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The SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
MARK ONE:
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter, November 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________________ to _________________.
Commission file number 0-12850
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 13-3152648
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
200 N. Westlake Blvd., Suite 202, Westlake Village, CA 91362
(Address of principal executive offices)
Issuer's telephone number, including area code (805) 381-2700
Edudata Corporation
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
State the number of shares of registrant's common stock outstanding as of
January 20,1997: 3,980,717, after adjustment for a one for 2.197317574 reverse
stock split effective January 13, 1997.
Transitional Small Business Disclosure Format Yes [ ] No [ X ]
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DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
FORM 10-QSB REPORT
November 30, 1996
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1 Interim Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet-November 30, 1996 4
Condensed Consolidated Statements of Operations 5
Thirteen Week and Thirty Nine Week Periods Ended November 30, 1996
Condensed Consolidated Statement of Shareholders' Equity 6
Thirty Nine Week Period Ended November 30, 1996
Condensed Consolidated Statement of Cash Flows 7
Thirty Nine Week Period Ended November 30, 1996
Notes to Interim Condensed Consolidated Financial Statements 8
Item 2 Management's Discussion and Analysis or Plan of Operation 12
PART II - OTHER INFORMATION
Item 1 Legal proceedings
Item 2 Changes in Senior Securities
Item 3 Defaults in Senior Securities
Item 4 Submission of Matters to a Vote of Security-Holders 18
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K 18
(a) Exhibits 18
(b) Reports on Form 8-K 19
Signatures 20
Exhibit 3.1 Amended and Restated Certificate of Incorporation of the
Registrant
Exhibit 10.1 Form of Secured Convertible Promissory Note, dated as of
November 27, 1996, Issued by the Registrant and a Schedule of Note
holders
Exhibit 10.2 Form of Warrant for the Purchase of Shares of Common
Stock, dated as of November 25, 1996, Issued by the Registrant and a
Schedule of Warrant holders
Exhibit 10.3 Security Agreement, dated as of November 25, 1996, Entered
into by the Registrant
Exhibit 10.4 Agency Agreement, dated as of October 23, 1996, by and
between the Registrant and M. H. Meyerson & Co., Inc.
</TABLE>
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<TABLE>
<S> <C>
Exhibit 10.5 Employment Agreement, dated as of October 1, 1996, by and
between the Registrant and Robert H. Gurevitch
Exhibit 10.6 Employment Agreement, dated as of October 1, 1996, by and
between the Registrant and Dewey Perrigo
Exhibit 10.7 Note Extension Agreement, dated as of November 25, 1996,
by and between the Registrant and Robert H. Gurevitch
Exhibit 10.8 Note Extension Agreement, dated as of November 25, 1996,
by and between the Registrant and Boston Marketing Company, Ltd.
Exhibit 10.9 Distribution Agreement, dated as of October 1, 1996, by
and between the Registrant and Boston Marketing Company, Ltd.
Exhibit 10.10 Form of Subscription Agreement
Exhibit 11.1 Statement Regarding Computation of Net Income (Loss) Per
Share
Exhibit 27.1 Financial Data Schedule
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1 - INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
November 30, 1996
(Unaudited)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 790,280
Accounts receivable, less allowances for bad
debts and sales returns of $20,975 1,070,868
Inventories 1,579,448
Prepaid expenses and other 211,763
-----------
Total current assets 3,652,359
Property and equipment, net 398,727
Debt issuance costs, net 266,935
Other assets 97,541
-----------
Total assets $ 4,415,562
===========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable $ 1,294,494
Accrued salaries and wages 94,965
Other accrued expenses 314,709
Customer deposits 30,310
Current portion of capital lease obligations 18,468
Notes payable to related parties 272,966
-----------
Total current liabilities 2,025,912
Notes payable 1,355,291
Capital lease obligations 67,555
Other long term liabilities 14,098
-----------
Total liabilities 3,462,856
-----------
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Common stock, par value $.01 per share; 20,000,000 shares
authorized; 3,980,717 shares issued and outstanding 87,469
Preferred stock, par value $.01 per shares; 1,000,000 shares authorized; -
none outstanding
Paid in capital 2,591,018
Accumulated deficit (1,725,781)
-----------
Total shareholders' equity 952,706
-----------
Total liabilities and shareholders' equity $ 4,415,562
===========
</TABLE>
The accompanying notes are an integral part of these interim consolidated
financial statements.
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DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEK AND THIRTY NINE WEEK PERIODS ENDED NOVEMBER 30, 1996
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Thirty Nine Weeks
-------------- -----------------
<S> <C> <C>
Net sales $ 2,773,180 $ 9,558,090
Cost of sales 1,748,459 5,614,431
----------- -----------
Gross profit 1,024,721 3,943,659
Operating expenses
Selling, general and administrative expenses 1,033,874 3,717,217
Research and development expenses 108,773 270,074
Amortization of debt issue costs 15,702 15,702
Interest expense 28,673 41,234
----------- -----------
Loss before tax (162,301) (100,568)
Provision for taxes on income 26,000 --
----------- -----------
Net loss $ (136,301) $ (100,568)
----------- -----------
Net loss per common share ($.03) ($.03)
===== =====
Weighted average common shares 3,980,717 3,841,632
----------- -----------
</TABLE>
The accompanying notes are an integral part of these interim
consolidated financial statements.
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DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE THIRTY NINE WEEK PERIOD ENDED NOVEMBER 30, 1996
(unaudited)
<TABLE>
<CAPTION>
Common Stock
-------------------------
Number of Shares Paid In Accumulated
Outstanding Amount Capital Deficit Total
----------- ------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance at March 2,
1996 3,417,758 $75,099 $1,289,782 ($1,625,213) $(260,332)
Issuance of common stock
for cash, net of
issuance costs 562,959 12,370 1,042,133 1,054,503
Issuance of warrants __ __ 259,103 __ 259,103
for cash
Net loss __ __ __ (100,568) (100,568)
--------- ------- ---------- ----------- ---------
Balance at November
30, 1996 3,980,717 $87,469 $2,591,018 $(1,725,781) $ 952,706
========= ======= ========== =========== =========
</TABLE>
The accompanying notes are an integral part of these interim consolidated
financial statements.
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DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THIRTY NINE WEEK PERIOD ENDED NOVEMBER 30, 1996
(unaudited)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss $ (100,568)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 69,981
Allowances for bad debts and sales returns (7,305)
Inventory write down 15,822
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (1,014,540)
Inventories (523,185)
Prepaid expenses and other (58,778)
Other assets (61,501)
Increase (decrease) in:
Accounts payable (322,372)
Accrued expenses 219,700
Customer deposits (219,035)
----------
Net cash used by operating activities (2,001,781)
----------
Cash flows from investing activities:
Purchase of property and equipment (208,324)
----------
Cash flows from financing activities:
Decrease in book overdraft (49,906)
Net proceeds from issuance of common stock 1,054,503
Net proceeds from issuance of notes payable 1,331,757
Proceeds from borrowings from related parties 25,000
Payments on borrowings from related parties (29,049)
Increase in other long term liabilities 1,469
----------
Net cash provided by financing activities 2,333,774
----------
Net increase in cash and cash equivalents 123,669
Cash and cash equivalents, beginning of period 666,611
----------
Cash and cash equivalents, end of period $ 790,280
==========
Supplemental cash flow information:
Capital lease obligation incurred $ 5,997
</TABLE>
The accompanying notes are an integral part of these interim consolidated
financial statements.
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DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC AND SUBSIDIARIES.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
(unaudited)
1. General
The accompanying unaudited interim condensed consolidated financial
statements include the accounts of Dental/Medical Diagnostic Systems, Inc.
and Subsidiaries (the "Company"). They have been prepared in accordance with
generally accepted accounting principles for interim financial information
and with instructions to Form 10-QSB and Item 10 of Regulation S-B.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair representation
have been included. Operating results for the thirteen week, and thirty nine
week periods ended November 30, 1996 are not necessarily indicative of the
results that may be expected for the year ending March 1, 1997. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-KSB for the period
ended March 2, 1996.
On October 23, 1996, the Company authorized an increase in the authorized
number of Common Stock from 10,000,000 shares to 20,000,000 shares. The Board
of Directors also authorized a new class of 1,000,000 shares of Preferred
Stock with a par value of $.01 per share This increase was effective on
January 13, 1997.
As of January 13, 1997 the Company effected a reverse stock split of 1 for
2.197317574 shares of its common stock. All shares and per share amounts have
been retroactively restated to reflect this reverse split.
2. Summary of Significant Accounting Policies
Basis of Presentation
Except for the second quarter of fiscal 1997, the Company since inception has
incurred start-up losses and has an accumulated consolidated deficit of
$1,725,781 at November 30, 1996.
The Company has funded these losses, and intends to fund possible future
losses, through the offering of notes and equity and/or debt securities and
ultimately, through the attainment of positive operating cash flows. Through
the acquisition of the Company by Edudata (see Note 2 to the Company's Annual
Report on Form 10-KSB), the Company raised approximately $606,000, net of
issuance costs and in the first quarter of fiscal year 1997 completed the
sale of 563,010 shares of the Company's common stock for approximately
$1,055,000, net of issuance costs, through an offshore offering pursuant to
Regulation-S. In the third quarter of fiscal year 1997 the Company sold debt
securities for $1,331,751, net of issuance costs (Note 5). The Company
anticipates raising additional capital through the offering of its debt
and/or equity securities.
The ability of the Company to raise additional funds and ultimately achieve
positive operating cash flow is uncertain and, therefore, this raises
substantial doubt about the Company's ability to continue as a going concern.
The accompanying interim condensed consolidated financial statements have
been prepared assuming that the Company will continue as a going concern and
do not include any adjustments that might result from the outcome of this
uncertainty.
Concentration of Credit Risk and Major Customers
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of trade accounts
receivable.
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For the third quarter and year to date period ended November 30, 1996, six of
the Company's customers accounted for 30% and 20% of sales, respectively. At
November 30, 1996, six of the Company's customers accounted for approximately
75% of trade accounts receivables.
The Company performs ongoing credit evaluations of its customers' financial
condition and generally does not require collateral. Estimated credit losses
and returns, have been provided for in the financial statements.
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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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. The significant estimates made in the preparation of
the consolidated financial statements relate to the assessment of the
carrying value of accounts receivable, inventories and warranty provision.
Actual results could differ from those estimates.
Earnings (Loss) Per Share
Earnings (loss) per share is computed based on the weighted average number of
common shares outstanding during the periods presented and common stock
equivalent unless antidilutive.
3. Related Party Transactions
From December 1995 through February 1996, Robert H. Gurevitch (Chairman of the
Board and Chief Executive Officer of the Company) and Boston Marketing Company,
Ltd. (an entity which is controlled by Hiroki Umezaki who is a Director and
greater than 10% stockholder of the Company) collectively loaned the Company an
aggregate of $377,015 in exchange for certain promissory notes. The promissory
notes bear interest at 6% per annum and were originally payable within six
months of issuance. On February 26, 1996, the company repaid $50,000 to each of
Mr. Gurevitch and Boston Marketing. As of November 25, 1996, Mr. Gurevitch and
Boston Marketing each agreed to extend the term of the promissory notes until
the earlier to occur of (a) November 25, 1998, (b) the completion of a public
offering of the Company's equity securities and (c) the repayment in full of the
promissory notes issued in connection with the Company's November 1996 financing
transaction (Note 5). Through the current periods no interest has been paid on
the promissory notes issued to Mr. Gurevitch and Boston Marketing, however,
interest was accrued in the Company's financial statements.
On April 11, 1996 Boston Marketing loaned the Company $25,000 in exchange for a
promissory note that bears interest at 6% per annum and is due within six
months. This note was paid in full by the Company on August 22, 1996.
From March 3, 1996 to November 30, 1996, 1,979 cameras and frame grabber units
at an aggregate cost of $1,484,250 have been purchased by the Company from
Boston Marketing. Amounts payable at November 30, 1996 to Boston Marketing
totaled $92,145 and are included in accounts payable. Through January 8, 1996,
an additional 530 cameras and frame grabber circuitry units have been purchased
by the Company at an aggregate cost of $397,500. Subsequent to November 30,
1996 payments totaling approximately $397,500 have been made to Boston
Marketing.
Effective October 1, 1996, the Company entered into a distribution agreement
with Boston Marketing. Pursuant to this agreement the Company acquired the
exclusive right to market certain component parts used in the Company's
intraoral camera to the dental market. This agreement has an initial five year
term and further provides that during each of such years the Company will
purchase a minimum of 2,500 units of the component parts at an initial price of
$750 per unit (subject to adjustment after October 1, 1998) (the "Minimum
Purchase Requirement"). This agreement is terminable by (a) the Company if it
objects to any price increase and (b) Boston Marketing if the Company fails to
satisfy the Minimum Purchase Requirement.
4. Inventories
Inventories at November 30, 1996 consisted of the following:
<TABLE>
<CAPTION>
<S> <C>
Raw materials $698,728
Work in process 134,733
Finished goods 745,987
-------
Total $1,579,448
==========
Finished goods inventory included $117,959 of dental burs.
</TABLE>
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5. Capital Transactions
On May 30, 1996, the Company completed the sale of a total of 562,959 shares of
its common stock to six foreign investors pursuant to Regulation S of the
Securities Act of 1933, as amended. Each share was sold at a price of $1.93 per
share and, consequently, the Company raised approximately $1,055,000 from the
sales, net of related expenses of approximately $34,000.
On November 27, 1996, the Company raised $1,600,000 through a private placement
of 32 Units to certain accredited investors. Each Unit consists of a $50,000
promissory note (each a "Note") and a warrant to purchase 25,000 shares of
Common Stock (each a "Warrant"). The Notes bear interest at a rate of 10% per
annum and the principal and all accrued interest are payable upon the earliest
to occur of: (a) May 27, 1998; (b) certain change in control events effecting
the Company; (c) a public offering of the Company's securities; or (d) the
sale by the Company's Chief Executive Officer of all or substantially all of his
holding of the Common Stock. Upon the happening of certain events the holders of
the Notes will have the right to convert the outstanding balances of their Notes
into shares of the Common Stock at a rate of $2.00 per share. Each Warrant
entitles the holder thereof to purchase shares of the Common Stock at an initial
exercise price of $2.00 per share (subject to adjustment for stock splits and
capital reorganizations). The Warrants are first exercisable on November 27,
1997 and expire on November 27, 2002. As a result of the warrants, these notes
have been discounted by $259,104, which amount is being amortized over eighteen
months.
Expenses associated with the private placement totaled $285,234. These expenses
have been capitalized and are being amortized over eighteen months. These
expenses included legal fees and fees paid to the placement agent who assisted
in the offering.
On July 2, 1996, the Company modified the vesting period and expiration date on
125,153 options granted in April 1996, whereby these options are fully vested
and expire in 2001.
6. Advertising and Promotion Expense
Total advertising and promotion expense incurred for the thirteen and
thirty-nine week periods ending November 30, 1996 amounted to $281,361 and
$900,340, respectively.
7. Income Taxes
The Company has accrued federal and state income taxes at the applicable
statuary rates which result in an effective tax rate of approximately 43 percent
or $26,000 for the second quarter. This accrual was reversed in the third
quarter due to the loss incurred. Upon further examination of the Company's tax
position following its acquisition of DMD and BDI, management has determined
that the Company's net operating losses (NOL) incurred prior to the acquisition
are not available for carryforward because management determined that the losses
were limited under the provisions of Internal Revenue Code Section 382. The
reassessment of losses available for carryforward had no impact on previously
issued financial statements because any deferred tax assets recognized were
fully offset by valuation allowances.
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Item 2. - Management's Discussion and Analysis or Plan of Operation
Introduction
This discussion summarizes the significant factors affecting the consolidated
operating results, financial condition and liquidity/cash flows of the Company
for the thirteen week and thirty nine week periods ended November 30, 1996.
This discussion should be read in conjunction with the financial statements and
notes thereto, included in this Report on Form 10-QSB and the Company's
financial statements and notes thereto, included in the Company's Annual Report
on From 10-KSB for the fiscal year ended March 2, 1996. Except for the
historical information contained herein , the matters discussed in this item
2-Management's Discussion and Analysis are forward looking statements that
involve risks and uncertainties and are based upon judgments concerning various
factors that are beyond the Company's control. See "Risk Issues and
Uncertainties" below. On January 13, 1997 the Company changed its name from
Edudata Corporation to Dental/Medical Diagnostics, Inc.
As more fully described in the Company's Annual Report on From 10-KSB for the
period ended March 2, 1996, on March 1, 1996 the Company purchased 100% of the
outstanding membership interests of Dental/Medical Diagnostic Systems, LLC
("DMD") and 100% of the outstanding capital stock of Bavarian Dental
Instruments, Inc. ("BDI"). Immediately subsequent to the transaction, the former
members of DMD and shareholders of BDI owned approximately 66.7% of the
Company's outstanding common stock and management control of the Company was
transferred to the former management of DMD and BDI. Accordingly, for accounting
purposes the acquisition was treated as a recapitalization of DMD and BDI with
DMD and BDI combined as the acquiror (reverse acquisition). As a result, the
combined historical financial statements of DMD and BDI became the financial
statements of the Company. Since both DMD and BDI were only formed in October
and November of 1995, and since the historical combined financial statements of
DMD and BDI became the financial statements of the Company there is no
comparable financial information for the comparable periods of the 1996 fiscal
year.
DMD was formed in October 1995 and has been primarily involved in designing,
developing, manufacturing and marketing TeliCam Intraoral Camera Systems
("TeliCam Systems"). The first shipments to customers of the TeliCam System
commenced in early February 1996. BDI was formed in November 1995 and has been
primarily involved in the marketing and distribution of dental burs imported
from Russia. The first sales of burs commenced in early March 1996. On July 9,
1996, the Company decided to discontinue the dental bur product line. The
Company intends to liquidate the remaining inventory of dental burs.
Because of the limited history of the Company's operations and because the
Company anticipates increased sales of the TeliCam Systems, the results of
operations for the period presented is not indicative of future results.
Results of Operations
For the thirteen week ("third quarter") and thirty nine week periods ended
November 30, 1996 (collectively, the "current periods"), total net sales for the
Company's product lines (intraoral dental cameras and dental burs) amounted to
$2,773,180 and $9,558,090 , respectively. During, the thirteen and thirty-nine
week period ended November 30, 1996 (a) cost of sales for both product lines
totaled $1,748,459 or 63% of net sales and $5,614,431 or 59%, respectively. (b)
gross margin for both product lines totaled 1,024,721, or 37% of net sales and
$3,943,659 or 41%, respectively, (c) selling, general and administrative
expenses totaled $1,033,874, and $3,717,217, respectively, and (d) research and
development expenses totaled $108,773 and $270,074, respectively. Amortization
of debt issue costs, which relate solely to the November 1996 financing, totaled
$15,702 for the third quarter and year to date. Interest expense totaled $28,673
for the quarter and $41,234 for the year to date. For the current periods,
operating profits/(losses) before interest expense relating to the intraoral
camera product line totaled $(132,965) and $ 158,650, respectively. Operating
profits/(losses) before interest relating to the dental bur product line totaled
$20,765 and ($196,341), respectively in the current periods. On a consolidated
basis the net loss before tax for the current periods totaled $(162,301) and
$(100,568),
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respectively. The tax provision of $26,000 was reversed in the third quarter
due to the loss incurred. This resulted in a net loss of ($136,301) or ($.03)
per share for the quarter and ($100,568) or ($.03) per share for the year to
date.
Intraoral Dental Camera Systems Product Line:
Sales: Net sales relating the intraoral dental camera systems and related
products for the third quarter totaled $2,727,341 and $9,327,277 for the fiscal
year to date.
Cost of Sales: Cost of sales relating to intraoral dental camera systems and
related products totaled $1,729,282 for the third quarter, or 63% of net sales
and $5,523,771 or 59% year to date. The cost of sales include direct costs of
production, including raw materials, labor and overhead. Cost of sales have
increased due to the increase in camera shipments. The percentage increase in
cost of sales during the third quarter is a result of increased international
sales which have a lower gross margin. The Company anticipates that
international sales will continue to increase in future periods.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses relating to the intraoral dental camera systems product
line totaled $1,025,146 for the third quarter, and $3,377,676 year to date.
These expenses relate to administering the continuing design, development,
manufacture and marketing of the Company's camera systems. The expenses include
the following: advertising and promotion expenses totaling $281,361 and
$766,123, respectively for the current periods. These advertising and
promotions costs relate to trade show fees, trade magazine advertising and
direct mail promotions. Salaries and wages for the current periods totaled
$246,925 and $752,108, respectively relating to sales and production
administration, marketing, sales and customer support staff and finance and
accounting personnel; and commissions resulting from the sales of the intraoral
dental camera systems totaled $245,252 and amortization $950,896, respectively.
Commissions are decreasing relative to sales primarily due to the increase in
international sales on which commissions are not paid. These expenses are
expected to increase in dollars relative to net sales in future periods due to
the need for additional support functions as the Company's sales increase.
Research and Development Expenses: Research and development expenses relating to
the intraoral dental camera totaled $108,773 and $270,074, respectively in the
current periods and relate to direct expenses of ongoing design and development
of enhancements to the Company's camera system. These expenses are comprised of
wages and benefits for engineering personnel, design and development fees, and
raw material used in the development of prototypes. These expenses are expected
to continue at relatively the same rates in future periods.
Dental Bur Product Line:
On July 9, 1996, the Company decided to discontinue its dental bur product line.
The Company is in the process of selling its remaining inventory. At November
30, 1995, assets and liabilities relating to this product line primarily
consist of approximately $117,959 of finished goods inventory and $28,079 of
accounts payable and accrued expenses. No significant loss is expected on the
liquidation of the remaining dental burs.
Sales: Dental bur net sales in the current periods amounted to $45,839 for the
third quarter and $230,813 for the fiscal year to date. As previously discussed,
since the Company decided to discontinue the dental burs product line, sales
from dental burs decreased in the third quarter as compared to previous quarters
and will continue to decrease in future periods.
Cost of Sales: Cost of sales relating to the sales of dental burs totaled
$19,177 in the third quarter, or 42% of net sales, and $90,660 year to date or
39% of net sales, and included dental bur product costs. Due to the
discontinuance of the product these costs have increased as a percent of net
sales.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses relating to the dental bur business totaled $5,898 and
$336,495, respectively in the current periods. These expenses relate to
importing, distribution, marketing and selling the dental bur product. These
expenses have been significantly decreased in the third quarter and will
continue to decrease in future periods due to the discontinuance of the product
line.
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Dental/Medical Diagnostic Systems, Inc.
Amortization of Debt Issuance cost: Amortization of debt issuance cost totaled
$15,702 for the periods, and is the result of the amortization over eighteen
months of the cost of the sale of the debt securities in the third quarter.
These costs will continue into future periods
Interest Expense: Interest expense totaled $28,673 for the quarter and $41,234
for the year to date. The increase in the current quarter is due to the
increased debt. These costs will continue into future periods.
Capital Resources and Liquidity
For the thirty-nine week period ended November 30, 1996 (" current period ") the
Company used net cash in operating activities of $2,001,781. Accounts receivable
increased $1,014,540 to $1,070,868 primarily due to the increase in intraoral
dental camera sales internationally shipped in the current period. Inventory
levels increased $523,185 to $1,579,448 in anticipation of increased sales and
production levels for the cameras. Accounts payable decreased by $ 322,372 to
$1,294,494 and customer deposits decreased $219,035 to $30,310 due to shipments
of product. These increases in working capital were partially financed by
accrued liabilities which increased $219,700 to $409,674.
Capital expenditures totaled $208,324 in the period and related primarily to
purchases of additional computer equipment and test equipment to support the
administrative and production functions of the Company.
Bank overdrafts decreased in the current period by $49,906. Cash on hand at the
end of the period was $790,280.
These cash outflows were primarily financed through the sale of 562,959 shares
of common stock to foreign investors which raised approximately $1,055,000, net
of issuance costs, and the private placement of debt financing of $1,331,757,
net of issuance costs.
The Company needs additional cash to continue to pay down its current
liabilities (including, without limitation, the debt incurred in connection with
the November 1996 private placement -- See Note 5 to Financial Statements), for
working capital purposes to support the anticipated increased sales levels and
to fund its research and development activities. The Company is currently
reviewing various capital raising alternations, including the possible issuance
of debt and/or equity securities. There can be no assurance, however, that such
efforts to raise funds will provide adequate cash or that such capital will be
available at terms acceptable to the Company, or at all. The inability to raise
additional capital may have a substantial negative impact on the Company's
business, operating results and financial condition.
Seasonality: It is expected that the Company's business will be moderately
seasonal, with lower sales in the summer months, as a consequence of holiday
vacations and a lesser number of trade shows.
New Accounting Pronouncements: The FASB recently issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
123), which is effective for financial statements for fiscal years beginning
after December 15, 1995. SFAS 123 establishes new financial accounting and
reporting standards for stock-based compensation plans. Entities will be allowed
to measure compensation cost for stock-based compensation under SFAS 123 or APB
Opinion No. 25, "Accounting for Stock Issued to Employees". Entities electing to
remain with the accounting provisions of APB Opinion No. 25 will be required to
make pro forma disclosure of net income and earnings per share as if the
provisions of SFAS 123 had been applied. The Company is in the process of
evaluating SFAS 123. The potential impact on the Company by adopting the new
standard has not been quantified at this time. The Company is required to
implement SFAS 123 in fiscal 1997.
14
<PAGE> 15
Risk Issues and Uncertainties
From time to time the Company may issue forward-looking statements relating to
such things as anticipated financial performance, business prospects,
acquisition activities and similar matters. The Private Securities Litigation
Reform Act of 1995 provides a safe harbor for forward-looking statements. In
order to comply with the terms of the safe harbor, the Company notes that a
variety of factors could cause the Company's actual results and experience to
differ materially from anticipated results or other expectations expressed in
the Company's forward looking statements. The risks and uncertainties that may
affect the Company's business, financial condition and results of operations
include, but are not limited to:
Limited Operating History and History of Losses. While the Company has
been in existence since 1981, its operations between 1988 and the acquisition of
its current operating business in March of 1996, were limited to the exploration
of acquisition opportunities. Dental Medical Diagnostic Systems, the division of
the Company which designs and markets the Company's intraoral camera system (the
"TeliCam System"), and Bavarian Dental Instruments, Inc. ("BDI"), the subsidiary
of the Company which distributes dental burs, have only been in operation since
October 1995. For the transition period ended March 2, 1996, the Company
incurred a net loss of $1,625,213, and for the 39 week period ended November 30,
1996, the Company had a net after tax loss of $100,568. The ability of the
Company to achieve profitability in the future, or if achieved, to sustain
profitability, will depend in part upon the successful and timely introduction
of new products, the successful marketing of existing products and the Company's
ability to collect receivables in a timely manner. There can be no assurance
that the Company will be able to generate and sustain net sales in the future,
effectively collect its receivables or achieve and sustain profitability.
Dependence Upon a Single Product. The TeliCam System, is currently the
Company's primary product and will account for substantially all of the
Company's revenue, if any, for the foreseeable future. There can be no assurance
that the TeliCam System will be more effective than competing products or
technologies, or will continue to be successfully marketed. If the TeliCam
System does not continue to be successfully commercialized, it is likely that
the Company's business, operating results and financial conditions would be
substantially impacted.
Importance of New Product Development to Growth. The Company's ability
to successfully develop and introduce new products on a timely basis will be a
significant factor in the Company's ability to grow and remain competitive. New
product development often requires long-term forecasting of market trends, the
development and implementation of new designs, compliance with excessive
governmental requirements and a substantial capital commitment. Although the
Company intends to devote a substantial portion of its resources to product
development activities, there can be no assurance that the Company will have
sufficient funds to develop new products or that the commitment and use of such
funds will result in improved and/or new products or that if successfully
completed, that such improved and/or new products will gain market acceptance.
Any failure by the Company to anticipate or respond in a cost-effective and
timely manner to market trends or customer requirements, or any significant
delays in product development or introduction, could have a material adverse
effect on the Company's business, operating results and financial condition.
Obsolescence and Technological Change. The medical and dental device
industry is characterized by rapid technological change. As technological
changes occur in the marketplace, the Company may have to modify its products in
order to keep pace with these changes and developments. The introduction of
products embodying new technologies or the emergence of new industry standards
may render existing products or products under development obsolete or
unmarketable. Although the Company intends to continue to improve and add to its
existing products, there can be no assurance that funds for such expenditures
will be available or that the Company's competitors will not develop products
with superior capabilities and/or market them at lower prices. Any failure by
the Company to anticipate or respond in a cost-effective and timely manner to
technological changes could have a material adverse effect on the Company's
business, operating results and financial condition.
15
<PAGE> 16
DEPENDENCE ON THIRD-PARTY SUPPLIERS. With the exception of the camera's CCD
processor unit, the Company believes that there multiple sources from which it
may purchase the components of the TeliCam System. Although the Company believes
it will continue to obtain such components on favorable terms and on a timely
basis, failure to do so may have a material adverse effect on the Company.
Pursuant to an agreement with Boston Marketing, the Company has obtained the
exclusive right to market the camera's CCD processor unit (the "Teli Units") to
the dental market. Boston Marketing is a licensed distributor of the Teli Units
under a separate agreement with their manufacturer. The agreement between Boston
Marketing and the Teli Units' manufacturer obligates Boston Marketing to meet
minimum purchase obligations. If Boston Marketing fails to meet these
obligations, Boston Marketing may be terminated as a licensed distributor. In
the event of such termination, the Company, as a sub-licensee sub-distributor of
Boston Marketing may lose its right to purchase the Teli Units. Moreover, in the
event the Company is unable to meet its minimum annual purchase obligations
under its agreement with Boston Marketing and as a consequence such agreement
terminates, the Company may be required to find an alternative source for the
primary component of its TeliCam System. The Company believes that, in the event
the Company loses its right to sell the Teli Units, replacement components could
be developed by and obtained from third parties, but that this process could
take a period of four to six months. If the Company is obliged to develop a new
CCD processor unit there is a substantial likelihood that it Company will need
to halt the production and marketing of its intraoral camera system during the
development period; that such halt would have a material adverse effect on the
Company's business, operating results and financial condition. In addition,
there is no guarantee that an intraoral camera system utilizing a replacement
CCD processor unit will be accepted by the dental market place.
EXTENSIVE GOVERNMENT REGULATION. The Company's products and its
manufacturing practices are subject to regulation by the United States Food and
Drug Administration (the "FDA") pursuant to the Federal Food, Drug and Cosmetic
Act (the "FDC Act"), and by other state and foreign regulatory agencies. Under
the FDC Act, medical and dental devices must receive FDA clearance or approval
before they may be sold. FDA regulations also require the Company to adhere to
certain "Good Manufacturing Practices" ("GMP") regulations, which include
validation testing, quality control and documentation procedures. The Company's
compliance with applicable regulatory requirements will be monitored through
periodic inspections by the FDA.
The process of obtaining required regulatory clearances or approvals can be
time consuming and expensive, and compliance with the FDA's GMP regulations and
other regulatory requirements can be burdensome. Moreover, there can be no
assurance that the required regulatory clearances will be obtained, and those
obtained may include significant limitations on the uses of the product in
question. In addition, changes in existing regulations and the adoption of new
regulations makes regulatory compliance by the Company extremely difficult and
there can be no assurance that the Company has in the past or will in the future
be in full compliance with applicable governmental regulations. Although the
Company believes that its products and procedures are currently in material
compliance with all relevant FDA requirements, the failure to obtain the
required regulatory clearances or to comply with applicable regulations could
result in fines, delays or suspensions of clearances, seizures or recalls of
products, operating restrictions and criminal prosecutions, and would have a
material adverse effect on the Company.
COMPETITION. The Company is part of an intensely competitive industry.
There are at least five major competitors manufacturing intraoral cameras. Many
of the Company's competitors have greater financial and other resources than the
Company. Consequently, such entities may develop, manufacture, market and/or
distribute systems which are substantially similar or superior to the Company's
products and may be able to devote substantially grater resources to the
marketing of their systems.
WIND DOWN OF BAVARIAN DENTAL INSTRUMENTS, INC. BDI distributes and markets
reusable diamond dental burs. The company is currently in the process of winding
down BDI's operations. Any failure by the Company to liquidate BDI's current
inventory could have an adverse effect on the Company's business, operating
results and financial condition.
INTERNATIONAL OPERATIONS. Since October 1995 and through November 30, 1996,
international sales have accounted for more than 10% of the Company's net sales,
and the Company expects that the
16
<PAGE> 17
international sales may increase as a percentage of sales in the future. Due to
its international sales, the Company is subject to the risks of conducting
business internationally, including unexpected changes in, or impositions of,
legislative or regulatory requirements, fluctuations in the U.S. dollar which
could materially adversely affect U.S. dollar revenues or operating expenses,
tariffs and other barriers and restrictions, potentially longer payment cycles,
greater difficulty in accounts receivable collection, potentially adverse taxes
and the burdens of complying with a variety of international laws and
communications standards. The Company is also subject to general geopolitical
risks, such as political and economic instability and changes in diplomatic and
trade relationships, in connection with its international operations. There can
be no assurance that these risks of conducting business internationally will not
have a material adverse effect on the Company's business. Further, any failure
by the Company to predict or plan for changes in the international arena could
have a material adverse effect on the Company's business, operating results and
financial condition.
DEPENDENCE ON KEY PERSONNEL. The Company's future performance will depend
significantly upon its Chairman of the Board and Chief Executive Officer Robert
H. Gurevitch and upon certain other key employees of the Company. The loss of
service of one or more of these persons could have a material adverse effect on
the Company's business and operations. The Company had entered into Employment
Agreements with Robert H. Gurevitch and Dewey Perrigo, the Company's Vice
President of Sales, pursuant to which they each have agreed to render services
to the Company until October 1, 1999. The Company maintains "key person" life
insurance on Mr. Gurevitch in the amount of $2.0 million, of which the Company
is the sole beneficiary but there can be no assurance that the proceeds will be
sufficient to offset the loss to the Company in the event of his death. The
Company does not maintain any insurance on the lives of its other senior
management. In addition, the Company's success will be dependent upon its
ability to recruit and retain qualified personnel. Any failure by the Company to
retain and attract key personnel could have a material adverse effect on the
Company's business, operating results and financial condition.
CONTROL BY EXISTING MANAGEMENT. The present officers and directors of the
Company and their affiliates beneficially own approximately 43% of the
outstanding Common Stock. Accordingly, they will have the ability to
significantly influence the election of the Company's directors and most
corporate actions. This concentration of ownership could have the effect of
delaying or preventing a change in control of the Company.
CONFLICT OF INTERESTS. The Company's Executive Vice President, Secretary
and Director, Hiroki Umezaki, is also an owner of Boston Marketing. The Company
has entered into an agreement with Boston Marketing relating to the purchase of
certain key components for the Company's TeliCam System. As of November 30,
1996, the Company owed Boston Marketing $92,145 for purchased product. The
Company has also entered into a commission agreement with Mr. Umezaki with
respect to sales of the TeliCam System in Asia. Additionally, Boston Marketing
and Robert Gurevitch have each loaned money to the Company (the "Loan
Obligations"). The Company believes that all of these transactions were on terms
no less favorable than were available from unaffiliated third parties. There can
be no assurance that the Company will not enter into transactions with
affiliated parties in the future.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
17
<PAGE> 18
Item 2. Changes in Securities.
None.
Item 3. Defaults in Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security-Holders.
As of October 23, 1996, pursuant to a written consent (the "Written Consent"),
stockholders holding in excess of 58% of the Common Stock approved an amendment
and restatement (the "Amendment and Restatement") of the Company's Certificate
of Incorporation (the "Certificate of Incorporation"). Pursuant to the Amendment
and Restatement the following material changes were made to the Certificate of
Incorporation:
(a) the Company's name was changed from Edudata Corporation to
Dental/Medical Diagnostic Systems, Inc.;
(b) the authorized number of shares of Common Stock was increased from
10,000,000 shares to 20,000,000 shares and a new class of 1,000,000
shares of Preferred Stock, par value $.01 per share, was authorized;
(c) a one-for-2.197317574 reverse stock split of (i) the shares of the
Common Stock which were outstanding on the date that the Amendment and
Restatement was filed with the Delaware Secretary of State (the
"Effective Date"), and (ii) the shares of the Common Stock underlying
outstanding options and other rights granted by the Company on or
prior to the Effective Date, was effected; and
(d) certain other provisions of the Certificate of Incorporation
(including, without limitation, the provision concerning director and
officer indemnification) were restated.
The stockholders of the Corporation were provided with an Information Statement
relating to the Written Consent on or about November 29, 1996. The Amendment and
Restatement was filed with the Delaware Secretary of State on January 13, 1997.
Item 5. Other Information.
None.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 3.1 Amended and Restated Certificate of Incorporation of the
Registrant
Exhibit 10.1 Form of Secured Convertible Promissory Note, dated as of
November 27, 1996, Issued by the Registrant and a Schedule of Note
holders
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<PAGE> 19
Exhibit 10.2 Form of Warrant for the Purchase of Shares of
Common Stock, dated as of November 25, 1996, Issued by the Registrant
and a Schedule of Warrant holders
Exhibit 10.3 Security Agreement, dated as of November 25, 1996,
Entered into by the Registrant
Exhibit 10.4 Agency Agreement, dated as of October 23, 1996, by
and between the Registrant and M. H. Meyerson & Co., Inc.
Exhibit 10.5 Employment Agreement, dated as of October 1, 1996, by
and between the Registrant and Robert H. Gurevitch
Exhibit 10.6 Employment Agreement, dated as of October 1, 1996, by
and between the Registrant and Dewey Perrigo
Exhibit 10.7 Note Extension Agreement, dated as of November 25,
1996, by and between the Registrant and Robert H. Gurevitch
Exhibit 10.8 Note Extension Agreement, dated as of November 25,
1996, by and between the Registrant and Boston Marketing Company, Ltd.
Exhibit 10.9 Distribution Agreement, dated as of October 1, 1996,
by and between the Registrant and Boston Marketing Company, Ltd.
Exhibit 10.10 Form of Subscription Agreement
Exhibit 11.1 Statement Regarding Computation of Net Income (Loss)
Per Share
Exhibit 27.1 Financial Data Schedule
(b) Reports on Form 8-K
During the fiscal quarter ended November 30, 1996, the Company did not file any
reports on Form 8-K.
19
<PAGE> 20
Signatures
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on behalf by the undersigned, thereto duly authorized.
Dental/Medical Diagnostic Systems, Inc.
Dated January 20, 1997 By: /s/ Ronald E. Wittman
-------------------------
Ronald E. Wittman
Chief Financial Officer
20
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
EDUDATA CORPORATION
A DELAWARE CORPORATION
Robert H. Gurevitch and Marvin H. Kleinberg each certifies that:
1. Robert H. Gurevitch is the duly elected and acting Chairman of
the Board, Chief Executive Officer and President, and Marvin H. Kleinberg is
the duly elected and acting Assistant Secretary, of the corporation named
above.
2. The Certificate of Incorporation of the corporation, filed
with the Secretary of State of the State of Delaware, on February 23, 1983, and
as previously amended on July 22, 1987, shall be further amended and restated
to read in full as follows:
FIRST: The name of the corporation is DENTAL/MEDICAL
DIAGNOSTIC SYSTEMS, INC. (the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of its registered
agent at that address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may now or hereafter be
organized under the General Corporation Law of the State of Delaware
as set forth in Title 8 to the Delaware Code (the "GCL").
FOURTH: (a) The total number of shares which the Corporation
shall have authority to issue is 20,000,000 shares of common stock,
par value $0.01 per share (the "Common Stock") and 1,000,000 shares of
Preferred Stock, par value $0.01 per share (the "Preferred Stock").
(b) The holders of the issued and outstanding shares of
Common Stock shall be entitled to one vote per share of Common Stock
held by them on all matters voted upon by stockholders of the
Corporation, including, but not limited to, the election of directors.
(c) The Preferred Stock may be divided into such number
of series as the Board of Directors of the Corporation may determine.
The Board of Directors of the Corporation is authorized to determine
and alter the rights, preferences, privileges and restrictions granted
to and imposed upon the Preferred Stock or any series thereof with
respect to any wholly unissued class or series of Preferred Stock, and
to fix the number of shares of any series of Preferred Stock and the
designation of any such series of Preferred Stock. The Board of
Directors of the Corporation,
<PAGE> 2
within the limits and restrictions stated in any resolution or
resolutions of the Board of Directors of the Corporation originally
fixing the number of shares constituting any series, may increase or
decrease (but not below the number of shares of such series then
outstanding) the number of shares of any series subsequent to the
issue of that series.
FIFTH: Effective upon the filing of this Amended and Restated
Certificate of Incorporation every 2.197317574 then issued and
outstanding shares of Common Stock are reconstituted and converted
into one (1) share of Common Stock and every then issued and
outstanding option or other right to purchase shares of Common Stock
is reconstituted and converted into an option or other right to
purchase one (1) share of Common Stock for each 2.197317574 shares of
Common Stock underlying such outstanding options and rights. The
Corporation shall not issue any fractional shares in connection with
the foregoing, but shall instead be authorized to pay in cash the fair
value of fractions of a share to holders entitled to issuance of
fractions of a share as of the date of the filing of this Amended
Restated Certificate of Incorporation.
SIXTH: Election of directors at an annual or special meeting
of stockholders need not be by written ballot unless the Bylaws of the
Corporation shall otherwise provide.
SEVENTH: In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors of the Corporation is
expressly authorized to adopt, repeal, alter, amend or rescind the
Bylaws of the Corporation.
EIGHTH: (a) The Corporation shall indemnify to the fullest
extent authorized or permitted by law (as now or hereafter in effect)
any person made, or threatened to be made, a defendant or witness to
any action, suit or proceeding (whether civil or criminal or
otherwise) by reason of the fact that he, his testator or intestate,
is or was a director or officer of the Corporation or by reason of the
fact that such director or officer at the request of the Corporation,
is or was serving any other corporation, partnership, joint venture,
trust, employee benefit plan or enterprise, in any capacity. Nothing
contained herein shall affect any rights to indemnification to which
employees other than directors and officers may be entitled by law. No
amendment or repeal of this Section (a) of Article EIGHTH shall apply
to or have any effect on any right to indemnification provided
hereunder with respect to any acts or omissions occurring prior to
such amendment or repeal.
(b) No director of the Corporation shall be personally
liable to the Corporation or its stockholders for monetary damages for
any breach of fiduciary duty by such a director as a director.
Notwithstanding he foregoing sentence, a director shall be liable to
the extent provided by applicable law (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant
to Section 174 of the GCL, or (iv) for any transaction from which such
director derived an improper personal benefit. No amendment to or
repeal of this Section (b) of Article EIGHTH shall apply to or have
any effect on the liability or alleged liability
2
<PAGE> 3
of any director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment or
repeal.
(c) In furtherance and not in limitation of the powers
conferred by statute:
(i) the Corporation may purchase and maintain
insurance on behalf of any person who is or was a
director, officer, employee or agent of the
Corporation, or is serving at the request of the
Corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise
against any liability asserted against him and
incurred by him in any such capacity, or arising out
of his status as such, whether or not the Corporation
would have the power to indemnify against such
liability under the provisions of law; and
(ii) the Corporation may create a trust fund,
grant a security interest and/or use other means
(including, without limitation, letters of credit,
surety bonds and/or other similar arrangements), as
well as enter into contracts providing
indemnification to the fullest extent authorized or
permitted by law and including as part thereof
provisions with respect to any or all of the
foregoing to ensure the payment of such amounts as
may become necessary to effect indemnification as
provided therein, or elsewhere.
NINTH: Whenever a compromise or arrangement is proposed
between the Corporation and its creditors or any class of them and/or
between the Corporation and its Stockholders or any class of them, any
court of equitable jurisdiction within the State of Delaware may, on
the application in a summary way of the Corporation or of any creditor
or Stockholder thereof, or on the application of any receiver or
receivers appointed for the Corporation under the provisions of
Section 291 of the GCL or on the application of trustees in
dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of the GCL, order a
meeting of the creditors or class of creditors, and/or of the
Stockholders or class of Stockholders of the Corporation, as the case
may be, agree to any compromise or arrangement and to any
reorganization of the Corporation as a consequence of such compromise
or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said
application has made, be binding on all the creditors or class of
creditors, and/or on all the Stockholders or class of Stockholders, of
the Corporation, as the case may be, and also in the Corporation.
3. The foregoing Amended and Restated Certificate of
Incorporation has been duly approved by the Board of Directors of the
Corporation in accordance with Section 245 of the GCL.
4. The foregoing Amended and Restated Certificate of
Incorporation has been duly approved, pursuant to resolutions of the Board of
Directors of the Corporation, and in accordance with Section 228 of the GCL, by
the written consent of the holders of a majority of the shares of Common Stock
3
<PAGE> 4
outstanding.
IN WITNESS WHEREOF, the undersigned have executed this Amended and
Restated Certificate of Incorporation as of the 13th day of January, 199_.
By: /s/ ROBERT H. GUREVITCH
------------------------
Robert H. Gurevitch
President
By: /s/ MARVIN H. KLEINBERG
-----------------------
Marvin H. Kleinberg
Assistant Secretary
4
<PAGE> 1
EXHIBIT 10.1
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
SECURED CONVERTIBLE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD,
ASSIGNED OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
WITH RESPECT THERETO UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR
UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATION IS NOT REQUIRED. THE COMPANY'S SUBSCRIPTION AGREEMENT
WITH THE HOLDER CONTAINS ADDITIONAL PROVISIONS RESTRICTING THE TRANSFER OF THIS
NOTE. A COPY OF SUCH AGREEMENT IS AVAILABLE FOR INSPECTION AT THE COMPANY'S
OFFICE.
As of November 27, 1996
FOR VALUE RECEIVED, DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC., a Delaware
corporation ("Company"), with its principal office at 200 N. Westlake Boulevard,
Suite 202, Westlake Village, California 91362, promises to pay to the order of
("Holder"), or registered assigns, on the earliest of (i) the
18-month anniversary of the date hereof, (ii) the date of successful
consummation by the Company of a public offering of its securities, as described
in Section 4.1 hereof, (iii) the date of consummation of a sale by the Company
of all or substantially all of its assets or certain mergers or consolidations
of the Company, as described in Section 4.2 hereof, (iv) the sale or exchange by
Robert H. Gurevitch of all or substantially all of the shares of Common Stock of
the Company, $.01 par value per share ("Common Stock"), owned by him, or (v) an
"Offering Termination" as defined in Section 7, subject to the conversion rights
of the Holder contained therein (in any such event, "Maturity Date"), the
principal amount of in such coin or currency of the United States of America as
at the time of payment shall be legal tender for the payment of public or
private debts, together with interest on the unpaid balance of said principal
amount from time to time outstanding at the rate of ten (10%) percent per annum
without compounding; provided, however, that if this Note is not paid in full on
or before the Maturity Date, interest shall accrue on the outstanding principal
of and, to the extent permitted by law, interest on the Note from the Maturity
Date up to and including the date of payment at a rate equal to the lesser of
eighteen percent (18%) per annum or the maximum interest rate allowed under
applicable law. This Note shall be paid pro rata with certain additional notes
of like tenor being issued simultaneously herewith. Payments of principal and
interest are to be made at the address of the Holder designated above or at such
other place as the Holder shall have notified the Company in writing at least
five days before such payment is due.
<PAGE> 2
This Note is issued pursuant to a subscription agreement
between the Company and the Holder, as amended ("Subscription Agreement') and is
secured by certain collateral more specifically described in certain Security
Agreement entered into by the Company for the benefit of the Holder, among
others (the "Security Agreement"), all of which is available for inspection at
the Company's principal office. Reference herein to the Subscription Agreement
and the Security Agreement shall in no way impair the absolute and unconditional
obligation of the Company to pay both principal and interest hereon as provided
herein.
The rights and remedies of the Holder hereunder are subject to
the terms and conditions of the Security Agreement with respect to the
appointment of M.H. Meyerson & Co., Inc., as agent (the "Agent") for the Holder
thereunder and hereunder to exercise the powers delegated to it thereunder,
including, without limitation, powers with respect to the enforceability and
collectibility of all amounts due hereunder. Reference to the Security Agreement
is made for a complete description of the rights, powers and obligations of the
Agent, including the Agents duty to act in certain circumstances at the
direction of the "Required Lenders," as such term is defined in Section 5(g)
thereof.
1. Use of Proceeds. The Company agrees that the amounts represented by
this Note shall not be used to pay any indebtedness for borrowed money or for
Related Party Obligations (as hereinafter defined) other than the sum of
$250,000 borrowed by the Company from two nonaffiliated investors on or about
October 4, 1996 and credit card charges for ordinary and necessary business
expenses. "Related Party Obligations" shall mean all of the Company's
obligations, including indebtedness (including principal and any interest
thereon) for borrowed funds and unpaid salaries, fees or other compensation,
owed to any of its officers, directors, stockholders or their affiliates, for
whatever purpose made and whether or not evidenced by a note, bond, debenture or
other formal instrument, excluding, for the purposes hereof, any salaries or
fees payable on a current basis to officers and directors in the ordinary course
of the Company's business but shall not include amounts owed to Boston Marketing
Company, Ltd. ("BMC") for purchases of product in the ordinary course of
business.
2. Events of Default. (a) Upon the occurrence of any of the following
events (herein called "Events of Default"):
(i) The Company shall fail to pay the principal of or interest
on this Note on the Maturity Date;
(ii) (A) The Company shall commence any proceeding or other
action relating to it in bankruptcy or seek reorganization,
arrangement, readjustment of its debts, receivership, dissolution,
liquidation, winding-up, composition or any other relief under any
bankruptcy law, or under any other insolvency, reorganization,
liquidation, dissolution, arrangement, composition, readjustment of
debt or any other similar act or law, of any jurisdiction, domestic or
foreign, now or hereafter existing; or (B) the Company shall admit the
material allegations of any petition or pleading in connection with any
such proceeding; or (C) the Company shall apply for, or consent or
acquiesce to, the appointment of a receiver, conservator, trustee or
similar officer for it or for all or a substantial part of its
property; or (D) the Company shall make a general assignment for the
benefit of creditors;
-2-
<PAGE> 3
(iii) (A) The commencement of any proceedings or the taking of
any other action against the Company in bankruptcy or seeking
reorganization, arrangement, readjustment of its debts, liquidation,
dissolution, arrangement, composition, or any other relief under any
bankruptcy law or any other similar act or law of any jurisdiction,
domestic or foreign, now or hereafter existing and the continuance of
any of such events for sixty (60) days undismissed, unbonded or
undischarged; or (B) the appointment of a receiver, conservator,
trustee or similar officer for the Company for any of its property and
the continuance of any of such events for sixty (60) days undismissed,
unbonded or undischarged; or (C) the issuance of a warrant of
attachment, execution or similar process against any of the property of
the Company and the continuance of such event for sixty (60) days
undismissed, unbonded and undischarged;
(iv) An "Event of Default" (as defined in the Security
Agreement) shall have occurred under the Security Agreement, after
giving effect to any applicable notice provisions and cure periods set
forth in the Security Agreement;
(v) Any breach of any of the Company's representations or
warranties contained in the Subscription Agreement or the Agency
Agreement dated October 23, 1996 between the Company and M.H. Meyerson
& Co., Inc. ("MHM"), except where such breach of representations or
warranties in the Agency Agreement, singly or in the aggregate, would
not have a material adverse effect on the Company's operations,
financial condition or prospects;
(vi) The Company shall fail to perform any obligation of the
Company contained in the Subscription Agreement or the Agency
Agreement, after giving effect to any applicable notice provisions and
cure periods except where such failure to perform an obligation in the
Agency Agreement would not have a material adverse effect on the
Company's operations, future conduct or prospects, or the rights of the
Holders;
(vii) The Company shall fail to comply with any of its
obligations under this Note; provided, however, that with respect to a
failure to comply with any of the provisions of Sections 3.1 (a) and
(c) of this Note, such failure is not remedied within thirty (30) days
after the Company's receipt of written notice of same;
(viii) The Company shall default with respect to any
indebtedness for borrowed money (other than under this Note) if either
(a) the effect of such default is to accelerate the maturity of such
indebtedness (giving effect to any applicable grace periods) or (b) the
holder of such indebtedness declares the Company to be in default
(giving effect to any applicable grace periods); or
(ix) Any judgment or judgments against the Company or any
attachment, levy or execution against any of its properties for any
amount in excess of $25,000 in the aggregate shall remain unpaid, or
shall not be released, discharged, dismissed, stayed or fully bonded
for a period of 30 days or more after its entry, issue or levy, as the
case may be;
then, and in any such event, the Holder at its option and without written notice
to the Company, may declare the entire principal amount of this Note then
outstanding together with accrued unpaid interest thereon immediately due and
payable, and the same shall forthwith become immediately due
-3-
<PAGE> 4
and payable without presentment, demand, protest, or other notice of any kind,
all of which are expressly waived. The Events of Default listed herein are
solely for the purpose of protecting the interests of the Holder of this Note.
If the Note is not paid in full upon acceleration, as required above, interest
shall accrue on the outstanding principal of and interest on this Note from the
date of the Event of Default up to and including the date of payment at a rate
equal to the lesser of eighteen (18%) percent per annum or the maximum interest
rate permitted by applicable law.
(b) Non-Waiver and Other Remedies. No course of dealing or delay on the
part of the Holder of this Note in exercising any right hereunder shall operate
as a waiver or otherwise prejudice the right of the Holder of this Note. No
remedy conferred hereby shall be exclusive of any other remedy referred to
herein or now or hereafter available at law, in equity, by statute or otherwise.
(c) Collection Costs: Attorney's Fees. In the event this Note is turned
over to an attorney for collection, the Company agrees to pay all reasonable
costs of collection, including reasonable attorney's fees and expenses and all
out of pocket expenses incurred in connection with such collection efforts,
which amounts may, at the Holder's option, be added to the principal hereof.
3. Obligation to Pay Principal and Interests Covenants. No provision of
this Note shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of and interest on this Note at the
place, at the respective times, at the rates, and in the currency herein
prescribed.
3.1. Affirmative Covenants. The Company covenants and agrees that,
while this Note is outstanding, it shall:
(a) Pay and discharge all taxes, assessments and governmental charges
or levies imposed upon it or upon its income and profits, or upon any properties
belonging to it before the same shall be in default; provided, however, that the
Company shall not be required to pay any such tax, assessment, charge or levy
which is being contested in good faith by proper proceedings and adequate
reserves for the accrual of same are maintained if required by generally
accepted accounting principles;
(b) Preserve its corporate existence and continue to engage in business
of the same general type as conducted as of the date hereof;
(c) Comply in all respects with all statutes, laws, ordinances, orders,
judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations and requirements ("Requirement(s)") of all governmental bodies,
departments, commissions, boards, companies or associates insuring the premises,
courts, authorities, officials, or officers, which are applicable to the
Company; except wherein the failure to comply would not have a material adverse
effect on the Company; provided that nothing contained herein shall prevent the
Company from contesting the validity or the application of any Requirements.
3.2. Negative Covenants. The Company covenants and agrees that while
this Note is outstanding it will not directly or indirectly:
-4-
<PAGE> 5
(a) Guaranty or otherwise in any way become or be responsible for
indebtedness for borrowed money or for obligations of any of its officers,
directors or principal stockholders or any of their affiliates, contingently or
otherwise, other than such guaranties existing as of the date hereof;
(b) Declare or pay cash dividends;
(c) Sell, transfer or dispose of, any of its assets other than in the
ordinary course of its business and for fair value;
(d) Purchase, redeem, retire or otherwise acquire for value any of its
capital stock now or hereafter outstanding; or
(e) Except as provided in Section 1, repay any indebtedness for
borrowed funds or Related Party Obligations.
4. Repayment.
4.1. Public Offering. This Note shall be paid in full, without premium,
in the event, and on the date, that the Company successfully consummates a
public offering of securities of the Company ("Offering"). The words "successful
consummation," for this purpose, shall mean the date on which the Company
receives the net proceeds of the Offering. In the event that the Holder has an
account at MHM, the Company shall repay the Note by making payment into such
Holder's account at MHM upon the successful consummation of the Offering. The
Offering contemplated by the letter of intent, dated August 9, 1996 ("Letter of
Intent"), between the Company and MHM, shall be referred to herein as the "MHM
Offering."
4.2. Consolidation or Merger: Sale of Assets or Shares. This Note shall
be paid in full, without premium, in the event (a) the Company consolidates or
merges with another corporation, unless (i) the Company shall be the surviving
corporation in such consolidation or merger or (ii) the other corporation
controls, is under common control with or is controlled by the Company
immediately prior to the consolidation or merger whether or not the Company
shall be the surviving corporation in such consolidation or merger, in which
event this Note shall remain outstanding as an obligation of the consolidated or
surviving corporation, or (b) the Company consummates a sale of all or
substantially all of its assets, or (c) there occurs a sale by Robert H.
Gurevitch of all or substantially all of the Company's outstanding Common Stock
owned by him.
4.3. Voluntary Prepayment. This Note may be prepaid or called by the
Company at any time in whole or in part without penalty or premium, but with at
least five days notice to the Holder. Interest shall accrue to and include the
date on which prepayment is made.
5. Required Consent. The Company may not modify any of the terms of
this Note without the prior written consent of the Holder.
6. Lost Documents. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Note or any Note
exchanged for it, and (in the case of loss, theft or destruction) of indemnity
satisfactory to it, and upon reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of such Note,
-5-
<PAGE> 6
if mutilated, the Company will make and deliver in lieu of such Note a new Note
of like tenor and unpaid principal amount and dated as of the original date of
the Note.
7. Conversion.
7.1. Offering Termination. In the event that either (x) the Company
elects not to proceed with the MHM Offering for any reason or (y) MHM elects not
to proceed with the MHM Offering under any of the following circumstances:
(i) information comes to MHM's attention relating to the Company, its
management or its position in the industry which would preclude a successful
public offering, (ii) a material adverse change has occurred in the financial
condition, business or prospects of the Company, (iii) the National Association
of Securities Dealers, Inc. determines that any payment (including cash and/or
securities) paid by the Company to any investment banker (other than MHM),
consultant or to any other person is "underwriter compensation" in connection
with the MHM Offering; (iv) as a result of the review of the Company's
financial statements by the Company's independent accountants, it is determined
that the Company's historical financial statements must be restated and that,
as restated, the Company's earnings, revenues, assets and/or net worth is
materially less than as previously presented; or (v) the Company has breached
any of its representations, warranties or obligations under the Letter of
Intent, or failed to expeditiously proceed with the MHM Offering or to
cooperate with MHM in requesting effectiveness of the registration statement
to be filed in connection with the MHM Offering at such time as MHM may deem
appropriate, then an "Offering Termination" shall be deemed to have occurred
and the Holder may, at its sole option, determine to convert this Note into
Common Stock, as provided below.
7.2. Notice. In the event of an Offering Termination, the Company shall
furnish notice of such event to the Holder at such Holder's address as set forth
on page one hereof within five (5) days of such Offering Termination. In order
to elect to convert the principal and interest of this Note, the Holder must
deliver to the Company within fifteen (15) days after the receipt of the notice
of the Offering Termination a written notice of his election to convert the
principal and interest of this Note into the applicable number of Converted
Shares, as determined under Section 7.3 hereof. If the Holder fails to deliver
such written notice within fifteen (15) days after receipt of the notice of the
Offering Termination, the Holder shall not be entitled to convert the principal
and interest of this Note as a result of such Offering Termination and this Note
and all accrued interest hereon shall be paid in full.
7.3. Conversion Rate. If the Holder properly elects to convert the
entire principal amount and interest owed under this Note pursuant to Section
7.2 hereof, the Company shall convert the entire principal amount and interest
then owed under the Note into the number of shares of the Common Stock
("Converted Shares") equal to the principal amount and interest then owed under
the Note divided by $2.00 ("Conversion Price") and issue such Converted Shares
to the Holder. If the Holder elects to convert this Note in accordance with
Section 7.2, the number of securities to be issued to the Holder upon such
conversion will be rounded up to the nearest whole number.
7.4. Adjustments.
(a) If the outstanding shares of the Company's Common Stock shall be
subdivided or split into a greater number of shares, or a dividend in Common
Stock shall be paid in respect of Common Stock, the Conversion Price in effect
immediately prior to such subdivision or at the record date of such dividend
shall simultaneously with the effectiveness of such subdivision or split or
-6-
<PAGE> 7
immediately after the record date of such dividend be proportionately reduced.
If the outstanding shares of Common Stock shall be combined or reverse-split
into a smaller number of shares, the Conversion Price in effect immediately
prior to such combination or reverse-split shall, simultaneously with the
effectiveness of such combination or reverse-split, be proportionately
increased. When any adjustment is required to be made in the Conversion Price,
the number of shares of Common Stock purchasable upon the conversion of this
Note shall be changed to the number determined by dividing (i) an amount equal
to the number of shares issuable upon the conversion of this Note immediately
prior to such adjustment, multiplied by the Conversion Price in effect
immediately prior to such adjustment, by (ii) the Conversion Price in effect
immediately after such adjustment.
(b) If there shall occur any capital reorganization or reclassification
of the Company's Common Stock (other than a change in par value or a subdivision
or combination as provided for in subsection (a) above), or the payment of a
liquidating distribution, then, as part of any such reorganization,
reclassification or liquidating distribution, lawful provision shall be made so
that the Holder of this Note shall have the right thereafter to receive upon the
conversion hereof (to the extent, if any, still convertible) the kind and amount
of shares of stock or other securities or property which such Holder would have
been entitled to receive if, immediately prior to any such reorganization,
reclassification or liquidating distribution, as the case may be, such Holder
had held the number of shares of Common Stock which were then purchasable upon
the conversion of this Note. In any such case, appropriate adjustment (as
reasonably determined by the Board of Directors of the Company) shall be made in
the application of the provisions set forth herein with respect to the rights
and interests thereafter of the Holder of this Note such that the provisions set
forth in this Section 7.4 (including provisions with respect to adjustment of
the Conversion Price) shall thereafter be applicable, as nearly as practicable,
in relation to any shares of stock or other securities or property thereafter
deliverable upon the conversion of this Note.
(c) No adjustment in the per share Conversion Price shall be required
unless such adjustment would require an increase or decrease in the Conversion
Price of at least $0.01; provided, however, that any adjustments which by reason
of this paragraph are not required to be made shall be carded forward and taken
into account in any subsequent adjustment. All calculations under this Section
7.4 shall be made to the nearest cent or to the nearest 1/100th of a share, as
the case may be. Anything in this Section 7.4 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the per share
Conversion Price, in addition to those required by this Section 7.4 as in its
discretion it shall deem to be advisable in order that any stock dividend,
subdivision of shares or distribution rights to purchase stock or securities
convertible or exchangeable for stock hereafter made by the Company to its
stockholders shall not be taxable.
(d) Upon the happening of any event requiring an adjustment of the
Conversion Price hereunder, the Company shall forthwith give written notice
thereto to the Holder of this Note stating the adjusted Conversion Price and the
adjusted number of shares purchasable upon the conversion hereof resulting from
such event and setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based.
8. Miscellaneous.
8.1. Benefit. This Note shall be binding upon and inure to the benefit
of the parties hereto and their legal representatives, successors and assigns.
-7-
<PAGE> 8
8.2. Notices and Addresses. All notices, offers, acceptances and any
other acts under this Note (except payment) shall be in writing, and shall be
sufficiently given if delivered to the addressee in person, by Federal Express
or similar receipted delivery, by facsimile delivery or, if mailed, postage
prepaid, by certified mail, return receipt requested, as follows:
To Holder: To Holder's address on page 1 of this Note
To The Company: Edudata Corporation
200 N. Westlake Boulevard
Suite 202
Westlake Village, CA 91362
Attn: Robert H. Gurevitch
CEO/Chairman
Fax: 805-374-1966
In either case M. H. Meyerson & Co., Inc.
with copies to: 525 Washington Boulevard
Jersey City, New Jersey 07310
Attn: Ronald I. Heller
Fax: 201-459-9458
Graubard Mollen & Miller
600 Third Avenue, 31st Floor
New York, NY 10016
Attn: David Alan Miller, Esq.
Fax: 212-818-8881
Troup Meisinger Steuber & Pasich LLP
10940 Wilshire Boulevard
Los Angeles, California 90024
Attn: C.N. Franklin Reddick, III, Esq.
Fax: 310-443-7599
or to such other address as any of them, by notice to the others may designate
from time to time. Time shall be counted to, or from, as the case may be, the
delivery in person or five (5) business days after mailing.
(a) Governing Law. This Note and any dispute, disagreement, or issue of
construction or interpretation arising hereunder whether relating to its
execution, its validity, the obligations provided therein or performance shall
be governed and interpreted according to the law of the State of New York and
agrees that service of process upon it mailed by certified mail to its address
shall be deemed in every respect effective service of process upon it in any
such suit, action or proceeding.
(b) Jurisdiction and Venue. The Company (i) agrees that any legal suit,
action or proceeding arising out of or relating to this Note shall be instituted
exclusively in New York
-8-
<PAGE> 9
State Supreme Court, County of New York or in the United States District Court
for the Southern District of New York, (ii) waives any objection to the venue of
any such suit, action or proceeding and the right to assert that such forum is
not a convenient forum, and (iii) irrevocably consents to the jurisdiction of
the New York State Supreme Court, County of New York, and the United States
District Court for the Southern District of New York in any such suit, action or
proceeding, and the Company further agrees to accept and acknowledge service of
any and all process which may be served in any such suit, action or proceeding
in New York State Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York and agrees that service of
process upon it mailed by certified mail to its address shall be deemed in every
respect effective service of process upon it in any such suit, action or
proceeding.
(c) Section Headings. Section headings herein have been inserted for
reference only and shall not be deemed to limit or otherwise affect, in any
matter, or be deemed to interpret in whole or in part any of the terms or
provisions of this Note.
(d) Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements contained herein shall survive the
delivery of this Note.
IN WITNESS WHEREOF, this Note has been executed and delivered on the
date specified above by the duly authorized representative of the Company.
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
By: ROBERT H. GUREVITCH
-----------------------------------
Robert H. Gurevitch
CEO/Chairman
-9-
<PAGE> 10
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
SCHEDULE OF SECURED CONVERTIBLE PROMISSORY NOTEHOLDERS
<TABLE>
<CAPTION>
VALUE OF
NAME OF NOTEHOLDER ADDRESS PROMISSORY NOTE
- ------------------------------------------ --------------------------- -----------------
<S> <C> <C>
Bear Stearns Securities Corp. as IRA 245 Park Avenue $25,000
Custodian FBO Paul Breslow New York, NY 10167
Attn: Associate Director
Bear Stearns Securities Corp. as IRA 245 Park Avenue $50,000
Custodian FBO David J. Carr New York, NY 10167
Attn: Associate Director
Bear Stearns Securities Corp. as IRA 245 Park Avenue $25,000
Custodian FBO Sharon Carr New York, NY 10167
Attn: Associate Director
Henry M. Cohn 88 Cliffield Road $50,000
Bedford, NY 10506
William M. De Arman 5420 Huckleberry Lane $50,000
Houston, TX 77056
Donehew Fund 212 East 22nd Street $50,000
Limited Partnership Cheyenne, WY 82001-3729
Attn: Robert H. Donehew
Bear Stearns Securities Corp. as Custodian c/o Neal M. Lisann, MD $25,000
FBO Empire Medical Diagnostic PC Defined 3 Arista Court
Contribution Profit Sharing Plan Dix Hills, NY 11746
Ronald J. Frank 244 Houtman Road $25,000
Saugerties, NY 12477
Louis Gigante 223 Osage Lane $25,000
Franklin Lakes, NJ 07417
Stephen Goldman 1077 River Road, N-603 $25,000
Edgewater, NJ 07020
Stanley D. Goodman 691 Birchwood Drive $25,000
Wyckoff, NJ 07481-1006
Janice Halle-Nesses 757 Highwoods Drive $175,000
Franklin Lakes, NJ 07417
</TABLE>
1
<PAGE> 11
<TABLE>
<CAPTION>
VALUE OF
NAME OF NOTEHOLDER ADDRESS PROMISSORY NOTE
- ----------------------------- -------------------------- -----------------
<S> <C> <C>
H&S Advisors, Inc. 114 Bay Ridge Parkway $20,000
Brooklyn, NY 11209
Attn: Jeffrey Hyman, M.D.
and/or Stanley Snyder
IF Consulting Ltd. 19 West Street North $50,000
Nassau, Bahamas
Jo-Bar Enterprises, L.L.C. 8700 West Bryn Mawr Avenue $50,000
9th Floor, South Tower
Chicago, IL 60631
Attn: Joel A. Stone
KCID Industries, c/o Robert J. Poulson, $25,000
Bradley S. Cooper Jr., Atty
63 Pioneer Street
Cooperstown, NY 13326
Richard M. Kirshner 14025 S.W. 104th Court $25,000
Miami, FL 33176
Jacqueline Knapp 947 Huron Road $187,500
Franklin Lakes, NJ 07417
Larry Kupferberg 39 West 83rd Street, #2 $152,500
New York, NY 10024
Christina Liff 37 Lords Way $25,000
Manhasset Hills, NY 11040
Private Trust Corp. Charlotte House $50,000
Ltd: TTEE New Box N65
Amsterdam Investment Nassau, Bahamas
Trust Attn: Warren Gilbert
Joseph Reiss, M.D. 33 Bayberry Road $50,000
Lawrence, NY 11559
Marc Roberts 29 Northfield Avenue $50,000
West Orange, NJ 07052
Claudia C. Rouhana 5 Prospect Lane $25,000
Sands Point, NY 11050
William J. Rouhana, Jr. 20 Anchor Way $25,000
Port Washington, NY 11050
William J. Rouhana, Sr. 20 Anchor Way $25,000
Trustee for Rouhana Port Washington, NY 11050
1990 GRIT dtd
7/30/90
</TABLE>
2
<PAGE> 12
<TABLE>
<CAPTION>
VALUE OF
NAME OF NOTEHOLDER ADDRESS PROMISSORY NOTE
- ----------------------- --------------------------- -----------------
<S> <C> <C>
William J. Rouhana, Sr. 20 Anchor Way $25,000
Trustee for Rouhana Port Washington, NY 11050
1995 GRAT dtd
3/2/95
Richard Semble, M.D. 8 Balmoral Drive $25,000
New City, NY 10956
Dr. Larry Sheer 513 Pepperidge Tree Lane $50,000
Kinnelon, NJ 07405
Stanley Snyder 207 East 74th Street $140,000
New York, NY 10021
Jeffrey M. Spiegel 333 East 79th Street, #3S $25,000
New York, NY 10021
Gibbs A. Williams 340 East 93rd Street, #14B $25,000
Keough Trust New York, NY 10128
$1,600,000.00
===============
</TABLE>
3
<PAGE> 1
EXHIBIT 10.2
NEITHER THIS WARRANT NOR THE COMMON STOCK WHICH MAY BE ACQUIRED UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED (THE
"ACT"), OR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
WITH RESPECT THERETO UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR
UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATION IS NOT REQUIRED. THE COMPANY'S SUBSCRIPTION AGREEMENT
WITH THE HOLDER CONTAINS ADDITIONAL PROVISIONS RESTRICTING THE TRANSFER OF THIS
WARRANT. A COPY OF SUCH AGREEMENT IS AVAILABLE FOR INSPECTION AT THE COMPANY'S
OFFICE.
For the Purchase of
shares of
Warrant No. _______ Common Stock
Date of Original Issuance: As of November 27, 1996
WARRANT FOR THE PURCHASE OF
SHARES OF COMMON STOCK
OF
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
(A DELAWARE CORPORATION)
Dental/Medical Diagnostic Systems, Inc., a Delaware corporation
("Company"), hereby certifies that
("Registered Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company, at any time or from time to time during the
period commencing on the first anniversary of the Date of Original Issuance set
forth above and ending on the day immediately prior to the sixth anniversary of
the Date of Original Issuance set forth above, shares of Common Stock, $.01 par
value, of the Company ("Common Stock"), at an initial exercise price equal to
$2.00 per share (subject to adjustment as provided below); provided, however,
upon the effective date ("Commencement Date") of the registration statement with
respect to the public offering ("Offering") of the Company's securities as
contemplated by the letter of intent dated August 9, 1996, as amended ("Letter
of Intent") between the Company and M.H. Meyerson & Co., Inc. ("MHM"), this
Warrant shall automatically convert (on a one-for-one basis) into the warrants
to be issued as part of the securities to be sold to the public in the Offering.
The number of shares of Common Stock purchasable upon exercise of this Warrant,
and the exercise price per share, each as adjusted from time to time pursuant to
the provisions of this Warrant, are hereinafter referred to as the "Warrant
Stock" and the "Exercise Price," respectively.
<PAGE> 2
1. Exercise.
(a) This Warrant may be exercised by the Registered Holder, in whole or
in part, by surrendering this Warrant, with the purchase form appended hereto as
Exhibit I duly executed by such Registered Holder, at the principal office of
the Company, or at such other office or agency as the Company may designate,
accompanied by payment in full, in lawful money of the United States, of the
Exercise Price payable in respect of the number of shares of Warrant Stock
purchased upon such exercise.
(b) Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the day on which the Warrant shall
have been surrendered to the Company as provided in subsection 1(a) above. At
such time, the person or persons in whose name or names any certificates for
Warrant Stock shall be issuable upon such exercise as provided in subsection
1(c) below shall be deemed to have become the holder or holders of record of the
Warrant Stock represented by such certificates.
(c) As soon as practicable after the exercise of this Warrant in full
or in part, and in any event within 10 days thereafter, the Company at its
expense will cause to be issued in the name of, and delivered to, the Registered
Holder, or, subject to the terms and conditions hereof, as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of full shares of
Warrant Stock to which such Registered Holder shall be entitled upon such
exercise plus, in lieu of any fractional share to which such Registered Holder
would otherwise be entitled, cash in an amount determined pursuant to Section 3
hereof, and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of shares of Warrant Stock equal (without
giving effect to any adjustment therein) to the number of such shares called for
on -the face of this Warrant, minus the number of such shares purchased by the
Registered Holder upon such exercise as provided in subsection 1(a) above.
2. Adjustments.
(a) If the outstanding shares of the Company's Common Stock shall be
subdivided or split into a greater number of shares, or a dividend in Common
Stock shall be paid in respect of Common Stock, the Exercise Price in effect
immediately prior to such subdivision or at the record date of such dividend
shall simultaneously with the effectiveness of such subdivision or split or
immediately after the record date of such dividend be proportionately reduced.
If the outstanding shares of Common Stock shall be combined or reverse-split
into a smaller number of shares, the Exercise Price in effect immediately prior
to such combination or reverse-split shall, simultaneously with the
effectiveness of such combination or reverse-split, be proportionately
increased. When any adjustment is required to be made in the Exercise Price, the
number of shares of Warrant Stock purchasable upon the exercise of this Warrant
shall be changed to the number determined by dividing (i) an amount equal to the
number of shares issuable upon the exercise of this Warrant immediately prior to
such adjustment, multiplied by the Exercise Price in effect immediately prior to
such adjustment, by (ii) the Exercise Price in effect immediately after such
adjustment.
-2-
<PAGE> 3
(b) If there shall occur any capital reorganization or
reclassification of the Company's Common Stock (other than a change in par value
or a subdivision or combination as provided for in subsection 2(a) above), or
any consolidation or merger of the Company with or into another corporation, or
a transfer of all or substantially all of the assets of the Company, or the
payment of a liquidating distribution, then, as part of any such reorganization,
reclassification, consolidation, merger, sale or liquidating distribution,
lawful provision shall be made so that the Registered Holder of this Warrant
shall have the right thereafter to receive upon the exercise hereof (to the
extent, if any, still exercisable) the kind and amount of shares of stock or
other securities or property which such Registered Holder would have been
entitled to receive if, immediately prior to any such reorganization,
reclassification, consolidation, merger, sale or liquidating distribution, as
the case may be, such Registered Holder had held the number of shares of Common
Stock which were then purchasable upon the exercise of this Warrant. In any such
case, appropriate adjustment (as reasonably determined by the Board of Directors
of the Company) shall be made in the application of the provisions set forth
herein with respect to the rights and interests thereafter of the Registered
Holder of this Warrant such that the provisions set forth in this Section 2
(including provisions with respect to adjustment of the Exercise Price) shall
thereafter be applicable, as nearly as practicable, in relation to any shares of
stock or other securities or property thereafter deliverable upon the exercise
of this Warrant.
(c) No adjustment in the per share Exercise Price shall be
required unless such adjustment would require an increase or decrease in the
Exercise Price of at least $0.01; provided, however, that any adjustments which
by reason of this paragraph are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 2 shall be made to the nearest cent or to the nearest 1/100th of a
share, as the case may be. Anything in this Section 2 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
per share Exercise Price, in addition to those required by this Section 2 as in
its discretion it shall deem to be advisable in order that any stock dividend,
subdivision of shares or distribution rights to purchase stock or securities
convertible or exchangeable for stock hereafter made by the Company to its
stockholders shall not be taxable.
(d) Upon the happening of any event requiring an adjustment of the
Exercise Price hereunder, the Company shall forthwith give written notice
thereto to the Registered Holder of this Warrant stating the adjusted Exercise
Price and the adjusted number of shares purchasable upon the exercise hereof
resulting from such event and setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
3. Fractional Shares. The Company shall not be required upon the
exercise of this Warrant to issue any fractional shares, but shall make an
adjustment therefor in cash on the basis of the mean between the low bid and
high asked prices for the Warrant Stock on the over-the-counter market as
reported by the National Association of Securities Dealers Automated Quotation
System or the closing market price of the Warrant Stock on a national securities
exchange on the trading day immediately prior to the date of exercise, whichever
is applicable, or if neither is applicable, then on the basis of the then fair
market value of the Warrant Stock as shall be reasonably determined by the Board
of Directors of the Company.
4. Limitation on Sales, etc. Each holder of this Warrant acknowledges
that this Warrant and the Warrant Stock have not been registered under the
Securities Act of 1933, as now in force or hereafter amended, or any successor
legislation ("Act"), and agrees not to sell, pledge, distribute,
-3-
<PAGE> 4
offer for sale, transfer or otherwise dispose of this Warrant or any Warrant
Stock issued upon its exercise in the absence of (a) an effective registration
statement under the Act as to this Warrant and the Warrant Stock issued upon its
exercise and registration or qualification of this Warrant or such Warrant Stock
under any applicable Blue Sky or state securities law then in effect, or (b) an
opinion of counsel, satisfactory to the Company, that such registration and
qualification are not required. Notwithstanding the foregoing, the holder
acknowledges that it may not sell the Warrant or any Warrant Shares for a period
of twenty-four months from the date of issuance of this Warrant without the
prior written consent of MHM, which consent may be withheld at MHM's sole
discretion and may be withheld if requested by Nasdaq or the National
Association of Securities Dealers, Inc. as a prerequisite to listing the
Company's securities on Nasdaq.
Without limiting the generality of the foregoing, unless the
offering and sale of the Warrant Stock to be issued upon the exercise of the
Warrant shall have been effectively registered under the Act, the Company shall
be under no obligation to issue the shares covered by such exercise unless and
until the Registered Holder shall have executed an investment letter in form and
substance reasonably satisfactory to the Company, including a warranty at the
time of such exercise that it is acquiring such shares for its own account, for
investment and not with a view to, or for sale in connection with, the
distribution of any such shares, in which event the Registered Holder shall be
bound by the provisions of a legend or legends to such effect which shall be
endorsed upon the certificates) representing the Warrant Stock issued pursuant
to such exercise.
5. Certain Dividends. If the Company pays a dividend or makes a
distribution on the Common Stock payable otherwise than in cash out of earnings
or earned surplus (determined in accordance with generally accepted accounting
principles) except for a stock dividend payable in shares of Common Stock (a
"Property Dividend"), then the Company will pay or distribute to the Registered
Holder of this Warrant, upon the exercise hereof, in addition to the Warrant
Stock purchased upon such exercise, the Property Dividend which would have been
paid to such Registered Holder if the Registered Holder had been the owner of
record of such shares of Warrant Stock immediately prior to the date on which a
record is taken for such Property Dividend or, if no record is taken, the date
as of which the record holders of Common Stock entitled to such dividends or
distribution are to be determined.
6. Rights of Warrant Holder.
The Company has agreed to register the Public Warrant that this
Warrant shall be converted into (and the underlying Warrant Stock) in connection
with the Offering and in connection with certain offerings by the Company, all
as set forth in Section 7 of the Subscription Agreement between the Company and
the Registered Holder pursuant to which this Warrant has been issued.
On the effective date of the registration statement utilized in
the Offering, the Registered Holder shall have the same rights (subject to the
restriction specified in Section 4 hereof) with respect to this Warrant as the
holders of the warrants issued to the public in the Offering and the Registered
Holder shall exchange this Warrant for the form of warrant issued to the public
in the Offering. Such new warrant and the rights of the Registered Holder shall
be governed by the warrant agreement executed in connection with the Offering.
Some of the rights of the Registered Holder reflected herein will not be
reflected in such warrant agreement, since the terms of the warrants to be
issued to the public in the Offering will be different, in certain respects,
from the terms of this Warrant.
-4-
<PAGE> 5
7. Notices of Record Date, etc. In case:
(a) the Company shall take a record of the holders of its Common
Stock (or other securities at the time issuable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution (other than a dividend or distribution payable solely in
capital stock of the Company or out of funds legally available therefor), or to
receive any right to subscribe for or purchase any shares of stock of any class
or any other securities, or to receive any other right; or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving entity), or any
transfer of all or substantially all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities as are
at the time issuable upon the exercise of this Warrant) shall be entitled to
exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least ten (10) days prior to the
record date or effective date, for the event specified in such notice, provided
that the failure to mail such notice shall not affect the legality or validity
of any such action.
8. Reservation of Stock. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such shares of Warrant Stock and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
9. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
10. Transfers, etc. The Company will maintain a register containing the
names and addresses of the Registered Holders of this Warrant and of the holders
of other warrants of like tenor issued simultaneously hereunder. Any Registered
Holder may change its, his or her address as shown on the warrant register by
written notice to the Company requesting such change.
Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this Warrant as the
absolute owner hereof for all purposes; provided,
-5-
<PAGE> 6
however, that if and when this Warrant is properly assigned in blank, the
Company may (but shall not be obligated to) treat the bearer hereof as the
absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
11. Mailing of Notices, etc. All notices and other communications from
the Company to the Registered Holder of this Warrant shall be mailed by
first-class certified or registered mail, postage prepaid, sent by reputable
overnight delivery or by facsimile to the address furnished to the Company in
writing by the last Registered Holder of this Warrant who shall have furnished
an address to the Company in writing. All notices and other communications from
the Registered Holder of this Warrant or in connection herewith to the Company
shall be mailed by first-class certified or registered mail, postage prepaid,
sent by reputable overnight delivery or by facsimile to the Company at its
offices at 200 N. Westlake Boulevard, Suite 202, Westlake Village, CA 91362, or
such other address as the Company shall so notify the Registered Holder.
12. No Rights as Stockholders. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
13. Change or Waiver. Any term of this Warrant may be changed or waived
only by an instrument in writing signed by the party against whom enforcement of
the change or waiver is sought.
14. Headings. The headings of this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.
15. Governing Law. This Warrant will be governed by and construed in
accordance with the law of the State of New York without regard to the
principles of conflict of law.
16. Venue. The Company (a) agrees that any legal suit, action or
proceeding arising out of or relating to this Warrant shall be instituted
exclusively in New York State Supreme Court, County of New York or in the United
States District Court for the Southern District of New York, (b) waives any
objection to the venue of any such suit, action or proceeding and the right to
assert that such forum is not a convenient forum, and (c) irrevocably consents
to the jurisdiction of the New York State Supreme Court, County of New York, and
the United States District Court for the Southern District of New York in any
such suit, action or proceeding. The Company further agrees to accept and
acknowledge service of any and all process which may be served in any such suit,
action or proceeding in the New York State Supreme Court, County of New York, or
in the United States District Court for the Southern District of New York and
agrees that service of process upon it mailed by certified mail to its address
shall be deemed in every respect effective service of process upon it in any
such suit, action or proceeding.
Dated: As of November 27, 1996 DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
By: ROBERT H. GUREVITCH
--------------------------------------
Robert H. Gurevitch
CEO/Chairman
-6-
<PAGE> 7
EXHIBIT I
PURCHASE FORM
To: Dental/Medical Diagnostic Systems, Inc.
200 N. Westlake Boulevard
Suite 202
Westlake Village, CA 91362
Dated:
In accordance with the provisions set forth in the attached Warrant
(No. ), the undersigned hereby irrevocably elects to purchase shares of
the Common Stock covered by such Warrant and herewith makes payment of $ ,
representing the full Exercise Price for such shares at the price per share
provided for in such Warrant.
The undersigned has had the opportunity to ask questions of and receive
answers from the officers of the Company regarding the affairs of the Company
and related matters, and has had the opportunity to obtain additional
information necessary to verify the accuracy of all information so obtained.
The undersigned understands that the shares have not been registered
under the Securities Act of 1933, as amended, or the securities laws of any
other jurisdiction, and hereby represents to the Company that the undersigned is
acquiring the shares for its own account, for investment, and not with a view
to, or for sale in connection with, the distribution of any such shares.
Signature________________________________
Address__________________________________
__________________________________
<PAGE> 8
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
SCHEDULE OF WARRANT HOLDERS
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF WARRANT HOLDER ADDRESS ISSUABLE
- ------------------------------------ ----------------------------- ----------------
<S> <C> <C>
Bear Stearns Securities Corp. as IRA 245 Park Avenue 12,500
Custodian FBO Paul Breslow New York, NY 10167
Attn: Associate Director
Bear Stearns Securities Corp. as IRA 245 Park Avenue 25,000
Custodian FBO David J. Carr New York, NY 10167
Attn: Associate Director
Bear Stearns Securities Corp. as IRA 245 Park Avenue 12,500
Custodian FBO Sharon Carr New York, NY 10167
Attn: Associate Director
Henry M. Cohn 88 Cliffield Road 25,000
Bedford, NY 10506
William M. De Arman 5420 Huckleberry Lane 25,000
Houston, TX 77056
Donehew Fund 212 East 22nd Street 25,000
Limited Partnership Cheyenne, WY 82001-3729
Attn: Robert H. Donehew
Bear Stearns Securities Corp. as Custodian c/o Neal M. Lisann, MD 12,500
FBO Empire Medical Diagnostic PC Defined 3 Arista Court
Contribution Profit Sharing Plan Dix Hills, NY 11746
Ronald J. Frank 244 Houtman Road 12,500
Saugerties, NY 12477
Louis Gigante 223 Osage Lane 12,500
Franklin Lakes, NJ 07417
Stephen Goldman 1077 River Road, N-603 12,500
Edgewater, NJ 07020
Stanley D. Goodman 691 Birchwood Drive 12,500
Wyckoff, NJ 07481-1006
Janice Halle-Nesses 757 Highwoods Drive 87,500
Franklin Lakes, NJ 07417
</TABLE>
1
<PAGE> 9
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF WARRANT HOLDER ADDRESS ISSUABLE
- ------------------------------------ ----------------------------- ----------------
<S> <C> <C>
H&S Advisors, Inc. 114 Bay Ridge Parkway 10,000
Brooklyn, NY 11209
Attn: Jeffrey Hyman, M.D.
and/or Stanley Snyder
IF Consulting Ltd. 19 West Street North 25,000
Nassau, Bahamas
Jo-Bar Enterprises, L.L.C. 8700 West Bryn Mawr Avenue 25,000
9th Floor, South Tower
Chicago, IL 60631
Attn: Joel A. Stone
KCID Industries, c/o Robert J. Poulson, Jr., Atty 12,500
Bradley S. Cooper 63 Pioneer Street
Cooperstown, NY 13326
Richard M. Kirshner 14025 S.W. 104th Court 12,500
Miami, FL 33176
Jacqueline Knapp 947 Huron Road 93,750
Franklin Lakes, NJ 07417
Larry Kupferberg 39 West 83rd Street, #2 76,250
New York, NY 10024
Christina Liff 37 Lords Way 12,500
Manhasset Hills, NY 11040
Private Trust Corp. Charlotte House 25,000
Ltd: TTEE New Amsterdam Investment Box N65
Trust Nassau, Bahamas
Attn: Warren Gilbert
Joseph Reiss, M.D. 33 Bayberry Road 25,000
Lawrence, NY 11559
Marc Roberts 29 Northfield Avenue 25,000
West Orange, NJ 07052
Claudia C. Rouhana 5 Prospect Lane 12,500
Sands Point, NY 11050
William J. Rouhana, Jr. 20 Anchor Way 12,500
Port Washington, NY 11050
William J. Rouhana, Sr. 20 Anchor Way 12,500
Trustee for Rouhana Port Washington, NY 11050
1990 GRIT dtd
7/30/90
</TABLE>
2
<PAGE> 10
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF WARRANT HOLDER ADDRESS ISSUABLE
- ------------------------------------ ----------------------------- ----------------
<S> <C> <C>
William J. Rouhana, Sr. 20 Anchor Way 12,500
Trustee for Rouhana Port Washington, NY 11050
1995 GRAT dtd
3/2/95
Richard Semble, M.D. 8 Balmoral Drive 12,500
New City, NY 10956
Dr. Larry Sheer 513 Pepperidge Tree Lane 25,000
Kinnelon, NJ 07405
Stanley Snyder 207 East 74th Street 70,000
New York, NY 10021
Jeffrey M. Spiegel 333 East 79th Street, #3S 12,500
New York, NY 10021
Gibbs A. Williams 340 East 93rd Street, #14B 12,500
Keough Trust New York, NY 10128
800,000
===========
</TABLE>
3
<PAGE> 1
EXHIBIT 10.3
SECURITY AGREEMENT
AGREEMENT made the 27th day of November, 1996 by and between
EDUDATA CORPORATION, a Delaware corporation ("Debtor"); those parties identified
on SCHEDULE A annexed hereto (each herein called a "Lender" and, collectively,
the "Lenders"); and M.H MEYERSON & CO., INC., as agent for the Lenders (in such
capacity herein called the "Agent").
W I T N E S S E T H:
1. Grant of Security Interest. To secure the payment of indebtedness
to the Lenders evidenced by certain Promissory Notes of even date herewith in
the aggregate amount of up to $1,600,000 (hereinafter, collectively, the
"NOTES", and individually, A "Note"), and also to secure any other indebtedness
or liability of the Debtor to each Lender, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, including
all future advances or loans which may be made to the Debtor at the option of
the Lenders (hereinafter collectively called the "Obligations"), the Debtor
hereby grants and conveys to each of the Lenders a continuing security interest
in and to all property and assets of the Debtor of every kind and description,
whether now existing or hereafter acquired, produced or created, including
without limitation, all accounts receivable, chattel paper, instruments, stock
certificates, notes, drafts, acceptances and other forms of instruments or
obligations, now or hereafter owing to the Debtor, whether arising from the sale
of goods or rendition of services by the Debtor, all of the Debtor's rights in,
to and under all purchase orders, now or hereafter received by the Debtor for
goods or services, and all monies due or to become due to the Debtor under all
contracts for the sale of goods or the performance of services by the Debtor
(whether or not yet earned by performance), or in connection with any other
transaction (including, without limitation, the right to receive the proceeds of
said purchase orders and contracts), and all collateral security and guarantees
of any kind given by any obligor with respect to any of the foregoing; all
equipment and fixtures; all motor vehicles; all general intangibles; all
documents; all of the Debtor's inventory (within the meaning of the Uniform
Commercial Code as, from time to time, in effect in the State of New York;
hereinafter, the "Uniform Commercial Code"), including, without limitation,
goods, merchandise and other personal property, now or hereafter owned or
acquired and wheresoever located, which are held for sale or lease or are
fumished or to be furnished under a contract of service or are raw
<PAGE> 2
materials used or consumed or to be consumed in the Debtor's businesses, and all
additions and accessions thereto, and all returns and refunds applicable thereto
and the right to collect the same; all proceeds and products thereof, and all
increases, substitutions, replacements, additions and accessions thereto (all of
the foregoing, hereinafter referred to collectively as the "Collateral").
The security interest granted herein to each Lender is an
undivided interest in the Collateral as a tenant-in-common with every other
Lender. Each Lender may realize upon the Collateral, as set forth in Section 4
hereof, to the extent of its Loan Percentage (as hereinafter defined), as
computed from time to time. The amount of each Lender's "Loan Percentage" shall
be the percentage computed by dividing the indebtedness owed to such Lender by
the aggregate indebtedness owed to all Lenders.
2. Covenants of Debtor. The Debtor covenants and agrees as follows:
(a) The lien granted by the Debtor to the Lenders in the
Collateral is a first ideal priority security interest. There are no other
mortgages, pledges, liens, security interests, claims, encumbrances or changes
of any kind ("Encumbrances") on any of the property of the Debtor other than as
set forth in Schedule B and the Debtor shall not intentionally grant any further
Encumbrances without the Agent's written consent. At the request of the Debtor,
the Lenders shall subordinate the lien granted to them hereby to liens of the
nature specified in Items (v) and (vi) of Schedule B in a manner reasonably
acceptable to the Lenders.
(b) To pay and perform all of the obligations secured by this
Agreement according to their terms.
(c) To defend the title to the Collateral against all persons
and against all claims and demands whatsoever, which Collateral the Debtor
hereby represents is lawfully owned by the Debtor and is now free and clear of
any and all liens, security interests, claims, charges, encumbrances, taxes and
assessments, except for the security interest granted hereby and the security
interests described on Schedule B hereto.
-2-
<PAGE> 3
(d) On at least twenty (20) days notice in writing by the Agent,
to do the following: furnish further assurance of title, execute any written
agreement or do any other acts necessary to effectuate the purposes and
provisions of this Agreement, execute any instrument or statement required by
law or otherwise in order to perfect, continue or terminate the security
interest of the Agent, on behalf of the Lenders, in the Collateral and pay all
costs of filing in connection therewith.
(e) To keep the Collateral, at the Debtor's expense, in good
repair and condition (reasonable wear and tear excepted).
(f) To retain possession of the Collateral at the locations
specified in SCHEDULE C, and not to remove, sell, exchange, assign, loan,
deliver, lease, license, mortgage or otherwise dispose of same (other than
inventory sold or receivables collected or cash disbursements made in the
ordinary course of business so long as an Event of Default has not occurred and
is not continuing hereunder) without the prior written consent of the Agent.
(g) To keep the Collateral free and clear of all further liens,
charges and encumbrances, other than those identified on SCHEDULE B.
(h) To pay, within twenty (20) days of the date when due, all
taxes, assessments and license fees relating to the Collateral except as same
may be contested by the Debtor in good faith by proper proceedings and providing
adequate reserves for the accrual of same are maintained if required by
generally accepted accounting principles.
(i) To keep the Collateral and records relating to the
Collateral available for inspection by the Agent and each Lender at all
reasonable times.
(j) To keep the Collateral fully insured against loss by fire,
theft and other casualties. The Debtor shall give prompt written notice to the
Agent and to insurers of loss or damage to the Collateral and shall promptly
file proofs of loss with insurers.
-3-
<PAGE> 4
(k) To comply with the material terms and conditions of any
leases covering the premises wherein the Collateral is located and any material
orders, ordinances, laws or statutes applicable to the Debtor of any city, state
or governmental department having jurisdiction with respect to such premises or
the conduct of business thereon, if the failure to comply therewith results in
the termination of any such lease or the inability of the Debtor to operate its
business thereon.
3. Financing Statements. The Agent, for itself and on behalf of each
of the other Lenders, is hereby authorized by the Debtor to sign on behalf of
the Debtor and file Form UCC-1 Financing Statements to perfect the security
interest in the Collateral granted herein and to file Form UCC-3 Amendments,
Releases and Termination Statements.
4. Events of Default and Remedies.
(a) The following shall constitute an "Event of Default" by the
Debtor hereunder:
(1) An Event of Default (as defined therein) shall occur
under any of the Notes, after giving effect to all notice provisions and cure
periods provided for therein;
(2) Failure by the Debtor to comply with or perform any
provision of this Agreement, provided, however, that with respect to a failure
by the Debtor to comply with any of the provisions of Section 2(c), (e), (i),
(j), and (k) of this Agreement, such failure is not remedied within twenty (20)
days after the Debtor's receipt of written notice of same; or
(3) Subjection of any of the Collateral to levy of
execution or other judicial process, which is not released, discharged,
dismissed, stayed or fully bonded for a period of 30 days or more after its
entry, issue or stay, as the case may be.
(b) Upon any default by the Debtor hereunder, the
Agent, on behalf of the Lenders, shall have all the rights, remedies and
privileges with respect to repossession, retention and sale of any or all of the
Collateral of the Debtor and disposition of the proceeds as are accorded by the
applicable sections of the Uniform Commercial Code.
-4-
<PAGE> 5
(c) Upon any default by the Debtor hereunder and upon
demand of the Agent, the Debtor shall assemble the Collateral and make it
available to the Agent at the place and at the time designated in the demand.
(d) If the Debtor shall default in the performance of
any of the provisions of this Agreement on the Debtor's part to be performed,
the Agent may, or at the direction of the Required Lenders (as hereinafter
defined in Section 5(g)) shall, perform same for the Debtor's accounts and any
monies expended in so doing shall be chargeable with interest to the Debtor and
added to the indebtedness to the Lenders secured hereby, ratably according to
their respective Loan Percentage.
5. The Agent.
(a) Authorization.
(1) Each Lender has irrevocably authorized the Agent, as
agent hereunder, to take such action on its behalf and as its agent under this
Agreement, the Note executed in favor of such Lender and all other documents
executed in connection therewith (collectively, the "Loan Documents"), and to
exercise such powers as are specifically delegated to it hereunder and
thereunder, including, without limitation, powers with respect to the
enforcement and collection of the Obligations, and to exercise such other powers
as are reasonably incidental thereto; provided, however, that the Agent shall
not, without the express authorization of the Required Lenders (as hereinafter
defined), be authorized to waive any payment default under the Notes.
(2) Except as set forth in subparagraph (1) hereinabove,
the Agent shall not be required to but may, in its sole discretion, exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Required Lenders, and such instructions shall be
binding upon all Lenders; provided, however, that the Agent shall not be
required to take any action which exposes the Agent to personal liability or
which is contrary to this Agreement or applicable law.
-5-
<PAGE> 6
(b) Notices.
(1) The Agent shall transmit promptly to each Lender each
notice received by it from the Debtor hereunder which the Debtor is not required
to furnish to the Lenders and each of the Lenders shall transmit promptly to the
Agent each notice received by it from the Debtor which is not otherwise required
to be delivered to the Agent by the terms hereof. The Agent shall be under no
obligation toward any Lender to ascertain or inquire as to the performance or
observance of any of the terms, covenants or conditions hereof to be performed
or observed by the Debtor, but the Agent and each Lender shall promptly notify
one another of any Event of Default of which it has actual notice.
(2) Each Lender expressly authorizes the Agent to collect
all sums due such Lender under the Loan Documents. The Agent shall promptly
disburse to the Lenders (to the extent of their ratable interest therein
according to the outstanding Loan Percentage of each Lender) available funds
received by it for the benefit of the Lenders.
(c) Exculpation. In exercising its duties and powers hereunder,
the Agent shall exercise the same care which it would exercise in dealing with
loans for its own account, but neither the Agent nor any of its directors,
officers, employees or attorneys shall be responsible for the truth or accuracy
of any representations or warranties given or made herein or for the validity,
effectiveness, sufficiency or enforceability of this Agreement, or any other
Loan Documents, and the Agent or any of its directors, officers, employees or
attorneys shall not be liable to any of the Lenders for any action taken or
omitted to be taken by it or any of them under the Loan Documents, except in the
case of its or their wilful misconduct or gross negligence. Each of the Lenders
represents and warrants to the Agent that it has made its own independent
judgment with respect to entering into this Agreement and the other Loan
Documents and undertaking its obligations hereunder and thereunder. Each Lender
also acknowledges that it will, independently and without reliance upon the
Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the Loan Documents. The
powers conferred by this Agreement on the Agent hereunder are solely to protect
its and the Lenders' interest in the Collateral and shall not impose any duty
upon the Agent to exercise any such powers. Except for
-6-
<PAGE> 7
the safe custody of any Collateral in its possession and the accounting for
monies actually received by it hereunder, the Agent shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to the Collateral. Neither the
Agent nor any of its directors, officers, employees (excluding any independent
contractors employed by the Agent) or attorneys shall have any responsibility
(1) to the Debtor on account of the failure or delay in performance or breach of
any Lender of any of its obligations hereunder, or (2) to any Lender on account
of the failure of or delay in performance or breach by any other Lender or the
Debtors of any of their obligations hereunder.
(d) Reliance. The Agent, as Agent hereunder, (1) shall be entitled to
rely on any communication, instrument or document believed by it to be genuine
or correct and to have been signed or sent by a person or persons believed by it
to be the proper person or persons; (2) shall be entitled to consult with legal
counsel, independent public accountants and other professional advisers and
experts selected by it, and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (3) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations made in or in connection with this Agreement; (4) shall not have
any duty to ascertain or to inquire as to the performance or observance of any
of the terms, covenants or conditions of this Agreement on the part of the
Debtor or to inspect the property (including the books and records) of the
Debtor; (5) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or venue of this
Agreement or any other instrument or document furnished pursuant hereto; and (6)
shall incur no liability under or in respect of this Agreement by acting upon
notice, consent, certificate or other instrument or writing (which may be by
telegram, telecopier, cable or telex) believed by it to be genuine and signed or
sent by the proper party or parties.
(e) Expenses and Indemnification. Each Lender agrees (1) to reimburse
the Agent, as agent hereunder, on demand, pro rata in accordance with its Loan
Percentage, for all expenses incurred by the Agent in connection with the
preparation, execution, operation and enforcement of, or legal advice in respect
of rights or responsibilities under, this Agreement and any document delivered
in connection herewith, to the extent that such expenses are not timely
reimbursed or reimbursable by the Debtor, and (2) to indemnify and hold harmless
the Agent and
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<PAGE> 8
any of its directors, officers or employees, on demand, pro rata in accordance
with its Loan Percentage, from and against all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against the Agent in any way relating to or arising out of the Loan
Documents or any action taken or omitted by the Agent under the Loan Documents,
to the extent that expenses and costs incurred by it in connection with such
liability are not reimbursed by the Debtor; provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Agent's gross negligence or wilful misconduct.
(f) Other Lenders. None of the Lenders (other than the Agent) shall
be deemed to be agent of any other Lenders; none of such Lenders or any of their
respective directors, officers or employees shall have any responsibility to the
Debtor on account of the failure or delay in performance or breach of any other
Lender of any of its obligations hereunder or to any other Lender on account of
the failure of or delay in performance or breach by any other Lender or the
Debtor of its obligations hereunder.
(g) Removal or Resignation of Agent. The Agent may resign at any time
by giving written notice thereof to the Lenders and the Debtor and may be
removed at any time, with or without cause, by the Required Lenders, and upon
any such resignation or removal the Required Lenders shall have the night to
appoint a successor Agent. "Required Lenders" shall mean any Lender or Lenders
(1) holding Notes evidencing, in the aggregate, an amount equal to not less than
75% of the aggregate principal amount of all Notes then outstanding; and (2)
constituting at least 51% in number of all Lenders holding unpaid Notes. If no
successor Agent shall have been so appointed by the Required Lenders, and shall
have accepted such appointment, within thirty (30) days after the retiring
Agent's giving of notice of resignation or the Required Lenders' removal of the
retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent. Upon the acceptance by a successor Agent of its appointment as
Agent hereunder, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Agreement. After any retiring Agent's resignation or removal hereunder as
Agent, the provisions of this Section 5 shall inure to
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<PAGE> 9
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
6. Fees and Expenses of Agent. Upon any default, the reasonable
attorneys' fees and the legal and other expenses for pursuing, searching for,
receiving, taking, keeping, storing, advertising for the sale of and selling the
Collateral incurred by the Agent shall be chargeable to and paid by the Debtor.
7. Liability for Deficiency. The Debtor shall remain liable for any
deficiency under the Obligations resulting from a sale of the Collateral and
shall pay any such deficiency forthwith on demand.
8. Waiver. Waiver of or acquiescence in any default by the Debtor, or
failure of the Agent to insist upon strict performance by the Debtor of any
warranties or covenants in this Agreement, shall not constitute a waiver of any
subsequent or other default or failure.
9. Notices. All notices to any party hereof shall be in writing and shall
be sufficiently given at the time of delivery if delivered to such party in
person, by Federal Express or similar receipted delivery, or on the fifth (5th)
business day after mailing if mailed, postage prepaid, by certified mail, return
receipt requested, addressed to such party at his address herein set forth or to
such other address as he, by notice to the others, may designate from time to
time.
10. Captions. The captions are inserted only as a matter of convenience
and for reference and in no way define, limit or describe the scope of this
Agreement nor the intent of any provision thereof.
11. Successors and Assigns. The terms, warranties and agreements herein
contained shall bind and inure to the benefit of the respective parties hereto,
and their respective legal representatives, successors and assigns.
12. Gender and Number. The gender and number used in this Agreement are
used as a reference term only and shall apply with the same effect whether the
parties are of the
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<PAGE> 10
masculine or feminine gender, corporate or other form, and the singular shall
likewise include the plural.
13. Modification of Agreement. This Agreement may not be changed orally.
14. Governinq Law. This Agreement shall be governed as to validity,
interpretation, construction, effect and in all other respects by the internal
law of the State of New York. The Debtor (1) agrees that any legal suit, action
or proceeding arising out of or relating to this Agreement shall be instituted
exclusively in New York State Supreme Court, County of New York or in the United
States District Court for the Southern District of New York, (2) waives any
objection to the venue of any such suit, action or proceeding and the right to
assert that such forum is not a convenient forum, and (3) irrevocably consents
to the jurisdiction of the New York State Supreme Court, County of New York, and
the United States District Court for the Southern District of New York in any
such suit, action or proceeding, and the Debtor further agrees to accept and
acknowledge service of any and all process which may be served in any such suit,
action or proceeding in New York State Supreme Court, County of New York, or in
the United States District Court for the Southern District of New York and
agrees that service of process upon it mailed by certified mail to its address
shall be deemed in every respect effective service of process upon it in any
such suit, action or proceeding.
IN WITNESS WHEREOF, the parties have signed this agreement on the day
and year first above written.
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<PAGE> 11
DEBTOR: LENDERS:
EDUDATA CORPORATION Each Lender has entered into a
Subscription Agreement with Edudata
Corporation that has been accepted by
By: /s/ ROBERT H. GUREVITCH Edudata Corporation as of the date hereof.
---------------------------- Pursuant to the terms of each such
Name: Robert H. Gurevitch Subscription Agreement, the execution of
Title: CEO/Chairman each Subscription Agreement by such
Lender is deemed to constitute the execu-
AGENT: tion of this Agreement by such Lender and
the agreement by such Lender to be bound
M.H. MEYERSON & CO., INC. by the terms of this Agreement.
By: /s/ RONALD I. HELLER
----------------------------
Name: Ronald I. Heller
Title:
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<PAGE> 1
EXHIBIT 10.4
EDUDATA CORPORATION
AGENCY AGREEMENT
As of October 23,1996
M.H. Meyerson & Co.. Inc.
525 Washington Boulevard
Jersey City, New Jersey 07310
Gentlemen:
This Agreement is being executed by the parties hereto this 26th day
of November, 1996, but effective as of October 23, 1996, and reflecting
modifications intended to be effective as of November 14, 1996.
Edudata Corporation, a Delaware corporation ("Company"), proposes to
offer for sale in a private placement ("Offering"), thirty-two (32) units
("Units) at a purchase price of $50,000 per Unit (or an aggregate of
$1,600,000), each Unit consisting of a $50,000 principal amount secured
convertible promissory note ("Note(s)") and a Warrant ("Warrant") to purchase
25,000 shares of common stock, $.01 par value per share ("Common Stock"). You
may accept subscriptions for fractional Units in your discretion and with the
Company's consent. The Notes and Warrants will be issued in the form of
Exhibits B and E to the Term Sheet (as defined below) hereto. The Units will
be offered on a "best efforts -- all or none" basis, in accordance with Section
4(2) and/or 3(b) of the Securities Act of 1933, as amended ("Securities Act"),
and Rules 501-506 of Regulation D ("Reg D") promulgated thereunder, only to
"accredited investors," as defined in Reg D.
The Company will issue to purchasers of Units additional Warrants
("Additional Warrants") in certain circumstances as set forth in Supplement No.
1 (as defined below) and Section 5.8 of this Agreement. For purposes of this
Agreement, (i) the term "Warrants" shall be deemed to include the Additional
Warrants as if they were the Warrants originally issued as part of the Units
unless the context otherwise requires.
The Units, Notes, Warrants and Additional Warrants have the terms and
conditions reflected in the Company's Confidential Term Sheet dated October 23,
1996, as supplemented by Supplement No. 1 (dated November 14, 1996)
("Supplement No. 1") to the Confidential Term
<PAGE> 2
Sheet dated October 23, 1996, to be delivered to each purchaser of Units
(together the "Term Sheet"). The Term Sheet, together with all exhibits
thereto, including the Subscription Agreement to be executed by each purchaser
and the Company, as such Subscription Agreement is amended by Supplement No. 1,
will be referred to herein as the "Offering Documents." M.H. Meyerson & Co.,
Inc. is sometimes referred to herein as "MHM" or the "Placement Agent." As used
herein, unless otherwise indicated, the term "Company" shall refer to and
include Edudata Corporation and its Subsidiary (as defined in Section 2.6).
1. Appointment of Placement Agent: The Offering Period.
1.1. Appointment of Placement Agent. You are hereby appointed
exclusive Placement Agent of the Company during the offering period herein
specified ("Offering Period") for the purpose of assisting the Company in
placing the Units with purchasers who are qualified accredited investors
("Subscribers"). The Offering Period shall commence on the day the Offering
Documents are first made available to you by the Company and shall continue
until November 15, 1996; provided, however, that the Offering Period may be
extended for an additional period not to exceed thirty (30) days by the mutual
decision of the Company and the Placement Agent without notice to any
Subscriber. If, at any time during the Offering Period, subscriptions for the
32 Units have been received (including up to 5 Units that may be subscribed for
by the holders ("October Note Holders") of the October Notes (as defined in the
Term Sheet) and paid for by tender of the October Notes) and accepted (and
funds in payment therefor have cleared) by the Company, then, upon the mutual
consent of the Company and the Placement Agent, a closing shall take place with
respect to such accepted subscriptions ("Closing"). If the Units are not sold
prior to the end of the Offering Period (including any extension thereof), the
Offering will be terminated and all funds received from Subscribers (and the
October Notes if they have been tendered) will be returned, without interest
and without any deduction. The day that the Offering Period terminates is
hereinafter referred to as the "Termination Date." You hereby accept such
agency and agree to assist the Company in placing Units with the Subscribers.
Your agency hereunder is not terminable by the Company except upon termination
of the Offering or breach by you of your obligations hereunder.
1.2. Offering Documents. The Company will provide the Placement
Agent with a sufficient number of copies of the Offering Documents for delivery
to potential Subscribers and such other information, documents and instruments
which the Placement Agent may reasonably request in order to comply with the
rules, regulations and judicial and administrative
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<PAGE> 3
interpretations respecting compliance with applicable state and federal
statutes related to the Offering.
1.3. Segregation of Funds. Each subscriber for Units shall tender
to the Placement Agent a check payable to "M.H. Meyerson & Co., Inc. -- Edudata
Special Account" in the amount of the investment subscribed for (or with
respect to the October Note Holders, they shall tender the October Notes),
which funds shall be held by the Placement Agent in a segregated noninterest
bearing bank account in accordance with Rules 10b-9 and 15c2-4 promulgated
under the Securities Exchange Act of 1934 ("Exchange Act"), as set forth in the
Offering Documents.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants as follows:
2.1. Due Incorporation and Qualification. The Company has been
duly incorporated, is validly existing and is in good standing under the laws
of its state of incorporation and is duly qualified as a foreign corporation
for the transaction of business and is in good standing in each jurisdiction in
which the ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to so qualify would not
have a material adverse effect on the business of the Company and the
Subsidiary taken as a whole. The Company has all requisite corporate power and
authority necessary to own or hold its properties and conduct its business as
described in the Offering Documents.
2.2. Authorized Capital. As of the date of this Agreement, the
Company is authorized to issue 10,000,000 shares of Common Stock, of which
8,746,900 shares are currently issued and outstanding. All of the issued and
outstanding shares of Common Stock have been duly and validly authorized and
issued and are fully paid and non-assessable. None of the holders of such
outstanding shares of Common Stock is subject to personal liability solely by
reason of being such a holder. The offers and sales of such outstanding shares
of Common Stock were at all relevant times either registered under the
Securities Act and the applicable state securities or Blue Sky laws, or exempt
from such registration.
2.3. No Preemptive Rights; Options; Registration Rights. Except as
set forth on Schedule 2.3, there are no preemptive or other rights to subscribe
for or purchase, or any restriction upon the voting or transfer of any shares
of Common Stock or other securities of the Company, under the Certificate of
Incorporation (and the proposed Amended and Restated Certificate of
Incorporation in substantially the form of Exhibit A to the Term Sheet
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<PAGE> 4
("Amendment") to be filed by the Company subsequent to the closing of the
Offering as provided in Section 5.7) or By-Laws of the Company or under any
agreement or other outstanding instrument to which the Company is a party or by
which it is bound. Except as set forth on Schedule 2.3, the Company does not
have outstanding any option, warrant, convertible security, or other right
permitting or requiring it to issue, or otherwise to purchase or convert any
obligation into, shares of Common Stock or other securities of the Company and
the Company has not agreed to issue or sell any shares of Common Stock or other
securities of the Company. No holder of any of the Company's securities has
any rights, "demand," "piggyback" or otherwise, to have such securities
registered or to demand the filing of a registration statement.
2.4. Financial Statements. The financial statements of the Company
included in the Offering Documents ("Financials") fairly present the financial
position and results of operations of the Company at the dates thereof and for
the periods covered thereby, subject, in the case of interim periods, to
year-end adjustments and normal recurring accruals. The Company has no
material liabilities or obligations, contingent, direct, indirect or otherwise
except (i) as set forth in the latest balance sheet included in the Financials
(the date of such Financials being referred to as the "Financial Statements
Date"), (ii) those incurred in the ordinary course of business since the date
of the Financials and (iii) as set forth on Schedule 2.4. Schedule 2.4 also
sets forth all outstanding amounts due to affiliates or any employees, officers
or directors of the Company, including, but not limited to, accrued salaries,
loans, etc.
2.5. No Material Adverse Changes. Except as otherwise stated in
the Offering Documents, since the Financial Statements Date, there has not been
any change in the condition, financial or otherwise, of the Company which could
materially adversely affect its ability to conduct its operations as described
in the Offering Documents.
2.6. Subsidiary. Except for the entity set forth in Schedule 2.6
(the "Subsidiary"), the Company has no subsidiaries and has no interest in,
shares of capital stock of or right to acquire an interest in or shares of
capital stock of any other corporation, limited liability company, partnership
or other entity. The Company owns all of the outstanding capital stock, of the
Subsidiary free and clear of all liens, charges and encumbrances of any kind
whatsoever, and there are no outstanding rights to acquire, or directly or
indirectly control the vote or transfer of, any of the capital stock of the
Subsidiary. The representations and warranties made by the Company in this
Agreement shall also apply and be true with respect to the Subsidiary as if
each
4
<PAGE> 5
representation and warranty contained herein made specific reference to the
Subsidiary each time the term "Company" is used.
2.7. Taxes. Except as set forth on Schedule 2.7, the Company has
filed all federal tax returns and all state and municipal and local tax returns
(whether relating to income, sales, franchise, withholding, real or personal
property or other types of taxes) required to be filed under the laws of the
United States and applicable states, and has paid in full all taxes which have
become due pursuant to such returns or claimed to be due by any taxing
authority or otherwise due and owing; provided, however, that the Company has
not paid any tax, assessment, charge, levy or license fee that it is contesting
in good faith and by proper proceedings and adequate reserves for the accrual
of same are maintained if required by generally accepted accounting principles.
Each of the tax returns heretofore filed by the Company correctly and
accurately reflects the amount of its tax liability thereunder. Except as set
forth on Schedule 2.7, the Company has withheld, collected and paid all levies,
assessments, license fees and taxes to the extent required. As used herein,
"tax" or "taxes" include all taxes, charges, fees, levies or other assessments
imposed by any Federal, state, local, or foreign taxing authority, including,
without limitation, income, premium, recapture, credit, excise, property,
sales, use, occupation, service, service use, leasing, leasing use, value
added, transfer, payroll, employment, license, stamp, franchise or similar
taxes (including any interest earned thereon or penalties or additions
attributable thereto).
2.8. Finder's Fees; Other Underwriters. The Company is not
obligated to pay a finder's fee to anyone in connection with the introduction
of the Company to the Placement Agent or the consummation of the Offering
contemplated hereunder or the public offering ("Public Offering") contemplated
in the letter of intent, dated August 9, 1996, as amended on October 23, 1996,
between the Company and the Placement Agent ("Letter of Intent"). Except as
set forth in Schedule 2.8, the Company has not paid or issued any monies,
securities or other compensation to any member of the National Association of
Securities Dealers, Inc. ("NASD") or to any associate or affiliate of such a
member or to any other person in consideration for such person raising funds
for the Company or providing consulting services to the Company during the
previous 12 months, except payments made to the Placement Agent. The Company
is not indebted to or owes any monies to any NASD member, associate or
affiliate.
2.9. No Pending Actions. Except as set forth in the Offering
Documents, there are no actions, suits, proceedings, claims or hearings of any
kind or nature existing or pending (or, to
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<PAGE> 6
the best knowledge of the Company, threatened) or, to the best knowledge of the
Company, any investigations or inquiries, before or by any court, or other
governmental authority, tribunal or instrumentality (or, to the Company's best
knowledge, any state of facts which would give rise thereto), pending or
threatened against the Company, or involving the properties of the Company,
which might result in any material adverse change in the business, properties,
financial position or results of operations of the Company, or which might
adversely affect the transactions or other sets contemplated by this Agreement
or the validity or enforceability of this Agreement. Schedule 2.9 sets forth
certain claims asserted against the Company, none of which, if resolved in a
manner adverse to the Company, would have a material adverse effect on the
Company.
2.10. Private Offering Exemption: Offering Documents. The Offering
Documents conform in all material respects with the requirements of Section
4(2) and/or 3(b) of the Securities Act and Rules 501-506 of Reg D and with the
requirements of all other applicable rules and regulations of the Securities
and Exchange Commission ("Commission") currently in effect relating to "private
offerings." The Offering Documents contain all material statements which are
required to be stated therein in accordance with such requirements and do not
contain any 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,
in the light of the circumstances under which they were made, not misleading.
The Notes and Warrants conform to the descriptions thereof contained in the
Subscription Agreement, as amended by Supplement No. 1. When any exhibit to the
Term Sheet that was required to be filed with the Commission was filed with the
Commission pursuant to the Exchange Act or the Regulations promulgated
thereunder, such exhibit complied in all material respects with the applicable
provisions of the Exchange Act and the Regulations promulgated thereunder and
did not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Assuming that (i) a proper Form D is filed in accordance with
Rule 503 of Reg D, (ii) the offer and the sale of the Units by the Placement
Agent was made in compliance with Rule 502(c) of Reg D and/or Section 4(2) of
the Securities Act, (iii) that the representations of the Subscribers in the
Subscription Agreements signed by them are true and correct (which facts will
not be independently verified by the Company), and (iv) each Subscriber signs
and delivers a copy of Supplement No. 1, the sale of Units in the Offering is
exempt from registration under the Securities Act and is in compliance with Reg
D.
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<PAGE> 7
2.11. Due Authorization: Consents. The Company has full right,
power and authority to enter into this Agreement and the Notes, the Warrants,
the Subscription Agreements, as amended by Supplement No. 1, and the Security
Agreement to be entered into between the Company, the Subscribers and you, as
agent for the Subscribers in the form annexed as Exhibit D to the Term Sheet
(the "Security Agreement") (collectively the "Offering Agreements") and to
perform all of its obligations hereunder and thereunder. The execution and
delivery of this Agreement and the Offering Agreements has been duly authorized
by all necessary corporate action and no further corporate action or approval
is or will be required for their respective execution, delivery and
performance. This Agreement constitutes, and the Offering Agreements upon
execution and delivery will constitute, valid and binding obligations of the
Company, enforceable in accordance with their respective terms (except (i) as
the enforceability thereof may be limited by bankruptcy or other laws now or
hereafter in effect relating to or affecting creditors' rights generally, (ii)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceedings therefor may be brought, and (iii) that
the enforceability of the indemnification and contribution provisions of the
respective agreements may be limited by the federal and state securities laws
and public policy), and, except as set forth on Schedule 2.11 (a), no consent,
approval, authorization, order of, or filing with, any court or governmental
authority or any other third party is required to consummate the transactions
contemplated by this Agreement or the Offering Documents, and except that the
offer and sale of the Units in certain jurisdictions may be subject to the
provisions of the securities or Blue Sky laws of such jurisdictions.
Additionally, no consents, approvals, authorizations, orders of, filings with,
any court or governmental authority or any other third party is required to
consummate the transactions contemplated by the Letter of Intent, except that
the registration statement on Forms S-1 or SB-2 and the registration statement
an Form 8-A must be declared effective by the Securities and Exchange
Commission, the shares must be approved for listing on Nasdaq, the compensation
payable to MHM must be approved by the NASD and the offer and sale of the
Company's securities may be subject to the provisions of the Blue Sky laws of
certain states. Subject to the liens set forth in Schedule 2.11(b), the
Security Agreement creates a valid security interest and lien, and, upon filing
the Financing Statements described in Section 3 thereof, will create a valid
and perfected first priority security interest and lien, and to all of the
Company's right, title and interest in and to the Collateral, as defined in the
Security Agreement
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<PAGE> 8
2.12. Non-Contravention. The Company's execution and delivery of
this Agreement and the Offering Agreements and the incurrence of the
obligations herein and therein set forth, and the consummation of the
transactions contemplated herein and therein will not (i) conflict with, or
constitute a breach of, or a default under, the Certificate of Incorporation or
By-Laws of the Company, or any contract, lease or other agreement or instrument
to which the Company is a party or in which the Company has a beneficial
interest or by which the Company is bound, all of which are set forth in
Schedule 2.12; (ii) violate any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or any of its properties or
business, except where such violation(s) would not have a material adverse
effect, singly or in the aggregate, on the Company; or (iii) have any material
adverse affect on any permit, certification, registration, approval, consent,
license or franchise necessary for the Company to own or lease and operate any
of its properties and to conduct its business or the ability of the Company to
make use thereof.
2.13. Shares and Warrant Shares. The issuance of the shares of
Common Stock issuable upon conversion of the Notes ("Note Shares") and upon
exercise of the Warrants ("Warrant Shares") have been duly and validly
authorized, and such shares, when issued and delivered in accordance with the
terms of this Agreement and the Warrants, respectively, will be duly and
validly issued, fully paid and non-assessable. The holders of the Note Shares
and the Warrant Shares will not be subject to personal liability by reason of
being such holders and will not be subject to the preemptive rights of any
holders of any security of the Company or similar contractual rights granted by
the Company. Except for those steps required by the first sentence of Section
5.7 of this Agreement, all corporate action required to be taken for the
authorization, issuance and sale of the Note Shares and the Warrant Shares has
been duly and validly taken.
2.14. No Right to Purchase. The issuance of the Units in the
Offering will not give any holder of any of the Company's outstanding shares of
Common Stock, options, warrants or other convertible securities or rights to
purchase securities of the Company (i) the right to purchase any additional
shares of Common Stock or any other securities of the Company, or (ii) the
right to purchase any securities at a reduced price.
2.15. No Regulatory Problems. The Company (i) has not filed a
registration statement which is the subject of any pending proceeding or
examination under Section 8 of the Securities Act, and is not and has not been
the subject of any refusal order or stop order thereunder; (ii) is not subject
to any pending proceeding under Rule 258 of the Securities Act or any similar
rule
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<PAGE> 9
adopted under Section 3(b) of the Securities Act, or to an order entered
thereunder; (iii) has not been convicted of any felony or misdemeanor in
connection with the purchase or sale of any security or involving the making of
any false filing with the Commission; (iv) is not subject to any order,
judgment, or decree of any court of competent jurisdiction temporarily or
preliminarily restraining or enjoining, or is subject to any order, judgment,
or decree of any court of competent jurisdiction, permanently restraining or
enjoining, the Company from engaging in or continuing any conduct or practice
in connection with the purchase or sale of any security or involving the making
of any false filing with the Commission; and (v) is not subject to a United
States Postal Service false representation order entered under Section 3005 of
Title 39, United States Code or a temporary restraining order or preliminary
injunction entered under Section 3007 of Title 39, United States Code, with
respect to conduct alleged to have violated Section 3005 of Title 39, United
States Code. None of the Company's directors, officers, or beneficial owners
of 10 percent or more of any class of its equity securities (i) has been
convicted of any felony or misdemeanor in connection with the purchase or sale
of any security, involving the making of a false Wing with the Commission, or
arising out of the conduct of the business of an underwriter, broker, dealer,
municipal securities dealer, or investment advisor, (ii) is subject to any
order, judgment or decree of any court of competent jurisdiction temporarily or
preliminarily enjoining or restraining. or is subject to any order, judgment or
decree of any court of competent jurisdiction permanently enjoining or
restraining such person from engaging in or continuing any conduct or practice
in connection with the purchase or sale of any security, or involving the
making of a false filing with the Commission, or arising out of the conduct of
the business of an underwriter, broker, dealer, municipal securities dealer, or
investment adviser; (iii) is subject to an order of the Commission entered
pursuant to Section 15(b), 15B(a) or 15B(c) of the Exchange Act, or is subject
to an order of the Commission entered pursuant to Section 203(e) or (f) of the
Investment Advisers Act of 11940; (iv) is suspended or expelled from membership
in, or suspended or barred from association with a member of, an exchange
registered as a national securities exchange pursuant to Section 6 of the
Exchange Act, an association registered as a national securities association
under Section 15A of the Exchange Act, or a Canadian securities exchange or
association for any act or omission to act constituting conduct inconsistent
with just and equitable principles of trade: or (v) is subject to a United
States Postal Service false representation order entered under Section 3005 of
Title 39, United States Code, or is subject to a restraining order or
preliminary injunction entered under Section 3007 of Title 39, United States
Code, with respect to conduct alleged to have violated Section 3005 of Title
39, United States Code.
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<PAGE> 10
2.16. No Defaults or Violations. Except as set forth in Schedule
2.16, the Company is not in default in the performance and observance of any
term, covenant or condition of any license, contract, indenture, mortgage, deed
of trust, note, loan or credit agreement, or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which the Company may be bound
or to which any of the properties or assets of the Company is subject, except
defaults which (singly or in the aggregate) would not have a material adverse
effect on the Company. The Company is not in violation of any term or
provision of its Certificate of Incorporation or By-Laws. The Company is not
in violation of any franchise, license, permit, applicable law, rule,
regulation, judgment or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or any of its properties or
business, except where such violation would not have a material adverse effect
on the Company.
2.17. Conduct of Business; Compliance. Except as disclosed in
Supplement No. 1, the Company has all requisite corporate power and authority,
and has all necessary authorizations, approvals, orders, licenses, certificates
and permits of and from all governmental regulatory officials and bodies, to
own or lease its properties and conduct its business as described in the
Offering Documents. The disclosures in the Offering Documents concerning the
effects of federal, state and local regulation on the Company's business as
currently contemplated are correct in all material respects and do not omit to
state a material fact. The Company is in compliance with all federal, state
and local laws, rules and regulations applicable to the conduct of its
business, except where noncompliance would not have a material adverse effect
on the Company. Except as disclosed in Supplement No. 1, the products
manufactured and/or distributed by the Company and the processes used in the
production and/or storage of such products do not violate any applicable state
or federal laws, regulations or rules, including those promulgated by the Food
and Drug Administration, Environmental Protection Agency or applicable state
agencies.
2.18. Title to Property; insurance. The Company has good and
marketable title to, or valid and enforceable leasehold estates in, all items
of real and personal property (tangible and intangible) owned or leased by it,
free and clear of all liens, encumbrances, claims, security interests, defects
and restrictions of any material nature whatsoever. The Company has adequately
insured its properties against loss or damage by fire or other casualty and
maintains, in adequate amounts.
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2.19. Intangibles. The Company owns or possesses the requisite
licenses or rights to use all trademarks, service marks, service names, trade
names, patents and patent applications, copyrights and other rights
(collectively, "Intangibles") used by the Company in its business or relating
to products sold by the Company. None of the Company's Intangibles have been
registered in the United States Patent and Trademark Office. There is no claim
or action by any person pertaining to, or proceeding pending or, to the
Company's knowledge, threatened and the Company has not received any notice of
conflict with, the asserted rights of others which challenges the exclusive
right of the Company with respect to any Intangibles used in the conduct of the
Company's business except as described in the Offering Documents. The
Intangibles and the Company's current products, services and processes do not
infringe on any intangibles hold by any third party. To the best of the
Company's knowledge, no others have infringed upon the Intangibles of the
Company.
2.20. Exchange Act Reports. The Company is subject to the reporting
requirements of the Securities Act and the Exchange Act and, except for the
Form 10-QSB for the quarter ended April 30, 1995, for the past three years has
filed all reports and statements required under the Securities Act and the
Exchange Act on a timely basis, and each report and statement was true and
complete in all material respects when filed.
2.21. Management Team. To the best of the Company's knowledge, the
background and other information concerning the officers and directors of the
Company previously furnished to the Placement Agent and each of such person's
responses to the Directors' and Officers' Questionnaires are true and accurate
in all material respects.
3. Representations and Warranties of the Placement Agent. The Placement
Agent represents and warrants as follows:
3.1. Due Incorporation. The Placement Agent is duly incorporated
and validly existing and in good standing under the laws of its state of
incorporation and is duly qualified as a foreign corporation for the
transaction of business and is in good standing in each jurisdiction where the
failure to be so qualified would not have a materially adverse effect on the
business of the Placement Agent.
3.2. Broker/Dealer Registration. The Placement Agent is registered
as a broker-dealer under Section 15 of the Exchange Act.
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3.3. Good Standing. The Placement Agent is a member in good
standing of the NASD.
3.4. Sale In Certain Jurisdictions. Sales of Units by the
Placement Agent will be made only in such jurisdictions in Which (i) the
Placement Agent is a registered broker-dealer or where an applicable exemption
from such registration exists and (ii) the Offering and sale of Units is
registered under, or is exempt from, applicable registration requirements.
3.5. Compliance with Laws. Offers and sales of Units by the
Placement Agent will be made in compliance with the provisions of Rule 502(c)
of Reg D and/or Section 4(2) of the Securities Act, and the Placement Agent
will furnish to each investor a copy of the Offering Documents prior to
accepting any payments for Units.
3.6. Disqualification Provisions. Neither the Placement Agent nor
any principal, director, officer or agent thereof is subject to any of the
disqualification provisions set forth in Rules 262(b) or (c) under the Act or
state law applicable to the transactions contemplated hereby.
4. Closing.
4.1. Closing. At any time prior to the Termination Date and after
the sale of the 32 Units and the clearance of the funds representing the sale
of such Units, upon the mutual consent of the Company and the Placement Agent
that there should be a Closing, a Closing shall take place at the offices of
Graubard Mollen & Miller ("GM&M"), 600 Third Avenue, New York, New York. At
the Closing, payment for the Units issued and sold by the Company (by wire
transfer as instructed by the Company) less the amount payable to the Placement
Agent pursuant to Section 4.3 hereof shall be made against delivery of (i) the
Notes and (ii) certificates representing the Warrants included in the Units.
4.2. Deliveries at Closing. At the Closing, and as a condition to
such Closing, the Company shall deliver or cause to be delivered to the
Placement Agent:
4.2.1 Opinions of Counsel. The opinion of Troop Meisinger
Steuber & Pasich LLP, dated as of the date of the Closing, in form and
substance satisfactory to GM&M. The opinion of Hyman, Phelps & McNamara, dated
as of the date of the Closing, in form and substance satisfactory to GM&M.
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<PAGE> 13
4.2.2 Other Documents. At the Closing, as a condition to
such Closing, the Company shall also deliver or cause to be delivered to the
Placement Agent the following documents:
(i) A certificate of the Company, signed by two
executive officers thereof, stating (a) that the representations and warranties
contained in Section 2 hereof are true and accurate at the Closing as applied
to the Company and the Subsidiaries with the same effect as though expressly
made at the Closing, and (b) that the stockholders of the Company have
authorized and approved a 1:2.197317574 reverse stock split of the Common Stock
of the Company and other matters set forth in the Amendment and certifying the
resolution adopted by the stockholders with respect thereto:
(ii) Subscription Agreements signed by the Company
and each of the Subscribers, together with Supplement No. 1 signed by the
Company and each of the Subscribers;
(iii) The Notes and the certificates representing
Warrants to be included in the Units;
(iv) The Security Agreement and UCC-1 financing
statements for filing in such jurisdictions as GM&M may reasonably require;
(v) Consents of any parties required to
consummate this Offering and the transactions contemplated thereby;
(vi) Lock-Up Agreements and Right of First Refusal
Agreements as contemplated by paragraphs (h) and (i) of the Letter of Intent
signed by the persons identified on SCHEDULE 4.2.2(vi); and
(vii) Such other closing documents as shall be
reasonably requested by the Placement Agent or GM&M.
4.3. Placement Agent's Fees and Expenses. At the Closing, the
Company shall pay to the Placement Agent a commission equal to 10% of the
aggregate purchase price of the Units (including any Units paid for by tender
of the October Notes). In order to reimburse the Placement Agent for its
expenses incurred in connection with the Offering, at the Closing, the Company
also shall pay to the Placement Agent a non-accountable expense allowance equal
to 3% of the aggregate purchase price of the Units. On or before the Closing,
the Company
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<PAGE> 14
shall pay the fees and disbursements of GM&M referred to in Section 5.3 below
in connection with the qualification of the Units under the securities or Blue
Sky laws of the states which the Placement Agent shall designate. All the
foregoing amounts are payable directly to the parties who are owed same by
deduction from the aggregate purchase price of the Units sold, If the October
Notes are tendered for Units in the Offering, the Placement Agent shall deduct
from the aggregate purchase prim of the Units, the interest accrued through the
Closing on the October Notes and shall remit same, on behalf of the Company, to
the October Note Holders.
5. Covenants. The Company covenants and agrees that:
5.1. Amendments to Offering Documents. Until the Offering has been
completed or terminated, it there shall occur any event relating to or
affecting, among other things, the Company or any affiliate, or the proposed
operations of the Company as described in the Offering Documents, as a result
of which it is necessary, in the reasonable opinion of GM&M or counsel for the
Company, to amend or supplement the Offering Documents in order that the
Offering Documents will not contain an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, the Company shall immediately prepare and furnish to the Placement
Agent a reasonable number of copies of an appropriate amendment of or
supplement to the Offering Documents, in form and substance satisfactory to
GM&M.
5.2. Use of Proceeds. The net proceeds of the Offering will not be
used to repay any indebtedness for borrowed funds or any Related Party
Indebtedness (as such term is defined in the Notes) except as otherwise
provided in the Notes.
5.3. Expenses of Offering. The Company shall be responsible for,
and shall pay, all expenses incurred in connection with the Offering,
including, but not limited to, the costs of preparing, printing and filing,
where necessary, the Offering Documents and all amendments and supplements
thereto; and the fees and disbursements (including filing fees) of GM&M in
connection with blue sky matters (which fees (excluding disbursements) shall be
$15,000). State exemption and blue sky filing fees will be paid by the Company
as the same are due.
5.4. Further Assurances. The Company will take such actions as may
be reasonably required or desirable to can out the provisions of this Agreement
and the transactions contemplated hereby. The Company further agrees to
promptly take, or cause to be taken, all actions and to promptly do, or cause
to be done, all other things necessary, proper or advisable
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<PAGE> 15
to prepare the registration statement necessary to file with the Commission in
connection with the proposed Public Offering and have such registration
statement declared effective by the Commission.
5.5. Capitalization. The Company will not change its current
capitalization or issue any shares of capital stock or any options, warrants or
other securities convertible into or exchangeable for shares of Common Stock,
other than as contemplated in the Letter of Intent, without the consent of the
Placement Agent prior to the earlier of the effectiveness or abandonment of the
proposed Public Offering.
5.6. Accuracy of Representations and Warranties. The Company
hereby agrees that prior to the Termination Date it will not enter into any
transaction and take no action, and use its best efforts to prevent the
occurrence of any event, which could result in any of its representations,
warranties or covenants contained in this Agreement or any of the Offering
Documents not to be true and correct, or not to be performed as contemplated,
at and as of the time immediately after the occurrence of such transaction or
event.
5.7. Amendment. As soon as practicable after the date of this
Agreement, the Company shall take such steps as are necessary to file the
Amendment in the Office of the Secretary of State of Delaware, including
without limitation making such filings as are necessary under the Exchange Act
and giving notice to the stockholders of the Company in accordance with the
Delaware General Corporation Law. Such filing shall not be revoked or amended
without the written consent of MHM, which consent may be withheld in its sole
discretion. Upon such filing, the Company shall furnish a certified copy of
the Amendment to counsel for the Placement Agent and the Company shall reserve
for issuance a sufficient number of shares of Common Stock to be issued to the
Subscribers upon conversion of the Notes and upon exercise of the Warrants.
5.8. Regulatory Compliance. The Company will use its best efforts
to achieve compliance with all applicable regulations of the U.S. Food and Drug
Administration ("FDA") and the State of California as they pertain to the
manufacture, marketing and sale of medical devices as expeditiously as
possible, including, but not limited to, those regulations described in
Supplement No. 1. The Company covenants to issue to Subscribers the Additional
Warrants as set forth in Supplement No. 1 unless Holland & Associates (the
Company's regulatory consultant referred to in Supplement No. 1) or, in the
event that Holland & Associates shall cease doing business, a similar
consultant reasonably acceptable to Placement Agent shall issue and deliver
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<PAGE> 16
a written report to the Company and the Placement Agent, by the dates set forth
in Supplement No. 1, stating that based upon its review of the Company's
operations, the Company is in substantial compliance with GMP and MDR
regulations (as defined in Supplement No. 1), as well as labeling requirements,
established by the FDA and the State of California. The Company will also use
its best efforts to determine whether the sale of its products in foreign
countries is in compliance with laws of such foreign countries and, to the
extent it is not, either discontinue sales not in compliance with such laws or,
alternatively, with the advice of counsel experienced in such laws, continue
such sales and use its best efforts to achieve compliance as expeditiously as
possible.
6. Indemnification and Contribution.
6.1. Indemnification by the Company. The Company agrees to
indemnify and hold harmless the Placement Agent, its officers, directors,
shareholders and agents and each person, if any, who controls the Placement
Agent within the meaning of the Securities Act and/or the Exchange Act against
any losses, claims, damages or liabilities, joint or several, to which the
Placement Agent or such controlling person may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained (A) in the Offering Documents, or (B) in any blue sky application or
other document executed by the Company specifically for blue sky purposes or
based upon any other written information furnished by the Company or on its
behalf to any state or other jurisdiction in order to qualify any or all of the
Units under the securities laws thereof (any such application, document or
information being hereinafter called a "Blue Sky Application"), (ii) any breach
by the Company of any of its representations, warranties or covenants contained
herein or in any of the Offering Agreements, or (iii) the omission or alleged
omission by the Company to state in the Offering Documents or in any Blue Sky
Application a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; and will reimburse the Placement Agent and each such
controlling person for any legal or other expenses reasonably incurred by the
Placement Agent or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action, whether arising out
of an action between the Placement Agent and the Company or the Placement Agent
and a third party: provided, however, that the Company will not be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon (i) an untrue statement or alleged untrue statement or
omission or alleged omission made
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<PAGE> 17
in reliance upon and in conformity with written information regarding the
Placement Agent which is furnished to the Company by the Placement Agent
specifically for inclusion in the Offering Documents or any such Blue Sky
Application or (ii) any breach by the Placement Agent of the representations,
warranties or covenants contained herein (collectively, (i) and (ii) above are
referred to as the "Non-Indemnity Events").
6.2. Indemnification by the Placement Agent. The Placement Agent
agrees to indemnity and hold harmless the Company, its officers, directors,
stockholders and agents and each person, if any, who controls the Company
within the meaning of the Securities Act and/or the Exchange Act against any
losses, claims, damages or liabilities, joint or several, to which the Company
or such controlling person may become subject, under the Securities Act or
otherwise insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any Non-indemnity Event; and
will reimburse the Company and each such controlling person for any legal or
other expenses reasonably incurred by the Company or such controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action provided that such loss, claim, damage or liability is
found ultimately to arise out of or be based upon any Non-indemnity Event.
6.3. Procedure. Promptly after receipt by an indemnified party
under this Section 6 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 6, notify in writing the indemnifying
party of the commencement thereof; and the omission so to notify the
indemnifying party will relieve the indemnifying party from any liability under
this Section 6 as to the particular item for which indemnification is then
being sought, but not from any other liability which it may have to any
indemnified party. In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent
that it may wish, jointly with any other indemnifying party, similarly
notified, to assume the defense thereof, with counsel who shall be to the
reasonable satisfaction of such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section 6 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation. Any such indemnifying party shall not
be liable to any such indemnified party on account of any settlement of any
claim or action affected without the consent of such indemnifying party.
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<PAGE> 18
6.4. Contribution. If the indemnification provided for in this
Section 6 is unavailable to any indemnified party in respect to any losses,
claims, damages, liabilities or expenses referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party, will
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 on
the one hand, and the Placement Agent, on the other hand, from the Offering, 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, on the one hand, and of the Placement Agent, on the other hand,
in connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses as well as any other relevant
equitable considerations. The relative benefits received by the Company, on
the one hand, and the Placement Agent, on the other hand, shall be deemed to be
in the same proportion as the total proceeds from the Offering (net of sales
commissions and the nonaccountable expense allowance, but before deducting
other expenses) received by the Company bear to the commissions and
nonaccountable expense allowance received by the Placement Agent. The relative
fault of the Company, on the one hand, and the Placement Agent, on the other
hand, will be determined with reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state
a material fact relates to information supplied by the Company, and its
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
6.5. Equitable Considerations. The Company and the Placement Agent
agree that it would not be just and equitable if contribution pursuant to this
Section 6 were determined by pro rate allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to in the immediately preceding paragraph.
6.6. Attorneys' Fees. The amount payable by a party under this
Section 6 as a result of the losses, claims, damages, liabilities or expenses
referred to above will be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or
defending any action or claim.
7. Termination by Placement Agent. The Placement Agent will have the
right to terminate this Agreement by giving written notice as herein specified,
at any time, at or prior to the Closing (a) if the Company shall have failed,
refused, or been unable to perform any of its obligations
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<PAGE> 19
hereunder, or breached any of its representations or warranties hereunder, or
(b) if, in the Placement Agent's opinion, there has occurred an event
materially and adversely affecting the value of the Warrants (or the shares of
Common Stock underlying the Warrants) or Notes.
8. Notices. Any notice hereunder shall be in writing and shall be
effective when delivered in person or by facsimile transmission, or mailed by
certified mail, postage prepaid, return receipt requested, to the appropriate
party or parties, at the following addresses: if to the Placement Agent, to
M.H. Meyerson & Co., Inc., 525 Washington Boulevard, Jersey City, New Jersey
07310, Attention: Ronald I. Heller (Fax No. 201-459-9458); with a copy to
Graubard Mollen & Miller, 600 Third Avenue, New York, New York 10016,
Attention, David Alan Miller, Esq. (Fax No. 212-818-8681); if to the Company,
to Edudata Corporation, 200 N, Westlake Boulevard, Suite 200, Westlake Village,
California 91362, Attention: Robert M. Gurevitch, CEO/Chairman
(Fax No. 805-374-1996); with a copy to Troop Meisinger Steuber & Pasich, LLP,
Attention: C.N. Franklin Reddick, III, Esq. (Fax No. 310-443-7599); or, in each
case, to such other address as the parties may hereinafter designated by like
notice.
9. Parties. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns. Neither
party may assign this Agreement or its obligations hereunder without the prior
written consent of the other party. This Agreement is intended to be, and is,
for the sole and exclusive benefit of the parties hereto and the persons
described in Section 6.1 and 6.2 hereof and their respective successors and
assigns, and for the benefit of no other person, and no other person will have
any legal or equitable right, remedy or claim under, or in respect of this
Agreement.
10. Amendments and/or Modification. Neither this Agreement, nor any term
or provision hereof, may be changed, waived, discharged, amended, modified or
terminated orally, or in any manner other than by an instrument in writing
signed by each of the parties hereto.
11. Further Assurances. Each party to this Agreement will perform any and
all acts and execute any and all documents as may be necessary and proper under
the circumstances in order to accomplish the intents and purposes of this
Agreement and to carry out its provisions.
12. Validity. In case any term of this Agreement will be held invalid,
illegal or unenforceable, in whole or in part, the validity of any of the other
terms of this Agreement will not in any way be affected thereby.
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13. Waiver of Breach. The failure of any party hereto to insist upon
strict performance of any of the covenants and agreements herein contained, or
to exercise any option or right herein conferred in any one or more instances,
will not be construed to be a waiver or relinquishment of any such option or
right, or of any other covenants or agreements, and the same will be and remain
in full force and effect.
14. Entire Agreement. This Agreement and the Letter of Intent contain the
entire agreement and understanding of the parties with respect to the subject
matter hereof and thereof, respectively, and there are no representations,
inducements, promises or agreements, oral or otherwise, not embodied in this
Agreement and/or in the Letter of Intent. Any and all prior discussions,
negotiations, commitments and understanding relating to the subject matter of
these agreements are superseded by them.
15. Counterparts. This Agreement may be executed in counterparts and each
of such counterparts will for all purposes be deemed to be an original, and
such counterparts will together constitute one and the same instrument.
16. Law. This Agreement will be deemed to have been made and delivered in
New York City and will be governed as to validity, interpretation,
construction, effect and in all other respects by the internal law of the State
of New York. The Company (i) agrees that any legal suit, action or proceeding
arising out of or relating to this Agreement shall be instituted exclusively in
New York State Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York, (ii) waives any objection
to the venue of any such suit, action or proceeding, and the right to assert
that such forum is an inconvenient forum, and (iii) irrevocably consents to the
jurisdiction of the New York State Supreme Court, County of New York, and the
United States District Court for the Southern District of New York in any such
suit, action or proceeding. The Company further agrees to accept and
acknowledge service of any and all process which may be served in any such
suit, action or proceeding in the New York State Supreme Court, County of New
York, or in the United States District Court for the Southern District of New
York and agrees that service of process upon it mailed by certified mail to its
address shall be deemed in every respect effective service of process upon it
in any such suit, action or proceeding.
17. Representations, Warranties and Covenants to Survive Delivery. The
respective representations, indemnities, agreements, covenants, warranties and
other statements of the
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<PAGE> 21
Company and the Placement Agent shall survive execution of this Agreement and
delivery of the Units and/or the termination of this Agreement prior thereto.
If you find the foregoing is in accordance with our
understanding, kindly sign and return to us a counterpart hereof, whereupon
this instrument along with all counterparts will become a binding agreement
between us.
Very truly yours,
EDUDATA CORPORATION
By /s/ ROBERT H. GUREVITCH
------------------------------------
Robert H. Gurevitch
CEO/Chairman
AGREED:
M.H. MEYERSON & CO., INC.
By /s/ MICHAEL SILVESTRI
---------------------------------
Michael Silvestri
President
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<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement (this "AGREEMENT") is made and entered into
as of the 1st day of October 1996, by and between EDUDATA CORPORATION, a
Delaware corporation (the "COMPANY"), and Robert H. Gurevitch ("EXECUTIVE").
1. ENGAGEMENT AND DUTIES.
(a) Upon the terms and subject to the conditions set
forth in this Agreement, the Company hereby engages and employs Executive as an
employee of the Company, with the title and designation of Chairman of the
Board of Directors, Chief Executive Officer and President. Executive hereby
accepts such engagement and employment.
(b) Executive shall be responsible for the oversight and
management of the Company's operations. Executive shall report directly to the
Board of Directors of the Company (the "BOARD").
(c) Executive agrees to devote his primary business time,
energies, skills, effort and attention to his duties hereunder and will not
render any material services to any other business concern. Executive will use
his best efforts and abilities faithfully and diligently to promote the
Company's business interests.
(d) Except for routine travel incident to the business of
the Company, Executive shall perform his duties and obligations under this
Agreement principally from an office provided by the Company in Westlake
Village, California.
2. TERM OF EMPLOYMENT. Executive's employment pursuant to this
Agreement shall commence on the date set forth above and shall terminate on the
earliest to occur of any of the following:
(a) the later to occur of (i) October 1, 1999,
and (ii) the third anniversary (the "OFFERING ANNIVERSARY") of the effective
date of a public offering of the Company's equity securities to be underwritten
by M.H. Meyerson & Co., Inc. (the "PUBLIC OFFERING"); provided, however, that
this subpart (a)(ii) shall not apply if the registration statement to be filed
with the United States Securities and Exchange Commission (the "COMMISSION") in
connection with the Public Offering (the "REGISTRATION STATEMENT") has not been
declared effective by the Commission on or prior to June 30, 1997.
(b) at any time, without cause, upon delivery by
the Company to Executive of 30 days' written notice of termination;
<PAGE> 2
(c) upon the death of Executive;
(d) upon delivery by the Company to Executive of
written notice of termination if Executive shall suffer a physical or mental
disability which renders Executive, in the reasonable judgment of the Board,
unable to perform his duties and obligations under this Agreement for 30 days
in any 12-month period; or
(e) immediately upon delivery by the Company to
Executive of written notice of termination "for cause," by reason of: (i) any
act or omission knowingly undertaken or omitted by Executive with the intent of
causing damage to the Company, its subsidiaries, its properties, assets or
business or its stockholders, officers, directors or employees; (ii) any act of
Executive involving any fraud, misappropriation or embezzlement, involving
properties, assets or funds of the Company or any of its subsidiaries; (iii)
Executive's failure to perform his normal duties or any provision of this
Agreement, in either case, as directed by the Board; (iv) conviction of, or
pleading nolo contendere to, (A) any crime or offense involving monies or other
property of the Company or its subsidiaries, (B) any felony offense, or (C) any
crime of moral turpitude; or (v) the chronic or habitual use of
non-prescription drugs or consumption of alcoholic beverages.
3. COMPENSATION
(a) During the term of his employment pursuant to this
Agreement, the Company shall pay to Executive a base salary (the "BASE SALARY")
at an annual rate of $180,000 until February 28, 1997 and thereafter at an
annual rate of $275,000. The base salary shall be payable in installments
throughout the year in the same manner and at the same times the Company pays
base salaries to other employees of the Company. Executive's performance will
be reviewed annually and, his base salary may be adjusted by the Board in the
exercise of its sole discretion; provided, however, that in no event shall
Executive's Base Salary be adjusted to (i) an annual rate of less than $180,000
prior to March 1, 1997 and (ii) an annual rate of less than $275,000 on or
after March 1, 1997.
(b) The Company shall pay to Executive a car allowance
during the term of his employment pursuant to this Agreement at a rate of $400
per month. The Company shall also provide Executive with a gas credit card
from a vendor of Executive's choosing.
(c) Executive shall be entitled to two weeks vacation
during each year of his employment pursuant to this Agreement.
(d) Executive, upon presentation of receipts or other
appropriate documentation, shall be entitled to reimbursement from the Company
for the reasonable costs and expenses which he incurs solely in connection with
the performance of his duties and obligations under this Agreement.
(e) The Company may deduct from any compensation payable
to Executive the amounts sufficient to cover applicable federal, state and/or
local income tax withholding, old-
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age and survivors' and other social security payments, state disability and
other insurance premiums and payments.
4. OTHER BENEFITS. During the term of his employment hereunder,
Executive shall be eligible to participate in the medical and dental insurance
programs (the "BENEFIT PLANS") maintained by the Company; provided, however,
that nothing contained in this Section 4 shall, in any manner whatsoever,
directly or indirectly, require or obligate the Company to adopt or implement,
or to prevent, preclude or otherwise prohibit the Company from amending,
modifying, curtailing, discontinuing or otherwise terminating the Benefit Plans
at any time (whether during or after the term hereof).
5. COMPENSATION UPON TERMINATION. Upon termination of this
Agreement, Executive shall receive all Base Salary earned through the date of
termination. If Executive's employment is terminated by the Company during the
term hereof pursuant to Section 2(b) hereof, Executive shall receive as
severance: (a) an amount equal to all Base Salary which would have been payable
to Executive through the earlier to occur of (i) September 30, 1999 and (ii)
the three-month anniversary of the Executive's final date of employment with
the Company, in either case payable at the rate of Executive's Base Salary at
the time of his termination; (b) the right to participate in all Company
Benefit Plans for a period of 12 months following the date of his termination;
and (c) the full vesting of all option rights granted to Executive by the
Company. If Executive's employment hereunder should be terminated for any of
the reasons set forth in Sections 2(a) and 2(c) through 2(e) hereof, Executive
shall not be entitled to any severance pay, benefits continuance or other
compensation not expressly set forth in the first sentence of this Section 5.
6. CONFIDENTIALITY AND TRADE SECRETS. Executive shall not, at
any time during or after the term of his employment, exploit, use for any
purpose not specifically related to Executive's employment by the Company
pursuant to the terms of this Agreement or disclose to any person (except as
required by law after first notifying the Company and giving the Company an
opportunity to object) any confidential information including, but not limited
to: price lists, pricing information, customer lists, customer names,
financial information, knowledge, trade secrets, know-how, unprinted or printed
data, and related intangible property developed during or prior to the term of
this Agreement, belonging to, used by, or developed by or for the benefit of
the Company (collectively, the "TRADE SECRETS").
7. RETURN OF CORPORATE PROPERTY AND TRADE SECRETS. Upon any
termination of this Agreement, Executive shall turn over to the Company all
property, writings or documents then in his possession or custody belonging to
or relating to the affairs of the Company or comprising or relating to Trade
Secrets.
8. DISCOVERIES AND INVENTIONS. If Executive, while employed by
the Company, makes, either solely or jointly with others, any discovery,
improvement or invention which would pertain or relate in any way to the
business, products, publications or processes of the Company, its subsidiaries
or affiliates, such discovery, improvement or invention (whether or not of
patent, copyright or trademark nature) shall be the exclusive property of the
Company.
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Executive shall execute and deliver to the Company without further
compensation, any and all documents which the Company deems necessary or
appropriate to prepare or prosecute applications for patents, copyrights, or
trademarks upon such discovery, improvement or invention, for the purposes of
assigning and transferring to the Company Executive's entire right, title and
interest in and to such discovery, improvement or invention, and patents,
copyrights or trademarks therefor, and otherwise more fully and perfectly to
evidence the Company's ownership thereof. This Section 8 shall not apply to
any discovery, improvement or invention Executive made prior to the
commencement of Executive's employment with the Company.
9. NON-COMPETITION. Executive agrees that, during the term of
this Agreement, Executive will not have any ownership interest (of record or
beneficial) in or have any interest as an employee, salesman, consultant,
officer or director of, or otherwise aid or assist in any manner, any firm,
corporation, partnership, proprietorship or other business which is competitive
with the Company anywhere in the world (a "COMPETITIVE ACTIVITY"); provided,
however, that Executive may own, directly or indirectly, solely as an
investment, securities of any person which is in competition with the Company,
which securities are traded in any national securities exchange or market, if
Executive (x) is not a controlling person of, or a member of a group which
controls, such person; or (y) does not, directly or indirectly, own two percent
or more of any class of securities of such person (a "PERMITTED COMPETITIVE
ACTIVITY"). Additionally, during the term of this Agreement and the three-
year period following the termination of this Agreement, Executive agrees not
to: (a) request or advise any then current employee of the Company to leave the
employ of the Company or (b) make an offer of employment to any person who was
employed by the Company in the six months immediately preceding the making of
such employment offer. Further, Executive agrees that during the three-year
period following the termination of this Agreement, in each year that the
Company provides Executive with a payment of $10,000 (the "Post Termination
Payment") (which Post Terminating Payments, if any, shall be due and paid to
Executive on the date of the termination of this Agreement and the first and
second anniversaries thereof), Executive will not engage in any Competitive
Activity other than a Permitted Competitive Activity; provided, however, that
if the Company fails to make any Post Termination Payment when due Executive
shall have no further objections to the Company with respect to the agreements
contained in this sentence.
10. SECURITIES REPURCHASE RIGHT. If prior to the later to occur
of (1) October 1, 1999, and (b) the Offering Anniversary (provided, however,
that this subpart (b) shall not apply if the Registration Statement has not
been declared effective by the Commission on or prior to June 30, 1997),
Executive employment hereunder is terminated and Executive engages in any
Competitive Activity other than a Permitted Competitive Activity, then the
Company shall have the right to purchase from Executive that number of shares
of the Company's Common Stock, par value $0.01 per share, (the "COMMON STOCK")
equal to fifty percent of (x) the greater of the number of shares of Common
Stock held by Executive on (i) October 1, 1996 or (ii) the date that the
Registration Statement is declared effective by the Commission (provided,
however, that this subpart (x)(i) shall not apply if the Registration Statement
is not declared effective by the Commission on or prior to June 30, 1997) (the
"ORIGINAL SHARES") less the number of Original Shares sold by Executive prior
to the date of termination of this Agreement (the "TERMINATION DATE") pursuant
to Rule 144 ("RULE 144 SALES") under the Securities Act of 1933, as amended,
plus (y) the number of shares of Common Stock, if any, acquired by Executive
prior to the Termination Date pursuant to the exercise of any options and/or
warrants granted to Executive in consideration of services rendered to the
Company by Executive (the "OPTION SHARES") less the number of Option Shares
sold in Rule 144 Sales. The per share purchase price of any share of the
Common Stock purchased by the Company pursuant to this Section 10 shall equal
fifty percent of the fair market value of a share of the Common Stock on the
Termination Date. For
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the purposes of this Section 10, fair market value shall mean price (1) if the
Common Stock is listed on the New York Stock Exchange, the American Stock
Exchange or any successor to either of such exchange, the average of the
closing price (as reported by such exchange) for the Common Stock for the ten
trading days immediately preceding the Termination Date, (2) if the Common
Stock is traded in the Nasdaq National Market, the Nasdaq Small Cap Market or
any successor to either of such markets, the average of the last sale price (as
reported by such market) for the ten trading days immediately preceding the
Termination Date, or (3) if the Common Stock is not listed on any such exchange
or market, the good faith determination of the Board as to the value of a share
of Common Stock on the Termination Date. Notwithstanding anything herein to
the contrary, the provisions of this Section 10 shall not apply, and the
Company shall have no purchase right, if Executive is terminated without cause,
or if Executive terminates his employment with the Company as a result of any
breach by the Company of its obligations hereunder. The certificates
representing the shares of Common Stock which are subject to this Section 10
shall bear a legend indicating that such shares are subject to this Section.
11. INJUNCTIVE RELIEF. Executive hereby recognizes, acknowledges
and agrees that, in the event of any breach by Executive of any of his
covenants, agreements, duties or obligations hereunder, the Company would
suffer great and irreparable harm, injury and damage, the Company would
encounter extreme difficulty in attempting to prove the actual amount of
damages suffered as a result of such breach, and the Company would not be
reasonably or adequately compensated in damages in any action at law.
Executive therefore covenants and agrees that, in addition to any other remedy
the Company may have at law, in equity, by statute or otherwise, in the event
of any breach by Executive of any of his covenants, agreements, duties or
obligations hereunder, the Company shall be entitled to seek and receive
temporary, preliminary and permanent injunctive and other equitable relief from
any court of competent jurisdiction to enforce any of the rights of the
Company, or any of the covenants, agreements, duties or obligations of
Executive hereunder, and/or otherwise to prevent the violation of any of the
terms or provisions hereof, all without the necessity of proving the amount of
any actual damage to the Company or any affiliate thereof resulting therefrom;
provided, however, that nothing contained in this Section 11 shall be deemed or
construed in any manner whatsoever as a waiver by the Company of any of the
rights which the Company may have against Executive at law, in equity, by
statute or otherwise arising out of, in connection with or resulting from the
breach by Executive of any of his covenants, agreements, duties or obligations
hereunder.
12. ARBITRATION.
(a) General. All disputes, controversies or unresolved
questions that arise under or with respect to this Agreement shall be settled
by arbitration under this Section 12. The party desiring arbitration shall
give notice to that effect to the other party. Arbitration shall be conducted
in accordance with the Employment Dispute Resolution Rules or then existing
rules for arbitration of employment disputes issued by the American Arbitration
Association. Any arbitration proceedings hereunder shall be held in Los
Angeles County, California, United States of America before a panel of three
arbitrators (one selected by Executive, one selected by the
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Company and one selected by the other two arbitrators). The arbitrators shall
only interpret and apply the terms and provisions of this Agreement and shall
not change any such terms or provisions or deprive either party of any right or
remedy expressly or impliedly provided for in this Agreement (or any agreement
relating hereto). The arbitration of such issues, including the determination
of any amount of damages suffered by any party, shall be final and binding upon
the parties hereto to the maximum extent permitted by law. The parties intend
that this Section 12 shall be valid, binding, enforceable and irrevocable and
shall survive the termination of this Agreement.
(b) Exception. Notwithstanding the foregoing provisions
of this Section 12, a party having given the other party at least ten days'
notice of the other party's alleged breach may in good faith seek immediate
equitable relief from a court of competent jurisdiction to enable the
instituting party to prevent irreparable harm (alleged to arise from the
alleged breach) pending arbitral relief.
(c) Arbitrators' Fees. The prevailing party shall
recover all fees, costs and expenses of any arbitrator, whether selected by the
Executive on the one hand or Company on the other hand.
(d) Expedited Procedure. By mutual agreement, the
parties may agree to have the arbitration conducted on an expedited basis.
Thereafter, the arbitrator shall be empowered to expedite the proceedings by
all reasonable means consistent with a fair hearing of the dispute. Such means
may include the imposition of accelerated discovery and hearing schedules,
requiring submissions within abbreviated time periods and imposing limits on
numbers of witnesses and the length of hearings.
(e) Enforcement. Judgment upon the decision of the
arbitrator may be entered in any court having jurisdiction over the party
against which enforcement is sought.
13. ATTORNEYS' FEES. If any action, suit, arbitration or other
proceeding is instituted concerning or arising out of this Agreement, the
prevailing party shall recover all of such party's costs and attorneys' fees
incurred in each and every such action, suit or other proceeding, including any
and all appeals or petitions therefrom. As used herein, "ATTORNEYS' FEES"
shall mean the full and actual costs of any legal services actually rendered in
connection with the matters involved, calculated on the basis of the usual fee
charged by the attorneys performing such services, and shall not be limited to
"reasonable attorneys' fees" as defined by any statute or rule of court.
14. MISCELLANEOUS.
(a) Notices. All notices, requests and other
communications (collectively, "NOTICES") given pursuant to this Agreement shall
be in writing, and shall be delivered by personal service or by United States
first class, registered or certified mail (return receipt requested), postage
prepaid, addressed to the party at the address set forth below:
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If to Company:
EDUDATA CORPORATION
200 North Westlake Boulevard, Suite 202
Westlake Village, California 91362
Attn: ____________________
Telephone: (805) 381-2700
Fax: (805) 374-1966
If to Executive:
Robert H. Gurevitch
__________________________
__________________________
Telephone: ( )
Fax: ( )
Any Notice shall be deemed duly given when received by the addressee thereof,
provided that any Notice sent by registered or certified mail shall be deemed
to have been duly given three days from date of deposit in the United States
mails, unless sooner received. Either party may from time to time change its
address for further Notices hereunder by giving notice to the other party in
the manner prescribed in this section.
(b) Entire Agreement. This Agreement contains the sole
and entire agreement and understanding of the parties with respect to the
entire subject matter of this Agreement, and any and all prior discussions,
negotiations, commitments and understandings, whether oral or otherwise,
related to the subject matter of this Agreement are hereby merged herein. No
representations, oral or otherwise, express or implied, other than those
contained in this Agreement have been relied upon by any party to this
Agreement.
(c) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF.
(d) Captions. The various captions of this Agreement are
for reference only and shall not be considered or referred to in resolving
questions of interpretation of this Agreement.
(e) Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument.
(f) Business Day. If the last day permissible for
delivery of any Notice under any provision of this Agreement, or for the
performance of any obligation under this Agreement, shall be other than a
business day, such last day for such Notice or performance shall be
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extended to the next following business day (provided, however, under no
circumstances shall this provision be construed to extend the date of
termination of this Agreement).
(g) Successors and Assigns. This Agreement and all
obligations and benefits of Executive and the Company hereunder shall bind and
inure to the benefit of Executive and the Company, their respective affiliates,
and their respective successors and assigns. Conversely, no assignment of this
Agreement, of any of the rights and/or duties hereunder by any party hereto
shall be valid without the prior written consent of the other party.
(h) Amendments and Waivers. No amendment or waiver of
any term or provision of this Agreement shall be effective unless made in
writing. Any written amendment or waiver shall be effective only in the
instance given and then only with respect to the specific term or provision (or
portion thereof) of this Agreement to which it expressly relates, and shall not
be deemed or construed to constitute a waiver of any other term or provision
(or portion thereof) waived in any other instance.
In witness whereof, the parties have executed this Agreement as of the date
first set forth above.
Company: Executive:
EDUDATA CORPORATION
By: /s/ ROBERT H. GUREVITCH /s/ ROBERT H. GUREVITCH
------------------------- -------------------------
Its: Chairman of the Board Robert H. Gurevitch
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EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This Employment Agreement (this "AGREEMENT") is made and entered into
as of the 1st day of October 1996, by and between EDUDATA CORPORATION, a
Delaware corporation (the "COMPANY"), and Dewey Perrigo ("EXECUTIVE").
1. ENGAGEMENT AND DUTIES.
(a) Upon the terms and subject to the conditions set
forth in this Agreement, the Company hereby engages and employs Executive as an
employee of the Company, with the title and designation of Director of Sales.
Executive hereby accepts such engagement and employment.
(b) Executive shall be responsible for the oversight and
management of the Company's sales operations. Executive shall report directly
to the Chief Executive Officer and President of the Company (the "CEO").
(c) Executive agrees to devote his primary business time,
energies, skills, effort and attention to his duties hereunder and will not
render any material services to any other business concern. Executive will use
his best efforts and abilities faithfully and diligently to promote the
Company's business interests.
(d) Except for routine travel incident to the business of
the Company, Executive shall perform his duties and obligations under this
Agreement principally from an office provided by the Company in Westlake
Village, California.
2. TERM OF EMPLOYMENT. Executive's employment pursuant to this
Agreement shall commence on the date set forth above and shall terminate on the
earliest to occur of any of the following:
(a) the later to occur of (i) October 1, 1999,
and (ii) the third anniversary (the "OFFERING ANNIVERSARY") of the effective
date of a public offering of the Company's equity securities to be underwritten
by M.H. Meyerson & Co., Inc. (the "PUBLIC OFFERING"); provided, however, that
this subpart (a)(ii) shall not apply if the registration statement to be filed
with the United States Securities and Exchange Commission (the "COMMISSION") in
connection with the Public Offering (the "REGISTRATION STATEMENT") has not been
declared effective by the Commission on or prior to June 30, 1997.
(b) at any time, without cause, upon delivery by
the Company to Executive of 30 days' written notice of termination;
(c) upon the death of Executive;
<PAGE> 2
(d) upon delivery by the Company to Executive of
written notice of termination if Executive shall suffer a physical or mental
disability which renders Executive, in the reasonable judgment of the Board of
Directors of the Company (the "BOARD"), unable to perform his duties and
obligations under this Agreement for 30 days in any 12-month period; or
(e) immediately upon delivery by the Company to
Executive of written notice of termination "for cause," by reason of: (i) any
act or omission knowingly undertaken or omitted by Executive with the intent of
causing damage to the Company, its subsidiaries, its properties, assets or
business or its stockholders, officers, directors or employees, (ii) any act of
Executive involving any fraud, misappropriation or embezzlement, involving
properties, assets or funds of the Company or any of its subsidiaries, (iii)
Executive's failure to perform his normal duties or any provision of this
Agreement, in either case, as directed by the Board, (iv) conviction of, or
pleading nolo contendere to, (A) any crime or offense involving monies or other
property of the Company or its subsidiaries, (B) any felony offense, or (C) any
crime of moral turpitude; or (v) the chronic or habitual use of
non-prescription drugs or consumption of alcoholic beverages.
3. COMPENSATION
(a) During the term of his employment pursuant to this
Agreement, the Company shall pay to Executive a base salary (the "BASE SALARY")
at an annual rate of $120,000 until February 28, 1997 and thereafter at an
annual rate of $150,000. The base salary shall be payable in installments
throughout the year in the same manner and at the same times the Company pays
base salaries to other employees of the Company. Executive's performance will
be reviewed annually and his base salary may be adjusted by the Board in the
exercise of its sole discretion; provided, however, that in no event shall
Executive's Base Salary be adjusted to (i) an annual rate of less than $120,000
prior to March 1, 1997 and (ii) an annual rate of less than $150,000 on or
after March 1, 1997.
(b) The Company shall pay to Executive a car allowance
during the term of his employment pursuant to this Agreement at a rate of $300
per month. The Company shall also provide Executive with a gas credit card
from a vendor of Executive's choosing.
(c) Executive shall be entitled to two weeks vacation
during each year of his employment pursuant to this Agreement; provided,
however, that the timing of any vacation leave must be pre-approved by the CEO.
(d) Executive, upon presentation of receipts or other
appropriate documentation, shall be entitled to reimbursement from the Company
for the reasonable costs and expenses which he incurs solely in connection with
the performance of his duties and obligations under this Agreement.
(e) The Company may deduct from any compensation payable
to Executive the amounts sufficient to cover applicable federal, state and/or
local income tax withholding, old-
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age and survivors' and other social security payments, state disability and
other insurance premiums and payments.
4. OTHER BENEFITS. During the term of his employment hereunder,
Executive shall be eligible to participate in the medical and dental insurance
programs (the "BENEFIT PLANS") maintained by the Company; provided, however,
that nothing contained in this Section 4 shall, in any manner whatsoever,
directly or indirectly, require or obligate the Company to adopt or implement,
or to prevent, preclude or otherwise prohibit the Company from amending,
modifying, curtailing, discontinuing or otherwise terminating the Benefit Plans
at any time (whether during or after the term hereof).
5. COMPENSATION UPON TERMINATION. Upon termination of this
Agreement, for any reason, Executive shall only be entitled to receive his Base
Salary earned through the date of termination.
6. CONFIDENTIALITY AND TRADE SECRETS. Executive shall not, at
any time during or after the term of his employment, exploit, use for any
purpose not specifically related to Executive's employment by the Company
pursuant to the terms of this Agreement or disclose to any person (except as
required by law after first notifying the Company and giving the Company an
opportunity to object) any confidential information including, but not limited
to: price lists, pricing information, customer lists, customer names,
financial information, knowledge, trade secrets, know-how, unprinted or printed
data, and related intangible property developed during or prior to the term of
this Agreement, belonging to, used by, or developed by or for the benefit of
the Company (collectively, the "TRADE SECRETS").
7. RETURN OF CORPORATE PROPERTY AND TRADE SECRETS. Upon any
termination of this Agreement, Executive shall turn over to the Company all
property, writings or documents then in his possession or custody belonging to
or relating to the affairs of the Company or comprising or relating to Trade
Secrets.
8. DISCOVERIES AND INVENTIONS. If Executive, while employed by
the Company, makes, either solely or jointly with others, any discovery,
improvement or invention which would pertain or relate in any way to the
business, products, publications or processes of the Company, its subsidiaries
or affiliates, such discovery, improvement or invention (whether or not of
patent, copyright or trademark nature) shall be the exclusive property of the
Company. Executive shall execute and deliver to the Company without further
compensation, any and all documents which the Company deems necessary or
appropriate to prepare or prosecute applications for patents, copyrights, or
trademarks upon such discovery, improvement or invention, for the purposes of
assigning and transferring to the Company Executive's entire right, title and
interest in and to such discovery, improvement or invention, and patents,
copyrights or trademarks therefor, and otherwise more fully and perfectly to
evidence the Company's ownership thereof. This Section 8 shall not apply to
any discovery, improvement or invention Executive made prior to the
commencement of Executive's employment with the Company.
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9. NON-COMPETITION. Executive agrees that, during the term of
this Agreement Executive will not have any ownership interest (of record or
beneficial) in or have any interest as an employee, salesman, consultant,
officer or director of, or otherwise aid or assist in any manner, any firm,
corporation, partnership, proprietorship or other business which is competitive
with the Company anywhere in the world (a "COMPETITIVE ACTIVITY"); provided,
however, that Executive may own, directly or indirectly, solely as an
investment, securities of any person which is in competition with the Company,
which securities are traded in any national securities exchange or market, if
Executive (x) is not a controlling person of, or a member of a group which
controls, such person; or (y) does not, directly or indirectly, own two percent
or more of any class of securities of such person (a "PERMITTED COMPETITIVE
ACTIVITY"). Additionally, during the term of this Agreement and the three-
year period following the termination of this Agreement, Executive agrees not
to: (a) request or advise any then current employee of the Company to leave
the employ of the Company or (b) make an offer of employment to any person who
was employed by the Company in the six months immediately preceding the making
of such employment offer.
10. SECURITIES REPURCHASE RIGHT. If prior to the later to occur
of (a) October 1, 1999 and (b) the Offering Anniversary (provided, however,
that this subpart (b) shall not apply if the Registration Statement has not
been declared effective by the Commission on or prior to June 30, 1997),
Executive's employment hereunder is terminated and Executive engages in any
Competitive Activity other than a Permitted Competitive Activity, then the
Company shall have the right to purchase from Executive that number of shares
of the Company's Common Stock, par value $0.01 per share, (the "COMMON STOCK")
equal to fifty percent of (x) the greater of the number of shares of Common
Stock held by Executive on (i) October 1, 1996 or (ii) the date that the
Registration Statement is declared effective by the Commission (provided,
however, that this subpart (x)(ii) shall not apply if the Registration
Statement has not been declared effective by the Commission on or prior to June
30, 1997) (the "ORIGINAL SHARES") less the number of Original Shares sold by
Executive prior to the date of termination of this Agreement (the "TERMINATION
DATE") pursuant to Rule 144 ("RULE 144 SALES") under the Securities Act of
1933, as amended, plus (y) the number of shares of Common Stock, if any,
acquired by Executive prior to the Termination Date pursuant to the exercise of
any options and/or warrants granted to Executive in consideration of services
rendered to the Company by Executive (the "OPTION SHARES") less the number of
Option Shares sold in Rule 144 Sales. The per share purchase price of any
share of the Common Stock purchased by the Company pursuant to this Section 10
shall equal fifty percent of the fair market value of a share of the Common
Stock on the Termination Date. For the purposes of this Section 10, fair
market value shall mean (1) if the Common Stock is listed on the New York Stock
Exchange, the American Stock Exchange or any successor to either of such
exchange, the average of the closing price (as reported by such exchange) for
the Common Stock for the ten trading days immediately preceding the Termination
Date, (2) if the Common Stock is traded in the Nasdaq National Market, the
Nasdaq Small Cap Market or any successor to either of such markets, the average
of the last sale price (as reported by such market) for the ten trading days
immediately preceding the Termination Date, or (3) if the Common Stock is not
listed on any such exchange or market, the good faith determination of the
Board as to the value of a share of Common Stock on the Termination Date.
Notwithstanding anything herein to the contrary, the provisions of this Section
10 shall not
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apply, and the Company shall have no purchase right, if Executive is terminated
without cause or Executive terminates his employment with the Company as a
result of any breach by the Company of its obligations hereunder. The
certificates representing the shares of Common Stock which are subject to this
Section 10 shall bear a legend indicating that such shares are subject to this
Section.
11. INJUNCTIVE RELIEF. Executive hereby recognizes, acknowledges
and agrees that, in the event of any breach by Executive of any of his
covenants, agreements, duties or obligations hereunder, the Company would
suffer great and irreparable harm, injury and damage, the Company would
encounter extreme difficulty in attempting to prove the actual amount of
damages suffered as a result of such breach, and the Company would not be
reasonably or adequately compensated in damages in any action at law.
Executive therefore covenants and agrees that, in addition to any other remedy
the Company may have at law, in equity, by statute or otherwise, in the event
of any breach by Executive of any of his covenants, agreements, duties or
obligations hereunder, the Company shall be entitled to seek and receive
temporary, preliminary and permanent injunctive and other equitable relief from
any court of competent jurisdiction to enforce any of the rights of the
Company, or any of the covenants, agreements, duties or obligations of
Executive hereunder, and/or otherwise to prevent the violation of any of the
terms or provisions hereof, all without the necessity of proving the amount of
any actual damage to the Company or any affiliate thereof resulting therefrom;
provided, however, that nothing contained in this Section 11 shall be deemed or
construed in any manner whatsoever as a waiver by the Company of any of the
rights which the Company may have against Executive at law, in equity, by
statute or otherwise arising out of, in connection with or resulting from the
breach by Executive of any of his covenants, agreements, duties or obligations
hereunder.
12. ARBITRATION.
(a) General. All disputes, controversies or unresolved
questions that arise under or with respect to this Agreement shall be settled
by arbitration under this Section 12. The party desiring arbitration shall
give notice to that effect to the other party. Arbitration shall be conducted
in accordance with the Employment Dispute Resolution Rules or then existing
rules for arbitration of employment disputes issued by the American Arbitration
Association. Any arbitration proceedings hereunder shall be held in Los
Angeles County, California, United States of America before a panel of three
arbitrators (one selected by Executive, one selected by the Company and one
selected by the other two arbitrators). The arbitrators shall only interpret
and apply the terms and provisions of this Agreement and shall not change any
such terms or provisions or deprive either party of any right or remedy
expressly or impliedly provided for in this Agreement (or any agreement
relating hereto). The arbitration of such issues, including the determination
of any amount of damages suffered by any party, shall be final and binding upon
the parties hereto to the maximum extent permitted by law. The parties intend
that this Section 12 shall be valid, binding, enforceable and irrevocable and
shall survive the termination of this Agreement.
5
<PAGE> 6
(b) Exception. Notwithstanding the foregoing provisions
of this Section 12, a party having given the other party at least ten days'
notice of the other party's alleged breach may in good faith seek immediate
equitable relief from a court of competent jurisdiction to enable the
instituting party to prevent irreparable harm (alleged to arise from the
alleged breach) pending arbitral relief.
(c) Arbitrators' Fees. The prevailing party shall
recover all fees, costs and expenses of any arbitrator, whether selected by the
Executive on the one hand or Company on the other hand.
(d) Expedited Procedure. By mutual agreement, the
parties may agree to have the arbitration conducted on an expedited basis.
Thereafter, the arbitrator shall be empowered to expedite the proceedings by
all reasonable means consistent with a fair hearing of the dispute. Such means
may include the imposition of accelerated discovery and hearing schedules,
requiring submissions within abbreviated time periods and imposing limits on
numbers of witnesses and the length of hearings.
(e) Enforcement. Judgment upon the decision of the
arbitrator may be entered in any court having jurisdiction over the party
against which enforcement is sought.
13. ATTORNEYS' FEES. If any action, suit, arbitration or other
proceeding is instituted concerning or arising out of this Agreement, the
prevailing party shall recover all of such party's costs and attorneys' fees
incurred in each and every such action, suit or other proceeding, including any
and all appeals or petitions therefrom. As used herein, "ATTORNEYS' FEES"
shall mean the full and actual costs of any legal services actually rendered in
connection with the matters involved, calculated on the basis of the usual fee
charged by the attorneys performing such services, and shall not be limited to
"reasonable attorneys' fees" as defined by any statute or rule of court.
14. MISCELLANEOUS.
(a) Notices. All notices, requests and other
communications (collectively, "NOTICES") given pursuant to this Agreement shall
be in writing, and shall be delivered by personal service or by United States
first class, registered or certified mail (return receipt requested), postage
prepaid, addressed to the party at the address set forth below:
6
<PAGE> 7
If to Company:
EDUDATA CORPORATION
200 North Westlake Boulevard, Suite 202
Westlake Village, California 91362
Attn: ____________________
Telephone: (805) 381-2700
Fax: (805) 374-1966
If to Executive:
/s/ DEWEY PERRIGO
--------------------------
Dewey Perrigo
Telephone: (805) 573-0748
Fax: (805) 574-1966
Any Notice shall be deemed duly given when received by the addressee thereof,
provided that any Notice sent by registered or certified mail shall be deemed
to have been duly given three days from date of deposit in the United States
mails, unless sooner received. Either party may from time to time change its
address for further Notices hereunder by giving notice to the other party in
the manner prescribed in this section.
(b) Entire Agreement. This Agreement contains the sole
and entire agreement and understanding of the parties with respect to the
entire subject matter of this Agreement, and any and all prior discussions,
negotiations, commitments and understandings, whether oral or otherwise,
related to the subject matter of this Agreement are hereby merged herein. No
representations, oral or otherwise, express or implied, other than those
contained in this Agreement have been relied upon by any party to this
Agreement.
(c) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF.
(d) Captions. The various captions of this Agreement are
for reference only and shall not be considered or referred to in resolving
questions of interpretation of this Agreement.
(e) Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument.
(f) Business Day. If the last day permissible for
delivery of any Notice under any provision of this Agreement, or for the
performance of any obligation under this Agreement, shall be other than a
business day, such last day for such Notice or performance shall be
7
<PAGE> 8
extended to the next following business day (provided, however, under no
circumstances shall this provision be construed to extend the date of
termination of this Agreement).
(g) Successors and Assigns. This Agreement and all
obligations and benefits of Executive and the Company hereunder shall bind and
inure to the benefit of Executive and the Company, their respective affiliates,
and their respective successors and assigns. Conversely, no assignment of this
Agreement, of any of the rights and/or duties hereunder by any party hereto
shall be valid without the prior written consent of the other party.
(h) Amendments and Waivers. No amendment or waiver of
any term or provision of this Agreement shall be effective unless made in
writing. Any written amendment or waiver shall be effective only in the
instance given and then only with respect to the specific term or provision (or
portion thereof) of this Agreement to which it expressly relates, and shall not
be deemed or construed to constitute a waiver of any other term or provision
(or portion thereof) waived in any other instance.
In witness whereof, the parties have executed this Agreement as of the date
first set forth above.
Company: Executive:
EDUDATA CORPORATION
By: /s/ ROBERT H. GUREVITCH /s/ DEWEY PERRIGO
------------------------- ------------------------
Its: Chairman of the Board Dewey Perrigo
-------------------------
8
<PAGE> 1
EXHIBIT 10.7
EXTENSION OF PROMISSORY NOTES
This EXTENSION OF PROMISSORY NOTES (this "NOTES EXTENSION") is made
and entered into as of November 25, 1996 by and between EDUDATA CORPORATION, a
Delaware corporation ("EDUDATA"), and Robert H. Gurevitch ("LENDER").
RECITALS
WHEREAS, EDUDATA has acquired all assets and liabilities of
Dental/Medical Diagnostic Systems, LLC, a California limited liability company
("DMD"), including (i) that certain Promissory Note, dated as of February 1,
1996 (the "FEBRUARY 1ST NOTE") and (ii) that certain Promissory Note, dated as
of February 15, 1996 (the "FEBRUARY 15TH NOTE") each of which are by and
between DMD and the Lender, in an aggregate principal amount totalling
US$200,000 (the February 1st Note and the February 15th Note, collectively, are
the "PROMISSORY NOTES") which Promissory Notes had original maturity dates, for
the payment by DMD of principal and interest respectively due Lender
thereunder, of August 1, 1996 for the February 1st Note, and August 15, 1996
for the February 15th Note (collectively, the "ORIGINAL PAYMENT DATES"); and
WHEREAS, DMD and Lender have previously agreed to extend the
respective Original Payment Dates until the date hereof (the "PAYMENT DATE");
and
WHEREAS, EDUDATA and Lender each now wish to provide for an extension
the Payment Date as hereinafter provided;
NOW THEREFORE, in consideration of the foregoing premises and the
mutual agreements contained herein, and for other good and valuable
consideration the sufficiency of which is hereby acknowledged by the parties
hereto, and subject to the conditions contained herein, EDUDATA and Lender
agree as follows:
1. Extension of the Payment Date of Promissory Notes. The
Payment Date shall be extended, until the earlier to occur of the following:
(a) twenty-four (24) months following the closing of that certain
$1.6 Million bridge loan transaction currently being negotiated by
EDUDATA and M.H. Meyerson & Company, as placement agent (the "BRIDGE
LOAN"); or
(b) the repayment in full of the entire principal amount of and
all interest due under those certain Secured Convertible Promissory
Notes in the original principal amount of $1.6 Million which are to be
issued in connection with the Bridge Loan; or
<PAGE> 2
(c) at such time as EDUDATA receives the proceeds from an
underwritten public offering of its Common Stock.
2. Full Force and Effect of Promissory Notes. Other than the
changes mandated in Paragraph 1 of this Notes Extension, all of the terms and
conditions of the respective Promissory Notes shall remain in full force and
effect.
3. Miscellaneous.
(a) Notices. All notices, requests and other communications
(collectively, "NOTICES") given pursuant to this Notes Extension shall be in
writing, and shall be delivered by personal service or by United States first
class, registered or certified mail (return receipt requested), postage
prepaid, addressed to the party at the address set forth below:
If to EDUDATA:
EDUDATA CORPORATION
200 North Westlake Boulevard, Suite 202
Westlake Village, California 91362
Attn: Chief Financial Officer
Telephone: (805) 381-2700
Fax: (805) 374-1966
If to Lender:
Robert H. Gurevitch
__________________________
__________________________
Telephone: ( )
Fax: ( )
Any Notice shall be deemed duly given when received by the addressee thereof,
provided that any Notice sent by registered or certified mail shall be deemed
to have been duly given three days from date of deposit in the United States
mails, unless sooner received. Either party may from time to time change its
address for further Notices hereunder by giving notice to the other party in
the manner prescribed in this section.
(b) Governing Law. THIS NOTES EXTENSION SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF.
<PAGE> 3
(c) Captions. The various captions of this Notes Extension are
for reference only and shall not be considered or referred to in resolving
questions of interpretation of this Notes Extension.
(d) Successors and Assigns. This Notes Extension, and all
obligations and benefits of Lender and EDUDATA hereunder, shall bind and inure
to the benefit of Lender and EDUDATA, their respective affiliates, and their
respective successors and assigns. Conversely, no assignment of this Notes
Extension, of any of the rights and/or duties hereunder by any party hereto
shall be valid without the prior written consent of the other party.
(e) Amendments and Waivers. No amendment or waiver of any term or
provision of this Notes Extension shall be effective unless made in writing.
Any written amendment or waiver shall be effective only in the instance given
and then only with respect to the specific term or provision (or portion
thereof) of this Notes Extension to which it expressly relates, and shall not
be deemed or construed to constitute a waiver of any other term or provision
(or portion thereof) waived in any other instance.
(f) Counterparts. This Notes Extension may be executed in one or
more counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and the same
instrument; signature pages may be detached from multiple separate counterparts
and attached to a single counterpart so that all signature pages are physically
attached to the same document.
(g) Entire Agreement. This Notes Extension, when signed by the
authorized representatives of all parties hereto, shall constitute the only
agreement among them with respect to the Promissory Notes and shall supersede
all prior agreements.
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Notes Extension as
of the date and year first above written.
EDUDATA:
EDUDATA CORPORATION,
a Delaware corporation
By: /s/ ROBERT H. GUREVITCH
-------------------------
Its: Chairman of the Board
-------------------------
LENDER:
ROBERT H. GUREVITCH
/s/ ROBERT H. GUREVITCH
------------------------------
<PAGE> 1
EXHIBIT 10.8
EXTENSION OF PROMISSORY NOTES
This EXTENSION OF PROMISSORY NOTES (this "NOTES EXTENSION") is made
and entered into as of November 25, 1996 by and between EDUDATA CORPORATION, a
Delaware corporation ("EDUDATA"), and BOSTON MARKETING COMPANY, LTD., a
Japanese corporation ("LENDER").
RECITALS
WHEREAS, EDUDATA has acquired all assets and liabilities of
Dental/Medical Diagnostic Systems, LLC, a California limited liability company
("DMD"), including (i) that certain Promissory Note, dated as of February 1,
1996 (the "FEBRUARY 1ST NOTE"), (ii) that certain Promissory Note, dated as of
February 15, 1996 (the "FEBRUARY 15TH NOTE") and (iii) that certain Promissory
Note, dated as of April 11, 1996 (the "APRIL NOTE"), each of which are by and
between DMD and the Lender, in an aggregate principal amount totalling
US$225,000 (the February 1st Note, the February 15th Note and the April Note,
collectively, are the "PROMISSORY NOTES") which Promissory Notes had original
maturity dates, for the payment by DMD of principal and interest respectively
due Lender thereunder, of August 1, 1996 for the February 1st Note, August 15,
1996 for the February 15th Note, and October 11, 1996 for the April Note
(collectively, the "ORIGINAL PAYMENT DATES"); and
WHEREAS, DMD and Lender have previously agreed to extend the
respective Original Payment Dates until the date hereof (the "PAYMENT DATE");
and
WHEREAS, EDUDATA and Lender each now wish to provide for an extension
the Payment Date as hereinafter provided;
NOW THEREFORE, in consideration of the foregoing premises and the
mutual agreements contained herein, and for other good and valuable
consideration the sufficiency of which is hereby acknowledged by the parties
hereto, and subject to the conditions contained herein, EDUDATA and Lender
agree as follows:
1. Extension of the Payment Date of Promissory Notes. The
Payment Date shall be extended, until the earlier to occur of the following:
(a) twenty-four (24) months following the closing of that certain
$1.6 Million bridge loan transaction currently being negotiated by
EDUDATA and M.H. Meyerson & Company, as placement agent (the "BRIDGE
LOAN"); or
<PAGE> 2
(b) the repayment in full of the entire principal amount of and
all interest due under those certain Secured Convertible Promissory
Notes in the original principal amount of $1.6 Million which are to be
issued in connection with the Bridge Loan; or
(c) at such time as EDUDATA receives the proceeds from an
underwritten public offering of its Common Stock.
2. Full Force and Effect of Promissory Notes. Other than the
changes mandated in Paragraph 1 of this Notes Extension, all of the terms and
conditions of the respective Promissory Notes shall remain in full force and
effect.
3. Miscellaneous.
(a) Notices. All notices, requests and other communications
(collectively, "NOTICES") given pursuant to this Notes Extension shall be in
writing, and shall be delivered by personal service or by United States first
class, registered or certified mail (return receipt requested), postage
prepaid, addressed to the party at the address set forth below:
If to EDUDATA:
EDUDATA CORPORATION
200 North Westlake Boulevard, Suite 202
Westlake Village, California 91362
Attn: Chief Financial Officer
Telephone: (805) 381-2700
Fax: (805) 374-1966
If to Lender:
BOSTON MARKETING COMPANY, LTD.
1545 Wilshire Boulevard, #504
Los Angeles, CA 90017
Telephone: ( )
Fax: (213) 413-6052
Any Notice shall be deemed duly given when received by the addressee thereof,
provided that any Notice sent by registered or certified mail shall be deemed
to have been duly given three days from date of deposit in the United States
mails, unless sooner received. Either party may from time to time change its
address for further Notices hereunder by giving notice to the other party in
the manner prescribed in this section.
<PAGE> 3
(b) Governing Law. THIS NOTES EXTENSION SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF.
(c) Captions. The various captions of this Notes Extension are
for reference only and shall not be considered or referred to in resolving
questions of interpretation of this Notes Extension.
(d) Successors and Assigns. This Notes Extension, and all
obligations and benefits of Lender and EDUDATA hereunder, shall bind and inure
to the benefit of Lender and EDUDATA, their respective affiliates, and their
respective successors and assigns. Conversely, no assignment of this Notes
Extension, of any of the rights and/or duties hereunder by any party hereto
shall be valid without the prior written consent of the other party.
(e) Amendments and Waivers. No amendment or waiver of any term or
provision of this Notes Extension shall be effective unless made in writing.
Any written amendment or waiver shall be effective only in the instance given
and then only with respect to the specific term or provision (or portion
thereof) of this Notes Extension to which it expressly relates, and shall not
be deemed or construed to constitute a waiver of any other term or provision
(or portion thereof) waived in any other instance.
(f) Counterparts. This Notes Extension may be executed in one or
more counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and the same
instrument; signature pages may be detached from multiple separate counterparts
and attached to a single counterpart so that all signature pages are physically
attached to the same document.
(g) Entire Agreement. This Notes Extension, when signed by the
authorized representatives of all parties hereto, shall constitute the only
agreement among them with respect to the Promissory Notes and shall supersede
all prior agreements.
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Notes Extension as
of the date and year first above written.
EDUDATA:
EDUDATA CORPORATION,
a Delaware corporation
By: /s/ ROBERT H. GUREVITCH
-----------------------------
Its: Chairman of the Board
-----------------------------
LENDER:
BOSTON MARKETING COMPANY, LTD., a
Japanese corporation
By: /s/ HIROKI UMEZAKI
-----------------------------
Its: President
-----------------------------
<PAGE> 1
EXHIBIT 10.9
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT (this "AGREEMENT") is made and entered
into as of October 1, 1996 (the "EFFECTIVE DATE"), by and between EDUDATA
CORPORATION, a Delaware corporation ("EDUDATA"), and BOSTON MARKETING COMPANY,
LTD., a Japanese corporation ("BMC").
SECTION 1. DEFINITIONS.
1.1. Definitions. For the purposes of this Agreement, the
following terms shall have the following meanings:
"DENTAL MARKET" means persons engaged in (i) the business of
selling dental and/or orthodontic products and/or services, (ii) the practice
of dental or orthodontic medicine, and (iii) the administration of educational
institutions authorized to confer degrees for the study of dentistry and
orthodontics.
"SALE PERIOD" means the period commencing on the Effective
Date and ending on the first anniversary thereof, and every consecutive
twelve-month period thereafter throughout the term of this Agreement.
"SYSTEM DEVICE" means Model No. CS6110 S/B with frame grabber,
CS 6110P S/B with frame grabber and CS6110 S/B without frame grabber, or any
successor devices thereto, which shall be identical to the CCDs and the CCUs
shipped to EDUDATA by BMC since December 1995.
"TELICAM MARK" shall mean the trademark more particularly
identified on Annex A hereto.
"TERRITORY" means the entire world.
SECTION 2. APPOINTMENT AND ACCEPTANCE.
2.1. Exclusive Appointment. BMC hereby appoints EDUDATA, and
EDUDATA hereby accepts such appointment, as BMC's exclusive distributor of the
System Devices to the Dental Market throughout the Territory. EDUDATA, without
the consent of BMC, shall have the right to appoint subdistributors and sales
representatives to sell the System Devices under the provisions of this
Agreement. BMC shall not sell or otherwise distribute, or appoint any person
to sell or otherwise distribute, the System Devices to the Dental Market in the
Territory
1
<PAGE> 2
without the prior written consent of EDUDATA, which consent may be withheld in
EDUDATA's sole and absolute discretion. EDUDATA shall also have a
right-of-first-refusal to be appointed the exclusive distributor within the
Territory of any additional products, accessories or equipment reasonably
associated with the System Devices, having applications to the Dental Market
(collectively, "ADDITIONAL DEVICES"), developed, marketed or sold by BMC
following the Effective Date of this Agreement, and BMC agrees to notify
EDUDATA of the development, marketing and/or sale of any such Additional
Devices as soon as practicable after the commencement of such development,
marketing and/or sales efforts by BMC. The terms and conditions of EDUDATA's
appointment with respect to any Additional Devices shall be agreed to pursuant
to good faith negotiations between the parties.
2.2. Term and Termination of Agreement. The term of this Agreement
shall commence on the Effective Date and shall continue for a period of five
(5) years thereafter, unless sooner terminated as provided in this section (the
"INITIAL TERM"). If at the end of the period ending 180 days prior to the
expiry of the Initial Term, this Agreement has not been terminated, the
parties, by mutual written agreement, may renew this Agreement on the same
terms and conditions as set forth herein for one (1) additional five (5) year
term (the "ADDITIONAL TERM"). During the Initial Term and the Additional Term,
if any, BMC shall only have the right to terminate this Agreement if (a)
EDUDATA fails to purchase an aggregate of 2,500 System Devices during any Sale
Period, (b) EDUDATA purchases CCDs or CCUs for use in its intraoral camera
systems from third parties (provided, however, that BMC shall have no right to
terminate this Agreement if EDUDATA orders System Devices from BMC and BMC
fails to fill such orders on a timely basis) or (c) EDUDATA fails to pay in
full for any System Device within 30 days of such System Device's delivery to
EDUDATA.
SECTION 3. PURCHASE PRICE AND PAYMENT TERMS.
3.1. Price. During the first two Sale Periods under this
Agreement, the price for each System Device shall be $750 (f.o.b. Japan);
provided, however, that BMC shall have the right at any time following six
months written notice to EDUDATA to increase such price. In the event such
price increase is not acceptable to EDUDATA, EDUDATA shall have the right to
terminate this Agreement. The purchase price for each System Device shall be
paid by wire transfer to BMC's Japan office. All prices will be determined and
paid in U.S. Dollars. EDUDATA shall have the right, in its sole and absolute
discretion, to establish the prices, charges and terms governing its sale of
the System Devices to third parties.
3.2. Taxes and Other Charges. The purchase price for the System
Devices does not include taxes and other charges. All shipping, handling,
insurance, brokerage and other charges and all import duties, sales, use or
privilege taxes, value-added taxes, excise or similar taxes, duties or
assessments, and other related charges levied by any jurisdiction pertaining to
the System Devices, other than taxes computed on the basis of the income of
BMC, shall be paid by EDUDATA.
2
<PAGE> 3
SECTION 4. WARRANTY; LIMITATION OF LIABILITY
4.1. Product Warranty. BMC warrants to EDUDATA that the System
Devices purchased by EDUDATA pursuant to this Agreement shall be free from
defects in design, materials and workmanship, and that it shall function in
accordance with the specifications provided to EDUDATA by BMC (the "PRODUCT
WARRANTY"). With respect to each System Device, the Product Warranty shall
remain in effect until the earlier to occur of (a) 12 months following the
delivery of such device to EDUDATA and (b) the incorporation of such System
Device into an EDUDATA intraoral camera system. BMC agrees to repair or
replace any defect in design, materials and\or workmanship on any System Device
during the term of the Product Warranty. Any warranty service hereunder shall
include only parts, but shall not include the cost of repairing or replacing
those parts and equipment damaged or rendered inoperable by the customer's
neglect or abuse. The foregoing warranty shall not apply to any System Devices
or parts thereof which have been (a) improperly repaired or altered, (b)
subjected to misuse, misapplication, negligence or accident or (c) used in a
manner contrary to BMC's directions. This warranty does not apply to defects
in materials or designs provided or stipulated by EDUDATA which are not
standard parts provided by BMC in the manufacture of the System Devices.
SECTION 5. TRADEMARKS, TRADE NAMES AND COPYRIGHTS.
5.1. Use of TELICAM Mark. During the term of this Agreement, BMC
hereby grants an unconditional and irrevocable license to EDUDATA to use the
TELICAM Mark in connection with marketing the System Device in the Territory.
5.2 Identification as Authorized Distributor. EDUDATA shall have
the right to represent itself as the exclusive authorized distributor of the
System Devices.
5.3 EDUDATA's Marks. BMC shall permit EDUDATA to place EDUDATA's,
or any of its subsidiaries' or affiliates' name, trademark, or logo on each
System Device to be distributed by EDUDATA.
5.4 Use of Intellectual Property. Nothing contained herein shall
be construed to allow BMC to use, in any fashion, any patent, copyright, trade
name or other item of intellectual property owned or otherwise held by EDUDATA.
Except as expressly provided herein, nothing contained herein shall be
construed to allow EDUDATA to use, in any fashion, any patent, copyright, trade
name or other item of intellectual property owned or otherwise held by BMC.
3
<PAGE> 4
SECTION 6. REPRESENTATIONS AND WARRANTIES.
6.1. Representations and Warranties of BMC. BMC represents,
warrants and covenants to EDUDATA that:
6.1.1. Distribution Rights. BMC has (a) BMC has the exclusive
right to sell and distribute the System Devices throughout the world, including
without limitation, the right to sublicense the right to sell and distribute
the System Devices in the Territory; (b) BMC has not granted any rights to any
third party operating within the Territory relating to the System Devices; (c)
BMC has not entered into any agreements providing for the sale and/or
distribution of the System Devices to any third party within the Territory; and
that (d) this Agreement is a valid, binding and enforceable obligation of BMC,
has been authorized by all necessary corporate action, and will not violate any
other agreement or relationship to which BMC is a party.
6.1.2. Ownership of Intellectual Property. BMC has the
unrestricted right to use the TELICAM Mark within the territory, including
without limitation the right to grant the license to use the TELICAM Mark to
EDUDATA set forth in Section 5 of this Agreement; and BMC has not entered into
any agreements with any third party operating within the Territory granting a
right to use of the TELICAM Mark.
6.1.3. Knowledge of Violations. To the best of BMC's
knowledge, neither the manufacture, distribution and sale in the Territory of
the System Devices nor the use by EDUDATA of the TELICAM Mark will violate or
infringe upon any patent, trademark, service mark, trade name, copyright, trade
secret, proprietary right, process or other intellectual property right of any
other person; and further, the transactions contemplated by this Agreement
will not result in any such violation; and
6.1.4. Licenses and Permits. BMC possesses from the
appropriate regulatory agencies, commissions, boards and governmental
authorities, whether national, regional or local state, all licenses, permits,
the authorizations, approvals, franchises and rights which are necessary for
BMC to distribute and sell the System Devices; and all such certificates,
licenses, permits, authorizations and rights have been lawfully and validly
issued, are in full force and effect and to the best of BMC's knowledge will
not be revoked, canceled, withdrawn, terminated or suspended.
6.2. Representations and Warranties of EDUDATA. EDUDATA
represents, warrants and covenants to BMC that:
6.2.1. No Conflict. This Agreement is a valid, binding and
enforceable obligation of EDUDATA, has been authorized by all necessary
corporate action, and will not violate any other agreement or relationship to
which EDUDATA is a party; and
4
<PAGE> 5
6.2.2. Licenses and Permits. EDUDATA possesses from the
appropriate regulatory agencies, commissions, boards and governmental bodies
and authorities, whether national, regional or local, all licenses, permits,
authorizations, approvals, franchises and rights which are necessary for
EDUDATA to distribute and sell the System Devices (other than licenses,
permits, authorizations, approvals, franchises and rights which are necessary
for the design, manufacture, distribution and/or sale of medical and/or dental
devices as to which EDUDATA makes no representation, warranty or covenant); and
all such certificates, licenses, permits, authorizations and rights have been
lawfully and validly issued, are in full force and effect and to the best of
EDUDATA's knowledge will not be revoked, canceled, withdrawn, terminated or
suspended.
SECTION 7. TERM AND TERMINATION
7.1. Reasons. Notwithstanding anything to the contrary contained
in Section 2 hereof, and subject to EDUDATA's rights contained in Section 3.1
hereof, this Agreement, including without limitation the license granted
pursuant to Section 5 hereof, shall terminate prior to its scheduled
expiration as follows:
(a) At any time by mutual written consent;
(b) Immediately upon notice by the adversely affected
party, if (i) a party materially breaches any of the terms and conditions of or
representations contained in this Agreement or (ii) fails to cure any such
breach within thirty (30) days of receipt by the breaching party of notice of
such breach except for breaches relating to the non-payment of undisputed
outstanding invoices which shall be cured within three (3) business days; and
(c) Immediately upon notice of the nonaffected party, if
a court having jurisdiction shall (i) enter a decree or order for relief in
respect of a party hereto in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, (ii)
appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator (or
similar official) of a party hereto or of any substantial part of the property
of a party hereto (including, without limitation, such party's subsidiaries, if
any, and their property), or (iii) order the winding up or liquidation of such
party's affairs, where any such decree or order for relief or any such other
decree or order remains unstayed and in effect for a period of sixty (60)
consecutive days.
7.2. Consequences of Expiration or Termination. Upon expiration or
prior termination of this Agreement:
(a) Unfilled Orders. Any orders received by BMC that are
unfilled on the effective date of expiration or termination of this Agreement
shall not be affected by such termination or expiration, and shall be timely
filled by BMC except where termination is due
5
<PAGE> 6
to EDUDATA's breach; provided, however, that EDUDATA's termination of this
Agreement pursuant to Section 3.1 shall not be deemed to constitute a breach;
(b) Settling of Accounts; Etc. EDUDATA shall (i) pay to
BMC all amounts owing to BMC under any binding order for System Devices as such
payments become due; (ii) cease to engage in advertising or promotional
activities concerning the System Device and the use of the TELICAM Mark or any
other trademark authorized by BMC pursuant to this Agreement; (iii) cease to
represent, in any manner, that EDUDATA has been designated by BMC to sell the
System Device; and (iv) deliver to BMC, at EDUDATA's expense, all documents
concerning the System Devices which are then in EDUDATA's possession and which
contain confidential information of BMC (provided, however that EDUDATA shall
not be required to return order or shipping documents containing information).
BMC shall within thirty (30) days from the date of expiration or termination of
this Agreement (i) refrain from using EDUDATA's trade names, trademarks, and
logos in connection with any of BMC's activities; (ii) cease to represent, in
any manner, that EDUDATA is responsible for the distribution of the System
Devices, and (iii) deliver to EDUDATA, at BMC's expense, all of the EDUDATA
confidential information then in the possession of BMC, its Subsidiaries or its
Affiliates;
(c) Continued Right to Use "Teli" Name. For a period of
six (6) months following the termination of this Agreement, EDUDATA shall have
the right to use the name "Telicam" in connection with its distribution and
sale of intraoral cameras;
(d) Continued Right to Sell System Devices. For a period
ending on the earlier to occur of (i) six (6) months following the termination
of this Agreement and (ii) the sale of the last System Device held by EDUDATA,
EDUDATA and its subdistributors and sales representatives, shall continue to
have the right to sell the System Device;
(e) Claims for Indemnity. NEITHER PARTY SHALL, IN
CONNECTION WITH THE EXPIRATION OR TERMINATION OF THIS AGREEMENT, HAVE THE RIGHT
TO CLAIM ANY INDEMNITY, REIMBURSEMENT OR COMPENSATION FOR ALLEGED LOSS OF
CLIENTELE, GOODWILL, OR THE LIKE OR HAVE ANY OTHER RIGHT TO COMPENSATION FOR
LOSSES OR DAMAGES RESULTING FROM THE EXPIRATION OR TERMINATION, EACH PARTY
ACKNOWLEDGING THAT IT HAS DECIDED AND WILL DECIDE ON ALL INVESTMENTS,
EXPENDITURES AND COMMITMENTS IN FULL AWARENESS OF THE POSSIBILITY OF ITS LOSSES
OR DAMAGES RESULTING FROM SUCH EXPIRATION OR TERMINATION AND IS WILLING TO BEAR
THE RISK THEREOF;
(f) Loss of Profits on Anticipated Sales.
Notwithstanding anything herein to the contrary, any claim of BMC under this
Agreement for loss of profits on anticipated sales as a consequence of a breach
by EDUDATA shall be limited to (i) $750 multiplied by 12,500 less (ii) $750
multiplied by the number of System Devices purchased by EDUDATA pursuant to
this Agreement. The parties agree that in the event of EDUDATA's breach of
this
6
<PAGE> 7
Agreement, BMC shall be obligated to use its best efforts to mitigate its
damages; and that the foregoing measure of damages shall not be deemed to be a
provision for liquidated damages; and
(g) Survival. Notwithstanding anything to the contrary
herein contained, the provisions of Sections 7.2, 8.1, 8.5 and 8.6 and
EDUDATA's obligation to pay for all operable System Devices which are delivered
to EDUDATA shall survive the expiration or other termination, for any reason
whatsoever of this Agreement.
SECTION 8. MISCELLANEOUS.
8.1. Indemnification. Each party agrees, if promptly notified by
the other, to indemnify and hold harmless the other from and against all claims
or liabilities resulting directly or indirectly from any breach by the
indemnifying party of any obligation under this Agreement, from any violation
by the indemnifying party of applicable law or regulation, from any
misrepresentation of the indemnifying party, or from any claim arising out of
any breach of any representation or warranty contained herein. In addition,
BMC shall indemnify and hold harmless EDUDATA from and against all claims or
liabilities which EDUDATA may suffer as a direct or indirect result of the
"Teli" name or the System Device infringing upon any patent, trade secret,
trademark or copyright or any other proprietary right held by a third party
when the "Teli" name and/or the System Device are used by EDUDATA in the manner
agreed upon by BMC and EDUDATA. Such indemnification shall include the payment
of reasonable attorneys' fees and other costs incurred by the indemnified party
in defending against such claims except that the indemnifying party must have
the right to control the defense and must approve any settlements.
8.2. Force Majeure. No party shall be liable for failure to
perform or delay in performing any obligation under this Agreement or any
individual contract of sale hereunder if such failure or delay is due to fire,
flood, earthquake, strike, labor trouble or other industrial disturbance, war
(declared or undeclared), embargo, blockade, shortage of labor, materials or
equipment, legal prohibition, governmental action, riot, insurrection, damage,
destruction or any other cause beyond the control of such defaulting party
preventing or delaying the performance.
8.3. Scope of Authority. The relationship of the parties under
this Agreement shall be and at all times shall remain one of independent
contractor. For the purposes of this Agreement, neither EDUDATA nor BMC is a
partner, agent, employee or legal representative of the other party.
8.4. Assignment. No party may transfer the rights or delegate the
duties provided for under the terms of this Agreement without the prior written
consent of the other party. Notwithstanding the foregoing sentence, no consent
shall be necessary for an assignment made by EDUDATA to any Subsidiary of
EDUDATA, to a purchaser of all or substantially all of the
7
<PAGE> 8
assets of EDUDATA, or to any corporation into which EDUDATA may merge,
providing that EDUDATA is the surviving corporation subsequent to any such
merger.
8.5. Governing Law. This Agreement and any contract of sale
concluded in accordance with this Agreement shall be interpreted and their
effects shall be determined in accordance with the laws of the State of
California, applicable to contracts made within and to be performed solely
within the State of California.
8.6. Attorneys' Fees. If any action, suit, arbitration or other
proceeding is instituted concerning or arising out of this Agreement, the
prevailing party shall recover all of such party's costs and attorneys' fees
incurred in each and every such action, suit or other proceeding, including any
and all appeals or petitions therefrom. As used herein, "attorneys' fees"
shall mean the full and actual costs of any legal services actually rendered in
connection with the matters involved, calculated on the basis of the usual fee
charged by the attorneys performing such services, and shall not be limited to
"reasonable attorneys' fees" as defined by any statute or rule of court.
8.7. Severability. If any provision of this Agreement is held to
be invalid, illegal or unenforceable for any reason or in any respect
whatsoever, such invalidity, illegality or unenforceability shall not affect
any other provisions of this Agreement, and this Agreement shall be construed
as if such invalid, illegal or unenforceable provision had never been contained
herein.
8.8. Waiver and Amendments. No failure or delay on the part of
either party hereto in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single waiver or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available. No amendment or waiver of any provision of
this Agreement nor consent to any departure therefrom, shall in any event be
effective unless the same shall be in writing and signed by both of the parties
hereto, and with respect to such waivers or consents shall be effective only in
the specific instance and for the specific purpose for which given.
8.9. Counterparts. This Agreement may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and
attached to a single counterpart so that all signature pages are physically
attached to the same document.
8.10. Entire Agreement. This Agreement and the annexes hereto, when
signed by the authorized representatives of all parties hereto, shall
constitute the only agreement among them with respect to the distribution of
the System Devices and shall supersede all prior agreements.
8
<PAGE> 9
8.11. Consent to Service of Process; Jurisdiction.
8.11.1 Except as provided in Section 8.1.2 below, the
parties hereto agree that any dispute arising out of this Agreement, whether
arising in contract, tort, equity, or otherwise, may be resolved by state or
federal courts located in California. Each of the parties hereto waives in any
such dispute any objection that it may have to such California courts
considering the dispute including, without limitation, any objection to the
laying of venue or based on the ground of forum non conveniens.
8.11.2 Each of the parties hereto agrees that the other
party to this Agreement shall have the right, to the extent permitted by
applicable law, to proceed against it or its property in a court in any
location reasonably selected in good faith to enable such other party to
realize on such property, or to enforce a judgment or other court order entered
in favor of any such other party. Both of the parties hereto waive any
objection that either may have to the location of the court in which the other
party to this Agreement has commenced a proceeding described in this paragraph
including, without limitation, any objection to the laying of venue or based on
the ground of forum non conveniens.
8.11.3 The parties hereto waive any right to have a jury
participate in resolving any dispute, whether sounding in contract, tort, or
otherwise arising out of this Agreement. Instead, any disputes resolved in
court will be resolved in a bench trial without a jury.
8.11.4 Both parties hereby irrevocably designate CT
Corporation System as its designee, appointee and agent to receive, for and on
behalf of it, service of process in any legal action or proceeding with respect
to this Agreement. It is understood that a copy of such process serviced on
such agent will be promptly forwarded by mail to it at its address set forth
below the signatures of the parties below, but the failure to receive such copy
shall not affect in any way the service of such process. Each of the parties
hereto further irrevocably consents to the service of process of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to it at the address
given in this Agreement, such service to become effective four days after such
mailing.
9
<PAGE> 10
8.11.5 Nothing herein shall affect the right of any party to
this Agreement to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against any other party in any
other jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
BOSTON MARKETING COMPANY, LTD.,
a Japanese corporation,
By: /s/ HIROKI UMEZAKI
------------------------------
Its: President
------------------------------
Notice Address:
Boston Marketing Company, Ltd.
12-1, 4-Chome Higashi-Nippon
Arakawa-KU, Tokyo, Japan
Attn: [SIG]
-----------------------------
Telephone: (813) 3803 0155
Fax: (813) 3803 6807
EDUDATA CORPORATION,
a Delaware corporation,
By: /s/ ROBERT H. GUREVITCH
-------------------------------
Its: Chairman
-------------------------------
Notice Address:
EDUDATA CORPORATION
200 North Westlake Boulevard, Suite 202
Westlake Village, CA 91362
Attn: Robert H. Gurevitch
Telephone: (805) 381-2700
Fax: (805) 374-2137
10
<PAGE> 1
EXHIBIT 10.10
EDUDATA CORPORATION
-------------------
SUBSCRIPTION INSTRUCTIONS
-------------------------
All subscribers for Units, each consisting of a $50,000 Secured Convertible
Promissory Note and a Warrant to purchase 25,000 shares of Common Stock of
Edudata Corporation ("Company"), must complete and execute the documents
contained in this booklet in accordance with the instructions set forth below.
The completed documents must then be returned to: Sharon Freifeld, M.H.
Meyerson & Co., Inc., 525 Washington Boulevard, Jersey City, New Jersey 07310.
Any questions you may have concerning these documents should be directed to Ms.
Freifeld at (800) 444-4114.
ALL INVESTORS MUST:
- ------------------
1. Complete, date and sign both copies of the Subscription Agreement included
in this package.
2. Complete, date and sign either the Confidential Purchaser Questionnaire for
individuals or the Confidential Purchaser Questionnaire for Corporations,
Partnerships, etc., each of which is included in this package.
3. Wire funds in the amount of $50,000 per Unit purchased as follows:
Bank name: PNC Bank - NJ
Bank address: 26 Journal Square
Jersey City, New Jersey 07306
ABA Routing: 031-207-607
Account number: 8011125868
For credit to: M.H. Meyerson & Co., Inc.
Edudata Special Account
THE UNITS OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND ARE BEING
OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS
OF SAID ACT AND SUCH LAWS. THE UNITS ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. THE UNITS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR
<PAGE> 2
THE ACCURACY OR ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
--------------------------
SUBSCRIPTION AGREEMENT
--------------------------
INSTRUCTIONS
FILL IN MISSING INFORMATION ON TOP OF PAGE 1.
COMPLETE, DATE AND SIGN BOTH COPIES OF THE SUBSCRIPTION AGREEMENT ON PAGE 13 IF
AN INDIVIDUAL, OR PAGE 14 IF A CORPORATION OR OTHER ENTITY.
3
<PAGE> 3
Name of Subscriber _________________________
SUBSCRIPTION AGREEMENT
(FOR ACCREDITED INVESTORS ONLY)
EDUDATA CORPORATION
200 N. WESTLAKE BOULEVARD
SUITE 202
WESTLAKE VILLAGE, CA 91362
Dear Sirs:
1. SUBSCRIPTION. I (sometimes referred to herein as the
"Investor") hereby subscribe for and agree to purchase ___ Units (as defined
below) of securities of Edudata Corporation ("Company"), a Delaware
corporation, on the terms and conditions described herein and in the
Confidential Term Sheet dated October 23, 1996, together with all supplements,
if any ("Term Sheet"), relating to this offering. The purchase price per Unit
is $50,000 and the aggregate amount subscribed for hereby is $_________. The
Company and M.H. Meyerson & Co., Inc., which is acting as the placement agent
for this offering ("MHM" or the "Placement Agent"), have the mutual discretion
to accept offers for fractional Units.
2. DESCRIPTION OF UNITS. Each Unit consists of:
a. a $50,000 principal amount interest-bearing secured
convertible promissory note ("Note"), that will have principal and interest
thereon payable upon the earliest of (i) the closing of the Company's public
offering ("Offering"), as described in Section 4.1 of the Note ("Consummation
Date"), (ii) the eighteen month anniversary of the date of the closing of this
offering ("Closing"), (iii) the sale or exchange by Robert H. Gurevitch of all
or substantially all of the shares of Common Stock of the Company owned by him,
(iv) the date of consummation of a sale by the Company of all or substantially
all of its assets or the merger or consolidation of the Company as described in
Section 4.2 of the Note, or (v) in the event of an "Offering Termination" as
defined in the letter of intent dated August 9, 1996 between the Company and
MHM ("Letter of Intent"). In the event of an Offering Termination, the Note is
convertible, at the option of the holder, into shares of the Company's common
stock, $.01 par value ("Common Stock"), at a conversion rate of $2.00 per
share; and
b. a warrant to purchase 25,000 shares of the Company's
Common Stock exercisable at any time or from time to time during the period
commencing one year from the Closing and ending five years thereafter at an
initial exercise purchase price of $2.00 per share ("Warrants"); provided,
however, that on the effective date of the registration statement with respect
to the Offering contemplated by the Letter of Intent ("MHM Offering"), the
Warrants will automatically convert (on a one-for-one basis) into the same
warrants to be issued as part of the securities to be offered to the public in
the MHM Offering ("Public Warrants").
<PAGE> 4
c. The 25,000 Warrants to be included in each Unit and the
information set forth herein regarding outstanding shares of Common Stock
reflect a 1:2.197317574 reverse stock split to be effected by the Company
before the Closing or as soon thereafter as practicable. If such reverse stock
split is effected before the Closing, the Units to be issued at the Closing
shall each reflect 25,000 Warrants. If such reverse stock split is effected
after the Closing, the Units to be issued at the Closing shall each reflect
54,932 Warrants and, upon such reverse stock split being effected, the parties
shall substitute therefore new Warrant certificates reflecting 25,000 Warrants
per Unit.
2. PURCHASE
a. I hereby tender to MHM cash or a check made payable to
the order of "M.H. Meyerson & Co., Inc. -- Edudata Special Account" in the
amount indicated above, two manually executed copies of this Subscription
Agreement and an executed copy of my Purchaser Questionnaire.
b. This offering will continue until the earlier of the
Closing or November 15, 1996, unless such latter date is extended, without
notice to the Investor, by mutual consent of MHM and the Company for a period
of up to 30 days ("Termination Date"). The Closing will take place upon the
receipt of $1,600,000 in proceeds for the purchase of Units in this offering.
Prior to the Termination Date, my cash or check delivered herewith will be held
by MHM in a segregated, non-interest bearing bank account subject to the terms
and conditions herein. If less than thirty-two (32) Units offered pursuant to
the Term Sheet are not sold and paid for by the Termination Date, my payment
will be returned to me without interest or deduction. Upon completion or
termination of this offering, I will be notified promptly by MHM as to whether
my subscription has been accepted by the Company. I acknowledge that $250,000
of the proceeds of this offering may be derived from the conversion of the
principal amount of notes issued by the Company to two non-affiliated investors
on or about October 4, 1996.
4. ACCEPTANCE OR REJECTION OF SUBSCRIPTION.
a. I understand and agree that the Company and MHM reserve
the right to reject this subscription for the Units, as a whole or in part and
at any time prior to the Closing or Termination Date, notwithstanding prior
receipt by me of notice of acceptance of my subscription, if in either of their
judgment they deem such action to be in the best interests of the Company; and
b. In the event of rejection of this subscription, my
subscription will be returned promptly to me without interest or deduction and
this Subscription Agreement shall have no force or effect. In the event my
subscription is accepted, the funds specified above shall be released to the
Company and the Note and certificate representing the Warrants shall be
delivered to MHM to hold on my behalf until otherwise instructed.
c. Effective upon acceptance of my subscription by the
Company, I shall become a party to a security agreement relating to all of the
Company's assets (the
<PAGE> 5
"Security Agreement"), a copy of which is annexed as an exhibit to the Term
Sheet. I agree to be bound by the terms and conditions of such Security
Agreement and acknowledge that my execution of this Subscription Agreement
shall be deemed to be the valid execution by me of the Security Agreement.
d. By my becoming a party to the Security Agreement, I am (i)
appointing MHM as my agent to take any and all action that may be necessary or
required to endorse my rights under the Note and the Security Agreement,
(ii) agreeing that MHM will be reimbursed for any out-of-pocket costs and
expenses incurred by it as my agent (such reimbursement to be either from the
collection of the Note or from me), (iii) agreeing to indemnify MHM and hold
it harmless from any liabilities under the Security Agreement, and (iv)
acknowledging that MHM as agent shall have such rights, duties and obligations
as set forth in such Security Agreement. I have read the Security Agreement and
understand that MHM as agent has no obligations in any way to monitor the
Company's performance.
5. CLOSING. The Closing of this offering will occur at the offices of
Graubard Mollen & Miller ("GM&M") upon the sale of thirty-two (32) Units. The
Units subscribed for herein shall not be deemed issued to or owned by me until
two copies of this Subscription Agreement have been executed by me and
countersigned by the Company and a Closing has occurred. At the Closing, my
Note and the certificates representing my Warrants shall be delivered to GM&M,
as custodian, to be held for my benefit until the consummation of the Offering
or such earlier time as I may request their delivery to me. I hereby authorize
GM&M, upon the consummation of the Offering, to (i) deliver the Note to the
Company upon full payment of all principal and interest due thereon and deliver
the proceeds of such payment to the Placement Agent for credit to my account
with the Placement Agent and (ii) to deliver the certificates representing my
Warrants to the Company in exchange for certificates representing an equal
number of Public Warrants and deliver such certificates representing the Public
Warrants to the Placement Agent for my account. If the reverse stock split
referred to in Section 2C is effected after the Closing, GM&M is authorized to
exchange the Warrant certificate received by it at the Closing for new Warrant
Certificates reflecting such reverse stock split.
6. DISCLOSURE.
a. Because this offering is limited to accredited investors as
defined in Section 2(15) of the Securities Act of 1933, as amended ("Securities
Act"), and Rule 501 promulgated thereunder, in reliance upon exemptions
contained in Section 4(2) and Rules 505 and 506 of the Securities Act and
applicable state securities laws, the Units are being sold without
registration under the Securities Act. Accordingly, the Company is offering the
Units utilizing the Term Sheet rather than a more detailed private offering
memorandum that contains the kind of information specified in Rule
502(b)(2)(i)(A) promulgated under the Securities Act. I acknowledge receipt of
the Term Sheet, including all exhibits listed therein, and acknowledge that I
have had an adequate opportunity to receive, and have received, all information
and materials regarding the Company that I have requested.
b. I fully understand that the Company has a limited financial
and operating history in its present business and that the Units are
speculative investments which
<PAGE> 6
involve a high degree of risk of loss of my entire investment. I fully
understand the nature of the risks involved in purchasing the Units and I am
qualified by my knowledge and experience to evaluate investments of this type.
I have carefully considered the potential risks relating to the Company and
purchase of its Units and have, in particular, reviewed each of the risks set
forth in the Term Sheet. Both my advisors and I have had the opportunity to ask
questions of and receive answers from representatives of the Company or persons
acting on its behalf concerning the Company and the terms and conditions of a
proposed investment in the Company and my advisors and I have also had the
opportunity to obtain additional information necessary to verify the accuracy of
information furnished about the Company. Accordingly, I have independently
evaluated the risks of purchasing the Units.
7. PLANNED PUBLIC OFFERING - REGISTRATION RIGHTS; LOCK-UP.
a. The Units are being offered pursuant to the Term Sheet to
which this Subscription Agreement is annexed as an exhibit. Also annexed as an
exhibit to the Term Sheet is a copy of the Letter of Intent that the Company
has received from MHM with regard to the Company's proposed MHM Offering. There
can be no assurance that a registration statement ("Registration Statement")
will be filed or, if filed, declared effective by the Securities and Exchange
Commission ("Commission") or, if the Registration Statement is declared
effective by the Commission, that the Company successfully will be able to
consummate the MHM Offering.
b. To facilitate the closing of the proposed Offering, I
agree that the Units, and the Notes and the Warrants (and the shares of Common
Stock underlying the Warrants) included in the Units offered hereby may not be
sold or otherwise transferred until twenty-four (24) months after the Closing
("Holding Period"), unless (i) MHM, in its sole discretion, consents to the
sale of all or part of such securities at an earlier date which consent may be
withheld in its sole discretion and which may be required to be withheld by
Nasdaq or the National Association of Securities Dealers, Inc. ("NASD") as a
prerequisite to listing the Company's securities on Nasdaq and (ii) if I am a
Pennsylvania resident, I comply with Sec. 204.011 of the Pennsylvania Blue Sky
regulations. The parties hereto agree that MHM is intended to be a third-party
beneficiary of this Subscription Agreement and that no modification of the
"lock-up" provisions contained in this Section 7b may be made without the prior
written consent of MHM.
c. Upon the date the Registration Statement with respect to
the MHM Offering is declared effective ("Effective Date") by the Commission,
such Warrants shall be automatically converted (on a one-for-one basis) into the
Public Warrants to be sold to the public in the MHM Offering. I understand that
the terms of the Warrants included in the Units are different from the terms of
the Public Warrants which have a higher exercise price, are redeemable by the
Company at a price of $.01 per Warrant if the price of the Company's Common
Stock reaches certain levels, and may be different in other material respects.
d. The Company, at its cost and expense (except commissions
or discounts and fees of the Investor's own professionals if any), agrees to
include the Public Warrants and shares of Common Stock underlying the Public
Warrants ("Registerable
4
<PAGE> 7
Securities") in the Company's Registration Statement to be filed in connection
with the Offering, and the Company shall keep the Registration Statement
current and effective until all of the Registerable Securities are sold or an
exemption from the registration requirements of the Securities Act is available.
e. The Investor shall have the right to "piggyback" the
Registerable Securities on each registration statement filed by the Company
during the seven year period following the consummation of the Offering (except
registration statements filed on Form S-4 and Form S-8), all at the Company's
cost and expense (except commissions or discounts and fees of the Investor's
own professionals, if any); provided, however, that this subparagraph (e) shall
not apply to any Registerable Securities if such Registerable Securities may
then be sold within a six-month period under Rule 144, assuming the investor's
compliance with the provisions of such Rule, and the Company delivers an option
to that effect to the transfer agent; and provided, further, that if the
offering (there than the MHM Offering) with respect to which a registration
statement is filed is managed by an independent underwriter other than MHM,
then (i) if in the reasonable judgment of the managing underwriter, which shall
be evidenced by a writing delivered to such Investor, the sale of the
Registerable Securities in connection with the proposed offering would have a
material adverse effect on the offering, the investor shall not sell his
Registerable Securities under such registration statement until 90 days after
the effective date of such registration statement, and (ii) if securities are
to be registered for the benefit of any other selling security holder ("Selling
Holder"), the Investor shall be entitled to sell immediately under such
registration statement a percentage of the total number of Registerable
Securities of a particular class of securities owned by him equal to the
highest percentage of that class to be sold under such registration statement
(vis-a-vis the total number of securities of that class owned) by any such
Selling Holder, with the investor being entitled to sell the balance of his
Registerable Securities under such registration statement commencing 90 days
after the effective date of the registration statement. The Company shall give
the Investor two weeks' notice of the intended filing date of any registration
statement, other than a registration statement filed on Form S-4 or Form S-8,
and the Investor shall have two weeks after receipt of such notice to notify
the Company of its intent to include the Registerable Securities in the
registration statement. The Company shall keep any registration statement onto
which the Investor has "piggybacked" his Registerable Securities current and
effective for a period up to 270 days from the date on which the Investor is
first entitled to sell the total number of his Registerable Securities
registered thereunder.
8. INVESTOR REPRESENTATIONS AND WARRANTIES. I acknowledge,
represent, and warrant to, and agree with, the Company (and MHM may rely
thereon) as follows:
a. I am aware that my investment involves a high degree of
risk as disclosed in the Term Sheet and have carefully read the Term Sheet
including the section thereof entitled "Risk Factors";
b. I acknowledge and am aware that there is no assurance
as to the future performance of the Company;
<PAGE> 8
c. I acknowledge that there may be certain adverse tax
consequences to me in connection with my purchase of Units and the Company and
MHM have advised me to seek the advice of experts in such areas prior to making
this investment;
d. I acknowledge that there can be no assurance that the
Company will file the Registration Statement for its proposed MHM Offering,
that such Registration Statement will be declared effective by the Commission
or, if declared effective, that the Company successfully will close the
proposed MHM Offering. If the proposed MHM Offering is not closed and the
Company does not receive alternative financing, which it does not anticipate,
the Company may not have the funds to pay the Notes or to fund the Company's
operating expenses; and
e. I am purchasing the Units for my own account for
investment and not with a view to or for sale in connection with the
distribution of the Units or the Notes or the Warrants contained in the Units
or the shares of Common Stock underlying the Warrants contained in the Units
nor with any present intention of selling or otherwise disposing of all or any
part of the Units, the Notes, the Warrants or the shares of Common Stock
underlying the Warrants contained in the Units. I agree that I must bear the
economic risk of my investment for an indefinite period of time because, among
other reasons, the Units have not been registered under the Securities Act or
under the securities laws of any state and, therefore, cannot be resold,
pledged, assigned, or otherwise disposed of unless they are subsequently
registered under the Securities Act and under applicable securities laws of
certain states or an exemption from such registration is available. I
understand that, other than as described herein, the Company is under no
obligation to register the Units on my behalf or to assist me in complying with
any exemption from such registration under the Securities Act or any state
securities laws. Furthermore, I hereby acknowledge and agree that I will not
sell, transfer, give, or otherwise dispose of, either publicly or privately,
the Units or any securities underlying the Units during the Holding Period
without the prior written consent of MHM. I hereby authorize the Company to
place a legend denoting the restrictions on the Note and the Warrants to be
issued;
f. I am not a member of the NASD. I have not, for a period
of 12 months prior to the date of this Subscription Agreement, been affiliated
or associated with any company, firm, or other entity which is a member of the
NASD. I do not own stock or other interest in, and I am not a creditor of, any
member of the NASD (other than interests acquired in open market purchases);
g. I have the financial ability to bear the economic risk
of my investment in the Company (including its complete loss), have adequate
means for providing for my current needs and personal contingencies, and have
no need for liquidity with respect to my investment in the Company;
h. I have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Units and have obtained, in my judgment, sufficient
information from the Company to evaluate the merits and risks of an investment
in the Company. I have not utilized any person as my purchaser representative
in connection with evaluating such merits and risks;
<PAGE> 9
i. I have relied solely upon my own investigation in
making a decision to invest in the Company;
j. I have received no representation or warranty from the
Company or the Placement Agent or any of their respective officers, directors,
employees or agents in respect of my investment in the Company and I have
received no information (written or otherwise) from them relating to the
Company or its business other than as set forth in the Term Sheet. I am not
participating in the offer as a result of or subsequent to: (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio; or
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising;
k. I have had full opportunity to ask questions of and to
receive satisfactory answers concerning the offering and other matters
pertaining to my investment and all such questions have been answered to my
full satisfaction;
l. I have been provided an opportunity to obtain any
additional information concerning the offering, the Company and all other
information to the extent the Company possesses such information or can acquire
it without unreasonable effort or expense;
m. I am an "accredited investor" as defined in Section
2(15) of the Securities Act and in Rule 501 promulgated thereunder;
n. I understand that (i) the Units have not been
registered under the Securities Act, or the securities laws of certain states
in reliance on specific exemptions from registration thereunder, (ii) no
securities administrator of any state or the Federal government has recommended
or endorsed this offering or made any findings or determination relating to the
fairness of an investment in the Company, and (iii) the Company is relying on
my representations and agreements for the purpose of determining whether this
transaction meets the requirements of the exemptions referred to in clause (i)
hereto;
o. I understand that (i) since neither the offer nor sale
of the Units has been registered under the Securities Act or the securities
laws of any state, the Units may not be sold, assigned, pledged or otherwise
disposed of unless they are so registered or an exemption from such
registration is available, (ii) it is not anticipated that there will be any
market for the resale of the Units, and (iii) except as set forth herein, the
Company has no obligation or intention to register the Notes and the Warrants
(including the Common Stock underlying the Warrants) or the Units under the
Securities Act or the securities laws of any states, or to take action so as to
permit sales of the Units pursuant thereto;
p. I understand that I am urged to seek independent advice
from my professional advisors relating to the suitability of an investment in
the Company in view of my overall financial needs and with respect to the legal
and tax implications of such investment;
q. If the investor is a corporation, company, trust,
employee benefit plan, individual retirement account, Keogh Plan, or other
tax-exempt entity, it is authorized and qualified to become an investor in the
Company and the person signing this Subscription Agreement on behalf of such
entity has been duly authorized by such entity to do so;
7
<PAGE> 10
r. The information contained in my Purchaser
Questionnaire, as well as any information which I have furnished to the Company
with respect to my financial position and business experience, is correct and
complete as of the date of this Subscription Agreement, and, if there should be
any material change in such information prior to the Closing, I will furnish
such revised or corrected information to the Company; and
s. I hereby acknowledge and am aware that except for any
rescission rights that may be provided under applicable laws, I am not entitled
to cancel, terminate, or revoke this subscription, and any agreements made in
connection herewith shall survive my death or disability.
t. I hereby acknowledge that I am aware that Nasdaq or the
NASD may request or require that no release or waiver to the "lock-up"
provisions set forth in Section 7b be given without its or their prior consent
and that MHM not give its consent to any request for any release or waiver
therefrom without the prior consent of Nasdaq or the NASD.
9. INDEMNIFICATION.
a. I hereby agree to indemnify and hold harmless the
Company and MHM, as Placement Agent, their respective officers, directors,
shareholders, employees, agents and attorneys against any and all losses,
claims, demands, liabilities, and expenses (including reasonable legal or other
expenses) incurred by each such person in connection with defending or
investigating any such claims or liabilities, whether or nor resulting in any
liability to such person, to which any such indemnified party may become
subject under the Securities Act, under any other statute, at common law or
otherwise, insofar as such losses, claims, demands, liabilities and expenses
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact made by me and contained in this Subscription
Agreement or my Purchaser Questionnaire, or (ii) arise out of or are based upon
any breach by me of any representation, warranty, or agreement contained herein.
b. I hereby agree to indemnify and hold harmless MHM, as
Agent under the Security Agreement, its officers, directors, shareholders,
employees, agents and attorneys against any and all losses, claims, demands,
liabilities, and expenses (including reasonable legal or other expenses)
incurred by each such person in connection with defending or investigating any
such claims or liabilities, whether or not resulting in any liability to such
person, to which any such indemnified party may become subject under any
statute, at common law or otherwise, insofar as such losses, claims, demands,
liabilities and expenses, arise out of or are based upon MHM's action or
inaction as agent under the Security Agreement (except to the extent that the
Security Agreement provides that no such indemnification is possible).
10. SEVERABILITY. In the event any part or parts of this
Subscription Agreement are found to be void, the remaining provisions of this
Subscription Agreement shall nevertheless be binding with the same effect as
though the void part or parts were deleted.
11. COUNTERPARTS. This Subscription Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. The execution of
this Subscription Agreement may be by actual or facsimile signature.
8
<PAGE> 11
12. BENEFIT. This Subscription Agreement shall be binding upon and
inure to the benefit of the parties hereto (and MHM to the extent it is a third
party beneficiary hereof or otherwise given rights hereunder) and their legal
representatives, successors and assigns. MHM shall be deemed to be a third
party beneficiary with respect to any sections hereof which so state or which
otherwise indicate that MHM would be entitled to rely on the representations,
warranties or covenants made by me therein.
13. NOTICES AND ADDRESSES. All notices, offers, acceptance and any
other acts under this Subscription Agreement (except payment) shall be in
writing, and shall be sufficiently given if delivered to the addresses in
person, by Federal Express or similar receipted delivery, by facsimile delivery
or, if mailed, postage prepaid, by certified mail, return receipt requested, as
follows:
To Subscriber: At the address set forth on the signature
page of this Subscription Agreement
To The Company: Edudata Corporation
200 N. Westlake Boulevard
Suite 202
Westlake Village, CA 91362
Attn: Robert H. Gurevitch
CEO/Chairman
Fax: 805-374-1966
In either case
with copies to: M.H. Meyerson & Co., Inc.
525 Washington Boulevard
Jersey City, New Jersey 07310
Attn: Ronald I. Heller
Fax: 201-459-9458
Graubard Mollen & Miller
600 Third Avenue, 31st Floor
New York, NY 10016
Attn: David Alan Miller, Esq.
Fax: 212-818-8881
Troop Meisinger Steuber & Pasich LLP
10940 Wilshire Boulevard
Los Angeles, California 90024
Attn: C.N. Franklin Reddick, III, Esq.
Fax: 310-443-7599
or to such other address as any of them, by notice to the others may designate
from time to time. Time shall be counted to, or from, as the case may be, the
delivery in person or five (5) days after mailing.
9
<PAGE> 12
14. GOVERNING LAW. This Subscription Agreement and any dispute,
disagreement, or issue of construction or interpretation arising hereunder,
whether relating to its execution, its validity, the obligations provided
therein or performance shall be governed by, and interpreted according to the
law of the State of New York.
15. VENUE. The Company (a) agrees that any legal suit, action or
proceeding arising out of or relating to this Agreement shall be instituted
exclusively in New York State Supreme Court, County of New York or in the
United States District Court for the Southern District of New York, (b) waives
any objection to the venue of any such suit, action or proceeding and the right
to assert that such forum is not a convenient forum, and (c) irrevocably
consents to the jurisdiction of the New York State Supreme Court, County of New
York, and the United States District Court for the Southern District of New
York in any such suit, action or proceeding. The Company further agrees to
accept and acknowledge service of any and all process which may be served in
any such suit, action or proceeding in the New York Supreme Court, County of
New York, or in the United States District Court for the Southern District of
New York and agrees that service of process upon it mailed by certified mail to
its address shall be deemed in every respect effective service of process upon
it in any such suit, action or proceeding.
16. ORAL EVIDENCE. This Subscription Agreement constitutes the entire
Subscription Agreement between the parties and supersedes all prior oral and
written agreements between the parties hereto with respect to the subject
matter hereof. Neither this Subscription Agreement nor any provision hereof may
be changed, waived, discharged, or terminated orally, except by a statement in
writing signed by the party or parties against which enforcement or the change,
waiver, discharge, or termination is sought.
17. SECTION HEADINGS. Section headings herein have been inserted for
reference only and shall not be deemed to limit or otherwise affect, in any
matter, or be deemed to interpret in whole or in part any of the terms or
provisions of this Subscription Agreement.
18. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties and agreements contained herein shall survive the
delivery of, and payment for, the Units.
19. ACCEPTANCE OF SUBSCRIPTION. The Company may accept this
Subscription Agreement at any time for all or any portion of the Units
subscribed for by executing a copy hereof as provided and notifying me within a
reasonable time thereafter.
10
<PAGE> 13
NOTICE TO RESIDENTS OF ALL STATES
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL
OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY
OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTION ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS
SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
NOTICE TO CALIFORNIA RESIDENTS: THESE SECURITIES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE CALIFORNIA
CORPORATIONS CODE BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE
LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS
SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
CALIFORNIA CORPORATIONS CODE, IF SUCH REGISTRATION IS REQUIRED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
COMMISSIONER OF CORPORATIONS, DEPARTMENT OF CORPORATIONS, STATE OF CALIFORNIA,
NOR HAS THE COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE DEPARTMENT OF CORPORATIONS OF THE STATE OF CALIFORNIA REQUIRES THAT
THE FOLLOWING LEGEND BE PLACED ON CERTIFICATES EVIDENCING SECURITIES SOLD TO
CALIFORNIA INVESTORS: IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSION OR CORPORATIONS OF THE
STATE OF CALIFORNIA EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
NOTICE TO FLORIDA RESIDENTS: FLORIDA LAW PROVIDES THAT WHEN SALES ARE
MADE TO FIVE OR MORE PERSONS IN FLORIDA, ANY SALE MADE IN FLORIDA IS VOIDABLE
BY THE PURCHASER WITHIN THREE DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS
MADE BY SUCH PURCHASER TO THE COMPANY, AN AGENT OF THE COMPANY OR AN ESCROW
AGENT OR WITHIN THREE DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS
COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER. PAYMENTS FOR
TERMINATED SUBSCRIPTIONS VOIDED BY PURCHASERS AS PROVIDED FOR IN THIS PARAGRAPH
WILL BE PROMPTLY REFUNDED WITHOUT
11
<PAGE> 14
INTEREST. TO ACCOMPLISH THIS WITHDRAWAL, A SUBSCRIBER NEED ONLY SEND A LETTER
OR TELEGRAM TO THE COMPANY (ATTN. MS. SHARON FREIFELD) AT THE ADDRESS SET FORTH
ON THE COVER PAGE OF THIS TERM SHEET, INDICATING HIS INTENTION TO WITHDRAW.
SUCH LETTER OR TELEGRAM SHOULD BE SENT AND POSTMARKED PRIOR TO THE END OF THE
AFOREMENTIONED THIRD BUSINESS DAY. IT IS ADVISABLE TO SEND SUCH LETTER BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS RECEIVED AND
ALSO TO EVIDENCE THE TIME IT WAS MAILED. IF THE REQUEST IS MADE ORALLY, IN
PERSON, OR BY TELEPHONE, TO AN OFFICER OF THE COMPANY, A WRITTEN CONFIRMATION
THAT THE REQUEST HAS BEEN RECEIVED SHOULD BE REQUESTED.
NOTICE TO ILLINOIS RESIDENTS: THESE SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECRETARY OF STATE OF ILLINOIS OR THE STATE OF ILLINOIS,
NOR HAS THE SECRETARY OF STATE OF ILLINOIS OR THE STATE OF ILLINOIS PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PRIVATE PLACEMENT MEMORANDUM. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NOTICE TO MASSACHUSETTS RESIDENTS: THE SECURITIES DESCRIBED HEREIN ARE
OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SECTION 1402(b)(13) OF
THE GENERAL LAWS OF MASSACHUSETTS, AS AMENDED, REGULATION 14.202(b)(13)(I) OF
THE SECURITIES DIVISION, OFFICE OF THE SECRETARY OF STATE OF MASSACHUSETTS
(MASSACHUSETTS UNIFORM LIMITED OFFERING EXEMPTION) AND SECTIONS 3(b) OR 4(2) OF
THE SECURITIES ACT OF 1933, AS AMENDED, AND/OR REGULATION D PROMULGATED
THEREUNDER.
NOTICE TO PENNSYLVANIA RESIDENTS: EACH PENNSYLVANIA RESIDENT WHO
SUBSCRIBES FOR THE SECURITIES BEING OFFERED HEREBY AGREES NOT TO SELL THESE
SECURITIES FOR A PERIOD OF TWELVE MONTHS AFTER THE DATE OF PURCHASE.
UNDER PROVISIONS OF THE PENNSYLVANIA SECURITIES ACT OF 1972, EACH
PENNSYLVANIA RESIDENT SHALL HAVE THE RIGHT TO WITHDRAW HIS ACCEPTANCE WITHOUT
INCURRING ANY LIABILITY TO THE SELLER, UNDERWRITER (IF ANY) OR ANY OTHER
PERSON, WITHIN TWO BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE ISSUER OF HIS
WRITTEN BINDING CONTRACT OF PURCHASE OR, IN THE CASE OF A TRANSACTION IN WHICH
THERE IS NO WRITTEN BINDING CONTRACT OF PURCHASE, WITHIN TWO BUSINESS DAYS
AFTER HE MAKES THE INITIAL PAYMENT FOR THE SECURITIES BEING OFFERED. TO
ACCOMPLISH THIS WITHDRAWAL, A SUBSCRIBER NEED ONLY SEND A LETTER OR TELEGRAM TO
THE SELLING AGENT AT THE ADDRESS SET FORTH IN THE TEXT OF THE MEMORANDUM,
INDICATING HIS OR HER INTENTION TO WITHDRAW. SUCH LETTER OR TELEGRAM SHOULD BE
SENT AND POSTMARKED PRIOR TO THE END OF THE AFOREMENTIONED SECOND BUSINESS DAY.
IT IS PRUDENT TO SEND SUCH A LETTER BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO ENSURE THAT IT IS RECEIVED AND ALSO TO EVIDENCE THE TIME WHEN IT
WAS MAILED. IF THE REQUEST IS MADE ORALLY (IN PERSON OR BY TELEPHONE, TO THE
SELLING AGENT AT THE NUMBER LISTED IN THE TEXT OF THE MEMORANDUM), A WRITTEN
CONFIRMATION THAT THE REQUEST HAS BEEN RECEIVED SHOULD BE REQUESTED.
<PAGE> 15
INDIVIDUAL INVESTOR Date:__________________________________
_____________________________ _______________________________________
Social Security Number Print Name of Investor No. 1
_______________________________________
Signature of Investor No. 1*
_______________________________________
Number and Street
_______________________________________
City, State, Zip Code
_____________________________ _______________________________________
Social Security Number Print Name of Investor No. 2
_______________________________________
Signature of Investor No. 2*
_______________________________________
Number and Street
_______________________________________
City, State, Zip Code
- -------------------
* The Investor's signature hereto shall constitute (i) the Investor's
signature, as Secured Party, of and on the Security Agreement to be
executed by the Company on the Closing of the offering, and (ii) the
Investor's agreement to be bound by the terms of such Security Agreement.
13
<PAGE> 16
ENTITY INVESTOR
Manner in which Units are to be held:
______ Individual Ownership
______ Tenants-in-Common
______ Joint Tenant with Right of Survivorship
______ Community Property
______ Separate Property
______ Partnership
______ Trust
______ Corporation
______ Other (please indicate)
Corporate or Other Entity Date:
-------------------------------
- ------------------------------- ------------------------------------
Federal ID Number Print Name of Entity
By:
---------------------------------
Signature**
Title:
------------------------------------
Number and Street
------------------------------------
City, State, Zip Code
DATED: , 1996.
-------------
- ---------------------------
** The Investor's signature hereto shall constitute (i) the Investor's
signature, as Secured Party, of and on the Security Agreement to be executed
by the Company on the Closing of the offering, and (ii) the Investor's
agreement to be bound by the terms of such Security Agreement.
14
<PAGE> 17
By signing below the undersigned accepts the foregoing subscription and
agrees to be bound by its terms.
EDUDATA CORPORATION
BY:
------------------------------------
Robert H. Gurevitch
CEO/Chairman
15
<PAGE> 1
EXHIBIT 11.1
STATEMENT REGARDING COMPUTATION OF NET INCOME (LOSS) PER SHARE
Dental/Medical Diagnostic Systems, Inc. and Subsidiaries
For the Thirteen Week and Thirty Nine Week Periods Ended November 30, 1996
<TABLE>
<CAPTION>
Thirteen Thirty Nine
NET INCOME PER SHARE WAS Weels Weeks
CALCULATED AS FOLLOWS: --------- -----------
<S> <C> <C>
Primary:
Net Income (loss) $(136,301) $(100,568)
Weighted average common shares outstanding 3,980,717 3,841,632
Incremental shares under stock options computed
under the treasury stock method using the average
market price of the issuer's commons stock during
the period -- --
Net income (loss) per share $(.03) $(.03)
Fully diluted:
Net income (loss) $(136,301) $(100,568)
Weighted average common shares outstanding 3,980,717 3,841,632
Incremental shares under stock options computed
under the treasury stock method using the market
price of the issuer's common stock at the end of
the period of higher than the average market price -- --
Weighted average common and common equivalent
shares outstanding 3,980,717 3,841,632
Net Income (loss) per share $(.03) $(.03)
</TABLE>
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF EDUDATA CORPORATION AS OF AND FOR
THE THIRTY NINE WEEK PERIOD ENDED NOVEMBER 30, 1996 INCLUDED IN THIS REPORT ON
FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-02-1996
<PERIOD-START> MAR-03-1996
<PERIOD-END> NOV-30-1996
<CASH> 790,280
<SECURITIES> 0
<RECEIVABLES> 1,070,868
<ALLOWANCES> 20,975
<INVENTORY> 1,579,448
<CURRENT-ASSETS> 3,652,359
<PP&E> 462,223
<DEPRECIATION> 69,980
<TOTAL-ASSETS> 4,415,562
<CURRENT-LIABILITIES> 2,025,912
<BONDS> 0
0
0
<COMMON> 3,980,717
<OTHER-SE> 2,591,018
<TOTAL-LIABILITY-AND-EQUITY> 4,415,562
<SALES> 9,558,090
<TOTAL-REVENUES> 9,558,090
<CGS> 5,614,431
<TOTAL-COSTS> 4,002,993
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41,234
<INCOME-PRETAX> (100,568)
<INCOME-TAX> 0
<INCOME-CONTINUING> (100,568)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (100,568)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> 0
</TABLE>
