SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM 10-K
[ X ] Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999
or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _________ to _________
Commission file number 0-935
AMPERSAND MEDICAL CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 36-4296006
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
414 N. Orleans St., Suite 305, Chicago, IL 60610
(Address of Principal Executive Offices) (Zip Code)
(312) 222-9550
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ----------------------
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. [ X ] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K. [ ]
The aggregate market value of the Common Stock held by non-affiliates of
the Company as of March 28, 2000 was $58,036,450 based upon the average bid
and asked prices of shares of the Company's Common Stock, no par value per
share ("Common Stock"), of $4.5625 per share as reported in the Electronic
Bulletin Board. The number of shares of Common Stock outstanding as of
March 28, 2000 is 21,755,937.
The following document is incorporated by reference into Part III of this
Form 10-K:
Ampersand Medical Corporation Proxy Statement, relating to the annual
meeting of shareholders.
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PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
The Company is primarily engaged in the design, development and
marketing of a series of instruments, disposables, and tests to provide
"Point of Care" enhanced cervical cancer screening. The Company also
designs, develops and markets software-based systems to provide analysis of
images on microscopic slides and to electronically exchange images and
related data with remote locations.
Ampersand Medical Corporation ("Ampersand," and together with its
subsidiaries, the "Company") was incorporated in Delaware on December 15,
1998. On May 26, 1999 Bell National Corporation ("Bell National"), the
former parent of the Company, was merged with and into the Company and Bell
National ceased to exist. Bell National was originally incorporated in
California on October 1, 1958. Through 1985, its principal subsidiary was
Bell Savings and Loan Association ("Bell Savings"), a state-chartered
savings and loan association. On July 25, 1985, the Federal Home Loan Bank
Board appointed the Federal Savings & Loan Insurance Corporation ("FSLIC")
as receiver of Bell Savings. At the same time, the assets of Bell Savings
were transferred to a new, unrelated, federally chartered mutual savings
and loan association, Bell Federal. The FSLIC's appointment followed
shortly after a determination that Bell Savings had a negative net worth.
On August 20, 1985, Bell National filed a voluntary petition under
Chapter 11 of the Bankruptcy Code. A Plan of Reorganization (the "Plan")
was approved by the Bankruptcy Court, and became effective June 29, 1987.
After emerging from bankruptcy proceedings in June 1987, and a vote
by shareholders to continue the operations of Bell National in October
1988, Bell National reached an agreement (the "Stock Purchase Agreement")
in 1989 with Milley Management Incorporated ("MMI"), a private investment
firm, whereby Bell National sold to a group of private investors (including
MMI) Common Stock, no par value (the "Common Stock"), totaling
approximately 41% of the outstanding voting shares on a fully diluted
basis.
On June 15, 1990, Bell National purchased 100% of the Common Stock of
Payne Fabrics, Inc. a designer and distributor of decorative drapery and
upholstery fabrics, for a purchase price of $6,493,000 and the issuance of
stock appreciation rights ("SAR's").
On August 4, 1997 Payne Fabrics, Inc. sold substantially all of its
assets and most of its liabilities related to the business of designing and
distributing decorative drapery and upholstery fabrics to Westgate Fabrics,
Inc. ("Westgate"), an unaffiliated third party (the "Asset Sale"). The
Asset Sale included the transfer to the buyer of the use and rights to the
Payne Fabrics name, and accordingly, Payne Fabrics, Inc., changed its name
to PFI National Corporation ("PFI"). On August 4, 1997 all of PFI's
operations were ceased. Since that time, Bell National and the remaining
subsidiaries of the Company, PFI, Bell Savings, and Pacific Coast Holdings
Insurance Company have had no business operations, other than
administrative activities, or any substantial assets or liabilities other
than cash and investments. At the date of the merger with InPath, L.L.C. on
December 4, 1998, Bell National had approximately $1 million dollars in
cash and investments.
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On December 4, 1998, Bell National acquired InPath, LLC ("InPath"), a
development-stage company engaged in the design and development of a
proprietary "Point of Care" system, including sample collection devices and
a series of instruments, used in the cervical cancer screening process. The
system also has applications in other point of care cancer screening
programs. In the acquisition, Bell National issued 4,288,790 shares of
Common Stock and warrants to purchase 3,175,850 shares of Common Stock to
the members of InPath in exchange for their units of membership interest in
InPath and the senior executives of InPath assumed management control of
Bell National. Based upon the terms of the acquisition agreement, for
financial reporting and accounting purposes the acquisition was accounted
for as a reverse acquisition whereby InPath was deemed to have acquired
Bell National. However, Bell National was, until its merger into
Ampersand, the continuing legal entity and registrant for both Securities
and Exchange Commission filing purposes and income tax filing purposes.
Since Bell National was a non-operating public shell company with nominal
assets and InPath was a private operating company, the acquisition was
recorded as the issuance of stock for the net monetary assets of Bell
National accompanied by a recapitalization, and no goodwill or other
intangible assets were recorded.
On December 15, 1998 Bell National formed a wholly owned Delaware
subsidiary, Ampersand Medical Corporation ("Ampersand"), for the primary
purpose of reincorporating Bell National in Delaware. Bell National's
stockholders approved the merger of Bell National into Ampersand at the
Annual Meeting on May 25, 1999, with Ampersand as the surviving
corporation. Ampersand became the parent corporation of Bell National's
subsidiaries at the time of the reincorporation.
In December 1998 the Company formed a French limited liability
company subsidiary, Samba Technologies, SARL ("Samba"), for the purpose of
acquiring the automated image cytometry and telemedicine technology used in
the business of the Samba department of Unilog Regions, SA, a French
company engaged in the design, development, and installation of commercial
software programs and networks for business applications. Samba
Technologies completed the acquisition of the Samba department's assets on
January 4, 1999, and at the same time entered into employment arrangements
with former Samba department employees. Since the acquisition, Samba
Technologies has continued to develop and market the cytometry and
telemedicine products previously developed and marketed by the Samba
department.
RECENT DEVELOPMENTS
In January 2000, the Board of Directors authorized the Company to
raise a minimum of $5,000,000 in new equity at a sales price per share of
$1.50. The proceeds of this new offering will be used to fund acquisitions
of additional technology, clinical trials, costs to carry the InPath
System's disposable and instrument designs through the manufacturing
process, and general corporate purposes. As of March 28, 2000, the Company
had sold 759,997 shares for a total gross cash proceeds of $1,140,000.
On March 29, 2000, to resolve a dispute between InPath and AccuMed
International, Inc. (AccuMed) over a Patent and Technology License
Agreement (the "License") dated September 4, 1998, including related
payments due thereunder, the Company and AccuMed signed a Letter Agreement
amending the License between InPath and AccuMed. The License, covering
certain "Point of Care" related applications, requires the payment of a
license issue fee of $500,000, against which InPath had made payments of
$400,000, a 7% royalty rate, and minimum royalty payments. InPath is also
required to make minimum royalty payments of $1,000,000 each during the
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second and third years of the License, $1,500,000 each during the fourth
and fifth years, and $2,000,000 each year thereafter. The License may not
be cancelled by InPath, without the occurrence of a breach by AccuMed,
prior to the payment of $5,000,000 in royalties or 5 years, whichever comes
first. InPath may elect to terminate its exclusivity under the License
upon written notice to AccuMed at which time its obligation to make the
minimum required royalty payments shall cease. InPath would then only be
obligated to make royalty payments based on actual sales of products.
The new Agreement provides for the assignment of the License to the
Company, elimination of the minimum royalty payment schedule, and a
reduction in the royalty rate to 4%. The Company has agreed to make cash
payments to AccuMed under the new Agreement totaling $600,000, issue a
$100,000 convertible promissory note due one year from the date the License
Amendment is signed, and issue 128,571 shares of Common Stock to AccuMed.
The note is convertible, at AccuMed's option, into Common Stock at a
conversion price of $3.50 per share and the Company has agreed to provide
AccuMed with price protection equal to $3.50 per share on the 128,571
shares of Common Stock until a measurement date 60 days following the date
on which the shares are registered and freely tradable. The cash payments
are characterized as the final minimum license payment and advanced non-
refundable royalty payments. The $100,000 principal amount of the note and
the 128,571 shares of Common Stock to a value of $450,000 are also
characterized as advanced non-refundable royalty payments. The amended
License is expected to be completed within 30 days. The Company has also
agreed to license an additional patent, software and related technology on
a non-exclusive basis for use in certain automated screening applications.
The Company will pay AccuMed $100,000 as a one time license fee 90 days
after signing of the new license or at the time the patent, software, and
related technology, is delivered to and accepted by the Company.
Since the amendment to the License was not executed as of year end,
the Company has continued to expense the minimum royalty payments,
including $250,000 in 1999 due under the License.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company operates in one industry segment involving medical
devices and supplies. All of the Company's operations during the reporting
period were conducted within this segment. The Samba department of Unilog
Regions SA, which was acquired by the Company on January 4, 1999 has
historically operated in the same industry segment. The Company expects to
continue to focus its operations on this industry segment.
DESCRIPTION OF BUSINESS
The Company believes that improved patient care and reduced
healthcare delivery costs can be achieved by creating "Point of Care"
screening and diagnostic services linked to a patient medical information
system. The Company's goal is to deliver turnkey enterprise solutions,
which improve patient care, while at the same time providing the healthcare
professional with a financial, profit or cost-control, incentive and the
opportunity for better overall patient management. The Company intends to
accomplish its goal through internal product development, strategic
partnerships, and acquisitions of companies or technologies, which relate
to the Company's products, markets, or operating model. Management
anticipates that the Company will incur substantial operating losses until
it is able to successfully market its full range of products.
PRODUCTS. The Company is focused on the design, development, and
marketing of a series of instruments, disposables, and tests, the "InPath
System" (the "System"), to provide "Point of Care" enhanced cervical cancer
screening. The System currently under development consists of proprietary
sample collection devices, and a series of in-vitro and in-vivo instruments
used to analyze the collected samples by employing a series of biomolecular
markers or probes to assist in the analysis process. The System may also
be used for specific sampling and analysis of atypical cellular specimens
for the early detection of oral, gastrointestinal, urological, esophageal,
ovarian, and other forms of cancer. The Company has completed pre-clinical
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testing of its sample collection device, designed for use directly by
medical providers, and anticipates that it will have production models of
this sample collection device available to commence a formal clinical trial
by the end of March 2000. The Company anticipates submitting the results
of this trial to the United States Food & Drug Administration ("the FDA")
in the form of a 510(k) Notification by the end of the second quarter of
2000. The design specifications for the proprietary in-vitro mapping and
analysis instrument have been completed and prototypes, including
instruments to be used for demonstration purposes, have been assembled for
final testing. The Company has completed the review and validation work,
verification of test sensitivity and specificity levels, on various
potential biomolecular markers using samples from approximately 400
patients and encompassing over 20,000 individual data reference points.
The initial combination of markers has been selected. However, the
research work directed at marker review and validation will continue for
the foreseeable future as the Company seeks to refine its current process
and to add additional capabilities to the analysis procedure, including but
not limited to the identification of additional abnormalities and certain
sexually transmitted infectious diseases. The Company anticipates that it
will commence a clinical trial of the complete InPath System by the end of
the second quarter of 2000, with the results of the trial submitted to the
FDA in the form of a PMA following by the end of 2000. The Company
anticipates that it will invest a substantial amount of capital in the
research and development process, including the cost of clinical trials, in
order to complete the System and introduce it into the market. The System
may be subject to regulation by various other regulatory agencies
throughout the world.
The Company's operating subsidiary Samba Technologies designs,
develops and markets software based systems for clinical and industrial
applications. One software suite package, which can be employed on a
variety of computer, imaging, and automated microscopy platforms, provides
image analysis of material on microscopic slides yielding information on
DNA, cell morphometry, densitometry, karyotyping (chromosome
classification), colony counting etc. A second software suite allows the
user to share images and related data for research, clinical and
educational purposes. This package has applications in tele-radiology,
tele-pathology and other areas where the need for images is critical to a
process, such as angiography, ultrasound procedures, and endoscopy
procedures. It can be matched to a wide variety of image capture
instruments or devices. The product can employ either static, historical,
or dynamic images. Samba also provides installation, interface, network,
and internet consulting services to the users of its software products.
BACK-LOG OF ORDERS. At March 28, 2000, Samba had a backlog of
contracts to be completed within the next twelve months amounting to
2,173,000 French Francs, or approximately $335,000. Samba currently has
contract quotes outstanding of approximately $1,340,000. The Company has
no assurance that Samba will be the successful bidder on any of its
outstanding quotes
MARKETS AND DISTRIBUTION. The Company markets or plans to market its
product lines to hospitals, clinics, managed care organizations, office-
based clinicians, and government health organizations on a worldwide basis.
The Company intends to begin marketing the InPath sample collector in
selected countries outside the U.S. in the third quarter of 2000. The
Company intends to introduce this product into the U.S. market, subject to
clearance by the FDA, as soon as practicable, but not before the fourth
quarter of 2000. The Company intends to have the cervical mapping and in -
vitro analysis instrument ready for distribution in markets outside the
U.S. as soon as practicable, but not before the fourth quarter of 2000 and
in the U.S., subject to FDA clearance, as soon as practicable, but not
before the beginning of 2001.
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The Company plans to distribute its InPath "Point of Care" products
in the U.S. through a strategic partner relationship with a company having
a significant position in the OB/GYN marketplace and a strong direct sales
organization. Internationally, the Company will seek a distribution
partner that has similar characteristics. The Company is currently in
discussions with several strategic partner candidates. The Company intends
to directly market its InPath products to managed care organizations,
governments, and other world health bodies.
The Company currently markets its Samba product line through a direct
sales force in Europe and through a distribution arrangement in Central and
South America. The Company is adding to its distribution arrangements to
cover specific countries in Europe, Asia, the Middle East and North Africa.
The Company acts as a direct referral service for Samba sales in the US and
anticipates adding a strategic distribution partner for the US market in
2000.
COMPETITION. Historically, competition in the healthcare industry
has been characterized by the search for technological innovations and
efforts to market such innovations. The Company believes that it may
benefit from the technological innovations incorporated in certain of its
products. While competitors may introduce new products which compete with
those the Company sells or intends to sell, the Company believes that its
research and development efforts will permit it to remain or become
competitive in all of the markets in which it presently sells or plans to
sell its products. The competition the Company faces in these markets is
substantial, however, and there can be no assurance that the technological
innovations of the Company's products will afford the Company the
competitive advantages it predicts.
The market for the Company's cancer screening and diagnostic product
line is highly competitive. The Company is unaware of any other companies
that are duplicating its efforts to develop a point-of-care collection,
mapping, and in-vitro analysis and diagnostic system for cervical cancer
screening. There are a number of companies attempting to develop an in-
vivo system to differentiate between cancerous, pre-cancerous and normal
tissue. Potential competition for the Company's InPath "Point of Care"
products includes many companies with financial, marketing, and research
and development resources substantially greater than those of the Company.
Similarly, the image analysis and tele-medicine markets, in which the
Company's Samba products are sold, are highly competitive. Several
American and foreign companies are developing and marketing products that
compete directly with Samba's products and services.
With regard to all of its products, the Company believes that it must
compete primarily on the basis of functionality, product features and
effectiveness of the product in standard medical practice. The Company also
believes that cost control and cost effectiveness are additional key
factors in achieving or maintaining a competitive advantage. Accordingly,
the Company focuses a significant amount of effort in its product
development process on producing systems and tests which do not add to
overall healthcare cost.
OPERATIONS. The Company currently engages in research and
development work on a contract basis at locations in Chicago, Illinois and
Cleveland, Ohio. The Company does not currently engage directly in
manufacturing products and it intends to utilize the operations of a
strategic partner or partners for its future instrument and disposable
component manufacturing requirements. The Company currently has
preliminary agreements in place with a medical instrument manufacturer
located in the United States and two high volume disposable component
manufacturers with production facilities located in the United States and
several foreign locations. The Company conducts research and development
work on its Samba software products at its own facility and at a contracted
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facility, both located in Grenoble, France. The Samba software products
are installed and integrated with off-the-shelf computer and imaging
components at the customer's location or in the Grenoble facility
immediately prior to delivery of the products. Consulting services are
generally performed at the customer's location or at the Grenoble facility
using customer data and communication access.
INTELLECTUAL PROPERTY. In order to secure its intellectual property
rights, the Company relies on a combination of patents, licensing
arrangements, trade names, trademarks, know-how, proprietary technology,
and policies and procedures for maintaining the secrecy of its trade
secrets, know-how and proprietary technology. The Company considers such
security and protection to be material to the successful marketing of its
products in the U.S. and in most of the foreign markets the Company has
entered or may enter in the future.
The Company has filed 12 provisional patent applications covering
components of its InPath "Point of Care" cervical cancer screening system.
The Company is the exclusive licensee of AccuMed International, Inc. for an
additional patent and certain other know-how and trade secrets covering the
"Point of Care" system. The Company purchased this license for cash, future
royalties, and other considerations. The Company is required to make
minimum annual royalty payments beginning in 1999 in order to maintain its
exclusive license to the patent and related technology (See discussion
under recent developments).
The Company's Samba software and technology consists primarily of
trade secrets and know-how and technical documentation.
The Company is continuing to prepare additional patent applications.
Since patent applications in the United States are maintained in secrecy
until patents issue, and since publications of discoveries in the
scientific or patent literature tend to lag behind actual discoveries by
several months, the Company cannot be certain whether it or another patent
applicant was the first to create inventions covered by pending patent
applications or the first to file patent applications for such inventions.
Protections relating to portions of technologies covered by such pending
patent applications may be challenged or circumvented by competitors, and
other portions may be in the public domain or protectable only under state
trade secret laws.
Worldwide, all of the Company's important products are or will be
sold under trademarks that the Company considers to be, in the aggregate,
material to the Company's business. The Company owns the Samba trade mark
and trade names of Samba, InPath, and Ampersand Medical Group. The Company
may file additional U.S. and foreign trademark applications in the future
and the Company will focus its acquisition efforts on technologies which
have strong patent or trade secret protection.
There can be no assurance that any patent or trademark registration
issued or which may be issued to the Company will provide the Company with
significant competitive advantages. Further, there can be no assurance
that any patent application which may be applied for by or for the benefit
of the Company will be granted or that challenges will not be instituted
against the validity or enforceability of any such patent application and,
if instituted, that such challenges will not be successful. The cost of
litigation to uphold the validity of a patent or patent application, or to
prevent infringement, could be substantial even if the Company were to
prevail. Furthermore, there can be no assurance that others will not
independently develop similar technologies or products, duplicate the
Company's technology or design around the patented aspects of the Company's
products. The protection afforded by patents depends upon a variety of
factors which may severely limit the value of the patent protection,
particularly in foreign countries. The Company intends to protect much of
the core technology it now possesses or will later develop as trade secrets
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rather than to rely on patents, either because patent protection is not
possible or, in management's opinion, would be less effective than
maintaining secrecy. To the extent that it relies on trade secret
protection, there can be no assurance that the Company's efforts to
maintain secrecy will be successful or that third parties will not be able
to develop the technology independently. The Company expects to register
the various trademarks associated with its collection and diagnostic
system, but there can be no assurance that if registered any such
registration or use of it will not be challenged by third parties, or that
if challenged, such third parties will not prevail.
GOVERNMENT REGULATION. The development, manufacture, sale, and
distribution of the Company's products are regulated by state and federal
authorities, including the FDA and comparable authorities in certain states
and other countries. In the U.S., the Food, Drug and Cosmetic Act (the
"FD&C Act") and regulations promulgated under it apply to the Company's
products. The FD&C Act provides that many of the Company's products cannot
be shipped in interstate commerce without prior authorization from the FDA.
Such authorization is based on a review by the FDA of the product's safety
and effectiveness for its intended uses. Medical devices may be authorized
by the FDA for marketing in the U.S. either pursuant to a pre-market
notification under Section 510(k) of the FD&C Act (a "501(k) Notification")
or a pre-marketing approval (a "PMA"). The process of obtaining FDA
marketing clearance and other applicable regulatory authorities may be
costly and there can be no guaranty that the process will be ultimately
successful. FDA 510(k) Notification applications and PMA's typically
require preliminary internal studies, field studies, and/or clinical
trials, in addition to an FDA submission. The Company employs a full-time
Director of Regulatory Affairs and Quality Assurance and provides
supplementary support through the use of consultants and members of its
Medical Advisory Board.
A 510(k) Notification, among other things, requires an applicant to
show that its products are "substantially equivalent" in terms of safety
and effectiveness to an existing FDA cleared predicate product. An
applicant may only market a product submitted through a 510(k) Notification
after the FDA has issued a written clearance determining the product has
been found to be substantially equivalent.
To obtain a PMA for a device, an applicant must demonstrate,
independently of other like devices, that the device in question is safe
and effective for its indications for intended uses. A PMA must be
supported by extensive data, including pre-clinical and clinical trial
data, as well as extensive literature to prove the safety and effectiveness
of the device. It usually takes the FDA substantially longer to grant a
PMA than to grant a 510(k) Notification. During the review period, the FDA
may conduct extensive reviews of the Company's facilities or those of its
strategic partners, deliver multiple requests for additional information
and clarifications, and convene advisory panels to assist in its
determination.
The FD&C Act generally bars advertising, promoting, or otherwise
marketing medical devices that the FDA has not approved or cleared.
Moreover, FDA enforcement policy strictly prohibits the promotion of
learned or approved medical devices for non-approved or "off-label" uses.
In addition, product clearances or approvals may be withdrawn for failure
to comply with regulatory standards.
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The Company's current and prospective overseas operations are also
subject to a significant degree of government regulation. Many countries,
directly or indirectly through reimbursement limitations, control the
selling price of most healthcare products. Furthermore, many developing
countries limit the importation of finished products. International
regulations are having an impact on U.S. regulations as well. The
International Organization for Standardization (the "ISO") sets the
standards regulating medical devices within the European Union. The FDA
recently adopted regulations governing the manufacture of medical devices
that appear to encompass and exceed the ISO's approach to regulating
medical devices. The FDA's adoption of the ISO's approach to regulation
and other changes to the manner in which the FDA regulates medical devices
will increase the cost of compliance with those regulations.
The Company will likely be subject to certain registration, record-
keeping and Medical Device Record reporting requirements, and the Company's
manufacturing facilities, if any, or those of its strategic partners, may
be obligated to follow the FDA's Quality System Regulation and may be
subject to periodic FDA inspections. Any failure to comply with the
Quality System Regulation or any other FDA or other government regulations
could have a material adverse effect on the Company's operations.
For sale and use in the United States, the Company's InPath System
products will need to be cleared for marketing by the FDA as described
above. There can be no assurance that the FDA or other governmental
agencies will clear the InPath System products or the advertising or
delivery of those products. Internationally, the InPath System products
may be subject to various government regulations. Such current or
potential regulations may delay the introduction of new products and
services and adversely affect the Company's cost of doing business.
The Company's InPath System "Point of Care" products may also be
subject to regulation in the United States under the Clinical Laboratory
Improvement Act (CLIA). Under this Act, diagnostic products are classified
into one of three categories depending on the user skill required to
perform and interpret the test; the potential for the test to produce an
incorrect result; and the potential risks presented by such an incorrect
result. Any laboratory or other site that performs clinical diagnostic
testing is required to be licensed under one of three levels corresponding
to the classification categories. Laboratories or sites are permitted to
perform only those diagnostic tests that are classified at or below the
level at which the laboratory is licensed.
The Company is developing the InPath System "Point of Care" products
to be user-friendly, require minimum operator training, and have safety and
operating checks built into the functionality of the instruments. The
Company believes its efforts will result in the lowest possible
classification by the Center for Disease Control (CDC), the agency
responsible for classification of diagnostic devices under CLIA. However,
there can be no assurance that the CDC will assign the InPath System "Point
of Care" products to the expected classification. CDC classification of
the products into a higher category may have a significant impact on the
Company's ability to market the product in the United States.
Although the Company currently sells Samba products in the United
States, expanding their sales for use in certain clinical applications may
require FDA clearance. Waiting for such approval would likely delay the
sales of these products into certain clinical applications in the U.S.
market and increase the Company's cost of doing business. Samba currently
has all required regulatory approvals in France, but may have to apply for
regulatory approval in other countries in order to market its products
outside France. There can be no assurance that Samba will be able to
obtain any regulatory approvals necessary to expand its market.
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RESEARCH AND DEVELOPMENT. The Company focuses its research and
development efforts on introducing new products as well as enhancing the
Company's existing products. The Company utilizes both in-house and
contracted research and development efforts. The Company believes that a
commitment to research and development is critical to its ability to
achieve its goals. During the year ended December 31, 1999 and the period
from March 16, 1998 (inception) through December 31, 1999, consolidated
expenditures for research and development, including Samba, were $1,782,000
and $181,000 respectively. Research and development expenditures by the
Samba during the year ended December 31, 1999 and for the two previous
years ending December 31, 1998 and 1997, when Samba operated as a
department of Unilog Regions SA prior to its acquisition by the Company on
January 4, 1999, were $320,000, $163,000 and $128,000, respectively.
COMPONENTS AND RAW MATERIALS. The Company stresses product
development focused on low-cost, easily accessible product components. The
Company's Samba products are compatible with various off-the-shelf
computers, computer components, microscopes, and imaging equipment.
WORKING CAPITAL PRACTICES. The Company's working capital practices
are comparable to those of other market participants. Collection periods
tend to be longer for sales of Samba products outside France than for sales
of Samba products inside France. Similarly, the Company believes that
collection periods for any future international sales of the Company's
U.S.-made products may prove longer than for domestic sales of such
products.
EMPLOYEES. As of March 29, 2000, the Company and its subsidiaries
employed a total of 19 full-time employees in the United States and France.
The Company's employees in France are represented by a national labor union
(customary to all French workers), and the Company considers its relations
with its employees to be good.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
The statements throughout this report that are not historical facts,
including but not limited to statements in this Item 1 and statements
contained in material incorporated into this report by reference, are
forward-looking statements. These statements are based on the Company's
current expectations and involve many risks and uncertainties. Some of
these risks and uncertainties are factors that affect all international
businesses, while others are specific to the Company and the areas of the
medical products industry in which it operates.
The factors below in some cases have affected and could affect the
Company's actual results, causing results to differ, possibly materially,
from those expressed in this report's forward-looking statements. These
factors include: economic conditions; technological advances in the medical
field; demand and market acceptance risks for new and existing products,
technologies, and healthcare services; the impact of competitive products
and pricing; manufacturing capacity; new plant start-ups; U.S. and
international regulatory, trade, and tax policies; product development
risks, including technological difficulties; ability to enforce patents;
and unforeseen foreign regulatory and commercialization factors.
Currency fluctuations are also a significant variable for global
companies, especially fluctuations in local currencies where hedging
opportunities are unreasonably expensive or unavailable. If the value of
the U.S. dollar strengthens relative to the currencies of the countries in
which the Company markets or intends to market its products, the Company's
ability to achieve projected sales and net earnings in such countries could
be adversely affected.
<PAGE>
The Company believes that its expectations with regard to forward-
looking statements are based upon reasonable assumptions within the bounds
of its knowledge of its business and operations, but there can be no
assurance that the actual results or performance of the Company will
conform to any future results or performance expressed or implied by such
forward-looking statements.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND
EXPORT SALES
The Company's operations outside the U.S. are currently conducted
primarily through Samba. Sales by Samba during the year ended December 31,
1999 and by the Samba department of Unilog for the two years ended
December 31, 1998 and 1997 prior to its acquisition by the Company on
January 4, 1999, outside the U.S. represented approximately 95%, 90%, and
90% of sales for the respective years. The Company's worldwide business is
subject to risks of currency fluctuations, governmental actions and other
governmental proceedings abroad. The Company does not regard these risks
as a deterrent to further expansion of its operations abroad. However,
the Company closely reviews its methods of operations and adopts strategies
responsive to changing economic and political conditions in countries it
seeks to operate in. The ongoing integration of the European market
continues to offer opportunities to businesses operating within the
European Union, and the Company hopes to take advantage of these
opportunities to improve the efficiency and productivity of its operations
there.
ITEM 2. PROPERTIES
The Company currently occupies leased space at 414 N. Orleans St.,
Suite 305, Chicago, Illinois 60610, under a lease which expires September,
2004. This address houses the executive offices of the Company, as well as
certain engineering and research staff. Before December 4, 1998 the
Company's executive offices were located at 3600 Rio Vista Avenue, Suite A,
Orlando, Florida 32805. Samba leases space in a suburb of Grenoble,
France, at 53, chemin du Vieux Chene, 38240, Meylan. The lease has a term
of nine years expiring in 2008. Samba has the option to terminate the
lease at the end of each three year term. The location houses Samba
administrative, sales, and research and development activities.
The Company considers all of its facilities to be well utilized, well
maintained, and in good operating condition. It considers the facilities to
be suitable for their intended purposes, and to have capacities and
projected capacities adequate to meet current and projected needs for the
Company's existing products.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently a party to any material legal
proceeding, nor is any of the Company's property the subject of any
material legal proceeding. The Company is not aware of any such legal
proceeding being contemplated by governmental authorities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of shareholders during the
fourth quarter of 1999.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Common Stock of the Company is quoted on the Over-the-Counter
Bulletin Board under the symbol "AMPM" (Prior to June 1, 1999 as "BLBN").
The following table sets forth the high and low bid quotations per
share of Common Stock for the periods indicated, as reported by the
National Quotation Bureau, LLC. These quotations represent prices between
dealers, do not include retail mark-ups, mark-downs, or commissions, and do
not represent actual transactions.
Bid Range of Common Stock
-------------------------
High Low
------- -----
Year Ended December 31, 1999:
- ----------------------------
1st Quarter $0.6875 $0.25
2nd Quarter $0.7500 $0.25
3rd Quarter $0.6250 $0.25
4th Quarter $0.8125 $0.25
Year Ended December 31, 1998:
- ----------------------------
1st Quarter $0.05 $0.05
2nd Quarter $0.05 $0.05
3rd Quarter $0.05 $0.05
4th Quarter $0.38 $0.05
HOLDERS
As of March 28, 2000 there were approximately 1,100 holders of record
of the Company's Common Stock.
DIVIDENDS
The Company has not paid a cash dividend and the Board of Directors
is not contemplating paying one at this time.
STOCK TRANSFER AGENT
The Company's stock transfer agent is Continental Stock Transfer and
Trust Co., 2 Broadway, New York, New York 10004, phone (212) 509-4000.
RECENT SALES OF UNREGISTERED SECURITIES AND USE OF PROCEEDS
On December 4, 1998, pursuant to a Stock and Membership Interest
Exchange Agreement of the same date, Bell National, predecessor to the
Company, issued 4,288,790 shares of Common Stock and warrants to purchase
3,175,850 shares of Common Stock to eight members of InPath in exchange for
their units of membership in InPath. Through this transaction Bell
National acquired all of the units of membership in InPath and all of the
assets consisting of equipment, technology license, patent applications and
trademarks. The Bell National Board of Directors determined that these
assets, in the aggregate, were appropriate consideration for the shares
issued to the InPath members given the assets' intrinsic value as well as
the favorable business opportunity which entry into the medical device
industry offered to Bell National. In June of 1999, subsequent to the
merger of Bell National into the Company, all of the warrants were
exercised and the Company issued 3,175,850 shares of Common Stock in
exchange for $3,176 in cash.
<PAGE>
Also on December 4, 1998, pursuant to a Claims Settlement Agreement
of the same date, Bell National issued shares of Common Stock to each of
two individuals and two corporations in settlement of debts that Bell
National owed to them. In the transaction, Bell National issued: 210,000
shares of Common Stock to Alexander M. Milley to settle a debt of $63,000
owed to him for services under an Employment Agreement dated November 20,
1989; 463,333 shares of Common Stock to Robert C. Shaw to settle a debt of
$139,000 owed to him under an Employment Agreement dated November 20, 1989;
600,000 shares of Common Stock to Cadmus Corporation ("Cadmus") to settle a
debt of $180,000 owed to it for management services provided to Bell
National; and 503,333 shares of Common Stock to MMI to settle a debt of
$151,000 owed to it for office space rental and for management services
provided to Bell National.
In January of 1999, the Board of Directors authorized the Company to
raise up to $1,500,000 in new equity or debt in order to provide operating
capital for the Company. Between March 1, 1999 and June 30, 1999, the
Company issued a series of 6% Convertible Subordinated Notes to a group of
accredited investors in exchange for $994,600 in cash. The Notes and
accrued interest due thereon will become due on June 30, 2000. The Notes,
including accrued interest due thereon, will automatically convert into
shares of Common Stock, at a conversion price of $0.33 per share, when the
Company has raised at least $5,000,000 in new equity or debt, not including
the $1,500,000 in equity or debt, of which the Notes are a part, authorized
to be raised by the Board in January 1999. The conversion price of the
Notes is subject to a reduction, but never less than $0.20 per share, based
on the per share valuation of the new $5,000,000 in equity or debt. The
noteholders have the option to convert the Notes and related accrued
interest into Common Stock at any time. A noteholder exercised his right
to convert a $25,000 Note into 75,758 shares of Common Stock on June 4,
1999.
Included in the above series of Notes is a Note issued to Seaside
Partners, L.P. in the principal amount of $500,000. Denis M. O'Donnell, who
is a director of the Company, is a member and manager of Seaside Advisors,
L.L.C., a firm which provides investment management services to Seaside
Partners. Also included in the above series of Notes is a Note issued to
Leonard R. Prange in the principal amount of $75,000. Mr. Prange is
President, COO, CFO, and Secretary of the Company. Both the Seaside and
Prange Notes were issued under the same terms and conditions as all of the
other Notes in the series.
The Board of Directors authorized the Company to raise additional
equity during 1999 through Private Placements of the Company's Common Stock
in the amounts of $1,500,000 and $500,000. The funds were to be used to
meet the working capital and operating needs of the Company. Between July
1,1999 and December 31, 1999 the Company sold 3,989,848 shares of Common
Stock to accredited investors under these Private Placements for total
gross cash proceeds of $1,001,400. During January 2000, upon receipt of
cleared funds received under the 1999 Private Placement, the Company
completed the sale of an additional 1,712,120 shares of Common Stock for
total gross proceeds of $565,000.
The Company has contracted with several advisory groups to assist it
in conjunction with the sale of the Notes and Private Placements of Common
Stock during 1999. Accordingly, the Company has recorded an accrual for
cash commissions amounting to $41,040 due to one of the advisory groups,
and is required to issue warrants to purchase 542,474 shares of Common
Stock at an average exercise price of $0.25. In addition the Company has
recorded an estimated accrual of $50,000 to cover "out of pocket" expenses
reimbursable to one group. Denis M. O'Donnell, M.D., a director of the
Company, is a member of Westgate Partners, L.L.C, an advisory group
entitled to receive $41,040 in commissions, 155,455 warrants to purchase
Common Stock at $0.363 per share, and the reimbursement of up to $50,000 in
"out of pocket" expenses.
<PAGE>
In September 1999 the Company converted a note payable and related
accrued interest amounting to $101,206 into 306,684 shares of Common Stock.
In November 1999, a warrant holder exercised a warrant to purchase 76,000
shares of Common Stock resulting in cash proceeds to the Company of
$20,000.
On December 10, 1999, the Company issued a Senior Convertible
Promissory Note to Azimuth Corporation ("Azimuth"), a company controlled by
Alexander M. Milley, a director and significant shareholder of the Company,
in exchange for $50,000 in cash. The note bears interest at the rate of
12% per annum and was convertible into Common Stock at a conversion price
of $0.20 per share. As additional compensation for the note, the Company
issued Azimuth a warrant to purchase 50,000 shares of Common Stock at an
exercise price of $0.33 per share. On February 22, 2000 Azimuth exercised
its right to convert the note and accrued interest due thereon into 256,250
shares of Common Stock of the Company.
In January 2000, the Board of Directors authorized the Company to
raise a minimum of $5,000,000 in new equity at a sales price per share of
$1.50. The proceeds of this new offering will be used to fund acquisitions
of additional technology, clinical trials, costs to carry the InPath
System's disposable and instrument designs through the manufacturing
process, and general corporate purposes. As of March 28, 2000, the Company
had sold 759,997 shares for total gross cash proceeds of $1,140,000.
On March 29, 2000, to resolve a dispute between InPath and AccuMed
International, Inc. (AccuMed) over a Patent and Technology License
Agreement (the "License") dated September 4, 1998, including related
payments due thereunder, the Company and AccuMed signed a Letter Agreement
amending the License. The License, covering certain "Point of Care"
related applications, requires the payment of license issue fee of
$500,000, against which InPath had made payments of $400,000, a 7% royalty
rate, and minimum royalty payments. InPath is also required to make
minimum royalty payments of $1,000,000 each during the second and third
years of the License, $1,500,000 each during the fourth and fifth years,
and $2,000,000 each year thereafter. The License may not be cancelled by
InPath, without the occurrence of a breach by AccuMed, prior to the payment
of $5,000,000 in royalties or 5 years, whichever comes first. InPath may
elect to terminate its exclusivity under the License upon written notice to
AccuMed at which time its obligation to make the minimum required royalty
payments shall cease. InPath would then only be obligated to make royalty
payments based on actual sales of products.
The new Agreement provides for the assignment of the License to the
Company, elimination of the minimum royalty payment schedule, and a
reduction in the royalty rate to 4%. The Company has agreed to make cash
payments to AccuMed under the new Agreement totaling $600,000, issue a
$100,000 convertible promissory note due one year from the date the License
Amendment is signed, and issue 128,571 shares of Common Stock to AccuMed.
The note is convertible, at AccuMed's option, into Common Stock at a
conversion price of $3.50 per share and the Company has agreed to provide
AccuMed with price protection equal to $3.50 per share on the 128,571
shares of Common Stock until a measurement date 60 days following the date
on which the shares are registered and freely tradable. The cash payments
are characterized as the final minimum license payment and advanced non-
refundable royalty payments. The $100,000 principal amount of the note and
the 128,571 shares of Common Stock to a value of $450,000 are also
characterized as advanced non-refundable royalty payments. The amended
License is expected to be completed within 30 days. The Company has also
agreed to license additional patent, software and related technology on a
non-exclusive basis for use in certain automated screening applications.
The Company will pay AccuMed $100,000 as a one time license fee 90 days
after signing of the new license or at the time the patent, software, and
related technology, is delivered to and accepted by the Company.
Since the amendment to the License was not executed as of year end.
The Company has continued to expense the minimum royalty payments,
including $250,000 in 1999, due under the License.
<PAGE>
In each of the above transactions, the Company was either exempted
from registering the issued shares of Common Stock under the Securities
Exchange Act of 1933 (the "Securities Act") because each transaction
qualified as an offering by an issuer not involving a public offering under
Section 4(2) of the Securities Act, or the parties relied upon Regulation D
to exempt the sales from registration under the Securities Act. Sales of
Notes and Common Stock were made to investors, who represented themselves
to the satisfaction of the Company as accredited investors under the
Securities Act. The Company did not engage in any general solicitation or
advertising in connection with each individual transaction or the
transactions as a group.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data is derived from, and qualified by
reference to, the audited Consolidated Financial Statements and notes
included elsewhere in this Annual Report on Form 10-K.
The following table sets forth the selected financial data as of the
date shown and for the period shown:
FOR THE YEAR ENDED DECEMBER 31, 1999 AND THE PERIOD
FROM MARCH 16, 1998 (INCEPTION) THROUGH DECEMBER 31, 1998.
(Dollar amounts in thousands, except per-share data)
1999 1998
---------- ----------
STATEMENT OF OPERATIONS DATA:
Net Sales $ 1,040 $ 0
Operating loss $ (4,117) $ (783)
Net loss $ (4,226) $ (789)
PER SHARE DATA:
Net loss $ (0.29) $ (0.07)
Weighted average shares outstanding 14,336,667 12,000,000
BALANCE SHEET DATA:
Working capital deficit $ (3,204) $ (80)
Total assets $ 1,871 $ 1,699
Notes payable: current $ 1,095 $ 75
Notes payable: long-term $ 26 $ 156
Stockholders' equity deficit $ (2,040) $ 728
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
See Note 1 to the Consolidated Financial Statements for background
and historical information on the Company. Ampersand was incorporated in
Delaware on December 15, 1998, as a wholly owned subsidiary of Bell
National Corporation. On May 26, 1999, subsequent to approval by
stockholders at the Annual Meeting, Bell National was merged into
Ampersand. Prior to the merger with Ampersand, Bell National acquired
InPath, L.L.C., a development stage company on December 4, 1998. Based
upon the terms of the InPath acquisition agreement, for financial reporting
and accounting purposes the acquisition was accounted for as a reverse
acquisition whereby InPath was deemed to have acquired Bell National.
Since Bell National was a non-operating public shell company with nominal
assets and InPath was a private operating company, the acquisition was
recorded as the issuance of stock for the net monetary assets of Bell
National accompanied by a recapitalization, and no goodwill or other
intangible assets were recorded. Accordingly, information presented in the
Consolidated Financial Statements includes the operations of InPath from
March 16, 1998 (inception) and the operations of the combined Company from
December 4, 1998.
REVENUE
During 1998, the Company was considered a development stage company
and had no revenues. On January 4, 1999, the Company's wholly owned
subsidiary, Samba Technologies, Sarl ("Samba"), acquired the business of
the Samba department of Unilog Regions, SA. Samba designs, develops and
markets image analysis and tele-medicine software, and network and internet
consulting services covering areas of image capture and transmission. The
Company's revenues for 1999 amounting to $1,040,000 were all produced
through the sale of Samba products and services.
COSTS AND EXPENSES
Cost of goods sold for 1999 amounting to $542,000 relate to the Samba
revenues and represent the cost of computer and imaging hardware, purchased
services and other products, and software engineering labor and related
expenses.
The Company devotes a substantial amount of its resources to research
and development efforts on new products including the InPath System and new
Samba software applications. Research and development expenses for 1999
amounted to $1,782,000 (including $320,000 of Samba costs), an increase of
885% over the 1998 amount of $181,000, which covered approximately nine
months of very early stage InPath product development. The expenses
consisted primarily of contract costs related to scientists and researchers
at universities and hospitals under specific development programs, full
scale device development contracts undertaken during 1999 with industrial
design and manufacturing organizations covering the disposable and
instrument components of the InPath System, reimbursements to medical and
engineering consultants, and payroll related costs for in-house software
engineering, scientific and research management staff.
<PAGE>
Selling, general and administrative expenses for 1999 were $2,833,000
(including $586,000 of Samba costs) an increase of 371% over the 1998
amount of $602,000, which covered the initial start-up period of
approximately nine months. The increase for 1999 is the result of a
significant expansion in the scale of operations of the Company. The
compensation cost component of this expense pool increased approximately
$700,000 as a result of the presence of executive personnel and
administrative staff, including those involved with Samba, for a full year.
The Company's new publicly held status resulted in a cost increase of
$200,000 primarily for professional services and insurance. In addition,
the Company charged to administrative expenses approximately $225,000 in
costs related to the organization of Samba and amortization of the
purchased SAMBA goodwill, $250,000 in royalty expense related to a Patent
and Technology License and recorded a compensation charge of approximately
$390,000 to reflect the year end value of outstanding SARs, the value of
warrants issued for services, and the value of options issued to non-
employee consultants. A significant component of the 1998 expenses
consisted of legal costs related to the initial establishment of InPath,
negotiation of the technology license with AccuMed International, Inc., and
the acquisition of InPath by the Company in December 1998 and the related
filings with the Securities and Exchange Commission.
During 1999 the Company incurred interest expense of $86,000. The
amount primarily reflects the interest due on the series of 6% Convertible
Subordinated Notes Due 2000 issued during 1999. Interest expense for 1998
was not significant.
Other expenses for 1999 amounting to $23,000, net, reflect the write
off of $100,000 paid to AccuMed International, Inc., as compensation for a
"no shop" clause in a Letter of Intent between AccuMed and the Company,
whereby the Company sought to license and purchase certain automated
microscopy technology from AccuMed. The Company was unable to reach a
final agreement with AccuMed and terminated the negotiations in September
1999. In addition, in accordance with taxation rules in France, the
Company's Samba subsidiary has recorded refundable income taxes in the
amount of $100,000. These refundable taxes represent a research and
development credit against future income taxes or direct cash refund
available to Samba. The Company also terminated a lease for office space
and wrote off the net remaining value $21,000 of leasehold improvements
related to that lease.
The net loss for 1999 was ($4,226,000), or ($0.29) per share on
14,336,667 weighted average outstanding shares. The net loss for the
period March 16, 1998 through December 31, 1998 was ($789,000), or ($0.07)
per share, on 12,000,000 weighted average common shares outstanding. The
calculation of net loss per share for 1998 assumes that all shares of the
Company were outstanding for the entire period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements continue to be for research,
development, and design expenses of its InPath products and the conversion
of those designs through the process of clinical trials and manufacturing.
At December 31, 1999 the Company had cash on hand of $36,000. During
January of 2000, the Company received an additional $565,000 in funds from
the sale of Common Stock as the result of the completion of a 1999 Private
Placement Offering.
At December 31, 1998, the Company had cash on hand of $700,000. Of
this amount, approximately $479,000 was used to make the final payment on
the purchase of the Samba department of Unilog Regions SA on January 4,
1999. Samba Technologies SARL, the wholly owned subsidiary of the Company,
which assumed the operations of the Samba department, has been cash flow
neutral during 1999.
<PAGE>
In January of 1999, the Board of Directors authorized the Company to
raise up to $1,500,000 in new equity or debt in order to provide operating
capital for the Company. Between March 1, 1999 and June 30, 1999, the
Company issued a series of 6% Convertible Subordinated Notes to a group of
accredited investors in exchange for $994,600 in cash. The Notes and
accrued interest due thereon will become due on June 30, 2000. The Notes,
including accrued interest due thereon, will automatically convert into
shares of Common Stock , at a conversion price of $0.33 per share, when the
Company has raised at least $5,000,000 in new equity or debt, not including
the $1,500,000 in equity or debt, of which the Notes are a part, authorized
to be raised by the Board in January 1999. The conversion price of the
Notes is subject to a reduction, but never less than $0.20 per share, based
on the per share valuation of the new $5,000,000 in equity or debt. The
noteholders have the option to convert the Notes and related accrued
interest into Common Stock at any time. A noteholder exercised his right
to convert a $25,000 Note into 75,758 shares of Common Stock on June 4,
1999.
Included in the above series of Notes is a Note issued to Seaside
Partners, L.P. in the principal amount of $500,000. Denis. M. O'Donnell,
who is a director of the Company, is a member and manager of Seaside
Advisors, L.L.C., a firm which provides investment management services to
Seaside Partners. Also included in the above series of Notes is a Note
issued to Leonard R. Prange in the principal amount of $75,000. Mr. Prange
is President, COO, CFO, and Secretary of the Company. Both the Seaside and
Prange Notes were issued under the same terms and conditions as all of the
other Notes in the series.
The Board of Directors authorized the Company to raise additional
equity during 1999 through Private Placements of the Company's Common Stock
in the amounts of $1,500,000 and $500,000. The funds were to be used to
meet the working capital and operating needs of the Company. Between July
1,1999 and December 31, 1999 the Company sold 3,989,848 shares of Common
Stock to accredited investors under these Private Placements for gross cash
proceeds of $1,001,400. During January 2000, upon receipt of cleared funds
received under the 1999 Private Placement, the Company completed the sale
of an additional 1,712,120 shares of Common Stock for total gross proceeds
of $565,000 (see comments in paragraph one).
The Company has contracted with several advisory groups to assist it
in conjunction with the sale of the Notes and Private Placements of Common
Stock during 1999. Accordingly, the Company has recorded an accrual for
cash commissions amounting to $41,040 due to one of the advisory groups,
and is required to issue warrants to purchase 542,474 shares of Common
Stock at an average exercise price of price of $0.25. In addition the
Company has recorded an estimated accrual of $50,000 to cover "out of
pocket" expenses reimbursable to one group. Denis M. O'Donnell, M.D., a
director of the Company, is a member of Westgate Partners, L.L.C, an
advisory group entitled to receive $41,040 in commissions, 155,455 warrants
to purchase Common Stock at $0.363 per share, and the reimbursement of up
to $50,000 in "out of pocket" expenses.
In September 1999 the Company converted a note payable and related
accrued interest amounting to $101,206 into 306,684 shares of Common Stock.
In November 1999, a warrant holder exercised a warrant to purchase 76,000
shares of Common Stock resulting in cash proceeds to the Company of
$20,000.
In July 1999, the Company's wholly owned subsidiary, Samba,
negotiated a Revolving Credit Line ("Revolver") with Banc National de Paris
(BNP). The terms of the Revolver provide that Samba may borrow, in the
form of an advance on payment against monthly billings, up to a maximum of
900,000 French Francs, approximately $140,000. The terms of the Revolver
require Samba to pay interest at Euribor plus 2.5%, (currently equal to
6.1%) on advances outstanding under the revolver and grant BNP a security
interest in Samba accounts receivable. The Revolver is subject to renewal
in June 2000. As of December 31, 1999, the outstanding amount under the
revolver was $134,000.
<PAGE>
On December 10, 1999, the Company issued a Senior Convertible
Promissory Note to Azimuth Corporation ("Azimuth"), a company controlled by
Alexander M. Milley, a director and significant shareholder of the Company,
in exchange for $50,000 in cash. The note bears interest at the rate of
12% per annum and was convertible into Common Stock at a conversion price
of $0.20 per share. As additional compensation for the note, the Company
issued Azimuth a warrant to purchase 50,000 shares of Common Stock at an
exercise price of $0.33 per share. On February 22, 2000 Azimuth exercised
its right to convert the note and accrued interest due thereon into 256,250
shares of Common Stock of the Company.
In January 2000, the Board of Directors authorized the Company to
raise a minimum of $5,000,000 in new equity at a sales price per share of
$1.50. The proceeds of this new offering will be used to fund acquisitions
of additional technology, clinical trials, costs to carry the InPath
System's disposable and instrument designs through the manufacturing
process, and general corporate purposes. As of March 28, 2000, the Company
has sold 759,997 shares for a total gross cash proceeds of $1,140,000.
On March 29, 2000, to resolve a dispute between InPath and AccuMed
International, Inc. (AccuMed) over a Patent and Technology License
Agreement (the "License") dated September 4, 1998, including related
payments due thereunder, the Company and AccuMed signed a Letter Agreement
amending the License. The License, covering certain "Point of Care"
related applications, requires the payment of a license issue fee of
$500,000, against which InPath had made payments of $400,000, a 7% royalty
rate, and minimum royalty payments. InPath is also required to make
minimum royalty payments of $1,000,000 each during the second and third
years of the License, $1,500,000 each during the fourth and fifth years,
and $2,000,000 each year thereafter. The License may not be cancelled by
InPath, without the occurrence of a breach by AccuMed, prior to the payment
of $5,000,000 in royalties or 5 years, whichever comes first. InPath may
elect to terminate its exclusivity under the License upon written notice to
AccuMed at which time its obligation to make the minimum required royalty
payments shall cease. InPath would then only be obligated to make royalty
payments based on actual sales of products.
The new Agreement provides for the assignment of the License to the
Company, elimination of the minimum royalty payment schedule, and a
reduction in the royalty rate to 4%. The Company has agreed to make cash
payments to AccuMed under the new Agreement totaling $600,000, issue a
$100,000 convertible promissory note due one year from the date the License
Amendment is signed, and issue 128,571 shares of Common Stock to AccuMed.
The note is convertible, at AccuMed's option, into Common Stock at a
conversion price of $3.50 per share and the Company has agreed to provide
AccuMed with price protection equal to $3.50 per share on the 128,571
shares of Common Stock until a measurement date 60 days following the date
on which the shares are registered and freely tradable. The cash payments
are characterized as the final minimum license payment and advanced non-
refundable royalty payments. The $100,000 principal amount of the note and
the 128,571 shares of Common Stock to a value of $450,000 are also
characterized as advanced non-refundable royalty payments. The amended
License is expected to be completed within 30 days. The Company has also
agreed to license additional patent, software and related technology on a
non-exclusive basis for use in certain automated screening applications.
The Company will pay AccuMed $100,000 as a one time license fee 90 days
after signing of the new license or at the time the patent, software, and
related technology, is delivered to and accepted by the Company.
Since the amendment to the License was not executed as of year end,
the Company has continued to expense the minimum royalty payments,
including $250,000 in 1999, due under the License.
<PAGE>
The operation of the Company has been, and will continue to be,
dependent upon management's ability to raise operating capital in the form
of debt or equity. The Company has incurred significant operating losses
since its inception. The Company expects that significant on-going
operating expenditures will be necessary to successfully implement its
business plan and develop, manufacture and market its products. These
circumstances raise substantial doubt about the Company's ability to
continue as a going concern. There can be no assurance that the Company
will be able to obtain additional capital to meet its current operating
needs, or to complete pending or contemplated licenses or acquisitions of
technologies. If the Company is unable to raise sufficient adequate
additional capital, or generate profitable sales revenues, management may
be forced to substantially curtail product research and development and
other activities and may be forced to cease operations.
The Company's internally used computer equipment is Year 2000
compliant. The software suites and systems currently sold by the Samba are
also Year 2000 compliant. Older installations of the Samba software suite
may not be Year 2000 compliant, and Samba has been contracted by some
customers to upgrade their systems to Year 2000 compliance. The Company
does not anticipate that it will incur any additional material costs
related to compliance with Year 2000 issues.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk inherent in the Company's financial statements is the
potential loss in fair value arising from adverse changes in interest
rates. The Company does not engage in any hedge transactions or use
derivative financial instruments to reduce its exposure to interest rate
changes since all of the Company's indebtedness is financed at fixed rates.
At December 31, 1999, the carrying amount of the Company's debt instruments
approximated their fair value. In addition, as of December 31, 1999, the
Company was not exposed to any material foreign-currency, commodity-price,
equity-price or other type of market or price risk. The Company's wholly
owned subsidiary, Samba, conducts the majority of its operations in Europe
using EURO and local European currencies. At December 31, 1999 the Company
has recorded a negative cumulative translation adjustment of ($83,000)
reflecting the current valuation of the Company's investment in and current
account with Samba.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company for the year
ended December 31, 1999 and the period March 16, 1998 through December 31,
1998, together with the report thereon of Ernst & Young LLP dated March 29,
2000, are filed as part of this report commencing on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information required for this item is incorporated by reference
to the discussion captioned "ELECTION OF DIRECTORS" in the Company's Proxy
Statement for the annual meeting of shareholders.
ITEM 11. EXECUTIVE COMPENSATION
The information required for this item is incorporated by reference
to the discussion captioned "EXECUTIVE COMPENSATION" in the Company's Proxy
Statement for the annual meeting of shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required for this item is incorporated by reference
to the discussion captioned "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT" in the Company's Proxy Statement for the annual
meeting of shareholders.
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January of 1999, the Board of Directors authorized the Company to
raise up to $1,500,000 in new equity or debt in order to provide operating
capital for the Company. Between March 1, 1999 and June 30, 1999, the
Company issued a series of 6% Convertible Subordinated Notes to a group of
accredited investors in exchange for $994,600 in cash. The Notes and
accrued interest due thereon will become due on June 30, 2000. The Notes,
including accrued interest due thereon, will automatically convert into
shares of Common Stock , at a conversion price of $0.33 per share, when the
Company has raised at least $5,000,000 in new equity or debt, not including
the $1,500,000 in equity or debt, of which the Notes are a part, authorized
to be raised by the Board in January. The conversion price of the Notes is
subject to a reduction, but never less than $0.20 per share, based on the
per share valuation of the new $5,000,000 in equity or debt. The
noteholders have the option to convert the Notes and related accrued
interest into Common Stock at any time. A noteholder exercised his right
to convert a $25,000 Note into 75,758 shares of Common Stock on June 4,
1999.
Included in the above series of Notes is a Note issued to Seaside
Partners, L.P. in the principal amount of $500,000. Denis. M. O'Donnell,
who is a director of the Company, is a member and manager of Seaside
Advisors, L.L.C., a firm which provides investment management services to
Seaside Partners. Also included in the above series of Notes is a Note
issued to Leonard R. Prange in the principal amount of $75,000. Mr. Prange
is President, COO, CFO, and Secretary of the Company. Both the Seaside and
Prange Notes were issued under the same terms and conditions as all of the
other Notes in the series.
The Company has contracted with several advisory groups to assist it
in conjunction with the sale of the Notes and Private Placements of Common
Stock during 1999. Accordingly, the Company has recorded an accrual for
cash commissions amounting to $41,040 due to one of the advisory groups,
and is required to issue warrants to purchase 542,474 shares of Common
Stock at an average exercise price of price of $0.25. In addition the
Company has recorded an estimated accrual of $50,000 to cover "out of
pocket" expenses reimbursable to one group. Denis M. O'Donnell, M.D., a
director of the Company, is a member of Westgate Partners, L.L.C, an
advisory group entitled to receive $41,040 in commissions, 155,455 warrants
to purchase Common Stock at $0.363 per share, and the reimbursement of up
to $50,000 in "out of pocket" expenses.
On December 10, 1999, the Company issued a Senior Convertible
Promissory Note to Azimuth Corporation ("Azimuth"), a company controlled by
Alexander M. Milley, a director and significant shareholder of the Company,
in exchange for $50,000 in cash. The note bears interest at the rate of
12% per annum and was convertible into Common Stock at a conversion price
of $0.20 per share. As additional compensation for the note, the Company
issued Azimuth a warrant to purchase 50,000 shares of Common Stock at an
exercise price of $0.33 per share. On February 22, 2000 Azimuth exercised
its right to convert the note and accrued interest due thereon into 256,250
shares of Common Stock of the Company.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 10-K
Documents Filed as Part of Report
Page
Index to Financial Statements Number
----------------------------- ------
1. FINANCIAL STATEMENTS
Report of Independent Auditors F-1
Consolidated Balance Sheets at December 31, 1999
and 1998 F-2 to F-3
Consolidated Statements of Operations for the
year ended December 31, 1999 and the period
March 16, 1998 (inception) through December 31,
1998 F-4
Consolidated Statements of Stockholders' Equity
(Deficit) for the year ended December 31, 1999
and the period March 16, 1998 (inception)
through December 31, 1998 F-5 to F-6
Consolidated Statements of Cash Flows for the
year ended December 31, 1999 and for the period
March 16, 1998 (inception) through December 31,
1998 F-7 to F-8
Notes to Consolidated Financial Statements F-9 to F-19
2. FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule is filed as part of this
report as page F-20;
Schedule II - Valuation and Qualifying Accounts.
All other schedules are omitted because they are not applicable, or
not required, or because the required information is included in the
Consolidated Financial Statements or notes thereto.
<PAGE>
3. EXHIBITS
Exhibit
Number Description
- ------- -----------
2.1 Bell National Corporation Plan of Reorganization (Annex I).
(Incorporated herein by reference to Item 1 of the Bell National
Corporation Annual Report on Form 10-K for the period from August 20, 1985
to December 31, 1985 and for the years ended December 31, 1986 and 1987.)
2.2 Exchange Agreement dated December 4, 1998 among the Company,
InPath, and the InPath Members. (Incorporated herein by reference to
Appendix A to the Bell National Corporation Definitive Proxy Statement on
Schedule 14A, filed on April 30, 1999.)
2.3 Agreement and Plan of Merger of Bell National Corporation and
the Company. (Incorporated herein by reference to Appendix C to the Bell
National Corporation Definitive Proxy Statement on Schedule 14A, filed on
April 30, 1999.)
3.1 Restated Articles of Incorporation. (Incorporated herein by
reference to Exhibit 3.1 of the Bell National Corporation Annual Report on
Form 10-K for the fiscal year ended December 31, 1988.)
3.2 Bylaws of Bell National Corporation. (Incorporated herein by
reference to Exhibit 3.2 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1989.)
3.3 Certificate of Incorporation of the Company as amended.
(Incorporated herein by reference to Appendix D to the Bell National
Corporation Definitive Proxy Statement on Schedule 14A, filed on April 30,
1999.)
3.4 By-laws of the Company. (Incorporated herein by reference to
Appendix E to the Bell National Corporation Definitive Proxy Statement on
Schedule 14A, filed on April 30, 1999.)
4.1 Form of Common Stock Purchase Warrant, as executed by Bell
National Corporation on December 4, 1998 with respect to each of Mr.
Gombrich, Theodore L. Koenig, William J. Ritger, Fred H. Pearson, Walter
Herbst, AccuMed International, Inc., Northlea Partners Ltd., and Monroe
Investments, Inc. (collectively, the "InPath Members"). (Incorporated
herein by reference to Exhibit 3 of the Schedule 13D filed jointly by the
InPath Members on December 14, 1998.)
4.2 Stockholders Agreement dated December 4, 1998 among the
Company, Winchester National, Inc., the InPath Members, and Mr. Milley, Mr.
Shaw, Cadmus, and MMI (collectively, the "Claimants"). (Incorporated
herein by reference to Exhibit 2 to the Schedule 13D filed jointly by the
InPath Members on December 14, 1998.)
4.3 Form of Common Stock Purchase Warrant issued to Holleb & Coff
on July 4, 1999 representing the right to purchase 250,000 shares of Common
Stock of the Company in connection with legal services rendered.
4.4 Form of Common Stock Purchase Warrant issued to The Research
Works on October 11, 1999 representing the right to purchase 70,000 shares
of Common Stock of the Company in connection with the preparation of an
investment research report.
<PAGE>
Exhibit
Number Description
- ------- -----------
4.5 Form of Common Stock Purchase Warrant issued to Azimuth
Corporation on December 10, 1999 representing the right to purchase 50,000
shares of Common Stock of the Company as additional consideration for a 12%
Convertible Promissory Note issued on the same date.
10.1 Stock Appreciation Rights Agreement dated as of November 20,
1989 between the Company and Raymond O'S. Kelly. (Incorporated herein by
reference to Exhibit 10.5 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1989.)
10.2 Stock Appreciation Rights Agreement dated as of November 20,
1989 between the Company and Nicholas E. Toussaint. (Incorporated herein
by reference to Exhibit 10.7 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1989.)
10.3 Stock Appreciation Rights Agreement dated as of June 14, 1990
between the Company and Roy D. Rafalco. (Incorporated herein by reference
to Exhibit 4 of the Company's Form 8-K filed June 15, 1990.)
10.4 SAR Agreement Extension dated November 15, 1995 between the
Company and Raymond O'S. Kelly. (Incorporated herein by reference to
Exhibit 10.20 of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995.)
10.5 SAR Agreement Extension dated November 15, 1995 between the
Company and Nicholas E. Toussaint. (Incorporated herein by reference to
Exhibit 10.21 of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995.)
10.6 Employment Agreement dated May 1, 1998 between Mr. Gombrich and
InPath, LLC, as amended on December 4, 1998. (Incorporated herein by
reference to Exhibit 10.6 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998).
10.8 Claims Agreement dated December 4, 1998 among the Company, the
Claimants, and Liberty Associates Limited Partnership. (Incorporated
herein by reference to Exhibit 4 to the Schedule 13D filed jointly by the
InPath Members on December 14, 1998.)
10.9 Ampersand Medical Corporation Equity Incentive Plan established
as of June 1, 1999. (Incorporated herein by reference to Appendix F to the
Bell National Corporation Definitive Proxy Statement on Schedule 14A, as
filed on April 30, 1999.)
10.10 Ampersand Medical Corporation Employee Stock Purchase Plan.
(Incorporated herein by reference to Appendix G to the Bell National
Corporation Definitive Proxy statement on Schedule 14A, as filed on April
30, 1999.)
10.11 Employment Agreement dated June 1, 1999 between Mr. Prange and
the Company.
10.12 Lease Agreement between the Company and O.P., L.L.C. dated
September 1, 1999 pertaining to the premises located at suite 305, 414 N.
Orleans, Chicago, IL 60610.
10.13 Amendment to Lease Agreement between the Company and O.P.,
L.L.C. dated November 1, 199 pertaining to the premises at suite 300, 414
N. Orleans, Chicago, IL 60610.
<PAGE>
Exhibit
Number Description
- ------- -----------
10.14 Form of Note purchase Agreements dated between March 1, 1999
and June 29, 1999 between the Company and several purchasers.
10.15 Form of 6% Convertible Subordinated Note Due 2000, dated
between March 1, 1999 and June 29, 1999 issued by the Company to several
purchasers.
10.16 Schedule of purchasers of 6% Convertible Notes Due 2000,
including dates and amount purchased.
10.17 Form of Senior Convertible Promissory Note issued to Azimuth
Corporation on December 10, 1999.
10.18 Form of Restricted Stock Award of 50,000 shares of Common Stock
issued to David A. Fishman, M.D., on August 10, 1999 as additional
compensation under a 36 month Consulting Agreement dated June 1, 1999.
10.19 Form of Restricted Stock award of 50,000 shares of Common Stock
issued to Arthur L. Herbst, M.D., on August 10, 1999 as additional
compensation under a 36 month Consulting Agreement dated July 1, 1999.
21.1 Subsidiaries of the Company.
27.1 Financial data schedule.
REPORTS ON FORM 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
AMPERSAND MEDICAL CORPORATION
Date: March 30, 2000 BY: /s/ Peter P. Gombrich
----------------------------------
Peter P. Gombrich
Chairman of the Board,
Chief Executive Officer and
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Peter P. Gombrich
- -----------------------
Peter P. Gombrich Director, Chairman of the
Board, Chief Executive Officer
(Principal Executive Officer) March 30, 2000
/s/ Alexander M. Milley
- -----------------------
Alexander M. Milley Director March 30, 2000
/s/ John Abeles
- -----------------------
John Abeles Director March 30, 2000
/s/ Denis M. O'Donnell
- -----------------------
Denis M. O'Donnell Director March 30, 2000
/s/ Leonard R. Prange
- -----------------------
Leonard R. Prange President,
Chief Operating Officer,
Chief Financial Officer,
and Secretary
(Principal Financial Officer
and Accounting Officer) March 30, 2000
/s/ Robert C. Shaw
- -----------------------
Robert C. Shaw Director March 30, 2000
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Ampersand Medical Corporation and Subsidiaries
We have audited the accompanying Consolidated Balance Sheets of
Ampersand Medical Corporation and Subsidiaries, formerly Bell National
Corporation, as of December 31, 1999 and 1998, and the related statements
of operations, changes in stockholders' equity and cash flows for the year
ended December 31, 1999 and the period from March 16, 1998 (inception)
through December 31, 1998. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these statements and schedule
based on our audits.
We conducted our audit in accordance with auditing standards
generally accepted in the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Ampersand Medical Corporation and Subsidiaries as of December 31, 1999 and
1998 and the results of its operations and its cash flows for the year
ended December 31, 1999 and the period from March 16, 1998 (inception)
through December 31, 1998, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed
in Note 1 to the financial statements, the Company has incurred substantial
net losses from operations and has limited financial resources. These
conditions raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans with regard to these matters are
described in Note 1. The financial statements do not include any
adjustments relating to the recoverability and classification of asset
carrying amounts or the amount and classification of liabilities that may
result from the outcome of this uncertainty.
/S/ ERNST & YOUNG, LLP
Chicago, Illinois
March 29, 2000
<PAGE>
PART I. FINANCIAL INFORMATION
AMPERSAND MEDICAL CORPORATION AND SUBSIDIARIES
(Formerly Bell National Corporation)
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
Balance Balance
December 31, December 31,
1999 1998
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents. . . . . . . $ 36 700
Accounts receivable, net of
allowance of $20 . . . . . . . . . . 398 --
Inventories. . . . . . . . . . . . . . 62 --
Refundable taxes . . . . . . . . . . . 131 --
Prepaid expenses . . . . . . . . . . . 54 35
---------- ----------
Total current assets . . . . . . . 681 735
Fixed assets, net. . . . . . . . . . . . . 177 88
Other assets:
License, patents, and technology,
net of amortization. . . . . . . . . . 696 746
Goodwill, net. . . . . . . . . . . . . . 317 --
Acquisition escrow . . . . . . . . . . . -- 100
Other. . . . . . . . . . . . . . . . . . -- 30
---------- ----------
Total assets . . . . . . . . . . . $ 1,871 1,699
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . $ 1,449 588
Customer deposits. . . . . . . . . . . . 40 --
Accrued payroll costs. . . . . . . . . . 450 81
Accrued royalties. . . . . . . . . . . . 250 --
Accrued expenses . . . . . . . . . . . . 399 71
Deferred revenue . . . . . . . . . . . . 68 --
Revolving line of credit . . . . . . . . 134 --
Current maturities of notes payable -
related party. . . . . . . . . . . . . 125 --
Current maturities of notes payable. . . 970 75
---------- ----------
Total current liabilities. . . . . 3,885 815
<PAGE>
AMPERSAND MEDICAL CORPORATION AND SUBSIDIARIES
(Formerly Bell National Corporation)
Consolidated Balance Sheets - CONTINUED
Balance Balance
December 31, December 31,
1999 1998
------------ ------------
Notes payable - related party,
less current maturities. . . . . . . . . 26 156
Stockholders' equity (deficit)
Preferred Stock, $0.001 par value
Authorized 5,000,000 shares;
None issued and outstanding
Common stock, no par value
Authorized and issued 12,000,000
shares in 1998 . . . . . . . . . . . -- 1,517
Common stock, $0.001 par value;
Authorized 50,000,000 shares;
Issued and outstanding 19,027,570
shares in 1999 . . . . . . . . . . . 19 --
Additional paid in capital . . . . . . . 3,039 --
Accumulated deficit. . . . . . . . . . . (5,015) (789)
Accumulated comprehensive loss -
Cumulative translation adjustment. . . (83) --
---------- ----------
Total stockholders' equity
(deficit). . . . . . . . . . . . (2,040) 728
---------- ----------
Total liabilities and stock-
holders' equity (deficit). . . . $ 1,871 1,699
========== ==========
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
AMPERSAND MEDICAL CORPORATION AND SUBSIDIARIES
(Formerly Bell National Corporation)
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
For the Period
March 16, 1998
(Inception)
Year Ended Through
December 31, December 31,
1999 1998
------------ --------------
Net sales. . . . . . . . . . . . . . . . $ 1,040 --
Cost and expenses
Cost of goods sold . . . . . . . . . . 542 --
Research and development expenses. . . 1,782 181
Selling, general and
administrative expenses. . . . . . . 2,833 602
---------- ----------
5,157 783
---------- ----------
Operating loss . . . . . . . . . . . . . (4,117) (783)
Other income (expense)
Interest (expense) - related party . . (14) (8)
Interest (expense) . . . . . . . . . . (72) --
Other, net . . . . . . . . . . . . . . (23) 2
---------- ----------
(109) (6)
---------- ----------
Loss before income taxes . . . . . . . . (4,226) (789)
Income taxes . . . . . . . . . . . . . . -- --
---------- ----------
Net loss . . . . . . . . . . . . . . . . $ (4,226) (789)
========== ==========
Basic and fully diluted net loss
per common share . . . . . . . . . . . $ (0.29) (0.07)
========== ==========
Weighted average number of
common share outstanding . . . . . . . 14,336,667 12,000,000
========== ==========
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
AMPERSAND MEDICAL CORPORATION AND SUBSIDIARIES
(Formerly Bell National Corporation)
Consolidated Statements of Stockholders' Equity
(Dollars in thousands)
Common
Common Stock Addi- Other Total
Pre- Stock par tional Accumu- compre- Stock-
ferred No par value Paid in lated hensive holder
Stock value $0.001 Capital Deficit loss Equity
------- ------- ------- ------- ------- ------- -------
March 16,
1998 (In-
ception) $ -- -- -- -- -- -- --
Equity of
accounting
acquiree 881 881
Contribution
of asset
in exchange
for equity -- 245 -- -- 245
Sale of
equity -- 391 -- -- 391
Net loss -- -- (789) -- (789)
------- ------- ------- ------- ------- ------- -------
Decem-
ber 31,
1998 -- 1,517 -- -- (789) -- 728
Merger of
Bell Nation-
al into
Ampersand
Medical
Corporation -- (1,517) 12 1,505 -- -- --
Comprehensive
Loss:
Net loss -- -- -- (4,226) -- (4,226)
Foreign
currency
transla-
tion -- -- -- -- (83) (83)
------
Total compre-
hensive loss (4,309)
Conversion of
notes payable
and accrued
interest -- -- -- 126 -- -- 126
Exercise of
warrants -- -- 3 20 -- -- 23
Warrants
issued for
services -- -- -- 126 -- -- 126
Sale of
common
Stock, net
of costs
incurred -- -- 4 956 -- -- 960
Restricted
stock
issued for
services -- -- -- 21 -- -- 21
<PAGE>
AMPERSAND MEDICAL CORPORATION AND SUBSIDIARIES
(Formerly Bell National Corporation)
Consolidated Statements of Stockholders' Equity - CONTINUED
(Dollars in thousands)
Common
Common Stock Addi- Other Total
Pre- Stock par tional Accumu- compre- Stock-
ferred No par value Paid in lated hensive holder
Stock value $0.001 Capital Deficit loss Equity
------- ------- ------- ------- ------- ------- -------
Options
issued
to non-
employees
for services -- -- -- 54 -- -- 54
Compensation
expense
related
to SAR's -- -- -- 231 -- -- 231
------- ------- ------- ------- ------- ------- -------
Decem-
ber 31,
1999 $ -- -- 19 3,039 (5,015) (83) (2,040)
======= ======= ======= ======= ======= ======= =======
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
AMPERSAND MEDICAL CORPORATION AND SUBSIDIARIES
(Formerly Bell National Corporation)
Consolidated Statements of Cash Flows
(Dollars in thousands)
For the Period
March 16, 1998
(Inception)
Year Ended Through
December 31, December 31,
1999 1998
------------ --------------
Operating Activities:
Net loss . . . . . . . . . . . . . . . . $ (4,226) (789)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization. . . . . 292 36
Loss on disposal of equipment. . . . . 21 --
Stock, warrants, and options issued
to non-employees for services. . . . 201 --
Compensation expense related to
Stock Appreciation Rights. . . . . . 231 --
Changes in assets and liabilities:
Accounts receivable, net . . . . . . (398) --
Inventories. . . . . . . . . . . . . (62) --
Refundable taxes . . . . . . . . . . (131) --
Deposits, prepaids and other
assets . . . . . . . . . . . . . . 111 (158)
Accounts payable . . . . . . . . . . 861 588
Customer deposits. . . . . . . . . . 40 --
Deferred revenue . . . . . . . . . . 68 --
Accrued royalties. . . . . . . . . . 250 --
Accrued expenses . . . . . . . . . . 697 59
---------- ----------
Net cash used in operating activities. . . (2,045) (264)
Cash used in investing activities:
Payments for acquisitions. . . . . . . . (500) --
Expenditures for license,
patents and technology . . . . . . . . (25) (501)
Purchase of fixed assets . . . . . . . . (144) (100)
---------- ----------
Net cash used in investing activities. . . (669) (601)
Cash flows from financing activities:
Proceeds from issuance of
convertible notes payable. . . . . . . 1,146 250
Proceeds from revolving line
of credit, net of payments . . . . . . 134 --
Payment of notes payable -
related party. . . . . . . . . . . . . (130) (19)
Proceeds from issuance of common
stock, net of costs incurred . . . . . 983 391
Net cash acquired. . . . . . . . . . . . -- 943
---------- ----------
Net cash provided by
financing activities . . . . . . . . . . 2,133 1,565
Effect of exchange rate changes
on cash. . . . . . . . . . . . . . . . . (83) --
---------- ----------
Net increase (decrease) in cash
and cash equivalents . . . . . . . . . . (664) 700
Cash and cash equivalents at
beginning of period. . . . . . . . . . . 700 --
---------- ----------
Cash and cash equivalents at
end of period. . . . . . . . . . . . . . $ 36 700
========== ==========
<PAGE>
AMPERSAND MEDICAL CORPORATION AND SUBSIDIARIES
(Formerly Bell National Corporation)
Consolidated Statements of Cash Flows - CONTINUED
For the Period
March 16, 1998
(Inception)
Year Ended Through
December 31, December 31,
1999 1998
------------ --------------
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . $ 5 --
Income taxes . . . . . . . . . . . . . . -- --
========== ==========
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
AMPERSAND MEDICAL CORPORATION
(Formerly Bell National Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1. THE COMPANY AND BASIS OF PRESENTATION
Ampersand Medical Corporation ("Ampersand" and together with its
subsidiaries the "Company") was incorporated in Delaware on December 15,
1998, as a wholly owned subsidiary of Bell National Corporation. At the
Annual Meeting of Bell National on May 25, 1999, stockholders approved the
merger of Bell National into Ampersand. The merger was affected on May 26,
1999 and Bell National ceased its existence. At the Annual Meeting,
stockholders also approved an increase in the authorized shares of Common
Stock of the Company from 20,000,000 to 50,000,000 shares.
From a historical perspective prior to its merger into the Ampersand,
Bell National Corporation ("Bell National") was incorporated in California
on October 1, 1958. Through 1985, its principal subsidiary was Bell Savings
and Loan Association ("Bell Savings"), a state chartered savings and loan
association. On July 25, 1985, the Federal Home Loan Bank Board appointed
the Federal Savings & Loan Insurance Corporation ("FSLIC") as receiver of
Bell Savings. At the same time, the assets of Bell Savings were transferred
to a new, unrelated, federally chartered mutual savings and loan
association, Bell Federal. The FSLIC's action followed shortly after a
determination that Bell Savings had a negative net worth. On August 20,
1985, Bell National filed a voluntary petition under Chapter 11 of the
Bankruptcy Code. A plan of reorganization was approved by the Bankruptcy
Court, and became effective June 29, 1987.
On June 15, 1990, Bell National purchased 100% of the Common Stock of
Payne Fabrics, Inc., a designer and distributor of decorative drapery and
upholstery fabrics, for a purchase price of $6,493,000 and the issuance of
stock appreciation rights. On August 4, 1997 Payne Fabrics, Inc. sold
substantially all of its assets and most of its liabilities related to the
business of designing and distributing decorative drapery and upholstery
fabrics to Westgate Fabrics, Inc. ("Westgate"), an unaffiliated third party
(the "Asset Sale"). The Asset Sale included the transfer to the buyer of
the use and rights to the Payne Fabrics name, accordingly, Payne Fabrics,
Inc., changed its name to PFI National Corporation ("PFI"). The Asset Sale
left PFI without any substantial assets and on August 4, 1997 all
operations were ceased. Bell National's other wholly-owned subsidiaries,
Bell Savings and Pacific Coast Holdings Insurance Company, had no
significant assets or liabilities. After the Asset Sale and before December
1998, the Company had no business operations and its only activities were
administrative.
On December 4, 1998, Bell National acquired InPath, LLC, a
development-stage company engaged in the design and development of medical
instruments and related tests. In the acquisition, Bell issued 4,288,790
shares of Common Stock and warrants to purchase 3,175,850 shares of Common
Stock to the members of InPath in exchange for their units of membership
interest in InPath and the senior executives of InPath assumed management
control of the Company. Subsequent to the annual meeting of the
stockholders on May 25, 1999, all of the warrants were exercised and
exchanged for shares of Common Stock in the Company.
<PAGE>
Also on December 4, 1998, pursuant to a Claims Settlement Agreement
of the same date, Bell National issued shares of Common Stock to each of
two individuals and two corporations in settlement of debts that Bell
National owed to them. In the transaction, the Bell National issued:
210,000 shares of Common Stock to Alexander M. Milley to settle a debt of
$63,000 owed to him for his services as Chairman of the Board and Secretary
of Bell National under an Employment Agreement dated November 20, 1989;
463,333 shares of Common Stock to Robert C. Shaw to settle a debt of
$139,000 owed to him for his services as President and Treasurer of Bell
National under an Employment Agreement dated November, 20 1989; 600,000
shares of Common Stock to Cadmus Corporation ("Cadmus") to settle a debt of
$180,000 owed to it for management services provided to Bell National; and
503,333 shares of Common Stock to MMI to settle a debt of $151,000 owed to
it as rent for office space and as payment for management services provided
to Bell National.
Based upon the terms of the acquisition agreement, for financial
reporting and accounting purposes the acquisition was accounted for as a
reverse acquisition whereby InPath is deemed to have acquired Bell
National. However, Bell National was the continuing legal entity and
registrant for both Securities and Exchange Commission filing purposes and
income tax filing purposes, until its merger into Ampersand in May 1999.
Because the Bell National was a non-operating public shell company with
nominal assets and InPath was a private operating company, the acquisition
was recorded as the issuance of stock for the net monetary assets of Bell
National, accompanied by a recapitalization and no goodwill or other
intangible assets were recorded. Accordingly, the Consolidated Financial
Statements presented hereunder only include the operations of InPath from
March 16, 1998 (inception) and the operations of Bell National and the
Company from December 4, 1998.
In December 1998, the Company formed a French limited liability
company subsidiary, Samba Technologies, Sarl ("Samba"), for the purpose of
acquiring the automated image cytometry and tele-medicine technology used
in the business of the Samba department of Unilog Regions, SA, a French
company engaged in the design, development, and installation of commercial
software programs and networks for business applications. Samba completed
the acquisition of the department's assets on January 4, 1999, and at the
same time entered into employment arrangements with the former department
employees. Since the acquisition, Samba has continued to develop and
market the image cytometry and tele-medicine products previously developed
and marketed by the department.
The Company has incurred significant net losses since its inception.
The Company expects that significant on-going operating expenditures will
be necessary to successfully implement its business plan and develop,
manufacture and market its products. These circumstances raise substantial
doubt about the Company's ability to continue as a going concern.
Implementation of the Company's plans and its ability to continue as a
going concern depend upon its acquiring substantial additional financing.
Management's plans include efforts to obtain additional capital. If the
Company is unable to obtain adequate additional financing or generate
profitable sales revenues, management may be required to curtail the
Company's product development and other activities and may be forced to
cease operations.
During January 2000, upon receipt of cleared funds received under the
1999 Private Placement, the Company completed the sale of an additional
1,712,120 shares of Common Stock for total gross proceeds of $565,000.
In January 2000, the Board of Directors authorized the Company to
raise a minimum of $5,000,000 in new equity at a sales price per share of
$1.50. The proceeds of this new offering will be used to fund acquisitions
of additional technology, clinical trials, costs to carry the InPath
System's disposable and instrument designs through the manufacturing
process, and general corporate purposes. As of March 28, 2000, the Company
has sold 759,997 shares for total gross cash proceeds of $1,140,000.
<PAGE>
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The Consolidated Financial Statements
include Ampersand Medical Corporation and its wholly owned subsidiaries.
All intercompany balances and transactions have been eliminated.
USE OF ESTIMATES. The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
REVENUE RECOGNITION. The Company will recognize revenue upon
shipment of product to customers, or in the case of sales of software by
its wholly owned subsidiary Samba Technologies, Sarl., upon shipment if
persuasive evidence of an arrangement exists; sufficient vendor-specific
objective evidence exists to support allocating the total fee to all
elements of the arrangement; the fee is fixed or determinable; and
collection is probable.
Revenue from ongoing client maintenance is recognized ratably over
the post-contract support term, which is twelve months. Revenue from
training services and professional services is recognized when the service
is completed. Revenue from implementation and installation services is
recognized using the percentage of completion method. The Company
calculates percentage of completion based on the estimated total number of
hours of service required to complete an implementation project and the
number of actual hours of service rendered. Implementation and
installation services are completed within 120 days.
CASH AND CASH EQUIVALENTS. The Company considers all highly liquid
investments with a maturity of three months or less at the time of purchase
to be cash equivalents.
INVENTORY. Inventories are stated at the lower of cost (first-in,
first-out method) or market.
PROPERTY AND EQUIPMENT. Property and equipment are stated at cost
and are depreciated using the straight-line method over the assets'
estimated useful lives. Principal useful lives are as follows:
Furniture and fixtures 5 years
Laboratory equipment 5 years
Computer and communications equipment 3 years
Leasehold improvements Useful life or life of
lease, whichever is shorter
Normal maintenance and repairs are charged to expense as incurred,
significant improvements are capitalized.
LICENSE, PATENTS, AND TECHNOLOGY. License, patents, and purchased
technology are recorded at their acquisition cost. During 1998, a portion
of a license, valued at $245,000, was contributed to the Company in
exchange for an equity stake of equal value. Costs to prepare patent
filings are recorded when incurred. Costs related to abandoned or denied
patent applications are written off at the time of abandonment or denial.
Amortization is begun as of the date of acquisition or upon the grant of
the final patent. All costs are amortized over a useful life of ten years.
GOODWILL. Goodwill is amortized using the straight-line method over
three years. Amortization expense for 1999 related to goodwill was
approximately $167,000.
RESEARCH AND DEVELOPMENT COSTS. Research and development costs are
charged to operations as incurred. The Company conducts a portion of its
research activities under contractual arrangements with scientists,
researchers, universities, and other independent third parties.
<PAGE>
FOREIGN CURRENCY TRANSLATION. The functional currency of the
Company's foreign operations is the local currency. Accordingly, all assets
and liabilities are translated into U.S. dollars using year-end exchange
rates, and all revenues and expenses are translated using weighted-average
exchange rates during the year. The amount of foreign currency translation
is not material to the results of operations and the financial position of
the Company.
LOSS PER SHARE. Basic loss per share is calculated based on the
weighted-average number of outstanding common shares. Diluted loss per
share is calculated based on the weighted-average number of outstanding
common shares plus the effect of dilutive potential common shares. The
Company's calculation of dilutive net loss per share excludes potential
common shares as the effect would be antidilutive. Potential common shares
include stock options and warrants. The weighted-average number of options
and warrants to purchase common stock using the treasury stock method for
1999 and 1998 were 24,000 and zero shares, respectively.
INCOME TAXES. The Company follows the liability method in accounting
for income taxes. Under this method, deferred tax assets and liabilities
are determined based on differences between financial reporting and tax
bases of assets and liabilities and are measured using tax rates and laws
that are expected to be in effect when the differences are expected to
reverse. Valuation allowances are provided against deferred tax assets if
it is more likely than not that the deferred tax assets will not be
realized.
OTHER COMPREHENSIVE INCOME (LOSS). Translation adjustments related to
the Company's foreign operations are included in other comprehensive loss
and reported separately in stockholders' equity.
STOCK COMPENSATION. As permitted by the Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation
(SFAS 123), the Company uses the intrinsic value method to account for
stock options as set fourth in Accounting Principles Board No. 25,
Accounting for Stock Issued to Employees (APB 25).
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31 (in
thousands):
1999 1998
------ ------
Furniture and fixtures $ 48 21
Laboratory equipment 91 41
Computer and communications equipment 91 25
Leasehold improvements 0 13
------ ------
230 100
Less accumulated depreciation and amortization (53) (12)
------ ------
Total $ 177 88
====== ======
<PAGE>
NOTE 4. OTHER ASSETS
Other assets include the following at December 31 (in thousands):
1999 1998
------ ------
License $ 746 745
Goodwill 475 --
Patent costs 50 25
------ ------
1,271 770
Less accumulated amortization (258) (24)
------ ------
Total $1,013 746
====== ======
NOTE 5. ACCRUED EXPENSES
Accrued expenses includes the following December 31 (in thousands):
1999 1998
------ ------
Accrued payroll and related costs $ 450 81
Accrued royalties 250 --
Accrued interest 52 5
Accrued interest - related party 18 3
Accrued taxes 110 --
Deferred revenue 68 --
Reserve for warranty 28 --
Other accrued expenses 191 63
------ ------
Total $ 917 152
====== ======
NOTE 6. NOTES PAYABLE - RELATED PARTIES
On September 1, 1998, the Company issued a note payable in the amount
of $175,000 to Mr. Peter P. Gombrich, its Chairman and CEO, in payment for
funds advanced to the Company. The note is due September 1, 2003 and
interest is payable at each anniversary date at the rate of 8% per annum.
The note may be repaid at any time without penalty. Principal payments in
the amount of $130,000 and $19,000 were made, during 1999 and 1998
respectively.
On May 11, 1999, the Company borrowed $75,000 under a 6% Convertible
Promissory Note to Leonard R. Prange, President, COO/CFO. The Note was
issued under terms identical to all 6% Convertible Promissory Notes issued
by the Company (see Note 7).
On December 10, 1999, the Company borrowed $50,000 from Azimuth
Corporation, a company controlled by Alexander M. Milley, a director and
significant shareholder of the Company. The promissory note bears interest
at the rate of 12% per annum and the principal along with accrued interest
is convertible into the Common Stock of the Company at a conversion price
of $0.20 per share. On February 22, 2000, Azimuth Corporation exercised
its right to convert the principal amount of the note plus accrued interest
due thereon in the amount of $1,250 into 256,250 shares of Common Stock of
the Company.
The carrying amount of notes payable approximates fair value at
December 31, 1999 and 1998.
<PAGE>
NOTE 7. NOTES PAYABLE
On August 28, 1998, the Company issued a note payable in the amount
of $75,000 to its former outside legal counsel, Holleb & Coff in payment
for legal services. The note is due on demand and interest accrues monthly
at the rate of 12% per annum. The outstanding balance, plus accrued
interest at December 31, 1999 is $87,000.
In January 1999, the Board of Directors authorized the Company to
raise up to $1,500,000 in debt or new equity to provide funding for current
operations. Subsequently, on various dates between March 1, 1999 and
June 29, 1999, the Company issued a series of interest bearing 6%
Convertible Promissory Notes totaling $969,600, including a Note in the
amount of $500,000 issued to Seaside Partners, L.P., a hedge fund which
receives investment management services from Seaside Advisors, L.L.C., of
which Dr. Denis M. O'Donnell, a director of the Company, is a member and
manager, and a Note in the amount of $75,000 issued to Leonard R. Prange,
President, COO/CFO (see Note 6 above), in exchange for cash. The maturity
date of the Notes was January 28, 2000, subject to extension by the Company
to June 30, 2000. On January 25, 2000, the Company notified the note-
holders that it was extending the maturity date of the Notes until June 30,
2000.
The Notes and accrued interest due thereon are automatically
convertible into shares of Common Stock at a conversion price of $0.33 per
share when the Company receives at least $5,000,000 from any additional
debt or equity offerings, excluding the original $1,500,000 authorized by
the Board. The conversion price may be lowered based on certain
circumstances related to the pricing of future debt or equity offerings but
may never be lowered below $0.20 per share. At December 31, 1999, the
conversion price of the notes is $0.33 per share.
In July 1999, the Company's wholly owned subsidiary, Samba,
negotiated a Revolving Credit Line ("Revolver") with the Banc National de
Paris ("BNP"). The terms of the Revolver provide that Samba may borrow in
the form of an advance on payment against monthly billings, up to a maximum
of 900,000 French Francs (approximately $140,000). The terms of the
Revolver require Samba to pay interest at the rate at Euribor plus 2.5%
(currently equal to 6.1%) on advances outstanding under the Revolver and
grant BNP a security interest in Samba accounts receivable. The Revolver
is subject to renewal in June 2000. As of December 31, 1999 the
outstanding amount under the revolver was approximately $134,000.
NOTE 8. STOCKHOLDERS' EQUITY
InPath, LLC was incorporated in the State of Delaware on March 16,
1998 as a limited liability company. The company sold membership units in
the amount of $391,000 and received a contribution of an asset valued at
$245,000 in exchange for membership units with a comparable value. On
December 4, 1998, InPath was acquired by Bell National, predecessor to the
Company in a transaction in which Bell National issued 4,288,790 shares of
Common Stock and warrants to purchase an additional 3,175,850 shares of
Common Stock to the members of InPath in exchange for their units of
membership interest in InPath. The warrants were issued because Bell
National did not have a sufficient amount of authorized Common Stock to
complete the transaction. Subsequent to approval and ratification of the
InPath/Bell National merger transactions, the merger of Bell National into
the Company, and the increase in the authorized Common Stock of the Company
to 50,000,000 at the Company's Annual Meeting on May 26, 1999, all of the
warrants were converted into shares of Common stock of the Company.
In conjunction with the InPath/Bell National merger transactions, and
the subsequent merger of the Bell National into Ampersand, 696,570 shares
of Common Stock, which had been designated "Class 4-B shares" (Class 4-B
shares were without value) pursuant to certain legal proceedings, were
cancelled. Class 4-B shares did not have voting rights and were not
entitled to any distributions from the Company on liquidation or otherwise.
<PAGE>
As discussed in Note 1, the InPath acquisition was accounted for as a
reverse acquisition whereby InPath was deemed to have acquired Bell
National. Accordingly, while the number of shares of Common Stock reflects
all shares currently outstanding, the amount recorded for Common Stock
includes the value of the InPath membership equity of $636,000 and the net
equity value of the Bell National and its subsidiaries as of December 4,
1998. The Accumulated deficit reflects the operations of InPath from
March 16, 1998 through December 3, 1998 and of Ampersand and the
consolidated Company from December 4, 1998 through December 31, 1999.
At various dates between July 1, 1999 and December 31, 1999, the
Company sold 3,989,848 shares of its Common Stock in Private Placement
Offerings to accredited private investors at prices ranging from $0.20 per
share to $0.33 per share. The Company received total gross proceeds of
$1,001,400. (See Note 12 Subsequent Events)
The Company has contracted with several advisory groups to assist it
in conjunction with the sale of the 6% Convertible Subordinated Notes Due
2000 (See Note 7 Notes Payable) and Private Placements of Common Stock
during 1999. Accordingly, the Company and is required to issue warrants to
purchase 542,474 shares of Common Stock at a weighted-average exercise
price of $0.25 to the advisory groups for their services. Denis M.
O'Donnell, M.D., a director of the Company, is a member of Westgate
Partners, L.L.C, an advisory group entitled to receive 155,455 warrants to
purchase Common Stock at $0.363 per share.
On July 15, 1999, the Company issued a warrant to Holleb & Coff, its
former outside legal counsel, entitling the holder to purchase 250,000
shares of Common Stock of the Company. In October 1999 the Company issued
a warrant to The Research Works, as consideration for the preparation of an
investment research report on the Company, entitling the holder to purchase
70,000 shares of Common Stock at $0.33 per share.
On December 10, 1999, the Company issued a $50,000 Promissory Note to
Azimuth Corporation, a company controlled by Alexander M. Milley, a
director and significant shareholder of the Company, in exchange for
$50,000 in cash. The Note bears interest at the rate of 12% per annum and
the principle along with accrued interest is convertible into the common
stock of the Company at a conversion price of $0.20 per share. As
additional compensation for the note, the Company issued Azimuth a warrant
to purchase 50,000 shares of Common Stock at an exercise price of $0.33 per
share. On February 22, 2000, Azimuth Corporation exercised its right to
convert the principal amount of the Note plus accrued interest due thereon
in the amount of $1,250 into 256,250 shares of common stock of the Company.
The services, related to all of the warrants issued or committed to
be issued were performed as of the date of grant or commitment to grant.
The warrants are exercisable immediately. The fair value of the warrants,
as calculated using the Black-Scholes method, was estimated at $344,000 at
the date of the grant. During 1999, the Company recorded $126,000 of
compensation expense for warrants issued for services.
The Company issued 250,000 options to purchase Common Stock to non-
employees during 1999 for consulting services. The options vest over three
years and have exercise prices ranging from $0.394 and $0.406. The Company
issued these options to consultants as consideration for consulting
services that commenced during 1999 and will be completed in 2001. As the
measurement date of these options had not been determined at December 31,
1999 the value of these options will be determined at the end of each
interim period until the measurement date is determined. Accordingly, a
fair value of $85,000 was calculated at December 31, 1999 using the Black-
Scholes method. This value is charged to compensation expense over the
term of the consulting agreement. The amount of expense to be ultimately
recognized will vary depending on the market value of the Common Stock at
the end of each period. During 1999, the Company recorded $54,000 of
compensation expense.
<PAGE>
In August 1999, the Company awarded restricted shares of common stock
to two outside consultants in accordance with the provisions of the Plan.
Each award of 50,000 shares, vests over a period of time, ranging from the
date of grant to three years. The consultant must maintain the consulting
relationship with the Company, except in the case of change of control or
termination by the Company without cause, during the entire vesting period.
The measurement date of these shares had not been determined at
December 31, 1999 and therefore the value of these shares will be based on
the market value of the Common Stock at the end of each interim period
until the measurement date is determined. Accordingly, a fair value of
$81,000 was calculated at December 31, 1999 using the Black-Scholes method
and the Company recorded $11,000 as compensation in 1999.
In applying the Black-Scholes method, the Company has used an
expected dividend yield of zero, a risk-free interest rate of 5%, a
volatility factor of 185% and a fair value of the underlying common shares
of $0.8125 for options and restricted stock issued to consultants and the
closing market price on the date of grant for warrants issued to
consultants. The expected life equaled the term of the warrants, options,
or restricted shares.
At December 31, 1999 and 1998, the Company had 450,000 stock
appreciation rights (SAR's) outstanding. These SAR's, issued in 1989, have
an exercise price of $0.30 and can be exercised through November 20, 2001.
In general, each SAR entitles the holder to receive upon exercise an amount
equal to the excess, if any, of the market value per share of Common Stock
at the date of exercise over the exercise price of the SAR, plus any
dividends or distributions per share made by the Company prior to the
exercise date. In lieu of making cash payments, the Company may elect to
issue shares of Common Stock on a one share for one SAR basis. The Company
has recorded compensation expense in the amount of $230,625 for the year
ended December 31, 1999 to reflect the difference between the closing
market price of the Company's common stock at December 31, 1999 and the
exercise price of the SAR's.
NOTE 9. LEASES
The Company currently leases its Chicago, Illinois corporate
headquarters and research offices under an operating lease expiring in
2004. The Company's wholly owned subsidiary, Samba Technologies, Sarl.,
leases office space in a suburb of Grenoble, France. Total rent expense,
including expenses related to the Company's previous headquarters location
and Samba's previous temporary office space, during the period ended
December 31, 1999 was $61,000.
Future minimum annual lease payments under the leases as of
December 31, 1999 are (in thousands):
YEAR AMOUNT
---- -------
2000 $92
2001 95
2002 84
2003 74
2004 57
<PAGE>
NOTE 10. INCOME TAXES
Significant components of deferred income taxes consist of the
following at December 31 (in thousands):
1999 1998
------- ------
Deferred tax assets related to:
Net operating loss carryforwards $1,647 $ 268
Accrued interest 1 2
Depreciation/amortization 8 8
------- ------
1,656 278
Less valuation reserve 1,656 278
------- ------
Net deferred tax asset $ -- $ --
======= ======
Prior to the acquisition on December 4, 1998, the Company had
significant net operating loss carryforwards (NOLs). These NOLs are not
reflected in the Company's financial statements because the restrictions on
the Company's ability to use these NOLs makes it highly unlikely the
Company will realize any significant future tax benefit related to the
NOLs.
The NOLs for the year ended December 31, 1999 and the period from
March 16, 1998 through December 31, 1998 expire in 2019 and 2018
respectively.
NOTE 11. EQUITY INCENTIVE PLAN AND EMPLOYEE STOCK PURCHASE PLAN
On May 25, 1999, stockholders approved the establishment of the 1999
Equity Incentive Plan (the "Plan") effective as of June 1, 1999. The Plan
provides that the Board may grant various forms of equity incentives to
directors, employees, and consultants, including but not limited to
Incentive Stock Options, Non - Qualified Stock Options, Stock Appreciation
Rights, and Restricted Stock Awards. Grants under the Plan are exercisable
at Fair Market Value determined as of the date of grant in accordance with
the terms of the Plan. Grants vest to recipients immediately or ratably
over periods ranging from two to five years, and expire five to ten years
from the date of grant.
The Company applies APB Opinion No. 25 and related interpretations in
accounting for options granted to employees under the Equity Incentive
Plan. No compensation cost was recorded during 1999 for options granted to
employees as the exercise price approximated the fair value of the
underlying Common Stock on the date of the grant.
Had stock options been accounted for under the fair value method
recommended by SFAS 123, the Company's net loss for the year ended
December 31, 1999 would have been $4,293,000 on a pro forma basis and a net
loss per share of $0.30 on a pro forma basis.
The fair value for these options used to compute pro forma net loss
was estimated at the date of the grant using a Black-Scholes option pricing
model with the following weighted average assumptions: risk-free interest
rate of 5%; dividend yield of zero; volatility factor of 185%; the market
price of the Company's Common Stock on the date of grant; and a weighted
average expected life of the options of 2.5 - 5.0 years.
<PAGE>
A summary of the Company's stock option activity, and related
information for the years ended December 31, 1999 follows:
Weighted
Average
Exercise
Options Price
-------- --------
Outstanding at beginning of year. -- --
Granted 1,035,000 $0.3964
Exercise -- --
Forfeited -15,000 $0.3937
---------
Outstanding at end of year. 1,020,000 $0.3964
=========
Exercisable at end of year. 373,337 $0.3955
=========
Weighted average fair value of options
granted during the year. $0.4461
At the Annual Meeting on May 25, 1999, the stockholders also approved
the Employee Stock Purchase Plan. The Plan offers employees the
opportunity to purchase shares of Common Stock of the Company, through a
payroll deduction plan, at 85% of the fair market value of such shares at
specified enrollment measurement dates. The aggregate number of shares
available for purchase under the Plan is 200,000. During 1999 there was no
activity in the Plan and no shares were purchased.
NOTE 12. SUBSEQUENT EVENTS
In January 2000, the Board of Directors authorized the Company to
raise a minimum of $5,000,000 in new equity at a sales price per share of
$1.50. The proceeds of this new offering will be used to fund acquisitions
of additional technology, clinical trials, costs to carry the InPath System
disposable and instrument designs through the manufacturing process, and
general corporate purposes. As of March 28, 2000, the Company had sold
759,997 shares for a total gross cash proceeds of $1,140,000.
See Note 13 Commitments and Contingencies for discussion of the
Agreement to amend the Patent and Technology License Agreement between the
Company's wholly owned subsidiary InPath, L.L.C., and AccuMed
International, Inc.
<PAGE>
NOTE 13. COMMITMENTS AND CONTINGENCIES
On March 29, 2000, to resolve a dispute between InPath and AccuMed
International, Inc. (AccuMed) over a Patent and Technology License
Agreement (the "License") dated September 4, 1998, including related
payments due thereunder, the Company and AccuMed signed a Letter Agreement
amending the License. The License, covering certain "Point of Care"
related applications, requires the payment of a license issue fee of
$500,000, against which InPath had made payments of $400,000, a 7% royalty
rate, and minimum royalty payments. InPath is also required to make
guaranteed minimum royalty payments of $1,000,000 each during the second
and third years of the License, $1,500,000 each during the fourth and fifth
years, and $2,000,000 each year thereafter. The License may not be
cancelled by InPath, without the occurrence of a breach by AccuMed, prior
to the payment of $5,000,000 in royalties or 5 years, whichever comes
first. InPath may elect to terminate its exclusivity under the License
upon written notice to AccuMed at which time its obligation to make the
minimum required royalty payments shall cease. InPath would then only be
obligated to make royalty payments based on actual sales of products.
The new Agreement provides for the assignment of the License to the
Company, elimination of the minimum royalty payment schedule, and a
reduction in the royalty rate to 4%. The Company has agreed to make cash
payments to AccuMed under the new Agreement totaling $600,000, issue a
$100,000 convertible promissory note due one year from the date the License
Amendment is signed, and issue 128,571 shares of Common Stock to AccuMed.
The note is convertible, at AccuMed's option, into Common Stock at a
conversion price of $3.50 per share and the Company has agreed to provide
AccuMed with price protection equal to $3.50 per share on the 128,571
shares of Common Stock until a measurement date 60 days following the date
on which the shares are registered and freely tradable. The cash payments
are characterized as the final minimum license payment and advanced non-
refundable royalty payments. The $100,000 principal amount of the note and
the 128,571 shares of Common Stock to a value of $450,000 are also
characterized as advanced non-refundable royalty payments. The amended
License is expected to be completed within 30 days. The Company has also
agreed to license an additional patent, software and related technology on
a non-exclusive basis for use in certain automated screening applications.
The Company will pay AccuMed $100,000 as a one time license fee 90 days
after signing of the new license or at the time the patent, software, and
related technology, is delivered to and accepted by the Company.
Since the amendment to the License was not executed as of year end,
the Company has continued to expense the minimum royalty payments,
including $250,000 in 1999, due under the License.
At December 31, 1999, the Company was contractually committed to pay
approximately $467,000 to scientists, researchers, universities, and other
independent third parties for services to be performed during 2000. These
contractual commitments are cancelable by the Company for non-performance.
<PAGE>
AMPERSAND MEDICAL CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Additions Balance
Balance at charged to at end
beginning costs and Retire- Other of
Description of period expenses ments charges period
- ----------- ---------- ---------- ------- ------- --------
RESERVES AND
ALLOWANCES DEDUCTED
FROM ASSET ACCOUNTS
ALLOWANCE FOR
UNCOLLECTABLE
ACCOUNTS RECEIVABLE
Period from March 16,
1998 (inception)
through December 31,
1998 $ 0 $ 0 $ 0 $ 0 $ 0
Year ended December 31,
1999 $ 0 $ 20 $ 0 $ 0 $ 20
RESERVES AND ALLOWANCES
WHICH SUPPORT BALANCE
SHEET CAPTION RESERVES
WARRANTY RESERVES
Period from March 16,
1998 (inception)
through December 31,
1998 $ 0 $ 0 $ 0 $ 0 $ 0
Year ended December 31,
1999 $ 0 $ 28 $ 0 $ 0 $ 28
<PAGE>
EXHIBIT INDEX
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 10-K
Documents Filed as Part of Report
1. FINANCIAL STATEMENTS
Page
Index to Financial Statements Number
----------------------------- -------
Report of Independent Auditors F-1
Consolidated Balance Sheets at December 31,
1999 and 1998 F-2 to F-3
Consolidated Statements of Operations for the
year ended December 31, 1999 and the period
March 16, 1998 (inception) through
December 31, 1998 F-4
Consolidated Statements of Stockholders' Equity
(Deficit) for the year ended December 31, 1999
and the period March 16, 1998 (inception)
through December 31, 1998 F-5 to F-6
Consolidated Statements of Cash Flows for the
year ended December 31, 1999 and for the period
March 16, 1998 (inception) through December 31,
1998. F-7 to F-9
Notes to Consolidated Financial Statements F-9 to F-19
2. FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule is failed as a part of
this report as page F-20.
Schedule II - Valuation and Qualifying Accounts.
All other schedules are omitted because they are not applicable or
not required, or because the required information is included in the
Consolidated Financial Statements or notes thereto.
3. EXHIBITS
Exhibit
Number Description
- ------- -----------
2.1 Bell National Corporation Plan of Reorganization (Annex I).
(Incorporated herein by reference to Item 1 of the Bell National
Corporation Annual Report on Form 10-K for the period from August 20, 1985
to December 31, 1985 and for the years ended December 31, 1986 and 1987.)
2.2 Exchange Agreement dated December 4, 1998 among the Company,
InPath, and the InPath Members. (Incorporated herein by reference to
Appendix A to the Bell National Corporation Definitive Proxy Statement on
Schedule 14A, filed on April 30, 1999.)
2.3 Agreement and Plan of Merger of Bell National Corporation and
the Company. (Incorporated herein by reference to Appendix C to the Bell
National Corporation Definitive Proxy Statement on Schedule 14A, filed on
April 30, 1999.)
<PAGE>
Exhibit
Number Description
- ------- -----------
3.1 Restated Articles of Incorporation. (Incorporated herein by
reference to Exhibit 3.1 of the Bell National Corporation Annual Report on
Form 10-K for the fiscal year ended December 31, 1988.)
3.2 Bylaws of Bell National Corporation. (Incorporated herein by
reference to Exhibit 3.2 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1989.)
3.3 Certificate of Incorporation of the Company as amended.
(Incorporated herein by reference to Appendix D to the Bell National
Corporation Definitive Proxy Statement on Schedule 14A, filed on April 30,
1999.)
3.4 By-laws of the Company. (Incorporated herein by reference to
Appendix E to the Bell National Corporation Definitive Proxy Statement on
Schedule 14A, filed on April 30, 1999.)
4.1 Form of Common Stock Purchase Warrant, as executed by Bell
National Corporation on December 4, 1998 with respect to each of Mr.
Gombrich, Theodore L. Koenig, William J. Ritger, Fred H. Pearson, Walter
Herbst, AccuMed International, Inc., Northlea Partners Ltd., and Monroe
Investments, Inc. (collectively, the "InPath Members"). (Incorporated
herein by reference to Exhibit 3 of the Schedule 13D filed jointly by the
InPath Members on December 14, 1998.)
4.2 Stockholders Agreement dated December 4, 1998 among the
Company, Winchester National, Inc., the InPath Members, and Mr. Milley, Mr.
Shaw, Cadmus, and MMI (collectively, the "Claimants"). (Incorporated
herein by reference to Exhibit 2 to the Schedule 13D filed jointly by the
InPath Members on December 14, 1998.)
4.3 Form of Common Stock Purchase Warrant issued to Holleb & Coff
on July 4, 1999 representing the right to purchase 250,000 shares of Common
Stock of the Company in connection with legal services rendered.
4.4 Form of Common Stock Purchase Warrant issued to The Research
Works on October 11, 1999 representing the right to purchase 70,000 shares
of Common Stock of the Company in connection with the preparation of an
investment research report.
4.5 Form of Common Stock Purchase Warrant issued to Azimuth
Corporation on December 10, 1999 representing the right to purchase 50,000
shares of Common Stock of the Company as additional consideration for a 12%
Convertible Promissory Note issued on the same date.
10.1 Stock Appreciation Rights Agreement dated as of November 20,
1989 between the Company and Raymond O'S. Kelly. (Incorporated herein by
reference to Exhibit 10.5 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1989.)
10.2 Stock Appreciation Rights Agreement dated as of November 20,
1989 between the Company and Nicholas E. Toussaint. (Incorporated herein
by reference to Exhibit 10.7 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1989.)
<PAGE>
Exhibit
Number Description
- ------- -----------
10.3 Stock Appreciation Rights Agreement dated as of June 14, 1990
between the Company and Roy D. Rafalco. (Incorporated herein by reference
to Exhibit 4 of the Company's Form 8-K filed June 15, 1990.)
10.4 SAR Agreement Extension dated November 15, 1995 between the
Company and Raymond O'S. Kelly. (Incorporated herein by reference to
Exhibit 10.20 of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995.)
10.5 SAR Agreement Extension dated November 15, 1995 between the
Company and Nicholas E. Toussaint. (Incorporated herein by reference to
Exhibit 10.21 of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995.)
10.6 Employment Agreement dated May 1, 1998 between Mr. Gombrich and
InPath, LLC, as amended on December 4, 1998. (Incorporated herein by
reference to Exhibit 10.6 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998).
10.8 Claims Agreement dated December 4, 1998 among the Company, the
Claimants, and Liberty Associates Limited Partnership. (Incorporated
herein by reference to Exhibit 4 to the Schedule 13D filed jointly by the
InPath Members on December 14, 1998.)
10.9 Ampersand Medical Corporation Equity Incentive Plan established
as of June 1, 1999. (Incorporated herein by reference to Appendix F to the
Bell National Corporation Definitive Proxy Statement on Schedule 14A, as
filed on April 30, 1999.)
10.10 Ampersand Medical Corporation Employee Stock Purchase Plan.
(Incorporated herein by reference to Appendix G to the Bell National
Corporation Definitive Proxy statement on Schedule 14A, as filed on April
30, 1999.)
10.11 Employment Agreement dated June 1, 1999 between Mr. Prange and
the Company.
10.12 Lease Agreement between the Company and O.P., L.L.C. dated
September 1, 1999 pertaining to the premises located at suite 305, 414 N.
Orleans, Chicago, IL 60610.
10.13 Amendment to Lease Agreement between the Company and O.P.,
L.L.C. dated November 1, 199 pertaining to the premises at suite 300, 414
N. Orleans, Chicago, IL 60610.
10.14 Form of Note purchase Agreements dated between March 1, 1999
and June 29, 1999 between the Company and several purchasers.
10.15 Form of 6% Convertible Subordinated Note Due 2000, dated
between March 1, 1999 and June 29, 1999 issued by the Company to several
purchasers.
10.16 Schedule of purchasers of 6% Convertible Notes Due 2000,
including dates and amount purchased.
10.17 Form of Senior Convertible Promissory Note issued to Azimuth
Corporation on December 10, 1999.
10.18 Form of Restricted Stock Award of 50,000 shares of Common Stock
issued to David A. Fishman, M.D., on August 10, 1999 as additional
compensation under a 36 month Consulting Agreement dated June 1, 1999.
<PAGE>
Exhibit
Number Description
- ------- -----------
10.19 Form of Restricted Stock award of 50,000 shares of Common Stock
issued to Arthur L. Herbst, M.D., on August 10, 1999 as additional
compensation under a 36 month Consulting Agreement dated July 1, 1999.
21.1 Subsidiaries of the Company.
27.1 Financial data schedule.
EXHIBIT 4.3
- -----------
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT
TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE
WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
AMPERSAND MEDICAL CORPORATION
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
No. W - 1999-1
250,000 Shares
FOR VALUE RECEIVED, AMPERSAND MEDICAL CORPORATION, a corporation duly
organized and existing under the laws of the State of Delaware (the
"Company," which term includes any successor), with its principal office at
900 North Franklin Street, Suite 210, Chicago, Illinois 60610, hereby
certifies that Holleb & Coff, an Illinois general partnership (the
"Holder"), is entitled, subject to the provisions of this Warrant, to
purchase from the Company, at any time before 5:00 p.m. (Eastern Standard
Time) on July 14, 2009 (the "Expiration Date"), the number of fully paid
and nonassessable shares of Common Stock of the Company set forth above,
subject to adjustment as hereinafter provided.
The Holder may purchase such number of shares of Common Stock at a
purchase price per share (as appropriately adjusted pursuant to Section 6
hereof) of $.33 (the "Exercise Price"). The term "Common Stock" shall mean
the aforementioned Common Stock of the Company, together with any other
equity securities that may be issued by the Company in addition thereto or
in substitution therefor as provided herein.
The number of shares of Common Stock to be received upon the exercise
or exchange of this Warrant and the price to be paid for a share of Common
Stock are subject to adjustment from time to time as hereinafter set forth.
The shares of Common Stock deliverable upon such exercise or exchange, as
adjusted from time to time, are hereinafter sometimes referred to as
"Warrant Shares."
Section 1. Exercise of and Payment for Warrant.
(a) Cash Exercise. The purchase rights represented by this Warrant
may be exercised by the Holder, in whole or in part, by the surrender of
this Warrant at the principal office of the Company, located at the address
set forth herein, accompanied by the form of Notice of Cash Exercise
attached hereto as Exhibit A-1, and by the payment to the Company, by cash
or by certified, cashier's or other check acceptable to the Company, of an
amount equal to the aggregate Exercise Price of the shares being purchased.
If this Warrant should be exercised in part only, the Company shall, upon
surrender of the Warrant, execute and deliver a new Warrant evidencing the
rights of the Holder thereof to purchase the balance of the Warrant Shares
purchasable hereunder.
<PAGE>
(b) Net Issue Exercise. In lieu of exercising this Warrant pursuant
to Section 1(a), the Holder may elect to receive shares equal to the value
of this Warrant (or of any portion thereof remaining unexercised)
determined in the manner described below, by surrender of this Warrant at
the principal office of the Company together with the form of Notice of
Cashless Exercise attached hereto as Exhibit A-2, in which event the
Company shall issue to the Holder a number of shares of the Company's
Common Stock computed using the following formula:
X = Y (A-B)
A
Where:
X = the number of shares of Common Stock to be issued to the
Holder.
Y = the number of shares of Common Stock purchasable under this
Warrant (at the date of such calculation) elected to be purchased.
A = the Fair Market Value (as hereinafter defined) of one share of
the Company's Common Stock (at the date of such calculation).
B = Exercise Price (as adjusted to the date of such calculation).
(c) Fair Market Value. "Fair Market Value" of one share of the
Company's Common Stock shall mean: (i) if the Common Stock is traded in the
Over The Counter Market, on the NASDAQ National Market, on the NASDAQ
SmallCap Market, or on an exchange, the average of the Quoted Prices (as
hereinafter defined) of the Common Stock for the thirty (30) consecutive
trading days prior to the date in question, or (ii) if the Common Stock is
not traded in the Over The Counter Market, on the NASDAQ National Market,
on the NASDAQ SmallCap Market, or on an exchange, the fair value per share
as determined by mutual agreement of the Company and the Holder; provided,
however, that if such agreement cannot be reached within thirty (30)
calendar days, such value shall be determined by an independent appraiser
appointed in good faith by the Company's Board of Directors, the cost of
which appraisal shall be borne by the Company. The "Quoted Price" of the
Common Stock is the last reported sales price, or the average of the bid
and asked price, as the case may be, of the Common Stock as reported by
NASDAQ or the primary national securities exchange on which the Common
Stock is then quoted; provided, however, that if quotes for the Common
Stock are not reported by NASDAQ or such primary national securities
exchange, the "Quoted Price" of the Common Stock shall be the last reported
sales price, or the average of the bid and asked price, as the case may be,
of the Common Stock as reported by the National Quotation Bureau, Inc. or
any organization performing a similar function.
(d) Miscellaneous. Upon receipt by the Company of this Warrant and
the applicable exercise form, together with proper payment of the Exercise
Price, if appropriate, at such office, the Holder shall be deemed to be the
holder of record of the Warrant Shares, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such Warrant Shares shall not then be actually delivered to
the Holder. The Company shall pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of the
Warrant Shares.
<PAGE>
Section 2. Reservation of Shares. The Company hereby agrees that at
all times there shall be reserved for issuance and delivery upon exercise
or exchange of this Warrant all shares of its Common Stock or other shares
of capital stock of the Company from time to time issuable upon exercise or
exchange of this Warrant. All such shares shall be duly authorized and,
when issued upon the exercise or exchange of the Warrant in accordance with
the terms hereof, shall be validly issued, fully paid and nonassessable,
free and clear of all liens, security interests, charges and other
encumbrances or restrictions on sale (other than as provided in the
Company's certificate of incorporation and any restrictions on sale set
forth herein or pursuant to applicable federal and state securities laws)
and free and clear of all preemptive rights.
Section 3. Fractional Interest. The Company will not issue a
fractional share of Common Stock upon exercise or exchange of this Warrant.
Instead, the Company will deliver its check for the current market value of
the fractional share. The current market value of a fraction of a share
shall be determined by multiplying the Fair Market Value (as hereinbefore
defined) of a full share by the fraction of a share and rounding the result
to the nearest cent.
Section 4. Assignment or Loss of Warrant.
(a) Except as provided in Section 9, the Holder of this Warrant
shall be entitled, without obtaining the consent of the Company, to assign
its interest in this Warrant, or any of the Warrant Shares, in whole or in
part to any bona fide officer, director or partner of Holder, provided,
however, that the transferee, prior to any such transfer, agrees in
writing, in form and substance satisfactory to the Company, to be bound by
the terms of this Agreement and provides the Company with an opinion of
counsel in such form reasonably acceptable to the Company, that such
transfer would not be in violation of the Act or any applicable state
securities or blue sky laws. Subject to the provisions hereof and of
Section 9, upon surrender of this Warrant to the Company or at the office
of its stock transfer agent or warrant agent, with the Assignment Form
annexed hereto duly executed and funds sufficient to pay any transfer tax,
the Company shall, without charge, execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees named in such instrument
of assignment and, if the Holder's entire interest is not being assigned,
in the name of the Holder, and this Warrant shall promptly be canceled.
(b) Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of indemnification satisfactory to the Company,
and upon surrender and cancellation of this Warrant, if mutilated, the
Company shall execute and deliver a new Warrant of like tenor and date.
Section 5. Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either
at law or equity, and the rights of the Holder are limited to those set
forth in this Warrant. Nothing contained in this Warrant shall be construed
as conferring upon the Holder hereof the right to vote or to consent or to
receive notice as a stockholder of the Company on any matters or with
respect to any rights whatsoever as a stockholder of the Company. No
dividends or interest shall be payable or accrued in respect of this
Warrant or the interest represented hereby or the Warrant Shares
purchasable hereunder until, and only to the extent that, this Warrant
shall have been exercised or exchanged in accordance with its terms.
Section 6. Adjustment of Exercise Price and Number of Shares. The
number and kind of securities purchasable upon the exercise or exchange of
this Warrant and the Exercise Price shall be subject to adjustment from
time to time upon the occurrence of certain events, as follows:
(a) Adjustment for Change in Capital Stock. If at any time after
the date hereof, the Company:
<PAGE>
(A) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock;
(B) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(C) combines its outstanding shares of Common Stock into a smaller
number of shares;
(D) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or
(E) issues by reclassification of its Common Stock any shares of
its capital stock;
then the Exercise Price in effect immediately prior to such action shall be
adjusted so that the Holder may receive, upon exercise or exchange of this
Warrant and payment of the same aggregate consideration, the number of
shares of capital stock of the Company which the Holder would have owned
immediately following such action if the Holder had exercised or exchanged
the Warrant immediately prior to such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or
reclassification.
(b) Adjustment for Lower-Priced Stock Issuances. If at any time
after the date hereof the Company issues Common Stock or securities
convertible into Common Stock at a price less than $.33 per share, the
Exercise Price shall simultaneously therewith be deemed adjusted to equal
such lower price, which adjustment shall be permanent, except that whenever
the Company thereafter issues Common Stock or securities convertible into
Common Stock at a price lower than the current Exercise Price as
established by this Section 6(b), the Exercise Price shall simultaneously
therewith be deemed further adjusted to equal such price lower than such
current Exercise Price.
(c) Deferral of Issuance or Payment. In any case in which an event
covered by this Section 6 shall require that an adjustment in the Exercise
Price be made effective as of a record date, the Company may elect to defer
until the occurrence of such event: (i) issuing to the Holder, if this
Warrant is exercised after such record date, the shares of Common Stock and
other capital stock of the Company, if any, issuable upon such exercise
over and above the shares of Common Stock or other capital stock of the
Company, if any, issuable upon such exercise on the basis of the Exercise
Price in effect prior to such adjustment; and (ii) paying to the Holder by
check any amount in lieu of the issuance of fractional shares pursuant to
Section 3.
(d) When No Adjustment Required. No adjustment need be made for a
change in the par value or no par value of the Common Stock.
(e) No Adjustment Upon Exercise of Warrants. No adjustments shall
be made under any Section herein in connection with the issuance of Warrant
Shares upon exercise or exchange of the Warrants.
(f) Common Stock Defined. Whenever reference is made in Section
6(a) to the issue of shares of Common Stock, the term "Common Stock" shall
include any equity securities of any class of the Company hereinafter
authorized which shall not be limited to a fixed sum or percentage in
respect of the right of the holders thereof to participate in dividends or
distributions of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Company. Subject to the provisions of
Section 8 hereof, however, shares issuable upon exercise or exchange hereof
shall include only shares of the class designated as Common Stock of the
Company as of the date hereof or shares of any class or classes resulting
from any reclassification or reclassifications thereof or as a result of
any corporate reorganization as provided for in Section 8 hereof.
<PAGE>
Section 7. Officers' Certificate. Whenever the Exercise Price shall
be adjusted as required by the provisions of Section 6, the Company shall
forthwith file in the custody of its secretary or an assistant secretary at
its principal office an officers' certificate showing the adjusted Exercise
Price determined as herein provided, setting forth in reasonable detail the
facts requiring such adjustment and the manner of computing such
adjustment. Each such officers' certificate shall be signed by the
chairman, president or chief financial officer of the Company and by the
secretary or any assistant secretary of the Company. Each such officers'
certificate shall be made available at all reasonable times for inspection
by the Holder or any holder of a Warrant executed and delivered pursuant to
Section 4 hereof.
Section 8. Reclassification, Reorganization, Consolidation or Merger.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock of the Company (other than a
subdivision or combination of the outstanding Common Stock and other than a
change in the par value of the Common Stock) or in the event of any
consolidation or merger of the Company with or into another corporation
(other than a merger in which merger the Company is the continuing
corporation and that does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon exercise or exchange of this Warrant) or in the event
of any sale, lease, transfer or conveyance to another corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, the Company shall cause effective provisions to be made so that
the Holder shall have the right thereafter, by exercising this Warrant, to
purchase the kind and amount of shares of stock and other securities and
property (including cash) receivable upon such reclassification, capital
reorganization and other change, consolidation, merger, sale or conveyance
by a holder of the number of shares of Common Stock that might have been
received upon exercise or exchange of this Warrant immediately prior to
such reclassification, capital reorganization, change, consolidation,
merger, sale or conveyance. Any such provision shall include provisions for
adjustments in respect of such shares of stock and other securities and
property that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Warrant. The foregoing provisions of this
Section 8 shall similarly apply to successive reclassifications, capital
reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
Section 9. Transfer to Comply with the Securities Act of 1933;
Registration Rights.
(a) No sale, transfer, assignment, hypothecation or other
disposition of this Warrant or of the Warrant Shares shall be made unless
any such transfer, assignment or other disposition will comply with the
rules and statutes administered by the Securities and Exchange Commission
and: (i) a Registration Statement under the Act including such shares is
currently in effect; or (ii) in the opinion of counsel, which counsel and
which opinion shall be reasonably satisfactory to the Company, a current
Registration Statement is not required for such disposition of the shares.
Each stock certificate representing Warrant Shares issued upon exercise or
exchange of this Warrant shall bear the following legend (unless, in the
opinion of counsel, which counsel and which opinion shall be reasonably
satisfactory to the Company, such legend is not required):
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS
ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
(b) The Holder of this Warrant is entitled to the benefits of the
Registration Rights Agreement, of even date herewith, a copy of which is on
file at the offices of the Company.
<PAGE>
EXHIBIT A-1
NOTICE OF CASH EXERCISE
To be executed by the Holder if the Holder desires to exercise warrants
evidenced by the foregoing Warrant.
To: Ampersand Medical Corporation
The undersigned hereby irrevocably elects to exercise _______________
warrants evidenced by the foregoing Warrant, purchasing thereunder the same
number of shares of Common Stock, and delivers $______________ in cash for
the aggregate Exercise Price of such warrants plus any applicable taxes
payable by the undersigned pursuant to such Warrant.
The undersigned requests that certificates for such shares be issued
in the name of:
_________________________________
_________________________________
_________________________________
(Please print name and address)
SSN:_____________________________
If said number of warrants shall not be all the warrants evidenced by
the foregoing Warrant certificate, the undersigned requests that a new
Warrant certificate evidencing the warrants not so exercised be issued in
the name of and delivered to:
_________________________________
_________________________________
_________________________________
(Please print name and address)
Dated: ________________,________
Name of Holder:
(Print)
By: __________________________________
Name:
Title:
<PAGE>
EXHIBIT A-2
NOTICE OF CASHLESS EXERCISE
To be executed by the Holder if the Holder desires to exercise warrants
evidenced by the foregoing Warrant.
To: Ampersand Medical Corporation
The undersigned hereby irrevocably elects to effect a net issue exercise of
______________ warrants evidenced by the foregoing Warrant, purchasing
thereunder ______________ shares of Common Stock calculated according to
the formula contained in Section 1(b) of the foregoing Warrant, and
delivers herewith in cash any amount necessary to pay any applicable taxes
payable by the undersigned pursuant to such Warrant.
The undersigned requests that certificates for such shares be issued in the
name of:
_________________________________
_________________________________
_________________________________
(Please print name and address)
SSN:_____________________________
If said number of warrants shall not be all the warrants evidenced by the
foregoing Warrant certificate, the undersigned requests that a new Warrant
certificate evidencing the warrants not so exercised be issued in the name
of and delivered to:
_________________________________
_________________________________
_________________________________
(Please print name and address)
Dated: ________________,________
Name of Holder:
(Print)
By: __________________________________
Name:
Title:
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
Dated: _____________, _____
FOR VALUE RECEIVED, ______________________hereby sells assigns and
transfers unto ______________________________ (the "Assignee"),
(please type or print in block letters)
its right to purchase up to _____ shares of Common Stock represented by
this Warrant and does hereby irrevocably constitute and appoint
_____________________ Attorney, to transfer the same on the books of the
Company. with full power of substitution in the premises.
Signature _________________________________
EXHIBIT 4.4
- -----------
AMPERSAND MEDICAL CORPORATION
STOCK PURCHASE WARRANT
THE WARRANT EVIDENCED HEREBY AND THE SHARES OF STOCK ISSUABLE UPON EXERCISE
THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD WITHOUT REGISTRATION
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE UNDER SUCH ACT OR THE
RULES OR REGULATIONS PROMULGATED THEREUNDER.
WARRANT TO PURCHASE SHARES OF COMMON STOCK AS DESCRIBED HEREIN
Date: October 11, 1999 Warrant Number RW-1
This certifies that, for value received, The Research Works, Inc. ("RW"), a
New Jersey corporation having its principal office at 623 Ocean Avenue, Sea
Girt, New Jersey 08750, or its registered assigns are entitled to purchase
during the period described in Section 4 below, expiring at the date and
time described in Section 3, from Ampersand Medical Corporation (the
"Company"), a Delaware corporation, having its principal office at 414
North Orleans, #305, Chicago, Illinois 60610, that number of shares of
fully paid and nonassessable common stock of the Company (the "Stock") as
are described in Section 1, at the exercise price described in Sections 2
and 8 (the "Exercise Price"), subject to the terms set forth herein. The
holder(s) of this Warrant and/or a registered assign or assigns, shall be
referred to herein as the "Warrantholder." This Warrant is being issued in
consideration of services to be performed by "RW", as set forth in that
certain agreement between the Company and "RW" executed effective
October 11, 1999 (the "Agreement"), a copy of which is attached hereto.
1. Stock Purchasable. The number of shares of Stock purchasable upon the
exercise of this Warrant is seventy thousand (70,000).
2. Exercise Price. The price at which this Warrant is exercisable,
unless such price is adjusted as described in Section 7, is thirty-three
cents ($0.33) per share, in lawful funds of the United States of America.
3. Expiration of Warrant. This Warrant shall expire and be no longer
exercisable after 5:00 p.m. Eastern Time on October 11, 2004 (the
"Expiration Date").
4. Exercise of Warrants. This Warrant shall vest immediately and may be
exercised as to one hundred percent (100%) of the total number of shares
covered by this Warrant at anytime after the issuance date of this Warrant.
The purchase rights represented by this Warrant may be exercised in
whole or in part (but not as to a fractional share of Stock), by the
Warrantholder or its duly authorized attorney or representative at any time
and from time to time while this Warrant is exercisable, upon presentation
of this Warrant at the principal office of the Company, with the purchase
form attached hereto duly completed and signed, and upon payment to the
Company in cash or by certified check or bank draft of an amount equal to
the number of shares being so purchased multiplied by the Exercise Price;
or, at the option of the Warrantholder, this Warrant may be surrendered to
the Company and the Company shall issue to the Warrantholder for no
additional cash consideration a number of shares of common stock determined
by dividing the product of the maximum number of shares of common stock the
Warrantholder is entitled to purchase hereunder times the difference
between the closing price per share on the date of surrender for exercise
and the Exercise Price, by the closing price per share on the date of
surrender for exercise date of surrender for exercise, as follows:
<PAGE>
Number of shares to be issued = ((maximum # of shares
purchasable under terms of the Warrants) X ((closing price per share on the
date of surrender for exercise) - (Exercise Price))) / (closing price per
share on the date of surrender for exercise)
Should Warrantholder elect to so surrender this Warrant, this Warrant
shall be terminated thereafter, and the Warrantholder shall have no other
rights hereunder.
5. Registration Rights. Should a Warrantholder exercise his rights, in
whole or in part, to purchase common shares (the "Warrant Shares"), and
provided that more than three years have elapsed from the date of issuance
of this Warrant, then the Company shall honor a request to register such
Warrant Shares pursuant to an S-3 filing under the Act, to the extent
requisite to permit the sale by such holder of such Warrant Shares. The
Company shall make such filing in timely fashion, but in no case more than
30 days from the time of such request. Any expenses relating to such filing
shall be paid by the Company. Should the Company fail to make such filing
within a 30 day period from the time of such request, the Company shall be
obligated to purchase such Warrant Shares for a cash payment per Warrant
Share equal to the difference between the Exercise Price and average
closing price of the Company's common stock during the 30 calendar days
immediately following Warrantholder's request to register the Warrant
Shares.
6. Procedures. The Company agrees that the Warrantholder shall be deemed
the record owner of the Stock as of the close of business on the date on
which the Warrant shall have been presented and payment shall have been
made for the Stock as aforesaid. Certificates for the shares of Stock so
purchased shall be delivered to the Warrantholder within a reasonable time,
not exceeding 15 days, after the exercise in full of the rights represented
by this Warrant.
If the Warrant is exercised in part only, the Company, upon surrender
of this Warrant for cancellation, shall deliver a new Warrant evidencing
the rights of the Warrantholder to purchase the balance of the shares of
Stock which the Warrantholder is entitled to purchase hereunder.
7. Exchange of Warrants. Subject to the provisions of Section 11, (i)
this Warrant is exchangeable at the option of the Warrantholder at the
principal office of the Company for other Warrants of different
denominations entitling the Warrantholder to purchase the same aggregate
number of shares of Stock as are purchasable hereunder; and (ii) this
Warrant may be divided or combined with other warrants that carry the same
rights. In either case, any alterations shall be made upon presentation, at
the principal office of the Company, of the Warrant(s), together with a
written notice signed by the Warrantholder specifying the names and
denominations in which any new Warrants are to be issued and the payment of
any transfer tax due in connection therewith.
8. Anti-Dilution Provisions. The Exercise Price in effect at any time
and the number and kind of securities purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the happening
of certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Stock in shares of Stock, (ii)
subdivide or reclassify its outstanding shares of Stock into a greater
number of shares, or (iii) combine or reclassify its outstanding shares of
Stock into a smaller number of shares, the Exercise Price in effect at the
time of the record date for such dividend or distribution or of the
effective date of such subdivision, combination or reclassification shall
be proportionately
<PAGE>
adjusted so that the holder of this Warrant, exercised after such
date, shall be entitled to receive the aggregate number and kind of shares
which, if this Warrant had been exercised by such holder immediately prior
to such date, he would have owned upon such exercise and been entitled to
receive upon such dividend, subdivision, combination or reclassification.
For example, if the Company declares a 2-for-i stock distribution in which
one share of Stock is distributed for each share outstanding and the
Exercise Price immediately prior to such event was $2.00 per share, the
adjusted Exercise Price immediately after such event would be $1.00 per
share. Such adjustment shall be made successively whenever any event listed
above shall occur.
(b) If any consolidation or merger of the Company with or into
another entity, or the sale of all or substantially all of its assets to
another entity shall be effected, or in case of any capital reorganization
or reclassification of the capital stock of the Company, then lawful and
adequate provision shall be made whereby each holder of Warrants shall
thereafter have the right to receive upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Stock of the
Company immediately theretofore receivable upon the conversion of such
Warrants, such shares of Stock, securities, interests or assets as may be
issued or payable with respect to or in exchange for a number of
outstanding shares of Stock equal to the number of shares of Stock
immediately theretofore so receivable by such holder had such
consolidation, merger, sale, reorganization or reclassification not taken
place, and, in any such case, appropriate provision shall be made with
respect to the rights and interests of the holder to the end that the
provisions hereof (including without limitation provisions for adjustment
of the applicable Exercise Price) shall thereafter be applicable, as nearly
as may be in relation to any shares of Stock, securities or assets
thereafter deliverable upon the exercise of such conversion rights.
(c) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsections (a) or (b) above, the number of
shares of Stock purchasable upon exercise of this Warrant shall
simultaneously be adjusted by multiplying the number of shares initially
issuable upon exercise of this Warrant by the Exercise Price in effect on
the date hereof and dividing the product so obtained by the Exercise Price,
as adjusted.
(d) Whenever the Exercise Price is adjusted, as herein provided,
the Company shall promptly cause a notice setting forth the adjusted
Exercise Price and adjusted number of shares of Stock issuable upon
exercise of each Warrant to be mailed to the holders, at their last
addresses appearing in the warrant register, and shall cause a certified
copy thereof to be mailed to its transfer agent. The Company may retain a
firm of independent certified public accountants selected by the Board of
Directors (who may be the regular accountants employed by the Company) to
make any computation required by this Section 8, and a certificate signed
by such firm shall be conclusive evidence of the correctness of such
adjustment.
9. Covenants. The Company covenants and agrees as follows:
(a) Reservation of Stock. During the period within which the
rights represented by the Warrant may be exercised, the Company shall, at
all times, reserve and keep available, free from preemptive rights out of
the aggregate of its authorized but unissued Stock, for the purpose of
enabling it to satisfy any obligation to issue shares of Stock upon the
exercise of this Warrant, the number of shares of Stock deliverable upon
the exercise of this Warrant. If at any time the number of shares of
authorized Stock shall not be sufficient to
<PAGE>
effect the exercise of this Warrant, the Company shall take such
corporate action as may be necessary to increase its authorized but
unissued Stock to such number of shares as shall be sufficient for such
purpose. The Company shall have analogous obligations with respect to any
other securities or properties issuable upon exercise of this Warrant.
(b) No Liens, etc. All Stock that may be issued upon exercise of
the rights represented by this Warrant shall, upon issuance, be validly
issued, fully paid, nonassessable and free from all taxes, liens and
charges with respect to the issue thereof.
(c) Taxes. All original issue taxes payable with respect to the
issuance of shares upon the exercise of the rights represented by this
Warrant shall be borne by the Company, but in no event shall the Company be
responsible or liable for income taxes or transfer taxes upon the transfer
of any Warrant.
(d) Notice of Events. The Company shall give prior written
notice to the Warrantholder of (i) any tender offer that is being made for
any of the Company's Stock; (ii) any offers to holders of Stock for
subscription or purchase by them of any shares of stock of any class; (iii)
any capital reorganization of the Company, reclassification of the capital
stock of the Company, consolidation or merger of the Company with or into
another corporation, the sale, lease or transfer of all or substantially
all of the property or assets of the Company to another corporation or the
voluntary or involuntary dissolution, liquidation or winding up of the
Company and (iv) any event of the type described in Section 8 hereof (any
such event in clauses (i)-(iv) above is referred to as an "Event"). Upon
becoming aware of any pending or proposed Event, the Company shall deliver
notice at least five business days before the day of the occurrence of any
Event and shall describe the Event, the date it is to take place and when
the holders of the Company's Stock will be entitled to exchange their
shares for securities or other properties deliverable upon such Event.
10. Voting Rights. Until exercised, this Warrant shall not entitle the
Warrantholder to any voting rights or other rights as a Stockholder of the
Company.
11. Transfer Restrictions. A Warrantholder may transfer its beneficial
interest or any portion thereof in the Warrant only to the Warrantholder's
spouse, lineal descendants or ancestors (and their spouses) or the trustee
of a trust for the principal benefit of such persons. Any transfer of
ownership or control of a corporation or other entity which is a
Warrantholder shall be deemed a transfer of this Warrant which must comply
with the terms of this Section 11. In addition, neither this Warrant nor
the Stock issuable upon the exercise hereof may be sold, transferred,
pledged or hypothecated unless the Company shall have been supplied with
evidence reasonably satisfactory to it that such transfer is not in
violation of the Act, and any applicable state laws. The Company may place
a legend to that effect on this Warrant or any replacement Warrant and on
each certificate representing shares issuable upon exercise of this
Warrant. Subject to the satisfaction of the aforesaid conditions, this
Warrant shall be transferable by the Warrantholder.
If this Warrant is transferred, in whole or in part, upon surrender
of this Warrant to the Company, the Company shall deliver to each
transferee a Warrant evidencing the rights of such transferee to purchase
the number of shares of Stock that such transferee is entitled to purchase
pursuant to such transfer.
<PAGE>
12. Lost, Stolen Warrants. If this Warrant is lost, stolen, mutilated or
destroyed, the Company shall, on such terms as the Company may reasonably
impose, including a requirement that the Warrantholder obtain a bond, issue
a new Warrant of like denomination, tenor and date. Any such new Warrant
shall constitute an original contractual obligation of the Company, whether
or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be
at any time enforceable by anyone.
13. Provisions of New Warrants. Any Warrant issued pursuant to the
provisions of Section 14, or upon transfer, exchange, division or partial
exercise of this Warrant or combination thereof with another Warrant or
Warrants, shall set forth each provision set forth in Sections 1 through
24, inclusive, of this Warrant as each such provision is set forth herein,
and shall be executed on behalf of the Company by a duly authorized
officer.
14. Cancellation of Warrant. Upon surrender of this Warrant for transfer
or exchange or upon the exercise hereof, this Warrant shall be canceled by
the Company, shall not be reissued by the Company, and, except as provided
in Section 11 in case of a transfer, no Warrant shall be issued in lieu
hereof. Any new Warrant certificate shall be issued promptly but no later
than seven days after receipt of the old Warrant certificate; provided,
however, that the obligation of the Company to transfer the Warrant or
issue the shares of Stock upon the exercise of this Warrant shall be
subject to compliance with Section 11.
15. Complete Agreement; Modifications. This Warrant and any documents
referred to herein or executed contemporaneously herewith constitute the
parties' entire agreement with respect to the subject matter hereof and
supersede all agreements, representations, warranties, statements, promises
and understandings, whether oral or written, with respect to the subject
matter hereof. This Warrant may not be amended, altered or modified except
by a writing signed by the parties.
16. Notices. All notices under this Warrant shall be in writing and shall
be delivered by certified mail, postage prepaid, to such address as may be
designated from time to time by the relevant party. Any notice sent by
certified mail will be deemed to have been given three (3) days after the
date on which it is mailed. Notices will be addressed as set forth on the
last page hereof or to such other addresses as the party to whom the same
is directed will have specified.
17. Successor and Assigns. Except as provided herein to the contrary,
this Warrant shall be binding upon and inure to the benefit of the parties,
their respective successors and permitted assigns.
18. Governing Law; Jurisdiction. This Warrant has been negotiated and
entered into in the State of New Jersey, and all questions with respect to
the Warrant and the rights and liabilities of the parties shall be governed
by the laws of that state, regardless of the choice of law provisions of
New Jersey or any other jurisdiction. Any and all disputes between the
parties which may arise pursuant to this Warrant shall be heard and
determined before the appropriate federal or state court located in New
Jersey. The parties hereto acknowledge that such court has jurisdiction to
interpret and enforce the provisions of this Warrant, and the parties waive
any and all objections that they may have as to venue in any of the above
courts.
<PAGE>
19. Construction. No term or provision of this Warrant shall be construed
so as to require the commission of any act contrary to law, and wherever
there is any conflict between any provision of this Warrant and any present
or future statute, law, ordinance, or regulation contrary to which the
parties have no legal right to contract, the latter shall prevail, but in
such event the provision of this Warrant so affected shall be curtailed and
limited only to the extent necessary to bring it within the requirements of
the law.
20. Waivers Strictly Construed. With regard to any power, remedy or right
provided herein or otherwise available to any party hereunder (i) no waiver
or extension of time shall be effective unless expressly contained in a
writing signed by the waiving party; and (ii) no alteration, modification
or impairment shall be implied by reason of any previous waiver, extension
of time, delay or omission in exercise, or other indulgence.
21. Severability. If one or more of the provisions of this Warrant shall
be held to be invalid, illegal or unenforceable in any respect, the
validity, legality or enforceability of the remainder of this Warrant shall
not be affected.
21. Headings. The headings in this Warrant are inserted only as a matter
of convenience, and in no way define, limit, or extend or interpret the
scope of this Warrant or of any particular provision.
23. Counterparts. This Warrant may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one or the same instrument.
WITNESS the signature of a duly authorized officer.
AMPERSAND MEDICAL CORPORATION
By: _______________________________
(name)
_______________________________
(title)
Date:_______________________________
<PAGE>
PURCHASE FORM
To Be Executed Upon Exercise of Warrant
The undersigned hereby exercises the right to purchase ____________________
shares of Stock, evidenced by the within Warrant, according to the terms
and conditions thereof, and herewith (makes payment of the purchase price
in full) (or requests that the Company exchange the Warrant as provided for
under terms of the Warrant). The undersigned requests that certificate(s)
for such shares shall be issued in the name set forth below:
Dated:__________________________ THE RESEARCH WORKS INC.
By: ______________________
(Signature)
Name:______________________
(Please print)
Address:____________________
_______________________
_______________________
Employer Identification Number, Social
Security Number or other identifying
number:
_______________________
If said number of shares shall not be all the shares purchasable under the
within Warrant, the Warrantholder hereby requests that a new Warrant for
the unexercised portion shall be registered in the name set forth below and
delivered to the address set forth below.
Name:______________________
(Please print)
Address:____________________
_______________________
_______________________
Employer Identification Number, Social
Security Number or other identifying
number:
_______________________
EXHIBIT 4.5
- -----------
AMPERSAND MEDICAL CORPORATION
STOCK PURCHASE WARRANT
THE WARRANT EVIDENCED HEREBY AND THE SHARES ISSUABLE UPON EXERCISE THEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE OFFERED OR SOLD WITHOUT REGISTRATION UNLESS AN
EXEMPTION FROM REGISTRATION IS AVAILABLE UNDER SUCH ACT OR THE RULES OR
REGULATIONS PROMULGATED THEREUNDER.
WARRANT TO PURCHASE SHARES OF COMMON STOCK AS DESCRIBED HEREIN
Date: December 10, 1999 Warrant Number AC-I
This certifies that, for value received, Azimuth Corporation, having its
principal office at 3600 Rio Vista Ave., Orlando, Florida 32805, or its
registered assigns are entitled to purchase during the period described in
Section 4 below, expiring at the date and time described in Section 3, from
Ampersand Medical Corporation (the "Company"), having its principal office
at 414 N. Orleans, Suite 305, Chicago, Illinois 60610, that number of fully
paid and nonassessable common stock of the Company (the "Stock") as are
described in Section 1, at the exercise price described in Section 2 and 8
(the "Exercise Price"), subject to the terms set forth herein. The
holder(s) of the Warrant and/or a registered assign or assigns, shall be
referred herein as the "Warrantholder." This warrant is issued as
additional consideration for a Senior Convertible Promissory Note dated
December 10, 1999 (the "Note"), a copy of which is attached hereto.
1. Stock Purchasable. The number of shares of Stock purchasable upon
exercise of this Warrant is fifty thousand (50,000).
2. Exercise Price. The price at which this warrant is exercisable,
unless such price is adjusted as described in Section 7, is the lesser of
thirty-three cents ($0.33) per share or 85% of the closing price of
Ampersand Medical Corporation common stock as quoted on the OTC Bulletin
Board on December 10, 1999.
3. Expiration of Warrant. This Warrant shall expire and be no longer
exercisable after 5:00 P.M. Central Standard Time on December 10, 2004 (the
"Expiration Date").
4. Exercise of Warrants. This Warrant shall vest immediately upon
receipt by Ampersand of funds under the Note and may be exercised as to one
hundred percent (100%) of the total number of shares covered by this
Warrant at anytime after the issuance date of this Warrant
The purchase rights represented by this Warrant may be exercised in
whole or in part (but not as to a fractional share of Stock), by the
Warrantholder or its duly authorized attorney or representative at any time
and from time to time while this Warrant is exercisable, upon presentation
of this Warrant at the principal office of the Company, with the purchase
form attached hereto duly completed and signed, and upon payment to the
Company in cash or by certified check or bank draft of an amount equal to
the number of shares being so purchased multiplied by the Exercise Price;
or, at the option of the Warrantholder, this Warrant may be surrendered to
the Company and the Company shall issue to the Warrantholder for no
additional cash consideration a number of shares of common stock determined
by dividing the product of the maximum number of shares of common stock the
Warrantholder is entitled to purchase hereunder times the difference
between the closing price per share on the date of surrender for exercise
and the Exercise Price, by the closing price per share on the date of
surrender for exercise date of surrender for exercise, as follows:
<PAGE>
Number of shares to be issued = ((maximum # of shares
purchasable under terms of the Warrants) X ((closing price per share on the
date of surrender for exercise) - (Exercise Price))) / (closing price per
share on the date of surrender for exercise)
Should Warrantholder elect to so surrender this Warrant, this Warrant
shall be terminated thereafter, and the Warrantholder shall have no other
rights hereunder.
5. Registration Rights. Should a Warrantholder exercise his rights, in
whole or in part, to purchase common shares (the "Warrant Shares"), and
provided that more than three years have elapsed from the date of issuance
of this Warrant, then the Company shall honor a request to register such
Warrant Shares pursuant to an S-3 filing under the Act, to the extent
requisite to permit the sale by such holder of such Warrant Shares. The
Company shall make such filing in timely fashion, but in no case more than
30 days from the time of such request. Any expenses relating to such filing
shall be paid by the Company. Should the Company fail to make such filing
within a 30 day period from the time of such request, the Company shall be
obligated to purchase such Warrant Shares for a cash payment per Warrant
Share equal to the difference between the Exercise Price and average
closing price of the Company's common stock during the 30 calendar days
immediately following Warrantholder's request to register the Warrant
Shares.
6. Procedures. The Company agrees that the Warrantholder shall be deemed
the record owner of the Stock as of the close of business on the date on
which the Warrant shall have been presented and payment shall have been
made for the Stock as aforesaid. Certificates for the shares of Stock so
purchased shall be delivered to the Warrantholder within a reasonable time,
not exceeding 15 days, after the exercise in full of the rights represented
by this Warrant.
If the Warrant is exercised in part only, the Company, upon surrender
of this Warrant for cancellation, shall deliver a new Warrant evidencing
the rights of the Warrantholder to purchase the balance of the shares of
Stock which the Warrantholder is entitled to purchase hereunder.
7. Exchange of Warrants. Subject to the provisions of Section 11, (i)
this Warrant is exchangeable at the option of the Warrantholder at the
principal office of the Company for other Warrants of different
denominations entitling the Warrantholder to purchase the same aggregate
number of shares of Stock as are purchasable hereunder; and (ii) this
Warrant may be divided or combined with other warrants that carry the same
rights. In either case, any alterations shall be made upon presentation, at
the principal office of the Company, of the Warrant(s), together with a
written notice signed by the Warrantholder specifying the names and
denominations in which any new Warrants are to be issued and the payment of
any transfer tax due in connection therewith.
8. Anti-Dilution Provisions. The Exercise Price in effect at any time
and the number and kind of securities purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the happening
of certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Stock in shares of Stock, (ii)
subdivide or reclassify its outstanding shares of Stock into a greater
number of shares, or (iii) combine or reclassify its outstanding shares of
Stock into a smaller number of shares, the Exercise Price in effect at the
time of the record date for such dividend or distribution or of the
effective date of such subdivision, combination or reclassification shall
be proportionately adjusted so that the holder of this Warrant, exercised
after such date, shall be entitled to receive the aggregate number and kind
of
<PAGE>
shares which, if this Warrant had been exercised by such holder
immediately prior to such date, he would have owned upon such exercise and
been entitled to receive upon such dividend, subdivision, combination or
reclassification. For example, if the Company declares a 2-for-i stock
distribution in which one share of Stock is distributed for each share
outstanding and the Exercise Price immediately prior to such event was
$2.00 per share, the adjusted Exercise Price immediately after such event
would be $1.00 per share. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) If any consolidation or merger of the Company with or into
another entity, or the sale of all or substantially all of its assets to
another entity shall be effected, or in case of any capital reorganization
or reclassification of the capital stock of the Company, then lawful and
adequate provision shall be made whereby each holder of Warrants shall
thereafter have the right to receive upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Stock of the
Company immediately theretofore receivable upon the conversion of such
Warrants, such shares of Stock, securities, interests or assets as may be
issued or payable with respect to or in exchange for a number of
outstanding shares of Stock equal to the number of shares of Stock
immediately theretofore so receivable by such holder had such
consolidation, merger, sale, reorganization or reclassification not taken
place, and, in any such case, appropriate provision shall be made with
respect to the rights and interests of the holder to the end that the
provisions hereof (including without limitation provisions for adjustment
of the applicable Exercise Price) shall thereafter be applicable, as nearly
as may be in relation to any shares of Stock, securities or assets
thereafter deliverable upon the exercise of such conversion rights.
(c) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsections (a) or (b) above, the number of
shares of Stock purchasable upon exercise of this Warrant shall
simultaneously be adjusted by multiplying the number of shares initially
issuable upon exercise of this Warrant by the Exercise Price in effect on
the date hereof and dividing the product so obtained by the Exercise Price,
as adjusted.
(d) Whenever the Exercise Price is adjusted, as herein provided,
the Company shall promptly cause a notice setting forth the adjusted
Exercise Price and adjusted number of shares of Stock issuable upon
exercise of each Warrant to be mailed to the holders, at their last
addresses appearing in the warrant register, and shall cause a certified
copy thereof to be mailed to its transfer agent. The Company may retain a
firm of independent certified public accountants selected by the Board of
Directors (who may be the regular accountants employed by the Company) to
make any computation required by this Section 8, and a certificate signed
by such firm shall be conclusive evidence of the correctness of such
adjustment.
9. Covenants. The Company covenants and agrees as follows:
(a) Reservation of Stock. During the period within which the
rights represented by the Warrant may be exercised, the Company shall, at
all times, reserve and keep available, free from preemptive rights out of
the aggregate of its authorized but unissued Stock, for the purpose of
enabling it to satisfy any obligation to issue shares of Stock upon the
exercise of this Warrant, the number of shares of Stock deliverable upon
the exercise of this Warrant. If at any time the number of shares of
authorized Stock shall not be sufficient to effect the exercise of this
Warrant, the Company shall take such corporate action as may be necessary
to increase its authorized but unissued Stock to such number of shares as
shall be sufficient for such purpose. The Company shall have analogous
obligations with respect to any other securities or properties issuable
upon exercise of this Warrant.
<PAGE>
(b) No Liens, etc. All Stock that may be issued upon exercise of
the rights represented by this Warrant shall, upon issuance, be validly
issued, fully paid, nonassessable and free from all taxes, liens and
charges with respect to the issue thereof.
(c) Taxes. All original issue taxes payable with respect to the
issuance of shares upon the exercise of the rights represented by this
Warrant shall be borne by the Company, but in no event shall the Company be
responsible or liable for income taxes or transfer taxes upon the transfer
of any Warrant.
(d) Notice of Events. The Company shall give prior written
notice to the Warrantholder of (i) any tender offer that is being made for
any of the Company's Stock; (ii) any offers to holders of Stock for
subscription or purchase by them of any shares of stock of any class; (iii)
any capital reorganization of the Company, reclassification of the capital
stock of the Company, consolidation or merger of the Company with or into
another corporation, the sale, lease or transfer of all or substantially
all of the property or assets of the Company to another corporation or the
voluntary or involuntary dissolution, liquidation or winding up of the
Company and (iv) any event of the type described in Section 8 hereof (any
such event in clauses (i)-(iv) above is referred to as an "Event"). Upon
becoming aware of any pending or proposed Event, the Company shall deliver
notice at least five business days before the day of the occurrence of any
Event and shall describe the Event, the date it is to take place and when
the holders of the Company's Stock will be entitled to exchange their
shares for securities or other properties deliverable upon such Event.
10. Voting Rights. Until exercised, this Warrant shall not entitle the
Warrantholder to any voting rights or other rights as a Stockholder of the
Company.
11. Transfer Restrictions. A Warrantholder may transfer its beneficial
interest or any portion thereof in the Warrant only to the Warrantholder's
spouse, lineal descendants or ancestors (and their spouses) or the trustee
of a trust for the principal benefit of such persons. Any transfer of
ownership or control of a corporation or other entity which is a
Warrantholder shall be deemed a transfer of this Warrant which must comply
with the terms of this Section 11. In addition, neither this Warrant nor
the Stock issuable upon the exercise hereof may be sold, transferred,
pledged or hypothecated unless the Company shall have been supplied with
evidence reasonably satisfactory to it that such transfer is not in
violation of the Act, and any applicable state laws. The Company may place
a legend to that effect on this Warrant or any replacement Warrant and on
each certificate representing shares issuable upon exercise of this
Warrant. Subject to the satisfaction of the aforesaid conditions, this
Warrant shall be transferable by the Warrantholder.
If this Warrant is transferred, in whole or in part, upon surrender
of this Warrant to the Company, the Company shall deliver to each
transferee a Warrant evidencing the rights of such transferee to purchase
the number of shares of Stock that such transferee is entitled to purchase
pursuant to such transfer.
12. Lost, Stolen Warrants. If this Warrant is lost, stolen, mutilated or
destroyed, the Company shall, on such terms as the Company may reasonably
impose, including a requirement that the Warrantholder obtain a bond, issue
a new Warrant of like denomination, tenor and date. Any such new Warrant
shall constitute an original contractual obligation of the Company, whether
or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be
at any time enforceable by anyone.
<PAGE>
13. Provisions of New Warrants. Any Warrant issued pursuant to the
provisions of Section 14, or upon transfer, exchange, division or partial
exercise of this Warrant or combination thereof with another Warrant or
Warrants, shall set forth each provision set forth in Sections 1 through
24, inclusive, of this Warrant as each such provision is set forth herein,
and shall be executed on behalf of the Company by a duly authorized
officer.
14. Cancellation of Warrant. Upon surrender of this Warrant for transfer
or exchange or upon the exercise hereof, this Warrant shall be canceled by
the Company, shall not be reissued by the Company, and, except as provided
in Section 11 in case of a transfer, no Warrant shall be issued in lieu
hereof. Any new Warrant certificate shall be issued promptly but no later
than seven days after receipt of the old Warrant certificate; provided,
however, that the obligation of the Company to transfer the Warrant or
issue the shares of Stock upon the exercise of this Warrant shall be
subject to compliance with Section 11.
15. Complete Agreement; Modifications. This Warrant and any documents
referred to herein or executed contemporaneously herewith constitute the
parties' entire agreement with respect to the subject matter hereof and
supersede all agreements, representations, warranties, statements, promises
and understandings, whether oral or written, with respect to the subject
matter hereof. This Warrant may not be amended, altered or modified except
by a writing signed by the parties.
16. Notices. All notices under this Warrant shall be in writing and shall
be delivered by certified mail, postage prepaid, to such address as may be
designated from time to time by the relevant party. Any notice sent by
certified mail will be deemed to have been given three (3) days after the
date on which it is mailed. Notices will be addressed as set forth on the
last page hereof or to such other addresses as the party to whom the same
is directed will have specified.
17. Successor and Assigns. Except as provided herein to the contrary,
this Warrant shall be binding upon and inure to the benefit of the parties,
their respective successors and permitted assigns.
18. Governing Law; Jurisdiction. This Warrant has been negotiated and
entered into in the State of Florida, and all questions with respect to the
Warrant and the rights and liabilities of the parties shall be governed by
the laws of that state, regardless of the choice of law provisions of
Florida or any other jurisdiction. Any and all disputes between the parties
which may arise pursuant to this Warrant shall be heard and determined
before the appropriate federal or state court located in Florida. The
parties hereto acknowledge that such court has jurisdiction to interpret
and enforce the provisions of this Warrant, and the parties waive any and
all objections that they may have as to venue in any of the above courts.
19. Construction. No term or provision of this Warrant shall be construed
so as to require the commission of any act contrary to law, and wherever
there is any conflict between any provision of this Warrant and any present
or future statute, law, ordinance, or regulation contrary to which the
parties have no legal right to contract, the latter shall prevail, but in
such event the provision of this Warrant so affected shall be curtailed and
limited only to the extent necessary to bring it within the requirements of
the law.
20. Waivers Strictly Construed. With regard to any power, remedy or right
provided herein or otherwise available to any party hereunder (i) no waiver
or extension of time shall be effective unless expressly contained in a
writing signed by the waiving party; and (ii) no alteration, modification
or impairment shall be implied by reason of any previous waiver, extension
of time, delay or omission in exercise, or other indulgence.
<PAGE>
21. Severability. If one or more of the provisions of this Warrant shall
be held to be invalid, illegal or unenforceable in any respect, the
validity, legality or enforceability of the remainder of this Warrant shall
not be affected.
21. Headings. The headings in this Warrant are inserted only as a matter
of convenience, and in no way define, limit, or extend or interpret the
scope of this Warrant or of any particular provision.
23. Counterparts. This Warrant may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one or the same instrument.
WITNESS the signature of a duly authorized officer.
AMPERSAND MEDICAL CORPORATION
By: _______________________________
(name)
_______________________________
(title)
Date:_______________________________
<PAGE>
PURCHASE FORM
To Be Executed Upon Exercise of Warrant
The undersigned hereby exercises the right to purchase __________________
shares of Stock, evidenced by the within Warrant, according to the terms
and conditions thereof, and herewith (makes payment of the purchase price
in full) (or requests that the Company exchange the Warrant as provided for
under terms of the Warrant). The undersigned requests that certificate(s)
for such shares shall be issued in the name set forth below:
Dated:___________________________ AZIMUTH CORPORATION
By: ______________________
(Signature)
Name:______________________
(Please print)
Address:
----------------------
----------------------
______________________
Employer Identification Number, Social
Security Number or other identifying
number:
_______________________
If said number of shares shall not be all the shares purchasable under the
within Warrant, the Warrantholder hereby requests that a new Warrant for
the unexercised portion shall be registered in the name set forth below and
delivered to the address set forth below.
Name:_______________________
(Please print)
Address:______________________
_______________________
_______________________
Employer Identification Number, Social
Security Number or other identifying
number:
_______________________
EXHIBIT 10.11
- -------------
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of the
first day of _____, 2000 by and between Ampersand Medical Corporation, a
Delaware corporation ("Ampersand"), and __________________________
("Employee").
RECITALS
Ampersand desires to have the benefits of Employee's knowledge and
experience as a full time senior executive without distraction by
employment-related uncertainties and considers such employment a vital
element of protecting and enhancing the best interests of Ampersand and its
shareholders.
Employee desires to be employed full time with Ampersand.
Ampersand desires to assure itself of the continued services of
Employee, and Employee desires to render services to Ampersand.
In consideration of the mutual covenants and other good and valuable
consideration, the parties agree as follows:
1. Term. Ampersand shall employ Employee for a ______ (__) year
period commencing __________________ (the "Effective Date") and ending
________________, unless terminated as provided in Sections 5 or 6. This
Agreement shall automatically renew for additional one (1) year terms
unless either party delivers to the other written notice of non-renewal at
least 60 days prior to the end of the term. In addition, if a Change of
Control as defined in section 7(d) occurs when less than one (1) year
remains prior to the expiration of this Agreement, this Agreement shall be
automatically extended until the first anniversary of the date on which the
Change of Control occurred. The period during which Employee is employed by
Ampersand is the "Employment Period."
2. Duties. Employee shall serve as the
___________________________________ and shall exercise the authority and
assume the responsibilities typically given to the
________________________________________ of a corporation similar in size
and nature to Ampersand, and shall assume any other duties and
responsibilities as the Board of Directors may prescribe that are
consistent with the duties of the president and chief financial officer of
a company similar in size and nature to Ampersand. Throughout the
Employment Period, Employee shall devote substantially all of his time,
attention and efforts during normal business hours to the performance of
his duties. Employee shall not render any services as a director, trustee,
officer, employee or consultant to any other organization without the prior
approval of the Board of Directors.
3. Compensation. During the Employment Period, Ampersand shall
compensate Employee as follows:
(a) A base annual salary determined by the Board of Directors
consistent with its practices for executive officers of Ampersand, but not
less than $_______________ per year, payable in accordance with Ampersand's
customary payroll practices;
(b) Bonuses as determined by the Board of Directors;
(c) If Employee's base annual salary is increased at any time, it
shall not thereafter be decreased;
(d) A monthly automobile allowance of $___________________.
<PAGE>
4. Employee Benefits-
(a) Employee shall be entitled, on a basis commensurate with
Employee's position with Ampersand, to full participation in, and service
credit for benefits as provided under, all life, accident, medical payment,
health and disability insurance, retirement pension, salary continuation,
expense reimbursement and other employee benefit and perquisite policies,
plans, programs and arrangements that generally are made available to
executive officers of Ampersand, except for such arrangements that the
Board of Directors, in its discretion, shall adopt for select employees to
compensate them for special or extenuating circumstances.
(b) Employee shall be entitled to _______ (__) weeks of
annual vacation leave at full pay.
(c) Employee shall be entitled to participate in all bonus,
incentive, profit-sharing, stock option, stock purchase, stock
appreciation, discretionary pay and similar policies, plans programs and
arrangements that generally are made available to executive officers of
Ampersand.
(d) Nothing in this Agreement shall limit in any way
Employee's participation in any other benefit plans or arrangements as are
from time to time approved by Ampersand.
5. Termination by Ampersand. Ampersand may terminate this
Agreement without entitling Employee to the severance benefits provided by
Sections 7 and 8 only under the following circumstances:
(a) Death, Total Disability or Retirement. This Agreement
shall be terminated upon Employee's death or retirement. This Agreement
shall be terminated if, as a result of Employee's incapacity resulting from
physical or mental illness or disease that is likely to be permanent,
Employee is unable to perform his duties for a period of more than 120
consecutive days during any twelve (12) month period and Employee is
qualified and eligible to receive disability benefits under the long-term
disability plan then in effect for executive officers of Ampersand; and
(b) Cause. Ampersand may terminate this Agreement for cause,
which means:
(i) the repeated, willful and continued failure by
Employee to follow the reasonable instructions of the Board of Directors of
Ampersand after Employee has been given written notice of the failure and a
period of at least thirty (30) days to cure the failure;
(ii) the willful commission by Employee of acts that are
dishonest and materially injurious to Ampersand;
(iii)the conviction of Employee of a felony; or
(iv) drug addiction.
Ampersand's termination of this Agreement for any reason other than those
specified in this Section 5 shall be a termination without cause. No breach
or default by Employee shall be deemed to have occurred unless written
notice is given to Employee within sixty (60) days after Ampersand first
learns of the breach or default and it is not cured within thirty (30) days
after notice is given to Employee.
<PAGE>
6. Termination by Employee. Employee may terminate this Agreement,
and shall be entitled to severance compensation and benefits as provided in
Sections 7 and 8 if:
(a) at any time more than 120 days after the occurrence of a Change
of Control, for any reason or no reason at all; or
(b) for Good Reason, provided that Employee terminates this
Agreement no later than ninety (90) days following the occurrence of an
event constituting Good Reason. "Good Reason" means the occurrence of any
of the following:
(i) The assignment of duties to Employee that are materially
inconsistent with Employee's position, duties and status as contemplated by
this Agreement (without the express written consent of Employee);
(ii) Any action by Ampersand that results in a material
adverse change in the nature or scope of the position, duties, authorities,
responsibilities or functions of Employee as contemplated by this
Agreement, except for strategic reallocations of the personnel reporting to
Employee;
(iii) Employee's base annual salary, as may be increased from
time to time, is reduced, Employee's right to participate in any policy,
plan, program or arrangement of the type referred to in Section 4(c) is
changed or terminated, or Employee's right to benefits of the type referred
to in Section 4(a) is changed, terminated or denied;
(iv) Ampersand relocates its principal executive offices, or
requires Employee to change his principal location of work to any location
that is more than fifty 50 miles from his principal location of work on the
Effective Date, or requires Employee to travel away from his office in the
course of discharging Employee's responsibilities or duties significantly
more (in terms of either consecutive days or aggregate days in any calendar
year) than was required of Employee prior to the Effective Date, in either
case without Employee's prior written consent; provided, however, that
Ampersand has the fight to make temporary assignments for a reasonable
period of time at other locations where Ampersand has a special need for
Employee's services; or
(v) Without limiting the generality or effect of the
foregoing, Ampersand fails to comply with any of its obligations in any
material respect.
7. Severance Payment After Change of Control.
(a) If, following the occurrence of a Change of Control, Ampersand
terminates this Agreement without cause or Employee resigns for Good
Reason, Employee shall receive a lump sum severance payment equal to
Employee's Base Amount, as defined in subsection (b) below.
(b) "Base Amount" means the sum of:
(i) Employee's annual base salary in effect immediately prior
to the termination of this Agreement; plus
(ii) the highest incentive compensation paid to Employee in
any of the two consecutive annual incentive compensation periods ending
immediately prior to the termination of this Agreement; plus
(iii) the monthly automobile allowance Employee is entitled to
receive pursuant to Section 3(d), multiplied by 12.
<PAGE>
(c) If a Change of Control occurs, despite the terms of any
applicable plan or arrangement to the contrary,
(i) Employee's stock options and stock appreciation rights
shall immediately vest and be immediately exercisable,
(ii) any risk of forfeiture included in restricted stock
grants made to Employee shall immediately lapse, and
(iii) Employee's rights in all other employee benefit and
compensation plans shall immediately vest, provided that Employee's rights
under any plan or arrangement of Ampersand described in Section 28OG(b)(6)
of the Internal Revenue Code of 1986, as amended, or any successor
provision thereto (the "Code"), shall not be altered as a result of this
subsection (c).
(d) A "Change of Control" shall be deemed to have taken place if:
(i) if Peter P. Gombrich shall cease to be the Chief
Executive Officer of the Company and the termination of his employment is a
direct result of any of the events set forth in paragraph (d)(ii) through
(d)(viii);
(ii) if any person, as that term is used in Section 13(d) and
Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), except the stockholders of record immediately prior to the
date hereof, becomes, is discovered to be, or files a report on Schedule
13D or 14D-1 disclosing that he is the beneficial owner, as defined in Rule
13d-3 under the Exchange Act, directly or indirectly, of securities
representing 20% or more of the combined voting power of Ampersand's then
outstanding securities entitled to vote generally in the election of
directors (unless such person is known by Employee to already be a
beneficial owner on the date of this Agreement);
(iii) Ampersand is merged, consolidated or reorganized into or
with another corporation or other legal person, or securities of Ampersand
are exchanged for securities of another corporation or other legal person,
and, immediately after such merger, consolidation, reorganization or
exchange, less than a majority of the combined voting power of the then
outstanding securities of the corporation or person immediately after the
transaction are held, directly or indirectly, in the aggregate by the
stockholders of Ampersand immediately prior to such transaction;
(iv) Ampersand, in any transaction or series of related
transactions, sells all or substantially all of its assets, and less than a
majority of the combined voting power of the then outstanding securities of
the purchaser immediately after the sale or sales are held, directly or
indirectly, in the aggregate by the stockholders of Ampersand immediately
prior to the sale;
(v) Ampersand sells or disposes of (in any transaction or
series of related transactions) business operations that generated two-
thirds of its consolidated revenues immediately prior thereto, determined
on the basis of Ampersand's four most recently completed fiscal quarters;
(vi) Ampersand files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act disclosing,
in response to Form 8-K or Schedule 14A, that a change in control of
Ampersand may have occurred or may occur pursuant to any then-existing
contract or transactions;
<PAGE>
(vii) any other transaction or series of related transactions
occurs that has substantially the effect of a transaction specified in any
of the preceding clauses in this subsection (d); or
(viii) Employee is terminated by Ampersand, or removed from
Employee's office or position without cause within ninety (90) days before
a Change of Control occurs.
(e) Notwithstanding any contrary provision in this Agreement, if
any amount or benefit to be paid or provided would be an "Excess Parachute
Payment", within the meaning of Section 280G of the Code but for the
application of this Subsection 7(e), then the payments and benefits shall
be reduced to the minimum extent necessary, but in no event to less than
zero, so that no portion of any payment or benefit, as reduced, constitutes
an Excess Parachute Payment. The determination of whether any reduction in
the payments or benefits is required pursuant to this Section 7(e) shall be
made at the expense of Ampersand. If any payments or benefits intended to
be provided must be reduced pursuant to this subsection (e), Employee may
designate the payments or benefits to be reduced. Ampersand shall provide
Employee with all reasonably requested information for Employee to make the
designation. If Employee fails to make such designation within ten (10)
business days of the termination of this Agreement, Ampersand may effect
reduction in any manner it deems appropriate.
(f) Notwithstanding the provisions of Section 7(d)(i), (ii) and
(v), unless otherwise determined in a specific case by majority vote of the
Board of Directors, a Change of Control shall not be deemed to have
occurred solely because an entity in which Ampersand directly or indirectly
beneficially owns 50% or more of the voting securities, or any Ampersand
sponsored employee stock ownership plan or other employee benefit plan
files or becomes obligated to file a report or a proxy statement in
response to Schedule 13D, Schedule 14D-l, Form 8-K or Schedule 14A under
the Exchange Act, disclosing beneficial ownership by it of units of
Ampersand, or because Ampersand reports that a change in control may have
occurred or may occur in the future by reason of such beneficial ownership.
(g) If this Agreement is not terminated as provided in Section
7(a), then the rights and obligations of the parties for the balance of the
Employment Period shall be governed by this Agreement exclusive of the
provisions contained in this Section 7, except this Section 7 shall
continue and become applicable if a subsequent Change of Control occurs
during the Employment Period.
8. Other Severance Benefits.
(a) If Employee is terminated without cause or Employee resigns for
Good Reason, and no Change of Control has occurred, Employee shall receive
a severance payment equal to Employee's Base Amount as defined in Section
7(b).
(b) If Employee is terminated without cause or Employee resigns for
Good Reason or as provided in Section 6(a), Ampersand shall continue to
provide, at no cost to Employee, basic employee group benefits referred to
in Section 4(a) that are welfare benefits, but not pension, retirement or
similar compensatory benefits, for Employee and Employee's dependents and
are substantially similar to those they were receiving or to which they
were entitled immediately prior to the termination of this Agreement for
the lesser of one year after termination or until Employee secures new
employment. Employee's stock option agreements shall provide for a
continuance of the option exercise period for at least two (2) years from
the date of Employee's termination without cause and at least one (1) year
from the date of Employee's resignation for Good Reason, except that if
Employee dies, continuance of the option exercise period shall be at least
two (2) years and the exercise period of an option shall not be extended
beyond the date on which it would have terminated had Employee continued to
be employed by the Company. The preceding sentence shall not apply to any
"incentive stock option," as that term is defined in Section 411 of the
Code.
<PAGE>
(c) If Employee is terminated without cause or Employee resigns for
Good Reason or as provided in Section 6(a), Ampersand shall promptly,
within five (5) business days after a request by Employee, pay or reimburse
Employee for the costs and expenses of any executive outplacement firm
selected by Employee; provided that Ampersand's liability under this
Subsection (e) shall be limited to $20,000. Employee shall provide
Ampersand with reasonable documentation of outplacement costs and expenses.
9. Timing of Payment. Any severance or other payment under this
Agreement shall be paid within thirty (30) days after the event giving rise
to Employee's entitlement to the payment or at any other date as the
parties agree.
10. Other Benefits. The provisions of Sections 7 and 8 shall not
affect Employee's participation in or terminate distributions and vested
rights under any pension, profit sharing, insurance or other employee
benefit plan to which Employee is entitled pursuant to the terms of the
plans, except for the acceleration of vested benefits in certain employee
benefits pursuant to Section 7(c) and as provided in Section 8(b).
11.No Mitigation Obligation. Ampersand recognizes that it will be
difficult, and may be impossible, for Employee to find reasonable
comparable employment following the termination of this Agreement. The non-
competition covenant contained in Section 13 further limits the employment
opportunities for Employee. In addition, Ampersand's severance pay policy
applicable in general to its salaried employees does not provide for
mitigation, offset or reduction of any severance payment. Accordingly, the
payment of severance compensation under this Agreement will be liquidated
damages, and that Employee shall not be required to seek other employment
or otherwise mitigate any payment.
12. No Right to Set Off. Ampersand shall not set off against
amounts payable to Employee any amounts earned by Employee in other
employment, or otherwise, after termination of this Agreement, or any
amounts which might have been earned by Employee in other employment had he
sought such other employment.
13. Competitive Activity. For two (2) years following the
termination of this Agreement, if Employee receives payments and benefits
under this Agreement, Employee shall not, without the prior written consent
of the Board of Directors, engage in any Competitive Activity. "Competitive
Activity" means Employee's participation in the management of any business
if it engages in substantial and direct competition with Ampersand and the
business' sales of any competing product or service amounted to 25% or more
of its net sales for its most recently completed fiscal year, and if
Ampersand's net sales of a competing product or service amounted to 25% or
more of Ampersand's net sales for its most recently completed fiscal year.
"Competitive Activity" shall not include
(a) the mere ownership of securities in any business and the
exercise of rights appurtenant thereto, or
(b) participation in the management of any business other than in
connection with that business' operations competitive with Ampersand.
14. Non-Disclosure of Information.
(a) During the Employment Period, and at all times thereafter,
except in the performance of Employee's obligations to Ampersand, Employee
shall not, directly or indirectly, use or authorize the use of any
confidential or other proprietary information ("Confidential Information")
of Ampersand including but not limited to trade secrets, product
specifications and ideas, manuals, systems, procedures, confidential
reports, customer lists, sales or distribution methods, patentable
information and data and financial information concerning Ampersand, which
<PAGE>
Confidential Information has been made known, whether or not with the
knowledge and permission of Ampersand, and whether or not developed,
devised or otherwise created in whole or in part by the efforts of
Employee, to Employee by reason of Employee's activities on behalf of
Ampersand. Employee shall not reveal, divulge or make known any
Confidential Information to any individual or business organization
whatsoever except in performance of Employee's obligations to Ampersand,
with the express permission of the Board of Directors, or as required by
operation of law.
(b) All Confidential Information is the exclusive property of
Ampersand. All business records, papers and documents kept or made by
Employee relating to the business of Ampersand shall be and remain the
property of Ampersand and shall remain in the possession of Ampersand. Upon
the termination of this Agreement or upon the request of Ampersand at any
time, Employee shall promptly deliver to Ampersand, and shall retain no
copies of any written materials, records or documents made by Employee or
in Employee's possession concerning the business and affairs of Ampersand
that contain Confidential Information.
(c) Without limiting the remedies available to Ampersand, Employee
acknowledges that a breach of any of the covenants contained in Section 13
and this Section 14 may result in material irreparable injury to Ampersand
for which there is no adequate remedy at law, that it may not be possible
to measure damages for such injuries precisely and that, in the event of a
breach or threatened breach, Ampersand may obtain a temporary restraining
order and a preliminary or permanent injunction restraining Employee from
engaging in activities prohibited by Section 13 or this Section 14 or any
other relief as may be required to specifically enforce any of the
covenants in such Sections.
15. Inventions.
(a) Employee shall promptly and fully disclose to Ampersand any and
all ideas, improvements, discoveries and inventions, whether or not they
are believed to be patentable ("Inventions"), which Employee conceives or
first actually reduces to practice, either alone or with others, during the
Employment Period, and which relate to the business now or hereafter
carried on or contemplated by Ampersand, or which result from any work
performed by Employee for Ampersand.
(b) All Inventions shall be the sole and exclusive property of
Ampersand, and during the Employment Period and at all times thereafter,
Employee shall, upon request, execute and assign any and all applications,
assignments and other instruments that Ampersand shall deem necessary or
appropriate to apply for or obtain a United States patent, trademark or
copyright and/or any foreign patent, trademark or copyright for any
Inventions. Employee shall assign and convey to Ampersand or its nominee
the sole and exclusive right, title and interest in and to any Inventions.
(c) The provisions of this Section 15 do not apply to an invention
for which no equipment, supplies, facility or Confidential Information of
Ampersand was used, that was developed entirely on Employee's own time, and
(i) that does not relate directly to the business of
Ampersand or to Ampersand's actual or anticipated research or development,
or
(ii) that does not result from any work performed by Employee
for Ampersand.
<PAGE>
16. Binding Arbitration: Legal Fees and Expenses.
(a) Any dispute or controversy arising under or in connection with
this Agreement prior to the occurrence of a Change of Control shall be
resolved exclusively by binding arbitration in Cook County, Illinois, in
accordance with the rules of the American Arbitration Association. Judgment
may be entered on the arbitrator's award in any court having jurisdiction.
Each party shall bear his or its own costs and expenses of arbitration, but
if Employee is the prevailing party in such arbitration, in whole or in
part, Ampersand shall pay as part of the award all attorney's and related
fees, costs and expenses incurred by Employee in connection with the
arbitration.
(b) If a Change of Control occurs and Employee determines, in good
faith, that Ampersand has failed to comply with any of its obligations
under this Agreement, or Ampersand or any other person takes or threatens
to take any action to declare this Agreement void or unenforceable or
institutes any litigation, arbitration proceeding or other action or
proceeding designed to deny or recover from Employee the benefits provided
or intended to be provided to Employee, Ampersand shall pay for, as
provided below, counsel selected and retained by Employee, to represent
Employee in connection with the initiation or defense of any litigation,
arbitration or other legal action, whether by or against Ampersand or any
director, officer, stockholder or other person affiliated with Ampersand,
in any jurisdiction. Within ten (10) business days after receipt of
Employee's request referencing this Section 16(b), Ampersand shall pay or
reimburse Employee for fees and expenses incurred, or reasonably
anticipated to be incurred, in accordance with the request and this Section
16(b). Ampersand shall pay and shall be solely responsible for any and all
attorneys' and related fees and expenses incurred by Employee in connection
with any of the foregoing, excluding any fees and expenses related to an
unsuccessful appeal filed by Employee of an adjudication on the merits, any
motion for a new trial filed by Employee that is denied or any other motion
filed by Employee for reconsideration or review that is denied.
17. Withholding of Taxes. Ampersand may withhold from any amounts
payable under this Agreement federal, state, city or other taxes as
required by law or government regulation.
18. Notices. All notices, requests, demands and other
communications called for or contemplated by this Agreement shall be in
writing and shall be deemed given when delivered personally or when mailed
by United States certified or registered mail, return receipt requested,
postage prepaid, addressed to the parties, their successors in interest or
assignees at the following addresses or such other addresses as the parties
may designate:
If to Ampersand: Ampersand Medical Corporation
414 N. Orleans, Suite 305
Chicago, Illinois 60610
Attn: Secretary
If to Employee: ___________________________
___________________________
___________________________
___________________________
19. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois, without
giving effect to Illinois' principles of conflict of laws. Venue will be
solely in the state or federal courts located in Cook County, Illinois,
subject only to Section 16(a).
<PAGE>
20. Validity. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain
in full force and effect. Any provision of this Agreement held to be
invalid or unenforceable shall be reformed only to the extent necessary to
make it valid and enforceable.
21. Entire Agreement. This Agreement constitutes the entire
understanding between the parties with respect to the subject matter, and
supersedes all negotiations, prior discussions, preliminary agreements and
employment arrangements between Employee and Ampersand. This Agreement may
not be amended, nor may any of its provisions be waived, except in a
writing executed by the parties.
22. Effect on Successors In Interest. This Agreement shall inure
to the benefit of and be binding upon the heirs, administrators, executors
and successors of each of the parties, including without limitation any
person acquiring, directly or indirectly, all or substantially all of the
business and/or assets of Ampersand by purchase, merger, consolidation,
reorganization or otherwise, and such successor shall thereafter be deemed
"Ampersand" for purpose of this Agreement. This Agreement is personal in
nature and neither of the parties shall, without the consent of the other,
assign, transfer or delegate this Agreement or any rights or obligations
except as expressly provided in this Section. Without limiting the
generality of the foregoing, Employee's fight to receive payments shall not
be assignable, transferable or delegable, whether by pledge, creation of a
security interest or otherwise, other than by bequest or devise or by the
laws of descent and distribution and, upon any attempt to assign or
transfer contrary to this Section, Ampersand shall have no liability to pay
any amount attempted to be assigned, transferred or delegated.
23. Effectiveness. This Agreement shall be effective upon the
Effective Date.
24. Captions. The captions and headings of the sections are
inserted only as a convenience and do not define, limit or otherwise
describe the scope of this Agreement or the intent of any of its
provisions.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
AMPERSAND MEDICAL CORPORATION
By: _____________________________
Peter P. Gombrich
_____________________________
(Employee)
EXHIBIT 10.12
- -------------
414 N.ORLEANS, CHICAGO, ILLINOIS
OFFICE BUILDING LEASE
Ampersand Medical Corporation, Inc.
<PAGE>
TABLE OF CONTENTS
OFFICE BUILDING LEASE
Page
Section 1 LEASE OF PREMISES 3
Section 2 DEFINITIONS 3
Section 3 EXHIBITS AND ADDENDA 4
Section 4 DELIVERY OF POSSESSION 4
Section 5 RENT 4
Section 6 INTEREST AND LATE CHARGES 9
Section 7 SECURITY DEPOSIT 10
Section 8 TENANTS USE OF THE PREMISES 10
Section 9 SERVICES AND UTILITIES 11
Section 10 PREPARATION AND CONDITION OF THE PREMISES 12
Section 11 CONSTRUCTION, REPAIRS AND MAINTENANCE 12
Section 12 ALTERATIONS AND ADDITIONS 13
Section 13 LEASEHOLD IMPROVEMENTS; TENANT'S PROPERTY 14
Section 14 CERTAIN RIGHTS RESERVED BY LANDLORD 14
Section 15 ASSIGNMENT AND SUBLETTING 15
Section 16 HOLDING OVER 17
Section 17 SURRENDER OF PREMISES 17
Section 18 DESTRUCTION OR DAMAGE 18
Section 19 EMINENT DOMAIN 19
Section 20 INDEMNIFICATION 19
Section 21 TENANT'S INSURANCE 20
Section 22 WAIVER OF SUBROGATION 21
Section 23 SUBORDINATION AND ATTORNMENT 21
Section 24 ESTOPPEL CERTIFICATES 22
Section 25 TRANSFER OF LANDLORDS INTEREST 23
Section 26 DEFAULT 23
Section 27 BROKERAGE FEES 26
Section 28 NOTICES 26
Section 29 GOVERNMENT ENERGY OR UTILITY CONTROLS 26
Section 30 INTENTIONALLY OMITTED 26
Section 31 QUIET ENJOYMENT 26
Section 32 OBSERVANCE OF LAW 26
Section 33 FORCE MAJEURE 27
Section 34 SIGN CONTROL 27
Section 35 RULES AND REGULATIONS 27
Section 36 MISCELLANEOUS 30
<PAGE>
414 N. ORLEANS
CHICAGO. ILLINOIS
OFFICE BUILDING LEASE
This Lease between OP., L.L.C., an Illinois limited liability company
("Landlord"), and Ampersand Medical Corporation , Inc. ("Tenant"), is dated
September 1, 1999.
1. LEASE OF PREMISES.
In consideration of the Rent (as defined at Section 5(c)) and the
provisions of this Lease, Landlord leases to Tenant and Tenant leases from
Landlord the Premises shown by diagonal lines on the floor plan attached
hereto as Exhibit "A," and further described at Section 2(h). The Premises
are located within the Building and Project described in Section 2(i).
Tenant shall have the non-exclusive right (unless otherwise provided
herein) in common with Landlord, other tenants, subtenants and invitees, to
use of the Common Areas (as defined at Section 2(d)).
2. DEFINITIONS.
As used in this Lease, the following terms shall have the following
meanings:
(a) Base Rent: See Base Rent Schedule attached hereto as Exhibit
"E". Base Year: 1999
(b) Broker(s):
Landlord's: Spectrum Real Estate Services, Inc.
Tenants: N/A
(c) Commencement Date: October 1, 1999
(d) Common Areas: The building lobbies, common corridors and
hallways, restrooms, stairways, elevators and other generally understood
public or common areas. Landlord shall have the right to regulate or
restrict the use of the Common Areas.
(e) Expiration Date: September 30, 2004, unless otherwise sooner
terminated in accordance with the provisions of this Lease.
(f) Landlord's Mailing Address: 414 N. Orleans, Suite 610, Chicago,
Illinois 60610. Tenant's Mailing Address: 414 N. Orleans, Suite 305,
Chicago, Illinois 60610
(g) Monthly Installments of Base Rent: See Base Rent Schedule.
(h) Premises: That portion of the Building containing approximately
2,700 square feet of Rentable Area, shown by diagonal lines on Exhibit "A,"
located on the third floor of the Building and known as Suite 305.
(i) Project: The building of which the Premises are a part (the
"Building") and any other buildings or improvements on the real property
(the "Property") located at 414 N. Orleans, Chicago, Illinois and further
described on Exhibit "B."
(j) Rentable Area: As to both the Premises and the Project, the
respective measurements of floor area as may from time to time be subject
to lease by Tenant and all tenants of the Project, respectively, as
determined by Landlord and applied on a consistent basis throughout the
Project.
(k) Security Deposit (Section 7): Four Thousand Three Hundred-
eighty seven Dollars and 00/100 ($4,387.00)
<PAGE>
(l) State: The State of Illinois.
(m) Tenant's Proportionate Share: 1 .5% Such share is a fraction,
the numerator of which is the Rentable Area of the Premises, and the
denominator of which is the Rentable Area of the Project, as determined by
Landlord from time to time. The Project consists of one building(s)
containing a total Rentable Area of 186,000 square feet.
(n) Tenant's Use Clause (Section 8): general office use.
(o) Term: The period commencing on the Commencement Date and
expiring at midnight on the Expiration Date.
(p) Lease Year: The twelve (12) month period commencing on the
Commencement Date and expiring on the first anniversary thereof and each
subsequent twelve (12) month period during the Term.
3. EXHIBITS AND ADDENDA.
The exhibits listed below are incorporated by reference in this
Lease:
(a) Exhibit "A" - Floor Plan showing the Premises.
(b) Exhibit "B" - Legal Description of Project.
(c) Exhibit "C" - (intentionally omitted).
(d) Exhibit "D" - (intentionally omitted).
(e) Exhibit "E" - Base Rent Schedule.
4. DELIVERY OF POSSESSION.
"As Is"
5. RENT.
(a) Payment of Base Rent. Tenant agrees to pay the Base Rent for
the Premises in accordance with those monthly installments specified on the
Base Rent Schedule. Monthly Installments of Base Rent shall be payable in
advance on the first day of each calendar month of the Term in the amount
specified on the Base Rent Schedule for that particular month. If the Term
begins (or ends) on other than the first (or last) day of a calendar month,
the Base Rent for the partial month shall be prorated on a per diem basis.
Tenant shall pay Landlord the first Monthly Installment of Base Rent when
Tenant executes the Lease.
(b) Project Operating Costs.
(1) In addition to its obligation to pay Monthly Installments
of Base Rent, Tenant shall also be obligated to pay, as Additional Rent for
each Lease Year Tenant's Proportionate Share of Project Operating Costs
(defined below) to the extent such costs exceed Project Operating Costs for
the Base Year. The Additional Rent payable hereunder for the years in which
the Term begins and ends shall be prorated to correspond to that portion of
the applicable calendar year occurring within the term of this Lease.
(2) The term "Project Operating Costs" shall include all
those items described in the following Sections 5(b)(2)(A) and (B).
<PAGE>
(A) All federal, state, county, and local governmental
taxes, assessments, water and sewer charges and other similar governmental
charges of every kind or nature (collectively, "Taxes"), which Landlord
shall pay, or become obligated to pay, because of, in connection with the
ownership, management, control or operation of the Building, Property or
Project, or of the personal property, fixtures, machinery, equipment,
systems and apparatus located therein or used in connection therewith,
including, without limitation Ii) real property taxes or assessments levied
or assessed against the Building or Project, (ii) any expenses (including,
but not limited to, legal fees) incurred by Landlord in any contest of real
estate taxes or assessments or the assessed value of the Building, Property
or the Project, however, there shall be no attorneys' fees charged if there
are no savings in excess of all fees, legal fees and costs expended, (iii)
assessments or charges levied or assessed against the Building or Project
by any redevelopment agency, and (iv) any tax measured by gross rentals
received from the leasing of the Premises, Building or Project, excluding
any net income, franchise, capital stock, estate or inheritance taxes
imposed by the State or federal government or their agencies, branches or
departments; provided that if, at any time during the Term, any
governmental entity levies, assesses or imposes on Landlord any (1) general
or special, ad valorem or specific, excise, capital levy or Other tax,
assessment, levy or charge directly on the Rent received under this Lease
or on the rent received wider any other leases of space in the Building or
Project, or (2) any license fee, excise or franchise tax, assessment, levy
or charge measured by or based, in whole or in part, upon such rent, or (3)
any transfer, transaction, or similar tax, assessment, levy or charge based
directly or indirectly upon the transaction represented by this Lease or
such other leases of space In the Building or Project, or 143 any
Occupancy, use, per capita or other tax,
assessment, levy or charge based directly pr indirectly upon the use or
occupancy of the Premises or other leased premises within the Building or
Project, then any and all of such taxes, assessments, levies and charges
shall be deemed to be included in the term Project Operating Costs. For
purposes hereof, Taxes for any year shall be Taxes which are due for
payment or paid in that year, rather than Taxes which are assessed or
become a lien during such year, It, at any time during the Term, the
assessed valuation of, or taxes on, the Project are riot based on a
completed Project having at least eighty-five percent (85%) of the Rentable
Area iii the Budding occupied, then the 'Taxes' component of Project
Operating Costs shall be adjusted by Landlord to reasonably approximate the
taxes which would have been payable if the Project were completed and at
least eighty-five percent (85%) of the Rentable Area in the Building
occupied. However, the taxes assessed shall be the lesser of the actual
taxes assessed and the adjustment as made by the Landlord above.
<PAGE>
(B) Operating costs (incurred by Landlord in
maintaining and Operating the Building and Project, including without
limitation the following: costs of (1) utilities; (2) supplies; (3)
insurance (including, but not limited to, public liability, property
damage, earthquake, and fire and extended coverage insurance for the full
replacement cost of the Building arid Project) as required by Landlord or
its tenders for the Project; (4) services of independent contractors; (5)
compensation (Including employment taxes and fringe benefits) of all
persons who perform duties connected with the operational, maintenance,
repair or overhaul of the Building or Project, and equipment, improvements
and facilities located within the Project, including, without limitation,
engineers, janitors, painters, floor waxers, window washers, security and
parking personnel and gardeners but excluding persons performing services
not uniformly available to or performed for substantially all Budding or
Project tenants); (6) operation and maintenance of a room for delivery and
distribution of mail to tenants of the Building or Project as required by
the U.S. Postal Service (Including, without limitation, an amount equal to
the fair market rental value of the mail room premises); (7) management of
the Budding or Project, whether managed by Landlord or an independent
contractor (including, without limitation, an amount equal to the fair
market rental value of any on-site manager's office); (8) rental expenses
for (or a reasonable depreciation allowance on) personal property used in
the maintenance, operation or repair of the Building or Project; 491 costs,
expenditures or charges (whether capitalized or not) due to requirements of
any governmental or quasi-governmental authority; (C) amortization of
capital expenses (including financing costs) (i) required by a governmental
entity for energy conservation or life safety purposes, or (ii) made by
landlord with the reasonable intent to reduce Project Operating Costs; (11)
legal, accounting end other professional fees incurred in connection with
the operation, maintenance and management pf the Building or Project; arid
(12) any other costs or expenses incurred by Landlord under this Lease or
with respect to the Building or Project and not otherwise. reimbursed by
specific tenants of the Project, which are properly allocable to the
operation and maintenance of the Building or Project in accordance with
generally accepted accounting principles. If at any time during the Term,
less than eighty-five percent (85%) of the Rentable Area of the Project is
occupied, the "operating costs' component of Project Operating Costs shall
be adjusted by Landlord to reasonably approximate the operating costs which
would have been incurred if the Project had been at least eighty-five
percent (85%) occupied.
<PAGE>
(3) Estimated Payments and Operating Statements.
(A) Estimated Payments. Landlord or its agent shall
furnish to Tenant, prior to the Commencement Date and prior to the
commencement of each calendar year after the Base Year, a written statement
setting forth Landlord's estimate of Tenant's Proportionate Share of the
Project Operating Costs (the "Estimated Operating Statement") for such
ensuing calendar year. Tenant shall pay to Landlord, on the first day of
each month, as Additional Rent, an amount equal to one-twelfth (1/12th) at
Landlord's estimate of Tenant's Proportionate Share of such Project
Operating Costs If, however, Landlord shall fail to furnish any such
estimated Operating Statement subsequent to the commencement of any
calendar year during the term of this Lease, than until the first day of
the month following the month in which such Estimated Operating Statement
is furnished to Tenant, Tenant shell pay to Landlord, on the first day of
each month, an amount equal to the monthly installment of estimated Project
Operating Costs payable under this section with respect to the last month
of the immediately preceding calendar year. Upon furnishing such Estimated
Operating Statement to Tenant, Landlord shall give notice to Tenant stating
whether the Monthly installments of Project Operating Costs which Tenant
has paid to date during the current calendar year are more or less than the
estimated sums which Tenant should have been paying to Landlord for the
current calendar year, based on that Estimated Operating Statement. In the
event there is a deficiency with respect to the estimated amounts paid by
Tenant to date in the current calendar year, Tenant shall pay the amount of
such deficiency within ten (10) days after demand therefore; in the event
there shall have been an over-payment, Landlord shall permit Tenant to
credit the amount thereof against the subsequent payments of Additional
Rent next due during the calendar year in which Landlord notifies Tenant of
such over-payment. If there shall be any increase or decrease in the
estimated Project Operating Costs for any Lease Year, whether during or
after such year, Landlord may furnish to Tenant a revised interim Estimated
Operating Statement and the Additional Rent shall be adjusted and paid, or
refunded by way of credits against future payments, as the case may be, or
Landlord may wait and make such adjustments as per subparagraph (2) below.
Notwithstanding the foregoing, Landlord may adjust its estimate for Taxes
at such time as actual tax bills become available.
(B) Operating Statement. Within one hundred twenty
(120) days after the end of each calendar year, or as soon thereafter as
possible, Landlord shall furnish to Tenant a statement pertaining to the
actual payments made by Landlord for Project Operating Costs for that
immediately preceding year (the "Operating Statement"). If the Operating
Statement shows that the sums paid by Tenant, pursuant to the Estimated
Operating Statement, or any revision thereof, exceed Tenant's Proportionate
Share of the actual Project Operating Costs for the calendar year in
question, Landlord shall permit Tenant to credit the amount of such excess
in installments, against the subsequent payments of
<PAGE>
Additional Rent next due during the remainder of
the calendar year in which such Operating Statement is furnished pursuant
to this section; and if such Operating Statement shows that the aggregate
amount of the estimated sums paid by Tenant were less than the Tenant's
Proportionate Share of the actual Project Operating Costs, Tenant shall pay
the amount of such deficiency within thirty (30) days after demand
therefore. Failure of Landlord to submit the written Operating Statement
referred to herein shall not constitute a waiver of any rights of Landlord.
(C) Disputes. Each Operating Statement given by
Landlord shall be conclusive and binding upon Tenant, unless within thirty
(30) days after the receipt thereof, Tenant shall notify Landlord that
Tenant disputes the accuracy of said Operating Statement, specifying the
particular respects in which the Operating Statement is claimed to be
incorrect. Notwithstanding any such notice disputing the Operating
Statement, any amount due to Landlord, as shown on any such Operating
Statement, shall be paid by Tenant within thirty (30) days after Landlord's
demand, as provided above, but without prejudice to any such written
objection. Tenant or its authorized representative shall have the right to
examine Landlord's books and records with respect to the items in the
Operating Statement during normal business hours and upon reasonable notice
at any time within forty-five (45) days following submission of the
Operating Statement by Landlord. If, within twenty-one (21) days after
Landlord's receipt of Tenant's notification of dispute of said Operating
Statement, Landlord and Tenant fail to agree, in writing, upon the actual
amount of Project Operating Costs and Tenant's Proportionate Share thereof,
then Landlord and Tenant shall jointly select an independent, certified
public accountant, licensed in the State of Illinois, who shall prepare a
report addressing the objections raised by Tenant. The fees and costs of
said accountant shall be paid one-half by Landlord and one-half by Tenant,
and the determination of said accountant shall be conclusive and binding on
Landlord and Tenant. Any sums owed by Landlord to Tenant based on the
accountant's report shall be paid to Tenant in the form of a credit against
those subsequent payments of Additional Rent next due during the remainder
of the calendar year in which the determination of such overpayment is
made.
(c) Definition of Rent. All costs and expenses which
Tenant assumes or agrees to pay to Landlord under this Lease (except with
respect to Base Rent) shall be deemed "Additional Rent" (which, together
with the Base Rent, is sometimes referred to as the "Rent"). The Rent shall
be paid to the Building manager (or other person) and at such place, as
Landlord may from time to time designate in writing, without any prior
demand therefore and without deduction or offset, in lawful money of the
United States of America.
<PAGE>
(d) Rent Control. If the amount of Rent or any other
payment due under this Lease violates the terms of any governmental
restrictions on such Rent or payment, then the Rent or payment due during
the period of such restrictions shall be the maximum amount allowable under
those restrictions. Upon termination of the restrictions, Landlord shall,
to the extent it is legally permitted, recover from Tenant the difference
between the amounts received during the period of the restrictions and the
amounts Landlord would have received had there been no restrictions.
(e) Taxes Payable by Tenant. In addition to the Rent
and any other charges to be paid by Tenant hereunder, Tenant shall
reimburse Landlord upon demand for any and all taxes payable by Landlord
(other than net income taxes) which are not otherwise reimbursable under
this Lease, whether or not now customary or within the contemplation of the
parties, where such taxes are upon, measured by or reasonably attributable
to Ii) the cost or value of Tenant's equipment, furniture, fixtures and
other personal property located in the Premises, or the cost or value of
any leasehold improvements made in or to the Premises by or for Tenant,
other than the Work, regardless of whether title to such improvements is
held by Tenant or Landlord; (ii) the gross or net Rent payable under this
Lease, including, without limitation, any rental or gross receipts tax
levied by any taxing authority with respect to the receipt of the Rent
hereunder; (iii) the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy by Tenant of the Premises
or any portion thereof; or (iv) this transaction or any document to which
Tenant is a party creating or transferring an interest or an estate in the
Premises. If it becomes unlawful for Tenant to reimburse Landlord for any
costs as required under this Lease, the Base Rent shall be revised to net
Landlord the same net Rent after imposition of any tax or other charge upon
landlord as would have been payable to Landlord but for the reimbursement
being unlawful.
6. INTEREST AND LATE CHARGES.
If Tenant fails to pay when due any Rent or other amounts or charges
which Tenant is obligated to pay under the terms of this Lease, the unpaid
amounts shall bear interest at lesser of (I) two percent (2.0%) in excess
of the "prime" or "reference" or "base" rate of interest announced as such,
from time to time, by the First National Bank of Chicago ("Prime") and (ii)
the maximum rate then allowed by law. Tenant acknowledges that the late
payment of any Monthly Installment of Base Rent will cause Landlord to lose
the use of that money and incur costs and expenses not contemplated under
this Lease, including, without limitation, administrative and collection
costs and processing and accounting expenses, the exact amount of which is
extremely difficult to ascertain. Therefore, in addition to interest (as
described above in this Section 6), if any such installment is not received
by Landlord within ten (10) days from the date it is due, Tenant shall pay
Landlord a late charge equal to ten percent (10%) of such delinquent
installment. Landlord and Tenant agree that this late charge represents a
reasonable estimate of such costs and expenses and is fair compensation to
Landlord for the loss suffered from such nonpayment by Tenant. Acceptance
of any interest or late charge shall not constitute a waiver of Tenant's
default with respect to such nonpayment by Tenant nor prevent Landlord from
exercising any other rights or remedies available to Landlord under this
Lease.
<PAGE>
7. SECURITY DEPOSIT.
(a) Tenant agrees to deposit with Landlord the Security Deposit set
forth at Section 2(k) above upon execution of this Lease, as security for
Tenant's faithful performance of its obligations under this Lease. Landlord
and Tenant agree that the Security Deposit may be commingled with funds of
Landlord and Landlord shall have no obligation or liability for payment of
interest on such deposit. Tenant shall not mortgage, assign, transfer or
encumber the Security Deposit without the prior written consent of Landlord
(which may be withheld in Landlord's sole discretion), and any attempt by
Tenant to do so shall be void, without force or effect and shall not be
binding upon Landlord.
(b) If Tenant fails to pay any Rent or other amount when due and
payable under this Lease, or fails to perform any of the terms hereof,
Landlord may appropriate and apply or use all or any portion of the
Security Deposit for Rent payments or any other amount then due and unpaid;
for Payment of any amount for which Landlord has become obligated as a
result of Tenant's default or breach; and for any loss or damage sustained
by Landlord as a result of Tenant's default or breach; and Landlord may so
apply or use this Security Deposit without prejudice to any other remedy
Landlord may have by reason of Tenant's default or breach. If Landlord so
uses any of the Security Deposit, Tenant shall, within ten (10) days after
written demand therefore, restore the Security Deposit to the full amount
originally deposited. Tenant's failure to do so shall constitute an act of
default hereunder and Landlord shall have the right to exercise any remedy
provided for at Section 26 hereof. Within fifteen (1 5) days after the Term
(or any extension thereof) has expired or Tenant has vacated the Premises,
whichever shall last occur, and provided Tenant is not then in default on
any of its obligations hereunder, Landlord shall return the Security
Deposit to Tenant, or, if Landlord has permitted Tenant to assign its
interest under this Lease, to the last assignee of Tenant. If Landlord
sells its interest in the Premises, Landlord may deliver this Security
Deposit to the purchaser of Landlord's interest and thereupon be relieved
of any further liability or obligation with respect to the Security
Deposit.
8. TENANTS USE OF THE PREMISES.
Tenant shall use the Premises solely for the purposes set forth in
Tenant's Use Clause. Tenant shall not use or occupy the Premises in
violation of law or any covenant, condition or restriction affecting the
Building or Project or the certificate of occupancy issued for the Building
or Project, and shall, upon notice from Landlord, immediately discontinue
any use of the Premises which is declared by any governmental authority
having jurisdiction to be a violation of law or the certificate of
occupancy. Tenant, at Tenant's own cost and expense, shall comply with all
laws, ordinances, regulations, rules and/or any directions of any
governmental agencies or authorities having jurisdiction which shall, by
reason of the nature of Tenant's use or occupancy of the Premises, impose
any duty upon Tenant or Landlord with respect to the Premises or its use or
occupation. A judgment of any court of competent jurisdiction or the
admission by Tenant in any action or proceeding against Tenant that Tenant
has violated any such laws, ordinances, regulations, rules and/or
directions in the use of the Premises shall be deemed to be conclusive
determination of that fact as between Landlord and Tenant,Tenant shall
not do, or permit to be done, anything which will
invalidate or increase the cost of any fire, extended coverage or other
insurance policy covering the Building or Project and/or property located
therein, and shall comply with all rules, orders, regulations, requirements
and recommendations of the Insurance Services Office or any other
organization performing a similar function. Tenant shall promptly upon
demand reimburse Landlord for any additional premium charged
<PAGE>
for such policy by reason of Tenant's failure to comply with
the provisions of this Section 8. Tenant shall not do, or permit anything
to be done, in or about the Premises which will in any way obstruct or
interfere with the rights of other tenants or occupants of the Building or
Project, or injure or annoy them, or use or allow the Premises to be used
for any improper, immoral, unlawful or objectionable purpose, nor shall
Tenant cause, maintain or permit any nuisance in, on or about the Premises.
Tenant shall not commit or suffer to be committed any waste in or upon the
Premises.
9. SERVICES AND UTILITIES.
Provided that Tenant is not in default hereunder, Landlord agrees to
furnish to the Premises during generally recognized business days, and
during hours determined by Landlord in its sole discretion (which are
presently from 9:00 a.m. to 5:00 p.m. on weekdays and from 9:00 a.m. to
1:00 p.m. on Saturdays, with Sundays and holidays excluded), and subject to
the Rules and Regulations of the Building or Project, heating, ventilation
and air conditioning ("HVAC") as required, in Landlord's judgment, for the
comfortable use and occupancy of the Premises. It is specifically
understood and agreed that Landlord shall cause the Premises to be
separately metered for the provision of electrical current service, at
Landlord's expense, and, if Landlord so requires, Tenant shall cause the
electrical utility to establish a separate account, in Tenant's name, for
the provision of electricity to the Premises. If Tenant desires HVAC at any
other time, Landlord shall use reasonable efforts to furnish such service
upon reasonable notice from Tenant and Tenant shall pay Landlord's charges
therefore on demand. Landlord shall also maintain and keep lighted the
common stairs, common entries and restrooms in the Building. Landlord shall
not be in default hereunder or be liable for any damages directly or
indirectly resulting from, nor shall the Rent be abated by reason of (i)
the installation, use, or interruption of use, of any equipment in
connection with the furnishing of any of the foregoing services; (ii)
failure to furnish, or delay in furnishing, any such services where such
failure or delay is caused by accident or any condition or event beyond the
reasonable control of Landlord, or by the making of necessary repairs or
improvements to the Premises, Building or Project; or (iii) the limitation,
curtailment or rationing of, or restrictions on, use of water, electricity,
gas or any other form of energy serving the Premises, Building or Project.
Landlord shall not be liable under any circumstances for a loss of or
injury to property or business, however occurring through or in connection
with or incidental to faihze to furnish any such services. If Tenant uses
heat generating machines or equipment in the Premises which affect the
temperature otherwise maintained by the HVAC system, Landlord reserves the
right to install supplementary air conditioning units in the Premises and
the costs thereof, including the cost of installation, operation and
maintenance thereof, shall be paid by Tenant to Landlord upon demand by
Landlord.
Tenant shall not, without the written consent of Landlord, use any
apparatus or device in the Premises, including without limitation,
electronic data processing machines, punch card machines or machines using
in excess of 120 volts, which consumes more electricity than is usually
furnished or supplied for the use of premises as general office space, as
determined by Landlord. Tenant shall not connect any apparatus with
electric current except through existing electrical outlets in the
Premises. Tenant shall not consume any water or electric current in excess
of that usually furnished or supplied for the use of premises as general
office space (as determined by Landlord), without first procuring the
written consent of Landlord, which Landlord may refuse, and in the event of
consent, Landlord may have installed a water meter or electrical current
meter in the Premises to measure the amount of water or electric current
consumed. The cost of any such meter and of its installation, maintenance
and repair shall be paid for by the Tenant and Tenant agrees to pay to
Landlord promptly upon demand for all such water and electric current
<PAGE>
consumed as shown by said meters, at the rates charged for such
services by the local public utility plus any additional expense incurred
in keeping account of the water and electric current so consumed. If a
separate meter is not installed, the excess cost for such water and
electric current shall be established by an estimate made by a utility
company or electrical engineer hired by Landlord at Tenant's expense.
Landlord shall furnish elevator service, lighting replacement for
building standard lights, restroom supplies, window washing and janitor
services in a manner that such services are customarily furnished to
comparable office buildings in the area.
10. PREPARATION AND CONDITION OF THE PREMISES.
(a) The Work and Workletter Agreement. The Premises is completed
and is prepared for Tenant's occupancy "as is".
Obligations. Landlord shall maintain in good order, condition
and repair the Building and all other portions of the Premises not the
obligation of Tenant or of any other tenant in the Building.
(b) Tenant's Obligations.
(1) Tenant, at Tenant's sole expense, shall, except for
services furnished by Landlord pursuant to Section 9 hereof, maintain the
Premises in good order, condition and repair, including, but not limited
to, the interior surfaces of the ceilings, walls and floors, all doors, all
interior windows, all Plumbing, pipes and fixtures, electrical wiring,
switches and fixtures, furnishings that are part of the Work and special
items and equipment installed by or at the expense of Tenant.
(2) Tenant shall be responsible for all repairs and
alterations in and to the Premises, Building and Project and the facilities
and systems thereof, the need for which arises out of Ii) Tenant's use or
occupancy of the Premises, (ii) the installation, removal, use or operation
of Tenant's Property (as defined in Section 1 3 below) in the Premises,
(iii) the moving of Tenant's Property into or out of the Building, or (iv)
the act, omission, misuse or negligence of Tenant, its agents, contractors,
employees or invitees.
(3) If Tenant fails to maintain the Premises in good order,
condition and repair, Landlord shall give Tenant notice to do such acts as
are reasonably required to so maintain the Premises. If Tenant fails to
promptly commence such work and diligently prosecute it to completion, then
Landlord shall have the right to do such acts and expend such funds, at the
expense of Tenant, as are reasonably required to perform such work. Any
amount so expended by landlord shall be paid by Tenant promptly after
demand with interest at the rate set forth in Section 6 above from the date
of such work. Landlord shall have no liability to Tenant for any damage,
inconvenience, or interference with the use of the Premises by Tenant as a
result of performing any such work.
(c) Compliance with Law. Landlord and Tenant shall each do
all acts required to comply with all applicable laws, ordinances, and rules
of any public authority relating to their respective maintenance
obligations as set forth herein.
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(d) Load and Equipment Limits. Tenant shall not place a load
upon any floor of the Premises which exceeds the load per square foot which
such floor was designed to carry, as determined by Landlord or Landlord's
structural engineer. The cost of any such determination made by Landlord's
structural engineering shall be paid for by Tenant upon demand. Tenant
shall not install business machines or mechanical equipment which cause
noise or vibration to such a degree as to be objectionable to Landlord or
other Building tenants.
(e) Interference. Except as otherwise expressly provide in
this Lease, Landlord shall have no liability to Tenant nor shall Tenant's
obligations under this Lease be reduced or abated in any manner whatsoever,
by reason of any inconvenience, annoyance, interruption or injury to
business arising from Landlord's making any repairs or changes which
Landlord is required or permitted by this Lease or by any other tenant's
lease or required by law to make in or to any portion of the Project,
Building or the Premises, including, but not limited to, the buildout of
the remaining tenant space(s) and incomplete base building areas in the
Building. Landlord shall nevertheless use reasonable efforts to minimize
any interference with Tenant's business in the Premises. Tenant shall give
Landlord prompt notice of any damage to or defective condition in any part
or appurtenance of the Building's mechanical, electrical, plumbing, HVAC or
other systems serving, located in, or passing through the Premises.
(f) Return of Premises. Upon the expiration or earlier
termination of this Lease, Tenant shall return the Premises to Landlord
clean and in the same condition as on the date Tenant took possession,
except for normal wear and tear. Any damage to the Premises, including any
structural damage, resulting from Tenant's use, or from the removal of
Tenant's fixtures, furnishings and equipment pursuant to Section 13(b)
below, shall be repaired by Tenant at Tenant's expense.
12. ALTERATIONS AND ADDITIONS.
(a) Tenant shall not make any additions, alterations or
improvements to the Premises without obtaining the prior written consent of
Landlord. Landlord's consent may be conditioned on Tenant's removing any
such additions, alterations or improvements upon the expiration of the Term
and restoring the Premises to the same condition as on the date Tenant took
possession. All work with respect to any addition, alteration or
improvement shall be done in a good and workmanlike manner by properly
qualified and licensed personnel approved by Landlord, and such work shall
be diligently prosecuted to completion.
(b) Tenant shall pay the costs of any work done on the Premises
pursuant to Section 12(a) above, and shall keep the Premises, Building and
Project free and clear of liens of any kind or nature. Tenant hereby
indemnifies, defends against and keeps Landlord free and harmless from and
against any and all liability, loss, damage, costs, attorneys' fees (of
counsel selected by Landlord) and any other expense incurred by Landlord on
account of, or as a result of, or due to, claims by any person performing
work or furnishing materials or supplies for Tenant or any person claiming
under Tenant.
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Tenant shall keep Tenant's leasehold interest, and any
additions or improvements, which are, or become, the property of Landlord
under this Lease, free and clear of all attachment or judgment liens.
Before the actual commencement of any work for which a claim or lien may be
filed, Tenant shall give Landlord notice of the intended commencement date
a sufficient time before that date to enable Landlord to post notices of
non-responsibility or any other notices which Landlord deems necessary for
the proper protection of Landlord's interest in the Premises, Building or
the Project, and landlord shall have the right to enter the Premises and
post such notices at any reasonable time.
(c) Landlord may require, at Landlord's sole option, that Tenant
provide to Landlord, at Tenant's expense, a lien and completion bond in an
amount equal to at least one and one-half (1 1/2) times the total estimated
cost of any additions, alterations or improvements to be made in or to the
Premises, to protect Landlord against any liability for mechanics and
material men's liens and to insure timely completion of the work. Nothing
contained in this Section 12(c) shall relieve Tenant of its obligation
under Section 12(b) above to keep the Premises, Building and Project free
of all liens.
(d) Unless their removal is required by Landlord, as provided in
Section 12(a) above, all additions, alterations and improvements made to
the Premises shall become the property of Landlord and be surrendered with
the Premises upon the expiration of the Term; provided, however, Tenant's
equipment, machinery and trade fixtures which may be removed without damage
to the Premises shall remain the property of Tenant and may be removed,
subject to the provisions of Section 1 3(b) below.
13. LEASEHOLD IMPROVEMENTS; TENANT'S PROPERTY.
(a) All fixtures, equipment, improvements and appurtenances
attached to, or built into, the Premises at the commencement of or during
the Term, whether or not by, or at the expense of, Tenant ("Leasehold
Improvements"), shall be and remain a part of the Premises; shall be the
property of Landlord; and shall not be removed by Tenant, except as
expressly provide in Section 13(b).
(b) All movable partitions, business and trade fixtures, machinery
and equipment, communications equipment and office equipment located in the
Premises and acquired by or for the account of Tenant, without expense to
Landlord, which can be removed without structural damage to the Building or
the Premises, and all furniture, furnishings and other articles of movable
personal property owned by Tenant and located in the Premises (collectively
"Tenant's Property") shall be and shall remain the property of Tenant and
may be removed by Tenant at any time during the Term; provided that if any
of Tenant's Property is removed, Tenant shall promptly repair, at its sole
cost and expense, and to Landlord's satisfaction, any and all damage to the
Premises or to the Building resulting from such removal.
14. CERTAIN RIGHTS RESERVED BY LANDLORD.
Landlord reserves the following rights, exercisable without liability
to Tenant for (i) damage or injury to property, person or business, (ii)
causing an actual or constructive eviction from the Premises, or (iii)
disturbing Tenant's use or possession of the Premises:
(a) To name the Building and Project and to change the name or
street address of the Building or Project;
<PAGE>
(b) To install and maintain all signs on the exterior and interior
of the Building and Project;
(c) To have pass keys to the Premises and all doors within the
Premises, excluding Tenant's vaults and safes;
(d) At any time during the Term, and on a reasonable prior notice
to Tenant, to inspect the Premises, and to show the Premises to any
prospective purchaser or mortgagee of the Project, or to any assignee of
any mortgage on the Project, or to others having an interest in the Project
or Landlord, and during the last six (6) months of the Term, to show the
Premises to prospective tenants thereof; and
(e) To enter the Premises for the purpose of making inspections,
repairs, alterations, additions or improvements to the Premises or the
Building (including, without limitation, checking, calibrating, adjusting
or balancing controls and other parts of the HVAC system), and to take all
steps as may be necessary or desirable for the safety, protection,
maintenance or preservation of the Premises or the Building or Landlord's
interest therein, or as may be necessary or desirable for the operation or
improvement of the Building or in order to comply with laws, orders or
requirements of governmental or other authority. Landlord agrees to use its
reasonable, good faith efforts (except in an emergency) to minimize
interference with Tenant's business in the Premises in the course of any
such entry.
15. ASSIGNMENT AND SUBLETTING.
Tenant acknowledges that Landlord has entered into this Lease in
reliance on Tenant's creditworthiness, reputation and ability to operate
the Premises for the purposes set forth in Section 8 above. No assignment
of this Lease or sublease of all or any part of the Premises shall be
permitted, except as specifically provided in this Section 15. Landlord
acknowledges that the Tenant subleases space to several related companies
and shall continue to do so and, as far as this paragraph is concerned all
of these related entities shall be included within the definition of
"Tenant".
(a) Tenant shall not, without the prior consent of Landlord, assign
or hypothecate this Lease or any interest herein or sublet the Premises or
any part thereof, or permit the use of the Premises by any party other than
Tenant. Any of the foregoing acts without such consent shall be void and
shall, at the option of Landlord, terminate this Lease. This Lease shall
not, nor shall any interest of Tenant herein, be assignable by operation of
law without the written consent of Landlord.
(b) If, at any time or from time to time during the Term, Tenant
desires to assign this Lease or sublet all or any part of the Premises,
Tenant shall give written notice to Landlord setting forth the terms and
provisions of the proposed assignment or sublease, and the identity of the
proposed assignee or subtenant. Tenant shall promptly supply Landlord with
such information concerning the business background and financial condition
of such proposed assignee or subtenant as Landlord may reasonably request.
Landlord shall have the option, exercisable by notice given to Tenant
within twenty (20) days after Tenant's notice is given, either to sublet
such space from Tenant at the rental and on the other terms set forth in
this Lease for the term set forth in Tenant's notice, or, in the case of an
assignment, to terminate this Lease. If Landlord does not exercise such
option, Tenant may assign the Lease or sublet such space to such proposed
assignee or subtenant on the following further conditions:
<PAGE>
(1) Landlord shall have the right to approve such proposed
assignee or subtenant, which approval shall not be unreasonably withheld,
and Tenant shall furnish sufficient information to Landlord so that
Landlord may make a reasonable determination as to the creditworthiness and
reputation of the proposed assignee or subtenant;
(2) The assignment or sublease shall be on the same terms set
forth in the notice given to Landlord and true and correct copies of all
documentation proposed to evidence any such assignment or sublease shall be
furnished to Landlord;
(3) No assignment or sublease shall be valid and no assignee
or sublessees shall take possession of the Premises until an executed
counterpart of such assignment or sublease has been delivered to Landlord;
(4) No assignee or sublessee shall have a further right to
assign or sublet except on the terms herein contained; and
(5) Any sums or other economic consideration received by
Tenant as a result of such assignment or subletting, however, denominated
under the assignment or sublease, which exceed, in the aggregate, (i) the
total sums which Tenant is obligated to pay Landlord under this Lease
(prorated to reflect obligations allocable to any portion of the Premises
subleased), plus (ii) any real estate brokerage commissions or fees payable
in connection with such assignment or subletting, shall be paid to Landlord
as Additional Rent under this Lease without affecting or reducing any other
obligations of Tenant hereunder.
(6) Any such assignment or sublease shall be specifically
subject to all of the terms and conditions of this Lease, and, in the event
of an assignment, such assignee shall specifically assume, in writing and
in a form satisfactory to Landlord, all of Tenant's rights and obligations
hereunder.
(c) Notwithstanding the provisions of Sections 15(a) and 15(b)
above, Tenant may assign this Lease or sublet the Premises or any portion
thereof, without Landlord's consent and without extending any recapture or
termination option to Landlord (pursuant to Section 1 5(bI above), to any
corporation which controls, is controlled by, or is under common control
with Tenant, or to any corporation resulting from a merger or consolidation
with Tenant, or to any person or entity which acquires all the assets of
Tenant's business as a going concern, provided that (1) the assignee or
sublessee assumes, in full, the obligations of Tenant under this Lease; (2)
Tenant remains fully liable under this Lease; (3) the use of the Premises
under Section 8 above remains unchanged; and (4) any successor to Tenant's
interest resulting from merger or consolidation has a net worth which is
equal to, or greater than, that of the Tenant immediately before such
merger or consolidation.
(d) No subletting or assignment shall release Tenant of Tenant's
obligations under this Lease or alter or modify the primary liability of
Tenant to pay the Rent and to perform all other obligations to be performed
by Tenant hereunder. The acceptance of Rent by Landlord from any other
person shall not be deemed to be a waiver by Landlord of any provision
hereof. Consent to one assignment or subletting shall not be deemed consent
to any subsequent assignment or subletting. In the event of default by
<PAGE>
an assignee or subtenant of Tenant or any successor of Tenant
in the performance of any of the terms hereof, Landlord may proceed
directly against Tenant without the necessity of exhausting remedies
against such assignee, subtenant or successor. Landlord may consent to
subsequent assignments of the Lease, sublettings or amendments or
modifications to the Lease with assignees of Tenant, without notifying
Tenant, or any successor of Tenant, and without obtaining its or their
consent thereto and any such actions shall not relieve Tenant of liability
under this Lease.
(e) If Tenant assigns the Lease or sublets the Premises or requests
the consent of Landlord to any assignment or subletting, or if Tenant
requests the consent of Landlord for any act that Tenant proposes to do,
then Tenant shall, upon demand pay Landlord an administrative fee of Two
Hundred Fifty and No/100 Dollars ($250.00), plus any attorneys' fees (of
counsel selected by Landlord), reasonably incurred by Landlord in
connection with such act or request.
16. HOLDING OVER.
If Tenant remains in possession after the Expiration Date hereof or
after any earlier termination date of this Lease or of the Tenant's right
to possession (a) Tenant shall be deemed a tenant at will; (b) Tenant shall
pay two hundred percent (200%) of the Base Rent and Additional Rent last
prevailing hereunder, and also shall pay all damages sustained by Landlord,
consequential as well as direct, by reason of such remaining in possession
after the expiration or termination of this Lease; (C) there shall be no
renewal or extension of this Lease by operation of law; and (d) the tenancy
at will may be terminated upon thirty (30) days' notice from Landlord; or,
at the sole option of Landlord, expressed by written notice to Tenant, but
not otherwise, such holding over shall constitute a renewal of this Lease
for a period of one (1) year on the same terms and conditions as provided
in this Lease. The provisions of this Section 16 shall not constitute a
waiver by Landlord of any re-entry rights of Landlord provided hereunder or
by law.
17. SURRENDER OF PREMISES.
(a) Tenant shall peaceably surrender the Premises to Landlord on
the Expiration Date, in broom-clean condition and in as good condition as
when Tenant took possession, except for (1) reasonable wear and tear, (2)
loss by fire or other casualty, and (3) loss by condemnation. Tenant shall,
on Landlord's request, remove Tenant's Property on or before the Expiration
Date and promptly repair all damage to the Premises or Building caused by
such removal,
(b) If Tenant abandons or surrenders the Premises, or is
dispossessed by process of law or otherwise, any of Tenant's Property left
on the Premises shall be deemed to be abandoned, and, at Landlord's option,
title shall pass to Landlord under this Lease as by a bill of sale. If
Landlord elects to remove all or any part of such Tenant's Property, the
cost of removal, including repairing any damage to the Premises or Building
caused by such removal, shall be paid by Tenant. On the Expiration Date,
Tenant shall surrender all keys to the Premises.
<PAGE>
18. DESTRUCTION OR DAMAGE.
(a) If the Premises or the portion of the Building necessary for
Tenant's occupancy is damaged by fire, earthquake, act of God, the elements
or other casualty, Landlord shall, subject to the provisions of this
Section 18, promptly repair the damage, if such repairs can, in Landlord's
opinion, be completed within ninety (90) days of the date on which such
casualty occurred. If Landlord determines that repairs can be completed
within ninety (90) days, this Lease shall remain in full force and effect,
and, provided that such damage is not the result of the negligence or
willful misconduct of Tenant or Tenant's agents, employees, contractors,
licensees or invitees, the Base Rent shall be abated to the extent Tenant's
use of the Premises is impaired, commencing with the date of damage and
continuing until completion of the repairs required of Landlord under
Section 18(d) below.
(b) If in Landlord's opinion, such repairs to the Premises or
portion of the Building necessary for Tenant's occupancy cannot be
completed within ninety (90) days of the date on which such casualty
occurred, Landlord may elect, upon notice to Tenant given within (30) days
after the date of such fire or other casualty, to repair such damage, in
which event this Lease shall continue in full force and effect, but the
Base Rent shall be partially abated as provided in Section 18(a) above, If
Landlord does not so elect to make such repairs, this Lease shall terminate
as of the date of such fire or other casualty.
(c) If any other portion of the Building or Project is totally
destroyed or damaged to the extent that, in Landlord's opinion, repair
thereof cannot be completed within ninety (90) days of the date on which
such casualty occurred, Landlord may elect, upon notice to Tenant, given
within thirty (30) days after the date of such fire or other casualty, to
repair such damage, in which event this Lease shall continue in full force
and effect, but the Base Rent shall be partially abated as provided in
Section 18(a) above. If Landlord does not elect to make such repairs, this
Lease shall terminate as of the date of such fire or other casualty.
(d) If the Premises are to be repaired under this Section 1 8,
Landlord shall repair, at its cost, any injury or damage to the Building
and the Work in the Premises, and Tenant shall be responsible, at its sole
cost and expense, for the repair, restoration and replacement of any other
Leasehold Improvements and Tenant's Property. Landlord shall not be liable
for any loss of business, inconvenience or annoyance arising from any
repair or restoration of any portion of the Premises. Building or Project
as a result of any damage from fire or other casualty.
(e) This Lease shall be considered an express agreement governing
any case of damage to or destruction of the Premises, Building or Project
by fire or other casualty, and any present or future law which purports to
govern the rights of Landlord and Tenant in such circumstances in the
absence of express agreement, shall have no application.
<PAGE>
19. EMINENT DOMAIN.
(a) If the whole of the Building or Premises is condemned or in any
other manner taken for any public purpose, this Lease shall terminate as of
the date of such condemnation and Rent shall be prorated to such date. If
less than the whole of the Building or Premises is so taken, this Lease
shall be unaffected by such taking, provided that (1) Tenant shall have the
right to terminate this lease by notice to Landlord given within ninety
(90) days after the date of such taking if twenty percent (20%) or more of
the Premises is taken and the remaining area of the Premises is not
reasonably sufficient for Tenant to continue operation of its business, and
(2) Landlord shall have the right to terminate this Lease by notice to
Tenant given within ninety (90) days after the date of such taking. If
either Landlord or Tenant so elects to terminate this Lease, the Lease
shall terminate on the thirtieth (30th) day after either such notice. The
Rent shall be prorated to the date of termination. If this Lease continues
in force upon such partial taking, the Base Rent and Tenant's Proportionate
Share shall be equitably adjusted according to the remaining Rentable Area
of the Premises and Project.
(b) In the event of any taking, partial or whole, all the proceeds
of any award, judgment or settlement payable by the condemning authority
shall be the exclusive property of Landlord, and Tenant hereby assigns to
Landlord all of its right, title and interest in any award, judgment or
settlement from the condemning authority. Tenant, however, shall have the
right, to the extent that Landlord's award is not reduced or prejudiced, to
claim from the condemning authority (but not from Landlord) such
compensation as may be recoverable by Tenant in its own right for
relocation expenses and damage to Tenant's Property.
(c) In the event of a partial taking of the Premises which does not
result in a termination of this Lease, Landlord shall restore the remaining
portion of the Premises as nearly as reasonably practicable to its
condition prior to the condemnation or taking, but only to the extent of
the Work. Tenant shall be responsible, at its sole cost and expense for the
repair, restoration and replacement of any other Leasehold Improvements and
Tenant's Property.
20. INDEMNIFICATION.
(a) Tenant shall and hereby does indemnify, defend and hold
Landlord harmless against and from liability and claims of any kind for
loss or damage to property of Tenant or any other person, or for any injury
to or death of any person, arising out of: (1) Tenant's use and occupancy
of the Premises, or any work, activity or other things allowed or suffered
by Tenant to be done in, on or about the Premises; (2) any breach or
default by Tenant of any of Tenant's obligations under this Lease; or (3)
any negligent or otherwise tortious act or omission of Tenant, its agents,
employees, invitees or contractors. Tenant shall, at Tenant's expense, and
by counsel selected by Landlord, defend Landlord in any action or
proceeding arising from any such claim and shall, and hereby does
indemnify, defend and hold Landlord harmless from and against all costs,
attorneys' fees, expert witness fees and any other expenses incurred in
such action or proceeding. As a material part of the consideration for
Landlord's execution of this Lease, Tenant hereby assumes all risk of
damage or injury to any person or property in, on or about the Premises
from any cause.
<PAGE>
(b) Landlord shall not be liable for injury or damage which may be
sustained by the person or property of Tenant, its employees, invitees or
customers, or any other person in or about the Premises, caused by or
resulting from fire, steam, electricity, gas, water or rain which may leak
or flow from or into any part of the Premises, or from the breakage,
leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, whether such
damage or injury results from conditions arising upon the Premises or upon
other portions of the Building or Project or from other sources. Landlord
shall not be liable for any damages arising from any act or omission of any
other tenant of the Building or Project.
21. TENANT'S INSURANCE.
(a) All insurance required to be carried by Tenant hereunder shall
be issued by responsible insurance companies acceptable to Landlord and
Landlord's lender and qualified to do business in the State. Each policy
shall name Landlord, and, at Landlord's request, any mortgagee of Landlord,
as an additional insured, as their respective interests may appear. Each
policy shall contain (1) a cross-liability endorsement, (2) a provision
that such policy and the coverage evidenced thereby shall be primary and
non-contributing with respect to any policies carried by Landlord and that
any coverage carried by Landlord shall be excess insurance, and (3) a
waiver by the insurer of any right of subrogation against Landlord, its
agents, employees and representatives, which arises or might arise by
reason of any payments under such policy or by reason of any act or
omission of Landlord, its agents, employees or representatives. A copy of
each paid up policy (authenticated by the insurer) or certificate of the
insurer evidencing the existence and amount of each insurance policy
required hereunder shall be delivered to Landlord before the date Tenant is
first given the right of possession of the Premises, and thereafter within
thirty (30) days after any demand by Landlord therefore. Landlord may, at
any time and from time to time, inspect and/or copy any insurance policies
required to be maintained by Tenant hereunder, No such policy shall be
cancellable except after twenty (20) days written notice to Landlord and
Landlord's lender. Tenant shall furnish Landlord with evidence of renewal
of any such policy (together with evidence of the payment of the premium
for such renewal), at least ten (10) days prior to the expiration thereof.
Tenant agrees that if Tenant does not take out Sand maintain such
insurance, Landlord may (but shall not be required to) procure said
insurance on Tenant's behalf and charge the Tenant the premiums incurred
therefore, together with a twenty-five percent (25%) handling charge,
payable upon demand. Tenant shall have the right to provide such insurance
coverage pursuant to blanket policies obtained by the Tenant, provided such
blanket policies expressly afford coverage to the Premises, Landlord,
Landlord's mortgagee and Tenant as required by this Lease.
(b) Beginning on the date Tenant is given access to the Premises
for any purpose and continuing until expiration or termination of the Term,
Tenant shall procure, pay for and maintain in effect policies of casualty
insurance covering (1) all Leasehold Improvements (including any
alterations, additions or improvements as may be made by Tenant pursuant to
the provisions of Section 1 2 above), and (2) trade fixtures, merchandise
and other personal property from time to time in, or about the Premises, in
an amount not less than one hundred percent (100%) of their actual
replacement cost from time to time, providing protection against any peril
included within the classification "Fire and Extended Coverage" together
with
<PAGE>
insurance against sprinkler damage, vandalism and malicious
mischief. The proceeds of such insurance shall be used for the repair or
replacement of the property so insured. Upon termination of this lease
following a casualty as set forth herein, the proceeds under (i) shall be
paid to Landlord, and the proceeds under (ii) above shall be paid to
Tenant.
(c) Beginning on the date Tenant is given access to the Premises
for any purpose and continuing until expiration or termination of the Term,
Tenant shall procure, pay for and maintain in effect workers' compensation
insurance as required by law and comprehensive public liability and
property damage insurance with respect to the construction of improvements
on the Premises, the use, operation or condition of the Premises and the
operations of Tenant in, on or about the Premises, providing personal
injury and broad form property damage for not less than One Million and
No/i 00 Dollars ($1,000,000.00) combined single limit for bodily injury,
death and property damage liability.
(d) Not less than every three (3) years during the Term, Landlord
and Tenant shall mutually agree to increases in all of Tenant's insurance
policy limits for all insurance to be carried by Tenant as set forth in
this Section 21.
22. WAIVER OF SUBROGATION.
Landlord and Tenant each hereby waive all rights of recovery against
the other and against the officers, employees, agents and representatives
of the other, on account of loss by, or damage to, the waiving party of its
property or the property of others under its control, to the extent that
such loss or damage is insured against under any fire and extended coverage
insurance policy which either may have in force at the time of the loss or
damage. Tenant shall, upon obtaining the policies of insurance required
under this Lease, give notice to its insurance carrier or carriers that the
foregoing mutual waiver of subrogation is contained in this Lease,
23. SUBORDINATION AND ATTORNMENT.
(a) Subordination of Lease. This Lease, and all rights of Tenant
hereunder are and shall be subject and subordinate to all ground leases of
the Property now or hereafter existing and to all mortgages, or trust deeds
in the nature of a mortgage (both collectively referred to hereafter as
"mortgages"), which may now or hereafter affect or encumber the Property
and/or the Building and/or any of such ground leases (whether or not such
mortgages shall also cover other lands and/or buildings and/or leases).
This subordination shall likewise apply to each and every advance made, or
hereafter to be made, under such mortgages; to all renewals, modifications,
replacements and extensions of such leases and such mortgages; and to
spreaders and consolidations of such mortgages. This Section 23 shall be
self-operative and no further instrument of subordination shall be
required. However, in confirmation of such subordination, Tenant shall
promptly execute, acknowledge and deliver any instrument that Landlord, the
lessor under any such ground lease or the holder of any such mortgage (or
their respective successors-in-interest), may request in order to evidence
such subordination. If Tenant fails to execute, acknowledge or deliver any
such instrument within ten (10) days after request therefore, Tenant hereby
irrevocably constitutes and appoints Landlord as Tenant's attorney-in-fact,
which appointment is agreed to be coupled with an interest, to execute and
deliver any such instruments for and on behalf of Tenant. Any lease to
which this Lease is subject and subordinate is hereinafter referred to as a
"Superior Lease" and the lessor of a Superior
<PAGE>
Lease is hereinafter referred to as a "Superior Lessor"; and
any mortgage to which this Lease is subject and subordinate is hereinafter
referred to as a "Superior Mortgage" and the holder of a Superior Mortgage
is hereinafter referred to as a "Superior Mortgagee." Notwithstanding the
foregoing, at Landlord's election, this Lease may be made senior to the
lien of any mortgage, if the mortgagee thereunder so requests.
(b) Notice in the Event of Default. Upon any default of Landlord,
including, but not limited to, any act or omission which would give Tenant
any right, immediately or after the lapse of a period of time, to cancel or
terminate this Lease, to claim a partial or total eviction, or to take any
other action hereunder, Tenant shall send, by registered or certified mail,
return receipt requested, written notice of such default to Landlord and to
each Superior Mortgagee and Superior Lessor whose name and address shall
previously have been furnished to Tenant. Tenant shall not exercise any
such right until a thirty (30) day period for remedying such default shall
have elapsed following the giving of such notice; provided, however, that
if such default cannot reasonably be cured within such thirty (30) day
period, then Landlord shall have such additional time to cure such default
as is reasonably necessary under the circumstances. If Landlord fails to
cure such default, within the time provided in the immediately preceding
sentence, then Tenant shall not exercise any such right until Tenant shall
have given, after the expiration of such time, an additional notice of
default in the manner described in the immediately preceding sentence, to
each such Superior Mortgagee and Superior Lessor, and each such Superior
Mortgagee and Superior Lessor shall have had an additional thirty (30) days
after such additional notice to cure such default; provided that if such
default cannot reasonably be cured within such thirty (30) day period, then
such Superior Mortgagee or Superior Lessor shall have such additional time
to cure such default as is reasonably necessary under the circumstances.
(c) Successor Landlord. If any Superior Lessor or Superior
Mortgagee shall succeed to the rights of Landlord hereunder, whether
through possession or foreclosure action or delivery of a new lease or
deed, or otherwise, then, at the request of such party (hereinafter
referred to as "Successor Landlord"), Tenant shall attorn to, and
recognize, each Successor Landlord as Tenant's landlord under this Lease
and shall promptly execute and deliver any instrument such Successor
Landlord may reasonably request to further evidence such attornment.
24. ESTOPPEL CERTIFICATES.
Each party agrees, at any time and from time to time, as requested by
the other party, to execute and deliver to the other land to any existing
or prospective mortgage lender, ground lessor, or purchaser designated by
Landlord), within ten (10) days after the written request therefor, a
statement certifying that this Lease is unmodified and in full force and
effect (or if there have been modifications, that the same is in full force
and effect as modified and stating the modifications); certifying the dates
to which the Base Rent and Additional Rent have been paid; stating whether
or not the other party is in default in performance of any of its
obligations under this Lease; and, if so, specifying each such default; and
stating whether or not any event has occurred which, with the giving of
notice or passage of time, or both, would constitute such a default, and,
if so, specifying each such event. Any such statement delivered pursuant
hereto shall be deemed a representation and warranty to be relied upon by
the party requesting the certificate and by others with whom such party may
be dealing, regardless of independent investigation. Tenant also shall
include in
<PAGE>
any such statements such other information concerning this Lease as
Landlord may reasonably request including, but not limited to, the amount
of Base Rent and Additional Rent under this Lease, and whether Landlord has
completed all improvements to the Premises required under this Lease. If
Tenant fails to execute, acknowledge or deliver any such statement within
ten (10) days after request therefore, Tenant hereby irrevocably
constitutes and appoints Landlord as Tenant's attorney-in-fact (which
appointment is agreed to be coupled with an interest), to execute and
deliver any such statements for and on behalf of Tenant.
25. TRANSFER OF LANDLORD'S INTEREST.
In the event of any sale or transfer by Landlord of the Premises,
Building or Project, and assignment of this Lease by Landlord, Landlord
shall be and is hereby entirely freed and relieved of any and all liability
and obligations contained in or derived from this Lease arising out of any
act, occurrence or omission relating to the Premises, Building, Project or
this Lease occurring after the consummation of such sale or transfer,
providing the purchaser shall expressly assume all of the covenants and
obligations of Landlord under this Lease. If any Security Deposit or
prepaid Rent has been paid by Tenant, Landlord may transfer the Security
Deposit or prepaid Rent to Landlord's successor and upon such transfer,
Landlord shall be relieved of any and all further liability with respect
thereto.
26. DEFAULT.
(a) Tenant's Default. The occurrence of any one or more of the
following events shall constitute a default and breach of this Lease by
Tenant:
(1) If Tenant abandons or vacates the Premises; or
(2) If Tenant fails to pay any Rent or any other charges
required to be paid by Tenant under this Lease and such failure continues
for five (5) days after such payment is due and payable; or
(3) If Tenant fails to promptly and fully perform any other
covenant, condition or agreement contained in this Lease and such failure
continues for thirty (30) days after written notice thereof from Landlord
to Tenant; or
(4) If a writ of attachment or execution is levied on this
Lease or on any of Tenant's Property; or
(5) If Tenant makes a general assignment for the benefit of
creditors; or
(6) If Tenant files a voluntary petition for relief or if a
petition against Tenant in a proceeding under the federal bankruptcy laws
or other insolvency laws is filed and not withdrawn or dismissed within
sixty (60) days thereafter, or if under the provisions of any law providing
for reorganization or winding up of corporations, any court of competent
jurisdiction assumes jurisdiction, custody or control of Tenant or any
substantial part of its property and such jurisdiction, custody or control
remains in force unrelinquished, unstayed or unterminated for a period of
sixty (60) days; or
(7) If in any proceeding or action in which Tenant is a
party, a trustee, receiver, agent or custodian is appointed to take charge
of the Premises or Tenant's Property (or has the authority to do so) for
the purpose of enforcing a lien against the Premises or Tenant's Property;
or
<PAGE>
(8) If Tenant is a partnership or consists of more than one
(1) person or entity, if any general partner of the partnership or other
person or entity is involved in any of the acts or events described in
Sections 26(a)(4) through (7) above.
(b) Remedies. In the event of Tenant's default hereunder, then in
addition to any other rights or remedies Landlord may have under any law,
Landlord shall have the right, at Landlord's option, without further notice
or demand of any kind to do the following:
(1) Terminate this Lease and Tenant's right to possession of
the Premises and re-enter the Premises and take possession thereof, and
Tenant shall have no further claim to the Premises or under this Lease; or
(2) Continue this Lease in effect, re-enter and occupy the
Premises for the account of Tenant, and collect any unpaid Rent or other
charges which have or thereafter become due and payable; or
(3) Re-enter the Premises under the provisions of Section
26(b)(2) above, and thereafter elect to terminate this Lease and Tenant's
right to possession of the Premises.
(4) In addition to (1) through (3) above, Landlord shall also
have the right to collect from Tenant any and all Base Rent that, but for
the existence of the Abatement Period, Tenant would have been required to
pay to Landlord prior to the occurrence of Tenant's default hereunder,
If Landlord re-enters the Premises under the provisions of
Sections 26(b)(2) and 26(b)(3) above, Landlord shall not be deemed to have
terminated this Lease or the obligation of Tenant to pay any Rent or other
charges thereafter accruing, unless Landlord notifies Tenant in writing of
Landlord's election to terminate this Lease. In the event of any re-entry
or retaking of possession by landlord, Landlord shall have the right, but
not the obligation, to remove all or any part of Tenant's Property in the
Premises and to place such property in storage at a public warehouse at the
expense and risk of Tenant, If Landlord elects to relet the Premises for
the account of Tenant, the rent received by Landlord from such reletting
shall be applied as follows: first, to the payment of any indebtedness
other than Rent due hereunder from Tenant to Landlord; second, to the
payment of any costs of such reletting; third, to the payment of the cost
of any alterations or repairs to the Premises; fourth to the payment of
Rent due and unpaid hereunder; and the balance, if any, shall be held by
Landlord and applied in payment of future Rent as it becomes due. If that
portion of rent received from the reletting which is applied against the
Rent due hereunder is less than the amount of the Rent due, Tenant shall
pay the deficiency to Landlord promptly upon demand by Landlord. Tenant
shall also pay to Landlord, as soon as determined, any cost and expenses
incurred by Landlord in connection with such reletting or in making
alterations and repairs to the Premises, which are not covered by the rent
received from the reletting.
(c) Damages. Should Landlord elect to terminate this Lease under
the provisions of Sections 26(b)(1) or 26(b)(3) above, Landlord may recover
as damages from Tenant the following:
(1) Past Rent. The worth at the time of the award of any
unpaid Rent which had been earned at the time of termination; plus
<PAGE>
(2) Rent Prior to Award. The worth at the time of the award
by which the unpaid Rent which would have been earned after termination
until the time of award exceeds the amount of such rental loss that Tenant
proves could have been reasonably avoided; plus
(3) Rent After Award. The worth at the time of the award of
the amount by which the unpaid Rent for the balance of the Term after the
time of award exceeds the amount of the rental loss that Tenant proves
could be reasonably avoided; plus
(4) Proximately Caused Damages. Any other amount necessary to
compensate Landlord for all detriment proximately caused by Tenant's
failure to perform its obligations under this Lease or which, in the
ordinary course of things, would be likely to result therefrom, including,
but not limited to, any costs or expenses (including attorneys' fees),
incurred by Landlord in (i) retaking possession of the Premises, (ii)
maintaining the Premises after Tenant's default, (iii) preparing the
Premises for reletting to a new tenant, including any repairs or
alterations, and (iv) reletting the Premises, including broker's
commissions.
"The worth at the time of the award" as used in Sections 26(c)(1) and
26(c)(2) above, is to be computed by allowing interest at the rate of Prime
plus two percent (2.0%) per annum. "The worth at the time of the award" as
used in Section 26(c)(3) above, is to be computed by discounting the amount
at the discount rate of the Federal Reserve Bank situated nearest to the
Premises at the time of the award plus one percent (1 %).
(d) Not a Waiver. The waiver by Landlord of any breach of any term,
covenant or condition of this Lease shall not be deemed a waiver of such
term, covenant or condition or of any other breach of the same or any other
term, covenant or condition. Acceptance of Rent by Landlord subsequent to
any breach hereof shall not be deemed a waiver of any preceding breach
other than the failure to pay the particular Rent so accepted, regardless
or Landlord's knowledge of any breach at the time of such acceptance of
Rent. Landlord shall not be deemed to have waived any term, covenant or
condition unless Landlord gives Tenant written notice of such waiver. No
delay or omission in the exercise of any right or remedy of Landlord upon
any default by Tenant shall impair such right or remedy or be construed as
a waiver of such default.
(e) Curing Tenant's Defaults. If Tenant defaults in the performance
of any of its obligations under this Lease, Landlord may (but shall not be
obligated to), without waiving such default, perform the same for the
account and at the expense of Tenant. Tenant shall pay Landlord all costs
of such performance promptly upon receipt of a bill therefore, together
with interest at the rate set forth in Section 6 above.
(f) Landlord's Default. If Landlord fails to perform any covenant,
condition or agreement contained in this Lease, subject to the notice and
cure provisions of Section 23(b) above, then Landlord shall be liable to
Tenant for any actual damages sustained by Tenant as a direct result of
Landlord's breach; provided, however, it is expressly understood and agreed
that if Tenant obtains a money judgment against Landlord resulting from any
default or other claim arising under this Lease, that judgment shall be
satisfied only out of the rents, issues, profits, and other income actually
received on account of Landlord's right, title and interest in the
Premises, Building
<PAGE>
or Project, and no other real, personal or mixed property of
Landlord (Or of any of the partners which comprise Landlord, if any)
wherever situated, shall be subject to levy to satisfy such judgment. If,
after notice by Tenant of default, as provided in Section 23(b) above,
Landlord and each Superior Mortgagee and Superior lessor fails to cure the
default in the time provided for in Section 23(b) above, then Tenant shall
have the right to cure that default at Landlord's expense. Tenant shall not
have the right to terminate this Lease or to withhold, reduce or offset any
amount against any payments of Rent or any other charges due and payable
under this Lease except as otherwise specifically provided herein.
27. BROKERAGE FEES.
Tenant warrants and represents that it has not dealt with any real
estate broker or agent in connection with this Lease or its negotiation
except for Tenant's Broker, as identified in Section 2(b) above. Tenant
hereby indemnifies. defends and hold Landlord harmless from any cost,
expense or liability (including costs of Suit and reasonable attorneys' fee
of counsel selected by Landlord) for any compensation, commission or fees
claimed by any other real estate broker or agent in connection with this
Lease or its negotiation by reason of any act of Tenant.
28. NOTICES.
All notices, approvals and demands permitted or required to be given
under this Lease shall be in writing and deemed duly served or given if
personally delivered or sent by certified or registered U.S. mail, return
receipt requested, postage prepaid, and addressed as follows: (a) if to
Landlord, to Landlord's Mailing Address and to the Building Manager, and
(b) if to Tenant, to Tenant's Mailing Address; provided, however, notices
to Tenant shall be deemed duly served or given if delivered or mailed to
Tenant at the Premises. Landlord and Tenant may from time to time by notice
to the other designate another place for receipt of future notices. If
mailed, notices shall be deemed given two (2) business days after mailing.
29. GOVERNMENT ENERGY OR UTILITY CONTROLS.
In the event of imposition of federal, state or local government
controls, rules, regulations, or restrictions on the use or consumption of
energy or other utilities during the Term, both Landlord and Tenant shall
be bound thereby. In the event of a difference in interpretation by
Landlord and Tenant of any such controls, the interpretation of Landlord
shall prevail, and Landlord shall have the right to enforce compliance
therewith, including the right of entry into the Premises to effect
compliance.
30. INTENTIONALLY OMITTED
31. QUIET ENJOYMENT.
Tenant, upon paying the Rent and performing all of its obligations
under this Lease, shall peaceably and quietly enjoy the Premises, subject
to the terms of this Lease and to any mortgage, lease, or other agreement
to which this Lease may be subordinate.
32. OBSERVANCE OF LAW.
Tenant shall not use the Premises or permit anything to be done in or
about the Premises which will, in any way, conflict with any law, statute,
ordinance or governmental rule or regulation now in force or which may
hereafter be enacted or promulgated. Tenant shall, at its sole cost and
expense, promptly comply with all laws, statutes, ordinances and
governmental rules, regulations or requirements now in
<PAGE>
force or which may hereafter be in force, and with the requirements
of any board of fire insurance underwriters or other similar bodies now or
hereafter constituted, relating to, or affecting the condition, use or
occupancy of the Premises, excluding structural changes not related to or
affected by Tenant's improvements or acts. The judgment of any court of
competent jurisdiction or the admission of Tenant in any action against
Tenant, whether Landlord is a party thereto or not, that Tenant has
violated any law, ordinance or governmental rule, regulation or
requirement, shall be conclusive of that fact as between Landlord and
Tenant.
33. FORCE MAJEURE.
Any prevention, delay or stoppage of work to be performed by Landlord
or Tenant which is due to strikes, labor disputes, inability to obtain
labor, materials, equipment or reasonable substitutes therefor, acts of
God, governmental restrictions or regulations or controls, judicial orders,
enemy or hostile government actions, civil commotion, fire or other
casualty, or other causes beyond the reasonable control of the party
obligated to perform hereunder, shall excuse performance of the work by
that party for a period equal to the duration of that prevention, delay or
stoppage. Nothing in this Section 33 shall excuse or delay Tenant's
obligation to pay Rent or other charges under this Lease.
34. SIGN CONTROL.
Tenant shall not affix, paint, erect or inscribe any sign,
projection, awning, signal or advertisement of any kind to any part of the
Premises, Building or Project, including without limitation, the inside or
outside of windows or doors, without the written consent of Landlord.
Landlord shall have the right to remove any signs or other matter,
installed without Landlord's permission, without being liable to Tenant by
reason of such removal, and to charge the cost of removal to Tenant as
Additional Rent hereunder, payable within ten (10) days of written demand
by Landlord.
35. RULES AND REGULATIONS.
It is the intention of Landlord that the Building shall be operated
at all times as a first-class office building, and Tenant covenants that it
will not engage in, or permit, any activities which are not consistent with
such standard. In furtherance of this purpose, but not in limitation
thereof, Tenant agrees to abide by the following rules and regulations, and
further agrees that Landlord may make such reasonable changes or additions
to such rules and regulations as it may deem necessary or advisable so long
as such additions or changes do not discriminate against Tenant, are
applied uniformly against all other tenants of the Building, and a copy of
any such changes or additions is delivered to Tenant:
(a) Any sign, lettering, picture, notice or advertisement installed
within the Premises which is visible from the public corridors within the
Building shall be installed in such manner, and be of such character and
style, as Landlord shall approve, in writing, in its reasonable discretion.
No sign, lettering, picture, notice or advertisement shall be placed on any
outside window or door or in a position to be visible from outside the
Building,
(b) Sidewalks, entrances, passages, courts, corridors, halls,
elevators and stairways in and about the Building shall not be obstructed
nor shall objects be placed against glass partitions, doors or windows
which would be unsightly from the Building's corridors or from the exterior
of the Building.
<PAGE>
(c) Except as otherwise provided herein, no animals, pets, bicycles
or any other vehicles shall be brought, or permitted to be, in the Building
or the Premises.
(d) Room to room canvasses to solicit business from other tenants
of the Building are not permitted.
(e) Tenant shall not waste electricity, water or air conditioning.
All controls shall be adjusted only by authorized Building personnel.
(f) Tenant shall not utilize the Premises in any manner which would
overload the standard heating, ventilating or air conditioning systems of
the Building.
(g) Tenant shall not Permit the use of any apparatus for sound
production or transmission in such manner that the sound so transmitted or
produced shall be audible or vibrations shall be detectable beyond the
Premises.
(h) Tenant shall not utilize any electronic, radiowave. microwave
or other transmitting, receiving or amplification device which would
disturb or interfere with any other tenant of the Building or the operation
of the Building generally.
(i) Tenant shall not utilize any equipment or apparatus in such
manner as to create any magnetic fields or waves which adversely affect or
interfere with the operation of any systems or equipment in the Building.
(j) Tenant shall keep all electrical and mechanical apparatus owned
by Tenant free of vibration, noise and air waves which may be transmitted
beyond the Premises.
(k) All corridor doors shall remain closed at all times.
(l) No locks or similar devices shall be attached to any door
except by Landlord and Landlord shall have the right to retain a key to all
such locks.
(m) Except in the case of Landlord's or Landlord's employees',
agents', or contractors' intentional or, to the extent permitted by law,
negligent acts or omissions, Tenant assumes full responsibility of
protecting the Premises from theft, robbery and pilferage. Except during
Tenant's normal business hours, Tenant shall keep all doors to the Premises
locked and other means of entry to the Premises closed and secured,
(n) Only machinery or mechanical devices of a nature directly
related to Tenant's ordinary use of the Premises shall be installed, placed
or used in the Premises and the installation and use of all such machinery
and mechanical devices is subject to the other rules contained in this
Lease.
(o) Except with the prior written approval of Landlord, which
approval shall not be unreasonably withheld or delayed, all cleaning,
repairing, janitorial, decorating, painting or other services and work in
and about the Premises shall be performed only by authorized Building
personnel.
(p) Except as otherwise specifically provided herein, safes,
furniture, equipment, machines and other large or bulky articles shall be
brought to the Building, and into and out of the Premises, at such times,
and in such manner, as Landlord shall direct (including the designation of
elevator), and at Tenant's sole risk and costs. Prior to Tenant's removal
of such articles form the Building, Tenant shall obtain written
authorization of the office of the Building and shall present such
authorization to a designated employee of Landlord.
<PAGE>
(q) Tenant shall not in any manner deface or damage the Building.
(r) Inflammables such as gasoline, kerosene, naphtha and benzene,
or explosives or any other articles of an intrinsically dangerous nature
are not permitted in the Building or the Premises without landlord's prior
written consent.
(s) Landlord shall advise the Tenant as to the maximum amount of
electrical current which can safely be used in the Premises, and shall
provide Tenant with a copy of the final electrical drawings for the
Premises, taking into account the capacity of the electrical wiring of
Building and the Premises and the needs of other tenants, and Tenant shall
not use more than such safe capacity. Landlord's consent to the
installation of electrical equipment shall, unless Tenant has actual
knowledge to the contrary, be deemed to be a determination that said
equipment is within such safe capacity.
(t) To the extent permitted by law, Tenant shall not permit
picketing or other union activity involving its employees in the Building,
except in those locations and subject to time and other constraints as to
which Landlord may give its prior written consent, which consent may be
withheld in Landlord's sole discretion.
(u) Tenant shall not enter into or upon the roof or basement of the
Building or any storage, heating, ventilation, air-conditioning, mechanical
or elevator machinery housing areas,
(v) Tenant shall not distribute literature, flyers, handouts or
pamphlets of any type in any of the common areas of the Building.
(w) Tenant shall not cook, otherwise prepare or sell any food or
beverages in or from the Premises, other than as is reasonably necessary in
order to accommodate Tenant's employees.
(x) Tenant shall not permit objectionable odors or vapors to
emanate from the Premises,
(y) Except as otherwise specifically provided with respect to the
Safe, Tenant shall not place a load upon any floor of the Premises
exceeding the floor load capacity for which such floor was designed or
allowed by law to carry.
(z) No floor coverings other than those provided for in the plans
and specifications for the original space improvements, shall be affixed to
any floor in the Premises by means of glue or other adhesive without
Landlord's prior written consent, which consent shall not be unreasonably
withheld or delayed.
(aa) The directories of the Building shall be used exclusively for
the display of the name and suite number of the tenants only and will be
provided at the expense of the Landlord. Additional names requested by
Tenant to be displayed in the directories must be approved by the Landlord
and, if approved, will be provided at the expense of the Landlord. Changes
in the directory listings requested by the Tenant after the Commencement
Date will be submitted to the Landlord for approval, which approval shall
not be unreasonably withheld or delayed, and, if approved, will be provided
at the expense of the Tenant.
(bb) Landlord and Tenant shall comply with all applicable laws,
ordinances, governmental orders or regulations and applicable orders or
directions from any public office or body having jurisdiction, with respect
to the Premises, the Building, the Property and their respective use or
occupancy thereof. Neither
<PAGE>
Landlord nor Tenant shall make or permit any use of the
Premises, the Building or the Property, respectively which is directly or
indirectly forbidden by law, ordinance, governmental regulation or order,
or direction of applicable public authority, or which may be dangerous to
person or property.
(cc) Tenant shall not take or permit to be taken in or out of other
entrances of the Building, or take or permit on other elevators, any item
normally taken in or out through service doors or in or on freight
elevators; and Tenant shall not, whether temporarily, accidentally or
otherwise, allow anything to remain in place or store anything in, or
obstruct in any way, any sidewalk, court, passageway, entrance or shipping
area. Tenant shall lend its full cooperation to keep such areas free from
all obstruction and in a clean and sightly condition, and move all
supplies, furniture and equipment as soon as received directly to the
Premises, and shall move all such items and waste (other than waste
customarily removed by Building employees) that are at any time being taken
from the Premises directly to the areas designated for disposal, All
courts, passageways, entrances, exits, elevators, escalators, stairways,
corridors, halls and roofs are not for the use of the general public and
Landlord shall, in all cases, retain the right to control and prevent
access thereto by all persons whose presence in the judgment of Landlord
shall be prejudicial to the safety, character, reputation and interests of
the Building and its tenants; provided, however, that nothing herein
contained shall be construed to prevent such access to persons with whom
Tenant deals within the normal course of Tenant's business unless such
persons are engaged in illegal activities, Neither Tenant nor any employee
or invitee of Tenant shall enter into areas reserved for the exclusive use
of Landlord, its employees or invitees.
(dd) Service requirements of Tenant will be attended to only upon
application at the office of the Building. Employees of Landlord shall not
perform any work or do anything outside of their duties unless under
special instructions from Landlord.
(ee) The toilet rooms, urinals, wash bowls and other apparatus
located in the Building shall not be used for any purpose other than that
for which they were constructed, and no foreign substance of any kind
whatsoever shall be thrown therein, and the expense of any breakage,
stoppage or damage resulting from the violation of this rule shall be borne
by Tenant if Tenant, or its employees or invitees, shall have caused it.
(ff) Landlord reserves the right to exclude or expel from the
Building any person who, in the judgment of Landlord, is intoxicated or
under the influence of liquor or drugs, or who shall in any manner do any
act in violation of any of the rules and regulations of the Building.
(gg) Except for the exclusive use of Tenant, its employees and
invitees, no vending machines of any description shall be installed,
maintained or operated without the written consent of Landlord. Landlord
hereby consents to Tenant's use of a commercial coffee service vendor of
its choice.
36. MISCELLANEOUS.
(a) Accord and Satisfaction; Allocation of Payments. No payment by
Tenant or receipt by Landlord of a lesser amount than the Rent provided for
in this Lease shall be deemed to be other than on account of the earliest
due Rent, nor shall any endorsement or statement on any check or letter
accompanying any check or payment as Rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without
prejudice to
<PAGE>
Landlord's right to recover the balance of the Rent or pursue
any other remedy provided for in this Lease. In connection with the
foregoing, Landlord shall have the absolute right, in its sole discretion,
to apply any payment received from Tenant to any account or other payment
of Tenant then not current and due or delinquent.
(b) Addenda. If any provision contained in any addendum to this
Lease is inconsistent with any other provision herein, the provision
contained in the addendum shall control, unless otherwise provided in the
addendum.
(c) Attorneys' Fees. If any action or proceeding is brought by
either party against the other pertaining to, or arising out of, this
Lease, the finally prevailing party shall be entitled to recover all costs
and expenses, including, but not limited to, reasonable attorneys' fees,
incurred on account of such action or proceeding.
(d) Captions; Section Numbers. The captions appearing within the
body of this Lease have been inserted as a matter of convenience and for
reference only and in no way define, limit or enlarge the scope or meaning
of this Lease. All references to Section numbers refer to Sections in this
Lease.
(e) Changes Requested by Lender. Neither Landlord nor Tenant shall
unreasonably withhold or delay its respective consent to changes or
amendments to this Lease requested by the lender on Landlord's interest, so
long as such changes do not alter the basic business terms of this Lease or
otherwise materially diminish any rights, or materially increase any
obligations, of the party from whom consent to such charge or amendment is
requested.
(f) Choice of Law. This Lease shall be construed and enforced in
accordance with the laws of the State.
(g) Consent. Notwithstanding anything contained in this Lease to
the contrary, Tenant shall have no claim, and hereby waives the right to
any claim against Landlord for money damages by reason of any refusal,
withholding or delaying by Landlord of any consent, approval or statement
of satisfaction, and in such event, Tenant's only remedies therefore shall
be an action for specific performance, injunction or declaratory judgment
to enforce any right to such consent, approval or statement of
satisfaction.
(h) Corporate Authority. If Tenant is a corporation, each
individual signing this Lease on behalf of Tenant represents and warrants
that he is duly authorized to execute and deliver this Lease on behalf of
the corporation, and that this Lease is binding on Tenant in accordance
with its terms. Tenant shall, at Landlord's request, deliver a certified
copy of a resolution of its board of directors authorizing such execution.
(i) Counterparts. This Lease may be executed in multiple
counterparts, all of which shall constitute one and the same Lease.
(j) Execution of Lease. The submission of this Lease to Tenant
shall be for examination purposes only, and does not and shall not
constitute a reservation, of or option for, Tenant to (ease, or otherwise
create any interest of Tenant in the Premises or any other premises within
the Building or Project. Notwithstanding the foregoing, execution of this
Lease by Tenant and its return to Landlord shall be binding upon Tenant but
shall not be binding on Landlord notwithstanding any time interval, until
Landlord has in fact signed and delivered this Lease to Tenant.
<PAGE>
(k) Furnishing of Financial Statements: Tenant's Representations.
In order to induce Landlord to enter into this Lease Tenant agrees that it
shall promptly furnish Landlord, from time to time, upon Landlord's
request, with financial statements reflecting Tenant's current financial
condition. Tenant represents and warrants that all financial statements,
records and information furnished by Tenant to Landlord in connection with
this Lease are true, correct and complete in all material respects.
(l) Further Assurances. The parties agree to promptly sign all
documents reasonably requested to give effect to the provisions of this
Lease.
(m) Prior Agreements: Amendments. This Lease contains all of the
agreements of the parties with respect to any matter covered or mentioned
in this Lease, and no prior agreement or understanding pertaining to any
such matter shall be effective for any purpose. No provisions of this Lease
may be amended or added to except by an agreement in writing signed by the
parties or their respective successors in interest.
(n) Recording. Tenant shall not record this Lease without the prior
written consent of Landlord. Tenant, upon the request of Landlord, shall
execute and acknowledge a "short form" memorandum of this Lease for
recording purposes.
(o) Severability. A final determination by a court of competent
jurisdiction that any provision of this Lease is invalid shall not affect
the validity of any other provision, and any provision so determined to be
invalid shall, to the extent possible, be construed to accomplish its
intended effect.
(p) Successors and Assigns. This Lease shall apply to and bind the
heirs, personal representatives, and permitted successors and assigns of
the parties.
(q) Time of the Essence. Time is of the essence of this Lease.
(r) Acceptance of Surrender: Consent. No act or conduct of
Landlord, including, without limitation, the acceptance of keys to the
Premises, shall constitute an acceptance of the surrender of the Premises
by Tenant before the expiration of the Term; Only a written notice from
Landlord to Tenant shall constitute acceptance of the surrender of the
Premises and accomplish a termination of the Lease. Landlord's consent to
or approval of, any act by Tenant requiring Landlord's consent or approval
shall not be deemed to waiver or render unnecessary Landlord's consent to
or approval of any subsequent act by Tenant.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease
as of the day and year first above written.
LANDLORD:
OP., L.L.C., an Illinois limited liability company
By: SPECTRUM REAL ESTATE SERVICES, INC.
By: ___________________________________
Its: ___________________________________
TENANT:
By: Ampersand Medical Corporation, Inc
By: __________________________________
Its: __________________________________
<PAGE>
EXHIBIT "A"
FLOOR PLAN OF PREMISES
<PAGE>
EXHIBIT "B"
LEGAL DESCRIPTION
Lots 15, 16, 17, and 18 in Block 10 in Higgins Law and Company's Addition
to Chicago, in the East Half of the North West Quarter of Section 9,
Township 39 North, Range 14 East of the Third Principal Meridian, in Cook
County, Illinois.
<PAGE>
Exhibit "E"
Base Rent and Other Provisions
1. Base Rent schedule shall be as follows:
Monthly
Year 1: 10/1/99 - 9/30/00 $4,387.50
Year 2: 10/1/00 - 9/30/01 $4,563.00
Year 3: 10/1/01 - 9/30/02 $4,745.52
Year 4: 10/1/02 - 9/30/03 $4,935.34
Year 5: 10/1/03 - 9/30/04 $5,132.75
EXHIBIT 10.13
- -------------
AMENDMENT TO LEASE WITH AMPERSAND MEDICAL, INC. AND O.P., LLC
Tenant: Ampersand Medical, Inc.
Building: 414 N. Orleans, Chicago, IL
Premises: Expansion to Suite 300, consisting of 795
square feet
Commencement Date: November 1, 1999
Term: November 1, 1999 - September 30, 2004
(coterminous with existing Lease for Suite 305)
Base Rent: $1,066 per month with four percent (4%)
annual escalation
Free Rent: November, 1999 and one-half (1/2) December,
1999
Common Area Rent: Base Year 1999
Security Deposit: Waived
Electricity: Tenant will be directly metered for
consumption of electricity from overhead
lights and wall outlets.
Agreed: Agreed:
__________________________ _________________________________
Ampersand, Inc. Spectrum Real Estate Services, Inc.
As agent for O.P., LLC Landlord.
EXHIBIT 10.14
- -------------
AMPERSAND MEDICAL CORPORATION
NOTE PURCHASE AGREEMENT
This note purchase agreement (this "Agreement") is made as of the
Closing Date (as defined below) by and between Ampersand Medical
Corporation, a Delaware corporation (the "Company"), with its principal
office at 414 North Orleans Street, Suite 305, Chicago, Illinois 60610 and
_________________________________________________ ("Purchaser").
RECITALS
The Company is undertaking the placement and sale (the "Offering") of
up to $1,500,000 principal amount of 6% Convertible Subordinated Notes due
2000, convertible into shares of the Company's common stock, no par value
(the "Common Stock") at a conversion price (the "Conversion Price") as
described in said notes. The notes will be sold by the Company to Purchaser
pursuant to Regulation D under the Securities Act of 1933, as amended (the
"Act") (the "Regulation D Purchasers").
AGREEMENT
In consideration of the mutual promises, representations, warranties
and conditions set forth in the Agreement, the Company and Purchaser agree
as follows:
1. PURCHASE AND SALE OF NOTE.
1.1 Issue of Note.
(a) The Company has authorized the issuance and sale to Purchaser,
in reliance upon the Purchaser's representations and warranties contained
in Section 4 and subject to the terms and conditions set forth herein, a 6%
Convertible Subordinated Note in the principal amount of $100,000 (the
"Note"), convertible into up to 500,000 shares of Common Stock (the
"Conversion Shares") pursuant to the exchange of the Note.
(b) In reliance upon the representations and warranties of the
Company contained herein, and subject to the terms and conditions set forth
herein, Purchaser agrees to purchase the Note.
2. CLOSING DATE; DELIVERY.
2.1 Closing. The closing of the sale and purchase of the Note under
this Agreement (the "Closing") shall be held at 11:00 am. (Central Standard
Time) on a date mutually agreeable to the Company and Purchaser, but in no
event later than June 4, 1999 (the "Closing Date"), at the offices of the
Company, or at such other place as the Company decides.
2.2 Delivery. At the Closing, subject to the terms and conditions
hereof, the Company will deliver to Purchaser the Note subscribed for by
Purchaser, dated as of the Closing Date, against payment of the purchase
price therefor by wire transfer, unless other means of payment shall have
been agreed upon by the Purchaser and the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Subject to and except as disclosed by the Company in the Confidential
Private Offering Memorandum (the "Offering Memorandum"), the Company
represents and warrants to Purchaser as of the date hereof as follows, and
all such representations and warranties shall be true and correct as of the
Closing Date as if then made and shall survive the Closing:
<PAGE>
3.1 Organization. The Company is a corporation, duly incorporated,
validly existing and in good standing under the laws of Delaware. The
Company has all requisite power and authority to own or lease its
properties and to conduct its businesses as now conducted. The Company
holds all licenses and permits required for the conduct of its business as
now conducted, which, if not obtained, would have a material adverse effect
on the business, financial condition or results of operations of the
Company taken as a whole. The Company is qualified as foreign or domestic
corporations and is in good standing in all states where the conduct of its
business or its ownership or leasing of property requires such
qualification, except where failure to so qualify would not have a material
adverse effect on the business, financial condition or results of
operations of the Company taken as a whole.
3.2 Capitalization. As of the date hereof, taking into account the
transaction contemplated hereby, the authorized capital stock of the
Company consists of 50,000,000 shares of Common Stock, 12,000,000 of which
are issued and outstanding, warrants for the purchase of an additional
3,175,850 shares of Common Stock, stock appreciation rights for an
additional 450,000 shares of Common Stock, and subordinated notes
convertible into 4,545,455 shares of Common Stock, (subject to adjustment
in certain circumstances). All of the issued and outstanding shares of
Common Stock have been duly authorized, validly issued and are hilly paid
and non-assessable. Except as stated in the Offering Memorandum and in this
Section 3.2, there are no existing subscriptions, options, warrants, calls,
commitments, agreements, conversion or other rights of any character
(contingent or otherwise) to purchase or otherwise acquire from the Company
at any time, or upon the happening of any stated event, any shares of the
capital stock of the Company, respectively.
3.3 Authority. The Company has all requisite corporate power and
authority to enter this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company,
and upon its execution and delivery by the Company, such document will
constitute a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, and subject as to
enforceability to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditor's rights from
time to time in effect and subject to general equity principles.
3.4 Issuance of the Note. The Note, when issued against payment
therefor pursuant to the terms of this Agreement, will be duly and validly
authorized and issued, hilly paid and nonassessable.
3.5 No Conflict with Law or Documents. The execution, delivery and
consummation of this Agreement and the transactions contemplated hereby
will not: (a) conflict with any provisions of the certificate of
incorporation of the Company, as amended to date, or the bylaws of the
Company, as amended to date; or (b) result in any violation of or default
or loss of a benefit under, or permit the acceleration of any obligation
under (in each case, upon the giving of notice, the passage of time, or
both) any mortgage, indenture, lease, agreement or other instrument,
permit, franchise, license, judgment, order, decree, law, ordinance, rule
or regulation applicable to the Company or its properties.
3.6 Consents, Approvals and Private Offering. Except for any
filings required under federal and applicable state securities laws, all of
which shall have been made as of the Closing Date to the extent required as
of such time, no consent, approval, order or authorization of, or
registration, declaration or filing with, any federal, state, local or
foreign governmental authority is required to be made or obtained by the
Company in connection with the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby.
<PAGE>
3.7 Absence of Certain Developments. Except as described in the
Offering Memorandum, since September 30, 1998, the Company has not: (a)
incurred or become subject to any material liabilities (absolute or
contingent) except current liabilities incurred, and liabilities under
contracts entered into, in the ordinary course of business, consistent with
past practices; (b) mortgaged, pledged or subjected to any lien, charge or
other encumbrance any of its assets, tangible or intangible; (c) sold,
assigned or transferred any of its assets or canceled any debts or
obligations except in the ordinary course of business, consistent with past
practices; (d) suffered any extraordinary losses, or waived any rights of
substantial value; (e) entered into any material transaction other than in
the ordinary course of business, consistent with past practices; or (f)
otherwise had any change in its condition, financial or otherwise, except
as shown on or reflected in the consolidated balance sheet as of March 31,
1999 that is included in the Company's 1999 First Quarter Form 10-Q, except
for changes in the ordinary course of business, consistent with past
practices, none of which individually or in the aggregate has been
materially adverse.
3.8 Litigation. There are no actions, suits, proceedings or
investigations pending, or to the Company's knowledge, threatened against
or affecting the Company that in the aggregate could reasonably be
anticipated to result in any material adverse effect on the Company.
3.9 Disclosure. The Offering Memorandum does not contain any untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
3.10 Year 2000 Compliance. The Company has reviewed its products,
business and operations which could be adversely affected by the risk that
computer applications developed, marketed, sold and delivered or used by
the Company may be unable to recognize and properly perform date-sensitive
functions involving dates prior to and after December 31, 1999 (the "Year
2000 Problem"). The Company's products and services provided or delivered
to its customers and the Company's internal information and business
systems will be able to perform properly date-sensitive functions for all
dates before and after January 1, 2000. In addition, the Company has
surveyed those vendors, suppliers and other third parties (collectively,
the "Outside Parties") with which the Company does business and whose
failure to adequately address the Year 2000 Problem could have a material
adverse effect on the business, financial condition or results of
operations of the Company taken as a whole. Based upon the aforementioned
internal review and surveys of the Outside Parties, the Year 2000 Problem
has not resulted in, and is not reasonably expected to have, a material
adverse effect on the business, financial condition or results of
operations of the Company taken as a whole.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
Purchaser represents, warrants and covenants with the Company as
follows:
4.1 Legal Power. Purchaser has the requisite power and authority to
enter into this Agreement, to purchase the Note hereunder, and to carry out
and perform its obligations under the terms of this Agreement.
4.2 Due Execution. This Agreement has been duly authorized,
executed and delivered by the Purchaser and, upon due execution and
delivery by the Company, this Agreement will be a valid and binding
agreement of the Purchaser.
<PAGE>
4.3 Investment Representations.
(a) Purchaser is acquiring the Note for its own account, not as
nominee or agent, for investment and not with a view to or for resale in
connection with, any distribution or public offering thereof within the
meaning of the Act, except pursuant to an effective registration statement
under the Act.
(b) Purchaser understands that: (i) neither the Note nor the
Conversion Shares have been registered under the Act by reason of a
specific exemption therefrom, and may not be transferred or resold except
pursuant to an effective registration statement or exemption from
registration; (ii) each certificate representing the Conversion Shares will
be endorsed with the following legends:
A) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM AND UPON
DELIVERY TO THE ISSUER OF THESE SECURITIES AN OPINION OF COUNSEL IN FORM
AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS; and
B) Any legend required to be placed thereon by applicable
federal or state securities laws;
and (iii) the Company will instruct any transfer agent not to register the
transfer of any of the Conversion Shares unless the conditions specified in
the foregoing legends are satisfied.
(c) Purchaser has received and reviewed the Offering Memorandum. In
addition, Purchaser has been furnished with such materials and has been
given access to such information relating to the Company as it or its
qualified representative has requested and has been afforded the
opportunity to ask questions regarding the Company and the Note, all as
Purchaser has found necessary to make an informed investment decision.
(d) Purchaser is an "accredited investor" as such term is defined
in Rule 501 of Regulation D under the Act and was not formed for the
specific purpose of acquiring the Note.
(e) Purchaser is not a resident of Canada or any territory thereof.
5. COVENANTS OF THE COMPANY.
5.1 Information. The Company shall deliver to the Purchaser all
annual, quarterly or other reports furnished to the public security
holders; provided that if the Company is not subject to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Company will promptly furnish to the Purchaser: (i) as
soon as available, and in any event within 90 days after the end of each
fiscal year of the Company, a consolidated balance sheet of the Company and
its consolidated subsidiaries, if any, as of the end of such fiscal year
and the related consolidated statements of income, stockholders' equity and
cash flows for such fiscal year, setting forth in each case in comparative
form the figures for the previous fiscal year, all prepared in accordance
with generally accepted accounting principles and reported on by
independent certified public accountants of recognized national standing;
and (ii) as soon as available, and in any event within 45 days after the
end of each of the first three fiscal quarters of each fiscal year of the
<PAGE>
Company, a consolidated balance sheet of the Company and its consolidated
subsidiaries, if any, as of the end of such quarter and the related
consolidated statements of income and stockholders' equity (together with
any other quarterly financial statements being prepared by the Company at
such time), setting forth in each case in comparative form the figures for
the corresponding quarter and the corresponding portion of the Company's
previous fiscal year, all certified (subject to normal year-end
adjustments) as to fairness of presentation and consistency by the chief
financial officer or the chief accounting officer of the Company.
5.2 Conducting the Offering. The Company will conduct the Offering
under Regulation D of the Act, and the Company represents as follows:
(a) Sales to Accredited Investors. The Company will only make
offers and sales of notes through the Offering to Regulation D Purchasers
or potential Regulation D Purchasers it reasonably believes to be
"accredited investors" as that term is defined in Rule 501(a) of Regulation
D under the Act;
(b) Regulation D Compliance. Offers and sales of notes through the
Offering will be made in compliance with Regulation D, and the Company has
not and shall not offer to sell notes through the Offering by any form of
general solicitation or general advertising that is prohibited by Rule
502(c) of Regulation D under the Act.
(c) Compliance Generally. The Company has and will observe all
securities laws and regulations applicable to it in any jurisdiction in
which it has or may offer, sell or deliver notes through the Offering and
it will not, directly or indirectly, offer, sell or deliver notes through
the Offering or distribute or publish any prospectus, circular,
advertisement or other offering material in relation to notes through the
Offering in or from any state in the United States or country or
jurisdiction except under circumstances that will result in compliance with
any applicable laws and regulations.
(d) Blue Sky Compliance. The Company will comply with the state
securities or blue sky laws of each state in which notes are offered
through the Offering.
5.3 Additional Covenants.
(a) The Company shall timely file all such documents required to be
filed by it pursuant to the Exchange Act in order to permit sales under
Rule 144 of the Act.
(b) During any period in which the Company is not subject to
Section 13 or 15(d) of the Exchange Act, the Company shall make available
information required to be provided by Rule 144(d)(4), upon request.
(c) Upon the request of the Purchaser and the certification of the
Purchaser that it qualifies under Rule 144(k) of the Act, the Company
shall, without further requirement, remove all restrictive legends from the
Purchaser's securities, insofar as such restrictions relate to the transfer
of such securities under the Act.
<PAGE>
6. CONDITIONS TO CLOSING.
6.1 Conditions to Obligations of the Purchaser. The Purchaser's
obligation to purchase the Note at the Closing is subject to the
fulfillment, at or prior to such Closing, of all of the following
conditions:
(a) Representations and Warranties True; Performance of
Obligations. The representations and warranties made by the Company in
Section 3 shall be true and correct in all material respects on the Closing
Date with the same force and effect as if they had been made on and as of
said date; except as described in or contemplated by the Offering
Memorandum, the business, assets, financial condition and results of
operations of the Company shall not have been adversely affected in any
material way prior to the Closing Date; and the Company shall have
performed all obligations and conditions herein required to be performed by
it on or prior to the Closing Date.
(b) Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Closing hereby and
all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchaser.
(c) Qualifications, Legal Investment. All authorizations, approvals
or permits, if any, of any governmental authority or regulatory body of the
United States or of any state that are required in connection with the
lawful sale and issuance of the Note pursuant to this Agreement shall have
been duly obtained and shall be effective on and as of the Closing Date. No
stop order or other order enjoining the sale of the Note shall have been
issued and no proceedings for such purpose shall be pending or, to the
knowledge of the Company, threatened by the SEC, or any commissioner of
corporations or similar officer of any state having jurisdiction over this
transaction. At the time of the Closing, the sale and issuance of the Note
shall be legally permitted by all laws and regulations to which the
Purchaser and the Company are subject.
6.2 Conditions to Obligations of the Company. The Company's
obligation to issue and sell the Note at the Closing is subject to the
fulfillment to the Company's satisfaction, on or prior to the Closing, of
the following conditions:
(a) Representations and Warranties True. The representations and
warranties made by the Purchaser in Section 4 shall be true and correct at
the Closing Date with the same force and effect as if they had been made on
and as of the Closing Date.
(b) Performance of Obligations. Purchaser shall have performed and
complied with all agreements and conditions required to be performed or
complied with by it on or before the Closing Date, and Purchaser shall have
delivered payment to the Company in respect of its purchase of Note.
(c) Qualifications, Legal Investment. All authorizations, approvals
or permits, if any, of any governmental authority or regulatory body of the
United States or of any state that are required in connection with the
lawful sale and issuance of the Note pursuant to this Agreement shall have
been duly obtained and shall be effective on and as of the Closing Date. No
stop order or other order enjoining the sale of the Note shall have been
issued and no proceedings for such purpose shall be pending or threatened
by the SEC or any commissioner of corporations or similar officer of any
state having jurisdiction over this transaction. At the time of the
Closing, the sale and issuance of the Note shall be legally permitted by
all laws and regulations to which Purchaser and the Company are subject.
<PAGE>
7. MISCELLANEOUS.
7.1 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Illinois as applied to agreements
among Illinois residents, made and to be performed entirely within the
State of Illinois without regard to principles of conflict of laws.
7.2 Indemnification. The Company agrees to indemnify the Purchaser
and each officer, director, employee, agent, partner, stockholder and
affiliate of the Purchaser (collectively, the "Indemnified Parties") for,
and hold each Indemnified Party harmless from and against: (1) any and all
damages, losses, claims and other liabilities of any and every kind,
including, without limitation, judgments and costs of settlement, and (ii)
any and all out-of-pocket costs and expenses of any and every kind,
including, without limitation, reasonable fees and disbursements of counsel
for such Indemnified Parties (all of which expenses periodically shall be
reimbursed as incurred), in each case, arising out of or suffered or
incurred in connection with any of the following: (a) any misrepresentation
or any breach of any warranty made by the Company herein or in the Note,
(b) any breach or non-fulfillment of any covenant or agreement made by the
Company herein or in the Note, and (c) any claim relating to or arising out
of a violation of applicable federal or state securities laws by the
Company in connection with the sale of the Note by the Company.
7.3 Survival. All representations, warranties, covenants and
agreements contained in or made pursuant to this Agreement or contained in
any certificate delivered pursuant to this Agreement, shall remain
operative and in full force and effect, regardless of any investigation
made by or on behalf of any party hereto, and shall survive the transfer
and payment for the Note and the consummation of the transactions
contemplated hereby.
7.4 Successors and Assigns. Except as otherwise expressly provided,
the provisions hereof shall inure to the benefit of, and be binding upon,
the successors, assigns, heirs, executors and administrators of the
parties.
7.5 Entire Agreement. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement among the parties with regard to the subjects hereof and no party
shall be liable or bound to any other party in any manner by any
representations, warranties, covenants or agreements except as specifically
set forth herein. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly
provided.
7.6 Separability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, it shall to the extent practicable, be
modified so as to make it valid, legal and enforceable and to retain as
nearly as practicable the intent of the parties, and the validity, legality
and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
7.7 Amendment and Waiver. Except as otherwise provided, any term of
this Agreement may be amended, and the observance of any term of this
Agreement may be waived (either generally or in a particular instance,
either retroactively or prospectively, and either for a specified period of
time or indefinitely), with the written consent of the Company and
Purchaser. Any amendment or waiver effected in accordance with this section
shall be binding upon each future holder of any security purchased under
this Agreement (including securities into which such securities have been
converted) and the Company.
<PAGE>
7.8 Notices. All required or permitted notices and other
communications shall be in writing and shall be deemed effectively given
upon personal delivery, on the first business day following mailing by
overnight courier, or on the fifth day following mailing by registered or
certified mail, return receipt requested, postage prepaid, addressed to the
Company and Purchaser at the respective addresses included herein.
7.9 Fees and Expenses. The Company shall pay its own expenses and
legal fees incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby and shall pay the reasonable and
documented legal fees and expenses of the Purchaser incurred on its behalf
with respect to this Agreement and the transactions contemplated hereby.
7.10 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and
are not to be considered in construing this Agreement.
7.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on
the date first written above.
AMPERSAND MEDICAL CORPORATION
By: _______________________________
Its: _______________________________
ATTEST:
By: _______________________________
Its: _______________________________
PURCHASER:
By: ________________________________
Its: ________________________________
EXHIBIT 10.15
- -------------
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT
TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE
WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
AMPERSAND MEDICAL CORPORATION
6% CONVERTIBLE SUBORDINATED NOTE DUE 2000
$100,000
June 4, 1999
1. Principal and Interest. AMPERSAND MEDICAL CORPORATION, a
corporation duly organized and existing under the laws of the State Of
Delaware (the "Company", which term includes any successor), for value
received, hereby promises to pay to the order of ____________________, or
any successor in interest registered on the books of the Company (the
"Holder") in lawful money of the United States at the address of the Holder
set forth below, the principal sum of One Hundred Thousand and 00/100
Dollars ($100,000) on January 28, 2000 (the "Maturity Date") which date may
be extended by the Company to June 30, 2000 (the "Extended Maturity Date"),
together with simple interest from the date hereof, computed on the basis
of a 360-day year of twelve 30-day months in arrears from the date of
original issuance hereof until the Maturity Date or the Extended Maturity
Date to Holders of record of the Notes at the rate set forth in the
following paragraph until the principal hereof is paid or made available
for payment.
The interest rate on this Note will be 6% per annum from the date of
original issuance. On the Maturity Date or the Extended Maturity Date, the
Company will pay, in lieu of the payment in whole or in part of interest in
cash on this Note, pay interest on this Note through the issuance of
additional shares of Common Stock of the Company at a conversion price as
defined in subsection 2(a) below in an aggregate principal amount equal to
the amount of interest that would be payable with respect to this Note, if
such interest were paid in cash.
This Note is one of a series of Notes that the Company contemplates
issuing to holders pursuant to a plan to raise no more than One Million
Five Hundred Thousand and 00/1 00 ($1,500,000.00) of proceeds currently
being undertaken by the Company, convertible into Common Stock at a
Conversion Price defined in subsection 2(a) below (the "$1,500,000 Debt
Offering).
2. Conversion.
(a) Conversion Price. Subject to and upon compliance with the
provisions of this Section 2, the principal amount of this Note (or any
portion hereof that is a multiple of $1,000 or a whole multiple thereof)
shall be convertible into shares of the Company's common stock, no par
value per share (the "Common Stock") at the conversion price (the
"Conversion Price") per each share of Common Stock that is the lesser of
(i) $0.33; (ii) 40% of the lowest conversion price established by the
Company in the contemplated offering by its subsidiary, Ampersand Medical
Corporation ("Ampersand") of $17,000,000 of 6% Convertible Subordinated
Notes due 1999 (the "1999 Debt Offering"); (iii) 40% of the lowest
conversion price below $0.75 in any other offering of debt securities of
the Company in substitution for the 1999 Debt Offering; or (iv) 40% of the
lowest price below $0.75 in any offering of equity securities of the
Company in substitution for the 1999 Debt Offering; provided, however, that
(x) under no circumstances shall the Conversion Price be less than $0.20
per share, (y) provisions (iii) and (iv) of this subsection shall not apply
to the $1,500,000 Debt Offering, and (z) all prices contemplated by (i)
through (iv) and (x) of this subsection shall be appropriately adjusted for
any combination, consolidation stock split or other recapitalization of the
Company.
(b) Automatic Conversion. This Note shall be automatically
converted by the Company into shares of Common Stock at the Conversion
Price immediately upon the satisfaction of the following condition: (i) the
Company's receipt of at least Five Million and 00/100 Dollars ($5,000,000)
as part of the 1999 Debt Offering or any other offering of debt or equity
securities of the Company, such minimum amount not to include the
$1,500,000 Debt Offering.
(c) Optional Conversion. The Holder may, upon notice to the
Company, convert this Note into shares of Common Stock at the Conversion
Price at any time.
(d) Mechanics of Conversion. No conversion notice shall be
necessary in the event of an automatic conversion pursuant to Section 2(b).
In the case of an automatic conversion pursuant to Section 2(b), such
conversion shall be deemed to have been made immediately following the
later to occur of (i) the receipt by the Company of a minimum amount of
$5,000,000 in accordance with Section 2(b) above, and the person or persons
entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holders of such
shares of Common Stock on such date.
(d) Reclassification, etc. If the Company at any time shall, by
subdivision, combination or reclassification of securities or otherwise,
change any of the securities into which this Note is convertible into the
same or a different number of securities of any class or classes, the
shares of Common Stock or other securities into which this Note is
convertible shall thereafter be convertible into the kind and number of
shares of stock or other securities or property of the Company or otherwise
to which the Holder would have been entitled if immediately prior to such
change the Holder had acquired the shares of Common Stock or other
securities into which this Note is convertible. If shares of the Company's
Common Stock or other securities purchasable hereunder are subdivided or
combined into a greater or smaller number of shares, the Conversion Price
under this Note shall be proportionately reduced in case of subdivision of
shares or proportionately increased in the case of combination of shares.
No adjustment on account of cash dividends or interest on the Company's
Common Stock or other securities into which this Note is convertible will
be made to the Conversion Price under this Note.
(e) Notice of Adjustment. Upon any adjustment of the securities
issuable upon conversion of this Note, the Conversion Price for the shares,
and/or any increase or decrease in the number of shares into which this
Note is convertible upon conversion of this Note, the Company shall give
written notice thereof, by first class mail, postage prepaid, addressed to
the Holder at the address of the Holder as shown on the books of the
Company.
(f) Fractional Shares. The Company shall not be required to issue
fractions of shares of Common Stock upon conversion of this Note. In lieu
of any fractional shares to which the Holder of this Note would otherwise
be entitled, the Company shall pay cash equal to such fraction multiplied
by the fair market value of the Common Stock as determined by the Board of
Directors of the Company, whose determination shall be conclusive.
(g) No Rights as Stockholder. This Note does not entitle the Holder
to any voting rights or other rights as a stockholder of the Company prior
to the conversion hereof.
3. Subordination.
(a) "Senior Indebtedness" means the principal of and premium, if
any, and interest on indebtedness of the Company for money borrowed from
commercial banks, equipment lessors, government instrumentalities or other
financial institutions under a secured or unsecured line of credit, term
loan or equipment lease.
(b) The Company agrees and the Holder, by acceptance of this Note,
agrees, expressly for the benefit of the present and future holders of
Senior Indebtedness, that, except as otherwise provided herein, upon: (1)
an event of default under any Senior Indebtedness; or (ii) any dissolution,
winding up or liquidation of the Company, whether or not in bankruptcy,
insolvency or receivership proceedings, the Company shall not pay, and the
Holder of this Note shall not be entitled to receive, any amount in respect
of the principal and interest of this Note unless and until the Senior
Indebtedness shall have been paid or otherwise discharged. Upon:
(1) an event of default under any Senior Indebtedness; or (2) any
dissolution, winding up or liquidation of the Company, any payment or
distribution of assets of the Company, which the Holder of this Note would
be entitled to receive but for the provisions hereof, shall be paid by the
liquidating trustee or agent or other person making such payment or
distribution directly to the holders of Senior Indebtedness ratably
according to the aggregate amounts remaining unpaid on Senior Indebtedness
after giving effect to any concurrent payment or distribution to the
holders of Senior Indebtedness. Subject to the payment in full of the
Senior Indebtedness and until this Note is paid in full, the Holder of this
Note shall be subrogated to the rights of the holders of the Senior
Indebtedness (to the extent of payments or distributions previously made to
the holders of Senior Indebtedness pursuant to this paragraph 3(b) to
receive payments or distributions of assets of the Company applicable to
the Senior Indebtedness).
(c) This Section 3 is not intended to impair, as between the
Company, its creditors (other than the holders of Senior Indebtedness) and
the Holder of this Note, the unconditional and absolute obligation of the
Company to pay the principal of and interest on this Note or to affect the
relative rights of the Holder of this Note and the other creditors of the
Company, other than the holders of Senior Indebtedness. Nothing in this
Note shall prevent the Holder of this Note from exercising all remedies
otherwise permitted by applicable law upon default under this Note, subject
to the rights, if any, of the holders of Senior indebtedness in respect to
cash, property or securities of the Company received upon the exercise of
any such remedy.
4. Redemption. This Note may not be redeemed prior to the Maturity
Date. Should the Company elect to extend the term of this Note, the Note
may not be redeemed prior to the Extended Maturity Date.
5. Place of Payment. All payments due to the Holder hereunder
shall be paid to the Holder at the address that the Holder shall have given
written notice to the Company.
6. Events of Default and Remedies. If any of the following events
of default (individually, an "Event of Default") shall occur for any reason
whatsoever (and whether it shall be voluntary or involuntary or occur or be
affected by operation of law or otherwise):
(a) The Company fails to make payment when due of any principal or
interest payable under this Note, and such failure continues for a period
of ten days after written notice that such payment is due and unpaid;
(b) The Company defaults in the observance or performance of any
material agreement or condition under this Note or the Note Purchase
Agreement dated of even date herewith, between the Company and Purchaser
(the "Note Purchase Agreement"), and such default continues for a period of
30 days after written notice of such default is given to the Company by the
Holder;
(c) Any representation or warranty made by the Company in the Note
Purchase Agreement shall prove to have been false in any material respect
in the date when made;
(d) The Company shall default under any material agreement for
borrowed money that causes the other party thereto to accelerate such
obligation;
(e) The Company shall: (i) file, or consent by answer or otherwise
to the filing against it of a petition for relief or reorganization or
arrangement or any other petition in bankruptcy or insolvency law of any
jurisdiction; (ii) make an assignment for the benefit of its creditors;
(iii) consent to the appointment of a custodian, receiver, trustee or other
officer with similar powers of itself or of any substantial part of its
property; (iv) be adjudicated insolvent or be liquidated; or (v) take
appropriate action for the purpose of any of the foregoing; or
(f) A court or governmental authority of competent jurisdiction
shall enter an order appointing a custodian, receiver, trustee or other
officer with similar powers with respect to the Company or any substantial
amount of its properties, or if an order for relief with respect to the
Company shall be entered in any case or proceeding for liquidation or
reorganization or otherwise to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution, winding up
or liquidation of the Company, or if any petition for any such relief shall
be filed against the Company, and such order or petition shall not be
dismissed or stayed within 60 days after the date of such filing, then
automatically upon the occurrence of such Event of Default the entire
unpaid principal amount of, and the unpaid accrued interest on, this Note
shall become immediately due and payable.
7. Additional Remedies. If any Event of Default hereunder shall
have occurred, the Holder may proceed to protect and enforce its rights
under this Note by exercising such remedies as are available to it in
respect thereof under the terms of this Note or applicable law, either by
suit in equity or by action at law, or both, whether for specific
performance of any agreement contained in this Note or in aid of the
exercise of any power granted in this Note. No remedy is intended to be
exclusive and each such remedy shall be cumulative.
8. Transfer.
(a) The transfer of this Note is registrable by the Holder hereof
in person or by his attorney duly authorized in writing on the books of the
Company. Upon surrender and cancellation of this Note upon any such
transfer, a new Note for the same aggregate principal amount will be issued
to the transferee in exchange herefor.
(b) The Company and any transfer or conversion agent may deem and
treat the person in whose name this Note shall be registered upon the books
of the Company as the absolute owner of this Note (whether or not his Note
shall be overdue and notwithstanding any notation of ownership or other
writing hereon) for all other purposes, and neither the Company nor any
transfer or conversion agent shall be affected by any notice to the
contrary. All such payments shall be valid and effectual to satisfy and
discharge the liability on this Note to the extent of the sum or sums so
paid.
9. Registration Rights. The Company shall register all of the
shares of Common Stock held by Holder and all of the shares of Common Stock
received pursuant to the conversion of this Note by filing a registration
statement on Form S-3 (or any successor form thereto or any other forms
then available to the Company for registration of securities), and cause
such registration statement to be declared effective on or prior to the
twelve-month anniversary date of the issuance of this Note. The Company
shall cause such registration statement to remain effective for five years
following the initial registration. If the Company fails to fails to
register Holder's Common Stock pursuant to this Section 9, the Company
shall pay to Holder liquidated damages in an amount equal to five percent
(5%) per month (or any part thereof), compounded monthly, on the amount of
the face value of this Note, until such time as the Company is no longer in
breach of this Section 9. Any payments due to Holder pursuant to this
Section 9 shall be made no later than the fifteenth day of the month
following the month in which such liquidated damages were incurred.
10. Attorney Fees.
(a) If the indebtedness represented by this Note or any part thereof
is collected in bankruptcy, receivership or other judicial proceedings or
if this Note is placed in the hands of attorneys for collection after
default, the Company agrees to pay, in addition to the principal and
interest payable hereunder, reasonable attorneys' fees and costs incurred
by the Holder.
11. Notices, All notices, reports and other communications required
or permitted hereunder shall be in writing and may be delivered in person,
by telecopy with written confirmation, overnight delivery service or U.S.
mail, in which event it may be mailed by first-class, certified or
registered, postage prepaid, addressed to the Holder at its address as
shown on the books of the Company or to the Company at 414 North Orleans
Street, Suite 305, Chicago, Illinois 60610, Attention: Chief Executive
Officer.
Each such notice, report or other communication shall for all
purposes under this Note be treated as effective or having been given when
delivered if delivered personally or, if sent by mail, at the earlier of
its receipt or five days after the same has been deposited in a regularly
maintained receptacle for the deposit of the United States mail, addressed
and mailed as aforesaid or, if sent by telecopier with written
confirmation, at the earlier of: (i) 24 hours after confirmation of
transmission by the sending telecopier machine; or (ii) delivery of written
confirmation.
12. Amendments. Consents and Waivers. This Note may be amended at
any time and from time to time to add to, eliminate or modify the terms and
provisions hereof and the rights of the Holder hereunder with the written
consent of the Company and the Holder; provided, however, that no such
change shall terminate or impair the subordination provisions of this Note
without the prior written consent of the holders of Senior Indebtedness.
Any amendment, waiver or consent by the Holder of this Note shall be
conclusive and binding upon such Holder and any future Holder of this Note
and of any Note issued in exchange or substitution herefor, irrespective of
whether or not any notation of such amendment, waiver or consent is made
upon this Note or such exchanged or substituted Note. The Company hereby
waives presentment, demand for performance, notice of non-performance,
protest, notice of protest and notice of dishonor. No delay on the part of
the Holder in exercising any right hereunder shall operate as a waiver of
such right or any other right.
13. No Recourse. No recourse shall be had for the payment of the
principal or interest on this Note, or any claim based hereon, or otherwise
in respect hereof, this Note, against any incorporator, stockholder,
officer or director, as such, past, present or future, of the Company or
any successor Company, whether by virtue of any constitution, statute or
rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part
of the consideration for the issue hereof, expressly waived and released.
14. Payment Due on Holidays. If the principal of or interest on
this Note falls due on a Saturday, Sunday or legal holiday at the place of
payment, such payment shall be made on the next succeeding business day and
such extended time shall be included in computing interest.
15. Severability. If any provision of this Note shall be held
invalid under any applicable laws, such invalidity shall not affect any
other provision of this Note that can be given effect without the invalid
provision and, to this end, the provisions hereof are severable.
16. Governing Law. This Note is being delivered in and shall be
construed in accordance with the laws of the State of Illinois, without
regard to the conflicts of laws provisions thereof.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
Company has caused this Note to be executed and delivered by its proper and
duly authorized officers as of the date first above written.
AMPERSAND MEDICAL CORPORATION
BY: _________________________________
NAME: Peter P. Gombrich
TITLE: Chief Executive Officer
Attest:
BY:_______________________________
NAME: Leonard Prange
TITLE: President
EXHIBIT 10.16
- -------------
SCHEDULE OF HOLDERS OF 6% CONVERTIBLE SUBORDINATED NOTES DUE 2000
Principal Base
Date of Amount Conv.
Note of Note Shs Name
-------- ---------- ---------- --------------------
3/1/99 $500,000 1,515,152 Seaside Partners
4/7/99 $100,000 303,030 Suzanne Musikantow
4/19/99 $33,000 100,000 Univest Mgt. E.P.S.P.,
c/o Frank Gerondi
5/11/99 $75,000 227,273 Leonard R. Prange
5125/99 $6,600 20,000 Kathleen B. Hanley
5/31/99 $50,000 151,515 D. Craig Wright
6/3/99 $100,000 303,030 Howard A. Hackett
6/3/99 $30,000 90,909 Gregory A. Booth
6/4/99 $25,000 75,758 Robert Cecchini
6/4/99 $25,000 75,758 Andrew K. Strange
-------- ---------
$969,600 2,938,183
======== =========
EXHIBIT 10.17
- -------------
SENIOR CONVERTIBLE PROMISSORY NOTE
Date: December 10, 1999 (Evidenced by receipt of wired
funds to the account of Ampersand Medical Corporation)
Borrower: Ampersand Medical Corporation
Lender: Azimuth Corporation
Type: Senior Convertible Promissory Note, senior to all
currently outstanding debt.
Principle: $50,000.00
Term: 75 days from date.
Interest Rate: 12% per annum, payable on the due date of the note
Conversion: At the option of the noteholder, the principle
amount of the note and any accrued interest due thereon may be converted
into shares of common stock of the Company at a conversion rate of $0.20
per share. Such conversion election may be made at any time during the 75-
day term of the note.
Penalty Provision: If the Company fails to pay the note and accrued
interest in full on the due date, the Company shall be deemed to be in
default on the note. The Company shall have a thirty-day cure period to
remedy such default. Immediately following such default, the following
adjustments shall be made to the terms of the note: (1) the interest rate
on the unpaid principle amount of the note shall increase from 12% to 15%,
and (2) the noteholders option to convert the principle amount of the note
and any accrued interest due thereon into shares of common stock of the
Company shall be adjusted to reflect a conversion rate of $0.10 per share.
Al the conclusion of the 30-day cure period, the note and any accrued
interest thereon shall become immediately due and payable in full.
Other Conditions: Ampersand will issue Azimuth Corporation a warrant
to purchase 50,000 shares of common stock at a strike price equal to $0.33
per share or 85% of the market price of Ampersand common stock as quoted on
the OTC Bulletin Board on December 10, 1999.
For Ampersand Medical Corporation
- -------------------- ----------
Leonard R. Prange Date
President
EXHIBIT 10.18
- -------------
RESTRICTED STOCK
AWARD AGREEMENT
1. Award
Subject to the terms and conditions of the Ampersand Medical
Corporation 1999 Equity Incentive Plan (the "Plan"), a copy of which has
been attached hereto, the Board of Directors of the company hereby grants
to David A. Fishman, M.D. a restricted stock award of 50,000 shares of
common stock
2. Grant Date
The grant date of the award is August 10,1999.
3. Valuation
The Board has determined that the fair market value of the
award is $0.4063 per share representing a total value of $20,315.00 for the
50,000 shares granted.
4. Restrictions
One-half (25,000 shares) of the award shall vest on August 16,
1999; the remaining one-half (25,000 shares) of the award shall vest on May
31, 2000. The Company shall retain the certificates representing the
unvested restricted shares and shall transfer to Dr. Fishman certificates
representing the respective number of shares, which immediately vest. The
Company shall transfer the certificates representing the unvested shares to
Dr. Fishman at the end of the vesting period.
5. Transferability
Except as provided in Article 8 of the Plan, the shares of
stock granted hereunder may not be sold, transferred, pledged, assigned or
otherwise alienated or hypothecated until the end of each applicable period
of restriction specified in Section 4 of this Award Agreement, or upon the
earlier occurrence or satisfaction of any other condition, as specified by
the Board in Section 7 of this Award Agreement Shares of restricted stock
shall become freely transferable, subject to registration requirements of
the Securities Act of 1933 (the "Act"), after the last day of the
applicable restriction period.
6. Registration
The restricted shares granted under this Award Agreement have
not been registered under the Act, as amended, or under the securities laws
of any state. The shares are subject to restrictions on transferability and
resale and may not be transferred or resold except as permitted under the
Act and applicable state securities laws pursuant to registration or
exemption therefrom. The Company will use its best efforts to file a
registration statement under the Act covering the granted shares as soon as
practicable, but in no case later then April 1, 2001.
<PAGE>
7. Other Provisions
In the event that the Company is sold or undergoes a change in
control, as defined in Section 5 of the Consulting Agreement (the
"Consulting Agreement") between Ampersand Medical Corporation and David A
Fishman, M.D. effective as of June 1, 1999, at any time prior to the end of
the vesting periods specified in Section 4, all remaining unvested
restricted stock shall become fully vested. The Company will immediately
transfer the certificates representing such shares to Dr. Fishman.
SIGNATURES
_____________________________ 9/1/99 _______________________ 10/12/99
Ampersand Medical Corporation Date David A. Fishman, M.D. Date
Leonard R. Prange
President By signing a copy of this
agreement, I acknowledge that I have read the Plan, and that I fully
understand all of my rights under the Plan, as well as all of the terms and
conditions, which may limit my eligibility to exercise this grant.
EXHIBIT 10.19
- -------------
RESTRICTED STOCK
AWARD AGREEMENT
1. Award
Subject to the terms and conditions of the Ampersand Medical
Corporation 1999 Equity Incentive Plan (the "Plan"), a copy of which has
been attached hereto, the Board of Directors of the company hereby grants
to Arthur L. Herbst, M.D. a restricted stock award of 50,000 shares of
common stock.
2. Grant Date
The grant date of the award is August 10, 1999.
3. Valuation
The Board has determined that the fair market value of the
award is $0.4063 per share representing a total value of $20,315.00 for the
50,000 shares granted.
4. Restrictions
One-third (16,666 shares) of the award shall vest on July 1,
2000; one-third (16,667 shares) of the award shall vest on July 1, 2001;
and the final one-third (16,666 shares) of the award shall vest on June 30,
2002. The Company shall retain the certificates representing the unvested
restricted shares and shall transfer to Dr. Herbst certificates
representing the respective number of shares in accordance with the
aforementioned vesting schedule.
5. Transferability
Except as provided in Article 8 of the Plan, the shares of
stock granted hereunder may not be sold, transferred, pledged, assigned or
otherwise alienated or hypothecated until the end of each applicable period
of restriction specified in Section 4 of this Award Agreement, or upon the
earlier occurrence or satisfaction of any other condition, as specified by
the Board in Section 7 of this Award Agreement Shares of restricted stock
shall become freely transferable, subject to registration requirements of
the Securities Act of 1933 (the "Act"), after the last day of the
applicable restriction period.
6. Registration
The restricted shares granted under this Award Agreement have
not been registered under the Act, as amended, or under the securities laws
of any state. The shares are subject to restrictions on transferability and
resale and may not be transferred or resold except as permitted under the
Act and applicable state securities laws pursuant to registration or
exemption therefrom. The Company will use its best efforts to file a
registration statement under the Act covering the granted shares as soon as
practicable, but in no case later then April 1, 2001.
<PAGE>
7. Other Provisions
In the event that the Company is sold or undergoes a change in
control, as defined in Section 5 of the Consulting Agreement (the
"Consulting Agreement") between Ampersand Medical Corporation and Arthur L.
Herbst, M.D. effective as of July 1, 1999, at any time prior to the end of
the vesting periods specified in Section 4, all remaining unvested
restricted stock shall become fully vested. The Company will immediately
transfer the certificates representing such shares to Dr. Herbst.
If the Consulting Agreement is terminated by the Company
without cause, as defined in the Consulting Agreement, all remaining
unvested restricted shares shall become fully vested. The Company will
immediately transfer the certificates representing such shares to Dr.
Herbst.
SIGNATURES
_____________________________ 8/20/99 _______________________ 8/23/99
Ampersand Medical Corporation Date Arthur L. Herbst, M.D. Date
Leonard R. Prange
President By signing a copy of this
agreement, I acknowledge that I have read the Plan, and that I fully
understand all of my rights under the Plan, as well as all of the terms and
conditions, which may limit my eligibility to exercise this grant.
EXHIBIT 21.1
- ------------
SUBSIDIARIES OF BELL NATIONAL CORPORATION
1. Bell Savings and Loan Association, a savings and loan association
chartered in the state of California.
2. Pacific Coast Holdings Insurance Company, an insurance company
organized under the laws of the state of California.
3. PFI National Corporation, a Delaware corporation.
4. InPath, LLC, a Delaware limited liability company.
5. Samba Technologies, SARL, a limited liability company organized under
the laws of France.
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