UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 27, 1996
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MICROTECH MEDICAL SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
Colorado 2-94117-D 84-0867911
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2 North Cascade, Colorado Springs, Colorado 80903
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(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code (719) 520-1800
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Item 1. Changes in Control of Registrant
On June 27, 1996, Jerry Kilgore ("Kilgore"), a former officer of the
Company, sold an aggregate of 26,835,000 shares of common stock of the Company
(the "Shares"), representing 40.3% of the Company's outstanding common stock, to
Kenneth M. Cahill ("Cahill"), the Tiegs Family Trust (an affiliate of Darel A.
Tiegs) ("Tiegs"), the R Lazy J Trust (an affiliate of J. Royce Renfrow)
("Renfrow"), and James Humpal ("Humpal"), for an aggregate purchase price of
$561,946 in cash, pursuant to an Agreement dated May 16, 1996 (the "Sale
Agreement"), between Kilgore, Cahill, Tiegs and Renfrow. Cahill, Tiegs, Renfrow
and Humpal shall be collectively referred to herein as the "Purchasers." Of the
26,835,000 Shares of common stock sold by Kilgore, Cahill purchased 12,880,800
of the Shares, Tiegs purchased 6,708,750 of the Shares, Renfrow purchased
6,708,750 of the Shares, and Humpal purchased 536,700 of the Shares.
The source of the purchase price with respect to each of the Purchasers
was as follows: (i) Mr. Cahill purchased his Shares with $269,733 of the
proceeds of a $300,000 loan extended to Mr. Cahill by James Wright. The loan
extended by Mr. Wright bears no interest, and the principal amount of the loan
is due and payable in full on August 17, 1996. The loan is unsecured. (ii)
Tiegs, Renfrow and Humpal purchased their Shares with funds obtained from loans
extended by Mr. Cahill to such Purchasers in the aggregate amount of $292,213.
Each of these loans bears interest at the rate of 9% per annum, and principal
and interest under each of the loans is due and payable in full on June 27,
1997. The loans are unsecured.
As of the date of this report, Cahill (and his affiliates) holds an
aggregate of 12,880,800 shares of the Company's common stock, or 19.35% of the
outstanding common stock, Tiegs (and its affiliates) holds an aggregate of
6,708,750 shares of the Company's common stock, or 10% of the outstanding common
stock, Renfrow (and its affiliates) holds 6,708,750 shares of the Company's
common stock, or 10% of the outstanding common stock, and Humpal (and his
affiliates) holds 536,700 shares of the Company's common stock, or less than 1%
of the outstanding common stock.
Pursuant to the Sale Agreement, of the total purchase price amount of
$561,946, (i) $63,600 was paid by the Purchasers to Kilgore, and (ii) $498,346
was paid by the Purchasers directly to the Company on behalf of Kilgore, as
payment in full of all amounts due by Kilgore to the Company pursuant to a
Settlement Agreement dated July 13, 1995, between Kilgore and the Company (the
"Settlement Agreement"), and a promissory note issued by Kilgore to the Company
pursuant to the Settlement Agreement.
In connection with the Sale Agreement, on June 27, 1996, the members of
the Company's Board of Directors, Charles L. Diehl and J. Kenneth McClatchy,
resigned from the Board of Directors and as the Company's officers, and Kenneth
M. Cahill, J. Royce Renfrow, James A. Humpal, and Darel A. Tiegs were appointed
as Board members to fill the four vacancies on the Board. In addition, Kenneth
Cahill was appointed as Chief Executive Officer and President of the Company,
Darel Tiegs was appointed as Vice President, and J. Royce Renfrow was appointed
as Corporate Secretary and General Counsel.
As additional consideration for the sale of the Shares, the Purchasers
agreed to submit to the Company's new Board of Directors a proposal to sell the
Company's medical test kit manufacturing operations to Kilgore. The Purchasers,
as new directors of the Company, also agreed to vote in favor of this asset sale
transaction and to recommend to the shareholders of the Company the approval of
such sale.
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Following the consummation of the transactions contemplated in the Sale
Agreement, Kilgore continues to hold options to purchase up to 3,000,000 shares
of the Company's common stock. Pursuant to the Sale Agreement, Kilgore has
agreed that, upon exercise of any of such options, he will appoint one or more
of the Purchasers as proxy to vote the shares acquired upon such exercise at any
shareholder meeting. In addition, Kilgore has agreed that he will use his best
efforts in obtaining proxies for approximately 5,000,000 additional shares of
the Company's outstanding common stock in order to obtain shareholder approval
of any transaction requiring shareholder approval, including the sale of the
Company's medical laboratory test kit manufacturing operations to Kilgore.
The Sale Agreement also contemplates that Kilgore will remain as an
employee of the Company until the sale of the medical test kit manufacturing
operations has been consummated. Kilgore will be paid a salary of $9,250 per
month until his employment terminates upon such sale.
In connection with the transactions contemplated by the Settlement
Agreement and the resignation of its former directors, Messrs. Diehl and
McClatchy, the Company has entered into an Indemnification Agreement with
Messrs. Diehl and McClatchy, dated June 27, 1996, pursuant to which the Company
has acknowledged its continuing obligation to indemnify Messrs. Kilgore, Diel
and McClatchy for claims that may be asserted against such persons in connection
with the Settlement Agreement transactions. The Indemnification Agreement
provides that the Company will indemnify the former directors against such
claims to the fullest extent permitted by the Company's Articles of
Incorporation and Colorado Corporation Law.
Item 2. Acquisition or Disposition of Assets
The Company has entered into an Asset Purchase Agreement dated June 27,
1996 (the "Asset Purchase Agreement"), between the Company and Kilgore, pursuant
to which the Company has agreed to sell its medical test kit manufacturing
operations, including all licenses, contracts, inventories, operating assets,
personal and real property, and any other assets related to such operations (the
"Assets") to Kilgore for $251,000. The parties to the Asset Purchase Agreement
have agreed that the Company shall present the terms of the sale of the Assets
to the shareholders of the Company for their vote prior to the consummation of
the transaction. The Company intends to submit a proposal to approve the
transactions at the Company's annual meeting of shareholders, which the Company
intends to hold as soon as practicable.
The Asset Purchase Agreement contemplates that Kilgore will purchase
all of the Assets and assume all liabilities of the Company related to the
medical test kit manufacturing operations. In payment for the Assets, Kilgore
shall deliver to the Company (i) $1,000 in cash, and (ii) a promissory note in
the principal amount of $250,000 (the "Note"). The Note will bear interest at
the Colorado National Bank Prime Lending Rate in effect on June 27, 1996, plus
one percent. Interest accrued under the Note will be payable monthly, and the
principal amount of $250,000 will be due and payable in full on June 1, 2001.
The Note will be secured by (i) an option held by Kilgore to purchase 3,000,000
shares of the Company's common stock, (ii) 16,000 shares of Valley of Sun, an
Arizona corporation, and (iii) a promissory note issued by Carolina
Multicommunications Corporation, an Arizona corporation, to Kilgore, in the
principal amount of $235,000.
The Purchasers of Kilgore's Shares have agreed in the Sale Agreement to
effect a corporate name change of the Company following the sale of the Assets,
and to transfer use of the name "Microtech Medical Systems" or "Microtech
Medical" to Kilgore.
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The Company has decided to divest itself of its medical test kit
products manufacturing operations in order to take advantage of real estate
markets and opportunities, especially those in Colorado, and to avoid the risks
of the high level of regulation, the rapidly changing technology, and the
potential liability associated with medical production. Management of the
Company believes that this change of business focus is in the best interests of
the Company and its shareholders.
Item 7. Financial Statements and Exhibits
(c) Exhibits.
10.5 Agreement dated May 16, 1996, between Jerry G. Kilgore, Tiegs Family
Trust, Kenneth Cahill, Mont Blanc Development Corporation and/or nominees,
and approved by the Company
10.6 Asset Purchase Agreement dated June 27, 1996, between the Company and
Jerry G. Kilgore
10.7 Indemnification Agreement dated June 27, 1996, between the Company,
Charles Diehl and J. Kenneth McClatchy
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MICROTECH MEDICAL SYSTEMS, INC.
(Registrant)
Date: July 18, 1996 By: /s/ J. Royce Renfrow
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J. Royce Renfrow
General Counsel and
Corporate Secretary
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EXHIBIT 10.5
AGREEMENT
AGREEMENT dated this 16th day of May, 1996, between Jerry G. Kilgore
(hereinafter "Kilgore") and Tiegs Family Trust, Kenneth Cahill, Mont Blanc
Development corporation and/or nominees (hereinafter "Purchaser").
NOW, THEREFORE, the parties agree as follows:
1. Kilgore agrees to sell 26,835,000 shares of Microtech Medical Systems, Inc.,
(hereinafter "MMSI") common stock to the Purchaser for the sum of $474,274.24,
current interest prorated to date of closing on a promissory note payable to
MMSI by Kilgore (estimated at approximately $10,000) and that sum due in
expenses related to Paragraph 2(i) of the Settlement Agreement between MMSI and
Kilgore dated the 30th day of July, 1995, a copy of which is attached hereto and
incorporated herein by reference as Exhibit "A".
a. An itemization and breakdown of the payment of proceeds related to the
sum payment of $474,274.24 is presented in Exhibit "B", a copy of which is
attached hereto and incorporated by reference.
b. The sum of $410,774.24, together with said prorated interest shall be
paid directly to MMSI at closing, in full payment and satisfaction of the
note described in Exhibit "B".
c. Fees and costs set forth in Paragraph 2(i) of Exhibit "A" shall be
specifically determined prior to closing and shall be paid directly to
MMSI as provided by in Exhibit "A".
2. Kilgore shall retain a three million share option granted to Kilgore in
October, 1993, a copy of which is attached hereto as Exhibit "C" and
incorporated herein by reference. Upon exercise of the options, Kilgore will
exercise a proxy Purchaser or nominee to vote the shares so obtained in any
shareholder meeting. Any value of said options or shares if exercised over and
above the amount described as secured thereby in Exhibit "D" of approximately
Two Hundred Fifty Thousand Dollars ($250,000.00) shall belong to Purchaser.
a. Upon the sale of the manufacturing operations to Kilgore or an
affiliate, as contemplated in Exhibit "D", a copy of which is attached
hereto and incorporated herein by reference, Kilgore will pledge his
options or his shares upon exercise of the option as partial collateral
for the contemplated purchase set forth in Exhibit "D".
<PAGE>
3. Kilgore will use his "best efforts" to assist the Purchaser in obtaining
voting proxies for approximately five million additional shares presently
entitled to vote at any meeting of the shareholders of MMSI, in order to assist
Purchaser in obtaining approval of any transaction requiring shareholder
approval, including the sale contemplated in Exhibit "D".
4. Kilgore will arrange for existing directors and officers of MMSI to resign at
joint meeting of the present and anticipated new Board of Directors (hereinafter
"Joint Meeting") to be held at closing in favor of new slate of Directors and
officers to be nominated by Purchaser.
5. Purchaser shall complete their "due diligence" requirements by May 24, 1996,
with closing to take place on or before June 5, 1996, unless extended by mutual
agreement of the parties.
6. Purchaser agrees to provide reasonable financial records, reports, accounts,
etc., for Kilgore or his attorney to verify and validate the availability of the
financial amounts described above in Paragraph 1 for the purchase of Kilgore's
shares, no later than May 31, 1996 in the event closing is extended, or at
Purchaser's option, place that described amount in escrow pursuant to acceptable
agreement between parties.
7. It is the express understanding of the parties, and part of the consideration
provided by Purchaser for the sale of the shares, that the Directors selected by
Purchaser shall submit for approval of the Board a proposal to sell the test kit
manufacturing operations of MMSI to Kilgore under the terms and conditions set
forth in Exhibit "D", attached hereto, and that they shall vote in favor of said
proposal, if Board members, and use their best efforts to secure approval of
said proposal by the Board at the joint meeting to be held at closing, and to
further recommend to the shareholders of MMSI the approval of said sale.
a. The Directors selected by the Purchaser shall submit the appropriate
proposals at the joint meeting of the Board to insure that the following
terms and conditions will be met.
b. Insurance premiums described in Paragraph 2(h) of the MMSI Settlement
Agreement, which were due in January of 1995 and 1996 shall be paid to
Southland Life Insurance. The beneficiary shall remain MMSI, until such
time as all indebtedness of Kilgore to MMSI pursuant to Exhibit "D" is
fully paid.
c. Payment to Kilgore's retirement SEP plan held and administered by Smith
Barney in an account identical to previous years (the amount to be 15% of
salary per year) per year, prorated to date of closing of Exhibit "D".
d. The closing of the sale contemplated in Exhibit D, the employment terms
and agreement described in Exhibit "A" between Kilgore and MMSI shall be
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terminated and cancelled.
e. Effect a corporate name change prior to closing of Exhibit "D", and
pursuant to the transaction contemplated in Exhibit "D", transfer the use
of the name Microtech Medical Systems or Microtech Medical to Kilgore,
subject to appropriate registration with the Colorado Secretary of State.
f. Upon satisfaction of all debts described in the Settlement Agreement,
and at the Joint Meeting, the new Directors shall agree to modify
Paragraph 2(h), whereby salary of Kilgore shall be increased to the
present $4,250.00 per month plus $5,000.00 per month until the operations
are sold to Kilgore pursuant to Exhibit D. If for any reason the proposal
is not approved by shareholders, Kilgore's salary is to be as stated in
2(h) of the Settlement Agreement plus $5,000.00 per month for the duration
of the remainder of term through end of 1998.
8. Kilgore covenants, warrants and represents as follows:
a. Kilgore will convey to Purchaser and/or nominees at closing good and
merchantable title to said 26,835,0000 shares of capital stock of MMSI,
representing all of his presently issued and outstanding shares of said
corporation free and clear of all liens, claims and encumbrances.
b. Kilgore has the power to enter into this agreement and to carry out its
obligations hereunder. The execution and delivery of this agreement and
the consummation of the transaction contemplated have been duly authorized
by Kilgore. No other corporate, court or other proceedings are necessary
to authorize the consummation of this agreement and the transactions
contemplated hereby. This agreement has been duly executed and delivered
by Kilgore, and constitutes a valid and binding obligation of Kilgore. The
execution and performance of this agreement by Kilgore does not violate,
or result in a breach of, or constitute a default under any judgment,
order or decree to which he may be subject, nor does such making or
performance constitute a violation of or conflict with any provision of
the MMSI's charter or by-laws.
c. To the extent of Kilgore's knowledge, neither Kilgore nor MMSI has any
notice of any actions, suits, claims, proceedings, or investigations
(whether or not purportedly on behalf of or against MMSI) pending and no
knowledge of any that are threatened against or affecting the Company's
business at law or in equity, or before or by any federal, state,
municipal or other governmental court, department, commission, board,
bureau, agency or instrumentality, domestic or foreign. MMSI is not in
default with respect to any order, writ, injunction or decree of any court
or federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality affecting its business. There are
no violations of any laws, regulations and orders applicable
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to MMSI's business or its assets, including without limitation all
environmental and pollution control requirements that are presently
applicable or that have been announced as being applicable at some future
date.
d. Neither Kilgore nor MMSI has become in any way obligated for any
broker's, finders, agent's or similar fee with respect to the transactions
contemplated by this agreement other than to their accountants and
attorneys.
e. No representation or warranty of Kilgore made in this agreement, nor in
any document, certificate or schedule required to be furnished pursuant to
this agreement, contains or will contain any untrue statement of a
material fact, and copies of any documents furnished to the Buyer will be
true and correct copies of such documents.
f. All of the foregoing representations and warranties will be true on and
as of the closing date.
g. Kilgore has no other pending or executory agreements with any other
party to sell all or a portion of the shares of stock which Kilgore is
conveying to Purchaser at closing.
h. Kilgore entered into an agreement in principle with Plains
Manufacturing, Inc., (PML) on November 14, 1995, for the sale of Kilgore's
stock, but the agreement was never formalized, PML was unable to obtain
financing to purchase the stock, and on April 5, 1996 Kilgore sent PML
written notice that he was rescinding his sale because of PML's
nonperformance. At this time, Kilgore warrants that PML has no legal or
equitable rights to his stock.
Kilgore has participated in voluntary interviews with William Johnson,
Staff Accountant of the Securities and Exchange Commission on March 15,
1996 and May 2, 1996, concerning Kilgore's actions as an officer and
director of MMSI, specifically concerning the transfers of MMSI funds by
Kilgore and investments in two wireless cable companies. No formal
proceedings have been initiated concerning Kilgore by the SEC, nor to his
knowledge is the SEC investigating MMSI for any violations of securities
regulations.
10. Unless otherwise required by law, none of the parties hereto shall make any
public announcement nor issue any press release regarding the transaction set
forth herein without the prior approval of the other parties, which approval
shall not be unreasonably withheld before closing. Following the closing,
appropriate press releases and SEC filings shall be prepared and issued by the
new Board of Directors.
11. This Agreement may be amended or modified only by a written instrument
executed by the parties hereto. Each party has reviewed and discussed this
Agreement with counsel, and any question of construction shall not be resolved
by any
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rule of interpretation providing for interpretation against the drafting
party.
12. This Agreement may be executed in any number of counterparts by telefax with
hard copy sent first class mail, each of which shall be deemed an original, but
all of which constitute one and the same instrument.
13. This Agreement and Exhibits constitute the entire Agreement between the
parties governing the matters addressed herein. No prior agreement or
representation, whether oral or written, shall have any force or effect thereon.
14. The commencement date of this Agreement is May 16, 1996.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day
and year first-above written.
SELLER:
/s/ Jerry G. Kilgore
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JERRY G. KILGORE
PURCHASER:
MONT BLANC DEVELOPMENT CORP.
By: /s/ J. Royce Renfrow
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President
/s/ Ken Cahill
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KENNETH CAHILL
THE TIEGS FAMILY TRUST
By: /s/ Darel A. Tiegs
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Trustee
APPROVED: 6/27/96
MICROTECH MEDICAL SYSTEMS, INC.
By: /s/ J. Royce Renfrow
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Secretary
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EXHIBIT "A"
SETTLEMENT AGREEMENT
The Settlement Agreement dated July 13, 1995, between the Company and Jerry
Kilgore, is incorporated by reference to Exhibit 10.4 filed with the Company's
annual report on Form 10-K for the year ended December 31, 1994.
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EXHIBIT "B"
TO BE PAID TO MMSI
Original Amount of
Promissory Note
Payable to MMSI: $422,774.24
- 12,000.00 paid in September '95 per Exhibit "B" by
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Kilgore
Principal Balance Due
on Promissory Note
Payable to MMSI: $410,774.24 to be paid to MMSI
Total to be Paid
to Kilgore: $ 35,000.00 paid (1) $34,000.00 in March '96 per
Exhibit "B" by Kilgore (full amount to be
applied to interest); (2) $500.00 in April
'96 per Exhibit "B" by Kilgore (amount
to be applied to interest); (3) $500.00
in May '96 per Exhibit "B" by Kilgore
(amount to be applied to interest)
16,500.00 paid in March '96 to exercise ISOP
options which expired end March
12,000.00 paid on principal in September, '95 by
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Kilgore, shown above
TOTAL OF MSSI
AND KILGORE: $474.274.24
BALANCE TO BE DETERMINED PRIOR TO CLOSING
Estimate of: $ 10,000.00 balance of interest due to be paid to
MMSI
Estimate of: $ 60,000.00 plus to satisfy Paragraph 2(i) SA to be
paid to MMSI
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EXHIBIT "C"
MICROTECH MEDICAL SYSTEMS, INC.
MINUTES OF SPECIAL MEETING
BOARD OF DIRECTORS
OCTOBER 12, 1993
A special meeting of the Board of Directors of Microtech Medical
Systems, Inc., was held on October 12, 1993 at 11:45 AM at the location of
Bennigans, Denver Tech Center, Englewood, Colorado. All three directors of the
company were present and included Jerry G. Kilgore, Charles L.
Diehl, and Dr. J. Kenneth McClatchy.
The 10 Q financials for the second quarter of 93 were reviewed which
showed sales of $124,551 and a profit of $40,589 before allowance for income
taxes. Mr. Kilgore stated that sales for the third quarter were comparable to
the second quarter of 93.
Mr. Kilgore stated that he has signed a 4 month investment banking
agreement with First Financial Capital Associates, Inc., a Florida corporation
on August 27, 1993 after outlining the terms of the agreement to the directors
in telephone conversations with each director. Mr. Kilgore presented an update
to the directors of merger candidates and an outline of a possible structuring
with a possible merger candidate, with no specific candidate implied.
The outstanding high accounts receivable was discussed, and that one
customer, IMR (Franklin, TN) was responsible for more than half of those
receivables; and the question was posed to Mr. Kilgore as to how the receivables
were allowed to become so high. Mr. Kilgore reviewed the history of providing
custom panels to the lab, directed by Dr. Thornsberry, over a 2 year period, and
that payments had been received periodically. Possible action to be taken was
discussed, with the understanding that Mr. Kilgore continue to follow the IMR
accounts receivable closely. Mr. Kilgore stated that over the time of providing
special panels to IMR that the company received sufficient payments to cover
their costs of products, and that he believed the company was in a break even
position relative to costs of production with IMR.
Concerning an added compensation package for Mr. Kilgore, the Board
members unanimously agreed to following resolution which was based on the
company's continuing performance, and the company's Articles of Incorporation,
Amended Articles, Fourth Article, paragraph b.
RESOLVED that, based on the improved performance of the company, Mr.
Jerry Kilgore be granted the option to purchase three million shares of common
stock at an exercise price of 0.1 cents per share, and the option to purchase
the shares to be exercised within five years of the above meeting date.
There being no further discussions or business of the meeting, the
meeting of the directors was adjourned.
Respectfully Submitted
Dr. J. Kenneth McClatchy
Secretary, Microtech Medical Systems, Inc.
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EXHIBIT "D"
Asset Purchase Agreement
The Asset Purchase Agreement dated June 27, 1996, between the Company and Jerry
Kilgore, is incorporated by reference to Exhibit 10.6 filed with this Report on
Form 8-K.
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ADDENDUM TO AGREEMENT
OF MAY 16, 1996 BETWEEN JERRY G. KILGORE,
TIEGS FAMILY TRUST, KENNETH CAHILL, AND
MONT BLANC DEVELOPMENT CORPORATION
A partial closing of the Agreement of May 16, 1996 between the above
parties shall be held on June 5, 1996, with final closing as set forth in
Paragraph 5, and the applicability of the provisions of Paragraph 6 to be
extended to June 12, 1996.
DATED, this 5th day of June, 1996.
SELLER:
/s/ Jerry G. Kilgore
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JERRY G. KILGORE
PURCHASER:
TIEGS FAMILY TRUST
BY: /s/ Darel A. Tiegs
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Trustee
/s/ Kenneth Cahill
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KENNETH CAHILL
MONT BLANC DEVELOPMENT CORP.
BY: /s/ J. Royce Renfrow
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SECOND ADDENDUM TO AGREEMENT
OF MAY 16, 1996 BETWEEN JERRY G. KILGORE,
TIEGS FAMILY TRUST, KENNETH CAHILL, AND
MONT BLANC DEVELOPMENT CORPORATION
A closing into escrow of the Agreement of May 16, 1996 between the
above parties shall be held on June 12, 1996, with final closing as set forth in
Paragraph 5, to be automatically concluded by wire transfer to the Trust Account
of Weiner, Schiller & May, P.C. of amounts due pursuant to the terms of the
Settlement Agreement dated July 30, 1995.
In consideration for Kilgore's agreement to be above extension, which
shall not exceed thirty (30) days from the date hereof, Purchaser shall pay to
Kilgore the sum of $5,000.00, receipt of which is hereby acknowledged. Said sum
shall apply toward the purchase price of Kilgore's stock as set forth in the
Agreement of May 16, 1996, provided, however, in the event final closing does
not take place within thirty (30) days of the date of this extension, said
non-refundable payment shall be forfeited and the Agreement of May 16, 1996 null
and void.
Kilgore acknowledges receipt of sufficient documentation to satisfy the
provisions of Paragraph 6 of the Agreement of May 16, 1996.
In all other respects, the Agreement of May 16, 1996 shall remain
unchanged.
DATED, this 11th day of June, 1996.
SELLER:
/s/ Jerry G. Kilgore
--------------------
JERRY G. KILGORE
PURCHASER:
TIEGS FAMILY TRUST
BY: /s/ Darel A. Tiegs
------------------
/s/ Kenneth Cahill
------------------
KENNETH CAHILL
MONT BLANC DEVELOPMENT CORP.
BY: /s/ J. Royce Renfrow
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<PAGE>
EXHIBIT 10.6
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (hereinafter referred to as the "Agreement") is
entered into as of June 27, 1996 between Microtech Medical Systems, Inc.,
("MMSI"), also referred to as the "Seller," and Jerry G. Kilgore or a related
affiliate, also referred to as the "Purchaser."
RECITALS
Whereas, the Board of Directors of MMSI intends to direct the Company
into new business ventures, in areas other than medical laboratory test products
with its inherent high level of regulation, competition, product liability
risks, and manufacturing complexity.
And Whereas, MMSI completed a secondary stock offering in January, 1988
in order to seek to acquire or participate in business ventures which could
result in a substantial change in this Company's business and operations.
And Whereas, the laboratory test kit products have only a small niche
appeal to select microbiology laboratories, and has found only limited
acceptance of a narrow spectrum of products related to antibiotic susceptibility
testing of fastidious and anaerobic bacteria.
Therefore, the Board of MMSI, in an effort to redirect and concentrate
its efforts on acquisitions and related activities and thereby enhance the
valuation of the Company, is desirous of selling its operations which
manufacture the test products.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
1.1 Asset Purchase: Seller shall sell, assign, transfer and deliver to
Purchaser, and Purchaser shall purchase from Seller, by appropriate assignment
and bill of sale one hundred percent (100%) interest in the whole interest of
Seller's right, title and interest in and to any and all authorizations,
licenses, contracts and assets directly or indirectly related to its medical
laboratory products ("Operations"), including without limitation all licenses,
contracts, inventories, operating assets, personal property, real property, and
any other asset related to the operations, as of the commencement date of this
Agreement. Seller makes no representations or warranties concerning the
Purchased Assets, as defined herein.
1.2 Purchase Price: In exchange for the sale of the Purchased Assets described
in
<PAGE>
Section 1.1 above, and in consideration for all liabilities, including accounts
payable and leases, to be assumed by Purchaser relating to the manufacturing
operations, Purchaser shall agree to pay Seller the sum certain of Two Hundred
Fifty-One Thousand Dollars ($251,000), see 1.3. Purchaser hereby represents,
covenants and agrees that Seller shall not in any way be liable for any
contracts, obligations or liabilities of the operations of any nature whatsoever
(whether accrued, absolute or contingent, whether disclosed or undisclosed,
whether known or unknown, whether due or to become due, whether related to the
Purchased Assets and the associated manufacturing operations or otherwise, and
regardless of when asserted) not specifically provided for in this Agreement,
which unassumed liabilities shall be the sole responsibility of Purchaser.
1.2.1 Assumption of Manufacturing Operations Responsibilities:
Purchaser hereby assumes and agrees to fully perform in timely manner
any and all of Seller's duties and obligations in the manufacturing
operations, referenced herein from and after the date of this
Agreement, as if it were the original purchaser therein.
1.3 Method of Purchase:
1.3.1 Down Payment: The non-refundable down payment shall be One
Thousand Dollars ($1,000), which amount shall be paid to Seller upon
the date this Agreement is executed by the parties hereto.
1.3.2 Balance of Purchase Price: The balance of the purchase price
shall be paid to Seller as follows:
(a) Payment: Two Hundred Fifty Thousand Dollars ($250,000) on or before
June 1, 2001. In the event that the $250,000 payment is not made on the
required date, the Purchaser shall, within ten (10) business days of
such default, provide Seller with a convertible financing received by
the Purchaser from one or more lenders.
(b) Promissory Note: At closing, Purchaser shall sign a Promissory Note
in the amount of Two Hundred Fifty Thousand Dollars ($250,000) due to
Seller on or before June 1, 2001, to bear interest at Colorado National
Bank Prime Lending Rate on date of sale plus one percent (1%), interest
payable monthly and due on the fifth of each month, with a final
balloon payment of $250,000 to be made on the due date.
(c) Collateral: Security for the note is to be:
1. The Three Million Share Option granted to Mr. Kilgore by
the Board of Directors of MMSI in October, 1993, said option
to be pledged as security at closing and held by the Board.
Upon exercise of the option,
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the issued shares shall be pledged and held by the Board,
along with a signed proxy giving the Directors the right to
vote the shares at any shareholder meeting.
2. Stock in Valley of Sun of approximately sixteen thousand
six hundred (16,600) shares.
3. Promissory note of Carolina Multicommunications Corporation
in the amount of Two Hundred Thirty-Five Thousand Dollars
($235,000.00).
1.3.3 Closing: The closing of the sale of the Purchased Assets shall be
simultaneous with the signing by Purchaser of the Two Hundred Fifty
Thousand Dollar ($250,000) promissory note, as required by Section
1.3.2(b) hereof, following shareholder approval.
ARTICLE II
2.1 Notices: All notes, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given and effective
(i) upon receipt if delivered in person, by cable or telegram, (ii) one business
day after depositing prepaid with a national overnight express delivery service
(e.g., Federal Express or Airborne) or (iii) three business days after deposit
in the United States Mail (registered or certified mail, postage prepaid, return
receipt requested):
If to Seller:
Microtech Medical Systems, Inc.
320 E. Costilla
Colorado Springs, CO 80903
If the Purchaser:
Jerry G. Kilgore
12931 E. Cedar Street
Aurora, CO 80012
or such other address as specified by the parties in writing from time to time.
2.2 Press Release: Unless otherwise required by law, none of the parties hereto
shall make any public announcement nor issue any press release regarding the
transactions set forth herein without the prior approval of the other parties,
which approval shall not be unreasonably withheld. Following the closing,
appropriate press releases and SEC filings may be prepared and issued by the new
Board of Directors. Purchaser hereby consents to Seller disclosing the terms
and/or a copy of this Agreement to shareholders and underwriters of Seller.
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2.3 Amendments: This Agreement may be amended or modified only by a written
instrument executed by the parties hereto.
2.4 Expenses: Except as otherwise expressly herein provided, each party to this
Agreement shall pay its own expenses (including, without limitation, the fees
and expense of its agents, representatives, counsel and accountants) incidental
to the negotiation, preparation, execution and performance of this Agreement.
2.5 Counterparts: This Agreement may be executed in any number of counterparts
by FAX, with hard copy sent first class mail, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
2.6 Parties in Interest - Assignment: This Agreement shall inure to the benefit
of and be binding upon Purchaser, Seller and their respective successors and
assigns. Nothing in this Agreement, express or implied, is intended to confer
upon any other person any rights or remedies under, or by reason of, this
Agreement. The rights and responsibilities of Seller and Purchaser hereunder may
be assigned to any party without the other party's prior written consent.
2.7 Applicable Law: The rights and obligations of the parties shall be construed
under and governed by the laws of the State of Colorado. Venue and jurisdiction
for judicial enforcement of this Agreement shall be Arapahoe County, Colorado.
2.8 Waiver: No provision in this Agreement shall be deemed waived by course of
conduct, unless such waiver is in writing signed by all parties and stating
specifically that it was intended to modify this Agreement.
2.9 Captions - Interpretation: Section headings contained herein are descriptive
only, and shall have no legal effect. Each party has reviewed and discussed this
Agreement with counsel, and any question of construction shall not be resolved
by any rule of interpretation providing for interpretation against the drafting
party.
2.10 Severability: In the event that any term or provision of this Agreement is
determined to be or would be void, unenforceable, or contrary to law, such term
or provision is voided; however, the remainder of this Agreement shall continue
in full force and effect, provided that such continuation would not diminish the
benefits of this Agreement for any party.
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2.11 Arbitration:
(a) Should a dispute arise under this Agreement which cannot be
resolved informally between the parties hereto, either Purchaser or
Seller may request that such dispute be submitted to arbitration for
resolution. Arbitration under this section shall take place at a
location mutually agreeable to Purchaser and Seller.
(b) Purchaser shall select one arbitrator, and Seller shall select
another arbitrator, within fifteen (15) days of a request for
arbitration hereunder, and the arbitrators so chosen shall select a
third arbitrator within fifteen (15) days of the later arbitrator's
selection. Each such arbitrator shall be an individual or firm
unaffiliated with any of the parties and with expertise in the
manufacturing operations. If Purchaser or Seller fails to designate a
third arbitrator, then such arbitrator shall be designated by the
American Arbitration Association upon request of Purchaser or Seller.
(c) The decision of a majority of the arbitrators shall be final,
conclusive and binding on the parties hereto and may be submitted to a
court of appropriate jurisdiction for enforcement thereof.
2.12 Attorney's Fees: If any action, suit or proceeding is commenced to
establish, maintain, or enforce any right or remedy under this Agreement, the
party not prevailing therein shall pay, in addition to any damages or other
award, all reasonable attorney's fees and litigation expenses incurred therein
by the prevailing party.
2.13 Entire Agreement: This Agreement constitutes the entire Agreement between
the parties governing the matters addressed herein. No prior agreement or
representation, whether oral or written, shall have any force or effect thereon.
2.14 Commencement Date: The commencement date of this Agreement is June 12,
1996.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first-above written.
SELLER:
MICROTECH MEDICAL SYSTEMS, INC.
By: /s/ J. Royce Renfrow
--------------------
Secretary
PURCHASER:
/s/ Jerry G. Kilgore
--------------------
JERRY G. KILGORE
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EXHIBIT 10.7
INDEMNIFICATION AGREEMENT
This Indemnification Agreement is entered into this 27th day of June,
1996, between MICROTECH MEDICAL SYSTEMS, INC. (the "Company") and Charles Diehl
("Diehl") and J. Kenneth McClatchy, Ph.D. ("McClatchy"), (hereinafter together
referred to as the "Indemnitees").
RECITALS
A. The Indemnitees have served as directors of the Company for many
years and, since April 1994, have been required to respond to unusual
circumstances arising out of certain transactions between the Company and Jerry
G. Kilgore ("Kilgore"), former President of the Company (the "Kilgore
Transactions").
B. Kilgore has agreed to sell his stock to certain purchasers and the
Indemnitees have agreed to resign as directors of the Company.
C. The Indemnitees desire that the Company acknowledge its continuing
indemnification obligations pursuant to the Articles of Incorporation of the
Company and agree to procedures for satisfying such obligations in the event
that any claims should be asserted against Indemnitees arising out of the
Kilgore Transactions, or otherwise.
In consideration of their services to the Company and for other good
and valuable consideration, receipt of which is hereby acknowledged, the Company
and the Indemnitees agree as follows:
1. The Indemnitees shall be entitled to indemnification against claims
to the full extent permitted by the Articles of Incorporation of the Company and
the Colorado Corporation Law, as amended from time to time. No amendment of the
Articles of Incorporation which might be adopted after the date hereof shall be
effective to reduce the Company's obligation to the Indemnitees in any way.
2. In the event that any claim, action, suit or proceeding is asserted
against the Indemnitees or either of them, or against the Company, or in the
event that an investigation or other proceeding is initiated against either of
them or the Company, by the Securities and Exchange Commission or any other
governmental agency (any such claim, action, suit or proceeding, and any such
investigation, whether private or governmental is referred to as a "Claim") or
if any party to any Claim or any person who is asserting any Claim requests the
Indemnitees to provide information, give testimony or otherwise participate in
any Claim, the Indemnitees shall be entitled, at the expense of the Company, to
retain counsel of their choice to represent them in connection with any such
matter.
3. The Indemnitees shall promptly notify the Company in writing of any
Claim and that they intend to retain counsel (who shall be named) in connection
with such matter. The Company agrees to cooperate with the Indemnitees in
providing information to them and their
<PAGE>
counsel in connection with the defense of any such claim. The Company shall
advance to the Indemnitees all costs that they incur in connection with any
Claim, provided that the Indemnitees agree to reimburse the Company in the event
that it should be ultimately determined that such indemnification of the
Indemnitees by the Company is prohibited by Colorado law. The Company shall pay
directly to counsel or other persons providing services to the Indemnitees in
connection with their rights hereunder upon receipt of appropriate invoices from
such parties, approved by the applicable Indemnitees.
4. This Agreement may be executed in counterparts, each of which shall
be deemed an original and together shall constitute one Agreement.
IN WITNESS WHEREOF this Agreement is entered into the day and year
first above written.
MICROTECH MEDICAL SYSTEMS, INC.
By: /s/ Charles Diehl
-----------------------------------------
President
/s/ Charles Diehl
-----------------------------------------
Charles Diehl, Individually
/s/ J. Kenneth McClatchy
-----------------------------------------
J. Kenneth McClatchy, Ph.D., Individually
APPROVED:
/s/ Jim Humpal
- --------------------------------
Jim Humpal, Director
/s/ J. Royce Renfrow
- --------------------------------
J. Royce Renfrow, Director
2.
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