<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------------------------------------------------
PRO-DEX, INC.
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(Exact Name of Registrant as Specified in its Charter)
Commission File No. 0-14942
Colorado 84-1261240
- ------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1401 Walnut Street, Suite 530, Boulder, CO 80302
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (303) 8165
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PRO-DEX, INC. 1988 STOCK OPTION PLAN
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(Full title of the plan)
Name and Address of Agent for Service of Process:
Dawn C. Anderson, Esq.
1401 Walnut Street, Suite 530
Boulder, CO 80302
(303) 443-6136
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(Telephone number, including area code, of agent for service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF SECURITIES TO AMOUNT TO BE OFFERING AGGREGATE AMOUNT OF
BE REGISTERED REGISTERED(1) PRICE PER UNIT OFFERING PRICE REGISTRATION FEE (2)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK 55,000 $1.75 $51,250 $100.00
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) The amount to be registered represents shares to be purchased on exercise
of all the currently outstanding options under the Pro-Dex, Inc. 1988 Stock
Option Plan.
(2) The stated registration fee is the minimum fee, pursuant to Section 6(b) of
the Securities Act of 1933.
<PAGE>
This Registration Statement is to register the shares of Common Stock
purchasable on exercise of incentive stock options heretofore granted to
employees and consultants of Pro-Dex, Inc., a Colorado corporation (the
"Company") pursuant to the Pro-Dex, Inc. 1988 Stock Option Plan. The Company has
heretofore registered its common stock, pursuant to the Securities Act of 1933
("1933 Act") and the Securities Exchange Act of 1934 ("1934 Act"). The Company
is a reporting company under the 1934 Act, and the common stock of Company
("Common Stock") is listed on NASDAQ Small Cap(TM).
PLAN INFORMATION.
The Company has caused to be delivered to each participant in the Company's 1988
Stock Option Plan (the "Plan"), specified Plan Summary Information, as required
pursuant to the Employee Retirement Income Security Act of 1974. Such Plan
Summary Information, which was an Exhibit to the Proxy Statement of the Company
in connection with its 1994 Annual Meeting of Shareholders is incorporated
herein by reference.
GENERAL PLAN INFORMATION.
Title of Plan and Name of Company. The Plan's title is "The Pro-Dex, Inc.
---------------------------------
1988 Stock Option Plan." The name of the Company whose securities are offered
under the Plan is Pro-Dex, Inc.
General Nature and Purpose of Plan.
----------------------------------
In 1988, the Company adopted its 1988 Stock Option Plan (the "Plan")
pursuant to which the Company's Board of Directors is authorized to issue
options to purchase up to 150,000 shares of the Company's Common Stock to
employees, directors and consultants of the Company. The Plan was adopted to
provide an incentive to potential optionees of the Company to further the growth
of the Company. The exercise price of options must be at least equal to the fair
market value of the Common Stock on the date of grant. The maximum term of the
options granted under the Plan is ten years. No options to purchase shares of
Common Stock were granted to optionees during the fiscal year ended June 30,
1995. At present, options to purchase an aggregate of 30,000 shares of the
Company's Common Stock are outstanding under this Plan, and such options permit
purchase of the Company's shares at $0.25 per share by Dr. Larry Kyle, a former
director of the Company who is currently the President of Pro-Dex Management,
Inc., one of the Company's subsidiaries and options to purchase 25,000 shares of
the Company's shares at $1.75 per share are exercisable by Shannon Squyres, a
consultant to the Company.
No action has been taken by the Company with respect to any modification,
earlier termination or extension of the 1988 Stock Option Plan.
Plan Subject to ERISA. The Plan is an incentive stock option plan adopted
---------------------
to comply with Section 422(a) of the Internal Revenue Code of 1986, as amended,
and as such, is subject to
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<PAGE>
compliance with ERISA in respect of any plan modification or termination, as the
same would affect the interest of any Plan participant.
Plan Administrator. The Compensation Committee of the Board of Directors
------------------
of the Company serves as Plan Administrator. Additional information regarding
the Plan can be obtained by participants by writing: Compensation Committee,
Board of Directors, Attn. Kent E. Searl, 1401 Walnut Street, Boulder, Colorado
80302 or by telephoning (303) 443-6136.
Material Relationships. The members of the Compensation Committee
----------------------
which serves as Plan Administrator are all members of the Board of Directors of
the Company. The voting members of the Compensation Committee include Richard N.
Reinhardt and Robert A. Hovee, neither of whom is an employee or consultant of
the Company. Messrs. Reinhardt and Hovee hold options under the Director's Stock
Option Plan, which options and shares underlying such options are not hereby
registered. Mr. Reinhardt currently holds 56,950 shares of Common Stock
individually, and for the purposes of computation of beneficial ownership of the
Company, Mr. Reinhardt is considered to own 486,084 shares of Common Stock,
comprising 5.5% of the issued and outstanding shares of the Company, assuming
exercise of all options held by him and affiliates and attributing to Mr.
Reinhardt certain options and shares held of record by Professional Sales
Associates, a firm of which he is a principal.
Neither of the holders of options currently outstanding under the 1988
Stock Option Plan is currently an officer or Director of the Company or holder
of 5% or more of the issued and outstanding shares of the Company's Common
Stock. Dr. Larry Kyle, who holds options to acquire 30,000 shares of Common
Stock under the 1988 Stock Option Plan is President of the Company's Pro-Dex
Management, Inc. subsidiary. Mr. Shannon Squyres, who holds options to acquire
25,000 shares of Common Stock under the 1988 Stock Option Plan is a consultant
to the Company.
Selection and Termination of Plan Administrators. Plan Administrators
------------------------------------------------
are selected by the Board of Directors of the Company. Although the Compensation
Committee of the Board of Directors may delegate certain plan administration
duties to any reputable accounting or ERISA plan administrative firm, the
appointment of the Compensation Committee to so serve as Plan Administrator is
not terminable except by the Board of Directors of the Company. Each member of
the Compensation Committee serves as a plan administrator for the entire term of
service of such Director on the Compensation Committee.
SECURITIES TO BE OFFERED.
- ------------------------
Title and Total Amount of Securities Being Offered Pursuant to Plan. The
-------------------------------------------------------------------
Company intends to register all the reserved shares of the Company's Common
Stock for which options are currently exercisable under the Company's 1988 Stock
Option Plan, constituting 55,000 shares of the Common Stock of Company. The
Company does not intend hereby to register the options heretofore granted to
acquire shares of the Company's Common Stock under the Company's 1988
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<PAGE>
Stock Option Plan.
Common Stock Registered Under Section 12 of 1934 Act. The Common Stock of
----------------------------------------------------
the Company has heretofore been registered under Section 12 of the 1934 Act.
ELIGIBILITY TO PARTICIPATE IN THE PLAN.
- --------------------------------------
All employees, consultants and independent contractors are eligible to
participate in the 1988 Stock Option Plan. However, the Company's Board of
Directors, which has complete authority to determine the grantees of such
options, has heretofore granted options only to the two individuals noted above,
a senior executive of one of the Company's subsidiaries and a consultant.
PURCHASE OF SECURITIES PURSUANT TO THE PLAN AND PAYMENT FOR SECURITIES OFFERED.
- -------------------------------------------------------------------------------
The following chart sets forth currently exercisable options outstanding
under Company's 1988 Stock Option Plan to date, stating the period of time
within which grantee employees and consultants may elect to exercise options
heretofore granted under such plan and the price at which the Company's Common
Stock is purchasable under such options.:
OUTSTANDING OPTIONS UNDER 1988 STOCK OPTION PLAN
<TABLE>
<CAPTION>
Options Exercise
Granted Price Expiration
Name Year (#) $/SH) Date
---- ---- -------- --------- ----------
<S> <C> <C> <C> <C>
M. Larry Kyle(1) 1988 30,000 0.25 6-30-98
Shannon Squyres(2) 1994 25,000 1.75 12-31-03
</TABLE>
- --------------
(1) Dr. Kyle was granted such options at a time when he was both President of
the Company's Pro-Dex Management, Inc. wholly owned subsidiary and a member
of the Company's Board of Directors. Dr. Kyle remains President of Pro-Dex
Management, but ended his service on the Board of Directors on July 26,
1995.
(2) Mr. Squyres was granted such options pursuant to a consulting agreement
between the Company and Mr. Squyres. Mr. Squyres expects to cease service
as a consultant to the Company on or about the effective date of this
Registration Statement.
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<PAGE>
Non-Contributory Plan. The 1988 Stock Option Plan provides for grant of
---------------------
options by the Company, without any payment for such options by the employee or
consultant to whom such options are granted. Such options are granted to acquire
shares at the market price as of the date of grant. Accordingly, neither the
Company nor the grantee is considered to have "contributed" to such Plan.
Reporting to Participants. Grant letters have been issued by the Company
-------------------------
to each participant granted options under the Plan, as required by the Plan. In
addition, the Company reports annually regarding the amount of currently
exercisable options, exercise price and the expiration dates therefore.
RESALE RESTRICTIONS.
- -------------------
Prior to the effective date of this Registration Statement on Form S-8, all
shares of the Company's Common Stock which Plan participants may acquire on
exercise of options under the 1988 Stock Option Plan are required by the terms
of such Plan and the terms of the grant letters to be restricted stock,
transferable only on registration under the federal and state securities laws or
opinion of counsel satisfactory to the Company that such registration is not
required under the circumstances of such transfer.
TAX EFFECTS OF PLAN PARTICIPATION.
- ---------------------------------
The Company's shareholders approved the 1988 Stock Option Plan in January
1989, within the required period after adoption of the Plan. Accordingly, the
options issued under the Plan to employees of the Company are incentive stock
options ("ISOs") pursuant to Section 422(a) of the Internal Revenue Code of
1986, as amended. No tax consequences result from the granting of the ISO or
from the exercise of the ISO by the Employee. In addition, the Company is not
allowed a business expense deduction in respect of an ISO. The employee who
acquired shares of the Company's Common Stock is accorded capital gains
treatment upon transfer of such shares, provided that (a) no disposition of such
shares is made within the 2 year period beginning on the date the option was
granted and no disposition of such shares is made within 1 year after the stock
is transferred to the employee on exercise of the ISO, and (b) at all times
during the period beginning with the grant of the option and ending on the day
three months before the date of such exercise, such individual was for the
purposes of Section 422(a) an employee of the corporation granting the option, a
parent or a subsidiary of the corporation granting the option, or a corporation
which is treated as such under Section 422(a). If the holding period rules are
not met for an option which otherwise meets Section 422(a), the gain that would
have been realized on exercise of the option is included as ordinary income in
the year of the disqualifying disposition. For purposes of assessing the tax
liability on an early disposition, fair market value is determined without
regard to restrictions on the shares. Gain for this purpose is equal to the
lesser of the (1) difference between fair market of the exercise date and ISO
exercise price, or (2) the amount realized on disposition of the shares, less
the employee's adjusted basis in the stock. If an employee transfers his shares
to a trust, receiver or fiduciary in an insolvency proceeding, the transfer is
not considered a disposition within
-5-
<PAGE>
the holding period. Alternative minimum tax rules are applied as if the benefits
of Section 421 do not apply to the ISO or shares acquired on exercise of the
ISO.
The options granted pursuant to the Plan to the consultant to the Company
were treated as options not qualified for ISO treatment under the terms of the
Plan and the grant letter relating to such action by the Company. Such options
are termed "nonstatutory stock options" and are accorded no favorable tax
treatment under Sections 421 through 424 of the Internal Revenue Code of 1986,
as amended. Nonstatutory options are generally taxed as ordinary income at the
time they are granted, the options being considered compensation for services
rendered by a consultant or employee. Nonstatutory options may be taxed (1) when
the option is granted, (2) when the option-holder exercises the option, (3) when
the option-holder transfers the option (options under the Plan are not
transferable) or (4) when restrictions on the disposition of stock acquired
pursuant to the option lapse. As the terms of each Plan and grant of options
differ, each option-holder is encouraged to consult with their personal tax
advisor in the grant letter relating to grant of options under the Company's
1988 Stock Option Plan.
The Company cannot deduct any amount of compensation in respect of the
granting or exercise of option, unless the employee fails to comply with the
Section 422(a) holding period. In event of sale by any employee prior to
termination of the holding period, the Company is permitted a deduction under
Section 162 in the year in which the non-qualifying disposition occurred. No
amount other than the price paid for the purchase of Common Stock pursuant to
exercise of any option is considered as received for the shares issued.
INVESTMENT OF FUNDS.
- -------------------
No investment of any funds occurs under the 1988 Stock Option Plan.
WITHDRAWAL FROM THE PLAN; ASSIGNMENT OF INTEREST.
- ------------------------------------------------
Upon termination of the employee or consultant's relationship with the
Company, such individual must exercise all currently exercisable options within
90 days unless the Plan Administrator in its discretion grants additional time
to exercise such options. There is no provision for any employee to terminate
participation in the plan, and there is no provision for any assignment of
interest by any employee. In the event of the death of any employee, the
employee's or consultant's estate or personal administrator may exercise such
options within the period such options would have been exercisable by the
employee or consultant, in the event of any ordinary termination of the employee
or consultant relationship.
FORFEITURE OR PENALTY.
- ---------------------
All options not exercised prior to expiration are forfeited. All options
not exercised prior to 90 days after termination of any employee or consultant,
whether by death, resignation or
-6-
<PAGE>
termination by the Company, are forfeited, unless the Compensation Committee of
the Company's Board of Directors otherwise permits extension for any specific
time certain.
CHARGES AND DEDUCTIONS AND LIENS THEREFOR.
- -----------------------------------------
The 1988 Stock Option Plan of the Company contains no provision to charge,
claim deductions or exert any lien with respect to the rights of any employee to
exercise any currently exercisable option under the Plan. Under the Plan, any
attempted placement of any lien, whether to enforce a judgment or otherwise,
results in termination of the option to acquire shares of the Company.
REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION
- -----------------------------------------------------------
The Company hereby advises participants in its 1988 Stock Option Plan that
information in the following filings with the Securities and Exchange Commission
is incorporated herein by reference and copies of such information is available,
without charge, upon written or oral request to George J. Isaac, Chief Financial
Officer, Pro-Dex, Inc., 1401 Walnut Street, Suite 500, Boulder, Colorado 80302
or by telephone at (303) 443-6136: (a) the Company's most recent filing of its
annual report on Form 10-KSB, (b) the Company's quarterly reports since such
date on Form 10-QSB, (c) all other reports filed pursuant to Section 13(a) or
15(d) of the 1934 Act, and (d) the description of the Company's Common Stock
filed pursuant to the Company's most recent Registration Statement applicable
thereto under the 1934 Act.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The Company hereby states that information in the following filings with
the Securities and Exchange Commission is incorporated herein by reference and
copies of such information is available, without charge, upon written or oral
request to George J. Isaac, Chief Financial Officer, Pro-Dex, Inc., 1401 Walnut
Street, Suite 500, Boulder, Colorado 80302 or by telephone at (303) 443-2136:
(a) the Company's most recent filing of its annual report on Form 10-KSB, (b)
the Company's quarterly reports since such date on Form 10-QSB, (c) all other
reports filed pursuant to Section 13(a) or 15(d) of the 1934 Act, (d) the
description of the Company's Common Stock filed pursuant to the Company's most
recent Registration Statement applicable thereto under the 1934 Act, and (e) all
documents subsequently filed pursuant to Sections 13(a), 13(c), 14 and 15(d) of
the 1934 Act prior to the filing of a post-effective amendment stating that all
securities offered have been sold or which deregisters all remaining securities
which then remain unsold.
-7-
<PAGE>
ITEM 4. DESCRIPTION OF SECURITIES.
The description of Common Stock set forth in the Company's 1934 Act
Registration Statement on Form 8A is hereby incorporated herein by reference.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
John G. Herbert, P.C. passed on certain matters in respect of this
registration on behalf of the Company.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Articles of Incorporation permit indemnification of directors and
officers to the full extent permitted under Colorado law. Such law does not
permit indemnification of directors in event of fraud on the Company, criminal
acts, or violation of fiduciary duties owed to the Company. The Company has in
place a Directors' and officers' errors and omissions policy. The Company's
Board of Directors and officers have been advised that the Securities and
Exchange Commission does not consider that it is permissible to indemnify any
officer or Director in respect of certain obligations under the federal
securities laws.
ITEM 7. EXEMPTION FROM REGISTRATION.
This registration is limited to a registration of the Common Stock which
may be acquired on exercise of incentive stock options under the 1988 Stock
Option Plan. No such options have been exercised to date. Accordingly, the
securities being registered hereunder are not being re-offered or resold
pursuant to this registration statement.
The grant of options pursuant to the 1988 Stock Option Plan was exempt
under Section 3(a)(2) of the 1933 Act, as an stock option plan to benefit
persons all of whom are eligible to be treated for such purposes as employees
within the meaning of Section 401(c) of the Internal Revenue Code of 1986. In
addition, the grant of options pursuant to the 1988 Stock Option Plan was exempt
under Section 4(2) of the 1933 Act, as fewer than 35 individuals were granted
such options, and each such individual was a senior executive or consultant to
the Company who is well informed regarding the Company's business and assets.
ITEM 8. EXHIBITS.
Attached hereto is an opinion of counsel regarding the legality of the shares of
Common Stock registered hereunder.
ITEM 9. UNDERTAKINGS.
-8-
<PAGE>
(1) That for the purpose of determining any liability under the Act, each
Post-Effective Amendment that contains a form of Prospectus shall be deemed to
be a new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(2) To file, during any period in which offers or sales are being made, a
Post-Effective Amendment to this Registration Statement to include any material
information with respect to the plan or any other material matter not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement;
(3) To remove from registration by means of a Post-Effective Amendment any
of the securities being registered that remain unsold at the termination of the
offering;
(4) Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the Registration Statement, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against the
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
-9-
<PAGE>
SIGNATURES
REGISTRANT
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boulder, State of Colorado on June 20, 1996.
--
PRO DEX, INC., a Colorado corporation
By: /s/ Kent E. Searl
---------------------------------------
Kent E. Searl, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated:
June 20, 1996 /s/ Ronald G. Coss
----------------------------------------
Ronald G. Coss, Vice Chairman, Director
June 20, 1996 /s/ Charles E. Strait
----------------------------------------
Charles E. Strait, President, Director
June 20, 1996 /s/ George J. Isaac
-----------------------------------------
George J. Isaac, Vice President, Director
June 20, 1996 /s/ Richard N. Reinhardt
-----------------------------------------
Richard N. Reinhardt, Director
June 20, 1996 /s/ Robert A. Hovee
-----------------------------------------
Robert A. Hovee, Director
-10-
<PAGE>
THE PLAN. Pursuant to the requirements of the Securities Act of 1933, the
trustees have duly caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized in the City of Boulder, State of
Colorado, on June 20, 1996.
PRO-DEX, INC. 1988 STOCK OPTION PLAN
By: Compensation Committee, Pro-Dex, Inc.
Board of Directors, Trustee
June 20, 1996 By: /s/ Richard N. Reinhardt
----------------------------------------
Richard N. Reinhardt, Member,
Compensation Committee
June 20, 1996 By: /s/ Robert A. Hovee
----------------------------------------
Robert A. Hovee, Member,
Compensation Committee
-11-
<PAGE>
JOHN G. HERBERT, P.C.
Attorneys At Law
1675 Larimer Street, Suite 310
Denver, Colorado 80202-1521
Telephone: (303) 534-0522
Telecopy: (303) 534-3638
June 11, 1996
Pro-Dex, Inc. 1988 Stock Option Plan
Attn: Mr. Richard N. Reinhardt, Trustee
1401 Walnut Street, Suite 500
Boulder, Colorado 80302
RE: Pro-Dex, Inc. 1988 Stock Option Plan - Registration on Form S-8
Dear Mr. Reinhardt:
We have been engaged as special counsel by Pro-Dex, Inc., a Colorado
corporation (the "Corporation") and the Pro-Dex, Inc. 1998 Stock Option Plan, to
review certain matters concerning the registration of shares to be acquired on
the exercise of options heretofore granted under such Plan. We have been
requested to render to you the opinions set forth in this letter.
A. DOCUMENTS REVIEWED
------------------
1. Articles of Incorporation of Pro-Dex, Inc., dated as of January
24, 1994, as amended;
2. Bylaws of Pro-Dex, Inc., as amended;
3. Certificate of the Secretary of State of the State of Colorado,
that the Corporation is in good standing under the laws of Colorado;
4. Form S-8 registering shares of Pro-Dex, Inc. Common Stock to be
acquired on exercise of options heretofore granted under the Pro-Dex, Inc. 1988
Stock Option Plan (the "Registration Statement");
5. The Pro-Dex, Inc. 1988 Stock Option Plan (the "Plan");
6. Minutes of the Shareholder's Meeting January 16, 1989, adopting
the 1988 Stock Option Plan; and
<PAGE>
1988 Stock Option Plan
June 11, 1996, p. 2
- --------------------------------------------------------------------------------
7. Grant Letters dated July 1, 1988 and December 31, 1994, granting
certain options pursuant to the Company's 1988 Stock Option Plan, reflecting
action of the Board of Directors of Pro-Dex, Inc.
Terms used herein which are defined in the above documents
("Documents"), which are not defined herein, shall have the meanings assigned in
the Documents. We have examined originals or copies, certified or otherwise
identified to our satisfaction of (i) the Documents, and (ii) such Corporation
records and documents and other documents and instruments as we have deemed
appropriate in connection with the opinions hereinafter expressed.
B. OPINIONS
--------
Based solely upon our review of the Documents and subject to the
qualifications, limitations and assumptions, comments as to scope, and general
statements set forth herein, we are of the opinion that:
1. Existence. The Corporation is a corporation validly existing and
---------
in good standing under the laws of the State of Colorado, with all requisite
power and authority to own its properties and to carry on the business in which
it is now engaged.
2. Authority. The Corporation has full legal right, power and
---------
authority to enter into the Asset Purchase Agreement, and the Asset Purchase
Agreement, when executed by all the parties thereto will have been validly
authorized, executed and delivered by the Corporation and Purchaser's
Subsidiary.
3. Issuance of Securities. Each of the shares to be issued pursuant
----------------------
to the exercise of options under the 1988 Stock Option Plan will, when sold in
accordance with the Registration Statement, upon the due and full payment
therefore in accordance with the terms of each applicable grant letter and the
Plan, and execution of the certificates in respect thereto by the requisite
corporate authorities, be validly issued, fully paid and non-assessable.
4. Compliance with ERISA. The 1988 Stock Option Plan complies with
---------------------
the Employee Retirement Income Security Act of 1976 ("ERISA") and Section 422A
relating to Incentive Stock Option Plans, to the extent that such compliance is
required in accordance with the terms thereof. Options heretofore granted to
Dr. M. Larry Kyle to acquire 30,000 shares of the Corporation's common stock,
pursuant to the 1988 Stock Option Plan, are incentive stock options pursuant to
Section 422A of the Internal Revenue Code of 1986, as amended. Options
heretofore granted to Mr. Shannon Squyrs to acquire 25,000 shares of the
Corporation's common stock, pursuant to the 1988 Stock Option Plan, are non-
statutory stock options.
<PAGE>
1988 Stock Option Plan
June 11, 1996, p. 3
- --------------------------------------------------------------------------------
C. QUALIFICATIONS
--------------
The opinions expressed herein are subject to and limited by the following
additional qualifications, assumptions and exclusions:
(a) Assumptions. The opinions expressed herein are based upon the
-----------
assumption that: (i) all signatures are genuine; (ii) all documents submitted
to us as originals are authentic; (iii) all documents submitted to us as copies
are true and correct reproductions of the originals of such documents; (iv) in
the case of the Asset Purchase Agreement, we have assumed the power, legal
capacity and authority of each person or entity, except the Corporation and
Purchaser's Subsidiary, to execute, deliver and perform their respective
obligations under such instrument and document, and that such instrument or
document constitutes a valid and binding obligation of each such person or
entity, enforceable against each such person or entity as appropriate, to the
extent that such validity, binding effect and enforceability affects the
opinions herein expressed; and (v) each individual executing and delivering any
Document was, at the time of such execution and delivery, sui juris, and under
no legal disability. We have no knowledge and have made no examination and
express no opinion with respect to the effect of forgery, the legal capacity,
sobriety or competency of any natural person, alteration after delivery, or
fraud, duress or undue influence.
(b) Knowledge. The qualification of any opinion or statement herein
---------
by the use of the words "knowledge," "current actual knowledge," "to our
knowledge" or "known to us," means that during the course of our representation
of the Corporation in connection with the preparation of the Registration
Statement, no fact or circumstance has come to the attention of the attorneys
directly involved in such activities or transactions which give such attorneys
actual knowledge of the existence of the facts so qualified. For your
information, the attorneys of this firm directly involved in such activities are
Diana L. Powell and John G. Herbert. Furthermore, except as otherwise expressly
set forth herein, we have not undertaken any investigation to determine the
existence of any such documents or facts, and no inference as to our knowledge
thereof shall be drawn from the fact of our representation of any party or
otherwise.
(d) No Investigation. In rendering this opinion and with your
----------------
concurrence, we have made no independent investigation as to the accuracy or
completeness of any representation, warranty, data or other information, whether
written or oral, that may have been made by or on behalf of the parties to the
Documents, and we have assumed in rendering this opinion that none of such
information, if any, contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements made, in light of the
circumstance in which they are made, not misleading. We have made no
examination of any accounting or financial matters and express no opinion with
respect thereto, with your concurrence. In giving the opinions set forth above,
our procedures have been limited to (i) discussions with the attorneys of this
firm
<PAGE>
1988 Stock Option Plan
June 11, 1996, p. 4
- --------------------------------------------------------------------------------
identified above, who have performed services for the Corporation, in connection
with the Registration Statement and related transactions to which the
Corporation was subject or a party, and (ii) discussions with the Corporation's
officers.
D. SCOPE AND GENERAL STATEMENTS
----------------------------
This opinion is provided for the purpose of complying with the requirements
of the Plan with respect to the Registration Statement and without our prior
written consent may not be relied upon, used, circulated, quoted or otherwise
referred to in any manner by any person, firm, governmental authority or entity
whatsoever, other than reliance thereon by the 1988 Stock Option Plan solely
with respect to the filing of the Registration Statement and exercise of options
heretofore granted during the effectiveness of such Registration Statement.
This opinion letter shall not be construed as or deemed to be a guaranty or
insuring agreement.
Although we have acted as special counsel for the Corporation in connection
with the transactions relating to or in respect of the Registration Statement,
our representation has been limited to specific matters from time to time
referred to us for substantive legal attention, and factual matters or
agreements pertaining to the Documents, entities, and the Corporation's
businesses and properties may exist of which we have no knowledge or
information. However, we have no current actual knowledge of any facts or
circumstances which would make any opinion expressed herein incorrect or subject
to question or require further investigation of any laws, facts or
circumstances. Further, we hereby advise you that, in our capacity as special
counsel for the Corporation, we are not handling or directing substantive legal
attention to pending litigation, overtly threatened litigation or claims of
violation by the Corporation of any Applicable Laws which would have a material
adverse consequence on the effectiveness of the Registration Statement.
Further this opinion is rendered as of the date hereof, and we undertake
no, and hereby disclaim any, obligation to advise you of any changes in or any
new developments which might affect any matters or opinions set forth herein.
We hereby advise you that any material change in the Corporation's financial
condition or any material event which would normally require disclosure prior to
any transaction by the Corporation may render the Registration Statement
ineffective.
<PAGE>
1988 Stock Option Plan
June 11, 1996, p. 5
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We are licensed to practice law only in the States of Colorado and Texas
and the District of Columbia, and we express no opinion with respect to the
effect of any laws other than the laws of the State of Colorado and the United
States.
JOHN G. HERBERT, P.C.
A Professional Corporation
By: /s/ Diana L. Powell
------------------------------------------
Diana L. Powell, Esq.
