U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________to__________________C
Commission file number 0-17032
PROTEIN DATABASES, INC.
_____________________________________________
(Name of small business issuer in its charter)
Delaware 13-3186604
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
405 Oakwood Road, Huntington Station, New York 11746
- ---------------------------------------------- ---------
(Address of principle executive offices) (Zip Code)
Issuer's telephone number (516) 673-3939
--------------
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
----------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days.
[x] Yes [ ] No
<PAGE>
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained,
to the best of issuer's knowledge, in definitive proxy or information state-
ments incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
[X]
Issuer's revenues for its most recent fiscal year were $1,633,777.
The aggregate market value of the registrant's Common Stock held by
nonaffiliates of the issuer on February 12, 1997 was approximately $145,373.
The number of shares of issuer's Common Stock outstanding as of
February 12, 1997 was 1,459,724.
DOCUMENTS INCORPORATED BY REFERENCE: None
----
Transitional Small Business Disclosure Format (Check one): Yes__: No _X_
<PAGE>
PART I
Item 1. Description of Business.
- --------------------------------
Background
Currently, Protein Databases, Inc. ("the Company" or "PDI"), incorporated in
1983, is a provider of innovative image analysis software and hardware
products for the worldwide bioresearch, drug discovery and clinical
diagnostic markets. Based on Long Island, New York, PDI develops user-
friendly, software-integrated scanner systems for biotechnology and
related research in drug discovery and diagnostic systems development.
The Company's customers are researchers studying complex biological systems
with a medical focus. They attempt to understand the molecular mechanisms of
changes that occur in cells as a result of diseases, read the DNA sequence
bar code to understand gene function and attempt to develop assays in drug
discovery programs.
The Company's present liquidity position is critical. The Company is
attempting to arrange one or more suitable alternative distribution
arrangements for its products and is exploring strategic relationships,
a business combination with other companies or the sale of the Company.
Management currently believes that the Company will require additional
product sales or funding during, or shortly after the end of, the
quarter ending June 30, 1997 to continue its operations (see Item 6 -
Management's Discussion and Analysis of Operations).
INTRODUCTION AND TECHNOLOGY
Part of the revolution in biotechnology has been the scientific advances in
the ability to separate the major molecules of life: proteins, the machines
responsible for running life processes and the building blocks of life, and
DNA, the chemical unit of genes that code the master "blueprint" of life.
Genes, very complex mixtures of proteins and other molecules, are assembled
into the fundamental units of life - cells and tissues. Manifestations of
disease and inheritance can be observed by analyzing the changes in cellular
proteins and genes. Unfortunately, only a small fraction of proteins and
genes have been characterized well enough to understand their function.
Science is in the process of analyzing the characteristics of proteins and
genes that have not yet been compiled. Electrophoretic separations of
proteins and DNA by electric charge (a chemical property of a molecule) and
by size (a physical property) are widely used techniques to separate proteins
and DNA to facilitate their analysis.
In many cases, these methods capture complex images of the separated
components on x-ray films, gels or special papers. These images require
further analysis to reduce the data into useful information. Because of the
complexity and high information density, this analysis can best be
accomplished with high performance software. The Company's core technology
consists of software for the computer image analysis of separated proteins
and DNA resulting from high resolution electrophoresis and other separation
methods.
PDI produces software that integrates personal computers and computer
workstations with high performance scanners to provide customers with
powerful image analysis and data reduction capabilities. The Company was
one of the first successfully to integrate scanners with sophisticated image
analysis software tools to supply the growing demand for image analysis
systems for the electrophoresis market.
<PAGE>
Products
The Company's major products are as follows,
SYSTEMS
420oe Densitometer: PDI invented Optically Enhanced Densitometry and the
420oe is the latest system to employ it The 420oe is a densitometer that has
third party reference optical density and reflectance density standards
built into the instrument, thus providing assurance that the instrument
is working automatically. High data quality; 12 bit, 0-3 O.D.,
multiwavelength scans solve most images. PDI made the 420oe to be versatile,
to process images from wet gels, dry gels, films, thick (up to 3mm) samples,
blots, photographs, negatives and small to larger 20x27cm images. This system
is available with all of the software described below.
The NightHawk(tm) System: Nighthawk combines the most compact (only 20cm
across) darkroom and variable intensity UV source and optics and software
for ethidium bromide documentation. The customer can capture the image,
save to a floppy and print to a thermal printer with 5 mouse clicks in less
than 30 seconds. Whether the customer chooses Mac or PC, the software is
the same. The system utilizes the Company's ImagePrint(tm) proprietary
software for quick prints or Quantity One(r) proprietary software, described
below, for saturated pixel measurements, histograms, image labeling and
rotation, comparisions, molecular weight and concentration determinations.
For more complex genetic analysis, customers use PDI's Diversity family of
software products described below.
SOFTWARE
The Company's software products are described below. Each is available for
Macintosh, MS-DOS PC and UNIX(r) computers.
Diversity Database(tm) is used by molecular biologists for RFLP
(Restriction Fragment Length Polymorphism's) analysis, DNA fingerprint
analysis and allelic frequency analysis. A DNA "fingerprint" is developed
from images of individual genetic specimens in which their DNA is fragmented
into pieces and arranged according to molecular size on a one-dimensional
gel. The program can sort the fingerprints according to genetic similarity
and create databases of 10,000 lane images. The software permits comparing
a new lane against the database of images to determine the closest match or
similarity. With it, a user can form databases of all types of 1-d images and
answer genetic related questions using a MAC or PC. The software package
also has all the quantitative tools found in Quantity One(r), described below.
DNA Code(r) is used for automatic DNA sequence gel reading. It can scan,
read and edit an entire x-ray film containing 4,000 readable bases in 30
minutes (displayed and read as a bar code). The sequence may then be output
in hard copy or in a computer-readable form.
PDQUEST(tm) is used for the analysis of proteins separated by two-dimensional
gel electrophoresis. This sophisticated program permits the analysis of 100
gels per experiment and 1000 gels per database. The program assists in the
identification of proteins and tracks certain changes in them under
experimental conditions. This enables scientists to obtain more information
than by traditional protein separation techniques and to preserve their
experimental findings in a standard computer format.
<PAGE>
Quantity One(r) is used for the analysis of one-dimensional gels, dot blots
and slot blots - techniques virtually ubiquitous to many life science
research applications. This program can scan and analyze in five minutes and
produce soft copy and hard copy histograms, traces and tables.
2-D(tm) is used for simple 2-D gel analysis with no database function.
It can accommodate 16 gels per experiment.
ImageWorks(tm), introduced in October 1996, is PDI's Internet initiative in
which software is sold over the worldwide web for the biotechnology market.
The Internet is utilized to distribute, support and update ImageWorks(tm).
It provides the tools to handle, analyze and communicate data and allows
scientists around the world to share their information. Researchers access
ImageWorks(tm) through PDI's web site at www.pdiq.com.
Millions of images are produced in biotechnology laboratories each year.
ImageWorks(tm) accepts these images and prepares them for publication,
presentation and Internet communication. ImageWorks'(tm) unique file format
combines every aspect of the image in one completely transportable file as a
vehicle for transmitting this type of data between laboratories around the
world.
Marketing and Sales
The Company sells its products in the United States and Canada directly to
customers and is substantially dependent upon distributors for the sale of
its products outside of the United States. The Company sells its products
in Japan under a distribution agreement with Toyobo Co. Ltd (Toyobo) and in
Germany, Korea, India, Taiwan and Israel under agreements with local
distributors. Until the completion of its software purchase requirements
during the third quarter of 1995, the Company sold its products in most
countries in Europe, the Middle East and Africa, and certain products world-
wide, under distribution agreements with Pharmacia Biosystems B.V. and
Pharmacia Biotech AB ("Pharmacia"). On April 19, 1996, Pharmacia, the most
significant worldwide distributor of the Company's products, elected not to
renew its contract to distribute the Company's products.
The market for the Company's products in Europe, Japan and countries in the
Middle East has been important, with the combined regions accounting for
approximately 65% of the Company's revenue in 1996 and approximately 52% of
revenue in 1995.
As amended, the Company's Distribution Agreement with Toyobo, the exclusive
distributor of the Company's products in Japan and the non-exclusive
distributor of the Company's products in all other countries in the Far East,
expires on December 31, 1998.
During 1996, Toyobo accounted for 41% of the Company's total revenues.
During 1995, Pharmacia accounted for 29% and Toyobo accounted for 19% of the
Company's total revenues.
The Company's customers may require training and support to achieve
satisfactory performance from the Company's products. Installation of a
software system and training of the user may take up to two days.
The Company is attempting to arrange one or more suitable new distribution
arrangements for the Company's products and is exploring strategic relation-
ships, a business combination with other companies or the sale of the Company.
<PAGE>
Management currently believes that the Company will require additional
product sales or funding during, or shortly after the end of, the quarter
ending June 30, 1997 to continue its operations. See "Management's
Discussion and Analysis of Operations - Liquidity and Capital Resources."
Research and Development
The Company is engaged in the ongoing refinement of its Software Systems
through its research facilities. In addition, the Company from time to time
consults with scientists who advise the Company regarding its products and
the Company actively solicits and receives suggestions from its customers
regarding product improvements.
The Company's principle research and development costs for its current
products have been incurred in prior years, but the Company needs continually
to maintain and improve its products, as well as to develop new products.
During 1996 and 1995 the Company incurred Research and Development expenses
of $534,673 and $520,943, respectively. The Company may be adversely
affected if it is not able to maintain its research and development efforts
at an appropriate level.
Competition
The Company competes with a number of companies that have financial,
marketing, manufacturing and human resources which substantially exceed
those of the Company. These competitors include Bio-Rad Laboratories,
Molecular Dynamics, Inc. and Bio Image Corp., each of which sells a turnkey
image analysis instrument capable of scanning and analyzing one and two-
dimensional and DNA gels.
The Company believes its systems approach to deliver total solutions is
necessary in order to enable the Company to compete in its market.
Licenses, Patents and Proprietary Information
Cold Spring Harbor Laboratory Agreement
In December 1983, the Company entered into a license agreement with CSHL
(the "License Agreement") pursuant to which CSHL granted the Company the
exclusive commercial right to use all information, technology, know-how,
inventions, computer software and improvements relating to CSHL's 2-D Gel
technology (collectively the "CSHL Technology"). Under applicable statutes
and regulations relating to technology developed under federal funding,
CSHL's rights to the CSHL Technology are subject to a retained license to
such technology by the federal government for its own use and for the
distrubution of two-dimensional gel analysis software to not-for-profit
research institutions. All inventions or improvements to the Company's
products become part of the CSHL Technology, but the Company retains the
right to utilize and exploit all of the technology. Pursuant to the
License Agreement, as last amended in June 1990, the Company is obligated
to Pay CSHL one-seventh of teh royalties paid to the Company under the
Millipore Agreement described below. The Company has no other royalties
due CSHL.
Under the terms of the License Agreement, which expired on June 1, 1994,
the Company has a perpetual non-exclusive license to use and exploit the
CSHL Technology.
<PAGE>
Millipore Agreement
In September 1987, the Company entered into an agreement (the "Millipore
Agreement") with Millipore Corporation ("Millipore") pursuant to which
Millipore has a worldwide non-exclusive license to use certain of the
Company's technology related to the 2-D electrophoretic method of protein
separation (the "Licensed Technology") to develop and market separation
equipment (the "Licensed Products"). The Licensed Technology excludes the
computer programs and related software for the analysis of the
electrophoretic method of protein separation (the "Licensed Technology")
to develop and market separation equipment (the "Licensed Products").
The Licensed Technology excludes the computer programs and related software
for the analysis of teh electrophoretic separations accomplised by the
2-D electrophoretic technology.
Under the Millipore Agreement, Millipore paid to the Company a total of
$500,000 during 1987 and 1988 for the Licensed Technology. Beginning in
1989, Millipore was required to pay the Company a royalty based on net sales
of any Licensed Products. The royalty decreases from 7% to 3% of sales as
certain cumulative thresholds of sales are achieved. The royalty terminates
on September 15, 1997. In 1996 and 1995, Millipore paid royalties of
$51,095 and $63,321, respectively, pursuant to the Millipore Agreement.
Employees
The Company has 14 full-time employees, of which one holds a Ph.D. degree
and five hold masters degrees in science or computer-related fields.
The Company is not a party to any collective bargaining agreement and
considers the relations with its employees to be good.
Item 2. Description of Properties.
The Company currently leases approximately 4,500 square feet in Huntington
Station, New York, for office, conference and computer systems space.
The lease, as extended, expires on May 31, 1997 and provides for rental
payments in 1997 of $24,000, plus certain expenses. These facilities are
considered to be adequate for the Company's present requirements.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
- ------------------------------------------------------------------
The following table provides information concerning the high and low bid
prices per share for the Company's common stock in the over-the-counter
market for each of the calendar quarters in the period from January 1, 1995
through December 31, 1996 as reported by the National Quotation Bureau.
Such bids reflect interdealer prices, without retail mark-up, mark-down or
commission, and may not represent actual transactions.
1996 Low High
Quarter Ended Bid Bid
- ------------- --- ----
March 31, 1996 $.25 $.25
June 30, 1996 .13 .25
September 30, 1996 .13 .13
December 31, 1996 .03 .13
1995 Low High
Quarter Ended Bid Bid
- ------------- --- ----
March 31, 1995 $.13 $.50
June 30, 1995 .25 .50
September 30, 1995 .25 .375
December 31, 1995 .06 .375
The Company has not paid any dividends on its Common Stock and no cash
dividends are contemplated for the foreseeable future.
As of December 31, 1996, there were 832 holders of record of the Company's
Common Stock.
Item 6. Management's Discussion and Analysis of Operations.
- ------------------------------------------------------------
Liquidity and Capital Resources
The Company's present liquidity position is critical. During the year ended
December 31, 1996, the Company had a net loss from operations of $811,323.
As of December 31, 1996, the Company's total current assets were $553,993
(including cash of $119,352) and its total liabilities were $267,378
(see accompanying Balance Sheet).
The Company is substantially dependent upon distributors for the sale of its
products outside of the United States.
As a result of purchases of the Company's software products by Pharmacia,
the Company operated profitably in the quarter and nine months ended
September 30, 1995. However, as a result of the completion of Pharmacia's
software purchase requirements during the third quarter of 1995, the Company
operated unprofitably in the fourth quarter of 1995 and in each quarter of
1996. On April 19, 1996, Pharmacia, the most significant worldwide
distributor of the Company's products, elected not to renew its contract to \
distribute the Company's products.
<PAGE>
During 1996, Toyobo accounted for 41% of the Company's total revenues.
During 1995, Pharmacia accounted for 29% and Toyobo accounted for 19% of
the Company's total revenues.
The Company is attempting to arrange one or more suitable alternative
distribution arrangements for its products and is exploring strategic
relationships, a business combination with other companies or the sale of
the Company. Management currently believes that the Company will require
additional product sales or funding during, or shortly after the end of,
the quarter ending June 30, 1997 to continue its operations.
As a result of the limited amount of funds currently available to finance
the Company's operations, the report of the Company's independent Certified
Public Accountants on the Financial Statements as of December 31, 1996
contains an explanatory paragraph indicating that there is substantial
doubt about the Company's ability to continue as a going concern.
The Company had no material commitments for capital equipment additions at
December 31, 1996.
Revenues
The Company generates revenues primarily by selling software systems and,
to a lesser extent, from contract research and development, royalties and
other sources.
Software systems revenues include revenues from the sale of the Company's
proprietary software, Original Equipment Manufacturers (OEM) equipment,
software maintenance and software updates. Software systems revenues
include sales of OEM equipment that cost $340,388 and $377,803 in 1996 and
1995, respectively. The Company obtains its principal OEM equipment from a
limited number of suppliers. If the Company were unable to continue to
obtain the equipment on reasonable terms from its current suppliers, or from
alternate sources, the Company would be materialy and adversely affected.
Excluding the costs of OEM equipment, the Company's Software systems revenues
decreased 39% in 1996. The decrease was primarily due to decreases in the
number of products sold under the Company's distribution agreements with
Pharmacia and by the Company's direct sales staff in North America.
Contract, royalty and other revenues include fees received for software
development totaling $73,000 in 1996 compared with $299,000 of such fees in
1995. Contracts, royalties and other revenues also include royalties of
$51,095 and $63,321 received from Millipore Corporation in 1996 and 1995,
respectively.
Expenses
Excluding lower costs of OEM equipment described above, the reduction in the
Company's cost of sales expenses in the year ended December 31, 1996 from
the prior year was primarily attributable to lower costs for equipment
supplies and maintenance, travel and freight. Except for OEM equipment
costs, which vary significantly with the level of the Company's revenues,
cost of sales expenses are relatively fixed.
The increase in the Company's general and administration expenses in the year
ended December 31, 1996 from the prior year was primarily attributable to
higher consulting fees.
<PAGE>
The Company's marketing and sales expenses decreased in the year ended
December 31, 1996 from the prior year principally as a result of lower
promotional, travel, salaries and commission expenses.
The Company's principal research and development costs for its current
products have been incurred in prior years, but the Company needs continually
to maintain and improve its products, as well as to develop new products,
and anticipates ongoing research and development efforts.
Item 7. Financial Statements.
- -----------------------------
See page F-1 for Protein Databases, Inc. Index to Consolidated Financial
Statements.
Item 8. Changes in and Disagreements with Accountants on Accounting and
- -----------------------------------------------------------------------
Financial Disclosure.
---------------------
None
<PAGE>
PART III
Item 9. Directors, Executive Officers , Promoters and Control Persons;
- ----------------------------------------------------------------------
Compliance with Section 16(a) of the Exchange Act.
--------------------------------------------------
The directors and executive officers of the Company are as follows:
Name Age Position
---- --- --------
Ronald R. Hahn 52 Chairman of the Board of Directors
Stephen H. Blose 47 President, Chief Executive Officer and Director
Joel A. Fontaine 52 Director
Alan P. Chodosh 43 Vice President of Finance and Secretary
Jon D. Randall 44 Vice President of Research and Development
Paul J. Collins 41 Vice President of Sales and Marketing
Directors are elected for a one-year term and until a successor is duly
elected and qualified. Officers are elected by the Board of Directors and
hold office at the pleasure of the Board until their successors are chosen
and qualified.
Ronald R. Hahn is currently Chairman and President of ESE Partners, LLC,
a venture capital management company located in Princeton, New Jersey.
In addition, he has been a partner of Princeton / Montrose Partners since
1981. He became a Director of the Company in April 1985 and Chairman of the
Board of Directors in October 1989.
Stephen H. Blose was appointed President (interim until January 20, 1989)
and a Director of the Company effective April 26, 1988. From January 1985
to April 1988, he served as a Vice President of the Company and was engaged
in market development and sales of the Company's products in the United
States and Europe. From 1978 to 1985, he was a senior research scientist
at Cold Spring Harbor Laboratory. He has Ph.D. and V.M.D. degrees from the
University of Pennsylvania.
Joel A. Fontaine was appointed a Director of the Company on August 22, 1995.
He has been Senior Vice President of Sales & Marketing of GretagMacbeth AG
since July 1, 1996 and President of Suprex Corporation, a manufacturer of
analytical instruments, from January 1988 through June 1996. In addition,
from 1968 through 1987 Mr. Fontaine held various positions with Fisher
Scientific Company, including General Manager of Fisher Medical in 1986
through 1987. He is also a director of the Analytical Instrument Association.
Alan P. Chodosh became Corporate Controller of the Company in June 1986, was
appointed Vice President - Corporate Controller and Secretary on August 5,
1987 and was appointed Vice President of Finance effective September 1, 1988.
He is a certified public accountant.
Jon D. Randall has been Director of Computer Systems since joining the
Company in June 1985 and was appointed Vice President of Research and
Development effective September 1, 1988. He has an M.S. in electrical
engineering from Stanford University and a B.S. degree from Massachusetts
Institute of Technology.
Paul J. Collins had been director of Marketing since joining the Company in
February 1988 and was appointed Vice President of Sales and Marketing
effective September 1, 1988.
<PAGE>
From January 1982 until joining the Company, he held various positions with
Pharmacia LKB Biotechnology, Inc., including Product Group Manager for
electrophoresis and process chromatography. Mr. Collins has a B.A. degree
in Biology from the University of Massachusetts and a M.A. degree in Plant
Biochemistry from Boston University.
There are no family relationships between any director or executive officer
of the Company.
Item 10. Executive Compensation.
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SUMMARY COMPENSATION TABLE
Long Term
Compensation
------------
Annual Compensation Awards
------------------- ------
Securities
Underlying All Other
Options /Compensation
Name and Principal Position
- ---------------------------
Year Salary($) Bonus($) SAR's(#) ($)
---- --------- -------- -------- ----
Stephen H. Blose 1996 $134,251 $0 None None
President and CEO 1995 $133,650 $0
1994 $127,400 $10,000
Jon D. Randall 1996 $120,500 $0
V.P. of Research 1995 $120,500 $0
and Development 1994 $115,000 $10,000
Alan P. Chodosh 1996 $110,000 $0
V.P. of Finance 1995 $110,000 $0
1994 $105,000 $10,000
Paul J. Collins 1996 $107,400 $0
V.P. of Sales and
Marketing 1995 $107,400 $0
1994 $102,400 $10,000
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year
---------------------------------------------------
and FY-End Option/SAR Values
----------------------------
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-money
Options/SAR's Options/SAR's
at FY-End (#) at FY-End ($)
Shares Acquired Value Exercisable / Exercisable /
Name on Exercise (#) Realized($) Unexercisable Unexercisable
- ----- --------------- ----------- ------------- -------------
Stephen H. Blose None Options Options
132,500/0 $0/$0
Jon D. Randall None Options Options
112,500/0 $0/$0
Alan P. Chodosh None Options Options
112,500/0 $0/$0
Paul J. Collins None Options Options
112,500/0 $0/$0
During 1996, Mr. Ronald R. Hahn received compensation of $36,000 as Chairman
of the Board of Directors and Mr. Joel A. Fontaine received compensation of
$7,500 as a director pursuant to an agreement under which he receives
directors' fees of $500 per month and $1,500 for each Board Meeting he
attends. Directors are reimbursed for reasonable out-of-pocket expenses
incurred in connection with the Company's business.
In 1996 the Company entered into a three year employment agreement with
Mr. Blose, expiring on July 31, 1999, which provides, in part, for Mr. Blose
to receive an annual compensation of at least $134,531. The agreement
provides for Mr. Blose to receive his annual compensation payments for six
or twelve months, under specified circumstances, upon termination of his
employment prior to the expiration of the term of the agreement. Such
circumstances include termination of employment without cause and the sale
of the Company for at least $1,200,000 and Mr. Blose is not employed by the
acquiring company.
In 1996 the Company entered into a three year employment agreement with
Mr. Randall, expiring on July 31, 1999, which provides, in part, for
Mr. Randall to receive his annual compensation of at least $123,512.
The agreement provides for Mr. Randall to receive compensation payments for
three or six months, under specified circumstances, upon termination of his
employment prior to the expiration of the term of the agreement. Such
circumstances include termination of employment without cause and the sale
of the Company for at least $1,200,000 and Mr. Randall is not employed
by the acquiring company.
In 1996 the Company entered into a three year employment agreement with
Mr. Chodosh, expiring on July 31, 1999, which provides, in part, for
Mr. Chodosh to receive his annual compensation of at least $112,750.
The agreement provides for Mr. Chodosh to receive compensation payments of
three or six months, under specified circumstances, upon termination of his
employment prior to the expiration of the term of the agreement.
Such circumstances include termination of his employment without cause or the
sale of the Company for at least $1,200,000 and Mr. Chodosh is not employed
by the acquiring company.
<PAGE>
In 1996 the Company entered into an employment agreement with Mr. Collins,
expiring on May 31, 1997, which provides, in part, for Mr. Collins to receive
compensation at the annual rate of at least $91,481. The agreement provides
for Mr. Collins to receive compensation payments for three or six months,
under specified circumstances, upon termination of his employment prior to the
expiration of the term of the agreement. Such circumstances include
termination of his employment without cause and the sale of the Company for
at least $1,200,000 and Mr. Collins is not employed by the acquiring company.
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
- ------------------------------------------------------------------------
The following table sets forth, as of December 31, 1996, the ownership of
the Company's common stock by (i) each person who is known by the Company to
own beneficially more than five (5%) of the Company's common stock, (ii)
each of the Company's directors and executive officers, and (iii) all
directors and executive officers of the Company as a group. The stockholders
listed in the table have sole voting and investment powers with respect to
the shares indicated.
Name and Amount and
Address of Nature of
Beneficial Beneficial Percent
Title of Class Owner Owner of Class (1)
- -------------- ---------- ---------- ------------
Common Stock Princeton/Montrose2 730,545 50.05%
Partners
243 North Highway 101
Suite 13
Solana Beach, CA 92076
Common Stock Ronald R. Hahn3 0 -
243 North Highway 101
Suite 13
Solana Beach, CA 92076
Common Stock Joel A. Fontaine 0 -
405 Oakwood Road
Hunt. Sta., NY 11746
Common Stock Stephen H. Blose4 134,813 8.47%
405 Oakwood Road
Hunt. Sta., NY 11746
Common Stock Jon D. Randall5 112,500 7.16%
405 Oakwood Road
Hunt. Sta., NY 11746
<PAGE>
Common Stock Alan P. Chodosh5 112,500 7.16%
405 Oakwood Road
Hunt. Sta., NY 11746
Common Stock Paul J. Collins 112,500 7.16%
405 Oakwood Road
Hunt. Sta., NY 11746
Common Stock All directors and 472,313 24.48%
officers as a
group (6 persons)6
- -----------------------
(1) The percentages are calculated on the basis of 1,459,724 shares of
Common Stock outstanding as of December 31, 1996. For the purpose of
calculating the percentage of shares of the Company's Common Stock owned
by any person, shares issuable upon the exercise of stock options held by
such person are deemed outstanding if they are exercisable within 60 days
of December 31, 1996, but such shares are not deemed outstanding for the
purpose of calculating the percentage of Common Stock owned by any other
person.
(2) Princeton/Montrose Partners is controlled by its general partners,
Ronald R. Hahn, Chairman of the Company, and Donald R. Stroben, an
individual unrelated to the Company. Mr. Hahn disclaims any beneficial
ownership in the shares of Common Stock owned by Princeton/Montrose
Partners.
(3) Does not include shares of Common Stock held by Princeton/Montrose
Partners (see Note 2 above).
(4) Includes 132,500 shares of Common Stock issuable upon the exercise
of stock options.
(5) Consists of 112,500 shares of Common Stock issuable upon the exercise
of stock options.
(6) Includes an aggregate of 470,000 shares of Common Stock issuable upon
the exercise of outstanding stock options (see Notes 4 and 5 above).
Excludes the shares of Common Stock owned by Princeton/Montrose Partners
(see Note 2 above).
Item 12. Certain Relationships and Related Transactions.
- --------------------------------------------------------
None.
<PAGE>
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits
- --------------
Exhibit
Numbe Description of Exhibits
- ------- -----------------------
3.2(i) - Third Restated Certificate of Incorporation of the
Registrant as filed in Delaware on July 15, 1988*
3.2(ii) - Certificate of Amendment of Certificate of
Incorporation of the Registrant as filed in
Delaware on October 16, 1992*****
3.4 - Amended and Restated By-laws effective July 15, 1988*
4.1(ii) - Specimen Certificate for shares of Common Stock of the
Registrant dated October 16,1992*****
10.1(i) - Exclusive Know-How License Agreement between the
Registrant and Cold Spring Harbor Laboratory dated
December 1, 1983 ("Exclusive Know-How License")*
10.1(ii) - Letter Amendment dated December 24, 1986 to Exclusive
Know-How License*
10.1(iii) - Letter Amendment dated March 6, 1987 to Exclusive
Know-How License*
10.1(iv) - Letter Amendment dated April 30, 1990 to Exclusive
Know-How License****
10.1(v) - Letter Amendment dated June 9, 1988 to Exclusive
Know-How License*
10.2 - Agreement dated September 15, 1987 between the Company
and Millipore Corporation*
10.3 - Lease dated April 15, 1993 between the Registrant and
Estate of Herbert Budin for office space******
10.4 - 1992 Stock Incentive Plan of the Registrant*****
10.6 - Database License Agreement dated August 26, 1987
between the Registrant and Cold Spring Harbor
Laboratory*
10.8 - Proprietary Information & Invention Agreement
between the Registrant and Charles DeLisi*
<PAGE>
10.9 - Form Software License Agreement of the Registrant*
10.10 - 1993 Outside Directors' Stock Option Plan of the
Registrant******
10.11 - Employment Agreement between the Registrant and
Stephen H. Blose dated August 1, 1996#
10.12 - Employment Agreement between the Registrant and
Jon D. Randall dated August 1, 1996#
10.13 - Employment Agreement between the Registrant and
Alan P. Chodosh dated August 1, 1996#
10.14 - Employment Agreement between the Registrant and
Paul J. Collins dated August 1, 1996#
27 - Financial Data Schedule #
* Filed as exhibits to Registration Statement No. 33-22694-NY filed on
June 21, 1988.
** Filed as exhibits to Form 10-K for 1988 on March 22, 1989.
*** Filed as exhibits to Form 8-K dated September 21, 1990.
**** Filed as exhibits to Form 10-K for 1990 on March 15, 1991.
***** Filed as exhibits to Form 10-K for 1992 on March 29, 1993.
****** Filed as exhibits to Form 10-K for 1993 on March 28, 1994.
# Filed herewith.
(b) Reports on Form 8-K
- -----------------------
The Company did not file any current reports on Form 8-K during the fourth
quarter of the year ended December 31, 1996.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act,
the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 25th day of March 1997.
PROTEIN DATABASES, INC.
S/Stephen H. Blose
By: ----------------------------------------
Stephen H. Blose, President and Director
In accordance with the Exchange Act, 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/Ronald R. Hahn
____________________ Chairman of the Board of March 25, 1997
Ronald R. Hahn Directors
S/Stephen H. Blose
____________________ President and Director March 25, 1997
Stephen H. Blose Chief Executive Officer)
S/Alan P. Chodosh
____________________ Vice President - Finance March 25, 1997
Alan P. Chodosh Principal Financial and
Accounting Officer)
S/Joel A. Fontaine
____________________ Director March 25, 1997
Joel A. Fontaine
<PAGE>
Protein Databases, Inc.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants F-2
Financial Statements
Balance Sheets F-3
Statements of Operations F-5
Statement of Stockholders' Equity F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-8 - F-15
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Protein Databases, Inc.
We have audited the accompanying balance sheets of Protein Databases, Inc.
as of December 31, 1996 and 1995, and the related statements of operations,
stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Protein Databases, Inc.
as of December 31, 1996 and 1995 and the results of its operations and its
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial
statements, the Company incurred a net loss of $811,323 during the year
ended December 31, 1996 and anticipates additional losses in 1997 until
such time as the Company is able to substantially increase revenues. These
factors, among others, as discussed in Note A to the financial statements,
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note A. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
GRANT THORNTON LLP
Melville, New York
February 14, 1997
F-2
<PAGE>
Protein Databases, Inc.
BALANCE SHEETS
December 31,
ASSETS 1996 1995
------------ -----------
CURRENT ASSETS
Cash and cash equivalents $ 119,352 $ 778,718
Accounts receivable 363,845 421,492
Inventory 59,483 64,688
Prepaid expenses 10,935 13,287
Other current assets 378 -
------------ -----------
Total current assets 553,993 1,278,185
PROPERTY AND EQUIPMENT
Computer and office equipment 799,199 751,645
Furniture and fixtures 120,047 119,889
Equipment under capital leases 23,870 23,870
Leasehold improvements 36,922 36,922
------------ ----------
980,038 932,326
Less accumulated depreciation and amortization
(including $23,870 of capitalized lease
amortization) (757,101) (662,446)
------------ ----------
222,937 269,880
OTHER ASSETS 9,020 13,520
------------ ----------
$ 785,950 $1,561,585
============ ==========
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
Protein Databases, Inc.
BALANCE SHEETS (continued)
December 31,
LIABILITIES AND STOCKHOLDERS' equity 1996 1995
CURRENT LIABILITIES ------------ ------------
Accounts payable $ 96,739 $ 159,537
Accrued expenses 128,053 42,462
Unearned revenue 42,586 29,691
-------- --------
Total current liabilities 267,378 231,690
-------- --------
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock - $.01 par value; authorized,
10,000,000 shares; outstanding, 1,459,724
shares in 1996 and 1995
14,597 14,597
Additional paid-in capital 8,519,636 8,519,636
Accumulated deficit (8,015,661) (7,204,338)
---------- ---------
518,572 1,329,895
---------- ---------
$ 785,950 $ 1,561,585
============ ===========
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
Protein Databases, Inc.
STATEMENTS OF OPERATIONS
Year ended December 31,
1996 1995
---------- ----------
Revenue
Software systems $1,492,975 $2,280,919
Contract, royalty and other 140,802 409,676
---------- ----------
1,633,777 2,690,595
---------- ----------
Expenses
Cost of sales 569,148 660,812
General and administrative 659,650 629,392
Marketing and sales 681,629 873,986
Research and development 534,673 520,943
---------- ----------
2,445,100 2,685,133
---------- ----------
NET (LOSS) EARNINGS $ (811,323) $ 5,462
=========== ============
Net (loss) earnings per common share $(.56) $.00
===== ====
Weighted average number of shares used in
computing earnings per share 1,459,724 1,640,034
========= =========
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
Protein Databases, Inc.
STATEMENT OF STOCKHOLDERS' EQUITY
Years ended December 31, 1996 and 1995
Common stock Additional Accumulated Stockholder's
-------------- paid in
Shares Amount capital deficit equity
------ ------ ---------- ----------- -----------
Balance at January 1, 1994
1,459,741 $14,597 $8,485,886 $(7,209,800) $1,290,683
Compensatory stock options
issued to employees 33,750 33,750
Fractional share adjustment
from 1992 reverse stock
split (17)
Net earnings
--------- ------- ---------- 5,462 5,462
-------- -------
Balance at December 31, 1995
1,459,724 14,597 8,519,636 (7,204,338) 1,329,895
Net loss --------- ------- ---------- (811,323) (811,323)
---------- ---------
Balance at December 31, 1996
1,459,724 $14,597 $8,519,636 $(8,015,661) $ 518,572
========= ======= ========== =========== ===========
The accompanying notes are an integral part of this statement.
F-6
<PAGE>
Protein Databases, Inc.
STATEMENTS OF CASH FLOWS
Year ended December 31,
1996 1995
-------- --------
Cash flows from operating activities
Net (loss) earnings $(811,323) $ 5,462
Adjustments to reconcile net (loss) earnings to net cash
(used in) provided by operating activities
Depreciation and amortization 95,635 73,790
Changes in operating assets and liabilities
Accounts receivable 57,647 371,274
Inventory 5,205 (16,256)
Prepaid expenses 2,352 (2,353)
Other assets 4,122 (520)
Accounts payable and accrued expenses
22,793 (101,185)
Unearned revenue 12,895 (51,462)
------ --------
Net cash (used in) provided by operating activities
(610,674) 278,750
-------- --------
Cash flows from investing activities
Capital expenditures (63,986) (134,014)
Proceeds from disposition of property and equipment
15,294 11,087
-------- --------
Net cash used in investing activities
(48,692) (122,927)
-------- --------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (659,366) 155,823
Cash and cash equivalents at beginning of year
778,718 622,895
-------- --------
Cash and cash equivalents at end of year $ 119,352 $ 778,718
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the year for
Interest $ - $ -
========= =========
Income taxes $ - $ -
========= =========
Noncash financing activity
Issuance of stock options and cancellation
of stock appreciation rights
$ - $ 33,750
========= ==========
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
Protein Databases, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE A - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Protein Databases, Inc. (the "Company"), incorporated in 1983, markets
intelligent scanning densitometers that integrate the Company's proprietary
software with computer hardware and scanning instrumentation manufactured by
others. These systems are sold to life science research laboratories at
university, government, hospital and industrial (biotech and pharmaceutical)
institutions, in the United States and abroad, for the analysis of biological
information. The Company's customers are researchers studying complex bio-
logical systems with a medical focus. They attempt to understand the
molecular mechanisms of changes that occur in cells as a result of diseases,
read the DNA sequence bar code to understand gene function and attempt to
develop assays in drug discovery programs.
The financial statements have been prepared assuming that the Company will
continue as a going concern. During the year ended December 31, 1996, the
Company incurred a net loss of $811,323, used cash from operations of
$610,674 and currently anticipates additional losses in 1997 until such time
as the Company is able to substantially increase revenues. This raises
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that may result should
the Company be unable to continue in existence.
The Company is substantially dependent upon distributors for the sale of its
products outside of the United States (see Note B-1). As a result of the
completion of the Company's most significant worldwide distributor's software
purchase requirements during the third quarter of 1995 and other reductions
in revenues, the Company operated unprofitably in the fourth quarter of 1995
and in each quarter of 1996. On April 19, 1996, such distributor elected not
to renew its contract to distribute the Company's products. Management is
attempting to arrange one or more suitable alternative distribution arrange-
ments for its products and is exploring strategic relationships, a business
combination with other companies or the sale of the Company. However, if the
Company is not successful in completing such arrangements, the Company's
sales will continue to be materially and adversely affected and the Company
will not operate profitably. Management currently believes that the Company
will require additional product sales or funding during, or shortly after
the end of, the quarter ending June 30, 1997 to continue its operations.
Software systems revenue includes revenue from the sale of the Company's
proprietary software, Original Equipment Manufacturers ("OEM") equipment,
software maintenance and software updates. The Company obtains its
principal OEM equipment from a limited number of suppliers. If the Company
were unable to obtain the equipment on reasonable terms from its current
suppliers, or from alternate sources, the Company would be adversely
affected.
F-8
<PAGE>
Protein Databases, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996 and 1995
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
1. Revenue
Software systems revenues are generally recognized at the time of shipment
of such systems. Contract revenues are recognized as services are performed.
Revenues from software maintenance agreements are deferred and recognized
ratably over the lives of the respective agreements.
The Company is substantially dependent upon distributors for the sale of its
products outside of the United States (see Note A). For the year ended
December 31, 1996, one foreign distributor accounted for 41% of the Company's
total revenues. At December 31, 1996, amounts due from such distributor
represented 37% of accounts receivable. For the year ended December 31,
1995, one distributor accounted for 29% and another distributor accounted
for 19% of the Company's total revenues. At December 31, 1995, amounts due
for such distributors represented 5% and 27% of accounts receivable
respectively.
Export sales were approximately $1,058,000 and $1,390,000 in 1996 and 1995,
respectively.
2. Research and Development
Company-sponsored research and development costs related to both present and
future products are expensed currently. Included in "Contract, royalty and
other" revenue for the years ended December 31, 1996 and 1995 are $73,000
and $299,000 of fees earned with respect to research and development projects
undertaken on behalf of customers.
3. Inventory
Inventory consisting of merchandise held for sale is stated at the lower of
cost or market; cost is determined using the first-in, first-out method.
4. Depreciation and Amortization
Depreciation and amortization of property and equipment are computed by the
straight-line method over estimated useful lives of 5 years or the duration
of the lease, whichever is shorter.
F-9
<PAGE>
Protein Databases, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996 and 1995
NOTE B (continued)
5. Use of Estimates and Fair Value of Financial Instruments
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The carrying amounts of the Company's cash and accounts receivable are
estimated to approximate their fair values. The Company believes that it is
not practical to determine the fair value of its liabilities given the
Company's present financial condition.
6. Income Taxes
Deferred income taxes are recognized for temporary differences between the
financial statement and income tax bases of assets and liabilities and loss
carryforwards for which income tax benefits are expected to be realized in
future years. A valuation allowance has been established to offset the
deferred tax assets as it is more likely than not that such deferred tax
assets will not be realized. The effect on deferred taxes of a change in
tax rates is recognized in income in the period that includes the enactment
date.
7. Net (Loss) Earnings Per Share
The computation of net (loss) earnings per share is based on the weighted
average number of outstanding shares during the period, plus, when their
effect is dilutive, common stock equivalents consisting of outstanding
stock options and warrants.
8. Stock-Based Compensation Plans
The Company maintains two fixed stock option plans, as more fully described
in Note E to the financial statements, accounted for using the "intrinsic
value" method pursuant to the provisions of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees." The fair value
and pro forma effects on the Company's net (loss) earnings and net (loss)
earnings per share are not presented as the fair value of the options
granted (determined pursuant to Statement of Financial Accounting Standards
No. 123. "Accounting for Stock-Based Compensation") is not material to the
financial statements.
F-10
<PAGE>
Protein Databases, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996 and 1995
NOTE B (continued)
9. Statements of Cash Flows
For purposes of the accompanying statements of cash flows, the Company
considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
NOTE C - INCOME TAXES
As of December 31, 1996, the Company had approximately $7,645,000 of net
operating loss carryforwards ("NOLs") for Federal income tax purposes
available to reduce future taxable income. As a result of the Tax Reform
Act of 1986, provisions of the Internal Revenue Code were substantially
modified to limit the availability of NOLs and other tax benefits that
arose prior to certain cumulative changes in a corporation's stock ownership.
Under these revised provisions, the Company's use of its NOLs is limited
because the Company is deemed to have undergone an ownership change, as a
result of the public issuance of its common stock in the year ended
December 1988. As a result of this change in ownership, approximately
$700,000 of the NOLs are presently unavailable for use, thereby reducing
the above NOLs to $6,945,000. The NOLs not subject to limitation
are approximately $4,840,000 at December 31, 1996. The balance of the
available NOLs subject to limitation of $2,805,000 will become available
each year through the year 2003 at an annual amount of $325,000. NOLs that
are limited in any year as a consequence of the annual limitations may be
carried forward for future use, subject to the other rules regarding the
utilization of NOLs.
In addition, subsequent ownership changes may further limit the use of the
Company's NOLs.
F-11
<PAGE>
Protein Databases, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996 and 1995
NOTE C (continued)
The net operating loss carryforwards expire as follows:
Not subject to limitation
2000 $1,423,000
2003 828,000
2004 1,175,000
2005 592,000
2006 22,000
2010 800,000
----------
4,840,000
----------
Subject to limitation
2001 1,093,000
2002 1,029,000
2003 683,000
----------
2,805,000
----------
Total net operating loss carryforwards $7,645,000
==========
Federal income tax credits of approximately $26,000 and $163,000 for
investment tax credits and research and development credits, respectively,
are available to reduce future Federal taxes payable, subject to similar
limitations.
The Company's provision for (benefit from) income taxes differs from the
Federal statutory rate as follows:
1996 1995
---------------------- ----------------------
Amount % Amount %
------ ------- ------ ------
Federal statutory rate
$(276,000) (34.0)% $ 2,000 34.0%
Increase in deferred tax asset
valuation allowance
276,000 34.0
Benefit of Federal and state net
operating loss carryforward
-------- ------ (2,000) (34.0)
------ -----
$ - - % $ - - %
======== ====== ======= =====
F-12
<PAGE>
Protein Databases, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996 and 1995
NOTE C (continued)
Deferred income taxes reflect the impact of "temporary differences" between
the amount of assets and liabilities for financial reporting purposes and
such amounts as measured by tax laws and regulations. Deferred tax assets
(liabilities) are comprised of the following at December 31,:
1996 1995
---------- -----------
Deferred tax assets
Net operating loss carryforwards $2,500,000 $ 2,224,000
Compensation 97,000 97,000
---------- -----------
Gross deferred tax assets 2,597,000 2,321,000
---------- -----------
Deferred tax liabilities
Depreciation (9,000) (9,000)
------ ------
Gross deferred tax liabilities (9,000) (9,000)
--------- ----------
Net deferred tax assets before valuation allowance
2,588,000 2,312,000
---------- ----------
Valuation allowance (2,588,000) (2,312,000)
---------- ----------
Net deferred tax assets $ - $ -
========== ==========
NOTE D - COMMITMENTS
1. Operating Lease
The Company is obligated under a noncancelable operating lease for the rental
of approximately 4,500 square feet of office space. The lease, as extended,
expires May 31, 1997. Minimum future rentals at December 31, 1996 aggregate
approximately $24,000 through May 1997. Rent expense for 1996 and 1995
aggregated approximately $85,000 each year.
F-13
<PAGE>
Protein Databases, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996 and 1995
NOTE D (continued)
2. Royalty Agreement
The Company is obligated to pay Cold Spring Harbor Laboratory ("CSHL")
one-seventh of the royalty on net sales earned by the Company under a
certain agreement pursuant to the Exclusive Know-How License Agreement,
as amended, with CSHL. Royalty expense for 1996 and 1995 was approximately
$7,000 and $9,000, respectively.
3. Employment Contracts
In 1996, the Company entered into employment agreements with its executive
officers, which expire on July 31, 1999, except for one which expires on May
31, 1997. Such agreements provide for minimum salary levels, adjusted
annually for cost-of-living changes, as well as for compensation payments of
up to twelve months, under specified circumstances, upon termination of
employment prior to the expiration of the term of the agreements. The
aggregate commitment for future salaries at December 31, 1996, excluding
bonuses, was approximately $1,000,000.
NOTE E - STOCKHOLDERS' EQUITY
1. Stock Options
The 1992 Stock Incentive Plan (the "Plan") provides for the granting to key
employees (including officers and directors) and other individuals, as
defined in the Plan, of nonqualified stock options, incentive stock options
and restricted stock. Pursuant to the Plan, the Company may grant stock
options or issue restricted stock aggregating 540,000 shares of the Company's
common stock. Unless the applicable Plan agreement provides otherwise,
options become exercisable over a four-year period from the date of grant
and generally expire ten years from such date of grant.
F-14
<PAGE>
Protein Databases, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996 and 1995
NOTE E (continued)
The Outside Directors' 1993 Stock Option Plan (the "Directors' Plan")
provides for the granting of options to persons who are members of the Board
of Directors and not employees of the Company. Pursuant to the Directors'
Plan, new eligible directors shall be granted options to purchase 5,000
shares of the Company's common stock, which options become exerciseable
(subject to stockholder approval) over a two-year period from the date of
grant and expire ten years from such date of grant.
Information with respect to the option plans is summarized as follows:
Weighted
average
Options Option exercise
for shares price price
---------- ------ --------
Outstanding at January 1, 1995
545,500 $.1193 - .75 $ .215
Granted 5,000 .69 .69
Expired (5,000) .75 .75
-------
Outstanding at December 31, 1995
545,500 .1193 - .75 .215
Granted 9,500 .44 .44
--------
Outstanding at December 31, 1996
555,000 .1193 - .75 .219
=======
Options exercisable at December 31, 1996
551,000 .1193 - .75 .217
=======
2. Warrants
During 1994, the Company issued to its Chairman a warrant to purchase 5,000
shares of common stock. The warrant is exercisable at $.50 per share and
expires ten years from the date of grant.
F-15
<PAGE>
EXHIBIT 10.11
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of this 1st day of August, 1996 by and between
Stephen H. Blose, residing at 69 Polk Avenue, East Northport, New York 11731
("Executive"), and Protein Databases, Inc., a Delaware corporation d.b.a.
PDI, Inc., with offices at 405 Oakwood Road Huntington Station, NY 11746-7296
(the "Company"), for the purpose of setting forth the terms and conditions of
Executive's employment by the Company and to protect the Company's knowledge,
expertise, customer relationships and the confidential information the
Company has developed regarding clients, customers, shareholders, option
holders, employees, products, business operations and services.
1. TIME AND EFFORTS
1.1 Executive shall be employed as the Company's President and Chief
Executive Officer, and shall have such duties and have such responsibilities
as the Company's Board of Directors may assign to the Executive in further-
ance of the Company's business.
1.2 In the performance of all of his duties and responsibilities hereunder,
Executive shall be subject to all of the Company's policies, rules and
regulations applicable to its officers generally. The Executive shall
report to the Company's Chairman and Board of Directors.
1.3 Executive shall continue to be a member of the Board of Directors during
the term of this Agreement.
1.4 Without the prior express authorization of the Board, Executive shall
not, directly or indirectly, during the term of this Agreement engage in any
activity competitive with or adverse to the Company's business. This Agree-
ment shall not be interpreted to prohibit Executive from making passive
personal investments, conducting private business affairs, or engaging in
educational or charitable activities, if those activities do not materially
interfere with the services required hereunder.
1.5 In order to induce the Company to enter into this Agreement, Executive
represents and warrants to the Company that (i) Executive is not a party or
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
subject to any written employment agreement with any other company and (ii)
Executive is subject to no restraint, limitation or restriction by virtue of
any written agreement or by virtue of any law or rule of law which would
impair the Executive's right or ability to perform fully his duties and
responsibilities pursuant to this Agreement.
1.6 Without first obtaining the written permission of the Board in each
instance, the Executive will not authorize or permit the Company to engage
the services, of or engage in any business activity with, or provide any
financial or other benefit to, any affiliate of the Executive. The phrase
"affiliate of Executive" as used in this Agreement shall mean and include
the Executive's family by blood or marriage (including, without limitation,
parents, spouse, siblings, children and in-laws) and any business or
business entitity which is directly or indirectly owned or controlled by the
Executive or any member of the Executive's family or in which the Executive
or any member of the Executive's family has any direct or indirect material
financial interest.
2. TERM
The term of this Agreement (the "Term") shall be for a period of three years,
commencing on August 1, 1996 and terminating on July 31, 1999 subject,
however, to prior termination as provided herein. Any extension or renewal
of this Agreement shall be upon such terms and conditions as shall be
negotiated by the parties upon the expiration hereof.
3. TERMINATION
This Agreement shall be terminated upon the happening of any of the following
events:
3.1 Upon the death of Executive.
3.2 Upon the sale of the Company or the sale of substantially all of the
Company's assets for a gross sales price of at least $2.5 Million and, the
Executive is not employed by the acquiring company or any of its affiliates;
or any of its affiliates; or
3.3 Upon the sale of the Company or the sale of substantially all of the
Company's assets for a gross sales price of at least $1.2 Million but less
than $2.5 Million and, the Executive is not employed by the acquiring
company or any of its affiliates.
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
3.3A If the Company or substantially all of the Company's assets is sold for
a gross sales price of less than $1.2 Million, then this entire Agreement is
null and void.
3.4 Whenever the Company and Executive shall mutually agree to termination.
3.5 At the option of the Company, upon written notice by the Company to the
Executive, for Cause. "Cause" shall exist for such termination if Executive
(i) pleads or is found guilty of a felony involving an act of dishonesty or
moral turpitude by a court of competent jurisdiction; (ii) engages in serious
misconduct; (iii) has made any material misrepresentation or omission to the
Company under Section 1.5 hereof; (iv) commits a willful, unexcused material
breach of his duty under this Agreement; (v) is in habitual neglect of
Executive duties; or (vi) usurps a corporate opportunity, is guilty of
embezzlement of property or funds of the Company, or commits any act of fraud
or intentional misrepresentation, dishonesty or other misconduct.
3.6 The Company may terminate Executive's employment under this Agreement at
any time without Cause, subject to the provisions for payment of compensation
as specified under Section 5.4 of this Agreement.
3.7 Upon the expiration of nine months, or six continuous months, of
disability (as defined in Section 6.2) during the term of this Agreement,
subject to the provisions for payment of compensation as specified under
Section 6.1 of this Agreement.
3.8 Upon the expiration of the three-year term of this Agreement, or any
extension or renewal thereof.
4. COMPANY'S AUTHORITY
Executive agrees to observe and comply with the reasonable rules and
regulations of Company adopted by the Board of Directors of the Company or
an appropriate committee of the Board of Directors with respect to the
performance of Executive's duties and to carry out and perform orders,
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Protein Databases, Inc.
EMPLOYMENT AGREEMENT
directions and policies of Company as they may be, from time-to-time,
stated to Executive either verbally or in writing so long as the order,
directions or policy is not inconsistent with the provisions of this
agreement.
5. CURRENT COMPENSATION
5.1 Annual Salary. For all services rendered by the Executive under this
Agreement, the Company shall pay or cause to be paid to the Executive, and
the Executive shall accept the Annual Salary and Incentive Compensation, if
any, all in accordance with the subject to the terms of this Agreement.
For purposes of this Agreement, the term "Compensation" shall mean the
Annual Salary and Incentive Compensation, if any. Executive shall be entitled
to receive as current compensation an annual salary in the amount of
$134,531.00 subject to increase, beginning January 1, 1997, based on the
increase in the local consumers price index or COLA. Effective April 1, 1996,
Executive has accepted a 20% reduction in his Normal Annual Salary in
consideration of the Company's cost containment measures.
Executive shall be restored to the Normal Annual Salary and will be paid
the amount of the 20% salary reduction from April 1, 1996 to the date of
sale of the business if:
(a) the sale of the Company or substantially all of its assets for a gross
sales price of at least $2.5 Million on or before April 1, 1997 or
$2.6 Million after April 1, 1997, or $2.7 Million after April 1, 1998,
or $2.8 Million after April 1, 1999, or
(b) if the company's accumulated deficit is reduced to $7,204,338, the
balance at December 31, 1995, as reported in any of the Company's quarterly
or annual reports as filed with the U.S. Securities and Exchange Commission
during the term of this Agreement.
5.1A The Executive shall be returned to his Normal Annual Salary, on a
accounting period to period basis, upon the achievement of two (2)
consecutive profitable quarters of operations as reported in any of the
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Protein Databases, Inc.
EMPLOYMENT AGREEMENT
Company's quarterly or annual reports as filed with the U.S. Securities and
Exchange Commission. The return to the Normal Annual Salary shall be as of
the beginning of the profitable period reported which will include accruals
for such compensation.
5.2 Incentive Compensation. In addition, Executive shall be entitled to
annual Incentive Compensation in accordance with the Company's Executive
Incentive Compensation Plan.
5.3 Payments of Current Compensation. The payment of Executive's Annual
Salary shall be made in bi-weekly installments on the then prevailing
paydays of the Company. Any payment for Incentive Compensation will be made
in accordance with the Executive Incentive Compensation Plan, and payment
will be made in one lump sum concurrently with payments made to others in
senior management. All payments are subject to the customary withholding tax
and other employment taxes as required with respect to compensation paid to
an employee.
5.4 Payment of Compensation on Termination. Upon termination of Executive's
employment prior to the expiration of the Term of this Agreement
(i) if such termination is pursuant to Section 3.1, 3.3A, 3.4, 3.5 or 3.7
hereof, Executive shall be entitled to any salary and accrued vacation
(up to a maximum of 20 days) unpaid through the date of termination of
employment;
(ii) if such termination is pursuant to Section 3.2 or 3.6 hereof, Executive
shall be entitled to Twelve (12) months Normal Annual Salary and payment of
accrued vacation (up to a maximum of 20 days) upon termination of employment;
(iii) if such termination is pursuant to Section 3.3 hereof, Executive shall
be entitled to Six (6) months Normal Annual Salary and payment of accrued
vacation (up to a maximum of 20 days) upon termination of employment;
All such Normal Annual Salary for future periods compensation pursuant to
this Section 5.4 shall be paid according to Section 5.3, unless other
arrangements are agreed to in writing. All other amounts due (unpaid salary,
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Protein Databases, Inc.
EMPLOYMENT AGREEMENT
vacation, and expenses) to the Executive shall be paid upon the termination
date, except if applicable, according to the terms of Section 5.1 and 5.1A.
6. DISABILITY
6.1 Disability Benefits. If Executive shall become disabled, as defined in
Section 6.2, during each of the first three months of such disability during
the term of this Agreement, the Company shall continue to pay to or for the
benefit of the Executive the benefits provided for in Section 7.1 and his
Annual Salary hereunder, less the amount of any disability benefits received
by the Executive from any source paid for or reimbursed by the Company.
Thereafter, Executive's compensation shall be reduced to reflect the reduced
performance of Executive's services. However, so long as the Executive is
providing services to the Company at a reduced level pursuant to an agreement
with the Company, Executive shall be entitled to receive the benefits
provided for in Section 7.1
6.2 Determination of Disability. For the purpose of this Agreement, Executive
is disabled if, upon the expiration of nine months of disability or six
continuous months of disability during the one year term of this Agreement,
he (i) is under a legal decree of incompetence; (ii) submits a bona fide
claim for any disability insurance benefits or for early distribution on
account of disability; (iii) is unable to perform his normal duties because
of a medical condition; or (iv) suffers from an agreed upon disability, as
defined in Section 6.3.
6.3 An "agreed upon disability" means the Executive has more than a
temporary incapacity, and because of a medically determinable disease,
injury, or other mental or physical disability, is unable to perform
substantially all of his regular duties. The agreed upon disability will be
based on the written opinion of the physician regularly attending the
Executive whose disability is in question. If the Company, disagrees with the
opinion of such physician, the Company may engage, at its own expense, another
physician to examine the Executive. The two physicians shall confer with each
other and, if they together agree in writing that the Executive is or is not
disabled, their written opinion shall be conclusive as to such disability.
If the physicians do not agree, they shall choose a third consulting
physician, at the Company's expense, and the written opinion of a majority
of these three physicians shall be conclusive as to such disability. In
conjunction with this paragraph, Executive consents to such examination,
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EMPLOYMENT AGREEMENT
to furnish any medical information requested by any examining physician, and
to waive any applicable physician-patient privilege that may arise because
of such examination.
6.4 In the event the Executive's disability is in question, and after
written request by the Company, the Executive refuses to be examined by his
regularly attending physician or if the regularly attending physician fails
to submit a report within 30 days after the examination has been requested
by the Company, the determination of disability shall be made by the a
physician chosen by the Company, whose determination shall be conclusive.
7. BENEFITS
7.1 Medical Insurance. Executive shall be entitled to participate in any
medical, dental, vision, life, long-term disability, other insurance or
employee benefit program instituted or maintained by the Company for the
benefit of its Executives.
7.2 Payment of Benefits on Termination of Employment Pursuant To Sections
3.2, 3.3, or 3.6. If Executive's employment with the Company is terminated
pursuant to Section 3.2, 3.3, or 3.6 hereof, the Company agrees that
Executive shall be entitled to continued participation in the health care
coverage, life insurance coverage or other employee benefit plans of the
Company according to and as permitted by applicable law and the terms and
conditions of such plans, as if Executive were still actively employed by
the Company, for a period of 12 months following the date of the termina-
tion if terminated under Sections 3.2 or 3.6, or for a period of six months
following the effective date of the termination if terminated under Section
3.3. If applicable law or the terms and conditions of such plans do not
permit Executive to be covered as if Executive were still actively employed
by the Company, the Company agrees to pay Executive an amount equal to what
the Company would have paid to maintain such benefits if Executive were still
employed by the Company during the 12-month period following termination in
accordance with Sections 3.2 or 3.6, or during the 6-month period following
termination in accordance with Sections 3.3.
7.3 Business Expenses. The Executive shall be reimbursed for all reasonable
expenses incurred by the Executive in connection with the Executive's
attendance at business meetings and promotion of Company business upon
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EMPLOYMENT AGREEMENT
presentation by the Executive to the Company of any expense report and
adequate records or other documentation substantiating the expenditures,
not less frequently than monthly.
8. RESTRICTIVE COVENANTS
8.1 Executive acknowledges that (i) he has a major responsibility for the
operation, administration, development and growth of the Company's business;
(ii) the Company's business is international in scope; (iii) his work for the
Company will bring him into close contact with confidential information of
the Company and its customers; and (iv) the agreements and covenants
contained in this Section 8 (the "Restrictive Covenants") are essential to
protect the business interests of the Company and that the Company would not
enter into this Agreement but for such agreements and covenants. Accordingly,
the Executive covenants and agrees as follows:
8.1.1 During the term of this Agreement and, if applicable, during the six
months following termination, Executive shall not, directly or indirectly,
(i) solicit for employment or provide services, or employ or engage the
service of, any employee of the Company who was employed by the Company at
the time of termination; (ii) aid or agree to aid any competitor, client,
or supplier of the Company in any attempt to hire any person who shall have
been employed by the Company within the two-year period preceding such
requested aid; or (iii) induce or attempt to influence any person or
business entity who was a client or supplier of the Company during any
portion of said period to transact business with a competitor of the Company.
8.2 Executive hereby expressly acknowledges, understands and agrees that all
documents, records, computer discs and programs, marketing and business plans
and studies, and business and financial information (collectively referred to
in this paragraph as "confidential information") relating to the Company's
business including, without limitation, the names and addresses of the
Company's clients and referral sources, all client records, files, and other
client information, all methods of marketing, all software programs and source
codes, training programs, fee policies, and management and operating methods,
whether they are prepared in whole or in part by the Executive or by any other
person, are and shall remain the exclusive property of the Company, and that
all such trade secrets are confidential, material and important to the
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EMPLOYMENT AGREEMENT
business and financial success of the Company, and that their disclosure or
unauthorized use would seriously and adversely affect the Company's business.
8.3 If any of the Restrictive Covenants, or any part thereof, is held to be
invalid or unenforceable, the same shall not affect the remainder of the
covenant or covenants, which shall be given full effect, without regard to
the invalid or unenforceable portions. Without limiting the generality of
the foregoing, if any of the Restrictive Covenants, or any part thereof,
is held to be unenforceable because of the duration of such provision or the
area covered thereby, the parties hereto agree that the court making such
determination shall have the power to reduce the duration and/or area of
such provision and, in its reduced form, such provision shall then be
enforceable.
9. DISPUTE RESOLUTION
Any dispute or claim arising out of, in connection with, or in relation to
the interpretation, performance or breach of this Agreement shall be resolved
by arbitration in accordance with the Commercial Arbitration Rules of
JAMS/End-Dispute, and judgment upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof.
Such arbitration shall be held in New York, New York. The arbitrators shall
be empowered to award costs to the successful party.
10. ASSIGNMENT
This Agreement is a personal contract, and the rights, interests and
obligations of the Executive hereunder may not be sold, transferred,
assigned, pledged or hypothecated except as otherwise expressly permitted
by the provisions of this Agreement. Executive shall not under any
circumstances have any option or right to require payment hereunder
otherwise than in accordance with the terms hereof. Except as otherwise
expressly provided herein, Executive shall not have any power of
anticipation, alienation or assignment of payments contemplated hereunder,
and all rights and benefits of Executive shall be for the sole personal
benefit of Executive, and no other person shall acquire any right, title
or interest hereunder by reason of any sale, assignment, transfer, claim
or judgment or bankruptcy proceedings against Executive; provided,
however, that in the event of Executive's death, Executive's estate, legal
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Protein Databases, Inc.
EMPLOYMENT AGREEMENT
representatives or beneficiaries (as the case may be) shall have the right
to receive all the benefits that accrued to the Executive pursuant to,
and in accordance with, the terms of the Agreement.
11. NOTICES
All notices, requests and demands hereunder shall be in writing and delivered
by hand, by mail, by FAX or by telegram, and shall be deemed given if by hand
delivery, upon such delivery, and if by mail, 48 hours after deposit in the
United States mail, first class, registered or certified mail, postage
prepaid and properly addressed to the party at the address set forth at the
beginning of this Agreement. Any party may change its address for purposes of
this paragraph by giving the other part written notice of the new address in
the manner set forth above.
12. INVALID PROVISIONS
Invalidity or unenforceability of any particular provision of this Agreement
shall not affect the other provisions hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provision were
omitted.
13. AMENDMENT MODIFICATION OR REVOCATION
This Agreement may be amended, modified or revoked in whole or in part, but
only by a written instrument which specifically refers to this Agreement and
expressly states that it constitutes an amendment, modification or revocation
hereof, as the case may be, and only if such written instrument has been
signed by each of the parties to this Agreement.
14. HEADINGS
The headings in this Agreement are inserted for convenience only and are not
to be considered in construction of the provisions hereof.
15. ENTIRE AGREEMENT
This Agreement contains the entire understanding among the parties and
supersedes any prior written or verbal agreements between them respecting the
subject matter hereof, including, without limitation, any prior verbal or
written employment agreement between Executive and the Company.
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Protein Databases, Inc.
EMPLOYMENT AGREEMENT
Upon the effectiveness hereof, any such prior verbal or written agreements
shall terminate.
No representations or warranties of any kind or nature relating to the
Company or its affiliates or their respective businesses, assets,
liabilities, operations, future plans or prospects have been made by or on
behalf of the Company to the Executive; nor have any representations or
warranties of any kind or nature been made by the Executive to the Company,
except as expressly set forth in this Agreement.
16. ATTORNEYS' FEES
If any legal action is necessary to enforce the terms and conditions of this
Agreement, the prevailing party in such action shall be entitled to recover
all costs of suit and reasonable attorneys' fees as determined by the
arbitrator.
17. FURTHER ASSURANCES
The parties shall execute such documents and take such other action as is
necessary or appropriate to effectuate the provisions of this Agreement.
18. CONTROLLING LAW
This Agreement shall be governed by the internal laws of the State of New
York without regard to conflict of laws.
19. WAIVER
A waiver by either party of any of the terms and conditions hereof shall not
be construed as a general waiver by such party, and such party shall be free
to reinstate such part or clause, with or without notice to the other party.
THE EFFECTIVE DATE OF THIS AGREEMENT IS August 1, 1996.
THE COMPANY:
By: Ronald R. Hahn
Chairman of the Board of Directors
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EMPLOYMENT AGREEMENT
EXECUTIVE:
Stephen H. Blose
President and Chief
Executive Officer
EXHIBIT 10.12
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of this 1st day of August, 1996 by and between
Jon D. Randall, residing at 401 Monroe Drive, Centerport, New York 11721
("Executive"), and Protein Databases, Inc., a Delaware corporation d.b.a.
PDI, Inc., with offices at 405 Oakwood Road Huntington Station, NY 11746-
7296 (the "Company"), for the purpose of setting forth the terms and cond-
itions of Executive's employment by the Company and to protect the Company's
knowledge, expertise, customer relationships and the confidential information
the Company has developed regarding clients, customers, shareholders, option
holders, employees, products, business operations and services.
1. TIME AND EFFORTS
1.1 Executive shall be employed as the Company's Vice President of Software
Development, and shall have such duties and have such responsibilities as the
Company's Chief Executive Officer may assign to the Executive in furtherance
of the Company's business.
1.2 In the performance of all of his duties and responsibilities hereunder,
Executive shall be subject to all of the Company's policies, rules and
regulations applicable to its officers generally. The Executive shall report
to the President and Chief Executive Officer.
1.3 Executive shall continue to be a member of the Executive Management.
1.4 Without the prior express authorization of the Board, Executive shall
not, directly or indirectly, during the term of this Agreement engage in any
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EMPLOYMENT AGREEMENT
activity competitive with or adverse to the Company's business. This Agree-
ment shall not be interpreted to prohibit Executive from making passive
personal investments, conducting private business affairs, or engaging in
educational or charitable activities, if those activities do not materially
interfere with the services required hereunder.
1.5 In order to induce the Company to enter into this Agreement, Executive
represents and warrants to the Company that (i) Executive is not a party or
subject to any written employment agreement with any other company and (ii)
Executive is subject to no restraint, limitation or restriction by virtue of
any written agreement or by virtue of any law or rule of law which would
impair the Executive's right or ability to perform fully his duties and
responsibilities pursuant to this Agreement.
1.6 Without first obtaining the written permission of the Board in each
instance, the Executive will not authorize or permit the Company to engage
the services, of or engage in any business activity with, or provide any
financial or other benefit to, any affiliate of the Executive. The phrase
"affiliate of Executive" as used in this Agreement shall mean and include
the Executive's family by blood or marriage (including, without limitation,
parents, spouse, siblings, children and in-laws) and any business or business
entity which is directly or indirectly owned or controlled by the Executive
or any member of the Executive's family or in which the Executive or any
member of the Executive's family has any direct or indirect material
financial interest.
2. TERM
The term of this Agreement (the "Term") shall be for a period of three years,
commencing on August 1, 1996 and terminating on July 31, 1999 subject,
however, to prior termination as provided herein. Any extension or renewal
of this Agreement shall be upon such terms and conditions as shall be
negotiated by the parties upon the expiration hereof.
3. TERMINATION
This Agreement shall be terminated upon the happening of any of the following
events:
3.1 Upon the death of Executive.
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EMPLOYMENT AGREEMENT
3.2 Upon the sale of the Company or the sale of substantially all of the
Company's assets for a gross sales price of at least $2.5 Million and, the
Executive is not employed by the acquiring company or any of its affiliates;
or
3.3 Upon the sale of the Company or the sale of substantially all of the
Company's assets for a gross sales price of at least $1.2 Million but less
than $2.5 Million and, the Executive is not employed by the acquiring
company or any of its affiliates.
3.3A If the Company or substantially all of the Company's assets is sold for
a gross sales price of less than $1.2 Million, then this entire Agreement is
null and void.
3.4 Whenever the Company and Executive shall mutually agree to termination.
3.5 At the option of the Company, upon written notice by the Company to the
Executive, for Cause. "Cause" shall exist for such termination if Executive
(i) pleads or is found guilty of a felony involving an act of dishonesty or
moral turpitude by a court of competent jurisdiction; (ii) engages in serious
misconduct; (iii) has made any material misrepresentation or omission to the
Company under Section 1.5 hereof; (iv) commits a willful, unexcused material
breach of his duty under this Agreement; (v) is in habitual neglect of
Executive's duties; or (vi) usurps a corporate opportunity, is guilty of
embezzlement of property or funds of the Company, or commits any act of fraud
or intentional misrepresentation, dishonesty or other misconduct.
3.6 The Company may terminate Executive's employment under this Agreement at
any time without Cause, subject to the provisions for payment of compensation
as specified under Section 5.4 of this Agreement.
3.7 Upon the expiration of nine months, or six continuous months, of
disability (as defined in Section 6.2) during the term of this Agreement,
subject to the provisions for payment of compensation as specified under
Section 6.1 of this Agreement.
3.8 Upon the expiration of the three-year term of this Agreement, or any
extension or renewal thereof.
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EMPLOYMENT AGREEMENT
4. COMPANY'S AUTHORITY
Executive agrees to observe and comply with the reasonable rules and
regulations of Company adopted by the Board of Directors of the Company or
an appropriate committee of the Board of Directors with respect to the
performance of Executive's duties and to carry out and perform orders,
directions and policies of Company as they may be, from time-to-time,
stated to Executive either verbally or in writing so long as the order,
directions or policy is not inconsistent with the provisions of this
agreement.
5. CURRENT COMPENSATION
5.1 Annual Salary. For all services rendered by the Executive under this
Agreement, the Company shall pay or cause to be paid to the Executive, and
the Executive shall accept the Annual Salary and Incentive Compensation,
if any, all in accordance with the subject to the terms of this Agreement.
For purposes of this Agreement, the term "Compensation" shall mean the
Annual Salary and Incentive Compensation, if any. Executive shall be entitled
to receive as current compensation an annual salary in the amount of
$123,512.00 subject to increase (but not decrease) in the discretion of the
Board of Directors, (herein referred to as the "Normal Annual Salary"). The
Normal Annual Salary shall be increased by at least the annual cost of living
increase, beginning January 1, 1997, based on the increase in the local
consumers price index or COLA. Effective April 1, 1996, Executive has
accepted a 20% reduction in his Normal Annual Salary in consideration of the
Company's cost containment measures.
Executive shall be restored to the Normal Annual Salary and will be paid the
amount of the 20% salary reduction from April 1, 1996 to the date of sale
of the business if:
(a) the sale of the Company or substantially all of its assets for a gross
sales price of at least $2.5 Million on or before April 1, 1997 or
$2.6 Million after April 1, 1997, or $2.7 Million after April 1, 1998, or
$2.8 Million after April 1, 1999, or
(b) if the company's accumulated deficit is reduced to $7,204,338, the
balance at December 31, 1995, as reported in any of the Company's quarterly
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EMPLOYMENT AGREEMENT
or annual reports as filed with the U.S. Securities and Exchange Commission
during the term of this Agreement.
5.1A The Executive shall be returned to his Normal Annual Salary, on a
accounting period to period basis, upon the achievement of two (2)
consecutive profitable quarters of operations as reported in any of the
Company's quarterly or annual reports as filed with the U.S. Securities and
Exchange Commission. The return to the Normal Annual Salary shall be as of
the beginning of the profitable period reported which will include accruals
for such compensation.
5.2 Incentive Compensation. In addition, Executive shall be entitled to
annual Incentive Compensation in accordance with the Company's Executive
Incentive Compensation Plan.
5.3 Payments of Current Compensation. The payment of Executive's Annual
Salary shall be made in bi-weekly installments on the then prevailing
paydays of the Company. Any payment for Incentive Compensation will be made
in accordance with the Executive Incentive Compensation Plan, and payment
will be made in one lump sum concurrently with payments made to others in
senior management. All payments are subject to the customary withholding tax
and other employment taxes as required with respect to compensation paid to
an employee.
5.4 Payment of Compensation on Termination. Upon termination of Executive's
employment prior to the expiration of the Term of this Agreement
(i) if such termination is pursuant to Section 3.1, 3.3A, 3.4, 3.5 or 3.7
hereof, Executive shall be entitled to any salary and accrued vacation
(up to a maximum of 20 days) unpaid through the date of termination of
employment;
(ii) if such termination is pursuant to Section 3.2 or 3.6 hereof, Executive
shall be entitled to Six (6) months Normal Annual Salary and payment of
accrued vacation (up to a maximum of 20 days) upon termination of employment;
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EMPLOYMENT AGREEMENT
(iii) if such termination is pursuant to Section 3.3 hereof, Executive shall
be entitled to Three (3) months Normal Annual Salary and payment of accrued
vacation (up to a maximum of 20 days) upon termination of employment;
All such Normal Annual Salary for future periods compensation pursuant to
this Section 5.4 shall be paid according to Section 5.3, unless other
arrangements are agreed to in writing. All other amounts due (unpaid salary,
vacation, and expenses) to the Executive shall be paid upon the termination
date, except if applicable, according to the terms of Section 5.1 and 5.1A.
6. DISABILITY
6.1 Disability Benefits. If Executive shall become disabled, as defined in
Section 6.2, during each of the first three months of such disability during
the term of this Agreement, the Company shall continue to pay to or for the
benefit of the Executive the benefits provided for in Section 7.1 and his
Annual Salary hereunder, less the amount of any disability benefits received
by the Executive from any source paid for or reimbursed by the Company.
Thereafter, Executive's compensation shall be reduced to reflect performance
of Executive's services. However, so long as Executive is providing services
to the Company at a reduced level pursuant to an agreement with the Company,
Executive shall be entitled to receive the benefits provided for in
Section 7.1
6.2 Determination of Disability. For the purpose of this Agreement, Executive
is disabled if, upon the expiration of nine months of disability or six
continuous months of disability during the one year term of this Agreement,
he (i) is under a legal decree of incompetence; (ii) submits a bona fide
claim for any disability insurance benefits or for early distribution on
account of disability; (iii) is unable to perform his normal duties because
of a medical condition; or (iv) suffers from an agreed upon disability, as
defined in Section 6.3
6.3 An "agreed upon disability" means the Executive has more than a
temporary incapacity, and because of a medically determinable disease,
injury, or other mental or physical disability, is unable to perform
substantially all of his regular duties. The agreed upon disability will be
based on the written opinion of the physician regularly attending the
Executive whose disability is in question. If the Company, disagrees with
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EMPLOYMENT AGREEMENT
the opinion of such physician, the Company may engage, at its own expense,
another physician to examine the Executive. The two physicians shall confer
with each other and, if they agree in writing that the Executive is or is not
disabled, their written opinion shall be conclusive as to such disability.
If the physicians do not agree, they shall choose a third consulting
physician, at the Company's expense, and the written opinion of a majority
of these three physicians shall be conclusive as to such disability. In
conjunction with this paragraph, Executive consents to such examination, to
furnish any medical information requested by any examining physician, and to
waive any applicable physician-patient priviledge that may arise because of
such examination.
6.4 In the event the Executive's disability is in question, and after written
request by the Company, the Executive refuses to be examined by his regularly
attending physician or if the regularly attending physician fails to submit a
report within 30 days after the examination has been requested by the Company,
the determination of disability shall be made by the a physician chosen by the
Company, whose determination shall be conclusive.
7. BENEFITS
7.1 Medical Insurance. Executive shall be entitled to participate in any
medical, dental, vision, life, long-term disability, other insurance or
employee benefit program instituted or maintained by the Company for the
benefit of its Executives.
7.2 Payment of Benefits on Termination of Employment Pursuant To Sections
3.2, 3.3, or 3.6. If Executive's employment with the Company is terminated
pursuant to Section 3.2, 3.3, or 3.6 hereof, the Company agrees that
Executive shall be entitled to continued participation in the health care
coverage, life insurance coverage or other employee benefit plans of the
Company according to and as permitted by applicable law and the terms and
conditions of such plans, as if Executive were still actively employed by
the Company, for a period of 6 months following the effective date of
termination if terminated under Sections 3.2 or 3.6, or for a period of 3
months following the effective date of the termination if terminated under
Section 3.3. If applicable law or the terms and conditions of such plans
do not permit Executive to be covered as if Executive were still actively
employed by the Company, the Company agrees to pay Executive an amount equal
to what the Company would have paid to maintain such benefits if Executive
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EMPLOYMENT AGREEMENT
were still employed by the Company during the 6-month period following
termination in accordance with Sections 3.2 or 3.6, or during the 3-month
period following termination in accordance with Sections 3.3.
7.3 Business Expenses. The Executive shall be reimbursed for all reasonable
expenses incurred by the Executive in connection with the Executive's
attendance at business meetings and promotion of Company business upon
presentation by the Executive to the Company of any expense report and
adequate records or other documentation substantiating the expenditures,
not less frequently than monthly.
8. RESTRICTIVE COVENANTS
8.1 Executive acknowledges that (i) he has a major responsibility for the
operation, administration, development and growth of the Company's business;
(ii) the Company's business is international in scope; (iii) his work for the
Company will bring him into close contact with confidential information of
the Company and its customers; and (iv) the agreements and covenants contain-
ed in this Section 8 (the "Restrictive Covenants") are essential to protect
the business interests of the Company and that the Company would not enter
this Agreement but for such agreements and covenants. Accordingly, the
Executive agrees as follows:
8.1.1 During the term of this Agreement and, if applicable, during the six
months following termination, Executive shall not, directly or indirectly,
(i) solicit for employment or provide services, or employ or engage the
service of, any employee of the Company who was employed by the Company at
the time of termination; (ii) aid or agree to aid any competitor, client,
or supplier of the Company in any attempt to hire any person who shall have
been employed by the Company within the two-year period preceding such
requested aid; or (iii) induce or attempt to influence any person or
business entity who was a client or supplier of the Company during any
portion of said period to transact business with a competitor of the Company.
8.2 Executive hereby expressly acknowledges, understands and agrees that all
documents, records, computer discs and programs, marketing and business plans
and studies, and business and financial information (collectively referred
to in this paragraph as "confidential information") relating to the Company's
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
business including, without limitation, the names and addresses of the
Company's clients and referral sources, all client records, files, and other
client information, all methods of marketing, all software programs and source
codes, training programs, fee policies wheather they are prepared in whole or
in part by the Executive or by any other person, are and shall remain the
exclusive property of the Company, and that all such trade secrets are
confidential, material and important to the business and financial success of
the Company, and that their disclosure or unauthorized use would seriously
and adversely affect the Company's business.
8.3 If any of the Restrictive Covenants, or any part thereof, is held to be
invalid or unenforceable, the same shall not affect the remainder of the
covenant or covenants, which shall be given full effect, without regard to
the invalid or unenforceable portions. Without limiting the generality of the
foregoing, if any of the Restrictive Covenants, or any part thereof, is held
to be unenforceable because of the duration of such provision or the area
covered thereby, the parties hereto agree that the court making such
determination shall have the power to reduce the duration and/or area of such
provision and, in its reduced form, such provision shall then be enforceable.
9. DISPUTE RESOLUTION
Any dispute or claim arising out of, in connection with, or in relation to
the interpretation, performance or breach of this Agreement shall be resolved
by arbitration in accordance with the Commercial Arbitration Rules of
JAMS/End-Dispute, and judgment upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof.
Such arbitration shall be held in New York, New York. The arbitrators shall
be empowered to award costs to the successful party.
10. ASSIGNMENT
This Agreement is a personal contract, and the rights, interests and
obligations of the Executive hereunder may not be sold, transferred,
assigned, pledged or hypothecated except as otherwise expressly permitted
by the provisions of this Agreement. Executive shall not under any
circumstances have any option or right to require payment hereunder
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
otherwise than in accordance with the terms hereof. Except as otherwise
expressly provided herein, Executive shall not have any power of anticipation.
alienation or assignment of payments contemplated hereunder, and all rights
and benetits of Executive shall be for the sole personal benefit of Executive,
and no other person shall acquire any right, title or interest hereunder by
reason of any sale, assignment, transfer, claim or judgment or bankruptcy
proceedings against Executive; provided, however, that in the event of
Executive's death, Executive's estate, legal representatives or beneficiaries
(as the case may be) shall have the right to receive all of the benefits that
accrued to the Executive pursuant to, and in accordance with, the terms of
this Agreement.
11. NOTICES
All notices, requests and demands hereunder shall be in writing and delivered
by hand, by mail, by FAX or by telegram, and shall be deemed given if by hand
delivery, upon such delivery, and if by mail, 48 hours after deposit in the
United States mail, first class, registered or certified mail, postage
prepaid and properly addressed to the party at the address set forth at the
beginning of this Agreement. Any party may change its address for purposes of
this paragraph by giving the other part written notice of the new address in
the manner set forth above.
12. INVALID PROVISIONS
Invalidity or unenforceability of any particular provision of this Agreement
shall not affect the other provisions hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provision were
omitted.
13. AMENDMENT MODIFICATION OR REVOCATION
This Agreement may be amended, modified or revoked in whole or in part, but
only by a written instrument which specifically refers to this Agreement and
expressly states that it constitutes an amendment, modification or revocation
hereof, as the case may be, and only if such written instrument has been
signed by each of the parties to this Agreement.
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
14. HEADINGS
The headings in this Agreement are inserted for convenience only and are not
to be considered in construction of the provisions hereof.
15. ENTIRE AGREEMENT
This Agreement contains the entire understanding among the parties and
supersedes any prior written or verbal agreements between them respecting the
subject matter hereof, including, without limitation, any prior verbal or
written employment agreement between Executive and the Company. Upon the
effectiveness hereof, any such prior verbal or written agreements shall
terminate.
No representations or warranties of any kind or nature relating to the
Company or its affiliates or their respective businesses, assets,
liabilities, operations, future plans or prospects have been made by or on
behalf of the Company to the Executive; nor have any representations or
warranties of any kind or nature been made by the Executive to the Company,
except as expressly set forth in this Agreement.
16. ATTORNEYS' FEES
If any legal action is necessary to enforce the terms and conditions of this
Agreement, the prevailing party in such action shall be entitled to recover
all costs of suit and reasonable attorneys' fees as determined by the
arbitrator.
17. FURTHER ASSURANCES
The parties shall execute such documents and take such other action as is
necessary or appropriate to effectuate the provisions of this Agreement.
18. CONTROLLING LAW
This Agreement shall be governed by the internal laws of the State of New
York without regard to conflict of laws.
19. WAIVER
A waiver by either party of any of the terms and conditions hereof shall not
be construed as a general waiver by such party, and such party shall be free
to reinstate such part or clause, with or without notice to the other party.
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
THE EFFECTIVE DATE OF THIS AGREEMENT IS August 1, 1996.
THE COMPANY:
By: Stephen H. Blose
President & CEO
EXECUTIVE:
Jon D. Randall
Vice President of
Software Development
EXHIBIT 10.13
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of this 1st day of August, 1996 by and between Alan
P. Chodosh, residing at 118 Maytime Drive, Jericho, New York 11753
("Executive"), and Protein Databases, Inc., a Delaware corporation d.b.a.
PDI, Inc., with offices at 405 Oakwood Road Huntington Station, NY 11746-7296
(the "Company"), for the purpose of setting forth the terms and conditions of
Executive's employment by the Company and to protect the Company's knowledge,
expertise, customer relationships and the confidential information the Company
has developed regarding clients, customers, shareholders, option holders,
employees, products, business operations and services.
1. TIME AND EFFORTS
1.1 Executive shall be employed as the Company's Vice President of Finance,
and shall have such duties and have such responsibilities as the Company's
Chief Executive Officer may assign to the Executive in furtherance of the
Company's business.
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
1.2 In the performance of all of his duties and responsibilities hereunder,
Executive shall be subject to all of the Company's policies, rules and
regulations applicable to its officers generally. The Executive shall report
to the President and Chief Executive Officer.
1.3 Executive shall continue to be a member of the Executive Management.
1.4 Without the prior express authorization of the Board, Executive shall
not, directly or indirectly, during the term of this Agreement engage in any
activity competitive with or adverse to the Company's business. This
Agreement shall not be interpreted to prohibit Executive from making passive
personal investments, conducting private business affairs, or engaging in
educational or charitable activities, if those activities do not materially
interfere with the services required hereunder.
1.5 In order to induce the Company to enter into this Agreement, Executive
represents and warrants to the Company that (i) Executive is not a party or
subject to any written employment agreement with any other company and (ii)
Executive is subject to no restraint, limitation or restriction by virtue of
any written agreement or by virtue of any law or rule of law which would
impair the Executive's right or ability to perform fully his duties and
responsibilities pursuant to this Agreement.
1.6 Without first obtaining the written permission of the Board in each
instance, the Executive will not authorize or permit the Company to engage
the services, of or engage in any business activity with, or provide any
financial or other benefit to, any affiliate of the Executive. The phrase
"affiliate of Executive" as used in this Agreement shall mean and include
the Executive's family by blood or marriage (including, without limitation,
parents, spouse, siblings, children and in-laws) and any business or business
entity which is directly or indirectly owned or controlled by the Executive
or any member of the Executive's family or in which the Executive or any
member of the Executive's family has any direct or indirect material
financial interest.
2. TERM
The term of this Agreement (the "Term") shall be for a period of three years,
commencing on August 1, 1996 and terminating on July 31, 1999 subject,
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
however, to prior termination as provided herein. Any extension or renewal of
this Agreement shall be upon such terms and conditions as shall be negotiated
by the parties upon the expiration hereof.
3. TERMINATION
This Agreement shall be terminated upon the happening of any of the following
events:
3.1 Upon the death of Executive.
3.2 Upon the sale of the Company or the sale of substantially all of the
Company's assets for a gross sales price of at least $2.5 Million and, the
Executive is not employed by the acquiring company or any of its affiliates;
or
3.3 Upon the sale of the Company or the sale of substantially all of the
Company's assets for a gross sales price of at least $1.2 Million but less
than $2.5 Million and, the Executive is not employed by the acquiring
company or any of its affiliates.
3.3A If the Company or substantially all of the Company's assets is sold for
a gross sales price of less than $1.2 Million, then this entire Agreement is
null and void.
3.4 Whenever the Company and Executive shall mutually agree to termination.
3.5 At the option of the Company, upon written notice by the Company to the
Executive, for Cause. "Cause" shall exist for such termination if Executive
(i) pleads or is found guilty of a felony involving an act of dishonesty or
moral turpitude by a court of competent jurisdiction; (ii) engages in serious
misconduct; (iii) has made any material misrepresentation or omission to the
Company under Section 1.5 hereof; (iv) commits a willful, unexcused material
breach of his duty under this Agreement; (v) is in habitual neglect of
Executive's duties or; (vi) usurps a corporate opportunity, is guilty of
embezzlement of property or funds of the or commits any act of fraud or
intentional misrepresentation, dishonesty or other misconduct.
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
3.6 The Company may terminate Executive's employment under this Agreement at
any time without Cause, subject to the provisions for payment of compensation
as specified under Section 5.4 of this Agreement.
3.7 Upon the expiration of nine months, or six continuous months, of
disability (as defined in Section 6.2) during the term of this Agreement,
subject to the provisions for payment of compensation as specified under
Section 6.1 of this Agreement.
3.8 Upon the expiration of the three-year term of this Agreement, or any
extension or renewal thereof.
4. COMPANY'S AUTHORITY
Executive agrees to observe and comply with the reasonable rules and
regulations of Company adopted by the Board of Directors of the Company or
an appropriate committee of the Board of Directors with respect to the
performance of Executive's duties and to carry out and perform orders,
directions and policies of Company as they may be, from time-to-time, stated
to Executive either verbally or in writing so long as the order, directions
or policy is not inconsistent with the provisions of this agreement.
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
5. CURRENT COMPENSATION
5.1 Annual Salary. For all services rendered by the Executive under this
Agreement, the Company shall pay or cause to be paid to the Executive, and
the Executive shall accept the Annual Salary and Incentive Compensation, if
any, all in accordance with the subject to the terms of this Agreement. For
purposes of this Agreement, the term "Compensation" shall mean the Annual
Salary and Incentive Compensation, if any. Executive shall be entitled to
receive as current compensation an annual salary in the amount of
$112,750.00 subject to increase (but not decrease) in the discretion of the
Board of Directors, (hereinafter referred to as the "Normal Annual Salary").
The Normal Annual Salary shall be increased by at least the annual cost of
living increase, beginning January 1, 1997, based on the increase in the
local consumers price index or COLA. Effective April 1, 1996, Executive
has accepted a 20% reduction in his Normal Annual Salary in consideration of
the Company's cost containment measures.
Executive shall be restored to the Normal Annual Salary and will be paid the
amount of the 20% salary reduction from April 1, 1996 to the date of sale of
the business if:
(a) the sale of the Company or substantially all of its assets for a gross
sales price of at least $2.5 Million on or before April 1, 1997 or $2.6
Million after April 1, 1997, or $2.7 Million after April 1, 1998, or $2.8
Million after April 1, 1999, or
(b) if the company's accumulated deficit is reduced to $7,204,338, the
balance at December 31, 1995, as reported in any of the Company's quarterly
or annual reports as filed with the U.S. Securities and Exchange Commission
during the term of this Agreement.
5.1A The Executive shall be returned to his Normal Annual Salary, on a
accounting period to period basis, upon the achievement of two (2)
consecutive profitable quarters of operations as reported in any of the
Company's quarterly or annual reports as filed with the U.S. Securities and
Exchange Commission. The return to the Normal Annual Salary shall be as of
the beginning of the profitable period reported which will include accruals
for such compensation.
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
5.2 Incentive Compensation. In addition, Executive shall be entitled to
annual Incentive Compensation in accordance with the Company's Executive
Incentive Compensation Plan.
5.3 Payments of Current Compensation. The payment of Executive's Annual
Salary shall be made in bi-weekly installments on the then prevailing
paydays of the Company. Any payment for Incentive Compensation will be made
in accordance with the Executive Incentive Compensation Plan, and payment
will be made in one lump sum concurrently with payments made to others in
senior management. All payments are subject to the customary withholding tax
and other employment taxes as required with respect to compensation paid to
an employee.
5.4 Payment of Compensation on Termination. Upon termination of Executive's
employment prior to the expiration of the Term of this Agreement
(i) if such termination is pursuant to Section 3.1, 3.3A, 3.4, 3.5 or 3.7
hereof, Executive shall be entitled to any salary and accrued vacation
(up to a maximum of 20 days) unpaid through the date of termination of
employment;
(ii) if such termination is pursuant to Section 3.2 or 3.6 hereof, Executive
shall be entitled to Six (6) months Normal Annual Salary and payment of
accrued vacation (up to a maximum of 20 days) upon termination of employment;
(iii) if such termination is pursuant to Section 3.3 hereof, Executive shall
be entitled to Three (3) months Normal Annual Salary and payment of accrued
vacation (up to a maximum of 20 days) upon termination of employment;
All such Normal Annual Salary for future periods compensation pursuant to
this Section 5.4 shall be paid according to Section 5.3, unless other
arrangements are agreed to in writing. All other amounts due (unpaid salary,
vacation, and expenses) to the Executive shall be paid upon the termination
date, except if applicable, according to the terms of Section 5.1 and 5.1A.
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
6. DISABILITY
6.1 Disability Benefits. If Executive shall become disabled, as defined in
Section 6.2, during each of the first three months of such disability during
the term of this Agreement, the Company shall continue to pay to or for the
benefit of the Executive the benefits provided for in Section 7.1 and his
Annual Salary hereunder, less the amount of any disability benefits received
by the Executive from any source paid for or reimbursed by the Company.
Thereafter, Executive's compensation shall be reduced to reflect the reduced
performance of Executive's services. However, so long as Executive is
providing services to the Company at a reduced level pursuant to an agreement
with the Company, Executive shall be entitled to receive the benefits
provided for in Section 7.1
6.2 Determination of Disability. For the purpose of this Agreement, Executive
is disabled if, upon the expiration of nine months of disability or six
continuous months of disability during the one year term of this Agreement,
he (i) is under a legal decree of incompetence; (ii) submits a bona fide
claim for any disability insurance benefits or for early distribution on
account of disability; (iii) is unable to perform his normal duties because
of a medical condition; or (iv) suffers from an agreed upon disability as
defined in Section 6.3.
6.3 An "agreed upon disability" means the Executive has more than a
temporary incapacity, and because of a medically determinable disease,
injury, or other mental or physical disability, is unable to perform
substantially all of his regular duties. The agreed upon disability will be
based on the written opinion of the physician regularly attending the
Executive whose disability is in question. If the Company, disagrees with
the opinion of such physician, the Company may engage, at its own expense,
another physician to examine the Executive. The two physicians shall confer
with each other and, if they together agree in writing that the Executive is
or is not disabled, their written opinion shall be conclusive as to such
disablity. If the physicians do not agree, they shall choose a third
consulting physician, at the Company's expense, and the written opinion of
a majority of these three physicians shall be conclusive as to such
disability. Inn conjuction with this paragraph, Executive consents to such
examination, to furnish any medical information requested by any examining
physician, and to waive any applicable physician-patient privilege that may
arise because of such examination.
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
6.4 In the event the Executive's disability is in question, and after written
request by the Company, the Executive refuses to be examined by his regularly
attending physician or if the regularly attending physician fails to submit
a report within 30 days after the examination has been requested by the
Company, the determination of disability shall be made by the a physician
chosen by the Company, whose determination shall be conclusive.
7. BENEFITS
7.1 Medical Insurance. Executive shall be entitled to participate in any
medical, dental, vision, life, long-term disability, other insurance or
employee benefit program instituted or maintained by the Company for the
benefit of its Executives.
7.2 Payment of Benefits on Termination of Employment Pursuant To Sections
3.2, 3.3, or 3.6. If Executive's employment with the Company is terminated
pursuant to Section 3.2, 3.3, or 3.6 hereof, the Company agrees that
Executive shall be entitled to continued participation in the health care
coverage, life insurance coverage or other employee benefit plans of the
Company according to and as permitted by applicable law and the terms and
conditions of such plans, as if Executive were still actively employed by
the Company, for a period of 6 months following the effective date of the
termination if terminated under Sections 3.2 or 3.6, or for a period of 3
months following the effective date of the termination if terminated under
Section 3.3. If applicable law or the terms and conditions of such plans do
not permit Executive to be covered as if Executive were still actively
employed by the Company, the Company agrees to pay Executive an amount equal
to what the Company would have paid to maintain such benefits if Executive
were still employed by the Company during the 6-month period following
termination in accordance with Sections 3.2 or 3.6, or during the 3-month
period following termination in accordance with Sections 3.3.
7.3 Business Expenses. The Executive shall be reimbursed for all reasonable
expenses incurred by the Executive in connection with the Executive's
attendance at business meetings and promotion of Company business upon
presentation by the Executive to the Company of any expense report and
adequate records or other documentation substantiating the expenditures,
not less frequently than monthly.
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
8. RESTRICTIVE COVENANTS
8.1 Executive acknowledges that (i) he has a major responsibility for the
operation, administration, development and growth of the Company's business;
(ii) the Company's business is international in scope; (iii) his work for the
Company will bring him into close contact with confidential information of
the Company and its customers; and (iv) the agreements and covenants
contained in this Section 8 (the "Restrictive Covenants") are essential to
protect the business interests of the Company and that the Company would not
enter this Agreement but for such agreements and covenants. Accordingly, the
Executive covenants and agrees as follows:
8.1.1 During the term of this Agreement and, if applicable, during the six
months following termination, Executive shall not, directly or indirectly,
(i) solicit for employment or provide services, or employ or engage the
service of, any employee of the Company who was employed by the Company at
the time of termination; (ii) aid or agree to aid any competitor, client, or
supplier of the Company in any attempt to hire any person who shall have been
employed by the Company within the two-year period preceding such requested
aid; or (iii) induce or attempt to influence any person or business entity
who was a client or supplier of the Company during any portion of said period
to transact business with a competitor of the Company.
8.2 Executive hereby expressly acknowledges, understands and agrees that all
documents, records, computer discs and programs, marketing and business plans
and studies, and business and financial information (collectively referred to
in this paragraph as "confidential information") relating to the Company's
business including, without limitation, the names and addresses of the
Company's clients and referral sources, all client records, files, and other
client information, all methods of marketing, all software programs and source
codes, training programs, fee policies, and management and operating methods,
whether they are prepared in whole or in part by the Executive or by any
other person, are and shall remain the exclusive property of the Company, and
that all such trade secrets are confidential, material and important to the
business and financial success of the Company, and that their disclosure or
unauthorized use would seriously and adversely affect the Company's business.
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
8.3 If any of the Restrictive Covenants, or any part thereof, is held to be
invalid or unenforceable, the same shall not affect the remainder of the
covenant or covenants, which shall be given full effect, without regard to
the invalid or unenforceable portions. Without limiting the generality of the
foregoing, if any of the Restrictive Covenants, or any part thereof, is held
to be unenforceable because of the duration of such provision or the area
covered thereby, the parties hereto agree that the court making such
determination shall have the power to reduce the duration and/or area of
such provision and, in its reduced form, such provision shall then be
enforceable.
9. DISPUTE RESOLUTION
Any dispute or claim arising out of, in connection with, or in relation to
the interpretation, performance or breach of this Agreement shall be resolved
by arbitration in accordance with the Commercial Arbitration Rules of
JAMS/End-Dispute, and judgment upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof.
Such arbitration shall be held in New York, New York. The arbitrators shall
be empowered to award costs to the successful party.
10. ASSIGNMENT
This Agreement is a personal contract, and the rights, interests and
obligations of the Executive hereunder may not be sold, transferred,
assigned, pledged or hypothecated except as otherwise expressly permitted
by the provisions of this Agreement. Executive shall not under any
circumstances have any option or right to require payment hereunder
otherwise than in accordance with the terms hereof. Except as otherwise
expressly provided herein, Executive shall not have any power of
anticipation, alienation or assignment of payments contemplated hereunder,
all all rights and benefits of Executive shall be for sole personal benefit
of Executive, and no other person shall acquire any right, title or interest
hereunder by reason of sale, assignment, transfer, claim or judgment or
bankruptcy proceedings against Executive; provided, however, that in the
event of Executive's death, Executive's estate, legal representatives or
beneficiaries (as the case may be) shall have the right to receive all the
benefits that accrued to the Executive pursuant to and in accordance with,
the terms of this Agreement.
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
11. NOTICES
All notices, requests and demands hereunder shall be in writing and delivered
by hand, by mail, by FAX or by telegram, and shall be deemed given if by hand
delivery, upon such delivery, and if by mail, 48 hours after deposit in the
United States mail, first class, registered or certified mail, postage
prepaid and properly addressed to the party at the address set forth at the
beginning of this Agreement. Any party may change its address for purposes of
this paragraph by giving the other part written notice of the new address in
the manner set forth above.
12. INVALID PROVISIONS
Invalidity or unenforceability of any particular provision of this Agreement
shall not affect the other provisions hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provision were
omitted.
13. AMENDMENT MODIFICATION OR REVOCATION
This Agreement may be amended, modified or revoked in whole or in part, but
only by a written instrument which specifically refers to this Agreement and
expressly states that it constitutes an amendment, modification or revocation
hereof, as the case may be, and only if such written instrument has been
signed by each of the parties to this Agreement.
14. HEADINGS
The headings in this Agreement are inserted for convenience only and are not
to be considered in construction of the provisions hereof.
15. ENTIRE AGREEMENT
This Agreement contains the entire understanding among the parties and
supersedes any prior written or verbal agreements between them respecting
the subject matter hereof, including, without limitation, any prior verbal
or written employment agreement between Executive and the Company. Upon the
effectiveness hereof, any such prior verbal or written agreements shall
terminate.
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
No representations or warranties of any kind or nature relating to the
Company or its affiliates or their respective businesses, assets,
liabilities, operations, future plans or prospects have been made by or on
behalf of the Company to the Executive; nor have any representations or
warranties of any kind or nature been made by the Executive to the Company,
except as expressly set forth in this Agreement.
16. ATTORNEYS' FEES
If any legal action is necessary to enforce the terms and conditions of this
Agreement, the prevailing party in such action shall be entitled to recover
all costs of suit and reasonable attorneys' fees as determined by the
arbitrator.
17. FURTHER ASSURANCES
The parties shall execute such documents and take such other action as is
necessary or appropriate to effectuate the provisions of this Agreement.
18. CONTROLLING LAW
This Agreement shall be governed by the internal laws of the State of New
York without regard to conflict of laws.
19. WAIVER
A waiver by either party of any of the terms and conditions hereof shall not
be construed as a general waiver by such party, and such party shall be free
to reinstate such part or clause, with or without notice to the other party.
THE EFFECTIVE DATE OF THIS AGREEMENT IS August 1, 1996.
THE COMPANY:
By: Stephen H. Blose
President & CEO
EXECUTIVE:
Alan P. Chodosh
Vice President of Finance
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
EXHIBIT 10.14
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of this 1st day of August, 1996 by and between
Paul J. Collins, residing at 5 Euclid Avenue, Winchester, Massachusetts 01890
("Executive"), and Protein Databases, Inc., a Delaware corporation d.b.a.
PDI, Inc., with offices at 405 Oakwood Road Huntington Station, NY 11746-7296
(the "Company"), for the purpose of setting forth the terms and conditions of
Executive's employment by the Company and to protect the Company's knowledge,
expertise, customer relationships and the confidential information the
Company has developed regarding clients, customers, shareholders, option
holders, employees, products, business operations and services.
1. TIME AND EFFORTS
1.1 Executive shall be employed as the Company's Vice President of Sales and
Marketing, and shall have such duties and have such responsibilities as the
Company's Chief Executive Officer may assign to the Executive in furtherance
of the Company's business.
1.2 In the performance of all of his duties and responsibilities hereunder,
Executive shall be subject to all of the Company's policies, rules and
regulations applicable to its officers generally. The Executive shall report
to the President and Chief Executive Officer.
1.3 Executive shall continue to be a member of the Executive Management
during the term of this agreement.
1.4 Without the prior express authorization of the Board, Executive shall
not, directly or indirectly, during the term of this Agreement engage in any
activity competitive with or adverse to the Company's business. This
Agreement shall not be interpreted to prohibit Executive from making passive
personal investments, conducting private business affairs, or engaging in
educational or charitable activities, if those activities do not materially
interfere with the services required hereunder.
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
1.5 In order to induce the Company to enter into this Agreement, Executive
represents and warrants to the Company that (i) Executive is not a party or
subject to any written employment agreement with any other company and (ii)
Executive is subject to no restraint, limitation or restriction by virtue of
any written agreement or by virtue of any law or rule of law which would
impair the Executive's right or ability to perform fully his duties and
responsibilities pursuant to this Agreement.
1.6 Without first obtaining the written permission of the Board in each
instance, the Executive will not authorize or permit the Company to engage
the services, of or engage in any business activity with, or provide any
financial or other benefit to, any affiliate of the Executive. The phrase
"affiliate of Executive" as used in this Agreement shall mean and include
the Executive's family by blood or marriage (including, without limitation,
parents, spouse, siblings, children and in-laws) and any business or business
entity which is directly or indirectly owned or controlled by the Executive
or any member of the Executive's family or in which the Executive or any
member of the Executive's family has any direct or indirect material
financial interest.
2. TERM
The term of this Agreement (the "Term") shall be for a period of ten (10)
months, commencing on August 1, 1996 and terminating on May 31, 1997 subject,
however, to prior termination as provided herein. Any extension or renewal of
this Agreement shall be upon such terms and conditions as shall be negotiated
by the parties upon the expiration hereof.
3. TERMINATION
This Agreement shall be terminated upon the happening of any of the following
events:
3.1 Upon the death of Executive.
3.2 Upon the sale of the Company or the sale of substantially all of the
Company's assets for a gross sales price of at least $2.5 Million and, the
Executive is not employed by the acquiring company or any of its affiliates;
or
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
3.3 Upon the sale of the Company or the sale of substantially all of the
Company's assets for a gross sales price of at least $1.2 Million but less
than $2.5 Million and, the Executive is not employed by the acquiring company
or any of its affiliates.
3.3A If the Company or substantially all of the Company's assets is sold for
a gross sales price of less than $1.2 Million, then this entire Agreement is
null and void.
3.4 Whenever the Company and Executive shall mutually agree to termination.
3.5 At the option of the Company, upon written notice by the Company to the
Executive, for Cause. "Cause" shall exist for such termination if Executive
(i) pleads or is found guilty of a felony involving an act of dishonesty or
moral turpitude by a court of competent jurisdiction; (ii) engages in serious
misconduct; (iii) has made any material misrepresentation or omission to the
Company under Section 1.5 hereof; (iv) commits a willful, unexcused material
breach of his duty under this Agreement; (v) is in habitual neglect of
Executive's duties; or (vi) usurps a corporate opportunity, is guilty of
embezzlement of property or funds of the Company, or commits any act of fraud
or intentional misrepresentation, dishonesty or other misconduct.
3.6 The Company may terminate Executive's employment under this Agreement at
any time without Cause, subject to the provisions for payment of compensation
as specified under Section 5.4 of this Agreement.
3.7 Upon the expiration of nine months, or six continuous months, of
disability (as defined in Section 6.2) during the term of this Agreement,
subject to the provisions for payment of compensation as specified under
Section 6.1 of this Agreement.
3.8 Upon the expiration of the ten month term of this Agreement, or any
extension or renewal thereof.
4. COMPANY'S AUTHORITY
Executive agrees to observe and comply with the reasonable rules and
regulations of Company adopted by the Board of Directors of the Company or
an appropriate committee of the Board of Directors with respect to the
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
performance of Executive's duties and to carry out and perform orders,
directions and policies of Company as they may be, from time-to-time, stated
to Executive either verbally or in writing so long as the order, directions
or policy is not inconsistent with the provisions of this agreement.
5. CURRENT COMPENSATION
5.1 Annual Salary. For all services rendered by the Executive under this
Agreement, the Company shall pay or cause to be paid to the Executive, and
the Executive shall accept the Annual Salary and Incentive Compensation, if
any, all in accordance with the subject to the terms of this Agreement. For
purposes of this Agreement, the term "Compensation" shall mean the Annual
Salary and Incentive Compensation, if any. Executive shall be entitled to
receive an annual salary in the amount of $91,481.00 subject to change at
the discretion of the Board of Directors, (hereinafter referred to as the
"Normal Annual Salary"). The Normal Annual Salary shall be increased by at
least the annual cost of living increase, beginning January 1, 1997, based on
the increase in the local consumers price index or COLA. Effective April 1,
1996, Executive has accepted a 20% reduction in his annual salary that was in
effect as of April 1, 1996, in consideration of the Company's cost
containment measures.
Executive shall be restored to the Normal Annual Salary and will be paid the
amount of the 20% salary reduction from April 1, 1996 to the date of sale of
the business if:
(a) the sale of the Company or substantially all of its assets for a gross
sales price of at least $2.5 Million on or before April 1, 1997 or $2.6
Million after April 1, 1997, or
(b) if the company's accumulated deficit is reduced to $7,204,338, the
balance at December 31, 1995, as reported in any of the Company's quarterly
or annual reports as filed with the U.S. Securities and Exchange Commission
during the term of this Agreement.
5.1A The Executive shall be returned to his Normal Annual Salary, on a
accounting period to period basis, upon the achievement of two (2)
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
consecutive profitable quarters of operations as reported in any of the
Company's quarterly or annual reports as filed with the U.S. Securities and
Exchange Commission. The return to the Normal Annual Salary shall be as of
the beginning of the profitable period reported which will include accruals
for such compensation.
5.2 Incentive Compensation. In addition, Executive shall be entitled to
annual Incentive Compensation in accordance with the Company's Executive
Incentive Compensation Plan.
5.3 Payments of Current Compensation. The payment of Executive's Annual
Salary shall be made in bi-weekly installments on the then prevailing paydays
of the Company. Any payment for Incentive Compensation will be made in
accordance with the Executive Incentive Compensation Plan, and payment will
be made in one lump sum concurrently with payments made to others in senior
management. All payments are subject to the customary withholding tax and
other employment taxes as required with respect to compensation paid to an
employee.
5.4 Payment of Compensation on Termination. Upon termination of Executive's
employment prior to the expiration of the Term of this Agreement
(i) if such termination is pursuant to Section 3.1, 3.3A, 3.4, 3.5 or 3.7
hereof, Executive shall be entitled to any salary and accrued vacation
(up to a maximum of 20 days) unpaid through the date of termination of
employment;
(ii) if such termination is pursuant to Section 3.2 or 3.6 hereof, Executive
shall be entitled to Six (6) months Normal Annual Salary and payment of
accrued vacation (up to a maximum of 20 days) upon termination of employment;
(iii) if such termination is pursuant to Section 3.3 hereof, Executive shall
be entitled to Three (3) months Normal Annual Salary and payment of accrued
vacation (up to a maximum of 20 days) upon termination of employment;
All such Normal Annual Salary for future periods compensation pursuant to
this Section 5.4 shall be paid according to Section 5.3, unless other
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
arrangements are agreed to in writing. All other amounts due (unpaid salary,
vacation, and expenses) to the Executive shall be paid upon the termination
date, except if applicable, according to the terms of Section 5.1 and 5.1A.
6. DISABILITY
6.1 Disability Benefits. If Executive shall become disabled, as defined in
Section 6.2, during each of the first three months of such disability during
the term of this Agreement, the Company shall continue to pay to or for the
benefit of the Executive the benefits provided for in Section 7.1 and his
Annual Salary hereunder, less the amount of any disability benefits received
by the Executive from any source paid for or reimbursed by the Company.
Thereafter, Executive's compensation shall be reduced to reflect the reduced
performance of Executive's services. However, so long as the Executive is
providing services to the Company at a reduced level pursuant to an agree-
ment with the Companyh, Executive shall be entitled to receive the benefits
provided for in Section 7.1
6.2 Determination of Disability. For the purpose of this Agreement,
Executive is disabled if, upon the expiration of nine months of disability
or six continuous months of disability during the one year term of this
Agreement, he (i) is under a legal decree of incompetence; (ii) submits a
bona fide claim for any disability insurance benefits or for early
distribution on account of disability; (iii) is unable to perform his normal
duties because of a medical condition; or (iv) suffers from an agreed upon
disability as defined in Section 6.3.
6.3 An "agreed upon disability" means the Executive has more than a
temporary incapacity, and because of a medically determinable disease,
injury, or other mental or physical disability, is unable to perform
substantially all of his regular duties. The agreed upon disability will be
based on the written opinion of the physician regularly attending the
Executive whose disability is in question. If the Company, disagrees with the
opinion of such physician, the Company may engage, at its own expense, another
physician to examine the Executive. The two physicians shall confer with each
other and, if they together agree in writing that the Executive is or is not
disabled, their written opinion shall be conclusive as to such disability.
If the physicians do not agree, they shall choose a third consulting
physician, at the Company's expense, and the written opinion of a majority
of these three physicians shall be conclusive as to such disability, In
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
conjuction with this paragraph, Executive consents to such examination, to
furnish any medical information requested by an examining physician, and to
waive any applicable physician-patient privilege that may arise because of
such examination.
6.4 In the event the Executive's disability is in question, and after written
request by the Company, the Executive refuses to be examined by his regularly
attending physician or if the regularly attending physician fails to submit a
report within 30 days after the examination has been requested by the
Company, the determination of disability shall be made by the a physician
chosen by the Company, whose determination shall be conclusive.
7. BENEFITS
7.1 Medical Insurance. Executive shall be entitled to participate in any
medical, dental, vision, life, long-term disability, other insurance or
employee benefit program instituted or maintained by the Company for the
benefit of its Executives.
7.2 Payment of Benefits on Termination of Employment Pursuant To Sections
3.2, 3.3, or 3.6. If Executive's employment with the Company is terminated
pursuant to Section 3.2, 3.3, or 3.6 hereof, the Company agrees that
Executive shall be entitled to continued participation in the health care
coverage, life insurance coverage or other employee benefit plans of the
Company according to and as permitted by applicable law and the terms and
conditions of such plans, as if Executive were still actively employed by
the Company, for a period of 6 months following the effective date of the
termination if terminated under Sections 3.2 or 3.6 or for a period of 3
months following the effective date of the termination if terminated under
Section 3.3. If applicable law or the terms and conditions of such plans
do not permit Executive to be covered as if Executive were actively
employed by the Company, the Company agrees to pay Executive an amount equal
to what the Company would have paid to maintain such benefits if Executive
were still employed by Company during the 6-month period following
termination in accordance with Sections 3.2 or 3.6, or during the 3-month
period following termination in accordance with Section 3.3.
7.3 Business Expenses. The Executive shall be reimbursed for all reasonable
expenses incurred by the Executive in connection with the Executive's
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
attendance at business meetings and promotion of Company business upon
presentation by the Executive to the Company of any expense report and
adequate records or other documentation substantiating the expenditures, not
less frequently than monthly.
8. RESTRICTIVE COVENANTS
8.1 Executive acknowledges that (i) he has a major responsibility for the
operation, administration, development and growth of the Company's business;
(ii) the Company's business is international in scope; (iii) his work for the
Company will bring him into close contact with confidential information of
the Company and its customers; and (iv) the agreements and covenants
contained in this Section 8 (the "Restrictive Covenants") are essential to
protect the business interests of the Company and that the Company would
not enter this Agreement but for such agreements and covenants. Accordingly,
the Executive covenants and agrees as follows:
8.1.1 During the term of this Agreement and, if applicable, during the six
months following termination, Executive shall not, directly or indirectly,
(i) solicit for employment or provide services, or employ or engage the
service of, any employee of the Company who was employed by the Company at
the time of termination; (ii) aid or agree to aid any competitor, client, or
supplier of the Company in any attempt to hire any person who shall have been
employed by the Company within the two-year period preceding such requested
aid; or (iii) induce or attempt to influence any person or business entity
who was a client or supplier of the Company during any portion of said period
to transact business with a competitor of the Company.
8.2 Executive hereby expressly acknowledges, understands and agrees that all
documents, records, computer discs and programs, marketing and business plans
and studies, and business and financial information (collectively referred to
in this paragraph as "confidential information") relating to the Company's
business including, without limitation, the names and addresses of the
Company's clients and referral sources, all client records, files, and other
client information, all methods of marketing, all software programs and
source codes, training programs, fee policies, and management and operating
methods, whether they are prepared in whole or in part by the Executive or
by any other person, are and shall remain the exclusive property of the
Company, and that all such trade secrets are confidential, material and
<PAGE>
Protein Databases, Inc.
EMPLOYMENT CONTRACT
material and important to the business and financial success of the Company,
and that their disclosure or unauthorized use would seriously and adversely
affect the Company's business.
8.3 If any of the Restrictive Covenants, or any part thereof, is held to be
invalid or unenforceable, the same shall not affect the remainder of the
covenant or covenants, which shall be given full effect, without regard to
the invalid or unenforceable portions. Without limiting the generality of
the foregoing, if any of the Restrictive Covenants, or any part thereof, is
held to be unenforceable because of the duration of such provision or the
area covered thereby, the parties hereto agree that the court making such
determination shall have the power to reduce the duration and/or area of
such provision and, in its reduced form, such provision shall then be
enforceable.
9. DISPUTE RESOLUTION
Any dispute or claim arising out of, in connection with, or in relation to
the interpretation, performance or breach of this Agreement shall be resolved
by arbitration in accordance with the Commercial Arbitration Rules of
JAMS/End-Dispute, and judgment upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof.
Such arbitration shall be held in New York, New York. The arbitrators shall
be empowered to award costs to the successful party.
10. ASSIGNMENT
This Agreement is a personal contract, and the rights, interests and
obligations of the Executive hereunder may not be sold, transferred,
assigned, pledged or hypothecated except as otherwise expressly permitted by
the provisions of this Agreement. Executive shall not under any circumstances
have any option or right to require payment hereunder otherwise than in
accordance with the terms hereof. Except as otherwise expressly provided
herein, Executive shall not have any power of anticipation, alienation or
assignment of payments contemplated hereunder, and all rights and benefits of
Executive shall be for the sole personal benefit of Executive, and no other
person shall acquire any right, title or interest hereunder by reason of any
sale, assignment, transfer, claim or judgment or bankruptcy proceedings
against Executive; provided, however, that in the event of Executive's death,
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
Executive's estate, legal representatives or beneficiaries (as the case may
be) shall have the right to receive all the benefits that accrued to the
Executive pursuant to, and in accordance with, the terms of the Agreement.
11. NOTICES
All notices, requests and demands hereunder shall be in writing and delivered
by hand, by mail, by FAX or by telegram, and shall be deemed given if by hand
delivery, upon such delivery, and if by mail, 48 hours after deposit in the
United States mail, first class, registered or certified mail, postage
prepaid and properly addressed to the party at the address set forth at the
beginning of this Agreement. Any party may change its address for purposes of
this paragraph by giving the other part written notice of the new address in
the manner set forth above.
12. INVALID PROVISIONS
Invalidity or unenforceability of any particular provision of this Agreement
shall not affect the other provisions hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provision were
omitted.
13. AMENDMENT MODIFICATION OR REVOCATION
This Agreement may be amended, modified or revoked in whole or in part, but
only by a written instrument which specifically refers to this Agreement and
expressly states that it constitutes an amendment, modification or revocation
hereof, as the case may be, and only if such written instrument has been
signed by each of the parties to this Agreement.
14. HEADINGS
The headings in this Agreement are inserted for convenience only and are not
to be considered in construction of the provisions hereof.
15. ENTIRE AGREEMENT
This Agreement contains the entire understanding among the parties and
supersedes any prior written or verbal agreements between them respecting
the subject matter hereof, including, without limitation, any prior verbal
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
or written employment agreement between Executive and the Company. Upon the
effectiveness hereof, any such prior verbal or written agreements shall
terminate.
No representations or warranties of any kind or nature relating to the
Company or its affiliates or their respective businesses, assets,
liabilities, operations, future plans or prospects have been made by or on
behalf of the Company to the Executive; nor have any representations or
warranties of any kind or nature been made by the Executive to the Company,
except as expressly set forth in this Agreement.
16. ATTORNEYS' FEES
If any legal action is necessary to enforce the terms and conditions of this
Agreement, the prevailing party in such action shall be entitled to recover
all costs of suit and reasonable attorneys' fees as determined by the
arbitrator.
17. FURTHER ASSURANCES
The parties shall execute such documents and take such other action as is
necessary or appropriate to effectuate the provisions of this Agreement.
18. CONTROLLING LAW
This Agreement shall be governed by the internal laws of the State of New
York without regard to conflict of laws.
<PAGE>
Protein Databases, Inc.
EMPLOYMENT AGREEMENT
19. WAIVER
A waiver by either party of any of the terms and conditions hereof shall not
be construed as a general waiver by such party, and such party shall be free
to reinstate such part or clause, with or without notice to the other party.
THE EFFECTIVE DATE OF THIS AGREEMENT IS AUGUST 1, 1996.
THE COMPANY:
By: Stephen H. Blose
President & CEO
EXECUTIVE:
Paul J. Collins
Vice President of
Sales and Marketing
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
# THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
PROTEIN DATABASES, INC'S DECEMBER 31, 1996 FINANCIAL STATEMENTS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 119,352
<SECURITIES> 0
<RECEIVABLES> 363,845
<ALLOWANCES> 0
<INVENTORY> 59,483
<CURRENT-ASSETS> 553,993
<PP&E> 980,038
<DEPRECIATION> (757,101)
<TOTAL-ASSETS> 785,950
<CURRENT-LIABILITIES> 267,378
<BONDS> 0
0
0
<COMMON> 14,597
<OTHER-SE> 503,975
<TOTAL-LIABILITY-AND-EQUITY> 785,950
<SALES> 1,633,777
<TOTAL-REVENUES> 1,633,777
<CGS> 569,148
<TOTAL-COSTS> 2,445,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (811,323)
<INCOME-TAX> 0
<INCOME-CONTINUING> (811,323)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (811,323)
<EPS-PRIMARY> (.56)
<EPS-DILUTED> (.56)
</TABLE>
