the date hereof (except as otherwise set forth herein),
and shall be deemed to severally represent and warrant to each Underwriter on
the Closing Date and the Additional Closing Date, if any, that:
(a) All consents, approvals, authorizations and orders
necessary for the execution and delivery by such Selling Shareholder
of this Agreement, and the "Power of Attorney" and the "Custody
Agreement" referred to in the last paragraph of this Section 7, and
for the sale and delivery of the Shares to be sold by such Selling
Shareholder hereunder, have been obtained; and such Selling
Shareholder has full right, power and authority to enter into this
Agreement, the Power of Attorney and the Custody Agreement, and to
sell, assign, transfer and deliver the Shares to be sold by such
Selling Shareholder hereunder.
12
<PAGE> 13
(b) This Agreement, the Power of Attorney and the Custody
Agreement have been duly authorized, executed and delivered by such
Selling Shareholder and this Agreement, the Power of Attorney and the
Custody Agreement constitute the valid and binding agreements of such
Selling Shareholder enforceable against such Selling Shareholder in
accordance with their respective terms, except to the extent
enforceability may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or other similar laws relating to
or affecting enforcement of creditors' rights generally or by general
equitable principles; the performance of this Agreement, the Power of
Attorney and the Custody Agreement and the consummation of the
transactions contemplated herein and therein will not result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, any statute, indenture, mortgage, deed of
trust, voting trust agreement, note agreement, lease or other
agreement or instrument to which such Selling Shareholder is a party
or by which such Selling Shareholder or such Selling Shareholder's
properties are bound, or under any order, rule or regulation of any
court or governmental agency or body applicable to such Selling
Shareholder or the business or property of such Selling Shareholder.
(c) Such Selling Shareholder has, and immediately prior
to the Closing Date (and the Additional Closing Date, if any) such
Selling Shareholder will have, good and valid title to the Shares to
be sold by such Selling Shareholder hereunder, free and clear of all
liens, encumbrances, equities, shareholder agreements, voting trusts
or claims of any nature whatsoever, and, upon delivery of such Shares
and payment therefor pursuant hereto, good and valid title to such
Shares, free and clear of all liens, encumbrances, equities,
shareholder agreements, voting trusts or claims of any nature
whatsoever (other than those arising by or through the Underwriters),
will pass to the several Underwriters.
(d) Such Selling Shareholder will not, during the
Restriction Period, directly or indirectly, sell, offer or contract to
sell, or otherwise dispose of or transfer any Company Securities owned
or controlled by such Selling Shareholder now or hereafter or any
rights to purchase Company Securities, without your prior written
consent.
(e) Such Selling Shareholder has not taken, and will not
take, directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or result
in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares.
(f) No consent, approval, authorization or order of, or
any filing or declaration with, any court or governmental agency or
body is required for the consummation by such Selling Shareholder of
the transactions on his part contemplated herein or in the Power of
Attorney or the Custody Agreement, except such as have been obtained
under the Act and such as may be required under state securities or
Blue Sky laws or the by-laws and rules of the NASD in connection with
the purchase and distribution by the Underwriters of the Shares to be
sold by such Selling Shareholder.
(g) Such Selling Shareholder is familiar with the
Registration Statement, the Prepricing Prospectus and the Prospectus
and has no knowledge of any material fact or condition not set forth
in the Registration Statement, the Prepricing Prospectus or the
Prospectus which has adversely affected, or may adversely affect, the
condition (financial or otherwise) of the business, properties,
results of operations or prospects of the Company, and the sale of the
Shares proposed to be sold by such Selling Shareholder is not prompted
by any such knowledge.
(h) The information with respect to such Selling
Shareholder contained in the Registration Statement, the Prepricing
Prospectus and the Prospectus (as amended or supplemented, if the
Company shall have filed with the Commission any amendment or
supplement thereto) does not contain any untrue statement of a
material fact or, to such Selling Shareholder's knowledge, omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading.
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<PAGE> 14
(i) The Selling Shareholder has not distributed and will
not distribute any Prepricing Prospectus, the Prospectus or any other
offering material in connection with the offering and sale of the
Shares, other than with your prior written consent and as permitted by
the Act.
(j) On the Closing Date, and on the Additional Closing
Date, if any, all stock transfer and other taxes (other than income
taxes) which are required to be paid in, connection with the sale and
transfer of the Shares to be sold by the Selling Shareholder to the
several Underwriters hereunder will have been fully paid for by such
Selling Shareholder and all laws imposing such taxes will have been
fully complied with.
In order to document the Underwriters' compliance with the reporting
and withholding provisions of the Tax Equity and Fiscal Responsibility Act of
1982 with respect to the transactions herein contemplated, the Selling
Shareholders severally agree to deliver to you at least two days prior to the
Closing Date a properly completed and executed United States Treasury
Department Form W-9 (or other applicable form or statement specified by
Treasury Department regulations in lieu thereof).
Each of the Selling Shareholders represents and warrants that
certificates in negotiable form representing all of the Shares to be sold by
such Selling Shareholder hereunder have been placed in custody under a Letter
of Transmittal and Custody Agreement (the "Custody Agreement"), in the form
heretofore furnished to you, duly executed and delivered by such Selling
Shareholder to [Norwest Bank Minnesota, N.A.], as custodian (the "Custodian"),
and that such Selling Shareholder has duly executed and delivered a Selling
Shareholder's Irrevocable Power of Attorney (the "Power of Attorney"), in the
form heretofore furnished to you, appointing David M. Pomerance and Mitchel J.
Laskey or either of them as such Selling Shareholder's attorneys-in-fact (the
"Attorneys-in-Fact") with authority to execute and deliver this Agreement on
behalf of such Selling Shareholder, to determine the purchase price to be paid
by the Underwriters to the Selling Shareholders as provided in Section 2
hereof, to authorize the delivery of the Shares to be sold by such Selling
Shareholder hereunder or otherwise to act on behalf of such Selling Shareholder
in connection with the transactions contemplated by this Agreement and the
Custody Agreement. Each of the Selling Shareholders specifically agrees that
the Shares represented by the certificates held in custody for such Selling
Shareholders under the Custody Agreement are subject to the interest of the
Underwriters hereunder, and that the arrangements made by such Selling
Shareholder for such custody, and the appointment by such Selling Shareholder
of the Attorneys-in-Fact pursuant to the Power of Attorney, are to that extent
irrevocable. Each of the Selling Shareholders specifically agrees that the
obligations of such Selling Shareholder hereunder shall not be terminated by
operation of law, whether by the death or incapacity of any individual Selling
Shareholder or, in the case of an estate or trust, by the death or incapacity
of any executor or trustee or the termination of such estate or trust, or in
the case of a partnership or corporation, by the dissolution of such
partnership or corporation, or by the occurrence of any other event. If any
individual Selling Shareholder or any executor or trustee should die or become
incapacitated, or if any such estate or trust shall be terminated, or if any
such partnership or corporation should be dissolved, or if any other such event
should occur before the delivery of the Shares hereunder, certificates
representing the Shares shall be delivered by or on behalf of the Selling
Shareholders in accordance with the terms and conditions of this Agreement and
the Custody Agreement, and actions taken by the Attorneys-in-Fact pursuant to
the Powers of Attorney shall be as valid as if such death, incapacity,
termination, dissolution or other event had not occurred, regardless of whether
or not the Custodian, the Attorneys-in-Fact, or any of them, shall have
received notice of such death, incapacity, termination, dissolution or other
event.
8. EXPENSES. Whether or not the transactions contemplated hereby
are consummated or this Agreement becomes effective or is terminated, the
Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement and the Prospectus and amendments and supplements
thereto and the mailing and delivering of copies thereof and of any Prepricing
Prospectus to the Underwriters and dealers; (ii) the printing and delivery
(including, without limitation, postage, air freight charges and charges for
counting and packaging) of such copies of the Registration Statement, the
Prospectus, each Prepricing Prospectus, the Blue Sky memoranda, the Power of
Attorney,
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<PAGE> 15
the Agreement Among Underwriters, this Agreement, the Selected Dealers
Agreement and all amendments or supplements to any of them as may be reasonably
requested for use in connection with the offering and sale of the Shares; (iii)
all expenses in connection with the qualification of the Shares for offering
and sale under state securities laws or Blue Sky laws, including the reasonable
attorneys' fees and out-of-pocket expenses of the counsel for the Underwriters
in connection therewith; (iv) the filing fees incident to securing any required
review by the NASD of the terms of the sale of the Shares and the reasonable
fees and disbursements of the Underwriters' counsel relating thereto; (v) the
cost of preparing stock certificates; (vi) the costs and charges of any
transfer agent or registrar; (vii) the cost of the tax stamps, if any, in
connection with the issuance and delivery of the Shares to the respective
Underwriters; (viii) all other fees, costs and expenses referred to in Item 13
of the Registration Statement, (ix) the transportation, lodging, graphics and
other expenses incidental to the Company's preparation for and participation in
the "roadshow" for the offering contemplated hereby; and (x) all other costs
and expenses incident to the performance of the obligations of the Company
hereunder which are not otherwise specifically provided for in this Section 8.
Notwithstanding the foregoing, in the event that the proposed offering is
terminated for the reasons set forth in Section 5(i) hereof, the Company agrees
to reimburse the Underwriters as provided in Section 5(i).
9. INDEMNIFICATION AND CONTRIBUTION. Subject to the limitations
in this paragraph below, the Company and the Selling Shareholders jointly and
severally agree to indemnify and hold harmless you and each other Underwriter,
the directors, officers, employees and agents of each Underwriter, and each
person, if any, who controls any Underwriter within the meaning of Section 15
of the Act or Section 20 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") from and against any and all losses, claims, damages,
liabilities and expenses, including, without limitation, reasonable costs of
investigation and attorneys' fees and expenses (collectively, "Damages")
arising out of or based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any Prepricing Prospectus or in the
Registration Statement or the Prospectus or in any amendment or supplement
thereto, or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except to the extent that any such Damages arise out of or are
based upon an untrue statement or omission or alleged untrue statement or
omission which has been made therein or omitted therefrom in reliance upon and
in conformity with the information furnished in writing to the Company by or on
behalf of any Underwriter through you expressly for use in connection
therewith, or (ii) any inaccuracy in or breach of the representations and
warranties of the Company or the Selling Shareholders contained herein or any
failure of the Company or the Selling Shareholders to perform their respective
obligations hereunder or under law; provided, however, that (A) the indemnity
agreement of each Selling Shareholder contained in this paragraph shall apply
only with respect to Damages arising out of or based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with information furnished by such Selling
Shareholder in writing to the Company expressly for use in or in connection
with the Registration Statement and the offering contemplated thereby, or
arising out of or based upon any such inaccuracy or breach of such Selling
Shareholder's representations and warranties contained herein or any failure of
such Selling Shareholder to perform his or its obligations hereunder or under
law, and (B) with respect to any untrue statement or omission made in any
Prepricing Prospectus, the indemnity agreement contained in this paragraph
shall not inure to the benefit of any Underwriter (or to the benefit of any
person controlling such Underwriter) from whom the person asserting any such
losses, claims, damages or liabilities purchased the Shares concerned if both
(y) a copy of the Prospectus was not sent or given to such person at or prior
to the written confirmation of the sale of such Shares to such person as
required by the Act, and (z) the untrue statement or omission in the Prepricing
Prospectus was corrected in the Prospectus. Notwithstanding anything in this
Section 9, in no event shall any Selling Shareholder's obligation under this
Section 9 exceed the total net proceeds from the offering received by such
Selling Shareholder (computed without deduction for any income taxes), it being
agreed that the Company shall bear the balance.
In addition to its other obligations under this Section 9, the Company
and the Selling Shareholders agree that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any inaccuracy in
the representations and warranties of the Company or any Selling Shareholder
herein or failure to perform their obligations hereunder, all as set forth in
this Section 9, they will reimburse each Underwriter on a quarterly basis for
all reasonable legal or other out-of-pocket expenses
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<PAGE> 16
incurred in connection with the investigation or defense of any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Company's or any Selling Shareholder's obligation to reimburse each Underwriter
for such expenses and the possibility that such payments might later be held to
have been improper by a court of competent jurisdiction. To the extent that
any such interim reimbursement payment is so held to have been improper, each
Underwriter shall promptly return it to the person(s) from whom it was
received, together with interest compounded daily determined on the basis of
the base lending rate announced from time to time by Chase Manhattan Bank, N.A.
(the "Prime Rate"). Any such interim reimbursement payments which are not made
to the Underwriters within 30 days of a request for reimbursement shall bear
interest at the Prime Rate from the date of such request.
If any action or claim shall be brought against any Underwriter or any person
controlling any Underwriter in respect of which indemnity may be sought against
the Company or any Selling Shareholder, such Underwriter or such controlling
person shall promptly notify in writing the party(s) against whom
indemnification is being sought (the "indemnifying party" or "indemnifying
parties"), and such indemnifying party(s) shall assume the defense thereof,
including the employment of counsel reasonably acceptable to such Underwriter
or such controlling person and payment of all fees and expenses. Such
Underwriter or any such controlling person shall have the right to employ
separate counsel (but the Company and the Selling Shareholders shall not be
liable for the fees and expenses of more than one counsel) in any such action
and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Underwriter or such controlling person
unless (i) the indemnifying party(s) has (have) agreed in writing to pay such
fees and expenses, (ii) the indemnifying party(s) has (have) failed to assume
the defense and employ counsel reasonably acceptable to the Underwriter or such
controlling person or (iii) the named parties to any such action (including any
impleaded parties) include both such Underwriter or such controlling person and
the indemnifying party(s), and such Underwriter or such controlling person
shall have been advised by its counsel that one or more legal defenses may be
available to the Underwriter which may not be available to the Company, or that
representation of such indemnified party and any indemnifying party(s) by the
same counsel would be inappropriate under applicable standards of
professional conduct (whether or not such representation by the same counsel
has been proposed) due to actual or potential differing interests between them,
in which case the indemnifying party(s) shall not have the right to assume
the defense of such action on behalf of such Underwriter or such
controlling person (notwithstanding its (their) obligation to bear the
fees and expenses of such counsel). The indemnifying party(s) shall
not be liable for any settlement of any such action effected without its
(their) written consent, which may not be unreasonably withheld, but if
settled with such written consent, or if there be a final judgment for the
plaintiff in any such action, the indemnifying party(s) agrees to indemnify and
hold harmless any Underwriter and any such controlling person from and against
any loss, claim, damage, liability or expense by reason of such settlement
or judgment, but in the case of a judgment only to the extent stated in the
first paragraph of this Section 9.
Each Underwriter agrees, severally and not jointly, to indemnify and hold
harmless the Company, its directors, its officers who sign the Registration
Statement, and any person who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act and the Selling
Shareholders, to the same extent as the foregoing indemnity from the Company
and the Selling Shareholders to each Underwriter, but only with respect
to information furnished in writing by or on behalf of such Underwriter through
you expressly for use in the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto. If any action
or claim shall be brought or asserted against the Company, any of its
directors, any such officers, or any such controlling person or the Selling
Shareholders based on the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto, and in respect
of which indemnity may be sought against any Underwriter pursuant to this
paragraph, such Underwriter shall have the rights and duties given to the
Company and the Selling Shareholders by the preceding paragraph (except that if
the Company shall have assumed the defense thereof such Underwriter shall not
be required to do so, but may employ separate counsel therein and participate
in the defense thereof, but the fees and expenses of such counsel shall be at
such Underwriter's expense), and the Company, its directors, any such officers,
and any such controlling persons and the Selling Shareholders shall have the
rights and duties given to the Underwriters by the immediately preceding
paragraph.
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<PAGE> 17
In addition to its other obligations under this Section 9, each
Underwriter severally agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or omission,
described in this Section 9 which relates to information furnished to the
Company in writing by or on behalf of the Underwriters through you expressly
for use in the Registration Statement, it will reimburse the Company (and, to
the extent applicable, each officer, director, controlling person or Selling
Shareholder) on a quarterly basis for all reasonable legal or other
out-of-pocket expenses incurred in connection with investigating or defending
any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Underwriters' obligation to reimburse the Company (and,
to the extent applicable, each officer, director, controlling person or Selling
Shareholder) for such expenses and the possibility that such payments might
later be held to have been improper by a court of competent jurisdiction. To
the extent that any such interim reimbursement payment is so held to have been
improper, the Company (and, to the extent applicable, each officer, director,
controlling person or Selling Shareholder) shall promptly return it to the
Underwriters together with interest, compounded daily, determined on the basis
of the Prime Rate. Any such interim reimbursement payments which are not made
to the Company within 30 days of a request for reimbursement shall bear
interest at the Prime Rate from the date of such request.
If the indemnification provided for in this Section 9 is unavailable
or insufficient for any reason whatsoever to an indemnified party under the
first or fourth paragraph of this Section 9 in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then an indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Selling Shareholders on the one hand and the Underwriters on the other hand
from the offering of the Shares or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Selling Shareholders
on the one hand and the Underwriters on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Shareholders on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company and the Selling
Shareholders bear to the total underwriting discounts and commissions received
by the Underwriters, in each case as set forth in the table on the cover page
of the Prospectus; provided that, in the event that the Underwriters shall have
purchased any Additional Shares hereunder, any determination of the relative
benefits received by the Company and the Selling Shareholders or the
Underwriters from the offering of the Shares shall include the net proceeds
(before deducting expenses) received by the Company and the Selling
Shareholders, and the underwriting discounts and commissions received by the
Underwriters, from the sale of such Additional Shares, in each case computed on
the basis of the respective amounts set forth in the notes to the table on the
cover page of the Prospectus. The relative fault of the Company and the
Selling Shareholders on the one hand and the Underwriters on the other hand
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company and the
Selling Shareholders on the one hand or by the Underwriters on the other hand
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company, the Selling Shareholders and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 9
was determined by a pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities and expenses referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 9, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price of the Shares underwritten by it and distributed to
the public exceeds the amount
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of any damages which such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section 9 are several in proportion
to the respective numbers of Firm Shares set forth opposite their names in
Schedule I hereto (or such numbers of Firm Shares increased as set forth in
Section 11 hereof) and not joint.
Notwithstanding the second and fifth paragraphs of this Section 9, any
losses, claims, damages, liabilities or expenses for which an indemnified party
is entitled to indemnification or contribution under this Section 9 shall be
paid by the indemnifying party to the indemnified party as such losses, claims,
damages, liabilities or expenses are incurred. The indemnity, contribution and
reimbursement agreements contained in this Section 9 and the representations
and warranties of the Company and the Selling Shareholders, respectively, set
forth in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, the Company, its directors or officers
or any person controlling the Company or the Selling Shareholders, (ii)
acceptance of any Shares and payment therefor hereunder and (iii) any
termination of this Agreement. A successor to any Underwriter or any person
controlling any Underwriter, or to the Company, its directors or officers, or
any person controlling the Company or the Selling Shareholders, shall be
entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section 9.
It is agreed that any controversy arising out of the operation of the
interim reimbursement arrangements set forth in the second and fifth paragraphs
of this Section 9, including the amounts of any requested reimbursement
payments and the method of determining such amounts, shall be settled by
arbitration conducted pursuant to the Code of Arbitration Procedure of the
NASD. Any such arbitration must be commenced by service of a written demand
for arbitration or written notice of intention to arbitrate, therein electing
the arbitration tribunal. In the event the party demanding arbitration does
not make such designation of an arbitration tribunal in such demand or notice,
then the party responding to said demand or notice is authorized to do so.
Such an arbitration would be limited to the operation of the interim
reimbursement provisions contained in the second and fifth paragraphs of this
Section 9, and would not resolve the ultimate propriety or enforceability of
the obligation to reimburse expenses which is created by the provisions of the
second and fifth paragraphs of this Section 9.
10. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several
obligations of the Underwriters to purchase the Firm Shares hereunder are
subject to the following conditions:
(a) Each of the Registration Statement and the Additional
Registration Statement shall have become effective not later than
12:00 noon, New York City time, on the date hereof, or at such later
date and time as shall be consented to in writing by you, and all
filings required by Rules 424(b) and 430A under the Act shall have
been timely made.
(b) You shall be reasonably satisfied that since the
respective dates as of which information is given in the Registration
Statement and Prospectus, (i) there shall not have been any change in
the capital stock (other than pursuant to the consummation of the
transaction described in Section 6(gg) hereof and the Prospectus) of
the Company or any material change in the indebtedness (other than in
the ordinary course of business) of the Company, (ii) except as set
forth or contemplated by the Registration Statement, the additional
Registration Statement or the Prospectus, no material oral or written
agreement or other transaction shall have been entered into by the
Company which is not in the ordinary course of business or which could
reasonably be expected to result in a material reduction in the future
earnings of the Company, (iii) no loss or damage (whether or not
insured) to the property of the Company or the Subsidiary, shall have
been sustained which had or could reasonably be
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expected to have a Material Adverse Effect, (iv) no legal or
governmental action, suit or proceeding affecting the Company or the
Subsidiary or any of their respective properties which is material to
the Company or the Subsidiary or which affects or could reasonably be
expected to affect the transactions contemplated by this Agreement
shall have been instituted or threatened, and (v) there shall not have
been any material change in the condition (financial or otherwise),
business, management, results of operations or prospects of the
Company or the Subsidiary which makes it impractical or inadvisable in
your judgment to proceed with the public offering or purchase the
Shares as contemplated hereby.
(c) You shall have received on the Closing Date (and the
Additional Closing Date, if any) an opinion of Cohen, Berke,
Bernstein, Brodie & Kondell, P.A., as counsel for the Company, dated
the Closing Date, satisfactory to you and your counsel, to the effect
that:
(i) The Company is a corporation duly
incorporated and validly existing in good standing under the
laws of the State of Florida, with full corporate power and
authority to own, lease and operate its properties and to
conduct its business as described in the Registration
Statement and the Prospectus (and any amendment or supplement
thereto), and is duly registered or otherwise qualified to
conduct its business as a foreign corporation and is in good
standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such
registration or qualification, except where the failure to so
register or qualify does not have a Material Adverse Effect.
(ii) The Subsidiary is a corporation duly
organized and validly existing in good standing under the laws
of the jurisdiction of its organization, with full corporate
power and authority to own, lease and operate its properties
and to conduct its business as described in the Registration
Statement and the Prospectus (and any amendment or supplement
thereto); and is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its
business requires such registration or qualification, except
where the failure to so register or qualify does not have a
Material Adverse Effect; and all of the outstanding shares of
capital stock of the Subsidiary have been duly authorized and
validly issued, and are fully paid and nonassessable, and are
owned by the Company, free and clear of any perfected security
interest, or to the best knowledge of such counsel after
reasonable inquiry, any other security interest, lien, adverse
claim, equity or other encumbrance.
(iii) The authorized and the outstanding capital
stock of the Company conforms in all respects to the
description thereof contained in the Prospectus under the
captions "Capitalization" and "Description of Capital Stock."
Except as set forth in the Prospectus, to the best of such
counsel's knowledge, the Company is not a party to or bound by
any outstanding options, warrants or similar rights to
subscribe for, or contractual obligations to issue, sell,
transfer or acquire, any of its capital stock or any
securities convertible into or exchangeable for any of such
capital stock.
(iv) All shares of capital stock of the Company
outstanding prior to the issuance of the Shares to be issued
and sold by the Company hereunder, have been duly authorized
and validly issued, are fully paid and nonassessable and are
free of any preemptive or, to the best knowledge of such
counsel, similar rights that entitle or will entitle any
person to acquire any Shares or Warrant Shares upon the
issuance thereof by the Company, and no such rights will exist
as of the Closing Date.
(v) The transactions described in Section 6(gg)
hereof have been fully consummated as described in the
Prospectus.
(vi) All offers and sales of the Company's
securities (other than offers and sales of the Shares by the
Underwriters, as to which such counsel need not opine) and the
transactions described in Section 6(gg) hereof have been made
in compliance in all material respects with the Act and all
other applicable state and federal securities laws or
regulations or applicable exemptions therefrom.
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(vii) The Shares to be issued and sold to the
Underwriters by the Company and the Selling Shareholders
hereunder and the Warrant Shares to be issued by the Company
under the Warrants have been duly authorized and, when issued
and delivered to the Underwriters (or to other permitted
purchasers under the Warrants) against payment therefor in
accordance with the terms hereof and thereof, as the case may
be, (A) such Shares and Warrant Shares will be validly issued,
fully paid and nonassessable and free of any preemptive or, to
the best knowledge of such counsel, similar rights that
entitle or will entitle any person to acquire any Shares or
Warrant Shares upon the issuance thereof by the Company, and
(B) good, valid and marketable title to such Shares issued
hereunder, free and clear of any claim, encumbrance or defect
in title of any nature (other than any arising by or through
the Underwriters), will pass to each Underwriter that has
purchased any portion of such Shares in good faith and
without knowledge of any such claim, encumbrance or defect.
(viii) The form of certificates for the Shares
conforms in all material respects to the requirements of the
applicable corporate laws of the State of Florida.
(ix) The Registration Statement has become
effective under the Act and, to the best knowledge of such
counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for
that purpose are pending before or contemplated by the
Commission.
(x) The Company has all requisite corporate power
and authority to enter into this Agreement and the Warrants
and to issue, sell and deliver the Shares to be sold by it to
the Underwriters as provided herein and the Warrant Shares as
provided therein, and this Agreement and the Warrants have
been duly authorized, executed and delivered by the Company
and are valid, legal and binding agreements of the Company
enforceable against the Company in accordance with their
terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other similar laws relating to or affecting
enforcement of creditors' rights generally or by general
equitable principals and except to the extent enforceability
of the provisions relating to indemnity and contribution for
liabilities under the Act may be limited by or under the Act.
(xi) Neither the Company nor the Subsidiary is in
violation of its articles of incorporation or bylaws, and, to
the best knowledge of such counsel, neither the Company nor
the Subsidiary is in default in the performance of any
obligation, agreement or condition contained in any bond,
indenture, note or other evidence of indebtedness or any other
agreement or obligation of the Company or the Subsidiary,
where the default would have, individually or in the
aggregate, a Material Adverse Effect.
(xii) Neither the offer, sale or delivery of the
Shares, the execution, delivery or performance of this
Agreement or the Warrants, compliance by the Company with all
provisions hereof or thereof nor consummation by the Company
of the transactions contemplated hereby or thereby (A)
conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, the articles of
incorporation or bylaws of the Company or any material
agreement, indenture, lease or other instrument known to such
counsel to which the Company is a party or by which any of its
properties is bound, (B) creates or will result in the
creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company, or (C) violates or will
result in any violation of any existing law, statute,
regulation, ruling (assuming compliance with all applicable
state securities and Blue Sky laws), judgment, injunction,
order or decree which is known to such counsel and applicable
to the Company or any of its properties.
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(xiii) No consent, approval, authorization or other
order of, or registration or filing with, any court,
regulatory body, administrative agency or other governmental
body, agency or official is required on the part of the
Company (except such as have been obtained under the Act or
such as may be required under state securities or Blue Sky
laws governing the purchase and distribution of the Shares)
for the valid issuance and sale of the Shares to the
Underwriters under this Agreement.
(xiv) The statute of limitations with regard to
claims under federal law based on the restatement of the
Company's financial statements as described in the Prospectus
under the headings "Business - Legal Proceedings" and "Risk
Factors - Restatement of Financial Reports" has expired,
and the Company has no liability with respect to any such
claims.
(xv) The Registration Statement and the Prospectus
and any supplements or amendments thereto (except for the
financial statements and the notes thereto and the schedules
and other financial and statistical data included therein, as
to which such counsel need not express any opinion) comply as
to form in all material respects with the requirements of the
Act. Without limiting the generality of the foregoing, any
Rule 434 Prospectus conforms in all material respects with the
requirements of Rule 434 under the Act.
(xvi) To the best knowledge of such counsel, there
are no legal or governmental proceedings pending or threatened
against the Company or the Subsidiary or to which the Company
or the Subsidiary or any of their respective properties is
subject, that are required to be described in the Registration
Statement or Prospectus (or any amendment or supplement
thereto) that are not described as required therein.
(xvii) To the best knowledge of such counsel,
neither the Company nor the Subsidiary is in violation of any
law, ordinance, administrative or governmental rule or
regulation applicable to the Company or the Subsidiary or of
any decree of any court or governmental agency or body having
jurisdiction over the Company or the Subsidiary except where
such violation does not and will not have a Material Adverse
Effect.
(xviii) To the best knowledge of such counsel, the
Company has such permits, licenses, franchises, approvals,
consents and authorizations of governmental or regulatory
authorities ("Permits"), as are necessary for the Company to
own its properties and to conduct its business in the manner
described in the Prospectus, except where the failure to have
such Permits would not individually or in the aggregate have a
Material Adverse Effect.
(xix) The properties described in the Prospectus as
held under lease by the Company or the Subsidiary are held
under duly executed leases.
(xx) Such counsel has reviewed all agreements,
contracts, indentures, leases or other documents or
instruments described or referred to in the Registration
Statement and the Prospectus (other than routine contracts
entered into by the Company or the Subsidiary for the purchase
of materials or the sale of products entered into in the
normal course of business, although such counsel has reviewed
the forms of such routine contracts), and such agreements,
contracts (and forms of contracts), indentures, leases or
other documents or instruments are fairly summarized or
disclosed in all material respects therein, and filed as
exhibits thereto as required, and such counsel does not know,
after reasonable inquiry, of any agreements, contracts,
indentures, leases or other documents or instruments required
to be so summarized or disclosed or filed which have not been
so summarized or disclosed or filed.
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(xxi) The descriptions in the Prospectus of
statutes, regulations or legal or governmental proceedings,
insofar as they purport to summarize certain of the provisions
thereof, are accurate and fairly present in all material
respects the information required to be shown.
(xxii) The Company is not an "investment company" or
an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended.
In rendering such opinion, in each case where such opinion is
qualified by "the best knowledge of such counsel" or "known to such
counsel", such counsel may rely as to matters of fact upon
certificates of executive and other officers and employees of the
Company as you and such counsel shall deem are appropriate and such
other procedures as you and such counsel shall mutually agree;
provided, however, in each such case, such counsel shall state that it
has no knowledge contrary to the information contained in such
certificates or developed by such procedures and knows of no reason
why you should not reasonably rely upon the information contained in
such certificates or developed by such procedures. Such counsel may
state in such opinion that their knowledge is limited to the knowledge
of their attorneys and other representatives and employees that have
given attention to the matters involving the Company.
In rendering such opinion, such counsel may also rely, to the
extent they deem such reliance proper, upon an opinion or opinions,
each dated the Closing Date, of other counsel as to matters governed
by the laws of jurisdictions other than the United States or the state
of Florida provided that (1) each such local counsel is acceptable to
you, (2) such counsel shall state in their opinion that they believe
that they and you are justified in relying thereon, and (3) such
reliance is expressly authorized by each opinion so relied upon and a
copy of each such opinion is delivered to you, and is in form and
substance satisfactory to our counsel. In rendering such opinion,
such counsel may rely, to the extent they deem such reliance proper,
as to matters of fact upon certificates of officers of the Company and
of government officials, provided that counsel shall state their
belief that they and the Representatives are justified in relying
thereon. Copies of all such certificates shall be furnished to the
Representatives and their counsel on the Closing Date.
(d) In addition, such counsel shall state that (i) based
solely upon a letter from The Nasdaq Stock Market Inc. to the Company
attached to such counsel's opinion, the Firm Shares, the outstanding
shares, and the Optional Shares have been duly included for trading on
the Nasdaq National Market upon issuance of the Shares and (ii) such
counsel has participated in conferences with the officers and other
representatives of the Company and the Underwriters and their counsel
during which the contents of the Registration Statement and the
Prospectus and related matters were discussed and reviewed, and,
although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus,
on the basis of the information that such counsel developed in the
course of the performance of the services referred to above,
considered in the light of such counsel's understanding of the
applicable law, that nothing came to their attention that caused them
to believe that the Registration Statement or the Prospectus (other
than the financial statements and schedules and the other financial
and statistical data therein, as to which such counsel need express no
belief), on such effective date, contained any untrue statement of a
material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading.
(e) You shall have received on the Closing Date (and the
Additional Closing Date, if any) the opinion of Cohen, Berke,
Bernstein, Brodie & Kondell, P.A., as counsel for the Selling
Shareholders, dated the Closing Date (and the Additional Closing Date,
if any) in form and substance satisfactory to you, to the effect that:
(i) This Agreement, the Power of Attorney and the
Custody Agreement have been duly authorized, executed and
delivered by or on behalf of each of the Selling Shareholders
and constitute valid and binding agreements of each Selling
Shareholder enforceable in accordance with
22
<PAGE> 23
their respective terms, except as may be limited by
bankruptcy, insolvency, reorganization or other laws of
general application relating to or affecting enforcement of
creditors' rights generally or the availability of equitable
remedies, regardless of whether such enforcement is considered
in a proceeding in equity or at law; and the performance of
this Agreement, the Power of Attorney and the Custody
Agreement and the consummation of the transactions herein and
therein contemplated will not result in a breach or violation
of any of the terms or provisions of, or constitute a default
under, any statute, indenture, mortgage, deed of trust, voting
trust agreement, note agreement, lease or other agreement or
instrument of which such counsel is aware and to which such
Selling Shareholder is a party or by which such Selling
Shareholder or its properties are bound, or any order, rule or
regulation, known to such counsel of any court or governmental
agency or body applicable to such Selling Shareholders or the
business or property of such Selling Shareholders.
(ii) No consent, approval, authorization or order
has been or is required for the consummation of the
transactions contemplated by this Agreement, the Power of
Attorney and the Custody Agreement in connection with the
Shares to be sold by each of the Selling Shareholders
hereunder, except consents, approvals, authorizations or
orders which have been duly obtained and are in full force and
effect, such as have been obtained under the Act and such as
may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of such Shares
by the Underwriters.
(iii) Immediately prior to the Closing Date (and
immediately prior to the Additional Closing Date, if
applicable) each of the Selling Shareholders has good and
valid title to the Shares to be sold by such Selling
Shareholder under this Agreement, free and clear of all liens,
encumbrances, equities or claims, and full right, power and
authority to sell, assign, transfer and deliver the Shares to
be sold by such Selling Shareholder hereunder.
(iv) Good, valid and marketable title to such
Shares, free and clear of all liens, encumbrances, equities or
claims (other than those arising by or through the
Underwriters) has been transferred to each of the several
Underwriters that has purchased any portion of such Shares in
good faith and without knowledge of any such lien,
encumbrance, equity or claim.
(f) You shall have received on the Closing Date an
opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.,
as counsel for the Underwriters, dated the Closing Date with respect
to the issuance and sale of the Firm Shares, the Registration
Statement and other related matters as you may reasonably request, and
the Company and its counsel shall have furnished to your counsel such
documents as they may reasonably request for the purpose of enabling
them to pass upon such matters.
(g) You shall have received letters addressed to you and
dated the date hereof and the Closing Date from each of KPMG Peat
Marwick L.L.P., Deloitte & Touche LLP and Ernst & Young LLP,
independent certified public accountants, substantially in the forms
heretofore approved by you.
(h) (i)No stop order suspending the effectiveness of the
Registration Statement or the Additional Registration Statement shall
have been issued and no proceedings for that purpose shall be pending
or, to the knowledge of the Company, shall be threatened or
contemplated by the Commission at or prior to the Closing Date; (ii)
no order suspending the effectiveness of the Registration Statement or
the Additional Registration Statement or the qualification or
registration of the Shares under the securities or Blue Sky laws of
any jurisdiction shall be in effect and no proceeding for such purpose
shall be pending or, to the knowledge of the Company, threatened or
contemplated by the Commission or the authorities of any jurisdiction;
(iii) any request for additional information on the part of the staff
of the Commission or any such authorities shall have been complied
with to the satisfaction of the staff of the Commission or such
authorities; (iv) after the date hereof no amendment or supplement to
the Registration Statement, the Additional Registration Statement or
the Prospectus shall have been filed unless a copy thereof was first
submitted to you and you did not object
23
<PAGE> 24
thereto in good faith; and (v) all of the representations and
warranties of the Company and the Selling Shareholders contained in
this Agreement shall be true and correct in all respects on and as of
the date hereof and on and as of the Closing Date as if made on and as
of the Closing Date, and you shall have received a certificate, dated
the Closing Date and signed by the chief executive officer and the
chief financial officer of the Company (or such other officers as are
acceptable to you) to the effect set forth in this Section 10(h) and
in Sections 10(b) and 10(i) hereof.
(i) The Company shall not have failed in any material
respect at or prior to the Closing Date to have performed or complied
with any of its agreements herein contained and required to be
performed or complied with by it hereunder at or prior to the Closing
Date.
(j) You shall have received a certificate, dated on and
as of the Closing Date, by or on behalf of each Selling Shareholder to
the effect that as of such Closing Date such Selling Shareholder's
representations and warranties in this Agreement are true and correct
as if made on and as of such Closing Date, and that such Selling
Shareholder has performed all such Selling Shareholder's obligations
and satisfied all the conditions on such Selling Shareholder's part to
be performed or satisfied at or prior to the Closing Date.
(k) The Company and the Selling Shareholders shall have
furnished or caused to have been furnished to you such further
certificates and documents as you shall have reasonably requested.
(l) At or prior to the Closing Date, you shall have
received the written commitment of each of the Company's officers and
directors, each of the Selling Shareholders and each of the
Registering Shareholders not to (i) directly or indirectly sell,
offer or contract to sell, or otherwise dispose of or transfer any
Company Securities owned or controlled by such persons now or
hereafter or any rights to purchase Company Securities for the
Restriction Period without your prior written consent.
(m) At or prior to the effective date of the Registration
Statement, you shall have received a letter from the Corporate
Financing Department of the NASD confirming that such Department has
determined to raise no objections with respect to the fairness or
reasonableness of the underwriting terms and arrangements of the
offering contemplated hereby.
(n) The Company shall have duly executed and delivered to
you the Warrants in accordance with Section 5(r) hereof.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to you and your counsel.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the satisfaction on and as of the Additional
Closing Date of the conditions set forth in this Section 10, except that, if
the Additional Closing Date is other than the Closing Date, the certificates,
opinions and letters referred to in paragraphs (c) through (l) shall be dated
as of the Additional Closing Date and the opinions called for by paragraphs (c)
and (e) shall be revised to reflect the sale of Additional Shares.
If any of the conditions hereinabove provided for in this Section 10
shall not have been satisfied when and as required by this Agreement, this
Agreement may be terminated by you by notifying the Company of such termination
in writing or by telegram at or prior to such Closing Date, but you shall be
entitled to waive any of such conditions.
24
<PAGE> 25
11. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective upon the later of (a) the execution and delivery hereof by the
parties hereto, and (b) release of notification of the effectiveness of the
Registration Statement by the Commission; provided, however, that the
provisions of Sections 8 and 9 shall at all times be effective.
If any one or more of the Underwriters shall fail or refuse to
purchase Firm Shares which it or they have agreed to purchase hereunder, and
the aggregate number of Firm Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than
one-tenth of the aggregate number of the Firm Shares, each non-defaulting
Underwriter shall be obligated, severally, in the proportion which the number
of Firm Shares set forth opposite its name in Schedule I hereto bears to the
aggregate number of Firm Shares set forth opposite the names of all
non-defaulting Underwriters or in such other proportion as you may specify in
the Agreement Among Underwriters, to purchase the Firm Shares which such
defaulting Underwriter or Underwriters agreed, but failed or refused to
purchase. If any Underwriter or Underwriters shall fail or refuse to purchase
Firm Shares and the aggregate number of Firm Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Firm Shares
and arrangements satisfactory to you, the Company and the Selling Shareholders
for the purchase of such Firm Shares are not made within 48 hours after such
default, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Shareholders. In any
such case which does not result in termination of this Agreement, either you or
the Company and the Selling Shareholders shall have the right to postpone the
Closing Date, but in no event for longer than seven (7) days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected. Any action taken under
this paragraph shall not relieve any defaulting Underwriter from liability in
respect of any such default of any such Underwriter under this Agreement.
12. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company or the Selling Shareholders by notice to the Company
and the Selling Shareholders, if prior to the Closing Date or the Additional
Closing Date (if different from the Closing Date and then only as to the
Additional Shares), as the case may be, in your sole judgment, (i) trading in
the Company's Common Stock shall have been suspended by the Commission or the
NMS, (ii) trading in securities generally on the New York Stock Exchange,
American Stock Exchange or NMS shall have been suspended or materially limited,
or minimum or maximum prices shall have been generally established on such
exchange, or additional material governmental restrictions, not in force on the
date of this Agreement, shall have been imposed upon trading in securities
generally by any such exchange or by order of the Commission or any court or
other governmental authority, (iii) a general moratorium on commercial banking
activities shall have been declared by either federal, New York State or
Florida State authorities or (iv) there shall have occurred any outbreak or
escalation of hostilities or other international or domestic calamity, crisis
or change in political, financial or economic conditions or other material
event the effect of which on the financial markets of the United States is such
as to make it, in your judgment, impracticable or inadvisable to market the
Shares or to enforce contracts for the sale of the Shares. Notice of such
cancellation shall be promptly given to the Company and its counsel by
telegraph, telecopy or telephone and shall be subsequently confirmed by letter.
13. INFORMATION FURNISHED BY THE UNDERWRITERS. The Company
acknowledges that (i) the paragraph immediately following footnote (3) on the
cover page of the Prospectus, and (ii) the third paragraph under the caption
"Underwriting" in any Prepricing Prospectus and in the Prospectus, constitute
the only information furnished by or on behalf of the Underwriters through you
or on your behalf as such information is referred to in Sections 6(a), 6(b) and
9 hereof.
14. MISCELLANEOUS. Except as otherwise provided in Sections 5 and
12 hereof, notice given pursuant to any of the provisions of this Agreement
shall be in writing and shall be delivered (i) if to the Company or Selling
Shareholders, to the office of the Company at 101 Southhall Lane, Suite 210,
Maitland, Florida 32751, Attention: Mitchel J. Laskey, President, (with copy to
Cohen, Berke, Bernstein, Brodie & Kondell, P.A., 2601 South Bayshore Drive,
Suite 1900, Miami, Florida 33133; Attention: Richard N. Bernstein, Esq.), or
(ii) if to you, as Representatives
25
<PAGE> 26
of the Underwriters, to Raymond James & Associates, Inc., 880 Carillon Parkway,
St. Petersburg, Florida 33716, Attention: Mr. Frank Hancock, and to Vector
Securities International, Inc., Mr. Robert Kerry, 1751 Lake Cook Road, Suite
350, Deerfield, Illinois 60015 (with copy to Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A., 1221 Brickell Avenue, Miami, Florida 33131,
Attention: Paul Berkowitz, Esq.).
This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, its directors and officers, and the other
controlling persons referred to in Section 9 hereof, the Selling Shareholders
and their respective successors and assigns, to the extent provided herein, and
no other person shall acquire or have any right under or by virtue of this
Agreement. Neither of the terms "successor" and "successors and assigns" as
used in this Agreement shall include a purchaser from you of any of the Shares
in his status as such purchaser.
15. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be
governed by and construed in accordance with the laws of the State of Florida
without reference to choice of law principles thereunder.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
This Agreement shall be effective when, but only when, at least one
counterpart hereof shall have been executed on behalf of each party hereto.
The Company, the Selling Shareholders and the Underwriters each hereby
irrevocably waive any right they may have to a trial by jury in respect to any
claim based upon or arising out of this Agreement or the transactions
contemplated hereby.
26
<PAGE> 27
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Selling Shareholders and the several Underwriters.
Very truly yours,
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
By:
------------------------------------------
Name:
Title:
SELLING SHAREHOLDERS
By:
------------------------------------------
Name:
Title:
As Attorney-in-Fact acting on behalf of each
of the Selling Shareholders other than David
M. Pomerance and Mitchel J. Laskey named in
Schedule II to this Agreement.
______________________________________________
Mitchel J. Laskey, individually
______________________________________________
David M. Pomerance, individually
CONFIRMED as of the date first above mentioned,
on behalf of itself and the other several
Underwriters named in Schedule I hereto.
RAYMOND JAMES & ASSOCIATES, INC.
By:________________________________________
Name: Frank Hancock
Title:
VECTOR SECURITIES INTERNATIONAL, INC.
By:________________________________________
Name:
Title:
27
<PAGE> 28
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER
OF FIRM
NAME SHARES
- ---- --------
<S> <C>
Raymond James & Associates, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vector Securities International, Inc. . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000
=========
</TABLE>
<PAGE> 29
SCHEDULE II
<TABLE>
<CAPTION>
FIRM SHARES ADDITIONAL SHARES TOTAL SHARES
----------- ----------------- ------------
<S> <C> <C>
COMPANY 4,000,000 -
SELLING SHAREHOLDERS 1,000,000
-
-
-
-
-
-
-
-
--------- -------- --------
TOTAL: 5,000,000
========= ======== ========
</TABLE>
<PAGE> 30
EXHIBIT A
FORM OF WARRANTS
<PAGE> 31
EXHIBIT B
LIST OF RESTRICTED SHAREHOLDERS
<PAGE> 1
EXHIBIT 1.02
5,000,000 SHARES
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
COMMON STOCK
SELECTED DEALER AGREEMENT
St. Petersburg, Florida
__________ __, 1996
Ladies and Gentlemen:
Dynamic Healthcare Technologies, Inc. (the "Company"), a corporation formed
pursuant to the laws of the State of Florida, and certain of its shareholders
(the "Selling Shareholders"), are offering for sale to the public an aggregate
of 5,000,000 shares of the $.01 par value common stock of the Company ("Common
Stock") together with up to an additional 750,000 shares of Common Stock to
cover over-allotments, if any (collectively, the "Shares"):
1. The Offering. The several underwriters named in the enclosed
Prospectus (the "Underwriters"), on whose behalf we are acting as
Representatives, have severally agreed to purchase from the Company and the
Selling Shareholders an aggregate of 5,000,000 Shares and have an option to
purchase up to an additional 750,000 Shares to cover over-allotments, if any.
The purchase is subject to the terms of an agreement among the several
Underwriters, the Company and the Selling Shareholders (the "Underwriting
Agreement"). The Shares are more fully described in the Prospectus. One or
more of the several Underwriters, acting through us, are severally offering a
portion of the Shares to certain dealers as principals (the "Selling Group"),
subject to the terms and conditions stated herein and in the Underwriting
Agreement, subject to modification or cancellation of the offering without
notice, at the initial public offering price hereinafter set forth and on the
cover page of the Prospectus (the "Authorized Public Offering Price") less
concession (the "Selling Concession"). The Authorized Public Offering Price may
be changed at any time or from time to time in our discretion without notice.
Authorized Public
Offering Price: $_____ per Share.
Dealer's Selling
Concession: $_____ per Share, payable or allowable as set
forth below.
Reallowance: You may reallow not in excess of $____ per
Share as a Selling Concession to dealers who
are members in good standing of the National
Association of Securities Dealers, Inc.
("NASD").
<PAGE> 2
Delivery
and Payment: _____________ __, 1996, or such other date as
we advise you, by certified or bank cashier's
check payable to the order of Raymond James &
Associates, Inc. against delivery of the
Shares. Shares shall be paid for in full at
the Authorized Public Offering Price or, if
we so advise you, at such price less the
dealer's Selling Concession. If payment is
at the Authorized Public Offering Price, the
concession will be paid to you upon
termination of this Agreement.
Termination: This Agreement will terminate 30 days from
its date unless sooner terminated or extended
by us.
2. Sales to and by Selected Dealers. Members of the Selling Group may
immediately offer Shares for sale and take orders therefor at the Authorized
Public Offering Price, subject to confirmation and allotment by us. We, in
turn, are prepared to receive orders, subject to confirmation and allotment by
us. We reserve the right to reject any order in whole or in part or to allot
fewer than the number of Shares for which application is made. Orders
transmitted by telephone should be confirmed by letter or telegram.
3. Offering Provisions. By becoming a member of the Selling
Group, you agree (a) to take up and pay for Shares allotted and confirmed to
you, (b) not to use any such Shares to reduce or cover any short position you
may have, (c) to comply with all of the rules and regulations of the NASD, and
(d) upon our request, to advise us of the number of Shares purchased from us
as representatives of the Selling Group remaining unsold by you and to resell
to us any and all such unsold Shares at the prices stated above, less all of
such part of the concession allowed you as we may determine.
4. Shares to be Placed for Investment. It is assumed that the
Shares sold by you will be effectively placed for investment. If we purchase
in the open market, for the account of any Underwriter, Shares sold to you and
not effectively placed for investment, we may not allow you the dealer's
concession on the Shares so purchased or, if such concession has theretofore
been allowed you, you agree to pay it to us on demand.
5. Purchases and Sales Permitted. Each Underwriter has consented
that we, for our own account as Underwriters, in our discretion, may make
purchases and sales of the Shares. You further agree that until termination of
this Agreement, you will not make purchases or sales of any Shares except (a)
pursuant to this Agreement, (b) purchases authorized by us, or (c) in the
ordinary course of business as broker or agent for a customer pursuant to an
unsolicited order.
6. Public Advertisement of Offering. It is expected that public
advertisement of the offering of the Shares will be made on or about the date
hereof. After the date of appearance on
-2-
<PAGE> 3
such advertisement, but not before, you are free to advertise over your own
name and at your own expense and risk.
7. Offering of Shares. The Shares are offered by us for delivery
when, as, and if sold and accepted by the Underwriters and subject to the terms
stated herein and in the Underwriting Agreement and Prospectus, to our right to
vary the concession and terms of the offering after their release for public
sale, to the approval of counsel as to legal matters, and to withdrawal,
cancellation, or modification of the offer without notice.
8. Position of Selected Dealers and Underwriters. You represent
(a) that you are a member in good standing of the NASD, or, (b) if a foreign
dealer not eligible for membership in the NASD, that you will not make any
sales within the United States, its territories, or possessions or to persons
who are citizens thereof or resident therein, and in making other sales to
comply with the NASD's Rules of Fair Practice as if you were a member. You
represent that you will comply with the "Free-Riding and Withholding"
interpretation of the Board of Governors of the NASD. You are not authorized
to give any information or make any representations other than as contained in
the Prospectus, or to act as agent for any Underwriter or for us. Nothing will
constitute the Selling Group as an association or other separate entity or
partners with the several Underwriters, with us, or with each other, but you
will be responsible for your share of any liability or expense based on any
claim to the contrary. Neither we nor any Underwriter will be under any
liability to you, except for obligations expressly assumed in this Agreement
and any liabilities under the Securities Act of 1933, as amended. No
obligations on our part will be implied or inferred herefrom.
9. Blue Sky Matters. Neither we nor any of the other
Underwriters will have any responsibility with respect to the right of any
dealer to sell the Shares in any jurisdiction, notwithstanding any information
that we may furnish in that connection. Upon application to us, you will be
informed as to the states in which we have been advised by counsel that the
Shares have been qualified for sale or are exempt under the respective Blue Sky
or securities laws of such states. You agree that you will not offer or sell
such Shares in violation of any applicable law, including, but not limited to,
the Blue Sky or securities laws of any state or jurisdiction in which such
Shares are offered or sold by you.
10. Delivery of Prospectus. You and we agree to comply with the
requirements of Rule 15c2-8 under the Securities Exchange Act of 1934, as
amended. Additional copies of the Prospectus will be supplied to you in
reasonable quantity upon request.
11. Governing Law. This Agreement will be governed and construed
in accordance with the laws of the State of Florida.
-3-
<PAGE> 4
If you desire to become a member of the Selling Group, please advise
to that effect immediately by telegram and sign and return the enclosed copy of
this letter to Raymond James & Associates, Inc., 880 Carillon Parkway, St.
Petersburg, Florida 33716.
Very truly yours,
RAYMOND JAMES & ASSOCIATES, INC.
As Representative of the Several Underwriters
By:
--------------------------------------------
Confirmed as of the above date:
- ------------------------------ VECTOR SECURITIES INTERNATIONAL, INC.
(Firm Name) As Representative of the Several Underwriters
- ------------------------------ By:
(Street Address) --------------------------------------
- ------------------------------
(City, State and Zip Code)
By:
---------------------------
- ------------------------------
(Title)
-4-
<PAGE> 1
EXHIBIT 1.03
5,000,000 SHARES
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
COMMON STOCK
_______________
AGREEMENT AMONG UNDERWRITERS
St. Petersburg, Florida
_____________, 1996
RAYMOND JAMES & ASSOCIATES, INC.
VECTOR SECURITIES INTERNATIONAL, INC.
as Representatives of the Several Underwriters
c/o Raymond James & Associates, Inc.
880 Carillon Parkway
St. Petersburg, Florida 33716
Dear Sirs:
We wish to confirm as follows our agreement with you with respect to
the purchase from Dynamic Healthcare Technologies, Inc., a Florida corporation
(the "Company") and certain of its shareholders (the "Selling Shareholders"),
by you and the other Underwriters named in Schedule I to the Underwriting
Agreement (as defined below) and the offering of (a) an aggregate of
5,000,000 shares (the "Firm Shares") of common stock, $.01 par value (the
"Common Stock") of the Company, and (b) any of the 750,000 shares (the
"Additional Shares") of Common Stock which the Underwriters shall have
determined to purchase from the Company and the Selling Shareholders pursuant
to Section 2 of the Underwriting Agreement. The Firm Shares and the Additional
Shares are hereinafter collectively referred to as the "Shares."
1. UNDERWRITING AGREEMENT. Annexed hereto as Exhibit A is a copy of a
proposed agreement (the "Underwriting Agreement") with the Company and the
Selling Shareholders providing for the purchase, upon the terms and conditions
set forth therein, from the Company and the Selling Shareholders by each
Underwriter, severally, of the number of Firm Shares set forth opposite its
name in Schedule I thereto and for the purchase from the Company and the
Selling Shareholders of all or part of the Additional Shares. The number of
Firm Shares which is set forth opposite each Underwriter's name in said
Schedule I, together with any additional Firm Shares which such Underwriter
becomes obligated to purchase pursuant to Section 2 of the Underwriting
Agreement, is hereinafter referred to as such Underwriter's "underwriting
commitment." We authorize you to execute the Underwriting Agreement on our
behalf and we agree to be bound thereby. We understand that changes may be
made as to those who are to be Underwriters and in the number of Firm Shares to
be purchased by them, but that the number of Shares to be purchased by us
individually as set forth in said Schedule I will not be increased without our
consent except as provided herein and in the Underwriting Agreement. We
authorize you to exercise, in your discretion, all authority and discretion
vested in the several Underwriters or in you by the provisions of the
Underwriting Agreement and to take all actions that you believe are necessary
or desirable to carry out the provisions of the Underwriting Agreement or this
Agreement.
<PAGE> 2
2. PUBLIC OFFERING. We authorize you to manage the offering of the
Shares and to take such action as you may deem to be advisable with respect
thereto, including, without limitation, the determination whether to purchase
any Additional Shares and the amount, if any, of Additional Shares to be so
purchased. The public offering of the Firm Shares is to be made as soon after
the public offering price thereof is determined as in your judgment is
advisable. The Shares shall be initially offered to the public at the public
offering price set forth on the cover page of the Prospectus referred to in the
Underwriting Agreement. We authorize you to make any changes in the public
offering price and other terms of the public offering you may deem to be
advisable.
The Shares are more particularly described in a registration
statement, dated ___________ __, 1996, on Form S-1 (File No. 333-______) filed
by the Company with the Securities and Exchange Commission under the Securities
Act of 1933, as amended. An amendment or amendments to such registration
statement will be filed and the registration statement and the related
prospectus may be further amended, but any such amendment or any change in the
registration statement and the related prospectus will not release or affect
our obligations hereunder or under the Underwriting Agreement. A copy of the
registration statement and the related prospectus as filed (exclusive of
exhibits) and a copy of each amendment as filed (exclusive of exhibits) have
heretofore been or will be delivered to us. Each Underwriter consents to being
named as an Underwriter in the registration statement and prospectus for the
amount of Shares set forth opposite its name in Schedule I to the Underwriting
Agreement.
3. RESERVATION OF SHARES. We authorize you, with respect to the
Shares which we agree to purchase, to reserve for sale and to sell and deliver
for our account any or all of such Shares in such amounts as you shall in your
discretion determine (a) to institutional and other retail purchasers selected
by you, (b) to dealers (including any Underwriter) selected by you who are
members of the National Association of Securities Dealers, Inc. (the "NASD")
and (c) to foreign dealers (including any Underwriter) who are not eligible for
membership in the NASD and who agree not to resell any such Shares to any
purchaser in the United States of America or to any person unless such dealer
has reason to believe such person is neither a resident, citizen nor national
of the United States of America. Such sales to dealers may be made pursuant to
Selected Dealer Agreement substantially in the form attached as Exhibit B
hereto.
Except for sales for the accounts of Underwriters designated by a
purchaser, aggregate sales of Shares to institutional and other retail
purchasers for the accounts of the Underwriters shall be as nearly as
practicable in the same proportions as their respective underwriting
commitments, and sales of Shares to dealers for the account of each Underwriter
shall be as nearly as practicable in the proportion that the number of Shares
of each Underwriter reserved for such sales bears to the total number of Shares
so reserved, as calculated from day to day. You will advise us of the number
of Shares purchased by us which we shall retain for direct sale. With your
consent, any Shares reserved by you for sale for our account but not sold and
paid for may be released to us for direct sale, in which event the number of
Shares so reserved shall be correspondingly reduced. We authorize you to fix
the concession to dealers and the reallowance to dealers and, after the initial
public offering of the Shares, to make such changes therein as you may deem to
be advisable. Each Underwriter agrees, upon your request, at any time or times
prior to the termination of this Agreement, to report to you the amount of
Shares purchased by such Underwriter pursuant to the provisions of the
Underwriting Agreement, which then remain unsold.
We will advise you from time to time, at your request, of the number
of Shares retained by or released to us which remain unsold. You may at any
time (a) reserve such Shares for sale by you for our account or (b) purchase
any such shares which, in your opinion, are needed to enable you to make
deliveries for the accounts of the several Underwriters pursuant to this
Agreement. Such purchases will be made at the public offering price or, at
your option, at such price less all or any part of the selling concession.
You may make purchases or sales of Shares from or to any dealers
hereunder or any Underwriter at the public offering price less all or any part
of the selling concession to the dealers and, with your consent, any
Underwriter may make purchases or sales of the Shares from or to any of the
dealers or any Underwriter at the public offering price less all or any part of
the selling concession to the dealers.
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<PAGE> 3
Each Underwriter agrees that it will not sell any Shares to any of its
partners, stockholders, directors, officers or employees, or members of their
families, until orders from bona fide customers and investors are first
satisfied.
4. DELIVERY AND PAYMENT. At or before 10:00 a.m., St. Petersburg,
Florida time, on the Closing Date referred to in the Underwriting Agreement
(the "Closing Date"), we will deliver to you at the office of Raymond James &
Associates, Inc., 880 Carillon Parkway, St. Petersburg, Florida, payment by
means of a certified or bank cashier's check payable to the order of Raymond
James & Associates, Inc. for either (i) an amount equal to the public offering
price less the selling concession in respect of the Firm Shares to be purchased
by us or (ii) an amount equal to the public offering price less the selling
concession in respect of such of the Firm Shares to be purchased by us as shall
have been retained by or released to us for direct sale, as you may advise. At
or before 10:00 a.m., St. Petersburg, Florida time, on the Additional Closing
Date referred to in the Underwriting Agreement (the "Additional Closing Date"),
if any, we will make similar payments for any Additional Shares acquired for
our account. You will make payment to the Company for the Shares purchased by
us (charging our account for the full purchase price of any such Shares not
paid by us) against delivery to you for our account of certificates for such
Shares.
You will deliver to us certificates for Shares purchased by us which
are not sold or reserved for sale by you. Certificates for all other Shares
purchased by us or any other shares of Common Stock which you then hold for our
account shall be delivered to us upon termination of this Agreement, or prior
thereto in your discretion, and may at any time be delivered to us against
payment therefor for carrying purposes only, subject to redelivery upon demand.
We agree that delivery of any Shares purchased by us shall be made
through the facilities of The Depository Trust Company if we are a member
thereof, unless we are otherwise notified by you in your discretion. If we are
not a member of The Depository Trust Company, such delivery shall be made
through a correspondent who is such a member, and we will, upon request,
furnish instructions to you (in connection with the purchase of Shares) naming
such correspondent, unless we are otherwise notified by you in your discretion.
Upon receipt by you of payment for any Shares sold by or through you
for our account, you will (i) with respect to such Shares paid for by us, remit
to us promptly an amount equal to the purchase price paid by us for such Shares
and credit or debit our account on your books with the difference between the
selling price of such Shares and the purchase price of such Shares, as set
forth in the Underwriting Agreement, and (ii) with respect to such Shares not
paid for by us, credit or debit our account on your books with the difference
between the selling price and the purchase price of such Shares, as set forth
in the Underwriting Agreement.
5. AUTHORITY TO BORROW. You are hereby authorized (to the extent
permitted by law) to arrange such loans for the account of one or more of the
Underwriters, severally and not jointly, to execute and deliver any notes or
other instruments in connection therewith, and to pledge as security therefor
all or any of the Shares which such Underwriter or Underwriters shall have
become obligated to purchase under any of the terms of this Agreement or of the
Underwriting Agreement or any Shares purchased for the account of such
Underwriter or Underwriters pursuant to Section 6 hereof, as you may deem
necessary or advisable to carry out the purchase, carrying, advertising, sale
and distribution of the Shares, or for any other purposes of this Agreement,
and to advance your own funds, individually and not as Representatives of the
several Underwriters, charging current interest rates. Any lender is hereby
authorized to rely upon your instructions in all matters relating to any such
loan or loans. In the event of any such advance or loan, repayment thereof
will, in your discretion, be effected prior to the making by you of any
remittance to any such Underwriter hereunder.
6. STABILIZATION; TRADING. We authorize you, at any time during the
term of this Agreement or for such longer period as may be necessary, to cover
any short position incurred under the provisions of this Agreement, (a) to make
purchases and sales of Shares of Common Stock in the open market or otherwise,
in addition to purchases and sales made under the authority of Section 3
hereof, either for long or short account, on such terms and at such prices as
you may determine and (b) in arranging for sales of Shares pursuant to Section
3 hereof to over-allot and to make purchases for the purpose of covering any
over-
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<PAGE> 4
allotment so made. All such purchases and sales and over-allotments shall be
made for the accounts of the several Underwriters and as nearly as practicable
in proportion to their respective underwriting commitments; provided, however,
that at no time shall our net commitment under this Section 6 for long and
short account exceed 15% of our underwriting commitment (after subtracting from
our commitment for short account the maximum number of Additional Shares which
we are entitled to purchase). Any Shares of Common Stock which may have been
purchased by you for stabilizing purposes prior to the execution of this
Agreement shall be treated as having been purchased for the accounts of the
several Underwriters pursuant to the foregoing authorization. We agree to take
up at cost on demand any Shares of Common Stock so purchased for our account
and to deliver on demand any Shares of Common Stock so sold or over-allotted
for our account. We will advise you from time to time, at your request, of the
number of such Shares of Common Stock remaining unsold which were delivered to
us pursuant to this Section 6.
You will notify us if you engage in any transaction hereunder which in
your judgment may be deemed to be a "stabilizing transaction" within the
meaning of the applicable rules of the Securities and Exchange Commission. We
authorize you to file with said Commission on our behalf any and all reports
required by such rules. If stabilization is effected, we will file with you,
not later than the fifth full business day following termination of
stabilization, original copies of any and all reports required of us by the
Securities Exchange Act of 1934, as amended, or the rules and regulations
thereunder.
If pursuant to the provisions of the first paragraph of this Section 6
and prior to the termination of this Agreement (or prior to such earlier date
as you may have determined) you purchase or contract to purchase for the
accounts of the several Underwriters in the open market or otherwise any Shares
which were retained by or released to us for direct sale, or any Shares which
may have been issued in exchange for such Shares, we authorize you either to
charge our account with an amount equal to the selling concessions with respect
thereto, which amount shall be credited against the cost of such Shares, or to
require us to repurchase such Shares at a price equal to the total cost of such
purchase, including commissions, if any, and transfer taxes on the redelivery.
We agree that, except with your consent and except as herein provided,
we will not, prior to the termination of this Agreement, bid for, purchase or
sell, directly or indirectly, for our own account, in the open market or
otherwise, or attempt to induce others to bid for, purchase or sell, either
before or after the sale of the Shares and either for long or short account,
any Shares or other shares of Common Stock of the Company, and prior to the
completion (as defined in Rule 10b-6 under the Securities Exchange Act of 1934)
of our participation in the distribution, we will otherwise comply with Rule
l0b-6. Nothing contained in this Section 6 shall prohibit us from acting as
broker or agent in the execution of unsolicited orders of customers for the
purchase or sale of any securities of the Company.
7. TERMINATION AND SETTLEMENT. Unless sooner terminated by you, this
Agreement shall terminate 30 days from the later of the date of the
commencement of the public offering and the Additional Closing Date, if any,
but may be extended for a period of time not exceeding an additional 30 days
with the consent of a majority in interest (based on their underwriting
commitments) of the Underwriters, including yourselves. You may in your
discretion upon notice to us, prior to the termination of this Agreement,
terminate or suspend any of the provisions of Sections 2, 3, and 6 hereof or
alter any of the terms or conditions of offering determined pursuant to Section
2 hereof.
Upon termination of this Agreement, all authorizations, rights and
obligations hereunder shall cease, except (a) the mutual obligations to settle
accounts hereunder, (b) our obligations to pay any amounts referred to in the
last paragraph of this Section 7, (c) our obligations to pay our proportionate
share (based upon our underwriting commitment) of expenses incurred by you, (d)
our obligations with respect to purchases which may be made by you from time to
time thereafter to cover any short position incurred hereunder, and (e) the
indemnity and other agreements set forth in Section 9 hereof, all of which
shall continue until fully discharged. No such termination shall affect any
obligations of any defaulting Underwriter.
- 4 -
<PAGE> 5
In the event that any Underwriter shall default in its obligation (i)
pursuant to the first paragraph of Section 6 hereof, (ii) to pay amounts
charged to its account pursuant to Section 8 hereof, or (iii) pursuant to this
Section 7, we will, within the limits set forth in Section 2 of the
Underwriting Agreement, assume our proportionate share (determined on the basis
of the respective underwriting commitments of the nondefaulting Underwriters)
of such obligation, but no such assumption shall affect any obligations of any
defaulting Underwriter.
The accounts arising pursuant to this Agreement shall be settled and
paid as soon as practicable after termination hereof. The determination by you
of the amounts to be paid to or by us shall be final and conclusive.
We authorize you to charge our account with (a) any transfer taxes on
sales or other transfers made for our account and (b) our proportionate share
of all expenses (including attorneys' fees), other than transfer taxes,
incurred by you, as Representatives of the several Underwriters, under this
Agreement or the Underwriting Agreement or otherwise in connection with the
purchase, carrying, advertising, sale and distribution of Shares together with
such reserve as you may deem to be advisable to cover possible additional
expenses.
Notwithstanding any settlement on the termination of this Agreement,
we agree to pay our proportionate share (based on our underwriting commitment)
of (i) all expenses incurred by you in investigating or defending against any
claim or proceeding which is asserted or instituted by any party (including any
governmental or regulatory body), other than an Underwriter, in connection with
the Prospectus (or any amendment or supplement thereto), and (ii) any
liability, including attorneys' fees and expenses, incurred by you in respect
of any such claim or proceeding, whether such liability shall be the result of
a judgment or as a result of any settlement agreed to by you, other than any
such liability, fee or expense to the extent that you receive indemnity or
contribution pursuant to Section 8 of the Underwriting Agreement. We also
agree to pay any transfer taxes which may be assessed and paid after such
settlement on account of any sales or transfers hereunder for our account.
8. COMPENSATION TO REPRESENTATIVES. As compensation for your services
in connection herewith, you are authorized to charge our account and pay to
yourselves $___ per Share which we become committed to purchase pursuant to
Section 2 or of the Underwriting Agreement. Such compensation shall be treated
as an expense of the several Underwriters and will be charged to their
respective accounts on your books for this offering.
9. INDEMNITY. Each Underwriter, including yourself, agrees to
indemnify and hold harmless each other Underwriter, each person, if any, who
controls any other Underwriter within the meaning of either Section 15 of the
Securities Act of 1933, as amended, or Section 20 of the Securities Exchange
Act of 1934, as amended, and any successor of any other Underwriter or of any
such controlling person, all to the extent that each Underwriter will be
obligated in the Underwriting Agreement to indemnify and hold harmless the
Company, its directors and officers and its controlling persons. This indemnity
agreement shall survive the termination of this Agreement and will remain in
full force and effect regardless of any investigation made by or on behalf of
any Underwriter or any person so controlling an Underwriter.
10. MISCELLANEOUS. With respect to the Underwriting Agreement, you
are also authorized in your discretion to (a) postpone the Closing Date, the
Additional Closing Date, if any, or any other time or date specified therein,
(b) exercise any right of cancellation or termination, (c) arrange for the
purchase by other persons (including yourselves or any other Underwriter) of
any Shares not taken up by any defaulting Underwriter or by the other
Underwriters as provided in Section 10 of the Underwriting Agreement and (d)
consent to such other changes in the Underwriting Agreement as in your judgment
do not materially and adversely affect the substance of our rights and
obligations thereunder.
We have examined the Prospectus, as amended to date, and are familiar
with the terms of the offering set forth therein. In addition, we confirm that
the information relating to us which has been furnished to the Company for use
therein is correct.
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<PAGE> 6
Upon request, you will inform us as to the jurisdictions in which you
have been advised by counsel that the Shares have been registered or qualified
for sale under applicable securities or Blue Sky laws, but you do not assume
any responsibility or obligation as to our right to sell such Shares in any
jurisdiction. Each Underwriter authorizes you to cause to be filed a Further
State Notice under the laws of the State of New York, if required, and to take
such other action as may be necessary or advisable to qualify the Shares for
offering or sale in any jurisdiction.
We confirm that we are either (a) a member of the NASD who agrees to
comply with all applicable rules of the NASD, including, without limitation,
the NASD's Interpretation with Respect to Free-Riding and Withholding and
Section 24 of Article III of the NASD's Rules of Fair Practice and that our
commitment to purchase Shares pursuant to the Underwriting Agreement will not
result in a violation of the financial responsibility requirements of Rule
15c3-1 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended, or of any similar provision of any applicable rule of
any securities exchange to which we are subject or of any restriction imposed
upon us by any such exchange or any government authority or (b) a foreign
dealer not eligible for membership in the NASD who hereby agrees to make no
sales within the United States, its territories or its possessions (except that
we may participate in group sales under Section 3 hereof) or to persons who are
citizens thereof or resident therein, and in making other sales to comply with
the above-mentioned NASD Interpretation, Section 8, 24 and 36 of the
above-mentioned Article III as if we were a NASD member and Section 25 of such
Article III as it applies to a nonmember broker or dealer in a foreign country.
If we are a foreign dealer, we represent that in connection with sales of
Shares and offers to sell Shares made by us outside the United States (a) we
will not offer or sell any Shares in any jurisdiction except in compliance with
applicable laws and (b) we will either furnish to each person to whom any such
sale or offer is made a copy of the Prospectus or inform such person that such
Prospectus will be available upon request. It is understood that no action has
been taken to permit a public offering in any jurisdiction other than the
United States where action would be required for such purposes.
We will not advertise over our name until after the first public
advertisement has been made by you on behalf of the Underwriters and then only
with your consent and at our own expense and risk.
Except as is otherwise specifically provided in this Agreement, you
will have full authority to take such action as you may deem necessary or
advisable in respect of all matters pertaining to the Underwriting Agreement
and this Agreement and in connection with the purchase, carrying, advertising,
sale and distribution of the Shares (including authority to terminate the
Underwriting Agreement as provided therein), but neither as Representatives nor
individually will you be under any liability whatsoever to any of the several
underwriters except such as may be imposed upon you by the Securities Act of
1933, as amended, the rules and regulations promulgated thereunder, and except
for lack of good faith and for the obligations expressly assumed by you in this
Agreement. Obligations not expressly assumed by you in this Agreement will not
be implied hereby or inferred herefrom. Authority with respect to matters to
be determined by you or by you and the Company pursuant to the terms of the
Underwriting Agreement will survive the termination of this Agreement.
You shall not be under any duty to account for any interest on our
funds at any time in your hands. In taking any action under this Agreement you
shall act only as agent of the Underwriters, and you shall be under no
liability to us except for lack of good faith and for obligations expressly
assumed by you in this Agreement.
Nothing herein contained shall constitute us partners with you or with
other Underwriters, and the obligations of ourself and of each of the
Underwriters are several and not joint.
Any notice from you to us shall be deemed to have been duly given if
mailed, telexed or telegraphed to us at our address as set forth in the
Underwriters' Questionnaire addressed by us to the Company. Any notice from
any Underwriter to you will be deemed to have been given if mailed, telexed or
telegraphed to you at the address set forth on the first page of this
Agreement.
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<PAGE> 7
We authorize you to file with any governmental agency or authority any
report which in your judgment is necessary or desirable in connection with the
offering of the Shares, and we agree to furnish you any information needed for
each such report.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Florida.
This Agreement may be signed in any number of counterparts which, when
taken together, will constitute one and the same instrument.
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<PAGE> 8
This Agreement is being executed by us and delivered to you in
duplicate. Please indicate your receipt of identical agreements from each of
the other Underwriters by confirming this Agreement, whereupon it shall
constitute a binding contract between us.
Very truly yours,
________________________________________
Attorney-in-Fact for the several
Underwriters named in Schedule I to the
Underwriting Agreement
Confirmed as of the date first
above-mentioned.
RAYMOND JAMES & ASSOCIATES, INC.
By:__________________________________
Name:
Title:
VECTOR SECURITIES INTERNATIONAL, INC.
By:__________________________________
Name:
Title:
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<PAGE> 1
EXHIBIT 4.02
- --------------------------------------------------------------------------------
WARRANT AGREEMENT
By and Among
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
RAYMOND JAMES & ASSOCIATES, INC.
and
VECTOR SECURITIES INTERNATIONAL, INC.
Dated as of _______________ __, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of _____________ __, 1996 by and among
DYNAMIC HEALTHCARE TECHNOLOGIES, INC., a Florida corporation (the "Company"),
RAYMOND JAMES & ASSOCIATES, INC. ("RJ&A") and VECTOR SECURITIES INTERNATIONAL,
INC. ("Vector", and together with RJ&A, the "Representatives").
The Company proposes to issue to the Representatives warrants as
hereinafter described (the "Representative Warrants") to purchase up to an
aggregate of 250,000 shares, subject to adjustment as provided in Section 8
hereof (such shares, as adjusted, being hereinafter referred to as the
"Shares") of the Company's Common Stock, par value $.01 per share (the "Common
Stock"), each Representative Warrant entitling the holder thereof to purchase
one share of Common Stock. All capitalized terms used herein and not otherwise
defined herein shall have the same meanings as in that certain Underwriting
Agreement, of even date herewith, by and among the Company and the
Representatives (the "Underwriting Agreement").
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth and for other good and valuable consideration, the
parties hereto agree as follows;
1. Issuance of Warrants; Form of Warrant. The Company will issue,
sell and deliver the Representative Warrants to the Representatives or their
bona fide officers and/or directors. The form of the Representative Warrant and
the form of election to purchase Shares to be attached thereto shall be
substantially as set forth on Exhibit A attached hereto. The Representative
Warrants shall be executed on behalf of the Company by the manual or facsimile
signature of the present or any future President or any Vice President of the
Company, and attested by the manual or facsimile signature of the present or
any future Secretary or Assistant Secretary of the Company.
2. Warrant Register. The Representative Warrants shall be
numbered and shall be registered in a Representative Warrant register to be
maintained by the Company (the "Representative Warrant Register"). The Company
shall be entitled to treat the registered holder of any Representative Warrant
on the Representative Warrant Register (the "Holder") as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Representative
<PAGE> 3
Warrant on the part of any other person, and shall not be liable for any
registration of transfer of the Representative Warrants which are registered or
are to be registered in the name of a fiduciary or the nominee of a fiduciary
unless made with the actual knowledge that a fiduciary or nominee is committing
a breach of trust in requesting such registration of transfer, or with such
knowledge of such facts that its participation therein amounts to bad faith.
The Representative Warrants shall be registered initially in the names of
"Raymond James & Associates, Inc." and "Vector Securities International, Inc."
in such denominations as the Representatives may request in writing to the
Company; provided, however, that the Representatives may designate that all or
a portion of the Representative Warrants be issued in varying amounts directly
to their bona fide officers and/or directors, and not to the Representatives.
Such designation will only be made by the Representatives if they determine
that such issuances would not violate the rules of the National Association of
Securities Dealers, Inc. (the "NASD") relating to the review of corporate
financing arrangements.
3. Transfer of Warrants. The Representative Warrants will not be
sold, transferred, assigned or hypothecated, in part or in whole (other than by
will or pursuant to the laws of descent and distribution), except to bona fide
officers of either of the Representatives and only upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer. In all cases of transfer by an attorney, the original power of
attorney, duly approved, or an official copy thereof, duly certified, shall be
deposited with the Company. In case of transfer by executors, administrators,
guardians or other legal representatives, duly authenticated evidence of their
authority shall be produced, and may be required to be deposited with the
Company in its discretion. Upon any registration of transfer, the Company shall
deliver a new Representative Warrant or Representative Warrants to the persons
entitled thereto. The Representative Warrants may be exchanged at the option of
the Holder thereof for another Representative Warrant, or other Representative
Warrants, of different denominations, of like tenor and representing in the
aggregate the right to purchase a like number of shares of Common Stock upon
surrender to the Company or its duly authorized agent. Notwithstanding the
foregoing, the Company shall have no obligation to cause the Representative
Warrants to be transferred on its books to any person, if such
2
<PAGE> 4
transfer would violate the Securities Act of 1933, as amended (the "Act") or
any applicable state securities laws.
4. Term of Warrants; Exercise of Warrants. (a) Each
Representative Warrant entitles the registered owner thereof to purchase one
Share at a purchase price of $____ per Share [120% of the purchase price set
forth on the cover page of the prospectus] (the "Exercise Price") at any time
from the first anniversary of the effective date of the Registration Statement
until 5:00 p.m., New York City time, on ______________ __, 2000 (the "Warrant
Expiration Date"). Prior to the Warrant Expiration Date, the Company will not
take any action which would terminate the Representative Warrants. The Exercise
Price and the Shares issuable upon exercise of the Representative Warrants are
subject to adjustment upon the occurrence of certain events, pursuant to the
provisions of Section 8 of this Agreement. Subject to the provisions of this
Agreement, each Holder shall have the right, which may be exercised as set
forth in Warrants, to purchase from the Company (and the Company shall issue
and sell to such Holder) the number of fully paid and nonassessable shares of
Common Stock specified in Warrant as follows:
(i) Upon surrender to the Company, or its duly authorized
agent, of Warrants with the form of election to purchase attached thereto duly
completed and signed, with signatures guaranteed by a member firm of a national
securities exchange, a commercial bank or trust company located in the United
States or a member of the NASD and upon payment to the Company of the Exercise
Price, as adjusted in accordance with the provisions of Section 8 of this
Agreement, for the number of Shares in respect of which Warrants are then
exercised. Payment of such Exercise Price may be made in cash or by cashier's
check payable to the order of the Company. No adjustment shall be made for any
dividends on any Shares issuable upon exercise of a Representative Warrant; or
(ii) Upon surrender to the Company, or its duly authorized
agent, of Warrants with the form of cashless exercise attached thereto (a
"Cashless Exercise"), duly completed and signed, with signatures guaranteed by
a member firm of a national securities exchange, a commercial bank or trust
company located in the United States or a member of the NASD. Such surrender
shall be deemed a waiver of the obligation of the Holder to pay all or any
portion of the Exercise Price. In the event of a
3
<PAGE> 5
Cashless Exercise, the Holder shall receive that number of shares of Common
Stock determined by multiplying the number of Shares in respect of which
Warrants are then exercised by a fraction, the numerator of which shall be an
amount equal to the Current Market Price (as such term is defined in Section
8(d) hereof) per share of Common Stock less the Exercise Price, as adjusted in
accordance with the provisions of Section 8 of this Agreement, and the
denominator of which shall be the Current Market Price per share of Common
Stock. Notwithstanding the foregoing, in the event that a Cashless Exercise
would, at any time the Representative Warrants remain outstanding, reasonably
be deemed by the Company's independent certified public accountants to give
rise to a charge to the Company's earnings for reporting purposes (which
determination shall be evidenced by an opinion of such independent certified
accountants, in a form reasonably satisfactory to the Holder), the Holder shall
not be entitled to use a Cashless Exercise.
(b) Upon each surrender of the Representative Warrants in
accordance with Section 4(a)(i) or 4(a)(ii) hereof, the Company shall issue and
cause to be delivered with all reasonable dispatch to or upon the written order
of the Holder of Warrants and in such name or names as such Holder may
designate (so long as surrender or transfer would not violate the Act or any
applicable state securities laws), a certificate or certificates for the number
of full Shares so purchased upon the exercise of Warrants, together with cash,
as provided in Section 9 of this Agreement, in respect of any fractional Shares
otherwise issuable upon such surrender. Such certificate or certificates shall
be deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a holder of record of such Shares as of the date
of the surrender of the Representative Warrants as aforesaid (and payment of
the Exercise Price with respect to Section 4(a)(i) hereof); provided, however,
that if, at the date of surrender of Warrants, the transfer books for the
Common Stock or other class of securities issuable upon the exercise of
Warrants shall be closed, the certificates for the Shares shall be issuable as
of the date on which such books shall next be opened (whether before, on or
after the Warrant Expiration Date) and until such date the Company shall be
under no duty to deliver any certificate for such Shares; provided, further;
however, that the transfer books of record, unless otherwise required by law,
shall not be closed at any one time for a period longer than twenty (20) days.
The rights of purchase represented by the Representative
4
<PAGE> 6
Warrants shall be exercisable, at the election of the Holders thereof, either
in full or from time to time in part and, in the event that any Representative
Warrant is exercised in respect of less than all of the Shares issuable upon
such exercise at any time prior to the Warrant Expiration Date, a new
Representative Warrant or Representative Warrants will be issued for the
remaining number of Shares specified in the Representative Warrant so
surrendered.
5. Payment of Taxes. The Company will pay all documentary stamp
taxes, if any, attributable to the issuance of Shares upon the exercise of the
Representative Warrants; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issue or delivery of any certificates for Shares in a
name other than that of the Holder of the Representative Warrants in respect of
which such Shares are issued.
6. Mutilated or Missing Warrants. In case any of the
Representative Warrants shall be mutilated, lost, stolen or destroyed, the
Company may, in its discretion, issue and deliver in exchange and substitution
for and upon cancellation of the mutilated Representative Warrant, or in lieu
of and substitution for the Representative Warrant lost, stolen or destroyed, a
new Representative Warrant of like tenor and representing an equivalent right
or interest, but only upon receipt of evidence reasonably satisfactory to the
Company of such mutilation, loss, theft or destruction of Warrant and
indemnity, also reasonably satisfactory to the Company, indemnifying the
Company for any claims arising under a Representative Warrant that has been
lost, stolen, mutilated or destroyed. An applicant for such substitute
Representative Warrants shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
7. Reservation of Shares, etc. There have been reserved, and the
Company shall at all times keep reserved, out of the authorized and unissued
Common Stock, a number of shares of Common Stock sufficient to provide for the
exercise of the rights of purchase represented by the outstanding
Representative Warrants. Norwest Bank Minnesota, N.A., transfer agent for the
Common Stock (the "Transfer Agent"), and every subsequent transfer agent, if
any, for the Company's securities issuable upon the exercise of the
Representative Warrants will be irrevocably authorized and directed at all
times until the Warrant Expiration Date to reserve such number of authorized
and unissued shares as shall be required for
5
<PAGE> 7
such purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of the
Company's securities issuable upon the exercise of the Representative Warrants.
The Company will supply the Transfer Agent or any subsequent transfer agent
with duly executed certificates for such purpose and will itself provide or
otherwise make available any cash which may be distributable as provided in
Section 9 of this Agreement. All Representative Warrants surrendered in the
exercise of the rights thereby evidenced shall be canceled, and such canceled
Representative Warrants shall constitute sufficient evidence of the number of
Shares that have been issued upon the exercise of Warrants. No shares of
Common Stock shall be subject to reservation in respect of unexercised
Representative Warrants subsequent to the Warrant Expiration Date.
8. Adjustments of Exercise Price and Number of Shares. The
Exercise Price and the number and kind of securities issuable upon exercise of
each Representative Warrant shall be subject to adjustment from time to time
upon the happening of certain events, as follows:
(a) In case the Company shall (i) declare a dividend on
its Common Stock in shares of Common Stock or make a distribution in Common
Stock, (ii) subdivide its outstanding Common Stock, (iii) combine its
outstanding Common Stock into a smaller number of shares of Common Stock or
(iv) issue by reclassification of its Common Stock other securities of the
Company (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing corporation), the number of
Shares purchasable upon exercise of each Representative Warrant immediately
prior thereto shall be adjusted so that the Holder of each Representative
Warrant shall be entitled to receive the kind and number of Shares or other
securities of the Company which he would have owned or have been entitled to
receive after the happening of any of the events described above, had Warrant
been exercised immediately prior to the happening of such event or any record
date with respect thereto. An adjustment made pursuant to this paragraph (a)
shall become effective immediately after the effective date of such event.
(b) In case the Company shall issue rights, options or
warrants to all holders of its Common Stock, without any charge to such
holders, entitling them (for a period expiring within 45 days after the record
date mentioned below in this paragraph (b)) to
6
<PAGE> 8
subscribe for or to purchase shares of Common Stock at a price per share that
is lower at the record date mentioned below than the Current Market Price per
share of Common Stock, the number of Shares thereafter purchasable upon
exercise of each Representative Warrant shall be determined by multiplying the
number of Shares theretofore purchasable upon exercise of each Representative
Warrant by a fraction, of which the numerator shall be the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock offered for subscription or purchase, and of which the
denominator shall be the number of shares of Common Stock outstanding on such
record date plus the number of shares which the aggregate offering price of the
total number of shares of Common Stock so offered would purchase at the Current
Market Price per share of Common Stock. Such adjustment shall be made whenever
such rights, options or warrants are issued, and shall become effective on the
date of issuance.
(c) In case the Company shall distribute to all holders
of its shares of Common Stock shares of stock (other than Common Stock) or
evidences of its indebtedness or assets (excluding cash dividends payable out
of consolidated earnings or retained earnings and dividends or distributions
referred to in paragraph (a) above) or rights, options or warrants or
convertible or exchangeable securities containing the right to subscribe for or
purchase shares of Common Stock (excluding those referred to in paragraph (b)
above), then in each case the number of Shares thereafter issuable upon the
exercise of each Representative Warrant shall be determined by multiplying the
number of Shares theretofore issuable upon the exercise of each Representative
Warrant, by a fraction, of which the numerator shall be the Current Market
Price per share of Common Stock on the record date mentioned below in this
paragraph (c), and of which the denominator shall be the Current Market Price
per share of Common Stock on such record date, less the then fair value (as
determined by the Board of Directors of the Company, whose determination shall
be conclusive) of the portion of the shares of stock (other than Common Stock)
or assets or evidences of indebtedness so distributed or of such subscription
rights, options or warrants, or of such convertible or exchangeable securities,
applicable to one share of Common Stock. Such adjustment shall be made whenever
any such distribution is made, and shall become effective on the date of
distribution.
(d) For the purpose of any computation under this
Agreement, the Current Market Price per share of Common Stock at any date shall
be the average of the daily closing prices for
7
<PAGE> 9
fifteen (15) consecutive trading days commencing twenty (20) trading days
before the date of such computation. The closing price for each day shall be
the last reported sale price regular way or, in case no such reported sale
takes place on such day, the average of the closing bid and asked prices
regular way for such day, in either case on the principal national securities
exchange on which the shares are listed or admitted to trading, or if they are
not listed or admitted to trading on any national securities exchange, but are
traded in the over-the-counter market, the closing sale price of the Common
Stock or, in case no sale is publicly reported, the average of the
representative closing bid and asked quotations for the Common Stock on the
National Association of Securities Dealers Automated Quotations ("NASDAQ")
system or any comparable system, or if the Common Stock is not listed on the
NASDAQ system or a comparable system, the closing sale price of the Common
Stock or, in case no sale is publicly reported, the average of the closing bid
and asked prices as furnished by two members of the NASD selected from time to
time by the Company for that purpose.
(e) No adjustment in the number of Shares purchasable
hereunder shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of Shares purchasable
upon the exercise of each Representative Warrant; provided, however, that any
adjustments which by reason of this paragraph (e) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment,
but not later than three years after the happening of the specified event or
events. All calculations shall be made to the nearest one thousandth of a
share. Anything in this Section 8 to the contrary notwithstanding, the Company
shall be entitled, but shall not be required, to make such changes in the
number of Shares purchasable upon the exercise of each Representative Warrant,
in addition to those required by this Section 8, as it in its discretion shall
determine to be advisable in order that any dividend or distribution in shares
of Common Stock, subdivision, reclassification or combination of shares of
Common Stock, issuance of rights, warrants or options to purchase Common Stock,
or distribution of shares of stock other than Common Stock, evidences of
indebtedness or assets (other than distributions of cash out of consolidated
earnings or retained earnings) or convertible or exchangeable securities
hereafter made by the Company to the holders of its Common Stock shall not
result in any tax to the holders of its Common Stock or securities convertible
into Common Stock.
8
<PAGE> 10
(f) Whenever the number of Shares purchasable upon the
exercise of each Representative Warrant is adjusted, as herein provided, the
Exercise Price shall be adjusted by multiplying the Exercise Price in effect
immediately prior to such adjustment by a fraction, of which the numerator
shall be the number of Shares purchasable upon the exercise of each
Representative Warrant immediately prior to such adjustment, and of which the
denominator shall be the number of Shares so purchasable immediately
thereafter.
(g) For the purpose of this Section 8, the term "shares
of Common Stock" shall mean (i) the class of stock designated as the Common
Stock of the Company at the date of this Agreement or (ii) any other class of
stock resulting from successive changes or reclassifications of such shares
consisting solely of changes in par value, or from no par value to par value,
or from par value to no par value. In the event that at any time, as a result
of an adjustment made pursuant to paragraph (a) above, the Holders shall become
entitled to purchase any shares of capital stock of the Company other than
Common Stock, thereafter the number of such other shares so purchasable upon
exercise of each Representative Warrant and the Exercise Price of such Shares
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Shares
contained in paragraphs (a) through (f), inclusive, and paragraphs (h) through
(m), inclusive, of this Section 8, and the provisions of Sections 4, 5 and 7,
with respect to the Shares, shall apply on like terms to any such other shares.
(h) Upon the expiration of any rights, options, warrants
or conversion rights or exchange privileges, if any thereof shall not have been
exercised, the Exercise Price and the number of shares of Common Stock
purchasable upon the exercise of each Representative Warrant shall, upon such
expiration, be readjusted and shall thereafter be such as it would have been
had it originally been adjusted (or had the original adjustment not been
required, as the case may be) as if (i) the only shares of Common Stock so
issued were the Common Stock, if any, actually issued or sold upon the exercise
of such rights, options, warrants or conversion rights or exchange privileges
and (ii) such Common Stock, if any, were issued or sold for the consideration
actually received by the Company upon such exercise plus the aggregate
consideration, if any, actually received by the Company for the issuance, sale
or grant of all of such rights, options, warrants or conversion rights or
exchange privileges whether or not exercised;
9
<PAGE> 11
provided, however, that no such readjustment shall have the effect of
increasing the Exercise Price by an amount in excess of the amount of the
adjustment initially made in respect to the issuance, sale or grant of such
rights, options, warrants or conversion rights or exchange privileges.
(i) The Company may, at its option, at any time during
the term of the Representative Warrants, reduce the then current Exercise Price
to any amount deemed appropriate by the Board of Directors of the Company.
(j) Whenever the number of Shares issuable upon the
exercise of each Representative Warrant or the Exercise Price of such Shares is
adjusted, as herein provided, the Company shall promptly mail by first class
mail postage prepaid, to each Holder notice of such adjustment or adjustments
at such Holder's address appearing on the Representative Warrant Register. The
Chief Financial Officer of the Company shall make any computation required by
this Section 8 and shall execute a certificate (the "CFO Certificate"), setting
forth the number of Shares issuable upon the exercise of each Representative
Warrant and the Exercise Price of such Shares after such adjustment, setting
forth a brief statement of the facts requiring such adjustment and setting
forth the computation by which such adjustment was made. Each Holder shall have
the right to inspect the CFO Certificate during reasonable business hours. In
the event that a Holder shall dispute the determination set forth in the CFO
Certificate, the Company shall retain, at its expense, a firm of independent
public accountants (who may be regular accountants employed by the Company) to
make the required computation and to prepare a certificate which shall set
forth the information required in the CFO Certificate. Such certificate shall
be conclusive on the correctness of such adjustment and each Holder shall have
the right to inspect such certificate during reasonable business hours.
(k) Except as provided in this Section 8, no adjustment
in respect of any dividends shall be made during the term of a Representative
Warrant or upon the exercise of a Representative Warrant.
(l) In case of any consolidation of the Company with, or
merger of the Company with or into another corporation or in case of any sale
or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, the Company or such successor or
purchasing corporation (or an
10
<PAGE> 12
affiliate of such successor or purchasing corporation), as the case may be,
agrees that each Holder shall have the right thereafter upon payment of the
Exercise Price in effect immediately prior to such action to purchase upon
exercise of each Representative Warrant the kind and amount of shares and other
securities and property (including cash) which he would have owned or have been
entitled to receive after the happening of such consolidation, merger, sale or
conveyance had Warrant been exercised immediately prior to such action. The
provisions of this paragraph (l) shall similarly apply to successive
consolidations, mergers, sales or conveyances.
(m) Notwithstanding any adjustment in the Exercise Price
or the number or kind of shares purchasable upon the exercise of the
Representative Warrants pursuant to this Agreement, certificates for the
Representative Warrants issued prior or subsequent to such adjustment may
continue to express the same price and number and kind of Shares as are
initially issuable pursuant to this Agreement.
9. Fractional Interests. The Company shall not be required to
issue fractions of Shares on the exercise of the Representative Warrants. If
more than one Representative Warrant shall be presented for exercise in full at
the same time by the same Holder, the number of Shares which shall be issuable
upon the exercise thereof shall be computed on the basis of the aggregate
number of Shares issuable on exercise of the Representative Warrants so
presented. If any fraction of a Share would, except for the provisions of this
Section 9, be issuable on the exercise of any Representative Warrant (or
specified portions thereof), the Company shall purchase such fraction for an
amount in cash equal to the same fraction of the Current Market Price per share
of Common Stock on the date of exercise.
10. Registration Rights.
The Representative Warrants and the Shares have been included
in the Registration Statement filed by the Company with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act"), File No. 333-________ (the "Registration Statement").
Until the Warrant Expiration Date, or such earlier time as all of the
Representative Warrants have been exercised, the Company shall prepare and
cause to be filed and cause to become and remain effective such amendments or
supplements to the Registration Statement and the
11
<PAGE> 13
Prospectus contained therein as shall be required under the Act in order to
keep the Representative Warrants and Shares registered under the Act, in order
to deliver to the Holders, upon exercise of the Representative Warrants, a
prospectus meeting the requirements of Section 10(a)(3) of the Act. In the
event it is determined by a Holder that in order for a Holder to offer and sell
Shares, a post-effective amendment to the Registration Statement containing an
amended or supplemented Prospectus or another registration statement is
required to be filed, the Company promptly upon receipt of notice from such
Holder of its present intent to exercise Representative Warrants, shall file
such post-effective amendment amending the Registration Statement or file such
other registration statement. Either the post-effective amendment or the new
registration statement shall include among other information, such information
as may be necessary for the Holder to offer and sell Shares pursuant to the
Prospectus or a prospectus contained in such other registration statement. The
Company shall diligently take such action as may be required to assure that the
Registration Statement as amended or the new registration statement shall
promptly become effective. After delivery of such number of Representative
Warrants that are being exercised and the applicable Purchase Price, the
Company shall deliver to the Holder certificates for Shares and such number of
final Prospectuses as the Holder may require for offer and sale of the Shares.
The Company shall obtain and keep effective all permits, consents and
approvals of governmental agencies and authorities, and shall take all action
which may be necessary to maintain the registration of the Shares under the
Securities and Exchange Act of 1934 (the "Exchange Act") and to qualify the
Warrants and Warrant Shares for sale under the securities laws of such of the
states, territories and possessions of the United States and Canadian Provinces
as may be necessary to permit the free exercise of the Representative Warrants,
and the issuance, sale, transfer and delivery of the Shares and shall maintain
such qualifications during the entire period in which the Representative
Warrants are exercisable.
11. Notices to Holders.
(a) Nothing contained in this Agreement or in any of the
Representative Warrants shall be construed as conferring upon the Holders
thereof the right to vote or to receive dividends or to consent or to receive
notice as shareholders in respect of the meetings of shareholders or the
election of directors of the
12
<PAGE> 14
Company or any other matter, or any rights whatsoever as shareholders of the
Company; provided, however, that in the event that a meeting of shareholders
shall be called to consider and take action on a proposal for the voluntary
dissolution of the Company, other than in connection with a consolidation,
merger or sale of all, or substantially all, of its property, assets, business
and good will as an entirety, then and in that event the Company shall cause a
notice thereof to be sent by first-class mail, postage prepaid, at least twenty
(20) days prior to the date filed as a record date or the date of closing the
transfer books in relation to such meeting, to each registered Holder of the
Representative Warrants at such Holder's address appearing on the
Representative Warrant Register; but failure to mail or to receive such notice
or any defect therein or in the mailing thereof shall not affect the validity
of any action taken in connection with such voluntary dissolution. If such
notice shall have been so given and if such a voluntary dissolution shall be
authorized at such meeting or any adjournment thereof, then from and after the
date on which such voluntary dissolution shall have been duly authorized by the
shareholders, the purchase rights represented by the Representative Warrants
and all other rights with respect thereto shall cease and terminate.
(b) In the event the Company intends to make any
distribution on its Common Stock (or other securities which may be issuable in
lieu thereof upon the exercise of the Representative Warrants), including,
without limitation, any such distribution to be made in connection with a
consolidation or merger in which the Company is the continuing corporation, or
to issue subscription rights or warrants to holders of its Common Stock, the
Company shall cause a notice of its intention to make such distribution to be
sent by first-class mail, postage prepaid, at least twenty (20) days prior to
the date fixed as a record date or the date of closing the transfer books in
relation to such distribution, to each registered Holder of the Representative
Warrants at such Holder's address appearing on the Representative Warrant
Register, but failure to mail or to receive such notice or any defect therein
or in the mailing thereof shall not affect the validity of any action taken in
connection with such distribution.
12. Notices. Any notice pursuant to this Agreement to be given or
made by the Holder of any Representative Warrant and/or the holder of any Share
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed as follows or to such other address as the
Company may
13
<PAGE> 15
designate by notice given in accordance with this Section 12, to the Holders of
Representative warrants and/or the holders of Shares:
Dynamic Healthcare Technologies, Inc.
101 Southhall Lane, Suite 210
Maitland, Florida 32751
Attn: Mr. Mitchel J. Laskey
with a copy to:
Cohen, Berke, Bernstein, Brodie & Kondell, P.A.
2601 South Bayshore Drive
Suite 1900
Miami, Florida 33133
Attn: Richard N. Bernstein, Esq.
Notices or demands authorized by this Agreement to be given or
made by the Company to or on the Holder of any Representative Warrant and/or
the holder of any Share shall be sufficiently given or made (except as
otherwise provided in this Agreement) if sent by first-class mail, postage
prepaid, addressed to such Holder or such holder of Shares at the address of
such Holder or such holder of Shares as shown on the Representative Warrant
Register or the books of the Company, as the case may be.
13. Governing Law. This Agreement and each Representative Warrant
issued hereunder shall be governed by and construed in accordance with the
substantive laws of the State of Florida. The Company hereby agrees to accept
service of process by notice given to it pursuant to the provisions of Section
12.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day, month and year first above written.
DYNAMIC HEALTHCARE TECHNOLOGIES,
INC.
14
<PAGE> 16
By:
-----------------------------
Attest:
- -------------------------------
RAYMOND JAMES & ASSOCIATES, INC.
By:
-----------------------------
Attest:
- -------------------------------
VECTOR SECURITIES INTERNATIONAL,
INC.
By:
-----------------------------
Attest:
- -------------------------------
15
<PAGE> 17
EXHIBIT A
No. Warrants
----------- ---------
VOID AFTER 5:00 P.M. NEW YORK CITY TIME
ON ______________, 1999
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
Warrant Certificate
THIS CERTIFIES THAT for value received or registered assigns, is the
owner of the number of warrants set forth above, each of which entitles the
owner thereof to purchase at any time from _ , 1994, until 5:00 p.m., New York
City time on _ , 1999 (the "Warrant Expiration Date"), one fully paid and
nonassessable share of Common Stock, par value $.01 per share (the "Common
Stock"), of DYNAMIC HEALTHCARE TECHNOLOGIES, INC., a Florida corporation (the
"Company"), at the purchase price of $[ ] per share (the "Exercise Price") upon
presentation and surrender of this Warrant Certificate with either the Form of
Election to Purchase or Form of Cashless Exercise duly executed. The number of
Warrants evidenced by this Warrant Certificate (and the number of shares which
may be purchased upon exercise thereof) set forth above, and the Exercise Price
per share set forth above, are the number and Exercise Price as of the date of
original issuance of the Warrants, based on the shares of Common Stock of the
Company as constituted at such date. As provided in the Warrant Agreement
referred to below, the Exercise Price and the number or kind of shares which
may be purchased upon the exercise of the Warrants evidenced by this Warrant
Certificate are, upon the happening of certain events, subject to modification
and adjustment.
This warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of an agreement dated as of
______________, 1996 (the "Warrant Agreement") among the Company, Raymond James
& Associates, Inc. and Vector Securities International, Inc. which Warrant
Agreement is hereby incorporated herein by reference and made a part hereof and
to which Warrant Agreement reference is hereby made for a full description of
the rights, limitations of rights, duties and immunities hereunder of the
Company and the holders of the warrant Certificates. Copies of the warrant
Agreement are on file at the principal office of the Company.
A-1
<PAGE> 18
This Warrant Certificate, with or without other Warrant Certificates,
upon surrender at the principal office of the Company, may be exchanged for
another Warrant Certificate or warrant Certificates of like tenor and date
evidencing Warrants entitling the holder to purchase a like aggregate number of
shares of Common Stock as the Warrants evidenced by the Warrant Certificate or
warrant Certificates surrendered entitled such holder to purchase. If this
Warrant Certificate shall be exercised in part, the holder hereof shall be
entitled to receive upon surrender hereof another Warrant Certificate or
Warrant Certificates for the number of whole Warrants not exercised.
No fractional shares of Common Stock will be issued upon the exercise
of any Warrant or Warrants evidenced hereby, but in lieu thereof a cash payment
will be made, as provided in the Warrant Agreement.
No holder of this Warrant Certificate shall be entitled to vote or
receive dividends or be deemed the holder of Common Stock, any other securities
of the Company which may at any time be issuable on the exercise hereof for any
purpose, nor shall anything contained in the Warrant Agreement or herein be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action (whether upon any recapitalization,
issue of stock, reclassification of stock, change of par value or change of
stock to no par value, consolidation, merger, conveyance, or otherwise) or,
except as provided in the Warrant Agreement, to receive notice of meetings, or
to receive dividends or subscription rights or otherwise, until the Warrant or
Warrants evidenced by this Warrant Certificate shall have been exercised and
the shares shall have become deliverable as provided in the Warrant Agreement.
If this Warrant shall be surrendered for exercise within any period
during which the transfer books for the Company's Common Stock or other class
of stock purchasable upon the exercise of this Warrant are closed for any
purpose, the Company shall not be required to make delivery of certificates for
shares purchasable upon such exercise until the date of the reopening of said
transfer books.
A-2
<PAGE> 19
IN WITNESS WHEREOF, DYNAMIC HEALTHCARE TECHNOLOGIES, INC. has caused
the signature (or facsimile signature) of its President and its Secretary to be
printed hereon.
Dated: , 1996
----------- DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
By:
----------------------------------
Name: Mitchel J. Laskey
Title: President
Attest:
- ---------------------------------
Name:
Title: Secretary
A-3
<PAGE> 20
FORM OF
ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Warrant Certificate in
accordance with Section 4(a)(i) of the Warrant Agreement.)
TO: DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
The undersigned hereby irrevocably elects to exercise Warrants
represented by this Warrant Certificate to purchase the shares of Common Stock
issuable upon the exercise of such Warrants and payment of the Exercise Price
therefor in accordance with Section 4(a)(i) of the Warrant Agreement and
requests that certificates for such shares to be issued in the name of:
Please insert social security or other
identifying number
- ---------------------------------------
- ---------------------------------------
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of
such Warrants shall be registered in the name of and delivered to:
Please insert social security or other
identifying number
- ---------------------------------------
- ---------------------------------------
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
Dated: , 19
--------------- --
- -------------------------------------------- Signature
<PAGE> 21
(Signature must conform in all
respects to name of holder as
specified on the face of this
Warrant Certificate)
Signature Guaranteed:
<PAGE> 22
FORM OF CASHLESS EXERCISE
(To be executed if holder desires to exercise
the Warrant Certificate in accordance
with Section 4(a)(ii) of the Warrant Agreement)
TO: DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
The undersigned hereby irrevocably elects a Cashless Exercise of the
Warrants represented by this Warrant Certificate to purchase the shares of
Common Stock issuable upon the exercise of such Warrants in accordance with
Section 4(a)(ii) of the Warrant Agreement and requests that certificates for
such shares be issued in the name of:
Please insert social security or other
identifying number
- --------------------------------------
- --------------------------------------
- ------------------------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------------------------
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of
such Warrants shall be registered in the name of and delivered to:
Please insert social security or other
identifying number
- --------------------------------------
- --------------------------------------
- ------------------------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------------------------
Dated: , 19
-------------- --
- --------------------------------------- Signature
(Signature must conform in all
respects to name of holder as
<PAGE> 23
specified on the face of this
Warrant Certificate)
Signature Guaranteed:
<PAGE> 24
FORM OF
ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificates.)
FOR VALUE RECEIVED, ______________________________ hereby sells,
assigns and transfers unto this Warrant Certificate, together with all right,
title and interest herein, and does hereby irrevocably constitute and appoint ,
to transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: , 19
--------------- --
Signature:
---------------------------
Signature Guaranteed:
NOTICE
The signature of the foregoing Assignment must correspond to the name
as written upon the face of this Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 25
No. Warrants
---- ----------
VOID AFTER 5:00 P.M. NEW YORK CITY TIME
ON _____________ __, 2000
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
Warrant Certificate
THIS CERTIFIES THAT for value received RAYMOND JAMES & ASSOCIATES,
INC. [VECTOR SECURITIES INTERNATIONAL, INC.] or registered assigns, is the
owner of the number of warrants set forth above, each of which entitles the
owner thereof to purchase at any time from ___________ __, 1996, until 5:00
p.m., New York City time on ____________ __, 2000 (the "Warrant Expiration
Date"), one fully paid and nonassessable share of Common Stock, par value $.01
per share (the "Common Stock"), of DYNAMIC HEALTHCARE TECHNOLOGIES, INC., a
Florida corporation (the "Company"), at the purchase price of [120% of Offering
Price] per share (the "Exercise Price") upon presentation and surrender of this
Warrant Certificate with either the Form of Election to Purchase or Form of
Cashless Exercise duly executed. The number of Warrants evidenced by this
Warrant Certificate (and the number of shares which may be purchased upon
exercise thereof) set forth above, and the Exercise Price per share set forth
above, are the number and Exercise Price as of the date of original issuance of
the Warrants, based on the shares of Common Stock of the Company as constituted
at such date. As provided in the Warrant Agreement referred to below, the
Exercise Price and the number or kind of shares which may be purchased upon the
exercise of the Warrants evidenced by this Warrant Certificate are, upon the
happening of certain events, subject to modification and adjustment.
This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of an agreement dated as of
____________ __, 1996 (the Warrant Agreement") among the Company, Raymond James
& Associates, Inc. and
<PAGE> 26
Vector Securities International, Inc. which Warrant Agreement is hereby
incorporated herein by reference and made a part hereof and to which Warrant
Agreement reference is hereby made for a full description of the rights,
limitations of rights, duties and immunities hereunder of the Company and the
holders of the Warrant Certificates. Copies of the Warrant Agreement are on
file at the principal office of the Company.
This Warrant Certificate, with or without other Warrant Certificates,
upon surrender at the principal office of the Company, may be exchanged for
another Warrant Certificate or Warrant Certificates of like tenor and date
evidencing Warrants entitling the holder to purchase a like aggregate number of
shares of Common Stock as the Warrants evidenced by the Warrant Certificate or
Warrant Certificates surrendered entitled such holder to purchase. If this
Warrant Certificate shall be exercised in part, the holder hereof shall be
entitled to receive upon surrender hereof another Warrant Certificate or
Warrant Certificates for the number of whole Warrants not exercised.
No fractional shares of Common Stock will be issued upon the exercise
of any Warrant or Warrants evidenced hereby, but in lieu thereof a cash payment
will be made, as provided in the Warrant Agreement.
No holder of this Warrant Certificate shall be entitled to vote or
receive dividends or be deemed the holder of Common Stock, any other securities
of the Company which may at any time be issuable on the exercise hereof for any
purpose, nor shall anything contained in the Warrant Agreement or herein be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action (whether upon any recapitalization,
issue of stock, reclassification of stock, change of par value or change of
stock to no par value, consolidation, merger, conveyance, or otherwise) or,
except as provided in the Warrant Agreement, to receive notice of meetings, or
to receive dividends or subscription rights or otherwise, until the Warrant or
Warrants evidenced by this Warrant Certificate shall have been exercised and
the shares shall have become deliverable as provided in the Warrant Agreement.
If this warrant shall be surrendered for exercise within any period
during which the transfer books for the Company's Common
2
<PAGE> 27
Stock or other class of stock purchasable upon the exercise of this Warrant are
closed for any purpose, the Company shall not be required to make delivery of
certificates for shares purchasable upon such exercise until the date of the
reopening of said transfer books.
3
<PAGE> 28
IN WITNESS WHEREOF, DYNAMIC HEALTHCARE TECHNOLOGIES, INC. has caused
the signature (or facsimile signature) of its President and its Secretary to be
printed hereon.
Dated: 1996
-----------------
DYNAMIC HEALTHCARE TECHNOLOGIES,
INC.
By:
--------------------------------
Name: Mitchel J. Laskey
Title: President
Attest:
- ----------------------------------
Name:
Title: Secretary
4
<PAGE> 29
FORM OF
ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Warrant Certificate in
accordance with Section 4(a)(i) of the Warrant Agreement.)
TO: DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
The undersigned hereby irrevocably elects to exercise Warrants
represented by this Warrant Certificate to purchase the shares of Common Stock
issuable upon the exercise of such Warrants and payment of the Exercise Price
therefor in accordance with Section 4(a)(i) of the Warrant Agreement and
requests that certificates for such shares to be issued in the name of:
Please insert social security or other
identifying number
- --------------------------------------
- --------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of
such Warrants shall be registered in the name of and delivered to:
Please insert social security or other
identifying number
- --------------------------------------
- --------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated: , 19
------------- --
- ------------------------------------------ Signature
<PAGE> 30
(Signature must conform in all
respects to name of holder as
specified on the face of this
Warrant Certificate)
Signature Guaranteed:
<PAGE> 31
FORM OF CASHLESS EXERCISE
(To be executed if holder desires to exercise
the Warrant Certificate in accordance
with Section 4(a)(ii) of the Warrant Agreement)
TO: DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
The undersigned hereby irrevocably elects a Cashless Exercise of the
Warrants represented by this Warrant Certificate to purchase the shares of
Common Stock issuable upon the exercise of such Warrants in accordance with
Section 4(a)(ii) of the Warrant Agreement and requests that certificates for
such shares be issued in the name of:
Please insert social security or other
identifying number
- -------------------------------------
- -------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of
such Warrants shall be registered in the name of and delivered to:
Please insert social security or other
identifying number
- -------------------------------------
- -------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated: , 19
------------- --
- ------------------------------------------- Signature
(Signature must conform in all
respects to name of holder as
<PAGE> 32
specified on the face of this
Warrant Certificate)
Signature Guaranteed:
<PAGE> 33
FORM OF
ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificates.)
FOR VALUE RECEIVED, ______________________________ hereby sells,
assigns and transfers unto this Warrant Certificate, together with all right,
title and interest herein, and does hereby irrevocably constitute and appoint ,
to transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: , 19
--------------- --
Signature:
------------------------------
Signature Guaranteed:
NOTICE
The signature of the foregoing Assignment must correspond to the name
as written upon the face of this Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 1
EXHIBIT 5.01
[COHEN, BERKE, BERNSTEIN, BRODIE & KONDELL LETTERHEAD]
August 21, 1996
Board of Directors
Dynamic Healthcare Technologies, Inc.
101 Southhall Lane, Suite 210
Maitland, Florida 32751
RE: REGISTRATION STATEMENT ON FORM S-1
SHARES OF COMMON STOCK
Gentlemen:
We have acted as counsel for Dynamic Healthcare Technologies, Inc. (the
"Company") in connection with the proposed public offering of the shares of its
Common Stock covered by the above-described Registration Statement.
In connection therewith, we have examined the following:
1. The Articles of Incorporation of the Company, certified by the
Secretary of State of the State of Florida;
2. The Bylaws of the Company, certified as complete and correct
by the Secretary of the Company;
3. The minute book of the Company, certified as correct and
complete by the Secretary of the Company; and
4. Certificate of Good Standing with respect to the Company,
issued by the Florida Secretary of State.
Based upon such examination and upon examination of such other instruments
and records as we have deemed necessary, we are of the opinion that:
<PAGE> 2
Board of Directors
August 21, 1996
Page 2
A. The Company has been duly incorporated under the laws of the State
of Florida and is validly existing and in good standing under the
laws of that state.
B. The 5,000,000 shares of Common Stock covered by the Registration
Statement have been legally authorized and when issued
in accordance with the terms described in said Registration
Statement, will be validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to this firm under the caption "Legal Matters"
in the Prospectus. In giving this consent, we do not admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, or the rules and regulations of the Securities and
Exchange Commission thereunder.
Sincerely,
/S/COHEN, BERKE, BERNSTEIN,
----------------------------------
BRODIE & KONDELL, P.A.
<PAGE> 1
EXHIBIT 10.01
REVOLVING CREDIT AND SECURITY AGREEMENT
BETWEEN
TERRANO CORPORATION, AND
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
"BORROWER"
AND
FIRST UNION NATIONAL BANK OF FLORIDA
"LENDER"
DATED: OCTOBER 12, 1994
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
1. DEFINITIONS............................................... 1
1.1. Defined Terms..................................... 1
1.2. Financial Terms................................... 4
2. REPRESENTATIONS AND WARRANTIES............................ 4
2.1. Valid Existence and Power......................... 5
2.2. Authority......................................... 5
2.3. Financial Condition............................... 5
2.4. Litigation........................................ 5
2.5. Agreements, Etc. ................................. 5
2.6. Authorizations.................................... 5
2.7. Title............................................. 6
2.8. Collateral........................................ 6
2.9. Location.......................................... 6
2.10. Taxes............................................. 6
2.11. Withholding Taxes................................. 6
2.12. Labor Law Matters................................. 6
2.13. Accounts.......................................... 6
2.14. Use and Location of Collateral.................... 7
2.15. Judgment Liens.................................... 7
2.16. Intent and Effect of Transactions................. 7
2.17. Subsidiaries...................................... 7
2.18. Hazardous Materials............................... 7
2.19. ERISA............................................. 7
2.20. Investment Company Act............................ 7
2.21. Additional Representations........................ 7
3. THE LOAN.................................................. 8
3.1. Discretionary Revolving Loan...................... 8
3.2. Limitations on Advances........................... 8
3.3. Notice and Manner of Borrowing.................... 9
3.4. Calculation of Interest........................... 9
3.5. Special Loan Account.............................. 9
3.6. Debit for Interest and Expenses................... 9
3.7. Overdue Amounts................................... 9
3.8. Sales Tax......................................... 9
4. CONDITIONS PRECEDENT TO BORROWING......................... 10
4.1. Conditions Precedent to Initial Advance........... 10
4.2. Conditions Precedent to Each Advance.............. 11
5. COVENANTS OF THE BORROWER................................. 11
5.1. Use of Loan Proceeds.............................. 12
5.2. Maintenance of Business and Properties............ 12
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
5.3. Insurance......................................... 12
5.4. Notice of Default................................. 12
5.5. Inspections....................................... 12
5.6. Financial Information............................. 12
5.7. Debt.............................................. 13
5.8. Liens............................................. 13
5.9. Dividends......................................... 13
5.10. Merger, Sale, Etc. ............................... 13
5.11. Loans and Other Investments....................... 14
5.12. Change in Business................................ 14
5.13. Accounts.......................................... 14
5.14. Transactions with Affiliates...................... 14
5.15. No Change in Name, Offices; Removal of
Collateral...................................... 14
5.16. No Sale, Leaseback................................ 14
5.17. Margin Stock...................................... 14
5.18. Payment of Taxes, Etc. ........................... 15
5.19. Subordination..................................... 15
5.20. Compliance; Hazardous Materials................... 15
5.21. Subsidiaries...................................... 15
5.22. Compliance with Assignment Laws................... 15
5.23. Further Assurances................................ 15
5.24. Withholding Taxes................................. 15
5.25. Other Covenants................................... 15
6. DEFAULT................................................... 15
6.1. Events of Default................................. 15
6.2. Remedies.......................................... 17
6.3. Receiver.......................................... 17
7. SECURITY AGREEMENT........................................ 17
7.1. Security Interest................................. 17
7.2. Remedies.......................................... 18
7.3. Power of Attorney................................. 18
7.4. Entry............................................. 19
7.5. Deposits; Insurance............................... 19
7.6. Other Rights...................................... 19
7.7. Accounts.......................................... 19
7.8. Tangible Collateral............................... 19
7.9. Waiver of Marshalling............................. 19
7.10. Waiver of Automatic Stay.......................... 19
8. MISCELLANEOUS............................................. 20
8.1. No Waiver, Remedies Cumulative.................... 20
8.2. Survival of Representations....................... 20
8.3. Expenses.......................................... 20
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
8.4. Notices........................................... 20
8.5. Governing Law..................................... 21
8.6. Successors and Assigns............................ 21
8.7. Counterparts...................................... 21
8.8. No Usury.......................................... 21
8.9. Powers............................................ 21
8.10. Approvals......................................... 21
8.11 Jurisdiction, Service of Process.................. 21
8.12. Multiple Borrowers................................ 22
8.13. Other Provisions.................................. 22
8.14. WAIVER OF JURY TRIAL.............................. 22
</TABLE>
iii
<PAGE> 5
REVOLVING CREDIT AND SECURITY AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of October 12, 1994, between TERRANO
CORPORATION, a Nebraska corporation, ("Terrano") and DYNAMIC HEALTHCARE
TECHNOLOGIES, INC., a Florida corporation ("Dynamic"), (the "Borrower") and
FIRST UNION NATIONAL BANK OF FLORIDA, a national banking association (the
"Lender");
W I T N E S S E T H:
WHEREAS, Terrano and its wholly owned subsidiary, Dynamic (hereafter
referred to jointly and severally as the "Borrower") have applied to the Lender
for a revolving line of credit loan in the principal amount of $4,000,000.00
(the "Loan"), which is evidenced by a Promissory Note and Security Agreement in
the same amount of even date herewith made by Borrower in favor of Lender; and
WHEREAS, the Lender is willing to extend such credit to Borrower on the
terms and subject to the conditions set forth in the Note and in this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and to induce the Lender to extend credit to the
Borrower, the parties agree as follows:
1. DEFINITIONS. In addition to terms defined elsewhere in this
Agreement, the following terms have the meanings indicated:
1.1. Defined Terms.
"Account" shall mean any account or contract receivable of
Borrower, including any rights of payment for goods sold or leased or for
services rendered, which is not evidenced by an instrument or chattel paper,
whether or not it has been earned by performance, and in addition includes all
property included in the definition of "accounts" as used in the Code, together
with any guaranties, letters of credit and other security therefor.
"Account Debtor" shall mean a Person who is obligated under any
Account, Chattel Paper, General Intangible or instrument (as instrument is
defined in the Code).
"Advance" shall mean an advance of proceeds of the Revolving
Loan to the Borrower pursuant to this Agreement, on any given Advance Date.
"Advance Date" shall mean the date as of which an Advance is
made.
"Advance Request" shall mean a request for an Advance under the
Revolving Loan as identified in Section 3.3 ("Notice and Manner of Borrowing")
hereof.
"Affiliate" of a named Person shall mean (a) any Person owing
5% more of the voting stock or rights of such named Person or of which the
named Person owns 5% or more of such voting stock or rights; (b) any Person
controlling, controlled by or under common control with such named Person; (c)
1
<PAGE> 6
any officer or director of such named Person or any Affiliates of the named
Person; and (d) any family member of the named Person or any Affiliate of such
named Person.
"Borrowing Base" shall have the meaning set forth in Section 3.2
hereof ("Limitations on Advances").
"Business Day" shall mean a weekday on which commercial banks are open
for business in Orlando, Florida.
"Chattel Paper" shall mean all writing or writings which evidence both
a monetary obligation and a security interest in or the lease of specific goods
and in addition includes all property included in the definition of "chattel
paper" as used in the Code, together with any guaranties, letters of credit and
other security therefor.
"Code" shall mean the Uniform Commercial Code, as in effect in Florida
from time to time.
"Collateral" means all assets of the Borrower, wherever located and
whether now owned by Borrower or hereafter acquired, including without
limitation the following: (a) all General Intangibles subject to any valid
license agreements; (b) all Accounts, Contracts, and Chattel Paper and any
other instrument or intangible representing payment for goods or services; (c)
all Equipment; (d) all funds in the Special Loan Account or otherwise on
deposit with or under the control of the Lender or its agents or
correspondents, if any; and (e) all parts, replacements, substitutions,
profits, products and cash and non-cash proceeds of any of the foregoing
(including insurance proceeds payable by reason of loss or damage thereto) in
any form and wherever located. Collateral shall include all written or
electronically recorded records relating to any such Collateral and other
rights relating thereto.
"Debt" shall mean all liabilities of Borrower as determined under
generally accepted accounting principles and all obligations which Borrower has
guaranteed or endorsed or is otherwise secondarily or jointly liable, and shall
include, without limitation (a) all obligations for borrowed money or purchased
assets, (b) obligations secured by assets whether or not any personal liability
exists, (c) the capitalized amount of any capital or finance lease obligations,
(d) the unfunded portion of pension or benefit plans or other similar
liabilities, (e) obligations as a general partner, (f) contingent obligations
pursuant to guaranties, endorsements, letters of credit and other secondary
liabilities, and (g) obligations for deposits.
"Default Rate" shall mean the highest lawful rate of interest per annum
specified in any Note to apply after a default under such Note and the passage
of any applicable cure period or, if no such rate is specified, a rate equal to
the lesser of (a) five (5) percentage points above the rate on the Loan
otherwise in effect from time to time, or (b) the highest rate of interest
allowed by law.
"Eligible Accounts" shall mean all Accounts (valued net of any sales
tax included in the invoiced amount, the maximum amount of any discounts or
other reductions) of the Borrower payable not more than forty-five (45) days
after the date of invoice and as to which the Lender has a first priority
perfected security interest subject only to Permitted Liens, excluding (a)
Accounts outstanding for ninety-one (91) days or more from the date of
invoice; (b) Accounts owing from any Affiliate of the Borrower; (c) Accounts
owed by a creditor of the Borrower except the portion of any Accounts owed by a
creditor of the Borrower which are not in dispute or subject to any
counterclaim, contra-account or offset; (d) Accounts owing by any Account
debtor which is insolvent or generally unable to pay its debts as they
2
<PAGE> 7
become due; and (e) Accounts of the type described in Exhibit 1.1B (if any) and
other Accounts the validity, collectibility or amount of which is determined in
good faith by the Borrower or the Lender to be doubtful.
"Equipment" shall mean all furniture, fixtures, equipment, motor
vehicles, rolling stock and other tangible property of the Borrower of every
description, except Inventory and in addition includes all property included in
the definition of "equipment" as used in the Code.
"Event of Default" shall mean any event specified as such in Section 6.1
hereof ("EVENTS OF DEFAULT"), provided that there shall have been satisfied any
requirement in connection with such event for the giving of notice or the lapse
of time, or both; "Default" or "default" shall mean any of such events, whether
or not any such requirement for the giving of notice or the lapse of time or the
happening of any further condition, event or act shall have been satisfied.
"General Intangibles" shall mean all intangible personal property
(including choses in action) except Accounts, Chattel Paper and instruments (as
defined in the Code), including all contract rights, copyrights, trademarks,
trade names, service marks, patents, patent drawings, designs, formulas, rights
to a Person's name itself, customer lists, rights to all prepaid expenses,
marketing expenses, rights to receive future contracts, fees, commissions and
orders relating in any respect to any business of a Borrower, all licenses and
permits, all computer programs and other software owned by Borrower (subject to
existing license agreements), or which Borrower has the right to use, and all
rights for breach of warranty or other claims for funds to which Borrower may
be entitled, and in addition includes all property included in the definition
of "general intangibles" as used in the Code.
"Indebtedness" shall mean all obligations now or hereafter owed to the
Lender by the Borrower, whether related or unrelated to the Loan, including,
without limitation, amounts owed or to be owed under the terms of the Loan
Documents, or arising out of the transactions described therein, including,
without limitation, sums advanced to pay overdrafts on any account maintained
by the Borrower with the Lender, reimbursement obligations for outstanding
letters of credit or banker's acceptances issued to the account of the
Borrower, or its Subsidiaries, amounts paid by the Lender under letters of
credit or drafts accepted by the Lender for the account of the Borrower or its
Subsidiaries, together with all interest accruing thereon, all fees, all costs
of collection, attorneys' fees and expenses of or advances by the Lender which
the Lender pays or incurs in discharge of obligations of the Borrower or to
repossess, protect, preserve, store or dispose of any Collateral, whether such
amounts are now due or hereafter become due, direct or indirect and whether
such amounts due are from time to time reduced or entirely extinguished and
thereafter re-incurred.
"Inventory" shall mean Inventory as defined under the Uniform Commercial
Code as enacted in the State of Florida.
"Lien" (collectively "Liens") shall mean any mortgage, pledge,
statutory lien or other lien arising by operation of law, security interest,
trust arrangement, financing lease, collateral assignment or other encumbrance,
or any segregation of assets or revenues (whether or not constituting a
security interest) with respect to any present of future assets, revenues or
rights to the receipt of income of the Person referred to in the context in
which the term is used.
"Loan" shall mean the Revolving Loan identified in Section 3.1 hereof
("Revolving Loan").
3
<PAGE> 8
"Loan Documents" shall mean this Agreement, any other Security
Agreement, any Note, the Advance Requests, UCC-1 financing statements and all
other documents and instruments now of hereafter evidencing, describing, or
securing the Indebtedness contemplated hereby or delivered in connection
herewith, as they may be modified.
"Maximum Loan Amount" shall mean $4,000,000.00.
"Note" shall mean the Revolving Note, as defined in Section 3.1
("Revolving Loan"), and any other promissory note now or hereafter evidencing
any Indebtedness, and all modifications, extensions and renewals thereof.
"Permitted Debt" shall mean (a) the Indebtedness; and (b) any other
Debt listed on Exhibit 1.1C hereto (if any) and any extensions, renewals,
replacements, modifications and refundings of any such Debt if, and to the
extent, permitted by Exhibit 1.1C; and (c) such other Debt as the Lender may
consent to in writing from time to time.
"Permitted Liens or Other Interests" shall mean (a) Liens securing the
Indebtedness; (b) Liens for taxes and other statutory Liens, landlord's Liens
and similar Liens arising out of operation of law (provided they are
subordinate to the Lender's Liens on Collateral) so long as the obligations
secured thereby are not past due or are being contested as permitted herein;
(c) Liens described on Exhibit 1.1D hereto (if any), provided, however, that no
debt not now secured by such Liens shall become secured by such Liens hereafter
and such Liens shall not encumber any other assets; (d) such other Liens as the
Lender may consent to in writing from time to time; and (e) any licenses given
by Borrower to third parties for the use of any software owned by Borrower.
"Person" shall mean any natural person, corporation, unincorporated
organization, trust, joint stock company, joint venture, association, company,
limited or general partnership, any government, or any agency or political
subdivision of any government.
"Prime Rate" shall mean that index rate of interest per annum announced
from time to time by the Lender (or its successor) as its "prime rate" or "prime
lending rate" (which rate shall not necessarily be the best or lowest rate for
any particular type of loan or for loans to any particular class or category
of customer). A change in the Prime Rate shall become effective from the
beginning of the day on which such change is announced by the Lender.
"Security Agreement" shall mean this Agreement as it relates to a
security interest in the Collateral, and any other mortgage, security agreement
or similar instrument now or hereafter executed by the Borrower granting the
Lender a security interest in any Collateral to secure the Indebtedness.
"Special Loan Account" shall mean the demand deposit account
established pursuant to Section 3.5 hereof ("Special Loan Account").
"Subsidiary" shall mean any corporation, partnership or other Person in
which the Borrower, directly or indirectly, owns more than fifty percent (50%)
of the stock, capital or income interests, or other beneficial interests, or
which is effectively controlled by the Borrower.
4
<PAGE> 9
1.2. Financial Terms. All financial terms used herein shall have
the meanings assigned to them under generally accepted accounting principles
unless another meaning shall be specified.
2. REPRESENTATIONS AND WARRANTIES. In order to induce the Lender
to enter into this Agreement and to make the Loans provided for herein, the
Borrower makes the following representations and warranties, all of which shall
survive the execution and delivery of the Loan Documents. Unless otherwise
specified, such representations and warranties shall be deemed made as of the
date hereof and as of the Advance Date of any Advance by the Lender to the
Borrower.
2.1. Valid Existence and Power. The Borrower and each Subsidiary is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization is duly qualified or licensed to
transact business in all places where the failure to be so qualified would have
a material adverse effect on it. The Borrower has the power to make and perform
the Loan Documents executed by it and all such instruments will constitute the
legal, valid and binding obligations of Borrower, enforceable in accordance
with their respective terms, subject only to bankruptcy and similar laws
affecting creditors' rights generally.
2.2. Authority. The execution, delivery and performance thereof by
the Borrower of any Loan Document has been duly authorized by all necessary
action of Borrower, and do not and will not violate any provision of law or
regulation, or any writ, order or decree of any court or governmental or
regulatory authority or agency or any provision of the governing instruments of
Borrower, and do not and will not, with the passage of time or the giving of
notice, result in a breach of, or constitute a default or require any consent
under, or result in the creation of any Lien upon any property or assets of
Borrower pursuant to, any law, regulation, instrument or agreement to which
Borrower is a party or by which Borrower or its respective properties may be
subject, bound or affected.
2.3. Financial Condition. Other than as disclosed in financial
statements delivered on or prior to the date hereof to the Lender, neither the
Borrower nor any Subsidiary has any direct or contingent obligations or
liabilities (including any guarantees or leases) or any material unrealized or
anticipated losses from any commitments of Borrower except as described on
Exhibit 2.3 (if any). The Borrower is not aware of any material adverse fact
(other than facts which are generally available to the public and not
particular to the Borrower, such as general economic or industry trends)
concerning the conditions of future prospects of the Borrower or any Subsidiary
which has not been fully disclosed to the Lender, including any material
adverse change in the operations or financial condition of the Borrower since
the date of the most recent financial statements delivered to the Lender.
2.4. Litigation. Except as disclosed on Exhibit 2.4 (if any),
there are not suits or proceedings pending, or to the knowledge of the
Borrower threatened, before any court or by or before any governmental or
regulatory authority, commission, bureau of agency or public regulatory body
against or affecting the Borrower, the Subsidiary or their assets, which if
adversely determined would have a material adverse effect on the financial
condition or business of the Borrower or such Subsidiary.
2.5. Agreements, Etc. Neither the Borrower nor any Subsidiary is a
party to any agreement or instrument or subject to any court order,
governmental decree or any charter or other corporate restriction, adversely
affecting its business, properties or assets, operations or condition
(financial or otherwise) nor is the Borrower in default in the performance,
observance or fulfillment of any of the
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obligations, covenants or conditions contained in any agreement or instrument
to which it is a party, or any law, regulation, decree, order or the like.
2.6. Authorizations. All authorizations, consents, approvals and
licenses required under applicable law or regulation for the ownership or
operation of the property owned or operated by the Borrower or any Subsidiary
or for the conduct of any business in which it is engaged have been duly issued
and are in full force and effect, and to the best knowledge and belief of
Borrower after diligent inquiry, it is not in default, nor has any event
occurred which with the passage of time or the giving of notice, or both, would
constitute a default, under any of the terms or provisions of any part thereof,
or under any order or decree, ruling, regulation, closing agreement or other
decision or instrument of any governmental commission, bureau or other
administrative agency or public regulatory body having jurisdiction over the
Borrower, which default would have a material adverse effect on the Borrower.
Except as noted herein, no approval, consent or authorization of, or filing or
registration with, any governmental commission, bureau or other regulatory
authority or agency is required with respect to the execution, delivery or
performance of any Loan Document.
2.7. Title. The Borrower and each Subsidiary has good title to all
of the assets shown in its financial statements free and clear of all Liens,
except Permitted Liens. The Borrower alone has full ownership rights in all
Collateral.
2.8. Collateral. The security interests granted to the Lender
herein and pursuant to any other Security Agreement (a) constitute and, as to
subsequently acquired property included in the Collateral covered by the
Security Agreement, will constitute, security interests under the Code entitled
to all of the rights, benefits and priorities provided by the Code and (b) are,
and as to such subsequently acquired Collateral will be fully perfected,
superior and prior to the rights of all third persons, now existing or
hereafter arising, subject only to Permitted Liens. All of the Collateral is
intended for use solely in the Borrower's business.
2.9. Location. The chief executive office of the Borrower where the
Borrower's business records are located is the address for notices in Section
8.4 ("Notices") and the Borrower has no other places of business except as
shown on Exhibit 2.9 (if any).
2.10. Taxes. The Borrower and each Subsidiary has filed all federal
and state income and other tax returns which, to the best knowledge of the
Borrower, are required to be filed, and have paid all taxes as shown on said
returns and all taxes, including ad valorem taxes, shown on all assessments
received by it to the extent that such taxes have become due. Neither the
Borrower nor any Subsidiary is subject to any federal, state or local tax Liens
nor has the Borrower received any notice of deficiency or other official notice
to pay any past due taxes. The Borrower and each Subsidiary has paid all sales
and excise taxes payable by it.
2.11. Withholding Taxes. The Borrower and each Subsidiary has paid
all withholding, FICA and other payments required by federal, state or local
governments with respect to any wages paid to employees.
2.12. Labor Law Matters. No goods or services have been or will be
produced by the Borrower or any Subsidiary in violation of any applicable labor
laws or regulations or any collective bargaining
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agreement or other labor agreements or in violation of any minimum wage,
wage-and-hour or other similar laws or regulations.
2.13. Accounts. Each Account, instrument, Chattel Paper and other
writing constituting any portion of the Collateral is (a) genuine and
enforceable in accordance with its terms except for such limits thereon arising
from bankruptcy and similar laws relating to creditors' rights; (b) not subject
to any defense, setoff, claim or counterclaim of a material nature against the
Borrower except as to which the Borrower has notified the Lender in writing;
and (c) not subject to any other circumstances that would impair the validity,
enforceability or amount of such Collateral except as to which the Borrower has
notified the Lender in writing. Each Account included in any Advance Request,
report or other document as an Eligible Account meets all the requirements of
an Eligible Account set forth herein.
2.14. Use and Location of Collateral. In all material respects, the
Collateral is located only, and shall at all times be kept and maintained only,
at the Borrower's location or locations as described herein except in the event
of Borrower's employees temporarily utilizing Collateral in the installation of
software and support of customer contracts. No such Collateral is attached or
affixed to any real property so as to be classified as a fixture unless the
Lender has otherwise agreed in writing.
2.15. Judgment Liens. Neither the Borrower nor any Subsidiary, nor
any of their assets, are subject to any unpaid judgments (whether or not
stayed) or any judgment liens in any jurisdiction.
2.16. Intent and Effect of Transactions. This Agreement and the
transactions contemplated herein (a) are not made or incurred with intent to
hinder, delay or defraud any person to whom the Borrower has been, is now, or
may hereafter become indebted; (b) do not render the Borrower insolvent nor is
the Borrower insolvent on the date of this Agreement; (c) do not leave the
Borrower with an unreasonably small capital with which to engage in its
business or in any business or transaction in which it intends to engage; and
(d) are not entered into with the intent to incur, or with the belief that the
Borrower would incur, debts that would be beyond its ability to pay as such
debts mature.
2.17. Subsidiaries. If the Borrower has any Subsidiaries, they are
listed on Exhibit 2.17.
2.18. Hazardous Materials. The Borrower's property and improvements
thereon have not, to the best knowledge of Borrower after diligent inquiry, in
the past been used, are not presently being used, and will not in the future be
used for, nor does the Borrower or any Subsidiary engage in, the handling,
storage, manufacture, disposition, processing, transportation, use or disposal
of hazardous or toxic materials.
2.19. ERISA. The Borrower has furnished to the Lender true and
complete copies of the latest annual report required to be filed pursuant to
Section 104 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), with respect to each employee benefit plan or other plan maintained
for employees of the Borrower or any Subsidiary and covered by Title IV of
ERISA (a "Plan"), and no Termination Event (as hereinafter defined) with
respect to any Plan has occurred and is continuing. For the purposes of this
Agreement, a "Termination Event" shall mean a "reportable event" as defined in
Section 4043(b) of ERISA ("Reportable Event"), or the filing of a notice of
intent to terminate under Section 4041 of ERISA. Neither the Borrower nor any
Subsidiary has any unfunded liability with respect to any such plan.
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<PAGE> 12
2.20. Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" as defined in the Investment Company Act
of 1940, as amended.
2.21. Additional Representations. Any additional representations or
warranties set forth on Exhibit 2.21 (if any) hereto are true and correct in
all material respects.
3. THE LOAN
3.1. Discretionary Revolving Loan. The Lender may in its reasonable
discretion lend to the Borrower a total principal amount not to exceed the
Maximum Loan Amount (the "Revolving Loan") for working capital to be used in
the operation of the Borrower's business. The Revolving Loan shall be evidenced
by and payable in accordance with the terms of a promissory note in the face
amount of the Maximum Loan Amount (the "Revolving Note"). The Revolving Note
shall evidence the outstanding principal balance of the Loan, as it may change
from time to time. ADVANCES HEREUNDER ARE DISCRETIONARY WITH THE LENDER AND THE
PRINCIPAL BALANCE OF THE REVOLVING LOAN, OR SO MUCH THEREOF AS MAY BE ADVANCED,
SHALL BE PAYABLE IN FULL ON DEMAND. Advances under the Revolving Loan shall be
subject to the following terms:
(a) Advances of proceeds of the Revolving Loan shall be
limited to the Maximum Loan Amount at any time outstanding;
(b) Should there occur any overdraft of any deposit account
maintained by the Borrower with the Lender, the Lender may, at its
option, disburse funds (whether or not in excess of the Maximum Loan
Amount) to eliminate such overdraft and such disbursement shall be
deemed an Advance of Loan proceeds hereunder entitled to all of the
benefits of the Loan Documents. Nothing herein shall be deemed an
authorization of or consent to the creation of an overdraft in any
account or create any obligations on the part of the Lender;
(c) All Advances by the Lender to or for the account of the
Borrower, whether or not in excess of the Maximum Loan Amount, shall be
considered part of the Indebtedness under the Note, shall bear interest
as provided in the Note, and shall be entitled to all rights and
benefits hereunder and under all other Loan Documents; and
(d) The Borrower shall not request and the Lender will not be
required to consider requests for Advances after April 30, 1996;
provided that the Lender may in its discretion extend such date in
writing and further provided that the repayment obligations of the
Borrower for Advances made by the Lender after such date (as it may be
extended) shall be binding on the Borrower or other persons liable for
any Indebtedness to the same extent as obligations with respect to
Advances made prior to such date.
3.2. Limitations on Advances. The outstanding balance of the
Revolving Loan may increase and decrease from time to time, and Advances
thereunder may be repaid and reborrowed, but the total of Advances outstanding
at any one time under the Revolving Loan shall never exceed the lesser of:
(a) The Maximum Loan Amount; or
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(b) the "Borrowing Base," which shall be a sum equal to 75%
of the total amount of Eligible Accounts.
The Borrower shall immediately pay to the Lender any amount by which
the Loan exceeds the Borrowing Base or the Maximum Loan Amount, whichever is
less. The Lender may, in its discretion, make, or permit to remain outstanding,
Advances to the Borrower in excess of the Borrowing Base and/or the Maximum
Loan Amount and all such amounts shall be part of the Loan and Indebtedness,
shall bear interest as provided in the Note, shall be payable on demand and
shall be entitled to all rights and security provided for herein, the Security
Agreement and all other Loan documents.
3.3 Notice and Manner of Borrowing. Unless another satisfactory
procedure for disbursements is agreed upon in writing by the parties, the
following procedure will be used for disbursement of proceeds of the Revolving
Loan. The Borrower shall deliver an Advance Request to the Lender not later
than 12:00 noon, Orlando time, on the Business Day of the proposed Advance
Date, in the form attached hereto as Exhibit 3.3, setting forth the amount of
the requested Advance, setting forth the Eligible Accounts of the Borrower
(together with other components of the Borrowing Base, if any) and a
reconciliation from the previous Advance Request (or monthly report),
specifying the date (which shall be a Business Day), and the amount of the
proposed Advance of proceeds, and providing such other information as the
Lender may require. The foregoing notwithstanding, Lender shall accept from
Borrower a verbal Advance Request, so long as such request is followed on the
same Business Day by an Advance Request in the form attached hereto as Exhibit
3.3 delivered to Lender via telecopier or facsimile and then further followed
by a written Advance Request in the form attached hereto as Exhibit 3.3
delivered by hand, U.S. Mail, or overnight delivery within two (2) business
days.
3.4 Calculation of Interest. All interest under the Note or
hereunder shall be calculated on the basis of a 360-day year for the actual
number of days elapsed in an interest period (actual/360 method), unless the
Lender shall otherwise elect.
3.5 Special Loan Account. The Borrower shall establish within six
(6) months from the date hereof and upon written notification by Lender and
maintain with the Lender, during the term of the Loan, a demand deposit account
(the "Special Loan Account") into which the Borrower shall deposit, as
received, all proceeds from the sale of Inventory and collection of Accounts
and other Collateral in the form of checks that it receives for payment within
two (2) days of receipt, drafts, cash or the like, and all such proceeds shall
constitute Collateral. Upon establishment of the Special Loan Account to be set
up on six months, the Lender shall debit collected funds from the Special Loan
Account and apply the balance thereof against the outstanding balance of the
Revolving Note on or after the Business Day following the Business Day of
deposit. The Lender may, but shall not be required to, apply to the Loan any
amounts represented by uncleared checks, subject to collection. Unless the
Lender shall agree to other arrangements, the Borrower shall direct (by
instruction on invoices and otherwise) all Account Debtors to make payments to
a designated post office box under the control of the Lender, which payments
shall be deposited directly into the Special Loan Account. The Borrower shall
pay the Lender's reasonable fees and charges in connection with such lock-box
arrangement.
3.6 Debit for Interest and Expenses. The Lender may debit the
Special Loan Account and/or make Advances to the Borrower) whether or not in
excess of the Maximum Loan Amount and/or the Borrowing Base) and apply such
amounts to the payment of interest, fees, expenses and other amounts
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<PAGE> 14
to which the Lender may be entitled from time to time and the Lender is hereby
irrevocably authorized to do so without consent of the Borrower.
3.7. Overdue Amounts. Any payments not made as and when due shall
bear interest from the date due until paid at the Default Rate.
3.8. Sales Tax. The Borrower shall notify the Lender if any Account
includes any sales or other similar tax and the Lender may, but shall not be
obligated to, remit any such taxes directly to the taxing authority and make
Advances or charge the Special Loan Account therefor. In no event shall the
Lender be liable for any such taxes.
4. Conditions Precedent to Borrowing. Prior to any advance of the
proceeds of any Loan, the following conditions shall have been satisfied, in
the sole reasonable opinion of the Lender and its counsel:
4.1. Conditions Precedent to Initial Advance. In addition to any
other requirement set forth in this Agreement, the Lender will not make the
initial Advance under the Revolving Loan unless and until the following
conditions shall have been satisfied:
(a) Loan Documents. The Borrower and each other party to
any Loan Documents, as applicable, shall have executed and delivered
this Agreement, the Note, and other required Loan Documents, all in
form and substance satisfactory to the Lender.
(b) Supporting Documents. The Borrower shall cause to be
delivered to the Lender the following documents:
(i) A copy of the governing instruments of the
Borrower and each Subsidiary, and a good standing
certificate of the Borrower and each Subsidiary,
certified by the appropriate official of its
state of incorporation and the State of Florida,
if different;
(ii) Incumbency certificate and certified resolutions
of the board of directors (or other appropriate
Persons) of the Borrower and each other Person
executing any Loan Documents authorizing the
execution, delivery and performance of the Loan
Documents; and
(iii) UCC-11 searches and other Lien searches showing
no existing security interests in or Liens on the
Collateral other than the security interests of
the Lender, except Permitted Liens; and
(iv) An attorneys opinion from Borrower's Florida
counsel confirming the accuracy of those
representations of Borrower set forth in Sections
2.1, 2.2, 2.4, 2.5, 2.6 and 2.8 above.
(c) Insurance. The Borrower shall have delivered to the
Lender satisfactory evidence of insurance meeting the requirements of
Section 5.3 within forty-five (45) days from the date hereof
("Insurance").
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<PAGE> 15
(d) Perfection of Liens. UCC-1 financing statements and, if
applicable, certificates of title covering the Collateral executed by
the Borrower shall duly have been recorded or filed in the manner and
places required by law to establish, preserve, protect and perfect the
interests and rights created or intended to be created by this Agreement
and any other Security Agreement; and all taxes, fees and other charges
in connection with the execution, delivery and filing of this Agreement,
the Security Agreement and the financing statements shall duly have been
paid.
(e) Subordinations. The Lender shall have received
subordinations satisfactory to it from (i) all lessors that might have
landlord's Liens on any Collateral within thirty (30) days of the date
hereof and (ii) all Affiliates as required by Section 5.19
("Subordination").
(f) Life Insurance. The original of a life insurance policy in
the amount of $2,000,000.00 on each of the lives of Mitchel J. Laskey
and David M. Pomerance with an appropriate assignment of all death
benefits on or before November 28, 1994.
(g) Additional Documents. The Borrower shall have delivered to
the Lender all additional opinions, documents, certificates and other
assurances that the Lender or its counsel may require.
4.2. Conditions Precedent to Each Advance. The following
conditions, in addition to any other requirements set forth in this Agreement,
shall have been met or performed by the Advance Date with respect to any
Advance Request:
(a) Advance Request. The Borrower shall have delivered to the
bank an Advance Request and other information, as required under in
Section 3.3 ("Notice and Manner of Borrowing").
(b) No Default. No default shall have occurred and be
continuing or will occur upon the making of the Advance in question and
the Borrower shall have delivered to the Lender an officer's certificate
to such effect, which may be incorporated in the Advance Request.
(c) Correctness of Representations. All representations and
warranties made by the Borrower herein or subsequently hereto or
otherwise in writing in connection herewith or subsequently hereto shall
be true and correct with the same effect as though the representations
and warranties had been made on and as of the proposed Advance Date
except for any representation or warranty limited by its terms to a
specific date and taking into account any amendments to the schedules or
amendments as a result of any disclosures made to Lender by Borrower in
writing as of a specific date, and the Borrower shall have delivered to
the Lender an officer's certificate to such effect, which may be
incorporated in the Advance Request.
(d) No Adverse Change. There shall have been no material
adverse change in the condition, financial or otherwise, of the Borrower
or any Subsidiary from such condition as it existed on the date of the
most recent financial statements of the Borrower or any Subsidiary
delivered prior to date hereof.
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<PAGE> 16
(e) Periodic Report. The Lender shall have received a
current monthly Accounts Receivable Report as required by Section
5.6(a) ("Financial Information") sufficient in form and substance
to calculate and verify the Borrowing Base.
(f) Further Assurances. The Borrower shall have delivered
such further documentation or assurances as the Lender may reasonably
require.
5. Covenants of the Borrower. The Borrower covenants and agrees that from
the date hereof and until payment in full of the Indebtedness and the formal
termination of this Agreement, unless the Lender shall otherwise consent in
writing, the Borrower and each Subsidiary:
5.1 Use of Loan Proceeds. Shall use the proceeds of the Loan only
in Borrower's ordinary course of business or otherwise permitted by the Lender
and furnish the Lender all evidence that it may reasonably require with respect
to such use.
5.2 Maintenance of Business and Properties. Shall at all times
maintain, preserve and protect all Collateral and all the remainder of its
material property used or useful in the conduct of its business, and keep the
same in good repair, working order and condition, and from time to time make,
or cause to be made, all material needful and proper repairs, renewals,
replacements, betterments and improvements thereto so that the business carried
on in connection therewith may be conducted properly and in accordance with
standards generally accepted in businesses of a similar type and size at all
times, and maintain and keep in full force and effect all licenses and permits
necessary to the proper conduct of its business.
5.3 Insurance. Shall maintain such liability insurance, workers'
compensation insurance, business interruption insurance and casualty insurance
as may be required by law, customary and usual for prudent businesses in its
industry or as may be reasonably required by the Lender and shall insure and
keep insured all Collateral and other properties in good and responsible
insurance companies having a rating of A+ or above. However, Lender shall
have the right to notify Borrower within thirty (30) days of receipt of the
name of an insurance company that such insurance company is not satisfactory to
Lender in Lender's reasonable discretion, in which event Borrower shall have
thirty (30) days to obtain insurance from another responsible insurance company
having a rating of A+ or above. All hazard insurance covering Collateral shall
be in amounts and shall contain co-insurance and deductible provisions approved
by the Lender, shall name and directly insure the Lender as secured party and
loss payee under a long-form New York standard loss payee clause, or its
equivalent, and shall not be terminable except upon 30 days' written notice to
the Lender.
5.4 Notice of Default. Shall provide to the Lender immediate
notice of (a) the occurrence of a Default, (b) any material litigation or
material changes in existing litigation or any judgment against it or its
assets, (c) any material damage or loss to property, (d) any notice from taxing
authorities as to claimed deficiencies or any tax lien or any notice relating
to alleged ERISA violations, (e) any Reportable Event, as defined in ERISA, (f)
any rejection, return, offset, dispute, loss or other circumstances having a
material adverse effect on any Collateral, and (g) any loss or threatened loss
of material licenses or permits.
5.5 Inspections. Shall permit inspections of the Collateral and
the records of the Borrower pertaining thereto, at such times and in such
manner as may be reasonably required by the Lender and
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<PAGE> 17
shall further permit such inspection, review and audits or its other records
and its properties (with such reasonable frequency and at such reasonable times
as the Lender may desire) by the Lender as the Lender may deem reasonably
necessary or reasonably desirable from time to time. The cost of such audits,
reviews and inspections shall be borne by the Borrower.
5.6 Financial Information. Shall maintain books and records in
accordance with generally accepted accounting principles and shall furnish to
the Lender the following periodic financial information:
(a) Periodic Borrowing Base Reports. Within fifteen (15) days
of the end of each month (or more frequently if required by the
Lender), (i) a report listing billed and unbilled Accounts and all
Eligible Accounts of the Borrower as of the last Business Day of such
month (the "Accounts Receivable Report") which shall include the
amount and age of each Account, the name and mailing address of each
Account Debtor and such other information as the Lender may require in
order to verify the Eligible Accounts, all in reasonable detail and in
form acceptable to the Lender.
(b) Quarterly Reports. Within 60 days after the end of each
calendar quarter, an income statement and a balance sheet prepared in
accordance with generally accepted accounting principles, of the end
of any such quarter and year-to-date, each certified by the chief
financial officer or president of the Borrower as being true and
accurate;
(c) Annual Reports. Within 90 days after the end of each
fiscal year, an income statement and a reconciliation of surplus
statement of the Borrower for such year, and a balance sheet as of the
end of such year, prepared in accordance with generally accepted
accounting principles, audited without scope limitations (including
Management Letter) by certified by independent certified public
accountants of recognized standing selected by the Borrower and
satisfactory to the Lender; and
(d) No Default Certificates. Together with each report
required by Subsection (b) and (c), shall submit a certificate
of its president or chief financial officer that, to the best knowledge
and belief after diligent inquiry, no Default or Event of Default then
exists or if a Default or Event of Default exists, the nature and
duration thereof and the Borrower's intention with respect thereto, and
in addition, shall cause the Borrower's independent auditors (if
applicable) to submit to the Lender, together with its audit report, a
statement that, in the course of such audit, it discovered no
circumstances which it believes would result in a Default or Event of
Default or it if discovered any such circumstances, the nature and
duration thereof. If the Borrower has Subsidiaries, the financial
statements required above shall be in consolidated and, if required by
the Lender, consolidating form for the Borrower and all Subsidiaries
required by generally accepted accounting principles to be consolidated
for financial reporting purposes. In addition to the financial
statements required herein, the Lender reserves the right to reasonably
require other or additional financial or other information concerning
the Borrower, its Subsidiaries, and/or the Collateral.
5.7 Debt. Shall not create or permit to exist any Debt in excess
of an aggregate of $200,000.00, including any guaranties or other contingent
obligations, except Permitted Debt.
5.8 Liens. Shall not create or permit to exist any Liens on any of
the Collateral except Permitted Liens.
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5.9. Dividends. Without obtaining the prior written approval of
Lender, which approval shall not be unreasonably withheld, shall not pay or
declare any dividends (other than stock dividends) or other distribution or
purchase, redeem or otherwise acquire any stock or other equity interests or pay
or acquire any debt subordinate to the Indebtedness unless, after giving effect
thereto, there shall be no Default hereunder and such payment or acquisition is
specifically permitted by Exhibit 5.9 hereto (if any); provided, however, that
any Subsidiary may pay dividends to the Borrower or another Subsidiary wholly
owned by the Borrower.
5.10. Merger, Sale, Etc.. Shall maintain its corporate existence,
good standing and necessary qualifications to do business and shall not merge
or consolidate with any Person or acquire all or substantially all of the
assets of, or 50% or more of any class of equity interest of, any Person or
sell, lease, assign or otherwise dispose of any Collateral or substantial
portion of its other assets (other than sales of obsolete or worn-out equipment
and sales of Inventory in the ordinary course of business), or sell or
otherwise dispose of stock of any Subsidiary, without obtaining the prior
written approval of Lender, which approval shall not be unreasonably withheld.
5.11. Loans and Other Investments. Shall not make or permit to exist
any advances or loans to, or guarantee or become contingently liable, directly
or indirectly, in connection with the obligations, leases, stock or dividends
of, or own, purchase or make any commitment to purchase any stock, bonds,
notes, debentures or other securities of, or any interest in, or make any
capital contributions to (all of which are sometimes collectively referred to
herein as "Investments") any Person except for (a) purchases of direct
obligations of the federal government, (b) deposits in commercial banks, (c)
commercial paper of any U.S. corporation having the highest ratings then given
by Moody's Inventors Service, Inc. or Standard & Poor's Corporation, (d)
existing investments in Subsidiaries, and (e) endorsement of negotiable
instruments for collection in the ordinary course of business, without
obtaining the prior written approval of Lender, which approval shall not be
unreasonably withheld.
5.12. Change in Business. Shall not enter into any business which is
substantially different from the business or businesses in which it is
presently engaged.
5.13. Accounts. (a) Shall not sell, assign or discount any of its
Accounts, Chattel Paper or any promissory notes held by it; and (b) shall
notify the Lender promptly in writing with any discount, offset or other
deductions not shown on the face of an Account invoice and any dispute over an
Account other than the discount of an Account invoice in the ordinary course of
business for collection, and any information relating to an adverse change in
any Account Debtor's financial condition or ability to pay its obligations.
5.14. Transactions with Affiliates. Shall not directly or indirectly
purchase, acquire or lease any property from, or sell, transfer or lease any
property to, or otherwise deal with, in the ordinary course of business or
otherwise, any Affiliate (other than a Subsidiary or partnership of which
Mitchel J. Laskey is the general partner); provided, however, that any acts or
transactions prohibited by this Section may be performed or engaged in, after
written notice to the Lender, if upon terms not less favorable to the Borrower
or such Subsidiary than if no such relationship existed. Any such Affiliate may
be a director, officer, employee of the Borrower or any Subsidiary, subject to
the limitations on compensation contained in this section and elsewhere in this
Agreement.
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5.15. No Change in Name, Offices; Removal of Collateral. Shall not,
unless it shall have given 60 days' advance written notice thereof to the
Lender, (a) change its name or the location of its chief executive office or
other office where books or records are kept or (b) permit any Inventory or
other tangible Collateral to be located at any location other than as specified
in Section 2.9. ("Location").
5.16. No Sale, Leaseback. Shall not enter into any
sale-and-leaseback or similar transaction.
5.17. Margin Stock. Shall not use any proceeds of the Loan to
purchase or carry any margin stock (within the meaning of Regulation U of the
Board of Governors of Federal Reserve System) or extend credit to others for
the purpose of purchasing or carrying any margin stock.
5.18. Payment of Taxes, Etc.. Shall pay before delinquent all of its
debts and taxes except that the Lender shall not unreasonably withhold its
consent to nonpayment of taxes being actively contested in accordance with law
(provided that the Lender may require bonding or other assurances).
5.19. Subordination. Shall cause all debt now or hereafter owed to
any Affiliate to be subordinated in right of payment and security to the
Indebtedness in accordance with subordination agreements satisfactory to the
Lender. Notwithstanding the terms hereof, any rights of James A. Terrano or
Mitchel J. Laskey arising out of their employment with Borrower, including
rights arising under any stock option agreement, are not intended to be
subordinate.
5.20. Compliance; Hazardous Materials. Shall strictly comply with
all laws, regulations, ordinances and other legal requirements, specifically
including, without limitation, ERISA, all securities laws and all laws relating
to hazardous materials and the environment. Unless approved in writing by the
Lender, neither the Borrower nor any Subsidiary shall engage in the storage,
manufacture, disposition, processing, handling, use or transportation of any
hazardous or toxic materials, whether or not in compliance with applicable laws
and regulations.
5.21. Subsidiaries. Shall not acquire, form or dispose of any
Subsidiaries or permit any Subsidiary to issue capital stock except to its
parent without the prior written consent of Lender, which consent shall not be
unreasonably withheld.
5.22. Compliance with Assignment Laws. Shall if required by the
Lender comply with the Federal Assignment of Claims Act and any other
applicable law relating to assignment of government contracts.
5.23. Further Assurances. Shall take such further action and provide
to the Lender such further assurances as may be reasonably requested to ensure
compliance with the intent of this Agreement and the other Loan Documents.
5.24. Withholding Taxes. Pay as and when due all employee
withholding, FICA and other payments required by federal, state and local
governments with respect to wages paid to employees.
5.25. Other Covenants. Shall comply with such additional covenants
as may be set forth in Exhibit 5.26 hereto (if any).
15
<PAGE> 20
6. DEFAULT.
6.1. Events of Default. Each of the following shall constitute a
Default, and upon the passage of any applicable cure period shall constitute an
Event of Default:
(a) Any representation or warranty made by the Borrower or
any other party to any Loan Document (other than the Lender) herein or
therein or in any certificate or report furnished in connection herewith
or therewith shall prove to have been untrue or incorrect in any
material respect when made; or
(b) There shall occur any default by the Borrower in the
payment, when due, of any principal of or interest on the Note, any
amounts due hereunder or any other Loan Document or any other
Indebtedness (not cured within any grace period provided in such Note or
in the document or instrument evidencing such Indebtedness); or
(c) There shall occur any default by the Borrower or any
other party to any Loan Document (other than the Lender) in the
performance of any agreement, covenant or obligation contained in this
Agreement or such Loan Document not provided for elsewhere in this
Section 6 and such default is not cured within any grace period provided
in this Agreement or such other Loan Document; or
(d) Any other obligation now or hereafter owed by the
Borrower or any Subsidiary to the Lender shall be in default and not
cured within any period of grace provided therein or Borrower shall be
in default under any obligation in excess of $25,000 owed to any other
obligee and is not diligently pursuing in good faith a defense to such
default, which default entitles the obligee to accelerate any such
obligations or exercise other remedies with respect thereto; or
(e) The Borrower or any Subsidiary shall (i) voluntarily
liquidate or terminate operations or apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of the Borrower or of all or of a substantial part
of its assets, (ii) admit in writing its inability, or be generally
unable, to pay its debts as the debts become due, (iii) make a general
assignment for the benefit of its creditors, (iv) commence a voluntary
case under the federal Bankruptcy Code (as now or hereafter in effect),
(v) file a petition seeking to take advantage of any other law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, (vi) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against it in an
involuntary case under the Bankruptcy Code, or (vii) take any corporate
action for the purpose of effecting any of the foregoing; or
(f) Without its application, approval or consent, a
proceeding shall be commenced, in any court of competent jurisdiction,
seeking in respect of the Borrower any remedy under the federal
Bankruptcy Code, the liquidation, reorganization, dissolution,
winding-up, or composition or readjustment of debt, the appointment of a
trustee, receiver, liquidator or the like of the Borrower, or of all or
any substantial part of the assets of the Borrower, or other like relief
under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts; or
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<PAGE> 21
(g) Any security interest or Lien of the Lender hereunder
or under any other Security Agreement shall not constitute a perfected
security interest of first priority in the Collateral thereby
encumbered, subject only to Permitted Liens; or
(h) There shall occur any material loss, theft, damage or
destruction of any the Collateral, which loss is not fully insured; or
(i) A judgment in excess of $25,000 shall be rendered
against the Borrower or any Subsidiary and shall remain undischarged,
undismissed and unstayed for more than ten days (except judgments
validly covered by insurance with a deductible of not more than $10,000)
or there shall occur any levy upon, or attachment, garnishment or other
seizure of, any material portion of the Collateral or other assets of
the Borrower or any Subsidiary by reason of the issuance of any tax
levy, judicial attachment or garnishment or levy of execution; or
(j) The Borrower or any Subsidiary shall fail to pay, on
demand, any returned or dishonored draft, check, or other item which has
been deposited to the Special Loan Account or otherwise presented to the
Lender and for which the Borrower has received provisional credit; or
(k) The Lender, in good faith, shall deem itself insecure.
(l) Any change in the status in the Borrower's corporate
organization, or any material change in the operational responsibilities of
Mitchel J. Laskey or David M. Pomerance (the "Key Management Personnel").
Borrower acknowledges that in making this Loan, the Lender has relied upon the
recognized expertise and historically proven management abilities of the Key
Management Personnel, as well as on the relationship of trust and confidence
which the Key Management Personnel have engendered with the Lender in their past
dealings. Borrower agrees that it will promptly notify Lender of any change in
the status of the Key Management Personnel in the Borrower's corporate
organization (i.e. officers, directors, Chief Operating Officers, etc.), and of
any material change in the operational responsibilities of either of the Key
Management Personnel.
6.2. Remedies. If any Default shall occur, the Lender may, without
notice to the Borrower, at its option, withhold further Advances to the
Borrower of proceeds of the Loans. Should (a) any Event of Default under
Sections 6.1(a), (c), (d), (e), (f), (g), (h), (i), (j), (k), or (l) occur and
not be cured within thirty (30) days following delivery of written notice
thereof by the Lender to the Borrower (which notice shall be complete upon hand
or overnight delivery or upon facsimile delivery or mailing by certified mail,
return receipt requested) or (b) any other Event of Default under Section
6.1(b) and not be cured within ten (10) days following delivery of written
notice thereof by the Lender to the Borrower (which notice shall be complete
upon hand or overnight delivery or upon facsimile delivery or mailing by
certified mail, return receipt requested) occur, the Lender may declare any
or all Indebtedness to be immediately due and payable (if not earlier
demanded), bring suit against the Borrower to collect the Indebtedness,
exercise any remedy available to the Lender hereunder and take any action
or exercise any remedy provided herein or in any other Loan Document or
under applicable law. No remedy shall be exclusive of other remedies or
impair the right of the Lender to exercise any other remedies.
THE FOREGOING EVENTS OF DEFAULT NOTWITHSTANDING, NOTHING HEREIN SHALL BE DEEMED
TO LIMIT, RESTRICT, IMPAIR OR DIMINISH THE ABSOLUTE RIGHT OF THE LENDER TO
DEMAND PAYMENT OF THE REVOLVING LOAN IN FULL, AT ANY TIME,
17
<PAGE> 22
WITHOUT CAUSE, AND TO EXERCISE ITS DISCRETION TO REFRAIN FROM ADDITIONAL
ADVANCES AT ANY TIME WITHOUT CAUSE.
6.3. Receiver. In addition to any other remedy available to it, the
Lender shall have the absolute right, upon the occurrence of an Event of
Default, to seek and obtain the appointment of a receiver to take possession of
and operate and/or dispose of the business and assets of the Borrower and any
costs and expenses incurred by the Lender in connection with such receivership
shall bear interest at the Default Rate and shall be secured by all Collateral.
7. SECURITY AGREEMENT.
7.1. Security Interest.
(a) As security for the payment and performance of any and
all of the Indebtedness and the performance of all other obligations and
covenants of the Borrower hereunder and under the other Loan Documents,
certain or contingent, now existing or hereafter arising, which are now,
or may at any time or times hereafter by owing by the Borrower
to the Lender, the Borrower hereby pledges to the Lender and gives the
Lender a continuing security interest in and general Lien upon and right
of set-off against, all right, title and interest of the Borrower in and
to the Collateral, whether now owned or hereafter acquired by the
Borrower.
(b) Except as herein or by applicable law otherwise
expressly provided, the Lender shall not be obligated to exercise any
degree of care in connection with any Collateral in its possession, to
take any steps necessary to preserve any rights in any of the Collateral
or to preserve any rights therein against prior parties, and the
Borrower agrees to take such steps. In any case the Lender shall be
deemed to have exercised reasonable care if it shall have taken such
steps for the care and preservation of the Collateral or rights therein
as the Borrower may have reasonably requested the Lender to take and the
Lender's omission to take any action not requested by the Borrower shall
not be deemed a failure to exercise reasonable care. No segregation or
specific allocation by the Lender of specified items of Collateral
against any liability of the Borrower shall waive or affect any security
interest in or Lien against other items of Collateral or any of the
Lender's options, powers or rights under this Agreement or otherwise
arising.
(c) The Lender may at any time and from time to time, with
or without notice to the Borrower, (i) transfer into the name of the
Lender or the name of the Lender's nominee any of the Collateral, (ii)
notify any Account Debtor or other obligor of any Collateral to make
payment thereon direct to the Lender of any amounts due or to become due
thereon and (iii) receive and after a default direct the disposition of
any proceeds of any Collateral.
7.2. Remedies.
(a) If an Event of Default shall have occurred and be
continuing, without waiving any of its other rights hereunder or under
any other Loan Documents, the Lender shall have all rights and remedies
of a secured party under the Code (and the Uniform Commercial Code of
any other applicable jurisdiction) and such other rights and remedies as
may be available hereunder, under other applicable law or pursuant to
contract. If requested by the Lender, the Borrower will promptly
assemble the Collateral and make it available to the Lender at a place
to be designated
18
<PAGE> 23
by the Lender. The Borrower agrees that any notice by the Lender of
the sale or disposition of the Collateral or any other intended
action hereunder, whether required by the Code or otherwise, shall
constitute reasonable notice to the Borrower if the notice is mailed to
the Borrower by regular or certified mail, postage prepaid, at least
five days before the action to be taken. The Borrower shall be liable
for any deficiencies in the event the proceeds of the disposition of the
Collateral do not satisfy the Indebtedness in full.
(b) If an Event of Default shall have occurred and be
continuing, the Lender may demand, collect and sue for all
amounts owed pursuant to Accounts, General Intangibles, Chattel paper
or for proceeds of any Collateral (either in the Borrower's name or the
Lender's name at the latter's option), with the right to enforce,
compromise, settle or discharge any such amounts. The Borrower
appoints the Lender as the Borrower's attorney-in-fact to endorse the
Borrower's name on all checks, commercial paper and other instruments
pertaining to Collateral or proceeds.
7.3 Power of Attorney. The Borrower authorizes the Lender at the
Borrower's expense to file any financing statements relating to the Collateral
(without the Borrower's signature thereon) which the Lender deems appropriate.
The Borrower irrevocably appoints the Lender as its attorney-in-fact to execute
any such financing statements in the Borrower's name and to perform all other
acts which the Lender deems appropriate to perfect and to continue perfection
of the security interest of the Lender. Only upon the occurrence of an Event
of Default and so long as the indebtedness represented by the Note is
outstanding, the Borrower hereby appoints the Lender as the Borrower's
attorney-in-fact to endorse, present and collect on behalf of the Borrower and
in the Borrower's name any draft, checks or other documents necessary or
desirable to collect any amounts which the Borrower may be owed.
7.4 Entry. The Borrower hereby irrevocably consents to any act by
the Lender or its agents in entering upon any premises for the purposes of
either (i) inspecting the Collateral or (ii) if an Event of Default shall have
occurred and be continuing, taking possession of the Collateral and the
Borrower hereby waives its right to assets against the Lender or its agents any
claim based upon trespass or any similar cause of action for entering upon any
premises where the Collateral may be located.
7.5 Deposits; Insurance. Upon the occurrence and continuance of an
Event of Default, the Borrower authorizes the Lender to collect and apply
against the Indebtedness when due any cash or deposit accounts in its
possession, and any refund of insurance premiums or any insurance proceeds
payable on account of the loss or damage to any of the Collateral and
irrevocably appoints the Lender as its attorney-in-fact to endorse any check or
draft or take other action necessary to obtain such funds.
7.6 Other Rights. The Borrower authorizes the Lender without
affecting the Borrower's obligations hereunder or under any other Loan Document
from time to time (i) to take from any party and hold additional Collateral or
guaranties for the payment of the Indebtedness or any part thereof, and to
exchange, enforce or release such collateral or guaranty of payment of the
Indebtedness or any part thereof and to release or substitute any endorser or
guarantor or any party who has given any security interest in any collateral as
security for the payment of the Indebtedness or any part thereof or any party
in any way obligated to pay the Indebtedness or any part thereof; and (ii) upon
the occurrence of any Event of Default to direct the manner of the disposition
of the Collateral and the enforcement of any endorsements, guaranties, letters
of credit or other security relating to the Indebtedness or any part thereof as
the Lender in its sole discretion may determine.
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<PAGE> 24
7.7. Accounts. After any Event of Default shall have occurred, the
Lender may notify any Account Debtor of the Lender's security interest and may
direct such Account Debtor to make payment directly to the Lender for
application against the Indebtedness. Any such payments received by or on
behalf of the Borrower at any time, whether before or after default, shall be
the property of the Lender, shall be held in trust for the Lender and not
commingled with any other assets of the Borrower (except to the extent they may
be commingled with other assets of the Borrower in an account with the Lender)
and shall be immediately delivered to the Lender in the form received. The
Lender shall have the right to apply any proceeds of Collateral to such of the
Indebtedness as it may determine.
7.8. Tangible Collateral. Except as otherwise provided herein or
agreed to in writing by the Lender, no Inventory or other tangible collateral
shall be commingled with, or become an accession to or part of, any property of
any other Person so long as such property is Collateral. Upon the occurrence
of any Event of Default, the Borrower shall, upon the request of the Lender,
promptly assemble all tangible Collateral for delivery to the Lender or its
agents. No tangible Collateral shall be allowed to become a fixture unless the
Lender shall have given its prior written authorization.
7.9. Waiver of Marshalling. The Borrower hereby waives any right it
may have to require marshalling of its assets.
7.10. Waiver of Automatic Stay. The Borrower hereby waives the
application of the automatic stay of enforcement provided in Section 362 of the
United States Bankruptcy Code and agrees that the Lender may proceed with
enforcement and collection notwithstanding the filing of a petition in
bankruptcy.
8. MISCELLANEOUS.
8.1. No Waiver, Remedies Cumulative. No failure on the part of the
Lender to exercise, and no delay in exercising, any right hereunder or under
any other Loan Document shall operate as a waiver thereof, nor shall any single
or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and are in addition to any other remedies provided by
law, any Loan Document, or otherwise.
8.2. Survival of Representations. All representations and
warranties made herein shall survive the making of the Loans hereunder and the
delivery of the Notes, and shall continue in full force and effect so long as
any Indebtedness is outstanding, there exists any commitment by the Lender to
the Borrower, and until this Agreement is formally terminated in writing.
8.3. Expenses. Whether or not the Loans herein provided for shall
be made, the Borrower shall pay all reasonable costs and expenses in connection
with the preparation, execution, delivery, amendment and enforcement of this
Agreement and any Loan Document, including the reasonable fees and
disbursements of counsel for the Lender in connection therewith, whether suit
be brought or not and whether incurred at trial or on appeal, and all costs of
repossession, storage, disposition, protection and collection of Collateral.
If the Borrower should fail to pay any tax or other amount required by this
Agreement to be paid or which may be reasonably necessary to protect or
preserve any Collateral or the Borrower's or Lender's interest therein, the
Lender may make such payment and the amount thereof shall be payable on demand,
shall bear interest at the Default Rate from the date of demand until paid and
shall be deemed to be Indebtedness entitled to the benefit and security of the
Loan Documents.
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<PAGE> 25
In addition, the Borrower agrees to pay and save the Lender harmless
against any liability for payment of any state documentary stamp taxes,
intangible taxes or similar taxes (including interest or penalties, if any)
which may now or hereafter be determined to be payable in respect to the
execution, delivery or recording of any Loan Document or the making of any
Advance, whether originally thought to be due or not, and regardless of any
mistake of fact or law on the part of the Lender or the Borrower with respect
to the applicability of such tax. The provisions of this section shall survive
payment in full of the Loans and termination of this Agreement.
8.4 Notices. Any notice or other communication hereunder to any
party hereto shall be by hand delivery, overnight delivery, facsimile,
telegram, telex or registered or certified mail and unless otherwise provided
herein shall be deemed to have been given or made when delivered, telegraphed,
telexed, faxed or deposited in the mails, postage prepaid, addressed to the
party at its address specified below (or at any other address that the party
may hereafter specify to the other parties in writing):
The Lender: First Union National Bank of Florida
20 North Orange Avenue, Suite 307
Orlando, FL 32801
Attention: Thomas M. Sawyer, Vice-President
The Borrower: Terrano Corporation, and
Dynamic Healthcare Technologies, Inc.
195 Wekiva Springs Road, Suite 324
Longwood, Florida 32779
Attention: Mitchel J. Laskey, President
and
Richard Bernstein, Esquire
Cohen, Berke, Bernstein, Brodie, Kondell & Laszlo
2601 South Bayshore Drive, 19th Floor
Coconut Grove, Florida 33133
8.5 Governing Law. This Agreement and the Loan Documents shall be
deemed contracts made under the laws of the State of Florida and shall be
governed by and construed in accordance with the laws of said state except
insofar as the laws of another jurisdiction may govern the perfection, priority
and enforcement of security interests in Collateral located in another
jurisdiction.
8.6 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the Borrower and the Lender, and their
respective successors and assigns; provided, that the Borrower may not assign
any of its right hereunder without the prior written consent of the Lender, and
any such assignment made without such consent will be void.
8.7 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original and all of
which when taken together shall constitute but one and the same instrument.
8.8 No Usury. Notwithstanding anything contained in this
Agreement, the Note, or in any other Loan Document to the contrary, in no event
will interest or other charges deemed to be interest be
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<PAGE> 26
chargeable against the Borrower if such amount (combined with any other amounts
considered to be in the nature of interest) would exceed the maximum amount
permitted by law from time to time while any of the Indebtedness is
outstanding, and in the event any amount in excess of the lawful maximum is
charged or collected by the Lender or paid by the Borrower, the Borrower shall
be entitled to the reimbursement of such excess together with interest thereon
at the highest lawful rate at the time of such overcharge.
8.9. Powers. All powers of attorney granted to the Lender are
coupled with an interest and are irrevocable only so long as the indebtedness
represented by the Note remains outstanding.
8.10. Approvals. If this Agreement calls for the approval or consent
of the Lender, such approval or consent may be given or withheld in the
discretion of the Lender unless otherwise specified herein.
8.11. Jurisdiction, Service of Process.
(a) Any suit, action or proceeding against the Borrower with
respect to this Agreement, the Collateral or any Loan Document or any
judgment entered by any court in respect thereof may be brought in the
courts of Orange County, Florida or in the U.S. District court for the
Middle District, as the Lender (in its sole discretion) may elect, and
the Borrower hereby accepts the nonexclusive jurisdiction of those
courts for the purpose of any suit, action or proceeding. Service of
process in any such case may be had against the Borrower by delivery in
accordance with the notice provisions herein or as otherwise permitted
by law, and the Borrower agrees that such service shall be valid in all
respects for establishing personal jurisdiction over it.
(b) In addition, the Borrower hereby irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement, the Loan Documents, the
Collateral or any judgment entered by any court in respect thereof
brought in Orange County, Florida or the U.S. District Court for the
Middle District of Florida, as selected by the Lender, and hereby
further irrevocably waives any claim that any suit, action or
proceedings brought in Orange County, Florida or in such District Court
has been brought in an inconvenient forum.
8.12. Multiple Borrowers. If more than one Person is named herein as
the Borrower, all obligations, representations and covenants herein and in other
Loan Documents to which the Borrower is a party shall be joint and several.
8.13. Other Provisions. Any other or additional terms and conditions
set forth in Exhibit 8.13 (if any) are hereby incorporated herein.
8.14. WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER OF THEM MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED UPON THIS AGREEMENT
OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY OTHER
LOAN DOCUMENT AND ANY OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR
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<PAGE> 27
ACTIONS OF ANY PARTY, THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES
ENTERING INTO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under Seal as of the day and year first above written.
Signed, sealed and delivered
in the presence of:
TERRANO CORPORATION, a Nebraska
corporation
/s/ Trudy Perry By: /s/ Mitchel J. Laskey
- ---------------------------------- ------------------------------
Name: Trudy Perry MITCHEL J. LASKEY, President
-----------------------------
/s/ Pamela Crunk
- ----------------------------------
Name: Pamela Crunk
----------------------------- (CORPORATE SEAL)
D Y N A M I C H E A L T H C A R E
TECHNOLOGIES, INC., a Florida
corporation
/s/ Trudy Perry By: /s/ Mitchel J. Laskey
- ---------------------------------- ------------------------------
Name: Trudy Perry MITCHEL J. LASKEY, President
-----------------------------
/s/ Pamela Crunk
- ----------------------------------
Name: Pamela Crunk
----------------------------- (CORPORATE SEAL)
"BORROWER"
FIRST UNION NATIONAL BANK OF
FLORIDA, a national banking association
/s/ Trudy Perry By: /s/ Joseph T. Potuzak
- ---------------------------------- ------------------------------
Name: Trudy Perry JOSEPH T. POTUZAK JR., Vice President
-----------------------------
/s/ Pamela Crunk
- ----------------------------------
Name: Pamela Crunk
----------------------------- "LENDER"
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<PAGE> 28
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
The foregoing instrument was acknowledged before me this 12th day of
October, 1994 by MITCHEL J. LASKEY, as President of TERRANO CORPORATION, a
Nebraska corporation, on behalf of the corporation. He is personally known to
me or produced _________________________ as identification and did not take an
oath.
______________________________________
Name of Notary
NOTARY PUBLIC, STATE OF NORTH CAROLINA
Commission Number:____________________
My Commission Expires:________________
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
The foregoing instrument was acknowledged before me this 12th day of
October, 1994 by MITCHEL J. LASKEY, as President of DYNAMIC HEALTHCARE
TECHNOLOGIES, INC., a Florida corporation, on behalf of the corporation. He
is personally known to me or produced _________________________ as
identification and did not take an oath.
______________________________________
Name of Notary
NOTARY PUBLIC, STATE OF NORTH CAROLINA
Commission Number:____________________
My Commission Expires:________________
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
The foregoing instrument was acknowledged before me this 12th day of
October, 1994 by JOSEPH T. PORUZAK, JR., as Vice President of FIRST UNION
NATIONAL BANK OF FLORIDA, a national banking association, on behalf of the
corporation. He is personally known to me or produced _______________________
as identification and did not take an oath.
______________________________________
Name of Notary
NOTARY PUBLIC, STATE OF FLORIDA
Commission Number:____________________
My Commission Expires:________________
24
<PAGE> 29
SCHEDULE OF EXHIBITS
(IF ANY EXHIBIT IS OMITTED, THE INFORMATION CALLED FOR THEREIN
SHALL BE CONSIDERED "NONE" OR "NOT APPLICABLE")
<TABLE>
<CAPTION>
EXHIBIT SECTION REFERENCE TITLE
- ------- ----------------- -----
<S> <C> <C>
1.1A 1.1 ("Collateral") Additional Collateral
1.1B 1.1 ("Eligible Accounts") Ineligible Accounts
1.1C 1.1 ("Permitted Debt") Permitted Debt
1.1D 1.1 ("Permitted Liens") Permitted Liens
2.3 2.3 ("Financial Condition") Contingent Liabilities
2.4 2.4 ("Litigation") Litigation
2.9 2.9 ("Location") Offices of Borrower
2.17 2.17 ("Subsidiaries") List of Subsidiaries
2.21 2.21 ("Additional Representations") Additional Representations
3.3 3.3 ("Notice and Manner of Borrowing") Form of Advance Request
5.10 5.10 ("Dividends") Permitted Dividends and Distributions
5.26 5.26 ("Other Covenants") Other Additional Covenants
</TABLE>
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<PAGE> 30
EXHIBIT 1.1A
ADDITIONAL COLLATERAL
CROSS-COLLATERALIZATION: All loans, advances and commitments issued to
Borrower by Lender shall be cross-collateralized, including, but not limited
to, those loans, advances and commitments issued by the Lender for which
Borrower serves as Guarantor.
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<PAGE> 31
EXHIBIT 1.1B
ADDITIONAL INELIGIBLE ACCOUNTS
The following shall be additional ineligible accounts:
1. Any accounts rebilled and whose age is greater than 90 days
from the original invoice date.
2. Those amounts of invoices whose payment is retained by account
debtor pending final inspection and acceptance, sometimes referred to as
"retainage".
3. Those portions of any account that were paid in cash and not
already deducted from the account balance.
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<PAGE> 32
EXHIBIT 1.1C
PERMITTED DEBT
The following shall be additional Permitted Debt:
1. Debt not exceeding $200,000.00 in aggregate principal amount in
any calendar year outstanding for the Borrower and all Subsidiaries incurred to
purchase equipment, provided that the amount of such debt shall not at any
time exceed the purchase price of the equipment purchased.
2. Debt outstanding at any time for the Borrower and all
Subsidiaries subordinated in right of payment and security to the Indebtness in
accordance with subordination agreements approved in writing by the Lender.
3. Debt payable to suppliers and other trade creditors in the
ordinary course of business on ordinary and customary trade terms and which is
not past due.
4. Debt of any one Borrower to the other Borrower.
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EXHIBIT 1.1D
PERMITTED LIENS
The following shall be additional Permitted Liens:
Liens arising in connection with the purchase and resale of IBM Inventory.
29
<PAGE> 34
EXHIBIT 2.3
CONTINGENT LIABILITIES
The following are contingent liabilities of the Borrower and
Subsidiaries except for liabilities which might arise out of purchase orders,
letter agreements, and contracts in the reasonable ordinary course of
Borrower's business.
NONE
31
<PAGE> 35
EXHIBIT 2.4
LITIGATION
Describe any suit or proceeding pending or threatened:
TERRANO CORPORATION, a Nebraska corporation, vs. SAN BERNARDINO
COMMUNITY HOSPITAL and DOES 1 - 20, inclusive, Defendants, in the Superior
Court of the State of California for the County of San Bernardino, under Case
Number SCV 13232.
31
<PAGE> 36
EXHIBIT 2.9
OFFICES OF BORROWER
List any offices of Borrower or Subsidiary not listed in Section 8.4.
<TABLE>
<CAPTION>
NAME LOCATION TYPE OF
FACILITY
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Terrano Corporation 245 South 84th Street
Lincoln, Nebraska 68510
- -----------------------------------------------------------------------------------------
Terrano Corporation 195 Wekiva Springs Road, Suite 324
Longwood, Florida 32771
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Dynamic Healthcare Technologies, 245 South 84th Street
Inc. Lincoln, Nebraska 68510
- -----------------------------------------------------------------------------------------
Dynamic Healthcare Technologies, 195 Wekiva Springs Road, Suite 324
Inc. Longwood, Florida 32771
</TABLE>
32
<PAGE> 37
EXHIBIT 2.17
LIST OF SUBSIDIARIES
NAME OF SUBSIDIARY LOCATION
- -------------------------------------------------------------------------------
Dynamic Healthcare Technologies, Inc. 245 South 84th Street
Lincoln, Nebraska 68510
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
33
<PAGE> 38
EXHIBIT 2.21
ADDITIONAL REPRESENTATIONS
Describe fully any additional representations or warranties set forth by the
Borrower.
NONE
34
<PAGE> 39
EXHIBIT 3.3
TERRANO CORP./DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
BORROWING BASE CERTIFICATE
(To be submitted monthly and at the time of each advance request)
Certificate Number: _______________
Certificate as of date: ___________
Last Certificate as of date: ______
In consideration of your continuing to make available to the undersigned
certain credit accommodations, we certify that the following figures accurately
represent the entire amount of billed accounts receivable and contracts
receivable (also known as unbilled accounts receivable) owing to the
undersigned and that such amounts continue to be pledged to you as collateral
security to all loans owing by this company to you under Agreement dated
October ___, 1994, free and clear of all liens and encumbrances except in your
favor.
A. Total Billed Accounts Receivable $______________________
B. Less Accounts Receivable arising
from the sale of IBM equipment $______________________
C. Less Accounts Receivable 91 Days
or More Past Due $______________________
D. Eligible Accounts Receivable
(A-B-C) $______________________
E. Total Contracts Receivable (Net
of any Accounts contained in
A, B, or C above) $______________________
F. Total Eligible Accounts/Contracts
Receivable (D+E) $______________________
G. Borrowing Base (F x 75%) $______________________
H. Loan Limit $4,000,000.00
I. Insert Lessor of G or H. This is the
Maximum Permitted Loan Balance $______________________
35
<PAGE> 40
EXHIBIT 3.3 (CONTINUED)
J. Outstanding balance at date of
certificate $______________________
K. Subtract I-J $______________________
Positive balance on Line K represents amount of excess availability.
Negative balance on Line K represents amount of overfunding. Our check payable
to First Union National Bank for this amount is attached.
The above information is hereby certified to be true and correct as of the date
indicated.
TERRANO CORP.
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
By:________________________________________
Name:______________________________________
Title:_____________________________________
36
<PAGE> 41
EXHIBIT 5.9
PERMITTED DIVIDENDS
Describe conditions under which dividends are permitted and specify any limits
on such permitted dividends:
NONE
37
<PAGE> 42
EXHIBIT 5.26
OTHER COVENANTS
1. FINANCIAL COVENANTS. At all times, the Borrower shall be in
compliance with the following financial covenants on a consolidated basis:
(a) The tangible net worth of the Borrower shall not be
less than $2,355,000.00 as of December 31, 1994, and shall not be less
than $2,900,000.00 as of December 31, 1995;
(b) The ratio of total liabilities of the Borrower to
tangible net worth of the Borrower shall not be more than 2.0:1 as
of the end of any quarter during the term of this Loan.
For purposes of this Agreement, the term "tangible net worth"
shall be the net worth of the Borrower according to generally accepted
accounting principles less (i) any write-up of assets subsequent to
December 31, 1993, (ii) deferred assets other than prepaid insurance
and prepaid taxes, (iii) patents, copyrights, trademarks, trade names,
noncompete agreements, franchises and other intangibles, (iv)
capitalized software development costs, (v) goodwill or other amounts
representing the excess of the purchase price of assets or stock over
the value assigned thereto on the books of the Borrower, (vi)
unamortized debt discount and expense, (vii) any Accounts, notes or
other amounts due from Affiliates, and (viii) any other amounts
categorized as intangibles under generally accepted accounting
principles.
2. KEY MAN LIFE INSURANCE. Borrower shall obtain on or before
November 28, 1994 and maintain in full force and effect throughout the term of
the Loan, at Borrower's expense, a life insurance policy in the amount of
$2,000,000.00 on each of the lives of Mitchel J. Laskey and David M. Pomerance
with death benefits assigned to the Lender. Borrower will not amend, modify,
cancel or allow to be terminated either such policy, and will timely pay all
premiums as they become due.
38
<PAGE> 1
Exhibit 10.02
AMENDMENT TO
REVOLVING CREDIT AND SECURITY AGREEMENT
between
TERRANO CORPORATION, AND
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
"Borrower"
and
FIRST UNION NATIONAL BANK OF FLORIDA
"Bank"
Dated: February 9, 1995
<PAGE> 2
AMENDMENT TO REVOLVING CREDIT AND SECURITY AGREEMENT
THIS AMENDMENT, dated as of February 9, 1995, of that certain Revolving
Credit and Security Agreement, dated October 12, 1994 (the "Agreement"),
between TERRANO CORPORATION, a Nebraska corporation ("Terrano") and DYNAMIC
HEALTHCARE TECHNOLOGIES, INC., a Florida corporation ("Dynamic") (collectively,
the "Borrower"), and FIRST UNION NATIONAL BANK OF FLORIDA, a national banking
association (the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrower has certain outstanding obligations to Lender
pursuant to a revolving line of credit loan in the principal amount of up to
$4,000,000.00 (the "Loan"), evidenced, among other things, by the Agreement and
by a Promissory Note, dated October 12, 1994, made by Borrower in favor of
Lender; and
WHEREAS, the Borrower and the Lender desire to amend certain of the
terms of the Loan and the Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties agree to amend the Agreement as follows:
1. Unless otherwise expressly provided herein, all capitalized
terms will have the same meanings as stated in the Agreement.
2. Section 1.1 of the Agreement is hereby amended to modify
certain Defined Terms, which hereinafter shall have the following meanings:
"Collateral" means all assets of the Borrower, wherever located
and whether now owned by Borrower or hereafter acquired, including
without limitation the following: (a) all General Intangibles subject to
any valid license agreements; (b) all Accounts, Contracts, and Chattel
Paper and any other instrument or intangible representing payment for
goods or services; (c) all Equipment; (d) all funds in the Special Loan
Account or otherwise on deposit with or under the control of the Lender
or its agents or correspondents, if any; (e) an assignment of all
copyrights, patents and trademarks; (f) all software, including but not
limited to all right, title and ownership interest in software programs,
related software and modules, and all related documentation and material
expressions of software, (including but not limited to all enhancements,
object codes, screens, formats, user-definable programs, source code
listings, source code tapes, work product, programming and systems
documentation, product descriptions, user reference manuals, technical
manuals, computer operating instructions, design and development
specifications); (h) all agreements with customers and licensees; and
(i) all parts,
<PAGE> 3
replacements, substitutions, profits, products and cash and non-cash
proceeds of any of the foregoing (including insurance proceeds payable
by reason of loss or damage thereto) in any form and wherever located.
Collateral shall include all written or electronically recorded records
relating to any such Collateral and other rights relating thereto.
"Loan Documents" shall mean this Agreement, any other Security
Agreement, any Note, the Advance Requests, any letter of credit issued
by Lender for Borrower and any agreement related thereto, UCC-1
financing statements (as amended), and all other agreements, documents
and instruments now or hereafter evidencing, describing, securing, or
relating to the Indebtedness contemplated hereby or delivered in
connection herewith as they may be modified.
"Maximum Loan Amount" shall mean $3,500,000.00.
3. Section 3, relating to the Loan, is hereby amended by adding the
following Section 3.9:
3.9 Letters of Credit
a. At its discretion the Lender may from time to time issue,
extend or renew letters of credit for the account of the Borrower or its
Subsidiaries. The availability of Advances under the Revolving Loan
shall be reduced by outstanding obligations of the Lender under any
letters of credit. All payments made by the Lender under any such
letters of credit (whether or not the Borrower is the account party or
drawer) and all fees, commissions, discounts and other amounts owed or
to be owed to the Lender in connection therewith, shall be deemed to be
Advances under the Revolving Note, shall be secured by the Collateral,
and shall be repaid on demand. The Borrower shall complete and sign such
applications and supplemental agreements and provide such other
documentation as the Lender may require. The form and substance of all
letters of credit, including expiration dates, shall be subject to the
Lender's approval. The Lender may charge a fee or commission for
issuance, renewal or extension of a letter of credit. The Borrower
unconditionally guarantees all obligations of any Subsidiary with
respect to letters of credit issued by the Lender for the account of
such Subsidiary. If the Lender should demand payment of the Revolving
Loan, the Borrower shall, on demand, deliver to the Lender good funds
equal to 100% of the Lender's maximum liability under all outstanding
letters of credit to be held as cash collateral for the Borrower's
reimbursement obligations to Lender and other Indebtedness. Unless the
parties otherwise agree in writing, the Borrower shall be obligated,
without demand, to make cash payment to the Lender within two (2)
business days of a sum sufficient to reimburse Lender for any payment
made by Lender under a letter of credit, plus interest at the rate
stated in the Note.
b. In order to induce Lender to issue letters of credit, the
Borrower agrees that neither Lender nor its correspondents or agents
shall be liable or responsible
2
<PAGE> 4
for, and the Borrower's unconditional obligation to reimburse Lender for
the obligations shall not be affected by, any event or circumstance,
including without limitation: (i) the validity, enforceability,
genuineness or sufficiency of documents or of any endorsement thereon
existing in connection with any letter of credit even if such documents
should in fact prove in any or all respects to be invalid,
unenforceable, insufficient, fraudulent or forged; (ii) any breach of
contract or other dispute between the Borrower and any beneficiary of a
letter of credit; (iii) payment by the Lender upon presentation of a
draft or documents which do not comply in any respect with the terms of
such letter of credit; (iv) loss of or damage to any collateral; (v) the
invalidity or insufficiency of any endorsements; (vi) delay in giving or
failure to give notice of arrival or any other notice; (vii) failure of
any instrument to bear any reference or adequate reference to the letter
of credit or to documents to accompany any instrument at negotiation; or
(viii) failure of any person to note the amount of any payment on the
reverse of the letter of credit or to surrender or take up the letter of
credit or to forward documents in the manner required by the letter of
credit; or (ix) any other matter whatsoever excepting only with respect
to each of the foregoing items the gross negligence or willful
misconduct of the Lender or its agent. The Borrower agrees that any
action taken or permitted to be taken by the Lender or its agent under
or in connection with any letter of credit, including related drafts,
documents, or property, unless constituting gross negligence or willful
misconduct on the part of the Lender or its agent, shall be binding on
the Borrower and shall not create any resulting liability to the
Borrower on the part of the Lender or its agent. The Borrower will
immediately examine (a) a copy of the letter of credit (and of any
amendments thereof) sent to it by the Lender or its agent, and (b) all
instruments and documents delivered to it from time to time by the
Lender or its agents, and the Borrower will immediately notify the
Lender in writing of any claim or irregularity.
c. Any letter of credit issued hereunder shall be governed by
the Uniform Customs of Practice for Documentary Credit (1983 Rev.),
International Chamber of Commerce Publication No. 400, as revised from
time to time, except to the extent that the terms of such publication
would limit or diminish rights granted to the Lender hereunder or in any
other Loan Document.
4. Section 6, relating to Default, is hereby amended by modifying
Sections 6.1(b) and (d) to read as follows:
(b) There shall occur any default by the Borrower in the
payment, when due, of any principal of or interest on the
Note, of any amounts due hereunder, of any reimbursement
obligation of the Borrower pursuant to Section 3.9 with
respect to, or for amounts paid by the Lender under, any
letter of credit, of any amounts due under any other Loan
Document, or of any other Indebtedness (not cured within
any grace period provided in such Note or in the document
or instrument evidencing such Indebtedness);
3
<PAGE> 5
(d) There shall occur any default by Borrower in any other obligation
now or hereafter owed by the Borrower or any Subsidiary to the
Lender which is not cured within any period of grace provided
therein, or there shall occur any default by Borrower under any
obligation in excess of $25,000 owed to any other obligee, and
Borrower is not diligently pursuing in good faith a defense to such
default, which default entitles the obligee to accelerate any such
obligations or exercise other remedies with respect thereto, or
there shall occur a default by Borrower under any lease of real
property which Borrower occupies and uses in the conduct of its
business and which default shall not have been cured within any
period of grace provided therein.
IN WITNESS WHEREOF, the parties hereby have caused this Amendment to
the Revolving Credit and Security Agreement to be duly executed under Seal as
of the day and year first above written.
Signed, sealed and delivered
in the presence of:
"BORROWER"
TERRANO CORPORATION, a Nebraska
Corporation
/s/ Sig Illegible By: /s/ Mitchel J. Laskey
- -------------------------------- ----------------------------
Name: Illegible President
/s/ MARGARET A. REIMAN
- -------------------------------- (CORPORATE SEAL)
Name: Margaret A. Reiman
and
DYNAMIC HEALTHCARE TECHNOLOGIES,
INC., a Florida corporation
/s/ JAMES R. CONNORS By: /s/ Mitchel J. Laskey
- -------------------------------- -----------------------------
Name: James R. Connors President
/s/ MARGARET A. REIMAN
- -------------------------------- (CORPORATE SEAL)
Name: Margaret A. Reiman
4
<PAGE> 6
"LENDER"
FIRST UNION NATIONAL BANK OF
FLORIDA, a national banking
corporation
/s/ MARGARET A. REIMAN By: /s/ ANTHONY HOLMES
- -------------------------------- ------------------------------
Name: Margaret A. Reiman Vice President
/s/ JAMES R. CONNORS
- -------------------------------- (CORPORATE SEAL)
Name: James R. Connors
STATE OF FLORIDA
COUNTY OF ORANGE
The foregoing instrument was acknowledged before me this 9th day of
February, 1995, by Mitchell L. Haskey as President of TERRANO CORPORATION, a
Nebraska corporation, on behalf of the corporation. He is personally known to
me or produced ________________________ as identification and did not take an
oath.
/s/ Margaret A. Reiman
- -----------------------------
Name of Notary: Margaret A. Reiman
NOTARY PUBLIC, STATE OF FLORIDA (CORPORATE SEAL)
Commission Number: CC 374528
My Commission Expires: June 25, 1998
5
<PAGE> 7
STATE OF FLORIDA
COUNTY OF ORANGE
The foregoing instrument was acknowledged before me this 9th day of
February, 1995, by Mitchell L. Laskey as President of DYNAMIC HEALTHCARE
TECHNOLOGIES, INC., a Florida corporation, on behalf of the corporation. He is
personally known to me or produced __________________________ as identification
and did not take an oath.
/s/ Margaret A. Reiman
__________________________________
Name of Notary: Margaret A. Reiman
NOTARY PUBLIC, STATE OF FLORIDA Notary Seal MARGARET A. REIMAN
Commission Number:________________ MY COMMISSION # CC 374528
My Commission Expires:____________ EXPIRES: June 25, 1998
Bonded Thru Notary Public Underwriters
STATE OF FLORIDA
COUNTY OF ORANGE
The foregoing instrument was acknowledged before me this 9th day of
February, 1995, by L. Anthony Holmes as Vice President of FIRST UNION NATIONAL
BANK OF FLORIDA, a national banking association, on behalf of the corporation.
He is personally known to me or produced __________________________ as
identification and did not take an oath.
/s/ Margaret A. Reiman
__________________________________
Name of Notary: Margaret A. Reiman
NOTARY PUBLIC, STATE OF FLORIDA Notary Seal MARGARET A. REIMAN
Commission Number:________________ MY COMMISSION # CC 374528
My Commission Expires:____________ EXPIRES: June 25, 1998
Bonded Thru Notary Public Underwriters
6
<PAGE> 1
EXHIBIT 10.03
SECOND AMENDMENT
TO REVOLVING CREDIT AND SECURITY AGREEMENT
THIS AMENDMENT is made and entered into as of December 8, 1995 by and
between DYNAMIC HEALTHCARE TECHNOLOGIES, INC., a Nebraska corporation (the
"Borrower"), and FIRST UNION NATIONAL BANK OF FLORIDA, a national banking
association (the "Lender").
W I T N E S S E T H:
WHEREAS, Dynamic Healthcare Technologies, Inc., a Florida corporation,
merged into its parent corporation, Terrano Corporation, a Nebraska corporation,
which changed its name to Dynamic Healthcare Technologies, Inc.; and
WHEREAS, the Borrower has certain outstanding obligations to Lender
pursuant to the terms of a revolving line of credit loan in the principal
amount of up to $3,500,000.00 (the "Loan"), evidenced, among other things, by a
Revolving Credit and Security Agreement, dated October 12, 1994, as amended
February 9, 1995 (the "Credit Agreement") and a Revolving Line of Credit
Promissory Note, dated October 12, 1994, made by Borrower in favor of Lender
(the "Note"); and
WHEREAS, Borrower and Lender desire to make certain modifications to
the Loan, the Credit Agreement and the Note as described below.
NOW, THEREFORE, in consideration of the premises and the mutual
convenants and agreements set forth below, the parties hereto agree as follows:
1. The Loan shall be changed from a revolving loan up to the
maximum principal amount of $3,500,000.00 to a term loan in the amount of
$2,800,000.00. The Revolving Credit and Security Agreement, shall hereinafter
be entitled "Credit and Security Agreement" and referred to herein as the
"Credit Agreement."
2. In Section 1.1. of the Credit Agreement, the definitions of
"Advance," "Advance Date," "Advance Request," "Borrowing Base," "Eligible
Accounts," "Maximum Loan Amount" and "special Loan Account" are hereby
deleted. In addition, the definition of the term "Collateral" shall be
revised to include Inventory, the term "Loan" shall mean the Term Loan
identified in Section 3.1 of the Credit Agreement ("Term Loan"), the term
"Advance Requests" shall be deleted from the definition of the term "Loan
Documents," and the term "Note" shall mean the renewal promissory note, as
defined in Section 3.1 ("Term Loan"), and all modifications, extensions and
renewals thereof.
3. In Section 2 of the Credit Agreement, delete "and as of the
Advance Date of any Advance by the Lender to the Borrower."
<PAGE> 2
4. The last sentence of Section 2.13 of the Credit Agreement is
hereby deleted.
5. Section 3 of the Credit Agreement is amended to provide in its
entirety as follows:
3.1 Amount of Loan. Subject to the terms and conditions of
this Credit and Security Agreement, the Lender hereby
agrees to make a term loan to the Borrower in the amount
of TWO MILLION EIGHT HUNDRED THOUSAND AND NO/100 DOLLARS
($2,800,000.00) as evidenced by a renewal promissory
note in such amount of even date herewith (the "Note").
3.2 Accrual of Interest. Interest shall accrue daily on the
Note at Lender's Prime Rate, plus 2%. Interest shall
accrue on the basis of the actual number of days elapsed
in a year of 360 days.
3.3 Payments of Principal and Interest. Principal and
interest on the Note shall be payable as follows:
(a) Borrower shall make fixed consecutive monthly
payments of principal and interest in the amount of
$29,910.97 each on the first day of each month for
a period of 27 months with the first such payment
due on January 1, 1996; and
(b) A balloon payment equal to the remaining unpaid
principal balance, and accrued interest on the
Note, shall be due and payable on March 31, 1998.
3.4 Collateral. The Loan shall be secured by the
Collateral.
6. Section 4 of the Credit Agreement is hereby deleted.
7. Section 5.6(a) of the Credit Agreement is amended to provide as
follows:
(a) Periodic Borrowing Base Reports.
(i) Within fifteen (15) days of the end of each
month (or more frequently if required by
Lender), a report listing billed and unbilled
Accounts of the Borrower as of the last
Business Day of such month, which shall
include the amount and age of each Account,
the name and mailing address of each Account
Debtor and such other information as the
Lender
2
<PAGE> 3
may require, all in reasonable detail and in form
acceptable to the Lender, and
(ii) within fifteen (15) days of the end of each quarter (or
more frequently if required by Lender), a summary of
Accounts in the form attached hereto as Exhibit 5.6A.
8. In Section 5.7 of the Credit Agreement, delete "in excess of an
aggregate of $200,000.00."
9. The first sentence and the last sentence (boldface on pages 17-18)
of Section 6.2 of the Credit Agreement are hereby deleted.
10. In Section 8.3 of the Credit Agreement, delete "or the making of
any Advance" in the fourth to last line thereof.
11. In Section 8.4 of the Credit Agreement, the addresses of Lender
and Borrower are amended as follows:
The Lender: First Union National Bank of Florida
800 North Magnolia Avenue
Special Assets Division (FL 2202)
Post Office Box 1000
Orlando, Florida 32802
The Borrower: Dynamic Healthcare Technologies, Inc.
101 Southall Lane, Suite 210
Maitland, Florida 32751
Attention: Mitchel J. Laskey, President
and
Richard Bernstein, Esquire
Cohen, Berke, Bernstein, Brodie, Kondell & Laszlo
2601 South Bayshore Drive, 19th Floor
Coconut Grove, Florida 33133
12. Exhibits 1.1B and 3.3 to the Credit Agreement are hereby deleted.
13. Paragraph 4 of Exhibit 1.1C to the Credit Agreement is hereby
deleted.
14. Exhibit 2.4 to the Credit Agreement is hereby amended to provide
in its entirety as follows:
3
<PAGE> 4
a. Russell Hospital Corp. vs. James A. Terrano and Dynamic
Healthcare Technologies, Inc. (CV95-126), Circuit Court
Tallapoosa, Alabama.
b. Terrano Corp. vs. James Terrano (Docket 522), District
Court, Lancaster County, Nebraska.
c. Debra Larson vs. Terrano (Docket 525), District Court,
Lancaster County, Nebraska.
d. James Terrano vs. Terrano Corporation (Docket 525),
District Court, Lancaster County, Nebraska.
e. SEC order in the Matter of Terrano Corp. (D-2006),
April 25, 1995.
15. In Exhibit 2.9 to the Credit Agreement, the references to
Terrano Corporation are hereby deleted. Borrower's Florida business address is
amended to be: 101 Southall Lane, Suite 210, Maitland, Florida 32751. The
reference to Borrower's Nebraska place of business is hereby deleted.
16. Exhibit 2.17 of the Credit Agreement is amended to state "None."
17. Exhibit 5.9 of the Credit Agreement is amended to list the
following:
Dividends are permitted on (i) up to 1,055,938 shares of
9% Series A Cumulative Convertible Preferred Stock and (ii) up
to 4,384,375 shares of 9% Series B Cumulative Convertible
Preferred Stock at an annual rate of $.0072 per share so long
as there is no Default under this Credit Agreement as defined
in Section 6.1 hereof.
18. The second sentence of Section 5.19 of the Credit Agreement is
hereby deleted.
19. Exhibit 5.26 of the Credit Agreement is amended to delete
Paragraph 1 thereof in its entirety.
20. Borrower hereby reaffirms to Lender each of Borrower's
representations, warranties, covenants and agreements set forth in the Credit
Agreement with the same force and effect as if each were fully restated herein
and made as of the date hereof, and Borrower hereby certifies to Lender that
there is currently existing no Event of Default under the Credit Agreement.
4
<PAGE> 5
21. Borrower hereby acknowledges and certifies to Lender that, as
of the date hereof, there are no counterclaims, defenses or offsets whatsoever
against Lender with respect to the Credit Agreement or with respect to the
documents, instruments, and agreements related to the Credit Agreement.
22. Borrower agrees to pay at closing all costs and expenses of
Lender in connection with the preparation, execution and delivery hereof,
including its reasonable attorneys' fees. In addition, Borrower shall pay any
and all stamp and other taxes and fees payable or determined to be payable in
connection with the execution and delivery, filing or recording of this Second
Amendment to Credit Agreement, the Credit Agreement and any other agreements,
instruments and documents related thereto, and Borrower agrees to hold Lender
harmless from and against any and all liabilities with respect to, or resulting
from, any delay in paying or omission to pay any such taxes or fees. Further,
Borrower agrees to pay at closing the cost of an appraisal ordered by Lender of
Borrower's furniture, fixtures and equipment in the amount of $1,500.00. A
copy of such appraisal shall be provided to Borrower.
23. Borrower agrees to provide to Lender a quarterly report
summarizing customer contracts in form and content acceptable to Lender. Such
report shall include, without limitation, the following information: name of
customer, address, phone number, services provided and to be provided, contract
price, amount billed and payment received to date.
24. Borrower hereby agrees that an Event of Default under the
Credit Agreement, as it may be modified or extended, shall constitute an Event
of Default under that certain Application and Agreement for Irrevocable Standby
Letter of Credit between Borrower and Lender, for an Irrevocable Standby Letter
of Credit in the amount of $100,000 for the benefit of John Alden Life Insurance
Company (the "Letter of Credit Agreement"), and that an Event of Default under
the Letter of Credit Agreement shall constitute an Event of Default hereunder.
Further, Borrower agrees that the Collateral which secures its obligations
hereunder shall also secure its obligations under the Letter of Credit
Agreement, and that the Property of Borrower which secures its obligations
under the Letter of Credit Agreement shall also secure its obligations under
the Credit Agreement.
25. This Second Amendment to Credit Agreement shall be governed by
and construed in accordance with the laws of the State of Florida.
26. Except to the extent modified by this Second Amendment to
Credit Agreement, the Credit Agreement and any other document, instrument or
agreement related to the Credit Agreement shall remain in full force and effect
and is hereby ratified and confirmed.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Second Amendment to
Credit Agreement to be executed by their respective officers thereunto duly
authorized to be effective as of the date first above written.
Signed, sealed and delivered in BORROWER:
the presence of:
DYNAMIC HEALTHCARE
TECHNOLOGIES, INC., a Nebraska
corporation
By: /s/ Mitchel J. Laskey
- ------------------------------- --------------------------------
Printed Name: Mitchel J. Laskey, President
-----------------
[CORPORATE SEAL]
- -------------------------------
Printed Name:
-----------------
LENDER:
FIRST UNION NATIONAL BANK OF
FLORIDA, a national banking association
[SIG] By: /s/ L. Anthony Holmes
- -------------------------------- ----------------------------------
Printed Name: [ILLEGIBLE] L. Anthony Holmes, Vice President
------------------
[SIG] [OFFICIAL SEAL]
- --------------------------------
Printed Name: [ILLEGIBLE]
------------------
6
<PAGE> 7
STATE OF FLORIDA
-------
COUNTY OF ORANGE
------
The foregoing instrument was executed and acknowledged before me this
____ day of December, 1995, by MITCHEL J. LASKEY, the President of DYNAMIC
HEALTHCARE TECHNOLOGIES, INC., a Nebraska corporation, on behalf of the
corporation. (notary must check applicable box)
[X] is/are personally known to me.
[ ] produced a current Florida driver's license as identification.
[ ] produced __________________________________ as identification.
{Notary Seal must be affixed} /s/ Marie E. Connor
------------------------------------------------
Signature of Notary
Marie E. Connor
------------------------------------------------
Name of Notary (Typed, Printed or Stamped)
Commission Number (if not legible on seal):
------------------------------------------------
My Commission Expires (if not legible on seal):
------------------------------------------------
[NOTARY SEAL]
7
<PAGE> 8
STATE OF FLORIDA
-------
COUNTY OF ORANGE
------
The foregoing instrument was executed and acknowledged before me this
18th day of December, 1995, by L. ANTHONY HOLMES, a Vice President of FIRST
UNION NATIONAL BANK OF FLORIDA, a national banking association, on behalf of the
association. (notary must check applicable box)
[ ] is/are personally known to me.
[X] produced a current Florida driver's license as identification.
[ ] produced __________________________________ as identification.
{Notary Seal must be affixed} /s/ Margaret E. Beckemeier
------------------------------------------------
Signature of Notary
Margaret E. Beckemeier
------------------------------------------------
Name of Notary (Typed, Printed or Stamped)
Commission Number (if not legible on seal):
------------------------------------------------
My Commission Expires (if not legible on seal):
------------------------------------------------
[NOTARY SEAL]
8
<PAGE> 9
EXHIBIT 5.6A
SUMMARY OF ACCOUNTS
To: National Bank of Florida, N.A. (the "Bank")
Certificate Number
-------------------------------
Certificate as of date
---------------------------
Last certificate as of date
----------------------
We certify that the following figures accurately represent the entire amount of
billed Accounts and contracts receivable (also known as unbilled Accounts)
owing to the undersigned and that such amounts continue to be pledged to you as
collateral security for all amounts owed by the undersigned to the Bank under
the Credit and Security Agreement dated October 12, 1994, as amended, or
otherwise, free and clear of all liens and encumbrances except in your favor.
A. Total Billed Accounts $_________
B. Less Balance Due IBM arising from the sale
of IBM equipment $_________
C. Less Accounts 91 Days or More Past Due $_________
D. Total Net Billed Accounts (A-B-C) $_________
E. Total Contracts Receivable (Net of any Accounts
contained in A, B, or C above) $_________
f. Total Net Accounts/Contracts Receivable (D & E) $_________
The above information is hereby certified to be true and correct as of the date
indicated. This report is to be given to the Bank on a quarterly basis.
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Date:
---------------------------------
<PAGE> 1
EXHIBIT 10.04
EXECUTION COPY
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of the 23rd day of August, 1994 by and
between TERRANO CORPORATION, a Nebraska corporation ("Employer"), and MITCHEL
J. LASKEY ("Employee").
WHEREAS, Employee wishes to be employed by Employer with the duties
and responsibilities as hereinafter described, and Employer desires to assure
itself of the availability of Employee's services in such capacity.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, Employer and Employee hereby agree as follows:
1. EMPLOYMENT. Employer hereby agrees to employ Employee, and
Employee hereby agrees to serve Employer, upon the terms and conditions
hereinafter set forth.
2. TERM. The employment of Employee by Employer pursuant to this
Agreement shall be for a three (3) year period commencing on the date hereof
and shall automatically renew for two (2) successive one-year periods
(hereinafter referred to as the "Service Period"). Notwithstanding the
foregoing, this Agreement shall terminate upon the expiration of the initial
term, or the any renewal term, as applicable, upon delivery of written notice
by either party not less than sixty (60) days prior to the end of the initial
term, or a renewal term, as the case may be.
3. DUTIES. Employee shall, subject to overall direction
consistent with the legal authority of the Board of Directors of Employer (the
"Board"), serve as, and have all power and authority inherent in the offices
of, President and Chief Operating Officer of Employer and each of its
subsidiaries and shall be responsible for those areas in the conduct of the
business reasonably assigned to him by the Board. Employee shall devote
substantially all his business time and efforts to the business of Employer;
provided, however, that it is understood and agreed that, while Employee may
devote limited time to other business matters in which he has an interest, in
the event of a conflict, Employee's first and primary responsibility shall be
to the performance of his duties for Employer.
4. COMPENSATION AND OTHER PROVISIONS. Employee shall be entitled
to the compensation and benefits hereinafter described in subparagraphs (a)
through (c) (such compensation and benefits being hereinafter referred to as
"Compensation Benefits").
(a) BASE SALARY. Employer or any subsidiary as Employer
may direct, shall pay to Employee a base salary equal to $150,000.00 per annum
during the Service Period (such amount, as it may be increased from time to
time, may sometimes hereinafter be referred to as "Base Salary"). The Base
Salary and Employee's other compensation will be reviewed by the
<PAGE> 2
Board at least annually during the Service Period and may be increased (but not
decreased) from time to time as the Board may determine.
(b) PARTICIPATION IN BENEFIT PLANS. During the Service
Period, Employee shall be eligible to participate in all employee benefit plans
and arrangements now in effect or which may hereafter be established,
including, without limitation, all life, group insurance and medical care plans
and all disability, retirement and other employee benefit plans of Employer or
its operating subsidiaries provided that (i) as of the date hereof Employee has
received and approved such benefits, and (ii) such benefit plans shall not be
diminished during the Term of Employment.
(c) OTHER PROVISIONS. Employee shall be entitled to four
(4) weeks paid vacation per annum. Employee shall be reimbursed for all
reasonable expenses incurred by him in the performance of his duties,
including, but not limited to, all reasonable entertainment and travel
expenses.
5. TERMINATION. Employee's employment hereunder shall terminate
as a result of any of the following events:
(a) Employee's death;
(b) Employee shall be unable to perform his duties
hereunder by reason of illness, accident or other physical or mental disability
for a continuous period of at least six months or an aggregate of nine months
during any continuous twelve month period ("Disability");
(c) termination by Employee; or
(d) for Cause, where "Cause" shall mean: (i) final
non-appealable adjudication of Employee of a felony; or (ii) the reasonable
determination of seventy-five (75%) percent of the Board that Employee has
engaged in intentional misconduct, or the gross neglect of his duties, which
has a material and continuing adverse effect on the business of Employer.
Any termination pursuant to subparagraph (b), (c) or (d) of
this Section shall be communicated by a written notice ("Notice of
Termination"), such notice to set forth with specificity the grounds for
termination if the result of "Cause". Employee's employment under this
Agreement shall be deemed to have terminated as follows: (i) if Employee's
employment is terminated pursuant to subparagraph (a) above, on the date of his
death; (ii) if Employee's employment is terminated pursuant to subparagraph (b)
or (d) above, on the date on which Notice of Termination is given; and (iii) if
Employee's employment is terminated pursuant to subparagraph (c) above, fifteen
(15) days after the date on which a Notice of Termination is given. The date on
which termination is deemed to have occurred pursuant to this paragraph is
hereinafter referred to as the "Date of Termination".
- 2 -
<PAGE> 3
6. PAYMENTS ON TERMINATION. In the event that Employee's
employment is terminated pursuant to Section 5 above, Employer shall pay to
Employee his full Base Salary through the Date of Termination together with all
benefits and other compensation, if any, due and owing as of that date. In the
event that Employee's employment is terminated at any time by Employer without
Cause, then Employer shall pay to Employee on the Date of Termination a lump
sum cash payment equal to one year of Employee's annual Base Salary as of the
Date of Termination in addition to all other benefits and other compensation,
if any, due and owing as of that date.
7. BOARD OF DIRECTORS. Employer shall use its best efforts to
cause Employee to be elected as a member of the Board of Directors of Employer
and each of its subsidiaries at all times during the Service Period. Employee
shall agree to faithfully serve Employer as a member of the Boards of
Directors upon election.
8. LIFE INSURANCE. If requested by Employer, Employee shall
submit to such physical examinations and otherwise take such actions and
execute and deliver such documents as may be reasonably necessary to enable
Employer to obtain life insurance on the life of Employee for the benefit of
Employer.
9. REPRESENTATIONS AND WARRANTIES. Employee represents and
warrants to Employer that he is under no contractual or other restriction or
obligation which would prevent the performance of his duties hereunder or
interfere with the rights of Employer hereunder.
10. DISCLOSURE AND PROTECTION OF CONFIDENTIAL INFORMATION.
(a) For purposes of this Agreement, "Confidential
Information" means knowledge, information and material which is proprietary to
Employer, of which Employee may obtain knowledge or access through or as a
result of his employment by Employer (including information conceived,
originated, discovered or developed in whole or in part by Employee).
Confidential Information includes, but is not limited to, (i) technical
knowledge, information and material such as trade secrets, processes, formulas,
data, know-how, improvements, inventions, computer programs, drawings, patents,
and experimental and development work techniques, and (ii) marketing and other
information, such as supplier lists, customer lists, marketing and business
plans, business or technical needs of customers, consultants, licensees or
suppliers and their methods of doing business, arrangements with customers,
consultants, licensees or suppliers, manuals and personnel records or data.
Confidential Information also includes any information described above which
Employer obtains from another party and which Employer treats as proprietary or
designates as confidential, whether or not owned or developed by Employer.
Notwithstanding the foregoing, any information which is or becomes available to
the general public otherwise than by breach of this Section 10 shall not
constitute Confidential Information for purposes of this Agreement.
(b) During the term of this Agreement and thereafter,
Employee agrees, to hold in confidence all Confidential Information and not to
use such information for Employee's
- 3 -
<PAGE> 4
own benefit or to reveal, report, publish, disclose or transfer, directly or
indirectly, any Confidential Information to any person or entity, or to utilize
any Confidential Information for any purpose, except in the course of
Employee's work for Employer.
(c) Employee will abide by any and all security rules and
regulations, whether formal or informal, that may from time to time be imposed
by Employer for the protection of Confidential Information, and will inform
Employer of any defects in, or improvements that could be made to, such rules
and regulations.
(d) Employee will notify Employer in writing immediately
upon receipt of any subpoena, notice to produce, or other compulsory order or
process of any court of law or government agency if such document requires or
may require disclosure or other transfer of Confidential Information.
(e) Upon termination of employment, Employee will deliver
to Employer any and all records and tangible property that contain Confidential
Information that are in his possession or under his control.
11. COVENANT NOT TO COMPETE.
(a) In consideration for Employer entering into this
Agreement, Employee covenants and agrees that during the Service Period and for
the two (2) year period thereafter, Employee will not, without the express
prior written consent of Employer, directly or indirectly, compete with the
business of Employer anywhere within the United States of America. Employee
will undertake no activities that may lead Employee to compete with or to
acquire rival, conflicting or antagonistic interests to those of Employer with
respect to the business of Employer, whether alone, as a partner, or as an
officer, director, employee, independent contractor, consultant or shareholder
holding 5% or more of the outstanding voting stock of any other corporation, or
as a trustee, fiduciary or other representative of any other person or entity.
(b) During the Service Period and for a period of two (2)
years after termination of employment, Employee will not, directly or
indirectly, solicit or induce any other employee of Employer or any parent or
affiliate to leave his or her employment, or solicit or induce any consultant
or independent contractor to sever that person's relationship with Employer.
(c) If any court shall determine that the duration or
geographical limit of any covenant contained in this Section 11 is
unenforceable, it is the intention of the parties that covenant shall not
thereby be terminated but shall be deemed amended to the extent required to
render it valid and enforceable, such amendment to apply only in the
jurisdiction of the court that has made such adjudication.
(d) Employee acknowledges and agrees that the covenants
contained in Sections 10 and 11 hereof are of the essence in this Agreement,
that each of such covenants is
- 4 -
<PAGE> 5
reasonable and necessary to protect and preserve the interests, properties, and
business of Employer, and that irreparable loss and damage will be suffered by
Employer should Employee breach any of such covenants. Employee further
represents and acknowledges that he shall not be precluded from gainful
engagement in a satisfactory fashion by the enforcement of these provisions.
12. AVAILABILITY OF INJUNCTIVE RELIEF. Employee acknowledges and
agrees that any breach by him of the provisions of Sections 10 or 11 hereof
will cause Employer irreparable injury and damage for which it cannot be
adequately compensated in damages. Employee therefore expressly agrees that
Employer shall be entitled to seek injunctive and/or other equitable relief, on
a temporary or permanent basis to prevent any anticipatory or continuing breach
of this Agreement or any part hereof, and is secured as an enforcement.
Nothing herein shall be construed as a waiver by Employer of any right it may
have or hereafter acquired to monetary damages by reason of any injury to its
property, business or reputation or otherwise arising out of any wrongful act
or omission of it.
13. SURVIVAL. The covenants, agreements, representations and
warranties contained in or made pursuant to this Agreement shall survive
Employee's termination of employment, irrespective of any investigation made by
or on behalf of any party.
14. MODIFICATION. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
15. NOTICES. Any notice required or permitted hereunder shall be
deemed validly given if delivered by hand, verified overnight delivery, or by
first class, certified mail to the following addresses (or to such other
address as the addressee shall notify in writing to the other party):
If to Employee: Mitchel J. Laskey
1611 Talisia Court
Longwood, Florida 32779
with a copy to: Richard N. Bernstein, Esq.
Cohen, Berke, Bernstein, Brodie
Kondell & Laszlo, P.A.
2601 South Bayshore Drive, 19th Floor
Miami, Florida 33133
If to Employer: Terrano Corporation
245 South 84th Street
Lincoln, Nebraska 68510
Attn: David M. Pomerance, President
- 5 -
<PAGE> 6
with a copy to: William E. Olson, Jr.
DeMars, Gordon, Olson, Recknor & Shively
1225 L Street, Suite 400
Post Office Box 81607
Lincoln, Nebraska 68501
16. WAIVER. Any waiver by either party of a breach of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision
of this Agreement. The failure of a party to insist upon strict adherence to
any term of this Agreement on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. All waivers must
be in writing.
17. BINDING EFFECT. Employer's rights and obligations under this
Agreement shall not be transferable by assignment or otherwise, and any attempt
to do any of the foregoing shall be void. The provisions of this Agreement
shall be binding upon the Employee and his heirs and personal representatives,
and shall be binding upon and inure to the benefit of Employer, its successors
and assigns.
18. HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
19. GOVERNING LAW; VENUE. This Agreement shall be governed and
construed in accordance with the laws of the State of Florida, without giving
effect to rules governing conflicts of law, with proper venue with respect to
all disputes related to this Agreement being Dade County, Florida.
20. INVALIDITY. The invalidity or unenforceability of any term of
this Agreement shall not invalidate, make unenforceable or otherwise affect any
other term of this Agreement, which shall remain in full force and effect.
21. ATTORNEYS' FEES. In the event any dispute or litigation
arises hereunder between any of the parties hereto, the prevailing party shall
be entitled to all reasonable costs and expenses incurred by it in connection
therewith (including, without limitation, all reasonable attorneys' fees and
costs incurred before and at any trial or other proceeding and at all tribunal
levels), as well as all other relief granted in any suit or other proceeding.
- 6 -
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first hereinabove written.
EMPLOYER:
ATTEST: TERRANO CORPORATION, a Nebraska
corporation
By: /s/ William E. Olson By: /s/ David M. Pomerance
------------------------------ ------------------------------------
William E. Olson, David M. Pomerance, Chief Executive
Assistant Secretary Officer
EMPLOYEE:
/s/ Mitchel J. Laskey
---------------------------------------
Mitchel J. Laskey
- 7 -
<PAGE> 1
EXHIBIT 10.05
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of the 23rd day of August, 1994 by
and between TERRANO CORPORATION, a Nebraska corporation ("Employer"), and DAVID
M. POMERANCE ("Employee").
WHEREAS, Employee wishes to be employed by Employer with the duties
and responsibilities as hereinafter described, and Employer desires to assure
itself of the availability of Employee's services in such capacity.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, Employer and Employee hereby agree as follows:
1. EMPLOYMENT. Employer hereby agrees to employ Employee, and
Employee hereby agrees to serve Employer, upon the terms and conditions
hereinafter set forth.
2. TERM. The employment of Employee by Employer pursuant to this
Agreement shall be for a three (3) year period commencing on the date hereof
and shall automatically renew for two (2) successive one-year periods
(hereinafter referred to as the "Service Period"). Notwithstanding the
foregoing, this Agreement shall terminate upon the expiration of the initial
term, or the any renewal term, as applicable, upon delivery of written notice
by either party not less than sixty (60) days prior to the end of the initial
term, or a renewal term, as the case may be.
3. DUTIES. Employee shall, subject to overall direction
consistent with the legal authority of the Board of Directors of Employer (the
"Board"), serve as, and have all power and authority inherent in the offices
of, Chief Executive Officer of Employer and each of its subsidiaries, and shall
be responsible for those areas in the conduct of the business reasonably
assigned to him by the Board. Employee shall devote substantially all his
business time and efforts to the business of Employer; provided, however, that
it is understood and agreed that, while Employee may devote limited time to
other business matters in which he has an interest, in the event of a conflict,
Employee's first and primary responsibility shall be to the performance of his
duties for Employer.
4. COMPENSATION AND OTHER PROVISIONS. Employee shall be entitled
to the compensation and benefits hereinafter described in subparagraphs (a)
through (c) (such compensation and benefits being hereinafter referred to as
"Compensation Benefits").
(a) BASE SALARY. Employer or any subsidiary as Employer
may direct, shall pay to Employee a base salary equal to $150,000.00 per annum
during the Service Period (such amount, as it may be increased from time to
time, may sometimes hereinafter be referred to as "Base Salary"). The Base
Salary and Employee's other compensation will be reviewed by the
<PAGE> 2
Board at least annually during the Service Period and may be increased (but not
decreased) from time to time as the Board may determine.
(b) PARTICIPATION IN BENEFIT PLANS. During the Service
Period, Employee shall be eligible to participate in all employee benefit plans
and arrangements now in effect or which may hereafter be established,
including, without limitation, all life, group insurance and medical care plans
and all disability, retirement and other employee benefit plans of Employer or
its operating subsidiaries provided that (i) as of the date hereof Employee has
received and approved such benefits, and (ii) such benefit plans shall not be
diminished during the Term of Employment.
(c) OTHER PROVISIONS. Employee shall be entitled to four
(4) weeks paid vacation per annum. Employee shall be reimbursed for all
reasonable expenses incurred by him in the performance of his duties,
including, but not limited to, all reasonable entertainment and travel expenses
and costs of transitional housing and commuting expenses.
5. TERMINATION. Employee's employment hereunder shall terminate
as a result of any of the following events:
(a) Employee's death;
(b) Employee shall be unable to perform his duties
hereunder by reason of illness, accident or other physical or mental disability
for a continuous period of at least six months or an aggregate of nine months
during any continuous twelve month period ("Disability");
(c) termination by Employee; or
(d) for Cause, where "Cause" shall mean: (i) final
non-appealable adjudication of Employee of a felony; or (ii) the reasonable
determination of seventy-five (75%) percent of the Board that Employee has
engaged in intentional misconduct, or the gross neglect of his duties, which
has a material and continuing adverse effect on the business of Employer.
Any termination pursuant to subparagraph (b), (c) or (d) of
this Section shall be communicated by a written notice ("Notice of
Termination"), such notice to set forth with specificity the grounds for
termination if the result of "Cause". Employee's employment under this
Agreement shall be deemed to have terminated as follows: (i) if Employee's
employment is terminated pursuant to subparagraph (a) above, on the date of his
death; (ii) if Employee's employment is terminated pursuant to subparagraph (b)
or (d) above, on the date on which Notice of Termination is given; and (iii) if
Employee's employment is terminated pursuant to subparagraph (c) above, fifteen
(15) days after the date on which a Notice of Termination is given. The date on
which termination is deemed to have occurred pursuant to this paragraph is
hereinafter referred to as the "Date of Termination".
- 2 -
<PAGE> 3
6. PAYMENTS ON TERMINATION. In the event that Employee's
employment is terminated pursuant to Section 5 above, Employer shall pay to
Employee his full Base Salary through the Date of Termination together with all
benefits and other compensation, if any, due and owing as of that date. In the
event that Employee's employment is terminated at any time by Employer without
Cause, then Employer shall pay to Employee on the Date of Termination a lump
sum cash payment equal to one year of Employee's annual Base Salary as of the
Date of Termination in addition to all other benefits and other compensation,
if any, due and owing as of that date.
7. BOARD OF DIRECTORS. Employer shall use its best efforts to
cause Employee to be elected as a member of the Board of Directors of Employer
and each of its subsidiaries at all times during the Service Period. Employee
shall agree to faithfully serve Employer as a member of the Boards of
Directors upon election.
8. LIFE INSURANCE. If requested by Employer, Employee shall
submit to such physical examinations and otherwise take such actions and
execute and deliver such documents as may be reasonably necessary to enable
Employer to obtain life insurance on the life of Employee for the benefit of
Employer.
9. REPRESENTATIONS AND WARRANTIES. Employee represents and
warrants to Employer that he is under no contractual or other restriction or
obligation which would prevent the performance of his duties hereunder or
interfere with the rights of Employer hereunder.
10. DISCLOSURE AND PROTECTION OF CONFIDENTIAL INFORMATION.
(a) For purposes of this Agreement, "Confidential
Information" means knowledge, information and material which is proprietary to
Employer, of which Employee may obtain knowledge or access through or as a
result of his employment by Employer (including information conceived,
originated, discovered or developed in whole or in part by Employee).
Confidential Information includes, but is not limited to, (i) technical
knowledge, information and material such as trade secrets, processes, formulas,
data, know-how, improvements, inventions, computer programs, drawings, patents,
and experimental and development work techniques, and (ii) marketing and other
information, such as supplier lists, customer lists, marketing and business
plans, business or technical needs of customers, consultants, licensees or
suppliers and their methods of doing business, arrangements with customers,
consultants, licensees or suppliers, manuals and personnel records or data.
Confidential Information also includes any information described above which
Employer obtains from another party and which Employer treats as proprietary or
designates as confidential, whether or not owned or developed by Employer.
Notwithstanding the foregoing, any information which is or becomes available to
the general public otherwise than by breach of this Section 10 shall not
constitute Confidential Information for purposes of this Agreement.
(b) During the term of this Agreement and thereafter,
Employee agrees, to hold in confidence all Confidential Information and not to
use such information for Employee's
- 3 -
<PAGE> 4
own benefit or to reveal, report, publish, disclose or transfer, directly or
indirectly, any Confidential Information to any person or entity, or to utilize
any Confidential Information for any purpose, except in the course of
Employee's work for Employer.
(c) Employee will abide by any and all security rules and
regulations, whether formal or informal, that may from time to time be imposed
by Employer for the protection of Confidential Information, and will inform
Employer of any defects in, or improvements that could be made to, such rules
and regulations.
(d) Employee will notify Employer in writing immediately
upon receipt of any subpoena, notice to produce, or other compulsory order or
process of any court of law or government agency if such document requires or
may require disclosure or other transfer of Confidential Information.
(e) Upon termination of employment, Employee will deliver
to Employer any and all records and tangible property that contain Confidential
Information that are in his possession or under his control.
11. COVENANT NOT TO COMPETE.
(a) In consideration for Employer entering into this
Agreement, Employee covenants and agrees that during the Service Period and for
the two (2) year period thereafter, Employee will not, without the express
prior written consent of Employer, directly or indirectly, compete with the
business of Employer anywhere within the United States of America. Employee
will undertake no activities that may lead Employee to compete with or to
acquire rival, conflicting or antagonistic interests to those of Employer with
respect to the business of Employer, whether alone, as a partner, or as an
officer, director, employee, independent contractor, consultant or shareholder
holding 5% or more of the outstanding voting stock of any other corporation, or
as a trustee, fiduciary or other representative of any other person or entity.
(b) During the Service Period and for a period of two (2)
years after termination of employment, Employee will not, directly or
indirectly, solicit or induce any other employee of Employer or any parent or
affiliate to leave his or her employment, or solicit or induce any consultant
or independent contractor to sever that person's relationship with Employer.
(c) If any court shall determine that the duration or
geographical limit of any covenant contained in this Section 11 is
unenforceable, it is the intention of the parties that covenant shall not
thereby be terminated but shall be deemed amended to the extent required to
render it valid and enforceable, such amendment to apply only in the
jurisdiction of the court that has made such adjudication.
(d) Employee acknowledges and agrees that the covenants
contained in Sections 10 and 11 hereof are of the essence in this Agreement,
that each of such covenants is
- 4 -
<PAGE> 5
reasonable and necessary to protect and preserve the interests, properties, and
business of Employer, and that irreparable loss and damage will be suffered by
Employer should Employee breach any of such covenants. Employee further
represents and acknowledges that he shall not be precluded from gainful
engagement in a satisfactory fashion by the enforcement of these provisions.
12. AVAILABILITY OF INJUNCTIVE RELIEF. Employee acknowledges and
agrees that any breach by him of the provisions of Sections 10 or 11 hereof
will cause Employer irreparable injury and damage for which it cannot be
adequately compensated in damages. Employee therefore expressly agrees that
Employer shall be entitled to seek injunctive and/or other equitable relief, on
a temporary or permanent basis to prevent any anticipatory or continuing breach
of this Agreement or any part hereof, and is secured as an enforcement.
Nothing herein shall be construed as a waiver by Employer of any right it may
have or hereafter acquired to monetary damages by reason of any injury to its
property, business or reputation or otherwise arising out of any wrongful act
or omission of it.
13. SURVIVAL. The covenants, agreements, representations and
warranties contained in or made pursuant to this Agreement shall survive
Employee's termination of employment, irrespective of any investigation made by
or on behalf of any party.
14. MODIFICATION. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
15. NOTICES. Any notice required or permitted hereunder shall be
deemed validly given if delivered by hand, verified overnight delivery, or by
first class, certified mail to the following addresses (or to such other
address as the addressee shall notify in writing to the other party):
If to Employee: David M. Pomerance
2421 Southeast Bahia Way
Stuart, Florida 34996
If to Employer: Terrano Corporation
245 South 84th Street
Lincoln, Nebraska 68510
Attn: Mitchel J. Laskey, President and
Chief Operating Officer
- 5 -
<PAGE> 6
16. WAIVER. Any waiver by either party of a breach of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision
of this Agreement. The failure of a party to insist upon strict adherence to
any term of this Agreement on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. All waivers must
be in writing.
17. BINDING EFFECT. Employer's rights and obligations under this
Agreement shall not be transferable by assignment or otherwise, and any attempt
to do any of the foregoing shall be void. The provisions of this Agreement
shall be binding upon the Employee and his heirs and personal representatives,
and shall be binding upon and inure to the benefit of Employer, its successors
and assigns.
18. HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
19. GOVERNING LAW; VENUE. This Agreement shall be governed and
construed in accordance with the laws of the State of Florida, without giving
effect to rules governing conflicts of law, with proper venue with respect to
all disputes related to this Agreement being Dade County, Florida.
20. INVALIDITY. The invalidity or unenforceability of any term of
this Agreement shall not invalidate, make unenforceable or otherwise affect any
other term of this Agreement, which shall remain in full force and effect.
21. ATTORNEYS' FEES. In the event any dispute or litigation
arises hereunder between any of the parties hereto, the prevailing party shall
be entitled to all reasonable costs and expenses incurred by it in connection
therewith (including, without limitation, all reasonable attorneys' fees and
costs incurred before and at any trial or other proceeding and at all tribunal
levels), as well as all other relief granted in any suit or other proceeding.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
- 6 -
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first hereinabove written.
EMPLOYER:
TERRANO CORPORATION, a Nebraska
corporation
By: /s/ Mitchel J. Laskey
-----------------------------
EMPLOYEE:
/s/ David M. Pomerance
--------------------------------
David M. Pomerance
- 7 -
<PAGE> 1
Exhibit 10.06
AMENDMENT TO EMPLOYMENT AGREEMENT
Amendment to Employment Agreement made effective the 1st day of
August, 1996, by and between DYNAMIC HEALTHCARE TECHNOLOGIES, INC., a Florida
corporation ("Employer") and David M. Pomerance ("Employee").
WHEREAS, Employer and Employee are parties to an Employment Agreement
dated August 23, 1994 (the "Employment Agreement").
WHEREAS, Employer and Employee desire to amend the Employment
Agreement as set forth herein, and supersede and replace all prior amendments
to the Employment Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, Employer and Employee hereby amend the Employment Agreement as
follows:
1. The first sentence of Paragraph 2 is hereby restated to read
as follows:
The employment of Employee by Employer pursuant to this
Agreement shall be for a one (1) year period commencing on
August 1, 1996 ("Commencement Date") and shall automatically
renew for successive one (1) one-year periods (hereinafter
referred to as the "Service Period") unless terminated by
written notice from either party within sixty (60) days prior
to renewal.
2. Paragraph 3 is hereby restated in its entirety to read as
follows:
"3. DUTIES.
(a) Employee shall, subject to overall
direction consistent with the legal authority
of the Board of Directors of Employee (the
"Board"), serve as, and have all power and
authority inherent in the office of Chairman
of the Board of Directors and shall be
responsible for those areas in the conduct of
the business reasonably assigned to him by
the Board.
(b) Employee shall serve as a part time
consultant ("Consultant") to Employer and
shall be responsible for those areas as are
reasonably assigned to him by Employer's
President, or by the Board, or as are
mutually agreed upon by the Employer's
President and Employee.
(c) Employee shall devote as much of
his business time as is necessary for him to
successfully carry out his duties as Chairman
of the Board and as Consultant as determined
by Employer's President."
3. Paragraph 4(a) is hereby restated in its entirety to read as
follows:
"(a) MONETARY COMPENSATION. Employee shall receive a one
time payment of $9,854.93 on the Commencement Date.
<PAGE> 2
In consideration of Employee's services as Chairman of the
Board, Employee shall receive monthly remuneration of $1,500
per month. In consideration of Employees services as
Consultant, Employee shall receive per diem compensation of
$2,500 per day with a non cumulative minimum of five (5) days
per month."
4. Paragraph 4(c) is hereby restated in its entirety to read as
follows:
"(c) OTHER PROVISIONS. Employee shall be reimbursed for
all reasonable expenses incurred by him in performance of his
duties as Chairman of the Board and Consultant, including, but
not limited to, all reasonable entertainment and travel
expenses, which shall include first class air travel or it's
dollar equivalent.
5. Paragraph 11 is hereby amended to replace the words "two (2)
year period" with the words "six (6) month period" in subparagraphs (a) and
(b).
6. In consideration for Employee entering into this Amendment (a)
Employee shall receive a bonus of $12,500 per calendar quarter, payable on the
first day of August and November 1996 and February and May 1997; and (b)
Employee's unvested options to purchase an aggregate of 100,000 shares of
Employer's common stock ("Option Shares") granted pursuant to a Stock Option
Agreement dated August 24, 1994 respectively, shall be deemed to have vested on
the Commencement Date.
7. Employee hereby acknowledges that he waives participation the
Employer's Management Incentive Compensation Plan and in all vacation and sick
day benefit programs.
8. Except as specifically set forth above, the provisions of the
Employment Agreement shall remain in full force and effect until further
amended in accordance with the provisions thereof.
IN WITNESS WHEREOF, the undersigned have duly executed this Amendment
as of the date first written above.
/s/ David M. Pomerance
---------------------------------------
DAVID M. POMERANCE
DYNAMIC HEALTHCARE TECHNOLOGIES,
INC., a Florida Corporation
By: /s/ Mitchel J. Laskey
----------------------------------
Mitchel J. Laskey
<PAGE> 1
EXHIBIT 10.07
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of the 16th day of May, 1996
by and between DYNAMIC HEALTHCARE TECHNOLOGIES, INC., a Nebraska corporation
("Employer"), and NIKHIL BHATT ("Employee").
WHEREAS, Employee wishes to be employed by Employer with the duties
and responsibilities as hereinafter described, and Employer desires to assure
itself of the availability of Employee's services in such capacity.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, Employer and Employee hereby agree as follows:
1. EMPLOYMENT. Employer hereby agrees to employ Employee, and
Employee hereby agrees to serve Employer, upon the terms and conditions
hereinafter set forth.
2. TERM. The employment of Employee by Employer pursuant to this
Agreement shall be for a three (3) year period commencing on June 2, 1996
(hereinafter referred to as the "Service Period").
3. DUTIES. Employee shall, subject to overall direction
consistent with the legal authority of the Board of Directors of Employer (the
"Board"), serve as, and have all power and authority inherent in the offices
of, Senior Vice President and Chief Technical Officer of Employer and each of
its subsidiaries and shall be responsible for those areas in the conduct of the
business reasonably assigned to him by the President of the Company, to whom
you will report directly, including, but not limited to, supervising and
managing all technical areas. Employee shall devote all his business time and
efforts to the business of Employer; provided, however, that it is understood
and agreed that, while Employee may devote limited time to other business
matters in which he has an interest, in the event of a conflict, Employee's
first and primary responsibility shall be to the performance of his duties for
Employer.
4. COMPENSATION AND OTHER PROVISIONS. Employee shall be entitled
to the compensation and benefits hereinafter described in subparagraphs (a)
through (d) (such compensation and benefits being hereinafter referred to as
"Compensation Benefits").
(a) BASE SALARY. Employer or any subsidiary as Employer
may direct, shall pay to Employee a base salary equal to $155,000.00 per annum
during the Service Period (such amount, as it may be increased from time to
time, may sometimes hereinafter be referred to as "Base Salary"). The Base
Salary and Employee's other compensation will be reviewed by the Board at least
annually during the Service Period and may be increased (but not decreased)
from time to time as the Board may determine based upon a performance
evaluation. Notwithstanding the foregoing, in the event that the "Consumer
Price Index United States City Average -- Urban
<PAGE> 2
Wage Earners and Clerical Workers," published by the Bureau of Labor Statistics
of the United States Department of Labor (the "CPI"), shall indicate that as of
December 31 of any year of Employee's employment, the average cost of living
during the twelve (12) months then ended shall have increased over the average
cost of living during the preceding twelve (12) month period, then the
Employee's Base Salary shall be increased prospectively by no less than such
percentage increase, effective on the following yearly anniversary date of this
Agreement.
(b) PARTICIPATION IN BENEFIT PLANS. During the Service
Period, Employee shall be eligible to participate in all employee benefit plans
and arrangements now in effect or which may hereafter be established,
including, without limitation, all life, group insurance and medical care plans
and all disability, retirement and other employee benefit plans of Employer or
its operating subsidiaries.
(c) RELOCATION EXPENSES. Employee shall be reimbursed
for the following relocation expenses: (i) household packing and moving
expenses; (ii) the cost of temporary housing in the Orlando area for a period
of up to six (6) months or as agreed to by Employer and Employee; and (iii) out
of pocket closing costs on the sale of Employee's house in Atlanta, Georgia,
including brokerage commissions.
(d) OTHER PROVISIONS. Employee shall be entitled to four
(4) weeks paid vacation per annum. Employee shall be reimbursed for all
reasonable expenses incurred by him in the performance of his duties,
including, but not limited to, all reasonable entertainment and travel
expenses.
5. TERMINATION. Employee's employment hereunder shall terminate
as a result of any of the following events:
(a) Employee's death;
(b) Employee shall be unable to perform his duties
hereunder by reason of illness, accident or other physical or mental disability
for a continuous period of at least six months or an aggregate of nine months
during any continuous twelve month period ("Disability");
(c) termination by Employee; or
(d) for Cause, where "Cause" shall mean: (i) final
non-appealable adjudication of Employee of a felony; or (ii) the reasonable
determination of seventy-five (75%) percent of the Board that Employee has
engaged in intentional misconduct, or the gross neglect of his duties, which
has a material and continuing adverse effect on the business of Employer.
Any termination pursuant to subparagraph (b), (c) or (d) of
this Section shall be communicated by a written notice ("Notice of
Termination"), such notice to set forth with specificity the grounds for
termination if the result of "Cause". Employee's employment under
- 2 -
<PAGE> 3
this Agreement shall be deemed to have terminated as follows: (i) if Employee's
employment is terminated pursuant to subparagraph (a) above, on the date of his
death; (ii) if Employee's employment is terminated pursuant to subparagraph (b)
or (d) above, on the date on which Notice of Termination is given; and (iii) if
Employee's employment is terminated pursuant to subparagraph (c) above, fifteen
(15) days after the date on which a Notice of Termination is given. The date on
which termination is deemed to have occurred pursuant to this paragraph is
hereinafter referred to as the "Date of Termination".
6. PAYMENTS ON TERMINATION. In the event that Employee's
employment is terminated pursuant to Section 5 above, Employer shall pay to
Employee his full Base Salary through the Date of Termination together with all
benefits and other compensation, if any, due and owing as of that date. In the
event that Employee's employment is terminated at any time by Employer without
Cause, then Employer shall pay to Employee on the Date of Termination a lump
sum cash payment equal to one year of Employee's annual Base Salary as of the
Date of Termination in addition to all other benefits and other compensation,
if any, due and owing as of that date.
7. LIFE INSURANCE. If requested by Employer, Employee shall
submit to such physical examinations and otherwise take such actions and
execute and deliver such documents as may be reasonably necessary to enable
Employer to obtain life insurance on the life of Employee for the benefit of
Employer.
8. REPRESENTATIONS AND WARRANTIES. Employee hereby represents
and warrants to the Employer that (i) the execution, delivery and performance
of this Agreement by Employee do not and shall not conflict with, breach,
violate or cause a default under any contract, agreement, instrument, order,
judgment or decree to which Employee is a party or by which Employee is bound,
(ii) Employee is not a party to or bound by any Employment Agreement,
Noncompete Agreement or Confidentiality Agreement with any other person or
entity which in any way may restrict, impair or limit the performance of his
duties hereunder, and (iii) upon the execution and delivery of this Agreement
by the Employee, this Agreement shall be the valid and binding obligation of
Employee, enforceable in accordance with its terms.
9. DISCLOSURE AND PROTECTION OF CONFIDENTIAL INFORMATION.
(a) For purposes of this Agreement, "Confidential
Information" means knowledge, information and material which is proprietary to
Employer, of which Employee may obtain knowledge or access through or as a
result of his employment by Employer (including information conceived,
originated, discovered or developed in whole or in part by Employee).
Confidential Information includes, but is not limited to, (i) technical
knowledge, information and material such as trade secrets, processes, formulas,
data, know-how, improvements, inventions, computer programs, drawings, patents,
and experimental and development work techniques, and (ii) marketing and other
information, such as supplier lists, customer lists, marketing and business
plans, business or technical needs of customers, consultants, licensees or
suppliers and their methods of doing business, arrangements with customers,
consultants, licensees or
- 3 -
<PAGE> 4
suppliers, manuals and personnel records or data. Confidential Information also
includes any information described above which Employer obtains from another
party and which Employer treats as proprietary or designates as confidential,
whether or not owned or developed by Employer. Notwithstanding the foregoing,
any information which is or becomes available to the general public otherwise
than by breach of this Section 9 shall not constitute Confidential Information
for purposes of this Agreement.
(b) During the term of this Agreement and thereafter,
Employee agrees, to hold in confidence all Confidential Information and not to
use such information for Employee's own benefit or to reveal, report, publish,
disclose or transfer, directly or indirectly, any Confidential Information to
any person or entity, or to utilize any Confidential Information for any
purpose, except in the course of Employee's work for Employer.
(c) Employee will abide by any and all security rules and
regulations, whether formal or informal, that may from time to time be imposed
by Employer for the protection of Confidential Information, and will inform
Employer of any defects in, or improvements that could be made to, such rules
and regulations.
(d) Employee will notify Employer in writing immediately
upon receipt of any subpoena, notice to produce, or other compulsory order or
process of any court of law or government agency if such document requires or
may require disclosure or other transfer of Confidential Information.
(e) Upon termination of employment, Employee will deliver
to Employer any and all records and tangible property that contain Confidential
Information that are in his possession or under his control.
10. COVENANT NOT TO COMPETE.
(a) In consideration for Employer entering into this
Agreement, Employee covenants and agrees that during the Service Period and for
the two (2) year period thereafter, Employee will not, without the express
prior written consent of Employer, directly or indirectly, compete with the
business of Employer anywhere within the United States of America. Employee
will undertake no activities that may lead Employee to compete with or to
acquire rival, conflicting or antagonistic interests to those of Employer with
respect to the business of Employer, whether alone, as a partner, or as an
officer, director, employee, independent contractor, consultant or shareholder
holding 5% or more of the outstanding voting stock of any other corporation, or
as a trustee, fiduciary or other representative of any other person or entity.
(b) During the Service Period and for a period of two (2)
years after termination of employment, Employee will not, directly or
indirectly, solicit or induce any other employee of Employer or any parent or
affiliate to leave his or her employment, or solicit or induce any consultant
or independent contractor to sever that person's relationship with Employer.
- 4 -
<PAGE> 5
(c) If any court shall determine that the duration or
geographical limit of any covenant contained in this Section 10 is
unenforceable, it is the intention of the parties that covenant shall not
thereby be terminated but shall be deemed amended to the extent required to
render it valid and enforceable, such amendment to apply only in the
jurisdiction of the court that has made such adjudication.
(d) Employee acknowledges and agrees that the covenants
contained in Sections 10 and 11 hereof are of the essence in this Agreement,
that each of such covenants is reasonable and necessary to protect and preserve
the interests, properties, and business of Employer, and that irreparable loss
and damage will be suffered by Employer should Employee breach any of such
covenants. Employee further represents and acknowledges that he shall not be
precluded from gainful engagement in a satisfactory fashion by the enforcement
of these provisions.
11. AVAILABILITY OF INJUNCTIVE RELIEF. Employee acknowledges and
agrees that any breach by him of the provisions of Sections 9 or 10 hereof will
cause Employer irreparable injury and damage for which it cannot be adequately
compensated in damages. Employee therefore expressly agrees that Employer
shall be entitled to seek injunctive and/or other equitable relief, on a
temporary or permanent basis to prevent any anticipatory or continuing breach
of this Agreement or any part hereof, and is secured as an enforcement.
Nothing herein shall be construed as a waiver by Employer of any right it may
have or hereafter acquired to monetary damages by reason of any injury to its
property, business or reputation or otherwise arising out of any wrongful act
or omission of it.
12. SURVIVAL. The covenants, agreements, representations and
warranties contained in or made pursuant to this Agreement shall survive
Employee's termination of employment, irrespective of any investigation made by
or on behalf of any party.
13. MODIFICATION. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
14. NOTICES. Any notice required or permitted hereunder shall be
deemed validly given if delivered by hand, verified overnight delivery, or by
first class, certified mail to the following addresses (or to such other
address as the addressee shall notify in writing to the other party):
If to Employee: Nick Bhatt
2635 Coachman Circle
Alpharetta, GA 30202
- 5 -
<PAGE> 6
If to Employer: Dynamic Healthcare Technologies, Inc.
101 Southhall Lane
Maitland, FL 32751
Attn: David M. Pomerance, President
with a copy to: Richard N. Bernstein, Esq.
Cohen, Berke, Bernstein, Brodie
Kondell & Laszlo, P.A.
2601 South Bayshore Drive, 19th Floor
Miami, Florida 33133
15. WAIVER. Any waiver by either party of a breach of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision
of this Agreement. The failure of a party to insist upon strict adherence to
any term of this Agreement on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. All waivers must
be in writing.
16. BINDING EFFECT. Employer's rights and obligations under this
Agreement shall not be transferable by assignment or otherwise, and any attempt
to do any of the foregoing shall be void. The provisions of this Agreement
shall be binding upon the Employee and his heirs and personal representatives,
and shall be binding upon and inure to the benefit of Employer, its successors
and assigns.
17. HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
18. GOVERNING LAW; VENUE. This Agreement shall be governed and
construed in accordance with the laws of the State of Florida, without giving
effect to rules governing conflicts of law, with proper venue with respect to
all disputes related to this Agreement being Dade County, Florida.
19. INVALIDITY. The invalidity or unenforceability of any term of
this Agreement shall not invalidate, make unenforceable or otherwise affect any
other term of this Agreement, which shall remain in full force and effect.
20. ATTORNEYS' FEES. In the event any dispute or litigation
arises hereunder between any of the parties hereto, the prevailing party shall
be entitled to all reasonable costs and expenses incurred by it in connection
therewith (including, without limitation, all reasonable attorneys' fees and
costs incurred before and at any trial or other proceeding and at all tribunal
levels), as well as all other relief granted in any suit or other proceeding.
- 6 -
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first hereinabove written.
EMPLOYER:
DYNAMIC HEALTHCARE TECHNOLOGIES, INC., a
Nebraska corporation
By: /s/ Mitchel J. Laskey
--------------------------------------------
Mitchel J. Laskey, President & C.O.O.
EMPLOYEE:
/s/ Nikhil Bhatt
------------------------------------------------
Nikhil Bhatt
- 7 -
<PAGE> 1
Exhibit 10.08
SUBLEASE
--------
THIS SUBLEASE is made and entered into this 31 day of January, 1995 by
and between John Alden Life Insurance Co., (hereinafter referred to as
"Sublessor") and Terrano Corporation dba Dynamic Healthcare Technologies, Inc.
(hereinafter referred to as "Sublessee");
W I T N E S S E T H
WHEREAS, Sublessor has entered into that certain lease agreement
(hereinafter referred to as the "Lease") dated December 6, 1993, by and between
Sublessor, as Tenant, and Hartford Accident and Indemnity Company, as Landlord,
(hereinafter referred to as "Landlord"), a true and correct copy of which, as
amended, is attached hereto as Exhibit A; and
WHEREAS, the Lease as amended demises certain premises located at 101
Southall Lane, Suite 200, Maitland, Florida 32751 (hereinafter referred to as
the "Building") which premises comprise a total floor area of approximately
20,126 rentable square feet (the "Premises"); and
WHEREAS, the Sublessee desires to sublease from the Sublessor a portion
comprising 14,612 rentable square feet or 13,695 usable square feet as shown in
Exhibit B, described as Suite 210 subject to the said Landlord's approval, the
entire Premises (the space which is subject to the terms of this Sublease is
hereinafter referred to as the "Sublease Premises" and defined in Section 1.1);
NOW THEREFORE, in consideration of the following mutual convenants and
conditions, the Sublessor and Sublessee hereby agree as follows:
SECTION 1. SUBLEASE PREMISES: USE
1.1 Subject to the terms and conditions set forth herein, Sublessor
hereby subleases unto Sublessee and Sublessee hereby hires and takes from
Sublessor the premises of 14,612 rentable square feet including two future
expansion space options at the then current lease rate, option 1: August 1995
for additional 2,737 rsf with a three month prior written notice, and a second
expansion option at any time with (6) six month prior written notice for the
remaining 2,777 rsf, with a six month prior written notice requirement, referred
to on Exhibit B attached hereto.
1.2 The Sublease Premises shall be occupied by Sublessee as an office,
and for no other use or purpose whatsoever. Sublease shall comply with and not
commit or permit to be committed upon the Sublease Premises any act which shall
violate any provision of the Lease.
<PAGE> 2
SECTION 2. TERM
2.1 The term of this Sublease shall commence on April 1, 1995 or
upon issuance of Certificate of Occupancy, whichever is the latter, and shall
terminate on March 31, 1999 (hereinafter "Termination Date").
SECTION 3. RENT
3.1 The Sublessee shall pay to Sublessor all and any amounts of rent
and additional rent:
Monthly
Base Rent Installments
Lease Year per Annum of Base Rent
---------- ----------- ------------
Year 1 $189,956.00 $15,829.67
Year 2 197,262.00 16,438.50
Year 3 204,568.00 17,047.33
Year 4 211,874.00 17,656.17
Florida Sales Tax shall be added to the installments above and any amount set
forth in the lease as additional rent. Additional rent shall include future
increases in the amounts of taxes on the land, the building, other improvements
on the land, and the cost of operation and maintenance of the property which
exceed the 1995 base year over the term of the Lease, in monthly installments
as set forth in the Lease in advance on or before the first day of each month
during the term of this Sublease, plus Florida Sales Tax.
Monthly installments shall be in default if not paid within five
calendar days when due. In the event Sublessee fails to pay any installment of
rent, additional rent, or any other sum due hereunder, and such failure
continues beyond five calendar days, Sublessee shall also be obligated to pay
interest on such overdue amount at the highest lawful rate computed from the
date when due until the date upon which Sublessor has received payment.
3.2 In addition to the obligation set forth above. Sublessee shall
be obligated to pay any amounts imposed and billed by Landlord under the terms
of Lease, including but not limited to the payment of additional rent insofar
as such amounts relate to the Sublease Premises. Without limiting the
generality of the foregoing, if any actions of obligations of Sublessee result
in any additional charges of liability being imposed upon Sublessor over and
above the rental obligations set forth in the Lease, Sublessee shall be
responsible for paying, or reimbursing Sublessor for all such amounts.
3.3 Simultaneously with each monthly installment or rent,
additional rent of any other payments, Sublessee shall additionally pay to
Sublessor all taxes levied by any governmental authority on the payment or
receipt of rent, including, without limitation, any sales tax imposed by the
State of Florida, Orange County, Florida.
<PAGE> 3
3.4 All installments of rent and other sums due hereunder shall be
paid to Sublessor at its offices at:
7300 Corporate Center Drive
Miami, FL 33126
Attn: Real Estate Leasing.
3.5 Security deposit: $100,000.00 Letter of Credit, clean,
irrevocable, available by sight draft, unconditional, and must name John Alden
Life Insurance Company as beneficiary which can decline to $0 in the amount of
$2,083.33 per month, over the 48 month lease term, payable upon demand in the
event that Sublessee does not complete its obligations under this lease.
SECTION 4.
4.1 The Sublessee agrees that this Sublease is subject and
subordinate to all of the terms and provisions of the Lease.
4.2 Sublessee hereby assumes and agrees to perform all of the
Sublessor's obligations under the Lease during the term of this Sublease of the
same extent that Sublessor would be obligated to perform such obligations if
this sublease did not exist; except, however, that Sublessee shall not be
obligated to pay to the Landlord the rental required pursuant to paragraph 3 of
the Lease. Any failure of Sublessee to comply with and abide by all terms and
provisions of the Lease shall constitute a default hereunder. Sublessee shall
look solely to the Sublessor for the performance of any obligations under the
Lease.
4.3 Sublessor hereby represents that the Lease is current and in
good standing on the date hereof.
4.4 Nothing contained in this Sublease shall in any way relieve the
Sublessor of its obligations to Landlord under the above-referenced Lease.
SECTION 5. INSURANCE
During the period of this Sublease, Sublessee shall maintain all
insurance required by the Lease reflecting Landlord and Sublessor and their
agents, servants, and employees, as additional insured parties. Upon
commencement of the term of this Sublease, Sublessee shall provide Landlord and
Sublessor with certificates of such coverage, together with copies of the
applicable policies. Not less than thirty days prior to the expiration of such
policies, Sublessee shall provide Landlord and Sublessor with certificates
evidencing renewal of the required coverage. Sublessee may satisfy the
foregoing obligation by an umbrella policy or separate policies (but not by a
self-insurance program).
SECTION 6. INDEMNIFICATION
<PAGE> 4
6.1 Sublessee shall at all times indemnify and keep harmless
Sublessor from all losses, damages, liabilities and expenses which may arise or
be claimed against Sublessor for any injuries or damages to person or property
consequent upon or arising from the use or occupancy of the Sublease Premises
by Sublessee, or consequent upon or arising from any acts, omissions, neglect
or fault of Sublessee, its agents, servants, employees, licensees, visitors,
customers, patrons or invitees, or consequent upon arising from Sublessee's
failure to comply with the Lease, this Sublease, or any laws, statutes,
ordinances, codes or regulations. Sublessor shall not be liable to Sublessee
for any damages, losses or injuries to the persons or property of Sublessee or
its agents, servants, employees, licensees, visitors, customers, or patrons,
which may be caused by the acts, neglect, omissions or faults of any persons,
firms or corporations, except when such injury, loss or damage results from
negligence of Sublessor, its agents, or employees. All personal property
placed or moved into the Sublease Premises shall be at the risk of Sublessee or
the owner thereof, and Sublessor shall not be liable to Sublessee for any
damage to said personal property.
6. In case Sublessor shall be made a party to any litigation
commenced against Sublessee, Sublessee shall protect and hold Sublessor
harmless and shall also pay all costs, expenses and reasonable attorney's fees
incurred by Sublessor as a result thereof.
SECTION 7. DEFAULT
If the rent or other monies due under this Sublease shall not be paid
when due, or if Sublessee shall fail to perform any of the conditions,
covenants, provisions and agreements contained herein, or if Sublessee shall be
adjudged bankrupt or insolvent by any court, or if a Receiver or Trustee in
Bankruptcy or a Receiver of any property of Sublessee shall be appointed in a
suit, action or proceeding, or if Sublessee shall make an assignment for the
benefit of creditors, or if Sublessee shall abandon or vacate the Sublease
Premises or if Sublessee shall commit any default under the Lease, then, in
each and every such instance, Sublessor may, at its option:
a. Retake and recover possession of the Sublease Premises and
terminate this Sublease;
b. Retake and recover possession of the Sublease Premises without
terminating this Sublease, in which event Sublessor may, subject to
Landlord's consent as provided in the Lease, re-rent the premises so
retaken as agent for and for the account of Sublessee and recover from
Sublessee the difference between the rental herein specified and the
rent provided in such re-rental;
c. Permit the Premises to remain vacant in which event Sublessee
shall continue to be responsible for all rental and other payments
hereunder.
d. Retake and recover possession of the Sublease Premises, and
accelerate and collect all rentals due hereunder for the balance of the
term of this Sublease;
<PAGE> 5
c. Take such other action as may be permitted under applicable law.
SECTION 8. SURRENDER AND HOLDOVER
8.1 On the Termination Date or upon the termination hereof upon a
day other than the Termination Date, Sublessee shall peaceably surrender the
Sublease Premises broom-clean in good order, condition and repair, reasonable
wear and tear only expected. On or before the Termination Date, Sublessee
shall, at its expense, remove all trade fixtures, personal property and
equipment and signs from the Sublease Premises and any property not removed
shall be deemed to have been abandoned. Any damage caused in the removal of
such items shall be repaired by Sublessee and at its expense. All alterations,
additions, improvements and fixtures (other than trade fixtures) which shall
have been made or installed by Sublessor or Sublessee upon the Sublease
Premises and all floor covering so installed shall remain upon and be
surrendered with the Sublease Premises as a part thereof, without disturbance,
molestation or injury, and without charge, at the expiration or termination of
this Sublease. If the Sublease Premises are not surrendered on the Termination
date or the date of termination, Sublessee shall indemnify Sublessor against
loss or liability, claims, without limitation, made by any succeeding Sublessee
founded on such delay. Sublessee shall promptly surrender all keys for the
Sublease Premises to Sublessor at the place hen fixed for payment of rent.
8.2 In the event of a holding over by Sublessee after expiration or
termination of this Sublease without the consent in writing of Sublessor,
Sublessee shall be deemed a lessee at sufferance and shall pay rent for such
occupancy at the rate of twice the last-current aggregate Base and Additional
Rent, prorated for the entire holdover period, plus all attorney's fees and
expenses incurred by Sublessor in enforcing its rights hereunder, plus any
other damages occasioned by such holding over. Except as otherwise agreed, any
holding over with the written consent of Sublessor shall constitute a
month-to-month lease.
SECTION 9. SPECIAL STIPULATIONS
9.1 This Sublease comprises the entire agreement between the
parties hereto with respect to the Sublease Premises, neither party having made
any representation or promises except as contained herein. No modification or
amendment to this Sublease shall be binding unless it is in writing signed by
both Sublessor and Sublessee.
9.2 Sublessee shall neither assign nor sublet nor allow any other
party to occupy or use the Sublease Premises, or any portion thereof.
9.3 Sublessee shall have neither an option to renew this Sublease
nor an option to expand the Sublease Premises hereunder.
9.4 Sublessee accepts possession of the sublease Premises in
"as-is" condition, excluding Sublessor's personal property, trade fixtures and
Wall Innovators systems; and Sublessor will provide a total of $192,491.00 for
Sublessee's interior modifications per Intertect Design Group, Inc.'s
Preliminary Pricing Plan dated 1-27-95 attached as Exhibit A-1, as estimated by
Yovaish Construction, and includes A & E fees of $12,325.00, $2,500.00 for
signage costs instead of appliances, and the 5% construction management fee.
Sublessor will provide Sublessee with one of the refrigerators located in the
premises. In the event that the actual construction costs are less than
$192,491.00, Sublessee shall receive a rental credit in an amount equal to the
difference.
<PAGE> 6
Sublessee shall not cause any additions or alterations to be made to the
Sublease Premises without Sublessor's and Landlord's prior written consent. All
additions or alterations shall remain upon the Sublease Premises and become the
property of Landlord upon termination of this Sublease (exception only movable
trade fixtures which may be removed without damage to the Sublease Premises);
provided, however, if Sublessor so requests, Sublessee shall remove any such
additions or alterations and repair all damage occasioned thereby.*
9.5 All costs and expenses which Sublessee assumes or agrees to pay
Sublessor pursuant to this Sublease shall be deemed additional rent, and in the
event of non-payment thereof, Sublessor shall have the same rights and remedies
provided herein and by law for nonpayment of rent.
9.6 Sublessee shall at all times maintain the Sublease premises in
good and safe condition and shall make all necessary repairs and perform all
necessary maintenance.
9.7 In the event that either party hereto files an action in the
courts to enforce this Sublease, the prevailing party in that action shall
receive from the non-prevailing party a reasonable attorney's fee plus all costs
incurred as a result of such litigation, including fees and costs related to
appellate proceedings.
9.8 This Sublease shall be governed by the laws of the State of
Florida.
9.9 Sublease represents and warrants that no broker is involved in
this transaction other than The Galbreath Company, Florida, and the Advantage
Realty Group, Inc. and Sublessee agrees to indemnify and hold Sublessor harmless
as to claims for commissions (and all attorneys' fees and costs incurred by
Sublessor) resulting or arising from any breach of this warranty.
9.10 All notices, demands, requests, consents or approvals which may
be or are required to be given by the terms of this Sublease shall be in writing
and shall be deemed to have been given when delivered to the other party at
their respective addresses set forth below. Either party may change its
address at any time, and from time to time, by notice to the other in
conformance with this provision.
Sublessor: John Alden Life Insurance Company
7300 Corporate Center Drive
Miami, FL 33126
Attn: Real Estate Leasing
Sublessee: Terrano Corporation
dba Dynamic Healthcare Technologies, Inc.
101 Southall Lane, Suite 210
Maitland, FL 32751
*Sublessor shall also provide Subleasee with an improvement allowance in the
amount equal to (a) $10 per usable square foot of area in the expansion
option spaces, multiplied by (b) the number of months remaining in the
sublease term at the commencement date of the sublease of the option spaces,
divided by 48.
<PAGE> 7
9.11 It shall be a condition precedent to performance of this
Sublease by the parties hereto that written consent to this Sublease be obtained
from Landlord under the Lease.
IN WITNESS WHEREOF, Sublessor and Sublessee have executed these presents
as of the date and year first above written.
Witness as to Sublessor John Allen Life Insurance
[SIG] By: /s/ Nathan S. Garrison
- ----------------------------- ----------------------
[SIG] Nathan S. Garrison
- ----------------------------- Vice President - Corporate Services
Witness as to Sublessee Terrano Corporation dba
Dynamic Healthcare Technologies, Inc.
[SIG] By: /s/ Mitchel J. Laskey
- ----------------------------- ---------------------
[SIG] Mitchel J. Laskey
- ----------------------------- President and COO
<PAGE> 1
Exhibit 10.09
FIRST AMENDMENT TO SUBLEASE
AMENDMENT TO SUBLEASE, dated as of the 27th day of October 1995,
between John Alden Life Insurance Co. (hereinafter referred to as "Sublessor")
and Terrano Corporation dba Dynamic Healthcare Technologies, Inc. (hereinafter
referred to as "Sublessee").
WITNESSETH
WHEREAS, John Alden Life Insurance Co., as Sublessor and Sublessee
entered into a Sublease Agreement dated as of 31st day of January, 1995 (the
"Sublease"), whereby Sublessee is presently in possession of premises
containing approximately 14,612 rentable square feet of space (hereinafter
referred to as the "Existing Premises") in the building located at 101 Southall
Lane, Suite 200 Maitland, Florida 32751 (hereinafter referred to as the
"Building"); and
WHEREAS, Sublessee desires to lease additional space in the Building,
and Sublessor is willing to lease said additional space to Sublessee; and
WHEREAS, the parties hereto desire to amend the Sublease only in the
respects and on the conditions hereinafter stated.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for such other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. For purposes of this Amendment, capitalized terms shall have the
meanings ascribed to them in the Sublease unless otherwise defined herein.
2. Sublessor and Sublessee hereby confirm that the Commencement Date of
the Term of the Sublease was April 1, 1995 and that the expiration date is
March 31, 1999.
3. Sublessee hereby subleases from Sublessor, through the remainder of
the Sublease Term, additional space consisting of approximately 2,737 rentable
square feet on the second floor of the Building (hereinafter referred to as the
"Additional Space"), which Additional Space is contiguous to the Existing
Premises, as shown on Exhibit B-1 attached hereto and made a part hereof. The
term for said Additional Space shall commence on the date in accordance with
the Certificate Of Occupancy obtained from the municipality, which shall not in
any event be later than January 1, 1996 (hereinafter referred to as the
"Effective Date") and for the period from and after the Effective Date, the
description of the Premises in the Base Sublease Information and Section 1 of
the Sublease shall be amended to reflect a total square footage of 17,349
rentable square feet.
(a) Sublessor hereby provides the amount of $20,841.73 to Sublessee as
Tenant Improvement Allowance for the remodelling of said 2,565 usable square
feet/
1
<PAGE> 2
2,737 rentable square feet Sublease Premises, as well $1,500.00 towards the
construction of a demising wall between Option 1 and option 2 spaces. The
Tenant Improvement allowance shall be paid to Sublessee in three equal
installments: the first after bilateral execution of this Sublease document
together with the $1,500.00 towards the demising wall, the second on December
1, 1995, and the last on January 1, 1996.
4. The Basic Sublease Information and Section 3 of the Sublease are
hereby amended to reflect that from and after the Effective Date through the
expiration of the initial Term, Sublessee shall pay to Sublessor, rent for the
Additional Space as follows:
<TABLE>
<CAPTION>
Base Rent Monthly Installments
Lease Year per annum of Base Rent
- ---------- --------- ---------------------
<S> <C> <C>
1/1/96 - 3/31/96 $ 8,895.24 (3 month $2,965.08
4/1/96 - 3/31/97 36,949.50 3,079.12
4/1/97 - 3/31/98 38,318.00 3,193.17
4/1/98 - 3/31/99 39,686.50 3,307.21
</TABLE>
As a result of the foregoing, the rent to be paid by Sublessee to Sublessor to
the entire premises for the period from and after the Effective Date through
the remainder of the initial term, shall be as follows:
<TABLE>
<CAPTION>
Base Rent Monthly Installments
Lease Year per annum of Base Rent
- ---------- --------- ---------------------
<S> <C> <C>
1/1/96 - 3/31/96 $ 56,384.25 (3 months) $18,794.75
4/1/96 - 3/31/97 234,211.50 19,517.62
4/1/97 - 3/31/98 242,886.00 20,240.50
4/1/98 - 3/31/99 251,560.50 20,963.38
</TABLE>
Florida Sales Tax shall be added to the installments above and any amount set
forth in the Lease as Additional rent. Additional rent shall include future
increases in the amounts of taxes on the land, the building, other improvements
on the land, and the cost of operation and maintenance of the property which
exceed the 1995 base year over the term of the Lease in monthly installments as
set forth in the Lease in advance on or before the first day of each month
during the term of this Sublease, plus Florida Sales tax.
the aforesaid amounts of Monthly Rent shall be payable as set forth in the
Sublease.
5. In order to induce Sublessor and Sublessee to enter into this
Amendment:
(a) Each party hereby reaffirms the Sublease, as amended by
this Amendment, to be in full force and effect;
(b) Each party hereby waives and releases any right, if any,
existing as of the date hereof, of setoff, deduction, counterclaim or defense
of any kind or nature to payment of rent or other payments due under the
Sublease and waives
2
<PAGE> 3
any defaults existing as of the date hereof, which might have otherwise
entitled the other party to terminate the Sublease; and
(c) Each party covenants and agrees to hold the terms and provisions
of this Amendment in confidence.
6. In order to induce Sublessor and Sublessee to enter into this
Amendment, each party represents and warrants:
(a) Except for this Amendment, there are no oral or other written
amendments, modifications, supplements, side agreements, letter
agreements, options or other agreements pertaining to the Sublease;
(b) Neither Sublessor nor Sublessee is in default under any of the
terms of the Sublease;
(c) Neither Sublessor or Sublessee has any past or present right of
offset or defense against any payments due or to become due under this
Amendment or the Sublease; and
(d) The Sublease was and this Amendment is duly authorized and
entered into and constitute the valid and binding obligations of Sublessor
and Sublessee enforceable in accordance with their provisions.
7. Each party acknowledges and agrees that they have entered into this
Amendment and have executed it voluntarily, without duress or coercion and have
done so with the advice of their legal counsel.
8. Each party acknowledges and agrees that each has made no
representation or warranty not set forth herein and that neither has relied in
any way on any representation, warranty, or statement not set forth in this
Amendment and that Tenant has not in any way relied on any representation,
warranty, statement of fact or opinion, understanding, disclosure or
nondisclosure of the other in entering into this Amendment and has not been
induced by Landlord in any way except for the agreements expressly contained in
this Amendment.
9. The Sublease and this Amendment constitute the entire agreement of
the parties with respect to the subject matter hereof and supersedes any and
all prior agreements or understandings between or among the parties.
10. This Amendment shall be binding upon and inure to the parties, their
respective heirs, legal representatives, successors and assigns,
11. This Amendment shall be governed by, and construed in accordance
with, the laws of the State of New Jersey.
3
<PAGE> 4
12. This Amendment may not be changed, amended or modified in any
manner other than by an agreement in writing executed by the parties hereto.
13. In the event of a conflict between the terms of this Amendment
and the Sublease, the terms of this Amendment shall govern.
14. This Amendment may be separately executed in any number of
counterparts, each of which when so executed shall be deemed to constitute one
and the same agreement.
15. Except as modified by this Amendment, the Sublease and all the
covenants, agreements, terms, provisions and conditions thereof shall remain in
full force and effect.
16. The submission of this Amendment for examination does not
constitute a reservation of, or option for, the Additional Space, and this
Amendment becomes effective only upon execution and delivery thereof by
Sublessor and Sublessee.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Sublease as of the day and year first written above.
John Alden Life Insurance Co.
Sublessor
By: /s/ Shelia M. Schulz
-------------------------------------
Shelia M. Schulz
Vice President - Corporate Services
Terrano Corporation
dba Dynamic Healthcare Technologies, Inc.
By: /s/ Mitchel J. Laskey
-------------------------------------
Mitchel J. Laskey
President and COO
4
<PAGE> 1
Exhibit 10.10
INDUSTRIAL LEASE
between
MBP PARTNERS, an Illinois general partnership
(Landlord)
and
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.,
----------------------------------------------
a Florida corporation
----------------------------------------------
(Tenant)
<PAGE> 2
TABLE OF CONTENTS
INDUSTRIAL LEASE
Article Title Page
1 Definitions 1
2 Premises 2
3 Term 2
4 Rental; Adjustments 2
5 Security Deposit 4
6 Use of Premises 5
7 Utilities and Services 6
8 Maintenance and Repairs 6
9 Alterations, Additions and Improvements 7
10 Indemnification and Insurance 8
11 Damage or Destruction 9
12 Condemnation 10
13 Relocation 10
14 Assignment and Subletting 10
15 Default and Remedies 11
16 Attorneys' Fees; Costs of Suit 13
17 Subordination and Attornment 13
18 Quiet Enjoyment 13
19 Parking 14
20 Rules and Regulations 14
21 Estoppel Certificates 14
22 Entry by Landlord 14
23 Landlord's Lease Undertakings - Exculpation
from Personal Liability; Transfer of Landlord's
Interest 15
24 Holdover Tenancy 15
25 Notices 15
26 Brokers 15
27 Miscellaneous 15
28 Floor Load Limits 17
29 Landlord's Lien 17
30 Uniform Commercial Code 17
EXHIBITS
Exhibit A Floor Plan of the Premises
Exhibit B Work Letter Agreement
Exhibit C Suite Acceptance Letter
Exhibit D Tenant Operations Inquiry
Schedule 1 to List of Permissible Hazardous Materials and
Exhibit D Quantities for Tenant
Exhibit E List of Additional Insureds
Exhibit F Rules and Regulations
Exhibit G Guaranty
<PAGE> 3
INDUSTRIAL LEASE
[FORM NET LEASE/MULTI-TENANT]
THIS LEASE ("Lease"), dated July 2 1996, is made and entered into by
and between MBP PARTNERS, an Illinois general partnership ("Landlord") and
DYNAMIC HEALTHCARE TECHNOLOGIES, INC., a Florida corporation ("Tenant") upon
the following terms and conditions:
ARTICLE I - DEFINITIONS
Unless the context otherwise specifies or requires, the following terms
shall have the meanings specified herein:
1.01 BUILDING. The term "Building" shall mean that certain
office/warehouse building located at 10901 Bren Road East, Minnetonka,
Minnesota, together with all related site land, improvements, parking
facilities, common areas, driveways, sidewalks and landscaping.
1.02 PREMISES. The term "Premises" shall mean Space No. 10901 in
the Building, as more particularly outlined on the drawing attached hereto as
Exhibit A and incorporated herein by reference.
1.03 RENTABLE AREA OF THE PREMISES. The term "Rentable Area of the
Premises" shall mean approximately 12,684 square feet, which Landlord and
Tenant have stipulated as the Rentable Area of the Premises.
1.04 LEASE TERM. The terms "Lease Term" or "Term" shall mean the
period between the Commencement Date and the Expiration Date (as such terms are
hereinafter defined), unless sooner terminated or renewed as otherwise provided
in this Lease.
1.05 COMMENCEMENT DATE. Subject to adjustment as provided in
Article 3, the term "Commencement Date" shall mean August 1, 1996.
1.06 EXPIRATION DATE. Subject to adjustment as provided in Article
3, the term "Expiration Date" shall mean July 31, 1999.
1.07 BASE RENT. Subject to adjustment as provided in Article 4, the
term "Base Rent" shall mean Nine Thousand Two Hundred Forty-Eight and 75/00
Dollars ($9,248.75) per month.
1.08 TENANT'S PERCENTAGE SHARE. The term "Tenant's Percentage
Share" shall mean seventeen and 25/00 percent (17.25%) with respect to
Operating Expenses (as hereinafter defined), seventeen and 25/00 percent
(17.25%) with respect to Property Taxes (as hereinafter defined), seventeen and
25/00 percent (17.25%) with respect to Insurance Expenses (as hereinafter
defined) and seventeen and 25/00 percent (17.25%) with respect to Tenant's law
compliance obligations under Section 6.02(C) of this Lease and for all other
purposes under this Lease.
1.09 SECURITY DEPOSIT. The term "Security Deposit" shall mean
Twenty-Five Thousand Six Hundred Sixty-three and 96/00 Dollars ($25,663.96).
1.10 TENANT'S PERMITTED USE. The term "Tenant's Permitted Use"
shall mean offices for Tenant's computer software development and marketing
business related to the medical industry and no other use.
1.11 LANDLORD'S ADDRESS FOR NOTICES. The term "Landlord's Address
for Notices" shall mean Heitman Minnesota Management Inc., 5510 Feltl Road,
Minnetonka, Minnesota 55343, with a copy to Heitman Properties Ltd., 180 North
LaSalle Street, Suite 3600, Chicago, Illinois 60601, Attn: Property Management.
1.12 TENANT'S ADDRESS FOR NOTICES. The term "Tenant's Address for
Notices" shall mean 10901 Bren Road East, Minnetonka, Minnesota 55343.
1.13 BROKERS. The term "Brokers" shall mean Heitman Minnesota
Management Inc. and Mary Burnton and John Scholz of the Galbreath Company.
-1-
<PAGE> 4
1.14 Guarantors. The term "Guarantors" shall mean -none- .
ARTICLE II - PREMISES
2.01 Lease of Premises. Landlord hereby leases the Premises to Tenant,
and Tenant hereby leases the Premises from Landlord, upon all of the terms,
covenants and conditions contained in this Lease. On the Commencement Date
described herein, Landlord shall deliver the Premises to Tenant in substantial
conformance with the Work Letter Agreement attached hereto as Exhibit B.
2.02 Acceptance of Premises. Tenant acknowledges that Landlord has not
made any representation or warranty with respect to the condition of the
Premises or the Building with respect to the suitability or fitness of either
for the conduct of Tenant's Permitted Use or for any other purpose. Prior to
Tenant's taking possession of the Premises, Landlord or its designee and Tenant
will walk the Premises for the purpose of reviewing the condition of the
Premises (and the condition of completion and workmanship of any tenant
improvements which Landlord is required to construct in the Premises pursuant
to this Lease); after such review, Tenant shall execute a Suite Acceptance
Letter in the form and content of Exhibit C, accepting the Premises.
ARTICLE III - TERM
3.01 Except as otherwise provided in this Lease, the Lease Term shall
be for the period described in Section 1.04 of this Lease, commencing on the
Commencement Date described in Section 1.05 of this Lease and ending on the
Expiration Date described in Section 1.06 of this Lease; provided, however,
that, if, for any reason, Landlord is unable to deliver possession of the
Premises on the date described in Section 1.05 of this Lease, Landlord shall
not be liable for any damage caused thereby, nor shall the Lease be void or
voidable, but, rather, the Lease Term shall commence upon, and the Commencement
Date shall be, the date that possession of the Premises is so tendered to
Tenant (except for Tenant-caused delays which shall not be deemed to delay
commencement of the Lease Term), and the Expiration Date described in Section
1.06 of this Lease shall be extended by an equal number of days.
ARTICLE IV - RENTAL: ADJUSTMENTS
4.01 Definitions. As used herein,
(A) "Property Taxes" shall mean the aggregate amount of all real
estate taxes, assessments (whether they be general or special), sewer
rents and charges, transit taxes, taxes based upon the receipt of rent
and any other federal, state or local governmental charge, general,
special, ordinary or extraordinary (but not including income or
franchise taxes, capital stock, inheritance, estate, gift, or any other
taxes imposed upon or measured by Landlord's gross income or profits,
unless the same shall be imposed in lieu of real estate taxes or other
ad valorem taxes), which Landlord shall pay or become obligated to pay
in connection with the Building, or any part thereof. Taxes shall
include all fees and costs, including attorneys' fees, appraisals and
consultants' fees, incurred by Landlord in seeking to obtain a reduction
of, or a limit on the increase in, any Taxes, regardless of whether any
reduction or limitation is obtained. Taxes for any calendar year shall
be Taxes which are due for payment or are paid during such year. If at
any time during the Lease Term the method of taxation then prevailing
shall be altered so that any new tax, assessment, levy, imposition or
charge shall be imposed upon Landlord in place or partly in place of any
such Taxes, or contemplated increase in any such Taxes, and shall be
measured by or be based in whole or in part upon the Building or the
rents or other income from the Building, then all such new taxes,
assessments, levies, impositions or charges, to the extent that they are
so measured or based, shall be included in Taxes to the extent that such
items would be payable if the Building was the only property of Landlord
subject to same and the income received by Landlord from the
Building was the only income of Landlord. Taxes shall also include any
personal property taxes imposed upon the furniture, fixtures, machinery,
equipment, apparatus, systems and appurtenances of Landlord used in
connection with the Building.
(B) "Operating Expenses" shall mean all costs, fees,
disbursements and expenses paid or incurred on behalf of Landlord in the
operation, ownership, maintenance, management, replacement and repair of
the Building (excluding Property Taxes).
Operating Expenses shall not include costs of alteration of the
premises of tenants of the Building, depreciation charges, interest and
principal payments on mortgages, ground rental payments, real estate brokerage
and leasing commissions, expenses incurred in enforcing obligations of tenants
of the Building, salaries and other compensation of executive officers of the
managing agent of the Building senior to the Building manager, costs of any
special services provided to any one tenant of the Building but not to tenants
of the Building generally, and costs of marketing or advertising the Building.
(C) "Insurance Expenses" shall mean all costs, fees,
disbursements and expenses paid or incurred by or on behalf of Landlord for
premiums for hazard, "all risk", casualty, rent interruption and liability
insurance and all other insurance, obtained by Landlord in connection with or
relating to the Building.
-2-
<PAGE> 5
4.02 Base Rent. During the Lease Term, Tenant shall pay to Landlord as
rental for the Premises the Base Rent described in Section 1.07 above, subject
to the following adjustments (herein collectively called the "Rent
Adjustments"):
(B) During each calendar year during the Lease Term, the Base
Rent payable by Tenant to Landlord, shall be increased by Tenant's
Percentage Share of the Property Taxes for such year (the "Tax
Adjustment").
(C) During each calendar year during the Lease Term, the Base
Rent payable by Tenant to Landlord, also shall be increased by Tenant's
Percentage Share of the Operating Expenses paid or incurred by Landlord
during such year (the "Operating Expense Adjustment").
(D) During each calendar year during the Lease Term, the Base
Rent payable by Tenant to Landlord, also shall be increased by Tenant's
Percentage Share of the Insurance Expenses for such year (the "Insurance
Adjustment").
(E) The Tax Adjustment, the Operating Expense Adjustment and the
Insurance Adjustment are hereinafter referred to collectively as the
"Tax, Operating Expense and Insurance Adjustments".)
4.03. Adjustment Procedure: Estimates. The Tax, Operating Expense and
Insurance Adjustments specified in Sections 4.02(B), 4.02(C) and 4.02(D) shall
be determined and paid as follows:
(A) During each calendar year during the Lease Term, Landlord
shall give Tenant written notice of Landlord's estimate of amounts
payable under Sections 4.02(B) and 4.02(C) for that calendar year. On or
before the first day of each calendar month during the calendar year,
Tenant shall pay to Landlord one-twelfth (1/12th) of such estimated
amounts; provided, however, that, not more often than quarterly,
Landlord may, by written notice to Tenant, revise its estimate for such
year, and subsequent payments by Tenant for such year shall be based
upon such revised estimate.
(B) Within ninety (90) days after the close of each calendar
year in which any Rent Adjustment is made or as soon thereafter as is
practicable, Landlord shall deliver to Tenant a statement of that year's
Property Taxes, Operating Expenses and Insurance Expenses, and the
actual Tax, Operating Expense and Insurance Expense Adjustments to be
made pursuant to Section 4.02(B), 4.02(C) and 4.02(D) for such calendar
year, as determined and certified by Landlord (the "Landlord's
Statement") and such Landlord's Statement shall be binding upon Landlord
and Tenant, except as provided in Section 4.04 below. If the amount of
the actual Tax Adjustment, Insurance Adjustment or Operating Expense
Adjustment is more than the estimated payments for the Tax Adjustment,
Insurance Adjustment or Operating Expense Adjustment for such calendar
year made by Tenant, Tenant shall pay the deficiency to Landlord upon
receipt of Landlord's Statement. If the amount of the actual Tax
Adjustment, Insurance Adjustment or Operating Expense Adjustment is less
than the estimated payments for such calendar year made by Tenant, any
excess shall be credited against Rent (as hereinafter defined) next
payable by Tenant under this Lease or, if the Lease Term has expired,
any excess thereof shall be paid to Tenant. No delay in providing the
statements described in this Section 4.03(B) shall act as a waiver of
Landlord's right to payment under Sections 4.02(B), 4.02(C) or 4.02(D)
above. Notwithstanding the foregoing, Tenant's right to receive any
credit or payment pursuant to the preceding sentences of this Section
4.03(B) is conditioned on this Lease being in full force and effect and
Tenant not being in default under this Lease on the date such credit or
payment is due.
(C) If this Lease shall terminate on a day other than the end of
a calendar year, the amount of the Tax, Operating Expense and Insurance
Adjustments to be paid pursuant to Sections 4.02(B), 4.02(C) and 4.02(D)
that is applicable to the calendar year in which such termination occurs
shall be prorated on the basis of the number of days from January 1 of
the calendar year to the termination date bears to 365. The
termination of this Lease shall not affect the obligations of Landlord
and Tenant pursuant to Sections 4.03(B) and 4.03(C) to be performed
after such termination.
4.04 Review of Landlord's Statement. Provided this Lease is in full
force and effect and that Tenant is not then in default under this Lease and
provided further that Tenant strictly complies with the provisions of this
Section 4.04, Tenant shall have the right, once each calendar year, to
reasonably review supporting data for any portion of a Landlord's Statement
that Tenant claims in incorrect, in accordance with the following procedure:
(A) Tenant shall, within ten (10) business days after any such
Landlord's Statement is delivered, deliver a written notice to Landlord
specifying the portions of the Landlord's Statement that are claimed to
be incorrect, and Tenant shall simultaneously pay to Landlord all
amounts due from Tenant to Landlord as specified in the Landlord's
Statement. Except as expressly set forth in subsection (C) below, in no
event shall Tenant be entitled to withhold, deduct, or offset any
monetary obligation of Tenant to Landlord under the Lease (including
without limitation, Tenant's obligation to make all payments of Base
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Rent including the CPI Adjustment and all payments of Tenant's Tax,
Operating Expense and Insurance Adjustments) pending the completion of
and regardless of the results of any review of records under this
Section 4.04. The right of Tenant under this Section 4.04 may only be
exercised once for any Landlord's Statement, and if Tenant fails to meet
any of the above conditions as a prerequisite to the exercise of such
right, the right of Tenant under this Section 4.04 for a particular
Landlord's Statement shall be deemed waived.
(B) Tenant acknowledges that Landlord maintains its records for
the Building at Landlord's manager's corporate offices and Tenant agrees
that any review of records under this Section 4.04 shall be at the sole
expense of Tenant and shall be conducted by an independent firm of
certified public accountants of national standing. Tenant acknowledges
and agrees that any records reviewed under this Section 4.04 constitute
confidential information of Landlord, which shall not be disclosed to
anyone other than the accountants performing the review and the
principals of Tenant who receive the results of the review. The
disclosure of such information to any other person, whether or not
caused by the conduct of Tenant, shall constitute a material breach of
this Lease.
(C) Any errors disclosed by the review shall be promptly
corrected by Landlord, provided, however, that if Landlord disagrees
with any such claimed errors, Landlord shall have the right to cause
another review to be made by an independent firm of certified public
accountants of national standing. In the event of a disagreement between
the two accounting firms, the review that discloses the least amount of
deviation from the Landlord's Statement shall be deemed to be correct.
In the event that the results of the review of records (taking into
account, if applicable, the results of any additional review caused by
Landlord) reveal that Tenant has overpaid obligations for a preceding
period, the amount of such overpayment shall be credited against
Tenant's subsequent installment obligations to pay the estimated Tax,
Operating Expenses and Insurance Adjustments. In the event that such
results show that Tenant has underpaid its obligations for a preceding
period, Tenant shall be liable for Landlord's actual accounting fees,
and the amount of such underpayment shall be paid by Tenant to Landlord
with the next succeeding installment obligation of estimated Tax,
Operating Expense and Insurance Adjustments.
4.05 Payments. Concurrently with the execution hereof, Tenant shall pay
Landlord Base Rent for the first calendar month of the Lease Term. Thereafter
the Base Rent described in Section 1.07, as adjusted in accordance with Section
4.02, shall be payable in advance on the first day of each calendar month. If
the Commencement Date is other than the first day of a calendar month, the
prepaid Base Rent for such partial month shall be prorated in the proportion
that the number of days this Lease is in effect during such partial month bears
to the total number of days in the calendar month. All Rent, and all other
amounts payable to Landlord by Tenant pursuant to the provisions of this Lease,
shall be paid to Landlord, without notice, demand, abatement, deduction or
offset, in lawful money of the United States at Landlord's office in the
Building or to such other person or at such other place as Landlord may
designate from time to time by written notice given to Tenant. No payment by
Tenant or receipt by Landlord of a lesser amount than the correct Rent due
hereunder shall be deemed to be other than a payment on account; nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment be deemed to effect or evidence an accord and satisfaction; and Landlord
may accept such check or payment without prejudice to Landlord's right to
recover the balance or pursue any other remedy in this Lease or at law or in
equity provided.
4.06 Late Charge; Interest. Tenant acknowledges that the late payment of
Base Rent or any other amounts payable by Tenant to Landlord hereunder (all of
which shall constitute additional rent to the same extent as Base Rent) will
cause Landlord to incur administrative costs and other damages, the exact
amount of which would be impracticable or extremely difficult to ascertain.
Landlord and Tenant agree that if Landlord does not receive any such payment on
or before ten (10) business days after the date the payment is due, Tenant
shall pay to Landlord, as additional rental, (a) a late charge equal to five
percent (5%) of the overdue amount to cover such additional administrative
costs; and (b) interest on the delinquent amounts at the lesser of the maximum
rate permitted by law if any or twelve percent (12%) per annum from the date
due to the date paid.
4.07 Additional Rental. For purposes of this Lease, all amounts payable
by Tenant to Landlord pursuant to this Lease, whether or not denominated as
such, shall constitute additional rental hereunder. Such additional rental,
together with the Base Rent and Rent Adjustments, shall sometimes be referred
to in this Lease as "Rent".
4.08 Additional Taxes. In addition to the Rent and other charges to be
paid by Tenant hereunder, Tenant shall reimburse Landlord upon demand for all
taxes payable by or imposed upon Landlord upon or with respect to; any fixtures
or personal property located in the Premises; any leasehold improvements made
in or to the Premises by or for Tenant; the Rent payable hereunder, including,
without limitation, any gross receipts tax, license fee or excise tax levied by
any governmental authority; the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy of any portion of the
Premises (including, without limitation, any applicable possession interest
taxes); or this transaction or any document to which Tenant is a party creating
or transferring an interest or an estate in the Premises.
ARTICLE V -- SECURITY DEPOSIT
5.01 Upon the execution of this Lease, Tenant shall deposit with
Landlord the Security Deposit described in Section 1.09 above. The Security
Deposit is made by Tenant to secure the faithful performance of all the terms,
covenants and conditions of this Lease to be performed by Tenant. If Tenant
shall default with respect to any covenant or provision hereof, Landlord may
use, apply or retain all or any portion of the Security Deposit to cure such
default or to compensate Landlord for any loss or damage which Landlord may
suffer thereby. If Landlord so uses or applies all or any portion of the
Security Deposit, Tenant shall immediately upon written demand deposit cash
with Landlord in an amount sufficient to restore the Security Deposit to the
full amount hereinabove stated. Landlord shall not be required to keep the
Security Deposit separate from its general accounts and Tenant shall not be
entitled to interest on the Security Deposit. Within thirty (30) days after the
expiration of the Lease Term and the vacation of the Premises by Tenant, the
Security Deposit, or such part as has not been applied to cure the default,
shall be returned to Tenant. In the event of any bankruptcy or other proceeding
initiated by or against Tenant, it is agreed that all such Security Deposit
held hereunder shall be deemed to be applied by Landlord to rent, sales tax,
and all other charges due from Tenant to Landlord for the last month of the
Term and each preceding month until such Security Deposit is fully applied.
<PAGE> 7
6.02 COMPLIANCE WITH LAWS AND OTHER REQUIREMENTS.
(A) Tenant shall cause the Premises to comply in all material respects
with all laws, ordinances, regulations and directives of any governmental
authority having jurisdiction including without limitation any certificate of
occupancy and any law, ordinance, regulation, covenant, condition or
restriction affecting the Building or the Premises which in the future may
become applicable to the Premises (collectively "Applicable Laws").
(B) Tenant shall not use the Premises, or permit the Premises to be
used, in any manner which: (a) violates any Applicable Law; (b) causes or is
reasonably likely to cause damage to the Building or the Premises; (c) violates
a requirement or condition of any fire and extended insurance policy covering
the Building and/or the Premises, or increases the cost of such policy; (d)
constitutes or is reasonably likely to constitute a nuisance, annoyance or
inconvenience to other tenants or occupants of the Building or its equipment,
facilities or systems; (e) interferes with, or is reasonably likely to interfere
with, the transmission or reception of microwave, television, radio, telephone
or other communication signals by antennae or other facilities located in the
Building; or (f) violates the Rules and Regulations described in Article XX.
(C) In addition to any other amounts payable by Tenant to Landlord
hereunder, Tenant shall pay to Landlord, as and when billed to Tenant and as
additional rental, Tenant's Percentage Share of the cost of any improvements,
capital expenditures, repairs or replacements to the Building, or any equipment
or machinery used in connection with the Building, if any such item is required
under any Applicable Law which was not applicable to the Building at the time
the Building was constructed; provided, however, that any such costs which are
properly charged to a capital account shall not be payable in a single year but
shall instead be amortized over their useful lives, as determined by the
Landlord in accordance with generally acceptable accounting principles, and
only the annual amortization amount (prorated based on the number of days of
the Lease term in the calendar year) shall be payable by the Tenant with
respect to any calendar year.
6.03 HAZARDOUS MATERIALS.
(A) No Hazardous Materials (as defined herein) shall be Handled (as
defined herein) upon, about, above or beneath the Premises or any portion of
the Building by or on behalf of a Responsible Party (as defined herein), unless
the Hazardous Materials are listed in Exhibit D hereto and then only in the
quantities listed in the exhibit. Any such Hazardous Materials so Handled, or
the presence of which is a result of the act or omission of a Responsible Party,
shall be known as Tenant's Hazardous Materials. Notwithstanding the foregoing,
normal quantities of those Hazardous Materials customarily used in the conduct
of general administrative and executive office activities (e.g., copier fluids
and cleaning supplies) may be Handled at the Premises without Landlord's prior
written consent. Tenant's Hazardous Materials shall be Handled at all times in
compliance with all applicable Environmental Laws (as defined herein).
(B) Notwithstanding the obligation of Tenant to indemnify Landlord
pursuant to this Lease, Tenant shall, at its sole cost and expense, promptly
take all actions required by any federal, state or local governmental agency or
political subdivision, or necessary for Landlord to make full economic use of
the Premises or any portion of the Building, which requirements or necessity
arises from the Handling of Tenant's Hazardous Materials upon, about, above or
beneath the Premises or any portion of the Building. Such actions shall
include, but not be limited to, the investigation of the environmental
condition of the Premises or any portion of the Building, the preparation
of any feasibility studies or reports and the performance of any cleanup,
remedial, removal or restoration work. Tenant shall take all actions
necessary to restore the Premises or any portion of the Building to the
condition existing prior to the introduction of Tenant's Hazardous Materials,
notwithstanding any less stringent standards or remediation allowable under
applicable Environmental Laws. Tenant shall nevertheless obtain Landlord's
written approval prior to undertaking any actions required by this Section,
which approval shall not be unreasonably withheld so long as such actions
would not potentially have a material adverse long-term or short-term effect
on the Premises or any portion of the Building.
(C) "Environmental Laws" means and includes all now and hereafter
existing statutes, laws, ordinances, codes, regulations, rules, rulings,
orders, decrees, directives, policies and requirements by any federal, state or
local governmental authority regulating, relating to, or imposing liability or
standards of conduct concerning public health and safety or the environment.
(D) "Hazardous Materials" means: (a) any material or substance: (i)
which is defined or becomes defined as a "hazardous substance," "hazardous
waste," "infectious waste," "chemical mixture or substance," or "air pollutant"
under Environmental Laws; (ii) containing petroleum, crude oil or any fraction
thereof; (iii) containing polychlorinated biphenyls (PCB's); (iv) containing
asbestos; (v) which is radioactive; (b) any other material or substance
displaying toxic, reactive, ignitable or corrosive characteristics, as all such
terms are used in their broadest sense, and are defined or become defined by
Environmental Laws, or (c) materials which cause a nuisance upon or waste to
the Premises or any portion of the Building.
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(E) "Handle," "handle," "Handled," "handled," "Handling" or
"handling" shall mean any installation, handling, generation, storage,
treatment, use, disposal, discharge, release, manufacture, refinement,
presence, migration, emission, abatement, removal, transportation, or
any other activity of any type in connection with or involving Hazardous
Materials.
(F) "Responsible Party" shall mean Tenant, its subtenants and
its assignees, and their respective contractors, clients, directors,
employees, agents, and invitees, or any of them, as the case may be.
(G) Tenant agrees to maintain only the Hazardous Materials
listed in Schedule 1 to Exhibit D in the Premises and in or at the
Building and only in the quantities listed in Schedule 1 to Exhibit D.
Tenant also agrees that changes to the type and quantities of such
Tenant's Hazardous Materials may be done only with the prior written
consent of the Landlord, which consent shall not be unreasonably
withheld. Tenant further agrees that Landlord shall have the right to
inspect the Premises to verify the types and quantities of the materials
stored therein.
(H) Tenant agrees to execute affidavits, representations and
the like from time to time at Landlord's request conveying Tenant's best
knowledge and belief regarding the presence of Hazardous Materials in
the Premises or in or at the Building.
ARTICLE VII - UTILITIES AND SERVICES
7.01 Services. Landlord shall provide the normal utility service
connection into the Premises and Tenant, at its sole expense, shall arrange
with the appropriate utility company to install all necessary connections and
without fail to maintain in continuous operation during the entire term of the
Lease, all such utility service, whether or not Tenant is in actual possession
of the Premises. Tenant shall pay for all water, gas, heat, light, power,
sweeping and other janitorial services, rubbish and trash disposal, sewer and
any other utilities and services supplied in, about or related to the Premises,
together with any taxes thereon, connection charges and deposits, and also
shall pay for all electrical light bulbs, lamps and tubes in connection
therewith. If any such utilities and services are not separately metered to
Tenant, Tenant shall pay a reasonable portion to be determined by Landlord of
all charges jointly metered with other premises. Landlord reserves the right
during the Term of this Lease to grant easements or public utility purposes on,
over, or below the Premises without any abatement in rent, provided that said
easements do not unreasonably interfere with the normal operation of the
business conducted by Tenant in the Premises. Landlord shall not be required
to pay for any service, supplies or upkeep in connection with the Premises.
Tenant shall arrange for and pay for all telephone service and equipment,
including any additions or alterations to the existing telephone service boards
and conduit, which shall be completed without interference to the service
and/or equipment of other tenants in the Building and which shall be
appropriately labeled upon the termination of this Lease.
Any amounts which Tenant is required to pay to Landlord pursuant to
this Section 7.01 shall be payable upon demand by Landlord and shall constitute
additional rent or Rent under this Lease.
7.02 Interruption of Services. Landlord shall not be liable for any
failure to furnish, stoppage of, or interruption in furnishing any of the
services or utilities described in Section 7.01, when such failure is caused by
accident, breakage, repairs, strikes, lockouts, labor disputes, labor
disturbances, governmental regulation, civil disturbances, acts of war,
moratorium or other governmental action, or any other cause beyond Landlord's
reasonable control, and, in such event, Tenant shall not be entitled to any
damages nor shall any failure or interruption abate or suspend Tenant's
obligation to pay Base Rent and additional rental required under this Lease or
constitute or be construed as a constructive or other eviction of Tenant.
Further, in the event any governmental authority or public utility promulgates
or revises any law, ordinance, rule or regulation, or issues mandatory controls
or voluntary controls relating to the use or conservation of energy, water,
gas, light or electricity, the reduction of automobile or other emissions, or
the provision of any other utility or service, Landlord may take any reasonably
appropriate action to comply with such law, ordinance, rule, regulation,
mandatory control or voluntary guideline without affecting Tenant's obligations
hereunder. Tenant recognizes that any security services provided by Landlord at
the Building are for the protection of Landlord's property and under no
circumstances shall Landlord be responsible for, and Tenant waives any rights
with respect to, providing security or other protection for Tenant or its
employees, invitees or property in or about the Premises or the Building.
ARTICLE VIII - MAINTENANCE AND REPAIRS
8.01 Landlord's Obligations.
(A) During the Lease Term, Landlord shall, at its expense,
maintain only the roof, foundation and the structural soundness of the
exterior walls (excluding all windows, plate glass, doors and pest
control and extermination) of the portion of the Building containing the
Premises in good repair and condition except for reasonable wear and
tear. Landlord also shall maintain, at its expense, subject to
reimbursement as part of Operating Expenses, the downspouts and fire
safety sprinkler system of the Building. If Tenant determines that any
such repair or maintenance by Landlord is required, Tenant shall
promptly give written notice to Landlord of the need for such repair or
maintenance and unless Landlord in good faith disagrees with such
determination by Tenant, Landlord shall proceed with reasonable
promptness to perform such maintenance. Landlord shall not be liable to
Tenant, except as otherwise expressly provided in this Lease, for any
damage or inconvenience. Tenant shall not be entitled to any abatement
or reduction of Rent by reason of any repairs, alterations or additions
made by Landlord under this Lease.
(B) Tenant shall, at its sole cost, pay for any damage to the
roof, foundation and/or external walls caused by any act, omission,
negligence or fault of Tenant or any employee, agent or contractor of
Tenant.
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(C) Landlord shall not be liable to Tenant, except as
otherwise expressly provided in this Lease, for any damage or
inconvenience. Tenant shall not be entitled to any abatement or
reduction of Rent by reason of any repairs, alterations or additions
made by Landlord under this Lease.
8.02 TENANT'S OBLIGATIONS. During the Lease Term, Tenant shall, at
its risk and at its own sole cost and expense, maintain all other parts of the
Building and other improvements in or on the Premises in good repair and
condition (including all necessary replacements), including, but not limited
to, heating, ventilation and air conditioning systems, all glass elements,
doors (including dock doors), dock bumpers, regular mowing of any grass,
trimming, weed removal, regular removal of debris and, if applicable, Tenant
shall pay Tenant's Percentage Share with respect to Operating Expenses of
maintenance expense for any spur railroad track serving the Premises, and
Tenant agrees to sign a joint maintenance agreement with the railroad company
servicing the Premises, if requested by such railroad company. Tenant shall
repaint the exterior doors or other exposed parts of the Building which
reasonably require periodic repainting to prevent deterioration. However, in a
multi-occupancy Building, Landlord reserves the right to perform lawn and other
common area maintenance (including, without limitation, exterior painting) and
in such instance Tenant agrees to pay Landlord for lawn and other common area
maintenance (including, without limitation, exterior painting) based on
Tenant's Percentage Share with respect to Operating Expenses. Tenant shall take
good care of all property and its fixtures, including all landscaping, and
suffer no waste. Tenant shall perform, as and when necessary, extermination for
pests including, but not limited to, roaches, rodents and termites. Should
Tenant neglect to keep and maintain the Premises as required herein, the
Landlord shall have the right, but not the obligation, to have the work done
and any reasonable costs plus a ten percent (10%) overhead charge therefor
shall be charged to Tenant as additional rental and shall become payable by
Tenant with the payment of the rental next due under this Lease. In connection
with Tenant's maintenance and repair of the heating, ventilation and air
conditioning systems, Tenant shall provide Landlord during the Term of this
Lease and any renewal hereof with a duplicate original of a maintenance
contract, in form and substance acceptable to Landlord, with an HVAC
maintenance firm acceptable to Landlord. Further, Tenant shall be responsible
for, and upon demand by Landlord shall promptly reimburse Landlord for, any
damage to any portion of the Building or the Premises caused by (a) Tenant's
activities in the Building or the Premises; (b) the performance or existence of
any alterations, additions or improvements made by Tenant in or to the Premises;
(c) the installation, use, operation or movement of Tenant's property in or
about the Building or the Premises; or (d) any act or omission by Tenant or its
officers, partners, employees, agents, contractors or invitees.
8.03 Tenant shall, at its own cost and expense, repair or replace any
damage or injury to all or any part of the Premises and Building, caused by
Tenant or Tenant's agents, employees, invitees, licensees or visitors;
provided; however, if Tenant fails to make such repairs or replacements
promptly, Landlord may, at its option, make such repairs or replacements and
Tenant shall reimburse the cost, plus a ten percent (10%) overhead charge
therefor, to Landlord on demand.
8.04 Tenant shall not commit or allow any waste or damage to be
committed on any portion of the Premises, and at the termination of this Lease,
by lapse of time or otherwise, Tenant shall deliver the Premises to
Landlord, broom clean with all debris removed, in as good condition as at the
date of first possession of Tenant, ordinary wear and tear excepted. Tenant
understands that "ordinary wear and tear" does not mean Tenant shall be
relieved of performing its obligations under this Lease relating to
maintenance, repairs and replacements as provided for in the Lease. The cost
and expense of any repairs necessary to restore the condition of the Premises
shall be borne by Tenant, and if Landlord undertakes to restore the Premises,
it shall have a right of reimbursement against Tenant.
8.05 LANDLORD'S RIGHTS. Landlord and its contractors shall have the
right, at all reasonable times and upon notice to Tenant except in an emergency
in which event no notice shall be required, to enter upon the Premises to make
any repairs to the Premises or the Building reasonably required or deemed
reasonably necessary by Landlord and to erect such equipment, including
scaffolding, as is reasonably necessary to effect such repairs. During the
pendency of such repairs, Landlord shall use reasonable efforts to minimize any
material interruption of Tenant's business; provided, that if such repairs by
Landlord are required to remedy an emergency situation or to cure a breach or
default by Tenant under this Lease, Landlord shall not be obligated to minimize
such interference.
ARTICLE IX - ALTERATIONS, ADDITIONS AND IMPROVEMENTS
9.01 LANDLORD'S CONSENT; CONDITIONS. Tenant shall not make or
permit to be made any alterations, additions, or improvements in or to the
Premises ("Alterations") without the prior written consent of Landlord.
Landlord may impose as a condition to such consent such requirements as
Landlord in its sole discretion deems necessary or desirable including without
limitation: Tenant's submission to Landlord, for Landlord's prior written
approval, of all plans and specifications relating to the Alterations;
Landlord's prior written approval of the time or times when the Alterations are
to be performed; Landlord's prior written approval of the contractors and
subcontractors performing work in connection with the Alterations; Tenant's
receipt of all necessary permits and approvals from all governmental
authorities having jurisdiction over the Premises prior to the construction of
the Alterations; Tenant's written notice of whether the Alterations include the
Handling of any Hazardous Materials, pursuant to Section 6.03; Tenant's
delivery to Landlord of such bonds and insurance as Landlord shall reasonably
require; and Tenant's payment to Landlord of all costs and expenses incurred by
Landlord because of Tenant's Alterations, including but not limited to costs
incurred in reviewing the plans and specifications for, and the progress of,
the Alterations.
9.02 PERFORMANCE OF ALTERATIONS WORK. All work relating to the
Alterations shall be performed in compliance with the plans and specifications
approved by Landlord, all applicable laws, ordinances, rules, regulations and
directives of all governmental authorities having jurisdiction and the
requirements of all carriers of insurance on the Premises and the Building, the
Board of Underwriters, Fire Rating Bureau, or similar organization. All work
shall be performed in a diligent, first class manner and so as not to
unreasonably interfere with any other tenants or occupants of the Building. All
costs incurred by Landlord relating to the Alterations shall be payable to
Landlord by Tenant as additional rent upon demand.
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9.03 Liens. Tenant shall pay when due all costs for work performed
and materials supplied to the Premises. Tenant shall keep Landlord, the
Premises and the Building free from all liens, stop notices and violation
notices relating to the Alterations or any other work performed for, materials
furnished to or obligations incurred by Tenant and Tenant shall protect,
indemnify, hold harmless and defend Landlord, the Premises and the Building of
and from any and all loss, cost, damage, liability and expense, including
attorneys' fees, arising out of or related to any such liens or notices.
Further, Tenant shall give Landlord not less than seven (7) business days prior
written notice before commencing any Alterations in or about the Premises to
permit Landlord to post appropriate notices of non-responsibility. Tenant shall
also secure, prior to commencing any Alterations, at Tenant's sole expense, a
completion and lien indemnity bond satisfactory to Landlord for such work.
During the progress of such work, Tenant shall, upon Landlord's request,
furnish Landlord with sworn contractor's statements and lien waivers covering
all work theretofore performed. Tenant shall satisfy or otherwise discharge all
liens, stop notices or other claims or encumbrances within ten (10) days after
Landlord notifies Tenant in writing that any such lien, stop notice, claim or
encumbrance has been filed. If Tenant fails to pay and remove such lien, claim
or encumbrance within such ten (10) days, Landlord, at its election, may pay and
satisfy the same and in such event the sums so paid by Landlord, with interest
from the date of payment at the rate set forth in Section 4.06 hereof for
amounts owed Landlord by Tenant shall be deemed to be additional rent due
and payable by Tenant at once without notice or demand.
9.04 Lease Termination. Except as provided in this Section 9.04, upon
expiration or earlier termination of this Lease Tenant shall surrender the
Premises to Landlord in the same condition as when received, subject to
reasonable wear and tear. All Alterations shall become a part of the Premises
and shall become the property of Landlord upon the expiration or earlier
termination of this Lease, unless Landlord shall, by written notice given to
Tenant, require Tenant to remove some or all of Tenant's Alterations, in which
event Tenant shall promptly remove the designated Alterations and shall
promptly repair any resulting damage, all at Tenant's sole expense. Tenant
shall not be required to remove any item of Work installed in the Premises
pursuant to the Work Letter attached as Exhibit B. All business and trade
fixtures, machinery and equipment, furniture, movable partitions and items of
personal property owned by Tenant or installed by Tenant at its expense in the
Premises shall be and remain the Property of Tenant; upon the expiration or
earlier termination of this Lease, Tenant shall, at its sole expense, remove
all such items and repair any damage to the Premises or the Building caused by
such removal. If Tenant fails to remove any such items or repair such damage
promptly after the expiration or earlier termination of the Lease, Landlord
may, but need not, do so with no liability to Tenant, and Tenant shall pay
Landlord the cost thereof upon demand.
ARTICLE X - INDEMNIFICATION AND INSURANCE
10.01 Indemnification. Tenant and Tenant's officers and directors
agree to protect, indemnify, hold harmless and defend Landlord and any
mortgagee or ground lessor, and each of their respective partners, directors,
officers, agents and employees, successors and assigns, regardless of any
negligence of, or imputed to Landlord as owner of the Building, Premises or
underlying real property involved in an injury, from and against:
(A) any and all loss, cost, damage, liability or expense as
incurred (including but not limited to actual attorneys' fees and legal
costs) arising out of or related to any claim, suit or judgment brought
by or in favor of any person or persons for damage, loss or expense due
to, but not limited to, bodily injury, including death, or property
damage sustained by such person or persons which arises out of, is
occasioned by or is in any way attributable to the use or occupancy of
the Premises or any portion of the Building by Tenant or the acts or
omissions of Tenant or its agents, employees, contractors, clients,
invitees or subtenants except that caused by the sole active negligence
of Landlord or its agents or employees. Such loss or damage shall
include, but not be limited to, any injury or damage to, or death of,
Landlord's employees or agents or damage to the Premises or any portion
of the Building.
(B) any and all environmental damages which arise from: (i) the
Handling of any Tenant's Hazardous Materials, as defined in Section 6.03
or (ii) the breach of any of the provisions of this Lease. For the
purpose of this Lease, "environmental damages" shall mean (a) all claims,
judgments, damages, penalties, fines, costs, liabilities, and losses
(including without limitation, diminution in the value of the Premises or
any portion of the Building, damages for the loss of or restriction on
the use of rentable or usable space or of any amenity of the Premises or
any portion of the Building, and from any adverse impact of Landlord's
marketing of space); (b) all reasonable sums paid for settlement of
claims, attorneys' fees, consultants' fees and experts' fees; and (c) all
costs incurred by Landlord in connection with investigation or
remediation relating to the Handling of Tenant's Hazardous Materials,
whether or not required by Environmental Laws, necessary for Landlord to
make full economic use of the Premises or any portion of the Building, or
otherwise required under this Lease. To the extent that Landlord is
strictly liable under any Environmental Laws, Tenant's obligation to
Landlord and the other indemnities under the foregoing indemnification
shall likewise be without regard to fault on Tenant's part with respect
to the violation of any Environmental Law which results in liability to
the indemnitee. Tenant's obligations and liabilities pursuant to this
Section 10.01 shall survive the expiration or earlier termination of this
Lease.
(C) any and all testing or investigation as may be requested by
any governmental agency or lender for the purpose of investigating the
presence of Tenant's Hazardous Materials that may not be in compliance
with Environmental Laws.
(D) Notwithstanding anything to the contrary contained herein,
nothing shall be interpreted or used to in any way affect, limit, reduce
or abrogate any insurance coverage provided by any insurers to either
Tenant or Landlord.
Notwithstanding anything to the contrary contained in this Lease, nothing
herein shall be construed to infer or imply that Tenant is a partner, joint
venturer, agent, employee, or otherwise acting by or at the direction of
Landlord.
10.02 Property Insurance.
(A) At all times during the Lease Term, Tenant shall procure and
maintain, at its sole expense, "all-risk" property insurance, in an
amount not less than one hundred percent (100%) of the replacement cost
covering (a) all leasehold improvements in and to the Premises which are
made at the expense of Tenant; and (b) Tenant's trade fixtures, equipment
and other personal property from time to
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time situated in the Premises, including, without limitation, all floor and
wall coverings. The proceeds of such insurance shall be used for the repair
or replacement of the property so insured, except that if not so applied or
if this Lease is terminated following a casualty, the proceeds applicable
to the leasehold improvements shall be paid to Landlord and the proceeds
applicable to Tenant's personal property shall be paid to Tenant.
(B) At all times during the Lease Term, Tenant shall procure and
maintain business interruption insurance in such amount as will reimburse
Tenant for direct or indirect loss of earnings attributable to all perils
insured against in Section 10.02(A).
10.03 Liability Insurance.
(A) At all times during the Lease Term, Tenant shall procure and
maintain, at its sole expense, general liability insurance applying to the
use and occupancy of the Premises and the business operated by Tenant. Such
insurance shall have a minimum combined single limit of liability of at
least $2,000,000 per occurrence and a general aggregate limit of at least
$3,000,000. All such policies shall be written to apply to all bodily
injury, property damage, personal injury losses and shall be endorsed to
include Landlord and its agents, beneficiaries, partners, employees, and
any deed of trust holder or mortgagee of Landlord or any ground lessor as
additional insureds. (A list of the current persons and entities to be
named as additional insureds is attached hereto as Exhibit E.) Such
liability insurance shall be written as primary policies, not excess or
contributing with or secondary to any other insurance as may be available
to the Landlord or additional insureds.
(B) Prior to the sale, storage, use or giving away of alcoholic
beverages on or from the Premises by Tenant or another person, Tenant, at
its own expense, shall obtain a policy or policies of insurance issued by a
responsible insurance company and in a form acceptable to Landlord saving
harmless and protecting Landlord and the Premises against any and all
damages, claims, liens, judgments, expenses and costs, including actual
attorney's fees, arising under any present or future law, statute, or
ordinance of the State of Minnesota or other governmental authority having
jurisdiction of the Premises, by reason of any storage, sale, use or giving
away of alcoholic beverages on or from the Premises. Such policy or
policies of insurance shall have a minimum combined single limit of
$1,000,000 per occurrence and shall apply to bodily injury, fatal or
nonfatal; injury to means of support; and injury to property of any person.
Such policy or policies of insurance shall name the Landlord and its
agents, beneficiaries, partners, employees and any mortgagee of Landlord or
any ground lessor of Landlord as additional insureds. (A list of the
current persons and entities to be named as additional insureds is attached
hereto as Exhibit E.)
10.04 Workers' Compensation Insurance. At all times during the Lease
Term, Tenant shall procure and maintain Workers' Compensation Insurance in
accordance with the laws of the State of Minnesota, and Employers' Liability
insurance with a limit not less than $1,000,000 Bodily Injury Each Accident;
$1,000,000 Bodily Injury By Disease - Each Person; and $1,000,000 Bodily Injury
by Disease - Policy Limit.
10.05 Automobile Liability Insurance. At all times during the Lease Term,
Tenant shall provide and maintain, at its sole expense, commercial automobile
liability insurance including owned, non-owned and hired vehicles, applying to
the use of any vehicles arising out of the operations of Tenant. Such insurance
shall apply to bodily injury and property damage in a combined single limit of
not less than $1,000,000 per accident.
10.06 Policy Requirements. All insurance required to be maintained by
Tenant shall be issued by insurance companies authorized to do insurance
business in the State of Minnesota and rated not less than A-VII in Best's
Insurance Guide and a Standard and Poor's claims paying ability rating of not
less than AA. A certificate of insurance (or, at Landlord's option, copies of
the applicable policies) evidencing the insurance required under this Article X
shall be delivered to Landlord not less than thirty (30) days prior to the
Commencement Date. No such policy shall be subject to cancellation or
modification without thirty (30) days prior written notice to Landlord and to
any deed of trust holder, mortgagee or ground lessor designated by Landlord to
Tenant. Tenant shall furnish Landlord with a replacement certificate with
respect to any insurance not less than thirty (30) days prior to the expiration
of the current policy. Tenant shall have the right to provide the insurance
required by this Article X pursuant to blanket policies, but only if such
blanket policies expressly provide coverage to the Premises and the Landlord as
required by this Lease.
10.07 Waiver of Subrogation. Each party hereby waives any right of
recovery against the other for injury or loss covered by insurance, to the
extent of the injury or loss covered thereby. Any policy of insurance to be
provided by Tenant pursuant to this Article X shall contain a clause denying the
insurer any right of subrogation against Landlord.
10.08 Failure to Insure. If Tenant fails to maintain any insurance which
Tenant is required to maintain pursuant to this Article X, Tenant shall be
liable to Landlord for any loss or cost resulting from such failure to maintain.
Tenant may not self-insure against any risks required to be covered by insurance
without Landlord's prior written consent.
ARTICLE XI - DAMAGE OR DESTRUCTION
11.01 Total Destruction. Except as provided in Section 11.03 below, this
Lease shall automatically terminate if the Premises are totally destroyed.
11.02 Partial Destruction of Premises. If the Premises are damaged by any
casualty and, in Landlord's opinion, the Premises (exclusive of any Alterations
made to the Premises by Tenant) can be restored to its pre-existing condition
within two hundred forty (240) days after the date of the damage or destruction,
Landlord shall, upon written notice from Tenant to Landlord of such damage,
except as provided in Section 11.03, promptly and with due diligence repair any
damage to the Premises (exclusive of any Alterations to the Premises made by
Tenant, which shall be promptly repaired by Tenant at its sole expense) and,
until such repairs are completed, the Rent shall be abated from the date of
damage or destruction in the same proportion that the rentable area of the
portion of the Premises which is unusable by Tenant in the conduct of its
business bears to the total rentable area of the Premises. If such repairs
cannot, in Landlord's opinion, be made within said two hundred forty (240) day
period, then
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<PAGE> 12
Landlord may, at its option, exercisable by written notice given to Tenant
within thirty (30) days after the date of the damage or destruction, elect to
make the repairs within a reasonable time after the damage or destruction, in
which event this Lease shall remain in full force and effect but the Rent shall
be abated as provided in the preceding sentence; if Landlord does not so elect
to make the repairs, then either Landlord or Tenant shall have the right, by
written notice given to the other within sixty (60) days after the date of the
damage or destruction, to terminate this Lease as of the date of the damage or
destruction.
11.03 Exceptions to Landlord's Obligations. Notwithstanding anything
to the contrary contained in this Article XI, Landlord shall have no
obligation to repair the Premises if either; (a) the Building in which the
Premises are located is so damaged as to require repairs to the Building
exceeding twenty percent (20%) of the full insurable value of the Building; or
(b) Landlord elects to demolish the Building in which the Premises are located;
or (c) the damage or destruction occurs less than two (2) years prior to the
Termination Date, exclusive of option periods. Further, Tenant's Rent shall not
be abated if either (i) the damage or destruction is repaired within five (5)
business days after Landlord receives written notice from Tenant of the
casualty, or (ii) Tenant, or any officers, partners, employees, agents or
invitees of Tenant, or any assignee or subtenant of Tenant, is, in whole or in
part, responsible for the damage or destruction.
11.04 Waiver. The provisions contained in this Lease shall supersede
any contrary laws now or hereafter in effect relating to damage or destruction.
ARTICLE XII --- CONDEMNATION
12.01 Taking. If the entire Premises or so much of the Premises as to
render the balance unusable by Tenant shall be taken by condemnation, sale in
lieu of condemnation or in any other manner for any public or quasi-public
purpose (collectively "Condemnation"), this Lease shall terminate on the date
that title or possession to the Premises is taken by the condemning authority,
whichever is earlier.
12.02 Award. In the event of any Condemnation, the entire award for
such taking shall belong to Landlord. Tenant shall have no claim against
Landlord or the award for the value of any unexpired term of this Lease or
otherwise. Tenant shall be entitled to independently pursue a separate award in
a separate proceeding for Tenant's relocation costs directly associated with
the taking, provided such separate award does not diminish Landlord's award.
12.03 Temporary Taking. No temporary taking of the Premises shall
terminate this Lease or entitle Tenant to any abatement of the Rent payable to
Landlord under this Lease; provided, further, that any award for such temporary
taking shall belong to Tenant to the extent that the award applies to any time
period during the Lease Term and to Landlord to the extent that the award
applies to any time period outside the Lease Term.
ARTICLE XIII -- RELOCATION
13.01 Relocation. Landlord shall have the right, at its option upon
not less than thirty (30) days prior written notice to Tenant, to relocate
Tenant and to substitute for the Premises described above other space in the
Building of approximately the same dimensions and size as the Premises
described in Section 1.02 above. If Tenant is already in occupancy of the
Premises, then Landlord shall also reimburse Tenant for Tenant's reasonable
moving and telephone relocation expenses and for reasonable quantities of new
stationery upon submission to Landlord of receipts for such expenditures
incurred by Tenant.
ARTICLE XIV -- ASSIGNMENT AND SUBLETTING
14.01 Restriction. Without the prior written consent of Landlord,
Tenant shall not, either voluntarily or by operation of law, assign, encumber,
or otherwise transfer this Lease or any interest herein, or sublet the Premises
or any part thereof, or permit the Premises to be occupied by anyone other than
Tenant or Tenant's employees. An assignment, subletting or other action in
violation of the foregoing shall be void and, at Landlord's option, shall
constitute a material breach of this Lease. For purposes of this Section 14.01,
an assignment shall include any transfer of any interest in this Lease or the
Premises by Tenant pursuant to a merger, division, consolidation or
liquidation, or pursuant to a change in ownership of Tenant involving a
transfer of voting control in Tenant (whether by transfer of partnership
interests, corporate stock or otherwise). Notwithstanding anything contained in
this Article XIV to the contrary, Tenant expressly covenants and agrees not to
enter into any lease, sublease, license, concession or other agreement for use,
occupancy or utilization of the Premises which provides for rental or other
payment for such use, occupancy or utilization based in whole or in part on the
net income or profits derived by any person from the property leased, used,
occupied or utilized (other than an amount based on a fixed percentage or
percentages of receipts or sales), and that any such purported lease,
sublease, license, concession or other agreement shall be absolutely void and
ineffective as a conveyance of any right or interest in the possession, use,
occupancy or utilization of any part of the Premises.
14.02 Notice to Landlord. If Tenant desires to assign this Lease or
any interest herein, or to sublet all or any part of the Premises, then at
least twenty (20) business days prior to the effective date of the proposed
assignment or subletting, Tenant shall submit to Landlord in connection with
Tenant's request for Landlord's consent:
(A) A statement containing (i) the name and address of the
proposed assignee or subtenant; (ii) such financial information with respect to
the proposed assignee or subtenant as Landlord shall reasonably require; (iii)
the type of use proposed for the Premises; and (iv) all of the principal terms
of the proposed assignment or subletting; and
(B) Four (4) originals of the assignment or sublease on a
form approved by Landlord and four (4) originals of the Landlord's Consent to
Sublease or Assignment and Assumption of Lease and Consent.
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14.03 LANDLORD'S RECAPTURE RIGHTS. Except in the event of Tenant's
corporate merger with another entity which merger also satisfies the
requirements of Section 14.04, at any time within twenty (20) business days
after Landlord's receipt of all (but not less than all) of the information and
documents described in Section 14.02 above, Landlord may, at its option by
written notice to Tenant, elect to: (a) sublease the Premises or the portion
thereof proposed to be sublet by Tenant upon the same terms as those offered
to the proposed subtenant; (b) take an assignment of the Lease upon the same
terms as those offered to the proposed assignee; or (c) terminate the Lease in
its entirety or as to the portion of the Premises proposed to be assigned or
sublet, with a proportionate adjustment in the Rent payable hereunder if the
Lease is terminated as to less than all of the Premises. If Landlord does not
exercise any of the options described in the preceding sentence, then, during
the above-described twenty (20) business day period, Landlord shall either
consent or deny its consent to the proposed assignment or subletting.
14.04 LANDLORD'S CONSENT; STANDARDS. Landlord's consent shall not be
unreasonably withheld; but, in addition to any other grounds for denial,
Landlord's consent shall be deemed reasonably withheld if, in Landlord's good
faith judgment: (i) the proposed assignee or subtenant does not have the
financial strength to perform its obligations under this Lease or any proposed
sublease; (ii) the business and operations of the proposed assignee or
subtenant are not of comparable quality to the business and operations being
conducted by other tenants in the Building; (iii) the proposed assignee or
subtenant intends to use any part of the Premises for a purpose not permitted
under this Lease; (iv) either the proposed assignee or subtenant, or any person
which directly or indirectly controls, is controlled by, or is under common
control with the proposed assignee or subtenant occupies space in the Building,
or is negotiating with Landlord to lease space in the Building; (v) the proposed
assignee or subtenant is disreputable; or (vi) the use of the Premises or the
Building by the proposed assignee or subtenant would, in Landlord's reasonable
judgment, significantly increase the pedestrian traffic in and out of the
Building or vehicular traffic in or to the Building or would require any
alterations to the Building to comply with applicable laws.
14.05 ADDITIONAL RENT. If Landlord consents to any such assignment or
subletting, all sums or other economic consideration received by Tenant in
connection with such assignment or subletting, whether denominated as rental
or otherwise, which exceeds, in the aggregate, the total sum which Tenant is
obligated to pay Landlord under this Lease (prorated to reflect obligations
allocable to less than all of the Premises under a sublease) shall be paid to
Landlord as additional rent under the Lease without affecting or reducing any
other obligation of Tenant hereunder.
14.06 LANDLORD'S COSTS. If Tenant shall assign this Lease or shall
sublet all or any part of the Premises or shall request the consent of Landlord
to any assignment, subletting or other act, Tenant shall pay to Landlord as
additional rent Landlord's costs related thereto, including Landlord's
reasonable attorneys' fees and a minimum fee to Landlord of Five Hundred Dollars
($500.00).
14.07 CONTINUING LIABILITY OF TENANT. Notwithstanding any assignment
or sublease, Tenant shall remain as fully and primarily liable for the payment
of Rent and for the performance of all other obligations of Tenant contained in
this Lease to the same extent as if the assignment or sublease had not
occurred; provided, however, that any act or omission of any assignee or
subtenant, other than Landlord, that violates the terms of this Lease shall be
deemed a violation of this Lease by Tenant.
14.08 NON-WAIVER. The consent by Landlord to any assignment or
subletting shall not relieve Tenant, or any person claiming through or by
Tenant, of the obligation to obtain the consent of Landlord, pursuant to this
Article XIV, to any further assignment or subletting. In the event of an
assignment or subletting, Landlord may collect rent from the assignee or the
subtenant without waiving any rights hereunder and collection of the rent from a
person other than Tenant shall not be deemed a waiver of any of Landlord's
rights under this Article XIV, an acceptance of assignee or subtenant as
Tenant, or a release of Tenant from the performance of Tenant's obligations
under this lease.
ARTICLE XV - DEFAULT AND REMEDIES
15.01 EVENTS OF DEFAULT BY TENANT. The occurrence of any of the
following shall constitute a material default and breach of this Lease by
Tenant:
(A) The failure by Tenant to pay Base Rent or make any other
payment required to be made by Tenant hereunder as and when due and the
continuation of such failure for ten (10) business days.
(C) The making by Tenant of any assignment of this Lease or
any sublease of all or part of the Premises, except as expressly
permitted under Article XIV of this Lease.
(D) The failure by Tenant to observe or perform any other
provision of this Lease to be observed or performed by Tenant, other
than those described in Sections 15.01(A), 15.01(B) or 15.01(C) above,
if such failure continues for thirty (30) days after written notice
thereof by Landlord to Tenant; provided, however, that if the nature of
the default is such that it cannot be cured within the thirty (30) day
period, no default shall be deemed to exist if Tenant commences the
curing of the default promptly within such thirty (30) day period and
thereafter diligently prosecutes the same to completion and achieves the
same within sixty (60) days after the occurrence of such default. The
thirty (30) day notice described herein shall be in lieu of, and not in
addition to, any notice required under law now or hereafter in effect
requiring that notice of default be given prior to the commencement of
an unlawful detainer or other legal proceeding.
(E) The making by Tenant of any general assignment for the
benefit of creditors, the filing by or against Tenant of a petition
under any federal or state bankruptcy or insolvency laws (unless, in the
case of a petition filed against Tenant, the same is dismissed within
thirty (30) days after filing); the appointment of a trustee or receiver
to take possession of substantially all of Tenant's assets at the
Premises or Tenant's interest in this Lease or the Premises, when
possession is not restored to Tenant within thirty (30) days; or the
attachment, execution or other seizure of substantially all of Tenant's
assets located at the Premises or Tenant's interest in this Lease or the
Premises, if such seizure is not discharged within thirty (30) days.
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15.02 Landlord's Right To Terminate Upon Tenant Default. In the event
of any default by Tenant as provided in Section 15.01 above, Landlord shall
have the right upon notice to Tenant to terminate this Lease or Tenant's right
to possession of the Premises without terminating this Lease, in which event
Landlord shall be entitled to receive from Tenant:
(A) The worth at the time of award of any unpaid Rent which
had been earned at the time of such termination; plus
(B) The worth at the time of award of the amount by which the
unpaid Rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss Tenant proves
could have been reasonably avoided; plus
(C) The worth at the time of award of the amount by which the
unpaid Rent for the balance of the term after the time of award exceeds
the amount of such rental loss that Tenant proves could be reasonably
avoided; plus
(D) Any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom; and
(E) At Landlord's election, such other amounts in addition to
or in lieu of the foregoing as may be permitted from time to time by
applicable law.
As used in subparagraphs (A) and (B) above, "worth at the time of
award" shall be computed by discounting such amounts at the then highest lawful
rate of interest, but in no event to exceed one percent (1%) per annum plus the
rate established by the Federal Reserve Bank of Chicago on advances made to
member banks under Sections 13 and 13a of the Federal Reserve Act ("discount
rate") prevailing on the date of execution of this Lease by Landlord. As used
in paragraph (C) above, "worth at the time of award" shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of
Chicago at the time of award plus one percent (1%).
15.03 Landlord's Right To Continue Lease Upon Tenant Default. In the
event of a default of this Lease and abandonment of the Premises by Tenant, if
Landlord does not elect to terminate this Lease as provided in Section 15.02
above, Landlord may from time to time, without terminating this Lease, enforce
all of its rights and remedies under this Lease. Without limiting the
foregoing, Landlord may continue this Lease in effect after Tenant's breach and
abandonment and recover Rent as it becomes due. Landlord may, but shall have no
obligation to re-let all or any part of the Premises. In the event Landlord at
its sole discretion elects to re-let the Premises, to the fullest extent
permitted by law, the proceeds of any reletting shall be applied first to pay
to Landlord all costs and expenses of such reletting (including without
limitation, costs and expenses of retaking or repossessing the Premises,
removing persons and property therefrom, securing new tenants, including
expenses for redecoration, alterations and other costs in connection with
preparing the Premises for the new tenant, and if Landlord shall maintain and
operate the Premises, the costs thereof) and receivers' fees incurred in
connection with the appointment of and performance by a receiver to protect the
Premises and Landlord's interest under this Lease and any necessary or
reasonable alterations; second, to the payment of any indebtedness of Tenant to
Landlord other than Rent due and unpaid hereunder; third, to the payment of
Rent due and unpaid hereunder; and the residue, if any, shall be held by
Landlord and applied in payment of other or future obligations of Tenant to
Landlord as the same may become due and payable, and Tenant shall not be
entitled to receive any portion of such revenue.
15.04 Right of Landlord to Perform. All covenants and agreements to
be performed by Tenant under this Lease shall be performed by Tenant at
Tenant's sole cost and expense. If Tenant shall fail to pay any sum of money,
other than Rent, required to be paid by it hereunder or shall fail to perform
any other act on its part to be performed hereunder, Landlord may, but shall
not be obligated to, make any payment or perform any such other act on Tenant's
part to be made or performed, without waiving or releasing Tenant of its
obligations under this Lease. Any sums so paid by Landlord and all necessary
incidental costs, together with interest thereon at the lesser of the maximum
rate permitted by law if any or twelve percent (12%) per annum from the date of
such payment, shall be payable to Landlord as additional rent on demand and
Landlord shall have the same rights and remedies in the event of nonpayment as
in the case of default by Tenant in the payment of Rent.
15.05 Default Under Other Leases. If the term of any lease, other
than this Lease, heretofore or hereafter made by Tenant for any space in the
Building shall be terminated or terminable after the making of this Lease
because of any default by Tenant under such other lease, such fact shall
empower Landlord, at Landlord's sole option, to terminate this Lease by notice
to Tenant or to exercise any of the rights or remedies set forth in Section
15.02.
15.06 Non-Waiver. Nothing in this Article shall be deemed to affect
Landlord's rights to indemnification for liability or liabilities arising prior
to termination of this Lease for personal injury or property damages under the
indemnification clause or clauses contained in this Lease. No acceptance by
Landlord of a lesser sum than the Rent then due shall be deemed to be other
than on account of the earliest installment of such Rent due, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment as rent be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such installment or pursue any other remedy in the Lease provided.
The delivery of keys to any employee of Landlord or to Landlord's agent or any
employee thereof shall not operate as a termination of this Lease or a
surrender of the Premises.
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15.07 Cumulative Remedies. The specific remedies to which Landlord may
resort under the terms of the Lease are cumulative and are not intended to be
exclusive of any other remedies or means of redress to which it may be lawfully
entitled in case of any breach or threatened breach by Tenant of any provisions
of the Lease. In addition to the other remedies provided in the Lease,
including the right to terminate Tenant's right of possession of the Premises
and reenter and repossess the Premises and remove all persons and property from
the Premises without terminating this Lease as provided in Section 15.02,
Landlord shall be entitled to a restraint by injunction of the violation or
attempted or threatened violation of any of the covenants, conditions or
provisions of the Lease or to a decree compelling specific performance of any
such covenants, conditions or provisions.
15.08 Default by Landlord. Landlord's failure to perform or observe any
of its obligations under this Lease shall constitute a default by Landlord
under this Lease only if such failure shall continue for a period of thirty
(30) days (or the additional time, if any, that is reasonably necessary
promptly and diligently to cure the failure) after Landlord receives written
notice from Tenant specifying the default. The notice shall give in reasonable
detail the nature and extent of the failure and shall identify the Lease
provision(s) containing the obligation(s). If Landlord shall default in the
performance of any of its obligations under this Lease (after notice and
opportunity to cure as provided herein), Tenant may pursue any remedies
available to it under the law and this Lease.
ARTICLE XVI -- ATTORNEYS FEES: COSTS OF SUIT
16.01 Attorneys' Fees. If either Landlord or Tenant shall commence any
action or other proceeding against the other arising out of, or relating to,
this Lease or the Premises, the prevailing party shall be entitled to recover
from the losing party, in addition to any other relief, its actual attorneys
fees irrespective of whether or not the action or other proceeding is
prosecuted to judgment and irrespective of any court schedule of reasonable
attorneys' fees. In addition, Tenant shall reimburse Landlord, upon demand, for
all reasonable attorneys' fees incurred in collecting Rent or otherwise seeking
enforcement against Tenant, its sublessees and assigns, of Tenant's obligations
under this Lease.
16.02 Indemnification. Should Landlord be made a party to any
litigation instituted by Tenant against a party other than Landlord, or by a
third party against Tenant, Tenant shall indemnify, hold harmless and defend
Landlord from any and all loss, cost, liability, damage or expense incurred by
Landlord, including attorneys' fees, in connection with the litigation.
ARTICLE XVII -- SUBORDINATION AND ATTORNMENT
17.01 Subordination. This Lease, and the rights of Tenant hereunder,
are and shall be subordinate to the interests of (i) all present and future
ground leases and master leases of all or any part of the Building; (ii)
present and future mortgages and deeds of trust encumbering all or any part of
the Building or the underlying real estate; (iii) all past and future advances
made under any such mortgages or deeds of trust; and (iv) all renewals,
modifications, replacements and extensions of any such ground leases, master
leases, mortgages and deeds of trust; provided, however, that any lessor under
any such ground lease or master lease or any mortgagee or beneficiary under any
such mortgage or deed of trust shall have the right to elect, by written notice
given to Tenant, to have this Lease made superior in whole or in part to any
such ground lease, master lease, mortgage or deed of trust. Upon demand, Tenant
shall execute, acknowledge and deliver any instruments reasonably requested by
Landlord or any such lessor, mortgagee or beneficiary to effect the purposes of
this Section 17.01. Such instruments may contain, among other things,
provisions to the effect that such lessor, mortgagee or beneficiary (hereafter,
for the purposes of this Section 17.01, a "Successor Landlord") shall (i) not
be liable for any act or omission of Landlord or its predecessors, if any,
prior to the date of such Successor Landlord's succession to Landlord's
interest under this Lease; (ii) not be subject to any offsets or defenses which
Tenant might be able to assert against Landlord or its predecessors, if any,
prior to the date of such Successor Landlord's succession to Landlord's
interest under this Lease; (iii) not be liable for the return of any security
deposit under the Lease unless the same shall have actually been deposited with
such Successor Landlord; and (iv) be entitled to receive notice of any Landlord
default under this Lease plus a reasonable opportunity to cure such default
prior to Tenant having any right or ability to terminate this Lease as a result
of such Landlord default.
17.02 Attornment. If requested to do so, Tenant shall attorn to and
recognize as Tenant's landlord under this Lease any superior lessor, superior
mortgagee or other purchaser of person taking title to the Building by reason
of the termination of any superior lease or the foreclosure of any superior
mortgage or deed of trust, and Tenant shall, upon demand, execute any documents
reasonably requested by any such person to evidence the attornment described in
this Section 17.02.
17.03 Mortgage and Ground Lessor Protection. Tenant agrees to give any
holder of any mortgage and any ground lessor, by registered or certified mail,
a copy of any notice of default served upon the Landlord by Tenant, provided
that prior to such notice Tenant has been notified in writing (by way of
service on Tenant of a copy of Assignment of Rents and Leases, or otherwise) of
the address of such mortgage holder or ground lessor (hereafter the "Notified
Party"). Tenant further agrees that if Landlord shall have failed to cure such
default within twenty (20) days after such notice to Landlord (or if such
default cannot be cured or corrected within that time, then such additional
time as may be necessary if Landlord has commenced within such twenty (20) days
and is diligently pursuing the remedies or steps necessary to cure or correct
such default), then the Notified Party shall have an additional thirty (30)
days within which to cure or correct such default (or if such default cannot be
cured or corrected within that time, then such additional time as may be
necessary if the Notified Party has commenced within such thirty (30) days and
is diligently pursuing the remedies or steps necessary to cure or correct such
default). Until the time allowed, as aforesaid, for the Notified Party to cure
such default has expired without cure, Tenant shall have no right to, and shall
not, terminate this Lease on account of Landlord's default.
ARTICLE XVIII -- QUIET ENJOYMENT
18.01 Provided that Tenant performs all of its obligations hereunder,
Tenant shall have and peaceably enjoy the Premises during the Lease Term,
subject to all of the terms and conditions contained in this Lease.
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<PAGE> 16
ARTICLE XIX - PARKING
19.01 Tenant, its employees and invitees, are hereby granted the
non-exclusive privilege to use parking spaces available to the Building. Tenant
shall abide by all rules and regulations regarding the use of the parking area
as may now exist or as may hereinafter be promulgated by Landlord. Landlord
reserves the right to modify, restripe and otherwise change the location of
drives, parking spaces and parking area available to the Building. Landlord may,
but shall have no obligation to, designate certain parking spaces for trucks,
handicapped persons or designated tenants as Landlord, in its sole discretion,
may deem necessary for the professional and efficient operation of the parking
area and the Building. Landlord shall have the right to reasonably restrict the
number and location of truck/tractor trailers for the overall benefit of all
tenants, it being agreed by Tenant that it is not the intent of this Lease to
provide unrestricted parking for truck/tractor trailers. Tenant agrees not to
overburden the parking facilities and agrees to cooperate with Landlord and
other tenants in the use of parking facilities. Tenant will reimburse Landlord
upon demand for any damage caused to the parking surfaces or facilities caused
by Tenant's or any of its employees', agents' or invitees' truck/tractor
trailers or any other vehicles. Landlord reserves the right in its absolute
discretion to determine whether parking facilities are becoming crowded and, in
such event, to allocate parking spaces among Tenant and other tenants. At no
time shall the parking of any vehicle be permitted in the fire lanes or
handicapped parking areas servicing the Building.
ARTICLE XX - RULES AND REGULATIONS
20.01 The Rules and Regulations attached hereto as Exhibit F are hereby
incorporated by reference herein and made a part hereof. Tenant shall abide by,
and faithfully observe and comply with the Rules and Regulations and any
reasonable and non-discriminatory amendments, modifications and/or additions
thereto as may hereafter be adopted and published by written notice to tenants
by Landlord for the safety, care, security, good order and/or cleanliness of the
Premises and/or the Building. Landlord shall not be liable to Tenant for any
violation of such rules and regulations by any other tenant or occupant of the
Building.
ARTICLE XXI - ESTOPPEL CERTIFICATES
21.01 Tenant agrees at any time and from time to time upon not less than
ten (10) days' prior written notice from Landlord to execute, acknowledge and
deliver to Landlord a statement in writing addressed and certifying to Landlord,
or to the holder or assignee of any existing or prospective mortgage encumbering
the Building or any part thereof (hereafter a "Mortgagee"), or to the lessor, or
existing or prospective assignee of the lessor's position, under any existing or
prospective ground lease of the land underlying the Building (hereafter a
"Ground Lessor"), or to any prospective purchaser of the land, improvements or
both compromising the Building, that this Lease is unmodified and in full force
and effect (or if there have been modifications, that the same is in full force
and effect as modified and stating the modifications); that Tenant has accepted
possession of the Premises, which are acceptable in all respects, and that any
improvements required by the terms of this Lease to be made by Landlord have
been completed to the satisfaction of Tenant; that Tenant is in full occupancy
of the Premises; that no rent has been paid more than thirty (30) days in
advance; that the first month's Base Rent has been paid; that Tenant is entitled
to no free Rent or other concessions except as stated in this Lease; that Tenant
has not been notified of any previous assignment of Landlord's or any
predecessor landlord's interest under this Lease; the dates of which Base Rent,
additional rental and other charges have been paid; that Tenant, as of the date
of such certificate, has no charge, lien or claim of setoff under this Lease or
otherwise against Base Rent, additional rental or other charges due or to become
due under this Lease; and that Landlord is not in default in performance of any
covenant, agreement or condition contained in this Lease or any other matter
relating to this Lease or the Premises or, if so, specifying each such default.
In addition, in the event that such certificate is being given to any Mortgagee
or Ground Lessor, such statement may contain any other provisions customarily
required by such Mortgagee or Ground Lessor including, without limitation, an
agreement on the part of Tenant to furnish to such Mortgagee or Ground Lessor,
as applicable, written notice of any Landlord default and reasonable opportunity
for such Mortgagee or Ground Lessor to cure such default prior to Tenant being
able to terminate this Lease. Any such statement delivered pursuant to this
Section may be relied upon by Landlord or any Mortgagee, Ground Lessor or
prospective purchaser to whom it is addressed and such statement, if required by
its addressee, may so specifically state. If Tenant does not execute,
acknowledge and deliver to Landlord the statement as and when required herein.
Landlord is hereby granted an irrevocable power-of-attorney, coupled with an
interest, to execute such statement on Tenants behalf, which statement shall be
binding on Tenant to the same extent as if executed by Tenant.
ARTICLE XXII - ENTRY BY LANDLORD
22.01 Landlord may enter the Premises at all reasonable times to:
inspect the same; exhibit the same to prospective purchasers, lenders or
tenants: determine whether Tenant is complying with all of its obligations under
this Lease; supply janitorial and other services to be provided by Landlord to
Tenant under this Lease; post notices of non-responsibility; and make repairs or
improvements in or to the Building or the Premises; provided, however, that all
such work shall be done as promptly as reasonably possible and so as to cause as
little interference to Tenant as reasonably possible. Tenant hereby waives any
claim for damages for any injury or inconvenience to, or interference with,
Tenant's business, any loss of occupancy or quiet enjoyment of the Premises or
any other loss occasioned by such entry. As provided for in clause (xiii) of
Section 27.19 of this Lease, Landlord shall at all times have the right, but not
the obligation, to obtain from Tenant and retain a key with which to unlock all
of the doors in, on or about the Premises (excluding Tenant's vaults, safes and
similar areas designated by Tenant in writing in advance), and Landlord shall
have the right to use any and all means by which Landlord may deem proper to
open such doors to obtain entry to the Premises, and any entry to the Premises
obtained by Landlord by any such means, or otherwise, shall not under any
circumstances be deemed or construed to be a forcible or unlawful entry into or
a detainer of the Premises or an eviction, actual or constructive, of Tenant
from any part of the Premises. Such entry by Landlord shall not as a termination
of this Lease. If Landlord shall be required to obtain entry by means other than
a key provided by Tenant, the cost of such entry shall be payable by Tenant to
Landlord as additional rent.
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<PAGE> 17
ARTICLE XXIII
LANDLORD'S LEASE UNDERTAKINGS - EXCULPATION
FROM PERSONAL LIABILITY;
TRANSFER OF LANDLORD'S INTEREST
23.01 LANDLORD'S LEASE UNDERTAKINGS. Notwithstanding anything to the
contrary contained in this Lease or in any exhibits, Riders or addenda hereto
attached (collectively the "Lease Documents"), it is expressly understood and
agreed by and between the parties hereto that: (a) the recourse of Tenant or
its successors or assigns against Landlord with respect to the alleged breach
by or on the part of Landlord of any representation, warranty, covenant,
undertaking or agreement contained in any of the Lease Documents (collectively,
"Landlord's Lease Undertakings") shall extend only to Landlord's interest in
the real estate of which the Premises demised under the Lease Documents are a
part ("Landlord's Real Estate") and not to any other assets of Landlord or of
its constituent partners; and (b) except to the extent of Landlord's interest
in Landlord's Real Estate, no personal liability or personal responsibility of
any sort with respect to any of Landlord's Lease Undertakings or any alleged
breach thereof is assumed by, or shall at any time be asserted or enforceable
against, Landlord, Heitman/JMB Advisory Corporation, Heitman Properties Ltd. or
Heitman Minnesota Management Inc., or against any of their respective
directors, officers, employees, agents, constituent partners, beneficiaries,
trustees or representatives.
It is expressly understood and agreed by and between the parties
hereto, anything herein to the contrary notwithstanding, that each and all of
the representations, warranties, covenants, undertakings and agreements herein
made on the part of Landlord while in form purporting to be the
representations, warranties, covenants, undertakings and agreements of Landlord
are nevertheless each and every one of them made and intended, not as personal
representations, warranties, covenants, undertakings and agreements by Landlord
or for the purpose or with the intention of binding Landlord personally, but
are made and intended for the purpose only of subjecting Landlord's interest in
Landlord's Real Estate to the terms of this Lease and for no other purpose
whatsoever, and in case of default hereunder by Landlord (or default through,
under or by any of its beneficiaries, or agents or representatives of said
beneficiaries), the Tenant shall look solely to the Landlord's interest in
Landlord's Real Estate.
23.02 TRANSFER OF LANDLORD'S INTEREST. Landlord and each successor to
Landlord shall be fully released from the performance of Landlord's obligations
subsequent to their transfer of Landlord's interest in the Building. Landlord
shall not be liable for any obligation hereunder after a transfer of its
interest in the Building.
ARTICLE XXIV - HOLDOVER TENANCY
24.01 If Tenant holds possession of the Premises after the expiration
or termination of the Lease Term, by lapse of time or otherwise, Tenant shall
become a tenant at sufferance upon all of the terms contained herein, except as
to Lease Term and Rent. During such holdover period, Tenant shall pay to
Landlord a monthly rental equivalent to one hundred fifty percent (150%) of the
Rent payable by Tenant to Landlord with respect to the last month of the Lease
Term. The monthly rent payable for such holdover period shall in no event be
construed as a penalty or as liquidated damages for such retention of
possession. Without limiting the foregoing, Tenant hereby agrees to indemnify,
defend and hold harmless Landlord, its beneficiary, and their respective
agents, contractors and employees, from and against any and all claims,
liabilities, actions, losses, damages (including without limitation, direct,
indirect, incidental and consequential) and expenses (including, without
limitation, court costs and reasonable attorneys' fees) asserted against or
sustained by any such party and arising from or by reason of such retention of
possession, which obligations shall survive the expiration or termination of
the Lease Term.
ARTICLE XXV - NOTICES
25.01 All notices which Landlord or Tenant may be required, or may
desire, to serve on the other may be served, as an alternative to personal
service, by mailing the same by registered or certified mail, postage prepaid,
or may be sent by overnight courier, addressed to the Landlord at the address
for Landlord set forth in Section 1.11 above and to Tenant at the address for
Tenant set forth in Section 1.12 above, or, from and after the Commencement
Date, to the Tenant at the Premises whether or not Tenant has departed from,
abandoned or vacated the Premises, or addressed to such other address or
addresses as either Landlord or Tenant may from time to time designate to the
other in writing. Any notice shall be deemed to have been given and served when
delivered personally or otherwise at the time the same was posted, except that
any notice given by overnight courier shall be deemed given on the first
business day following the date such notice is delivered by such courier
provided such courier verifies delivery thereof.
ARTICLE XXVI - BROKERS
26.01 The parties recognize as the broker(s) who procured this Lease
the firm(s) specified in Section 1.13 and agree that Landlord shall be solely
responsible for the payment of any brokerage commissions to said broker(s), and
that Tenant shall have no responsibility therefor unless written provision to
the contrary has been made a part of this Lease. If Tenant has dealt with any
other person or real estate broker in respect to leasing, subleasing or renting
space in the Building, Tenant shall be solely responsible for the payment of
any fee due said person or firm and Tenant shall protect, indemnify, hold
harmless and defend Landlord from any liability in respect thereto.
ARTICLE XXVII - MISCELLANEOUS
27.01 ENTIRE AGREEMENT. This Lease contains all of the agreements and
understandings relating to the leasing of the Premises and the obligations of
Landlord and Tenant in connection with such leasing. Landlord has not made, and
Tenant is not relying upon, any warranties, or representations, promises or
statements made by Landlord or any agent of Landlord, except as expressly set
forth herein. This Lease supersedes any and all prior agreements and
understandings between Landlord and Tenant and alone expresses the agreement
of the parties.
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<PAGE> 18
27.02 AMENDMENTS. This Lease shall not be amended, changed or
modified in any way unless in writing executed by Landlord and Tenant. Landlord
shall not have waived or released any of its rights hereunder unless in writing
and executed by the Landlord.
27.03 SUCCESSORS. Except as expressly provided herein, this Lease and
the obligations of Landlord and Tenant contained herein shall bind and benefit
the successors and assigns of the parties hereto.
27.04 FORCE MAJEURE. Landlord shall incur no liability to Tenant with
respect to, and shall not be responsible for any failure to perform, any of
Landlord's obligations hereunder if such failure is caused by any reason beyond
the control of Landlord including, but not limited to strike, labor trouble,
governmental rule, regulations, ordinance, statute or interpretation, fire,
earthquake, civil commotion, or failure or disruption of utility services. The
amount of time for Landlord to perform any of Landlord's obligations shall be
extended by the amount of time Landlord is delayed in performing such obligation
by reason of any force majeure occurrence whether similar to or different from
the foregoing types of occurrences.
27.05. SURVIVAL OF OBLIGATIONS. Any obligations of Tenant accruing
prior to the expiration of the Lease shall survive the termination of the
Lease, and Tenant shall promptly perform all such obligations whether or not
this Lease has expired.
27.06 LIGHT AND AIR. No diminution or shutting off of any light, air
or view by any structure now or hereafter erected shall in any manner affect
this Lease or the obligations of Tenant hereunder, or increase any of the
obligations of Landlord hereunder.
27.07 GOVERNING LAW. This Lease shall be governed by, and construed
in accordance with, the laws of the State of Minnesota.
27.08 SEVERABILITY. In the event any provision of this Lease is found
to be unenforceable, the remainder of this Lease shall not be affected, and any
provision found to be invalid shall be enforceable to the extent permitted by
law. The parties agree that in the event two different interpretations may be
given to any provision hereunder, one of which will render the provision
unenforceable, and one of which will render the provision enforceable, the
interpretation rendering the provision enforceable shall be adopted.
27.09 CAPTIONS. All captions, headings, titles, numerical references
and computer highlighting are for convenience only and shall have no effect on
the interpretation of this Lease.
27.10 INTERPRETATION. Tenant acknowledges that it has read and
reviewed this Lease and that it has had the opportunity to confer with counsel
in the negotiation of this Lease. Accordingly, this Lease shall be construed
neither for nor against Landlord or Tenant, but shall be given a fair and
reasonable interpretation in accordance with the meaning of its terms and the
intent of the parties.
27.11 INDEPENDENT COVENANTS. Each covenant, agreement, obligation or
other provision of this Lease to be performed by Tenant are separate and
independent covenants of Tenant, and not dependent on any other provision of
the Lease.
27.12 NUMBER AND GENDER. All terms and words used in this Lease,
regardless of the number or gender in which they are used, shall be deemed to
include the appropriate number and gender, as the context may require.
27.13 TIME IS OF THE ESSENCE. Time is of the essence of this Lease
and the performance of all obligations hereunder.
27.14 JOINT AND SEVERAL LIABILITY. If Tenant comprises more than one
person or entity, or if this Lease is guaranteed by any party, all such persons
shall be jointly and severally liable for payment of rents and the performance
of Tenant's obligations hereunder.
27.15 EXHIBITS AND SCHEDULES. Exhibits A (Outline of Premises), B
(Work Letter Agreement), C (Suite Acceptance Letter), D (Tenant Operations
Inquiry), E (List of Additional Insureds), F (Rules and Regulations) and G
(Guaranty), and Schedule 1 to Exhibit D (List of Permissible Hazardous Materials
and Quantities) are incorporated into this Lease by reference and made a part
hereof.
27.16 OFFER TO LEASE. The submission of this Lease to Tenant or its
broker or other agent, does not constitute an offer to Tenant to lease the
Premises. This Lease shall have no force and effect until (a) it is executed
and delivered by Tenant to Landlord and (b) it is fully reviewed and executed
by Landlord; provided, however, that, upon execution of this Lease by Tenant
and delivery to Landlord, such execution and delivery by Tenant shall, in
consideration of the time and expense incurred by Landlord in reviewing the
Lease and Tenant's credit, constitute an offer by Tenant to Lease the Premises
upon the terms and conditions set forth herein (which offer to Lease shall be
irrevocable for twenty (20) business days following the date of delivery).
27.17 WAIVER: NO COUNTERCLAIM: CHOICE OF LAWS. To the extent
permitted by applicable law, Tenant hereby waives the right to a jury trial in
any action or proceeding regarding this Lease and the tenancy created by this
Lease. It is mutually agreed that in the event Landlord commences any
summary proceeding for non-payment of Rent, Tenant will not interpose any
counterclaim of whatever nature or description in any such proceeding. In
addition, Tenant hereby submits to local jurisdiction in the State of Minnesota
and agrees that any action by Tenant against Landlord shall be instituted in
the State of Minnesota and that Landlord shall have personal jurisdiction over
Tenant for any action brought by Landlord against Tenant in the State of
Minnesota. To the extent permitted by applicable law, Tenant hereby waives any
and all rights of redemption granted by any present or future laws.
27.18 ELECTRICAL SERVICE TO THE PREMISES. Anything set forth in
Section 7.01 or elsewhere in this Lease to the contrary notwithstanding,
electricity to the Premises shall not be furnished by Landlord, but shall be
furnished by the approved electric utility company serving the Building.
Landlord shall permit Tenant to receive such service directly from such utility
company at Tenant's cost (except as otherwise provided herein) and shall permit
Landlord's wire and conduits, to the extent available, suitable and safely
capable, to be used for such purposes.
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<PAGE> 19
27.19 RIGHTS RESERVED BY LANDLORD. Landlord reserves the following
rights exercisable without notice (except as otherwise expressly provided to
the contrary in this Lease) and without being deemed an eviction or disturbance
of Tenant's use or possession of the Premises or giving rise to any claim for
set-off or abatement of Rent: (i) to change the name or street address of the
Building; (ii) to install, affix and maintain all signs on the exterior and/or
interior of the Building; (iii) to designate and/or approve prior to
installation, all types of signs, window shades, blinds, drapes, awnings or
other similar items, and all internal lighting that may be visible from the
exterior of the Premises; (iv) to display the Premises and/or the Building to
mortgagees, prospective mortgagees, prospective purchasers and ground lessors
at reasonable hours upon reasonable advance notice to Tenant; (v) to change the
arrangement of entrances, doors, corridors, elevators and/or stairs in the
Building, provided no such change shall materially adversely affect access to
the Premises; (vi) to grant any party the exclusive right to conduct any
business or render any service in the Building, provided such exclusive right
shall not operate to prohibit Tenant from using the Premises for the purposes
permitted under this Lease; (vii) to prohibit the placement of vending or
dispensing machines of any kind in or about the Premises other than for use by
Tenant's employees; (viii) to prohibit the placement of video or other
electronic games in the Premises; (ix) to have access for Landlord and other
tenants of the Building to any mail chutes and boxes located in or on the
Premises according to the rules of the United States Post Office; (x) to close
the Building after normal business hours, except that Tenant and its employees
and invitees shall be entitled to admission at all times under such rules and
regulations as Landlord prescribes for security purposes; (xi) to install,
operate and maintain security systems which monitor, by close circuit
television or otherwise, all persons entering or leaving the Building; (xii) to
install and maintain pipes, ducts, conduits, wires and structural elements
located in the Premises which serve other parts or other tenants of the
Building; and (xiii) to retain at all times master keys or pass keys to the
Premises. See Addendum.
27.20 TENANT OPERATIONS INQUIRY. As a material inducement to Landlord
to enter into this Lease (i) Tenant has completed Exhibit D hereto, and (ii)
Tenant represents and warrants to Landlord that Exhibit D is true and correct
in all material respects and is not misleading.
27.21 GUARANTY. Simultaneously with execution and delivery of this
Lease, the Guarantors shall execute and deliver to Landlord the Guaranty in the
form and content of Exhibit G hereto.
ARTICLE XXVIII - FLOOR LOAD LIMITS
28.01 FLOOR LOAD LIMITS. Tenant shall not place a load upon any floor
of the Premises exceeding the floor load per square foot area which it was
designed to carry and which is allowed by law. Landlord reserves the right to
prescribe the weight and position of all safes, business machines and
mechanical equipment in the Building. Such installations shall be placed and
maintained by Tenant, at Tenant's expense, in settings sufficient, in
Landlord's judgment, to absorb and prevent vibration, noise and annoyance to
occupants of the complex of adjacent property.
ARTICLE XXIX - LANDLORD'S LIEN
29.01 LANDLORD'S LIEN. As security for Tenant's payment of Rent,
damages and all other payments required to be made by this Lease, Tenant hereby
grants to Landlord a lien upon all property of Tenant now or subsequently
located upon the Premises. If Lessee abandons or vacates any substantial
portion of the Premises or is in default in the payment of any rentals, damage
or other payments required to be made by this Lease, Landlord may take any
action it deems necessary and may be available to it under the laws of the
State of Minnesota. The proceeds of the sale of the personal property shall be
applied by Landlord toward the cost of the sale and then toward the payment of
all sums then due by Tenant to Landlord under the terms of this Lease.
ARTICLE XXX - UNIFORM COMMERCIAL CODE
30.01 UNIFORM COMMERCIAL CODE. To the extent, if any, this Lease
grants Landlord any lien or lien rights greater than provided by the laws of
the State of Minnesota pertaining to "Landlord's Liens", this Lease is intended
as and constitutes a security agreement within the meaning of the Uniform
Commercial Code as in effect in the State of Minnesota. Landlord, in addition
to the rights prescribed in this Lease, shall have a lien upon, and Tenant
grants to Landlord an interest in, all of Tenant's property now or hereafter
located upon the Premises, including without limitation all of Tenant's
equipment, inventory, fixtures, accounts, general intangibles and other items
of personal property or fixtures located upon the Premises whether now owned or
hereafter acquired, and all additions, substitutions, replacements and
accessions thereto, and all proceeds of the foregoing, to secure the payment to
Landlord of the various amounts provided in this Lease. The Tenant agrees to
and shall execute and deliver to Landlord such "Financing Statements,"
continuation statements, and provide such further assurances as Landlord may
from time to time consider necessary or desirable to create, perfect and
preserve the lien and security interest described above and all additions,
substitutions, replacements and accessions thereto, and all proceeds of its or
their sale or other disposition. The Landlord, at the expense of Tenant, may
cause such Financing Statements, continuation statements, and assurances to be
recorded and re-recorded, filed and re-filed, and renewed or continued, at such
times and places as may be required or permitted by law to create, perfect and
preserve such liens and security interests. In the event Tenant fails to
promptly execute and return to Landlord such Financing Statements or
continuation statements as Landlord may request to create, preserve and perfect
its lien, Tenant shall and does hereby designate Landlord to act as Tenant's
agent for the sole and limited purpose of executing and filing such Financing
Statements or continuation statements and any such execution by Landlord
pursuant to this Lease shall be effective and binding upon Tenant as though
executed originally by Tenant, and under such circumstances Tenant authorizes
Landlord to sign such financing and continuation statements. Tenant's
designation of Landlord as agent hereunder shall not be subject to revocation
until this Lease is terminated.
NOTE: Need to file UCC-1 Financing Statement describing such collateral in
Secretary of State's office and county recorder
AND UCC-2 Financing Statement (fixtures), with legal description
attached, with the county recorder.
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<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have executed this lease as of
the date first above written.
TENANT: LANDLORD:
DYNAMIC HEALTHCARE MBP PARTNERS, an Illinois general
TECHNOLOGIES, INC., partnership
a Florida corporation
By: HEITMAN/JMB ADVISORY CORPORATION,
an Illinois corporation, its duly
authorized agent and attorney-in-
fact
By: /s/ SIG ILLEGIBLE By: /s/ SIG ILLEGIBLE
------------------------ -------------------------------
Its: VP Finance, CFO Its: Vice President
----------------------- -------------------------------
ATTEST:
/s/ Gail E. Carter
- --------------------------
Gail E. Carter
WITNESSES: WITNESSES:
/s/ Jane Karangu /s/ Eva Kovacs
- -------------------------- ----------------------------
Jane Karangu Eva Kovacs
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<PAGE> 21
ADDENDUM
TO INDUSTRIAL LEASE
DATED JULY 2, 1996
BETWEEN MBP PARTNERS ("Landlord") and
DYNAMIC HEALTHCARE TECHNOLOGIES, INC. ("Tenant")
The provisions of this Addendum shall modify and amend the hereinafter
specified provisions of, and otherwise supplement, the above-described Lease
as follows:
1. New Lease. As of the date of this Lease, Tenant is in possession of
the Premises (and additional adjacent premises described in this Addendum and
depicted on Exhibit A as the "Additional Space") pursuant to the terms of that
certain Standard Warehouse Lease dated July 20, 1990, as amended ("Prior
Lease"). The parties acknowledge that the tenant pursuant to the Prior Lease was
Dimensional Medicine, Inc., a Minnesota corporation, which is a predecessor by
merger of Tenant. As of the Commencement Date of this Lease, Landlord and Tenant
agree that the Prior Lease is and shall be terminated. Accordingly, Landlord and
Tenant agree that this Lease shall be controlling during the entire Lease Term
described in Section 3.01. Tenant further acknowledges that, except as expressly
set forth in this Lease, Landlord shall not be obligated to provide any
inducements or allowances with regards to the Premises.
2. Occupancy During Construction. During Landlord's construction of
the Work pursuant to the Work Letter attached to the Lease as Exhibit B, Tenant
shall vacate the Premises and may operate its business in and from the
Additional Space. Upon completion of the Work pursuant to Exhibit B, Tenant
shall vacate the Additional Space and occupy only the Premises from that time
through the end of the Term. Tenant shall cooperate with Landlord during
Landlord's construction of the Work so as to not delay Landlord's completion of
construction in any manner whatsoever.
3. Rights Reserved by Landlord. Section 27.19 of the Lease is hereby
amended to require Landlord to provide notice to Tenant prior to Landlord's
actions described in subsections (i), (iii), (v), (vii), (viii), (x) and (xi)
of Section 27.19.
IN AGREEMENT, Landlord and Tenant have executed this Addendum to
Industrial Lease as of the date and year first above written.
LANDLORD:
MBP PARTNERS,
an Illinois general partnership
By: HEITMAN/JMB ADVISORY
CORPORATION, an Illinois corporation,
its duly authorized agent and attorney-in-fact
By: signature illegible
--------------------------------------
Its: Vice President
TENANT:
DYNAMIC HEALTHCARE TECHNOLOGIES
INC., a Florida corporation
By: signature illegible
--------------------------------------
Its: VP Finance, CFO
<PAGE> 22
EXHIBIT A
Floor Plan or Layout of Premises
(Approximately 12,684 Sq.Ft.)
(Office 12,684 Sq.Ft.)
(Warehouse 0 Sq.Ft.)
Tenant: DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
-------------------------------------
[ILLUSTRATION]
#10901
12,684 Square Feet
Additional
Space
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HEITMAN CENTRE AT BREN ROAD EAST I
<PAGE> 23
EXHIBIT B
WORK LETTER AGREEMENT
[Landlord Performs Work]
[Turn Key]
This Work Letter Agreement ("Work Letter") is executed simultaneously
with that certain Lease (the "Lease") between DYNAMIC HEALTHCARE TECHNOLOGIES,
INC., a Florida corporation, as "Tenant", and MBP PARTNERS, an Illinois general
partnership, as "Landlord", relating to demised premises ("Premises") at the
building commonly known as Bren Road East I, 10901 Bren Road, Minnetonka,
Minnesota (the "Building"), which Premises are more fully identified in the
Lease. Capitalized terms used herein, unless otherwise defined in this Work
Letter, shall have the respective meanings ascribed to them in the Lease.
For and in consideration of the agreement to lease the Premises and the
mutual covenants contained herein and in the Lease, Landlord and Tenant hereby
agree as follows:
1. Tenant's Initial Plans; the Work. Tenant desires Landlord to
perform certain leasehold improvement work in the Premises in substantial
accordance with the plan or plans (collectively, the "Initial Plan") prepared by
Sandra Martin & Associates dated March 15, 1996 and last revised May 3, 1996, a
copy or copies of which is/are attached hereto as Schedule I. Such work, as
shown in the Initial Plan and as more fully detailed in the Working Drawings (as
defined and described in Paragraph 2 below), shall be hereinafter referred to as
the "Work". Not later than June 15, 1996, Tenant shall furnish to Landlord such
additional plans, drawings, specifications and finish details as Landlord may
reasonably request to enable Landlord's architects and engineers to prepare
mechanical, electrical and plumbing plans and to prepare the Working Drawings,
including a final telephone layout and special electrical connection
requirements, if any. All plans, drawings, specifications and other details
describing the Work which have been or are hereafter furnished by or on behalf
of Tenant shall be subject to Landlord's approval, which Landlord agrees shall
not be unreasonably withheld. Landlord shall not be deemed to have acted
unreasonably if it withholds its approval of any plans, specifications, drawings
or other details or of any Additional Work (as defined in Paragraph 7 below)
because, in Landlord's reasonable opinion, the work, as described in any such
item, or the Additional Work, as the case may be: (a) is likely to adversely
affect Building systems, the structure of the Building or the safety of the
Building and/or its occupants; (b) might impair Landlord's ability to furnish
services to Tenant or other tenants in the Building; (c) would increase the cost
of operating the Building; (d) would violate any governmental laws, rules or
ordinance (or interpretations thereof); (e) contains or uses hazardous or toxic
materials or substances; (f) would adversely affect the appearance of the
Building; (g) might adversely affect another tenant's premises; (h) is
prohibited by any ground lease affecting the Building or any mortgage, trust
deed or other instrument encumbering the Building; or (i) is likely to be
substantially delayed because of unavailability or shortage of labor or
materials necessary to perform such work or the difficulties or unusual nature
of such work. The foregoing reasons, however, shall not be the only reasons for
which Landlord may withhold its approval, whether or not such other reasons are
similar or dissimilar to the foregoing. Neither the approval by Landlord of the
Work or the Initial Plan or any other plans, drawings, specifications or other
items associated with the Work nor Landlord's performance, supervision or
monitoring of the Work shall constitute any warranty by Landlord to Tenant of
the adequacy of the design for Tenant's intended use of the Premises.
2. Working Drawings. If necessary for the performance of the Work
and not included as part of the Initial Plan attached hereto, Landlord shall
prepare or cause to be prepared final working drawings and specifications for
the Work (the "Working Drawings") based on and consistent with the Initial
Plan, and the other plans, drawings, specifications, finish details and other
information furnished by Tenant to Landlord and approved by Landlord pursuant
to Paragraph 1 above. So long as the Working Drawings are consistent with the
Initial Plan, Tenant shall approve the Working Drawings within three (3) days
after receipt of same from Landlord by initialing and returning to Landlord
each sheet of the Working Drawings or by executing Landlord's approval form
then in use, whichever method of approval Landlord may designate.
3. Performance of the Work. Landlord, at its expense, shall cause the
Work to be performed using building standard materials, quantities and
procedures then in use by Landlord ("Building Standards"), except as may be
stated or shown otherwise in the Working Drawings.
4. Authorization to Proceed. Landlord may proceed with the Work at
any time after the execution of this Work Letter and the completion of the
Working Drawings, if applicable; provided, however, that Landlord, at its
option, may request Tenant to execute and deliver to Landlord a separate
written authorization (in the form then in use by Landlord) to proceed with the
Work, in which event Tenant shall execute and deliver such written
authorization within three (3) days after Landlord's request therefor, and, at
Landlord's option, no Work shall be commenced until Tenant has executed and
delivered to Landlord such authorization.
5. Substantial Completion. Landlord shall cause the Work to be
"substantially completed" on or before November 1, 1996, subject to delays
caused by strikes, lockouts, boycotts or other labor problems, casualties,
discontinuance of any utility or other service required for performance of the
Work, unavailability or shortages of materials or other problems in obtaining
materials necessary for performance of the Work or any other matter beyond the
control of Landlord (or beyond the control of Landlord's contractors or
subcontractors performing the Work) and also subject to "Tenant Delays" (as
defined and described in Paragraph 6 of this Work Letter). The Work shall be
deemed to be "substantially completed" for all purposes under this Work Letter
and the Lease if and when Landlord's architect issues a written certificate to
Landlord and Tenant, certifying that the Work has been substantially completed
(i.e., completed except for "punchlist" items listed in such architect's
certificate) in substantial compliance with the Working Drawings. If the Work
is not deemed to be substantially completed on or before November 1, 1996, (a)
Landlord agrees to use reasonable efforts to complete the Work as soon as
practicable thereafter, (b) the Lease shall remain in full force and effect,
(c) Landlord shall not be deemed to be in breach or default of the Lease or this
Work Letter as a result thereof and Landlord shall have no liability to Tenant
as a result of any delay in substantial completion (whether for damages,
abatement of Rent or otherwise),
EXHIBIT B
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<PAGE> 24
6. Tenant Delays. There shall be no extension of the scheduled
commencement or expiration date of the term of the Lease (as otherwise
permissibly extended under Paragraph 5 above) if the Work has not been
substantially completed on said scheduled commencement date by reason of any
delay attributable to Tenant ("Tenant Delays"), including without limitation:
(i) the failure of Tenant to furnish all or any plans,
drawings, specifications, finish details or the other information
required under Paragraph 1 above on or before the date stated in
Paragraph 1;
(ii) the failure of Tenant to grant approval of the Working
Drawings within the time required under Paragraph 2 above;
(iii) the failure of Tenant to comply with the requirements
of Paragraph 4 above;
(iv) Tenant's requirements for special work or materials,
finishes, or installations other than the Building Standards or Tenant's
requirement for special construction or phasing;
(v) the performance of any Additional Work (as defined in
Paragraph 7 below) requested by Tenant or the performance of any work in
the Premises by any person, firm or corporation employed by or on behalf
of Tenant, or any failure to complete or delay in completion of such
work;
(vi) any other act or omission of Tenant, or (vii) Tenant's
failure to work in harmony with and to interfere with Landlord or
Landlord's agents in performing the Work and any Additional Work in the
Premises.
7. Additional Work. Upon Tenant's request and submission by
Tenant (at Tenant's sole cost and expense) of the necessary information and/or
plans and specifications for work other than the Work described in the Working
Drawings ("Additional Work") and the approval by Landlord of such Additional
Work, which approval Landlord agrees shall not be unreasonably withheld,
Landlord shall perform such Additional Work, at Tenant's sole cost and expense,
subject, however, to the following provisions of this Paragraph 7. Prior to
commencing any Additional Work requested by Tenant, Landlord shall submit to
Tenant a written statement of the cost of such Additional Work, which cost
shall include a fee payable to Landlord in the amount of 15% of the total cost
of such Additional Work as compensation to Landlord for monitoring the
Additional Work and for administration, overhead and field supervision
associated with the Additional Work and an additional charge payable to
Landlord in the amount of 5% of the total Cost of the Work as compensation for
Landlord's general conditions (such fee and additional charge being hereinafter
referred to collectively as "Landlord's Additional Compensation"), and,
concurrently with such statement of cost, Landlord shall also submit to Tenant
a proposed tenant extra order (the "TEO") for the Additional Work in the
standard form then in use by Landlord. Tenant shall execute and deliver to
Landlord such TEO and shall pay to Landlord the entire cost of the Additional
Work, including Landlord's Additional Compensation (as reflected in Landlord's
statement of such cost), within five (5) days after Landlord's submission of
such statement and TEO to Tenant. If Tenant fails to execute or deliver such
TEO or pay the entire cost of such Additional Work within such 5-day period,
then Landlord shall not be obligated to do any of the Additional Work and may
proceed to do only the Work, as specified in the Working Drawings.
EXHIBIT B
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<PAGE> 25
9. Lease Provisions. The terms and provisions of the Lease, insofar as
they are applicable to this Work Letter, are hereby incorporated herein by
reference. All amounts payable by Tenant to Landlord hereunder shall be deemed
to be additional Rent under the Lease and, upon any default in the payment of
same, Landlord shall have all of the rights and remedies provided for in the
Lease.
10. Miscellaneous.
(a) This Work Letter shall be governed by the laws of the state in
which the Premises are located.
(b) This Work letter may not be amended except by a written instrument
signed by the party or parties to be bound thereby.
(c) Any person signing this Work Letter on behalf of Tenant warrants
and represents he/she has authority to sign and deliver this Work Letter and
bind Tenant.
(d) Notices under this Work Letter shall be given in the same manner as
under the Lease.
(e) The headings set forth herein are for convenience only.
(f) This Work Letter sets forth the entire agreement of Tenant and
Landlord regarding the Work.
(g) In the event that the final working drawings and specifications are
included as part of the Initial Plan attached hereto, or in the event Landlord
performs the Work without the necessity of preparing working drawings and
specifications, then whenever the term "Working Drawings" is used in this
Agreement, such term shall be deemed to refer to the Initial Plan and all
supplemental plans and specifications approved by Landlord.
11. Exculpation of Landlord and Heitman. Notwithstanding anything to
the contrary contained in this Work Letter, it is expressly understood and
agreed by and between the parties hereto that:
(a) The recourse of Tenant or its successors or assigns against
Landlord with respect to the alleged breach by or on the part of Landlord of
any representation, warranty, covenant, undertaking or agreement contained in
this Work Letter or the Lease (collectively, "Landlord's Work Letter
Undertakings") shall extend only to Landlord's interest in the real estate, of
which the premises demised under the Lease Documents are a part (hereinafter,
"Landlord's Real Estate") and not to any other assets of Landlord or of its
constituent partners; and
(b) Except to the extent of Landlord's interest in Landlord's Real
Estate, no personal liability or personal responsibility of any sort with
respect to any of Landlord's Work Letter Undertakings or any alleged breach
thereof is assumed by, or shall at any time be asserted or enforceable against,
Landlord, its constituent partners, Heitman Advisory Corporation, Heitman
Properties Ltd. or Heitman Minnesota Management Inc., or against any of their
respective directors, officers, employees, agents, constituent partners,
beneficiaries, trustees or representatives.
IN WITNESS WHEREOF, this Work Letter Agreement is executed as of the 2nd
day of July, 1996.
Tenant: Landlord:
DYNAMIC HEALTHCARE TECHNOLOGIES, MBP PARTNERS, an Illinois general
INC., a Florida corporation partnership
By: /s/ sig illegible By: HEITMAN/JMB ADVISORY CORPORATION, an
- -------------------------------- Illinois corporation, its duly
Title: VP Finance, CFO authorized agent and attorney-in-fact
By: /s/ sig illegible
--------------------------------
Title: Vice President
EXHIBIT B
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<PAGE> 26
EXHIBIT C
SUITE ACCEPTANCE AGREEMENT
Building Name/Address: Bren Road East I/10901 Bren Road East
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Tenant Name: Dynamic Healthcare Technologies, Inc.
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Tenant Code: Suite #:
--------------------------------- -----------------------
Management's Tenant Contact: Phone #:
--------------------- ------------------
Gentlemen:
As a representative of the above referenced tenant, I/we have physically
inspected the suite noted above and its improvements with
----------------------
a representative of
- ----------------------, ------------------------------------
(name of HPL Corporation). I/we accept the suite improvements as to compliance
with all the requirements indicated in our lease, also including the following
verified information below:
Lease Commencement Date: August 1, 1996 Occupancy Date:
-------------------, -------------------
Lease Rent Start Date*: August 1, 1996 Annual Rent Start*:
-------------------, ----------------
Lease Expiration Date: July 31, 1999 Actual Expiration Date:
-------------------, ------------
Date Keys Delivered:
-------------------
Items requiring attention:
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* If these dates are not the same, attach documentation.
NOTE: This inspection is to be made prior to tenant move-in.
Very truly yours, Distribution
------------
Tenant
Dynamic Healthcare Technologies, Inc. Tenant Lease File
- ------------------------------------- Group Manager/HPL Leasing:
By: -------------
---------------------------------- Regional Leasing Manager:
-------------
Its: HPL Accounting:
--------------------------------- ------------------------
HPL Document Control:
Date: -------------------
-------------------------------- Regional Engineer:
---------------------
HPL Construction:
----------------------
<PAGE> 27
Page 1 of 4
EXHIBIT D
TENANT OPERATIONS INQUIRY
Date: 5-22-96
----------------------
For proposed lease at (property name and address): 10901 Bren Road East
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1. Name of Company: Dynamic Healthcare Technologies, Inc.
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2. Address (local): 10901 Bren Road East, Minnetonka, MN 55343
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Phone Number (local): 612-938-8280
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3. Address (corporate): 101 Southhall Lane, Suite 210, Maitland, FL 32751
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Phone Number (corporate): 407-875-9991
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4. What is your business? (describe briefly) Healthcare information systems
----------------------------------
development and support.
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5. What operations will you maintain at the proposed facility? Computer
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Software development and support.
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6. Describe any assembly, manufacturing, machining, painting, printing or
mechanical repair activities that will be part of your business operations
at the proposed facility. Computer system minor repairs and integration.
--------------------------------------------------
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page 2 of 4
EXHIBIT D
TENANT OPERATIONS INQUIRY
7. TENANT CHEMICAL INVENTORY AT PROPOSED FACILITY -- (make additional copies,
if required.)
(You may exclude small quantities of toner and other office supplies)
<TABLE>
<CAPTION>
Chemicals
(by chemical name What will be the What will be the What will be the
where available). average quantity on maximum quantity on annual quantity on
Provide copies of Material the proposed the proposed the proposed How will the
Safety Data Sheets premises? premises? premises? chemical be stored?
<S> <C> <C> <C> <C>
- -------------------- -------------------- -------------------- -------------------- --------------------
N/A
- -------------------- -------------------- -------------------- -------------------- --------------------
- -------------------- -------------------- -------------------- -------------------- --------------------
- -------------------- -------------------- -------------------- -------------------- --------------------
- -------------------- -------------------- -------------------- -------------------- --------------------
- -------------------- -------------------- -------------------- -------------------- --------------------
- -------------------- -------------------- -------------------- -------------------- --------------------
- -------------------- -------------------- -------------------- -------------------- --------------------
- -------------------- -------------------- -------------------- -------------------- --------------------
- -------------------- -------------------- -------------------- -------------------- --------------------
Storage Methods (use all that apply): A) 55 gallon drum; B) 20 gallon drum; C) 2-5 gallon pallet/container; D) bulk dry
packages; E) cartoned small containers (less than 2 gallons or 10 pounds) on pallets; F) on floor; G) on racks; H)
underground tank; I) aboveground tank; J) other (please describe)
</TABLE>
<PAGE> 29
EXHIBIT D
TENANT OPERATIONS INQUIRY
8. Describe any pollution control equipment that will be used at the proposed
facility. (example: paint spray booth, fume hood, waste water treatment).
N/A
9. Will your operations How will the How will the wastes
generate any chemical chemical wastes be disposed?
wastes that require be stored on-site? (example: recycled,
special disposal? landfilled, incinerated)
(example: waste oil,
waste solvent)
No N/A N/A
10. Does your business have an EPA Hazardous Waste Generator ID Number?
NO:
11. What spill prevention and containment measures will be in place for the
chemicals and wastes stored at the proposed facility? (describe briefly)
N/A
<PAGE> 30
EXHIBIT D
TENANT OPERATIONS INQUIRY
12. Does your business have an Emergency Response or Contingency Plan in place
in the event of a chemical incident? (please provide a copy)
NO:
13. Does your business have any type of Hazardous Material training program for
your employees? (describe briefly)
N/A
14. Do you have copies of all the Material Safety Data Sheets (MSDS) at your
facility for the chemicals listed in question #7?
NO:
15. Does your business carry environmental insurance coverage in the event of a
chemical incident?
NO:
How much coverage? (Please provide a copy of the certificate of insurance).
16. Will you be required to make filings and notices required by SARA TITLE III
for the operations at the proposed facility?
NO:
17. This form was prepared by the undersigned as a complete and correct
description of tenant's proposed operations at the location noted, and the
Landlord may rely on this information.
/s/ Mitchel J. Laskey Mitchel J. Laskey
- ---------------------- --------------------------
Signature Print Name
5/22/96
- ----------------------
Date
<PAGE> 31
SCHEDULE 1 TO EXHIBIT D
List of Permissible
Hazardous Materials and Quantities
NONE
<PAGE> 32
EXHIBIT E
Additional Insureds
Additional insureds pursuant to the requirements outlined in Article X of the
Lease:
MBP Partners, an Illinois general partnership;
Heitman/JMB Advisory Corporation;
Heitman Properties Ltd.;
Heitman Minnesota Management Inc.;
and their respective partners, agents and employees.
The Insurance Certificate should be sent to:
Heitman Minnesota Management Inc.
10391 West 70th Street
Minnetonka, Minnesota 55343
Attention: Property Manager
<PAGE> 33
EXHIBIT F
Rules and Regulations
1. Tenant, its officers, agents, servants and employees shall not
block or obstruct any of the entries, passages, doors, hallways or stairways of
the Building or garage, or place, empty or throw any rubbish, litter,
trash or material of any nature into such areas, or permit such areas to be
used at any time except for ingress or egress of Tenant, its officers, agents,
servants, employees, patrons, licensees, customers, visitors or invitees.
2. The movement of furniture, equipment, machines, merchandise or
materials within, into or out of the Premises or the Building not in the
ordinary course of Tenant's business as permitted herein, shall be restricted to
time, method and routing of movement as determined by Landlord upon request from
Tenant and Tenant shall assume all liability and risk to property, the Premises
and the Building in such movement. The movement of furniture, equipment,
machines, merchandise or materials within, into or out of the Premises in the
ordinary course of Tenant's permitted business shall also be at Tenant's sole
risk and responsibility and shall be conducted in such a fashion as not to cause
damage or injury to the Premises or the Building or to disturb other occupants
thereof. Tenant shall not move furniture, machines, equipment, merchandise or
materials within, into or out of the Premises or the Building not in the
ordinary course of Tenant's permitted business without having first obtained a
written permit from Landlord twenty-four (24) hours in advance. Safes and other
heavy fixtures, equipment or machines intended to be kept permanently in the
Premises shall be moved into the Premises or the Building only with Landlord's
written consent and placed where directed by Landlord, provided, however, Tenant
may allow for the preparation of meals and snacks for Tenant's employees or
invitees.
3. Landlord will not be responsible for lost or stolen personal
property, equipment, money or any article taken from Premises, regardless of
how or when loss occurs.
4. Tenant, its officers, agents, servants and employees shall not
install or operate any refrigerating, heating or air conditioning apparatus or
carry on any mechanical operation or bring into the Premises any inflammable
fluids or explosives without written permission of Landlord.
5. Tenant, its officers, agents, servants or employees shall not
use the Premises for housing, lodging or sleeping purposes or for the cooking
or preparation of food without written permission of Landlord.
6. Tenant, its officers, agents, servants, employees, patrons,
licensees, customers, visitors or invitees shall not bring into the Premises or
keep on Premises any fish, fowl, reptile, insect or animal without the prior
written consent of the Landlord.
7. No additional locks shall be placed on any door in the Building
without the prior written consent of Landlord. Landlord will furnish two keys
to each lock on doors in the Premises and Landlord, upon request of Tenant,
shall provide additional duplicate keys at Tenant's expense. Landlord may at
all times keep a pass key to the Premises. All keys shall be returned to
Landlord promptly upon termination of this Lease.
8. Tenant, its officers, agents, servants or employees shall do no
painting or decorating in the Premises; or mark, paint or cut into, drive nails
or screw into nor in any way deface any part of the Premises or the Building
without the prior written consent of Landlord. If Tenant desires signal,
communication, alarm or other utility or service connection installed or
changed, such work shall be done at expense of Tenant, with the approval and
under the direction of Landlord.
9. Tenant, its officers, agents, servants and employees shall not
permit the operation of any musical or sound-producing instruments or device
which may be heard outside the Premises, or which may emanate electrical waves
or x-rays or other emissions which will impair radio or television broadcasting
or reception from or in the Building, or be hazardous to health, well-being or
condition of persons or property.
10. Tenant, its officers, servants and employees shall, before
leaving the Premises unattended, close and lock all doors and shut off all
lights, business equipment and machinery. Damage resulting from failure to do so
shall be paid by Tenant. Each Tenant, before closing for the day and leaving
the Premises, shall see that all doors are locked.
11. All plate and other glass now in the Premises or Building which
is broken through cause attributable to Tenant, its officers, agents, servants,
employees, patrons, licensees, customers, visitors or invitees shall be
replaced by and at expense of Tenant under the direction of Landlord.
12. Tenant shall give Landlord prompt notice of all accidents to or
defects in air conditioning equipment, plumbing, electric facilities or any
part of appurtenance of the Premises.
13. The plumbing facilities shall not be used for any other
purpose than that for which they are constructed, and no foreign substance
of any kind shall be thrown therein, and the expense of any breakage, stoppage
or damage resulting from a violation of this provision shall be borne by
Tenant, who shall, or whose officers, employees, agents, servants, patrons,
customers, licensees, visitors or invitees shall have caused it. Landlord
shall not be responsible for any damage due to stoppage, backup or overflow of
the drains or other plumbing fixtures.
14. All contractors and/or technicians performing work for Tenant
within the Premises, Building or garage facilities shall be referred to
Landlord for approval before performing such work. This shall apply to all work
including, but not limited to, installation of telephones, telegraph equipment,
electrical devices and attachments, and all installations affecting floors,
walls, windows, doors, ceilings, equipment or any other physical feature of the
Building, the Premises or garage facilities. None of this work shall be done by
Tenant without Landlord's prior written approval.
15. No showcases or other articles shall be put in front of or
affixed to any part of the exterior of the Building, without the prior written
consent of Landlord.
16. Neither Tenant nor any officer, agent, employee, servant,
patron, customer, visitor, licensee or invitee of any Tenant shall go upon the
roof of the Building, without the written consent of the Landlord.
<PAGE> 34
17. In the event Tenant must dispose of crates, boxes, etc. which
will not fit into wastepaper baskets, it will be the responsibility of Tenant
to dispose of same properly.
18. If the Premises shall become infested with vermin, roaches, or
other undesirable creatures, Tenant, at its sole cost and expense, shall cause
the Premises to be professionally treated from time to time to the satisfaction
of Landlord and shall employ such exterminators for this purpose as shall be
approved by Landlord.
19. Tenant shall not install any antenna or aerial wires, radio or
television equipment or any other type of equipment inside or outside of the
Building without Landlord's prior approval in writing and upon such terms and
conditions as may be specified by Landlord in each and every instance.
20. Tenant shall not make or permit any use of the Premises, the
Building or garage facilities which, directly or indirectly, is forbidden by
law, ordinance or governmental or municipal regulation, code or order or which
may be disreputable or dangerous to life, limb or property.
21. Tenant shall not advertise the business, profession or
activities of Tenant in any manner which violates the letter or spirit of any
code of ethics adopted by any recognized association or organization pertaining
thereto, use the name of the Building for any purpose other than that of the
business address of Tenant or use any picture or likeness of the Building or
the complex name in any letterheads, envelopes, circulars, notices,
advertisements, containers or wrapping material without Landlord's express
consent in writing.
22. Tenant shall not conduct its business and/or control its
officers, agents, employees, servants, patrons, customers, licensees and
visitors in such a manner as to create any nuisance or interfere with, annoy or
disturb any other tenant or Landlord in its operation of the Building or commit
waste or suffer or permit waste to be committed in Premises.
23. The Tenant shall not install in the Premises any equipment
which uses a substantial amount of electricity without the advance written
consent of the Landlord. The Tenant shall ascertain from the Landlord the
maximum amount of electrical current which can safely be used in the Premises,
taking into account the capacity of the electric wiring in the Building and the
Premises and the needs of other tenants in the Building and the complex and
shall not use more than such safe capacity. The Landlord's consent to the
installation of electric equipment shall not relieve the Tenant from the
obligation not to use more electricity than such safe capacity.
24. The Tenant, without the prior written consent of Landlord, shall
not lay linoleum or other similar floor covering within the Premises.
25. No outside storage of any material, pallets, disabled vehicles,
etc., will be permitted including but not limited to trash, except in approved
containers.
26. Tenant shall not allow a fire or bankruptcy sale or any auction
to be held on the Premises, or allow the Premises to be used for the storage
of merchandise held for sale to the general public.
27. Canvasing, soliciting, distribution of hand-bills or any other
written material peddling in the Building and the complex are prohibited, and
each Tenant shall cooperate to prevent the same.
28. Tenant agrees to park in only these parking stalls designated
as tenant parking. Tenant shall hold Landlord harmless for the removal and
changes related thereto when Tenant, or its employees, park in spaces
designated as visitor, handicapped parking, red or yellow curb areas. Tenant
shall not park or allow to be kept any vehicle on the Premises, either company
or personnel, which is not being used on a daily basis.
29. Tenant shall not maintain armed security in or about the
Premises nor possess any weapons, explosives, combustibles or other hazardous
devices in or about the Building and/or Premises.
30. Landlord may waive any one more of these Rules and Regulations
for the benefit of any particular tenant or landlords, but no such waiver by
Landlord shall be construed as a waiver of such Rules and Regulations in favor
of any other tenant or landlords, nor prevent Landlord from thereafter
enforcing any such Rules and Regulations against any or all of the tenants of
the complex.
31. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of any Lease on premises in the complex.
<PAGE> 1
EXHIBIT 21.01
SUBSIDIARIES OF THE REGISTRANT
Name: DMI Acquisition Corp.
Jurisdiction of
Incorporation: Florida
Doing Business as: Dynamic Healthcare Technologies, Inc.
<PAGE> 1
Exhibit 23.02
KPMG Peat Marwick LLP
111 North Orange Avenue, Suite 1600
P.O. Box 3031
Orlando, FL 32802
Board of Directors
Dynamic Healthcare Technologies, Inc.
We consent to the use of our audit report dated March 6, 1996 on the financial
statements of Dynamic Healthcare Technologies, Inc. as of December 31, 1994 and
1995 and for each of the years then ended included herein and to the reference
to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Orlando, Florida
August 21, 1996
<PAGE> 2
KPMG Peat Marwick LLP
111 North Orange Avenue, Suite 1600
P.O. Box 3031
Orlando, FL 32802
Dynamic Healthcare Technologies, Inc.
Maitland, Florida
Ladies and Gentlemen:
Re: Registration Statement on Form S-1
With respect to the subject registration statement, we acknowledge our
awareness of the use therein of our report dated July 30, 1996 related to our
review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the
meaning of sections 7 and 11 of the Act.
Very truly yours,
/s/ KPMG Peat Marwick LLP
Orlando, Florida
August 21, 1996
<PAGE> 1
Exhibit 23.03
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Dynamic Healthcare
Technologies, Inc. on Form S-1 of our report on Terrano Corporation dated March
16, 1994 (January 11, 1995 as to the 1993 restated financial statements),
appearing in the Prospectus, which is part of this Registration Statement, and
of our report dated March 16, 1994 (January 11, 1995 as to the restated
Allowance for Doubtful Accounts Receivable Information) relating to the
financial statement schedule appearing elsewhere in this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ DELOITTE & TOUCHE LLP
August 20, 1996
Orlando, Florida
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Exhibit 23.04
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated May 24, 1996 in the Registration Statement (Form S-1
No. 333-00000) and related Prospectus of Dynamic Healthcare Technologies, Inc.
dated August 20, 1996.
/s/ Ernst & Young
Minneapolis, Minnesota
August 20, 1996
