<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X Quarterly Report pursuant to Section 13 or 15(d)
--- of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997
--- Transition Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
-------- --------
Commission File Number: 0-17119
---------
A-Fem Medical Corporation
---------------------------------------------------------------------
(exact name of small business issuer as specified in its charter)
Nevada 33-0202574
--------------------------------- ------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
10180 SW Nimbus Ave., Suite J5
Portland, OR 97223
--------------------------------------------
(Address of principal executive
offices)
(503)968-8800
-----------------------------
(Issuer's telephone number)
Athena Medical Corporation
------------------------------------------
(Former name, former address and
former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past
90 days. Yes X No
----- -----
As of June 30, 1997, the issuer had outstanding 11,831,554 shares of its
$.01 par value Common Stock.
Transitional Small Business Disclosure Format: (Check one) Yes No X
---- ----
<PAGE>
PART I - FINANCIAL INFORMATION
See "Basis of Presentation."
PAGE 2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
A-Fem Medical Corporation
BALANCE SHEETS
as of June 30
(unaudited)
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 2,517,891 $ 134,095
Restricted Cash 106,571 -
Accounts Receivable, trade 26,610 8,451
Inventory 40,731 388,316
Prepaids and Other 292,311 282,355
-------------- --------------
Total Current Assets 2,984,114 813,217
EQUIPMENT, FURNITURE and LEASEHOLDS, at cost 992,438 787,638
Less: Accumulated Depreciation (304,020) (167,859)
-------------- --------------
688,418 619,779
PATENTS and LICENSES, net 56,383 47,602
LOANS RECEIVABLE - Officers and Directors 56,969 120,219
-------------- --------------
Total Assets $ 3,785,884 $1,600,817
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 300,716 $ 140,234
Current Portion of Capital Lease Obligation 223,291 145,698
Accrued Expenses 19,275 16,200
Accrued Salaries and Related Liabilities 179,207 17,785
Accrued Settlement for Litigation 200,000 -
-------------- --------------
Total Current Liabilities 922,489 319,917
Long-Term Portion of Capital Lease Obligation 218,035 161,854
-------------- --------------
Total Liabilities 1,140,524 481,771
STOCKHOLDERS' EQUITY
Common Stock, $0.01 par value, authorized 33,000,000
shares; issued 11,831,554 and 8,978,243 shares 118,315 89,782
Additional Paid-in Capital 11,851,525 8,514,308
Accumulated (Deficit) Earnings (9,324,480) (7,485,044)
-------------- --------------
Total Stockholders' Equity 2,645,360 1,119,046
-------------- --------------
Total Liabilities and Stockholders' Equity $ 3,785,884 $1,600,817
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
PAGE 3
<PAGE>
A-Fem Medical Corporation
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30 June 30
--------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Sales, net $ 19,297 $ 5,831 $ 31,100 $ 155,801
Cost of Sales 159,068 1,832 168,882 54,695
------------ ------------ ------------ --------------
Gross Margin (139,771) 3,999 (137,782) 101,106
Operating Expenses:
General and Administrative 827,503 1,073,592 1,461,963 2,183,750
------------ ------------ ------------ --------------
Net Operating Income (Loss) (967,274) (1,069,593) (1,599,745) (2,082,644)
Other Income (Loss) 2,013,706 - 2,010,778 -
------------ ------------ ------------ --------------
Net Income (Loss) $1,046,432 ($1,069,593) $ 411,033 ($2,082,644)
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
Net Income (Loss) Per Share $0.08 ($0.12) $0.03 ($0.23)
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
Weighted Average Shares Outstanding 12,473,982 8,956,484 12,133,708 8,952,363
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
</TABLE>
The accompanying notes are an integral part of these statements.
PAGE 4
<PAGE>
A-Fem Medical Corporation
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
(unaudited)
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30 ended June 30
------------------------------- --------------------------------
1997 1996 1997 1996
-------------- --------------- ------------- -----------------
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income (Loss) $ 1,046,432 $ (1,069,593) $ 411,034 $ (2,082,644)
Adjustments to reconcile net income (loss) to net cash
provided (used in) operating activities:
Depreciation and amortization 34,226 40,320 67,083 77,060
Loss on disposal of assets - - 7,507 -
Changes in working capital:
Restricted cash 26,557 - 52,804 -
Accounts receivable (14,644) 141,964 4,162 (6,386)
Inventory 151,855 (61,080) 150,087 (228,696)
Prepaid expenses and other (148,231) 115,842 (163,863) (23,865)
Accounts payable 32,724 (180,791) 11,244 (56,314)
Accrued salaries and related liabilities (59,654) (2,456) (113,286) 2,066
Accrued expenses 5,124 (21,800) (36,947) (53,800)
-------------- --------------- ------------- -----------------
Net cash provided by (used in) operating activities 1,074,389 (1,037,594) 389,825 (2,372,579)
Cash Flows From Investing Activities:
Purchases of equipment, furniture and leaseholds (139,748) (69,645) (143,765) (243,359)
Net proceeds from sale of equipment - - 980 -
-------------- --------------- ------------- -----------------
Net cash used in investing activities (139,748) (69,645) (142,785) (243,359)
Additions to notes receivable, net of repayments (870) (1,729) 67,124 (3,459)
Net proceeds from long-term lease obligations,
net of repayments 63,416 8,120 67,281 307,551
Proceeds from sale of Common Stock, exercise of
options and warrants 382,143 14,900 1,464,951 (18,100)
-------------- --------------- ------------- -----------------
Net cash provided by financing activities 444,689 21,291 1,599,356 285,992
-------------- --------------- ------------- -----------------
Net Increase (Decrease) in Cash and Cash Equivalents 1,379,330 (1,085,948) 1,846,396 (2,329,946)
Cash and Cash Equivalents, beginning of period 1,138,561 1,220,043 671,495 2,464,041
-------------- --------------- ------------- -----------------
Cash and Cash Equivalents, end of period $ 2,517,891 $ 134,095 $2,517,981 $ 134,095
-------------- --------------- ------------- -----------------
-------------- --------------- ------------- -----------------
</TABLE>
The accompanying notes are an integral part of these statements.
PAGE 5
<PAGE>
A-Fem Medical Corporation
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
1. ORGANIZATION OF THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
A-Fem Medical Corporation ("A-Fem" or the "Company") is a product development
company dedicated to women's healthcare. A-Fem has developed two core
technologies, one related to feminine protection and the other related to
diagnostic products. Each of these core technologies has a variety of
product applications that the Company is developing for the short and
long-term.
The Company's feminine protection product is an interlabial pad. It is the
first generation of a product which is intended to create an entirely new
segment within the feminine protection category.
The Company is developing its proprietary Rapid-Sense-TM- diagnostic
technology which enables the visual quantification of a desired substance
(such as tumor markers) in any desired biological sample (i.e. blood, urine
or saliva).
BASIS OF PRESENTATION
The interim financial data is unaudited; however, in the opinion of management,
the interim data include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the interim
periods. The financial statements included herein have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures included herein
are adequate to make the information presented not misleading. Operating
results for the periods presented are not necessarily indicative of future
results. These financial statements should be read in conjunction with the
financial statements and notes to financial statements included in the Company's
annual report on Form 10-KSB for the year ended December 31,1996.
PER SHARE DATA
The net income (loss) per share was computed by dividing the net income (loss)
by the weighted average number of shares and dilutive common stock equivalents
of the Company outstanding during the periods.
LICENSING AGREEMENT
Under terms of a licensing agreement, the Company assumed an obligation to pay
royalties to an investor (who is a non-controlling stockholder) based on varying
percentages of up to five percent of net sales of the Company's feminine
protection product through February 1998.
2. COMMON STOCK OPTIONS AND WARRANTS
Under the provisions of its 1994 Incentive and Non-Qualified Stock Option
Plan, as amended July 1997 (the "Plan"), the Company has reserved 3,300,000
shares of its common stock for issuance under qualified options,
non-qualified options, stock appreciation rights, and other awards as set
forth in the Plan. The Plan provides for administration by a committee
comprised of not less than two non-employee members of the Company's Board of
Directors. Such committee (or the Board of Directors in its absence)
determines the number of shares, option price, duration and other terms of
the options granted under the Plan. Qualified options may
PAGE 6
<PAGE>
only be awarded to employees of the Company. Non-qualified options are
available for issuance to consultants, advisors and others having a
relationship with the Company, on terms determined by the committee.
As of June 30, 1997, options for a total of 2,753,628 shares of Common Stock
have been awarded, options for 690,640 shares have been exercised, and
options for 2,062,988 shares are outstanding. Of the options awarded and
outstanding, options for 1,850,238 shares are qualified stock options, and
options for 212,750 are non-qualified stock options. There were options to
purchase 697,348 shares granted, options to purchase 617,140 shares exercised
and options to purchase 197,500 shares surrendered during the quarter ended
June 30, 1997.
The following table summarizes outstanding options to purchase shares of the
Company's common stock as of June 30, 1997:
QUALIFIED STOCK OPTIONS
<TABLE>
<CAPTION>
Titles of Securities Weighted Average
Issuable: Common Stock Shares Under Option Exercise Price Per Share
- ------------------------------------- ----------------------- ----------------------------
<S> <C> <C>
Number exercisable at June 30, 1997: 1,108,674 $1.56
Number exercisable thereafter: 741,564 $3.36
</TABLE>
NON-QUALIFIED STOCK OPTIONS
<TABLE>
<CAPTION>
Titles of Securities Weighted Average
Issuable: Common Stock Shares Under Option Exercise Price Per Share
- ------------------------------------- ----------------------- ----------------------------
<S> <C> <C>
Number exercisable at June 30, 1997: 110,250 $2.98
Number exercisable thereafter: 102,500 $2.76
</TABLE>
As of June 30, 1997, warrants to purchase an aggregate of 2,796,416 shares
were outstanding. There were no warrants granted, warrants to purchase
597,000 shares exercised, and no warrants surrendered during the quarter
ended June 30, 1997.
The following table summarizes warrants outstanding for the purchase of
shares of the Company's Common Stock as of June 30, 1997:
WARRANTS
<TABLE>
<CAPTION>
Titles of Securities Shares Subject Weighted Average
Issuable: Common Stock to Warrants Exercise Price Per Share
- ------------------------------------- ----------------------- ----------------------------
<S> <C> <C>
Number exercisable at June 30, 1997: 2,796,416 $2.21
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATION
The Company is a product development company dedicated to women's health
care. The Company has two core technologies, one related to feminine
protection, the other related to diagnostic products. The Company has not
had material revenues from operations. At its current stage of operations,
the Company's financial position and operating results may be materially
affected by a number of factors, including the availability of additional
capital, competition and technological change.
PAGE 7
<PAGE>
RESULTS OF OPERATIONS
In the first half of 1997, the Company has focused its efforts on plans for
its marketing roll-out of the interlabial pad in the Pacific Northwest which
is scheduled for early 1998.
For the three months ended June 30, 1997, the Company had net operating
revenues of $19,297 compared with $5,831 during the same period in the prior
year. For the six month period ended June 30, 1997, revenues were $31,100
compared with $155,801 for the same period in the prior year. Higher
revenues in 1996 were principally associated with non-recurring sales in
China.
Other income was approximately $2,000,000 in the three and six months ended
June 30, 1997, due to a license of certain technology to Procter & Gamble in
May, 1997. There was no other income in the comparable periods in 1996.
Net Income was $1,046,433 for the three months ended June 30, 1997 compared
with a loss of $1,069,593 in 1996 and $411,033 in the six months ended June
30, 1997 compared with a loss of $2,082,644 in the six months ended June 30,
1996, in each case as a result of Other Income.
The Company reduced operating expenses by $246,089 and $110,158 in the three
and six months ended June 30, 1997, respectively, compared with the
comparable periods of the prior year. The reduction of expenses was
attributable to the reduction in external consultants and elimination of
marketing expenses related to the test market in Florida.
The Company expects operating expenses to increase significantly in the
second half of 1997 and beyond, as the Company commences its roll-out of its
interlabial pad in the Northwest and across the West.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company had cash and cash equivalents of $2,624,461
and working capital of $1,946,850. The Company's net cash position improved
by $1,352,773 between March 31 and June 30 as a result of the receipt of
$2,000,000 from Procter & Gamble in May, 1997.
The Company expects to continue to incur losses each month during the
remainder of 1997 and through 1998, as the cost of marketing, research and
development will continue to exceed income from product sales. In order to
carry out its marketing plan for its interlabial pad, the Company estimates
it will need to raise approximately $12 million in financing over the next
six months and $30 million thereafter. The Company does not expect
significant amounts of debt financing to be available to it in the near term
and that it will have to issue additional equity.
The Company may not be able to secure investment on terms favorable to the
Company. Inability of the Company to obtain financing will adversely affect
the Company.
Certain statements in this Form 10-QSB contain "forward-looking" information
(as defined in Section 27A of the Securities Act of 1993, as amended) that
involve risks and uncertainties, including, but not limited to, the effect of
economic conditions, lack of revenues from products, product development,
operating losses, results of financing efforts, availability and cost of raw
materials and labor, potential need for additional capital equipment, market
acceptance risks, risks of international business, the impact of competitive
products and pricing and the risk factors listed from time to time in the
Company's SEC reports, including but not limited to, the Company's report on
Form 10-KSB for the fiscal year ended December 31, 1996.
PAGE 8
<PAGE>
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held July 10, 1997. At
the annual meeting, shareholders elected persons identified below for the
terms set forth below by the votes set forth opposite their names.
<TABLE>
<CAPTION>
Class 1 Directors (Terms
- ------------------------
expiring at the 1998 Votes Against Broker
- -------------------- ------------- ------
Annual Meeting) Votes For or Withheld Abstained Non-Votes
- --------------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C>
James E. Reinmuth 10,022,231.5 8,070 0 0
James R. Wilson 10,022,131.5 8,170 0 0
<CAPTION>
Class 2 Directors (Terms
- ------------------------
expiring at the 1999
- --------------------
Annual Meeting
- --------------
William H. Fleming 10,023,231.5 7,070 0 0
Roseanna Sevcik 9,942,126.5 88,155 0 0
Carol A. Scott 10,025,231.5 5,070 0 0
</TABLE>
PAGE 9
<PAGE>
Shareholders were also asked to vote on the following matters which received the
votes indicated below:
<TABLE>
<CAPTION>
Votes
-----
Against or Votes Broker
---------- ----- ------
Votes For Withheld Abstained Non-Votes
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
An amendment to the Company's 3,346,428.5 3,852,797 9,043 2,822,033
Articles of Incorporation to authorize a
class of preferred stock to be designated
by the Board of Directors
An amendment to the Company's 10,017,650.5 2,383 11,168 0
Articles of Incorporation to change the
name of the Company to A - FEM
Medical Corporation
Amendments to amend the Company's 9,515,267.5 112,331 20,543 383,060
1994 Incentive and Nonqualified Plan
Ratification of the appointment of 10,010,288.5 133 19,880 0
Arthur Andersen LLP as independent
public accountants for the fiscal year
ending December 31, 1997
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
3.1 Articles of incorporation, as amended
3.2 Bylaws, as amended
4.1 Stock Purchase Agreement between the Company and
certain investors dated December 6, 1996.
10.26 Employment Agreement between the Company and J. Peter
Burke dated as of April 28, 1997.
10.27(1) Agreement dated effective as of April 28, 1997 between
The Procter & Gamble Company and the Company.
10.28 Employment Agreement between the Company and James R.
Wilson dated as of May 1, 1997.
11.1 Statement Re: computation of per share earnings
27.2 Financial Data Schedule
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(1) Incorporated by reference to exhibit number 10.1 to
the Company's Current Report on Form 8-K, file number 0-17119,
filed with the Commission on May 16, 1997.
b) Reports on Form 8-K
A Form 8-K file no. 0-17119 was filed with the Commission on
May 16, 1997, and contained information regarding the agreement
dated effective as of April 28, 1997 pursuant to which the
Company granted to the Procter & Gamble Company certain
technology and trademark rights.
PAGE 11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Company caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
A-Fem Medical Corporation
Date: August 13, 1997 S/WILLIAM H. FLEMING
-----------------------------------
William H. Fleming
President, Chief Operating
Officer, Secretary and Director
(principal executive officer)
Date: August 13, 1997 S/J. PETER BURKE
-----------------------------------
J. Peter Burke
Executive Vice President and
Chief Financial Officer
(principal financial officer and
principal accounting officer)
PAGE 12
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
XTRAMEDICS, INC.
FIRST. The name of the Corporation is XTRAMEDICS, INC.
SECOND. Its principal office in the State of Nevada is located at One
East First Street, Reno, Washoe County, Nevada 89501. The name and address
of its resident agent is The Corporation Trust Company of Nevada, One East
First Street, Nevada 89501.
THIRD. The nature of the business, or objects or purposes to be
transacted, promoted or carried on by the corporation are:
To engage in any lawful activity and to manufacture, purchase or
otherwise acquire, invest in, own, mortgage, pledge, sell, assign and
transfer or otherwise dispose of, trade, deal in and deal with goods, wares
and merchandise and personal property of every class and description.
To perform research and development services and to manufacture and
market health case devices, products and services.
To hold, purchase and convey real and personal estate and to mortgage or
lease any such real or personal estate with its franchises and to take the
same by devise or bequest.
To acquire, and pay for in cash, stock or bonds of this corporation or
otherwise, the goodwill, rights, assets and property, and to undertake or
assume the whole or any part of the obligations or liabilities of any person,
firm, association or corporation.
To acquire, hold, use, sell, assign, lease, grant licenses in respect
of, mortgage, or otherwise dispose of letters patent of the United States or
any foreign country, patent rights, licenses and privileges, inventions,
improvements and processes, copyrights, trademarks and trade names, relating
to or useful in connection with any business of this corporation.
To guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge
or otherwise dispose of the shares of the capital stock of or any bonds,
securities or evidences of the indebtedness created by any other corporation
or corporations of this
1
<PAGE>
state, or any other state or government, and, while owner of such stock,
bonds, securities or evidence of indebtedness, to exercise all the rights,
powers and privileges of ownership, including the right to vote, if any.
To borrow money and contract debts when necessary for the transaction of
its business, or for the exercise of its corporate rights, privileges or
franchises, or for any other lawful purpose of its incorporation; to issue
bonds, promissory notes, bills of exchange, debentures, and other obligations
and evidences of indebtedness, payable at specified time or times, or payable
upon the happening of a specified event or events, whether secured by
mortgage, pledge or otherwise, or unsecured, for money borrowed, or in
payment for property purchased, or acquired, or for any other lawful objects.
To purchase, hold, sell and transfer shares of its own capital stock,
and use therefor its capital, capital surplus, surplus, or other property or
funds; provided it shall not use its funds or property for the purchase of
its own shares of capital stock when such use would cause any impairment of
its capital; and provided further, that shares of its own capital stock
belonging to it shall not be voted upon, directly or indirectly, nor counted
as outstanding, for the purpose of computing any stockholders' quorum or vote.
To conduct business, have one or more offices, and hold, purchase,
mortgage and convey real and personal property in this state, and in any of
the several states, territories, possessions and dependencies of the United
States, the District of Columbia, and in any foreign countries.
To do all and everything necessary and proper for the accomplishment of
the objects hereinbefore enumerated or necessary or incidental to the
protection and benefit of the corporation, and, in general, to carry on any
lawful business necessary or incidental to the attainment of the objects of
the corporation, whether or not such business is similar in nature to the
objects hereinbefore set forth.
The objects and purposes specified in the foregoing clauses will, except
where otherwise expressed, be in nowise limited or restricted by reference
to, or inference from, the terms of any other clause in these articles of
incorporation, but the objects and purposes specified in each of the
foregoing clauses of this article shall be regarded as independent objects
and purposes.
FOURTH. The aggregate number of shares which the corporation is
authorized to issue is 23,000,000 with said shares being divided into two
classes. The designation of each class, the number of shares of each class,
and the par value, if any, of the shares of each class, or a statement that
the shares of any class are without par value, are as follows:
2
<PAGE>
Par value per share or statement
Class Series (if any) Number of Shares that shares are without par value
- ----- --------------- ---------------- ---------------------------------
Common 20,000,000 $.01
Common Class B 3,000,000 $.01
The preference, qualifications, limitations, restrictions, and the
special or relative rights in respect of the share of each class are as
follows:
The Common Stock and the Class B Common Stock of the corporation will
be, when issued, fully paid and non-assessable.
Holders of the Common Stock and Class B Common Stock will be entitled
equally to their pro rata share of such dividends and distributions as may be
declared from time to time by the Board of Directors.
The Class B Common Stock is convertible at any time into Common Stock on
a share-for-share basis.
The holders of the Class B Common Stock will not share in the assets of
the corporation in the event of liquidation or dissolution until the holders
of the Common Stock have received $.50 per share, after which holders of the
Class B Common Stock will receive $.50 per share. Thereafter, both classes
will share equally in any remaining assets. Shareholders will have no
preemptive rights to subscribe for any securities of the corporation.
Holders of the Common Stock and Class B Common Stock will each be
entitled to one (1) vote per share. The holders of the Class B Common Stock
will be entitled to elect at any time a majority of the corporation's Board
of Directors, but will not be entitled to cumulative voting. Holders of the
Common Stock will be entitled to cumulate their votes in the election of the
remaining directors.
FIFTH: The governing board of the corporation will be known as
directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the bylaws of the
corporation, provided that the number of directors will not be reduced to
less than three (3), except that in cases where all the shares of the
corporation are owned beneficially and of record by either one or two
stockholders, the number of directors may be less than three (3) but not less
than the number of stockholders.
The names and post-office addresses of the first board of directors,
which will be three (3) in number, are as follows:
3
<PAGE>
Name Post Office Address
- ---- -------------------
Marvin Loeb............. 1815 East Carnegie Avenue
Santa Ana, CA 92705
Bruce N. Barron......... 2250 East Devon Avenue
Des Plaines, IL 60018
John F. Perry........... 210 Ashland Court
Vernon Hills, IL 60061
SIXTH. The capital stock, after the amount of the subscription price or
par value has been paid in, will not be subject to assessment to pay the
debts of the corporation.
SEVENTH: The name and post office address of the incorporation signing
the articles of incorporation is:
Name Post Office Address
- ---- -------------------
James T. Hitch III...... Baker & McKenzie
3200 Prudential Plaza
Chicago, IL 60601
EIGHTH: The corporation is to have perpetual existence.
NINTH: In furtherance, and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized:
Subject to the bylaws, if any adopted by the stockholders, to make,
alter, or amend the bylaws of the corporation.
To fix the amount to be reserved as working capital over and above its
capital stock paid in, to authorize and cause to be executed mortgages and
liens upon the real and personal property of the corporation.
By resolution passed by a majority of the whole board, to designate one
(1) or more committees, each committee to consist of one (1) or more of the
directors of the corporation, which, to the extent provided in the resolution
or in the bylaws of the corporation, will have and may exercise the powers of
the board of directors in the management of the business and affairs of the
corporation, and may authorized the seal of the corporation to be affixed to
all papers which may require it. Such committee or committees will have such
name or names as may be stated in the
4
<PAGE>
bylaws of the corporation or as may be determined from time to time by
resolution adopted by the board of directors.
When and as authorized by the affirmative vote of stockholders holding
stock entitling them to exercise at lease a majority of the voting power
given at a stockholders' meeting called for that purpose, or when authorized
by the written consent of the holders of at least a majority of the voting
stock issued and outstanding, the board of directors will have power and
authority at any meeting to sell, lease, or exchange all of the property and
assets of the corporation, including its good will and its corporate
franchises, upon such terms and conditions as its board of directors deem
expedient and for the best interests of the corporation.
TENTH. Meetings of the stockholders may be held outside the State of
Nevada, if the bylaws so provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Nevada at such place or places as may be designated from time to time by the
board of directors or in the bylaws of the corporation.
ELEVENTH: The corporation reserves the right to amend, alter, change,
or repeal any provision contained in these articles of incorporation, in the
manner now or hereafter prescribed by statute, or by these articles of
incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of
the State of Nevada, do make and file these articles of incorporation, hereby
declaring and certifying that the facts herein stated are true, and
accordingly have hereunto set my hands this 5th day of December, 1986.
_____________________________________
James T. Hitch III
STATE OF ILLINOIS )
)
COUNTY OF COOK )
On this 5th day of December, 1986, before me, a Notary Public,
personally appeared James T. Hitch, III, who acknowledged that he executed
the above instrument.
_____________________________________
Notary Public
My commission expires 2/18/90.
5
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
Xtramedics, Inc., a corporation organized under the laws of the State of
Nevada, by its president and secretary does hereby certify:
1. That the board of directors of said corporation by unanimous
written consent dated as of September 8, 1987 passed resolutions declaring
that the following changes and amendments in the articles of incorporation
are advisable.
RESOLVED, that Article Four of the Articles of Incorporation of the
corporation be amended by replacing the first paragraph of said Article Four
with the following:
FOURTH. The aggregate number of shares which the corporation is
authorized to issue is 33,000,000 with said shares being divided into
two classes. The designation of each class, the number of shares of
each class, and the par value, if any, of the shares of each class, or a
statement that the shares of any class are without par value, are as
follows:
Series (if Par value per share or statement
Class any) Number of Shares that shares are without par value
- ----- ---------- ---------------- ---------------------------------
Common 30,000,000 $.01
Common Class B 3,000,000 $.01
RESOLVED, that the Board of Directors recommends to the stockholders
that the Articles of Incorporation of the Corporation be amended to add a new
article as follows:
TWELFTH: The Bylaws of the corporation shall provide for the
indemnification of the corporation's directors, officers, employees and
agents for expenses incurred in connection with the defense of actions,
suits or proceedings to the fullest extent permitted by Nevada law.
RESOLVED, that the Board of Directors recommends to the stockholders
that the Articles of Incorporation be amended to add a new article as follows:
THIRTEENTH: No director or officer of the Corporation shall be
liable to the Corporation or to the stockholders for damages for any
breach of
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fiduciary duty; provided, however, that a director or officer shall be liable
for damages which result from any of the following:
(a) Acts or omissions which involve intentional misconduct, fraud or
a knowing violation of law;
(b) The willful or grossly negligent payment of any improper dividend
or distribution; or
(c) Acts or omissions which occurred prior to March 18, 1987.
2. That the number of shares of the corporation outstanding and
entitled to vote on an amendment to the articles of incorporation is
4,000,000 of which 1,400,000 shares are outstanding shares of Common Stock
and of which 2,600,000 shares are outstanding shares of Class B Common Stock;
that said changes and amendments have been consented to and authorized by the
written consent of stockholders holding at least a majority of each class of
stock outstanding and entitled to vote thereon.
IN WITNESS WHEREOF, the said Xtramedics, Inc. has caused this
certificate to be signed by its president and its secretary and its corporate
seal to be hereto affixed this _____ day of September, 1987.
XTRAMEDICS, INC.
By __________________________________
John F. Perry, President
By __________________________________
Donald J. Moore, Secretary
(SEAL)
STATE OF ILLINOIS )
)
COUNTY OF COOK )
On ___________ personally appeared before me, a Notary Public, John F.
Perry, President of Xtramedics, Inc., who acknowledged that he executed the
above instrument.
__________________________________
Notary Public
My commission expires 2/18/90.
2
<PAGE>
STATE OF ILLINOIS )
)
COUNTY OF COOK )
On ___________ personally appeared before me, a Notary Public, Donald J.
Moore, Secretary of Xtramedics, Inc., who acknowledged that he executed the
above instrument.
__________________________________
Notary Public
My commission expires 2/18/90.
3
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
Xtramedics, Inc., a corporation organized under the laws of the State of
Nevada, by its President and Secretary does hereby certify:
1. That the Board of Directors of the corporation, by unanimous
written consent dated as of February 16, 1994, passed resolutions declaring
that the following changes and amendments to the Articles of Incorporation
(as previously amended) are advisable.
RESOLVED, that the Articles of Incorporation of the corporation be
amended to: (a) effect a 1:10 reverse split (the "Reverse Split") of
all issued and outstanding shares of Common Stock and Class B Common
Stock, without changing the par value thereof nor the aggregate number
of shares that the corporation is authorized to issue (such number being
33,000,000), with fractional shares resulting therefrom being rounded up
to the closes whole number, and resulting in a total of 3,226,652 shares
of the corporation's stock outstanding immediately thereafter (subject
only to rounding up of fractional interests); (b) eliminate the Class B
Common Stock (and to provide for automatic conversion of issued Class B
Common Stock to Common Stock on a 1:1 post-Reverse Split basis); (c)
eliminate cumulative voting rights; (d) eliminate (to the extent not
already provided in the corporation's Articles of Incorporation)
preemptive rights; and (e) change the name of the corporation to "Athena
Medical Corporation"; and that, accordingly the following amendments to
the Articles of Incorporation of the corporation (as previously amended)
be made:
(A) Replacing Article FIRST in its entirety with the following:
"FIRST. The name of the corporation is ATHENA MEDICAL CORPORATION."
(B) Replacing Article FOURTH in its entirety with the following:
"FOURTH. The aggregate number of shares which the corporation is
authorized to issue is 33,000,000 shares of Common Stock, par value
$0.01 per share. Upon the amendment of this Article FOURTH, each
outstanding share is converted
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into 0.1 share. The Common Stock of the corporation will be, when issued,
fully paid and non-assessable.
"No holder of any of the Common Stock nor of any shares of any other
class of the corporation shall be entitled as of right to subscribe for,
purchase or otherwise acquire any of the shares of any class of the
corporation that the corporation proposes to issue or any of the rights or
options that the corporation proposes to grant for the purchase of shares of
any class of the corporation or for the purchase of shares, bonds, securities
or obligations of the corporation that are convertible into, exchangeable for
or that carry rights to subscribe for, purchase or otherwise acquire shares
of any class of the corporation, and all of such shares, bonds, securities or
obligations of the corporation, whether now or hereafter authorized or
created, may be issued, or may be reissued or transferred if the same have
been reacquired and have treasury status, and all of such rights and options
may be granted by the corporation's Board of Directors to such persons,
firms, corporations and associations, and for such lawful consideration, and
on such terms, as the corporation's Board of Directors in its discretion may
determine, without first offering the same, or any thereof, to any such
holder. This provision shall be interpreted to deny preemptive or
preferential rights to the maximum extent permitted under Nevada law.
"Holders of Common Stock shall not be entitled to cumulate their votes
for the election of directors."
RESOLVED, that upon the filing of the Certificate of Amendment with the
Secretary of State of Nevada, all issued and outstanding shares of Class B
Common Stock of the corporation shall be automatically converted into an
equivalent number of shares of Common Stock, without any action on the part
of the holders thereof.
2. That the number of shares of the corporation outstanding and
entitled to vote on an amendment to the Articles of Incorporation and
otherwise is 32,266,512, of which 29,999,902 shares are outstanding shares of
Common Stock and of which 2,267,500 shares are outstanding shares of Class B
Common Stock; and that each and all of such changes and amendments have been
consented to and authorized by the written consent of shareholders bolding at
least a majority of the Common Stock and Class B Common Stock, taken together
and outstanding and entitled to vote thereon, by the written consent of
shareholders holding at least a majority of the Common Stock outstanding and
entitled to vote thereon (as a separate class), and by the written consent of
shareholders holding at least a majority of the Class B Common Stock
outstanding and entitled to vote thereon (as a separate class).
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<PAGE>
IN WITNESS WHEREOF, Xtramedics, Inc. has caused this Certificate of
Amendment to be signed by its President and its Secretary this ______ day of
June, 1994.
XTRAMEDICS, INC.
By: __________________________________
William H. Fleming, President
By: __________________________________
William H. Fleming, Secretary
STATE OF OREGON )
) ss:
COUNTY OF MULTNOMAH )
On this _____ day of June, 1994, personally appeared before me, a Notary
Public, William H. Fleming, as President and Secretary of Xtramedics, Inc.,
who acknowledged that he executed the above instrument.
______________________________________
Notary Public for Oregon
My commission expires ________________
3
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
Athena Medical Corporation, a corporation organized under the laws of
the State of Nevada, by its President and Secretary, does hereby certify:
1. That the Board of Directors of the corporation, by unanimous
written consent dated June 13, 1997, passed a resolution declaring that the
following amendment to the Articles of Incorporation (as previously amended)
is advisable:
Article First of the Articles of Incorporation shall be deleted in its
entirety and the following substituted thereof.
"FIRST. The name of the corporation is A-FEM Medical Corporation."
2. That the Board of Directors of the corporation, by unanimous
written consent dated June 13, 1997 further called an annual meeting of the
stockholders entitled to vote for the consideration of such amendment, that
due notice of such meeting to each stockholder entitled to vote thereon was
given, that such meeting of stockholders was held July 10, 1997, that a vote
was taken for and against the amendment, that the number of shares of the
corporation outstanding and entitled to vote on an amendment to the Articles
of Incorporation and otherwise was 11,471,554, and that the amendment was
voted upon and was approved by stockholders holding at least a majority of
the voting power of the shares outstanding and entitled to vote thereon.
IN WITNESS WHEREOF, Athena Medical Corporation has caused this
Certificate of Amendment to be signed by its President and its Secretary this
____ day of July, 1997.
ATHENA MEDICAL CORPORATION
By: __________________________________
William H. Fleming, President
By: __________________________________
William H. Fleming, Secretary
1
<PAGE>
STATE OF OREGON )
) ss:
COUNTY OF MULTNOMAH )
The foregoing instrument was acknowledged before me, a Notary Public, on
this _____ day of July, 1997, by William H. Fleming, as President and
Secretary of Athena Medical Corporation.
______________________________________
Notary Public for Oregon
My commission expires ________________.
2
<PAGE>
BYLAWS
ATHENA MEDICAL CORPORATION
(fka Xtramedics, Inc.)
ARTICLE I OFFICES
Section 1. The registered office of the corporation shall be in the City
of Reno, County of Washoe, State of Nevada. The principal office for the
transaction of the business of the corporation shall be in the City of Portland,
County of Washington, State of Oregon.
Section 2. The corporation may also have offices at such other places both
within and without the State of Nevada as the Board of Directors may from time
to time determine or the business of the corporation may require.
ARTICLE II MEETINGS OF STOCKHOLDERS
Section 1. Election of directors shall take place at the annual meeting of
stockholders.
Section 2. Annual meetings of stockholders shall be held on the first
Tuesday of February if not a legal holiday; and if a legal holiday, then on the
next secular day following, at 11:00 a.m. at the principal office of the
corporation; or at such other date, time and place as shall be designated from
time to time by the Board of Directors and stated in the notice of the meeting,
at which they shall elect a Board of Directors, and transact such other business
as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting, stating the place, date
and hour of the meeting and the purpose for which the meeting is called, shall
be given to each stockholder entitled to vote at such meeting not less than ten
(10) nor more than sixty (60) days before the date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any person who has
been a stockholder of record for at least six months prior to the demand for
such inspection or who holds at least five percent of all outstanding shares
of the corporation, for any purpose germane to the meeting,
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during ordinary business hours, for a period of at least ten days prior to
the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the chairman and shall be promptly called by the
chairman, president or secretary at the request in writing of a majority of the
Board of Directors or at the request in writing of stockholders owning at least
one-fifth of the shares of the corporation issued and outstanding and entitled
to vote. Such request shall state the purpose or purposes of the proposed
meeting.
Section 6. Written notice of a special meeting, stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. Holders of one-third of the shares issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be presented or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjournment meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the shares having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which, by express provision of any statute or of
the certificate of
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<PAGE>
incorporation or these bylaws, a different vote is required, in which case such
express provision shall govern and control the decision of such question.
Section 10. Each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the corporation
having voting power held by such stockholder, but no proxy shall be valid after
the expiration of six months from the date of its execution, unless coupled with
an interest, or unless the person executing it specifies therein that the proxy
is irrevocable and the length of time for which it is to continue in force,
which in no case shall exceed seven years from the date of its execution.
Stockholders may not cumulate votes for the election of directors.
Section 11. Any action, except the election of directors, required to be
taken at any annual or special meeting of stockholders of the corporation, or
any action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon where present and voted,
except as may be otherwise specifically provided by statute or by the
certificate of incorporation. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing.
ARTICLE III DIRECTORS
Section 1. The number of directors who shall constitute the Board shall
range from a minimum of five members to a maximum of nine members, the
specific number to be set by resolution of the Board, provided that the Board
may consist of fewer than five directors until vacancies are filled. The
number of directors may be changed from time to time by amendment to these
Bylaws, but no decrease in the number of directors shall have the effect of
shortening the term of any incumbent director. The Board shall be divided
into two classes, hereby designated Class 1 and 2, said classes to be as
equal in number as may be possible. At the 1997 annual meeting of
stockholders, the directors of Class 1 shall be elected for a term expiring
at the 1998 annual meeting of stockholders and the directors of Class 2 shall
be elected for a term expiring at the 1999 annual meeting of stockholders.
Commencing in 1998, and at each annual meeting of stockholders thereafter,
the successors to the class of directors whose terms expire at that meeting
shall be elected to hold office for a term of two years, and each director
shall serve for the term he or she was elected or until his or her successor
shall have been elected and qualified or until his or her death,
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<PAGE>
resignation, or removal from office. Directors need not be stockholders of the
corporation or residents of the State of Nevada.
Section 2. Any vacancy occurring on the Board may be filled by the
affirmative vote of a majority of the remaining directors then in office though
less than a quorum of the Board. A director elected to fill a vacancy shall be
elected for the unexpired term of his or her predecessor in office. Any
directorship to be filled by reason of an increase in the number of directors
may be filled by the Board for a term of office continuing only until the next
election of the class for which such director shall have been chosen, and until
his or her successor shall be elected and qualified.
Section 3. Any director, whether elected by the stockholders or appointed
by the directors, may be removed from office by the vote or written consent of
stockholders representing two-thirds of the issued and outstanding stock
entitled to voting power.
Section 4. The business of the corporation shall be managed by its Board
of Directors which may exercise all such powers of the corporation and do all
such lawful acts and things as are not by statute or by the certificate of
incorporation or by these bylaws directed or required to be exercised or done by
the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 5. The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the State of Nevada.
Section 6. The first meeting of each newly elected Board of Directors
shall be held immediately after the annual meeting of stockholders and no notice
of such meeting, other than this bylaw, shall be necessary to the newly elected
directors in order legally to constitute the meeting, provided a quorum shall be
present. In the event such meeting is not so held, the meeting may be held at
such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the Board of Directors, or as shall be
specified in a written waiver signed by all of the directors.
Section 7. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the Board.
Section 8. Special meetings of the Board may be called by the chairman on
five days' notice to each director, either personally or by mail, facsimile
transmission or telegram; and special meetings shall be promptly called by the
chairman, the president or the secretary in like manner and on like notice on
the written request of
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<PAGE>
two directors or stockholders owning at least one-fifth of the shares of the
corporation issued and outstanding and entitled to vote.
Section 9. At all meetings of the Board, a majority of directors then in
office shall constitute a quorum for the transaction of business and the act of
a majority of the directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
Section 11. Unless otherwise restricted by statute, the certificate of
incorporation or these bylaws, members of the Board of Directors or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEE OF DIRECTORS
Section 12. Each committee shall fix its own rules of procedure and shall
keep regular minutes of its meetings and report the same to the Board of
Directors when required.
COMPENSATION OF DIRECTORS
Section 13. The Board of Directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation thereof. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
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<PAGE>
ARTICLE IV NOTICES
Section 1. Whenever, under the provisions of a statute or of the
certificate of incorporation or these bylaws, notice is required to be given to
any director or stockholder, it shall not be construed to mean personal notice,
but such notice may be given in writing, by mail, addressed to such director or
stockholder, at his or her address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by facsimile transmission or telegram.
Section 2. Whenever any notice is required to be given under the
provisions of a statute or of the certificate of incorporation or these bylaws,
a waiver thereof in writing, signed by the person or persons entitled to the
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V OFFICERS
Section 1. The officers of the corporation shall be chosen by the Board of
Directors and shall be a chairman, a vice chairman, a president, a secretary and
a treasurer. The Board of Directors may also choose one or more vice
presidents, and one or more assistant secretaries and assistant treasurers. Any
number of offices may be held by the same person, unless the articles of
incorporation or these bylaws otherwise provide.
Section 2. The Board of Directors at its first meeting after each annual
meeting of stockholders shall choose a chairman, a vice chairman, a president, a
secretary and a treasurer.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
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THE CHAIRMAN, THE VICE CHAIRMAN AND THE
PRESIDENT
Section 6. The chairman shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the Board of
Directors and shall see that all orders and resolutions of the Board of
Directors are carried into effect. In the absence of the vice chairman, or it
the event of his inability to act, the chairman shall perform the duties of the
vice chairman.
The vice chairman shall review, advise and consult with the officers of the
corporation with respect to the day-to-day business operations of the
corporation. In the absence of the chairman or the president, or in the event
of the inability of either of the same to act, the vice chairman shall perform
the duties of either or both of the same.
Section 7. The president shall be the chief operating officer of the
corporation and shall be responsible for the day-to-day business operations of
the corporation. If the chairman and the vice chairman are absent, or if the
chairman requests him to do so in writing, the president shall preside at
meetings of the stockholders and the Board of Directors.
Section 8. Any of the chairman, the vice chairman and the president shall
be authorized to execute bonds, mortgages and other contracts requiring a seal,
under the seal of the corporation, except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the corporation.
THE VICE PRESIDENT
Section 9. In the absence of the president or in the event of his
inability or refusal to act, the vice president (or in the event there be more
than one vice president, the vice presidents in the order designated, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the president, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the president. The vice presidents
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 10. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and the Board of Directors in a book to be kept
for that purpose, and
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shall perform like duties for the standing committees when required. He or she
shall give, or cause to be given, notice of all meetings of stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or president, under whose
supervision he or she shall be. The secretary shall have custody of the
corporate seal of the corporation and the secretary, or an assistant secretary,
shall have authority to affix the same to any instrument requiring it and when
so affixed, it may be attested by the secretary's signature or by the signature
of such assistant secretary. The Board of Directors may give general authority
to any other officer to affix the seal of the corporation and to attest the
affixing by his or her signature.
Section 11. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election), shall, in
the absence of the secretary or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 12. The treasurer shall have the custody of the corporation funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the Board of Directors.
Section 13. The treasurer shall disburse the funds of the corporation as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all of his or her transactions as treasurer of the financial condition of the
corporation.
Section 14. If required by the Board of Directors, the treasurer shall
give the corporation a bond (which shall be renewed every six years) in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his or her office and
for the restoration to the corporation, in case of his or her death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in the treasurer's possession or under
his or her control belonging to the corporation.
Section 15. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election), shall
in the absence of the
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treasurer or in the event of his or her inability or refusal to act, perform the
duties and exercise the powers of the treasurer and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
ARTICLE VI CERTIFICATES OF SHARES
Section 1. Every holder of shares in the corporation shall be entitled to
have a certificate signed by, or in the name of the corporation by, the chairman
or the president and either the treasurer or an assistant treasurer or the
secretary or an assistant secretary of the corporation, certifying that the
corporation is organized under the laws of the State of Nevada, the name of the
person to whom the certificate is issued, the number and class of shares which
the certificate represents, and the par value of the shares so represented.
Section 2. If the corporation shall be authorized to issue more than one
class of shares or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of shares or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of shares, provided that in lieu of the
foregoing requirements, there may be set forth on the face or back of the
certificate which the corporation shall issue to represent such class or series
of shares a statement that the corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of shares or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 3. Where a certificate is countersigned: (a) by a transfer agent
other than the corporation or its employee; or (b) by a registrar other than the
corporation or its employee, any other signature on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he or she
were such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 4. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of shares to be lost, stolen or destroyed. When authorizing
such issue of a new certificate or certificates, the
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Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his or her legal representative, to advertise
the same in such manner as it shall require and/or to give the corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
TRANSFERS OF SHARES
Section 5. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 6. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of shares or for the purpose of
any other lawful action, the Board of Directors may fix in advance a record
date, which shall not be more than sixty nor less than ten days before the date
of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the
adjournment meeting.
REGISTERED STOCKHOLDERS
Section 7. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of the
State of Nevada.
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ARTICLE VII GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the shares of the corporation, subject to the
provisions of the certificate of incorporation, if any, may be declared by the
Board of Directors at any regular or special meeting, pursuant to the laws of
the State of Nevada. Dividends may be paid in cash, in property or in shares of
the corporation, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum as the directors
from time to time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the corporation, or for such other purpose as the
directors shall think conducive to the interest of the corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
ANNUAL STATEMENTS
Section 3. The Board of Directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officers or such other person or persons as the Board of
Directors from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall end on December 31,
unless otherwise determined by the Board of Directors.
SEAL
Section 6. The corporation may have a corporate seal, which shall have
inscribed thereon the name of the corporation, the year of its organization and
the words "Incorporated, Nevada." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
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NEVADA CONTROL SHARE ACQUISITION ACT
Section 7. The provisions of the Nevada Control Share Acquisition Act,
Nevada Revised Statutes ("NRS") 78.378-78.3793, inclusive, shall not apply to
any acquisition of a controlling interest in the corporation, with the term
"acquisition" defined as provided in NRS 78.3783 and the term "controlling
interest" defined as provided in NRS 78.3785.
ARTICLE VIII INDEMNIFICATION OF DIRECTORS,
OFFICERS AND EMPLOYEES
Section 1. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation, by reason
of the fact that he or she is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him or her in connection with the action, suit or proceeding if he or she
acted in good faith and in a manner which he or she reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, does not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to be
in or not opposed to the best interests of the corporation, and that, with
respect to any criminal action or proceeding, he or she had reasonable cause to
believe that his or her conduct was unlawful.
Section 2. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses, including amounts paid in settlement and attorneys' fees actually and
reasonably incurred by him or her in connection with the defense or settlement
of such action or suit if he or she acted in good faith and in a manner which he
or she reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter as
to which such person has been adjudged by a court of competent jurisdiction,
after
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exhaustion of all appeals therefrom, to be liable to the corporation or for
amount paid in settlement to the corporation, unless and only to the extent that
the court in which the action or suit was brought or other court of competent
jurisdiction determines upon application that, in view of all the circumstances
of the case, the person is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper.
Section 3. To the extent that a director, officer, employee or agent of
the corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 1 and 2, or in defense of any
claim, issue or matter therein, he or she must be indemnified by the corporation
against expenses, including attorneys' fees, actually and reasonably incurred by
him or her in connection with the defense.
Section 4. Any indemnification under Sections 1 and 2, unless ordered by a
court or advanced pursuant to Section 5, must be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances. The
determination must be made:
(a) By the stockholders;
(b) By the Board of Directors by majority vote of a quorum consisting of
directors who were not parties to the action, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not
parties to the action, suit or proceeding so orders, by independent
legal counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the
action, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
Section 5. Expenses incurred by a director or an officer in defending a
civil or criminal action, suit or proceeding must be paid by the corporation as
they are incurred and in advance of the final disposition of the action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he or she is not entitled to be indemnified by the
corporation. The provisions of this Section do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
Section 6. The indemnification and advancement of expenses authorized in
or ordered by a court pursuant to this Article:
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(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the
certificate of incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either an
action in his or her official capacity or an action in another
capacity while holding his or her office, except that indemnification,
unless ordered by a court pursuant to Section 2 or for the advancement
of expenses made pursuant to Section 5, may not be made to or on
behalf of any director or officer if a final adjudication establishes
that his or her acts or omissions involved intentional misconduct,
fraud or a knowing violation of the law and was material to the cause
of action; and
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs, executor and
administrators of such a person.
ARTICLE IX AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new bylaws
may be adopted by the stockholders or by the Board of Directors at any regular
meeting of the Board of Directors or of the stockholders or at any special
meeting of the Board of Directors or of the stockholders, if notice of such
alteration, amendment, repeal or adoption or new bylaws be contained in the
notice of such meeting of the stockholders or of the Board of Directors. These
bylaws may also be altered, amended or repealed or new bylaws may be adopted by
the stockholders or by the Board of Directors by written consent without a
meeting in compliance with the requirements of NRS 78.320(2) and 78.320(3) in
the case of a stockholder consent and in compliance with the requirements of NRS
78.315(2) in the case of a consent of the Board of Directors.
* * * * * * * * * *
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Adopted: 12/30/86
Amended: 10/9/87
9/29/88
9/29/89
2/16/94
3/24/94
6/13/94
6/24/94
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ATHENA MEDICAL CORPORATION
Amendment to Bylaws Effective May 18, 1995:
Article III
*****
[new] AUDIT COMMITTEE
Section 14. There shall be a standing committee of the Board of Directors
known as the Audit Committee. The Audit Committee shall be comprised of three
members of the Board of Directors, a majority of whom shall not be officers,
employees or consultants of the corporation or any subsidiary of it, and who do
not have any relationship with the corporation or its management which, in the
opinion of the Board of Directors, would interfere with the exercise of
independent judgment in carrying out the responsibilities of an Audit Committee
member.
The Audit Committee shall assist the Board of Directors in fulfilling its
responsibilities for the corporation's accounting and financial reporting
practices, and provide a channel of communication between the Board and the
corporation's independent auditors. To accomplish the foregoing purpose, the
Audit Committee shall:
(a) Recommend to the Board of Directors which firm to appoint as the
corporation's independent auditors, and whether to change such appointment or
relationship;
(b) Review the independent auditors' compensation and proposed terms of
engagement;
(c) Meet and review with the independent auditors, the corporation's chief
financial officer and other appropriate corporate officers, matters relating to
financial reporting and accounting procedures and policies, adequacy of
financial, accounting and operating controls, and the scope of the independent
auditors' audit;
(d) Review the results of the independent auditors' audit, including any
qualifications to the auditors' opinion, any management letters and management's
responses to recommendations by the independent auditors in connection with the
audit;
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(e) Review with the independent auditors and management any registration
statement filed by the corporation in connection with the public offering or
other sale of its securities;
(f) Consider and recommend to the Board of Directors major changes and
questions of choice regarding the appropriate auditing and accounting principles
and practices to be followed when preparing the corporation's financial
statements;
(g) Report to the Board of Directors on the results of the Audit
Committee's activities, and make recommendations to the Board with respect to
financial reporting and accounting practices and policies, and financial,
accounting and operational controls and safeguards;
(h) Conduct, as the need arises, a review of all potential conflict of
interest situations and transactions involving the corporation and any director,
officer, employee, affiliate or other person; and
(i) Have such other powers and perform such other duties as the Board may
from time to time assign to it.
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Amendment to Bylaws Effective February 27, 1996:
Article III
*****
[new] NOMINATING COMMITTEE
Section 15. There shall be a standing committee of the Board of Directors
known as the Nominating Committee. The Nominating Committee shall be comprised
of three members of the Board of Directors, none of whom shall be an officer,
employee or consultant of the corporation or any subsidiary of it. The
Nominating Committee shall:
(a) Recommend to the Board of Directors the slate of nominees and
directors to be elected by the shareholders at each annual meeting of the
shareholders (and any other meeting of shareholders called for the purpose of
electing one or more directors);
(b) Recommend to the Board persons to fill vacancies in the Board of
Directors to be elected by the Board of Directors itself;
(c) Recommend to the Board existing Directors to be selected for
membership on the various committees of the Board of Directors; and
(d) Have such other powers and perform such other duties as the Board may
from time to time assign to it.
In pursuing its functions and making its recommendations, the Nominating
Committee shall consider input from the Chief Executive Officer and/or the Chief
Operating Officer as to potential Board candidates and qualifications for
Directors and committee members.
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ATHENA MEDICAL CORPORATION
STOCK PURCHASE AGREEMENT
Dated as of
December 6, 1996
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CONTENTS
Section 1. Purchase and Sale of Stock................................. 1
1.1 Sale and Issuance of Stock................................. 1
1.2 Closing.................................................... 1
Section 2. Representations and Warranties of the Company.............. 2
2.1 Organization, Good Standing and Qualification.............. 2
2.2 Capitalization............................................. 2
2.3 Subsidiaries............................................... 2
2.4 Authorization.............................................. 2
2.5 Valid Issuance of Securities............................... 3
2.6 Governmental Consents...................................... 3
2.7 Litigation................................................. 3
2.8 Permits.................................................... 3
2.9 Compliance With Other Instruments.......................... 4
2.10 Offering................................................... 4
2.11 Disclosure................................................. 4
2.12 Title to Property and Assets............................... 4
2.13 Employee Benefit Plans..................................... 5
2.14 Taxes...................................................... 5
2.15 Labor Agreements and Actions............................... 5
2.16 Insurance.................................................. 5
2.17 Environmental, Health and Safety........................... 5
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2.18 Financial Statements....................................... 6
2.19 Changes.................................................... 7
2.20 Filings with the Securities and Exchange Commission
and Compliance with Securities Laws........................ 7
Section 3. Representations and Warranties of the Investors and
William Gerry.............................................. 7
3.1 Enforceability............................................. 7
3.2 Purchase Entirely for Own Account.......................... 7
3.3 Disclosure of Information; Due Diligence................... 8
3.4 Investment Experience; Accredited Investor Status.......... 8
3.5 Restricted Securities...................................... 8
3.6 Legend..................................................... 9
3.7 Residency.................................................. 9
3.8 Payment of Commission...................................... 9
3.9 Purchaser Representative................................... 9
Section 4. Conditions of Investors' Obligations at the Closing........ 9
4.1 Representations and Warranties............................. 10
4.2 Performance................................................ 10
4.3 Corporate Documents........................................ 10
4.4 Delivery of Shares......................................... 10
4.5 Consents, Permits and Waivers.............................. 10
4.6 Qualifications............................................. 10
4.7 Opinion of Company Counsel................................. 10
4.8 Material Adverse Occurrence................................ 11
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4.9 Compliance Certificate.................................... 11
Section 5. Conditions of the Company's Obligations to the Investors
at the Closing............................................ 11
5.1 Representations and Warranties............................ 11
5.2 Payment of Purchase Price................................. 11
5.3 Securities Laws Qualification............................. 11
5.4 Performance............................................... 11
Section 6. Registration Rights....................................... 11
6.1 Definitions............................................... 12
6.2 Request for Registration.................................. 12
6.3 Obligations of the Company................................ 14
6.4 Furnish Information....................................... 16
6.5 Expenses of Registration.................................. 16
6.6 Indemnification........................................... 16
6.7 Reports Under Securities Exchange Act of 1934............. 18
Section 7. Covenants of the Company and the Investors................ 19
7.1 Insurance................................................. 19
7.2 Price Protection.......................................... 19
7.3 Use of Proceeds........................................... 21
7.4 No Trading in the Company's Stock......................... 21
Section 8. Miscellaneous............................................. 21
8.1 Survival of Warranties.................................... 21
8.2 Successors and Assigns.................................... 21
8.3 Governing Law............................................. 21
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8.4 Counterparts.............................................. 21
8.5 Titles and Subtitles...................................... 22
8.6 Notices................................................... 22
8.7 Expenses; Attorneys' Fees................................. 22
8.8 Amendments and Waivers.................................... 23
8.9 Severability.............................................. 23
8.10 Entire Agreement.......................................... 24
Common Stock..................................................... 1
Certain Antidilution Rights...................................... 1
Change in Control................................................ 1
SCHEDULE 1.1 Securities Purchased
SCHEDULE 2A Supplemental Disclosure Schedule
SCHEDULE 2B Schedule of Exceptions
SCHEDULE 2.1 Description of Securities
SCHEDULE 4.7 Form of Legal Opinion
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made as of December
6, 1996, by and among ATHENA MEDICAL CORPORATION, a Nevada corporation (the
"Company"), and the several investors named on the signature page hereto
(each an "Investor" and, collectively, the "Investors").
WHEREAS, the Investors desire in the aggregate to purchase, and the
Company desires to sell and issue to the Investors, 225,000 shares (the
"Shares") of the Company's common stock, $0.01 par value per share (the
"Common Stock").
NOW, THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
Section 1. Purchase and Sale of Stock
1.1 Sale and Issuance of Stock
Subject to the terms and conditions of this Agreement, the Company
agrees to issue and sell to each Investor, and each Investor, severally and
not jointly, agrees to purchase from the Company, the number of Shares set
forth opposite the name of such Investor under the heading "Number of Shares
to be Purchased" on Schedule 1.1 at a price of $2.00 per share.
1.2 Closing
The closing of the purchase and sale of the Shares shall take place at
the offices of Perkins, Coie, 1211 S.W. Fifth Avenue, Suite 1500, Portland,
Oregon, at 10:00 a.m., on December 6, 1996, or at such other location and
time as the Company and the Investors hereto mutually agree upon (such
closing being referred to herein as the "Closing" and such date and time
being referred to herein as the "Closing Date"). At the Closing, the Company
shall issue and deliver to each Investor a stock certificate or certificates,
registered in the name of such Investor, representing the Shares being
purchased by such Investor at the Closing. As payment in full for the Shares
being purchased by an Investor under this Agreement, and against delivery of
the stock certificate or certificates therefor on the Closing Date, each
Investor shall deliver to the Company a check payable to the order of the
Company in the amount set forth opposite
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the name of such Investor under the heading "Aggregate Purchase Price" on
Schedule 1.1, or shall transfer such amount to the account of the Company by
wire transfer.
Section 2. Representations and Warranties of the Company
The Company represents and warrants to the Investors that, except as set
forth in the Company's reports filed with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended (the "1934
Act Reports"), the Supplemental Disclosure Schedule attached hereto as
Schedule 2A, or on the Schedule of Exceptions attached hereto as Schedule 2B:
2.1 Organization, Good Standing and Qualification
The Company is a corporation duly organized and validly existing under
the laws of the State of Nevada and has the requisite corporate power and
authority to own and operate its properties and assets and to conduct its
business as now conducted and as proposed to be conducted in the future, to
execute and deliver this Agreement, to issue and sell the Shares, and to
carry out the provisions of this Agreement. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on its business,
properties, prospects or financial condition (a "Material Adverse Effect").
2.2 Capitalization
As of September 30, 1996, the authorized capital of the Company
consisted of 33,000,000 shares of Common Stock, 9,458,597 shares of which
were issued and outstanding, and 3,300,000 shares of which are reserved for
issuance to employees, consultants and directors pursuant to stock option
plans or other plans or arrangements approved by the Company's Board of
Directors (collectively, the "Plan"). Options for 2,266,530 shares of Common
Stock have been granted under the Plan; options to purchase 2,213,030 shares
of Common Stock were outstanding as of September 30, 1996. The Company has
issued, and there were outstanding as of September 30, 1996, warrants to
purchase 3,500,150 shares of Common Stock. The Common Stock is described on
Schedule 2.1.
2.3 Subsidiaries
The Company does not own or control, directly or indirectly, any
interest in any other corporation, association, partnership or other entity.
The Company is not a participant in any joint venture, partnership, or
similar arrangement.
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2.4 Authorization
All corporate action on the part of the Company, its officers, directors
and shareholders necessary for the authorization, execution and delivery of
this Agreement and the transactions contemplated herein, the performance of
all obligations of the Company hereunder and the authorization, issuance and
delivery of the Shares and any other securities to be issued hereunder
(collectively, the "Securities") have been taken or will be taken prior to
the Closing Date, and this Agreement constitutes the valid and legally
binding obligation of the Company, enforceable in accordance with its terms.
2.5 Valid Issuance of Securities
The Securities, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable and free of any liens or encumbrances
created by the Company.
2.6 Governmental Consents
No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any federal,
regional, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated
by this Agreement, except for filings, if any, required pursuant to
applicable securities laws, which filings will be made within the required
statutory period.
2.7 Litigation
There is no action, suit, proceeding, or investigation pending or, to
the Company's knowledge, currently threatened against the Company which
questions the validity of this Agreement or the right of the Company to enter
into this Agreement, or to consummate the transactions contemplated hereby,
or which might result, either individually or in the aggregate, in a Material
Adverse Effect, or any change in the current equity ownership of the Company.
The Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no legal action, lawsuit, legal proceeding or
investigation related to any of the foregoing by the Company currently
pending or which the Company intends to initiate.
2.8 Permits
The Company has all franchises, permits, licenses, and any similar
authority necessary for the conduct of its business as now being conducted by
it, the lack of which would have a Material Adverse Effect, and believes it
can obtain, without undue
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burden or expense, any similar authority for the conduct of its business as
planned to be conducted. The Company is not in default under any of such
franchises, permits, licenses or other similar authority.
2.9 Compliance With Other Instruments
The Company is not in violation of any provision of its Articles of
Incorporation or Bylaws or in violation or default of any provision of any
instrument, judgment, order, writ, decree or contract to which it is a party
or by which it is bound or any provision of any federal or state statute,
rule or regulation applicable to the Company, which violation or default
would have a Material Adverse Effect. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated
hereby will not result in any such violation or default or require any
consent under or be in conflict with or constitute, with or without the
passage of time and giving of notice, either a violation or default under any
such provision, instrument, judgment, order, writ, decree or contract or an
event which results in the creation of any lien, charge or encumbrance upon
any assets of the Company.
2.10 Offering
Subject in part to the truth and accuracy of the Investors'
representations set forth in this Agreement, the offer, sale and issuance of
the Securities as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and will have been registered or qualified (or are exempt
from registration or qualification) under the registration, permit or
qualification requirements of all applicable state securities laws.
2.11 Disclosure
The Company has fully provided the Investors with all the information
reasonably available to the Company that the Investors have requested for
deciding whether to purchase the Securities. This Agreement (including the
schedules and exhibits attached hereto) and the 1934 Act Reports when taken
as a whole do not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made herein and
therein not misleading.
2.12 Title to Property and Assets
The Company has good and marketable title to its property and assets,
free and clear of any material liens, claims or encumbrances. With respect
to the property and assets it leases, the Company is in compliance with such
leases and, to the Company's knowledge, holds a valid leasehold interest free
of any material liens, claims or encumbrances.
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2.13 Employee Benefit Plans
The Company does not have any Employee Benefit Plan as defined in the
Employee Retirement Income Security Act of 1974.
2.14 Taxes
The Company has timely and properly filed all tax returns (federal,
state, foreign and local) required to be filed by it in connection with the
Company's income. All such returns, when filed, were true, correct and
complete in all material respects. All taxes relating to the Company's
income, all assessments imposed and all other taxes (federal, state, foreign
and local) due and payable on or before the date hereof have been timely
paid. The Company has paid all payroll and withholding taxes. There are no
agreements, waivers or other arrangements providing for an extension of time
with respect to the assessment of any tax or deficiency against the Company,
nor are there any actions, suits, proceedings, investigations or claims now
pending against the Company in respect of any tax or assessment, or, to the
Company's knowledge, any matters under discussion with any federal, state,
foreign or local authority relating to any taxes or assessments, or any
claims for additional taxes or assessments asserted by any such authority.
2.15 Labor Agreements and Actions
Except as set forth in the Schedule of Exceptions, the Company is not
bound by or subject to any written or oral, express or implied, contract,
commitment or arrangement with any employee or labor union, and no labor
union has requested or, to the Company's knowledge, has sought to represent
any of the employees, representatives or agents of the Company.
2.16 Insurance
The Company has in full force and effect fire and casualty insurance
policies, with extended coverage, sufficient in amount (subject to reasonable
deductibles) to allow it to replace any of its properties that might be
damaged or destroyed. The Company has in full force and effect products
liability and errors and omissions insurance in amounts customary for
companies similarly situated.
2.17 Environmental, Health and Safety
The Company has obtained all material permits, licenses, and other
authorizations which are required, and otherwise has no liability, under
federal, state, and local laws or regulations relating to public health and
safety, worker health and safety and pollution or protection of the
environment, including laws ("Environmental
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Laws") relating to emissions, discharges, releases or threatened releases of
hazardous substances, pollutants, contaminants or hazardous or toxic
materials or wastes into air, surface water, groundwater, or soil, sediment,
lands, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of hazardous
substances, pollutants, contaminants or hazardous or toxic materials or
wastes. The Company is in material compliance with all terms and conditions
of any and all required permits, licenses, and authorizations, and is in
compliance with and has no material liability under any Environmental Laws or
any codes, plans, orders, decrees, judgments or notice issued thereunder.
Except as disclosed in any Public Report (as defined in Section 2.20),
including the financial statements of the Company contained therein, the
Company has no liability for cleanup, responsibility for cleanup costs, or
damages for personal injury or property damage with respect to air, surface
water, soil, groundwater, sediments or land contamination at any site,
location or facility.
2.18 Financial Statements
The Company has delivered to the Investors its (a) audited financial
statements (balance sheet, income statement and statement of cash flows
including notes thereto) at December 31, 1995 and for the fiscal year then
ended, and (b) unaudited financial statements at March 31, 1996, June 30,
1996, and September 30, 1996 and for the three-month periods then ended (the
"Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated and with each other, except
that unaudited Financial Statements may not contain all footnotes required by
generally accepted accounting principles. The Financial Statements present
fairly the financial condition and operating results of the Company as of the
dates, and for the periods, indicated therein. Except as set forth in the
Financial Statements, the Company has no material liabilities, contingent or
otherwise, other than (x) liabilities incurred in the ordinary course of
business subsequent to September 30, 1996 and (y) obligations under contracts
and commitments incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in the
Financial Statements, which, in both cases, individually or in the aggregate,
are not material to the financial condition or operating results of the
Company. Except as disclosed in the Financial Statements, the Company is not
a guarantor or indemnitor of any indebtedness of any other person, firm, or
corporation. The Company maintains and will continue to maintain a standard
system of accounting established and administered in accordance with
generally accepted accounting principles.
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2.19 Changes
To the Company's knowledge and except for transactions contemplated
herein, since September 30, 1996, there has not been any change in the
assets, liabilities, financial condition, or operating results of the Company
from that reflected in the Financial Statements, except changes in the
ordinary course of business that have not been, in the aggregate, materially
adverse to the Company, its business properties, prospects or financial
condition.
2.20 Filings with the Securities and Exchange Commission and Compliance
with Securities Laws
The Company's Annual Reports on Form 10-KSB, as amended, for the fiscal
years ended December 31, 1993, 1994 and 1995, respectively, and its Quarterly
Reports on Form 10-QSB for the fiscal quarters ending March 31, 1996, June
30, 1996, and September 30, 1996 (each, a "Public Report"), as of their
respective filing dates with the Securities and Exchange Commission (the
"Commission"), (a) complied in all material respects with the requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations promulgated thereunder, and (b) except with respect to
statements of third parties contained in any exhibits, did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. All such Public Reports were timely filed. Copies of the Public
Reports have been delivered to each Investor.
Section 3. Representations and Warranties of the
Investors and William Gerry
Each Investor hereby represents and warrants to the Company that:
3.1 Enforceability
This Agreement constitutes a valid and legally binding obligation of
such Investor, enforceable in accordance with its terms.
3.2 Purchase Entirely for Own Account
This Agreement is made with such Investor in reliance upon such
Investor's representation to the Company, which, by such Investor's execution
of this Agreement, such Investor hereby confirms, that the securities to be
received by such Investor will be acquired for investment for such Investor's
own account and not with a view to the distribution of any part thereof, and
that such Investor has no present intention of
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selling, granting any participation in, or otherwise distributing the same in
a manner contrary to the Securities Act or applicable state securities laws.
3.3 Disclosure of Information; Due Diligence
Such Investor represents that it has had an opportunity to ask questions
of and receive answers from the Company regarding the Company regarding its
business and affairs. Such Investor represents that he, she or it (a) is
relying solely on the information and representations and warranties of the
Company contained in this Agreement and the Public Reports and (b) on no
other information, representation or warranty (including, without limitation,
any information or statement contained in the Business Plan Overview prepared
by Kriegsman Group), in connection with such Investor's decision to enter
into this Agreement and to purchase the securities to be purchased hereunder.
3.4 Investment Experience; Accredited Investor Status
Such Investor can bear the economic risk of this investment (including
possible complete loss of such investment) for an indefinite period of time
and has such knowledge and experience in financial or business matters that
such Investor is capable of evaluating the merits and risks of the investment
in the securities to be purchased hereunder. Such Investor understands that
the securities to be purchased hereunder have not been registered under the
Securities Act, or under the securities laws of any jurisdiction, by reason
of reliance upon certain exemptions, and that the reliance on such exemptions
is predicated upon the accuracy of such Investor's representations and
warranties in this Section 3. The Investor is familiar with Regulation D
promulgated under the Securities Act (Regulation D) and is either (a) an
"accredited investor" as defined in Rule 501(a) of Regulation D or
represented by William Gerry, a purchaser representative who meets the
requirements of Rule 501(h) of Regulation D and, together with such purchaser
representative, has such knowledge and experience in financial and business
matters that the Investor is capable of evaluating the merits and risks of
this investment.
3.5 Restricted Securities
Such Investor understands that the securities to be purchased hereunder
are characterized as "restricted securities" under the federal securities
laws inasmuch as they are being acquired from the Company in a transaction
not involving a public offering and that under such laws and applicable
regulations such securities may be resold without registration under the
Securities Act only in certain limited circumstances. In this connection,
such Investor represents that it is familiar with Rule 144, as currently in
effect under the Securities Act, and understands the resale limitations
imposed thereby and by the Securities Act.
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3.6 Legend
It is understood that the certificates evidencing the securities to be
purchased hereunder may bear the following legend for a period of three years
from the Closing date:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY APPLICABLE STATE SECURITIES LAW, AND NO INTEREST
THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR
OTHERWISE TRANSFERRED UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS
COVERING ANY SUCH TRANSACTION INVOLVING SAID SECURITIES, (ii) THIS
CORPORATION RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF
THESE SECURITIES SATISFACTORY TO THIS CORPORATION STATING THAT SUCH
TRANSACTION IS EXEMPT FROM REGISTRATION, OR (iii) THIS CORPORATION
OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM
REGISTRATION.
3.7 Residency
For purposes of the application of state securities laws, such Investor
represents that he, she or it is a resident of the state set forth under such
Investor's name on the signature pages hereof.
3.8 Payment of Commission
Investors are aware that William Gerry is receiving a commission from
the Issuer in connection with this Stock Purchase Agreement.
3.9 Purchaser Representative
William Gerry represents and warrants to the Company that he is a
purchaser representative who meets the requirements of Rule 501(h) of
Regulation D.
Section 4. Conditions of Investors' Obligations at the Closing.
The obligations of the Investors under Section 1.1 of this Agreement are
subject to the fulfillment at or before the Closing of each of the following
conditions:
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4.1 Representations and Warranties
The representations and warranties contained in Section 2 hereof shall
be true and correct in all material respects on and as of the Closing Date
with the same effect as though such representations and warranties had been
made as of the Closing Date.
4.2 Performance
The Company shall have performed and complied with all agreements,
covenants, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
4.3 Corporate Documents
The Company shall have delivered to the Investors or special counsel to
the Investors, copies of all corporate documents of the Company as the
Investors shall reasonably request.
4.4 Delivery of Shares
The Company shall have delivered to each Investor at the Closing a stock
certificate representing the Shares to be purchased by such Investor.
4.5 Consents, Permits and Waivers
The Company and the Investors shall have obtained any and all consents,
permits and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement (except for such as may be
properly obtained subsequent to the Closing).
4.6 Qualifications
The offer, sale and issuance of the Shares to the Investors pursuant to
this Agreement shall be qualified or exempt from qualification under all
applicable federal and state securities laws.
4.7 Opinion of Company Counsel
The Investors shall have received from Perkins Coie, counsel for the
Company, an opinion, dated as of the Closing Date, in substantially the form
of Schedule 4.7 attached hereto.
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4.8 Material Adverse Occurrence
There shall not have occurred any event or condition of any character
that might, in the reasonable opinion of the Investors, result in a Material
Adverse Effect.
4.9 Compliance Certificate
The President of the Company shall have delivered to the Investors at
the Closing a certificate certifying that the conditions specified in
Sections 4.1 and 4.2 have been fulfilled.
Section 5. Conditions of the Company's Obligations to the Investors
at the Closing
The obligations of the Company to the Investors under this Agreement are
subject to the fulfillment at or before the Closing of each of the following
conditions:
5.1 Representations and Warranties
The representations and warranties of the Investors contained in Section
3 shall be true in all material respects on and as of the Closing with the
same effect as though such representations and warranties had been made as of
the date of the Closing.
5.2 Payment of Purchase Price
Each Investor shall have delivered the Aggregate Purchase Price for the
Shares to be purchased by such Investor as set forth in Schedule 1.1 hereto,
in same-day funds.
5.3 Securities Laws Qualification
The offer and sale to the Investors of the Shares shall be qualified or
exempt from qualification under all applicable federal and state securities
laws, which qualification or exemption the Company shall have exercised its
best efforts to obtain.
5.4 Performance
The Investors shall have performed and complied with all agreements,
obligations and conditions contained in this Agreement that are required to
be performed or complied with by them on or before the Closing.
Section 6. Registration Rights
The Company covenants and agrees as follows:
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6.1 Definitions
For purposes of this Section 6:
(a) The term "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement or
document by the Securities and Exchange Commission ("SEC").
(b) The term "Registrable Securities" means (i) the Shares sold
hereby and (ii) any Common Stock of the Company issued as (or issuable upon
the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange
for, or in replacement of the Securities; provided, however, that shares of
Common Stock shall no longer be treated as Registrable Securities after they
(x) have been sold (A) to or through a broker, dealer or underwriter in a
public distribution or a public securities transaction, whether in a
registered offering or pursuant to Rule 144, or (B) by a person in a
transaction in which its rights under this Section 6 are not assigned or (y)
are eligible for resale under Rule 144.
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding that are, and the number of shares of Common Stock issuable
pursuant to then convertible securities that upon issuance would be,
Registrable Securities.
(d) The term "Holder" means any person owning or
having the right to acquire Registrable Securities or any
assignee thereof in accordance with Section 6.10 hereof.
6.2 Request for Registration
(a) If the Company shall receive at any time after the date six
months after the Closing Date a written request from the Holders of at least
50% of the Registrable Securities then outstanding that the Company file a
registration statement under the Securities Act covering at least 40% of the
Registrable Securities then outstanding, then the Company shall, within 10
days of the receipt thereof, give written notice of such request to all
Holders and shall, subject to the limitations of Section 6.2(b), effect as
soon as practicable, and in any event shall use its best efforts to effect
within 120 days of the receipt of such request, the registration under the
Securities Act of all Registrable Securities that the Holders request to be
registered within 20 days of the mailing of such notice by the Company.
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(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise
the Company as a part of their request made pursuant to this Section 6.2 and
the Company shall include such information in the written notice referred to
in Section 6.2(a). In such event, the right of any Holder to include his or
her Registrable Securities in such registration shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise
mutually agreed by Initiating Holders holding a majority of the Registrable
Securities to be included in the registration and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by Initiating Holders holding a majority of
the Registrable Securities to be included in the registration. Such
underwriter or underwriters shall be reasonably acceptable to the Company.
Notwithstanding any other provision of this Section 6.2, if the
underwriter advises the Company in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Company shall
so advise all Holders of Registrable Securities that would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable
Securities that may be included in the underwriting shall be allocated among
all Holders thereof, including the Initiating Holders, in proportion (as
nearly as practicable) to the amount of Registrable Securities of the Company
owned by each Holder. Any Registrable Securities excluded or withdrawn from
such underwriting shall be withdrawn from the registration.
(c) The Company is obligated to effect only one such registration
pursuant to this Section 6.2.
(d) Notwithstanding the foregoing, (i) the Company shall not be
obligated to effect a registration pursuant to this Section 6.2 during the
period starting with the date of the Company's filing of, and ending on the
date 120 days following the effective date of, a registration statement
pertaining to an underwritten public offering of securities for the account
of the Company, provided the Company is at all times during such period
diligently pursuing such registration and (ii) if the Company shall furnish
to Holders requesting a registration statement pursuant to this Section 6.2,
a certificate signed by the Chairman of the Board of Directors of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would interfere with any material transaction then being pursued
by the Company for such registration statement to be filed and it is
therefore essential to defer the filing of such registration statement, the
Company shall have the right to defer taking action with respect to such
filing for a period of not more than 120 days after receipt of the request
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of the Initiating Holders; provided, however, that this right to delay any
requested registration shall not be utilized more than once in any 12-month
period.
6.3 Obligations of the Company
Whenever required under this Section 6 to effect the registration of any
Registrable Securities, the Company shall, as expeditiously as reasonably
possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby determined as provided hereafter.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with
such registration statement as may be necessary to comply with the provisions
of the Securities Act with respect to the disposition of all securities
covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by
them and covered by such registration statement.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue
Sky laws of any of the states of Florida, Georgia, New Jersey, New York,
Oregon and Washington as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as
a condition thereto to qualify to do business or to file a general consent to
service of process in any such states.
(e) Enter into customary agreements (including, if the method of
distribution is by means of an underwriting, an underwriting agreement in
customary form) and take such other actions as are reasonably required in
order to expedite or facilitate the disposition of the Registrable Securities
to be so included in the registration statement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated
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therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing, and, at the request of any such
Holder, promptly prepare and furnish to such Holder a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances under which they are made.
(g) Furnish, at the request of any Holder requesting registration
of Registrable Securities pursuant to this Section 6, on the date that such
Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 6, if such securities
are being sold through underwriters, or, if such securities are not being
sold through underwriters, on the date that the registration statement with
respect to such securities becomes effective, (i) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters
in an underwritten public offering, addressed to the underwriters, if any,
and to the Holders requesting registration of Registrable Securities and (ii)
a letter dated such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
(h) Otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security holders,
as soon as reasonably practicable, but not later than 18 months after the
effective date of the registration statement, an earnings statement covering
the period of at least 12 months beginning with the first full month after
the effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act.
(i) Use its best efforts to list the Restricted Securities covered
by such registration statement with any securities exchange on which the
Common Stock of the Company is then listed.
For purposes of Sections 6.3(a) and (b), the period of distribution of
Registrable Securities in a firm commitment underwritten public offering
shall be deemed to extend until each underwriter has completed the
distribution of all securities purchased by it, and the period of
distribution of Registrable Securities in any other registration shall be
deemed to extend until the earlier of the sale of all Registrable Securities
covered thereby and six months after the effective date thereof.
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6.4 Furnish Information
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Section 6 with respect to the Registrable
Securities of any selling Holder, that such Holder shall furnish to the
Company such information regarding it, the Registrable Securities held by it,
and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities
and to execute such documents in connection with such registration as the
Company may reasonably request.
6.5 Expenses of Registration
All expenses, other than underwriting discounts and commissions relating
to Registrable Securities, incurred in connection with registrations, filings
or qualifications pursuant to Section 6.2, including, without limitation, all
registration, filing and qualification fees, printers and accounting fees,
fees and disbursements of counsel for the Company, and the reasonable fees
and disbursements of one special counsel for the selling Holders selected by
them, shall be borne by the Company. The Holders shall bear and pay the
underwriting discounts and commissions applicable to securities offered for
their account, together with all fees and disbursements of counsel for the
selling Holders beyond the reasonable fees and disbursements of one special
counsel for the selling Holders, selected by them, in connection with any
registrations, filings and qualifications made pursuant to Section 6.2 of
this Agreement.
6.6 Indemnification
In the event any Registrable Securities are included in a registration
statement under this Section 6:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers, directors, employees and
agents of each Holder, any underwriter (as defined in the Securities Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act against any
losses, claims, damages, or liabilities (joint or several and including,
without limitation, reasonable attorneys' fees and expenses) to which any of
them may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively, a
"Violation"): (i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or
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necessary to make the statements therein not misleading or (iii) any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law; and
the Company will pay to each such Holder, partner, officer, director,
employee or agent, underwriter or controlling person, as incurred, any legal
or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section
6.6(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability, or action to the extent that it arises out of or is based
upon a Violation that occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration
by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any
underwriter and any other Holder selling securities in such registration
statement and any partner, officer, director, or controlling person of any
such underwriter or other Holder, against any losses, claims, damages, or
liabilities (joint or several and including, without limitation, reasonable
attorneys' fees and expenses) to which any of the foregoing persons may
become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (but only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished by such
Holder under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred
by any person intended to be indemnified pursuant to this Section 6.6(b) in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement
contained in this Section 6.6(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity
under this Section 6.6(b) exceed the gross proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 6.6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against
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any indemnifying party under this Section 6.6, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly
noticed, to assume the defense thereof with counsel mutually satisfactory to
the parties; provided, however, that an indemnified party shall have the
right to retain its own counsel, with fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 6.6, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
6.6.
(d) If the indemnification provided for in this Section 6.6
is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any losses, claims, damages or liabilities
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall, to the extent permitted by applicable
law, contribute to the amount paid or payable by such indemnified party as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative fault of the indemnifying party, on the
one hand, and of the indemnified party, on the other, in connection with the
Violation(s) that resulted in such loss, claim, damage or liability, as well
as any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by a
court of law by reference to, among other things, whether the untrue or
allegedly untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(e) The obligations of the Company and Holders under this Section
6.6 shall survive the completion of any offering of Registrable Securities in
a registration statement under this Section 6, and otherwise.
6.7 Reports Under Securities Exchange Act of 1934
With a view to making available to the Holders the benefits of Rule 144
promulgated under the Securities Act and any other rule or regulation of the
SEC that may at any time permit a Holder to sell securities of the Company to
the public without registration, the Company agrees to:
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(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144;
(b) use it best efforts to file with the SEC in a timely manner
all reports and other documents required of the Company under the Securities
Act and the Exchange Act; and
(c) furnish to any Holder forthwith upon request, so long as the
Holder owns any Registrable Securities, (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144,
the Securities Act and the Exchange Act, (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and
documents filed by the Company with the SEC or distributed to shareholders
and (iii) such other information as the Holder may reasonably request in
availing such Holder of any SEC rule or regulation allowing such Holder to
sell any Registrable Securities without registration.
Section 7. Covenants of the Company and the Investors
7.1 Insurance
The Company agrees to maintain valid policies of workers' compensation
insurance and of insurance with respect to its properties and business of the
kinds and in amounts not less than is customarily obtained by corporations
engaged in the same or similar business and similarly situated, including,
without limitation, insurance against loss, damage, fire, theft, public
liability and other risks.
7.2 Price Protection
(a) If the average reported last sale price of Common Stock for
the 20 business days immediately preceding the date which is the first
anniversary of the Closing Date (the "Average Price"), is less than $2.00
per share (the "Purchase Price"), as adjusted as set forth below, the
Company shall promptly issue to each Investor, without the payment of any
additional consideration by such Investor, additional shares of Common Stock
in an amount equal to the difference between (x) the quotient resulting from
dividing (A) the aggregate purchase price set forth opposite the name of such
Investor under the heading "Aggregate Purchase Price" on Schedule 1.1
attached hereto by (B) the Average Price and (y) an amount (the "Base Number
of Shares"), subject to adjustment as set forth below, originally equal to
the number of Shares set forth opposite the name of such Investor under the
heading "Number of Shares to be Purchased" on Schedule 1.1. No fractional
shares or scrip representing fractional shares shall be issued in connection
with the rights described in this Section.
19
<PAGE>
(b) It is understood that the certificates evidencing any
securities issued under this Section 7.2 shall bear the legend set forth in
Section 3.6.
(c) No Investor shall, solely by virtue of this Section 7.2, have
any of the rights of a holder of Common Stock of the Company, either at law
or equity, with respect to any securities which may be issued under this
Section until such securities are issued to such Investor, at which time such
Investor shall be deemed the holder of record o such securities for all
purposes.
(d) No Investor may assign, sell, transfer or otherwise dispose of
any of such Investor's rights set forth in this Section 7.2 without the
assignment, sale, transfer or other disposition of all of such Investor's
Shares.
(e) For purposes of this Section 7.2, the Purchase Price and the
Base Number of Shares under this Section for a given Investor are subject to
adjustment from time to time as follows:
(i) If the Company, at any time prior to the Anniversary
Date, shall split, subdivide or combine the securities as to which
rights under this Section 7.2 exist, into a different number of
securities of the same class, the Purchase Price and the Base
Number of Shares shall be proportionately decreased in the case of
a split or subdivision or proportionately increased in the case of
a combination.
(ii) If the Company, at any time prior to the Anniversary
Date, by reclassification of securities or otherwise, shall change
any of the securities as to which rights under this Section 7.2
exist into the same or a different number of securities of any
other class or classes, the rights granted to the Investors under
this Section 7.2 shall thereafter represent the right to acquire
such number and kind of securities as would have been issuable as
the result of such change with respect to the securities that were
subject to the rights under this Section 7.2 immediately prior to
such reclassification or other change and the Purchase Price and
the Base Number of shares shall be appropriately adjusted.
(iii) Upon the occurrence of each adjustment or
readjustment pursuant to this Section 7.2(e), the Company shall
promptly compute such adjustment or readjustment in accordance with
the terms hereof and furnish to the Investor a certificate setting
forth such adjustment or readjustments.
20
<PAGE>
7.3 Use of Proceeds
The Company shall use the proceeds from the sale of the Securities for
working capital.
7.4 No Trading in the Company's Stock
Each Investor agrees that, during the 35 business days immediately
preceding the first anniversary of the Closing Date, such Investor will not
directly or indirectly in any way dispose of any equity security of the
Company or any debt or equity security or other instrument convertible into
or exercisable for any equity security of the Company without the prior
written consent of the Company.
Section 8. Miscellaneous
8.1 Survival of Warranties
The warranties, representations and covenants contained in or made
pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the Closing Date.
8.2 Successors and Assigns
Except to the extent that the application of certain provisions of this
Agreement to transferees and assignees of the Securities is expressly
limited, the provisions of this Agreement shall inure to the benefit of and
be binding upon the respective successors and assigns of the parties. Nothing
in this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
8.3 Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Oregon.
8.4 Counterparts
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
21
<PAGE>
8.5 Titles and Subtitles
The titles and subtitles used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this
Agreement.
8.6 Notices
All notices required or permitted to be given under this Agreement shall
be in writing. Notices may be served by certified or registered mail,
postage paid with return receipt requested; by private courier, prepaid; by
telex, facsimile or other telecommunication device capable of transmitting or
creating a written record; or personally. Mailed notices shall be deemed
delivered five (5) days after deposit with the U.S. Postal Service, properly
addressed. Couriered notices shall be deemed delivered on the date that the
courier warrants that delivery will occur. Telex or telecommunicated notices
shall be deemed delivered when receipt is either confirmed by confirming
transmission equipment or acknowledged by the addressee or its office.
Personal delivery shall be effective when accomplished. Unless a party
changes its address by giving notice to the other party as provided herein,
notices shall be delivered to the Company, at the address set forth below, or
to any of the Investors, care of William Gerry, Hammershlag Kempner & Co.,
11 West 42nd Street, New York, New York 10036:
If to the Company, to it at: Athena Medical Corporation
Suite J-5, 10180 SW Nimbus Avenue
Portland, OR 97223
Attention: William H. Fleming
Facsimile No.: (503) 639-3674
With a copy to: Perkins Coie
1211 SW Fifth Avenue
Suite 1500
Portland, OR 97204
Attention: Patrick J. Simpson
Facsimile No.: (503) 727-2222
8.7 Expenses; Attorneys' Fees
Each of the Company and the Investors shall be responsible for payment
of legal fees incurred by such parties in connection with the transaction
contemplated by this Agreement.
22
<PAGE>
8.8 Amendments and Waivers
After the Closing, any term of this Agreement may be amended and the
observance of any term may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of the Company and the holders of at least two-thirds of the
Securities.
8.9 Severability
If one or more provisions of this Agreement is held to be unenforceable
under applicable law, such provision shall be excluded from this Agreement,
and the balance of this Agreement shall be interpreted as if such provision
were so excluded and shall be enforceable in accordance with its terms.
23
<PAGE>
8.10 Entire Agreement
This Agreement and the other documents delivered at the Closing
constitute the full and entire understanding and agreement between the
parties with respect to the subject matter hereof and supersede all prior
agreements with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this STOCK PURCHASE
AGREEMENT as of the date first above written.
ATHENA MEDICAL CORPORATION
By:
------------------------------
Name:
Title:
INVESTORS:
SUNBELT INVESTMENTS
by W. S. FARISH & CO.
By:
--------------------------
Name: Terry W. Ward
Address: W. S. Farish & Co.
Suite 1200
1100 Louisiana
Houston, TX 77002
W. S. FARISH & CO. F/B/O
EDWARD H. GERRY
24
<PAGE>
By:
---------------------------
Name: Terry W. Ward
Address: W. S. Farish & Co.
Suite 1200
1100 Louisiana
Houston, TX 77002
W. S. FARISH & CO. F/B/O
MARTHA F. GERRY
By:
---------------------------
Name: Terry W. Ward
Address: W. S. Farish & Co.
Suite 1200
1100 Louisiana
Houston, TX 77002
W. S. FARISH & CO. F/B/O
HENRY A. GERRY
By:
---------------------------
Name: Terry W. Ward
Address: W. S. Farish & Co.
Suite 1200
1100 Louisiana
Houston, TX 77002
25
<PAGE>
W. S. FARISH & CO. F/B/O
CORNELIA G. CORBETT
By:
---------------------------
Name: Terry W. Ward
Address: W. S. Farish & Co.
Suite 1200
1100 Louisiana
Houston, TX 77002
TRUST U/I DATED 10/29/74 F/B/O HEATHER
G. CORBETT ET AL
By:
---------------------------
Name: William Gerry, Trustee
Address: Hammershlag Kempner & Co.
11 West 42nd Street
New York, New York 10036
GERRY-CORBETT FOUNDATION
By:
---------------------------
Name: William Gerry
Address: 1043 Guisando Drive
Tampa, Florida 33613
26
<PAGE>
HEATHER G. CORBETT
By:
---------------------------
Name: William Gerry
Address: 1043 Guisando Drive
Tampa, Florida 33613
CORNELIA H. CORBETT
By:
---------------------------
Name: William Gerry
Address: 1043 Guisando Drive
Tampa, Florida 33613
CARL L. KEMPNER SR. AND JOHN STERN
TRUSTEES, HAMMERSHLAG KEMPNER
SAVINGS & INVESTMENT PLAN DATED
1/1/84 F/B/O WILLIAM F. GERRY
By:
---------------------------
Name: William Gerry, Trustee
Address: Hammershlag Kempner & Co.
11 West 42nd Street
New York, New York 10036
27
<PAGE>
W. F. GERRY TRUSTEE F/B/O CORNELIA H.
CORBETT TRUST #3 U/I DATED 1/12/83
By:
---------------------------
Name: William Gerry, Trustee
Address: Hammershlag Kempner & Co.
11 West 42nd Street
New York, New York 10036
W. F. GERRY TRUSTEE F/B/O ALYDA M.
CORBETT TRUST #3 U/I DATED 1/12/83
By:
---------------------------
Name: William Gerry, Trustee
Address: Hammershlag Kempner & Co.
11 West 42nd Street
New York, New York 10036
W. F. GERRY TRUSTEE F/B/O RICHARD F.
CORBETT TRUST #3 U/I DATED 12/22/82
By:
---------------------------
Name: William Gerry, Trustee
Address: Hammershlag Kempner & Co.
11 West 42nd Street
New York, New York 10036
28
<PAGE>
WILLIAM GERRY, CUSTODIAN FOR E. T.
GERRY SPECIAL #9
By:
---------------------------
Name: William Gerry, Trustee
Address: Hammershlag Kempner & Co.
11 West 42nd Street
New York, New York 10036
29
<PAGE>
WILLIAM GERRY, CUSTODIAN FOR E. T.
GERRY SPECIAL #10
By:
---------------------------
Name: William Gerry, Trustee
Address: Hammershlag Kempner & Co.
11 West 42nd Street
New York, New York 10036
30
<PAGE>
SCHEDULE 1.1
Securities Purchased
Number of Shares Aggregate
Investors to be Purchased Purchase Price
- --------- --------------- --------------
Sunbelt Investments 50,000 $100,000
W. S. Farish & Co. F/B/O 25,000 $ 50,000
Edward H. Gerry
W. S. Farish & Co. F/B/O 25,000 $ 50,000
Martha F. Gerry
W. S. Farish & Co. F/B/O 25,000 $ 50,000
Henry A. Gerry
W. S. Farish & Co. F/B/O 12,500 $ 25,000
Cornelia G. Corbett
Trust U/I dated 10/29/74 25,000 $ 50,000
F/B/O Heather G. Corbett
et al
Gerry-Corbett Foundation 12,500 $ 25,000
Heather G. Corbett 12,500 $ 25,000
Cornelia H. Corbett 6,250 $ 12,500
Carl L. Kempner Sr. and 6,250 $ 12,500
John Stern Trustees,
Hammershlag Kempner
Savings & Investment Plan
dated 1/1/84 F/B/O
William F. Gerry
W. F. Gerry Trustee F/B/O 5,000 $ 10,000
Cornelia H. Corbett Trust
#3 U/I dated 1/12/83
1
<PAGE>
W. F. Gerry Trustee F/B/O 5,000 $ 10,000
Alyda M. Corbett Trust #3
U/.I dated 1/12/83
W. F. Gerry Trustee F/B/O 5,000 $ 10,000
Richard F. Corbett Trust #3
U/I dated 12/22/82
William Gerry, Custodian 5,000 $ 10,000
for E. T. Gerry Special #9
William Gerry, Custodian 5,000 $ 10,000
for E. T. Gerry Special #10 ------- --------
Totals: 225,000 $450,000
------- --------
------- --------
2
<PAGE>
SCHEDULE 2A
SUPPLEMENTAL DISCLOSURE SCHEDULE
December 6, 1996
This Supplemental Disclosure Schedule has been prepared and delivered in
connection with the Stock Purchase Agreement, dated as of the date hereof
(the "Agreement"), between ATHENA MEDICAL CORPORATION (the "Company") and the
persons identified on the signature page of the Agreement (collectively, the
"Investors"). Certain matters are described in this Supplemental Disclosure
Schedule for information purposes notwithstanding the fact that, because they
do not rise above applicable materiality thresholds or otherwise, they are
not required to be listed by the terms of the Agreement. In no event shall
the inclusion of such matters in this Supplemental Disclosure Schedule be
deemed or interpreted to broaden or otherwise amplify the representations and
warranties contained in the Agreement. Any matter referred to in this
Supplemental Disclosure Schedule shall be deemed to be referred to in all
Sections of the Schedule of Exceptions attached as Schedule 2B to the
Agreement, to the extent applicable, whether or not there is an express
cross-reference and, in accepting delivery of this Supplemental Disclosure
Schedule, each Investor acknowledges that he, she or it is on notice as to
any matter set forth in this Supplemental Disclosure Schedule. Neither the
delivery of this Supplemental Disclosure Schedule nor any sale made under the
Agreement shall, under any circumstances, create any implication that there
has been no change in the affairs of the Company since the dated hereof or
that the information contained herein is correct as of any time subsequent to
the date hereof. Except as otherwise defined herein, capitalized terms used
herein have the meanings assigned in the Agreement.
---------------------------
1. Change in Executive Management
In September 1996, John Perry resigned as the Chief Executive Officer of
the Company. He remains with the Company as General Manager of the Florida
Division.
2. China
The Company has received purchase orders from a distributor in China for
Fresh'n Fit Padette totaling approximately $1.2 million. The Company ships
against such orders upon receipt of a letter of credit. The Company has
shipped one order to
3
<PAGE>
China totaling approximately $160,000. The other orders were scheduled to be
shipped in the third and fourth quarters of 1996. The Company has not
received letters of credit for these shipments. The Company has been
informed that the Padette has been placed on the shelves of more than 200
retail stores in the Shanghai-Pudong region. Although sales of the product
have occurred, the Company has not received any specific sales data or orders
for additional product. The Company has no reason to believe that additional
product will be ordered by the distributor. The Company has no present plans
to replace the distributor.
3. Florida Roll-Out
The Padette is carried by more than 350 Walgreen stores in Florida. It
is also available at certain FedMart, Rexall, Discount Drugs and other retail
stores in Florida. Sales of the Padette product to date in Florida have been
modest, with sales of $40,000 since its introduction in June 1996. The
Company believes that insufficient marketing support, including lack of
advertising, is the primary reason sales have not been higher. If the
Company is successful in raising additional funds, the Company intends to
increase its marketing efforts in Florida by means of newspaper advertising,
light mailings of its Padette product to potential users, restocking
physicians' offices with the product and by having representatives of the
Company attend women's fairs in the area. There can be no assurance that the
Company's marketing and promotional activities will be successful in
increasing sales of the Padette product or that demand for the product will
expand.
4. Private Placement Financing
In June 1996, the company announced that it had engaged Sands Brothers &
Co., Ltd. to act as placement agent in connection with a proposed private
placement of approximately $7-10 million in equity securities and that net
proceeds of the private placement would be used principally to fund the
Company's roll-out of products in the Southeastern region of the United
States, development of foreign markets and for research and development of
additional products. Although the Company is pursuing such financing, the
Company and Sands Brothers have not yet been able to arrange for the sale of
such amount of securities and the financing may not be completed in those
amounts or at all. The Company expects to use the net proceeds of the sale
of common stock pursuant to the Agreement to fund its operations until
additional financing is obtained.
The Company's operations to date have consumed substantial and
increasing amounts of cash. (See the Company's financial statements
contained in the 1934 Act Reports.) The Company has in the past financed its
growth and operations principally through private placements of equity
securities. The continued development and
4
<PAGE>
commercialization of the Company's current and proposed products will require
a commitment of substantial funds. The Company believes that its existing
capital resources and , the net proceeds from the sale of its common stock
pursuant to the Agreement will enable the Company to maintain its current and
planned operating levels into the first quarter of 1997. Thereafter, the
Company will need to raise additional capital to fund its operations. The
Company may seek such additional funding through public or private equity or
debt financings. If additional funds are raised by issuing equity
securities, further dilution to shareholders may result. There can be no
assurance that additional funds can be obtained on acceptable terms, or at
all. If the Company is unable to raise additional funds, the Company will be
materially adversely affected and may not be able to continue to operate.
5. Additional Product
In September 1996, the Company received clearance from the U.S. Food and
Drug Administration to market a one-step visual home pregnancy test called
Affirm. The Company has no definite schedule to market the Affirm pregnancy
test. In spite of the FDA clearance, the Company's ability to commercialize
this product successfully is subject to the risks inherent in new products.
These risks include uncertainties whether the product, once developed, can be
successfully manufactured and marketed or will be commercially successful.
Moreover, the costs of developing and introducing new products cannot be
reliably forecast and may substantially exceed the Company's expectations and
financial resources. Delays in development of the Affirm product may result
in a later than anticipated introduction, which could have a material adverse
effect on the Company. There can be no assurance that the Company will be
successful in commercializing the Affirm product.
5
<PAGE>
SCHEDULE 2B
SCHEDULE OF EXCEPTIONS
None.
6
<PAGE>
SCHEDULE 2.1
DESCRIPTION OF SECURITIES
Common Stock
Holders of Common Stock are entitled to receive dividends as may from
time to time be declared by the Board of Directors out of funds legally
available therefor and to one vote per share on all matters on which the
holders of Common Stock are entitled to vote. The current policy of the
Company is to retain earnings to provide funds for the operation and
expansion of its business. The Company has never paid any cash dividends,
and the Board of Directors does not anticipate paying cash dividends in the
foreseeable future. Any future decision with respect to dividends will
depend on future earnings, future capital needs and the Company's operating
and financial condition, among other factors. Holders of Common Stock do not
have any cumulative voting rights or conversion, pre-emptive, redemption or
sinking fund rights. In the event of a liquidation, dissolution or winding
up of the Company, holders of Common Stock are entitled to share equally and
ratably in the Company's assets, if any, remaining after the payment of all
liabilities of the Company.
Certain Antidilution Rights
Holders of Common Stock who owned shares of Common Stock on February 17,
1994 have the right to receive additional shares of Common Stock (without
consideration) sufficient to maintain their percentage ownership if the
Company issues Common Stock (or warrants or options to acquire Common Stock)
on or after February 17, 1994 and before February 17, 1997 at a price of less
than $.40 per share. No other holders of Common Stock have antidilution
rights.
Change in Control
The Nevada Control Share Acquisition Act places certain restrictions on
acquisition of control shares, similar to those found in other jurisdictions.
The Company has opted, as permitted by Nevada law, to provide in its bylaws
that this Act does not apply to acquisition of shares of the Company's stock.
The Company's articles and bylaws do not contain any provisions that would
delay, defer or prevent a change in control of the Company.
7
<PAGE>
SCHEDULE 4.7
Form of Legal Opinion
To the Investors Listed on Schedule A
Re: Athena Medical Corporation
Ladies and Gentlemen:
We have acted as counsel to Athena Medical Corporation (the "Company")
in connection with the issuance, sale and delivery of ____ shares of its
Common Stock, par value $0.01 per share (the "Shares"), pursuant to a Stock
Purchase Agreement (the "Agreement"), dated as of December __, 1996, among
the Company and the investors identified in the Agreement (the "Investors").
This opinion is rendered pursuant to Section 4.7 of the Agreement.
Capitalized terms used herein, not otherwise defined herein, shall have the
meanings assigned to them in the Agreement.
We have examined the originals or certified, conformed or photostatic
copies of records, agreements, instruments and documents and have made such
other investigation as we have deemed relevant or necessary as a basis for
the opinions expressed herein. We have assumed without investigation the
genuineness of all signatures, the authenticity of all documents submitted to
us as originals and the conformity to original documents of all documents
submitted to us as conformed, certified or photostatic copies. As to various
questions of fact relevant to this opinion, we have relied on certificates of
public officials and statements or certificates of officers or
representatives of the Company.
We have also assumed that the parties to the Agreement other than the
Company have the power to enter into and perform their obligations under the
Agreement and that the Agreement has been duly authorized, executed and
delivered by, is valid and binding upon, and is enforceable in accordance
with its terms against, such parties. We have further assumed that the
representations and warranties made by the Investors in the Agreement are
true and correct and that the representations and warranties as to factual
matters made by the Company in the Agreement are true and correct.
Whenever a statement herein is qualified by the phrase "to our
knowledge," it is intended to indicate that, during the course of our
representation of the Company, no information that would give us actual
knowledge of the inaccuracy of such statement has come to the attention of
those attorneys in this firm who have rendered legal
8
<PAGE>
To the Investors Listed
on Schedule A
- -----------------------
Page 2
services to the Company in connection with the transactions contemplated by
the Agreement.
Based on the foregoing, and subject to the limitations set forth above
and below, we are of the opinion that:
1. The Company is a corporation duly organized and validly existing
under the laws of the State of Nevada, and the Company has the requisite
corporate power and authority to conduct its business as now conducted and as
proposed to be conducted in the future.
2. The Company has the requisite corporate power and authority to
execute, deliver and perform the Agreement. All corporate action on the part
of the Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of the Agreement, the performance of
all obligations of the Company thereunder and the authorization, issuance and
delivery of the Shares have been taken and the Agreement has been duly and
validly authorized, executed and delivered by the Company and constitutes
valid and legally binding obligations of the Company, enforceable in
accordance with its terms.
3. The Shares, when issued, sold and delivered in accordance with the
terms of the Agreement for the consideration expressed therein, will be duly
and validly issued, fully paid and nonassessable.
4. The authorized capital stock of the Company is as follows:
(i) Stock. _________ shares of Common Stock, __________ shares of
which have been authorized, issued and outstanding.
5. The execution, delivery, performance and compliance with the terms of
the Agreement and the Collateral Agreements by the Company do not violate any
provision of any applicable federal or state law, rule or regulation or any
provision of the Company's Restated Articles of Incorporation or Restated
Bylaws, or, to our knowledge, any judgment, writ, decree or order directed
specifically to and binding upon the Company and, to our knowledge, do not
conflict with, require any consent under or constitute a breach or default
under the provision of any material agreement to which the Company is a party
or by which it is bound.
9
<PAGE>
To the Investors Listed
on Schedule A
___________________
Page 3
The opinions expressed above are specifically subject to the following
limitations, exceptions, qualifications and assumptions:
A. We express no opinion as to the effect of any bankruptcy,
insolvency, reorganization, moratorium or other similar law relating to or
affecting the relief of debtors or the rights and remedies of creditors
generally.
B. We express no opinion as to compliance by the Company with any
federal or state securities laws, rules and regulations.
C. We express no opinion as to limitations imposed by state law,
federal law or general equitable principles (i) upon the specific
enforceability of any of the remedies, covenants or other provisions of any
applicable agreement, (ii) upon the availability of injunctive relief or
other equitable remedies, regardless of whether enforcement of any such
agreement is considered a proceeding in equity or at law, or (iii) upon
rights of indemnification and contribution in respect of federal and state
securities matters.
We are members of the Bar of the State of Oregon and our opinions
expressed herein are limited to the laws of the State of Oregon and the
federal laws of the United States, and we do not express any opinion herein
concerning the laws of any other jurisdiction.
The opinions expressed herein are rendered as of the date hereof, and we
expressly disclaim any undertaking or obligation to advise you of any changes
which may occur after the date hereof which would affect this opinion. The
opinions expressed herein are for the benefit of and may be relied upon only
by you, and then solely in connection with the closing of the transactions
contemplated by the Agreement. Neither these opinions nor any extract
herefrom or reference hereto shall be published or furnished to, quoted to,
or relied upon by any other person for any other purpose without our express
written permission.
Very truly yours,
PERKINS COIE
10
<PAGE>
SCHEDULE A
1
<PAGE>
EXHIBIT 10.26
EMPLOYMENT AGREEMENT
BETWEEN: ATHENA MEDICAL CORPORATION, a Nevada corporation (the "Company");
AND: J. PETER BURKE ("Employee").
DATED: Effective April 28, 1997.
RECITAL:
The Company (dba A FEM Medical Corporation) is engaged in the business of
developing and marketing feminine hygiene products and diagnostics
world-wide. The parties desire to set forth their agreement as to Employee's
services as Executive Vice President and Chief Financial Officer of the
Company.
AGREEMENT:
In consideration of the foregoing Recital and the terms, conditions and
covenants set forth below, the parties agree as follows:
SECTION 1. EMPLOYMENT
The Company agrees to employ Employee as Executive Vice President and
Chief Financial Officer for a term commencing on April 28, 1997, and
continuing until termination in accordance with Section 5. Employee accepts
employment with the Company on the terms and conditions set forth in this
Agreement, and agrees to devote Employee's full time and attention to the
performance of Employee's duties under this Agreement. Employee agrees to
serve as the Company's Executive Vice President and Chief Financial Officer
commencing upon election as such by the Company's Board of Directors and
completion of a standard officer questionnaire. Employee's general duties
shall consist of responsibility for general administration, finance, sales
and marketing, personnel, SEC and state securities law compliance, financial
planning and reporting, and all other operations oversight not otherwise
delegated by the Company's Board of Directors to the President. On all
matters of Company policy, Employee shall consult with the President and/or
the Chairman of the Company. Employee shall perform such specific duties and
shall exercise such specific authority as may be assigned to Employee by the
Company's Board of Directors.
1
<PAGE>
Employee agrees that in all aspects of his employment, Employee shall
comply with the policies, standards, rules and regulations of the Company
from time to time established, and shall perform Employee's duties
faithfully, intelligently, to the best of Employee's ability and in the best
interest of the Company. The devotion of reasonable periods of time by
Employee for personal purposes, outside non-competitive business activities
or charitable activities shall not be deemed a breach of this Agreement,
provided that such purposes or activities do not materially interfere with
the services required to be rendered to or on behalf of the Company.
SECTION 2. CONFIDENTIALITY
2.1 Confidential Information
Employee acknowledges and agrees that all research, product and equipment
specifications, manufacturing methods, lists of the Company's customers and
suppliers, marketing and product planning information, and other Company data
related to its business, as well as information of third parties that the
Company is required to keep confidential (collectively, the "Confidential
Information"), are valuable assets of the Company. Except for disclosures
reasonably made to advance the business of the Company and information which
is a matter of public record, Employee shall not, during the term of this
Agreement or after termination of employment with the Company for any reason,
disclose any Confidential Information to any person or use any Confidential
Information (regardless of whether same is considered proprietary or a trade
secret) for the benefit of Employee or any other person, except with the
prior written consent of the Company in each instance.
2.2 Return of Documents and Property
Employee acknowledges and agrees that all originals and all copies of
records, reports, files, correspondence, lists, plans, drawings, memoranda,
notes, sketches, summaries, schedules, codes, tapes and other documentation
and property related to the business of the Company or containing any
Confidential Information are and shall be the sole and exclusive property of
the Company, and shall be returned to the Company upon termination of
Employee's employment with the Company or upon the written request of an
authorized representative of the Company at any time.
2.3 Related Company Policies
Employee further agrees to comply with all policies, rules and
regulations adopted by the Company's Board of Directors or shareholders from
time to time with respect to insider trading and other duties applicable to
the employees of a publicly-traded corporation. Employee also agrees, if
requested, to sign a separate
2
<PAGE>
confidentiality agreement applicable to all employees. The terms of such
separate agreement will control over any conflicting term in this Agreement.
2.4 Injunction
Employee agrees that it would be difficult to measure damage to the
Company from any breach by Employee of Section 2.1, 2.2 or 2.3 and that
monetary damages would be an inadequate remedy for any such breach.
Accordingly, Employee agrees that if Employee shall breach Section 2.1, 2.2
or 2.3, the Company shall be entitled, in addition to any and all other
remedies it may have at law or in equity, to an injunction or other
appropriate order to restrain any such breach, without showing or proving any
actual damage sustained by the Company, and without posting bond or other
undertaking.
2.5 No Release
Employee agrees that termination of employment with the Company shall not
release Employee from any of Employee's obligations under Section 2.1, 2.2 or
2.3.
SECTION 3. COMPENSATION
3.1 Amount
In consideration of all services to be rendered by Employee to the
Company under this Agreement, the Company shall pay to Employee monthly
compensation of $10,416.67 (an annualized salary of $125,000.00), payable
monthly in arrears or on the same dates as other management personnel are
paid, and prorated for any short calendar month. Compensation shall be
subject to the customary withholding of income taxes and to other employment
taxes required with respect to compensation paid by an employer to an
employee.
3.2 Other Benefits
Compensation paid to Employee shall be in addition to any contribution
made by the Company for the benefit of Employee to any qualified
profit-sharing or retirement plan maintained by the Company for the exclusive
benefit of its employees. The Company shall provide to Employee and
Employee's spouse and dependents the same coverage and participation that the
Company may provide to other management personnel with respect to accident
and health insurance, life insurance and other employment benefits, upon
Employee meeting the respective eligibility conditions of each such benefit.
3
<PAGE>
3.3 Incentive and Non-Qualified Stock Options
Subject to approval by the Company's Board of Directors (or a committee
thereof), Employee may be awarded one or more options to purchase shares of
the Company's common stock, exercisable at the approximate publicly-traded
price of such stock on the date of award. The options will be exercisable
according to a vesting schedule and performance standards agreed upon by the
parties. Termination of employment for any reason or no reason will
automatically terminate the right to exercise the incentive (qualified)
option as to any shares not then vested. The options will also be subject to
other terms and conditions, including restrictions on transfer of the options
and the shares, required by the Company on all similar options.
3.4 Income From Employee's Efforts
All income generated by Employee for Employee's services to the Company,
and all activities related to such services, shall belong to the Company,
whether paid directly to the Company or to Employee. Employee agrees to,
upon request by the Company from time to time, render a detailed accounting
of all transactions during the course of Employee's employment.
3.5 Work Made for Hire
All techniques, processes, products, manuals, documents, materials, ideas
and Confidential Information developed by Employee while employed by the
Company shall be considered work made for hire and shall, unless specifically
otherwise agreed in writing by the Company prior to such development, become
the sole and exclusive property of the Company.
SECTION 4. EXPENSES
Employee shall be entitled to reimbursement from the Company for
reasonable expenses necessarily incurred by Employee in the performance of
Employee's duties under this Agreement, upon presentation of vouchers
detailing the amount, date and business purpose of each such expense. All
expenses in excess of $200.00 must be approved in advance by another officer
of the Company, and all travel and related expenses and reimbursements will
be governed by the travel policies and procedures adopted by the Company.
4
<PAGE>
SECTION 5. TERMINATION
5.1 Termination by Prior Notice or Agreement
The employment of Employee by the Company may be terminated by either the
Company or Employee upon the giving of 30 days' prior written notice to the
other party. This Agreement may be terminated at any earlier time upon the
mutual written agreement of the Company and Employee.
5.2 Immediate Termination
The employment of Employee by the Company may be terminated immediately
in the sole discretion of the Board of Directors of the Company upon the
occurrence of any one of the following events:
5.2.1 If Employee shall willfully and continuously fail or refuse
to comply with any of the policies, standards, rules and regulations
established by the Company's Board of Directors or shareholders from time to
time.
5.2.2 If Employee shall be guilty of fraud, dishonesty or any other
act of misconduct in the performance of Employee's duties on behalf of the
Company.
5.2.3 If Employee shall fail or refuse to perform any provision of
this Agreement to be performed by Employee.
5.2.4 Upon the sale, transfer or other disposition of all or
substantially all the assets of the Company, the distribution of the
Company's assets to its shareholders in liquidation, or the discontinuance of
the Company's conduct of the business described in the Recital.
5.2.5 If Employee shall suffer a permanent disability. For
purposes of this Agreement, "permanent disability" shall be defined in
accordance with the terms of any disability income policy insuring Employee
which may be purchased by the Company, as determined by the company issuing
such policy. But if such a policy is not in force, "permanent disability"
shall be defined as Employee's inability due to physical or mental illness,
or other cause, to perform the majority of Employee's usual duties for a
period of three months or more, as determined by a physician licensed to
practice medicine in Oregon and chosen by the Company.
5.3 Death
In the event Employee dies during the term of this Agreement, this
Agreement shall automatically terminate, and the Company shall pay to
Employee's estate the
5
<PAGE>
compensation which would be otherwise payable to Employee through the last
day of the month in which Employee's death occurs.
5.4 Compensation Upon Certain Termination
In the event that the Company terminates Employee's employment without
his consent and not by reason of an event described in Section 5.2 or 5.3
above, the Company agrees to pay to Employee on the effective date of
termination an amount (net of customary withholdings) equal to 50% of
Employee's then annualized base salary.
5.5 At-Will Employment
The employment of Employee by the Company is "at-will". Employee may
terminate employment at any time, for any reason or for no reason.
Correspondingly, the Company may terminate Employee's employment at any time,
for any reason or for no reason.
SECTION 6. VACATION; SICK LEAVE
Subject to the prior coordination of time with other officers and senior
management of the Company, Employee shall be entitled to 30 working days per
calendar year (prorated for a short year) of combined vacation/sick days.
Accrual of same and permitted leaves shall be as provided in the Company's
employee manual.
SECTION 7. MISCELLANEOUS
7.1 Representation by Employee
Employee represents and warrants to the Company that there is no
employment contract or any other contractual obligation to which Employee is
subject which prevents Employee from entering into this Agreement or from
performing fully Employee's duties under this Agreement.
7.2 Notices
Any notice or consent required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
personally delivered to a party or 24 hours after deposit in the United
States Mail, first class postage prepaid by both first class and certified
mail, return receipt requested, or 24 hours after delivery to a recognized
national overnight carrier, with overnight shipping charges paid, and
addressed to such party as follows:
6
<PAGE>
If to Employee: J. Peter Burke
5617 SW Hewett Blvd.
Portland, OR 97221
If to the Company: Athena Medical Corporation
10180 SW Nimbus Avenue, Suite J-5
Portland, OR 97223
Attn: President
or such other address as a party may specify by a notice in writing, given in
the same manner.
7.3 Attorneys' Fees
If any action or other proceeding shall be instituted relating to any
term or condition of this Agreement or relating to any of the rights, duties
or obligations arising under it (including without limitation a proceeding
for injunction as provided by Section 2.4), the prevailing party shall be
entitled to recover from the other party, and the other party agrees to pay
to the prevailing party, whether or not the matter proceeds to final judgment
or decree, in addition to costs and disbursements allowed by law, such sum as
the trial and each appellate court may adjudge reasonable as attorneys' fees
in such action or other proceeding, and in any appeal of it.
7.4 Interpretation
The waiver by either party of a breach of any term or provision of this
Agreement shall not be construed as a waiver of any subsequent breach of the
same or any other term or provision by either party. Time is of the essence
of this Agreement in all particulars. The term "days" means calendar days.
This Agreement may not be amended or modified except by written agreement
executed by the parties. The captions heading the sections and subsections
of this Agreement are inserted for convenience of reference only, and are not
to be used to define, limit, construe or describe the scope or intent of any
term, provision or section of this Agreement. This Agreement may be executed
in several counterparts, each of which shall be deemed an original but all of
which taken together shall constitute one and the same instrument.
7.5 Integration
THIS AGREEMENT CONTAINS THE FINAL AND CONCLUSIVE AGREEMENT AND
UNDERSTANDING OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER OF IT, AND
SUPERSEDES ALL PRIOR AND CONTEMPORANEOUS AGREEMENTS, ORAL OR WRITTEN,
INCLUDING
7
<PAGE>
WITHOUT LIMITATION THE PARTIES' LETTER AGREEMENT OF DECEMBER 16, 1996.
EXCEPT AS SET FORTH IN THIS AGREEMENT, THERE ARE NO PROMISES,
REPRESENTATIONS, AGREEMENTS OR UNDERSTANDINGS, ORAL OR WRITTEN, BETWEEN THE
PARTIES RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT.
EXECUTED as of the date first set forth above.
_______________________________________
J. Peter Burke
EMPLOYEE
ATHENA MEDICAL CORPORATION
By_____________________________________
Its President
COMPANY
8
<PAGE>
EXHIBIT 10.28
EMPLOYMENT AGREEMENT
BETWEEN: ATHENA MEDICAL CORPORATION, a Nevada corporation (the "Company");
AND: JAMES R. WILSON ("Employee").
DATED: Effective May 1, 1997.
R E C I T A L:
The Company (dba A FEM Medical Corporation) is engaged in the business of
developing and marketing feminine hygiene products and diagnostics
world-wide. Employee is a member of the Company's Board of Directors and was
appointed by the Board of Directors as the Company's Treasurer on October 22,
1996. The parties desire to set forth their agreement as to Employee's
services as such on and after May 1, 1997.
AGREEMENT:
In consideration of the foregoing Recital and the terms, conditions and
covenants set forth below, the parties agree as follows:
SECTION 1. EMPLOYMENT
The Company agrees to employ Employee for a term commencing on May 1,
1997, and continuing until termination in accordance with Section 5.
Employee accepts employment with the Company on the terms and conditions set
forth in this Agreement, and agrees to perform the duties of the Company's
Treasurer as provided in the Company's Bylaws (except as otherwise assigned
by the Company's Board of Directors to the chief financial officer or other
officers). Employee further agrees to perform any specific duties assigned
to Employee by the Company's Board of Directors. The parties anticipate that
Employee will be required to devote at least three days of each week on
behalf of the Company.
Employee agrees that in all aspects of his employment, Employee shall
comply with the policies, standards, rules and regulations of the Company
from time to time established, and shall perform Employee's duties
faithfully, intelligently, to the best of Employee's ability and in the best
interest of the Company. The devotion of reasonable periods of time by
Employee for personal purposes, outside non-competitive business activities
or charitable activities shall not be deemed a
1
<PAGE>
breach of this Agreement, provided that such purposes or activities do not
materially interfere with the services required to be rendered to or on
behalf of the Company.
SECTION 2. CONFIDENTIALITY
2.1 Confidential Information
Employee acknowledges and agrees that all research, product and equipment
specifications, manufacturing methods, lists of the Company's customers and
suppliers, marketing and product planning information, and other Company data
related to its business, as well as information of third parties that the
Company is required to keep confidential (collectively, the "Confidential
Information"), are valuable assets of the Company. Except for disclosures
reasonably made to advance the business of the Company and information which
is a matter of public record, Employee shall not, during the term of this
Agreement or after termination of employment with the Company for any reason,
disclose any Confidential Information to any person or use any Confidential
Information (regardless of whether same is considered proprietary or a trade
secret) for the benefit of Employee or any other person, except with the
prior written consent of the Company in each instance.
2.2 Return of Documents and Property
Employee acknowledges and agrees that all originals and all copies of
records, reports, files, correspondence, lists, plans, drawings, memoranda,
notes, sketches, summaries, schedules, codes, tapes and other documentation
and property related to the business of the Company or containing any
Confidential Information are and shall be the sole and exclusive property of
the Company, and shall be returned to the Company upon termination of
Employee's employment with the Company or upon the written request of an
authorized representative of the Company at any time.
2.3 Related Company Policies
Employee further agrees to comply with all policies, rules and
regulations adopted by the Company's Board of Directors or shareholders from
time to time with respect to insider trading and other duties applicable to
the employees of a publicly-traded corporation. Employee also agrees, if
requested, to sign a separate confidentiality agreement applicable to all
employees. The terms of such separate agreement will control over any
conflicting term in this Agreement.
2.4 Injunction
Employee agrees that it would be difficult to measure damage to the
Company from any breach by Employee of Section 2.1, 2.2 or 2.3 and that
monetary damages
2
<PAGE>
would be an inadequate remedy for any such breach. Accordingly, Employee
agrees that if Employee shall breach Section 2.1, 2.2 or 2.3, the Company
shall be entitled, in addition to any and all other remedies it may have at
law or in equity, to an injunction or other appropriate order to restrain any
such breach, without showing or proving any actual damage sustained by the
Company, and without posting bond or other undertaking.
2.5 No Release
Employee agrees that termination of employment with the Company shall not
release Employee from any of Employee's obligations under Section 2.1, 2.2 or
2.3.
SECTION 3. COMPENSATION
3.1 Amount
In consideration of all services to be rendered by Employee to the
Company under this Agreement, the Company shall pay to Employee compensation
of $5,000.00 per month for a period commencing May 1, 1997, payable monthly
in arrears or on the same dates as other management personnel are paid.
Compensation shall be subject to the customary withholding of income taxes
and to other employment taxes required with respect to compensation paid by
an employer to an employee.
3.2 Other Benefits
Employee's services will be as a part-time employee. Accordingly,
neither Employee or Employee's spouse and dependents are or will be entitled
to coverage and participation with respect to profit-sharing plan, retirement
plan, accident and health insurance, life insurance or other employment
benefits, unless Employee meets the respective eligibility conditions
(including minimum hours-of-service) of each such benefit.
3.3 Income From Employee's Efforts
All income generated by Employee for Employee's services to the Company,
and all activities related to such services, shall belong to the Company,
whether paid directly to the Company or to Employee. Employee agrees to,
upon request by the Company from time to time, render a detailed accounting
of all transactions during the course of Employee's employment.
3
<PAGE>
3.4 Work Made for Hire
All techniques, processes, products, manuals, documents, materials, ideas
and Confidential Information developed by Employee while employed by the
Company shall be considered work made for hire and shall, unless specifically
otherwise agreed in writing by the Company prior to such development, become
the sole and exclusive property of the Company.
SECTION 4. EXPENSES
The compensation provided under Section 3.1 above is intended to
compensate Employee for normal travel expenses (such as those between
Employer's home or office and the Company's principal office) and incidental
expenses. However, Employee shall be entitled to reimbursement from the
Company for other non-ordinary reasonable expenses necessarily incurred by
Employee in the performance of Employee's duties under this Agreement (such
as out-of-state travel), upon presentation of vouchers detailing the amount,
date and business purpose of each such expense. All expenses in excess of
$200.00 must be approved in advance by another officer of the Company, and
all travel and related expenses and reimbursements will be governed by the
travel policies and procedures adopted by the Company.
SECTION 5. TERMINATION
5.1 Termination by Prior Notice or Agreement
The employment of Employee by the Company may be terminated by either the
Company or Employee upon the giving of 30 days' prior written notice to the
other party. This Agreement may be terminated at any earlier time upon the
mutual written agreement of the Company and Employee.
5.2 Immediate Termination
The employment of Employee by the Company may be terminated immediately
in the sole discretion of the Board of Directors of the Company upon the
occurrence of any one of the following events:
5.2.1 If Employee shall willfully and continuously fail or refuse to
comply with any of the policies, standards, rules and regulations established
by the Company's Board of Directors or shareholders from time to time.
5.2.2 If Employee shall be guilty of fraud, dishonesty or any other
act of misconduct in the performance of Employee's duties on behalf of the
Company.
4
<PAGE>
5.2.3 If Employee shall fail or refuse to perform any provision of
this Agreement to be performed by Employee.
5.2.4 Upon the sale, transfer or other disposition of all or
substantially all the assets of the Company, the distribution of the
Company's assets to its shareholders in liquidation, or the discontinuance of
the Company's conduct of the business described in the Recital.
5.2.5 If Employee shall suffer a permanent disability. For purposes
of this Agreement, "permanent disability" shall be defined in accordance with
the terms of any disability income policy insuring Employee which may be
purchased by the Company, as determined by the company issuing such policy.
But if such a policy is not in force, "permanent disability" shall be defined
as Employee's inability due to physical or mental illness, or other cause, to
perform the majority of Employee's usual duties for a period of three months
or more, as determined by a physician licensed to practice medicine in Oregon
and chosen by the Company.
5.3 Death
In the event Employee dies during the term of this Agreement, this
Agreement shall automatically terminate, and the Company shall pay to
Employee's estate the compensation which would be otherwise payable to
Employee through the last day of the month in which Employee's death occurs.
5.4 Proration of Compensation
Except as otherwise provided in Section 5.3, upon termination of
employment, the compensation payable to Employee pursuant to Section 3.1
shall be prorated to the date of such termination and shall be payable on the
first day of the month following such termination date.
5.5 At-Will Employment
The employment by Employee by the Company is "at-will". Employee may
terminate employment at any time, for any reason or for no reason.
Correspondingly, the Company may terminate Employee's employment at any time,
for any reason or for no reason.
SECTION 6. MISCELLANEOUS
6.1 Representation by Employee
Employee represents and warrants to the Company that there is no
employment contract or any other contractual obligation to which Employee is
subject which
5
<PAGE>
prevents Employee from entering into this Agreement or from performing fully
Employee's duties under this Agreement.
6.2 Notices
Any notice or consent required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
personally delivered to a party or 24 hours after deposit in the United
States Mail, first class postage prepaid by both first class and certified
mail, return receipt requested, or 24 hours after delivery to a recognized
national overnight carrier, with overnight shipping charges paid, and
addressed to such party as follows:
If to Employee: James R. Wilson
3198 Powder River Drive
Eugene, OR 97408
If to the Company: Athena Medical Corporation
10180 SW Nimbus Avenue, Suite J-5
Portland, OR 97223
Attn: President
or such other address as a party may specify by a notice in writing, given in
the same manner.
6.3 Attorneys' Fees
If any action or other proceeding shall be instituted relating to any
term or condition of this Agreement or relating to any of the rights, duties
or obligations arising under it (including without limitation a proceeding
for injunction as provided by Section 2.4), the prevailing party shall be
entitled to recover from the other party, and the other party agrees to pay
to the prevailing party, whether or not the matter proceeds to final judgment
or decree, in addition to costs and disbursements allowed by law, such sum as
the trial and each appellate court may adjudge reasonable as attorneys' fees
in such action or other proceeding, and in any appeal of it.
6.4 Interpretation
The waiver by either party of a breach of any term or provision of this
Agreement shall not be construed as a waiver of any subsequent breach of the
same or any other term or provision by either party. Time is of the essence
of this Agreement in all particulars. The term "days" means calendar days.
This Agreement may not be amended or modified except by written agreement
executed by the parties. The captions heading the sections and subsections
of this Agreement are inserted for
6
<PAGE>
convenience of reference only, and are not to be used to define, limit,
construe or describe the scope or intent of any term, provision or section of
this Agreement. This Agreement may be executed in several counterparts, each
of which shall be deemed an original but all of which taken together shall
constitute one and the same instrument.
6.5 Integration
This Agreement has been approved by the Company's Board of
Directors pursuant to Nevada Revised Statutes 78.140(3) and Article III,
Section 13 of the Company's Bylaws. THIS AGREEMENT CONTAINS THE FINAL AND
CONCLUSIVE AGREEMENT AND UNDERSTANDING OF THE PARTIES WITH RESPECT TO THE
SUBJECT MATTER OF IT, AND SUPERSEDES ALL PRIOR AND CONTEMPORANEOUS
AGREEMENTS, ORAL OR WRITTEN, INCLUDING WITHOUT LIMITATION THE PARTIES'
CONSULTANT AGREEMENT OF DECEMBER 1, 1996 . EXCEPT AS SET FORTH IN THIS
AGREEMENT, THERE ARE NO PROMISES, REPRESENTATIONS, AGREEMENTS OR
UNDERSTANDINGS, ORAL OR WRITTEN, BETWEEN THE PARTIES RELATING TO THE SUBJECT
MATTER OF THIS AGREEMENT.
EXECUTED as of the date first set forth above.
COMPANY:
Athena Medical Corporation
By: ---------------------------
Its President
EMPLOYEE:
-------------------------------
James R. Wilson
7
<PAGE>
A-FEM MEDICAL CORPORATION Exhibit 11.1
CALCULATIONS OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30 June 30
---------------------------- -----------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Actual weighted average shares outstanding 12,473,982 8,956,484 12,133,708 8,952,363
for the period
Dilutive common stock, options and warrants 1,317,444 - (1) 1,315,585 -(1)
using the treasury stock method
------------- ------------- ------------- -------------
Total shares used in per share calculations 12,473,982 8,956,484 12,133,708 8,952,363
------------- ------------- ------------- -------------
Net income (loss) $1,046,432 ($1,069,593) $411,033 ($2,082,644)
------------- ------------- ------------- -------------
Net income (loss) per share $0.08 ($0.12) $0.03 ($0.23)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
(1) Warrants and options outstanding are not included as the effect would be
anti-dilutive.
PAGE 13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
PART 1-FINANCIAL INFORMATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,517,891
<SECURITIES> 0
<RECEIVABLES> 26,610
<ALLOWANCES> 0
<INVENTORY> 40,731
<CURRENT-ASSETS> 2,984,114
<PP&E> 992,438
<DEPRECIATION> (304,020)
<TOTAL-ASSETS> 3,785,884
<CURRENT-LIABILITIES> 922,489
<BONDS> 0
0
0
<COMMON> 118,315
<OTHER-SE> 11,851,525
<TOTAL-LIABILITY-AND-EQUITY> 3,785,884
<SALES> (31,100)
<TOTAL-REVENUES> (31,100)
<CGS> 168,882
<TOTAL-COSTS> 168,882
<OTHER-EXPENSES> 1,461,963
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,009
<INCOME-PRETAX> 411,033
<INCOME-TAX> 0
<INCOME-CONTINUING> 411,033
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 411,033
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0
</TABLE>
