As Filed With the Securities and Exchange Commission on February 14, 2000
Registration No. 333-________
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------
DIMENSIONAL VISIONS INCORPORATED
(Name of small business issuer in its charter)
----------
Delaware 23-2517953
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2759
(Primary Standard Industrial
Classification Code Number)
----------
2301 W. Dunlap Avenue, Suite 207
Phoenix, Arizona 85021, (602) 997-1990
(Address and telephone number of principal executive office)
Prentice Hall Corporation System, Inc.
1013 Centre Road
Wilmington, DE 19805, (302) 998-0595
(Name, address and telephone number of agent for service)
----------
COPIES TO:
Lynne Bolduc, Esq.
Horwitz & Beam
Two Venture Plaza, Suite 350
Irvine, CA 92618, (949) 453-0300
----------
Approximate Date of Proposed Sale to the Public.
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=======================================================================================================
Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Number of Shares Offering Price Aggregate Registration
Securities to be Registered to be Registered Per Share(1) Offering Price Fee
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value 855,973 $0.84375 $ 722,227.20 $ 190.67
Common Stock, $0.001 par value,
underlying Series D Preferred Stock 750,000 $0.84375(2) $ 632,812.50 $ 167.06
Common Stock, $0.001 par value,
underlying Series E Preferred Stock 675,000 $0.84375(3) $ 569,531.25 $ 150.36
Common Stock, $0.001 par value,
underlying Debt Securities 314,292 $0.84375(4) $ 265,183.88 $ 70.01
Common Stock, $0.001 par value,
underlying Warrants 7,327,210 $0.84375(5) $6,182,333.44 $1,632.14
Common Stock, $0.001 par value,
underlying Stock Option Plan 1,500,000 $0.84375(6) $1,265,625.00 $ 334.13
- -------------------------------------------------------------------------------------------------------
Total 11,422,475 $9,637,713.27 $2,544.37
=======================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) and based upon the average of the
bid and asked prices for the Common Stock on February 7, 2000, as reported
by the OTC Bulletin Board.
(2) Represents Common Stock issuable upon conversion of the Company's Series D
Preferred Stock.
(3) Represents Common Stock issuable upon conversion of the Company's Series E
Preferred Stock.
(4) Represents Common Stock issuable upon conversion of the Company's debt
securities.
(5) Represents Common Stock issuable upon exercise of warrants. Pursuant to
Rule 416 promulgated under the Securities Act of 1933, this Registration
Statement also covers any additional Common Shares which may become
issuable by reason of the antidilution provisions of the Warrants.
(6) Represents Common Stock issuable upon exercise of options from the
Company's 1999 Stock Option Plan.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
================================================================================
<PAGE>
PROSPECTUS
DIMENSIONAL VISIONS INCORPORATED
11,422,475 SHARES OF
COMMON STOCK
($0.001 PAR VALUE)
THE OFFERING:
This Offering relates to the possible sale, from time to time, by certain
stockholders, the "Selling Stockholders," of Dimensional Visions Incorporated of
up to 11,422,475 shares of common stock of Dimensional Visions. We will not
receive any proceeds from sales by Selling Stockholders other than from the
exercise of warrants or the conversion of debt. All expenses incurred in
registering these shares for sale (approximately $37,000) are being borne by
Dimensional Visions, but all selling and other expenses incurred by the Selling
Stockholders will be borne by the Selling Stockholders. See "Selling
Stockholders."
The shares of common stock offered hereby have been acquired by the Selling
Stockholders from Dimensional Visions in private transactions and are
"restricted securities" under the Securities Act of 1933, as amended, prior to
their sale hereunder. This prospectus has been prepared for the purpose of
registering the shares to allow for future resales by the Selling Stockholders
to the public without restriction. To the best of our knowledge, the Selling
Stockholders have made no arrangement with any brokerage firm for the sale of
any shares. See "Plan of Distribution."
MARKET FOR THE SHARES:
The Common Stock of Dimensional Visions is traded in the over-the-counter
electronic bulletin board system, also called the Bulletin Board, under the
symbol "DVUI." The closing bid and asked prices for the Common Stock on February
7, 2000, as reported by the Bulletin Board were $0.8125 and $0.875 per share,
respectively. To date, the volume of trading in the Common Stock has been
limited and, therefore, the market prices for the Common Stock may not
accurately reflect the value of Dimensional Visions.
- --------------------------------------------------------------------------------
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES ONLY
IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING ON PAGE 3.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IF TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
THE DATE OF THIS PROSPECTUS IS FEBRUARY 14, 2000
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. YOU SHOULD ALSO READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE
RISK FACTORS AND FINANCIAL STATEMENTS.
DIMENSIONAL VISIONS INCORPORATED
OFFICES:
Dimensional Visions office and principal place of business is located at 2301
West Dunlap Avenue, Suite 207, Phoenix, Arizona 85021, and its telephone number
is (602) 997-1990.
OUR BUSINESS:
Dimensional Visions creates and delivers special Living Image(TM) Solutions for
products, packaging and marketing communications utilizing its unique patent
pending ULTRA-DV3D(R) and Animotion(TM) ADVANCED HALOGRAPHIX Multi-Dimensional
Digital Design and Production Processing System.
Living Image(TM) embodies dramatic Multi-Dimensional Visual Effects. These
Multi-Dimensional Visual Effects may be produced in varying sizes to specified
customer applications for companies who want to differentiate their products
from the competition while increasing their sales and profits.
A lenticulated (also called lenticular) lens is a layer of lenticles (or lenses)
in front of the image. These lenses work as a viewer which self adjusts to
whatever distance the viewer is from the image. If the viewer is looking at a
Living Image(TM), not only do these lenses allow the viewer to see the proper
stereo views, but they also create fluid animation simultaneously.
OUR OBJECTIVE:
Our objective is to become a dominant marketer, developer and producer of the
Living Image(TM) in the United States and internationally.
OUR STRATEGY:
We believe that our Living Image(TM) Solutions offer unique selling solutions
demanded by leading companies and select visionary leaders in the "Promotion
Marketing Industry," "Advertising & Graphic Design Industry," and Original
Equipment Manufacturers throughout the United States.
OUR SUBSIDIARY:
InfoPak, Inc. is our one active subsidiary company. InfoPak manufactures and
markets a hardware/software packaged product line called the
"InfoPakSystem(TM)." This system was designed to handle substantial offline
information and databases that may require frequent updating.
CURRENT STATUS:
We have decided to focus all of our resources on our Living Image(TM) product
line. During Fiscal Year 1999, we retained an investment-banking firm to assist
us in the sale of our InfoPak, Inc. subsidiary. To date, we have not found a
buyer. We will continue to support the operations of InfoPak until it is sold or
our Board of Directors decides to discontinue its operations.
SELLING STOCKHOLDERS:
A list of the shares being registered in this prospectus and the people and
entities that own them appears in the "Selling Stockholders" section of this
prospectus.
1
<PAGE>
THE OFFERING
Common Stock Outstanding on
February 10, 2000 ........................ 6,169,607
Common Stock Offered by
Selling Stockholders ..................... 11,422,475
Risk Factors............................... An investment in our shares is
very risky, and you should be
able to bear a complete loss
of your investment. See "Risk
Factors" for a detailed
discussion of the risks and
uncertainties concerning
Dimensional Visions' common
stock.
OTC Bulletin Board Symbol.................. DVUI
SUMMARY FINANCIAL INFORMATION
The following table presents selected historical financial data for Dimensional
Visions derived from our Financial Statements. The following data should be read
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements of Dimensional Visions and the notes to
the Financial Statements included elsewhere in this prospectus.
Six Months Ended Fiscal Year Ended
December 31, June 30,
----------------------- ----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(unaudited) (unaudited) (audited) (audited)
STATEMENT OF OPERATIONS DATA:
Revenue $300,418 $410,400 $ 741,901 $609,392
Net loss $459,051 $427,580 $1,465,812 $421,659
Net loss per share $ 0.08 $ 0.12 $ 0.37 $ 0.14
December 31, 1999 June 30, 1999
----------------- -------------
(unaudited) (audited)
BALANCE SHEET DATA:
Working capital surplus (deficiency) $ 176,478 $ (603,946)
Total assets $1,249,067 $ 530,973
Total liabilities $1,027,988 $1,118,740
Stockholder's equity (deficiency) $ 221,079 $ (587,767)
2
<PAGE>
RISK FACTORS
THE SHARES OFFERED IN THIS PROSPECTUS ARE VERY SPECULATIVE AND INVOLVE A HIGH
DEGREE OF RISK. THESE SHARES SHOULD BE PURCHASED ONLY BY PEOPLE WHO CAN AFFORD
THE LOSS OF THEIR ENTIRE INVESTMENT. BEFORE PURCHASING THESE SHARES, YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND THE OTHER INFORMATION
CONCERNING DIMENSIONAL VISIONS AND ITS BUSINESS CONTAINED IN THIS PROSPECTUS.
DIMENSIONAL VISIONS IS INCURRING LOSSES FROM ITS OPERATIONS.
Dimensional Visions has operated at a loss for all of the periods for which
financial statements are included in this prospectus. The likelihood of our
success must be considered in the light of the problems, expenses, difficulties,
complications, and delays frequently encountered in connection with the growth
of a business, and the competitive environment in which we operate. Our success
is dependent upon the successful development and marketing of our products, as
to which there is no assurance. Unanticipated problems, expenses, and delays are
frequently encountered in establishing business and marketing and developing
products. These include, but are not limited to, competition, the need to
develop customer support capabilities and market expertise, setbacks in product
development, market acceptance, sales, and marketing. Our failure to meet any of
these conditions would have a materially adverse effect upon our business and
could force us to reduce or curtail operations. No assurance can be given that
Dimensional Visions can or will ever operate profitably. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business of Dimensional Visions--Market and Penetration" and "--Competition."
DIMENSIONAL VISIONS DEPENDS ON KEY PERSONNEL FOR CRITICAL MANAGEMENT DECISIONS.
Our success depends, to a significant extent, upon a number of key employees,
including our C.E.O./President, John McPhilimy, and our Senior Vice President,
Bruce D. Sandig. The loss of services of one or more of these employees could
have a material adverse effect on our business. We believe that our future
success will also depend in part upon our ability to attract, retain, and
motivate qualified personnel. Competition for such personnel is intense. There
can be no assurance that we can attract and retain such personnel. We have "key
person" life insurance on both Mr. McPhilimy and Mr. Sandig. See "Management."
THERE IS COMPETITION FOR OUR PRODUCTS.
We compete with other established businesses that market similar products. Many
of these companies have greater capital, marketing and other resources than we
do. Also, other processes are currently available which allow a viewer to
perceive an image in three-dimensions, including those which employ stereoscopic
glasses and viewing hoods and other processes, and holograms and other
three-dimensional image systems which do not require the use of viewing
apparatus. Further, our products may be more expensive than conventional, high
quality, two-dimensional prints and for this reason, high quality, conventional
processes and methods may be favored for many, if not most, illustration and
promotion contexts. See "Business of Dimensional Visions--Competition."
3
<PAGE>
DIMENSIONAL VISIONS MAY REQUIRE ADDITIONAL FINANCING FOR ITS BUSINESS.
Our future capital requirements will depend on many factors, including cash flow
from operations, competing market developments, and our ability to market our
products successfully. Although we currently do not have any specific plans or
arrangements for financing and do not believe that additional financing will be
required, if our working capital is insufficient to fund our activities for the
next year, it will be necessary to raise additional funds through equity or debt
financings. Any equity financings could result in dilution to our stockholders.
Debt financing may result in higher interest expense. Any financing, if
available, may be on unfavorable terms. If we could not raise adequate funds, we
would have to reduce or curtail our operations.
WE CANNOT GUARANTEE THAT OUR PRODUCTS WILL SELL SUCCESSFULLY.
There can be no assurance that our marketing and sales strategies will be
effective and that consumers will buy our products. Our failure to penetrate our
targeted markets would have a material adverse effect upon our operations and
prospects. Market acceptance of our products will depend in part upon our
ability to demonstrate the advantages of our products over competing products.
In addition, our sales strategy contemplates sales to markets yet to be
established. Currently, we don't have any distribution agreements for any of our
products in place. See "Business of Dimensional Visions--Market and Penetration"
and "--Competition."
OUR BUSINESS IS AFFECTED BY THE ECONOMY.
As with other businesses, ours may be adversely affected by unfavorable local,
regional or national economic conditions affecting disposable consumer income.
There can be no assurance that consumer spending will not decline in response to
economic conditions, thereby adversely affecting our growth, sales, and
profitability.
INVESTORS WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.
In many cases, our officers, directors, and present stockholders have acquired
their securities at a cost substantially less than that which investors will pay
for the Common Stock offered by this prospectus. As a result, investors
participating in this Offering will likely incur immediate, substantial dilution
in the net tangible book value per share of the Common Stock. The net tangible
book value of a share represents the amount of Dimensional Visions' tangible
assets less the amount of its liabilities, divided by the number of shares
outstanding.
UP TO 11,422,475 SHARES OF COMMON STOCK OF DIMENSIONAL VISIONS WILL BECOME
ELIGIBLE FOR PUBLIC SALE IMMEDIATELY WHICH COULD HAVE A DEPRESSIVE EFFECT ON THE
STOCK.
When our registration statement, of which this prospectus is a part, is declared
effective by the SEC, 855,973 shares of our common stock will be eligible for
immediate resale on the public market and 10,566,502 shares of our common stock
underlying warrants, options, preferred stock, and debt securities, upon
exercise of the warrants or options or conversion of the preferred stock or debt
securities, will be eligible for immediate resale on the public market for our
common stock. If a significant number of shares are offered for sale
simultaneously, it would have a depressive effect on the trading price of our
common stock on the public market.
4
<PAGE>
DIMENSIONAL VISIONS' COMMON STOCK IS CURRENTLY CLASSIFIED AS A "PENNY STOCK"
WHICH COULD CAUSE INVESTORS TO EXPERIENCE DELAYS AND OTHER DIFFICULTIES IN
TRADING SHARES IN THE STOCK MARKET.
Dimensional Visions' Common Stock is quoted and traded on the Over-the-Counter
Bulletin Board ("Bulletin Board"). As a result, an investor could find it more
difficult to dispose of, or to obtain accurate quotations as to the market value
of, the stock. In addition, trading in the Common Stock is covered by what is
known as the "Penny Stock Rules." The Penny Stock Rules require brokers to
provide additional disclosure in connection with any trades involving a stock
defined as a "penny stock," including the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the
risks associated therewith. The regulations governing penny stocks could limit
the ability of brokers to sell the shares offered in this prospectus and thus
the ability of the purchasers of this Offering to sell these shares in the
secondary market. Dimensional Visions' stock will be covered by the Penny Stock
Rules until it has a market price of $5.00 per share or more, subject to certain
exceptions.
THE OFFERING PRICE OF THESE SHARES WILL VARY AND MAY NOT HAVE ANY RELATIONSHIP
TO OUR NET WORTH.
The shares being offered in this prospectus are offered at the market price
prevailing at the time of the offer. The market price of these shares may vary
and may have a limited relationship, or no relationship, to our assets, book
value, results of operations, or other established criteria of value. The
offering price also may not be indicative of the prices that will prevail in the
subsequent trading market for our securities.
NO DIVIDENDS PAID ON COMMON STOCK; DIVIDENDS ON PREFERRED STOCK IN ARREARS.
Dimensional Visions has never paid dividends on its Common Stock and does not
anticipate paying cash dividends in the foreseeable future. Dimensional Visions
is in arrears on dividends required to be paid on its Series A Preferred Stock
and Series B Preferred Stock. The unpaid cumulative dividends total
approximately $88,000. See "Dividend Policy" and Note 10 of Notes to
Consolidated Financial Statements.
5
<PAGE>
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Dimensional Visions' Common Stock has been quoted on the Bulletin Board under
the symbol "DVUI" since January 12, 1998. Prior to January 12, 1998, Dimensional
Visions' Common Stock traded under the symbol "DVGL." The following table sets
forth the quarterly high and low bid prices of Dimensional Visions' Common Stock
for the periods indicated, after adjusting such prices for Dimensional Visions'
1-for-25 reverse Common Stock split which was effective January 15, 1998. Bid
quotations represent interdealer prices without adjustment for retail markup,
markdown and/or commissions and may not necessarily represent actual
transactions.
High Low
---- ---
FISCAL 1998
First Quarter............................................ 2 1/2 1 1/8
Second Quarter........................................... 2 1/2 1/2
Third Quarter............................................ 2 1/4 1/2
Fourth Quarter........................................... 1 5/8 3/4
FISCAL 1999
First Quarter............................................ 1 11/32 27/64
Second Quarter........................................... 21/32 1/4
Third Quarter............................................ 7/16 3/16
Fourth Quarter........................................... 27/32 3/16
FISCAL 2000
First Quarter............................................ 2 3/16 3/8
Second Quarter........................................... 1 23/32 27/32
Third Quarter (through February 7, 2000)................. 1 3/16 13/16
HOLDERS
As of February 2, 2000, the number of stockholders of record was 424, not
including beneficial owners whose shares are held by banks, brokers and other
nominees. Dimensional Visions estimates that it has approximately 3,500
stockholders in total.
DIVIDEND POLICY
Dimensional Visions has paid no dividends on its Common Stock since its
inception and does not anticipate or contemplate paying cash dividends in the
foreseeable future.
Pursuant to the terms of Dimensional Visions' Series A Convertible Preferred
Stock, a 5% annual dividend is due and owing. Pursuant to the terms of
Dimensional Visions' Series B Convertible Preferred Stock, an 8% annual dividend
is due and owing. As of June 30, 1999, Dimensional Visions has not declared
dividends on Series A or B preferred stock. The unpaid cumulative dividends
totaled approximately $88,000. See Note 10 of Notes to Consolidated Financial
Statements.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion regarding the financial statements of Dimensional
Visions should be read in conjunction with the Financial statements of
Dimensional Visions included herewith.
OVERVIEW
Dimensional Visions is engaged in the business of manufacturing
multi-dimensional marketing promotional products.
SELECTED CONSOLIDATED FINANCIAL DATA
You should read the selected consolidated financial data set forth below along
with "Management's Discussion and Analysis" and our consolidated financial
statements and the related notes. We have derived the consolidated financial
data for 1995, 1996, 1997, 1998 and 1999 from our audited consolidated financial
statements. We believe the unaudited financial data shown in the table below
include all adjustments consisting only of normal recurring adjustments, that we
consider necessary for a fair presentation of such information. Operating
results for the six months ended December 31, 1999, are not necessarily
indicative of the results that may be expected for all of 2000. Potentially
dilutive common shares have been excluded from the shares used to compute
earnings per share in each loss year because their inclusion would be
antidilutive.
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 1999 June 30, 1998 June 30, 1997 June 30, 1996 June 30, 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Operation revenue $ 741,901 $ 609,392 $ 551,517 $ 1,083,897 $ 134,028
Net Loss $(1,465,812) $ (421,659) $(2,162,134) $(2,035,647) $(1,192,332)
Net Loss per share of
common stock $ (.37) $ (.14) $ (1.11) $ (2.98) $ (1.81)
Balance Sheet Data:
Working Capital (deficit) $ (603,946) $ (235,920) $ (107,952) $ 9,528 $ (138,013)
Total Assets $ 530,973 $ 920,841 $ 529,520 $ 1,408,919 $ 451,237
Total Liabilities $ 1,118,740 $ 713,539 $ 613,947 $ 673,058 $ 2,502,230
Stockholders' equity
(deficiency) $ (587,767) $ 207,302 $ (84,427) $ 735,861 $(2,050,993)
Six Months Ended Six Months Ended
December 31, 1999 December 31, 1998
----------------- -----------------
(unaudited) (unaudited)
Operation revenue $ 300,418 $ 410,400
Net Loss $ (459,051) $ (427,580)
Net Loss per share of common stock $ (.08) $ (.12)
Balance Sheet Data:
Working Capital (deficit) $ 176,478 $ (161,400)
Total Assets $ 1,249,067 $ 1,037,840
Total Liabilities $ 1,027,988 $ 1,245,119
Stockholders' equity (deficiency) $ 221,079 $ (207,279)
</TABLE>
7
<PAGE>
PLAN TO ADDRESS GOING CONCERN OPINION
The Company's independent certified public accountants' report on the Company's
consolidated financial statements for the year ended June 30, 1999 contains an
explanatory paragraph regarding the Company's ability to continue as a going
concern. Among the factors cited by the accountants as raising substantial doubt
as to the Company's ability to continue as a going concern are the Company's
recurring losses from operations and limited sales of its products. The
accountants state that the Company's ability to continue as a going concern is
subject to the attainment of profitable operations or obtaining necessary
funding from outside sources. The Company has developed a plan to achieve
profitability and allay doubts as to its ability to continue as a going concern.
This plan includes: (1) increased marketing of its existing products to increase
sales; and (2) obtaining long term-financing through securities offerings.
INCREASED MARKETING. The Company will use a portion of the proceeds from the
exercise of warrants registered in this document to expand its sales force,
establish a marketing and promotion department, and fund product marketing. The
Company believes these efforts will result in increased sales of its products.
LONG TERM FINANCING THROUGH SECURITIES OFFERINGS. The Company has received
approximately $1,000,000 net of expenses through the private offering of its
Series D and Series E Preferred Stock. Management believes that proceeds from
these Offerings, together with anticipated cash flow from sales of the Company's
products, will be sufficient to support currently anticipated working capital
requirements for at least 12 months. At the completion of this registration, the
Company will have no debt except for trade payables and equipment leases,
thereby increasing cash available for working capital.
FISCAL YEAR ENDED JUNE 30, 1999, AS COMPARED TO FISCAL YEAR ENDED JUNE 30, 1998
RESULTS OF OPERATIONS
The net loss for the fiscal year ended June 30, 1999, was $1,465,812 compared
with a net loss of $421,659 for the fiscal year ended June 30, 1998. The
substantial increase of the net loss is the result of the gain recognized from
the sale of the product line of $410,000 for the fiscal year ended June 30,
1998, and the subsequent recognition of bad debt totaling $402,006 for the
fiscal year ended June 30, 1999. Interest expense and administrative expenses
were also significantly higher for the fiscal year ended June 30, 1999.
Revenue for the fiscal year ended June 30, 1999, was $741,901 compared to
revenue of $609,392 for the fiscal year ended June 30, 1998. Approximately
$614,000 of total revenue for the fiscal year ended June 30, 1999, was from
print products compared to $323,000 of total revenue for the fiscal year ended
June 30, 1998. Dimensional Visions is continuing to increase the percentage of
print revenue as a part of total revenue. Sales of products and licensing fees
for InfoPak, Inc. are continuing to diminish.
On March 1, 1998, Dimensional Visions sold computer hardware through its
InfoPak, Inc. subsidiary to a customer for $100,000 and agreed to accept a note
for $90,000 with interest at 10% commencing on September 1, 1998. Dimensional
Visions has not been able to collect the required monthly payments due on this
note. The customer has filed for an arbitration hearing on the basis that
Dimensional Visions failed to provide data to support their customer base (see
Note 3 to the Consolidated Financial Statements). Dimensional Visions has filed
a counter-claim for full payment of the note.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, Dimensional Visions had a working capital deficiency of
$603,946 compared with a working capital deficiency of $235,920 as of June 30,
1998. The decrease in working capital is largely the result of increased
short-term borrowings used as operating funds, the write-off of certain bad
debts (see Note 3 to the Consolidated Financial Statements), and the reduction
of accounts receivable. During the period ended June 30, 1999, Dimensional
Visions raised a total of $720,000 before debt issuance costs of approximately
$57,450 through the sale of long and short term debentures.
SIX MONTHS ENDED DECEMBER 31, 1999, AS COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1998
RESULTS OF OPERATIONS
The net loss for the six months ended December 31, 1999, was $459,051 compared
to a net loss of $427,580 for the six months ended December 31, 1998. The
Company would have reported an improved six months ended December 31, 1999,
compared to the similar period ended December 31, 1998, if the net loss were
reduced by the $73,042 attributable to the amortization of the discounted value
of the debentures and the $44,975 in interest expense that will be converted to
common stock upon the completion of the registration statement. The loss before
other income and expenses decreased by over $75,000 for the six months ended
December 31, 1999, to $343,939 from $419,458 for the six months ended December
31, 1998.
Revenue for the six months ended December 31, 1999, was $300,418 compared to
revenue of $410,400 for the six months ended December 31, 1998. Sales of the
Company's print products were similar for the periods ended December 31, 1999
and 1998. The contribution of InfoPak revenue decreased by approximately
$100,000. The timing of some large orders at the end of the year that were
produced and shipped in early January 2000 would have increased the revenue
figure for the period ended December 31, 1999, by approximately $79,000. In
addition, a substantial amount of executive time was spent on raising capital
and improving the Company's balance sheet.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, the Company is enjoying an improved liquidity position.
With the completion of the Series D Preferred and Series E Preferred private
placements there is over $570,000 in available cash as of December 31, 1999, and
accounts receivable have increased by over $100,000 from the fiscal year ended
June 30, 1999.
The Company extended an offer to its debenture holders and certain creditors to
convert their debt to equity in the Company. The offer, which expired on October
15, 1999, permitted the conversion of debt into shares of the Company's common
stock at $.375 per share. Interest on the debentures continues to accrue at 12%
per annum until the filing of a registration statement is completed.
Additionally, certain accounts payable were offered the opportunity to convert
their receivables into shares of Dimensional Visions' Common Stock at $.375 per
share. As of December 31, 1999, the entire outstanding balance of $720,000 of
debentures and $60,748 of accounts payable have chosen to convert. The $60,748
of accounts payable have already been converted to common stock. As of December
31, 1999, a total of 2,081,995 shares of the Company's common stock would have
been issued to convert the accounts payable and the debentures including accrued
interest.
9
<PAGE>
YEAR 2000 COMPLIANCE
The Company's business operations depend on a network of computer systems. Many
of the systems previously used a two digit date field to represent the date and
could not have distinguished the Year 1900 from the Year 2000 (commonly referred
to as the Year 2000 problem). In addition, the fact that the Year 2000 is a leap
year could have created difficulties for some systems. At this date, it appears
that the operations of the Company have not been materially adversely affected
by any Year 2000 computer-related problems. However, it is still possible that
Year 2000 problems could emerge. If the Company or one of its vendors develops
problems related to Year 2000 which have not shown up at this date, the
operations of the Company may be adversely affected.
FLUCTUATIONS IN OPERATING RESULTS; SEASONALITY
Annual and quarterly fluctuations in Dimensional Visions' results of operations
may be caused by the timing and composition of orders from Dimensional Visions'
customers and distribution channels. Dimensional Visions' future results also
may be affected by a number of factors, including its ability to offer products
at competitive prices and to anticipate customer demands. Dimensional Visions'
results may also be affected by economic conditions in the geographical areas in
which Dimensional Visions operates. All of the foregoing may result in
substantial unanticipated quarterly earnings shortfalls or losses. Due to all of
the foregoing, Dimensional Visions believes that period-to-period comparisons of
its results of operations are not necessarily meaningful and should not be
relied upon as indicative of future performance.
AVAILABLE INFORMATION
Dimensional Visions is presently subject to the reporting requirements of the
Securities Exchange Act of 1934 (the "Exchange Act"). Dimensional Visions has
filed with the Securities and Exchange Commission (the "Commission") a
Registration Statement on Form SB-2 (together with all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Act") with respect to the securities offered hereby. This
prospectus, which constitutes a part of the Registration Statement, omits
certain information contained in the Registration Statement on file with the
Commission pursuant to the Act and the rules and regulations of the Commission
thereunder. The Registration Statement, including the exhibits thereto, may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Copies
of such material may be obtained by mail at prescribed rates from the Public
Reference Branch of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. Statements contained in this prospectus as to the contents of any
contract or other document referred to are not necessarily complete and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference. Such material may also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov. Dimensional Visions' securities are currently listed on the
over-the-counter bulletin board and trading under the symbol "DVUI."
10
<PAGE>
BUSINESS OF DIMENSIONAL VISIONS
GENERAL
Dimensional Visions creates and delivers special value-added and integrated
product/packaging solutions and integrated marketing solutions called Living
Image(TM) utilizing its unique patent pending Multi-Dimensional Digital Design
and Production Processing System.
Living Image(TM) Solutions are very dramatic Multi-Dimensional Visual Effects.
These Multi-Dimensional Visual Effects may be produced in varying sizes to
specified customer applications for companies who want to differentiate their
products from the competition while increasing their sales and profits.
A lenticulated (also called lenticular) lens is a layer of lenticles (or lenses)
in front of the image. These lenses work as a viewer which self adjusts to
whatever distance the viewer is from the image. If the viewer is looking at
DV3D(R) and Animotion(TM) not only do these lenses allow the viewer to see the
proper stereo views, but they also create fluid animation simultaneously.
Our objective is to become a dominant marketer, developer and producer of the
Living Image(TM) in the United States and internationally.
We believe that our Living Image(TM) Solutions offer unique selling solutions
demanded by leading companies and select visionary leaders in the "Promotion
Marketing Industry," "Advertising & Graphic Design Industry," and Original
Equipment Manufacturers throughout the United States.
InfoPak, Inc. is our one active subsidiary company. InfoPak manufactures and
markets a hardware/software packaged product line called the
"InfoPakSystem(TM)." This system was designed to handle substantial offline
information and databases that may require frequent updating.
We have decided to focus all of our resources on our Living Image(TM) product
line. During Fiscal Year 1999, we retained an investment banking firm to assist
us in the sale of our InfoPak, Inc. subsidiary. To date, we have not found a
buyer. We will continue to support the operations of InfoPak until it is sold or
our Board of Directors decides to discontinue its operations.
Dimensional Visions office and principal place of business is located at 2301
West Dunlap Avenue, Suite 207, Phoenix, Arizona 85021, and its telephone number
is (602) 997-1990.
OUR HISTORY
FISCAL YEARS 1988-1994
In 1988, Dimensional Visions Group, Ltd. (Bulletin Board: DVGL) was incorporated
in the state of Delaware. Dimensional Visions was headquartered in Philadelphia,
Pennsylvania. At that time, Dimensional Visions was in the "robotic camera
controlled" three-dimensional photographic imaging and lenticular lithographic
printing business. The entire complicated process utilized during this timeframe
was very expensive and extremely difficult to consistently reproduce quality
images to meet the price and delivery demands of the product promotion markets.
Dimensional Visions, during this timeframe, tried unsuccessfully to perfect the
complicated "robotic camera" process.
FISCAL YEARS 1995-1997
In 1995, Dimensional Visions acquired InfoPak, Inc. of Phoenix, Arizona
("InfoPak") which is currently our wholly owned subsidiary. InfoPak manufactures
and markets a hardware/software package called the "InfoPakSystem(TM)". It was
marketed to mobile business professionals and delivered to carefully targeted
companies in the automobile appraisal and real-estate businesses.
11
<PAGE>
From 1995 to 1997, Dimensional Visions utilized the software development
resources of InfoPak to develop the patent-pending software and systematic
digital process for its Living Image(TM) Solutions.
FISCAL YEARS 1998-1999
In January 1998, we established our current headquarters in Phoenix, Arizona.
Under the leadership of a totally new executive management team, Dimensional
Visions was completely restructured including changing our corporate name to
Dimensional Visions Incorporated and changing our stock trading symbol from DVGL
to DVUI.
During this timeframe, we sold all of the original robotic photographic
equipment to concentrate on the new Living Image(TM) (utilizing very high-end
Intel based graphic design computers). Our management team believes that the new
process is much more cost effective and best meets the demands of today's quick
changing market.
STRATEGY
MARKET & PENETRATION
Multi-dimensional marketing promotion, once considered a novelty, is a growing
part of the marketing communication mainstream. The nation's most savvy
marketing groups and decision-makers are adopting multi-dimensional solutions as
a way to reach and influence readers who simply ignore even the most
sophisticated, "flat" marketing communications. Living Image(TM) solutions are
dramatic. You can combine depth and movement to excite the senses, command
attention, and leave a lasting impression. Statistics continue to demonstrate
the effectiveness of multi-dimension. Consider a 1998 TIME magazine study of a
mass-circulation dimensional advertisement: 96% of TIME readers recalled seeing
the advertisement. It caught practically everyone's attention. Ninety-one
percent reported reading half or more of the advertisement. This compares to the
30 to 40% readership that is typical of a flat print advertisement.
Additionally, 72% of the individuals who say the advertisement retained a
distinct association between the dimensional advertisement, the corporation that
produced the ad, and the services that firm represented. Significantly, 69% were
favorably disposed toward the dimensional advertiser, compared to a 14%
favorable rating among those not exposed to the ad.
Living Image(TM) solutions have and will be (a) integrated onto products, (b)
integrated onto product packaging, and (c) integrated onto marketing
communications for products and services. We define the market for our Living
Image(TM) as the following major vertical markets in the United States:
* Specially selected Original Equipment Manufacturers ("OEM's")
* Specially selected Promotional Marketing Firms
* Specially selected Advertising & Graphics Design Firms (less newspaper,
radio and TV)
Dimensional Visions believes that the market for Living Image(TM) is in its
infancy particularly with the advent of new very high-end Intel based graphic
design computers and vastly improved lenticular plastic extrusion capabilities.
With these advances, coupled with the best-integrated software methodology and
marketing strategy, we believe Dimensional Visions can be a market leader.
Dimensional Visions estimates that the market universe for its Living Image(TM)
is as follows:
* ORIGINAL EQUIPMENT MANUFACTURERS: According to Sales Leads USA, the
estimated 1998 total annual revenues for original equipment manufacturers
is approximately $3.8 trillion with an estimated marketing communications
one-year universe of $38 billion and an estimated marketing communications
five-year universe of $190 billion.
12
<PAGE>
* PROMOTION MARKETING INDUSTRY: According to Promo Magazine, the estimated
1997 revenues for the promotion marketing industry was $79.5 billion.
Dimensional Visions believes that the Premium/Incentives, Point of
Purchase, Specialty Printing, and Agencies Net Revenues categories, which
account for over $43.7 billion, are potential users of the Living Image(TM)
Solutions.
* ADVERTISING INDUSTRY: According to Advertising Age, the 1997 advertising
revenues in the U.S. totaled over $187.6 billion. We believe that that
Newspapers, Magazines, Direct Mail, Business Papers, and Miscellaneous
other advertising methods are potential users of the Living Image(TM)
Solutions. These categories make up over $116.4 billion or 62% of total
advertising revenues.
PRODUCTION
Dimensional Visions controls or supervises all phases of the production of its
Living Image(TM) products from the image development and computerized
enhancement phases through the color separation and printing phases. Images are
provided to us by our clients in many formats including digitally in graphic
file formats and photographically in pictures or transparencies. Photographic
images are scanned into the computer to be modified and enhanced. Through a
proprietary process, several images are composited together to generate a final
image that will appear as a three-dimensional and/or animation image when viewed
through a lenticular material. "Lenticular" is a plastic optical material that
allows the three-dimensional and/or animation image to be viewed without the use
of any viewing apparatus such as glasses or hoods. The final computer image is
sent to an image setter located at our main offices where films are made. These
films are forwarded to a commercial printer where, through the lithographic
process, the images are printed on a polymer based lenticular material which
focuses the multi-dimensional or animation images. We produce the DV3D(R) and
Animotion(TM) images for the final image at our facilities in Phoenix, Arizona.
Printing is done under the supervision of Dimensional Visions with third-party
vendors. The polymer based lenticular material on which the DV3D(R) and
Animotion(TM) images are printed is supplied by producers in the petrochemical
and plastic fabricating industries.
COMPETITION
Other processes currently are available which allow a viewer to perceive an
image in three-dimensions, including those which employ stereoscopic glasses and
viewing hoods and other processes, and holograms and other three-dimensional
image systems which do not require the use of viewing apparatus. Dimensional
Visions is aware of at least two companies, Optigraphics, Inc. and National
Graphics, Inc., which compete with our products. Our products may be more
expensive than conventional, high quality, two-dimensional prints and for this
reason, high quality, conventional processes and methods may be favored for
many, if not most, illustration and promotion contexts.
PATENTS, TRADEMARKS AND PROPRIETARY PROTECTION
The Company filed a patent application on February 15, 1999 for its Living
Image(TM) Software and Print System. The Company believes that the patent will
issue within two years.
Dimensional Visions has received trademark registration of DV3D(R) and has
submitted a trademark application for Animotion(TM) and Living Image(TM) which
we believe will issue within the next 24 months as well.
13
<PAGE>
Dimensional Visions enters into confidentiality agreements with all persons and
entities who or which may have access to our technology. However, no assurance
can be given that such agreements, the patents, or any additional patents that
may be issued to Dimensional Visions will prevent third parties from developing
similar or competitive technology. There can be no assurance that the patents
will provide us with any significant competitive advantages, or that challenges
will not be instituted against the validity or enforceability of its patents, or
if instituted that any such challenges will not be successful. The cost of
litigation to uphold the validity and prevent infringement can be substantial.
In addition, no assurance can be given that we will have sufficient resources to
either institute or defend any action, suit or other proceeding by or against
our company with respect to any claimed infringement of patent or other
proprietary rights. In the event that we should lose, in the near future, the
protection afforded by the patents and any future patents, such event could have
a material adverse effect on our operations. Furthermore, there can be no
assurance that our own technology will not infringe patent or other rights owned
by others or licenses to which may not be available to us.
EMPLOYEES
As of the date of this prospectus, we had eight employees, including three in
management, one of whom is involved in product development and manufacturing,
one in marketing and sales, and one in finance. Dimensional Visions is not a
party to any collective bargaining agreements. Dimensional Visions considers its
relations with employees to be good.
PROPERTIES
We lease approximately 4,364 square feet of office space at 2301 W. Dunlap
Avenue, Suites 207 and 201 in Phoenix, Arizona. This location serves as our
principal executive offices and our current design and production facilities.
The lease covering this property terminates on December 31, 2000. The total
lease payments for fiscal year 2000 will be $66,600. The lease also requires us
to pay all taxes and insurance.
LITIGATION
In June 1999, Electronic Pricing Guides, Inc., an Arizona corporation ("EPG"),
filed a claim against InfoPak and Dimensional Visions at the American
Arbitration Association, Dallas, Texas branch, arbitration file number 76 Y 181
00146 99. EPG claimed breach of contract and InfoPak, Inc. filed a counter-claim
also seeking breach of contract and breach of promissory note. EPG seeks money
damages for lost business in an undiscerned amount. InfoPak seeks money damages
in the amount of $85,500 plus interest from March 1, 1998 and $8,000.
Dimensional Visions does not believe that this legal proceeding will have a
material adverse effect on our financial condition or operating results. See
Note 3 to the Consolidate Financial Statements.
To the best knowledge of our management, there are no other material litigation
matters pending or threatened against us.
14
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and officers of Dimensional Visions as of the date of
this prospectus are as follows:
Name Age Position
---- --- --------
John D. McPhilimy 56 Director, Chairman of the Board of Directors
and Chief Executive Officer
Roy D. Pringle 32 Vice President, Chief Financial Officer
and Director
Bruce D. Sandig 40 Senior Vice President Engineering
and Director
Susan A. Gunther 49 Director
Mr. John McPhilimy was appointed as a Director, President, and Chief Executive
Officer of Dimensional Visions in November 1997. In January 1998, he was
appointed Chairman of the Board. From January 1995 until November 1997, Mr.
McPhilimy served as President of Selah Information Systems, Inc., Mesa, Arizona,
a company involved in information systems. From March 1992 to December 1995, Mr.
McPhilimy served as President of Travel Teller, Inc. Mr. McPhilimy has over 30
years of executive and marketing experience in high-technology industries such
as aerospace, air transportation, and electronic telecommunication networks with
Bell Helicopter Textron, Aerospatiale, Executive Jet Aviation, Travel Teller
Inc., Marketing Works, and Selah Information Systems. Over the last 15 years he
has been responsible for implementing marketing strategies of NetJets and Travel
Teller, which created the new industries of "nationwide fractional ownership of
business jets" and "electronic ticket delivery networks," respectively.
Mr. Roy D. Pringle was appointed as Vice President, Chief Financial Officer, and
Chief Information Officer of Dimensional Visions in November 1997, and provides
overall integrated enterprise-wide financial management systems for Dimensional
Visions. Mr. Pringle has worked for InfoPak, Inc. since June 1992. Mr. Pringle
holds a master's degree from the American Graduate School of International
Management. Prior to joining InfoPak, he was President and founder of a small
software company, Signature Software.
Mr. Bruce D. Sandig was appointed as a Director of Dimensional Visions in
January 1998 and as Senior-Vice President of Creative Design and Production
Engineering of Dimensional Visions in November 1997 and provides overall
development and integration of the DV3D(R)and Animotion(TM) Multi-Dimensional
Images systems. Mr. Sandig was a co-founder of InfoPak in 1992. Mr. Sandig has
over 15 years experience in electro-mechanical and software engineering/design
with such companies as Universal Propulsion Company, Kroy, Inc., Dial
Manufacturing, and Softie, Inc., where he also created several proprietary
software games for Nintendo.
Ms. Susan A. Gunther has served as Director of Dimensional Visions since January
1998. Since January 1998 she has served as Managing Principal Consultant for
Oracle, Inc. She served as Director of Business Processing from March 1995 to
December 1997 for AmKor Electronics.
There currently are no Committees on the Board of Directors.
Directors serve until the next annual meeting or until their successors are
qualified and elected. Officers serve at the discretion of the Board of
Directors.
15
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the total compensation earned by or paid to
Dimensional Visions' Chief Executive Officer for the fiscal year ended June 30,
1999. No officer of Dimensional Visions earned more than $100,000 in the fiscal
year ended June 30, 1999.
<TABLE>
<CAPTION>
Long Term Compensation
--------------------------------------
Annual Compensation Awards Payouts
------------------------------------ -------------------------- ----------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Year Salary($) Bonus($) Compensation($) Awards($) Options/SARs(#) Payouts($) Compensation($)
---- --------- -------- --------------- --------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John D. McPhilimy 1999 $89,250 $0 $0 $0 -- $0 $0
</TABLE>
OPTIONS/SAR GRANTS IN THE FISCAL YEAR 1999
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
Number of
Securities % of Total
Underlying Options/SARs Granted
Option/SARs to Employees in Exercise or Base Expiration
Name Year Granted (#) Fiscal Year Price ($/Share) Date
---- ---- ----------- ----------- --------------- ----
<S> <C> <C> <C> <C> <C>
John D. McPhilimy 1999 0 -- -- --
</TABLE>
AGGREGATED OPTIONS/SAR EXERCISES IN THE FISCAL YEAR 1999
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of
Underlying Exercised Unexercised
Shares Options/ SARs at FY-End(#) In-the-Money
Acquired on Value Exercisable/ Options/SARs at
Name Year Exercise(#) Realized Unexercisable FY-End($)
---- ---- ----------- -------- ------------- ---------
<S> <C> <C> <C> <C> <C>
John D. McPhilimy 1999 -- 0 450,000(E)/0(U) $191,250
</TABLE>
EMPLOYMENT AND RELATED AGREEMENTS
John D. McPhilimy has an employment agreement with Dimensional Visions. The term
of the agreement is three years ending in November 2000. Mr. McPhilimy's base
compensation is $90,000 per year. The agreement renews by mutual written consent
on the thirtieth month of its term for a two year period without further action
by either party. The agreement may be terminated by Dimensional Visions for
cause.
Roy D. Pringle has an employment agreement with Dimensional Visions. The term of
the agreement is three years ending in November 2000. Mr. Pringle's base
compensation is $72,000 per year.
Bruce D. Sandig has an employment agreement with Dimensional Visions. The term
of the agreement is three years ending in November 2000. Mr. Sandig's base
compensation is $84,000 per year.
16
<PAGE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Certificate of Incorporation and Bylaws of Dimensional Visions provide that
Dimensional Visions will indemnify and advance expenses, to the fullest extent
permitted by the Delaware General Corporation Law, to each person who is or was
a director, officer or agent of Dimensional Visions, or who serves or served any
other enterprise or organization at the request of Dimensional Visions (an
"Indemnitee"). Under Delaware law, to the extent that an Indemnitee is
successful on the merits of a suit or proceeding brought against him or her by
reason of the fact that he or she was a director, officer or agent of
Dimensional Visions, or serves or served any other enterprise or organization at
the request of Dimensional Visions, Dimensional Visions will indemnify him or
her against expenses (including attorneys' fees) actually and reasonably
incurred in connection with such action. If unsuccessful in defense of a
third-party civil suit or a criminal suit, or if such a suit is settled, an
Indemnitee may be indemnified under Delaware law against both (i) expenses,
including attorneys' fees, and (ii) judgments, fines and amounts paid in
settlement if he or she acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of Dimensional Visions,
and, with respect to any criminal action, had no reasonable cause to believe his
other conduct was unlawful. If unsuccessful in defense of a suit brought by or
in the right of Dimensional Visions, where the suit is settled, an Indemnitee
may be indemnified under Delaware law only against expenses (including
attorneys' fees) actually and reasonably incurred in the defense or settlement
of the suit if he or she acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of
Dimensional Visions except that if the Indemnitee is adjudged to be liable for
negligence or misconduct in the performance of his or her duty to Dimensional
Visions, he or she cannot be made whole even for expenses unless a court
determines that he or she is fully and reasonably entitled to indemnification
for such expenses. Also under Delaware law, expenses incurred by an officer or
director in defending a civil or criminal action, suit or proceeding may be paid
by Dimensional Visions in advance of the final disposition of the suit, action
or proceeding upon receipt of an undertaking by or on behalf of the officer or
director to repay such amount if it is ultimately determined that he or she is
not entitled to be indemnified by Dimensional Visions. Dimensional Visions may
also advance expenses incurred by other employees and agents of Dimensional
Visions upon such terms and conditions, if any, that the Board of Directors of
Dimensional Visions deems appropriate. Insofar as indemnification for
liabilities arising under the Act may be permitted to directors, officers or
persons controlling Dimensional Visions pursuant to the foregoing provisions, in
the opinion of the Commission, such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
CERTAIN TRANSACTIONS
None.
17
<PAGE>
STOCK OPTION PLANS
1996 EQUITY INCENTIVE PLAN
In June 1996, Dimensional Visions adopted the 1996 Equity Incentive Plan (the
"1996 Plan") covering 10,000,000 shares of Dimensional Visions' Common Stock
pursuant to which employees, consultants and other persons or entities who were
in a position to make a significant contribution to the success of Dimensional
Visions were eligible to receive awards in the form of incentive or
non-incentive options, stock appreciation rights, restricted stock or deferred
stock. The 1996 Plan will terminate ten years after June 12, 1996, the effective
date of the 1996 Plan. The 1996 Plan is administered by the Board of Directors.
In its discretion, the Board of Directors may elect to administer the 1996 Plan.
Restricted stock entitles the recipients to receive shares of Dimensional
Visions' Common Stock subject to such restriction and condition as the
Compensation Committee may determine for no consideration or such considerations
as determined by the Compensation Committee. Deferred stock entitles the
recipients to receive shares of Dimensional Visions' Common Stock in the future.
As of the date of this prospectus, 5,002,978 shares have been issued pursuant to
this plan. The Company has decided that it will not issue any additional shares
under the 1996 Plan, but will instead issue options under its 1999 Stock Option
Plan.
1999 STOCK OPTION PLAN
On November 15, 1999, the Board of Directors of Dimensional Visions adopted the
1999 Stock Option Plan (the "1999 Plan"). This plan was approved by the a
majority of our stockholders at our January 28, 2000, stockholders' meeting. The
purpose of the 1999 Plan is to advance the interests of the Company by
encouraging and enabling acquisition of a financial interest in the Company by
its officers and other key individuals. The 1999 Plan is intended to aid the
Company in attracting and retaining key employees, to stimulate the efforts of
such individuals and to strengthen their desire to remain with the Company. A
maximum of 1,500,000 shares of the Company's Common Stock are available to be
issued under the 1999 Plan. The option exercise price will be 100% of the fair
market value of the Company's Common Stock on the date the option is granted and
will be exercisable for a period not to exceed 10 years from the date of grant.
18
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the shares of
Dimensional Visions' outstanding Common Stock beneficially owned as of the date
of this prospectus by (i) each of Dimensional Visions' directors and executive
officers, (ii) all directors and executive officers as a group, and (iii) each
other person who is known by Dimensional Visions to own beneficially more than
5% of Dimensional Visions' Common Stock.
Name and Address of Amount and Nature of Percent
Beneficial Owners(1) Beneficial Ownership(2) Ownership(2)
- -------------------- ----------------------- ------------
John D. McPhilimy 1,000,000(3) 14.0%
1340 W. Elgin Street
Chandler, AZ 85224
Bruce D. Sandig 700,000(4) 10.2%
13247 N. 3rd Place
Phoenix, AZ 85022
Roy D. Pringle 506,047(5) 7.6%
7186 W. Topeka Drive
Glendale, AZ 85308
Susan A. Gunther 75,000(6) 1.2%
26210 S. Lime Drive
Queen Creek, AZ 85242
All executive officers and directors
as a group (4 persons) 2,281,047 27.0%
- ----------
(1) Each person named in the table has sole voting and investment power with
respect to all Common Stock beneficially owned by him or her, subject to
applicable community property law, except as otherwise indicated. Except as
otherwise indicated, each of such persons may be reached through
Dimensional Visions at 2301 W. Dunlap Avenue, Suite 207, Phoenix, Arizona
85021.
(2) The percentages shown are calculated based upon the 6,169,607 shares of
Common Stock outstanding as of the date of this prospectus. The numbers and
percentages shown include the shares of Common Stock actually owned as of
the date of this prospectus and the shares of Common Stock that the
identified person or group had the right to acquire within 60 days of such
date. In calculating the percentage of ownership, all shares of Common
Stock that the identified person or group had the right to acquire within
60 days of the date of this prospectus upon the exercise of options and
warrants, or the conversion of Preferred Stock, are deemed to be
outstanding for the purpose of computing the percentage of the shares of
Common Stock owned by such person or group, but are not deemed to be
outstanding for the purpose of computing the percentage of the shares of
Common Stock owned by any other person.
(3) Mr. McPhilimy has warrants to purchase 450,000 shares of Dimensional
Visions' Common Stock at an exercise price of $.20 until October 28, 2003
and warrants to purchase 550,000 shares of Common Stock at an exercise
price of $.25 until January 27, 2005.
(4) Mr. Sandig has warrants to purchase 240,000 shares of Dimensional Visions'
Common Stock at an exercise price of $.20 until October 28, 2003 and
warrants to purchase 460,000 shares of Common Stock at an exercise price of
$.25 until January 27, 2005.
(5) Mr. Pringle owns 6,047 shares of Dimensional Visions' Common Stock. Also
included in the amount are common stock purchase warrants to purchase
210,000 shares of Dimensional Visions' Common Stock at an exercise price of
$.20 until October 28, 2003 and warrants to purchase 290,000 shares of
Common Stock at an exercise price of $.25 until January 27, 2005.
(6) Ms. Gunther has warrants to purchase 40,000 shares of Dimensional Visions'
Common Stock at an exercise price of $.50 until October 28, 2003 and
warrants to purchase 35,000 shares of Common Stock at an exercise price of
$.25 until January 27, 2005.
19
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the number of shares of Common Stock which may be
offered for sale from time to time by the Selling Stockholders. The shares
offered for sale constitute all of the shares of Common Stock known to
Dimensional Visions to be beneficially owned by the Selling Stockholders. To the
best of management's knowledge, none of the Selling Stockholders has or have any
material relationship with Dimensional Visions.
<TABLE>
<CAPTION>
Percentage
Shares of Common Owned if More
Name of Selling Stockholder Stock Offered(1) Than 1%
--------------------------- ---------------- -------
<S> <C> <C>
John Arrillaga TTEE of the John Arrillaga Survivor's TR UTA DTD 7/20/77(12) 2,000 1.20
John Arrillaga TTEE of the John Arrillaga Survivor's TR UTA DTD 7/20/77(13) 72,000 1.20
Felix Cisek 16,000 --
Henry J. Cobb 4,179 --
Leon Tad Davis(14) 43,342 1.72
Paul R. Essi 34,400 --
Felco Inc. 300 --
Melissa B. Fell 300 --
Morris B. Fell 200 --
First Fidelity Trust FBO Consulting Solutions, Ltd.(17) 28,000 1.10
Edmund L. Fochtman, Jr. 4,000
Foundation Asset Management Inc. Nominee for Baptist Foundation of Arizona as
Arizona Nonprofit Corp Agent for Hunsinger Charitable Trust 16,000 --
Four Queens Petroleum 200 --
George J. Frick 8,000 --
Jodi Geiger IRA 4,800 --
Mary F. Hauser 12,000 --
Lorenz A. Hittel 1,847 --
Joe Hrudka 4,000 --
John Huston 12,000 --
Market Pulse Journal 100,000 1.62
Mikko Kallio & Ulla Kallio JT TEN 8,000 --
Mikko Kallio 4,000 --
Robert J. Kelly(20) 140,000 7.80
Owen Family Living Trust Ben G. Owen & Fay Owen TR/UA 2,000 --
Ila Patel 16,000 --
Richard Peery Trustee UTA 07/20/77(31) 72,000 1.46
Richard T. Peery Separate Property Trust(32) 2,000 1.46
Richard T. Peery Trustee UAD 7/20/77(33) 16,000 1.46
Raymond A. Quadt TTEE(34) 30,959 1.92
W. Scott Schirmer(39) 1,999 2.01
Desmond F. Sheahan 1,847 --
Barbara A. S. Smith 4,800 --
George S. Smith Separate Property Account(44) 45,000 2.03
George S. Smith Separate Property Account(45) 45,000 2.03
George S. Smith Separate Property Account(46) 35,000 2.03
Eugene L. Snowden(47) 10,000 2.30
William H. Stevens 31,200 --
William H. Stevens 2,600 --
Scott Ward 10,000 --
Pamela J. Wilson 2,000 --
Douglas T. Yates 12,000 --
Donald John Casey Family Trust(2) 22,500 --
Everyone Counts, Inc. (2) 25,000 --
Charles Wafer(2)(53) 100,000 3.81
Janice Casey Larsen(2) 2,500 --
Michael Shapiro(2) 25,000 --
Mark B. Casey(2) 25,000 --
Robert L. Casey(2) 25,000 --
Eugene L. Snowden(2)(48) 50,000 2.30
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Percentage
Shares of Common Owned if More
Name of Selling Stockholder Stock Offered(1) Than 1%
--------------------------- ---------------- -------
<S> <C> <C>
VMR Profit Sharing Plan & Trust, Leon T. Davis, MD, Trustee(2)(57) 75,000 1.79
KFT LTD(2)(62) 70,000 12.02
Roamin Korp, Inc. (2)(63) 70,000 12.02
Kite Family Trust(2)(64) 70,000 12.02
Robert H. Kite(2)(65) 70,000 12.02
Dennis and Diane Schlegel(2) 14,000 --
Schlegel Money Purchase Plan(2) 12,000 --
Larry L. Peery(2)(59) 30,000 1.03
Mark Ward(2) 20,000 --
Edward Conn(2) 4,000 --
Robert Boesel(2) 20,000 --
Southwest Ventures(2) 10,000 --
Keith Denner(2) 10,000 --
Fidelity Insurance Company FBO Vivagy Trust(3)(87) 125,000 3.89
Fidelity Insurance Company FBO Vivagy Trust(3)(88) 125,000 3.89
Roamin Korp, Inc. (3)(66) 12,500 12.02
Robert H. Kite(3)(67) 12,500 12.02
KFT LLLP(3)(68) 75,000 12.02
Kite Family Trust(3)(69) 50,000 12.02
Thomas C. and Marilyn A. Watson Revocable Trust Dated 1/20/99(3)(89) 25,000 1.59
Thomas C. and Marilyn A. Watson Revocable Trust Dated 1/20/99(3)(90) 25,000 1.59
Roy A. Kite III(3)(93) 50,000 1.59
Surinvex International Corp. (3)(95) 70,000 3.29
Surinvex International Corp. (3)(96) 35,000 3.29
Robert J. Kelly(3)(21) 50,000 7.80
Ronald Evjen(3)(99) 20,000 1.45
Aurora Enterprises, L.L.C. Money Purchase Pension Trust, Richard M. Weinroth,
Trustee(4) 12,365 --
Andrew Revocable Trust dated 5/4/94, William V. Andrew, Trustee(4)(126) 12,365 1.11
Robert J. Kelly(4)(22) 11,955 7.80
Robert B. and Mary K. Lyons, Trustee(4) 4,223 --
Daniel and Robin Rubenstein(4) 12,365 --
Crotts Revocable Family Trust, dated 11/5/85, Glen E. Crotts, Trustee(4)(104) 24,731 1.20
Richard W. Cooper(4) 9,511 --
McCormack Partners, LLC(4)(106) 24,731 1.50
George Reiss, M.D., PC, Pension Plan, dated 3/10/94, George R. Reiss, Trustee(4) 12,258 --
New Church Ventures Credit Corporation(4)(110) 48,860 2.36
Kitty Hawk Investments, Inc. (4) 9,772 --
Hans C. Peyer(4) 12,107 --
David and Dennet Jones, TTEES FBO The Jones Family Trust(4) 4,817 --
Eugene L. Snowden(4)(85) 4,720 2.30
Dale Riker(4)(112) 28,627 1.49
Russell H. Richie(4)(114) 16,301 1.06
McCormack Partners, LLC(4)(107) 4,500 1.50
Nancy Gwen Crotts(4) 2,898 --
Robert J. Kelly(4)(23) 2,586 7.80
Glen Crotts(4)(116) 10,920 1.17
Robert Kite(4)(70) 10,920 12.02
Kite Family Trust(4)(72) 10,920 12.02
KFT Limited(4)(73) 10,920 12.02
Gregory Mastroieni(4) 10,920 --
George T. Bard(5)(120) 51,000 1.24
John L. Broan(5)(122) 30,000 1.04
Leon Tad Davis(5)(15) 42,000 1.72
Ronald G. Evjen(5)(100) 30,000 1.45
Jodi Geiger IRA(5) 4,800 --
Mitchell and Jodi Geiger(5) 7,200 --
Robert J. Kelly(5)(24) 30,000 7.80
Peter Mizioch(5) 30,000 --
Raymond Quadt(5)(35) 30,000 1.92
W. Scott Schirmer(5)(52) 30,000 2.01
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Percentage
Shares of Common Owned if More
Name of Selling Stockholder Stock Offered(1) Than 1%
--------------------------- ---------------- -------
<S> <C> <C>
Eugene L. Snowden(5)(86) 30,000 2.30
Charles W. Wafer(5)(54) 63,000 3.81
Woodland Management Company(5)(124) 42,000 1.01
Robert J. Kelly(5)(25) 15,705 7.80
Ronald G. Evjen(5)(101) 15,697 1.45
W. Scott Schirmer(5)(40) 15,479 2.01
George T. Bard(5)(121) 26,629 1.24
Raymond Quadt(5)(36) 15,479 1.92
Leon Tad Davis(5)(16) 21,671 1.72
Peter Mizioch(5) 12,252 --
Peter Mizioch IRA(5) 3,005 --
Woodland Management Company(5)(125) 21,000 1.01
Jodi Geiger IRA(5) 2,400 --
Mitchell and Jodi Geiger(5) 3,600 --
Eugene L. Snowden(5)(49) 15,000 2.30
Charles W. Wafer(5)(55) 31,500 3.81
Eugene E. Perlow(5) 4,000 --
Andrew Revocable Trust(5)(127) 8,000 1.11
Ward T. Bell(5) 4,000 --
Glen E. Crotts(5)(117) 8,000 1.17
Ila Patel(5) 8,000 --
Felix Cisek(5) 8,000 --
Ronald D. Austin(5) 4,000 --
George J. Frick(5) 4,000 --
W. Scott Schirmer(5)(42) 4,000 2.01
Foundation Asset Management(5) 8,000 --
Joe Hrudka(5) 2,000 --
Ryan Schirmer(5) 4,000 --
Edmund L. Fochtman(5) 2,000 --
Eugene E. Perlow(5) 4,000 --
Marc and Karen Shlossman(5) 4,000 --
Authur W. Lindquist(5) 7,000 --
White Wing Venture(5)(130) 8,000 1.39
Alan G. Otteni(5) 8,000 --
Ronald D. Austin(5) 12,000 --
George J. Frick(5) 12,000 --
Ila Patel(5) 24,000 --
Felix Cisek(5) 24,000 --
Alan G. Otteni(5) 24,000 --
White Wing Venture(5)(131) 24,000 1.39
Joe Hrudka(5) 5,680 --
Arthur W. Lindquist(5) 21,000 --
Marc and Karen Shlossman(5) 12,000 --
Glen E. Crotts(5)(118) 24,000 1.17
Foundation Asset Management(5) 24,000 --
Eugene E. Perlow(5) 12,000 --
Edmund L. Fochtman(5) 6,000 --
Joe Hrudka(5) 320 --
Ryan Schirmer(5) 12,000 --
W. Scott Schirmer(5)(43) 12,000 2.01
Eugene E. Perlow(5) 12,000 --
Andrew Revocable Trust(5)(129) 24,000 1.11
Ward T. Bell(5) 12,000 --
Ronald G. Evjen(5)(102) 5,000 1.45
White Wing Venture Capital Investors, LLC(5)(132) 50,000 1.39
Steve Antol(5) 25,000 --
Herbert, Schenk & Johnsen, P.C. (5) 100,000 1.59
Arlington, LLC(5) 150,000 2.37
John L. Broan TTEE FBO John L. Broan 1984 Rev Trust(5)(123) 35,000 1.04
Andrew Broan(5) 5,000 --
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Percentage
Shares of Common Owned if More
Name of Selling Stockholder Stock Offered(1) Than 1%
--------------------------- ---------------- -------
<S> <C> <C>
Robert J. Kelly(5)(26) 140,000 7.80
Kent Casey(5) 27,300 --
Robert J. Kelly(5)(27) 35,000 7.80
Rita and Dave West(5) 5,000 --
Dave Butler(5) 9,600 --
Jerry Blumberg(5) 2,400 --
White Wing Venture Capital Investors, LLC(5)(133) 4,800 1.39
David Kohler(5) 20,000 --
Raymond A. Quadt TTEE FBO Raymond A. Quadt Trust DTD 6/15/95(5)(37) 3,500 1.92
First Fidelity Trust Limited FBO Taylor Ltd(5)(134) 180,000 4.58
Geraldine Amann(5) 5,000 --
First Fidelity Trust Limited FBO Erin Ltd(5)(137) 90,000 4.73
First Fidelity Trust Limited FBO Taylor Ltd(5)(135) 90,000 4.58
First Fidelity Trust Limited FBO Erin Ltd(5)(138) 180,000 4.73
Epic Ltd(5) 50,000 --
Logan Kohler(5) 10,769 --
Taylor Kohler(5) 10,769 --
Larry Peery(5)(60) 19,231 1.03
Mark Ward(5) 19,231 --
Nick Simak(5) 5,000 --
Scott Mampre(5) 5,000 --
Lee Family Rev. Trust(5)(139) 30,000 4.73
James Kohler(5) 5,000 --
Lawrence G. Olson(5)(141) 30,000 1.12
Alice Whitbeck(5) 5,000 --
Ellen Hodges(5) 5,000 --
Mitch Geiger(5) 5,000 --
Larry Duall(5) 10,000 --
Geraldine Amann(5) 3,293 --
Aurora Enterprises(5) 25,000 --
Andrew Revocable Trust(5)(128) 25,000 1.11
Robert Kelly(5)(28) 25,000 7.80
Daniel and Robin Rubenstein(5) 25,000 --
McCormack Partners(5)(108) 50,000 1.50
Crotts Rev. Family Trust(5)(105) 50,000 1.20
George R. Reiss(5) 25,000 --
New Church Ventures(5)(111) 100,000 2.36
Kitty Hawk Investments(5) 20,000 --
Hans C. Peyer(5) 25,000 --
David J. Jones(5) 10,000 --
Viola M. Streuter(5) 732 --
Richard W. Cooper(5) 19,268 --
Eugene L. Snowden(5)(50) 10,000 2.30
W. Scott Schirmer(5)(41) 63,000 2.01
Ryan Schirmer(5) 2,000 --
Dale Riker(5)(113) 65,000 1.49
Robert Lyons(5) 10,000 --
Russell Ritchie(5)(116) 50,000 1.06
McCormack Partners(5)(109) 15,000 1.50
Nancy Gwen Crotts(5) 10,000 --
Robert J. Kelly(5)(29) 10,000 7.80
Glen Crotts(5)(119) 30,000 1.17
Robert Kite(5)(74) 30,000 12.02
Kite Family Trust((75) 30,000 12.02
KFT Limited(5)(76) 30,000 12.02
Gregory Mastroieni(5) 30,000 --
Donald John Casey Family Trust(5) 11,250 --
Everyone Counts, Inc. (5) 12,500 --
Charles Wafer(5)(56) 50,000 3.81
Janice Casey Larsen(5) 1,250 --
Michael Shapiro(5) 12,500 --
Mark B. Casey(5) 12,500 --
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Percentage
Shares of Common Owned if More
Name of Selling Stockholder Stock Offered(1) Than 1%
--------------------------- ---------------- -------
<S> <C> <C>
Eugene L. Snowden(5)(51) 25,000 2.30
VMR Profit Sharing Plan and Trust, Leon T. Davis, MD, Trustee(5)(58) 37,500 1.79
Robert L. Casey(5) 12,500 --
Southwest Ventures(5) 5,000 --
Dennis and Diane Schlegel(5) 7,000 --
Schlegel Money Purchase Plan(5) 6,000 --
Larry L. Peery(5)(61) 15,000 1.03
Mark Ward(5) 10,000 --
Edward Conn(5) 2,000 --
Robert Boesel(5) 10,000 --
Keith Denner(5) 5,000 --
Robert H. Kite(5)(77) 35,000 12.02
KFT LTD(5)(78) 35,000 12.02
Roamin Korp, Inc. (5)(79) 35,000 12.02
Kite Family Trust(5)(80) 35,000 12.02
Pamela J. Wilson(5) 1,000 --
Scott Ward(5) 5,000 --
First Fidelity Trust FBO Consulting Solutions Ltd. (5)(18) 14,000 1.10
Zaida, Ltd. Co. (5) 20,000 --
Kent Casey(5) 10,500 --
W.B. McKee Securities(5) 7,000 --
Ronald Evjen(5)(103) 20,000 1.45
Robert J. Kelly(5)(30) 50,000 7.80
Surinvex International Corp. (5)(97) 35,000 3.29
Surinvex International Corp. (5)(98) 70,000 3.29
Roy A. Kite III(5)(94) 50,000 1.59
Thomas C. and Marilyn A. Watson Revocable Trust Dated 1/20/99(5)(91) 25,000 1.59
Thomas C. and Marilyn A. Watson Revocable Trust Dated 1/20/99(5)(92) 25,000 1.59
Kite Family Trust(5)(81) 50,000 12.02
KFT LLLP(5)(82) 75,000 12.02
Robert H. Kite(5)(83) 12,500 12.02
Roamin Korp, Inc. (5)(84) 12,500 12.02
Fidelity Insurance Company Ltd. FBO Vivagy Trust(5)(143) 125,000 3.89
Fidelity Insurance Company Ltd. FBO Vivagy Trust(5)(144) 125,000 3.89
Kent Casey(5) 3,000 --
W.B. McKee Securities(5) 2,000
First Fidelity Trust FBO Consulting Solutions Ltd. (5)(19) 26,000 1.10
LK Associates(5)(136) 26,000 4.58
Bridgewater Capital Corporation(5) 5,500 --
Bridgewater Capital Corporation(5) 6,000 --
Bridgewater Capital Corporation(5) 4,000 --
Cameron Capital Management Ltd.(5) 2,000 --
Carlton Capital(5) 2,000 --
J. Patrick Carter(5) 1,500 --
Charles J. Dedde(5) 2,800 --
Stan Dreyfus(5) 1,000 --
Stan Dreyfus(5) 500 --
First Bermuda Securities, Ltd.(5) 1,500 --
Richard Houlihan(5) 1,000 --
Richard Houlihan(5) 500 --
M. Richard Keating(5) 800 --
Sean F. Lee(5)(140) 6,000 4.73
Peter Lichtman(5) 6,000 --
William Lunde(5) 1,500 --
William Lunde(5) 6,200 --
William Lunde(5) 2,000 --
William Lunde(5) 3,000 --
Ronnie Matlock --Casey(5) 210,000 3.29
Lawrence Olson(5)(142) 40,000 1.12
Raymond Quadt(5)(38) 40,000 1.92
Mary Fitzpatrick(5) 145,000 2.30
Steven Peck(5) 40,000 --
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Percentage
Shares of Common Owned if More
Name of Selling Stockholder Stock Offered(1) Than 1%
--------------------------- ---------------- -------
<S> <C> <C>
J. Buford Salmon(5) 2,000 --
J. Buford Salmon(5) 1,000 --
Leslie Singer(5) 50,000 --
Norman Williams(5) 25,000 --
Douglas T. Yates(5) 4,600 --
John D. McPhilimy(5)(7)(145) 450,000 13.95
John D. McPhilimy(5)(7)(146) 550,000 13.95
Bruce D. Sandig(5)(8)(147) 240,000 10.19
Bruce D. Sandig(5)(8)(148) 460,000 10.19
Roy D. Pringle(5)(9)(149) 290,000 7.60
Roy D. Pringle(5)(9)(150) 210,000 7.60
Susan A. Gunther(5)(10)(151) 40,000 1.20
Susan A. Gunther(5)(10)(152) 35,000 1.20
K. Scott Farmer(5)(11) 100,000 1.59
1999 Employee Stock Option Plan(6) 1,500,000 n/a
-----------
Total 11,442,475
===========
</TABLE>
- ----------
(1) All of these Shares are currently restricted under Rule 144 of the Act.
(2) Indicates Common Shares issuable upon conversion of the Company's Series
D Preferred Stock.
(3) Indicates Common Shares issuable upon conversion of the Company's Series
E Preferred Stock.
(4) Indicates Common Shares issuable upon conversion of debt.
(5) Indicates Common Shares issuable upon exercise of warrants.
(6) Indicates Common Shares issuable upon exercise of options issued under
the Plan.
(7) John D. McPhilimy is the President and Chief Executive Officer of the
Company.
(8) Bruce D. Sandig is a Senior Vice President of the Company.
(9) Roy D. Pringle is a Vice President and Chief Financial Officer of the
Company.
(10) Susan A. Gunther is a member of the Board of Directors of the Company.
(11) K. Scott Farmer is an employee of the Company.
(12) Includes 72,000 shares also held in this trust.
(13) Includes 2,000 shares also held in this trust.
(14) Includes 63,671shares also held upon exercise of warrants.
(15) Includes 65,013 shares also held upon exercise of warrants and in common
stock.
(16) Includes 85,342 shares upon exercise of warrants and in common stock.
(17) Includes 40,000 shares also held upon exercise of warrants.
(18) Includes 54,000 shares held upon exercise of warrants and in common
stock.
(19) Includes 42,000 shares also held upon exercise of warrants and in common
stock.
(20) Includes 370,246 shares also held upon exercise of warrants, conversion
of debt, and in preferred stock.
(21) Includes 460,246 shares also held upon exercise of warrants, conversion
of debt, and in common stock.
(22) Includes 498,291 shares held upon exercise of warrants and in common and
preferred stock.
(23) Includes 507,660 shares also held upon exercise of warrants and in common
and preferred stock.
(24) Includes 480,246 shares also held upon exercise of warrants, conversion
of debt and in common and preferred stock.
(25) Includes 494,541 shares held upon exercise of warrants, conversion of
debt and in common and preferred stock.
(26) Includes 370,246 shares also held upon exercise of warrants, conversion
of debt and in common and preferred stock.
25
<PAGE>
(27) Includes 475,246 shares held upon exercise of warrants, conversion of
debt and in common and preferred stock.
(28) Includes 485,246 shares upon exercise of warrants, conversion of debt and
in common and preferred stock.
(29) Includes 500,246 shares also held upon exercise of warrants, conversion
of debt and in common and preferred stock.
(30) Includes 460,246 shares held upon exercise of warrants, conversion of
debt and in common and preferred stock.
(31) Includes 18,000 shares also held by various trusts.
(32) Includes 78,000 shares held in a various trusts.
(33) Includes 74,000 shares held by various trusts.
(34) Includes 88,979 shares also held upon exercise of warrants.
(35) Includes 89,938 shares held upon exercise of warrants and in common
stock.
(36) Includes 104,459 shares held upon exercise of warrants and in common
stock.
(37) Includes 116,438 shares held upon exercise of warrants and in common
stock.
(38) Includes 79,938 shares also held upon exercise of warrants and in common
stock.
(39) Includes 124,479 shares also held upon exercise of warrants.
(40) Includes 110,999 shares also held upon exercise of warrants and in common
stock.
(41) Includes 63,478 shares also held upon exercise of warrants and in common
stock.
(42) Includes 122,478 shares also held upon exercise of warrants and in common
stock.
(43) Includes 114,478 shares also held upon exercise of warrants and in common
stock.
(44) Includes 80,000 shares also held in various property accounts.
(45) Includes 80,000 shares also held in various property accounts.
(46) Includes 90,000 shares also held in various property accounts.
(47) Includes 134,720 shares upon exercise of warrants, conversion of debt and
in preferred stock.
(48) Includes 94,720 shares upon exercise of warrants, conversion of debt and
in common stock.
(49) Includes 129,720 shares also held upon exercise of warrants, conversion
of debt and in common and preferred stock.
(50) Includes 134,720 shares upon exercise of warrants, conversion of debt and
in common and preferred stock.
(51) Includes 119,720 shares also held upon exercise of warrants, conversion
of debt and in common and preferred stock.
(52) Includes 96,478 shares also held upon exercise of warrants and in common
stock.
(53) Includes 144,500 shares also held upon exercise of warrants.
(54) Includes 181,500 shares also held upon exercise of warrants and in
preferred stock.
(55) Includes 213,000 shares held upon exercise of warrants and in preferred
stock.
(56) Includes 194,500 shares also held upon exercise of warrants and in
preferred stock.
(57) Includes 37,500 shares also held upon exercise of warrants.
(58) Includes 75,000 shares held in preferred stock.
(59) Includes 34,231 shares also held upon exercise of warrants.
(60) Includes 45,000 shares held upon exercise of warrants and in preferred
stock.
(61) Includes 49,231 shares also held upon exercise of warrants and in
preferred stock.
(62) Includes 772,760 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants and preferred stock.
(63) Includes 772,760 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
(64) Includes 772,760 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
(65) Includes 772,760 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
26
<PAGE>
(66) Includes 830,260 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
(67) Includes 830,260 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
(68) Includes 767,760 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
(69) Includes 792,760 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
(70) Includes 831,840 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
(71) Includes 831,840 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
(72) Includes 831,840 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
(73) Includes 831,840 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
(74) Includes 812,760 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
(75) Includes 812,760 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
(76) Includes 812,760 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
(77) Includes 807,760 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
(78) Includes 807,760 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
(79) Includes 807,760 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
(80) Includes 807,760 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
(81) Includes 792,760 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
(82) Includes 767,760 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
(83) Includes 830,260 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
(84) Includes 830,260 shares also held by various corporations and trusts
controlled by Robert Kite, upon exercise of warrants, conversion of debt
and preferred stock.
(85) Includes 140,000 shares upon exercise of warrants and in common and
preferred stock.
(86) Includes 114,720 shares upon exercise of warrants, conversion of debt and
in common and preferred stock.
(87) Includes 125,000 shares also held by this trust.
(88) Includes 125,000 shares also held by this trust.
(89) Includes 75,000 shares also held by this trust.
(90) Includes 75,000 shares also held by this trust.
(91) Includes 75,000 shares also held by this trust.
(92) Includes 75,000 shares also held by this trust.
27
<PAGE>
(93) Includes 50,000 shares also held upon conversion of warrants.
(94) Includes 50,000 shares also held in preferred stock.
(95) Includes 140,000 shares also held upon exercise of warrants and in
preferred stock.
(96) Includes 175,000 shares also held upon exercise of warrants and in
preferred stock.
(97) Includes 175,000 shares also held upon exercise of warrants and in
preferred stock.
(98) Includes 140,000 shares also held upon exercise of warrants and in
preferred stock
(99) Includes 70,697 shares also held upon exercise of warrants.
(100) Includes 60,697 shares also held upon exercise of warrants and in
preferred stock.
(101) Includes 75,000 shares held upon exercise of warrants and in preferred
stock.
(102) Includes 85,697 shares held upon exercise of warrants and in preferred
stock.
(103) Includes 70,697 shares held upon exercise of warrants and in preferred
stock.
(104) Includes 50,000 shares also held upon exercise of warrants.
(105) Includes 24,731 shares also held upon conversion of debt.
(106) Includes 69,500 shares held upon conversion of debt and exercise of
warrants.
(107) Includes 89,731 shares held upon conversion of debt and exercise of
warrants.
(108) Includes 44,231shares held upon conversion of debt and exercise of
warrants.
(109) Includes 79,231shares held upon conversion of debt and exercise of
warrants.
(110) Includes 100,000 shares also held upon exercise of warrants.
(111) Includes 48,860 shares held upon conversion of debt.
(112) Includes 65,000 shares also held upon exercise of warrants.
(113) Includes 28,627 shares held upon conversion of debt.
(114) Includes 50,000 shares also held upon exercise of warrants.
(115) Includes 16,301 shares held upon conversion of debt.
(116) Includes 62,000 shares also held upon exercise of warrants.
(117) Includes 64,920 shares held upon conversion of debt and exercise of
warrants.
(118) Includes 48,920 shares held upon conversion of debt and exercise of
warrants.
(119) Includes 42,920 shares also held upon conversion of debt and exercise of
warrants.
(120) Includes 26,629 shares held upon exercise of warrants.
(121) Includes 51,000 shares also held upon exercise of warrants.
(122) Includes 35,000 shares held in trust.
(123) Includes 30,000 shares also held upon exercise of warrants.
(124) Includes 21,000 shares also held upon exercise of warrants.
(125) Includes 42,000 shares also held upon exercise of warrants.
(126) Includes 57,000 shares also held upon exercise of warrants.
(127) Includes 61,365 shares also held upon exercise of warrants and conversion
of debt.
(128) Includes 44,365 shares held upon exercise of warrants and conversion of
debt.
(129) Includes 45,365 shares held upon exercise of warrants and conversion of
debt.
(130) Includes 78,800 shares also held upon exercise of warrants.
(131) Includes 62,800 shares also held upon exercise of warrants.
(132) Includes 36,800 shares also held upon exercise of warrants.
(133) Includes 82,000 shares also held upon exercise of warrants.
(134) Includes 116,000 shares held in various trusts.
(135) Includes 206,000 shares held in various trusts.
(136) Includes 260,000 shares held in various trusts.
(137) Includes 216,000 shares held in various trusts.
(138) Includes 126,000 shares held in various trusts.
(139) Includes 276,000 shares held in various trusts.
(140) Includes 300,000 shares held in various trusts.
28
<PAGE>
(141) Includes 40,000 shares also held upon exercise of warrants.
(142) Includes 30,000 shares also held upon exercise of warrants.
(143) Includes 125,000 shares also held in this trust.
(144) Includes 125,000 shares also held in this trust.
(145) Includes 550,000 shares also held upon exercise of warrants.
(146) Includes 450,000 shares held upon exercise of warrants.
(147) Includes 460,000 shares held upon exercise of warrants.
(148) Includes 240,000 shares also held upon exercise of warrants.
(149) Includes 216,047 shares also held upon exercise of warrants, including
6,047 of common stock.
(150) Includes 296,047 shares upon exercise of warrants, including 6,047 of
common stock.
(151) Includes 35,000 shares held upon exercise of warrants.
(152) Includes 40,000 shares held upon exercise of warrants.
PLAN OF DISTRIBUTION
The Shares will be offered and sold by the Selling Stockholders for their own
accounts. Dimensional Visions will not receive any of the proceeds from the sale
of the Shares pursuant to this prospectus other than from the exercise of
warrants or the conversion of debt. Dimensional Visions will pay all of the
expenses of the registration of the Shares, but shall not pay any commissions,
discounts, and fees of underwriters, dealers, or agents.
The Selling Stockholders may offer and sell the Shares from time to time in
transactions in the over-the-counter market or in negotiated transactions, at
market prices prevailing at the time of sale or at negotiated prices. The
Selling Stockholders have advised Dimensional Visions that they have not entered
into any agreements, understandings, or arrangements with any underwriters or
broker-dealers regarding the sale of their Shares, nor is there an underwriter
or coordinating broker acting in connection with the proposed sale of Shares by
the Selling Stockholders. Sales may be made directly to or through
broker-dealers who may receive compensation in the form of discounts,
concessions, or commissions from the Selling Stockholders or the purchasers of
the Shares for whom such broker-dealers may act as agent or to whom they may
sell as principal, or both (which compensation as to a particular broker-dealer
may be in excess of customary commissions).
The Selling Stockholders and any broker-dealers acting in connection with the
sale of the Shares hereunder may be deemed to be "underwriters' within the
meaning of Section 2(11) of the Act, and any commissions received by them and
any profit realized by them on the resale of Shares as principals may be deemed
underwriting compensation under the Act.
Under the Exchange Act and the regulations thereunder, any person engaged in a
distribution of the Shares offered by this prospectus may not simultaneously
engage in market making activities with respect to the Common Stock of
Dimensional Visions during the applicable "cooling off" periods prior to the
commencement of such distribution. In addition, and without limiting the
foregoing, the Selling Stockholders will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, including, without
limitation, Rules 10b-6 and 10b-7, which provisions may limit the timing of
purchases and sales of Common Stock by the Selling Stockholders.
Selling Stockholders may also use Rule 144 under the Act to sell the Shares if
they meet the criteria and conform to the requirements of such Rule.
29
<PAGE>
DESCRIPTION OF SECURITIES
The authorized capital stock of Dimensional Visions currently consists of
100,000,000 shares of Common Stock, $.001 par value, and 10,000,000 shares of
Preferred Stock, $.001 par value.
Dimensional Visions' Transfer Agent is American Stock Transfer & Trust
Corporation, 40 Wall Street, New York, New York 10005.
The following summary of certain terms of Dimensional Visions' securities does
not purport to be complete and is subject to, and qualified in its entirety by,
the provisions of Dimensional Visions' Articles of Incorporation and Bylaws.
COMMON STOCK
As of the date of this prospectus, there are 6,169,607 shares of Common Stock
outstanding.
Holders of Common Stock are each entitled to cast one vote for each share held
of record on all matters presented to stockholders. Cumulative voting is not
allowed; hence, the holders of a majority of the outstanding Common Stock can
elect all directors.
Holders of Common Stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor and,
in the event of liquidation, to share pro rata in any distribution of
Dimensional Visions' assets after payment of liabilities. The Board of Directors
is not obligated to declare a dividend and it is not anticipated that dividends
will be paid until Dimensional Visions is profitable.
Holders of Common Stock do not have preemptive rights to subscribe to additional
shares if issued by Dimensional Visions. There are no conversion, redemption,
sinking fund or similar provisions regarding the Common Stock. All of the
outstanding shares of Common Stock are fully paid and non-assessable and all of
the shares of Common Stock offered hereby will be, upon issuance, fully paid and
non-assessable.
PREFERRED STOCK
SERIES A PREFERRED STOCK
The Company's Series A Convertible 5% Preferred Stock, 100,000 shares
authorized, is convertible into common stock at the rate of 1.6 shares of common
stock for each share of the Series A Preferred. Dividends from date of issue are
payable from retained earnings, and have been accumulated on June 30 each year,
but have not been declared or paid. The Series A Preferred were issued for the
purpose of raising operating funds. As of the date of this prospectus, there are
20,500 shares of Series A Convertible 5% Preferred Stock outstanding.
SERIES B PREFERRED STOCK
The Company's Series B Convertible 8% Preferred Stock, 200,000 shares
authorized, is convertible into common stock at the rate of four shares of
common stock for each share of the Series B Preferred. Dividends from date of
issue are payable from retained earnings, and have been accumulated on June 30
each year, but have not been declared or paid. The Series B Preferred were
issued for the purpose of raising operating fund. Shares of Series B Preferred
were issued to holders of warrants to purchase such preferred stock. The funding
for the exercise of these warrants was the exchange of 1,907,000 of principal
amount of secured and unsecured notes. As of the date of this prospectus, there
are 3,500 shares of Series B Convertible 8% Preferred Stock outstanding.
SERIES C PREFERRED STOCK
The Company's Series C Convertible Preferred Stock is convertible at a rate of
0.4 shares of common stock per share of Series C Preferred and was issued to
certain holders of the Company's 10% Secured Notes in lieu of accrued interest.
30
<PAGE>
Shares of Series C Preferred were also issued in exchange for $262,750 of
interest due under secured and unsecured notes. As of the date of this
prospectus, there are 13,442 shares of Series C Convertible Preferred Stock
outstanding.
SERIES D PREFERRED STOCK
The Company's Series D Convertible Preferred Stock is convertible at a rate of
two shares of common stock per share of Series D Preferred and were issued for
the purpose of raising operating funds. As of the date of this prospectus, there
are 375,000 shares of Series D Convertible Preferred Stock outstanding.
SERIES E PREFERRED STOCK
The Company's Series E Convertible Preferred Stock is convertible at a rate of
one share of common stock per share of Series E Preferred and were issued for
the purpose of raising operating funds. As of the date of this prospectus, there
are 675,000 shares of Series E Convertible Preferred Stock outstanding.
SERIES P PREFERRED STOCK
The Company's Series P Convertible Preferred Stock is convertible at a rate of
0.4 shares of common stock per share of Series P Preferred. The Series P
Preferred was issued on September 2, 1995, to InfoPak stockholders in exchange
for (1) all of the outstanding capital stock of InfoPak, (2) as signing bonuses
for certain employees and a consultant of InfoPak, and (3) to satisfy InfoPak's
outstanding debt obligations to certain stockholders. As of the date of this
prospectus, there are 86,640 shares of Series P Convertible Preferred Stock
outstanding.
WARRANTS AND OPTIONS
As of February 10, 2000, there are 7,227,210 warrants issued and outstanding
expiring at various times until January 27, 2005. The exercise prices vary from
$.10 to $12.50 per share with a weighted average exercise price of $.56 per
share. Officers and directors of the Company own 2,275,000 of the 7,227,210
issued and outstanding warrants with a weighted average exercise price of $.23
per share. Other individuals or entities own the other 4,952,210 warrants which
have a weighted average exercise price of $.71 per share. There are 395,000
warrants with an exercise price of $.25 that expire 120 days after the
effectiveness of a registration statement by the Company. Additionally there are
712,500 warrants with an exercise price of $.50 that expire 120 days after the
effectiveness of a registration statement by the Company. There are 100,000
warrants that will be issued quarterly at the rate of 12,500 per quarter to an
employee of the Company beginning on May 1, 2000, as long as he remains in the
employ of the Company.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
Dimensional Visions by Horwitz & Beam, Irvine, California.
EXPERTS
The Financial Statements of Dimensional Visions for the fiscal years ended June
30, 1998 and June 30, 1999, included herein and elsewhere in the registration
statement, have been included herein and in the registration statement in
reliance on the report of Gitomer & Berenholz, P.C., appearing elsewhere herein,
and upon the authority of said firm as experts in accounting and auditing.
31
<PAGE>
<PAGE>
DIMENSIONAL VISIONS INCORPORATED
AND SUBSIDIARY
FINANCIAL REPORT
YEARS ENDED JUNE 30, 1999 AND 1998
AND
SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
YEARS ENDED JUNE 30, 1999 AND 1998
AND
SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Independent Auditors' Report F-2
Consolidated Financial Statements
Balance Sheets F-4
Statements of Operations F-5
Statements of Stockholders' Equity (Deficiency) F-6
Statements of Cash Flows F-10
Notes to Consolidated Financial Statements F-14
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Dimensional Visions Incorporated and Subsidiary
Phoenix, Arizona
We have audited the accompanying consolidated balance sheet of Dimensional
Visions Incorporated and Subsidiary (the "Company") as of June 30, 1999, and the
related consolidated statements of operations, stockholders' equity
(deficiency), and cash flows for each of the two years in the period ended June
30, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Dimensional Visions Incorporated
and Subsidiary as of June 30, 1999 and the results of their operations and their
cash flows for each of the two years in the period ended June 30, 1999 in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has financed its
operations primarily through the sale of its securities. As described in Note 1
to the consolidated financial statements, the Company has suffered recurring
losses from operations and has limited sales of its products, which raises
substantial doubt about the Company's ability to continue as a going concern.
The future of the Company as an operating business will depend on its ability to
F-2
<PAGE>
To the Board of Directors and Stockholders
Dimensional Visions Incorporated and Subsidiary
(1) successfully market its products, (2) obtain sufficient capital
contributions and/or financing as may be required to sustain its current
operations and fulfill its sales and marketing activities, (3) achieve a level
of sales adequate to support the Company's cost structure, and (4) ultimately
achieve a level of profitability. Management's plan concerning these matters are
also described in Note 1. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ GITOMER & BERENHOLZ, P.C.
- -----------------------------
GITOMER & BERENHOLZ, P.C.
Huntingdon Valley, Pennsylvania
October 7, 1999
F-3
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, June 30,
1999 1999
------------ ------------
ASSETS (Unaudited)
Current assets
Cash $ 573,802 $ 20,019
Notes receivable, net of allowance for bad
debts of $402,006 41,663 41,663
Accounts receivable, trade, net of allowance
For bad debts of $11,833 186,979 78,068
Inventory 2,128 6,900
Prepaid expenses 9,703 17,896
------------ ------------
Total current assets 814,275 164,546
------------ ------------
Equipment
Equipment 401,678 401,678
Furniture and fixtures 50,162 50,162
------------ ------------
451,840 451,840
Less accumulated depreciation 297,500 279,681
------------ ------------
154,340 172,159
------------ ------------
Other assets
Deferred costs 246,788 158,567
Patent rights and other assets 33,664 35,701
------------ ------------
280,452 194,268
------------ ------------
Total assets $ 1,249,067 $ 530,973
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities
Short-term borrowings $ 235,000 $ 213,767
Current portion of obligations under capital
Leases 22,638 20,552
Accounts payable, accrued expenses and other
Liabilities 380,159 534,173
------------ ------------
Total current liabilities 637,797 768,492
------------ ------------
Long-term debt 320,023 268,215
------------ ------------
Obligations under capital leases, net of
Current portion 70,168 82,033
------------ ------------
Total liabilities 1,027,988 1,118,740
------------ ------------
Stockholders' equity (deficiency)
Preferred stock - $.001 par value, authorized
10,000,000 shares; issued and outstanding
1,176,582 at December 31, 19999, and
130,810 shares at June 30, 1999 1,177 131
Additional paid-in capital 1,570,344 658,170
------------ ------------
1,571,521 658,301
Common stock - $.001 par value, authorized
100,000,000 shares; issued and outstanding
6,025,610 at December 31, 1999 and
5,138,192 shares at June 30, 1999 6,026 5,138
Additional paid-in capital 19,910,192 19,556,402
Deficit (21,266,660) (20,807,608)
------------ ------------
Total stockholders' equity (deficiency) 221,079 (587,767)
------------ ------------
Total liabilities and stockholders'
equity (deficiency) $ 1,249,067 $ 530,973
============ ============
See notes to consolidated financial statements.
F-4
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended December 31, Year Ended June 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Operating revenue $ 300,418 $ 410,400 $ 741,901 $ 609,392
Cost of sales 193,261 245,561 562,711 473,147
----------- ----------- ----------- -----------
Gross profit 107,157 164,839 179,190 136,245
Sale of product line 107,157 164,839 179,190 146,245
----------- ----------- ----------- -----------
Operating expenses
Engineering and development costs 77,152 97,085 146,480 226,237
Marketing expenses 25,367 168,324 301,630 249,607
General and administrative
Expenses 348,577 318,888 605,347 395,414
----------- ----------- ----------- -----------
Total operating expenses 451,096 584,297 1,053,457 871,258
----------- ----------- ----------- -----------
Loss before other income (expenses) (343,939) (419,458) (874,267) (325,013)
----------- ----------- ----------- -----------
Other income (expenses)
Interest expense (120,196) (29,420) (207,727) (92,117)
Interest income 5,084 21,298 18,188 30,806
Loss on sale/abandonment of
Leasehold improvements and
Equipment -- -- -- (35,335)
Bad debt expense on notes receivable -- -- (402,006) --
----------- ----------- ----------- -----------
(115,112) (8,122) (591,545 (96,646)
----------- ----------- ----------- -----------
Net loss $ (459,051) $ (427,580) $(1,465,812) $ (421,659)
=========== =========== =========== ===========
Loss per share
Basic and diluted loss per
Common share $ (.08) $ (.12) $ (.37) $ (.14)
=========== =========== =========== ===========
Shares used in computing net loss
Per share 5,759,686 3,617,089 3,973,118 3,073,650
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
($.001 Par Value) Additional ($.001 Par Value) Additional
---------------- Paid-in -------------------- Paid-in
Shares Amount Capital Shares Amount Capital Deficit Total
------- ----- --------- ---------- ------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1997 219,378 $ 219 $ 923,209 68,137,872 $68,138 $17,844,144 $(18,920,137) $(84,427)
Conversion of 2,500 shares of
Series A convertible preferred
stock valued at $25,000 into
100,000 pre-split shares of the
Company's common stock (2,500) (3) (24,997) 100,000 100 24,900 -- --
Conversion of 81,407 shares
Series P convertible preferred
stock valued at $203,517 into
814,070 pre-split shares of the
Company's common stock (81,407) (81) (203,436) 814,070 814 202,703 -- --
Conversion of 2,150 shares
Series S convertible preferred
stock valued at $11,500 into
215,000 pre-split shares of the
Company's common stock (2,150) (2) (11,498) 215,000 215 11,285 -- --
Conversion of 50,000 of
convertible debentures to 1,818,182
pre-split shares of the Company's
common stock issued pursuant to a
Regulation S offering -- -- -- 1,818,182 1,818 48,182 -- 50,000
Exercise of 1,000,000 warrants
to purchase 1,000,000 pre-split
shares of the Company's common
stock at $.10 per share -- -- -- 1,000,000 1,000 9,000 -- 10,000
Issuance of 50,000 pre-split
shares of the Company's common
stock to an employee for
compensation valued at $2,750 -- -- -- 50,000 50 2,700 -- 2,750
Issuance of 180,000 pre-split
shares of the Company's common
stock to consultants for services
valued at $11,250 -- -- -- 180,000 180 11,070 -- 11,250
The Company sold through a private
placement 1,400,000 pre-split shares
of the Company's common stock valued
at $.05 per share -- -- -- 1,400,000 1,400 68,600 -- 70,000
The Company sold through an offshore
placement 1,666,666 pre-split shares
of the Company's common stock valued
at $.045 per share -- -- -- 1,666,666 1,667 73,333 -- 75,000
</TABLE>
F-6
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
($.001 Par Value) Additional ($.001 Par Value) Additional
---------------- Paid-in -------------------- Paid-in
Shares Amount Capital Shares Amount Capital Deficit Total
------- ----- --------- ---------- ------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of 1,500,000 post-split
warrants to purchase 1,500,000
shares of the Company's common stock
at $.50 per share for a five year
period commencing January 1998 to
the investment banker connection
with private placement of the
Company's securities -- -- -- -- -- -- -- --
Issuance of 420,000 warrants to
purchase the Company's common stock
at $1 per share based on the
post-split price for a five year
period commencing during October
1997 through January 1998 in
connection with a bridge loan that
was converted to equity -- -- -- -- -- -- -- --
Issuance of 297,000 post-split
warrants to purchase the Company's
common stock at prices ranging from
approximately $.91 to $.93 per share
in connection with the issuance of
debentures that were converted to
equity for a three year period
commencing April 1998 or June 1998.
The warrant price was adjusted by
the accrued interest on the
debenture that was applied against
the warrant exercise price -- -- -- -- -- 1,660 -- 1,660
The noteholders converted
substantially all the short term
loans and related interest through
a private placement into 14,921,000
pre-split shares of the Company's
common stock valued at $1.50 per
share based on the post-split price
or $.06 per share at the pre-split
price and issued 298,808 post-split
warrants to purchase the Company's
common stock at $1.50 per share
until February 28, 1999 and $2.00
per share until February 28, 2001 -- -- -- 14,921,000 14,921 477,779 -- 492,700
</TABLE>
F-7
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
($.001 Par Value) Additional ($.001 Par Value) Additional
---------------- Paid-in -------------------- Paid-in
Shares Amount Capital Shares Amount Capital Deficit Total
------- ----- --------- ---------- ------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of a warrant to purchase
3.53 units each consisting of 16,000
shares of the Company's common stock
and 8,000 redeemable common stock
purchase warrants to the investment
banker in connection with the
private placement of the Company's
securities at $28,800 per unit for a
five year period commencing April 1998 -- -- -- -- -- 28 -- 28
1 for 25 reverse stock split -- -- -- (86,690,419) (86,691) 86,691 -- --
Net loss -- -- -- -- -- -- (421,659) (421,659)
------- ----- --------- ---------- ------- ----------- ------------ --------
Balance, June 30, 1998 133,321 $133 $683,278 3,612,101 $3,612 $18,862,075 $(19,341,796) $207,302
Conversion of 1,500 shares Series B
convertible preferred stock valued
at $15,000 into 6,000 shares of the
Company's common stock (1,500) (1) (14,999) 6,000 6 14,994 -- --
Conversion of 1,011 shares Series C
convertible preferred stock valued
at $10,110 into 47,390 shares of the
Company's common stock (1,011) (1) (10,109) 403 -- 10,110 -- --
Issuance of 1,519,688 shares of
the Company's common stock to
consultants for services valued at
$320,593 -- -- -- 1,519,688 1,520 319,073 -- 320,593
Issuance of 485,000 warrants to
purchase 485,000 shares of the
Company's common stock at $.50 per
share for a three and a half year
period commencing January 16, 1998
in connection with the issuance of
convertible debentures due July 31,
2001. Black Scholes option pricing
model was used to value the warrants -- -- -- -- -- 310,850 -- 310,850
</TABLE>
F-8
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
($.001 Par Value) Additional ($.001 Par Value) Additional
---------------- Paid-in -------------------- Paid-in
Shares Amount Capital Shares Amount Capital Deficit Total
------- ----- --------- ---------- ------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of 85,000 warrants to
purchase 85,000 shares of the
Company's common stock at $.25 per
share and issuance of 150,000
warrants to purchase 150,000 shares
of the Company's common stock at
$.10 per share for a three year
period commencing January 25, 1999
in connection with the issuance of
convertible debentures due July 1999
through October 1999. The Black
Scholes option pricing model was
used to value the warrants. -- -- -- -- -- 39,300 -- 39,300
Net loss -- -- -- -- -- -- (1,465,812) (1,465,812)
---------------------------------------------------------------------------------------------
Balance, June 30, 1999 130,810 $131 $658,170 5,138,192 $5,138 $19,556,402 $(20,807,608) $(587,767)
Conversion of 4,228 shares Series C
convertible preferred stock valued
at $42,280 into 1,688 shares of the
Company's common stock (4,228) (4) (42,276) 1,688 2 42,278 -- --
Exercise of 125,000 warrants to
purchase 125,000 shares of the
Company's common stock at $.20
per share -- -- -- 125,000 125 24,875 -- 25,000
Exercise of 150,000 warrants to
purchase 150,000 shares of the
Company's common stock at $.10
per share -- -- -- 150,000 150 14,850 -- 15,000
Issuance of 166,730 shares of the
Company's common stock to settle
accounts payable valued at $62,398 -- -- -- 166,730 167 62,231 -- 62,398
Issuance of 444,000 shares of the
Company's common stock to
consultants for services valued
at $210,000 -- -- -- 444,000 444 209,556 -- 210,000
Issuance of 375,000 shares of the
Company's Series D Preferred Stock 375,000 375 337,125 -- -- -- -- 337,500
Issuance of 675,000 shares of the
Company's Series E Preferred Stock 675,000 675 617,325 -- -- -- -- 618,000
Net loss -- -- -- -- -- -- (459,051) (459,051)
---------------------------------------------------------------------------------------------
Balance, December 31, 1999
(unaudited) 1,176,582 $1,177 $1,570,344 6,025,610 $6,026 $19,910,192 $(21,266,660) $221,079
=============================================================================================
</TABLE>
See notes to financial statements.
F-9
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months
Ended December 31, Year Ended June 30,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Operating activities
Net loss $ (459,051) $ (427,580) $(1,465,812) $ (421,659)
Adjustments to reconcile net loss to net
cash used in operating activities
Gain on sale of product line -- -- -- (410,000)
Allowance for bad debts on notes
Receivable -- -- 402,006 --
Compensation paid to officers/
employees through issuance of
warrants and common stock -- -- -- 2,750
Consulting service paid through
issuance of warrants and common
stock 22,500 13,000 65,593 11,250
Depreciation and amortization of
property and equipment 17,819 28,832 46,172 43,117
Amortization of debt discount 73,041 -- 112,132 --
Amortization of other assets and deferred costs 71,316 7,615 36,811 19,856
Interest expense paid through
reduction of warrant price to
debenture holders -- -- -- 1,660
Interest expense paid through issuance of common stock -- -- -- 73,840
Loss on sale/abandonment of leasehold
improvements and equipment -- -- -- 35,335
Transfer of prepaid expenses to
Assets sold -- -- -- (10,002)
Changes in assets and liabilities
which provided (used) cash
Accounts receivable, trade (108,911) (14,108) 66,552 (62,319)
Inventory 4,772 (13,631) 62,464 109,763
Prepaid supplies and expenses 8,193 (31,357) 7,782 (15,677)
Accounts payable, accrued expenses
and other liabilities (91,616) 120,182 94,196 26,030
----------- ----------- ----------- -----------
Net cash used in operating activities (461,937) (317,047) (572,104) (596,056)
----------- ----------- ----------- -----------
Investing activities
Payment of obligations under capital lease (9,779) (3,469) (16,477) (19,850)
Purchase of equipment -- (58,800) (57,279) (10,200)
Deposits -- -- -- (4,100)
Notes receivable -- -- -- (90,000)
Proceeds from payments on notes receivable -- 18,169 18,169 38,162
----------- ----------- ----------- -----------
Net cash used in investing activities (9,779) (44,100) (55,587) (85,988)
----------- ----------- ----------- -----------
</TABLE>
F-10
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
Six Months
Ended December 31, Year Ended June 30,
---------------------- -----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Financing activities
Proceeds from
Sale of -- -- -- 145,000
Common stock 955,500 -- --
Preferred stock net of offering costs -- -- -- 28
of $94,500 -- -- 235,000 --
Warrant right -- 485,000 485,000 --
Short-term borrowings
Long-term debt
Reduction in deferred consulting fee
contract originally paid in common stock 30,000 -- 100,000 --
Debt obligation note converted to
common stock -- -- -- 25,000
Debt obligations converted to common stock
net of offering costs of $203,140 in 1998 -- -- -- 418,860
Issuance of common stock in connection
with the exercise of warrants 40,000 -- -- 10,000
Proceeds from sale of equipment and
Supplies -- -- -- 10,000
Borrowings from factor -- 84,367 195,560 79,500
Payment of debt obligations -- (154,500) (350,060) (100,000)
Disbursement of debt issuance costs -- (33,700) (33,700) --
---------- ---------- ---------- ----------
Net cash provided by financing activities 1,025,500 381,167 631,800 588,388
---------- ---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 553,783 20,020 4,109 (93,656)
Cash, beginning of period 20,019 15,910 15,910 109,566
---------- ---------- ---------- ----------
Cash, end of period $ 573,802 $ 35,930 $ 20,019 $ 15,910
========== ========== ========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 7,152 $ 22,974 $ 34,957 $ 5,425
========== ========== ========== ==========
Issuance of common stock in connection
with consulting services $ 210,000 -- $ 320,593 $ 11,250
========== ========== ========== ==========
</TABLE>
F-11
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
AND
SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998 (UNAUDITED)
Supplemental disclosure of non-cash investing and financing activities for the
six months ended December 31, 1999:
The Company issued 1,688 shares of the Company's common stock in connection with
the conversion of Series C Convertible Preferred Stock valued at $42,280.
The Company issued 444,000 of the Company's common stock to consultants for
services valued at $210,000.
The Company issued 166,730 of the Company's common stock to settle accounts
payable valued at $62,398.
Supplemental disclosure of non-cash investing and financing activities for
fiscal year 1999:
The Company issued 6,403 shares of the Company's common stock in connection
with the conversion of convertible preferred stock valued at $25,110 as
follows:
Converted to
Value Common Stock
---------- ----------
Series B Convertible Preferred Stock $ 15,000 6,000
Series C Convertible Preferred Stock 10,110 403
---------- ----------
$ 25,110 6,403
========== ==========
The Company issued 1,519,688 shares of the Company's common stock to
consultants for services valued at $320,593.
The Company recorded additional paid-in capital of $350,150 with the
issuance of warrants to purchase 920,000 shares of the Company's common
stock in connection with the short and long-term debenture financing.
F-12
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
AND
SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998 (UNAUDITED)
Supplemental disclosure of non-cash investing and financing activities for
fiscal year 1998:
The Company recorded capital lease obligations of $138,912 relating to the
acquisition of equipment.
In connection with the sale of a product line for $410,000 the Company
recorded a note receivable.
The Company issued 72,727 shares (1,818,182 pre-split shares) of the
Company's common stock in connection with the conversion of $50,000 of
convertible debentures to common stock under a Regulation S Securities
Subscription Agreement.
The Company issued 596,840 shares (14,921,000 pre-split shares) of the
Company's common stock in connection with the conversion of $695,840
short-term debt and related interest expense.
The Company issued 45,163 shares (1,129,070 pre-split shares) of the
Company's common stock in connection with the conversion of convertible
preferred stock valued at $240,018 as follows:
Converted to
Value Common Stock
---------- ----------
Series A Convertible Preferred Stock $ 25,000 100,000
Series P Convertible Preferred Stock 203,518 814,070
Series S Convertible Preferred Stock 11,500 215,000
---------- ----------
$ 240,018 1,129,070
========== ==========
The Company issued 7,200 shares (180,000 pre-split shares) of the Company's
common stock to consultants for services valued at $11,250.
The Company issued 2,000 shares (50,000 pre-split shares) of the Company's
common stock to employees valued at $2,750 for compensation and/or accrued
compensation.
F-13
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 1: Summary of Significant Accounting Policies
DESCRIPTION OF BUSINESS, FINANCING AND BASIS OF FINANCIAL STATEMENT
PRESENTATION
Dimensional Visions Incorporated (the "Company" or "DVI") was
incorporated in Delaware on May 12, 1988. The Company produces and
markets lithographically printed stereoscopic and animation print
products. The stockholders of the Company approved a name change
effective January 15, 1998 from Dimensional Visions Group, Ltd. to
Dimensional Visions Incorporated.
The Company, through a wholly-owned subsidiary of InfoPak, Inc. has
developed a data delivery system that provides end users with specific
industry printed materials by way of a portable hand-held reader. Data
is acquired electronically from the data provided by mainframe systems
and distributed through a computer network to all subscribers.
The Company has financed its operations primarily through the sale of
its securities. The Company has had limited sales of its products
during the six months ended December 31, 1999 and the years ended June
30, 1999 and 1998. Even though the sales during the past two years
have significantly increased over the prior years, the volume of
business is not nearly sufficient to support the Company's cost
structure.
LIQUIDITY AND CAPITAL RESOURCES
The Company has incurred losses since inception of $21,266,660 and had
working capital of $176,478 as of December 31, 1999 and had a working
capital deficiency of $603,946 as of June 30, 1999. The future of the
Company as an operating business will depend on its ability to (1)
successfully market and sell its products, (2) obtain sufficient
capital contributions and/or financing as may be required to sustain
its current operations and to fulfill its sales and marketing
activities, (3) achieve a level of sales adequate to support the
Company's cost structure, and (4) ultimately achieve a level of
profitability. Management's plan to address these issues includes (a)
redirecting its marketing efforts of the Company's products and
substantially increasing sales results, (b) continued exercise of
tight cost controls to conserve cash, (c) raising additional long term
financing, and (d) selling of its subsidiary.
F-14
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 1: Summary of Significant Accounting Policies (Continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
The consolidated financial statements have been prepared on a going
concern basis which contemplates the realization and settlement of
liabilities and commitments in the normal course of business. The
available funds at June 30, 1999, plus the limited revenue is not
sufficient to satisfy the present cost structure. Management
recognizes that the Company must generate additional resources to
enable it to continue operations. Management plans include the
continued expansion of the sale of its products and the sale of
additional securities.
Further, there can be no assurances, assuming the Company successfully
raises additional funds that the Company will achieve profitability or
positive cash flow from the sale of its products. In the event the
Company is not able to secure sufficient funds on a timely basis
necessary to maintain its current operations, it may cease all or part
of its existing operations and/or seek protection under the bankruptcy
laws.
CONSOLIDATION POLICY
The consolidated financial statements include the accounts of DVI and
its wholly-owned subsidiary, InfoPak, Inc. All significant
intercompany balances and transactions have been eliminated in
consolidation.
INVENTORY
Inventory is stated at the lower of cost or market. Cost is determined
by the first-in, first-out method. Inventory consists of finished
goods of $2,128 and $6,900 as of December 31, 1999 and June 30, 1999.
EQUIPMENT, DEPRECIATION AND AMORTIZATION
Equipment is stated at cost. Depreciation, which includes amortization
of assets under capital lease is provided by the use of the
straight-line method over the estimated useful lives of the assets as
follows:
Equipment 5 - 7 years
Furniture and fixtures 5 years
F-15
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 1: Summary of Significant Accounting Policies (Continued)
PATENT RIGHTS
Costs incurred to acquire patent rights and the related technology are
amortized over the shorter of the estimated useful life or the
remaining term of the patent rights. In the event that the costs of
patent rights and/or acquired technology are abandoned, the write-off
will be charged to expenses in the period the determination is made to
abandon them.
ENGINEERING AND DEVELOPMENT COSTS
The Company charges to engineering and development costs all items of
a non-capital nature related to bringing "significant" improvement to
its product. Such costs include salaries and expenses of employees and
consultants, the conceptual formulation, design, and testing of the
products and creation of prototypes. All such costs of a capital
nature are capitalized.
INCOME TAXES
The Company accounts for income taxes under the liability method.
Deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax bases of assets
and are measured using the enacted tax rates and laws that will be in
effect when the differences are expected to reverse.
LOSS PER SHARE
The Company adopted Statement of Financial Accounting Standards
Statement No. 128, "Earnings Per Share" (FAS 128"), which is effective
for fiscal years ending after December 15, 1997. FAS 128 replaced the
calculation of primary and fully diluted earnings per share with basic
and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Dilutive earnings per share is
very similar to the previously reported fully diluted earnings per
share.
F-16
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 1: Summary of Significant Accounting Policies (Continued)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of revenue
and expenses during the reporting periods. Actual results could differ
from those estimates.
CONCENTRATION OF CREDIT RISK
The Company is subject to credit risk through trade receivables. The
Company relies on a limited number of customers for its sales. The
Company is in the process of building a customer base for its products
and, therefore, the degree of risk is substantially higher until the
base grows.
The Company also relies on several key vendors to supply plastics and
printing services. Although there are a limited number of vendors
capable of fulfilling the Company's needs, the Company believes that
other vendors could provide for the Company's needs on comparable
terms. Abrupt changes could, however, cause a delay in processing and
a possible inability to meet sales commitments on schedule, or a
possible loss of sales, which would affect operating results
adversely.
STOCK-BASED COMPENSATION
The Company accounts for stock-based awards to employees in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB Opinion No. 25") and has adopted the
disclosure-only alternative of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS
123").
F-17
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 1: Summary of Significant Accounting Policies (Continued)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The financial statements and all information in these notes as of and
for the six months ended December 31, 1999 and 1998 are unaudited, but
in the opinion of management, have been prepared on the same basis as
the audited consolidated financial statements, and include all
adjustments necessary for the fair presentation of the results of the
interim period. All adjustments reflected in the consolidated
financial statements are of a normal recurring nature. The data
disclosed in the notes to the consolidated financial statements for
this period is also unaudited.
Note 2: Cash
The Company considers all highly liquid investments, with an original
maturity of three months or less when purchased, to be cash
equivalents.
The Company maintains its cash in banks located in Arizona. The total
cash balances are insured by the FDIC up to $100,000 per financial
institution. As of December 31, 1999 and June 30, 1999, there were no
uninsured balances. As of December 31, 1999 $496,355 was held in a
brokerage account which is fully insured.
Note 3: Notes Receivable
Notes receivable consists of the following:
Interest
Rate Amount Maturity
-------- -------- --------
Sale of Product Line (1) 11% $360,506 September 2001
Sale of InfoReaders (2) 10% 83,163 August 2001
--------
443,669
Less allowance for bad debts 402,006
--------
$ 41,663
========
(1) On September 25, 1997, the Company sold one of its product lines for
$410,000 (see Note 14). During February 1998, the terms of the note
were modified. The payment period was changed to forty-eight months
and the interest rate was increased to 11%. Effective September 1998,
the modified terms provide for payments to be $11,533 per month. The
Company has been unable to collect the required monthly payments.
During the year ended June 30, 1999, the Company received three
F-18
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 3: Notes Receivable (Continued)
installments and a fee of $10,000 which was included as interest
income. Management has determined that they are currently unable to
collect the amounts due on the note. Accordingly, management has
established a 100% allowance against this note. The Company has
determined that it does not make economic sense to take back this
product line and operate this aspect of the business. The Company will
continue to pursue the collection of this note. As of December 31,
1999 no additional funds have been collected.
(2) On March 1, 1998, the Company sold InfoReaders (hardware) to a
customer for $100,000 and agreed to accept a note for $90,000 with
payments commencing on September 1, 1998. The monthly installment is
$2,904, including interest at 10% per annum for thirty-six months. The
Company has not been able to collect the required monthly payments due
on this note. The customer has filed for an arbitration hearing on the
basis that the Company failed to provide data to support their
customer base and is requesting payment of $1,000,000 for the lost
business. The Company made provisions to acquire the data for the
customer. However, the customer was unwilling to pay for the
acquisition cost of the data and bring their account current.
Accordingly, without the updated data and failure to pay the
outstanding balance due the Company, there is no reason to support the
system. No date has been set for the arbitration hearings. The Company
has filed a counter-claim for full payment of the note. The Company
has taken a $41,500 allowance against the balance due on the note as
of June 30, 1999.
Note 4: Deferred Costs
Deferred costs as of December 31, 1999 and June 30, 1999 consists of
the following:
December 31, 1999 June 30, 1999
----------------- -------------
Consulting contract $227,956 $133,788
Debt issuance costs 18,832 24,779
-------- --------
$246,788 $158,567
======== ========
On April 5, 1999, the Company entered into a contract with a
consultant. The fee for services for 36 months is $287,668 ($7,991 per
month), or upon signing of the contract, the Company will issue
$255,000 of the Company's common stock. The market value of the common
stock on April 5, 1999 was $.1875 per share and 1,360,000 shares of
F-19
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 4: Deferred Costs (Continued)
registered common stock was issued (registered under Form S-8). In
addition, the warrant price on previously issued 500,000 warrants will
be reduced to $.10 per share. In accordance with the terms of the
agreement either party may terminate or change the terms of this
agreement with 30 days written notice. On May 28, 1999 the term of
this agreement was modified and the term was reduced to 22 months.
Under the provisions of the contract, the consultant is required to
either return the shares or the cash equivalency of the reduction.
Accordingly on May 28, 1999, the Company received a $100,000 payment
from the consultant.
The Company incurred debt issuance costs of $33,700 which is being
amortized over 34 months, the term of the Series A convertible
debentures.
On July 29, 1999, the Company entered into a contract with a
consultant. The fee for services for 36 months is $42,304 ($1,175 per
month), or upon signing of the contract, the Company will issue
$37,500 of the Company's common stock. The market value of the common
stock on July 29, 1999 was $.375 per share and 100,000 shares of
registered common stock was issued (registered under Form S-8). In
accordance with the terms of the agreement either party may terminate
or change the terms of this agreement with 30 days written notice. On
August 24, 1999 the term of this agreement was modified and the term
was reduced to 6 months. Under the provisions of the contract, the
consultant is required to either return the shares or the cash
equivalency of the reduction. Accordingly on August 24, 1999, the
Company received a $30,000 payment from the consultant.
On August 10, 1999, the Company entered into a contract with a
consultant. The fee for services for 36 months is $169,216 ($4,700 per
month), or upon signing of the contract, the Company will issue
$150,000 of the Company's common stock. The market value of the common
stock on August 10, 1999 was $.50 per share and 300,000 shares of
registered common stock was issued (registered under Form S-8). In
accordance with the terms of the agreement either party may terminate
or change the terms of this agreement with 30 days written notice.
F-20
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 5: Patent Rights and Other Assets
December 31, 1999 June 30, 1999
----------------- -------------
Patent rights $ 58,426 $ 58,426
Deposits 4,100 4,100
Trademark 225 225
-------- --------
62,751 62,751
Less accumulated amortization 29,087 27,050
-------- --------
Total $ 33,664 $ 35,701
======== ========
Note 6: Accounts Payable, Accrued Expenses and Other Liabilities
December 31, 1999 June 30, 1999
----------------- -------------
Accounts payable $206,355 $403,837
Accrued expenses
Interest 105,615 61,465
Salaries 42,875 63,159
Payroll taxes payable 5,314 5,712
-------- --------
Total $380,159 $534,173
======== ========
Note 7: Short-Term Borrowings
On May 26, 1998, the Company entered into a renewable one year
agreement with a factor that provides advances up to $100,000 based on
80% of the face value of accounts receivable factored. As collateral
for this funding, the Company has provided a security interest under
the Uniform Commercial Code in all of the Company's assets and has
guaranteed the collection of the receivable under recourse. Interest
is charged at the rate of .0067 per day or 2% a month on outstanding
borrowings. As of December 31, 1999 and June 30, 1999, there were no
outstanding borrowings under this arrangement.
During January through April 1999, the Company received short-term
borrowings of $235,000. The loans were 12% convertible debentures,
with due dates ranging from July 25, 1999 through October 29, 1999.
The terms of the debenture provide for a three month extension if the
debenture is not paid on the original due date. During the extension
period, interest is calculated at the stated rate plus 3% through the
extended due date (15%).
F-21
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 7: Short-Term Borrowings (Continued)
As of December 31, 1999 and June 30, 1999, the debentures are
convertible into 685,000 shares of the Company's common stock.
The Company also issued to the debenture holders three year warrants
which expire January 25, 2002 to purchase the Company's common stock
at $.25 per share for 85,000 warrants and at $.10 per share for
150,000 warrants.
The warrants were valued at $39,300 by Black Scholes option pricing
model. Accordingly, the debentures were discounted for the value
allocated to the warrants and additional paid-in capital was recorded.
As of June 30, 1999, additional interest expense of $18,067 was
recorded and the remaining unamortized discount was $21,233. As of
June 30, 1999, the discounted value of the debenture was $213,767.
As of December 31, 1999, the short-term borrowings of $235,000 and
related accrued interest is in default. The Company failed to pay the
principal and interest payment on the notes. However, the Company
extended an offer to the holders of the short-term notes to convert
their debt and accrued interest to equity in the Company. The offer
which was accepted by all of the existing note holders permits the
conversion of debt into shares of the Company's common stock at $.375
per share. Interest on the short-term borrowings continues to accrue
at 12% per annum until the filing of a registration statement is
completed.
Note 8: Long-Term Debt
During July through September 1998, the Company through a private
placement was able to borrow $485,000 through the issuance of Series A
12% convertible secured debentures.
The debentures are due July 31, 2001. Interest is accrued and payable
on July 31 of each year and the first interest payment is due July 31,
1999. In the event the Company fails to pay the debenture holders any
accrued interest or principal the default rate is 16% from the due
date through the date paid.
On July 15, 1998, the Company entered into a security agreement with
the debenture holders that grants a security interest in substantially
all the assets of the Company.
F-22
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 8: Long-Term Debt (Continued)
As of June 30, 1999, the debentures are convertible into 485,000
shares of the Company's common stock.
The Company also issued to the debenture holders three year warrants
which expire January 15, 2001 to purchase the Company's common stock
at $.50 per share.
The warrants were valued at $310,850 by using the Black Scholes option
pricing model. Accordingly, the debentures were discounted for the
value allocated to the warrants and additional paid-in capital was
recorded. As of June 30, 1999 additional interest expense of $94,065
was recorded and the remaining unamortized discount was $216,785. As
of December 31, 1999 the remaining unamortized discount was $164,977.
As of December 31, 1999 ad June 30, 1999, the discounted value of the
debentures was $320,023 and $268,215, respectively.
On July 31, 1999, the Company failed to make an interest payment to
the debenture holders. The Company extended an offer to the debenture
holders to convert their debt and accrued interest to equity in the
Company. The offer which was accepted by all of the existing debenture
holders permits the conversion of debt into shares of the Company's
common stock at $.375 per share. Interest on the debentures continues
to accrue at 12% per annum until the filing of a registration
statement is completed.
Note 9: Leases
The company leases certain equipment under a master lease agreement,
which are classified as capital leases. The equipment leases have a
five year term with an option to acquire the equipment for $1 at the
end of the lease term. Leased capital assets included in equipment was
as follows:
December 31, 1999 June 30, 1999
----------------- -------------
Equipment $138,912 $138,912
Less accumulated
Amortization 31,424 21,502
-------- --------
$107,488 $117,410
======== ========
F-23
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 9: Leases (Continued)
Future minimum payments, by year and in the aggregate, under
noncancellable capital leases and operating leases with terms of one
year or more consist of the following:
December 31, 1999 June 30, 1999
Years Ending ----------------- ------------- June 30, 1999
June 30, Capital Leases Operating Leases
-------- -------------- ----------------
2000 $19,700 $39,400 $ 66,600
2001 39,400 39,400 33,800
2002 39,400 39,400 --
2003 29,550 29,550 --
------ ------ --------
128,050 147,750 $100,400
========
Amounts representing
interest 35,244 45,165
------ ------
Present value of net
minimum payments 92,806 102,585
Current portion 22,638 20,552
------ ------
Long-term portion $70,168 $82,033
======= =======
The Company's rental expense for operating leases was approximately
$69,100 in 1999 and $33,700 in 1998 and for the six months ended
December 31, 1999 and 1998 rental expense was $33,668 and $28,604,
respectively.
Note 10: Commitments and Contingencies
The Company has outstanding employment and consulting contracts that
expire through June 30, 2001 as follows:
Years Ending June 30, Amount
--------------------- --------
2000 $246,000
2001 102,500
--------
$348,500
========
F-24
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 10: Commitments and Contingencies (Continued)
On June 22,1999, a customer filed a lawsuit demanding a claim for loss
of value or market share for $1,000,000 under the provision of a
distributorship contract that provides for arbitration on a material
breach of contract. The suit was amended by the customer on July 6,
1999. To date the Company was never notified of a breach of contract
for which the Company has a period of time to remedy the breach under
the terms of the distributorship contract. The customer has breached
the contract by failing to pay for products, licensing fees and
failing to provide the Company with information on the number of
updates needed for the units. The Company has filed a counter claim
for payment of the entire amount of the note for product received by
the customer and the outstanding accounts receivable balance.
Management believes that this matter will be resolved favorably and
will not have an adverse effect on its financial position.
There are no other legal proceedings which the Company believes will
have a material adverse effect on its financial position.
The Company has not declared dividends on Series A or B Convertible
Preferred Stock. The cumulative dividends in arrears through December
31, 1999 and June 30, 1999 was approximately $88,000.
Note 11: Common Stock
The shareholders of record at the close of business on December 5,
1997, voted on January 15, 1998, to approve a 1 for 25 reverse stock
split effective that date. In this report, all per share calculations
have been adjusted to give retroactive effect to a 1 for 25 reverse
split.
As of December 31, 1999, there are outstanding 5,817,210 of non-public
warrants to purchase the Company's common stock at prices ranging from
$0.10 to $12.50 with a weighted average price of $0.63 per share.
As of December 31, 1999, there were 1,176,582 shares of various
classes of Convertible Preferred Stock outstanding which can be
converted to 1,515,833 shares of common stock.
As of December 31, 1999, there were $485,000 of secured debentures
which can be converted into 485,000 shares of the Company's common
stock and $235,000 of short-term borrowings which can be converted
into 685,000 shares of the Company's common stock.
F-25
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 11: Common Stock (Continued)
The total number of shares of the Company's common stock that would
have been issuable upon conversion of the outstanding debt, warrants
and preferred stock equaled 8,503,043 shares as of December 31, 1999,
and would be in addition to the 6,025,607 shares of common stock
outstanding as of December 31, 1999.
During August and September 1999, the Company issued 1,688 shares its
Common Stock as a result of the conversion of 4,228 shares of Series C
Convertible Preferred Stock.
During the six months ended December 31, 1999, the Company issued
444,000 shares of its common stock to consultants for services valued
at $210,000.
During August 1999, the Company issued 166,730 shares of its common
stock in lieu of cash to settle $62,398 of accounts payable.
On July 15, 1999, the Company issued 90,000 shares of its stock in
connection with the exercise of warrants.
As of June 30, 1999, there are outstanding 4,746,710 of non-public
warrants and options to purchase the Company's common stock at prices
ranging from $.20 to $12.50 with a weighted average price of $.2339
per share.
As of June 30, 1999, there were 130,810 shares of various classes of
Convertible Preferred Stock outstanding which can be converted to
92,524 shares of common stock (see Note 11).
As of June 30, 1999, there were short-term convertible debentures
which can be converted to 685,000 shares of common stock.
As of June 30, 1999, there were Series A convertible debentures which
can be converted to 485,000 shares of common stock.
The total number of shares of the Company's common stock that would
have been issuable upon conversion of the outstanding warrants,
options and preferred stock equaled 6,009,234 shares as of June 30,
1999, and would be in addition to the 5,138,192 shares of common stock
outstanding as of June 30, 1999.
The Company issued during the year ended June 30, 1999, 1,519,688
shares of the Company's common stock to consultants for services
F-26
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 11: Common Stock (Continued)
(including $133,788 as deferred) valued at $320,593 (average price per
share $.21).
During July 1997, 1,400,000 shares (pre-split) of the Company's common
stock was sold to third parties in a private placement for $70,000
($.05 per share).
On July 14, 1997, the Company issued 1,818,182 (pre-split) shares of
the Company's common stock in connection with the conversion of a
$50,000 convertible debenture to common stock under a Regulation S
offering ($.0275 per share).
On September 30, 1997, the Company issued 1,666,666 (pre-split) shares
of the Company's common stock to a third party for $75,000 under a
Regulation S offering ($.045 per share).
On December 30, 1997, the Company issued 1,000,000 (pre-split) shares
of the Company's common stock in connection with the exercise of
1,000,000 warrants (pre-split) at $.10 per share.
The Company issued 180,000 (pre-split) shares of the Company's common
stock to consultants for services valued at $11,250 (average price per
share $.0625).
The Company issued to an employee 50,000 (pre-split) shares of the
Company's common stock for compensation valued at $2,750 ($.055 per
share).
The Company issued 1,128,800 (pre-split) shares of the Company's
common stock in connection with the conversion of preferred stock
valued at $240,018.
On April 8, 1998, the Company issued 564,840 post-split shares
(14,121,000 pre-split shares) of the Company's common stock in
connection with the conversion of short-term financing into units.
Each unit consists of 16,000 (post-split) shares of the Company's
common stock and 8,000 (post-split) redeemable common stock purchase
warrants which provides the right to purchase 8,000 shares of the
Company's common stock at $1.50 per share until February 28, 1999 and
$2.00 per share until February 28, 2001. The unit price is $24,000.
The Company sold 35.3 units.
On June 12, 1998, the Company issued 800,000 (pre-split) shares of the
Company's common stock in connection with the conversion of short-term
financing into units, as described in the previous paragraph. The
Company sold 2 units for $48,000.
F-27
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 12: Preferred Stock
The Company raised, through the sale of these units, approximately
$695,840 less offering costs of approximately $203,140 for net
proceeds to the Company of $492,700.
The Company has authorized 10,000,000 shares of $.001 par value per
share Preferred Stock, of which the following were issued and
outstanding:
Allocated Outstanding
--------- -----------
December 31, 1999 June 30, 1999
----------------- -------------
Series A Preferred 100,000 23,000 23,000
Series B Preferred 200,000 3,500 3,500
Series C Preferred 1,000,000 13,442 17,670
Series D Preferred 375,000 375,000 --
Series E Preferred 1,000,000 675,000 --
Series P Preferred 600,000 86,640 86,640
--------- --------- -------
Total Preferred Stock 3,325,000 1,176,582 130,810
========= ========= =======
The Company's Series A Convertible 5% Preferred Stock ("Series A
Preferred"), 100,000 shares authorized, is convertible into common
stock at the rate of 1.6 shares of common stock for each share of the
Series A Preferred. Dividends from date of issue are payable from
retained earnings, and have been accumulated on June 30 each year, but
have not been declared or paid.
The Company's Series B Convertible 8% Preferred Stock ("Series B
Preferred") is convertible at the rate of 4 shares of common stock for
each share of Series B Preferred. Dividends from date of issue are
payable on June 30 from retained earnings at the rate of 8% per annum
and have not been declared or paid.
The Company's Series C Convertible Preferred Stock ("Series C
Preferred") is convertible at a rate of 0.4 shares of common stock per
share of Series C Preferred.
The Company's Series D Convertible Preferred Stock ("Series D
Preferred") is convertible at a rate of 2 shares of common stock per
share of Series D Preferred.
The Company's Series E Convertible Preferred Stock ("Series E
Preferred") is convertible at a rate of 1 share of common stock per
share of Series E Preferred.
The Company's Series P Convertible Preferred Stock ("Series P
Preferred") is convertible at a rate of 0.4 shares of common stock for
each share of Series P Preferred.
F-28
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 12: Preferred Stock (Continued)
The Company's Series A Preferred and Series B Preferred were issued
for the purpose of raising operating funds. The Series C Preferred was
issued to certain holders of the Company's 10% Secured Notes in lieu
of accrued interest and also will be held for future investment
purposes.
The Series P Preferred was issued on September 12, 1995, to InfoPak
shareholders in exchange for (1) all of the outstanding capital stock
of InfoPak, (2) as signing bonuses for certain employees and a
consultant of InfoPak, and (3) to satisfy InfoPak's outstanding debt
obligations to certain shareholders.
Shares of Series B Preferred were issued to holders of warrants to
purchase such preferred stock. The funding for the exercise of these
warrants was the exchange of $1,907,000 of principal amount of secured
and unsecured notes.
Shares of Series C Preferred were also issued in exchange for $262,750
of interest due under the secured and unsecured notes.
The Company raised $375,000 net of offering costs of $37,500 through
this issuance of 375,000 shares of its Series D Preferred. These
shares were issued for the purpose of raising operating funds.
The Company raised $675,000 net of offering costs of $57,000 through
this issuance of 675,000 shares of its Series E Preferred. These
shares were issued for the purpose of raising operating funds.
Note 13: Stock Option Plan and Equity Incentive Plan
The Company has adopted a stock option plan (the "Plan") covering
1,500,000 shares post-split (increased from 20,000 post-split by the
Board of Directors on January 13, 1998) of the Company's common stock
$.001 par value, pursuant to which officers, directors, key employees
and consultants of the Company are eligible to receive incentive, as
well as non-qualified stock options and Stock Appreciation Rights
("SAR's"). The Plan, which has been extended for 10 years by the Board
of Directors on January 13, 1998, and expires September 2008, will be
administered by the Board of Directors or a committee chosen
therefrom. This plan must be formally approved by the stockholders of
the Company. Incentive stock options granted under the Plan are
exercisable for a period of up to 10 years
F-29
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 13: Stock Option Plan and Equity Incentive Plan (Continued)
from the date of grant at an exercise price, which is not less than
the fair market value of the common stock on the date of the grant,
except that the terms of an incentive stock option granted under the
Plan to a stockholder owning more than 10% of the outstanding common
stock may not exceed five years and the exercise price of an incentive
stock option granted to such a stockholder may not be less than 110%
of the fair market value of common stock on the date of the grant.
Non-qualified stock options may be granted on terms determined by the
Board of Directors or a committee designated by the Board of
Directors. SAR's which give the holder the privilege of surrendering
such rights for the appreciation in the Company's common stock between
the time of grant and the surrender, may be granted on any terms
determined by the Board of Directors or committee designated by the
Board of Directors. No SAR's have been granted.
A summary of transactions under this Plan is as follows:
Weighted
Average
Exercise
Price
Shares Per Share
---------- ----------
Options outstanding
July 1, 1997 -- $ --
Grants 1,300,000 $ .93
Cancelled -- --
---------- ----------
Options outstanding
June 30, 1998 1,300,000 .93
Grants -- --
Cancelled (1,300,000) (.93)
---------- ----------
Options outstanding
June 30, 1999 -- $ --
========== ==========
Options exercisable
at end of year -- $ --
========== ==========
F-30
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 13: Stock Option Plan and Equity Incentive Plan (Continued)
The Company on June 13, 1996 adopted the 1996 Equity Incentive Plan
(the "Plan") covering 10,000,000 shares of the Company's common stock
$.001 par value, pursuant to which officers, directors, key employees
and consultants of the Company are eligible to receive incentive, as
well as non-qualified stock options, SAR's, and Restricted Stock and
Deferred Stock. The Plan, which expires in June 2006, will be
administered by the Compensation Committee of the Board of Directors.
Incentive stock options granted under the Plan are exercisable for a
period of up to 10 years from the date of grant at an exercise price,
which is not less than the fair market value of the common stock on
the date of the grant, except that the terms of an incentive stock
option granted under the Plan to a stockholder owning more than 10% of
the outstanding common stock may not exceed five years and the
exercise price of an incentive stock option granted to such a
stockholder may not be less than 110% of the fair market value of
common stock on the date of the grant. Non-qualified stock options may
be granted on terms determined by the Compensation Committee of the
Board of Directors. SAR's which give the holder the privilege of
surrendering such rights for the appreciation in the Company's common
stock between the time of grant and the surrender, may be granted on
any terms determined by the Compensation Committee of the Board of
Directors.
Restricted stock awards entitle the recipient to acquire shares for no
cash consideration or for consideration determined by the Compensation
Committee. The award may be subject to restrictions, conditions and
forfeiture as the Committee may determine. Deferred stock award
entitles recipient to receive shares in the future. Since inception of
this plan in 1996 through December 31, 1999, 5,002,978 shares of
common stock has been issued. For the year ended June 30, 1999,
1,519,688 shares of common stock have been issued at prices ranging
from $.1875 to $.6562 per share. For the six months ended December 31,
1999, 444,000 shares of common stock have been issued at prices
ranging from $.37 to $.625 per share. In addition, as of December 31,
1999, no options or SAR's have been granted. As of June 30, 1998,
7,200 (post-split) shares of common stock have been issued under this
plan at prices ranging from $1.50 to $2.00 per share. In addition, as
of June 30, 1998, no options or SAR's have been granted.
F-31
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 13: Stock Option Plan and Equity Incentive Plan (Continued)
If the Company had elected to recognize compensation expense based on
the fair value of stock plans as prescribed by FAS No. 123, the
Company's net loss and net loss per share would have been increased to
the pro forma amounts indicated below:
Year Ended June 30,
Six Months Ended ------------------
December 31, 1999 1999 1998
----------------- ---- ----
Net Loss - as reported $(459,051) $(1,465,812) $(421,659)
Net Loss - pro forma $(459,051) $(1,465,812) $(855,464)
Net Loss per share -
as reported ($.08) ($.37) $(.14)
Net Loss per share -
pro forma ($.08) ($.37) $(.28)
The weighted-average fair value at the date of grant for options
granted in 1998 was $.93. The fair value of each option grant is
estimated on the date of grant using the Black-Scholes Option Pricing
Model. The following weighted average assumptions were used: no
dividends; expected volatility factor of .99; risk-free interest of
6.25%; and an expected life of five years. The compensation expense
and pro forma net loss may not be indicative of amounts to be included
in future periods. All references to the number of shares under option
and option prices have been adjusted to reflect a 1 for 25 reverse
stock split effective January 15, 1998.
Note 14: Sale of Product Line
On September 25, 1997, the Company sold one of its product lines, the
real estate multiple listing data delivery system. The purchase price
was $410,000 plus the assumption of a $59,247 contingent liability to
a third party. At closing a promissory note for $410,000 was delivered
to the Company. The terms of the note provided for 36 monthly
installments of $13,330, including interest at 10% per annum,
commencing on October 25, 1997. During February 1998, the terms of the
note were modified. The payment period was changed to forty-eight
months and the interest rate was increased to 11%. Effective September
1998, the modified terms provide for payments to be $11,533 per month.
The Company has been unable to collect the required monthly payments
(see Note 3).
F-32
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 15: Income Taxes
The tax effects of significant items comprising the Company's net
deferred taxes as of June 30, 1999 were as follows:
Deferred tax assets:
Goodwill $ 311,000
Net operating loss carryforwards 6,207,000
-----------
6,518,000
Deferred tax liabilities
Allowance for bad debts 173,000
Equipment 79,000
Patent rights 4,000
-----------
256,000
Net deferred tax asset 6,262,000
Valuation allowance (6,262,000)
-----------
Net deferred tax asset reported $ --
===========
The change in valuation allowance for the year ended June 30, 1999 was
increased by approximately $151,000.
There was no provision for current income taxes for the years ended
June 30, 1999 and 1998. Additionally there was no provision for
current income taxes for the six months ended December 31, 1999 and
1998.
The federal net operating loss carryforwards of approximately
$17,632,000 expires in various years through 2019. In addition the
Company has state carryforwards of approximately $2,358,000.
The Company has had numerous transactions in its common stock. Such
transactions may have resulted in a change in the Company's ownership,
as defined in the Internal Revenue Code Section 382. Such change may
result in an annual limitation on the amount of the Company's taxable
income which may be offset with its net operating loss carryforwards.
The Company has not evaluated the impact of Section 382, if any, on
its ability to utilize its net operating loss carryforwards in future
years.
F-33
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 16: Segment of Business Reporting
The operations of the Company are divided into the following business
segments for financial reporting purposes.
* Lithographically printed stereoscopic prints commonly referred to
as three-dimensional prints and litho-graphically printed
animation.
* Hardware and software information and audio playback systems and
method products and programs.
There are no intersegment or foreign sales. For the period ended
December 31, 1999 three customers accounted for approximately 89% of
the lithographic sales and two customers accounted for approximately
98% of the hardware and software information and playback systems. For
the year ended June 30, 1999 three customers accounted for
approximately 47% of the lithographic sales and two customers
accounted for approximately 94% of the hardware and software
information and playback systems.
Financial information by business segments is as follows:
Year Ended June 30, 1999
-------------------------------------------
Hardware
Lithographic and Software Consolidated
------------ ------------ ------------
Net customer sales $ 613,989 $ 127,912 $ 741,901
Interest income -- 18,188 18,188
Interest expense 207,726 -- 207,726
Operating loss (852,174) (22,093) (874,267)
Segment assets 469,526 61,447 530,973
Depreciation and
amortization 33,955 12,217 46,172
Bad debt expense on
notes receivable -- 402,006 402,006
Six Months Ended December 31, 1999
-------------------------------------------
Hardware
Lithographic and Software Consolidated
------------ ------------ ------------
Net customer sales $ 278,221 $ 22,197 $ 300,418
Interest income 5,084 -- 5,084
Interest expense 120,196 -- 120,196
Operating loss (199,031) (144,908) (343,939)
Segment assets 1,187,491 61,576 1,249,067
Depreciation and
amortization 17,646 173 17,819
F-34
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(Information pertaining to the six months ended
December 31, 1999 and 1998 is unaudited)
Note 17: Subsequent Events
The Company sold 1,250,000 shares of the Company's common stock for
$787,500, net of estimated offering costs of $87,500, through a
private placement of its common stock during August through October 7,
1999.
The Company extended an offer to the debenture holders and certain
creditors to convert their debt to equity in the Company. The offer
which expires on October 15, 1999 permits the conversion of debt into
shares of the Company's common stock at $.375 per share. As of October
7, 1999, the entire outstanding balance of $720,000 of debentures
(discounted value $481,982 at June 30, 1999) and $60,748 of accounts
payable will be converted to 2,081,995 shares of the Company's common
stock. Interest on the debentures continues to accrue at 12% per annum
until the filing of a registration statement is completed.
The following pro-forma gives effect to the subsequent events as
indicated in the above paragraphs as if the transactions occurred on
June 30, 1999:
Actual Pro-forma
------------ ------------
Current liabilities $ 768,492 $ 493,977
Long-term debt 268,215 --
Obligations under capital lease net
of current portion 82,033 82,033
------------ ------------
Total liabilities 1,118,740 576,010
------------ ------------
Stockholders' equity (deficiency)
Preferred stock 131 131
Additional paid-in capital 658,170 658,170
------------ ------------
658,301 658,301
Common stock 5,138 8,470
Additional paid-in capital 19,556,402 21,121,318
Deficit (20,807,608) (20,807,608)
------------ ------------
(587,767) 980,481
------------ ------------
Total liabilities and stockholders'
equity (deficiency) $ 530,973 $ 1,556,491
============ ============
F-35
<PAGE>
====================================== ======================================
YOU SHOULD RELY ONLY ON THE
INFORMATION CONTAINED IN THIS DOCUMENT
OR THAT WE HAVE REFERRED TO YOU. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE
YOU WITH INFORMATION THAT IS DIMENSIONAL VISIONS INCORPORATED
DIFFERENT. THE DELIVERY OF THIS
PROSPECTUS AND ANY SALE MADE BY THIS
PROSPECTUS DOESN'T IMPLY THAT THERE
HAVEN'T BEEN CHANGES IN THE AFFAIRS OF
DIMENSIONAL VISIONS SINCE THE DATE OF
THIS PROSPECTUS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
TABLE OF CONTENTS 11,422,475
SHARES OF COMMON STOCK
PAGE
----
Prospectus Summary 1
Risk Factors 3
Market for Common Stock and
Related Stockholder Matters 6
Dividend Policy 6 --------------
Management's Discussion and PROSPECTUS
Analysis of Financial --------------
Condition and Results of
Operations 7
Business of Dimensional Visions 11
Management 15
Employment and Related Agreements 16
Certain Transactions 17
Principal Stockholders 19
Selling Stockholders 20
Plan of Distribution 29
Description of Securities 30
Legal Matters 31
Experts 31
Financial Statements F-1
DEALER PROSPECTUS DELIVERY
OBLIGATION. UNTIL MAY 11, 2000 (90
DAYS AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT
PARTICIPATING IN THE DISTRIBUTION, MAY FEBRUARY 11, 2000
BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN
ADDITION TO THE OBLIGATION OF DEALERS
TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
====================================== ======================================
<PAGE>
DIMENSIONAL VISIONS INCORPORATED
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is required by its Bylaws and Certificate of Incorporation to
indemnify, to the fullest extent permitted by law, each person that the Company
is permitted to indemnify. The Company's Charter requires it to indemnify such
parties to the fullest extent permitted by Sections 102(b)(7) and 145 of the
Delaware General Corporation Law.
Section 145 of the Delaware General Corporation Law permits the Company to
indemnify its directors, officers, employees, or agents against expenses,
including attorneys fees, judgments, fines and amounts paid in settlements
actually and reasonably incurred in relation to any action, suit, or proceeding
brought by third parties because they are or were directors, officers,
employees, or agents of the corporation. In order to be eligible for such
indemnification, however, the directors, officers, employees, or agents of the
Company must have acted in good faith and in a manner they reasonably believed
to be in, or not opposed to, the best interests of the Company. In addition,
with respect to any criminal action or proceeding, the officer, director,
employee, or agent must have had no reason to believe that the conduct in
question was unlawful.
In derivative actions, the Company may only indemnify its officers, directors,
employees, and agents against expenses actually and reasonably incurred in
connection with the defense or settlement of a suit, and only if they acted in
good faith and in a manner they reasonably believed to be in, or not opposed to,
the best interests of the corporation. Indemnification is not permitted in the
event that the director, officer, employee, or agent is actually adjudged liable
to the Corporation unless, and only to the extent that, the court in which the
action was brought so determines.
The Company's Certificate of Incorporation permits the Company to indemnify its
directors except in the event of: (1) a breach of the duty of loyalty to the
Company or its stockholders; (2) an act or omission that involves intentional
misconduct or a knowing violation of the law and an act or omission not in good
faith; (3) liability arising under Section 174 of the Delaware General
Corporation Law, relating to unlawful stock purchases, redemptions, or payment
of dividends; or (4) a transaction in which the potential indemnity received an
improper personal benefit.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers, or persons controlling the Company pursuant to
the foregoing provisions, the Company has been informed that in the opinion of
the Commission, such indemnification is against public policy as expressed in
the Act and is therefore unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC Registration Fee $ 2,544
Accounting Fees and Expenses $ 7,500
Legal Fees and Expenses $ 15,000
Printing Expenses $ 7,500
Miscellaneous $ 4,456
---------
Total $ 37,000
=========
II-1
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
On September 15, 1998, the Company completed a private placement (the "1998 Debt
Private Placement") of $485,000 of its Series A 12% convertible secured
debentures. The debentures are due July 31, 2001. Interest is accrued and
payable on July 31 of each year. The Company also issued to the debenture
holders three year warrants which expire January 15, 2001, to purchase the
Company's common stock at $.50 per share. The 1998 Debt Private Placement was
exempt from the registration provisions of the Securities Act of 1933, as
amended (the "Act") by virtue of Section 4(2) of the Act, as transactions by an
issuer not involving any public offering. The securities issued pursuant to the
1998 Debt Private Placement were restricted securities as defined in Rule 144 of
the Act. The offering generated net proceeds of approximately $451,050. All
investors in the 1998 Debt Private Placement were accredited investors as that
term is defined in Rule 501 of Regulation D adopted under the Act.
On April 29, 1999, the Company completed a private placement (the "1999 Debt
Private Placement") of $235,000 of its short-term debt securities. The loans
were 12% convertible debentures with due dates ranging from July 25, 1999,
through October 29, 1999. The Company also issued to the debenture holders three
year warrants which expire January 25, 2002, to purchase the Company's common
stock at $.25 per share for 85,000 warrants and $.10 per share for 150,000
warrants. The 1999 Debt Private Placement was exempt from the registration
provisions of the Securities Act of 1933, as amended (the "Act") by virtue of
Section 4(2) of the Act, as transactions by an issuer not involving any public
offering. The securities issued pursuant to the 1999 Debt Private Placement were
restricted securities as defined in Rule 144 of the Act. The offering generated
net proceeds of approximately $211,500. All investors in the 1999 Debt Private
Placement were accredited investors as that term is defined in Rule 501 of
Regulation D adopted under the Act.
On September 1, 1999, the Company completed a private placement (the "Series D
Private Placement") of 375,000 units of its securities (the "Units"), each unit
consisting of one share of Series D Convertible Preferred Stock which is
convertible into two shares of Common Stock of the Company and one warrant,
exercisable at $0.25 and expiring 120 days after the date of effectiveness of a
registration statement of the Company, at $1.00 per Unit, minimum investment
$50,000. The Series D Private Placement was exempt from the registration
provisions of the Securities Act of 1933, as amended (the "Act") by virtue of
Section 4(2) of the Act, as transactions by an issuer not involving any public
offering. The securities issued pursuant to the Series D Private Placement were
restricted securities as defined in Rule 144 of the Act. The offering generated
net proceeds of approximately $357,500. All investors in the Series D Private
Placement were accredited investors as that term is defined in Rule 501 of
Regulation D adopted under the Act.
On December 30, 1999, the Company completed a private placement (the "Series E
Private Placement") of 675,000 units of its securities (the "Units"), each unit
consisting of one share of Series E Convertible Preferred Stock which is
convertible into one share of Common Stock of the Company and one warrant,
exercisable at $0.50 and expiring 120 days after the date of effectiveness of a
registration statement of the Company, at $1.00 per Unit, minimum investment
$50,000. The Series E Private Placement was exempt from the registration
provisions of the Securities Act of 1933, as amended (the "Act") by virtue of
Section 4(2) of the Act, as transactions by an issuer not involving any public
offering. The securities issued pursuant to the Series E Private Placement were
restricted securities as defined in Rule 144 of the Act. The offering generated
net proceeds of approximately $618,000. All investors in the Series E Private
Placement were accredited investors as that term is defined in Rule 501 of
Regulation D adopted under the Act.
II-2
<PAGE>
ITEM 27. EXHIBITS
Exhibit
(a) Exhibits
3.1 Certificate of Incorporation, dated May 12, 1988
3.2 Bylaws
4.1 Certificate of Designation of Series A Convertible Preferred Stock,
dated December 12, 1992
4.2 Certificate of Designation of Series B Convertible Preferred Stock,
dated December 22, 1993
4.3 Certificate of Designation of Series P Convertible Preferred Stock,
dated September 11, 1995
4.4 Certificate of Designation of Series S Convertible Preferred Stock,
dated August 28, 1995
4.5 Certificate of Designation of Series C Convertible Preferred Stock,
dated November 2, 1995
4.6 Certificate of Designation of Series D and Series E Convertible
Preferred Stock, dated August 25, 1999
4.7 Form of Warrant Agreement to debt holders, dated January 15, 1998
4.8 Form of Warrant Agreement to debt holders, dated April 8, 1998
4.9 Form of Warrant Agreement to participants in Private Placement dated
April 8, 1998
4.10 Series A Convertible Secured Debenture
4.11 Security Agreement for Series A Convertible Secured Debentures
5.0 Opinion of Horwitz & Beam
10.1 1996 Equity Incentive Plan
10.2 1999 Stock Option Plan
10.3 Agreement dated September 25, 1997 by and between InfoPak, Inc.,
DataNet Enterprises, LLC, and David and Staci Noles
10.4 Lease Agreement, dated October 27, 1997
10.5 Employment Agreement dated August 1, 1998, with John D. McPhilimy
10.6 Employment Agreement dated November 1, 1997, with Bruce D. Sandig
10.7 Employment Agreement dated November 1, 1997, with Roy D. Pringle
21.1 Subsidiaries of the Registrant
24.1 Consent of Horwitz & Beam (included in their opinion set forth in
Exhibit 5 hereto)
24.2 Consent of Gitomer & Berenholz, P.C.
25.1 Power of Attorney (see signature page)
27.1 Financial Data Schedule
ITEM 28. UNDERTAKINGS
The undersigned registrant hereby undertakes to:
(1) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of Dimensional Visions
pursuant to the foregoing provisions, or otherwise, Dimensional Visions has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
II-3
<PAGE>
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Dimensional Visions will, unless in the opinion of its counsel the
matter has been settled by controlling precedent submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(2) File, during any period in which it offers or sells securities, a post
effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
For determining liability under the Act, treat each post-effective amendment as
a new registration statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Phoenix,
State of Arizona on February 10, 2000.
DIMENSIONAL VISIONS INCORPORATED
By: /s/ John D. McPhilimy
------------------------------------
John D. Mcphilimy, President, Chief
Executive Officer, Director
POWER OF ATTORNEY
Each person whose signature appears appoints John D. McPhilimy as his agent
and attorney-in-fact, with full power of substitution to execute for him and in
his name, in any and all capacities, all amendments (including post-effective
amendments) to this Registration Statement to which this power of attorney is
attached. In accordance with the requirements of the Securities Act of 1933,
this Registration Statement was signed by the following persons in the
capacities and on the dates stated.
Signature Title Date
--------- ----- ----
/s/ John D. McPhilimy President, Chief Executive February 10, 2000
- ----------------------- Officer, Director
John D. McPhilimy
/s/ Roy D. Pringle Vice President, Chief Financial February 10, 2000
- ----------------------- Officer, Director, Secretary
Roy D. Pringle
/s/ Bruce D. Sandig Senior Vice President, Director February 10, 2000
- -----------------------
Bruce D. Sandig
/s/ Susan A. Gunther Director February 10, 2000
- -----------------------
Susan A. Gunther
II-5
CERTIFICATE OF INCORPORATION
OF
DIMENSIONAL VISIONS GROUP, LTD.
------------
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the
"corporation") is
DIMENSIONAL VISIONS GROUP, LTD.
SECOND: The address, including street, number, city, and county, of the
registered office of the corporation in the State of Delaware is 229 South State
Street, City of Dover, County of Kent; and the name of the registered agent of
the corporation in the State of Delaware is The Prentice-Hall Corporation
System, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is Twenty Two Million (22,000,000), consisting of Two
Million (2,000,000) shares of Preferred Stock, all of a par value of ($.001),
and Twenty Million (20,000,000) shares of Common Stock, all of a par value of
($.001).
The classes and designations and the voting powers, preferences and
qualifications and the other rights, limitations and restrictions of the
Preferred Stock shall be determined by the Board of Directors by appropriate
resolution from time to time.
FIFTH: The name and the mailing address of the incorporator are as
follows:
NAME MAILING ADDRESS
---- ---------------
T. M. Bonovich 229 South State Street, Dover, Delaware
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as
<PAGE>
the case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on the corporation.
EIGHTH; For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation and regulation
of the powers of the corporation and of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of the
corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by, or in the
manner provided in, the By-Laws. The phrase "whole Board" and the phrase "total
number of directors" shall be deemed to have the same meaning, to wit, the total
number of directors which the corporation would have if there were no vacancies.
No election of directors need be by written ballot.
2. After the original or other By-Laws of the corporation have been
adopted, amended, or repealed, as the case may be, in accordance with the
provisions of Section 109 of the General Corporation Law of the State of
Delaware, and, after the corporation has received any payment for any of its
stock, the power to adopt, amend, or repeal the By-Laws of the corporation may
be exercised by the Board of Directors of the corporation; provided, however,
that any provision for the classification of directors of the corporation for
staggered terms pursuant to the provisions of subsection (d) of Section 141 of
the General Corporation Law of the State of Delaware shall be set forth in an
initial By-Law or in a By-Law adopted by the stockholders entitled to vote of
the corporation unless provisions for such classification shall be set forth in
this certificate of incorporation.
3. Whenever the corporation shall be authorized to issue only one class
of stock, each outstanding share shall entitle the holder thereof to notice of,
and the right to vote at, any meeting of stockholders. Whenever the corporation
shall be authorized to issue more than one class of stock, no outstanding share
of any class of stock which is denied voting power under the provisions of the
certificate of incorporation shall entitle the holder thereof to the right to
vote at any meeting of stockholders except as the provisions of paragraph (2) of
subsection (b) of section 242 of the General Corporation Law of the State of
Delaware shall otherwise require; provided, that no share of any such class
which is otherwise denied voting power shall entitle the holder thereof to vote
upon the increase or decrease in the number of authorized shares of said class.
NINTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by paragraph (7) of subsection
(b) of Section 102 of the General Corporation Law of the State of Delaware, as
the same may be amended and supplemented.
TENTH: The corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented, indemnify any and all persons whom it shall
have power to indemnify under said section from and against any and all of the
expenses, liabilities or other matters referred to in or covered by said
section, and the
<PAGE>
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any By-Law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ELEVENTH: From time to time any of the provisions of this certificate
of incorporation may be amended altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
Signed on May 12, 1988.
/s/ T. M. Bonovich.
----------------------------------------
T. M. Bonovich
Incorporator
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
DIMENSIONAL VISIONS GROUP, LTD.
Dimensional Visions Group, Ltd., a corporation duly organized and existing under
the Delaware General Corporation Law (the "Corporation"), does hereby certify:
FIRST: That Article Fourth of the Certificate of Incorporation of the
Corporation (the "Certificate of Incorporation") is hereby amended by the
insertion of the paragraph set forth below immediately prior to the first
paragraph thereof:
Upon the filing date of the Certificate of Amendment of
Certificate of Incorporation of the Corporation (the "Effective Date")
adding this paragraph to Article Fourth, a one-for-twenty five reverse
split of the Corporation's Common Stock shall become effective, such
that each twenty five (25) shares of Common Stock outstanding and held
of record by each stockholder of the Corporation (including treasury
shares) immediately prior to the Effective Date shall be reclassified
as and shall represent one (1) share of Common Stock from and after
the Effective Date."
SECOND: That Article First of the Certificate of Incorporation is hereby
amended to read in it entirety as follows:
The name of the corporation is "Dimensional Visions Incorporated."
THIRD: That said amendments were duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, Dimensional Visions Group, Ltd. has caused this
Certificate of Amendment to be executed by its duly authorized officer this 15th
day of January, 1998.
Dimensional Visions Group, Ltd.,
a Delaware corporation
By: /s/ John D. McPhilimy
------------------------------------
Name: John D. McPhilimy
Title: President
Date: 1/17/98
-----------------
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Dimensional Visions Group, Ltd., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST, That at a meeting of the Board of Directors of Dimensional Visions
Group, Ltd., a resolution was duly adopted setting forth a proposed amendment to
the Certificate of Incorporation of said corporation, declaring said amendment
to be advisable and calling a meeting of the stockholders of said corporation
for consideration thereof. The resolution setting forth the proposed amendment
is as follows:
RESOLVED, That the Certificate of Incorporation of this
corporation be amended by change the Fourth Article thereof so that,
as amended said Article shall be and read as follows:
The total number of shares of stock which the corporation shall
have authority to issue is One Hundred and Ten Million (110,000,000),
consisting of Ten Million (10,000,000) shares of Preferred Stock, all
of the par value of ($.001), and One Hundred Million (100,000,000)
shares of Common Stock, all of a par value of ($.001).
SECOND, That thereafter, pursuant to resolution of its Board of Directors,
an Annual Meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD, That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
<PAGE>
IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by Steven M. Peck, its President and Chief Executive Officer, this 20th
day of March, 1996.
DIMENSIONAL VISIONS GROUP, LTD.
By /s/ Steven M. Peck
-------------------------------------
Steven M. Peck, President
and Chief Executive Officer
BY-LAWS OF
DIMENSIONAL VISIONS GROUP, LTD.
ARTICLE I - OFFICERS
SECTION 1-1. REGISTERED OFFICE AND REGISTERED AGENT.
The Corporation shall maintain a registered office and registered agent
within the State of Delaware, which may be changed by the Board of Directors
from time to time.
SECTION 1-2. OTHER OFFICES.
The Corporation may also have offices at such other places, within or
without the State of Delaware, as the Board of Directors may from time to time
determine.
ARTICLE II - STOCKHOLDERS' MEETINGS
SECTION 2-1. PLACE OF STOCKHOLDERS' MEETINGS.
Meetings of stockholders may be held at such place, either within or
without the State of Delaware, as may be designated by the Board of Directors
from time to time. If no such place is designated by the Board of Directors,
meetings of the stockholders shall be held at the registered office of the
Corporation in the State of Delaware.
SECTION 2-2. ANNUAL MEETING.
A meeting of the stockholders of the Corporation shall be held in each
calendar year commencing with the year 1988, on the 31st day of October if not a
legal holiday, and if such day is a legal holiday, then such meeting shall be
held on the next business day.
At such annual meeting, there shall be held an election for a Board of
Directors to serve for the ensuing year and until their respective successors
are elected and qualified, or until their earlier resignation or removal.
Unless the Board of Directors shall deem it advisable, financial reports of
the Corporation's business need not be sent to the stockholders and need not be
presented at the annual meeting. If any report is deemed advisable by the Board
of Directors, such report may contain such information as the Board of Directors
shall determine and need not be certified by a Certified Public Accountant
unless the Board of Directors shall so direct.
SECTION 2-3. SPECIAL MEETINGS.
Except as otherwise specifically provided by law, special meetings of the
stockholders may be called at any time:
(a) By the Board of Directors;
(b) By the President of the Corporation; or
(c) By the holders of record of not less than a majority of all the shares
outstanding and entitled to vote.
<PAGE>
Upon written request of any person entitled to call a special meeting,
which request shall set forth the purpose for which the meeting is desired, it
shall be the duty of the Secretary to give prompt written notice of such meeting
to be held at such time as the Secretary may fix, subject to the provisions of
Section 2-4 hereof. If the Secretary shall fail to fix such date and give notice
within ten (10) days after receipt of such request, the person or persons making
such request may do so.
SECTION 2-4. NOTICE OF MEETINGS AND ADJOURNED MEETINGS.
Written notice stating the place, date and hour of any meeting shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder entitled to vote at such meeting. If mailed,
notice is given when deposited in the United States Mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
Corporation. Such notice may be given in the name of the Board of Directors,
President, Vice President, Secretary of Assistant Secretary.
When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. If the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
SECTION 2-5. QUORUM.
Unless the Certificate of Incorporation provides otherwise, the presence,
in person or by proxy, of the holders of a majority of the outstanding shares
entitled to vote shall constitute a quorum but in no event shall a quorum
consist of less than one-third (1/3) of the shares entitled to vote at a
meeting. The stockholders present at a duly organized meeting can continue to do
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. If a meeting cannot be organized
because of the absence of a quorum, those present may, except as otherwise
provided by law, adjourn the meeting to such time and place as they may
determine. In the case of any meeting for the election of Directors, those
stockholders who attend the second of such adjourned meetings, although less
than a quorum as fixed in the Section, shall nevertheless constitute a quorum
for the purpose of electing Directors.
SECTION 2-6. VOTING LIST; PROXIES.
The officer who has charge of the stock ledger of the Corporation shall
prepare and make, at least ten (10) days before every meeting of 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 stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) 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.
<PAGE>
Upon the willful neglect or refusal of the Directors to produce such a list
at any meeting for the election of Directors, they shall be ineligible to any
office at such meeting.
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy. All proxies shall
be executed in writing and shall be filed with the Secretary of the Corporation
not later than the day on which exercised. No proxy shall be voted or acted upon
after three (3) days from its date, unless the proxy provides for a longer
period.
Except as otherwise specifically provided by law, all matters coming before
the meeting shall be determined by a vote by shares. All elections of Directors
shall be by written ballot unless otherwise provided in the Certificate of
Incorporation. Except as otherwise specifically provided by law, all other votes
may be taken by voice unless a stockholder demands that it be taken by ballot,
in which latter event the vote shall be taken by written ballot.
SECTION 2-7. INFORMAL ACTION BY STOCKHOLDERS.
Unless otherwise provided by the Certificate of Incorporation, any action
required to be taken at any annual or special meeting of stockholders, 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 stock 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 were present and voted.
Prompt notice of the taking of corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders or members,
who have not consented in writing.
ARTICLE III - BOARD OF DIRECTORS
SECTION 3-1. NUMBER.
The business and affairs of the Corporation shall be managed by a Board of
not less than one (1) and not more than seven (7) Directors.
SECTION 3-2. PLACE OF MEETING.
Meetings of the Board of Directors may be held at such place either within
or without the State of Delaware, as a majority of the Directors may from time
to time designate or as may be designated in the notice calling the meeting.
SECTION 3-3. REGULAR MEETINGS.
A regular meeting of the Board of Directors shall be held annually,
immediately following the annual meeting of stockholders, at the place where
such meeting of the stockholders is held or at such other place, date and hour
as a majority of the newly elected Directors may designate. At such meeting the
Board of Directors shall elect officers of the Corporation. In addition to such
regular meeting, the Board of Directors shall have the power to fix, by
resolution, the place, date and hour of other regular meetings of the Board.
<PAGE>
SECTION 3-4. SPECIAL MEETINGS.
Special meetings of the Board of Directors shall be held whenever ordered
by the President, by a majority of the members of the executive committee, if
any, or by a majority of the Directors in office.
SECTION 3-5. NOTICES OF MEETINGS OF BOARD OF DIRECTORS.
(a) REGULAR MEETINGS. No notice shall be required to be given of any
regular meeting, unless the same be geld at other than the time or place for
holding such meetings as fixed in accordance with Section 3-3 of these by-laws,
in which event one (1) day's notice shall be given of the time and place of such
meeting.
(b) SPECIAL MEETINGS. At least one (1) day's notice shall be given of the
time, place and purpose for which any special meeting of the Board of Directors
is to be held.
SECTION 3-6. QUORUM.
A majority of the total number of Directors shall constitute a quorum for
the transaction of business, and the vote of a majority of the Directors present
at a meeting at which a quorum is present shall be the act of the Board of
Directors. If there be less than a quorum present, a majority of those present
may adjourn the meeting from time to time and place to place and shall cause
notice of each such adjourned meeting to be goven to all absent Directors.
SECTION 3-7. INFORMAL ACTION BY THE BOARD OF DIRECTORS.
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 3-8. POWERS.
(a) GENERAL POWERS. The Board of Directors shall have all powers necessary
or appropriate to the management of the business and affairs of the Corporation,
and, in addition to the power and authority conferred by these by-laws, may
exercise all powers of the Corporation and do all such lawful acts and things as
are not by statute, these by-laws or the Certificate of Incorporation directed
or required to be exercised or done by the stockholders.
(b) SPECIFIC POWERS. Without limiting the general powers conferred by the
last preceding clause and the powers conferred by the Certificate of
Incorporation and by-laws of the Corporation, it is hereby expressly declared
that the Board of Directors shall have the following powers:
(i) To confer upon any officer or officers of the Corporation the power to
choose, remove or suspend assistant officers, agents or servants.
(ii) To appoint any person, firm or corporation to accept and hold in trust
for the Corporation any property belonging to the Corporation or in which
<PAGE>
it is interested, and to authorize any such person, firm or corporation to
execute any documents and perform any duties that may requisite in relation
to any such trust.
(iii) To appoint a person or persons to vote shares of another corporation
held and owned by the Corporation.
(iv) By resolution adopted by a majority of the full Board of Directors, to
designate one (1) or more of its number to constitute an executive
committee which, to the extent provided in such resolution, shall have and
may exercise the power of the Board of Directors in the management of the
business and affairs of the Corporation and may authorize the seal of the
Corporation to be affixed.
(v) By resolution passed by a majority of the whole Board of Directors, to
designate one (1) or more additional committees, each to consist of one (1)
or more Directors, to have such duties, powers and authority as the Board
of Directors shall determine. All committees of the Board of Directors,
including the executive committee, shall have the authority to adopt their
own rules of procedure. Absent the adoption of specific procedures, the
procedures applicable to the Board of Directors shall also apply to
committees thereof.
(vi) To fix the place, time and purpose of meetings of stockholders.
(vii) To purchase or otherwise acquire for the Corporation any property,
rights or privileges which the Corporation is authorized to acquire, at
such prices, on such terms and conditions and for such consideration as it
shall from time to time see fit, and, at its discretion, to pay any
property or rights acquired by the Corporation, either wholly or partly in
money or in stocks, bonds, debentures or other securities of the
Corporation.
(viii) To create, make and issue mortgages, bonds, deeds of trust, trust
agreements and negotiable or transferable instruments and securities,
secured by mortgage or otherwise, and to do every other act and thing
necessary to effectuate the same.
(ix) To appoint and remove or suspend such subordinate officers, agents or
servants, permanently or temporarily, as it may from time to time think
fit, and to determine their duties, and fix, and from time to time change,
their salaries or emoluments, and to require security in such instances and
in such amounts as it thinks fit.
(x) To determine who shall be authorized on the Corporation's behalf to
sign bills, notes, receipts, acceptances, endorsements, checks, releases,
contracts and documents.
SECTION 3-9. COMPENSATION OF DIRECTORS.
Compensation of Directors and reimbursement of their expenses incurred in
connection with the business of the Corporation, if any, shall be as determined
from time to time by resolution of the Board of Directors.
SECTION 3-10. REMOVAL OF DIRECTORS BY STOCKHOLDERS.
The entire Board of Directors or any individual Director may be removed
from office without assigning any cause by a majority vote of the holders of the
outstanding shares entitled to vote. In case the Board of Directors or any one
(1) or more Directors be so removed, new Directors may be elected at the same
time.
<PAGE>
SECTION 3-11. RESIGNATION.
Any Director may resign at any time by submitting his written resignation
to the Corporation. Such resignation shall take effect at the time of its
receipt by the Corporation unless another time be fixed in the resignation, in
which case it shall become effective at the time so fixed. The acceptance of a
resignation shall not be required to make it effective.
SECTION 3-12. VACANCIES.
Vacancies and new created directorships resulting from any increase in the
authorized number of Directors elected by all of the stockholders having the
right to vote as a single class may be filled by a majority of the Directors
then in office, although less than a quorum, or by a sole remaining Director,
and each person so elected shall be a Director until his successor is elected
and qualified or until his earlier resignation or removal.
SECTION 3-13. PARTICIPATION BY CONFERENCE TELEPHONE.
Directors may participate in regular or special meetings of the Board by
telephone or similar communications equipment by means of which all other
persons at the meeting can hear each other, and such participation shall
constitute presence at the meeting.
ARTICLE IV - OFFICERS
SECTION 4-1. ELECTION AND OFFICE.
The Corporation shall have a President, a Secretary and a Treasurer who
shall be elected by the Board of Directors. The Board of Directors may elect
such additional officers as it may deem proper, including a Chairman and a Vice
Chairman of the Board of Directors, one (1) or more Vice Presidents, and one (1)
or more assistant or honorary officers. Any number of offices may be held by the
same person.
SECTION 4-2. TERM.
The President, the Secretary and the Treasurer shall each serve for a term
of one (1) year and until their respective successors are chosen and qualified,
unless removed from office by the Board of Directors during their respective
tenures. The term of office of any other officer shall be as specified by the
Board of Directors.
SECTION 4-3. POWERS AND DUTIES OF THE PRESIDENT.
Unless otherwise determined by the Board of Directors, the President shall
have the usual duties of an executive officer with general supervision over and
direction of the affairs of the Corporation. In the exercise of these duties and
subject to the limitations of the laws of the State of Delaware, these by-laws,
and the actions of the Board of Directors, he may appoint, suspend and discharge
employees and agents, shall preside at all meetings of the stockholders at which
he shall be present, and, unless there is a Chairman of the Board of Directors,
shall preside at all meetings of the Board of Directors and, unless otherwise
specified by the Board of Directors, shall be a member of all committees. He
shall also do and perform such other duties as from time to time may be assigned
to him by the Board of Directors.
<PAGE>
Unless otherwise determined by the Board of Directors, the President shall
have full power and authority on behalf of the Corporation to attend and to act
and to vote at any meeting of the stockholders of any corporation in which the
Corporation may hold stock, and, at any such meeting, shall possess and may
exercise any and all of the rights and powers incident to the ownership of such
stock and which, as the owner thereof, the Corporation might have possessed and
exercised.
SECTION 4-4. POWERS AND DUTIES OF THE SECRETARY.
Unless otherwise determined by the Board of Directors, the Secretary shall
record all proceedings of the meetings of the Corporation, the Board of
Directors and all committees, in books to be kept for that purpose, and shall
attend to the giving and serving of all notices for the Corporation. He shall
have charge of the corporate seal, the certificate books, transfer books and
stock ledgers, and such other books and papers as the Board of Directors may
direct. He shall perform all other duties ordinarily incident to the office of
Secretary and shall have such other powers and perform such other duties as may
be assigned to him by the Board of Directors.
SECTION 4-5. POWERS AND DUTIES OF THE TREASURER.
Unless otherwise determined by the Board of Directors, the Treasurer shall
have charge of all the funds and securities of the Corporation which may come
into his hands. When necessary or proper, unless otherwise ordered by the Board
of Directors, he shall endorse for collection on behalf of the Corporation
checks, notes and other obligations, and shall deposit the same to the credit of
the Corporation in such banks or depositories as the Board of Directors may
designate and shall sign all receipts and vouchers for payments made to the
Corporation. He shall sign all checks made by the Corporation, except when the
Board of Directors shall otherwise direct. He shall enter regularly, in books of
the Corporation to be kept by him for that purpose, a full and accurate account
of all moneys received and paid by him on account of the Corporation. Whenever
required by the Board of Directors, he shall render a statement of the financial
condition of the Corporation. He shall at all reasonable times exhibit his books
and accounts to any Director of the Corporation, upon application at the office
of the Corporation during business hours. He shall have such other powers and
shall perform such other duties as may be assigned to him from time to time by
the Board of Directors. He shall give such bond, if any, for the faithful
performance of his duties as shall be required by the Board of Directors and any
such bond shall remain in the custody of the President.
SECTION 4-6. POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD OF DIRECTORS.
Unless otherwise determined by the Board of Directors, the Chairman of the
Board of Directors, if any, shall preside at all meetings of Directors and shall
serve ex officio as a member of every committee of the Board of Directors. He
shall have such other powers and perform other such further duties as may be
assigned to him by the Board of Directors.
SECTION 4-7. POWERS AND DUTIES OF VICE PRESIDENTS AND ASSISTANT OFFICERS.
Unless otherwise determined by the Board of Directors, each Vice President
and each assistant officer shall have the powers and perform the duties of his
<PAGE>
respective superior officer. Vice Presidents and assistant officers shall have
such rank as shall be designated by the Board of Directors and each, in the
order of rank, shall act for such superior officer in his absence, or upon his
disability or when so directed by such superior officer or by the Board of
Directors. Vice Presidents may be designated as having responsibility for a
specific aspect of the Corporation's affairs, in which event each such Vice
President shall be superior to the other Vice Presidents in relation to matters
within his aspect. The President shall be the superior officer of the Vice
Presidents. The Treasurer and the Secretary shall be the superior officers of
the Assistant Treasurers and Assistant Secretaries, respectively.
SECTION 4-8. DELEGATION OF OFFICE.
The Board of Directors may delegate the powers or duties of any officer of
the Corporation to any other officer or to any Director from time to time.
SECTION 4-9. VACANCIES.
The Board of Directors shall have the power to fill any vacancies in any
office occurring from whatever reason.
SECTION 4-10. RESIGNATIONS.
Any officer may resign at any time by submitting his written resignation to
the Corporation. Such resignation shall take effect at the time of its receipt
by the Corporation, unless another time by fixed in the resignation, in which
case it shall become effective at the time so fixed. The acceptance of a
resignation shall not be required to make it effective.
ARTICLE V - CAPITAL STOCK
SECTION 5-1. STOCK CERTIFICATES.
Shares of the Corporation shall be represented by certificates signed by or
in the name of the Corporation by (a) the Chairman or Vice Chairman of the Board
of Directors, or the President or a Vice President, and (b) the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary, representing
the number of shares registered in certificate form. If such certificate is
countersigned (i) by a transfer agent other than the Corporation or its
employee, or (ii) by a registrar other than the Corporation or its employee, the
signatures of the officers of the Corporation may be facsimiles. In case any
officer who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer at the date of issue.
SECTION 5-2. DETERMINATION OF STOCKHOLDERS OF RECORD.
The Board of Directors may fix, in advance, a record date to determine the
stockholders entitled to notice of or to vote at any meeting of 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
<PAGE>
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action. Such date shall be not more than sixty (60) nor less than
ten (10) days before the date of any such meeting, nor more than sixty (60) days
prior to any other action.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held. The record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
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
adjourned meeting.
SECTION 5-3. TRANSFER OF SHARES.
Transfer of shares shall be made on the books of the Corporation only upon
surrender of the share certificate, duly endorsed and otherwise in proper form
for transfer, which certificate shall be canceled at the time of transfer. No
transfer of shares shall be made on the books of this Corporation if such
transfer is in violation of a lawful restriction noted conspicuously on the
certificate.
SECTION 5-4. LOST, STOLEN OR DESTROYED SHARE CERTIFICATES.
The Corporation may issue a new certificate of stock or uncertified shares
in place of any certificate therefore issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen, or destroyed certificate, or his legal representative to give the
Corporation a bond sufficient to indemnify it against claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
ARTICLE VI - NOTICES
SECTION 6-1. CONTENTS OF NOTICE.
Whenever any notice of a meeting is required to be given pursuant to these
by-laws or the Certificate of Incorporation or otherwise, the notice shall
specify the place, day and hour of the meeting and, in the case of a special
meeting or where otherwise required by law, the general nature of the business
to be transacted at such meeting.
SECTION 6-2. METHOD OF NOTICE.
All notices shall be given to each person entitled thereto, either
personally or by sending a copy thereof through the mail or by telegraph,
charges prepaid, to his address as it appears on the records of the Corporation,
or supplied by him to the Corporation for the purpose of notice. If notice is
sent by mail or telegraph, it shall be deemed to have been given to the person
entitled thereto when deposited in the United States Mail or with the telegraph
office for transmission. If no address for a stockholder appears on the books of
the Corporation with an address for the purpose of notice, notice deposited in
<PAGE>
the United States Mail addressed to such stockholder care of General Delivery in
the city in which the principal office of the Corporation is located shall be
sufficient.
SECTION 6-3. WAIVER OF NOTICE.
Whenever notice is required to be given under any provision of law or of
the certificate of Incorporation or by-laws of the Corporation, a written
waiver, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders,
Directors, or members of a committee of Directors need be specified in any
written waiver of notice unless so required by the Certificate of Incorporation.
ARTICLE VII - INDEMNIFICATION OF DIRECTORS AND OFFICERS AND OTHER PERSONS
SECTION 7-1. INDEMNIFICATION.
The Corporation shall have the power to indemnify any Director, officer,
employee or agent of the Corporation against expenses (including legal fees),
judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him, to the fullest extent now or hereafter permitted by law in
connection with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, brought or threatened
to be brought against him by reason of his performance as a Director, officer,
employee or agent of the Corporation, its parent or any of its subsidiaries, or
in any other capacity on behalf of the Corporation, its parent or any of its
subsidiaries.
The Board of Directors by resolution adopted in each specific instance may
similarly indemnify any person other than a Director, officer, employee or agent
of the Corporation for liabilities incurred by him in connection with services
rendered by him for or at the request of the Corporation, its parent or any of
its subsidiaries.
The provisions of this Section shall be applicable to all actions, suits or
proceedings commenced after its adoption, whether such arise out of acts or
omissions which occurred prior or subsequent to such adoption and shall continue
as to a person who has ceased to be a Director, officer, employee or agent or to
render services for or at the request of the Corporation or as the case may be,
its parent, or subsidiaries and shall inure to the benefit of the heirs,
executors and administrators of such a person. The rights of indemnification
provided for herein shall not be deemed exclusive of any other rights to which
any Director, officer, employee or agent of the Corporation may be entitled
under these by-laws, agreement, vote of stockholders or disinterested directors
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
<PAGE>
SECTION 7-2. ADVANCES.
Expenses incurred by any officer or director in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding as authorized by the
Board of Directors in the specific case upon receipt of an undertaking, by or on
behalf of such Director or officer, to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized by law. Such expenses incurred by other employees and
agents may be paid upon such terms and conditions, if any, as the Board of
Directors deems appropriate.
SECTION 7-3. INSURANCE.
The Corporation may purchase and maintain insurance on behalf of any person
who 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 any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
law.
ARTICLE VIII - SEAL
The form of the seal of the Corporation, called the corporate seal of the
Corporation, shall be as impressed adjacent hereto.
ARTICLE IX - FISCAL YEAR
The Board of Directors shall have the power by resolution to fix the fiscal
year of the Corporation. If the Board of Directors shall fail to do so, the
President shall fix the fiscal year.
ARTICLE X - AMENDMENTS
The original or other by-laws may be adopted, amended or repealed by the
stockholders entitled to vote thereon at any regular or special meeting or, if
the Certificate of Incorporation provides, by the Board of Directors. The fact
that such power has been so conferred upon the Board of Directors shall not
divest the stockholders of the power nor limit their power to adopt, amend or
repeal by-laws.
ARTICLE XI - INTERPRETATION OF BY-LAWS
All words, terms and provisions of these by-laws shall be interpreted and
defined by and in accordance with the General Corporation Law of the State of
Delaware, as amended, and as amended from time to time hereafter.
CERTIFICATE OF DESIGNATION OF
TERMS OF FIRST SERIES A PREFERENCE STOCK
DIMENSIONAL VISIONS GROUP, LTD. (the "Corporation" or "Company"), a
Delaware corporation, pursuant to Section 151 (g) of the General Corporation Law
of the State of Delaware, as amended, hereby certifies that:
1. The Board of Directors of the Corporation, pursuant to authority
expressly vested in it by the provisions of the Company's Restated
Certificate of Incorporation, duly adopted the following resolution
creating the first series of the Preference Stock of the Corporation
to consist initially of 100,000 share and fixing the designations,
preferences and rights, and the qualifications, limitations and
restrictions thereof, of the shares of such series at a meeting duly
held on October 21, 1992:
RESOLVED, that pursuant to authority expressly granted to the
Board of Directors by the provisions of this Corporations' Certificate
of Incorporation, the Board of Directors hereby creates the first
series of the Preference Stock of the Corporation to consist initially
of 100,000 shares ("First Series") and hereby fixes the designations,
preferences and rights, and qualifications, limitations and
restrictions thereof, of the shares of such series (in addition to the
designations, preferences and rights, and the qualification,
limitations and restrictions thereof, set forth in the Certificate of
Incorporation which are applicable to this Corporation's Preference
Stock of all series) as follows:
i. DESIGNATION OF SERIES. The First Series shall be designated by
the Series A Convertible Preference Stock.
ii. NUMBER OF SHARES. The number of shares of the First Series shall
be 100,000, which number from time to time may be increased or
decreased (but not below the number of shares in the series then
outstanding) by resolution of the Board of Directors of the
Corporation.
iii. DIVIDENDS The dividend rate of the First Series shall be $.50 per
share per annum in cash, and no more, which shall be payable from
funds legally available foe that purpose annually on June 30 of
each year, commencing on June 30, 1992. Dividends on shares of
the First Series shall cumulate from the date of their purchase,
but accruals of the dividends will not bear interest. If such
dividends for any quarterly period are not paid in full, holders
of shares of the First Series shall participate ratable, with the
holders of all shares of Preference Stock (excluding the shares
of such series thereof, if any, which by their terms rank junior
as to dividends to the shares of the First Series), in any cash
dividends paid for such period, in proportion to the full amounts
of dividends for such period to which they are entitled, and the
Corporation shall not pay cash dividends to the holders of shares
of Preference Stock for any subsequent period or to holders of
shares of Preference Stock of any series which by their terms
rank junior to the shares of the First Series until all such
dividends accrued on shares of the First Series have been paid in
full.
iv. REDEMPTION. Share of the First Series shall be redeemable at the
Corporation's sole option in whole or in any part at any time or
times after the fifth anniversary of the date of their issue, but
<PAGE>
not earlier, at the price of $10 per share plus in each case an
amount equal to all dividends accumulated but unpaid on such
shares to the date fixed for redemption whether or not earned or
declared (the "redemption price"). Notice of every redemption,
stating the date fixed for redemption, the redemption price, and
the place of payment thereof, shall be given by mailing a copy of
such notice no later than the thirtieth day and not earlier than
the sixtieth day prior to the date fixed for redemption to the
holders of the record of the shares to be redeemed at their
addresses as the same shall appear on the books of the
Corporation. The Corporation, upon or after mailing notice of
redemption as aforesaid or upon or after irrevocably authorizing
the bank or trust company in the city of Philadelphia,
Pennsylvania, or such other place as may be determined by the
Corporation's Board of Directors, an amount equal to the
redemption price of the shares to be redeemed, which amount shall
be payable to the holders of such shares upon surrender of
certificates therefore on or after the redemption date or prior
thereto if so directed by the Board. Upon such deposit, or if no
such deposit is made then from and after the date fixed for
redemption unless the Corporation shall default in making payment
of the redemption price upon surrender of certificates as
aforesaid, the shares called for redemption shall cease to be
outstanding and shall be deemed to have been acquired by the
Corporation and the holders thereof shall cease to be
stockholders with respect to such shares and shall have no
interest in or claim against the Corporation with respect to such
shares other than the right to receive the redemption price from
such bank or trust company or from the Corporation, as may be the
case, without interest thereon, upon surrender of certificates as
aforesaid; provided that conversation rights of shares called for
redemption shall terminate at the close of business on the fifth
day prior to the date fixed for redemption unless default shall
be made on payment of the redemption price. In case any holder of
shares of the First Series which have been called for redemption
shall not, within six years after the date of such deposit, have
claimed the amount deposited with respect to the redemption
thereof, such bank, or trust company, upon demand, shall pay over
to the Corporation such unclaimed amount and shall thereupon be
relieved of all responsibility in respect thereof to such holder,
and thereafter such holder shall look only to the Corporation for
payment thereof. The Corporation shall be entitled to any
interest that may be paid on funds so deposited.
v. NO LIQUIDATION PREFERENCE. In the event of a voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation, holders of shares of the First Series shall have no
liquidation preference over holders of the Corporation's Common
Stock. Holders of shares of the First Series shall participate
ratably with holders of the Corporation's Common Stock in the
distribution of assets with each share of the First Series
accounting for forty (40) shares of the Corporation's Common
Stock. Neither the merger nor consolidation of the Corporation
with or into any corporation, nor any sale, transfer or lease of
<PAGE>
all or part of the Corporation's assets, shall be deemed a
liquidation of the Corporation within the meaning of this
paragraph (v).
vi. CONVERSION RIGHTS. Any holder of shares of the First Series may
convert any or all of such shares into fully paid and
non-assessable shares of Common Stock of the Corporation
(hereafter called "Common Stock") on the terms, at the times, and
in the manner hereinafter set forth.
a. Shares of the First Series may be converted at any time one
hundred and eighty (180) days from the date the shares were
purchased into shares of Common Stock at the rate of forty
shares of Common Stock for each share of the First Series,
such rate should be subject to adjustment as hereinafter
provided, except that as to any shares of such series which
are called for redemption pursuant to paragraph (iv) hereof
the right of conversion shall terminate at the close of
business on the fifth day prior to the date fixed for
redemption unless default shall be made in the payment of
the redemption price. Upon conversion no adjustment shall be
made for dividends either on the shares being converted or
on the Common Stock issued thereupon.
b. Any holder of shares of the First Series who elects to
convert them shall surrender the certificate therefor at the
principal office of any Transfer Agent, or the Corporation
as the case may be, for such shares, with the form of
written notice endorsed on such certificate of his election
to convert them completed. If necessary under the
circumstances such certificate shall be endorsed for
transfer or accompanied by executed instruments of transfer,
together with such other transfer papers as the Transfer
Agent may reasonably require. The Corporation or such
Transfer Agent, as the case may be, may require, as a
condition to the exercise of the conversion privilege, the
payment of any transfer tax or other governmental charge
(but not any tax payable upon the issue of stock deliverable
upon such conversion) that may be imposed upon any transfer
incidental or prior to the conversion, or the submission of
proper proof that the same has been paid. The conversion
privilege shall be deemed to have been exercised, and the
shares of Common Stock issuable upon such conversion shall
be deemed to have been issued, upon the date the Transfer
Agent, or the Corporation as the case may be, receives for
conversion the certificate representing such shares with the
required terms for conversion satisfied, except that as to
any shares of such series which are surrendered for
conversion on a date which is less than five business days
preceding the date fixed for the determination of holders of
Common Stock entitled to receive rights to subscribe for or
to purchase shares of Common Stock or other securities of
the Corporation convertible to Common Stock, the conversion
privilege shall be deemed to have been exercised on the
business day next succeeding the date fixed for such
determination. Each person entitled to receive the Common
Stock issuable upon such conversion shall from the same date
be treated as the record holder of such Common Stock, and
the person who surrenders such shares for conversion shall
on that date cease to be treated as the record holder of the
shares surrendered.
c. The Corporation shall not issue in connection with the
conversion of share of the First Series certificates for a
fraction ok one share of Common Stock, but in lieu thereof
<PAGE>
shall pay to any person who would otherwise be entitled
thereto an amount of case equal to such fraction multiplied
by the Market Price of the Common Stock on the last business
day of the week preceding the week in which the conversion
privilege was deemed to have been exercised. As used herein,
"Market Price" means the last reported sale price regular
way on such day or, in case no such reported sale takes
place on such day, the reported closing bid price regular
way, in either case on the principal national securities
exchange on which the Common Stock is then listed or, if not
listed on any national securities exchange, the closing bid
price in the over-the-counter market as reported by any New
York Stock Exchange member firm selected from time to time
by the Board of Directors for that purpose.
d. As soon as practicable after the effective date of
conversion of any shares of the First Series, the
Corporation shall deliver to the person or persons entitled
thereto, at the principal office of the Transfer Agent at
which such stock was surrendered for conversion,
certificates representing the shares of Common Stock and any
cash to which such person or persons shall be entitled on
such conversion.
e. The conversion rate set forth in subparagraph (a) of this
paragraph (vi) shall be subject to adjustment as follows:
1. if the Corporation subdivides the outstanding shares of
its Common Stock into a greater number of shares or
combines them into a smaller number of shares, the
conversion rate in effect immediately prior to such
subdivision or combination shall be proportionately
increased or decreased effective at the opening of
business on the day following the day upon which such
subdivision or combination becomes effective;
2. if the Corporation fixes a record date for the purpose
of determining the holders of shares of Common Stock,
entitled to receive any dividend in Common Stock, the
conversion rate in effect immediately prior to such
record date shall be proportionally increased effective
at the opening of business on the day following such a
record date, provided that if for any reason the plan
to pay such dividend in Common Stock is legally
abandoned before payment, that any adjustment made in
the conversion rate by reason of the passage of such
record date shall be cancelled as of the date the plan
is abandoned; and
3. the insurance to all holders of Common Stock of the
corporation of rights to subscribe to Common Stock at a
price lower than 90% of the Market Price (defined
above) thereof as of the close of business on the last
business day of the week preceding such insurance of
rights shall be deemed to constitute the payment of a
dividend in Common Stock (and the record date therefore
shall be deemed to have been fixed as the date of
insurance of such rights)of that number of shares which
is determined by dividing the Market Price per share as
<PAGE>
of such time into the difference between (A) the total
Market Price as of such time of the number of shares
purchasable upon exercise of such rights and (B) the
total offering price of such shares.
f. In case of
1. any reclassification or change of the Common Stock of
the Corporation other than a change in its par value, a
change from par value to no par value or case provided
in subparagraph (c) of this paragraph (vi), or
2. a merger of consolidation in which the Corporation is
not the continuing corporation,
provision shall be made so that holders of the First Series
shall thereafter have the right to convert each share
thereof into the kind and amount of shares or stock or other
securities or property receivable upon such
reclassification, change merger or consolidation by a holder
of the number and kind of shares of capital stock of the
Corporation into which such shares of the First Series were
convertible immediately prior thereto. In any such case the
Board of Directors shall determine the manner in which the
adjustments provided for in subparagraph (e) of the
paragraph (vi) shall thereafter be made.
g. Whenever the conversion rate is required to be adjusted:
1. the Corporation shall file a certificate setting forth
such adjusted conversion rate and the facts upon which
the adjustment is based with the Transfer Agents for
shares of the First Series and the Transfer Agents for
the Common Stock and thereafter (until further
adjusted) the adjusted conversion rate shall be as set
forth in such certificate; and
2. the Corporation shall mail notice of such adjusted
conversion rate to each holder of shares of the First
Series.
vii. VOTING RIGHTS. Except as provided below, holders of the First
Series shall have the general power to vote in the election of
directors and for all other purposes, on the basis of forty (40)
votes per share of the First Series. Holders of shares of the
First Series shall not have the general power to vote on any
matters on which they are entitled to vote as a series or as a
part of the class of Preference Stock, regardless of series.
CERTIFICATE OF DESIGNATION OF
TERMS OF SECOND SERIES B PREFERENCE STOCK
DIMENSIONAL VISIONS GROUP, LTD. (the "Corporation" or "Company"), a
Delaware corporation, pursuant to Section 151 (g) of the General Corporation Law
of the State of Delaware, as amended, hereby certifies that:
1. The Board of Directors of the Corporation, pursuant to authority
expressly vested in it by the provisions of the Company's Restated
Certificate of Incorporation, duly adopted the following resolution
creating the second series of the Preference Stock of the Corporation
to consist initially of 200,000 shares and fixing the designations,
preferences and rights, and the qualifications, limitations and
restrictions thereof, of the shares of such series pursuant to a
unanimous vote of the Board of Directors held on October 1, 1993:
RESOLVED, that pursuant to authority expressly granted to the
Board of Directors by the provisions of this Corporations' Restated
Certificate of Incorporation, the Board of Directors hereby creates
the second series of the Preference Stock of the Corporation to
consist initially of 200,000 shares ("Second Series") and hereby fixes
the designations, preferences and rights, and qualifications,
limitations and restrictions thereof, of the shares of such series (in
addition to the designations, preferences and rights, and the
qualification, limitations and restrictions thereof, set forth in the
Restated Certificate of Incorporation which are applicable to this
Corporation's Preference Stock of all series) as follows:
i. DESIGNATION OF SERIES. The Second Series shall be designated
by the Series B Senior Redeemable Convertible Preference
Stock.
ii. NUMBER OF SHARES. The number of shares of the Second Series
shall be 200,000, which number from time to time may be
increased or decreased (but not below the number of shares
in the series then outstanding) by resolution of the Board
of Directors of the Corporation.
iii. DIVIDENDS The dividend rate of the Second Series shall be 8%
per share per annum in cash, and no more, which shall be
payable from funds legally available foe that purpose
annually on June 30 of each year, commencing on June 30,
1994. Dividends on shares of the Second Series shall
cumulate from the date of their purchase, but accruals of
the dividends will not bear interest. If such dividends for
any quarterly period are not paid in full, holders of shares
of the Second Series shall participate ratable, with the
holders of all shares of Preference Stock (excluding the
shares of such series thereof, if any, which by their terms
rank junior as to dividends to the shares of the Second
Series), in any cash dividends paid for such period, in
proportion to the full amounts of dividends for such period
to which they are entitled, and the Corporation shall not
pay cash dividends to the holders of shares of Preference
Stock for any subsequent period or to holders of shares of
Preference Stock of any series which by their terms rank
junior to the shares of the Second Series until all such
dividends accrued on shares of the Second Series have been
paid in full.
<PAGE>
iv. REDEMPTION. Share of the Second Series shall be redeemable
at the Corporation's sole option in whole or in any part at
any time or times after the fifth anniversary of the date of
their issue, but not earlier, at the price of $10 per share
plus in each case an amount equal to all dividends
accumulated but unpaid on such shares to the date fixed for
redemption whether or not earned or declared ( the
"redemption price"). Notice of every redemption, stating the
date fixed for redemption, the redemption price, and the
place of payment thereof, shall be given by mailing a copy
of such notice no later than the thirtieth day and not
earlier than the sixtieth day prior to the date fixed for
redemption to the holders of the record of the shares to be
redeemed at their addresses as the same shall appear on the
books of the Corporation. The Corporation, upon or after
mailing notice of redemption as aforesaid or upon or after
irrevocably authorizing the bank or trust company in the
city of Philadelphia, Pennsylvania, or such other place as
may be determined by the Corporation's Board of Directors,
an amount equal to the redemption price of the shares to be
redeemed, which amount shall be payable to the holders of
such shares upon surrender of certificates therefor on or
after the redemption date or prior thereto if so directed by
the Board. Upon such deposit, or if no such deposit is made
then from and after the date fixed for redemption unless the
Corporation shall default in making payment of the
redemption price upon surrender of certificates as
aforesaid, the shares called for redemption shall cease to
be outstanding and shall be deemed to have been acquired by
the Corporation and the holders thereof shall cease to be
stockholders with respect to such shares and shall have no
interest in or claim against the Corporation with respect to
such shares other than the right to receive the redemption
price from such bank or trust company or from the
Corporation, as the case may be, without interest thereon,
upon surrender of certificates as aforesaid; provided that
conversation rights of shares called for redemption shall
terminate at the close of business on the fifth day prior to
the date fixed for redemption unless default shall be made
on payment of the redemption price. In case any holder of
shares of the Second Series which have been called for
redemption shall not, within six years after the date of
such deposit, have claimed the amount deposited with respect
to the redemption thereof, such bank, or trust company, upon
demand, shall pay over to the Corporation such unclaimed
amount and shall thereupon be relieved of all responsibility
in respect thereof to such holder, and thereafter such
holder shall look only to the Corporation for payment
thereof. The Corporation shall be entitled to any interest
that may be paid on funds so deposited.
v. LIQUIDATION PREFERENCE. In the event of a voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation, holders of shares of the Second Series shall
have a liquidation preference over holders of the
Corporation's Common Stock and holders of the Corporation's
Series A Preferred Stock. Neither the merger nor the
consolidation of the Corporation into or any corporation,
nor any sale, transfer or lease of all or part of the
Corporation's assets, shall be deemed a liquidation of the
Corporation within the meaning of this paragraph (v).
<PAGE>
vi. CONVERSION RIGHTS. Any holder of shares of the Second Series
may convert any or all of such shares into fully paid and
non-assessable shares of Common Stock of the Corporation
(hereafter called "Common Stock") on the terms, at the
times, and in the manner hereinafter set forth.
a. Shares of the Second Series may be converted at any
time one hundred and eighty (180) days from the date
the shares were purchased into shares of Common Stock
at the rate of one hundred shares of Common Stock for
each share of the First Series, such rate should be
subject to adjustment as hereinafter provided, except
that as to any shares of such series which are called
for redemption pursuant to paragraph (iv) hereof the
right of conversion shall terminate at the close of
business on the fifth day prior to the date fixed for
redemption unless default shall be made in the payment
of redemption price. Upon conversion no adjustment
shall be made for dividends either on the shares being
converted or on the Common Stock issued thereupon.
b. Any holder of shares of the Second Series who elects to
convert them shall surrender the certificate therefor
at the principal office of any Transfer Agent, or the
Corporation as the case may be, for such shares, with
the form of written notice endorsed on such certificate
of his/her election to convert them completed. If
necessary under the circumstances such certificate
shall be endorsed for transfer or accompanied by
executed instruments of transfer, together with such
other transfer papers as the Transfer Agent may
reasonably require. The Corporation or such Transfer
Agent, as the case may be, may require, as a condition
to the exercise of the conversion privilege, the
payment of any transfer tax or other governmental
charge (but not any tax payable upon the issue of stock
deliverable upon such conversion) that may be imposed
upon any transfer incidental or prior to the
conversion, or the submission of proper proof that the
same has been paid. The conversion privilege shall be
deemed to have been exercised, and the shares of Common
Stock issuable upon such conversion shall be deemed to
have been issued, upon the date the Transfer Agent, or
the Corporation as the case may be, receives for
conversion the certificate representing such shares
with the required terms for conversion satisfied,
except that as to any shares of such series which are
surrendered for conversion on a date which is less than
five business days preceding the date fixed for the
determination of holders of Common Stock entitled to
receive rights to subscribe for or to purchase shares
of Common Stock or other securities of the Corporation
convertible to Common Stock, the conversion privilege
shall be deemed to have been exercised on the business
day next succeeding the date fixed for such
determination. Each person entitled to receive the
Common Stock issuable upon such conversion shall from
the same date be treated as the record holder of such
Common Stock, and the person who surrenders such shares
for conversion shall on that date cease to be treated
as the record holder of the shares surrendered.
c. The Corporation shall not issue in connection with the
conversion of share of the Second Series certificates
<PAGE>
for a fraction on one share of Common Stock, but in
lieu thereof shall pay to any person who would
otherwise be entitled thereto an amount of case equal
to such fraction multiplied by the Market Price of the
Common Stock on the last business day of the week
preceding the week in which the conversion privilege
was deemed to have been exercised. As used herein,
"Market Price" means the last reported sale price
regular way on such day or, in case no such reported
sale takes place on such day, the reported closing bid
price regular way, in either case on the principal
national securities exchange on which the Common Stock
is then listed or, if not listed on any national
securities exchange, the closing bid price in the
over-the-counter market as reported by any New York
Stock Exchange member firm selected from time to time
by the Board of Directors for that purpose.
d. As soon as practicable after the effective date of
conversion of any shares of the Second Series, the
Corporation shall deliver to the person or persons
entitled thereto, at the principal office of the
Transfer Agent at which such stock was surrendered for
conversion, or the Corporation as the case may be,
certificates representing the shares of Common Stock
and any cash to which such person or persons shall be
entitled on such conversion.
e. The conversion rate set forth in subparagraph (a) of
this paragraph (vi) shall be subject to adjustment as
follows:
1. if the Corporation subdivides the outstanding
shares of its Common Stock into a greater number
of shares or combines them into a smaller number
of shares, the conversion rate in effect
immediately prior to such subdivision or
combination shall be proportionately increased or
decreased effective at the opening of business on
the day following the day upon which such
subdivision or combination becomes effective;
2. if the Corporation fixes a record date for the
purpose of determining the holders of shares of
Common Stock, entitled to receive any dividend in
Common Stock, the conversion rate in effect
immediately prior to such record date shall be
proportionally increased effective at the opening
of business on the day following such a record
date, provided that if for any reason the plan to
pay such dividend in Common Stock is legally
abandoned before payment, that any adjustment made
in the conversion rate by reason of the passage of
such record date shall be cancelled as of the date
the plan is abandoned;
3. the insurance to all holders of Common Stock of
the corporation of rights to subscribe to Common
Stock at a price lower than 90% of the Market
Price (defined above) thereof as of the close of
business on the last business day of the week
preceding such insurance of rights shall be deemed
to constitute the payment of a dividend in Common
Stock (and the record date therefore shall be
deemed to have been fixed as the date of insurance
<PAGE>
of such rights)of that number of shares which is
determined by dividing the Market Price per share
as of such time into the difference between (A)
the total Market Price as of such time of the
number of shares purchasable upon exercise of such
rights and (B) the total offering price of such
shares; and
4. In the case of the Corporation shall issue, prior
to January 1st, 1995, shares of its Common Stock
in excess of twenty million (20,000,000) shares,
then the conversion rate shall be proportionately
increased. However, in calculating the twenty
million (20,000,000) shares, shares of Common
Stock issued in connection with the Second Series
shall not be counted and no adjustment in the
conversion rate will be made for those shares. The
twenty million (20,000,000) share amount shall be
proportionately adjusted in the event the
Corporation subdivided the outstanding shares of
its Common Stock into a greater number of shares
or combines them into a smaller number of shares
prior to January 1st, 1995.
f. In case of
1. any reclassification or change of the Common Stock
of the Corporation other than a change in its' par
value, a change from par value to no par value or
case provided in subparagraph (c) of this
paragraph (vi), or
2. a merger of consolidation in which the Corporation
is not the continuing corporation,
provision shall be made so that holders of the Second
Series shall thereafter have the right to convert each
share thereof into the kind and amount of shares or
stock or other securities or property receivable upon
such reclassification, change, merger or consolidation
by a holder of the number and kind of shares of capital
stock of the Corporation into which such shares of the
Second Series were convertible immediately prior
thereto. In any such case the Board of Directors shall
determine the manner in which the adjustments provided
for in subparagraph (e) of the paragraph (vi) shall
thereafter be made.
g. Whenever the conversion rate is required to be adjusted:
1. the Corporation shall file a certificate setting
forth such adjusted conversion rate and the facts
upon which the adjustment is based with the
Transfer Agents for shares of the Second Series
and the Transfer Agents for the Common Stock and
thereafter (until further adjusted) conversion
rate shall be as set forth in such certificate;
and
2. the Corporation shall mail notice of such adjusted
conversion rate to each holder of shares of the
Second Series.
vii. VOTING RIGHTS. Except as provided below, holders of shares
of the Second Series shall have the general power to vote in
the election of directors and for all other purposes, on the
basis of one hundred (100) votes per share of the Second
Series. Holders of shares of the Second Series shall not
have the general power to vote on any matters on which they
are entitled to vote as a series or as a part of the class
of Preference Stock, regardless of series.
CERTIFICATE OF DESIGNATION OF TERMS OF
FOURTH SERIES P CONVERTIBLE PARTICIPATING PREFERRED STOCK
Dimensional Visions Group, Ltd. (the "Corporation" or "Company"), a
Delaware corporation, pursuant to Section 151(g) of the General Corporation Law
of the State of Delaware, as amended, hereby certifies that:
1. The Board of Directors of the Corporation, pursuant to authority
expressly vested in it by the provisions of the Company's Restated Certificate
of Incorporation, duly adopted the following resolution creating the fourth
series of the Preference Stock of the Corporation to consist initially of
600,000 shares and fixing the designations, preferences and rights, and the
qualifications, limitations and restrictions thereof, of the shares of such
series at a meeting duly held on August 26, 1995:
RESOLVED, That pursuant to authority expressly granted to the Board of
Directors by the provisions of this Corporation's Certificate of
Incorporation, the Board of Directors hereby creates the third series
of the Preference Stock of the Corporation to consist initially of
600,000 shares ("Fourth Series") and hereby fixes the designations,
preferences and rights, and qualifications, limitations and
restrictions thereof, of the shares of such series (in addition to the
designations, preferences and rights, and the qualification,
limitations and restrictions thereof, set forth in the Certificate of
Incorporation which are applicable to this Corporation's Preference
Stock of all series) as follows:
(1) Designation of Series. The Fourth Series shall be designated
by the Series P Convertible Participating Preferred Stock.
(2) Number of Shares. The number of shares of the Fourth Series
shall be 600,000, which number from time to time may be increased or decreased
(but not below the number of shares of the series then outstanding) by
resolution of the Board of Directors of the Corporation.
(3) Dividends. Dividends will be paid on the Fourth Series P
Convertible Participating Preferred Stock to the extent that dividends are paid
on the Corporation's Common Stock.
(4) Redemption. Shares of the Fourth Series P Convertible
Participating Preferred Stock shall not be redeemable.
<PAGE>
(5) No Liquidation Preference. In the event of a voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, holders
of shares of the Fourth Series shall have no liquidation preference over holders
of the Corporation's Common Stock. Holders of shares of the Fourth Series shall
participate ratably with holders of the Corporation's Common Stock in the
distribution of assets with each share of the Fourth Series accounting for ten
(10) shares of the Corporation's Common Stock. Nether the merger nor
consolidation of the Corporation with or into any corporation, nor any sale,
transfer or lease of all or part of the Corporation's assets, shall be deemed a
liquidation of the Corporation within the meaning of this paragraph (5).
(6) Conversion Rights. Any holder of shares of the Fourth Series
may convert any or all of such shares into fully paid and non-assessable shares
of Common Stock of the Corporation (hereafter called "Common Stock") on the
terms, at the times, and in the manner hereinafter set forth.
(a) Shares of the Fourth Series may be converted at any time
after January 1, 1996, or at such time that the number of shares of the
Company's authorized but unissued Common Stock are available to allow 100%
conversion of the entire issued and outstanding Fourth Series P Convertible
Participating Preferred Stock, into shares of Common Stock at the rate of ten
(10) shares of Common Stock for each share of the Fourth Series, such rate to be
subject to adjustment as hereinafter provided.
(b) Any holder of shares of the Fourth Series who elects to
convert them shall surrender the certificate therefor at the principal office of
any Transfer Agent, or the Corporation as the case may be, for such shares, with
the form of written notice endorsed on such certificate of his elections to
convert them completed. If necessary under the circumstances, such certificate
shall be endorsed for transfer or accompanied by executed instruments of
transfer, together with such other transfer papers as the transfer Agent may
reasonably require. The Corporation or such Transfer Agent, as the case may be,
may require, as a condition to the exercise of the conversion privilege, the
payment of any transfer tax or other governmental charge (but not any tax
payable upon the issue of stock deliverable upon such conversion) that may be
imposed upon any transfer incidental or prior to the conversion, or the
submission of proper proof that the same has been paid. The conversion privilege
shall be deemed to have been exercised, and the shares of Common Stock issuable
upon such conversion shall be deemed to have been issued, upon the date the
Transfer Agent, or the Corporation as the case may be, receives for conversion
the certificate representing such shares with the required terms for conversion
satisfied, except that as to any shares of such series which are surrendered for
2
<PAGE>
conversion on a date which is less than five business days preceding the date
fixed for the determination of holders of Common Stock entitled to received
rights to subscribe for or to purchase shares of Common Stock or other
securities of the Corporation convertible to Common Stock, the conversion
privilege shall be deemed to have been exercised on the business day next
succeeding the date fixed for such determination. Each person entitled to
receive the Common Stock issuable upon such conversion shall from the same date
be treated as the record holder of such Common Stock, and the person who
surrenders such shares for conversion shall on that date cease to be treated as
the record holder of the shares surrendered.
(c) The Corporation shall not issue in connection with the
conversion of shares of the Fourth Series certificates for a fraction of one
share of Common Stock, but in lieu thereof shall pay to any person who would
otherwise be entitled thereto an amount of case equal to such fraction
multiplied by the Market Price of the Common Stock on the last business day of
the week preceding the week in which the conversion privilege was deemed to have
been exercised. As used herein, "Market Price" means the last reported sale
price regular way on such day or, in case no such reported sale takes place on
such day, the reported closing bid price regular way, in either case on the
principal national securities exchange on which the Common Stock is then listed
or, if not listed on any national securities exchange, the closing bid price in
the over-the-counter market as reported by any New York Stock Exchange member
firm selected from time to time by the Board of Directors for that purpose.
(d) As soon as practicable after the effective date of conversion
of any shares of the Fourth Series, the Corporation shall deliver to the person
or persons entitled thereto, at the principal office of the Transfer Agent at
which such stock was surrendered for conversion, certificates representing the
shares of Common Stock and any cash to which such person or persons shall be
entitled on such conversion.
(e) The conversion rate set forth in subparagraph (a) of this
paragraph (6) shall be subject to adjustment as follows:
(i) if the Corporation subdivides the outstanding shares of
its Common Stock into a greater number of shares or combines them
into a smaller number of shares, the conversion rate in effect
immediately prior to such subdivision or combination shall be
proportionately increased or decreased effective at the opening
3
<PAGE>
of business on the day following the day upon which such
subdivision or combination becomes effective;
(ii) if the Corporation fixes a record date for the purpose
of determining the holders of shares of Common Stock, entitled to
receive any dividend in Common Stock, the conversion rate in
effect immediately prior to such record date shall be
proportionately increased effective at the opening of business on
the day following such record date, provided that if for any
reason the plan to pay such dividend in Common Stock is legally
abandoned before payment, then any adjustment made in the
conversion rate by reason of the passage of such record date
shall be canceled as of the date the plan is abandoned; and
(iii) the issuance to all holders of Common Stock of the
Corporation of rights to subscribe to Common Stock at a price
lower than 90% of the Market Price (defined above) thereof as of
the close of business on the last business day of the week
preceding such issuance of rights shall be deemed to constitute
the payment of a dividend in Common Stock to the holders of
shares of Common Stock (and the record date therefore shall be
deemed to have been fixed as the date of issuance of such rights)
of that number of shares which is determined by dividing the
Market price per share as of such time into the difference
between (a) the total Market Price as of such time of the number
of shares purchasable upon exercise of such rights and (B) the
total offering price of such shares.
(f) In case of
(i) any reclassification or change of the Common Stock of
the Corporation other than a change in its par value, a change
from par value to no par value or case provided for in
subparagraph (c) of this paragraph (6), or
(ii) a merger of consolidation in which the Corporation is
not the continuing corporation,
provisions shall be made so that the Fourth Series shall
thereafter have the right to convert each share thereof into the
kind and amount of shares of stock or other securities or
property receivable upon such reclassification, change, merger or
consolidation by a holder of the number and kind of shares of
4
<PAGE>
capital stock of the Corporation into which such shares of the
Fourth Series were convertible immediately prior thereto. In any
such case the Board of Directors shall determine the manner in
which the adjustments provided for in subparagraph (e) of the
paragraph (6) shall thereafter be made.
(g) Whenever the conversion rate is required to be adjusted:
(i) the Corporation shall file a certificate setting forth
such adjusted conversion rate and the facts upon which the
adjustment is based with the Transfer Agents for shares of the
Fourth Series and the Transfer Agents for the Common Stock and
thereafter (until further adjusted) the adjusted conversion rate
shall be as set forth in such certificate; and
(ii) the Corporation shall mail notice of such adjusted
conversion rate to each holder of shares of the Fourth Series.
(7) Voting Rights. Except as provided below, holders of shares of
the Fourth Series shall have the general power to vote in the election of
directors and for all other purposes, on the basis of ten (10) votes per share
of the Fourth Series. Holders of shares of the Fourth Series shall not have the
general power to vote on any matters on which they are entitled to vote as a
series or as part of the class of Preference Stock, regardless of series.
2. This instrument will become effective as of the beginning of business on
September 5, 1995.
5
<PAGE>
IN WITNESS WHEREOF, the Company has caused its corporate seal to be
hereunto affixed and this certificate to be signed by George S. Smith, its Chief
Executive Officer, and attested by Joann Furman, its Secretary/Treasurer, this
5th day of September, 1995.
DIMENSIONAL VISIONS GROUP, LTD.
By: /s/ George S. Smith
------------------------------------
George S. Smith
Chief Executive Officer
[CORPORATE SEAL]
Attest:
- -------------------------------------
Joann Furman
Secretary/Treasurer
CERTIFICATE OF DESIGNATION OF TERMS OF
THIRD SERIES S CONVERTIBLE PARTICIPATING PREFERRED STOCK
Dimensional Visions Group, Ltd. (the "Corporation" or "Company"), a
Delaware corporation, pursuant to Section 151(g) of the General Corporation Law
of the State of Delaware, as amended, hereby certifies that:
1. The Board of Directors of the Corporation, pursuant to authority
expressly vested in it by the provisions of the Company's Restated Certificate
of Incorporation, duly adopted the following resolution creating the third
series of the Preference Stock of the Corporation to consist initially of 50,000
shares and fixing the designations, preferences and rights, and the
qualifications, limitations and restrictions thereof, of the shares of such
series at a meeting duly held on August 26, 1995:
RESOLVED, That pursuant to authority expressly granted to the
Board of Directors by the provisions of this Corporation's
Certificate of Incorporation, the Board of Directors hereby
creates the third series of the Preference Stock of the
Corporation to consist initially of 50,000 shares ("Third
Series") and hereby fixes the designations, preferences and
rights, and qualifications, limitations and restrictions thereof,
of the shares of such series (in addition to the designations,
preferences and rights, and the qualification, limitations and
restrictions thereof, set forth in the Certificate of
Incorporation which are applicable to this Corporation's
Preference Stock of all series) as follows:
(1) Designation of Series. The Third Series shall be
designated by the Series S Convertible Participating Preferred
Stock.
(2) Number of Shares. The number of shares of the Third
Series shall be 50,000, which number from time to time may be
increased or decreased (but not below the number of shares of the
series then outstanding) by resolution of the Board of Directors
of the Corporation.
(3) Dividends. Dividends will be paid on the Third Series S
Convertible Participating Preferred Stock to the extent that
dividends are paid on the Corporation's Common Stock.
(4) Redemption. Shares of the Third Series S Convertible
Participating Preferred Stock shall not be redeemable.
(5) No Liquidation Preference. In the event of a voluntary
or involuntary liquidation, dissolution or winding up of the
Corporation, holders of shares of the Third Series shall have no
<PAGE>
2
liquidation preference over holders of the Corporation's Common
Stock. Holders of shares of the Third Series shall participate
ratably with holders of the Corporation's Common Stock in the
distribution of assets with each share of the Third Series
accounting for one hundred (100) shares of the Corporation's
Common Stock. Neither the merger nor consolidation of the
Corporation with or into any corporation, nor any sale, transfer
or lease of all or part of the Corporation's assets, shall be
deemed a liquidation of the Corporation within the meaning of
this paragraph (5).
(6) Conversion Rights. Any holder of shares of the Third
Series may convert any or all such shares into fully paid and
non-assessable shares of Common Stock of the Corporation
(hereafter called "Common Stock") on the terms, at the times, and
in the manner hereinafter set forth.
(a) Shares of the Third Series may be converted at any time
after January 1, 1996, or at such time after October 1, 1995 that
the number of shares of the Company's authorized but unissued
Common Stock are available to allow 100% conversion of the entire
issued and outstanding Third Series S Convertible Participating
Preferred Stock, into shares of Common Stock at the rate of one
hundred (100) shares of Common Stock for each share of the Third
Series, such rate to be subject to adjustment as hereinafter
provided.
(b) Any holders of shares of the Third Series who elects to
convert them shall surrender the certificate therefor at the
principal office of any Transfer Agent, or the Corporation as the
case may be, for such shares, with the form of written notice
endorsed on such certificate of his election to convert them
completed. If necessary under the circumstances, such certificate
shall be endorsed for transfer or accompanied by executed
instruments of transfer, together with such other transfer papers
as the Transfer Agent may reasonably require. The Corporation or
such Transfer Agent, as the case may be, may require, as a
condition to the exercise of the conversion privilege, the
payment of any transfer tax or other governmental charge (but not
any tax payable upon the issue of stock deliverable upon such
conversion) that may be imposed upon any transfer incidental or
prior to the conversion, or the submission of proper proof that
the same has been paid. The conversion privilege shall be deemed
to have been exercised, and the shares of Common Stock issuable
upon such conversion shall be deemed to have been issued, upon
the date the Transfer Agent, or the Corporation as the case may
be, receives for conversion the certificate representing such
shares with the required terms for conversion satisfied, except
that as to any shares of such series which are surrendered for
conversion on a date which is less than five business days
preceding the date fixed for the determination of holders of
Common Stock entitled to receive rights to subscribe for or to
purchase shares of Common Stock or other securities of the
Corporation convertible to Common Stock, the conversion privilege
shall be deemed to have been exercised on the business day next
succeeding the date fixed for such determination. Each person
entitled to receive the Common Stock issuable upon such
conversion shall from the same date be treated as the record
holder of such Common Stock, and the person who surrenders such
shares for conversion shall on that date cease to be treated as
the record holder of the shares surrendered.
<PAGE>
3
(c) The Corporation shall not issue in connection with the
conversion of shares of the Third Series certificates for a
fraction of one share of Common Stock, but in lieu thereof shall
pay to any person who would otherwise be entitled thereto an
amount of case equal to such fraction multiplied by the Market
Price of the Common Stock on the last business day of the week
preceding the week in which the conversion privilege was deemed
to have been exercised. As used herein, "Market Price" means the
last reported sale price regular way on such day or, in case no
such reported sale takes place on such day, the reported closing
bid price regular way, in either case on the principal national
securities exchange on which the Common Stock is then listed or,
if not listed on any national securities exchange, the closing
bid price in the over-the-counter market as reported by any New
York Stock Exchange member firm selected from time to time by the
Board of Directors for that purpose.
(d) As soon as practicable after the effective date of
conversion of any shares of the Third Series, the Corporation
shall deliver to the person or persons entitled thereto, at the
principal office of the Transfer Agent at which such stock was
surrendered for conversion, certificates representing the shares
of Common Stock and any cash to which such person or persons
shall be entitled on such conversion.
(e) The conversion rate set forth in subparagraph (a) of
this paragraph (6) shall be subject to adjustment as follows:
(i) if the Corporation subdivides the outstanding
shares of its Common Stock into a greater number of shares
or combines them into a smaller number of shares, the
conversion rate in effect immediately prior to such
subdivision or combination shall be proportionately
increased or decreased effective at the opening of business
on the day following the day upon which such subdivision or
combination becomes effective;
(ii) if the Corporation fixes a record date for the
purpose of determining the holders of shares of Common
Stock, entitled to receive any dividend in Common Stock, the
conversion rate in effect immediately prior to such record
date shall be proportionately increased effective at the
opening of business on the day following such record date,
provided that if for any reason the plan to pay such
dividend in Common Stock is legally abandoned before
payment, then any adjustment made in the conversion rate by
reason of the passage of such record date shall be canceled
as of the date the plan is abandoned; and
(iii) the issuance to all holders of Common Stock of
the Corporation of rights to subscribe to Common Stock at a
price lower than 90% of the Market Price (defined above)
thereof as of the close of business on the last business day
of the week preceding such issuance of rights shall be
deemed to constitute the payment of a dividend in Common
Stock to the holders of shares of Common Stock (and the
record date therefore shall be deemed to have been fixed as
the date of issuance of such rights) of that number of
shares which is determined by dividing the Market Price per
share as of such time into the difference between (A) the
total Market Price as of such time of the number of shares
purchasable upon exercise of such rights and (B) the total
offering price of such shares.
<PAGE>
4
(f) In case of
(i) any reclassification or change of the Common Stock
of the Corporation other than a change in its par value, a
change from par value to no par value or case provided for
in subparagraph (c) of this paragraph (6), or
(ii) a merger of consolidation in which the Corporation
is not the continuing corporation,
provision shall be made so that holders of the Third Series
shall thereafter have the right to convert each share
thereof into the kind and amount of shares of stock or other
securities or property receivable upon such
reclassification, change, merger or consolidation by a
holder of the number and kind of shares of capital stock of
the Corporation into which such shares of the Third Series
were convertible immediately prior thereto. In any such case
the Board of Directors shall determine the manner in which
the adjustments provided for in subparagraph (e) of the
paragraph (6) shall thereafter be made.
(g) Whenever the conversion rate is required to be adjusted:
(i) the Corporation shall file a certificate setting
forth such adjusted conversion rate and the facts upon which
the adjustment is based with the Transfer Agents for shares
of the Third Series and the Transfer Agents for the Common
Stock and thereafter (until further adjusted) the adjusted
conversion rate shall be as set forth in such certificate;
and
(ii) the Corporation shall mail notice of such adjusted
conversion rate to each holder of shares of the Third
Series.
(7) Voting Rights. Except as provided below, holders of
shares of the Third Series shall have the general power to vote
in the election of directors and for all other purposes, on the
basis of one hundred (100) votes per share of the Third Series.
Holders of shares of the Third Series shall not have the general
power to vote on any matters on which they are entitled to vote
as a series or as part of the class of Preference Stock,
regardless of series.
<PAGE>
5
2. This instrument will become effective as of the beginning of
business on August 28, 1995.
IN WITNESS WHEREOF, The Company has caused its corporate seal to be
hereunto affixed and this certificate to be signed by George S. Smith, its Chief
Executive Officer, and attested by Joann Furman, its Secretary/Treasurer, this
28th day of August, 1995.
DIMENSIONAL VISIONS GROUP, LTD.
By /s/ GEORGE S. SMITH
-------------------------------------
George S. Smith
Chief Executive Officer
[CORPORATE SEAL]
Attest:
/s/ JOANN FURMAN
- ----------------------------
Joann Furman
Secretary/Treasurer
CERTIFICATE OF DESIGNATION OF
TERMS OF SERIES C CONVERTIBLE PREFERRED STOCK
DIMENSIONAL VISIONS GROUP, LTD. (the "Corporation" or "Company"), a
Delaware corporation, pursuant to Section 151 (g) of the General Corporation Law
of the State of Delaware, as amended, hereby certifies that:
1. The Board of Directors of the Corporation, pursuant to authority
expressly vested in it by the provisions of the Company's Restated
Certificate of Incorporation, duly adopted the following resolution
creating the Series C Convertible Preferred Stock of the Corporation
to consist initially of 1,000,000 shares and fixing the designations,
preferences and rights, and the qualifications, limitations and
restrictions thereof, of the shares of such series at a meeting duly
held on October 12, 1995:
RESOLVED, that pursuant to authority expressly granted to the
Board of Directors by the provisions of this Corporations' Certificate
of Incorporation, the Board of Directors hereby creates this series of
the Preference Stock of the Corporation to consist initially of
1,000,000 shares and hereby fixes the designations, preferences and
rights, and qualifications, limitations and restrictions thereof, of
the shares of such series (in addition to the designations,
preferences and rights, and the qualification, limitations and
restrictions thereof, set forth in the Certificate of Incorporation
which are applicable to this Corporation's Preference Stock of all
series) as follows:
i. DESIGNATION OF SERIES. This series shall be designated by the
Series C Convertible Preferred Stock.
ii. NUMBER OF SHARES. The number of shares of this series shall be
1,000,000, which number from time to time may be increased or
decreased (but not below the number of shares in the series then
outstanding) by resolution of the Board of Directors of the
Corporation.
iii. DIVIDENDS. Dividends will be paid on the Series C convertible
Preferred Stock to the extent that the dividends are paid on the
Corporation's Common Stock.
iv. REDEMPTION. Shares of Series C Convertible Preferred Stock shall
not be redeemed.
v. NO LIQUIDATION PREFERENCE. In the event of a voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation, holders of shares of the Series C Convertible
Preferred Stock shall have no liquidation preference over holders
of the Corporation's Common Stock. Holders of shares of the
Series C Convertible Preferred Stock shall participate ratably
with holders of the Corporation's Common Stock in the
distribution of assets with each share of the Series C
Convertible Preferred Stock accounting for ten (10) shares of the
Corporation's Common Stock. Neither the merger nor the
consolidation of the Corporation with or into or any corporation,
nor any sale, transfer or lease of all or part of the
Corporation's assets, shall be deemed a liquidation of the
Corporation within the meaning of this paragraph (v).
<PAGE>
vi. CONVERSION RIGHTS. Any holder of shares of the Series C
Convertible Preferred Stock may convert any or all of such shares
into fully paid and non-assessable shares of Common Stock of the
Corporation (hereafter called "Common Stock") on the terms, at
the times, and in the manner hereinafter set forth.
a. Shares of the Series C Convertible Preferred Stock may be
converted at any time into shares of Common Stock at the
rate of ten (10) shares of Common Stock for each share of
the Series C Convertible Preferred Stock, such rate to be
subject to adjustment as hereinafter provided.
b. Any holder of shares of the Series C Convertible Preferred
Stock who elects to convert them shall surrender the
certificate therefor at the principal office of any Transfer
Agent, or the Corporation as the case may be, for such
shares, with the form of written notice endorsed on such
certificate of his election to convert them completed. If
necessary under the circumstances such certificate shall be
endorsed for transfer or accompanied by executed instruments
of transfer, together with such other transfer papers as the
Transfer Agent may reasonably require. The Corporation or
such Transfer Agent, as the case may be, may require, as a
condition to the exercise of the conversion privilege, the
payment of any transfer tax or other governmental charge
(but not any tax payable upon the issue of stock deliverable
upon such conversion) that may be imposed upon any transfer
incidental or prior to the conversion, or the submission of
proper proof that the same has been paid. The conversion
privilege shall be deemed to have been exercised, and the
shares of Common Stock issuable upon such conversion shall
be deemed to have been issued, upon the date the Transfer
Agent, or the Corporation as the case may be, receives for
conversion the certificate representing such shares with the
required terms for conversion satisfied, except that as to
any shares of such series which are surrendered for
conversion on a date which is less than five business days
preceding the date fixed for the determination of holders of
Common Stock entitled to receive rights to subscribe for or
to purchase shares of Common Stock or other securities of
the Corporation convertible to Common Stock, the conversion
privilege shall be deemed to have been exercised on the
business day next succeeding the date fixed for such
determination. Each person entitled to receive the Common
Stock issuable upon such conversion shall from the same date
be treated as the record holder of such Common Stock, and
the person who surrenders such shares for conversion shall
on that date cease to be treated as the record holder of the
shares surrendered.
c. The Corporation shall not issue in connection with the
conversion of shares of the Series C Convertible Preferred
Stock certificates for a fraction of one share of Common
Stock, but in lieu thereof shall pay to any person who would
otherwise be entitled thereto an amount of case equal to
such fraction multiplied by the Market Price of the Common
Stock on the last business day of the week preceding the
week in which the conversion privilege was deemed to have
been exercised. As used herein, "Market Price" means the
last reported sale price regular way on such day or, in case
<PAGE>
no such reported sale takes place on such day, the reported
closing bid price regular way, in either case on the
principal national securities exchange on which the Common
Stock is then listed or, if not listed on any national
securities exchange, the closing bid price in the
over-the-counter market as reported by any New York Stock
Exchange member firm selected from time to time by the Board
of Directors for that purpose.
d. As soon as practicable after the effective date of
conversion of any shares of the Series C Convertible
Preferred Stock, the Corporation shall deliver to the person
or persons entitled thereto, at the principal office of the
Transfer Agent at which such stock was surrendered for
conversion, certificates representing the shares of Common
Stock and any cash to which such person or persons shall be
entitled on such conversion.
e. The conversion rate set forth in subparagraph (a) of this
paragraph (vi) shall be subject to adjustment as follows:
1. if the Corporation subdivides the outstanding shares of
its Common Stock into a greater number of shares or
combines them into a smaller number of shares, the
conversion rate in effect immediately prior to such
subdivision or combination shall be proportionately
increased or decreased effective at the opening of
business on the day following the day upon which such
subdivision or combination becomes effective;
2. if the Corporation fixes a record date for the purpose
of determining the holders of shares of Common Stock,
entitled to receive any dividend in Common Stock, the
conversion rate in effect immediately prior to such
record date shall be proportionally increased effective
at the opening of business on the day following such a
record date, provided that if for any reason the plan
to pay such dividend in Common Stock is legally
abandoned before payment, that any adjustment made in
the conversion rate by reason of the passage of such
record date shall be cancelled as of the date the plan
is abandoned; and
3. the insurance to all holders of Common Stock of the
corporation of rights to subscribe to Common Stock at a
price lower than 90% of the Market Price (defined
above) thereof as of the close of business on the last
business day of the week preceding such insurance of
rights shall be deemed to constitute the payment of a
dividend in Common Stock (and the record date therefore
shall be deemed to have been fixed as the date of
insurance of such rights)of that number of shares which
is determined by dividing the Market Price per share as
of such time into the difference between (A) the total
Market Price as of such time of the number of shares
purchasable upon exercise of such rights and (B) the
total offering price of such shares.
<PAGE>
f. In case of
1. any reclassification or change of the Common Stock of
the Corporation other than a change in its' par value,
a change from par value to no par value or case
provided in subparagraph (c) of this paragraph (vi), or
2. a merger of consolidation in which the Corporation is
not the continuing corporation,
provision shall be made so that holders of the Series C
Convertible Preferred Stock shall thereafter have the right
to convert each share thereof into the kind and amount of
shares or stock or other securities or property receivable
upon such reclassification, change merger or consolidation
by a holder of the number and kind of shares of capital
stock of the Corporation into which such shares of the
Series C Convertible Preferred Stock were convertible
immediately prior thereto. In any such case the Board of
Directors shall determine the manner in which the
adjustments provided for in subparagraph (e) of the
paragraph (vi) shall thereafter be made.
g. Whenever the conversion rate is required to be adjusted:
1. the Corporation shall file a certificate setting forth
such adjusted conversion rate and the facts upon which
the adjustment is based with the Transfer Agents for
shares of the Series C Convertible Preferred Stock and
the Transfer Agents for the Common Stock and thereafter
(until further adjusted) the adjusted conversion rate
shall be as set forth in such certificate; and
2. the Corporation shall mail notice of such adjusted
conversion rate to each holder of shares of the Series
C Convertible Preferred Stock.
vii. VOTING RIGHTS. Except as provided below, holders of shares of the
Series C Convertible Preferred Stock shall have the general power to
vote in the election of directors and for all other purposes, on the
basis of ten (10) votes per share of the Series C Convertible
Preferred Stock. Holders of shares of the Second Series shall not have
the general power to vote on any matters on which they are entitled to
vote as a series or as a part of the class of Preference Stock,
regardless of series.
CERTIFICATE OF DESIGNATION OF
SERIES D PREFERRED STOCK
AND
SERIES E PREFERRED STOCK
OF
DIMENSIONAL VISIONS INCORPORATED
A.
CERTIFICATION
John D. McPhilimy and Roy Pringle certify that they are President and
Secretary, respectively, of Dimensional Visions Incorporated, a Delaware
corporation (the "Corporation"), and that, pursuant to the Corporation's
Articles of Incorporation, as amended, and Delaware General Corporation Law, the
Board of Directors of the Corporation adopted the following resolutions on
August 25, 1999; at which point none of the Series D Preferred Stock or Series E
Preferred Stock had been issued.
B.
SERIES D PREFERRED STOCK
1. CREATION AND DESIGNATION OF SERIES D PREFERRED STOCK. The Corporation is
authorized to issue ten million (10,000,000) shares of preferred stock, $.001
par value, of which three hundred seventy-five thousand (375,000) shares are
designated as the Series D Preferred Stock, having the voting powers,
preferences, relative, participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set forth below.
2 LIQUIDATION PREFERENCES. In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, the holders of outstanding shares
of Series D Preferred Stock will be entitled to receive, before any distribution
is made with respect to the Corporation's Common Stock, a preferential payment
at a rate per each whole share of Series D Preferred Stock equal to $1.00.
3. CONVERSION PROVISIONS. Each share of Series D Preferred Stock is
convertible into two (2) shares of the Corporation's Common Stock at any time
after the date of issuance. Any holder of the Series D Preferred Stock may elect
conversion (the "Conversion Right") of any number of the Shares so held by
remitting the Certificate evidencing ownership of the Shares together with a
1
<PAGE>
signed irrevocable stock transfer power, with signature guaranteed, to the
Corporation requesting and specifying the number of Shares that the Holder seeks
to convert into the Corporation's Common Stock (the "Conversion Request").
4. REGISTRATION RIGHTS. If the Corporation at any time proposes to register
any of its securities under the Securities Act of 1933, as amended (the "Act"),
including under an SB-2 Registration Statement or otherwise, the Corporation
will use its best efforts to cause all of the shares of common stock underlying
the outstanding shares of Series D Preferred Stock to be registered under the
Act (with the securities which the Corporation at the time propose to register),
all to the extent requisite to permit the sale or other disposition by the
Holder; provided, however, that the Corporation may, as a condition precedent to
its effecting such registration, require the Holder to agree with the
Corporation and the managing underwriter or underwriters of the offering to be
made by the Corporation in connection with such registration that the Holder
will not sell any securities of the same class or convertible into the same
class as those registered by the Corporation (including any class into which the
securities registered by the Corporation are convertible) for such reasonable
period after such registration becomes effective as shall then be specified in
writing by such underwriter or underwriters if in the opinion of such
underwriter or underwriters the Corporation's offering would be materially
adversely affected in the absence of such an agreement. All expenses incurred by
the Corporation in complying with this Section, including without limitation all
registration and filing fees, listing fees, printing expenses, fees and
disbursements of all independent accounts, or counsel for the Corporation and or
counsel for the Holder and the expense of any special audits incident to or
required by any such registration and the expenses of complying with the
securities or blue sky laws of any jurisdiction shall be paid by the
Corporation. Notwithstanding the foregoing, Holder shall pay all underwriting
discounts or commissions with respect to any securities sold by the Holder.
5 CALL FEATURE. At the option of the Board of Directors, the Corporation
may call (buy back) the shares of Series D Preferred Stock in whole or in part,
at any time and at the option of the Board of Directors of the Corporation,
continuing until all shares have been retired, at a rate of $1.00 per share of
Series D Preferred Stock. The Corporation shall provide investors with twenty
days' written notice of any call and Investors may convert their Shares prior to
the date of the call.
Appropriate adjustments shall be made in the call feature for stock splits,
reverse stock splits, stock dividends, recapitalization, mergers, or
reorganization.
Purchase by the Corporation is subject (i) to the Corporation having
legally available funds for such purpose and (ii) such purchase being in full
conformity with applicable law. If funds are available for only a partial call,
the Corporation will call shares on a pro rata basis. No assurance can be given
that the Corporation will have funds available legally to make purchases in full
or partial. No assurance can be given that the Board of Directors will elect to
call all or a portion of the Series D Preferred Stock in any year.
6 DISTRIBUTIONS. In the event this Corporation shall declare a distribution
payable wholly or partially in securities, the holders of shares of Series D
Preferred Stock shall be entitled to a proportionate share of any such
2
<PAGE>
distribution as though they were the holders of the number of shares of Common
Stock of the Corporation into which their shares of Series D Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
7 RECAPITALIZATION. If at any time or from time to time there shall be a
recapitalization of the Common Stock (other than a subdivision, combination or
merger or sale of assets transaction provided for elsewhere in this Amendment)
provision shall be made so that the holders of shares of Series D Preferred
Stock shall thereafter be entitled to receive upon conversion of the Series D
Preferred Stock the number of shares of stock or other securities or property of
the Corporation or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 7 with respect to the rights of the holders of the Series D
Preferred Stock after the recapitalization to the end that the provisions of
this Section 7 (including adjustment of the applicable Conversion Prices then in
effect and the number of shares purchasable upon conversion of the Series D
Preferred Stock) shall be applicable after that event as nearly equivalent as
may be practicable.
8 NO IMPAIRMENT. This Corporation will not, by amendment of its Articles of
Incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by this Corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 8 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series D Preferred Stock against impairment.
9 NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
a. No fractional shares shall be issued upon the conversion of any
share or shares of the Series D Preferred Stock and the number of shares of
Common Stock to be issued shall be rounded to the nearest whole share. Whether
or not fractional shares are issuable upon such conversion shall be determined
on the basis of the total number of shares of Series D Preferred Stock the
holder is at the time converting into Common Stock and the number of shares of
Common Stock issuable upon such aggregate conversion.
b. Upon the occurrence of each adjustment or readjustment of the
Conversion Price of Series D Preferred Stock pursuant to this Section 9, this
Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series D Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This Corporation shall, upon the written request at any
time of any holder of Series D Preferred Stock furnish or cause to be furnished
to such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price for such series of Preferred Stock at the
time in effect, and (C) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon the conversion
of a share of Series D Preferred Stock.
3
<PAGE>
10. NOTICES OF RECORD DATE. In the event of any taking by this Corporation
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, this Corporation shall
mail to each holder of Series D Preferred Stock, at least twenty (20) days prior
to the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right.
11. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. This Corporation shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series D Preferred Stock such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series D Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series D
Preferred Stock, in addition to such other remedies as shall be available to the
holder of such Preferred Stock, this Corporation will take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purposes, including, without limitation, engaging in best
efforts to obtain the requisite shareholder approval on any necessary amendment
to these articles.
12. NOTICES. Any notice required by the provisions of this Section 12 to be
given to the holders of shares of Series D Preferred Stock shall be deemed given
if deposited in the United States mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of this Corporation.
13. STATUS OF CONVERTED STOCK. In the event any shares of Series D
Preferred Stock shall be converted pursuant to Section 3 hereof, the shares so
converted shall be returned to authorized but unissued status.
14. MISCELLANEOUS PROVISIONS. The shares of Series D Preferred Stock have
no voting rights and no sinking fund has or will be established to provide for
any dividends or distributions or the possible repurchase of the Series D
Preferred Stock.
C.
SERIES E PREFERRED STOCK
1. CREATION AND DESIGNATION OF SERIES E PREFERRED STOCK. The Corporation is
authorized to issue ten million (10,000,000) shares of preferred stock, $.001
par value, of which one million(1,000,000) shares are designated as the Series E
Preferred Stock, having the voting powers, preferences, relative, participating,
optional and other special rights and the qualifications, limitations and
restrictions thereof that are set forth below.
4
<PAGE>
2. LIQUIDATION PREFERENCES. In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, the holders of outstanding shares
of Series E Preferred Stock will be entitled to receive, after the preferential
payment in full to holders of outstanding shares of Series D Preferred Stock as
required by this Section B(2) but before any distribution is made with respect
to the Corporation's Common Stock, a preferential payment at a rate per each
whole share of Series E Preferred Stock equal to $1.00.
3. CONVERSION PROVISIONS. Each share of Series E Preferred Stock is
convertible into one (1) share of the Corporation's Common Stock at any time
after the date of issuance. Any holder of the Series E Preferred Stock may elect
conversion (the "Conversion Right") of any number of the Shares so held by
remitting the Certificate evidencing ownership of the Shares together with a
signed irrevocable stock transfer power, with signature guaranteed, to the
Corporation requesting and specifying the number of Shares that the Holder seeks
to convert into the Corporation's Common Stock (the "Conversion Request"). The
Corporation shall provide investors with twenty days' written notice of any call
and Investors may convert their Shares prior to the date of the call.
4. REGISTRATION RIGHTS. If the Corporation at any time proposes to register
any of its securities under the Act, including under an SB-2 Registration
Statement or otherwise, the Corporation will use its best efforts to cause all
of the shares of common stock underlying the outstanding shares of Series E
Preferred Stock to be registered under the Act (with the securities which the
Corporation at the time propose to register), all to the extent requisite to
permit the sale or other disposition by the Holder; provided, however, that the
Corporation may, as a condition precedent to its effecting such registration,
require the Holder to agree with the Corporation and the managing underwriter or
underwriters of the offering to be made by the Corporation in connection with
such registration that the Holder will not sell any securities of the same class
or convertible into the same class as those registered by the Corporation
(including any class into which the securities registered by the Corporation are
convertible) for such reasonable period after such registration becomes
effective as shall then be specified in writing by such underwriter or
underwriters if in the opinion of such underwriter or underwriters the
Corporation's offering would be materially adversely affected in the absence of
such an agreement. All expenses incurred by the Corporation in complying with
this Section, including without limitation all registration and filing fees,
listing fees, printing expenses, fees and disbursements of all independent
accounts, or counsel for the Corporation and or counsel for the Holder and the
expense of any special audits incident to or required by any such registration
and the expenses of complying with the securities or blue sky laws of any
jurisdiction shall be paid by the Corporation. Notwithstanding the foregoing,
Holder shall pay all underwriting discounts or commissions with respect to any
securities sold by the Holder.
5. CALL FEATURE. At the option of the Board of Directors, the Corporation
may call (buy back) the shares of Series E Preferred Stock in whole or in part,
at any time and at the option of the Board of Directors of the Corporation,
continuing until all shares have been retired, at a rate of $1.00 per share of
Series E Preferred Stock. The Corporation shall provide investors with twenty
days' written notice of any call and Investors may convert their Shares prior to
the date of the call.
Appropriate adjustments shall be made in the call feature for stock splits,
reverse stock splits, stock dividends, recapitalization, mergers, or
reorganization.
5
<PAGE>
Purchase by the Corporation is subject (i) to the Corporation having
legally available funds for such purpose and (ii) such purchase being in full
conformity with applicable law. If funds are available for only a partial call,
the Corporation will call shares on a pro rata basis. No assurance can be given
that the Corporation will have funds available legally to make purchases in full
or partial. No assurance can be given that the Board of Directors will elect to
call all or a portion of the shares in any year.
6. DISTRIBUTIONS. In the event this Corporation shall declare a
distribution payable wholly or partially in securities, the holders of shares of
Series E Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the Corporation into which their shares of Series E Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
7. RECAPITALIZATION. If at any time or from time to time there shall be a
recapitalization of the Common Stock (other than a subdivision, combination or
merger or sale of assets transaction provided for elsewhere in this Amendment)
provision shall be made so that the holders of the Series E Preferred Stock
shall thereafter be entitled to receive upon conversion of the Series E
Preferred Stock the number of shares of stock or other securities or property of
the Corporation or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 7 with respect to the rights of the holders of the Series E
Preferred Stock after the recapitalization to the end that the provisions of
this Section 7 (including adjustment of the applicable Conversion Prices then in
effect and the number of shares purchasable upon conversion of the Series E
Preferred Stock) shall be applicable after that event as nearly equivalent as
may be practicable.
8. NO IMPAIRMENT. This Corporation will not, by amendment of its Articles
of Incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by this Corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 8 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series E Preferred Stock against impairment.
9. NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
a. No fractional shares shall be issued upon the conversion of any
share or shares of the Series E Preferred Stock and the number of shares of
Common Stock to be issued shall be rounded to the nearest whole share. Whether
or not fractional shares are issuable upon such conversion shall be determined
on the basis of the total number of shares of Series E Preferred Stock the
holder is at the time converting into Common Stock and the number of shares of
Common Stock issuable upon such aggregate conversion.
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b. Upon the occurrence of each adjustment or readjustment of the
Conversion Price of Series E Preferred Stock pursuant to this Section 9, this
Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series E Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This Corporation shall, upon the written request at any
time of any holder of Series E Preferred Stock furnish or cause to be furnished
to such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price for such series of Preferred Stock at the
time in effect, and (C) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon the conversion
of a share of Series E Preferred Stock.
10. NOTICES OF RECORD DATE. In the event of any taking by this Corporation
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, this Corporation shall
mail to each holder of Series E Preferred Stock, at least twenty (20) days prior
to the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right.
11. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. This Corporation shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series E Preferred Stock such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series E Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series E
Preferred Stock, in addition to such other remedies as shall be available to the
holder of such Preferred Stock, this Corporation will take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purposes, including, without limitation, engaging in best
efforts to obtain the requisite shareholder approval on any necessary amendment
to these articles.
12. NOTICES. Any notice required by the provisions of this Section 12 to be
given to the holders of shares of Preferred Stock shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of this Corporation.
13. STATUS OF CONVERTED STOCK. In the event any shares of Series E
Preferred Stock shall be converted pursuant to Section 3 hereof, the shares so
converted shall be returned to authorized but unissued status.
14. MISCELLANEOUS PROVISIONS. The shares of Series E Preferred Stock have
no voting rights and no sinking fund has or will be established to provide for
any dividends or distributions or the possible repurchase of the Series E
Preferred Stock.
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IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation of Series D Preferred Stock and Series E Preferred Stock to be duly
executed by its President and attested to by its Secretary and has caused its
corporate seal to be affixed hereto, this 25th day of August, 1999.
/s/ John D. McPhilimy
- ---------------------------------------
John D. McPhilimy, President
/s/ Roy Pringle
- ---------------------------------------
Roy Pringle, Secretary
8
NEITHER THIS WARRANT, NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF, HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAW. SUCH SECURITIES MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME
EFFECTIVE WITH REGARD THERETO OR (II) IN THE OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER THE SECURITIES ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH A PROPOSED
SALE OR TRANSFER.
COMMON STOCK
PURCHASE WARRANT
For the Purchase of Shares of
Common Stock of
DIMENSIONAL VISIONS INCORPORATED
(Par Value $0.001 Per Share)
(Incorporated under the Laws of the State of Delaware)
VOID AFTER 5:00 P.M. PST ON JANUARY 15, 2001
Date of Original Issuance: January 15, 1998
This is to certify that, for value received, __________________________
or assigns (the "Warrantholder"), is entitled, subject to the terms and
conditions hereinafter set forth, at any time and on or before 5:00 P.M.,
Pacific Standard Time, on January 15, 2001, but not thereafter, to purchase
200,000 shares of common stock, par value $0.001 per share (the "Common Stock"),
of DIMENSIONAL VISIONS INCORPORATED (the "Company") for the Warrant Price (as
defined below), and to receive a certificate or certificates for the shares of
Common Stock so purchased.
1. TERMS AND EXERCISE OF WARRANTS.
(a) EXERCISE PERIOD. Subject to the terms of this Warrant, the
Warrantholder shall have the right, at any time during the period (the "Exercise
Period") commencing on the date hereof and ending at 5:00 P.M., Pacific Standard
Time, on January 15, 2001 (the "Termination Date"), or if such date is a day on
which banking institutions are authorized by law to close, then on the next
succeeding day which shall not be such a day, to purchase from the Company up to
the number of fully paid and nonassessable shares of Common Stock which the
Warrantholder may at the time be entitled to purchase pursuant to this Warrant,
provided that, until September 15, 1998, no such shares shall be purchased, on
September 15, 1998, 100,000 shares of Common Stock may be purchased, and on
January 15, 1999, all 200,000 shares of Common Stock may be purchased pursuant
to this Warrant. Such shares of Common Stock and any other securities that the
Company may be required by the operation of SECTION 3 to issue upon the exercise
hereof are referred to hereinafter as the "Warrant Shares."
<PAGE>
(b) METHOD OF EXERCISE. This Warrant shall be exercised by
surrender of this Warrant to the Company at its principal office in Phoenix,
Arizona, or at such other address as the Company may designate by notice in
writing to the Warrantholder at the address of the Warrantholder appearing on
the books of the Company or such other address as the Warrantholder may
designate in writing, together with the form of Election to Purchase included as
EXHIBIT "A" hereto, duly completed and signed, and upon payment to the Company
of the Warrant Price (as defined in SECTION 2) multiplied by the number of
Warrant Shares being purchased upon such exercise (the "Aggregate Warrant
Price"), together with all taxes applicable upon such exercise. Payment of the
Aggregate Warrant Price shall be made in cash or by certified check or cashier's
check, payable to the order of the Company.
(c) PARTIAL EXERCISE. This Warrant shall be exercisable, at
the election of the Warrantholder, either in full or from time to time in part,
during the Exercise Period.
(d) SHARE ISSUANCE UPON EXERCISE. Upon the exercise and
surrender of this Warrant certificate and payment of such Warrant Price, the
Company shall issue and cause to be delivered with all reasonable dispatch to
the Warrantholder, in such name or names as the Warrantholder may designate in
writing, a certificate or certificates for the number of full Warrant Shares so
purchased upon the exercise of the Warrant, together with cash, as provided in
SECTION 7 hereof, with respect to any fractional Warrant Shares otherwise
issuable upon such surrender and, if applicable, the Company shall issue and
deliver a new Warrant to the Warrantholder for the number of shares not so
exercised. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a holder of such Warrant Shares as of the close of business on the date of the
surrender of the Warrant and payment of the Warrant Price, notwithstanding that
the certificates representing such Warrant Shares shall not actually have been
delivered or that the stock transfer books of the Company shall then be closed.
2. WARRANT PRICE.
The price per share at which Warrant Shares shall be purchasable on the
exercise of this Warrant shall be $.50 per share until January 15, 2001, subject
to adjustment pursuant to SECTION 3 hereof (originally and as adjusted, the
"Warrant Price").
3. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES.
The Company agrees to reserve and shall keep reserved for issuance the
number of shares of Common Stock issuable upon exercise of this Warrant. The
number and kind of securities purchasable upon the exercise of this Warrant and
the Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
(a) In case the Company shall (1) pay a dividend or make a
distribution in shares of its Common Stock, (2) subdivide its outstanding Common
Stock into a greater number of shares, (3) combine its outstanding Common Stock
into a smaller number of shares, or (4) issue by reclassification of its Common
Stock any shares of capital stock of the Company (other than a change in par
value, or from par value to no par value, or from no par value to par value),
the Warrant Price and the number of shares of Common Stock or other securities
issuable upon exercise of this Warrant in effect immediately prior thereto shall
be adjusted so that the Warrantholder, by operation of SECTION 3(d) hereof,
shall be entitled to receive
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the number of shares which it would have owned or have been entitled to receive
immediately following the happening of any of the events described above, had
this Warrant been exercised immediately prior to the record or effective date
thereof.
An adjustment made pursuant to SECTIONS 3(a)(1)-(4) above shall become
effective immediately after the record date in the case of a dividend or
distribution (PROVIDED, HOWEVER, that such adjustments shall be reversed if such
dividends or distributions are not actually paid) and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification. If, as a result of an adjustment made pursuant to this
paragraph, the Warrantholder shall become entitled to receive shares of two or
more classes of capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be evidenced by a resolution) shall
determine the allocation of the adjusted Warrant Price between or among the
shares of such classes of capital stock.
(b) In case of any reclassification of the outstanding Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision, combination or
stock dividend), or in case of any consolidation of the Company with, or merger
of the Company into, another corporation wherein the Company is not the
surviving entity, or in case of any sale of all, or substantially all, of the
property, assets, business and goodwill of the Company, the Company, or such
successor or purchasing corporation, as the case may be, shall provide, by a
written instrument delivered to the Warrantholder, that the Warrantholder shall
thereafter be entitled, upon exercise of this Warrant, to the kind and amount of
shares of stock or other equity securities, or other property or assets that
would have been receivable by such Warrantholder upon such reclassification,
consolidation, merger or sale, if this Warrant had been exercised immediately
prior thereto. Such corporation, which thereafter shall be deemed to be the
"Company" for purposes of this Warrant, shall provide in such written instrument
for adjustments to the Warrant Price that shall be as nearly equivalent as may
be practicable to the adjustments provided for in this SECTION 3.
(c) No adjustment in the number of securities purchasable
hereunder shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of securities (calculated to
the nearest full share or unit thereof) then purchasable upon the exercise of
this Warrant; provided, however, that any adjustment which by reason of this
SECTION 3(c) is not required to be made immediately shall be carried forward and
taken into account in any subsequent adjustment.
(d) Whenever the Warrant Price is adjusted as provided in this
SECTION 3, the number of shares of Common Stock or other securities issuable
upon exercise of this Warrant shall be adjusted simultaneously, by multiplying
the number of shares previously issuable by a fraction, of which the numerator
shall be the Warrant Price in effect immediately prior to such adjustment, and
of which the denominator shall be the Warrant Price as so adjusted.
(e) For the purpose of this SECTION 3, the term "Common Stock"
shall mean (i) the class of stock designated as Common Stock of the Company at
April 8, 1998, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value. In the event that at any time, as a result of an adjustment made pursuant
to this SECTION 3, the Warrantholder shall become entitled to purchase any
shares of the Company's capital stock other than Common Stock, thereafter the
number of such other shares so purchasable upon the exercise of this Warrant and
the Warrant Price of such shares shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the shares contained in this SECTION 3.
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<PAGE>
(f) Whenever the number of shares of Common Stock and/or other
securities purchasable upon the exercise of this Warrant or the Warrant Price is
adjusted as herein provided, the Company shall cause to be promptly mailed to
the Warrantholder by first class mail, postage prepaid, notice of such
adjustment and a certificate of the Company's chief financial officer setting
forth the number of shares of Common Stock and/or other securities purchasable
upon the exercise of this Warrant, the Warrant Price after such adjustment, a
brief statement of the facts requiring such adjustment, and the computation by
which such adjustment was made.
(g) Irrespective of any adjustments in the Warrant Price or
the number or kind of securities purchasable upon the exercise of this Warrant,
the Warrant certificate or certificates theretofore or thereafter issued may
continue to express the same price or number or kind of securities stated in
this Warrant initially issuable hereunder.
4. REGISTRATION RIGHTS.
The Company covenants and agrees as follows:
(a) For purposes of this SECTION 4:
(i) The terms "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;
(ii) The term "Registrable Securities" means (A) the
shares of Common Stock and the Warrant Shares and (B) any shares of
Common Stock or other securities of the Company issuable with respect
to the units (the "Units") offered by the Company pursuant to the
Private Placement Memorandum dated February 17, 1998, as amended to
date (the "Private Placement Memorandum"), as a result of a stock split
or dividend or any sale, transfer, assignment, or other transaction by
the Company or a Holder (as defined below) involving the Units and any
securities into which the Units may thereafter be changed as a result
of merger, consolidation, recapitalization, or otherwise. As to any
particular Registrable Securities, such securities will cease to be
Registrable Securities when they have been distributed to the public
pursuant to an offering registered under the Securities Act or sold to
the public through a broker, dealer, or market-maker in compliance with
Rule 144 under the Securities Act; and
(iii) The term "Holder" means any person owning or
having the right to acquire Registrable Securities.
(b) Commencing promptly following the final Closing Date (as
defined in the Private Placement Memorandum), the Company shall prepare and file
a registration statement covering all of the Registrable Securities as further
provided in SECTION 4(c).
(c) To effect the registration of any Registrable Securities,
the Company shall, as expeditiously as reasonably possible, use its best efforts
to:
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<PAGE>
(i) Prepare and file with the Securities and Exchange
commission (the "SEC") a registration statement with respect to such
Registrable Securities, cause such registration statement to become
effective, and keep such registration statement effective until the
expiration of the Warrants.
(ii) 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.
(iii) 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.
(iv) Register and qualify the securities covered by
such registration statement under such other securities or blue sky
laws of the jurisdictions in which the purchasers reside at the time of
the issuance of the Units; provided that in no event shall (A) the
Company be required to qualify to do business in any state or to take
any action which would subject it to general or unlimited service of
process in any state where it is not now so subject, (B) any
stockholder be required to escrow their shares of capital stock of the
Company, or (C) the Company or any stockholder be required to comply
with any other requirement which they deem unduly burdensome.
(v) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement
with terms generally satisfactory to the managing underwriter of such
offering. Each Holder participating in such underwriting shall also
enter into and perform its obligations under such an agreement.
(d) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this SECTION 4 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them, and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
(e) All expenses incurred in connection with the registration
pursuant to SECTION 4(b) (other than underwriter's commissions and fees or any
fees of others employed by a selling Holder, including attorneys' fees),
including without limitation all registration, filing and qualification fees,
printers' and accounting fees, and fees and disbursements of counsel for the
Company, shall be borne by the Company.
(f) With respect to the registration of the Registrable
Securities under this SECTION 4:
(i) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the officers and directors 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 Securities
Exchange Act of 1934, as amended (the "Exchange Act"), against any
losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Securities Act, the Exchange Act or
any state securities law or
5
<PAGE>
regulation, 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 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 reimburse each such
Holder, officer or director, underwriter or controlling person for 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 4(f)(i) 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 which 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.
(ii) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its
directors and officers, any underwriter (as defined in the Securities
Act) for the Company, each person, if any, who controls the Company or
any such underwriter within the meaning of the Securities Act or the
Exchange Act, and any other Holder selling securities in such
registration statement or any of its directors or officers or any
person who controls such Holder, against any losses, claims, damages,
or liabilities (or actions in respect thereto) which arise out of or
are based upon any Violation, in each case to the extent (and only to
the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will
reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, any person who controls the
Company, any underwriter or controlling person of any such underwriter,
any other such Holder, officer, director, or controlling person in
connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity
agreement contained in this SECTION 4(f)(ii) 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), and provided further that
the obligations of each selling Holder hereunder shall be limited to an
amount equal to the proceeds of each such selling Holder of the shares
sold by such selling Holder pursuant to such registration.
(iii) Promptly after receipt by an indemnified party
under this Section 5(f) 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 any indemnifying party
under this Section 4(f), notify the indemnifying party in writing 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 the fees and expenses to be paid
by the indemnifying
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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 notify an indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying
party of any liability that it may have to any indemnified party
otherwise than under this SECTION 4(f).
(g) 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 or pursuant to a registration
form which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC, the Company
agrees that, if and for so long as it is subject to the reporting requirements
of Section 13 of the Exchange Act, it will:
(i) 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
(ii) Furnish to any Holder, so long as the Holder
owns any Registrable Securities, forthwith upon reasonable request (i)
a written statement by the Company that it has complied with the
reporting requirements of the Exchange Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information
as may be reasonably requested in availing any Holder of any rule or
regulation of the SEC permitting the selling of any such securities
without registration or pursuant to such rule.
(h) The rights to cause the Company to register securities
granted to a Holder by the Company under this SECTION 4 may be transferred or
assigned by a Holder only to a transferee or assignee of not less than 5,000
shares of Registrable Securities (as presently constituted and subject to
subsequent adjustments for stock splits, stock dividends, reverse stock splits,
and the like), provided that the Company is given written notice at the time of
or within a reasonable time after said transfer or assignment and identifying
the securities with respect to which such registration rights are being
transferred or assigned, and provided further that the transferee or assignee of
such rights assumes the obligations of such Holder under this SECTION 4 and
acknowledges the possible restriction of such rights as set forth under SECTION
4(c)(iv).
5. TRANSFER OF WARRANT.
Subject to the transfer conditions referred to in the legend endorsed
hereon, this Warrant and all rights hereunder are transferable, in whole or in
part, without charge to the Warrantholder, upon surrender of this Warrant with a
properly executed Assignment (in the form of EXHIBIT "B" hereto) at the
principal office of the Company in Phoenix, Arizona.
6. NO RIGHTS AS SHAREHOLDER; NOTICES TO WARRANTHOLDER.
Nothing contained in this Warrant shall be construed as conferring upon
the Warrantholder or its transferee any rights as a shareholder of the Company,
either at law or in equity, including the right to vote, receive dividends,
consent or receive notices as a shareholder with respect to any meeting of
shareholders for the election of directors of the Company or for any other
matter.
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7. FRACTIONAL INTERESTS.
The Company shall not be required to issue fractional shares of Common
Stock on the exercise of a Warrant. If any fraction of a share of Common Stock
would, except for the provisions of this SECTION 7, be issuable on the exercise
of a Warrant (or specified portion thereof), the Company shall in lieu thereof
pay an amount in cash equal to the then Current Market Price multiplied by such
fraction. For purposes of this Agreement, the term "Current Market Price" shall
mean (i) if the Common Stock is traded in the over-the-counter market and not in
the NASDAQ National Market System nor on any national securities exchange, the
average of the per share closing bid prices of the Common Stock on the 30
consecutive trading days immediately preceding the date in question, as reported
by NASDAQ or an equivalent generally accepted reporting service, or (ii) if the
Common Stock is traded in the NASDAQ National Market System or on a national
securities exchange, the average for the 30 consecutive trading days immediately
preceding the date in question of the daily per share closing prices of the
Common Stock in the NASDAQ National Market System or on the principal stock
exchange on which it is listed, as the case may be. For purposes of clause (i)
above, if trading in the Common Stock is not reported by NASDAQ, the bid price
referred to in said clause shall be the lowest bid price as reported on the OTC
Bulletin Board, or if not available, in the "pink sheets" published by National
Quotation Bureau, Incorporated. The closing price referred to in clause (ii)
above shall be the last reported sale price or, in the case no such reported
sale takes place on such day, the average of the reported closing bid and asked
prices, in either case in the NASDAQ National Market System or on the national
securities exchange on which the Common Stock is then listed.
8. NOTICES.
Any notice given pursuant to this Warrant by the Company or by the
Warrantholder shall be in writing and shall be deemed to have been duly given
upon (a) transmitter's confirmation of the receipt of a facsimile transmission,
(b) confirmed delivery by a standard overnight carrier, or (c) the expiration of
three business days after the day when mailed by United States Postal Service by
certified or registered mail, return receipt requested, postage prepaid at the
following addresses:
If to the Company:
Dimensional Visions Incorporated
2301 West Dunlap Avenue
Suite 207
Phoenix, Arizona 85021
If to the Warrantholder, then to the address of the Warrantholder in
the Company's books and records.
Each party hereto may, from time to time, change the address to which
notices to it are to be transmitted, delivered or mailed hereunder by notice in
accordance herewith to the other party.
9. GENERAL PROVISIONS.
(a) SUCCESSORS. All covenants and provisions of this Warrant
shall bind and inure to the benefit of the respective executors, administrators,
successors and assigns of the parties hereto.
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(b) CHOICE OF LAW. This Warrant and the rights of the parties
hereunder shall be governed by and construed in accordance with the laws of the
State of Arizona, including all matters of construction, validity, performance,
and enforcement, and without giving effect to the principles of conflict of
laws.
(c) ENTIRE AGREEMENT. Except as provided herein, this Warrant,
including exhibits, contains the entire agreement of the parties, and supersedes
all existing negotiations, representations or agreements and all other oral,
written, or other communications between them concerning the subject matter of
this Warrant.
(d) SEVERABILITY. If any provision of this Warrant is
unenforceable, invalid, or violates applicable law, such provision shall be
deemed stricken and shall not affect the enforceability of any other provisions
of this Warrant.
(e) CAPTIONS. The captions in this Warrant are inserted only
as a matter of convenience and for reference and shall not be deemed to define,
limit, enlarge, or describe the scope of this Warrant or the relationship of the
parties, and shall not affect this Warrant or the construction of any provisions
herein.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the date first above written.
DIMENSIONAL VISIONS INCORPORATED, a
Delaware corporation
By: ____________________________________
Its:____________________________________
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<PAGE>
EXHIBIT A
DIMENSIONAL VISIONS INCORPORATED
ELECTION TO PURCHASE
Dimensional Visions Incorporated
2301 West Dunlap Avenue
Suite 207
Phoenix, Arizona 85021
The undersigned hereby irrevocably elects to exercise the
right of purchase set forth in the attached Warrant to purchase thereunder
__________ shares of the Common Stock (the "Shares") provided for therein and
requests that the Shares be issued in the name of
Name: ____________________________________
Address: ____________________________________
____________________________________
Social Security Number or Employer Identification Number: __________________
Dated: ____________________________
Name of Warrantholder or Assignee:____________________________________________
(Please Print)
Signature: ___________________________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant.)
Method of payment: ___________________________________________________
(Please Print)
______________________________________________________________
Medallion Signature Guarantee (required if an assignment
of Shares acquired on exercise, or an assignment of Warrants
remaining after exercise, is made upon exercise.)
<PAGE>
EXHIBIT B
ASSIGNMENT
FOR VALUE RECEIVED, _____________________________________
hereby sells, assigns and transfers all of the rights of the undersigned under
the attached Warrant with respect to the number of shares of Common Stock
covered thereby set forth below, unto:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
and does hereby irrevocably constitute and appoint _____________________,
Attorney, to transfer the attached Warrant on the books of the Company, with
full power of substitution.
Dated: ____________ Signature:__________________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant.)
__________________________________________
(SSN or EIN of Warrantholder)
______________________________________________________________
Medallion Signature Guarantee (required if an assignment
of Shares acquired on exercise, or an assignment of Warrants
remaining after exercise, is made upon exercise.)
NEITHER THIS WARRANT, NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF, HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAW. SUCH SECURITIES MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME
EFFECTIVE WITH REGARD THERETO OR (II) IN THE OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER THE SECURITIES ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH A PROPOSED
SALE OR TRANSFER.
COMMON STOCK
PURCHASE WARRANT
For the Purchase of Shares of
Common Stock of
DIMENSIONAL VISIONS INCORPORATED
(Par Value $0.001 Per Share)
(Incorporated under the Laws of the State of Delaware)
VOID AFTER 5:00 P.M. PST ON FEBRUARY 28, 2001
Date of Original Issuance: April 8, 1998
This is to certify that, for value received, __________________________
or assigns (the "Warrantholder"), is entitled, subject to the terms and
conditions hereinafter set forth, at any time and on or before 5:00 P.M.,
Pacific Standard Time, on February 28, 2001, but not thereafter, to purchase
_______ shares of common stock, par value $0.001 per share (the "Common Stock"),
of DIMENSIONAL VISIONS INCORPORATED (the "Company") for the Warrant Price (as
defined below), and to receive a certificate or certificates for the shares of
Common Stock so purchased.
1. TERMS AND EXERCISE OF WARRANTS.
(a) EXERCISE PERIOD. Subject to the terms of this Warrant, the
Warrantholder shall have the right, at any time during the period (the "Exercise
Period") commencing on the date hereof and ending at 5:00 P.M., Pacific Standard
Time, on February 28, 2001 (the "Termination Date"), or if such date is a day on
which banking institutions are authorized by law to close, then on the next
succeeding day which shall not be such a day, to purchase from the Company up to
the number of fully paid and nonassessable shares of Common Stock which the
Warrantholder may at the time be entitled to purchase pursuant to this Warrant.
Such shares of Common Stock and any other securities that the Company may be
required by the operation of SECTION 3 to issue upon the exercise hereof are
referred to hereinafter as the "Warrant Shares."
<PAGE>
(b) METHOD OF EXERCISE. This Warrant shall be exercised by
surrender of this Warrant to the Company at its principal office in Phoenix,
Arizona, or at such other address as the Company may designate by notice in
writing to the Warrantholder at the address of the Warrantholder appearing on
the books of the Company or such other address as the Warrantholder may
designate in writing, together with the form of Election to Purchase included as
EXHIBIT "A" hereto, duly completed and signed, and upon payment to the Company
of the Warrant Price (as defined in SECTION 2) multiplied by the number of
Warrant Shares being purchased upon such exercise (the "Aggregate Warrant
Price"), together with all taxes applicable upon such exercise. Payment of the
Aggregate Warrant Price shall be made in cash or by certified check or cashier's
check, payable to the order of the Company.
(c) PARTIAL EXERCISE. This Warrant shall be exercisable, at
the election of the Warrantholder, either in full or from time to time in part,
during the Exercise Period.
(d) SHARE ISSUANCE UPON EXERCISE. Upon the exercise and
surrender of this Warrant certificate and payment of such Warrant Price, the
Company shall issue and cause to be delivered with all reasonable dispatch to
the Warrantholder, in such name or names as the Warrantholder may designate in
writing, a certificate or certificates for the number of full Warrant Shares so
purchased upon the exercise of the Warrant, together with cash, as provided in
SECTION 7 hereof, with respect to any fractional Warrant Shares otherwise
issuable upon such surrender and, if applicable, the Company shall issue and
deliver a new Warrant to the Warrantholder for the number of shares not so
exercised. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a holder of such Warrant Shares as of the close of business on the date of the
surrender of the Warrant and payment of the Warrant Price, notwithstanding that
the certificates representing such Warrant Shares shall not actually have been
delivered or that the stock transfer books of the Company shall then be closed.
2. WARRANT PRICE.
The price per share at which Warrant Shares shall be purchasable on the
exercise of this Warrant shall be [$.93, as adjusted] per share until February
28, 2001, subject to adjustment pursuant to SECTION 3 hereof (originally and as
adjusted, the "Warrant Price").
3. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES.
The Company agrees to reserve and shall keep reserved for issuance the
number of shares of Common Stock issuable upon exercise of this Warrant. The
number and kind of securities purchasable upon the exercise of this Warrant and
the Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
(a) In case the Company shall (1) pay a dividend or make a
distribution in shares of its Common Stock, (2) subdivide its outstanding Common
Stock into a greater number of shares, (3) combine its outstanding Common Stock
into a smaller number of shares, or (4) issue by reclassification of its Common
Stock any shares of capital stock of the Company (other than a change in par
value, or from par value to no par value, or from no par value to par value),
the Warrant Price and the number of shares of Common Stock or other securities
issuable upon exercise of this Warrant in effect immediately prior thereto shall
be adjusted so that the Warrantholder, by operation of SECTION 3(d) hereof,
shall be entitled to receive the number of shares which it would have owned or
have been entitled to receive immediately following the happening of any of the
events described above, had this Warrant been exercised immediately prior to the
record or effective date thereof.
2
<PAGE>
An adjustment made pursuant to SECTIONS 3(a)(1)-(4) above shall become
effective immediately after the record date in the case of a dividend or
distribution (PROVIDED, HOWEVER, that such adjustments shall be reversed if such
dividends or distributions are not actually paid) and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification. If, as a result of an adjustment made pursuant to this
paragraph, the Warrantholder shall become entitled to receive shares of two or
more classes of capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be evidenced by a resolution) shall
determine the allocation of the adjusted Warrant Price between or among the
shares of such classes of capital stock.
(b) In case of any reclassification of the outstanding Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision, combination or
stock dividend), or in case of any consolidation of the Company with, or merger
of the Company into, another corporation wherein the Company is not the
surviving entity, or in case of any sale of all, or substantially all, of the
property, assets, business and goodwill of the Company, the Company, or such
successor or purchasing corporation, as the case may be, shall provide, by a
written instrument delivered to the Warrantholder, that the Warrantholder shall
thereafter be entitled, upon exercise of this Warrant, to the kind and amount of
shares of stock or other equity securities, or other property or assets that
would have been receivable by such Warrantholder upon such reclassification,
consolidation, merger or sale, if this Warrant had been exercised immediately
prior thereto. Such corporation, which thereafter shall be deemed to be the
"Company" for purposes of this Warrant, shall provide in such written instrument
for adjustments to the Warrant Price that shall be as nearly equivalent as may
be practicable to the adjustments provided for in this SECTION 3.
(c) No adjustment in the number of securities purchasable
hereunder shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of securities (calculated to
the nearest full share or unit thereof) then purchasable upon the exercise of
this Warrant; provided, however, that any adjustment which by reason of this
SECTION 3(c) is not required to be made immediately shall be carried forward and
taken into account in any subsequent adjustment.
(d) Whenever the Warrant Price is adjusted as provided in this
SECTION 3, the number of shares of Common Stock or other securities issuable
upon exercise of this Warrant shall be adjusted simultaneously, by multiplying
the number of shares previously issuable by a fraction, of which the numerator
shall be the Warrant Price in effect immediately prior to such adjustment, and
of which the denominator shall be the Warrant Price as so adjusted.
(e) For the purpose of this SECTION 3, the term "Common Stock"
shall mean (i) the class of stock designated as Common Stock of the Company at
April 8, 1998, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value. In the event that at any time, as a result of an adjustment made pursuant
to this SECTION 3, the Warrantholder shall become entitled to purchase any
shares of the Company's capital stock other than Common Stock, thereafter the
number of such other shares so purchasable upon the exercise of this Warrant and
the Warrant Price of such shares shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the shares contained in this SECTION 3.
(f) Whenever the number of shares of Common Stock and/or other
securities purchasable upon the exercise of this Warrant or the Warrant Price is
adjusted as herein provided, the
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<PAGE>
Company shall cause to be promptly mailed to the Warrantholder by first class
mail, postage prepaid, notice of such adjustment and a certificate of the
Company's chief financial officer setting forth the number of shares of Common
Stock and/or other securities purchasable upon the exercise of this Warrant, the
Warrant Price after such adjustment, a brief statement of the facts requiring
such adjustment, and the computation by which such adjustment was made.
(g) Irrespective of any adjustments in the Warrant Price or
the number or kind of securities purchasable upon the exercise of this Warrant,
the Warrant certificate or certificates theretofore or thereafter issued may
continue to express the same price or number or kind of securities stated in
this Warrant initially issuable hereunder.
4. REGISTRATION RIGHTS.
The Company covenants and agrees as follows:
(a) For purposes of this SECTION 4:
(i) The terms "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;
(ii) The term "Registrable Securities" means (A) the
shares of Common Stock and the Warrant Shares and (B) any shares of
Common Stock or other securities of the Company issuable with respect
to the units (the "Units") offered by the Company pursuant to the
Private Placement Memorandum dated February 17, 1998, as amended to
date (the "Private Placement Memorandum"), as a result of a stock split
or dividend or any sale, transfer, assignment, or other transaction by
the Company or a Holder (as defined below) involving the Units and any
securities into which the Units may thereafter be changed as a result
of merger, consolidation, recapitalization, or otherwise. As to any
particular Registrable Securities, such securities will cease to be
Registrable Securities when they have been distributed to the public
pursuant to an offering registered under the Securities Act or sold to
the public through a broker, dealer, or market-maker in compliance with
Rule 144 under the Securities Act; and
(iii) The term "Holder" means any person owning or
having the right to acquire Registrable Securities.
(b) Commencing promptly following the final Closing Date (as
defined in the Private Placement Memorandum), the Company shall prepare and file
a registration statement covering all of the Registrable Securities as further
provided in SECTION 4(c).
(c) To effect the registration of any Registrable Securities,
the Company shall, as expeditiously as reasonably possible, use its best efforts
to:
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<PAGE>
(i) Prepare and file with the Securities and Exchange
commission (the "SEC") a registration statement with respect to such
Registrable Securities, cause such registration statement to become
effective, and keep such registration statement effective until the
expiration of the Warrants.
(ii) 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.
(iii) 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.
(iv) Register and qualify the securities covered by
such registration statement under such other securities or blue sky
laws of the jurisdictions in which the purchasers reside at the time of
the issuance of the Units; provided that in no event shall (A) the
Company be required to qualify to do business in any state or to take
any action which would subject it to general or unlimited service of
process in any state where it is not now so subject, (B) any
stockholder be required to escrow their shares of capital stock of the
Company, or (C) the Company or any stockholder be required to comply
with any other requirement which they deem unduly burdensome.
(v) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement
with terms generally satisfactory to the managing underwriter of such
offering. Each Holder participating in such underwriting shall also
enter into and perform its obligations under such an agreement.
(d) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this SECTION 4 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them, and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
(e) All expenses incurred in connection with the registration
pursuant to SECTION 4(b) (other than underwriter's commissions and fees or any
fees of others employed by a selling Holder, including attorneys' fees),
including without limitation all registration, filing and qualification fees,
printers' and accounting fees, and fees and disbursements of counsel for the
Company, shall be borne by the Company.
(f) With respect to the registration of the Registrable
Securities under this SECTION 4:
(i) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the officers and directors 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 Securities
Exchange Act of 1934, as amended (the "Exchange Act"), against any
losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Securities Act, the Exchange Act or
any state securities law or regulation, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise
5
<PAGE>
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 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 reimburse each such Holder, officer or director,
underwriter or controlling person for 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 4(f)(i)
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 which 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.
(ii) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its
directors and officers, any underwriter (as defined in the Securities
Act) for the Company, each person, if any, who controls the Company or
any such underwriter within the meaning of the Securities Act or the
Exchange Act, and any other Holder selling securities in such
registration statement or any of its directors or officers or any
person who controls such Holder, against any losses, claims, damages,
or liabilities (or actions in respect thereto) which arise out of or
are based upon any Violation, in each case to the extent (and only to
the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will
reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, any person who controls the
Company, any underwriter or controlling person of any such underwriter,
any other such Holder, officer, director, or controlling person in
connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity
agreement contained in this SECTION 4(f)(ii) 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), and provided further that
the obligations of each selling Holder hereunder shall be limited to an
amount equal to the proceeds of each such selling Holder of the shares
sold by such selling Holder pursuant to such registration.
(iii) Promptly after receipt by an indemnified party
under this Section 5(f) 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 any indemnifying party
under this Section 4(f), notify the indemnifying party in writing 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 the 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
6
<PAGE>
and any other party represented by such counsel in such proceeding. The
failure to notify an indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying
party of any liability that it may have to any indemnified party
otherwise than under this SECTION 4(f).
(g) 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 or pursuant to a registration
form which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC, the Company
agrees that, if and for so long as it is subject to the reporting requirements
of Section 13 of the Exchange Act, it will:
(i) 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
(ii) Furnish to any Holder, so long as the Holder
owns any Registrable Securities, forthwith upon reasonable request (i)
a written statement by the Company that it has complied with the
reporting requirements of the Exchange Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information
as may be reasonably requested in availing any Holder of any rule or
regulation of the SEC permitting the selling of any such securities
without registration or pursuant to such rule.
(h) The rights to cause the Company to register securities
granted to a Holder by the Company under this SECTION 4 may be transferred or
assigned by a Holder only to a transferee or assignee of not less than 5,000
shares of Registrable Securities (as presently constituted and subject to
subsequent adjustments for stock splits, stock dividends, reverse stock splits,
and the like), provided that the Company is given written notice at the time of
or within a reasonable time after said transfer or assignment and identifying
the securities with respect to which such registration rights are being
transferred or assigned, and provided further that the transferee or assignee of
such rights assumes the obligations of such Holder under this SECTION 4 and
acknowledges the possible restriction of such rights as set forth under SECTION
4(c)(iv).
5. TRANSFER OF WARRANT.
Subject to the transfer conditions referred to in the legend endorsed
hereon, this Warrant and all rights hereunder are transferable, in whole or in
part, without charge to the Warrantholder, upon surrender of this Warrant with a
properly executed Assignment (in the form of EXHIBIT "B" hereto) at the
principal office of the Company in Phoenix, Arizona.
6. NO RIGHTS AS SHAREHOLDER; NOTICES TO WARRANTHOLDER.
Nothing contained in this Warrant shall be construed as conferring upon
the Warrantholder or its transferee any rights as a shareholder of the Company,
either at law or in equity, including the right to vote, receive dividends,
consent or receive notices as a shareholder with respect to any meeting of
shareholders for the election of directors of the Company or for any other
matter.
7
<PAGE>
7. FRACTIONAL INTERESTS.
The Company shall not be required to issue fractional shares of Common
Stock on the exercise of a Warrant. If any fraction of a share of Common Stock
would, except for the provisions of this SECTION 7, be issuable on the exercise
of a Warrant (or specified portion thereof), the Company shall in lieu thereof
pay an amount in cash equal to the then Current Market Price multiplied by such
fraction. For purposes of this Agreement, the term "Current Market Price" shall
mean (i) if the Common Stock is traded in the over-the-counter market and not in
the NASDAQ National Market System nor on any national securities exchange, the
average of the per share closing bid prices of the Common Stock on the 30
consecutive trading days immediately preceding the date in question, as reported
by NASDAQ or an equivalent generally accepted reporting service, or (ii) if the
Common Stock is traded in the NASDAQ National Market System or on a national
securities exchange, the average for the 30 consecutive trading days immediately
preceding the date in question of the daily per share closing prices of the
Common Stock in the NASDAQ National Market System or on the principal stock
exchange on which it is listed, as the case may be. For purposes of clause (i)
above, if trading in the Common Stock is not reported by NASDAQ, the bid price
referred to in said clause shall be the lowest bid price as reported on the OTC
Bulletin Board, or if not available, in the "pink sheets" published by National
Quotation Bureau, Incorporated. The closing price referred to in clause (ii)
above shall be the last reported sale price or, in the case no such reported
sale takes place on such day, the average of the reported closing bid and asked
prices, in either case in the NASDAQ National Market System or on the national
securities exchange on which the Common Stock is then listed.
8. NOTICES.
Any notice given pursuant to this Warrant by the Company or by the
Warrantholder shall be in writing and shall be deemed to have been duly given
upon (a) transmitter's confirmation of the receipt of a facsimile transmission,
(b) confirmed delivery by a standard overnight carrier, or (c) the expiration of
three business days after the day when mailed by United States Postal Service by
certified or registered mail, return receipt requested, postage prepaid at the
following addresses:
If to the Company:
Dimensional Visions Incorporated
2301 West Dunlap Avenue
Suite 207
Phoenix, Arizona 85021
If to the Warrantholder, then to the address of the Warrantholder in
the Company's books and records.
Each party hereto may, from time to time, change the address to which
notices to it are to be transmitted, delivered or mailed hereunder by notice in
accordance herewith to the other party.
9. GENERAL PROVISIONS.
(a) SUCCESSORS. All covenants and provisions of this Warrant
shall bind and inure to the benefit of the respective executors, administrators,
successors and assigns of the parties hereto.
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<PAGE>
(b) CHOICE OF LAW. This Warrant and the rights of the parties
hereunder shall be governed by and construed in accordance with the laws of the
State of Arizona, including all matters of construction, validity, performance,
and enforcement, and without giving effect to the principles of conflict of
laws.
(c) ENTIRE AGREEMENT. Except as provided herein, this Warrant,
including exhibits, contains the entire agreement of the parties, and supersedes
all existing negotiations, representations or agreements and all other oral,
written, or other communications between them concerning the subject matter of
this Warrant.
(d) SEVERABILITY. If any provision of this Warrant is
unenforceable, invalid, or violates applicable law, such provision shall be
deemed stricken and shall not affect the enforceability of any other provisions
of this Warrant.
(e) CAPTIONS. The captions in this Warrant are inserted only
as a matter of convenience and for reference and shall not be deemed to define,
limit, enlarge, or describe the scope of this Warrant or the relationship of the
parties, and shall not affect this Warrant or the construction of any provisions
herein.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the date first above written.
DIMENSIONAL VISIONS INCORPORATED, a
Delaware corporation
By: _______________________________
Its:_______________________________
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<PAGE>
EXHIBIT A
DIMENSIONAL VISIONS INCORPORATED
ELECTION TO PURCHASE
Dimensional Visions Incorporated
2301 West Dunlap Avenue
Suite 207
Phoenix, Arizona 85021
The undersigned hereby irrevocably elects to exercise the
right of purchase set forth in the attached Warrant to purchase thereunder
__________ shares of the Common Stock (the "Shares") provided for therein and
requests that the Shares be issued in the name of
Name: ____________________________________
Address: ____________________________________
____________________________________
Social Security Number or Employer Identification Number: __________________
Dated: _________________________
Name of Warrantholder or Assignee:____________________________________________
(Please Print)
Signature: _________________________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant.)
Method of payment: __________________________________________
(Please Print)
________________________________________________________________
Medallion Signature Guarantee (required if an assignment
of Shares acquired on exercise, or an assignment of Warrants
remaining after exercise, is made upon exercise.)
<PAGE>
EXHIBIT B
ASSIGNMENT
FOR VALUE RECEIVED, _____________________________________
hereby sells, assigns and transfers all of the rights of the undersigned under
the attached Warrant with respect to the number of shares of Common Stock
covered thereby set forth below, unto:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
and does hereby irrevocably constitute and appoint ______________________,
Attorney, to transfer the attached Warrant on the books of the Company, with
full power of substitution.
Dated: ____________ Signature:__________________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant.)
__________________________________________
(SSN or EIN of Warrantholder)
________________________________________________________________
Medallion Signature Guarantee (required if an assignment
of Shares acquired on exercise, or an assignment of Warrants
remaining after exercise, is made upon exercise.)
NEITHER THIS WARRANT, NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF, HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAW. SUCH SECURITIES MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME
EFFECTIVE WITH REGARD THERETO OR (II) IN THE OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER THE SECURITIES ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH A PROPOSED
SALE OR TRANSFER.
COMMON STOCK
PURCHASE WARRANT
For the Purchase of Shares of
Common Stock of
DIMENSIONAL VISIONS INCORPORATED
(Par Value $0.001 Per Share)
(Incorporated under the Laws of the State of Delaware)
VOID AFTER 5:00 P.M. PST ON FEBRUARY 28, 2001
Date of Original Issuance: ______________, 1998
This is to certify that, for value received, __________________________
or assigns (the "Warrantholder"), is entitled, subject to the terms and
conditions hereinafter set forth, at any time and on or before 5:00 P.M.,
Pacific Standard Time, on February 28, 2001, but not thereafter, to purchase
_______ shares of common stock, par value $0.001 per share (the "Common Stock"),
of DIMENSIONAL VISIONS INCORPORATED (the "Company") for the Warrant Price (as
defined below), and to receive a certificate or certificates for the shares of
Common Stock so purchased.
1. TERMS AND EXERCISE OF WARRANTS.
(a) EXERCISE PERIOD. Subject to the terms of this Warrant, the
Warrantholder shall have the right, at any time during the period (the "Exercise
Period") commencing on the date hereof and ending at 5:00 P.M., Pacific Standard
Time, on February 28, 2001 (the "Termination Date"), or if such date is a day on
which banking institutions are authorized by law to close, then on the next
succeeding day which shall not be such a day, to purchase from the Company up to
the number of fully paid and nonassessable shares of Common Stock which the
Warrantholder may at the time be entitled to purchase pursuant to this Warrant.
Such shares of Common Stock and any other securities that the Company may be
required by the operation of SECTION 3 to issue upon the exercise hereof are
referred to hereinafter as the "Warrant Shares."
<PAGE>
(b) METHOD OF EXERCISE. This Warrant shall be exercised by
surrender of this Warrant to the Company at its principal office in Phoenix,
Arizona, or at such other address as the Company may designate by notice in
writing to the Warrantholder at the address of the Warrantholder appearing on
the books of the Company or such other address as the Warrantholder may
designate in writing, together with the form of Election to Purchase included as
EXHIBIT "A" hereto, duly completed and signed, and upon payment to the Company
of the Warrant Price (as defined in SECTION 2) multiplied by the number of
Warrant Shares being purchased upon such exercise (the "Aggregate Warrant
Price"), together with all taxes applicable upon such exercise. Payment of the
Aggregate Warrant Price shall be made in cash or by certified check or cashier's
check, payable to the order of the Company.
(c) PARTIAL EXERCISE. This Warrant shall be exercisable, at
the election of the Warrantholder, either in full or from time to time in part,
during the Exercise Period.
(d) SHARE ISSUANCE UPON EXERCISE. Upon the exercise and
surrender of this Warrant certificate and payment of such Warrant Price, the
Company shall issue and cause to be delivered with all reasonable dispatch to
the Warrantholder, in such name or names as the Warrantholder may designate in
writing, a certificate or certificates for the number of full Warrant Shares so
purchased upon the exercise of the Warrant, together with cash, as provided in
SECTION 7 hereof, with respect to any fractional Warrant Shares otherwise
issuable upon such surrender and, if applicable, the Company shall issue and
deliver a new Warrant to the Warrantholder for the number of shares not so
exercised. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a holder of such Warrant Shares as of the close of business on the date of the
surrender of the Warrant and payment of the Warrant Price, notwithstanding that
the certificates representing such Warrant Shares shall not actually have been
delivered or that the stock transfer books of the Company shall then be closed.
2. WARRANT PRICE.
The price per share at which Warrant Shares shall be purchasable on the
exercise of this Warrant shall be $1.50 per share until February 28, 1999 and
$2.00 per share until February 28, 2001, subject to adjustment pursuant to
SECTION 3 hereof (originally and as adjusted, the "Warrant Price").
3. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES.
The Company agrees to reserve and shall keep reserved for issuance the
number of shares of Common Stock issuable upon exercise of this Warrant. The
number and kind of securities purchasable upon the exercise of this Warrant and
the Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
(a) In case the Company shall (1) pay a dividend or make a
distribution in shares of its Common Stock, (2) subdivide its outstanding Common
Stock into a greater number of shares, (3) combine its outstanding Common Stock
into a smaller number of shares, or (4) issue by reclassification of its Common
Stock any shares of capital stock of the Company (other than a change in par
value, or from par value to no par value, or from no par value to par value),
the Warrant Price and the number of shares of Common Stock or other securities
issuable upon exercise of this Warrant in effect immediately prior thereto shall
be adjusted so that the Warrantholder, by operation of SECTION 3(d) hereof,
shall be entitled to receive the number of shares which it would have owned or
have been entitled to receive immediately following the happening of any of the
events described above, had this Warrant been exercised immediately prior to the
record or effective date thereof.
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<PAGE>
An adjustment made pursuant to SECTIONS 3(a)(1)-(4) above shall become
effective immediately after the record date in the case of a dividend or
distribution (PROVIDED, HOWEVER, that such adjustments shall be reversed if such
dividends or distributions are not actually paid) and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification. If, as a result of an adjustment made pursuant to this
paragraph, the Warrantholder shall become entitled to receive shares of two or
more classes of capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be evidenced by a resolution) shall
determine the allocation of the adjusted Warrant Price between or among the
shares of such classes of capital stock.
(b) In case of any reclassification of the outstanding Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision, combination or
stock dividend), or in case of any consolidation of the Company with, or merger
of the Company into, another corporation wherein the Company is not the
surviving entity, or in case of any sale of all, or substantially all, of the
property, assets, business and goodwill of the Company, the Company, or such
successor or purchasing corporation, as the case may be, shall provide, by a
written instrument delivered to the Warrantholder, that the Warrantholder shall
thereafter be entitled, upon exercise of this Warrant, to the kind and amount of
shares of stock or other equity securities, or other property or assets that
would have been receivable by such Warrantholder upon such reclassification,
consolidation, merger or sale, if this Warrant had been exercised immediately
prior thereto. Such corporation, which thereafter shall be deemed to be the
"Company" for purposes of this Warrant, shall provide in such written instrument
for adjustments to the Warrant Price that shall be as nearly equivalent as may
be practicable to the adjustments provided for in this SECTION 3.
(c) No adjustment in the number of securities purchasable
hereunder shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of securities (calculated to
the nearest full share or unit thereof) then purchasable upon the exercise of
this Warrant; provided, however, that any adjustment which by reason of this
SECTION 3(c) is not required to be made immediately shall be carried forward and
taken into account in any subsequent adjustment.
(d) Whenever the Warrant Price is adjusted as provided in this
SECTION 3, the number of shares of Common Stock or other securities issuable
upon exercise of this Warrant shall be adjusted simultaneously, by multiplying
the number of shares previously issuable by a fraction, of which the numerator
shall be the Warrant Price in effect immediately prior to such adjustment, and
of which the denominator shall be the Warrant Price as so adjusted.
(e) For the purpose of this SECTION 3, the term "Common Stock"
shall mean (i) the class of stock designated as Common Stock of the Company at
April 8, 1998, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value. In the event that at any time, as a result of an adjustment made pursuant
to this SECTION 3, the Warrantholder shall become entitled to purchase any
shares of the Company's capital stock other than Common Stock, thereafter the
number of such other shares so purchasable upon the exercise of this Warrant and
the Warrant Price of such shares shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the shares contained in this SECTION 3.
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<PAGE>
(f) Whenever the number of shares of Common Stock and/or other
securities purchasable upon the exercise of this Warrant or the Warrant Price is
adjusted as herein provided, the Company shall cause to be promptly mailed to
the Warrantholder by first class mail, postage prepaid, notice of such
adjustment and a certificate of the Company's chief financial officer setting
forth the number of shares of Common Stock and/or other securities purchasable
upon the exercise of this Warrant, the Warrant Price after such adjustment, a
brief statement of the facts requiring such adjustment, and the computation by
which such adjustment was made.
(g) Irrespective of any adjustments in the Warrant Price or
the number or kind of securities purchasable upon the exercise of this Warrant,
the Warrant certificate or certificates theretofore or thereafter issued may
continue to express the same price or number or kind of securities stated in
this Warrant initially issuable hereunder.
4. REGISTRATION RIGHTS.
The Company covenants and agrees as follows:
(a) For purposes of this SECTION 4:
(i) The terms "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;
(ii) The term "Registrable Securities" means (A) the
shares of Common Stock and the Warrant Shares and (B) any shares of
Common Stock or other securities of the Company issuable with respect
to the units (the "Units") offered by the Company pursuant to the
Private Placement Memorandum dated February 17, 1998, as amended to
date (the "Private Placement Memorandum"), as a result of a stock split
or dividend or any sale, transfer, assignment, or other transaction by
the Company or a Holder (as defined below) involving the Units and any
securities into which the Units may thereafter be changed as a result
of merger, consolidation, recapitalization, or otherwise. As to any
particular Registrable Securities, such securities will cease to be
Registrable Securities when they have been distributed to the public
pursuant to an offering registered under the Securities Act or sold to
the public through a broker, dealer, or market-maker in compliance with
Rule 144 under the Securities Act; and
(iii) The term "Holder" means any person owning or
having the right to acquire Registrable Securities.
(b) Commencing promptly following the final Closing Date (as
defined in the Private Placement Memorandum), the Company shall prepare and file
a registration statement covering all of the Registrable Securities as further
provided in SECTION 4(c).
(c) To effect the registration of any Registrable Securities,
the Company shall, as expeditiously as reasonably possible, use its best efforts
to:
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<PAGE>
(i) Prepare and file with the Securities and Exchange
commission (the "SEC") a registration statement with respect to such
Registrable Securities, cause such registration statement to become
effective, and keep such registration statement effective until the
expiration of the Warrants.
(ii) 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.
(iii) 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.
(iv) Register and qualify the securities covered by
such registration statement under such other securities or blue sky
laws of the jurisdictions in which the purchasers reside at the time of
the issuance of the Units; provided that in no event shall (A) the
Company be required to qualify to do business in any state or to take
any action which would subject it to general or unlimited service of
process in any state where it is not now so subject, (B) any
stockholder be required to escrow their shares of capital stock of the
Company, or (C) the Company or any stockholder be required to comply
with any other requirement which they deem unduly burdensome.
(v) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement
with terms generally satisfactory to the managing underwriter of such
offering. Each Holder participating in such underwriting shall also
enter into and perform its obligations under such an agreement.
(d) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this SECTION 4 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them, and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
(e) All expenses incurred in connection with the registration
pursuant to SECTION 4(b) (other than underwriter's commissions and fees or any
fees of others employed by a selling Holder, including attorneys' fees),
including without limitation all registration, filing and qualification fees,
printers' and accounting fees, and fees and disbursements of counsel for the
Company, shall be borne by the Company.
(f) With respect to the registration of the Registrable
Securities under this SECTION 4:
(i) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the officers and directors 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 Securities
Exchange Act of 1934, as amended (the "Exchange Act"), against any
losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Securities Act, the Exchange Act or
any state securities law or regulation, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise
5
<PAGE>
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 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 reimburse each such Holder, officer or director,
underwriter or controlling person for 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 4(f)(i)
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 which 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.
(ii) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its
directors and officers, any underwriter (as defined in the Securities
Act) for the Company, each person, if any, who controls the Company or
any such underwriter within the meaning of the Securities Act or the
Exchange Act, and any other Holder selling securities in such
registration statement or any of its directors or officers or any
person who controls such Holder, against any losses, claims, damages,
or liabilities (or actions in respect thereto) which arise out of or
are based upon any Violation, in each case to the extent (and only to
the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will
reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, any person who controls the
Company, any underwriter or controlling person of any such underwriter,
any other such Holder, officer, director, or controlling person in
connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity
agreement contained in this SECTION 4(f)(ii) 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), and provided further that
the obligations of each selling Holder hereunder shall be limited to an
amount equal to the proceeds of each such selling Holder of the shares
sold by such selling Holder pursuant to such registration.
(iii) Promptly after receipt by an indemnified party
under this Section 5(f) 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 any indemnifying party
under this Section 4(f), notify the indemnifying party in writing 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 the 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
6
<PAGE>
and any other party represented by such counsel in such proceeding. The
failure to notify an indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying
party of any liability that it may have to any indemnified party
otherwise than under this SECTION 4(f).
(g) 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 or pursuant to a registration
form which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC, the Company
agrees that, if and for so long as it is subject to the reporting requirements
of Section 13 of the Exchange Act, it will:
(i) 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
(ii) Furnish to any Holder, so long as the Holder
owns any Registrable Securities, forthwith upon reasonable request (i)
a written statement by the Company that it has complied with the
reporting requirements of the Exchange Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information
as may be reasonably requested in availing any Holder of any rule or
regulation of the SEC permitting the selling of any such securities
without registration or pursuant to such rule.
(h) The rights to cause the Company to register securities
granted to a Holder by the Company under this SECTION 4 may be transferred or
assigned by a Holder only to a transferee or assignee of not less than 5,000
shares of Registrable Securities (as presently constituted and subject to
subsequent adjustments for stock splits, stock dividends, reverse stock splits,
and the like), provided that the Company is given written notice at the time of
or within a reasonable time after said transfer or assignment and identifying
the securities with respect to which such registration rights are being
transferred or assigned, and provided further that the transferee or assignee of
such rights assumes the obligations of such Holder under this SECTION 4 and
acknowledges the possible restriction of such rights as set forth under SECTION
4(c)(iv).
5. TRANSFER OF WARRANT.
Subject to the transfer conditions referred to in the legend endorsed
hereon, this Warrant and all rights hereunder are transferable, in whole or in
part, without charge to the Warrantholder, upon surrender of this Warrant with a
properly executed Assignment (in the form of EXHIBIT "B" hereto) at the
principal office of the Company in Phoenix, Arizona.
6. NO RIGHTS AS SHAREHOLDER; NOTICES TO WARRANTHOLDER.
Nothing contained in this Warrant shall be construed as conferring upon
the Warrantholder or its transferee any rights as a shareholder of the Company,
either at law or in equity, including the right to vote, receive dividends,
consent or receive notices as a shareholder with respect to any meeting of
shareholders for the election of directors of the Company or for any other
matter.
7
<PAGE>
7. FRACTIONAL INTERESTS.
The Company shall not be required to issue fractional shares of Common
Stock on the exercise of a Warrant. If any fraction of a share of Common Stock
would, except for the provisions of this SECTION 7, be issuable on the exercise
of a Warrant (or specified portion thereof), the Company shall in lieu thereof
pay an amount in cash equal to the then Current Market Price multiplied by such
fraction. For purposes of this Agreement, the term "Current Market Price" shall
mean (i) if the Common Stock is traded in the over-the-counter market and not in
the NASDAQ National Market System nor on any national securities exchange, the
average of the per share closing bid prices of the Common Stock on the 30
consecutive trading days immediately preceding the date in question, as reported
by NASDAQ or an equivalent generally accepted reporting service, or (ii) if the
Common Stock is traded in the NASDAQ National Market System or on a national
securities exchange, the average for the 30 consecutive trading days immediately
preceding the date in question of the daily per share closing prices of the
Common Stock in the NASDAQ National Market System or on the principal stock
exchange on which it is listed, as the case may be. For purposes of clause (i)
above, if trading in the Common Stock is not reported by NASDAQ, the bid price
referred to in said clause shall be the lowest bid price as reported on the OTC
Bulletin Board, or if not available, in the "pink sheets" published by National
Quotation Bureau, Incorporated. The closing price referred to in clause (ii)
above shall be the last reported sale price or, in the case no such reported
sale takes place on such day, the average of the reported closing bid and asked
prices, in either case in the NASDAQ National Market System or on the national
securities exchange on which the Common Stock is then listed.
8. REDEMPTION.
(a) The then outstanding Warrants may be redeemed, at the
option of the Company, at $.05 per share of Common Stock purchasable upon
exercise of such Warrants, any time after February 17, 1999, the Daily Market
Price per share of the Common Stock for a period of at least 20 consecutive
trading days ending not more than 10 days prior to the date of the notice given
pursuant to SECTION 8(b) hereof has equaled or exceeded $2.50, and prior to
expiration of the Warrants. The Daily Market Price of the Common Stock shall be
determined by the Company in the manner set forth in SECTION 8(e) as of the end
of each trading day (or, if no trading in the Common Stock occurred on such day,
as of the end of the immediately preceding trading day in which trading
occurred) before the Company may give notice of redemption. All outstanding
Warrants must be redeemed if any are redeemed, and any right to exercise an
outstanding Warrant shall terminate at 5:00 p.m. (Arizona Time) on the business
day immediately preceding the date fixed for redemption. A trading day shall
mean a day in which trading of securities occurred on the New York Stock
Exchange.
(b) The Company may exercise its right to redeem the Warrants
only by giving the notice set forth in the following sentence by the end of the
tenth day after the provisions of SECTION 8(a) have been satisfied. In case the
Company shall exercise its right to redeem, it shall give notice to the
registered holders of the outstanding Warrants, by mailing to such registered
holders a notice of redemption, first class, postage prepaid, at their addresses
as they shall appear on the records of the Company. Any notice mailed in the
manner provided herein shall be conclusively presumed to have been duly given
whether or not the registered holder actually receives such notice.
(c) The notice of redemption shall specify the redemption
price, the date fixed for redemption (which shall be between the thirtieth and
forty-fifth day after such notice is mailed), the place where the Warrant
certificates shall be delivered and the redemption price shall be paid, and that
the right to exercise the Warrant shall terminate at 5:00 p.m. (Arizona Time) on
the business day immediately preceding the date fixed for redemption.
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(d) Appropriate adjustment shall be made to the redemption
price and to the minimum Daily Market Price prerequisite to redemption set forth
in SECTION 8(a) hereof, in each case on the same basis as provided in SECTION 3
hereof with respect to adjustment of the Warrant Price.
(e) For purposes of this Agreement, the term "Daily Market
Price" shall mean (i) if the Common Stock is traded in the over-the-counter
market and not in the NASDAQ National Market System nor on any national
securities exchange, the closing bid price of the Common Stock on the trading
day in question, as reported by NASDAQ or an equivalent generally accepted
reporting service, or (ii) if the Common Stock is traded in the NASDAQ National
Market System or on a national securities exchange, the daily per share closing
price of the Common Stock in the NASDAQ National Market System or on the
principal stock exchange on which it is listed on the trading day in question,
as the case may be. For purposes of clause (i) above, if trading in the Common
Stock is not reported by NASDAQ, the bid price referred to in said clause shall
be the lowest bid price as reported on the OTC Bulletin Board, or if not
available, in the "pink sheets" published by National Quotation Bureau,
Incorporated. The closing price referred to in clause (ii) above shall be the
last reported sale price or, in case no such reported sale takes place on such
day, the average of the reported closing bid and asked prices, in either case in
the NASDAQ National Market System or on the national securities exchange on
which the Common Stock is then listed.
9. NOTICES.
Any notice given pursuant to this Warrant by the Company or by the
Warrantholder shall be in writing and shall be deemed to have been duly given
upon (a) transmitter's confirmation of the receipt of a facsimile transmission,
(b) confirmed delivery by a standard overnight carrier, or (c) the expiration of
three business days after the day when mailed by United States Postal Service by
certified or registered mail, return receipt requested, postage prepaid at the
following addresses:
If to the Company:
Dimensional Visions Incorporated
2301 West Dunlap Avenue
Suite 207
Phoenix, Arizona 85021
If to the Warrantholder, then to the address of the Warrantholder in
the Company's books and records.
Each party hereto may, from time to time, change the address to which
notices to it are to be transmitted, delivered or mailed hereunder by notice in
accordance herewith to the other party.
10. GENERAL PROVISIONS.
(a) SUCCESSORS. All covenants and provisions of this Warrant
shall bind and inure to the benefit of the respective executors, administrators,
successors and assigns of the parties hereto.
(b) CHOICE OF LAW. This Warrant and the rights of the parties
hereunder shall be governed by and construed in accordance with the laws of the
State of Arizona, including all matters of
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construction, validity, performance, and enforcement, and without giving effect
to the principles of conflict of laws.
(c) ENTIRE AGREEMENT. Except as provided herein, this Warrant,
including exhibits, contains the entire agreement of the parties, and supersedes
all existing negotiations, representations or agreements and all other oral,
written, or other communications between them concerning the subject matter of
this Warrant.
(d) SEVERABILITY. If any provision of this Warrant is
unenforceable, invalid, or violates applicable law, such provision shall be
deemed stricken and shall not affect the enforceability of any other provisions
of this Warrant.
(e) CAPTIONS. The captions in this Warrant are inserted only
as a matter of convenience and for reference and shall not be deemed to define,
limit, enlarge, or describe the scope of this Warrant or the relationship of the
parties, and shall not affect this Warrant or the construction of any provisions
herein.
10
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the date first above written.
DIMENSIONAL VISIONS INCORPORATED, a
Delaware corporation
By: _______________________________
Its:_______________________________
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EXHIBIT A
DIMENSIONAL VISIONS INCORPORATED
ELECTION TO PURCHASE
Dimensional Visions Incorporated
2301 West Dunlap Avenue
Suite 207
Phoenix, Arizona 85021
The undersigned hereby irrevocably elects to exercise the
right of purchase set forth in the attached Warrant to purchase thereunder
__________ shares of the Common Stock (the "Shares") provided for therein and
requests that the Shares be issued in the name of
Name: ____________________________________
Address: ____________________________________
____________________________________
Social Security Number or Employer Identification Number: __________________
Dated: _________________________
Name of Warrantholder or Assignee: ____________________________________________
(Please Print)
Signature: _________________________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant.)
Method of payment: __________________________________________
(Please Print)
_________________________________________________________________
Medallion Signature Guarantee (required if an assignment
of Shares acquired on exercise, or an assignment of Warrants
remaining after exercise, is made upon exercise.)
<PAGE>
EXHIBIT B
ASSIGNMENT
FOR VALUE RECEIVED, _____________________________________
hereby sells, assigns and transfers all of the rights of the undersigned under
the attached Warrant with respect to the number of shares of Common Stock
covered thereby set forth below, unto:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
and does hereby irrevocably constitute and appoint _____________________,
Attorney, to transfer the attached Warrant on the books of the Company, with
full power of substitution.
Dated: ____________ Signature:___________________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant.)
___________________________________________
(SSN or EIN of Warrantholder)
________________________________________________________________
Medallion Signature Guarantee (required if an assignment
of Shares acquired on exercise, or an assignment of Warrants
remaining after exercise, is made upon exercise.)
FORM OF DEBENTURE
THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE
TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT") SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (II)
RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN
CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE
STATE SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY DEBENTURE ISSUED
IN EXCHANGE FOR THIS DEBENTURE.
DIMENSIONAL VISIONS INCORPORATED
Series A 12% Convertible Secured Debenture
$__________ July ___, 1998
FOR VALUE RECEIVED, Dimensional Visions Incorporated, a Delaware
corporation (the "Company") with its principal executive office at 2301 West
Dunlap Avenue, Suite 207, Phoenix, Arizona 85021, promises to pay to the order
of __________________ (the "Payee" or the "Holder of this Debenture") or
registered assigns on July 31, 2001 (the "Maturity Date"), the principal sum of
__________ ($______________) (the "Principal Amount"), in such coin or currency
of the United States of America as at the time of payment shall be legal tender
for the payment of public and private debts, together with interest thereon at
the rate of twelve (12%) percent per annum (the "Stated Rate"), payable as
hereinafter set forth in cash, or at the option of the Holder of this Debenture,
in the Company's Common Stock as provided in SECTION 4 hereof. Payment of
interest shall be made at the Stated Rate on July 31, 1999 and each July 31
thereafter (an "Interest Payment Date") through the Maturity Date at the address
designated above or at such other place as the Payee shall have notified the
Company in writing at least five (5) days before such payment is due.
Each payment by the Company pursuant to this Debenture shall be made
without setoff or counterclaim and in immediately available funds.
This Debenture is one of a duly authorized issue of Debentures of the
Company designated as its Series A 12% Convertible Secured Debenture due July
31, 2001 (herein called the
<PAGE>
"Debentures"), limited in aggregate principal amount to Five Hundred Thousand
Dollars ($500,000).
The amount of all repayments of principal, interest rates applicable
thereto and interest accrued thereon shall be recorded on the records of the
Payee and, prior to any transfer of, or any action to collect, this Debenture
shall be endorsed on this Debenture. Any such recordation or endorsement shall
constitute PRIMA FACIE evidence of the accuracy of the information so recorded
or endorsed, but the failure to record any such amount or rate shall not limit
or otherwise affect the obligations of the Company hereunder to make payments of
principal or interest when due. All payments by the Company hereunder shall be
applied first to pay any interest which is due, but unpaid ("Accrued Interest"),
then to reduce the Principal Amount.
The Company (i) waives presentment, demand, protest, or notice of any
kind in connection with this Debenture and (ii) agrees, in the event of an Event
of Default (as defined in Section 2 hereof), to pay to the Holder of this
Debenture, on demand, all costs and expenses (including reasonable legal fees)
incurred in connection with the enforcement and collection of this Debenture. If
the date for any payment due hereunder would otherwise fall on a day which is
not a Business Day, such payment or expiration date shall be extended to the
next following Business Day with interest payable at the applicable rate
specified herein during such extension. "Business Day" shall mean any day other
than a Saturday, Sunday, or any day which shall be in the State of Arizona a
legal holiday or a day on which banking institutions are authorized by law to
close.
In the event that for any reason the Company shall fail to pay to the
Holder of this Debenture when due all or any portion of the unpaid Accrued
Interest or Principal Amount of this Debenture, interest shall accrue and be
payable on such due but unpaid amounts at a rate per annum (the "Default Rate")
equal to the Stated Rate plus four percent (4%) (but in no event higher than the
maximum rate permitted by law) from the date when first due until and including
the date when actually collected by the Holder of this Debenture. Such interest
shall be payable on demand.
In consideration for the loan evidenced by this Debenture and other
identical Debentures in the aggregate Principal Amount of up to Five Hundred
Thousand Dollars ($500,000), the Company shall issue to the Holders of this
Debenture warrants to purchase 25,000 shares of the Company's common stock, at
an exercise price of Fifty Cents ($0.50) per share (subject to adjustment) (the
"Warrant") for each Twenty Five Thousand Dollars ($25,000) Principal Amount of
Debentures.
THE OBLIGATIONS OF THE COMPANY UNDER THE DEBENTURES ARE SECURED
PURSUANT TO A SEPARATE SECURITY AGREEMENT.
2
<PAGE>
1. CONVERSION OF DEBENTURE.
A. CONVERSION. This Debenture is convertible, in whole or in
part, at the option of the Holder, into shares of the Company's common stock,
par value $.001 (the "Common Stock") at any time prior to the repayment of this
Debenture at the rate of One Dollar ($1.00) per share (the "Conversion Price")
(i.e., one share of Common Stock for each One Dollar ($1.00) of principal amount
converted) subject to adjustment as hereinafter provided.
B. ADJUSTMENT BASED UPON STOCK DIVIDENDS, COMBINATION OF
SHARES OR RECAPITALIZATION. In the event that the Company shall at any time (i)
pay a stock dividend, (ii) subdivide its outstanding shares of Common Stock into
a greater number of shares, (iii) combine its outstanding shares of Common Stock
into a smaller number of shares, or (iv) issue by reclassification of its shares
of Common Stock any other special capital stock of the Company, the Holder, upon
surrender of this Debenture for conversion, shall be entitled to receive the
number of shares of Common Stock or other capital stock of the Company which he
would have owned or have been entitled to receive after the happening of any of
the events described above had this Debenture been converted immediately prior
to the happening of such event.
C. ADJUSTMENT BASED UPON MERGER OR CONSOLIDATION. In case of
any consolidation or merger to which the Company is a party (other than a merger
in which the Company is the surviving entity and which does not result in any
reclassification of or change in the outstanding Common Stock of the Company),
or in case of any sale or conveyance to another corporation of the property of
the Company as an entirety or substantially as an entirety, the Holder shall
have the right to convert this Debenture into the kind and amount of securities
and property receivable upon such consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock into which such Debenture might
have been converted immediately prior thereto.
D. EXERCISE OF CONVERSION PRIVILEGE. The conversion privilege
provided for herein shall be exercisable in whole or in part by the Holder by
written notice to the Company and the surrender of this Debenture in exchange
for up to the number of shares of Common Stock into which this Debenture is
convertible based upon the Conversion Price. If the entire amount of this
Debenture is not so exercised, the Company shall issue a new Debenture
representing the remaining outstanding Principal Amount.
E. CORPORATE STATUS OF SHARES TO BE ISSUED. All shares of the
Company's Common Stock which may be issued upon the conversion of this Debenture
shall, upon issuance, be fully paid and non-assessable.
F. ISSUANCE OF STOCK CERTIFICATE. Upon the conversion of this
Debenture, the Company shall in due course issue to the Holder a certificate or
certificates representing the number of shares of its Common Stock to which the
conversion relates.
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<PAGE>
G. STAMP TAXES, ETC. The Company shall pay all documentary,
stamp or other transactional taxes attributable to the issuance or delivery of
the Common Stock upon conversion of this Debenture; PROVIDED, HOWEVER, that the
Company shall not be required to pay any taxes which may be payable in respect
of any transfer involved in the issuance or delivery of any certificate for such
Common Stock in a name other than that of the Holder of this Debenture and the
Company shall not be required to issue or deliver any such certificate unless
and until the person requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the Company's
satisfaction that such tax has been paid.
2. EVENTS OF DEFAULT
A. The term "Event of Default" shall mean any of the events
set forth in this SECTION 2A:
(a) NON-PAYMENT OF OBLIGATIONS. The Company shall
default in the payment of the principal or accrued interest of this
Debenture as and when the same shall become due and payable, whether by
acceleration or otherwise.
(b) BANKRUPTCY, INSOLVENCY, ETC. The Company shall:
(i) become insolvent or generally fail or be
unable to pay, or admit in writing its inability to pay, its
debts as they become due;
(ii) apply for, consent to, or acquiesce in,
the appointment of a trustee, receiver, sequestrator or other
custodian for the Company or any of its property, or make a
general assignment for the benefit of creditors;
(iii) in the absence of such application,
consent or acquiesce in, permit or suffer to exist the
appointment of a trustee, receiver, sequestrator or other
custodian for the Company or for any part of its property;
(iv) permit or suffer to exist the
commencement of any bankruptcy, reorganization, debt
arrangement or other case or proceeding under any bankruptcy
or insolvency law, or any dissolution, winding up or
liquidation proceeding, in respect of the Company, and, if
such case or proceeding is not commenced by the Company or
converted to a voluntary case, such case or proceeding shall
be consented to or acquiesced in by the Company or shall
result in the entry of an order for relief; or
(v) take any corporate or other action
authorizing, or in furtherance of, any of the foregoing.
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<PAGE>
(c) JUDGMENTS. A judgment which, with other such
outstanding judgments against the Company and its subsidiaries (in each
case to the extent not covered by insurance), exceeds an aggregate of
One Hundred Thousand Dollars($100,000), shall be rendered against the
Company or any subsidiary and, within fifteen (15) days after entry
thereof, such judgment shall not have been discharged or execution
thereof stayed pending appeal, or, within fifteen (15) days after the
expiration of any such stay, such judgment shall not have been
discharged.
(d) SECURITY AGREEMENT. The Company shall breach or
default under any provision of the Security Agreement.
B. ACTION IF BANKRUPTCY. If any Event of Default described in
clauses (b)(i) through (v) of Section 2A shall occur, the outstanding principal
amount of this Debenture and all other obligations hereunder shall automatically
be and become immediately due and payable, without notice or demand.
C. ACTION IF OTHER EVENT OF DEFAULT. If any Event of Default
(other than any Event of Default described in clauses (b)(i) through (v) of
Section 2A) shall occur for any reason, whether voluntary or involuntary, and be
continuing, the Holder of this Debenture may, upon notice to the Company,
declare all or any portion of the outstanding principal amount of this Debenture
together with interest accrued thereon to be due and payable and any or all
other obligations hereunder to be due and payable, whereupon the full unpaid
principal amount hereof, such accrued interest, and any and all other such
obligations which shall be so declared due and payable shall be and become
immediately due and payable, without further notice, demand, or presentment.
D. REMEDIES. Subject to the provisions of Section 2C and 3A
hereof, in case any Event of Default shall occur and be continuing, the Holder
of this Debenture may proceed to protect and enforce its rights by a proceeding
seeking the specific performance of any covenant or agreement contained in this
Debenture or the Security Agreement, or in aid of the exercise of any power
granted in this Debenture or may proceed to enforce the payment of this
Debenture or to enforce any other legal or equitable rights as such Holder.
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<PAGE>
3. AMENDMENTS AND WAIVERS.
A. WAIVERS, AMENDMENTS, ETC.
(a) The provisions of this Debenture may from time to
time be amended, modified or waived, if such amendment, modification,
or waiver is in writing and consented to by the Company and the holders
of not less than 50% in principal amount of the Debentures (the
"Required Holders"); PROVIDED, HOWEVER, that no such amendment,
modification or waiver:
(i) which would modify this Section 3A,
change the definition of "Required Holders", extend the
Maturity Date, or subject the Payee under each Debenture to
any additional obligations shall be made without the consent
of the Payee of each Debenture, or
(ii) which would reduce the amount of any
payment or prepayment of principal of or interest on any
principal amount payable hereunder (or reduce the principal
amount of or rate of interest payable hereunder) shall be made
without the consent of the Holder of each Debenture so
affected.
(b) No failure or delay on the part of the Payee in
exercising any power or right under this Debenture shall not operate as
a waiver thereof, nor shall any single or partial exercise of any such
power or right preclude any other or further exercise thereof or the
exercise of any other power or right. No notice to or demand on the
Company in any case shall entitle it to any notice or demand in similar
or other circumstances. No waiver or approval by the Payee shall,
except as may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval hereunder
shall require any similar or dissimilar waiver or approval thereafter
to be granted hereunder.
(c) To the extent that the Company makes a payment or
payments to the Payee, and such payment or payments or any part thereof
are subsequently for any reason invalidated, set aside, and/or required
to be repaid to a trustee, receiver, or any other party under any
bankruptcy law, state or federal law, common law, or equitable cause,
then to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied, and all rights and remedies
therefor, shall be revived and continued in full force and effect as if
such payment had not been made or such enforcement or setoff had not
occurred.
(d) After any waiver, amendment, or supplement under
this section becomes effective, the Company shall mail to the Holders
of the Debentures a copy thereof.
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<PAGE>
4. COMMON STOCK IN LIEU OF INTEREST.
At the sole discretion of the Holder, the Holder may elect to
receive one share of Common Stock for each one dollar of interest due to Holder
on any Interest Payment Date (i.e., Common Stock at the rate of $1.00 per share)
partially or entirely in lieu of cash payment of interest, by notifying the
Company of its election to receive the Common Stock at least five (5) days prior
to any Interest Payment Date. The number of shares of Common Stock so issued
shall be subject to adjustment in accordance with SECTION 1B AND 1C hereof.
5. REDEMPTION/PREPAYMENT.
The Company may not redeem or prepay this Debenture, except
that the Company may redeem or prepay this Debenture, in whole, but not in part,
at any time on or after July 31, 1999, upon 30 days prior written notice, for
the outstanding Principal Amount and Accrued Interest, but only if a
registration statement with respect to the Common Stock issuable on conversion
of this Debenture is then effective under the Securities Act of 1933, as
amended.
6. MISCELLANEOUS.
A. PARTIES IN INTEREST. All covenants, agreements, and
undertakings in this Debenture binding upon the Company or the Payee shall bind
and inure to the benefit of the successors and permitted assigns of the Company
and the Payee, respectively, whether so expressed or not.
(a) REGISTERED HOLDER. The Company may consider and
treat the person in whose name this Debenture shall be registered as
the absolute owner thereof for all purposes whatsoever (whether or not
this Debenture shall be overdue) and the Company shall not be affected
by any notice to the contrary. In case of transfer of this Debenture by
operation of law, the transferee agrees to notify the Company of such
transfer and of its address, and to submit appropriate evidence
regarding such transfer so that this Debenture may be registered in the
name of the transferee. This Debenture is transferable only on the
books of the Company by the Holder hereof, in person or by attorney, on
the surrender hereof, duly endorsed. Communications sent to any
registered owner shall be effective as against all Holders or
transferees of the Debenture not registered at the time of sending the
communication.
B. GOVERNING LAW. This Debenture shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
any conflict provisions therein.
C. NOTICES. Unless otherwise provided, all notices required or
permitted under this Debenture shall be in writing and shall be deemed
effectively given (i) upon personal delivery to the party to be notified, (ii)
upon confirmed delivery by Federal Express or other nationally
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<PAGE>
recognized courier service providing next-business-day delivery, or (iii) three
(3) business days after deposit with the United States Postal Service, by
registered or certified mail, postage prepaid and addressed to the party to be
notified, in each case at the address set forth below, or at such other address
as such party may designate by written notice to the other party (provided that
notice of change of address shall be effective upon receipt by the party to whom
such notice is addressed).
If sent to Payee, notices shall be sent to the following address:
________________________________
________________________________
________________________________
________________________________
If sent to the Company, notices shall be sent to the following address:
Dimensional Visions Incorporated
2301 West Dunlap Avenue
Suite 207
Phoenix, Arizona 85201
John D. McPhilimy, President
D. WAIVER OF JURY TRIAL. THE PAYEE AND THE COMPANY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS DEBENTURE OR ANY OTHER DOCUMENT OR INSTRUMENT
EXECUTED AND DELIVERED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE PAYEE OR
THE COMPANY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PAYEE'S EXTENDING
CREDIT PURSUANT TO THIS DEBENTURE.
IN WITNESS WHEREOF, this Debenture has been executed and delivered on
the date specified above by the duly authorized representative of the Company.
DIMENSIONAL VISIONS INCORPORATED
By:________________________________
John D. McPhilimy
President
FORM OF SECURITY AGREEMENT
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made and entered into as
of July ___, 1998, by DIMENSIONAL VISIONS INCORPORATED, a Delaware corporation
("Borrower"), whose chief executive office is located at 2301 W. Dunlap Avenue,
Suite 207, Phoenix, Arizona 85021, for the benefit of the holders (collectively,
"Lender") of the Borrower's Series A 12% Convertible Secured Debentures (the
"Debentures").
1. SECURITY INTEREST
1.1 COLLATERAL. Borrower hereby grants to Lender a security interest
(the "Security Interest") in the property, or interests in property, of
Borrower, whether now owned or existing or hereafter acquired or arising and
wherever located (collectively, the "Collateral"), as set forth below:
(a) All contract rights, leases, documents of title, deposit
accounts, certificates of deposit, and general intangibles;
(b) The Note dated September 25, 1997 payable by DataNet
Enterprises, LLC, a Texas limited liability company to InfoPak, Inc., in the
original principal amount of $410,000, as amended, by Addendum No. 1 thereto
dated __________, 199___, and Addendum No. 2 thereto dated March 11, 1998 (the
"InfoPak Note");
(c) All inventory, including, without limitation, raw
materials, work-in-process, or materials used or consumed in the business of
Borrower, whether in the possession of Borrower, warehouseman, bailee, or any
other person or entity;
(d) All machinery, furniture, fixtures, and other equipment;
(e) All negotiable and nonnegotiable documents of title;
(f) All monies, securities or other property now or hereafter
in the possession of or on deposit with Lender, whether held in a general or
special account of deposit, including, without limitation, any account or
deposit held jointly by Borrower with any other person or entity, or for
safekeeping or otherwise, except to the extent specifically prohibited by law;
(g) All rights under contracts of insurance covering any of
the above-described property;
<PAGE>
(h) All attachments, accessions, tools, parts, supplies,
increases and additions to, and all replacements of and substitutions for any of
the above-described property;
(i) All products of any of the above-described property,
including any products evidenced by a note or other instrument;
(j) All proceeds of any of the above-described property,
including any proceeds evidenced by a note or other instrument; and
(k) All books and records pertaining to any of the
above-described property, including, without limitation, any computer readable
memory and any computer hardware or software necessary to process such memory
(collectively, the "Books and Records").
1.2 EXCLUSIONS FROM COLLATERAL. Notwithstanding the foregoing, the
Collateral shall not include any accounts, receivables, chattel paper, or other
rights to payment, except as specifically provided in SECTION 1.1. hereof, nor
shall the Collateral include any of the assets or common stock of InfoPak, Inc.,
except the Note described in SECTION1.1 HEREOF.
2. SECURED OBLIGATIONS
The Collateral shall secure, in such order of priority as Lender may
elect, the following (collectively, the "Secured Obligations"):
(a) payment and performance of all obligations of Borrower
under the terms of the Debentures, together with all extensions, modifications,
substitutions, or renewals thereof, or other advances made thereunder; and
(b) payment and performance of every obligation, covenant and
agreement of Borrower contained in this Agreement, together with all extensions,
modifications, substitutions, or renewals hereof.
Unless Borrower shall have otherwise agreed in writing, the Secured Obligations,
for purposes of this Agreement, shall not include "consumer credit" subject to
the disclosure requirements of the Federal Truth in Lending Act or any
regulations promulgated thereunder.
3. REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower hereby represents and warrants to Lender that:
3.1 USE. The Collateral is or will be used or produced primarily for
business purpose of Borrower.
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<PAGE>
3.2 LOCATION. The Collateral, including, without limitation, the Books
and Records will be kept at the facilities of Borrower at 2301 West Dunlap
Avenue, Suite 201, Phoenix, Arizona 85021, except for the InfoPak Note which
shall be held by Capital West Investment Group ("Capital West") or an affiliate
of Capital West for the benefit of Lender, or any agent designated by Lender to
hold the InfoPak Note.
3.3 BUSINESS NAMES. Borrower does not do business under any name other
than Dimensional Visions Incorporated.
3.4 OTHER AGREEMENTS. The execution, delivery and performance by
Borrower of this Agreement and all other documents and instruments relating to
the Secured Obligations will not result in any material breach of the terms and
conditions or constitute a material default under any agreement or instrument
under which Borrower is a party or is obligated. Borrower is not in material
default in the performance or observance of any covenants, conditions or
provisions of any such agreement or instrument.
3.5 PRIORITY. The Security Interest in the Collateral granted to Lender
constitutes, and hereafter will constitute, a security interest of first
priority, except with respect to any liens existing as of the date hereof and
except for any purchase money security interests as defined in A.R.S.
ss.47-9312.
3.6 AUTHORITY. Borrower has the full power, authority and legal right
to grant to Lender the Security Interest, and no further consent, authorization,
approval, or other action is required for the grant of the Security Interest or
for Lender's exercise of its rights and remedies under this Agreement, except as
may be required in connection with the sale of the Collateral by Lender by the
laws affecting the offering and sale of securities.
3.7 CHIEF EXECUTIVE OFFICE. The address of Borrower set forth in the
preamble of this Agreement is the chief executive office of Borrower.
3.8 OBLIGORS. To the knowledge of Borrower, each account, chattel
paper, instrument, or general intangible included in the Collateral is genuine
and enforceable in accordance with its terms against the party named therein who
is obligated to pay the same ("Obligor"), and the security interests that are
part of each item of chattel paper included in the Collateral are valid security
interests. To the knowledge of Borrower, each Obligor is solvent, and the amount
that Borrower has represented to Lender as owing by each Obligor is the amount
actually and unconditionally owing by that Obligor, without deduction except for
normal cash discounts where applicable. To the knowledge of Borrower, no Obligor
has any material defense, setoff, claim or counterclaim of a material nature
against Borrower that can be asserted against Lender whether in any proceeding
to enforce the Security Interest or otherwise. To the knowledge of Borrower,
each document,
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<PAGE>
instrument and chattel paper included in the Collateral is complete and regular
on its face and free from evidence of forgery or alteration. To the knowledge of
Borrower, no material default has occurred in connection with any instrument,
document or chattel paper included in the Collateral. To the knowledge of
Borrower, no material payment in connection therewith is overdue and to the
knowledge of Borrower, no presentment, dishonor or protest has occurred in
connection therewith.
4. COVENANTS OF BORROWER
4.1 TRANSFERS. Borrower shall not sell, transfer, assign or otherwise
dispose of any Collateral or any interest therein (except as permitted herein)
without obtaining the prior written consent of Lender and shall keep the
Collateral free of all security interests or other encumbrances except the
Security Interest, except any liens existing as of the date hereof and any liens
junior to the Security Interest. Although proceeds of Collateral are covered by
this Agreement, this shall not be construed to mean that Lender consents to any
sale or other transfers of the Collateral.
4.2 MAINTENANCE. Borrower shall keep and maintain the Collateral in
good condition and repair and shall not use the Collateral in violation of any
provision of this Agreement or any applicable statute, ordinance or regulation
or any policy of insurance insuring the Collateral.
4.3 INSURANCE. Borrower shall provide and maintain insurance in
accordance with its customary practices.
4.4 PAYMENTS OF CHARGES. Borrower shall pay when due all taxes,
assessments and other charges which may be levied or assessed against the
Collateral.
4.5 FIXTURES AND ACCESSIONS. Borrower shall prevent any portion of the
Collateral that is not a fixture from being or becoming a fixture and shall
prevent any portion of the Collateral from being or becoming an accession to
other goods that are not part of the Collateral.
4.6 POSSESSION BY LENDER. Borrower, upon demand, shall promptly deliver
to Lender all instruments, documents and chattel paper included in the
Collateral. Borrower shall notify Lender immediately of any material default by
any Obligor in the payment or performance of its obligations with respect to any
Collateral, upon Borrower obtaining actual knowledge of such default. Borrower,
without Lender's prior written consent, shall not make or agree to make any
material alteration, modification or cancellation of, or substitution for, or
credit, adjustment or allowance on, any Collateral.
4.7 NOTICE TO LENDER. Borrower shall give Lender 45 days' prior written
notice of any change: (i) in the location of any of the facilities of Borrower;
(ii) in the location of the Collateral, including, without limitation, the Books
and Records; or (iii) of the names under which it does business.
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4.8 INSPECTIONS. Lender or its agents may inspect the Collateral at
reasonable times and may enter into any premises where the Collateral is or may
be located. Borrower shall keep the Books and Records in accordance with
generally accepted accounting principles, to the extent applicable. Unless
waived in writing by Lender, Borrower shall, when applicable, mark the
Collateral, including, without limitation, the Books and Records, to indicate
the Security Interest. Lender shall have free and complete access to the Books
and Records and shall have the right to make extracts therefrom or copies
thereof. Upon the reasonable request of Lender from time to time, Borrower shall
submit up-to-date schedules of the accounts receivable comprising the Collateral
in such detail as Lender may reasonably require and shall deliver to Lender
confirming specific assignments of all accounts, instruments, documents and
chattel paper included in such accounts receivable. After the occurrence of any
Event of Default (as defined below), upon the request of Lender, Borrower shall
submit up-to-date schedules of inventory comprising the Collateral in such
detail as Lender may reasonably require.
4.9 DEFENSE OF COLLATERAL. Borrower, at its cost and expense, shall
protect and defend this Agreement, all of the rights of Lender hereunder, and
the Collateral against all claims and demands of other parties, including,
without limitation, defenses, setoffs, claims and counterclaims asserted by any
Obligor against Borrower and/or Lender. Borrower shall pay all claims and
charges that in the reasonable opinion of Lender might prejudice, imperil or
otherwise affect the Collateral or the Security Interest. Borrower shall
promptly notify Lender of any levy, distraint or other seizure by legal process
or otherwise of any part of the Collateral and of any threatened or filed claims
or proceedings that might in any way affect or impair the terms of this
Agreement.
4.10 PERFECTION OF SECURITY INTEREST. The Security Interest, at all
times, shall be perfected and except as otherwise agreed by Lender shall be
prior to any other interests in the Collateral. Borrower shall act and perform
as necessary and shall execute and file all security agreements, financing
statements, continuation statements and other documents requested by Lender to
establish, maintain and continue the perfected Security Interest. Borrower, on
written demand, shall promptly pay all reasonable costs and expenses of filing
and recording, including, without limitation, the reasonable costs of any
searches, deemed necessary by Lender from time to time to establish and
determine the validity and the continuing priority of the Security Interest.
4.11 PAYMENT OF CHARGES. Except with respect to any payment less than
$25,000 other than for income taxes or payroll taxes, if Borrower fails to pay
any taxes, assessments, expenses or charges, or fails to keep all of the
Collateral free from other security interests, encumbrances or claims except for
Permitted Liens, or fails to keep the Collateral in good condition and repair,
or fails to procure and maintain insurance thereon, or to perform otherwise as
required herein, Lender may advance the monies necessary to pay the same, to
accomplish such repairs, to procure and maintain such insurance or to so
perform. Lender is hereby authorized to enter upon any property in the
possession or control of Borrower for such purposes.
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4.12 RIGHTS AND POWERS. Any actions of Lender hereunder may be taken by
the holders of the Debentures owning the majority in outstanding principal
amount of the Debentures, or any agent acting on their behalf. The costs and
expenses of any agent appointed by Lender, including any agent appointed to hold
the InfoPak Note, shall be borne by Borrower. All rights, powers, and remedies
granted Lender herein, or otherwise available to Lender, are for the sole
benefit and protection of Lender, and Lender may exercise any such right, power,
or remedy at its option and in its sole and absolute discretion without any
obligation to do so. In addition, if under the terms hereof, Lender is given two
or more alternative courses of action, Lender may elect any alternative or
combination of alternatives at its option and in its sole and absolute
discretion. All monies advanced by Lender under the terms hereof and all amounts
paid, suffered, or incurred by Lender in exercising any authority granted
herein, including, without limitation, reasonable attorneys' fees, shall be
added to the Secured Obligations, shall be secured by the Collateral, shall bear
interest at the highest rate payable on any of the Debentures until paid, and
shall be due and payable by Borrower to Lender immediately without demand.
5. NOTIFICATION AND PAYMENTS; COLLECTION OF COLLATERAL; USE OF COLLATERAL BY
BORROWER
5.1 NOTICE TO OBLIGORS. Lender, after the occurrence of any Event of
Default, and without notice to Borrower, may notify any or all Obligors of the
existence of the Security Interest and may direct the Obligors to make all
payments on the Collateral to Lender. Until Lender has notified the Obligors to
remit payments directly to it, Borrower, at Borrower's own cost and expense,
shall collect or cause to be collected the accounts and monies due under the
accounts, documents, instruments and general intangibles or pursuant to the
terms of the chattel paper. Lender shall not be liable or responsible for any
embezzlement, conversion, negligence or default by Borrower or Borrower's agents
with respect to such collections. All agents used in such collections shall be
agents of Borrower and not agents of Lender. Unless Lender notifies Borrower in
writing that it waives one or more of the requirements set forth in this
sentence, any payments or other proceeds of Collateral received by Borrower,
after notification to Obligors, shall be held by Borrower in trust for Lender in
the same form in which received, shall not be commingled with any assets of
Borrower and shall be turned over to Lender not later than the next business day
following the day of receipt. All payments and other proceeds of Collateral
received by Lender directly or from Borrower shall be applied to the Secured
Obligations in such order and manner and at such time as Lender, in its sole
discretion, shall determine.
5.2 COLLECTION. Lender, after the occurrence of an Event of Default and
without notice to Borrower, may demand, collect and sue on the Collateral
(either in Borrower's or Lender's name), enforce, compromise, settle or
discharge the Collateral and endorse Borrower's name on any instruments,
documents, or chattel paper included in or pertaining to the Collateral.
5.3 USE OF COLLATERAL. Until the occurrence of an Event of Default,
Borrower may: (i) use, consume, and sell any inventory included in the
Collateral in any lawful manner in the
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ordinary course of Borrower's business provided that all sales shall be at
commercially reasonable prices; (ii) make all transfers permitted by SECTION 4.1
hereof; and (iii) subject to SECTION 5.1 and SECTION 5.2 hereof, retain
possession of any other Collateral and use it in any lawful manner consistent
with this Agreement.
6. COLLATERAL IN THE POSSESSION OF LENDER
6.1 CARE. Lender shall use such reasonable care in handling, preserving
and protecting the Collateral in its possession as it uses in handling similar
property for its own account. Lender, however, shall have no liability for the
loss, destruction or disappearance of any Collateral unless there is affirmative
proof of a lack of due care. A lack of due care shall not be implied solely by
virtue of any loss, destruction, or disappearance.
6.2 PRESERVATION OF COLLATERAL. Borrower shall be solely responsible
for taking any and all actions to preserve rights against all Obligors. Lender
shall not be obligated to take any such actions whether or not the Collateral is
in Lender's possession. Borrower waives presentment and protest with respect to
any instrument included in the Collateral on which Borrower is in any way liable
and waives notice of any action taken by Lender with respect to any instrument,
document, or chattel paper included in any Collateral that is in the possession
of Lender.
7. EVENTS OF DEFAULT; REMEDIES
7.1 EVENTS OF DEFAULT. The occurrence of any of the following events or
conditions shall constitute an "Event of Default":
(i) Any failure to pay any principal or interest or any other
part of the Secured Obligations when the same shall become due and
payable.
(ii) Borrower shall breach any warranty, representation,
covenant, or agreement made herein.
(iii) Any warranty, representation, or statement made or
furnished to Lender by or on behalf of Borrower shall prove to have
been false or misleading in any material respect when made or
furnished.
(iv) The abandonment by Borrower of all or any part of the
Collateral with a value in excess of $25,000.
(v) The loss, theft, or destruction of, or any substantial
damage to, in excess of $25,000 in amount, any portion of the
Collateral, that is not adequately covered by insurance.
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(vi) The occurrence of a Default or an Event of Default under
and as defined in the Debentures.
7.2 REMEDIES. Upon the occurrence of any Event of Default, and at any
time while such Event of Default is continuing, Lender shall have the following
rights and remedies and may do one or more of the following:
(i) Declare all or any part of the Secured Obligations to be
immediately due and payable, and the same, with all costs and charges,
shall be collectible thereupon by action at law.
(ii) Without further notice or demand and without legal
process, take possession of the Collateral wherever found and, for this
purpose, enter upon any property occupied by or in the control of
Borrower. Borrower, upon demand by Lender, shall assemble the
Collateral and deliver it to Lender or to a place designated by Lender
that is reasonably convenient to both parties.
(iii) Operate the business of Borrower as a going concern,
including, without limitation, extend sales or services to new
customers and advance funds for such operation. Lender shall not be
liable for any depreciation, loss, damage, or injury to the Collateral
or other property of Borrower as a result of such action. Borrower
hereby waives any claim of trespass or replevin arising as a result of
such action.
(iv) Pursue any legal or equitable remedy available to collect
the Secured Obligations, to enforce its title in and right to
possession of the Collateral and to enforce any and all other rights or
remedies available to it.
(v) Upon obtaining possession of the Collateral or any part
thereof, after written notice to Borrower as provided in SECTION 7.4
hereof, sell such Collateral at public or private sale either with or
without having such Collateral at the place of sale. The proceeds of
such sale, after deducting therefrom all expenses of Lender in taking,
storing, repairing, and selling the Collateral (including, without
limitation, reasonable attorneys' fees) shall be applied to the payment
of the Secured Obligations, and any surplus thereafter remaining shall
be paid to Borrower or any other person that may be legally entitled
thereto. In the event of a deficiency between such net proceeds from
the sale of the Collateral and the total amount of the Secured
Obligations, Borrower, upon demand, shall promptly pay the amount of
such deficiency to Lender.
7.3 PURCHASE OF COLLATERAL. Lender, so far as may be lawful, may
purchase all or any part of the Collateral offered at any public or private sale
made in the enforcement of Lender's rights and remedies hereunder.
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7.4 NOTICE. Any demand or notice of sale, disposition or other intended
action hereunder or in connection herewith, whether required by the UCC or
otherwise, shall be deemed to be commercially reasonable and effective if such
demand or notice is given to Borrower at least 10 days prior to such sale,
disposition or other intended action, in the manner provided herein for the
giving of notices.
7.5 COSTS AND EXPENSES. Borrower shall pay all reasonable costs and
expenses of Lender, including, without limitation, costs of uniform commercial
code searches, court costs and reasonable attorneys' fees, incurred by Lender in
enforcing payment and performance of the Secured Obligations or in exercising
the rights and remedies of Lender hereunder. All such reasonable costs and
expenses shall be secured by this Agreement and by other lien and security
documents securing the Secured Obligations. In the event of any court
proceedings, court costs and attorneys' fees shall be set by the court and not
by jury and shall be included in any judgment obtained by Lender.
7.6 ADDITIONAL REMEDIES. In addition to any remedies provided herein
for an Event of Default, Lender shall have all the rights and remedies afforded
a secured party under the UCC and all other legal and equitable remedies allowed
under applicable law. No failure on the part of Lender to exercise any of its
rights hereunder arising upon any Event of Default shall be construed to
prejudice its rights upon the occurrence of any other or subsequent Event of
Default. No delay on the part of Lender in exercising any such rights shall be
construed to preclude it from the exercise thereof at any time while that Event
of Default is continuing. Lender may enforce any one or more rights or remedies
hereunder successively or concurrently. By accepting payment or performance of
any of the Secured Obligations after its due date, Lender shall not thereby
waive the agreement contained herein that time is of the essence, nor shall
Lender waive either its right to require prompt payment or performance when due
of the remainder of the Secured Obligations or its right to consider the failure
to so pay or perform an Event of Default.
8. MISCELLANEOUS PROVISIONS
8.1 POWER OF ATTORNEY. Borrower hereby appoints Lender as its true and
lawful attorney-in-fact, with full power of substitution to do the following:
(i) to demand, collect, receive, receipt for, sue and recover all sums of money
or other property which may now or hereafter become due, owing, or payable from
the Collateral; (ii) to execute, sign, and endorse any and all claims,
instruments, receipts, checks, drafts or warrants issued in payment for the
Collateral; (ii) to settle or compromise any and all claims arising under the
Collateral, and, in the place and stead of Borrower to execute and deliver its
release and settlement for the claim; (iv) to file any claim or claims or to
take any action or institute or take part in any proceedings, either in its own
name or in the name of Borrower, or otherwise, which in the sole and absolute
discretion of Lender may seem to be necessary or advisable; and (v) to execute
any documents necessary to perfect or continue the
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Security Interest. This power is a power coupled with an interest and is given
as security for the Secured Obligations, and the authority hereby conferred is
and shall be irrevocable and shall remain in full force and effect until
renounced by Lender.
8.2 INDEMNIFICATION. Borrower agrees to indemnify, defend, protect, and
hold harmless Lender, and its affiliates and their respective heirs, personal
representatives, successors, assigns and shareholders and the directors,
officers, employees, agents, and attorneys of the foregoing (collectively, the
"Indemnified Parties") for, from, and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses, and disbursements of any kind or nature whatsoever (including,
without limitation, the fees and disbursements of counsel for such Indemnified
Parties in connection with any investigative, administrative, or judicial
proceeding commenced or threatened, whether or not such Indemnified Parties are
designated parties thereto) that may be imposed on, incurred by, or asserted
against the Indemnified Parties, in any manner relating to or arising out of
this Agreement or the Debentures (the "Indemnified Liabilities"); provided,
however, that Borrower shall have no obligation to an Indemnified Party
hereunder with respect to Indemnified Liabilities arising from the gross
negligence or willful misconduct of that Indemnified Party.
8.3 OTHER SECURITY. The acceptance of this Agreement by Lender shall
not be considered a waiver of or in any way to affect or impair any other
security that Lender may have, acquire simultaneously herewith, or hereafter
acquire for the payment or performance of the Secured Obligations, nor shall the
taking by Lender at any time of any such additional security be construed as a
waiver of or in any way to affect or impair the Security Interest. Lender may
resort, for the payment or performance of the Secured Obligations, to its
several securities therefor in such order and manner as it may determine.
8.4 ACTIONS BY LENDER. Without notice or demand, without affecting the
obligations of Borrower hereunder, and without affecting the Security Interest
or the priority thereof, Lender, from time to time, may: (i) extend the time for
payment of all or any part of the Secured Obligations, accept a renewal note
therefor, reduce the payments thereon, release any person liable for all or any
part thereof, or otherwise change the terms of all or any part of the Secured
Obligations; (ii) take and hold other security for the payment or performance of
the Secured Obligations and enforce, exchange, substitute, subordinate, waive,
or release any such security; (iii) join in any extension or subordination
agreement; or (iv) release any part of the Collateral from the Security
Interest.
8.5 WAIVERS. Borrower waives and agrees not to assert: (i) any right to
require Lender to proceed against any guarantor, to proceed against or exhaust
any other security for the Secured Obligations, to pursue any other remedy
available to Lender, or to pursue any remedy in any particular order or manner;
(ii) the benefits of any legal or equitable doctrine or principle of
marshalling; (iii) the benefits of any statute of limitations affecting the
enforcement hereof; (iv) demand, diligence, presentment for payment, protest and
demand, and notice of extension, dishonor, protest, demand and nonpayment,
relating to the Secured Obligations; and (v) any benefit of, and any right to
participate in, any other security now or hereafter held by Lender.
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8.6 DEFINITIONS. All undefined capitalized terms used herein shall have
the meaning given them in the Debentures. Otherwise the terms herein shall have
the meanings in and be construed under the UCC.
8.7 GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of Delaware, without regard to the choice
of law rules of the State of Delaware.
8.8 JURISDICTION AND VENUE. Borrower hereby expressly agrees that in
the event any actions or other legal proceedings are initiated by or against
Borrower or Lender involving any alleged breach or failure by any party to pay,
perform or observe any sums, obligations or covenants to be paid, performed or
observed by it under this Agreement, or involving any other claims or
allegations arising out of the transactions evidenced or contemplated by this
Agreement, regardless of whether such actions or proceedings shall be for
damages, specific performance or declaratory relief or otherwise, such actions,
in the sole and absolute discretion of Lender, may be required to be brought in
Maricopa County, Arizona; and Borrower hereby submits to the jurisdiction of the
State of Arizona for such purposes and agrees that the venue of such actions or
proceedings shall properly lie in Maricopa County, Arizona; and Borrower hereby
waives any and all defenses to such jurisdiction and venue.
8.9 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same agreement.
8.10 ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding of the parties with respect to the subject matter hereof,
supersede all other prior understandings, oral or written, with respect to the
subject matter hereof, and are intended by Lender and Borrower as the final,
complete and exclusive statement of the terms agreed to by them.
8.11 AMENDMENTS. No amendment, modification, change, waiver, release,
or discharge hereof and hereunder shall be effective unless evidenced by an
instrument in writing and signed by the party against whom enforcement is
sought.
8.12 SECTION HEADINGS. The section headings set forth in this Agreement
are for convenience only and shall not have substantive meaning hereunder or be
deemed part of this Agreement.
8.13 TIME OF ESSENCE. Time is of the essence of this Agreement and each
and every provision hereof.
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8.14 SEVERABILITY. If any provision hereof is invalid or unenforceable,
the other provisions hereof shall remain in full force and effect and shall be
liberally construed in favor of Lender in order to effectuate the other
provisions hereof.
8.15 BINDING NATURE. This provisions of this Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their heirs,
personal representatives, successors and assigns. The term "Lender" shall
include not only the original Lender hereunder but also any future owner and
holder, including, without limitation, pledgees, of Debenture or Debentures or
note or notes evidencing the Secured Obligations. The provisions hereof shall
apply to the parties according to the context thereof and without regard to the
number or gender of words or expressions used.
8.16 CONSTRUCTION. This Agreement shall be construed as a whole, in
accordance with its fair meaning, and without regard to or taking into account
any presumption or other rule of law requiring construction against the party
preparing this Agreement.
8.17 CONTINUING AGREEMENT. This is a continuing Agreement which shall
remain in full force and effect until actual receipt by Lender of written notice
of its revocation as to future transactions and shall remain in full force and
effect thereafter until all of the Secured Obligations incurred before the
receipt of such notice, and all of the Secured Obligations incurred thereafter
under commitments extended by Lender before the receipt of such notice, shall
have been paid and performed in full.
8.18 NO SETOFFS BY BORROWER. No setoff or claim that Borrower now has
or may in the future have against Lender shall relieve Borrower from paying or
performing the Secured Obligations.
8.19 NOTICES. All notices required or permitted to be given hereunder
shall be in accordance with provisions of the Debentures.
8.20 COPY. A carbon, photographic or other reproduced copy of this
Agreement and/or any financing statement relating hereto shall be sufficient for
filing and/or recording as a financing statement.
8.21 CONFLICTS. In the event any provision of this Agreement is
inconsistent with any provisions of the Debentures, the provision of the Loan
Agreement shall prevail.
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IN WITNESS WHEREOF, this Agreement was executed by Borrower as of the
date first set forth above.
BORROWER
DIMENSIONAL VISIONS INCORPORATED,
a Delaware corporation
By:___________________________________
Name: John D. McPhilimy
Title: President
[INSERT POWER OF ATTORNEY] - LOO
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[LETTERHEAD OF HORWITZ & BEAM]
February 10, 2000
Dimensional Visions Incorporated
Ladies and Gentlemen:
This office represents Dimensional Visions Incorporated, a Delaware
corporation (the "Registrant") in connection with the Registrant's Registration
Statement on Form SB-2 under the Securities Act of 1933 (the "Registration
Statement"), which relates to the sale of 11,422,475 shares of the Registrant's
Common Stock (the "Shares" or the "Registered Securities") by certain beneficial
owners of the Company's shares. In connection with our representation, we have
examined such documents and undertaken such further inquiry as we consider
necessary for rendering the opinion hereinafter set forth.
Based upon the foregoing, it is our opinion that the Registered Securities,
when sold as set forth in the Registration Statement, will be legally issued,
fully paid and nonassessable.
We acknowledge that we are referred to under the heading "Legal Matters" in
the prospectus which is a part of the Registration Statement, and we hereby
consent to such use of our name in such Registration Statement and to the filing
of this opinion as Exhibit 5 to the Registration Statement and with such state
regulatory agencies in such states as may require such filing in connection with
the registration of the Registered Securities for offer and sale in such states.
HORWITZ & BEAM
/s/ Horwitz & Beam
----------------------------------------
DIMENSIONAL VISIONS GROUP, LTD.
1996 EQUITY INCENTIVE PLAN
1. PURPOSE
The purpose of this 1996 Equity Incentive Plan (the "Plan") is to advance
the interests of Dimensional Visions Group, Ltd. (the "Company") and its
subsidiaries by enhancing the ability of the Company to (i) attract and retain
employees and other persons or entities who are in a position to make
significant contributions to the success of the Company and its subsidiaries;
(ii) reward such persons or entities for such contributions; and (iii) encourage
such persons or entities to take into account the long-term interest of the
Company through ownership of shares ("Shares") of the Company's Common Stock
("Stock").
The Plan is intended to accomplish these goals by enabling the Company to
grant awards ("Awards") in the form of Options, Stock Appreciation Rights,
Restricted Stock or Deferred Stock, all as more fully described below.
2. ADMINISTRATION
The Plan will be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board"). The
Committee will determine the recipients of Awards, the times at which Awards
will be made and the size and type or types of Awards to be made to each
recipient and will set forth in such Awards the terms, conditions and
limitations applicable to it. Awards may be made singly, in combination or in
tandem. The Committee will have full and exclusive power to interpret the Plan,
to adopt rules, regulations and guidelines relating to the Plan, to grant
waivers of Plan restrictions and to make all of the determinations necessary for
this administration. In its discretion, the Board of Directors may elect to
administer all or any aspects of the Plan and to perform any of the duties or
exercise any of the rights delegated or granted to the Committee under the terms
of the Plan; provided, however, that the Board may not make such election if the
election would result in the failure of the Plan to comply with Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), at a time at which the Plan would otherwise be in compliance with such
rule. Such determinations and actions of the Committee (or the Board as the case
may be), and all other determinations and actions of the Committee (or the Board
as the case may be) made or taken under authority granted by any provision of
the Plan, will be conclusive and binding on all parties. Nothing in this
paragraph shall be construed as limiting the power of the Committee to make
adjustments under Section 11 or to amend or terminate the Plan under Section 16.
3. EFFECTIVE DATE AND TERM OF PLAN
Subject to the approval of the Plan by the Company's shareholders, the Plan
will be deemed effective on June 13, 1996. Grants of Awards under the Plan may
be made prior to the receipt of shareholder approval, subject to such approval
of the Plan.
The Plan will terminate ten (10) years after the effective date of the
Plan, subject to earlier termination of the Plan by the Board pursuant to
Section 16. No Award may be granted under the Plan after the termination date of
the Plan, but Awards previously granted may extend beyond that date.
<PAGE>
4. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 11 below, the maximum
aggregate number of Shares of Stock that may be delivered for all purposes under
the Plan shall be ten million (10,000,000).
If any Award requiring exercise by the Participant for delivery of Stock is
canceled or terminates without having been exercised in full, or if any Award
payable in Stock or cash is satisfied in cash rather than Stock, the number of
Shares of Stock as to which such Award was not exercised or for which cash was
substituted will be available for future grants of Stock except that Stock
subject to an Option canceled upon the exercise of an SAR shall not again be
available for Awards under the Plan unless, and to the extent that, the SAR is
settled in cash. Likewise, if any Award payable in Stock or cash is satisfied in
Stock rather than cash, the amount of cash for which such Stock was substituted
will be available for future Awards of cash compensation. Shares of Restricted
Stock forfeited to the Company in accordance with the Plan and the terms of the
particular Award shall be available again for Awards under the Plan unless the
Participant has received the benefits of ownership (within the applicable
interpretation under Rule 16b-3 under the Exchange Act), in which case such
Shares may only be available for Awards to Participants who are not subject to
Section 16 of the Exchange Act.
Stock delivered under the Plan may be either authorized but unissued Stock
or previously issued Stock acquired by the Company and held in treasury. No
fractional Shares of Stock will be delivered under the Plan and the Committee
shall determine the manner in which fractional share value will be treated.
5. ELIGIBILITY AND PARTICIPATION
Those eligible to receive Awards under the Plan ("Participants") will be
persons in the employ of the Company or any of its subsidiaries ("Employees")
and other persons or entities who, in the opinion of the Committee, are in a
position to make a significant contribution to the success of the Company or its
subsidiaries, including non-employee directors of the Company or a subsidiary of
the Company and consultants to the Company or a subsidiary of the Company. A
"subsidiary" for purposes of the Plan will be a corporation in which the Company
owns, directly or indirectly, stock possessing 50% or more of the total combined
voting power of all classes of stock.
6. OPTIONS
a. Nature of Options. An Option is an Award entitling the Participant to
purchase a specified number of Shares at a specified exercise price. Both
"incentive stock options," as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") (referred to herein as an "ISO") and
non-incentive stock options may be granted under the Plan. ISOs may be awarded
only to Employees.
b. Exercise Price. The exercise price of each Option shall be determined by
the Committee, but in the case of an ISO shall not be less than 100% (110% in
the case of an ISO granted to a ten (10%) percent shareholder) of the Fair
Market Value of a Share at the time the ISO is granted. For purposes of this
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Plan, "Fair Market Value" shall mean the average closing price of the Shares for
the twenty (20) trading days preceeding the grant of an Option. For purposes of
this Plan, "ten-percent shareholder" shall mean any Employee who at the time of
grant owns directly, or is deemed to own by reason of the attribution rules set
forth in Section 424(d) of the Code, Stock possessing more than ten (10%)
percent of the total combined voting power of all classes of stock of the
Company or any of its subsidiaries.
c. Duration of Options. In no case shall an Option be exercisable more than
ten (10) years (five (5) years, in the case of an ISO granted to a "ten-percent
shareholder" as defined in (b) above) from the date the Option was granted.
d. Exercise of Options and Conditions. Options granted under any single
Award will become exercisable at such time or times, and on and subject to such
conditions, as the Committee may specify. Options will not be exercisable unless
the shares subject thereto have been approved for listing on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") or such
other exchange or quotation system on which the Common Stock is then listed or
quoted. The Committee may at any time and from time to time accelerate the time
at which all or any part of the Option may be exercised.
e. Payment for and Delivery of Stock. Full payment for Shares purchased
will be made at the time of the exercise of the Option, in whole or in part.
Payment of the purchase price will be made in cash or in such other form of
consideration as the Committee may approve, including, without limitation,
delivery of Shares of Stock.
7. STOCK APPRECIATION RIGHTS
a. Nature of Stock Appreciation Rights. A Stock Appreciation Right (an
"SAR") is an Award entitling the recipient to receive payment, in cash and/or
Stock, determined in whole or in part by reference to appreciation in the value
of a Share. In general, an SAR entitles the recipient to receive, with respect
to each Share as to which the SAR is exercised, the excess of the Fair Market
Value of a Share on the date of exercise over the Fair Market Value of a Share
on the date the SAR was granted. However, the Committee may provide at the time
of grant that the amount the recipient is entitled to receive will be adjusted
upward or downward under rules established by the Committee to take into account
the performance of the Shares in comparison with the performance of other stocks
or an index or indices of other stocks.
b. Grant of SARs. SARs may be granted in tandem with, or independently of,
Options granted under the Plan. An SAR granted in tandem with an Option which is
not an ISO may be granted either at or after the time the Option is granted. An
SAR granted in tandem with an ISO may be granted only at the time the Option is
granted.
c. Exercise of SARs. An SAR not granted in tandem with an Option will
become exercisable at such time or times, and on such conditions, as the
Committee may specify. An SAR granted in tandem with an Option will be
exercisable only at such times, and to the extent, that the related Option is
exercisable. An SAR granted in tandem with an ISO may be exercised only when the
market price of the Shares subject to the Option exceeds the exercise price of
such Option.
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The Committee may at any time and from time to time accelerate the time at which
all or part of the SAR may be exercised.
8. RESTRICTED STOCK
A Restricted Stock Award entitles the recipient to acquire Shares, subject
to certain restrictions or conditions, for no cash consideration, if permitted
by applicable law, or for such other consideration as determined by the
Committee. The Award may be subject to such restrictions, conditions and
forfeiture provisions as the Committee may determine, including, but not limited
to, restrictions on transfer, continuous service with the Company or any of its
subsidiaries; achievement of business objectives, and individual, unit and
Company performance. Subject to such restrictions, conditions and forfeiture
provisions as may be established by the Committee, any Participant receiving an
Award will have all the rights of a shareholder of the Company with respect to
Shares of Restricted Stock, including the right to vote the Shares and the right
to receive any dividends thereon.
9. DEFERRED STOCK
A Deferred Stock Award entitles the recipient to receive Shares to be
delivered in the future. Delivery of the Shares will take place at such time or
times, and on such conditions, as the Committee may specify. The Committee may
at any time accelerate the time at which delivery of all or any part of the
Shares will take place. At the time any Deferred Stock Award is granted, the
Committee may provide that the Participant will receive an instrument evidencing
the Participant's right to future delivery of Deferred Stock.
10. TRANSFERS
No Award (other than an Award in the form of an outright transfer of cash
or Stock) may be assigned, pledged or transferred other than by will or by the
laws of descent and distribution and during a Participant's lifetime will be
exercisable only by the Participant or, in the event of a Participant's
incapacity, his or her guardian or legal representative.
11. ADJUSTMENTS
a. In the event of a stock dividend, stock split or combination of Shares,
recapitalization or other change in the Company's capitalization, or other
distribution to holders of the Company's Common Stock other than normal cash
dividends, after the effective date of the Plan, the Committee will make any
appropriate adjustments to the maximum number of Shares that may be delivered
under the Plan and to any Participant under Section 4 above.
b. In any event referred to in paragraph (a), the Committee will also make
any appropriate adjustments to the number and kind of Shares of Stock or
securities subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provision of Awards affected by
such change. The Committee may also make such adjustments to take into account
material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions or similar corporate transactions, or
any other event, if it is determined by the Committee that adjustments are
appropriate to avoid distortion in the operation of the Plan.
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12. RIGHTS AS A SHAREHOLDER
Except as specifically provided by the Plan, the receipt of an Award will
not give a Participant rights as a shareholder; the Participant will obtain such
rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, upon actual receipt of Shares. However, the Committee may,
on such conditions as it deems appropriate, provide that a Participant will
receive a benefit in lieu of cash dividends that would have been payable on any
or all Shares subject to the Participant's Award had such Shares been
outstanding.
13. CONDITIONS ON DELIVERY OF STOCK
The Company will not be obligated to deliver any Shares pursuant to the
Plan or to remove any restrictions or legends from Shares previously delivered
under the Plan until, (a) in the opinion of the Company's counsel, all
applicable Federal and state laws and regulations have been complied with, (b)
if the outstanding Shares are at the time listed on any stock exchange, until
the Shares to be delivered have been listed or authorized to be listed on such
exchange upon official notice of notice of issuance, and (c) until all other
legal matters in connection with the issuance and delivery of such Shares have
been approved by the Company's counsel. If the sale of Shares has not been
registered under the Securities Act of 1933, as amended, the Company may
require, as a condition to exercise of the Award, such representations and
agreements as counsel for the Company may consider appropriate to avoid
violation of such Act and may require that the certificates evidencing such
Shares bear an appropriate legend restricting transfer. If an Award is exercised
by the Participant's legal representative, the Company will be under no
obligation to deliver Shares pursuant to such exercise until the Company is
satisfied as to the authority of such representative.
14. TAX WITHHOLDING
The Company will have the right to deduct from any cash payment under the
Plan taxes that are required to be withheld and further to condition the
obligation to deliver or vest Shares under this Plan upon the Participant's
paying the Company such amount as it may request to satisfy any liability for
applicable withholding taxes. The Committee may in its discretion permit
Participants to satisfy all or part of their withholding liability by delivery
of Shares with a Fair Market Value equal to such liability or by having the
Company withhold from Stock delivered upon exercise of an Award, Shares whose
Fair Market Value is equal to such liability.
15. MERGERS; ETC.
In the event of any merger or consolidation involving the Company, any sale
of substantially all of the Company's assets or any other transaction or series
of related transactions as a result of which a single person or several persons
acting in concert own a majority of the Company's then outstanding Stock (such
merger, consolidation, sale or other transaction being hereinafter referred to
as a "Transaction"), all outstanding Options and SARs shall become immediately
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exercisable and each outstanding share of Restricted Stock and each outstanding
Deferred Stock Award shall immediately become free of all restrictions and
conditions. Upon consummation of the Transaction, all outstanding Options and
SARs shall terminate and cease to be exercisable. There shall be excluded from
the foregoing any Transaction as a result of which (a) the holders of Stock
prior to the Transaction retain or acquire securities constituting a majority of
the outstanding voting Common Stock of the acquiring or surviving corporation or
other entity and (b) no single person owns more than half of the outstanding
voting Common Stock of the acquiring or surviving corporation or other entity.
For purposes of this Section, voting Common Stock of the acquiring or surviving
corporation or other entity that is issuable upon conversion of convertible
securities or upon exercise of warrants or options shall be considered
outstanding, and all securities that vote in the election of directors (other
than solely as the result of a default in the making of any dividend or other
payment) shall be deemed to constitute that number of shares of voting Common
Stock which is equivalent to the number of such votes that may be cast by the
holders of such securities.
In lieu of the foregoing, if there is an acquiring or surviving corporation
or entity, the Committee may by vote of a majority of the members of the
Committee who are Continuing Directors (as defined below), arrange to have such
acquiring or surviving corporation or entity or an Affiliate (as defined below)
thereof grant to Participants holding outstanding Awards replacement Awards
which, in the case of ISOs, satisfy, in the determination of the Committee, the
requirements of Section 425 (e) of the Code. The term "Continuing Director"
shall mean any director of the Company who (i) is not an Acquiring Person or an
Affiliate of an Acquiring Person and (ii) either was (A) a member of the Board
of Directors of the Company on the effective date of the Plan or (B) nominated
for his or her initial term of office by a majority of the Continuing Directors
in office at the time of such nomination. The term "Acquiring Person" shall
mean, with respect to any Transaction, each Person who is a party to or a
participant in such Transaction or who, as a result of such Transaction, would
(together with other Persons acting in concert) own a majority of the Company's
outstanding Common Stock; provided, however, that none of the Company, any
wholly-owned subsidiary of the Company, any employee benefit plan of the Company
or any trustee in respect thereof acting in such capacity shall, for purposes of
this Section, be deemed an "Acquiring Person." The term "Affiliate", with
respect to any Person, shall mean any other Person who is, or would be deemed to
be an "affiliate" or an "associate" of such Person within the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended. The term
"Person" shall mean a corporation, association, partnership, joint venture,
trust, organization, business, individual or government or any governmental
agency or political subdivision thereof.
16. AMENDMENTS AND TERMINATION
The Committee will have the authority to make such amendments to any terms
and conditions applicable to outstanding Awards as are consistent with this Plan
provided that, except for adjustments under Section 11 hereof, no such action
will modify such Award in a manner adverse to the Participant without the
Participant's consent except as such modification is provided for or
contemplated in the terms of the Award.
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The Board may amend, suspend or terminate the Plan without shareholder
approval.
17. NO GUARANTEE OF EMPLOYMENT
The grant of an Award under this Plan shall not constitute an assurance of
continued employment for any period.
18. MISCELLANEOUS
This Plan shall be governed by and construed in accordance with the laws of
the State of Delaware.
7
EXHIBIT A
DIMENSIONAL VISIONS, INC.
1999 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purpose of Dimensional Visions, Inc.'s 1999 Stock Option Plan (the
"Plan") is to advance the interest of Dimensional Visions, Inc. (the "Company")
by encouraging and enabling the acquisition of a financial interest in the
Company by officers and other key employees of the Company. In addition, the
Plan is intended to aid the Company in attracting and retaining key employees,
to stimulate the efforts of such employees and to strengthen their desire to
remain in the employ of the Company.
SECTION 2. DEFINITIONS
"Business Day" means a day on which the NASDAQ is open for securities
trading.
"Change in Control" shall mean a change in control of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A under the Securities Exchange Act of 1934 ("1934 Act") as in
effect on January 1, 1999, provided that such a change in control shall be
deemed to have occurred at such time as (i) any "person" (as that term is used
in Sections 13(d) and 14(d)(2) of the 1934 Act), is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the 1934 Act as in effect on January 1,
1999) directly or indirectly, of securities representing 20% or more of the
combined voting power for election of directors of the then outstanding
securities of the Company or any successor of the Company; (ii) during any
period of two (2) consecutive years or less, individuals who at the beginning of
such period constituted the Board of Directors of the Company cease, for any
reason, to constitute at least a majority of the Board of Directors, unless the
election or nomination for election of each new director was approved by a vote
of at least two-thirds of the directors then still in office who were directors
at the beginning of the period; (iii) the share owners of the Company approve
any merger or consolidation as a result of which the DVUI Common Stock (as
defined below) shall be changed, converted or exchanged (other than a merger
with a wholly owned subsidiary of the Company) or any liquidation of the Company
or any sale or other disposition of 50% or more of the assets or earning power
of the Company; or (iv) the share owners of the Company approve any merger or
consolidation to which the Company is a party as a result of which the persons
who were share owners of the Company immediately prior to the effective date of
the merger or consolidation shall have beneficial ownership of less than 50% of
the combined voting power for election of directors of the surviving corporation
following the effective date of such merger or consolidation; provided, however,
that no Change in Control shall be deemed to have occurred if, prior to such
times as a Change in Control would otherwise be deemed to have occurred, the
Board of Directors determines otherwise.
"ISO" means an incentive stock option within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended.
"DVUI Common Stock" means Dimensional Visions, Inc. Common Stock, par value
$.001 per share.
"NSO" means a stock option that does not constitute an ISO.
"Options" means ISOs and NSOs granted under this Plan.
A-1
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SECTION 3. OPTIONS
The Company may grant ISOs and NSOs to those persons meeting the
eligibility requirements in Section 6.
SECTION 4. ADMINISTRATION
The Plan shall be administered by the Board of Directors. No person, other
than members of the Board of Directors, shall have any discretion concerning
decisions regarding the Plan. The Board shall determine the key employees of the
Company (including officers, whether or not they are directors) to whom, and the
time or times at which, Options will be granted; the number of shares to be
subject to each Option; the duration of each Option; the time or times within
which the Option may be exercised; the cancellation of the Option (with the
consent of the holder thereof); and the other conditions of the grant of the
Option, at grant or while outstanding, pursuant to the terms of the Plan. The
provisions and conditions of the Options need not be the same with respect to
each optionee or with respect to each Option.
The Board may, subject to the provisions of the Plan, establish such rules
and regulations as it deems necessary or advisable for the proper administration
of the Plan, and may make determinations and may take such other action in
connection with or in relation to the Plan as it deems necessary or advisable.
Each determination or other action made or taken pursuant to the Plan, including
interpretation of the Plan and the specific conditions and provisions of the
Options granted hereunder by the Board, shall be final and conclusive for all
purposes and upon all persons including, but without limitation, the Company,
the Board, officers and the affected employees of the Company, optionees and the
respective successors in interest of any of the foregoing.
SECTION 5. STOCK
The DVUI Common Stock to be issued, transferred and/or sold under the Plan
shall be made available from authorized and unissued DVUI Common Stock or from
the Company's treasury shares. The total number of shares of DVUI Common Stock
that may be issued or transferred under the Plan pursuant to Options granted
thereunder may not exceed 1,500,000 shares (subject to adjustment as described
below). Such number of shares shall be subject to adjustment in accordance with
Section 5 and Section 11. DVUI Common Stock subject to any unexercised portion
of an Option which expires or is canceled, surrendered or terminated for any
reason may again be subject to Options granted under the Plan.
SECTION 6. ELIGIBILITY
Options may be granted to employees and directors of the Company.
SECTION 7. AWARDS OF OPTIONS
Except as otherwise specifically provided in this Plan, Options granted
pursuant to the Plan shall be subject to the following terms and conditions:
(a) Option Price. The option price will be 100% of the fair market value of
the DVUI Common Stock on the date of grant. The fair market value of a share of
DVUI Common Stock shall be the average of the high and low market prices at
which a share of DVUI Common Stock shall have been sold on the date of grant, or
on the next preceding trading day if such date was not a trading date, as
reported on the NASDAQ Transactions listing.
(b) Payment. The option price shall be paid in full at the time of
exercise. Payment must be in cash.
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(c) Exercise May Be Delayed Until Withholding is Satisfied. The Company may
refuse to exercise an Option if the optionee has not made arrangements
satisfactory to the Company to satisfy the tax withholding which the Company
determines is necessary to comply with applicable requirements.
(d) Duration of Options. The duration of Options shall be determined by the
Board, but in no event shall the duration of an ISO exceed ten (10) years from
the date of its grant or the duration of an NSO exceed fifteen (15) years from
the date of its grant.
(e) Other Terms and Conditions. Options may contain such other provisions,
not inconsistent with the provisions of the Plan, as the Board shall determine
appropriate from time to time, including vesting provisions; provided, however,
that, except in the event of a Change in Control or the disability or death of
the optionee, no Option shall be exercisable in whole or in part for a period of
twelve (12) months from the date on which the Option is granted. The grant of an
Option to any employee shall not affect in any way the right of the Company to
terminate the employment of the holder thereof.
(f) ISOs. The Board, with respect to each grant of an Option to an
optionee, shall determine whether such Option shall be an ISO, and, upon
determining that an Option shall be an ISO, shall designate it as such in the
written instrument evidencing such Option. If the written instrument evidencing
an Option does not contain a designation that it is an ISO, it shall not be an
ISO.
The aggregate fair market value (determined in each instance on the date on
which an ISO is granted) of the DVUI Common Stock with respect to which ISOs are
first exercisable by any optionee in any calendar year shall not exceed $250,000
for such optionee. If any subsidiary of the Company shall adopt a stock option
plan under which options constituting ISOs may be granted, the fair market value
of the stock on which any such incentive stock options are granted and the times
at which such incentive stock options will first become exercisable shall be
taken into account in determining the maximum amount of ISOs which may be
granted to the optionee under this Plan in any calendar year.
SECTION 8. NONTRANSFERABILITY OF OPTIONS
No Option granted pursuant to the Plan shall be transferable otherwise than
by will or by the laws of descent and distribution. During the lifetime of an
optionee, the Option shall be exercisable only by the optionee personally or by
the optionee's legal representative.
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SECTION 9. EFFECT OF TERMINATION OF EMPLOYMENT, OTHER CHANGES OF EMPLOYMENT OR
EMPLOYER STATUS, DEATH, RETIREMENT OR A CHANGE IN CONTROL
<TABLE>
<CAPTION>
EVENT IMPACT ON VESTING IMPACT ON EXERCISE PERIOD
----- ----------------- -------------------------
<S> <C> <C>
Employment terminates All options become immediately Option expiration date provided
upon Disability vested in grant continues to apply
Employment terminates Option held at least 12 full Option expiration date provided
upon Retirement calendar months become in grant continues to apply
immediately vested; options held
less than 12 full calendar months
are forfeited
Employment terminates All options become immediately Right of executor, administrator
upon death vested of estate (or other transferee
permitted by Section 8)
terminates on earlier of (1) 12
months from the date of death,
or (2) the expiration date
provided in the Option
Employment terminates All options become immediately Option expiration date provided
upon Change in Control vested in grant continues to apply
Termination of employment Unvested options are forfeited Expires upon earlier of 6 months
for other reasons (Optionees from termination date or option
should be aware that the expiration date provided in grant
receipt of severance does
not extend their termination
date)
US military leave Vesting continues during leave Option expiration date provided
in grant continues to apply
US FMLA leave of Vesting continues during leave Option expiration date provided
absence in grant continues to apply
</TABLE>
In the case of other leaves of absence not specified above, optionees will
be deemed to have terminated employment (so that options unvested will expire
and the option exercise period will end on the earlier of 6 months from the date
the leave began or the option expiration date provided in the grant), unless the
Board identifies a valid business interest in doing otherwise in which case it
may specify what provisions it deems appropriate in its sole discretion;
provided that the Board shall have no obligation to consider any such matters.
Notwithstanding the foregoing provisions, the Board may, in its sole
discretion, establish different terms and conditions pertaining to the effect of
an optionee's termination on the expiration or exercisability of Options at the
time of grant or (with the consent of the affected optionee) outstanding
Options. However, no Option can have a term of more than fifteen years.
SECTION 10. NO RIGHTS AS A SHARE OWNER
An optionee or a transferee of an optionee pursuant to Section 8 shall have
no right as a share owner with respect to any DVUI Common Stock covered by an
Option or receivable upon the exercise of an Option until the optionee or
transferee shall have become the holder of record of such DVUI Common Stock, and
no adjustments shall be made for dividends in cash or other property or other
distributions or rights in respect to such DVUI Common Stock for which the
record date is prior to the date on which the optionee or transferee shall have
in fact become the holder of record of the share of DVUI Common Stock acquired
pursuant to the Option.
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SECTION 11. ADJUSTMENT IN THE NUMBER OF SHARES AND IN OPTION PRICE
In the event there is any change in the shares of DVUI Common Stock through
the declaration of stock dividends, or stock splits or through recapitalization
or merger or consolidation or combination of shares or spin-offs or otherwise,
the Board shall make such adjustment, if any, as it may deem appropriate in the
number of shares of DVUI Common Stock available for Options as well as the
number of shares of DVUI Common Stock subject to any outstanding Option and the
option price thereof. Any such adjustment may provide for the elimination of any
fractional shares which might otherwise become subject to any Option without
payment therefor.
SECTION 12. AMENDMENTS, MODIFICATIONS AND TERMINATION OF THE PLAN
The Board may terminate the Plan at any time. From time to time, the Board
may suspend the Plan, in whole or in part. From time to time, the Board may
amend the Plan, in whole or in part, including the adoption of amendments deemed
necessary or desirable to qualify the Options under the laws of various
countries (including tax laws) and under rules and regulations promulgated by
the Securities and Exchange Commission with respect to employees who are subject
to the provisions of Section 16 of the 1934 Act, or to correct any defect or
supply an omission or reconcile any inconsistency in the Plan or in any Option
granted thereunder, or for any other purpose or to any effect permitted by
applicable laws and regulations, without the approval of the share owners of the
Company. However, in no event may additional shares of DVUI Common Stock be
allocated to the Plan or any outstanding option be repriced or replaced without
share-owner approval. Without limiting the foregoing, the Board of Directors may
make amendments applicable or inapplicable only to participants who are subject
to Section 16 of the 1934 Act.
No amendment or termination or modification of the Plan shall in any manner
affect any Option theretofore granted without the consent of the optionee,
except that the Board may amend or modify the Plan in a manner that does affect
Options theretofore granted upon a finding by the Board that such amendment or
modification is in the best interest of holders of outstanding Options affected
thereby. Grants of ISOs may be made under this Plan until November 15, 2009 or
such earlier date as this Plan is terminated, and grants of NSOs may be made
until all of the 1,500,000 shares of DVUI Common Stock authorized for issuance
hereunder (adjusted as provided in Sections 5 and 11) have been issued or until
this Plan is terminated, whichever first occurs. The Plan shall terminate when
there are no longer Options outstanding under the Plan, unless earlier
terminated by the Board.
SECTION 13. GOVERNING LAW
The Plan and all determinations made and actions taken pursuant thereto
shall be governed by the laws of the State of Arizona and construed in
accordance therewith.
A-5
AGREEMENT
This Agreement is entered into as of September __, 1997, by and between
InfoPak Inc. a Delaware corporation ( "InfoPak"), DataNet Enterprises, LLC a
Texas limited liability corporation ("DataNet") and David L. Noles and Staci L.
Noles (collectively the "Noles").
W I T N E S S
WHEREAS, a portion of InfoPak'S business is supplying third party
distributors with a data delivery system which interfaces with real estate
multiple listing services ("MLS") on line systems which provides participating
end users access to all or a portion of the MLS database by means of a portable,
hand-held reader (the "InfoReader"). A personal computer located in the end
user'S office is equipped with a peripheral (the "InfoLoader") for loading the
MLS database and software to a PCMCIA card (the InfoCard"). The InfoReader
allows the end user to search the MLS database which has been transferred to the
InfoCard. The foregoing is referred to herein as the "MLS Business".
WHEREAS, DataNet desires to acquire the MLS Business and to license the
proprietary technology and trademarks used by InfoPak in the MLS Business.
WHEREAS, InfoPak is willing to sell the MLS Business, and license the
proprietary technology and trademarks used in the MLS Business to DataNet on the
terms and conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties and covenants set forth herein, the
parties agree as follows.
ARTICLE I
SALE AND PURCHASE, TRANSFER AND LICENSE
SECTION 1.1 TRANSFER OF ASSETS. Subject to the terms and conditions hereof,
InfoPak shall sell, assign, grant, transfer, convey and deliver to DataNet, and
DataNet shall purchase and accept from InfoPak as of the Closing Date, the
following assets relating to the MLS Business, wherever situated, as the same
shall exist on the Closing Date (collectively, the "ASSETS").
(a) Software Products. The software products owned, licensed, and under
development by InfoPak and listed in Schedule 1.1(a), including interfaces for
third party databases, supplements, modifications, updates, custom modules,
corrections and associated documentation (collectively, the "PRODUCTS"). The
Products shall not include any programming language code necessary to support
and modify any and all InfoPak Software;
(b) Tools. The software design and development tools and scripts, and
modifications and additions to such tools and scripts, listed in Schedule
1.1(b), which were or are used in the development, operation or maintenance of
the Products (collectively, the "TOOLS");
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(c) Transferred Agreements. All rights of InfoPak under the agreements
entered into between InfoPak and third parties named therein in the operation of
the MLS Business and listed in Schedule 1.1(c) (collectively, the "TRANSFERRED
AGREEMENTS"); and
(d) Books, Records and Other Materials. All books and records used in
connection with the Assets, including without limitation any and all (I)
customer and marketing materials relating to the Products or the Tools, such as
product documentation, sales and marketing collateral, product data sheets,
customer training materials, sales training materials, and sales presentation
materials; (ii) customer support materials relating to the Products or Tools,
such as support training materials; (iii) data contained in Seller'S customer
support organization computer system relating to the Products or Tools; (iv) all
customer lists relating to the Products and Tools;
SECTION 1.2 ASSUMPTION OF LIABILITIES AND OBLIGATIONS. DataNet shall assume
and be obligated to discharge those liabilities and obligations arising out of
or resulting from the operation of the MLS Business conducted with the Assets
and ownership of the Assets that are set forth below (the "Assumed
Liabilities").
(a) Assumption of InfoPak'S obligation payable to First Portland
Corporation in the amount of Fifty Nine Thousand Four Hundred and Twenty Seven
($59,427) Dollars;
(b) Post Closing Contractual Obligations. Any and all obligations relating
to the period on or after the Closing Date under the Transferred Agreements; and
(c) Other Post-Closing Liabilities. Any and all Liabilities arising out of
DataNet'S operation and ownership of the Assets on or after the Closing Date.
SECTION 1.3 PURCHASE PRICE. In consideration of the acquisition of the
Assets under Section 1.1 and assumption of the assumed Liabilities under Section
1.2 DataNet agrees to pay and deliver to InfoPak Four Hundred and Fifty Thousand
($450,000) Dollars, payable at closing by;
(i) Wire transfer of immediately available funds in the amount of Forty
Thousand ($40,000) Dollars to an account designated by InfoPak, which amount
shall be applied first to the past due amounts owed to InfoPak by DataNet and;
(ii) Delivery of a promissory note in the principle amount of Four Hundred
and Ten Thousand ($410,000) Dollars. The interest on the note shall be twelve
(12%) percent annually. The term of the promissory note will be for a period of
thirty-six (36) months with the first payment due thirty (30) days from the
Closing Date. The form of promissory note is attached hereto as Exhibit A (the
"Promissory Note"). Data Net and the Noles agree to be jointly and severally
obligated for the payment of the Purchase Price.
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SECTION 1.4 LICENSE OF PROPRIETARY TECHNOLOGY AND TRADEMARKS.
(a) Grant of License. In connection with the purchase of the MLS Business,
InfoPak hereby grants a license (the "License") to DataNet for the use of its
proprietary technology in the MLS Business. The proprietary technology is listed
on Schedule 1.4(a) attached hereto (the "Technology"). In connection with the
license for the Technology InfoPak also grants a license to DataNet to use the
trademarks listed on Schedule 1.4(b) (the "Trademarks") for use only in the real
estate market dealing with Multiple Listing Service databases.
(b) Term of License. Subject to the terms and conditions herein, the term
of the License shall be perpetual, provided the Purchase Price has been paid in
full and there is no material breach of this Agreement.
(c) Exclusive Use of Technology and Trademarks . During the term of the
License DataNet shall have the exclusive use of the Technology and Trademarks
only as they relate to the conduct of DataNet'S real estate data delivery system
business provided, that there has been no breech of this Agreement including but
not limited to a default in the amount due under the Promissory Note.
(d) Restriction of use of Technology. The use of the Technology by DataNet
and all ideas and all products derived from it is specifically limited to the
real estate market in applications dealings with Multiple Listing Services
("MLS") databases.
(e) Confidential Information. The Technology contains confidential
information. DataNet and The Noles agree jointly and severely that they will not
disclose such confidential information to any third party or use it for some
other purpose other than the MLS Business as contemplated by this Agreement and
further agree to maintain the confidential information in a manner that a
prudent person would use in the care of such confidential information.
SECTION 1.5 LEGAL TITLE OF ASSETS. All ownership interest and legal title
to the Assets including but not limited to the Products, Tools and Transferred
Agreements shall be retained by InfoPak until the Purchase Price has been paid
in full. At such time as the Purchase Price has been paid in full all ownership
interest and legal title to the Assets, including but not limited to Products,
Tools and Transferred Agreements, shall pass to DataNet.
SECTION 1.6 RELEASE OF RECEIVABLE. At the Closing Date, InfoPak shall
release Allied Broker Services, Inc. of Lincoln, Nebraska from any sums due or
past due to InfoPak.
SECTION 1.7 RETURN OF ASSETS. In the event there is a material breech of
this Agreement including but not limited to a default not subsequently cured
under the Promissory Note, the Assets will promptly be returned and the License
for Technology and the Trademarks will be canceled.
SECTION 1.8 INTERCREDITOR AGREEMENT. The parties to this Agreement hereby
acknowledge that certain Agreement dated September ___, 1997 by and between
InfoPak and First Portland Corporation a copy which is attached hereto as
Exhibit B, and agree to be bound to said agreement as it relates to this
Agreement. However, in the event of any inconsistencies or conflicts between
this Agreement and the agreement listed as Exhibit B hereto, this Agreement
shall govern as between InfoPak, DataNet and the Noles.
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SECTION 1.9 CLOSING. Subject to the terms and conditions of this Agreement,
the transfer of the Assets and licensing of the Technology and Trademarks
contemplated hereby (the "Closing") shall take place on such date as soon as
practicable as the parties may agree (the "Closing Date").
SECTION 1.10 ACTIONS AT THE CLOSING . At the Closing, InfoPak shall deliver
the Assets and Technology and the Trademarks to DataNet, DataNet shall deliver
the Purchase Price in accordance with the provisions of this Agreement, and
InfoPak and DataNet shall take such actions and execute and deliver such
agreements and other instruments and documents as necessary or appropriate to
effect the transactions contemplated by this Agreement in accordance with its
terms.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF INFOPAK
InfoPak represents and warrants to DataNet and the Noles as follows:
SECTION 2.1 Organization. InfoPak is a corporation duly formed and validly
existing under the laws of its jurisdiction of organization and has full
corporate power and authority and legal right to own and operate the Assets and
to carry on the MLS Business as presently conducted, to execute and deliver this
Agreement and all of the other agreements and instruments to be executed and
delivered by InfoPak pursuant hereto, and to consummate the transactions
contemplated hereby and thereby.
SECTION 2.2 Authority. The execution and delivery of this Agreement (and
all other agreements and instruments contemplated hereunder) by InfoPak, the
performance by InfoPak of its obligations hereunder and thereunder, and the
consummation by InfoPak of the transactions contemplated hereby and thereby have
been duly authorized by all necessary action by the Board of Directors of
InfoPak, and no other act or proceeding on the part of or on behalf of InfoPak
or any of their shareholders is necessary to approve the execution and delivery
of this Agreement and such other agreements and instruments, the performance by
InfoPak of its obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby. The signatory officer(S) of
InfoPak have the power and authority to execute and deliver this Agreement and
all of the other agreements and instruments to be executed and delivered by
InfoPak pursuant hereto, to consummate the transactions hereby and thereby
contemplated and to take all other actions required to be taken by InfoPak
pursuant to the provisions hereof and thereof.
SECTION 2.3 Execution and Binding Effect. This Agreement has been duly and
validly executed and delivered by InfoPak and constitutes, and the other
agreements and instruments to be executed and delivered by InfoPak pursuant
hereto, upon their execution and delivery by InfoPak, will constitute (assuming,
in each case, the due and valid authorization, execution and delivery thereof by
DataNet), legal, valid and binding agreements of InfoPak, enforceable against
InfoPak in accordance with their respective terms, except as enforceability may
be limited by bankruptcy, insolvency, moratorium, or other laws affecting the
enforcement of creditors' rights generally or provisions limiting competition,
and by equitable principles.
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SECTION 2.4 No Violation. Neither the execution, delivery and performance
of this Agreement and all of the other agreements and instruments to be executed
and delivered pursuant hereto, nor the consummation of the transactions
contemplated hereby or thereby, will, with or without the passage of time or the
delivery of notice or both, (a) conflict with, violate or result in any breach
of the terms, conditions or provisions of the articles or bylaws of InfoPak (b)
conflict with or result in a violation or breach of, or constitute a default or
require consent of any person (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any Transferred Agreement, any notice, bond, mortgage, indenture, license,
franchise, permit, agreement, lease or other instrument or obligation to which
InfoPak is a party or by which InfoPak or any of the properties or assets of
InfoPak may be bound, where such conflict, violation, breach, default or consent
would have a material adverse effect on the business conducted with the Assets
or the Assets or (c) violate any statute, ordinance or law or any rule,
regulation, order, writ, injunction or decree of any governmental entity
applicable to InfoPak or by which any properties or assets of InfoPak may be
bound, where such violation would have a material adverse effect on the MLS
business conducted with the Assets.
SECTION 2.5 Assets Generally. The Assets and the Technology and Trademarks
include all properties currently used by InfoPak in operating the MLS Business
conducted with the Assets and Technology and Trademarks and necessary for
DataNet to operate the MLS Business conducted with the Assets and Technology and
Trademarks after the Closing Date in a manner substantially equivalent to the
manner in which InfoPak has operated the MLS Business conducted with the Assets
prior to and through the Closing Date.
SECTION 2.6 Compliance with Law. The operation of the business conducted
with the Assets has been conducted in all material respects in accordance with
all applicable laws, regulations and other requirements of governmental entities
having jurisdiction over the same.
SECTION 2.7 Litigation; Other Claims. There are no claims, actions, suits,
inquires, proceedings, or investigations against InfoPak relating to the MLS
Business conducted with the Assets, which are currently pending or, to InfoPak'S
knowledge, threatened, at law or in equity or before or by any governmental
entity.
SECTION 2.8 Product Liability. There are no claims, actions, suits,
inquires, proceedings or investigations pending, or threatened by InfoPak, or,
to InfoPak'S knowledge, threatened against InfoPak relating to any of the Assets
containing allegations that the Assets are defective or were improperly designed
or manufactured or improperly labeled or otherwise improperly described for use.
SECTION 2.9 Defaults. InfoPak is not in default under or with respect to
any judgment, order, writ, injunction or decree of any court or any governmental
entity which could reasonably be expected to materially adversely affect the
business conducted with the Assets. There does not exist any default by InfoPak
or, to the knowledge of InfoPak, by any other person, or event that, with notice
or lapse of time, or both, would constitute a default under any agreement
entered into by InfoPak as part of the operations of the business conducted with
the Assets which could reasonably be expected to materially and adversely affect
the business conducted with the Assets or the Assets, and no notices of breach
thereof have been received by InfoPak.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF DATANET
DataNet and the Noles jointly and severely represents and warrants to InfoPak
as follows:
SECTION 3.1 Organization. DataNet is a corporation duly formed and validly
existing under the laws of its jurisdiction of organization and has full
corporate power and authority and the legal right to execute and deliver this
Agreement and all of the other agreements and instruments to be executed and
delivered by DataNet pursuant hereto, and to consummate the transactions
contemplated hereby and thereby.
SECTION 3.2 Authority. The execution and delivery of this Agreement (and
all other agreements and instruments contemplated hereunder) by DataNet, the
performance by DataNet of its obligations hereunder and thereunder, and the
consummation by DataNet of the transactions contemplated hereby and thereby have
been duly authorized by all necessary action, and no other act or proceeding on
the part of DataNet is necessary to approve the execution and delivery of this
Agreement. The signatory officer of DataNet has the power and authority to
execute and deliver this Agreement and all of the other agreements and
instruments to be executed and delivered by DataNet pursuant hereto, to
consummate the transactions hereby and thereby contemplated and to take all
other actions required to be taken by DataNet pursuant to the provisions hereof
and thereof.
SECTION 3.3 Execution and Binding Effect. This Agreement has been duly and
validly executed and delivered by DataNet and constitutes, and the other
agreements and instruments to be executed and delivered by DataNet pursuant
hereto, upon their execution and delivery by DataNet, will constitute (assuming,
in each case, the due and valid authorization, execution and delivery thereof by
InfoPak), legal, valid and binding agreements of DataNet, enforceable against
DataNet in accordance with their respective terms, except as enforceability may
be limited by bankruptcy, insolvency, moratorium, or other laws affecting the
enforcement of creditors' rights generally or provisions limiting competition,
and by equitable principles.
SECTION 3.4 No Violation. Neither the execution, delivery and performance
of this Agreement and all of the other agreements and instruments to be executed
and delivered pursuant hereto, nor the consummation of the transactions
contemplated hereby or thereby, will, with or without the passage of time or the
delivery of notice or both, (a) conflict with, violate or result in any breach
of the terms, conditions or provisions of the articles or bylaws of DataNet, (b)
conflict with or result in a violation or breach of, or constitute a default or
require consent of any Person (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any notice, bond, mortgage, indenture, license, franchise, permit, agreement,
lease or other instrument or obligation to which DataNet is a party or by which
DataNet or any of its properties or assets may be bound, where such conflict,
violation, breach, default or consent would have a material adverse effect on
the business or assets of DataNet, or (c) violate any statute, ordinance or law
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or any rule, regulation, order, writ, injunction or decree of any governmental
entity applicable to DataNet or by which any of its properties or assets may be
bound, where such violation would have a material adverse effect on the business
or assets of DataNet.
ARTICLE IV
COVENANTS
SECTION 4.1 Access to Information. At all times following the Closing, each
party shall provide the other party (at such other party's expense) with such
reasonable assistance, including the provision of available relevant records or
other information and reasonable access to and cooperation of any personnel
within their employ, as may be reasonable requested by either of them in
connection with the preparation of any financial statement or tax return, or any
audit or examination by any taxing authority, or any judicial or administrative
proceeding relating to liability for taxes.
SECTION 4.2 Consulting Agreements.
(a) Consulting Agreement. During the period following the Closing, InfoPak
agrees to provide consulting services to customers of DataNet as an independent
contractor to DataNet. Such consulting services shall be provided to DataNet
pursuant to the terms attached hereto as Schedule 4.2.
(b) Reimbursement. DataNet agrees to compensate InfoPak for the services
described in Section 4.2(a) above and pursuant to the terms attached hereto as
Schedule 4.2.
SECTION 4.3 No Modification to Transferred Agreements. Until Purchase Price
is paid in full DataNet agrees that it will not modify, alter or assign any of
the Transferred Agreements without the written consent of InfoPak, which will
not be unreasonably withheld.
SECTION 4.4 Non-compete. InfoPak or any of its affiliates, shall not
compete, directly or indirectly, with DataNet or its assigns in the MLS Business
throughout the United States of America or Canada for period of five years, from
the date of this Agreement.
ARTICLE V
CONDITIONS TO DATANET'S OBLIGATIONS
The obligations of DataNet are subject to the fulfillment, prior to or on
the Closing Date, of each of the following conditions, all or any of which may
be waived by DataNet in writing, except as otherwise provided by law:
SECTION 5.1 Representations and Warranties True; Performance; Certificate.
(a) The representations and warranties of InfoPak contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same effect as though such representations and warranties had been
made or given again at and as of the Closing Date;
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(b) InfoPak shall have performed and complied with all of its agreements,
covenants and conditions required by this Agreement to be performed or complied
with by it prior to or at the Closing Date;
SECTION 5.2 No Proceeding or Litigation.
(a) No preliminary or permanent injunction or other order shall have been
issued by any governmental entity, nor shall any statute, rule, regulation or
executive order be promulgated or enacted by any governmental entity which
prevents the consummation of the transactions contemplated by this Agreement.
(b) No suit, action, claim, proceeding or investigation before any
governmental entity shall have been commenced and be pending against InfoPak, of
its respective Affiliates, associates, officers or directors, seeking to prevent
the sale of the Assets or asserting that the sale of the Assets would be illegal
or create liability for damages.
SECTION 5.3 Documents. This Agreement, any other instruments of conveyance
and transfer and all other documents to be delivered by InfoPak to DataNet at
the Closing and all actions of InfoPak required by this Agreement or incidental
thereto, and all related matters, shall be in form and substance reasonably
satisfactory to DataNet and DataNet'S counsel.
ARTICLE VI
CONDITIONS TO InfoPak'S OBLIGATIONS
The obligations of InfoPak under this Agreement are subject to the
fulfillment, prior to or on the Closing Date, of each of the following
conditions, all or any of which may be waived in writing by InfoPak, except as
otherwise provided by law.
SECTION 6.1 Representations and Warranties True; Performance.
(a) The representations and warranties of DataNet contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same effect as though such representations and warranties had been
made or given again at and as of the Closing Date;
(b) DataNet shall have performed and complied with all of its agreements,
covenants and conditions required by this Agreement to be performed or complied
with by it prior to or at the Closing Date;
SECTION 6.2 No Proceeding or Litigation.
(a) No preliminary or permanent injunction or other order shall have been
issued by any governmental entity, nor shall any statute, rule, regulation or
executive order be promulgated or enacted by any governmental entity which
prevents the consummation of the transactions contemplated by this Agreement.
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(b) No suit, action, claim, proceeding or investigation before any
governmental entity shall have been commenced and be pending against DataNet, or
any of its Affiliates, associates, officers or directors, seeking to prevent the
sale of the Assets or asserting that the sale of the Assets would be illegal or
create liability for damages.
SECTION 6.3 Documents. This Agreement, any other instruments of conveyance
and transfer and all other documents to be delivered by DataNet to InfoPak at
the Closing and all actions of DataNet required by this Agreement or incidental
thereto, and all related matters, shall be in form and substance reasonably
satisfactory to InfoPak and InfoPak'S counsel.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1 Indemnification by InfoPak. InfoPak shall indemnify and hold
harmless DataNet and its affiliates and each of their officers, directors,
employees, agents, successors and assigns ("DataNet INDEMNITIES") for any and
all liabilities, losses, damages, claims, costs and expenses, interest, awards,
judgments and penalties (including, without limitation, legal costs and expenses
and interest on the amount of any loss from the date suffered or incurred) (a
"LOSS") arising out of, resulting from or caused by:
(a) any inaccuracy or misrepresentation in or breach of any of the
representations or warranties made by, or covenants or agreements of InfoPak
contained in this Agreement;
(b) except for liabilities assumed under Section 1.2, all liabilities or
obligations, including, without limitation, those relating to taxes, (whether
known or unknown, accrued or not accrued, fixed or contingent) of InfoPak
arising out of or resulting from the operation of the MLS Business prior to the
Closing.
SECTION 7.2 Indemnification by Buyer. DataNet and the Noles jointly and
severely shall indemnify and hold harmless InfoPak, its affiliates and each of
its officers, directors, employees, agents, successors and assigns ("InfoPak
INDEMNITIES") for any and all Losses arising out of or resulting from:
(a) any inaccuracy or misrepresentation in or breach of any of the
representations or warranties made by, or covenants or agreements of DataNet and
the Noles contained in this Agreement;
(b) a liability or obligation, including, without limitation, those
relating to taxes, (whether known or unknown, accrued or not accrued, fixed and
determined or contingent) of DataNet, or any direct or indirect subsidiary or
transferee of DataNet to which all or any part of the MLS Business conducted
with the Assets is transferred, arising out of or resulting from the operation
by DataNet of the MLS Business conducted with the Assets on and after the
Closing Date, other than a liability or obligation for which any DataNet
Indemnitee is entitled to indemnification from InfoPak pursuant to the
provisions of Section 7.2(a);
(c) any claim arising out of the failure of DataNet, or any direct or
indirect subsidiary of DataNet or transferee, to perform its obligations assumed
under the Transferred Agreements.
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SECTION 7.3 Indemnification Procedure.
(a) Whenever any Loss shall be asserted against or incurred by a DataNet
Indemnitee or InfoPak Indemnitee (the "INDEMNIFIED PARTY"), the Indemnified
Party shall give written notice thereof (a "CLAIM") to InfoPak or DataNet,
respectively (the "INDEMNIFYING PARTY"). The Indemnified Party shall furnish to
the Indemnifying Party in reasonable detail such information as the Indemnified
Party may have with respect to the Claim (including in any case copies of any
summons, complaint or other pleading which may have been served on it and any
written claim, demand, invoice, billing or other document evidencing or
asserting the same). The failure to give such notice shall not relieve the
Indemnifying Party of its indemnification obligations under this Agreement.
(b) Any controversy involving only DataNet and InfoPak regarding whether a
Claim is properly chargeable, under the terms of this Article VII, where the
amount of the claim is liquidated, involves only a claim for money damages, and
does not relate to the ownership of any intellectual property rights, shall be
settled by binding arbitration administered in Phoenix, Arizona by the American
Arbitration Association ("AAA") in accordance with its Commercial Arbitration
Rules and judgment upon the award rendered through arbitration may be entered in
any court having jurisdiction thereof. Such arbitration shall be held in
Phoenix, Arizona. The fees and expenses of the Arbitrator shall be borne equally
by DataNet and InfoPak. Each party shall be responsible for its own legal fees
and expenses for the proceeding.
(c) If the Claim is based on a claim of a person that is not a party to
this Agreement, the Indemnifying Party shall, at its expense, undertake the
defense of such Claim with attorneys of its own choosing reasonably satisfactory
to the Indemnified Party. In the event the Indemnifying Party, within a
reasonable time after receiving notice of a Claim from the Indemnified Party,
fails to defend the Claim, the Indemnified Party may, at the Indemnifying
Party's expense, undertake the defense of the Claim and may compromise or settle
the Claim, all for the account of the Indemnifying Party. After notice from the
Indemnifying Party to the Indemnified Party of its election to assume the
defense of such Claim, the Indemnifying Party shall not be liable to the
Indemnified Party under this Section 7.3 for any legal expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof, except
for such expenses incurred in connection with cooperation with, or at the
request of, the Indemnifying Party; provided, however, that the Indemnified
Party shall have the right to employ counsel to represent it if, in the
Indemnified Party's reasonable judgment, based upon the advice of counsel, it is
advisable, in light of the separate interests of the Indemnified Party and the
Indemnifying Party, for the Indemnified Party to be represented by separate
counsel, and in that event the reasonable fees and expenses of such separate
counsel shall be paid by the Indemnifying Party.
(d) The Indemnifying Party shall not consent to entry of any judgment,
except with the consent of the Indemnified Party given in its sole discretion,
or enter into any settlement, except with the consent of the Indemnified Party,
which such consent shall not be unreasonably withheld or delayed. In the event
the Indemnified Party refuses to consent to the entry of a judgment or a
settlement for which Indemnifying Party is solely and entirely responsible and
has indicated its sole and entire responsibility in writing to the Indemnified
Party, following such refusal, the liability of the Indemnifying Party to the
Indemnified Party will be fixed at the amount of any money damages provided in
the proposed judgment or settlement.
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ARTICLE VIII
GENERAL TERMS AND CONDITIONS
SECTION 8.1 Notices. Every notice or other communication required or
contemplated by this Agreement by either party shall be delivered by (I)
personal delivery, (ii) postage prepaid, return receipt requested, registered or
certified mail (airmail if available), or the equivalent of registered or
certified mail under the laws of the country where mailed, (iii) internationally
recognized express courier, such as Federal Express, UPS or DHL, (iv) "tested"
telex (a telex for which the proper answer back has been received), or (v)
facsimile with a confirmation copy sent simultaneously in the manner
contemplated by clauses (I), (ii) or (iii) of this Section 8.1, in each case
addressed to the party for whom intended at the following address:
(1) If to InfoPak, Inc.: InfoPak, Inc.
Attn: Ronnie M. Matlock
8855 N. Black Canyon Hwy., Suite 2000
Phoenix, AZ 85021
Phone: 602-997-1990
Facsimile: 602-997-5658
With a copy to: John L. Thomas, Esq.
18 Beth Drive
Moorestown, NJ 08057
Phone: 609-234-0960
Facsimile: 609-234-2098
(2) If to DataNet: DataNet Enterprises LLC
Attn: Mr. David L. Noles
700 Austin, Suite 111
Levelland, TX 79336
Phone: 806-894-7475
Facsimile: 806-894-7599
With a copy to: Pat Phelan, Esq.
518 Avenue H
Levelland, TX 79336
Phone: 806-894-5178
(3) If to Noles: Mr. David L. Noles and/or Ms. Staci L. Noles
119 Holly
Levelland, TX 79336
Phone: 806-894-9238
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With a copy to: Pat Phelan, Esq.
518 Avenue H
Levelland, TX 79336
Phone: 806-894-5178
or at such other address as the intended recipient previously shall have
designated by written notice to the other party. Notice by registered or
certified mail shall be effective on the date it is officially recorded as
delivered to the intended recipient by return receipt or equivalent, and in the
absence of such record of delivery, the effective date shall be presumed to have
been the sixth (6th) business day after it was deposited in the mail. All
notices and other communications required or contemplated by this Agreement to
be delivered in person or sent by courier shall be deemed to have been delivered
to and received by the addressee and shall be effective on the date of personal
delivery; notices delivered by "tested" telex or by facsimile with simultaneous
confirmation copy by registered or certified or equivalent mail or courier shall
be deemed delivered to and received by the addressee and effective on the date
sent. Notice not given in writing shall be effective only if acknowledged in
writing by a duly authorized representative of the party to whom it was given.
SECTION 8.2 Injunctive Relief. DataNet and the Noles jointly and severely
consent and agree that InfoPak may seek injunctive relief for the purpose of
restraining DataNet and/or the Noles, as the case may be, from any violation of
this Agreement, in addition to recovery by InfoPak of losses, costs and
reasonable attorney's fees, and other relief to which InfoPak may be entitled as
a result of any violation of this Agreement.
SECTION 8.3 Force Majeure. No party hereto shall be liable for failure to
perform, in whole or in material part, its obligations under this Agreement if
such failure is caused by any event or condition not existing as of the date of
this Agreement (unless reasonably foreseeable by such party) and not reasonably
within the control of the affected party, including without limitation, by fire,
flood, typhoon, earthquake, explosion, strikes, labor troubles or other
industrial disturbances, unavoidable accidents, war (declared or undeclared),
acts of terrorism, sabotage, embargoes, blockage, acts of governmental entities,
riots, insurrections, or any other cause beyond the control of the parties;
provided, only, that the affected party promptly notifies the other party of the
occurrence of the event of force majeure and takes all reasonable steps
necessary to resume performance of its obligations so interfered with.
SECTION 8.4 No Agency. This Agreement shall not constitute an appointment
of any of the parties hereto as the legal representative or agent of any other
party hereto nor shall any party hereto have any right or authority to assume,
create or incur in any manner any obligation or other liability of any kind,
express or implied, against, or in the name or on behalf of, the other party
hereto.
SECTION 8.5 Severability. In the event any provision of this Agreement
shall be determined to be invalid or unenforceable under applicable law, all
other provisions of this Agreement shall continue in full force and effect
unless such invalidity or unenforceability causes substantial deviation from the
underlying intent of the parties expressed in this Agreement or unless the
invalid or unenforceable provisions comprise an integral part of, or are
inseparable from, the remainder of this Agreement. If this Agreement continues
in full force and effect as provided above, the parties shall replace the
invalid provision with a valid provision which corresponds as far as possible to
and purpose of the invalid provision.
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SECTION 8.6 Assignment and Succession. Except as expressly permitted
herein, including but not limited to Exhibit B attached hereto, DataNet may not
assign or otherwise transfer any rights, interests or obligations under this
Agreement without the prior written consent of InfoPak, which consent may be
withheld in the sole and absolute discretion of InfoPak for any reason
whatsoever or for no reason and any attempted assignment in violation of this
provision shall be void and of no effect.
SECTION 8.7 Amendments and Waivers. No amendment, modification, termination
or waiver of any provision of this Agreement or consent to any departure by any
party therefrom, shall in any event be effective without the written concurrence
of the other party hereto. Any waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it is given. No notice
to or demand on any party in any case shall entitle any other party to any other
or further notice or demand in similar or other circumstances.
SECTION 8.8 Further Assurances. Each of the parties hereto agrees that,
from and after the Closing, upon the reasonable request of the other party
hereto and without further consideration, such party will execute and deliver to
such other party such documents and further assurances and will take such other
actions (without cost to such party) as such other party may reasonably request
in order to carry out the purpose and intention of this Agreement including but
not limited to the effective consummation of the transactions contemplated under
the provisions of this Agreement, the transfer of the Assets to DataNet, the
vesting in DataNet of title to the Assets in accordance with the provisions of
this Agreement, and the correction of errors and defects in any such documents.
SECTION 8.9 Absence of Third-Party Beneficiaries. No provisions of this
Agreement, express or implied, are intended or shall be construed to confer upon
or give to any Person other than the parties hereto, any rights, remedies or
other benefits under or by reason of this Agreement unless specifically provided
otherwise herein, and except as so provided, all provisions hereof shall be
solely between the parties to this Agreement.
SECTION 8.10 Governing Law. The validity, construction, performance and
enforceability of this Agreement shall be governed in all respects by the laws
of the State of Arizona, without reference to the choice-of-law principles
thereof.
SECTION 8.11 Interpretation. This Agreement, including any exhibits,
addenda, schedules and amendments, has been negotiated at arm's length and
between persons sophisticated and knowledgeable in the matters dealt with in
this Agreement. Each party has been represented by experienced and knowledgeable
legal counsel. Accordingly, any rule of law or legal decision that would require
interpretation of any ambiguities in this Agreement against the party that has
drafted it is not applicable and is waived. The provisions of this Agreement
shall be interpreted in a reasonable manner to effect the purposes of the
parties and this Agreement.
SECTION 8.12 Entire Agreement. The terms of this Agreement and the other
writings referred to herein and delivered by the parties hereto are intended by
the parties to be the final expression of their agreement with respect to the
subject matter hereof and may not be contradicted by evidence of any prior or
contemporaneous agreement. The parties further intend that this Agreement,
together with the exhibits and schedules hereto, shall constitute the complete
and exclusive statement of its terms. The parties acknowledge and agree that
this Agreement and exhibits and schedules hereto constitute the agreements
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necessary to accomplish the transactions contemplated by this Agreement and are
parts of an integrated arrangement between the parties with respect to the
purchase and sale of the Assets by DataNet after the Closing, and that separate
agreements have been used for the sake of convenience.
SECTION 8.13 Counterparts. This Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument. Execution and
delivery of this Agreement by exchange of facsimile copies bearing the facsimile
signature of a party hereto shall constitute a valid and binding execution and
delivery of this Agreement by such party. Such facsimile copies shall constitute
enforceable original documents.
SECTION 8.14 Expenses. Each of the parties agrees to pay its own expenses
in connection with the transactions contemplated by this Agreement, including
without limitation legal, consulting, accounting and investment banking fees,
whether or not such transactions are consummated.
SECTION 8.15 Consents. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing.
SECTION 8.16 Headings. The article and section headings contained in this
Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of InfoPak and DataNet and the Noles as of the date
first above written.
INFOPAK, INC.
By:
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Name:
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Title:
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DATANET ENTERPRISES LLC
By:
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Name:
----------------------------------
Title:
----------------------------------
DAVID L. NOLES AND STACI L. NOLES
/s/ David L. Noles
----------------------------------------
David L. Noles
/s/ Staci L. Noles
----------------------------------------
Staci L. Noles
15
<PAGE>
EXHIBITS
--------
Exhibit A Promissory Note
Exhibit B Intercreditor Agreement
SCHEDULES
---------
Schedule 1.1(a) Products
Schedule 1.1(b) Tools
Schedule 1.1(c) Transferred Agreements
Schedule 1.4(a) InfoPak Proprietary Technology
Schedule 1.4(b) Trademarks
Schedule 4.2 Consulting Agreement
16
<PAGE>
EXHIBIT A
DataNet ENTERPRISES, LLC
12% PROMISSORY NOTE
Date: September __, 1997 $410,000
FOR VALUE RECEIVED, the undersigned, DataNet Enterprises, LLC, a Texas
corporation (the "Maker"), whose principal address is 700 Austin, Suite 111,
Levelland, TX 79336, and David L. Noles and Staci L. Noles (collectively the
"guarantors"), jointly and severely promises to pay to the order of InfoPak,
Inc. the ("Payee"), without defalcation or set off, the principal sum of Four
Hundred and Ten Thousand Dollars, together with interest on the outstanding
principal balance hereof from time to time outstanding from the date hereof and
until this Note is paid in full, whether before or after maturity, at an annual
rate of twelve percent (12%) and, to the extent lawful, to pay interest at the
same rate on any overdue installment of interest. Payment of principal and
interest shall be due and payable on a monthly basis pursuant to Schedule A
attached hereto.
Payments of principal and interest shall be made in lawful money of the
United States of America by wire transfer of immediately available funds, cash,
or banker'S certified check to Payee'S address listed at the end of this Note or
such other place as the holder of this Note shall designate to Maker in writing.
Maker shall have the privilege of prepaying in whole or in part any and all
amounts due hereunder at any time and such prepayments may be made without
penalty or premium. No partial prepayment shall postpone or interrupt payments
of future installments of principal which shall continue to be due and payable
as agreed herein above. Notwithstanding anything to the contrary contained,
herein, Maker shall give Payee at least thirty (30) days written notice (the
"Notice") of the payment or prepayment of any amounts due hereunder.
The occurrence of any of the following events with respect to Maker (which
for the purposes herein shall include all subsidiaries of Maker) shall
constitute a default hereunder; (a) if any payment of principal or interest as
the aforesaid shall not be paid when due, and shall continue unpaid for a period
of ten (10) days thereafter; or (b) if Maker shall voluntarily suspend
17
<PAGE>
transaction of its business or operations; or (c) if Maker shall make an
assignment for the benefit of creditors, or file a voluntarily petition under
the United States Bankruptcy Code, as amended, or any other Federal or State
law, or shall fail to have such a petition dismissed within thirty (30) days
after its filing; or (d) if an order for relief shall be entered following the
filing of an involuntary petition against Maker under the United States
Bankruptcy Code, as amended or be entered appointing a trustee, receiver or
custodian of all or part of Maker'S property.
Upon the occurrence of any event of default hereunder, the entire unpaid
amount of principal hereunder and all other sums due and owing to Payee by Maker
shall, at the option of Payee or any other holder hereof, become immediately due
and payable without notice or demand. In addition, upon the occurrence of any
event of default hereunder, Payee shall have all rights and remedies provided
under all applicable laws and shall be deemed to have exercised the same
immediately and without notice or further action, and Payee shall have the
right, immediately and without further action by it, to set off against this
Note all money owed by Payee in any capacity to Maker, whether or not due,
including an attorney's fee of ten (10%) percent for collection.
All rights, title and interest in this Note shall be fully assignable by
the Payee.
Presentment for payment or acceptance, demand and protest, and notice of
dishonor or payment or acceptance, notice of protest and notice of any renewal,
extension, modification or change of time, manner, place or terms of payment,
are hereby waived by Maker or any endorsers, sureties, and guarantors hereof.
Any notice to Maker shall be sufficiently served for all purposes if placed in
the mail addressed to, or left upon the premises, at the address of Maker.
Any failure or delay of Payee to exercise any right hereunder shall not be
construed as a waiver of the right to exercise the same or any other right at
any other time or times. The waiver by Payee of a breach or default of any
provisions of this Note shall not operate or be construed as a waiver of any
subsequent breach or default thereof.
18
<PAGE>
This Note shall be construed according to, and shall be governed by, the
laws of the State of Arizona.
The provisions of this Note shall be deemed severable, so that if any
provision hereof is declared invalid under the laws of any state where it is in
effect, or of the United States, all other provisions of this Note shall
continue in full force and effect.
This Note shall be binding upon the successors and assigns of Maker, and
shall inure to the benefit of and be enforceable by the heirs, personal
representatives, successors and assigns of Payee or any other holder hereof.
This Note is intended to take effect as an instrument under seal.
IN WITNESS WHEREOF, the undersigned intending to be legally bound has duly
executed, sealed and delivered this Note the day and year first above written.
DataNet Enterprises, LLC
Witness: By:
-------------------------- ------------------------------------
Secretary (An Authorized Officer)
Address of Payee:
8855 N. Black Canyon Highway The Guarantors
Phoenix, AZ 85201
/s/ David L. Noles
----------------------------------------
David L. Noles
/s/ Staci L. Noles
----------------------------------------
Staci L. Noles
19
<PAGE>
SCHEDULE A
Month Payment
- ----- -------
1 $13,229.55
2 $13,229.55
3 $13,229.55
4 $13,229.55
5 $13,229.55
6 $13,229.55
7 $13,229.55
8 $13,229.55
9 $13,229.55
10 $13,229.55
11 $13,229.55
12 $13,229.55
13 $13,229.55
14 $13,229.55
15 $13,229.55
16 $13,229.55
17 $13,229.55
18 $13,229.55
19 $13,229.55
20 $13,229.55
21 $13,229.55
22 $13,229.55
23 $13,229.55
24 $13,229.55
25 $13,229.55
26 $13,229.55
27 $13,229.55
28 $13,229.55
29 $13,229.55
30 $13,229.55
31 $13,229.55
32 $13,229.55
33 $13,229.55
34 $13,229.55
35 $13,229.55
36 $13,229.55
20
<PAGE>
EXHIBIT B
INTERCREDITOR AGREEMENT
21
<PAGE>
Schedule 1.1a
PRODUCTS
InfoReader(TM) Real Estate Software*
InfoLoader(TM) Real Estate Software*
InfoServer(TM) Real Estate Software*
SlaveServer(TM) Real Estate Software*
* "Real Estate Software" shall mean user interfaces, interfaces for third party
Real Estate databases, supplements, modifications, updates, custom modules
(libraries), corrections and associated documentation developed by InfoPak, Inc.
for the Real Estate Data Delivery System. Notwithstanding any language to the
contrary contained herein, "Real Estate Software" shall not include any
programming language code necessary to support and modify any and all InfoPak
Software.
22
<PAGE>
Schedule 1.1b
TOOLS
cserv.exe billing.exe jcm.exe dispbill.exe asciiout.exe cardid.exe chklist.ms
display.exe dl.exe encrypt.exe eracard.exe fromasc.exe readhead.exe split.exe
testcom.exe toascii.exe trunc.exe writbyte.exe
23
<PAGE>
Schedule 1.1c
TRANSFERRED AGREEMENTS
AGT Directory Limited Distributorship Agreement
a.) Delta Financial Corp. First Amendment to Distributorship Agreement
b.) N.B. Enterprising for Excellence, Inc. First Amendment to
Distributorship Agreement
Gerding, Inc. Distributorship Agreement
Donald C. Meyer / DCM Consulting Distributorship Agreement
InfoMate, Inc. Distributorship Agreement
Southeast Arizona Multiple Listings Service, Inc. Sale and service Agreement
Prince Georges County Association of Realtors Distribution Agreement
a). U.S. Recognition, Inc. First Amendment to distributorship Agreement
PRC Realty Systems, Inc. Authorized Access Agreement
a). Interealty Corp. Amendment Number One
DataNet Enterprises, LLC
24
<PAGE>
Schedule 1.4(a)
InfoPak Proprietary Technology
Database Manipulation:
1. C and C++ source and object code used for the compression of database
information. 2. C and C++ source and object code used for indexing database
information. 3. Assembler source and object code used for decompressing
database information on the InfoReader. 4. Assembler source and object code
used for searching compressed databases on the InfoReader.
InfoCard Communications:
1. C and C++ source and object code used for erasing, reading, and writing
PCMCIA cards via an InfoLoader. 2. Assembler source and object code used
for erasing, reading, and writing PCMCIA cards via an InfoReader.
Data Acquisition:
1. C and C++ source and object code used for retrieving database
information from third party databases.
Intellectual Property:
1. Data Delivery System as described in Patent Pending #____________-
2. All data compression methodologies used individually and/or jointly.
3. Database indexing and searching methodologies.
4. OTHER NECESSARY PATENTS.
Restrictions:
Use of these licensed products and ideas and all products derived from them
is specifically limited to the Real Estate Market in applications dealing
with Multiple Listing Service (MLS) databases.
25
<PAGE>
Schedule 1.4(b)
Trademarks
InfoCard(TM)
InfoReader(TM)
InfoLoader(TM)
InfoServer(TM)
SlaveServer(TM)
26
<PAGE>
Schedule 4.2
Consulting Agreement
InfoPak shall provide to DataNet training, technical assistance and
software support at InfoPak'S office for a period of 120 days from the date
of the Closing at no cost to DataNet.
For an additional 90 days, InfoPak shall provide such service and
assistance to DataNet at a cost of $50.00 per hour.
Thereafter, technical assistance shall be provided at the programming rate
of $100.00 per hour.
27
OFFICE LEASE
by and between
PRESSION ADVISORY L.L.C
An Arizona Limited Liability Company
"Landlord"
and
DIMENSIONAL VISIONS GROUP, LTD.
A Delaware Corporation
"Tenant"
October 27, 1997
for premises known as
"DUNLAP EXECUTIVE OFFICE"
2301 West Dunlap Avenue, Suite 207
Phoenix, Arizona
<PAGE>
TABLE OF CONTENTS Page
1. BASIC PROVISIONS 1
2. LEASED PREMISES; NO ADJUSTMENT 2
3. LEASE TERM; COMMENCEMENT DATE 2
4. SECURITY DEPOSIT 2
5. RENT; RENT TAX; ADDITIONAL RENT 3
6. OPERATING COSTS 3
7. CONDITION, REPAIRS AND ALTERATIONS 4
8. SERVICES 5
9. LIABILITY AND CASUALTY INSURANCE 6
10. CASUALTY DAMAGE 6
11. WAIVER OF SUBROGATION 7
12. LANDLORD'S RIGHT TO PERFORM TENANT OBLIGATIONS 7
13. DEFAULT AND REMEDIES 7
14. LATE PAYMENTS 8
15. SURRENDER 8
16. INDEMNIFICATION AND EXCULPATION 9
17. ENTRY BY LANDLORD 9
18. SUBSTITUTE PREMISES 9
19. ASSIGNMENT AND SUBLETTING 10
20. USE OF LEASED PREMISES 11
21. SUBORDINATION AND ATTORNMENT 11
22. ESTOPPEL CERTIFICATE 12
23. SIGNS 12
24. PARKING 12
25. LIENS 12
26. HOLDING OVER 12
27. ATTORNEYS' FEES 13
<PAGE>
28. RESERVED RIGHTS OF LANDLORD 13
29. EMINENT DOMAIN 13
30. NOTICES 13
31. RULES AND REGULATIONS 14
32. ACCORD AND SATISFACTION 14
33. EARLY MOVE-IN 14
34. MISCELLANEOUS 14
<PAGE>
OFFICE LEASE
I. BASIC PROVISIONS
<TABLE>
<CAPTION>
<S> <C> <C>
1.1 Date October 27. 1997
1.2 Landlord: Presson Advisory. L.LC.
an Arizona Limited Liability Company
1.3 Landlord's Address: 501 Fast Thomas. Suite 200
Phoenix. Arizona 85012
1.4 Tenant: Dimensional Visions Group, Ltd.
A Delaware Corporation
1.5 Tenant's Address 2301 West Dunlap, Suite 207
Phoenix, Arizona 85021
1.6 Property The parcel of real estate located in Maricopa County, Arizona,
described on Exhibit "A" attached hereto and incorporated herein by
this reference.
1.7 Building That certain office building located at 2301 West Dunlap. Phoenix,
AZ and situated on the Property, and the landscaping, parking
facilities, and all other improvements and appurtenances to the
Property.
1.8 Leased Premises Approximately 3100 rentable square feet of office space located on
the 2nd floor of the Building and commonly known as Suite 207
1.9 Permitted use General office and no other purpose.
1.10 Lease Term. Three (3) years and One-Half (1/2 ) months.
1.11 Scheduled Commencement Date: December 15, 1997
1.12 Annual Basic Rent: December 15, 1997 through December 31, 1997-Rent at no charge.
1. $44,950.00 ($3,745.83/month) based upon a rental rate of $14.50
PSF 1/1/98 through 12/31/98.
2. $46,500.00 ($3,875.00/month) based upon a rental rate of $15.00
PSF 1/1/99 through 12/31/99
3. $48,050.00 ($4,004.17/month) based upon a rental rate of $15.50
PSF 1/1/2000 through 12/31/2000.
1.13 Security Deposit. $4,100.00
1.14 Base Year Costs 1998 actual Operating Costs per rentable square foot from the
Commencement Date until December 31, 1998 extrapolated over a twelve
(12) month period.
1.15 Building Hours 7 a.m., to 7 p.m., Monday through Friday, and 8 a.m. to 2 p.m. on
Saturday, excluding recognized federal, state or local holidays.
1.16 Parking Spaces Three (3) covered/reserved.
1.17 Parking Charge. Two (2) covered/reserved no charge.
One (1) covered/reserved at $25.00 per month.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
1.18 Guarantors None
1.19 Broker DAUM Commercial Real Estate Services and CB Commercial.
1.20 Metropolitan Area: Phoenix
1.21 Late Charge Percentage Ten Percent (10%)
1.22 Riders 1= Hazardous Materials - exception would be for copy machine and
common office supplies.
1.23 Exhibits A = Description of the Property
B = Floor Plan
E = Building Rules and Regulations
G = Work Letter
</TABLE>
2. LEASED PREMISES: NO ADJUSTMENTS
2.1 Leased Premises. Landlord leases to Tenant, and Tenant leases and
accepts from Landlord, the Leased Premises, upon the terms and conditions set
forth in this Lease and any modifications, supplements or addenda to this Lease
(the "Lease"), including the Basic Provisions of Article I which are
incorporated into this Lease by this reference, together with the nonexclusive
right to use, in common with Landlord and others, the Building Common Areas (as
defined below). For the purposes of this Lease, the term "Building Common Areas"
means common hallways, corridors, walkways and footpaths, foyers and lobbies,
bathrooms and janitorial closets, electrical and telephone closets, landscaped
areas, and such other areas within or adjacent to the Building which are subject
to or are designed or intended solely for the common enjoyment, use and/or
benefits of the tenants of the Building.
2.2 No Adjustment The Annual Basic Rent at the Commencement Date (as
defined below) is based on the Leased Premises containing approximately the
rentable square footage set forth in Article 1.8 above. The Annual Basic Rent
shall not be increased or decreased if the actual rentable square footage of the
Leased Premises is more or less than the rentable square footage set forth in
Article 1.8.
3. LEASE TERM: COMMENCEMENT DATE
3.1 Lease Term. The Lease Term shall begin on the Commencement Date and
shall be for the period set forth in Article 1.10 above, plus any period of less
than one (1) month between the Commencement Date and the first day of the next
succeeding calendar month, unless sooner terminated in accordance with the
further provisions of this Lease.
3.2 Commencement Date. The Commencement Date shall mean the earliest of (a)
the date on which Landlord tenders possession of the Leased Premises to Tenant;
(b) the date on which Landlord would have tendered possession of the Leased
Premises to Tenant but for any act or omission of Tenant, its agents,
contractors or employees, or (c) the date on which Tenant takes possession of
the Leased Premises.
3.3 Memorandum of Commencement Date. Landlord and Tenant shall, within ten
(10) days after the Commencement Date, execute a declaration in the form of
Exhibit "C" attached hereto specifying the Commencement Date should the
Commencement Date be a date other than the Scheduled Commencement Date.
3.4 Delay in Commencement Date. In the event Landlord shall be unable, for
any reason, to deliver possession of the Leased Premises to Tenant on the
Scheduled Commencement Date, Landlord shall not be liable for any loss or damage
occasioned due to such failure, nor shall such inability affect the validity of
this Lease or the obligations of Tenant. In such event, Tenant shall not be
obligated to pay Annual Basic Rent or Additional Rent until the Commencement
Date. In the event Landlord shall not have delivered possession of the Leased
Premises to Tenant within thirty (30) days after the Scheduled Commencement
<PAGE>
Date, and if such failure to deliver possession was (a) caused solely by the
fault or neglect of Landlord, and (b) not caused by any fault or neglect of
Tenant or due to additional time required to plan for and install other work for
Tenant beyond the amount of time which would have been required if only building
standard improvements had been installed, then, as its sole and exclusive remedy
for Landlord's failure to deliver possession of the Leased Premises in a timely
manner, Tenant shall have the right to terminate this Lease by delivering
written notice of termination to Landlord at any time within thirty (30) days
after the expiration of such thirty (30) day period. Such termination shall be
effective thirty (30) days after receipt by Landlord of Tenant's notice of
termination unless Landlord shall, prior to the expiration of such thirty (30)
day period, deliver possession of the Leased Premises to Tenant. Upon a
termination of this Lease pursuant to the provisions of this Article 3.4, the
parties shall have no further obligations or liabilities to the other and
Landlord shall promptly return any monies previously deposited or paid by
Tenant.
3.5 Lease Year. Each "Lease Year" shall be a period of twelve (12)
consecutive calendar months, the first Lease Year beginning on the Commencement
Date or on the first day of the calendar month next succeeding the Commencement
Date if the Commencement Date is not on the first day of a calendar month.
4. SECURITY DEPOSIT
Tenant shall pay to Landlord, upon the execution of this Lease, the
Security Deposit set forth in Article 1.13 above as security for the performance
by Tenant of its obligations under this Lease, which amount shall be returned to
Tenant after the expiration or earlier termination of this Lease, provided that
Tenant shall have fully performed all of its obligations contained in this
Lease. The Security Deposit, at the election of Landlord, may be retained by
Landlord as and for its full damages or may be applied in reduction of any loss
and/or damage sustained by Landlord by reason of the occurrence of any breach,
nonperformance or default by Tenant under this Lease without the waiver of any
other right or remedy available to Landlord at law, in equity or under the terms
of this Lease. If any portion of the Security Deposit is so used or applied,
Tenant shall, within five(5) days after written notice from Landlord, deposit
with Landlord immediately available funds in an amount sufficient to restore the
Security Deposit to its original amount, and Tenant's failure to do so shall be
a breach of this Lease. Tenant acknowledges and agrees that in the event Tenant
shall file a voluntary petition pursuant to the Bankruptcy Code, or if an
involuntary petition is filed against Tenant pursuant to the Bankruptcy Code,
then Landlord may apply the Security Deposit towards those obligations of Tenant
to Landlord which accrued prior to the filing of such petition. Tenant
acknowledges further that the Security Deposit may be commingled with Landlord's
other funds and that Landlord shall be entitled to retain any interest earnings
on the Security Deposit. In the event of termination of Landlord's Interest in
this Lease, Landlord shall transfer the Security Deposit to Landlord's successor
in interest, and Landlord shall be released from liability by Tenant for the
return of such deposit or for an accounting of the Security Deposit.
5. RENT: RENT TAX: ADDITIONAL RENT
5.1 Payment of Rent. Tenant shall pay to Landlord the Annual Basic Rent set
forth in Article 1.12 above, subject to adjustment as provided for in Article
1.12. The Annual Basic Rent shall be paid in equal monthly installments, on or
before the first day of each and every calendar month during the Lease Term, in
advance, without notice or demand and without abatement, deduction or set-off,
except for the first month's rent which is due and payable on execution, and
pro-rata, in advance for any partial month.. The Annual Basic Rent for the first
full month of the Lease Term shall be paid upon the execution of this Lease. All
payments requiring proration shall be prorated on the basis of a thirty (30) day
month. In addition, all payments to be made under this Lease shall be paid in
lawful money of the United States of America to Landlord or its agent at the
address set forth in Article 1.3 above, or to such other person or at such other
place as Landlord may from time to time designate in writing.
5.2 Rent Tax. In addition to the Annual Basic Rent and Additional Rent (as
defined below), Tenant shall pay to Landlord, together with the monthly
installments of Annual Basic Rent and payments of Additional Rent, an amount
equal to any state or local sales, rental, occupancy, excise, use or
transactional privilege taxes assessed or levied upon Landlord with respect to
the amounts paid by Tenant to Landlord under this Lease, as well as all taxes
assessed or imposed upon Landlord's gross receipts or gross income from leasing
the Leased Premises to Tenant, including, without limitation, transaction
privilege taxes, education excise taxes, any tax now or subsequently imposed by
the City of Phoenix, the State of Arizona, any other governmental body, and any
<PAGE>
taxes assessed or imposed in lieu of or in substitution of any of the foregoing
taxes. Such taxes shall not, however, include any franchise, gift, estate,
inheritance, conveyance, transfer or net income tax assessed against Landlord.
5.3 Additional Rent In addition to Annual Basic Rent, all other amounts to
be paid by Tenant to Landlord pursuant to this Lease (including amounts to be
paid by Tenant pursuant to Article 6 below), if any, shall be deemed to be
Additional Rent, irrespective of whether designated as such, and shall be due
and payable within thirty (30) days after receipt by Tenant of Landlord's
statement or together with the next succeeding installment of Annual Basic Rent,
whichever shall first occur. Landlord shall have the same remedies for the
failure to pay Additional Rent as for the nonpayment of Annual Basic Rent.
6. OPERATING COSTS
6.1 Tenant's Obligation. The Annual Basic Rent does riot include amounts
attributable to any increase in the amount of Taxes (as hereinafter defined) or
amounts attributable to any increase in the cost of the use, management, repair,
service, insurance, condition, operation and maintenance of the Building.
Therefore, in order that the Annual Basic Rent payable throughout the Lease Term
shall reflect any such increases, Tenant shall pay to Landlord, in accordance
with the further provisions of this Article 6, an amount per rentable square
foot of the Leased Premises equal to the difference between the Operating Costs
(as hereinafter defined) per rentable square foot and the Base Year Costs.
Tenant acknowledges that the Base Year Costs does not constitute a
representation by Landlord as to the Operating Costs per rentable square foot
that may be incurred during any calendar year.
6.2 Landlord's Estimate. Landlord shall furnish Tenant an estimate of the
Operating Costs per rentable square foot for each Fiscal Year (as hereinafter
defined) commencing with the Fiscal Year in which the Commencement Date occurs.
In addition, Landlord may, from time to time, furnish Tenant a revised estimate
of Operating Costs should Landlord anticipate any increase in Operating Costs
from that set forth in a prior estimate. Commencing with the first month to
which an estimate applies, Tenant shall pay, in addition to the monthly
installments of Annual Basic Rent, an amount equal to one-twelfth (1/12th) of
the product of the rentable square footage of the Leased Premises multiplied by
the difference (but not less than zero (0)), if any, between such estimate and
the Base Year Costs; provided, however, if less than ninety-five percent (95%)
of the rentable area of the Building shall be occupied by tenants during the
period covered by such estimate, the estimated Operating Costs for such period
shall be, for the purposes of this Article 6, increased to an amount reasonably
determined by Landlord to be equivalent to the Operating Costs that would be
incurred if occupancy would be at least ninety-five percent (95%) during the
entire period. Within one hundred twenty (120) days after the expiration of each
Fiscal Year or such longer period of time as may be necessary to compile such
statement, Landlord shall deliver to Tenant a statement of the actual Operating
Costs for such Fiscal Year, If the actual Operating Costs for such Fiscal Year
are more or less than the estimated Operating Costs, a proper adjustment shall
be made; provided, however, if less than ninety-five percent (95%) of the
rentable area of the Building shall have been occupied by tenants at any time
during such period, the actual Operating Costs for such period shall be, for the
purposes of this Article 6, increased to an amount reasonably determined by
Landlord to be equivalent to the Operating Costs that would have been incurred
had such occupancy been at least ninety-five (95%) during the entire period. Any
excess amounts paid by Tenant shall be, at Landlord's option, applied to any
amounts then payable by Tenant to Landlord or to the next maturing monthly
installments of Annual Basic Rent or Additional Rent. Any deficiency between the
estimated and actual Operating Costs shall be paid by Tenant to Landlord
concurrently with the monthly installment of Annual Basic Rent next due. Any
amount owing for a fractional Fiscal Year in the first or final Lease Years of
the Lease Term shall be prorated. For the purposes of this Lease, the term means
the fiscal year (or portion of the fiscal year) of Landlord. The Fiscal Year
currently commences on January land ends on December 31; provided, however,
Landlord reserves the right to change the Fiscal Year at any time or times, but
no such change shall result in an increase in the amounts otherwise payable by
Tenant pursuant to the provisions of this Article 6.
6.3 Operating Costs - Defined. For the purposes of this Lease, "Operating
Costs" shall mean all costs and expenses accrued, paid or incurred by Landlord,
or on Landlord's behalf, in respect of the use, management, repair. service,
insurance, condition, operation and maintenance of the Building including, but
not limited to the following: (a) salaries, wages and benefits of all persons
who perform duties in connection with landscaping, parking, janitorial and
general cleaning services, security services and any and all other employees
engaged by or on behalf of Landlord; (b) payroll taxes, workmen's compensation,
uniforms and related expenses for such employees; (c) the cost of all charges
for oil, gas, steam, electricity, any alternate source of energy, heat,
ventilation, air-conditioning, refrigeration, water, sewer service, trash
<PAGE>
collection, pest control and all other utilities, together with any taxes on
such utilities; (d) the cost of painting non-tenant space; (e) the cost of all
charges for rent, casualty, liability, fidelity and other insurance maintained
by Landlord, including any deductible amounts incurred with respect to an
insured loss; (f) the cost of all supplies (including cleaning supplies), tools,
materials, equipment and personal property, the rental of the personal property
and sales, transaction privilege, excise and oilier taxes on the personal
property; (g) depreciation of hand tools and other moveable equipment; (h) the
cost of all charges for window and other cleaning, janitorial, and security
services; (i) the cost of charges for independent contractors; (j) the cost of
repairs and replacements made by Landlord at its expense and the fees and other
charges for maintenance and service agreements; (k) the cost of exterior and
interior landscaping; (l) costs relating to the operation and maintenance of all
real property and improvements appurtenant to the Building including, without
limitation, all parking areas, service areas, walkways and landscaping; (m) the
cost of alterations and improvements made by reason of the laws and requirements
of any public authorities or the requirements of insurance bodies; (n) all
management fees and other charges for management services and overhead costs
(including travel and related expenses), whether provided by an independent
management company, Landlord or an affiliate of Landlord, not to exceed,
however, the then prevailing range of rates charged in comparable office
buildings in tile metropolitan area set forth in Article 1.20; (o) the cost of
any capital improvements or additions which improve the comfort or amenities
available to tenants of the Building, provided, however, that any such costs
shall be amortized with interest over the useful life of the improvement or
addition; (p) the cost of any capital improvements or additions which are
intended to enhance the safety of the Building or reduce (or avoid increases in)
Operating Costs, provided, however, that any such costs shall be amortized with
interest over the useful life of the improvement or addition; (q) the cost of
licenses and permits, inspection fees and reasonable legal, accounting and other
professional fees and expenses; (r) taxes (as defined below); and (s) all other
charges properly allocable to the use, management, repair, service, insurance,
condition, operation and maintenance of the Building in accordance with
generally accepted accounting principles.
6.4 Operating Costs - Exclusions. Excluded from Operating Costs shall be
the following: (a) depreciation, except to the extent expressly included
pursuant to Article 6.3 above; (b) interest on and amortization of debts, except
to the extent expressly included pursuant to Article 6.3 above;(c)leasehold
improvements, including redecorating made for tenants of the Building; (d)
brokerage commissions and advertising expenses for procuring tenants for the
Building or the Property; (e) refinancing costs; (f) the cost of any repair,
replacement or addition which would be required to be capitalized under general
accepted accounting principles, except to the extent expressly included pursuant
to Article 6.3 above; and (g) the cost of any item included in Operating Costs
under Article 6.3 above to the extent that such cost is reimbursed or paid
directly by an insurance company, condemnor, a tenant of the Building or any
other party.
6.5 Taxes - Defined. For the purposes of this Lease, "Taxes" shall mean and
include all real property taxes and personal property taxes, general and special
assessments, foreseen as well as unforeseen, which are levied or assessed upon
or with respect to the Property any improvements, fixtures, equipment and other
property of Landlord, real or personal, located on the Property and used in
connection with the operation of all or any portion of the Property, as well as
any tax, surcharge or assessment which shall be levied or assessed in addition
to or in lieu of such real or personal property taxes and assessments. Taxes
shall also include any expenses incurred by Landlord in contesting the amount or
validity of any real or personal property taxes and assessments. Taxes shall
not, however, include any franchise, gift, estate, inheritance, conveyance,
transfer or income tax assessed against Landlord.
No Waiver. The failure by Landlord to furnish Tenant with a statement of
Operating Costs shall not constitute a waiver by Landlord or its right to
require Tenant to pay excess Operating Costs per rentable square foot.
7. CONDITION. REPAIRS AND ALTERATIONS
7.1 As-Is Condition. Landlord shall provide the Leased Premises to Tenant,
and Tenant accepts the Leased Premises in an "AS-IS" condition, and Landlord
makes no representations or warranties concerning the condition of the Leased
Premises and has no obligation to construct, remodel, improve, repair, decorate
or paint the Leased Premises or any improvement on or part of the Leased
Premises, except as set forth in Articles 7.4. 10 or as outlined in the "Work
Letter" marked as Exhibit's" below. Tenant represents and warrants that it has
inspected the Leased Premises prior to execution of this Lease, and that it is
relying on its own inspection in executing this Lease and not on any statement,
representation or warranty of Landlord, its agents or employees.
<PAGE>
7.2 Alterations and Improvements. Tenant shall not make any improvements or
other alterations to the interior or exterior of the Leased Premises (the
"Tenant Improvements") without first obtaining the written consent of Landlord
to the proposed work, including the plans, specifications and the proposed
architect and/or contractor(s) for such alterations and/or improvements. All
such Tenant Improvements shall be at the sole cost and expense of Tenant. Tenant
acknowledges and agrees that any review by Landlord of Tenant's plans and
specifications and/or right of approval exercised by Landlord with respect to
any Tenant Improvements is for Landlord's benefit only and Landlord shall not,
by virtue of such review or right of approval, be deemed to make any
representation. warranty or acknowledgment to Tenant or to any other person or
entity as to the adequacy of Tenant's plans and specifications or any Tenant
Improvements.
7.3 Tenant's Obligations. Tenant shall, at Tenants sole cost and expense,
maintain the Leased Premises in a clean, neat and sanitary condition and shall
keep the Leased Premises and every part of the Leased Premises in good condition
and repair except where the same is required to be done by Landlord. Tenant
waives all rights to make repairs at the expense of Landlord as provided by any
law, statute or ordinance now or subsequently in effect. All of Tenant's
Improvements are the property of the Landlord, and Tenant shall, upon the
expiration or earlier termination of the Lease Term, surrender the Leased
Premises, including Tenants Improvements, to Landlord, broom clean and in the
same condition as when received, ordinary wear and tear excepted. Except as set
forth in Articles 7.4.10 and the "Work Letter" marked as Exhibit "G" below,
Landlord has no obligation to construct, remodel, improve, repair, decorate or
paint the Leased Premises or any improvement on or part of the Leased Premises.
Tenant shall pay for the cost of all repairs to the Leased Premises not required
to be made by Landlord and shall be responsible for any redecorating,
remodeling, alteration, painting and carpet cleaning other than routine
vacuuming during the Lease Term. Tenant shall pay for any repairs to the Leased
Premises and/or the Building made necessary by any negligence or carelessness of
Tenant, its employees or invitees.
7.4 Landlord's Obligations. Landlord shall (a) make all necessary repairs
to the exterior walls, exterior doors, windows and corridors of the Building,
(b) keep the Building and the Building Common Areas in good condition,
and(c)keep the Building equipment such as elevators, plumbing, heating, air
conditioning and similar Building equipment in good repair, but Landlord shall
not be liable or responsible for breakdowns or interruptions in service when
reasonable efforts are made to restore such service.
7.5 Removal of Alterations. Upon the expiration or earlier termination of
this Lease, Tenant shall remove from the Leased Premises all movable trade
fixtures and other movable personal property, and shall promptly repair any
damage to the Leased Premises and/or the Building caused by such removal. All
such removal and repair shall be entirely at Tenants sole cost and expense. At
any time within fifteen (15) days prior to the scheduled expiration of the Lease
Term or immediately upon any termination of this Lease, Landlord may require
that Tenant remove from the Leased Premises any alterations, additions,
improvements, trade fixtures, equipment, shelving, cabinet units or movable
furniture (and other personal property) designated by Landlord to be removed. In
such event, Tenant shall, in accordance with the provisions of Article 7.2 above
and Article 10 below, complete such removal (including the repair of any damage
caused thereby) entirely at its own expense and within fifteen (15) days after
notice from Landlord. All repairs required of tenant pursuant to the provisions
of this Article 7.5 and Article 10 below shall be performed in a manner
satisfactory to Landlord, and shall include, but not be limited to, repairing
plumbing, electrical wiring and holes in walls, restoring damaged floor and/or
ceiling tiles, repairing any other cosmetic damage, and cleaning the Leased
Premises. Except for normal wear.
7.6 No Abatement. Except as provided herein, Landlord shall have no
liability to Tenant, nor shall Tenants covenants and obligations under this
Lease, including without limitation, Tenant's obligation to pay Annual Basic
Rent and Additional Rent, be reduced or abated in any manner whatsoever by
reason of any inconvenience, annoyance, interruption or injury to business
arising from Landlord's making any repairs or changes which Landlord is required
or permitted to make pursuant to the terms of this Lease or by any other tenants
lease or are required by law to be made in and to any portion of the Leased
Premises or the Building. Landlord shall, nevertheless, use reasonable efforts
to minimize any interference with Tenant's business in the Leased Premises. If
Landlord is unable to abate damages within sixty (60) days then Tenant has the
right to terminate.
<PAGE>
8. SERVICES
8.1 Climate Control. Landlord shall provide reasonable climate control to
the Leased Premises during the Building Hours as is suitable, in Landlord's
judgment, for the comfortable use and occupation of the Leased Premises,
excluding, however, air conditioning, evaporative cooling or heating for
electronic data processing or other equipment requiring extraordinary climate
control.
8.2 Janitorial Services. Landlord shall make janitorial and cleaning
services available to the Leased Premises at least five (5) evenings per week,
except recognized federal, state or local holidays. Tenant shall pay to
Landlord, within five (5) days after receipt of Landlord's bill, the reasonable
costs incurred by Landlord for extra cleaning in the Leased Premises required
because of (a) misuse or neglect on the part of Tenant, its employees or
invitees, (b) use of portions of the Leased Premises for special purposes
requiring greater or more difficult cleaning work than office areas,(c)interior
glass partitions or unusual quantities of glass surfaces, (d) non-building
standard materials or finishes installed by Tenant or at its request, (e)
removal from the Leased Premises of refuse and rubbish of Tenant in excess of
that ordinarily accumulated in general office occupancy or at times other than
Landlord's standard cleaning times, and (f) shampooing or other forms of carpet
cleaning other than routine vacuuming.
8.3 Electricity. Landlord shall, during Building Hours, furnish reasonable
amounts of electric current as required for normal and usual lighting purposes
and for office machines and equipment such as personal computers, telecopy or
facsimile machines, typewriters, adding machines, copying machines, calculators
and similar machines and equipment normally utilized in general office use.
Tenants use of electric energy in the Leased Premises shall not at any time
exceed the capacity of any of the risers, piping, electrical conductors and
other equipment in or serving the Leased Premises. The Tenant will have
electricity uninterrupted except for any emergency throughout lease period
without regauged to building hours.
8.4 Water. Landlord shall furnish cold and heated water for drinking and
lavatory purposes to the Building Common Areas.
8.5 Light Bulbs. Landlord shall perform such replacement of lamps,
fluorescent tubes and lamp ballasts in the Leased Premises and in the Building
as may be required from time to time. If the lighting fixtures in the Leased
Premises are other than those furnished at the beginning of the Lease Term,
Tenant shall pay Landlord's charge for replacing the lamps, lamp ballasts and
fluorescent tubes in such lighting fixtures so installed by Tenant within thirty
(30) days after receipt of Landlord's bill.
8.6 Additional Services. Tenant shall pay to Landlord, monthly as billed,
as Additional Rent, Landlord's charge for services furnished by Landlord to
Tenant in excess of that agreed to be furnished by Landlord pursuant to this
Article 8, including, but not limited to (a) any utility services utilized by
Tenant during other than Building Hours, and (b) climate control in excess of
that agreed to be furnished by Landlord pursuant to Article 8.1 above or
provided at times other than Building Hours.
8.7 Interruptions in Service. Landlord does not warrant that any of the
foregoing services or any other services which Landlord may supply will be free
from interruption. Tenant acknowledges that anyone or more of such services may
be suspended by reason of accident, repairs, inspections, alterations or
improvements necessary to be made, or by strikes or lockouts, or by reason of
operation of law, or by causes beyond the reasonable control of Landlord.
Landlord shall not be liable for and Tenant shall not be entitled to any
abatement or reduction of Annual Basic Rent or Additional Rent by reason of any
disruption of the services to be provided by Landlord pursuant to this Lease.
9. LIABILITY AND CASUALTY INSURANCE
9.1 Liability Insurance. Tenant shall, during the Lease Term, keep in full
force and effect, a policy or policies of commercial general liability insurance
for bodily injury, personal injury (including wrongful death) and damage to
property resulting from (i) any occurrence in the Leased Premises, (ii) any act
or omission by Tenant, by any subtenant of Tenant, or by any of their respective
invitees, agents, servants, contractors or employees anywhere in the Leased
Premises or the Building, (iii) the business operated by Tenant or by any
subtenant of Tenant in the Leased Premises, and (iv) the contractual liability
of Tenant to Landlord pursuant to the indemnification provisions of Article 16.1
<PAGE>
below, which coverage shall not be less than One Million and No/100 Dollars
($l,000,000.00), combined single limit, per occurrence. The liability policy or
policies shall contain an endorsement naming Landlord as an additional insured.
9.2 Casualty Insurance. Tenant shall, during the Lease Term, keep in full
force and effect, a policy or policies of so called "All Risk" or "All Peril"
insurance, including coverage for vandalism or malicious mischief, insuring the
Tenant Improvements and Tenant's stock in trade, furniture, personal property,
fixtures, equipment and other items in the Leased Premises, with coverage in an
amount equal to the replacement cost.
9.3 Worker's Compensation Insurance. Tenant shall, during the Lease Term,
keep in full force and effect, a policy or policies of worker's compensation
insurance with an insurance carrier and in amounts approved by the Industrial
Commission of the State of Arizona.
9.4 Business Interruption Insurance. If Landlord shall so require, Tenant
shall, during the Lease Term, keep in full force and effect, a policy or
policies of business interruption insurance in an amount equal to twelve (12)
monthly installments of Annual Basic Rent and Additional Rent payable to
Landlord, together with the taxes on such rent, insuring Tenant against losses
sustained by Tenant as a result of any cessation or interruption of Tenant's
business in the Leased Premises for any reason.
9.5 Insurance Requirements. Each insurance policy and certificate of such
insurance policy obtained by Tenant pursuant to this Lease shall contain a
clause that the insurer will provide Landlord with at least thirty (30) days
prior written notice of any material change, non-renewal or cancellation of the
policy. Each such insurance policy shall be with an insurance company authorized
to do business in the State of Arizona and reasonably acceptable to Landlord. A
certificate (e.g. Acord Form 27) evidencing the coverage under each such policy,
as well as a certified copy of the required additional insured endorsement(s)
shall be delivered to Landlord prior to commencement of the Lease Term. All
insurance policies required pursuant to this Article 9 shall be written as
primary policies, not contributing with or in excess of any coverage which
Landlord may carry. Tenant shall procure and maintain all policies entirely at
its own expense and shall, at least twenty (20) days prior to the expiration of
such policies, furnish Landlord with renewal certificates of such policies.
Tenant shall not do or permit to be done anything which shall invalidate the
insurance policies maintained by Landlord or the insurance policies required
pursuant to this Article 9 or the coverage under such policies.
9.6 Co-Insurance. If on account of the failure of Tenant to comply with the
provisions of this Article 9 Landlord is deemed a co-insurer by its insurance
carrier, then any loss or damage which Landlord shall sustain by reason of such
failure shall be borne by Tenant, and shall be paid by Tenant within ten (10)
days after receipt of a bill for such loss or damage.
9.7 Adequacy of Insurance. Landlord makes no representation or warranty to
Tenant that the amount of insurance to be carried by Tenant under the terms of
this Lease is adequate to fully protect Tenant's interests. If Tenant believes
that the amount of any such insurance is insufficient, Tenant is encouraged to
obtain, at its sole cost and expense, such additional insurance as Tenant may
deem desirable or adequate. Tenant acknowledges that Landlord shall not, by the
fact of approving, disapproving, waiving, accepting, or obtaining any insurance,
incur any liability for or with respect to the amount of insurance carried, the
form or legal sufficiency of such insurance, the solvency of any insurance
companies or the payment or defense of any lawsuit in connection with such
insurance coverage, and Tenant hereby expressly assumes full responsibility for
and all liability, if any, with respect to, Tenant's insurance coverage.
10. CASUALTY DAMAGE
10.1 Obligation to Repair. In the event of any damage to the Leased
Premises, Tenant shall promptly notify Landlord in writing. If the Leased
Premises or any part of the Building are damaged by fire or other casualty not
due to the fault or negligence of Tenant, its employees, invitees, agents,
contractors or servants, the damage to the Building and/or the Leased Premises
shall be repaired by and at the expense of Landlord, excluding any alterations
or improvements made by Tenant, unless this Lease is terminated in accordance
with the provisions of Article 10.2 below. Until such repairs by Landlord are
completed, Annual Basic Rent and Additional Rent shall be abated in proportion
to the part of the Leased Premises which is unusable by Tenant in the conduct of
its business. If, however, such damage is due in whole or in part to the fault
or neglect of Tenant or any subtenant of Tenant, or any of their respective
<PAGE>
agents, employees, servants, contractors or invitees, there shall be no
abatement of Annual Basic Rent or Additional Rent and Tenant shall be required
to repair all such damage at its sole cost and expense. There shall be no
abatement of Annual Basic Rent or Additional Rent on account of damage to the
Building or the Property unless there is also damage to the Leased Premises.
Tenant hereby waives any statute now or subsequently in effect which grants
to Tenant the right to terminate this Lease or which provides for an abatement
of rent on account of damage or destruction, including, without limitation, ARS.
ss. 33-343.
10.2 Landlord's Option. If the damage is not fully covered by Landlord's
insurance, or if Landlord determines in good faith that the cost of repairing
the damage is more than one-third of the then replacement cost of the Building,
or if Landlord has determined in good faith that the required repairs to the
Building cannot be made within a one hundred twenty (120) day period without the
payment of overtime or other premiums, or in the event a holder of a mortgage or
a deed of trust against the Building or the Property requires that all or any
portion of the insurance proceeds be applied in reduction of the mortgage debt,
or if such damage occurs during the final year of the Lease Term, then Landlord
may, by written notice to Tenant within sixty (60) days after the occurrence of
such damage, terminate this Lease as of the date set forth in Landlord's notice
to Tenant. This right will be reciprocal. If Landlord does not elect to
terminate this Lease, Landlord shall, at its sole cost and expense, repair the
Building and the Leased Premises, excluding any alterations or improvements made
by Tenant, and while such repair work is being performed, the Annual Basic Rent
and Additional Rent shall be abated as provided above. Nothing in this Article
10 shall be construed as a limitation of Tenant's liability for any such damage,
should such liability otherwise exist.
11. WAIVER OF SUBROGATION
Landlord and Tenant each hereby waives its rights and the subrogation
rights of its insurer against the other patty and any other tenants of space in
the Building or the Property as well as their respective officers, employees,
agents, authorized representatives and invitees, with respect to any claims
including, but not limited to, claims for injury to any persons, and/or damage
to the Property, the Building or the Leased Premises and/or any fixtures,
equipment, personal property, furniture, improvements and/or alterations in or
to the Leased Premises, which are caused by or result from (a) risks or damages
required to be insured against under this Lease, or (b) risks and damages which
are insured against by insurance policies maintained by Landlord and Tenant from
time to time. Landlord and Tenant shall obtain for the other party from its
insurers under each policy required by this Lease or otherwise maintained a
waiver of all rights of subrogation which such insurers of Landlord or Tenant
might otherwise have against the other party.
12. LANDLORD'S RIGHT TO PERFORM TENANT OBLIGATIONS
All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of Annual Basic Rent or Additional Rent. If
Tenant shall fail to pay any sum of money, other than Annual Basic Rent,
required to be paid by it under this Lease, or shall fail to perform any other
act on its part to be performed under this Lease, and such failure shall
continue for ten (10) days after notice of such failure by Landlord (or such
shorter period of time as may be reasonable in the event of an emergency),
Landlord may (but shall not be obligated to do so) without waiving or releasing
Tenant from any of Tenant's obligations, make any such payment or perform any
such other act on behalf of Tenant. All sums so paid by Landlord and all
necessary incidental costs, together with interest at the greater of (a)
eighteen percent (18%) per annum or (b) the rate of interest per annum publicly
announced, quoted or published, from time to time, by Bank of America, at its
Phoenix, Arizona office as its "reference rate" plus four (4) percentage points,
from the date of such payment by Landlord until reimbursement in full by Tenant
(the "Default Rate"), shall be payable to Landlord as Additional Rent with the
next monthly installment of Annual Basic Rent; provided, however, in no event
shall the Default Rate exceed the maximum rate (if any) permitted by applicable
law.
13. DEFAULT AND REMEDIES
13.1 Event of Default. If Tenant shall fail to pay any installment of
Annual Basic Rent, any Additional Rent or any other sum required to be paid by
Tenant under this Lease, and such failure shall continue for ten (10) days, or
if Tenant shall fail to perform any of the other covenants or conditions which
Tenant is required to observe and perform and such failure shall continue for
<PAGE>
fifteen (15) days (or such shorter period of time as may be specified by
Landlord in the event of an emergency) after written notice of such failure by
Landlord to Tenant, or if Tenant makes or has made any warranty, representation
or statement to Landlord in connection with this Lease which is or was
materially false or misleading when made or furnished, or if Tenant shall commit
an Event of Default under any other agreement between Landlord and Tenant, or if
the interest of Tenant in this Lease or any of Tenant's equipment, fixtures, or
personal property located on the Leased Premises shall be levied upon under
execution or other legal process. or if any petition shall be filed by or
against Tenant or any Guarantor to declare Tenant or any Guarantor a bankrupt or
to delay, reduce or modify Tenant's or any Guarantor's debts or obligations, or
if any petition shall be filed or other action taken to reorganize or modify
Tenant's or any Guarantor's capital structure, or if Tenant or any Guarantor
shall be declared insolvent according to law, or if any assignment of Tenant's
or any Guarantor's property shall be made for the benefit of creditors, or if a
receiver or trustee is appointed for Tenant or any Guarantor or all or any of
their respective property, or if Tenant or any Guarantor shall file a voluntary
petition pursuant to the Bankruptcy Code or any successor the Bankruptcy Code or
if an involuntary petition be filed against Tenant or any Guarantor pursuant to
the Bankruptcy Code or any successor the Bankruptcy Code, then Tenant shall have
committed a material breach and default under this Lease (an "Event of
Default").
13.2 Remedies. Upon the occurrence of an Event of Default under this Lease
by Tenant, Landlord may, without prejudice to any other rights and remedies
available to a landlord at law, in equity or by statute, Landlord may exercise
one or more of the following remedies, all of which shall be construed and held
to be cumulative and non-exclusive: (a) Terminate this Lease and re-enter and
take possession of the Leased Premises, in which event, Landlord is authorized
to make such repairs, redecorating, refurbishments or improvements to the Leased
Premises as may be necessary in the reasonable opinion of Landlord acting in
good faith for the purposes of reletting the Leased Premises and the costs and
expenses incurred in respect of such repairs, redecorating and refurbishments
and the expenses of such reletting (including brokerage commissions) shall be
paid by Tenant to Landlord within ten (10) days after receipt of Landlord's
statement; or (b) Without terminating this Lease, re-enter and take possession
of the Leased Premises; or (c)Without such re-entry, recover possession of the
Leased Premises in the manner prescribed by any statute relating to summary
process, and any demand for Annual Basic Rent, re-entry for condition broken,
and any and all notices to quit, or other formalities of any nature to which
Tenant may be entitled, are hereby specifically waived to the extent permitted
by law; or (d) Without terminating this Lease, Landlord may relet the Leased
Premises as Landlord may see fit without thereby avoiding or terminating this
Lease, and for the purposes of such reletting, Landlord is authorized to make
such repairs, redecorating, refurbishments or improvements to the Leased
Premises as may be necessary Ill the reasonable opinion of Landlord acting in
good faith for the purpose of such reletting, and if a sufficient sum is not
realized from such reletting (after payment of all costs and expenses of such
repairs, redecorating and refurbishments and expenses of such reletting
(including brokerage commissions) and the collection of rent accruing therefrom)
each month to equal the Annual Basic Rent and Additional Rent payable under this
Lease, then Tenant shall pay such deficiency each month within ten (10) days
after receipt of Landlord's statement; or (e) Landlord may declare immediately
due and payable all the remaining installments of Annual Basic Rent and
Additional Rent, and such amount, less the fair rental value of the Leased
Premises for the remainder of the Lease Term shall be paid by Tenant within ten
(10) days after receipt of Landlord's statement. Landlord shall not by re-entry
or any other act, be deemed to have terminated this Lease, or the liability of
Tenant for the total Annual Basic Rent and Additional Rent reserved under this
Lease or for any installment of Annual Basic Rent and Additional Rent then due
or subsequently accruing, or for damages. unless Landlord notifies Tenant in
writing that Landlord has so elected to terminate this Lease. After the
occurrence of an Event of Default, the acceptance of Annual Basic Rent or
Additional Rent, or the failure to re-enter by Landlord shall not be deemed to
be a waiver of Landlord's right to subsequently terminate this Lease and
exercise any other rights and remedies available to it, and Landlord may
re-enter and take possession of the Leased Premises as if no Annual Basic Rent
or Additional Rent had been accepted after the occurrence of an Event of
Default. Upon an Event of Default, Tenant shall also pay to Landlord all costs
and expenses incurred by Landlord, including court costs and attorneys' fees, in
retaking or otherwise obtaining possession of the Leased Premises, removing and
storing all equipment, fixtures and personal property on the Leased Premises and
otherwise enforcing any of Landlord's rights, remedies or recourses arising as a
result of an Event of Default
13.3 Interest on Past Due Amounts. In addition to the late charge described
in Article 14 below, if any installment of Annual Basic Rent or Additional Rent
is not paid promptly when due, it shall bear interest at the Default Rate;
provided, however, this provision shall not relieve Tenant from any default in
the making of any payment at the time and in the manner required by this Lease;
and provided, further, in no event shall the Default Rate exceed the maximum
rate (if any) permitted by applicable law.
<PAGE>
13.4 Landlord Default. In the event Landlord should neglect or fail to
perform or observe any of the covenants, provisions or conditions contained in
this Lease on its part to be performed or observed, and such failure continues
for thirty (30) days after written notice of default (or if more than thirty
(30) days shall be required because of the nature of the default, if Landlord
shall fail to commence the curing of such default within such thirty (30) day
period and proceed diligently to completion), then Landlord shall be responsible
to Tenant for any actual damages sustained by Tenant as a result of Landlord's
breach, but not special or consequential damages. Notwithstanding any other
provisions in this Lease, any claim which Tenant may have against Landlord for
failure to perform or observe any of the covenants, provisions or conditions
contained in this Lease shall be deemed waived unless such claim is asserted by
written notice of such claim to Landlord within ten (10) days of commencement of
the alleged default or of occurrence of the cause of action and unless suit be
brought upon such claim within six (6) months subsequent to the occurrence of
such cause of action. Tenant shall have no right to terminate this Lease, except
as expressly provided elsewhere in this Lease.
14. LATE PAYMENTS
Tenant hereby acknowledges that the late payment by Tenant to Landlord of
any monthly installment of Annual Basic Rent any Additional Rent or any other
sums due under this Lease will cause Landlord to incur costs not contemplated by
this Lease, the exact amount of which will be extremely difficult and
impracticable to ascertain. Such costs include but are not limited to
processing, administrative and accounting costs. Accordingly, if any monthly
installment of Annual Basic Rent, any Additional Rent or any other sum due from
Tenant shall not be received by Landlord within ten (10) days after the date
when due, Tenant shall pay to Landlord a late charge equal to the greater of the
Late Charge Percentage set forth in Article 1.21 multiplied by such overdue
amount or One Hundred and No/l00 Dollars ($100.00). Tenant acknowledges that
such late charge represents a fair and reasonable estimate of the costs Landlord
will incur by reason of late payments by Tenant. Nothing contained in this
Article 14 shall be deemed to condone, authorize, sanction or grant to Tenant an
option for the late payment of Annual Basic Rent, Additional Rent or any other
sum due under this Lease. If any check of Tenant is returned for insufficient
funds, Tenant shall pay to Landlord a Fifty and No/l00 Dollars ($50.00)
processing charge, in addition to payment of the amount due plus applicable
interest and late charges.
15. SURRENDER
Tenant shall, upon the expiration or earlier termination of this Lease,
peaceably surrender the Leased Premises, including any Tenant Improvements, in a
broom clean condition and otherwise in as good condition as when Tenant took
possession, except for (i) reasonable wear and tear subsequent to the last
repair, replacement, restoration, alteration or renewal; (ii) loss by fire or
other casualty, and (iii) loss by condemnation. If Tenant shall abandon, vacate
or surrender the Leased Premises, or be dispossessed by process of law or
otherwise, any personal property and fixtures belonging to Tenant and left in
the Leased Premises shall be deemed abandoned and, at Landlord's option, title
shall pass to Landlord under this Lease as by a bill of sale. Landlord may,
however, if it so elects, remove all or any part of such personal property from
the Leased Premises and the costs incurred by Landlord in connection with such
removal, including storage costs and the cost of repairing any damage to the
Leased Premises and/or the Building caused by such removal shall be paid by
Tenant within ten (10) days after receipt of Landlord's statement. Upon the
expiration or earlier termination of this Lease, Tenant shall surrender to
Landlord all keys to the Leased Premises and shall inform Landlord of the
combination of any vaults, locks and safes left on the Leased Premises. The
obligations of Tenant under this Article 15 shall survive the expiration or
earlier termination of this Lease. Tenant shall indemnify Landlord against any
loss or liability resulting from delay by Tenant in so surrendering the
Premises, including, without limitation, any claims made by any succeeding
Tenant founded on such delay. Tenant shall give written notice to Landlord at
least thirty (30) days prior to vacating the Leased Premises for the express
purpose of arranging a meeting with Landlord for a joint inspection of the
Leased Premises. In the event of Tenants failure to give such notice or to
participate in such joint inspection, Landlord's inspection at or after Tenant's
vacation of the Leased Premises shall be conclusively deemed correct for
purposes of determining Tenant's liability for repairs and restoration under
this Lease.
<PAGE>
16. INDEMNIFICATION AND EXCULPATION
16.1 Indemnification. Tenant shall indemnify, protect, defend and hold
Landlord harmless for, from and against all claims, damages, losses, costs,
liens, encumbrances, liabilities and expenses, including reasonable attorneys',
accountants' and investigators' fees and court costs (collectively, the
"Claims"), however caused, arising in whole or in part from Tenant's use of all
or any part of the Leased Premises and/or the Building or the conduct of Tenants
business or from any activity, work or thing done, permitted or suffered by
Tenant or by any invitee, servant, agent, contractor, employee or subtenant of
Tenant in the Leased Premises and/or the Building, and shall further indemnify,
protect, defend and hold Landlord harmless for, from and against all Claims
arising in whole or in part from any breach or default in the performance of any
obligation on Tenant's part to be performed under the terms of this Lease or
arising in whole or in part from any act, neglect, fault or omission by Tenant
or by any invitee, servant, agent, employee or subtenant of Tenant anywhere in
the Leased Premises and/or the Building. In case any action or proceeding is
brought against Landlord to which this indemnification shall be applicable,
Tenant shall pay all Claims resulting therefrom and shall defend such action or
proceeding, if Landlord shall so request, at Tenant's sole cost and expense, by
counsel reasonably satisfactory to Landlord. The obligations of Tenant under
this Article 16.1 shall survive the expiration or earlier termination of this
Lease.
16.2 Exculpation. Tenant, as a material part of the consideration to
Landlord, hereby assumes all risk of damage to property, injury and death to
persons and all claims of any other nature resulting from Tenants use of all or
any part of the Leased Premises and/or the Building, and Tenant hereby waives
all claims against Landlord arising out of Tenants use of all or any part of the
Leased Premises and/or the Building. Neither Landlord nor its agents or
employees shall be liable for any damaged property of Tenant entrusted to any
employee or agent of Landlord or for loss of or damage to any property of Tenant
by theft or otherwise. Landlord shall not be liable for any injury or damage to
persons or property resulting from any cause, including, but not limited to,
fire, explosion, falling plaster, steam, gas, electricity, sewage, odor, noise,
water or rain which may leak from any part of the Building or from the pipes,
appliances or plumbing works in tile Building, or from the roof of any structure
on the Property, or from any streets or subsurface on or adjacent to the
Building or the Property, or from any other place or resulting from dampness or
any other causes whatsoever, unless caused solely by the gross negligence or
willful misconduct of Landlord. Neither Landlord nor its employees or agents
shall be liable for any defects in the Leased Premises and/or the Building, nor
shall Landlord be liable for the negligence or misconduct, including, but not
limited to, criminal acts, by maintenance or other personnel or contractors
serving the Leased Premises and/or the Building, other tenants or third parties,
unless Landlord is grossly negligent or guilty of willful misconduct. All
property of Tenant kept or stored on the Property shall be so kept or stored at
the risk of Tenant only, and Tenant shall indemnify, defend and hold Landlord
harmless for, from and against any Claims arising out of damage to the same,
including subrogation claims by Tenant's insurance carriers, unless such damage
shall be caused by the willful act or gross neglect of Landlord and through no
fault of Tenant. None of the events or conditions set forth in this Article 16
shall be deemed a constructive or actual eviction or result in a termination of
this Lease, nor shall Tenant be entitled to any abatement or reduction of Annual
Basic Rent or Additional Rent by reason of such events or condition. Tenant
shall give prompt notice to Landlord with respect to any defects, fires or
accidents which Tenant observes in the Leased Premises and/or the Building.
17. ENTRY BY LANDLORD
Landlord reserves and shall at any and all times have, upon twenty four
(24) hours prior written notice (except in the event of an emergency), the right
to enter the Leased Premises, to inspect tile same, to submit the Leased
Premises to prospective purchasers or tenants, to post notices of
non-responsibility, and to alter, improve or repair the Leased Premises and any
portion of the Building of which the Leased Premises area part, without
abatement of Annual Basic Rent or Additional Rent, and may for that purpose
erect scaffolding and other necessary structures where reasonably required by
the character of the work to be performed, always providing that access into the
Leased Premises shall not be blocked thereby, and further providing that the
business of Tenant shall not be interfered with unreasonably. Tenant hereby
waives any claim for damages for any injury or inconvenience to or interference
with Tenant's business, any loss of occupancy or quiet enjoyment of the Leased
Premises or any loss occasioned thereby. For each of the aforesaid purposes,
Landlord shall at all times have and retain a key with which to unlock all the
doors in, upon or about the Leased Premises, excluding Tenant's vaults and
safes, and Landlord shall have the right to use any and all means which Landlord
may deem proper to open such doors in an emergency in order to obtain entry to
the Leased Premises, and any entry to the Leased Premises obtained by Landlord
by any such means or otherwise shall not under any circumstances be construed or
deemed to be a forcible or unlawful entry into, or a detainer of, the Leased
Premises or an eviction of Tenant from all or any portion of the Leased
<PAGE>
Premises. Nothing in this Article 17 shall be construed as obligating Landlord
to perform any repairs, alterations or maintenance except as otherwise expressly
required elsewhere in this Lease.
18. SUBSTITUTE PREMISES
18.1 Relocation of Leased Premises. Landlord may, before or after the
Commencement Date, elect by notice to Tenant, to substitute for the Leased
Premises other office space in the Building (the "Substitute Premises")
designated by Landlord, provided that the Substitute Premises shall contain at
least the same useable area as the Leased Premises and have a configuration
substantially similar to the Leased Premises. Landlord's notice shall be
accompanied by a plan of the Substitute Premises. Tenant shall vacate and
surrender the Leased Premises and shall occupy the Substitute Premises promptly
(and, in any event, not later than fifteen (15) days) after Landlord has
substantially completed the work to be performed by Landlord in the Substitute
Premises pursuant to Article 18.2 below. Tenant shall pay the same rental rate
per square foot with respect to tile Substitute Premises as was payable with
respect to the Leased Premises. This Lease shall remain in full force and effect
and the Substitute Premises shall subsequently be deemed to be the Leased
Premise
18.2 Compensation to Tenant. In the event Landlord shall elect to relocate
Tenant to Substitute Premises, Tenant shall not be entitled to any compensation
for any inconvenience or interference with Tenant's business, nor any abatement
or reduction of Annual Basic Rent or Additional Rent, but Landlord shall, at
Landlord's expense perform the following: (a) furnish and install in the
Substitute Premises fixtures, equipment, improvements, appurtenances and
leasehold improvements at least equal in kind and quality to those contained or
to be contained in the Leased Premises at the time such notices of substitution
is given by Landlord; (b) provide personnel to perform, under Tenant's
direction, the moving of Tenant's personal property and trade fixtures from the
Leased Premises to the Substitute Premises;(c)promptly reimburse Tenant for
Tenant's actual and reasonable out-of-pocket costs incurred in connection with
the relocation of any telephone or other communications equipment from the
Leased Premises to the Substitute Premises; and (d) promptly reimburse Tenant
for any other actual and reasonable out-of-pocket costs incurred by Tenant in
connection with Tenants move from Leased Premises to the Substitute Premises,
provided such costs are approved by Landlord in advance which approval shall not
be unreasonably withheld. Tenant shall cooperate with Landlord so as to
facilitate the performance by Landlord of its obligations under this Article
13.2 and the prompt surrender by Tenant of the Leased Premises. Without limiting
the generality of the preceding sentence, Tenant shall provide Landlord promptly
any approvals or instructions and any plans or specifications or any other
information reasonably requested by Landlord, and Tenant shall perform promptly
in the Substitute Premises any work to be performed in the Substitute Premises
by Tenant to prepare the same for Tenant's occupancy.
19. ASSIGNMENT AND SUBLET'TING
19.1 Assignment and Subletting Prohibited. Tenant shall not transfer or
assign this Lease or any right or interest under this Lease, or sublet the
Leased Premises or any part of the Leased Premises, without first obtaining
Landlord's prior written consent, which consent Landlord shall not unreasonably
withhold. No transfer or assignment (whether voluntary or involuntary, by
operation of law or otherwise) or subletting shall be valid or effective without
such prior written consent. Should Tenant attempt to make or allow to be made
any such transfer, assignment or subletting, except as stated above, or should
any of Tenant's rights under this Lease be sold or otherwise transferred by or
under court order or legal process or otherwise, then, and in any of the
foregoing events Landlord may, at its option, treat such act as an Event of
Default by Tenant. Should Landlord consent to a transfer, assignment or
subletting, such consent shall not constitute a waiver of any of the
restrictions or prohibitions of this Article 19, and such restrictions or
prohibitions shall apply to each successive transfer, assignment or subletting
under this Article 19, if any.
19.2 Deemed Transfers. If Tenant is a corporation, an unincorporated
association, a limited liability company or a partnership, the transfer,
assignment or hypothecation of twenty-five percent (25%) or more of any stock or
interest in such corporation, association, limited liability company or
partnership shall be deemed a transfer within the meaning of and subject to the
provisions of this Article 19.
19.3 Landlord's Consent Required. If Tenant desires at any time to assign
this Lease or sublet the Leased Premises or any portion of the Leased Premises,
it shall first notify Landlord of its desire to do so and shall submit in
writing to Landlord: (a) the name, address, telephone number and social security
<PAGE>
number or taxpayer identification number, if applicable, of the proposed
sub-tenant or assignee; (b) the nature of the proposed subtenant's or assignee's
business to be carried on in the Leased Premises;(c)the terms and the provisions
of the proposed sublease or assignment; and (d) such financial information as
Landlord may reasonably request concerning the proposed subtenant or assignee.
Tenant's failure to comply with the provisions of this Article 19.3 shall
entitle Landlord to withhold its consent to the proposed assignment or
subletting.
19.4 Recapture. If Tenant proposes to assign its interest in this Lease or
sublet all or any part of the Leased Premises, Landlord may, at its option, upon
written notice to Tenant within thirty (30) days after Landlord's receipt of the
information specified in Article 19.3 above, elect to recapture all or any
portion of the Leased Premises, and within sixty (60) days after notice of such
election has been given to Tenant, this Lease shall terminate as to the portion
of the Leased Premises recaptured. If all or a portion of the Leased Premises is
recaptured by Landlord pursuant to this Article 19.4, Tenant shall promptly
execute and deliver to Landlord a termination agreement setting forth the
termination date with respect to the Leased Premises or the recaptured portion
of the Leased Premises, and prorating the Annual Basic Rent, Additional Rent and
other charges payable under this Lease to such date. If Landlord doe not elect
to recapture as set forth above, Tenant may then after enter into a valid
assignment or sublease with respect to the Leased Premises, provided that
Landlord consents to such assignment or sublease pursuant to this Article 19,
and provided further, that (a) such assignment or sublease is executed within
ninety (90) days after Landlord has given its consent, (b) Tenant pays all
amounts then owed to Landlord under this Lease,(c)there is not in existence an
Event of Default as of the effective date of the assignment or sublease, (d)
there have been no material changes with respect to the financial condition of
the proposed subtenant or assignee or the business such party intends to conduct
in the Leased Premises, aid (e) a fully executed original of such assignment or
sublease providing for an express assumption by the assignee or subtenant of all
of the terms, covenants and conditions of this Lease is promptly delivered to
Landlord.
19.5 Adjustment to Rental. In the event Tenant assigns its interest in this
Lease or sublets the Leased Premises, the Annual Basic Rent set forth in Article
1.12 above, as adjusted, shall be increased effective as of the date of such
assignment or subletting to the rent and other consideration payable by any such
assignee or sublessee pursuant to such assignment or sublease. Notwithstanding
the foregoing, in no event shall the Annual Basic Rent after any such assignment
or subletting be less than the Annual Basic Rent specified in Article 1.12
above, as adjusted.
19.6 No Release from Liability. Landlord may collect Annual Basic Rent and
Additional Rent from the assignee, subtenant, occupant or other transferee, and
apply the amount so collected, first to the monthly installments of Annual Basic
Rent, then to any Additional Rent and other sums due and payable to Landlord,
and the balance, if any, to Landlord, but no such assignment, subletting,
occupancy, transfer or collection shall be deemed a waiver of Landlord's rights
under this Article 19, or the acceptance of the proposed assignee, subtenant,
occupant or transferee. Notwithstanding any assignment, sublease or other
transfer (with or without the consent of Landlord), Tenant shall remain
primarily liable under this Lease and neither Tenant nor any Guarantor shall be
released from performance of any of the terms, covenants and conditions of this
Lease.
19.7 Landlord's Expenses. If Landlord consents to an assignment, sublease
or other transfer by Tenant of all or any portion of Tenants interest under this
Lease, Tenant shall reimburse Landlord for its actual administrative expenses
and for legal, accounting and other out of pocket expenses incurred by Landlord,
all not to exceed an aggregate of Two Hundred Fifty and No/100 Dollars
($250.00).
19.8 Assumption Agreement. If Landlord consents to an assignment, sublease
or other transfer by Tenant of all or any portion of Tenants interest under this
Lease, Tenant shall execute and deliver to Landlord, and cause the transferee to
execute and deliver to Landlord, an instrument in the form and substance
acceptable to Landlord it) which (a) the transferee adopts this Lease and
assumes and agrees to perform, jointly and severally with Tenant, all of the
obligations of Tenant under this Lease, (b) Tenant acknowledges that it remains
primarily liable for the payment of Annual Basic Rent, Additional Rent and other
obligations under this Lease,(c)Tenant subordinates to Landlord's statutory
lien, contract lien and security interest, any liens, security interests or
other rights which Tenant may claim with respect to any property of transferee
and (d) the transferee agrees to use and occupy the Leased Premises solely for
the purpose specified in Article 20 and otherwise in strict accordance with this
Lease.
<PAGE>
20. USE OF LEASED PREMISES
The Leased Premises are leased to Tenant solely for the Permitted Use set
forth in Article 1.9 above and for no other purpose whatsoever. If Tenant wishes
to change the Permitted Use set forth in Article 1.9 above, Tenant shall first
seek Landlord's prior written consent. Within thirty (30) days after receipt by
Landlord of Tenant's request for consent, Landlord shall provide Tenant written
notice that Landlord has (i) consented to the proposed change in the Permitted
Use, or (ii) decline to consent to the change, or (iii) elected to terminate
this Lease, in which event this Lease shall terminate ten (10) days following
receipt by Tenant of Landlord's Notice of Termination. Tenant shall not do or
permit anything to be done in or about tile Leased Premises nor bring or keep
anything in the Leased Premises which will in any way increase the existing rate
of or affect any casualty or other insurance on the Building, the Property, or
any of their respective contents, or cause a cancellation of any insurance
policy covering the Building, the Property, or any part of the Building or the
Property, or any of their respective contents. Tenant shall not do or permit
anything to be done in or about the Leased Premises and/or the Building which
will in any way obstruct or interfere with the rights of other tenants or
occupants of the Building, or injure or annoy them. Tenant shall not use or
allow the Leased Premises to be used for any improper, immoral, unlawful or
objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance
in, on or about the Leased Premises and/or the Building. In addition, Tenant
shall not commit or suffer to be committed any waste in or upon the Leased
Premises and/or the Building. Tenant shall not use the Leased Premises and/or
the Building or permit anything to be done in or about the Leased Premises
and/or the Building which will in any way conflict with any matters of record,
or any law, statute, ordinance or governmental rule or regulation now in force
or which may subsequently be enacted or promulgated, and shall, at its sole cost
and expense, promptly comply with all matters of record and all laws, statutes,
ordinances and governmental rules, regulations and requirements now in force or
which may subsequently be in force and with the requirements of any Board of
Fire Underwriters or other similar body now or subsequently constituted,
foreseen or unforeseen, ordinary as well as extraordinary, relating to or
affecting the condition, use or occupancy of the Property, excluding structural
changes not relating to or affected by Tenant's improvements or acts. The
judgment of any court of competent jurisdiction or the admission by Tenant in
any action against Tenant, irrespective of whether Landlord is a party, that
Tenant has violated any matters of record, or any law, statute, ordinance or
governmental rule, regulation or requirement, shall be conclusive of that fact
between Landlord and Tenant. In addition, Tenant shall not place a load upon any
floor of the Leased Premises which exceeds the load per square foot which the
floor was designed to carry, nor shall Tenant install business machines or other
mechanical equipment in the Leased Premises which cause noise or vibration that
may be transmitted to the structure of the Building.
21. SUBORDINATION AND AT'TORNMENT
21.1 Subordination. This Lease and all rights of Tenant under this Lease
shall be, at the option of Landlord, subordinate to (a) all matters of record,
(b) all ground leases, overriding leases and underlying leases (collectively
referred to as the "leases") of the Building or the Property now or subsequently
existing,(c)all mortgages and deeds of trust (collectively referred to as the
"mortgages") which may now or subsequently encumber or affect the Building or
the Property, and (d) all renewals, modifications, amendments, replacements and
extensions of leases and mortgages and to spreaders and consolidations of the
mortgages, irrespective or whether leases or mortgages shall also cover other
lands, buildings or leases. The provisions of this Article 21.1 shall be
self-operative and no further instruments of subordination shall be required. In
confirmation of such subordination, Tenant shall promptly execute, acknowledge
and deliver any instrument that Landlord, the lessor under any lease or the
holder of any mortgage or any of their respective assigns or successors in
interest may reasonably request to evidence such subordination. Any lease to
which this Lease is subject and subordinate is called a "Superior Lease" and the
lessor under a Superior Lease or its assigns or successors in interest is called
a "Superior Lessor". Any mortgage to which this Lease is subject and subordinate
is called a "Superior Mortgage" and tile holder of a Superior Mortgage is called
a "Superior Mortgagee". If Landlord, a Superior Lessor or a Superior Mortgagee
requires that such instruments be executed by Tenant, Tenant's failure to do so
within ten (10) days after request for such instrument shall be deemed an Event
of Default under this Lease. Tenant waives any right to terminate this Lease
because of any foreclosure proceedings. Tenant hereby irrevocably constitutes
and appoints Landlord (and any successor Landlord) as Tenants attorney-in-fact
to execute and deliver to any Superior Lessor or Superior Mortgagee any
documents required to be executed by Tenant for and on behalf of Tenant if
Tenant shall have failed to do so within ten (10) days after the request for
execution and delivery.
21.2 Attornment If any Superior Lessor or Superior Mortgagee (or any
purchaser at a foreclosure sale) succeeds to the rights of Landlord under this
Lease, whether through possession or foreclosure action, or the delivery of anew
<PAGE>
lease or deed (a "Successor Landlord"), Tenant shall attorn to and recognize
such Successor Landlord as Tenant's landlord under this Lease and shall promptly
execute and deliver any instrument that such Successor Landlord may reasonably
request to evidence such attornment. Notwithstanding such subordination,
Tenant's right to quiet possession of the Premises shall not be disturbed if
Tenant is not in default and so long as Tenant shall pay the rent and observe
and perform all of the provisions of this Rental Agreement, unless this Rental
Agreement is otherwise terminated pursuant to its terms.
22. ESTOPPEL CERTIFICATE
Tenant shall, from time to time, within ten (10) days after written request
by Landlord, execute, acknowledge and deliver to Landlord a statement in writing
certifying: (a) that this Lease is unmodified and in full force and effect (or,
if modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect); (b) the dates to which
Annual Basic Rent, Additional Rent and other charges are paid in advance, if
any;(c)that there are not, to Tenant's knowledge, any uncured defaults on the
part of Landlord under this Lease or specifying such defaults if any are
claimed; (d) that Tenant has paid Landlord the Security Deposit; (e) the
Commencement Date and the scheduled expiration date of the Lease Term; (f) the
rights (if any) of Tenant to extend or renew this Lease or to expand the Leased
Premises; and (g) the amount of Annual Basic Rent, Additional Rent and other
charges currently payable under this Lease. In addition, such statement shall
provide such other information and facts Landlord may reasonably require. Any
such statement may be relied upon by any prospective or existing purchaser,
ground lessee or mortgagee of all or any portion of the Property, as well as by
any other assignee of Landlord's interest in this Lease. Tenant's failure to
deliver such statement within such time shall be conclusive upon Tenant (I) that
this Lease is in full force and effect, without modification except as may be
represented by Landlord; (ii) that there are no uncured defaults in Landlord's
performance under this Lease; (iii) that Tenant has paid to Landlord the
Security Deposit; (iv) that not more than one month's installment of Annual
Basic Rent or Additional Rent has been paid in advance; (v) that the
Commencement Date and the scheduled expiration date of the Lease Term are as
stated in the statement, (vi) that Tenant has no rights to extend or renew this
Lease or to expand the Leased Premises; (vii) that the Annual Basic Rent,
Additional Rent and other charges are as set forth in the certificate; and
(viii) that the other information and facts set forth in the certificate are
true and correct.
23. SIGNS
Landlord shall retain absolute control over the exterior appearance of the
Building and the exterior appearance of the Leased Premises as viewed from the
public halls. Tenant shall not install, or permit to be installed, any drapes.
shutters, signs, lettering, advertising, or any items that will in any way alter
the exterior appearance of tile Building or the exterior appearance of the
Leased Premises as viewed from the public halls or the exterior of the Building.
Notwithstanding the foregoing, Landlord shall install, at Tenant's sole cost and
expense, letters or numerals at or near the entryway to the Leased Premises
provided Tenant obtains Landlord's prior written consent as to size, color,
design and location. All such letters or numerals shall be in accordance with
the criteria established by Landlord for the Building. In addition, Tenant's
name and suite number shall be identified on the Building directory.
24. PARKING
Tenant is allocated the number of parking spaces designated in Article 1.16
above entitling Tenant to park in parking spaces located in the Parking Facility
as designated by Landlord from time to time for use by Tenant, its employees and
licensees, and for which Tenant shall pay the monthly charges set forth in
Article 1.17 above. The parking spaces shall be available to Tenant, its
employees and licensees on a "first come, first serve" basis. Landlord reserves
the right to increase the parking charges set forth in Article 1.17 in such
reasonable amounts as Landlord deems necessary based upon increased costs of
operating and maintaining the Parking Facility. Holders of parking passes shall
not be entitled to park in visitor parking spaces so designated by Landlord, or
in any other parking spaces other than those designated by Landlord for use by
holders of parking passes.
25. LIENS
Tenant shall keep the Leased Premises free and clear of all mechanic's and
materialmen's liens. If, because of any act or omission (or alleged act or
omission) of Tenant, any mechanics', materialmen's or other lien, charge or
order for the payment of money shall be filed or recorded against the Leased
Premises, the Property, or the Building, or against any other property of
<PAGE>
Landlord (irrespective of whether such lien, charge or order is valid or
enforceable as such), Tenant shall, at its own expense, cause the same to be
canceled or discharged of record within thirty (30) days after Tenant shall have
received written notice of the filing of such lien, or Tenant may. within such
thirty (30) day period, furnish to Landlord, a bond pursuant to A.R.S.
ss.33-1004 (or any successor statute) and satisfactory to Landlord and all
Superior Lessors and Superior Mortgagees against the lien, charge or order, in
which case Tenant shall have the right to contest, in good faith, the validity
or amount of such lien.
26. HOLDING OVER
It is agreed that the date of termination of this Lease and the right of
Landlord to recover immediate possession of the Leased Premises thereupon is an
important and material matter affecting the parties hereto and the rights of
third parties, all of which have been specifically considered by Landlord and
Tenant. In the event of any continued occupancy or holding over of the Leased
Premises without the express written consent of Landlord beyond the expiration
or earlier termination of this Lease or of Tenants right to occupy the Leased
Premises, whether in whole or in part, or by leaving property on the Leased
Premises or otherwise, this Lease shall be deemed a monthly tenancy and Tenant
shall pay 150% times the Annual Basic Rent then in effect, in advance at the
beginning of the hold-over month(s), plus any Additional Rent or other charges
or payments contemplated in this Lease.
27. ATTORNEYS' FEES
Tenant shall pay to Landlord all amounts for costs (including reasonable
attorneys' fees) incurred by Landlord in connection with any breach or default
by Tenant under this Lease or incurred in order to enforce or interpret the
terms or provisions of this Lease. Such amounts shall be payable within ten (10)
days after receipt by Tenant of Landlord's statement. In addition, if any action
shall be instituted by either of the parties hereto for the enforcement or
interpretation of any of their respective rights or remedies in or under this
Lease, the prevailing party shall be entitled to recover from the losing party
all costs incurred by the prevailing party in such action and any appeal
therefrom, including reasonable attorneys' fees to be fixed by the court.
28. RESERVED RIGHTS OF LANDLORD
Landlord reserves the following rights, exercisable without liability to
Tenant for damage or injury to property, persons or business and without
effecting an eviction, constructive or actual, or disturbance of Tenant's use or
possession or giving rise to any claim: (a) to name the Building and the
Property and to change the name or street address of the Building and the
Property; (b) to install and maintain all signs on the exterior and interior of
the Building and the Property;(c)to designate all sources furnishing sign
painting and lettering; (d) during the last ninety (90) days of the Lease Term,
if Tenant has vacated the Leased Premises, to decorate, remodel, repair, alter
or otherwise prepare the Leased Premises for re-occupancy, without affecting
Tenants obligation to pay Annual Basic Rent; (e) on reasonable prior notice to
Tenant, to exhibit the Leased Premises to any prospective purchaser, mortgagee,
or assignee of any mortgage on the Building or the Property and to others having
interest in the Leased Premises, Building and/or the Property, at any time
during the Lease Term, and to prospective tenants during the last six (6) months
of the Lease Term; (f) to take any and all measures, including entering the
Leased Premises for the purposes of making inspections, repairs, alterations,
additions and improvements to the Leased Premises or to the Building (including,
for the purposes of checking, calibrating, adjusting and balancing controls and
other parts of the Building systems) as maybe necessary or desirable for the
operation, improvement, safety, protection or preservation of the Leased
Premises or the Building, or in order to comply with all laws, orders and
requirements of governmental or other authorities, or as may otherwise be
permitted or required by this Lease; provided, however, that Landlord shall
endeavor (except in an emergency) to minimize interference with Tenants business
in the Leased Premises; (g) to relocate various facilities within the Building
and on the Property if Landlord shall determine such relocation to be in the
best interest of the development of the Building and/or the Property, provided,
that such relocation shall not materially restrict access to the Leased
Premises; (h) to change the nature, extent, arrangement, use and location of the
Building Common Areas; (i) to make alterations or additions to and to build
additional stories on the Building and to build additional buildings or
improvements on the Property; and (j) to install vending machines of all kinds
in the Leased Premises and the Building, and to receive all of the revenue
derived therefrom, provided, however, that no vending machines shall be
installed by Landlord in the Leased Premises unless Tenant so requests. Landlord
further reserves the exclusive right to the roof of the Building. No easement
for light, air, or view is included in the leasing of the Leased Premises to
Tenant. Accordingly, any diminution or shutting off of light, air or view by any
<PAGE>
structure which may be erected on the Property or other properties in the
vicinity of the Building shall in no way affect this Lease or impose any
liability upon Landlord.
29. EMINENT DOMAIN
29.1 Taking. If the whole of the Building is lawfully and permanently taken
by condemnation or any other manner for any public or quasi-public purpose, or
by deed in lieu of condemnation, this Lease shall terminate as of the date of
vesting of title in such condemning authority and the Annual Basic Rent and
Additional Rent shall be pro rated to such date. If any part of the Building or
Property is so taken, or if the whole of the Building is taken, but not
permanently, then this Lease shall be unaffected thereby, except that (a)
Landlord may terminate this Lease by notice to Tenant within sixty (60) days
after the date of vesting of title in the condemning authority, and (b) if
twenty percent (20%) or more of the Leased Premises shall be permanently taken
and the remaining portion of the Leased Premises shall not be reasonably
sufficient for Tenant to continue operation of its business, Tenant may
terminate this Lease by notice to Landlord within sixty (60) days after the date
of vesting of title in such condemning authority. This Lease shall terminate on
the thirtieth (30th) day after receipt by Landlord of such notice, by which date
Tenant shall vacate and surrender the Leased Premises to Landlord. The Annual
Basic Rent and Additional Rent shall be pro rated to the earlier of the
termination of this Lease or such date as Tenant is required to vacate the
Leased Premises by reason of the taking. If this Lease is not terminated as a
result of a partial taking of the Leased Premises, the Annual Basic Rent and
Additional Rent shall be equitably adjusted according to the rentable area of
the Leased Premises and Building remaining.
29.2 Award. In the event of a taking of all or any part of the Building or
the Property, all of the proceeds or the award, judgment, settlement or damages
payable by the condemning authority shall be and remain the sole and exclusive
property of Landlord, and Tenant hereby assigns all of its right, title and
interest in and to any such award, judgment, settlement or damages to Landlord.
Tenant shall, however, have the right, to the extent that the same shall not
reduce or prejudice amounts available to Landlord, to claim from the condemning
authority, but not from Landlord, such compensation as may be recoverable by
Tenant in its own right for relocation benefits, moving expenses, and damage to
Tenants personal property and trade fixtures.
30. NOTICES
Any notice or communication given under the terms of this Lease shall be in
writing and shall be delivered in person, sent by any public or private express
delivery service or deposited with the United States Postal Service or a
successor agency, certified or registered mail, return receipt requested,
postage pre-paid, addressed as set forth in the Basic Provisions, or at such
other address as a party may from time to time designate by notice under this
Article 30. Notice given by personal delivery or by public or private express
delivery service shall be effective upon delivery, notice sent by mail shall be
deemed to have occurred upon deposit of the notice in the United States mail.
The inability to deliver a notice because of a changed address of which no
notice was given or a rejection or other refusal to accept any notice shall be
deemed to be the receipt of the notice as of the date of such inability to
deliver or rejection or refusal to accept. Any notice to be given by Landlord
may be given by the legal counsel and/or the authorized agent of Landlord.
31. RULES AND REGULATIONS
Tenant shall abide by all rules and regulations (the "Rules and
Regulations") of the Building imposed by Landlord, as attached hereto as Exhibit
"E" or as may subsequently be issued by Landlord. The Rules and Regulations may
be changed from time to time upon ten (10) days notice to Tenant. Breach of the
Rules and Regulations, by Tenant shall constitute an Event of Default if such
breach is not fully cured within ten (10) days alter written notice to Tenant by
Landlord; provided, however, no notice or opportunity to cure shall be required
in connection with a breach of rule number 39. Landlord shall not be responsible
to Tenant for nonperformance by any other tenant, occupant or invitee of the
Building of any Rules or Regulations.
32. ACCORD AND SATISFACTION
No payment by Tenant or receipt by Landlord of a lesser amount than the
monthly installment of Annual Base Rent and Additional Rent (jointly called
"Rent" in this Article 32), shall be deemed to be other than on account of the
<PAGE>
earliest stipulated Rent due and not yet paid, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment as Rent
be deemed an accord and satisfaction. Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such Rent or to
pursue any other remedy in this Lease. No receipt of money by Landlord from
Tenant after the termination of this Lease, after the service of any notice
relating to the termination of this Lease, after the commencement of any suit,
or after final judgment for possession of the Leased Premises, shall reinstate,
continue or extend the Lease Term or affect any such notice, demand, suit or
judgment.
33. EARLY MOVE IN
Landlord shall give occupancy to Tenant on December 8, 1997 to start moving
furniture, equipment, etc. into the premises. All terms and conditions of this
lease shall apply during the early move-in period.
34. MISCELLANEOUS
34.1 Entire Agreement, Amendments. This Lease and any Exhibits attached to
and forming a part of this Lease set forth all of the covenants, promises,
agreements, conditions and understandings between Landlord and Tenant concerning
the Leased Premises and there are no covenants, promises, agreements,
representations, warranties, conditions or understandings either oral or written
between them other than as contained in this Lease. Except as otherwise provided
in this Lease, no subsequent alteration, amendment, change or addition to this
Lease shall be binding unless it is in writing and signed by both Landlord and
Tenant..
34.2 Time of the Essence. Time is of the essence of each and every term,
covenant and condition of this Lease.
34.3 Binding Effect. The covenants and conditions of this Lease shall,
subject to the restrictions on assignment and subletting, apply to and bind the
heirs, executors, administrators, personal representatives, successors and
assigns of the parties to this Lease.
34.4 Recordation Neither this Lease nor any memorandum of this Lease shall
be recorded by Tenant.
34.5 Governing law. This Lease and all the terms and conditions of this
Lease shall be governed by and construed in accordance with the laws of the
State of Arizona.
34.6 No Partnership. Nothing contained in this Lease shall be deemed or
construed as creating an agency, partnership or joint venture relationship
between Landlord and Tenant or between Landlord and any other party, or cause
Landlord to be responsible in any way for the debts or obligations of Tenant or
any other party.
34.7 Authority. If Tenant executes this Lease as a partnership, each
individual executing this Lease on behalf of the partnership represents and
warrants that he or she is a general partner of the partnership and that this
Lease is binding upon file partnership in accordance with its terms. If Tenant
executes this Lease as a corporation, each of the persons executing this Lease
on behalf of Tenant covenants and warrants that Tenant is a duly authorized and
existing corporation, that Tenant has and is qualified to transact business in
Arizona, that the corporation has full right, authority and power to enter into
this Lease and to perform its obligations under this Lease, that each person
signing this Lease on behalf of the corporation is authorized to do so and that
this Lease is binding upon the corporation in accordance with its terms.
34.8 No Waiver. The failure of either party to insist in any one or more
instances upon the strict performance of any one or more of the obligations of
this Lease, or to exercise any election contained in this Lease, shall not be
construed as a waiver or relinquishment for the future of the performance of
such one or more obligations of this Lease or the right to exercise such
election, but the same shall continue and remain in full force and effect with
respect to any subsequent breach, act or omission.
34.9 Severability. If any clause or provision of this Lease is or becomes
illegal or unenforceable because of any present or future law or regulation of
any governmental body or entity effective during the Lease Term, the intention
of the parties is that the remaining provisions of this Lease shall not be
affected by such determination.
<PAGE>
34.10 Exhibits. If any provision contained in an Exhibit or Addenda to this
Lease is inconsistent with any other provision of this Lease, the provision
contained in this Lease shall supersede the provisions contained in such Exhibit
or Addenda, unless otherwise provided.
34.11 Fair Meaning. The language of this Lease shall be construed to its
normal and usual meaning and not strictly for or against either Landlord or
Tenant. Landlord and Tenant acknowledge and agree that each party has reviewed
and revised this Lease and that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not apply to the
interpretation of this Lease, or any Exhibits, Riders or amendments to this
Lease.
34.12 No Merger. The voluntary or other surrender of this Lease by Tenant
or a mutual cancellation of this Lease shall not work as a merger and shall, at
Landlord's option, either terminate any or all existing subleases or
subtenancies, or operate as an assignment to Landlord of any or all of such
subleases or subtenancies.
34.13 Force Majeure. Any prevention, delay or stoppage due to strikes,
lockouts, labor disputes, acts of God, inability to obtain labor or materials or
reasonable substitutes for labor or materials, governmental restrictions,
regulations or controls, judicial orders, enemy or hostile government actions,
civil commotion, fire or other casualty and other causes beyond the reasonable
control of Landlord shall excuse the Landlord's performance under this Lease for
the period of any such prevention, delay, or stoppage.
34.14 Transfer of Landlord's Interest. The term "Landlord" as used in this
Lease, insofar as the covenants or agreements on the part of the Landlord are
concerned, shall be limited to mean and include only the owner or owners of
Landlord's interest in this Lease at the time in question. Upon any transfer or
transfers of such interest, the Landlord herein named in this Lease (and in the
case of any subsequent transfer, the (lien transferor) shall be relieved of all
liability for the performance of any covenants or agreements on the part of the
Landlord contained in this Lease.
34.15 Limitation on Landlord's Liability. If Landlord becomes obligated to
pay Tenant any judgment arising out of any failure by the Landlord to perform or
observe any of the terms, covenants, conditions or provisions to be performed or
observed by Landlord under this Lease, Tenant shall be limited in the
satisfaction of such judgment solely to Landlord's interest in the Building and
the Property or any proceeds arising from the sale of the Building or the
Property, and no other property or assets of Landlord or the individual
partners, directors, officers or shareholders of Landlord or its constituent
partners shall be subject to levy, execution or other enforcement procedure
whatsoever for the satisfaction of any such money judgment.
34.16 Brokerage Fees. Tenant warrants and represents that it has not dealt
with any realtor, broker or agent in connection with this Lease except the
Broker identified in Article 1.19 above. Tenant shall indemnify, defend and hold
Landlord harmless for, from and against any cost, expense or liability
(including the cost of suit and reasonable attorneys' fees) for any
compensation, commission or charges claimed by any other realtor, broker or
agent in connection with this Lease or by reason of any act of Tenant.
34.17 Guaranty. Concurrently with the execution of this Lease, Tenant shall
cause the Guarantors to execute, have acknowledged and deliver to Landlord, the
Guaranty of Lease attached hereto as Exhibit "F", whereby Guarantors
unconditionally guaranty to Landlord each and every obligation of Tenant under
this Lease.
34.18 Continuing Obligations. All obligations of Tenant under this Lease
not fully performed as of the expiration or earlier termination of this Lease
shall survive the expiration or earlier termination of this Lease, including,
without limitation, all payment obligations with respect to Annual Basic Rent,
Additional Rent and all obligations concerning the condition of the Leased
Premises.
34.19 Confidentiality. Tenant shall keep the term, rental rate and all
other provisions of this lease confidential and shall prevent the publication or
other disclosure thereof by Tenant, its shareholders, officers, directors,
employees, agents or representatives unless Tenant receives the prior written
consent of Landlord, which consent Landlord may withhold in its sole and
absolute discretion. A breach by Tenant of the provisions of this paragraph
shall constitute an Event of Default under this Lease.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the date
and year first above written.
LANDLORD TENANT
PRESSON ADVISORY L.L.C. Dimensional Vision Group, Ltd.
an Arizona Limited Liability Company A Delaware Corporation
By Presson Corporation, An Arizona Corporation
Its: General Manager
By: /s/ Daryl R. Burton By: /s/ Roy D. Pringle
-------------------------- --------------------------
Its President Its: CFO
<PAGE>
RIDER "1"
Rider I to Office Lease dated October 27,1997, between PRESSON ADVISORY
L.L.C., an Arizona Limited Liability Company ("Landlord") and Dimensional
Visions Group, Ltd. a Delaware Corporation ("Tenant").
1. Hazardous Materials Laws. "Hazardous Materials Laws" means any and all
federal, state or local laws, ordinances, rules, decrees, orders, regulations or
court decisions (including the so-called "common-law") relating to hazardous
substances, hazardous materials, hazardous waste, toxic substances,
environmental conditions on, under or about the Property, or soil and ground
water conditions, including, but not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), as amended, 42
U.S.C. ss.9601, et seq., the Resource Conservation and Recovery Act ("RCRA"), 42
U.S.C. ss.6901, et seq., the Hazardous Materials Transportation Act, 49 U.S.C.
ss. 1801, et seq., any amendments to the foregoing, and any similar federal,
state or local laws, ordinances, rules, decrees, orders or regulations.
2. Hazardous Materials. "Hazardous Materials" means any chemical, compound,
material, substance or other matter that: (I) is a flammable explosive,
asbestos, radioactive material, nuclear medicine material, drug, vaccine,
bacteria, virus, hazardous waste, toxic substance, petroleum product, or related
injurious or potentially injurious material, whether injurious or potentially
injurious by itself or in combination with other materials; (ii) is controlled,
designated in or governed by any Hazardous Materials Law; (iii) gives rise to
any reporting, notice or publication requirements under any Hazardous Materials
Law; or (iv) gives rise to any liability, responsibility or duty on the part of
Tenant or Landlord with respect to any third person under any Hazardous
Materials Law.
3. Use. Tenant shall not allow any Hazardous Material to be used, generated,
released, stored or disposed of on, under or about, or transported from, the
Leased Premises, the Building or the Property, unless: (I) such use is
specifically disclosed to and approved by Landlord in writing prior to such use;
and (ii) such use is conducted in compliance with the provisions of this Rider
1. Landlord may approve such use subject to reasonable conditions to protect the
Leased Premises, the Building or the Property, and Landlord's interests.
Landlord may withhold approval if Landlord determines that such proposed use
involves a material risk of a release or discharge of Hazardous Materials or a
violation of any Hazardous Materials Laws or that Tenant has not provided
reasonable assurances of its ability to remedy such a violation and fulfill its
obligations under this Rider 1.
4. Compliance With Laws. Tenant shall strictly comply with, and shall maintain
the Leased Premises in compliance with, all Hazardous Materials Laws. Tenant
shall obtain and maintain in full force and effect all permits. licenses and
other governmental approvals required for Tenant's operations on the Leased
Premises under any Hazardous Materials Laws and shall comply with all terms and
conditions of any Hazardous Materials laws. At Landlord's request, Tenant shall
deliver copies of; or allow Landlord to inspect, all such permits, licenses and
approvals. Tenant shall perform any monitoring, investigation, clean-up, removal
and other remedial work (collectively, "Remedial Work") required as a result of
any release or discharge of Hazardous Materials affecting the Leased Premises or
the Building, or any violation of hazardous Materials Laws by Tenant or any
assignee or sublessee of Tenant or their respective agents, contractors,
employees, licensees, or invitees. Landlord shall have the right to intervene in
any governmental action or proceeding involving any Remedial Work, and to
approve performance of the work, in order to protect Landlord's interests.
5. Compliance With Insurance Requirements. Tenant shall comply with the
requirements of Landlord's and Tenant's respective insurers regarding Hazardous
Materials and with such insurers' recommendations based upon prudent industry
practices regarding management of Hazardous Materials.
6. Notice: Reporting. Tenant shall notify Landlord, in writing, within two (2)
days after any of the following: (a) a release or discharge of any Hazardous
Material, whether or not the release or discharge is in quantities that would
otherwise be reportable to a public agency; (b) Tenant's receipt of any order of
a governmental agency requiring any Remedial Work pursuant to any Hazardous
Materials Laws; (c) Tenant's receipt of any warning, notice of inspection,
notice of violation or alleged violation, or Tenant's receipt of notice or
knowledge of any proceeding, investigation of enforcement action, pursuant to
any Hazardous Materials Laws; or (d) Tenant's receipt of notice or knowledge of
any claims made or threatened by any third party against Tenant or the Leased
Premises, the Building or the Property, relating to any loss or injury resulting
from Hazardous Materials. Tenant shall deliver to Landlord copies of all test
<PAGE>
results, reports and business or management plans required to be filed with any
governmental agency pursuant to any Hazardous Materials Laws.
7. Termination: Expiration. Upon the termination or expiration of this Lease,
Tenant shall remove any equipment, improvements or storage facilities utilized
in connection with any Hazardous Materials and shall, clean up, detoxify, repair
and otherwise restore the Leased Premises to a condition free of Hazardous
Materials.
8. Indemnity. Tenant shall protect, indemnify, defend and hold Landlord harmless
for, from and against any and all claims, costs, expenses, suits, judgments,
actions, investigations, proceedings and liabilities arising out of or in
connection with any breach of any provisions of this Rider I or directly or
indirectly arising out of the use, generation, storage, release, disposal or
transportation of Hazardous Materials by Tenant or any sublessee or assignee of
Tenant, or their respective agents, contractors, employees, licensees, or
invitees, on, under or about the Leased Premises, the Building or the Property
during the Lease Term or Tenant's occupancy of the Leased Premises, including,
but not limited to, all foreseeable and unforeseeable consequential damages and
the cost of any Remedial Work. Neither the consent by Landlord to the use,
generation, storage, release, disposal or transportation of Hazardous Materials
nor the strict compliance with all Hazardous Material Laws shall excuse Tenant
from Tenant's indemnification obligations pursuant to this Rider 1. The
foregoing indemnity shall be in addition to and not a limitation of the
indemnification provisions of Rider 1 of the Lease. Tenant's obligations
pursuant to this Rider 1 shall survive the termination or expiration of this
Lease.
9 Assignment: Subletting. If Landlord's consent is required for an assignment of
this Lease or a subletting of the Leased Premises, Landlord shall have the right
to refuse such consent if the possibility of a release of Hazardous Materials is
materially increased as a result of the assignment or sublease or if Landlord
does not receive reasonable assurances that the new tenant has the experience
and the financial ability to remedy a violation of the Hazardous Materials Laws
and fulfill its obligations under this Rider 1.
10. Entry and Inspection: Cure. Landlord and its agents, employees and
contractors, shall have the right, but not the obligation, to enter the Leased
Premises at all reasonable times to inspect the Leased Premises and Tenant's
compliance with the terms and conditions of this Rider 1, or to conduct
investigations and tests. No prior notice to Tenant shall be required in the
event of an emergency, or if Landlord has reasonable cause to believe that
violations of this Rider 1 have occurred, or if Tenant consents at the time of
entry. In all other cases, Landlord shall give at least twenty-four (24) hours
prior notice to Tenant. Landlord shall have the right, but not the obligation,
to remedy any violation by Tenant of the provisions of this Rider I or to
perform any Remedial Work which is necessary or appropriate as a result of any
governmental order, investigation or proceeding. Tenant shall pay, upon demand,
as Additional Rent, all costs incurred by Landlord in remedying such violations
or performing all Remedial Work, plus interest on such costs incurred at the
Default Rate from the date of demand until the date received by Landlord.
11. Event of Default. The release or discharge of any Hazardous Material or the
violation of any Hazardous Materials Law shall constitute an Event of Default by
Tenant under this Lease. In addition to and not in lieu of the remedies
available under this Lease as a result of such Event of Default, Landlord shall
have the right, without terminating this Lease, to require Tenant to suspend its
operations and activities on the Leased Premises until Landlord is satisfied
that appropriate Remedial Work has been or is being adequately performed and
Landlord's election of this remedy shall not constitute a waive of Landlord's
right to subsequently pursue the other remedies set forth in this Lease.
LANDLORD TENANT
PRESSON ADVISORY L.L.C. Dimensional Vision Group, Ltd.
an Arizona Limited Liability Company A Delaware Corporation
By Presson Corporation, An Arizona Corporation
Its: General Manager
By: /s/ Daryl R. Burton By: /s/ Roy D. Pringle
-------------------------- --------------------------
Its President Its: CFO
<PAGE>
EXHIBIT "E"
RULES AND REGULATIONS
1. Unless otherwise specifically defined in this Exhibit, all capitalized
terms in these Rules and Regulations shall have the meaning set forth in the
Lease to which these Rules and Regulations are attached.
2. The sidewalks, driveways, entrances, passages, courts, elevators,
vestibules, stairways, corridors or halls of the Building shall not be
obstructed or encumbered or used for any purpose other than ingress and egress
to and from the premises leased to any tenant or occupant. The halls, passages,
exits, entrances, elevators, stairways, balconies and roof are not for the use
of the general public, and the Landlord shall in all cases retain the right to
control and prevent access thereto by all persons whose presence in the judgment
of Landlord shall be prejudicial to the safety, character, reputation and
interests of the Building and its tenants.
3. No awnings or other projection shall be attached to the outside walls or
windows of the Building. No curtains, blinds, shades, or screens shall be
attached to or hung in, or used in connection with, any window or door of the
premises leased to any tenant or occupant, without the prior written consent of
Landlord. All electrical fixtures hung in any premises leased to any tenant or
occupant must be of a type, quality, design, color, size and general appearance
approved by Landlord.
4. No tenant shall place objects against glass partitions, doors or windows
which would be in sight from the Building corridors or from the exterior of the
Building and such tenant will promptly remove any such objects when requested to
do so by Landlord.
5. The windows and doors that reflect or admit light and air into the
halls, passageways or other public places in the Building shall not be covered
or obstructed, nor shall any bottles, parcels, or other articles be placed on
any window sills.
6. No show cases or other articles shall be put in front of or affixed to
any part of the exterior of the Building nor placed in the halls, corridors,
walkways, landscaped areas, vestibules or other public parts of the Building.
7. The restrooms, water and wash closets and other plumbing fixtures shall
not be used for any purposes other than those for which they were constructed,
and no sweepings, rubbish, rags or other substances shall be thrown in the
restrooms, water and wash closets. The reasonable costs incurred by Landlord (a)
for extra cleaning in any restroom, water or wash closet required because of any
misuse of such restroom, water or wash closet, and/or (b) to repair any damage
resulting from any misuse of the fixtures will be borne by the tenant who, or
whose employees, agents, visitors or licensees, caused the same. No tenant shall
bring or keep, or permit to be brought or kept, any inflammable, combustible,
explosive or hazardous fluid, material, chemical or substance in or about the
premises leased to such tenant or the Property.
8. No tenant or occupant shall mark, paint, drill into, or ii any way
deface any part of the Building or the premises leased to such tenant or
occupant. No boring, cutting or strings of wires shall be permitted, except with
the prior consent of Landlord, and as Landlord may direct. No tenant or occupant
shall install any resilient tile or similar floor covering in the premises
leased to such tenant or occupant except in a manner approved by Landlord.
9. Any carpeting cemented down by a tenant shall be installed with a
releasable adhesive. In the event of a violation of this paragraph by a tenant,
Landlord may charge the expense incurred to remove the carpeting to such tenant.
10. No bicycles, vehicles or animals of any kind (except seeing eye dogs)
shall be brought into or kept in or about the premises leased to any tenant. No
cooking shall be done or permitted in the Building by any tenant without the
written approval of Landlord. No tenant shall cause or permit any unusual or
objectionable odors to emanate from the premises leased to such tenant.
11. No space in the Building shall be used for manufacturing, for the
storage of merchandise, or for the sale of merchandise, goods or property of any
kind at auction.
<PAGE>
12. No tenant and no employee, visitor, agent, or licensee of any Tenant
shall make, or permit to be made, any unseemly or disturbing noises or
vibrations or disturb or interfere with other tenants or occupants of the
Building, or neighboring buildings or premises whether by the use of any musical
instrument, radio, television set broadcasting equipment or other audio device,
unmusical noise, whistling, singing, yelling or screaming. or in any other way.
Nothing shall be thrown out of any doors. No tenant and no employee, visitor,
agent, or licensee of any Tenant shall conduct itself in any manner that is
inconsistent with the character of the Building as a first quality building or
that will impair the comfort, convenience or safety of other tenants in the
Building.
13. No additional locks or bolts of any kind shall be placed upon any of
the doors, nor shall any changes be made in belts or the mechanism of such
locks. Each tenant must, upon the termination of its tenancy, restore to
Landlord all keys of stores, offices and toilet rooms, either furnished to, or
otherwise procured by, such tenant.
14. All removals from the Building, or the carrying in or out of the
Building or from the premised leased to any tenant, of any safes, freight,
furniture or bulky matter of any description must take place at such time and in
such manner as Landlord or its agents may determine, from time to time. Landlord
reserves the right to inspect all freight to be brought into the Building and to
exclude from the Building all freight which violates any of the Rules and
Regulations or the provisions of such tenant's lease.
15. Landlord shall have the right to prohibit any advertising by any tenant
or occupant which, in Landlord's opinion, tends to impair the reputation of the
Building or its desirability as a building for offices, and upon notice from
Landlord, such tenant or occupant shall refrain from or discontinue such
advertising.
16. Each tenant, before closing and leaving the premises leased to such
tenant at any time, shall see that all entrance doors are locked and all
electrical equipment and lighting fixtures are turned off. Corridor doors, when
not in use, shall be kept closed.
17. Each tenant shall, at its expense, provide artificial light in the
premises leased to such tenant for Landlord's agents, contractors and employees
while performing janitorial or other cleaning services and making repairs or
alterations in said premises.
18. No premises shall be used, or permitted to be used for lodging or
sleeping, or for any immoral or illegal purposes or in any manner that, in
Landlord's reasonable judgment, threatens the safety of the Building or the
tenants of the Building and their employees and invitees.
19. The requirements of tenants will be attended to only upon application
at the office of Landlord. Building employees shall not be required to perform,
and shall not be requested by any tenant or occupant to perform, and work
outside of their regular duties, unless under specific instructions from the
office of Landlord.
20. Canvassing, soliciting and peddling in the Building are prohibited and
each tenant and occupant shall cooperate in seeking their prevention.
21. There shall not be used in the Building, either by any tenant or
occupant or by their agents or contractors, in the delivery or receipt of
merchandise, freight or other matter, any hand trucks or other means of
conveyance except those equipped with rubber tires, rubber side guards and such
other safeguards as Landlord may require.
22. If the premises leased to any tenant become infested with vermin, such
tenant, at its sole cost and expense, shall cause its premises to be
exterminated, from time to time, to the satisfaction of Landlord, and shall
employ such exterminators for the extermination of the vermin as shall be
approved in writing by Landlord.
23. No premises shall be used, or permitted to be used, at any time,
without the prior written approval of Landlord, as a store for the sale or
display of goods, wares or merchandise of any kind, or as a restaurant, shop,
booth, bootblack or other stand, or for the conduct of any business or
occupation which predominantly involves direct patronage of the general public
in the premises leased to such tenant, or for manufacturing or for other similar
purposes.
<PAGE>
24. No tenant shall clean any window of the Building from the outside
25. No tenant shall move, or permit to be moved, into or out of the
Building or the premises leased to such tenant, any heavy or bulky matter,
without the specific approval of Landlord. If any such matter requires special
handling, only a qualified person shall be employed to perform such special
handling. No tenant shall place or permit to be placed, on any pad of the floor
or floors of the premises leased to such tenant, a load exceeding the floor load
per square foot which such floor was designed to carry and which is allowed by
law. Landlord reserves the right to prescribe the weight and position of safes
and other heavy objects, which must be placed so as to distribute the weight.
26. With respect to work being performed by a tenant in its premises with
the approval of Landlord, the tenant shall refer all contractors, contractors'
representatives and installation technicians to Landlord for its supervision,
approval and control prior to the performance of any work or services. This
provision shall apply to all work performed in the Building including
installation of telephones, telegraph equipment, electrical devices and
attachments, and installations of every nature affecting floors, walls,
woodwork, trim, ceilings, equipment and ally other physical portion of the
Building.
27. Landlord shall not be responsible for lost or stolen personal property,
equipment, money, or jewelry from the premises of tenants or public rooms
whether or not such loss occurs when the Building or the premises are locked
against entry.
28. Landlord may permit entrance to the premises of tenants by use of pass
keys controlled by Landlord employees, contractors, or service personnel
directly supervised by Landlord and employees of the United States Postal
Service.
29. Each tenant and all of tenant's representatives, shall observe and
comply with the directional and parking signs on the property surrounding the
Building, and Landlord shall not be responsible for any damage to any vehicle
towed because of noncompliance with parking regulations.
30. No tenant shall install any radio, telephone, television, microwave or
satellite antenna, loudspeaker music system or other device on the roof or
exterior walls of the Building or on common walls with adjacent tenants.
31. Each tenant shall store all trash and garbage within its premises. No
material shall be placed in the trash boxes or receptacles in the Building
unless such material may be disposed of in the ordinary and customary manner of
removing and disposing of trash and garbage and will not result in a violation
of any law or ordinance governing such disposal. All garbage and refuse disposal
shall be made only through entryways and elevators provided for such purposes
and at such times as Landlord shall designate.
32. No tenant shall employ any persons other than the janitor of Landlord
for the purpose of cleaning its premises without the prior written consent of
Landlord.
33. Each tenant shall give prompt notice to Landlord of any accidents to or
defects in plumbing, electrical or heating apparatus so that same may be
attended to properly.
34. No tenant shall bring into the Building any pollutants, contaminants,
inflammable, gasoline, kerosene or hazardous substances (as now or later defined
under State or Federal law).
35. Landlord reserves the right to restrict access to and from the Building
between the hours of 6:00P.M. and 8:00 A.M. on business days and at all hours on
Saturdays, Sundays and holidays.
36. All tenant and tenant's servants, employees, agents, visitors, invitees
and licensees shall observe faithfully and comply strictly with these Rules and
Regulations and such other and further appropriate Rules and Regulations as
Landlord or Landlord's agent from time to time adopt. Each tenant shall at all
times keep the premises leased to such tenant, its employees, agents mid
invitees under its control so as to prevent the performance of any act that
would damage the Building or its reputation or the premises leased to such
tenant or could injure, annoy, or threaten the security of the other tenants in
the Building or their respective employees, agents or invitees or the public.
<PAGE>
37. Landlord may deny entrance to the Building and may remove from the
Building any person or persons who appear to be or are intoxicated, or who
appear to be or are under the influence of liquor or drugs, or who are in any
manner violating any of the Building Rules and Regulations, or who present a
hazard or nuisance to any other person. The reasonable costs incurred by
Landlord for security services or other costs reasonably incurred by Landlord to
remove any such persons shall be borne by the tenant whose employees, agents
and/or invitees are so removed.
38. Landlord shall furnish each tenant, at Landlord's expense, with two (2)
keys to unlock the entry level doors and two (2) keys to unlock each corridor
door entry to each tenant's premises and, at such tenant's expense, with such
additional keys as such tenant may request. No tenant shall install or permit to
be installed any additional lock on any door into or inside of the premises
leased to that tenant or make or permit to be made any duplicate of keys to tile
entry level doors or the doors to such premises. Landlord shall be entitled at
all times to possession of a duplicate of all keys to all doors into or inside
of the premises leased to tenants of the Building. All keys shall remain the
property of Landlord. Upon the expiration of the Lease Term, each tenant shall
surrender all such keys to Landlord and shall deliver to Landlord the
combination to all locks on all safes, cabinets and vaults which will remain in
the premises leased to that tenant. Landlord shall be entitled to install,
operate and maintain security systems in or about the Property which monitor, by
computer, close circuit television or otherwise, persons entering or leaving the
Property, tile Building and/or the premises leased to any tenant. For the
purposes of this rule the term "keys" shall mean traditional metallic keys,
plastic or other key cards and other lock opening devices.
39. Each person using the Parking Facility or other areas designated by
Landlord where parking will be permitted shall comply with all Rules and
Regulations adopted by Landlord with respect to the Parking Facility or other
areas, including any employee or visitor parking restrictions, and any sticker
or other identification system established by Landlord. Landlord may refuse to
permit any person who violates any parking rule or regulation to park in the
Parking Facility or other areas, aid may remove any vehicle which is parked in
the Parking Facility or other areas in violation of the parking Rules and
Regulations. The Rules and Regulations applicable to the Parking Facility and
the outside parking areas are as follows:
a. The maximum speed limit within the Parking Facility shall be 5 miles per
hour, the maximum speed limit in other parking areas shall be 15 miles per
hour.
b. All directional signs and arrows must be strictly observed
c. All vehicles must be parked entirely within painted stall lines.
d. No intermediate or full-size car may be parked in any parking space
reserved for a compact car; no bicycle, motorcycle or other two or three
wheeled vehicle, and no truck, van or other oversized vehicle, may be
parked in any area not specifically designated for use by such vehicle.
e. No vehicle may be parked (i) in an area not striped for parking, (ii) in a
space which has been reserved for visitors or for another person or firm,
(iii) in an aisle or on a ramp, (iv) where a "no parking" sign is posted or
which has otherwise designated as a 110 parking area, (v) in a cross
hatched area, (vi) ii an area bearing a "handicapped parking only" or
similar designation unless the vehicle bears an appropriate handicapped
designation, (vii) in an area bearing a "loading zone" or similar
designation unless the vehicle is then engaged in a loading or unloading
function and (viii) in an area with a posted height limitation if the
vehicle exceeds the limitation.
f. Parking passes, stickers or other identification devices supplied by
Landlord shall remain the property of Landlord and shall not be
transferable. A replacement charge determined by Landlord will be payable
by each tenant for loss of any magnetic parking card or parking pass or
sticker.
g. Garage managers or attendants shall not be authorized to make or allow any
exceptions to these Rules and Regulations.
<PAGE>
h. Each operator shall be required to park and lock his or her own vehicle,
shall use the Parking Facilities at his or her own risk and shall bear full
responsibility for all damage to or loss of his or her vehicle, and for all
injury to persons and damage to property caused by his or her operation of
the vehicle.
i. Landlord reserves the right to tow away, at the expense of the owner, any
vehicle which is inappropriately parked or parked in violation of these
Rules and Regulations.
40. Landlord has designated the Building a "non-smoking" building in
accordance with The Smoking Pollution Control Ordinance adopted by the City of
Phoenix, Arizona as set forth in Sections 23-101, etc. of the City of Phoenix
Municipal Code. Accordingly, smoking of tobacco or any other weed plant is
prohibited in the Building Common Areas located within the Building, including
the Building lobby, public corridors, lavatories, elevators and other public
areas. Further, smoking of tobacco or any other weed plant is prohibited within
the Leased Premises.
41. Landlord reserves the right at any tine and from time to time to
rescind, alter or waive, in whole or in part, any of the Building Rules and
Regulations when it is deemed necessary, desirable or proper, in Landlord's
judgment for its best interest or of the best of the tenants of the Building.
TENANT:
Dimensional Visions Group, Ltd.
A Delaware Corporation
BY: /s/ Roy D. Pringle
----------------------------
Its: CFO
<PAGE>
EXHIBIT G
WORKLETTER
Landlord at its sole cost and expense shall provide the following tenant
improvements:
1. Demise suite in accordance with plan in Exhibit B.
2. Touch-up paint throughout.
3. Install new carpet throughout.
4. Remove and replace the glass wall adjacent to the exterior door for the
purpose of moving large office equipment through the door.
<PAGE>
RIDER 2
THIS RIDER 2 to Office Lease dated October 27, 1997 between PRESSON ADVISORY
L.L.C. an Arizona Limited Liability Company ("Landlord") and DIMENSIONAL VISIONS
GROUP, LTD. a Delaware Corporation ("Tenant").
1. Quite Enjoyment:
Landlord covenants that, provided Tenant complies with the terms and conditions
set forth herein, Tenant shall quietly and peacefully have and hold the Leased
Premises for the Term of the Lease.
2. In Addition to 7.1:
Notwithstanding the foregoing, Landlord knows of no defect or repair or other
condition of the Leased Premises that would interfere with Tenant's Quiet
Enjoyment and possession of the Leased Premises.
3. In Addition to 18.1:
In the event Landlord needs to relocate Tenant into a substitute premise in the
building and substitute promise is not acceptable to Tenant, Tenant may cancel
the Lease.
LANDLORD TENANT
PRESSON ADVISORY L.L.C. Dimensional Vision Group, Ltd.
an Arizona Limited Liability Company A Delaware Corporation
By Presson Corporation, An Arizona Corporation
Its: General Manager
By: /s/ Daryl R. Burton By: /s/ Roy D. Pringle
-------------------------- --------------------------
Its President Its: CFO
<PAGE>
AMENDMENT #1
TO LEASE
THIS AMENDMENT #1 TO LEASE, made and entered into this 10th day of August, 1998
by and between PRESSON ADVISORY L.L.C., an Arizona Limited Liability Company,
hereinafter referred to as ("Landlord") and DIMENSIONAL VISIONS GROUP, LTD, a
Delaware Corporation hereinafter referred to as ("Tenant").
WITNESSETH
WHEREAS, Landlord leased certain premises to Tenant in the Dunlap Executive
Office Building, located at 2301 W. Dunlap Avenue, Suite 207, in the City of
Phoenix, State of Arizona, pursuant to that certain Lease dated the 27th day of
October 1997, the premises being more particularly described; therein; and
WHEREAS, Landlord wishes to expand Tenant's premises and Tenant wishes to expand
its premises from Landlord; and
WHEREAS, Landlord and Tenant therefore wish to amend said Lease;
NOW, THEREFORE, in consideration of these present and the agreement of each
other, Landlord and Tenant agree that the said Lease shall be and the same is
hereby amended as of the 15th day of September 1998.
1. Lease Premises:
Paragraph 1.8 of the Lease is deleted and the following new Paragraph
replaces it:
"Approximately 4,364 rentable square feet of office space located on the
2nd floor of the Building and commonly known as Suite 207 and 201.
Furthermore, Suite 207 consists of approximately 3,100 rentable square feet
and Suite 201 consists of approximately 1,264 rentable square feet.
2. Rental:
The Annual Basic Rent set forth by Paragraph 1.12 shall be amended to
reflect the following New Base Rent Schedule:
September 15, 1998 through September 30, 1998 - $63,278.00 ($2,812.32 per
month), based upon a rental rate of $14.50 per rentable square foot.
October 1, 1998 through December 31, 1998 - $63,278.00 ($5,273.17 per
month), based upon a rental rate of $14.50 per rentable square foot.
January 1, 1999 through December 31, 1999 - $65,460.00 ($5,455.00 per
month), based upon a rental rate of $15.00 per rentable square foot.
January 1, 2000 through December 31, 2000 - $67,642.00 ($5,636.83 per
month), based upon a rental rate of $15.50 per rentable square foot.
3. All other terms and conditions of this Lease, as amended, remain in full
force and effect as heretofore.
IN WITNESS WHEREOF, Landlord and Tenant have executed this instrument by proper
persons thereunto duly authorized so to do on the day and year first
hereinabove.
LANDLORD TENANT
PRESSON ADVISORY L.L.C. Dimensional Vision Group, Ltd.
an Arizona Limited Liability Company A Delaware Corporation
By Presson Corporation, An Arizona Corporation
Its: General Manager
By: /s/ Daryl R. Burton By: /s/ Roy D. Pringle
-------------------------- --------------------------
Its President Its: CFO
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of August, 1998, by and between JOHN D.
MCPHILIMY, an adult individual (hereinafter referred to as "Employee"), and
DIMENSIONAL VISIONS, INC., a Delaware corporation, with a principal place of
business located at 2301 W. Dunlap, Suite 201, Phoenix, Arizona 85021
(hereinafter referred to as "Company");
W I T N E S S E T H:
WHEREAS, Employee is being employed by the Company as of November 1, 1997;
AND, WHEREAS, the Company and Employee desire to enter into an Agreement
that sets forth the terms and conditions of Employee's services to the Company;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto intending to be legally bound, hereby agree
as follows:
1. Employment Term, Duties and Acceptance.
A. Company hereby retains Employee as the Company's President and
Chief Executive Officer for a period of three (3) years (the "Employment
Period"), commencing on November 1,1997(the "Employment Period"), earlier
terminations as hereinafter provided, to render his full time services to the
Company upon the terms and conditions herein contained, in such capacity. In
such capacity Employee shall report and be responsible to the Company's Board of
Directors.
B. Employee hereby accepts the foregoing employment and agrees to
devote, on a full- time basis, his best efforts, energy and skill to such
employment.
C. During the term of this Agreement, Employee shall not, except as
may be permitted by the Board of Directors, be employed by, work for, or be
associated with, directly or indirectly, as an officer, consultant, employee, or
in any other capacity, any other business operation whether or not same is
competitive with the business of the Company.
2. Compensation and Expense Reimbursement.
A. As base compensation for Employee duly rendering his services
pursuant to the terms of this Agreement, Company agrees to pay and Employee
agrees to accept a base salary of Ninety Thousand Dollars ($90,000) per annum
payable in equal installments, twice monthly, less such deductions or amounts as
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<PAGE>
shall be required to be withheld by applicable law or regulation, and paid in
accordance with the Company's payroll practices. Such base salary shall be
subject to increase by the Board of Directors upon annual review. Employee shall
be eligible for bonus payments in accordance with the Bonus Plan as approved by
the Board of Directors.
B. Company shall pay or reimburse Employee for travel and other
expenses reasonably incurred by Employee in the performance of his services
under this Agreement during the Employment Period, upon presentation of expense
statements, vouchers or such other supporting documentation as may reasonably be
required.
3. Fringe Benefits. Employee shall be entitled (subject to the terms and
conditions of particular plans and programs), to all fringe benefits afforded to
other employees of the Company, including, but not by way of limitation, the
right to participate in any pension, stock option, retirement, major medical,
group health, disability, accident and life insurance, relocation reimbursement,
and other employee benefit programs made generally available, from time to time,
by the Company except to the extent that Employee, pursuant to the terms of this
Agreement is already receiving such benefits from the Company.
4. Vacations. Employee shall be entitled, during each employment year, to
four (4) weeks vacation, per annum, non-cumulative.
5. Renewal and Termination by Company.
A. This employment Agreement shall renew by mutual written consent on
the thirtieth month of its term for a two year period without further action by
either party, or until terminated, as provided herein.
B. Notwithstanding the stated term of employment, this Agreement and
the term of employment may be sooner terminated by the Company for cause or for
any of the following reasons:
(i) In the event Employee, in the reasonable opinion of the
Company, as determined by the Board of Directors, is unable by reason of
physical or mental disability to continue the proper performance of his duties
2
<PAGE>
hereunder for a period of three (3) consecutive months, the Company may
terminate Employee's employment on a date thirty (30) days after the date on
which the Company shall have mailed written notice of such termination to
Employee's last known address;
(ii) The Employee's death;
(iii) Employee has committed an act of dishonesty, theft,
substance abuse, intoxication, unethical business conduct, a material breach of
the Employment Agreement, or has been convicted of a felony; all of the
foregoing shall be separately and collectively, known as "cause" for
termination.
(iv) The gross negligence, or Employee's intentional act or
failure to act (collectively) and separately hereinafter called "act"), which
act materially and adversely affects the business or affairs of the Company.
(v) The willful failure, refusal, or inability of Employee to
perform his duties as may, from time to time, be delegated to him by the
Company, through the Board of Directors.
6. Notice of Termination. Any purported termination by the Company shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 18 hereof (except if the event given rise to termination
is Employee's death). For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of Employee's
employment under the provision so indicated.
7. Compensation Upon Termination or During Disability.
A. During any period that the Employee fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness, the
Employee shall continue to receive his full base salary at the rate then in
effect and all other compensation, until the Employee's employment is terminated
by the Company pursuant to Section 5 hereof, and for a three month period
thereafter (the three month period shall commence on the date the Company
notifies Employee of the Company's election to terminate Employee's employment,
pursuant to the provisions of Section 5(B) hereof).
3
<PAGE>
B. If the Employee's employment shall be terminated for cause, except
as herein specifically provided to the contrary in the event the cause for
termination is death or disability, the Company shall pay the Employee his full
base salary through the date of termination at the rate in effect at the time
the Notice of Termination is given and the Company shall have no further
obligations to the Employee under this Agreement.
C. If the Employee's employment by the Company shall be terminated
without cause, then the Employee shall be entitled to the benefits provided
below:
(i) The Company shall pay the Employee an amount equal to
one-half of Employee's annual base salary at the rate in effect at the time
Notice of Termination is given, said payments to be made at the same time and in
the same manner, over a six month period, as if Emplyee had remained in the
employ of the Company; plus
(ii) Any bonus to which the Employee would otherwise be entitled,
pro rated to the effective date of termination; plus
(iii) All other amounts payable to the Employee and all benefits
payable to him under any other plan or agreement relating to retirement benefits
or to compensation previously earned and deferred, in accordance with the
respective terms of such plans or agreements, pro rated to a date three (3)
months following the date of termination.
8. Trade Secrets.
A. Employee acknowledges that his employment by the Company, which is
in the business of three-dimensional imaging, will enable him to obtain
confidential information concerning the Company, its subsidiaries and
affiliates, and information about the trade secrets the Company employs in its
business, including but not limited to the following: research, experiments,
inventions, discoveries and improvements conceived, developed or worked on by
the Company, whether or not related to Company's business as it now exists; data
and information about costs, profit, markets, sales, key personnel, pricing
policies; technical, scientific, patent and proprietary information and/or
processes; operational methods and other business affairs and methods, including
plans for future developments, now known or available to Employee or the public
(all of which is hereinafter collectively referred to as the "Confidential
4
<PAGE>
Information"). Confidential Information shall also mean the same as trade
secrets under the 2nd Restatement of Torts. Employee and the Company further
acknowledge that the services to be performed under this Agreement are of a
special, unique, unusual and extraordinary character; the Company's products and
services will be marketed and licensed throughout the United States and abroad,
and that the Company will be competing with other organizations which are or
could be located in any part of the United States or abroad. Accordingly,
Employee agrees that he shall not use for himself or divulge any of the
Confidential Information to anyone outside of the Company's business and then
only with the prior written consent of the Company's Board of Directors.
Employee further acknowledges that he is not now and has not in the past been
engaged in any business related to that of the Company (three dimensional
imaging). Accordingly, Employee agrees that upon the termination of expiration
of this Agreement, and for a period of two (2) years thereafter, Employee will
not, directly or indirectly, alone or as a member or a partnership, or as an
officer, employee, director, stockholder or consultant, of or to any person,
firm or corporation engage in any business, directly or indirectly, the same as
or similar to and/or competitive with that of the Company as now constituted or
as may hereafter be constituted during the term of this Agreement (including its
successors or assigns) and during the two (2) year restrictive covenant period
set fourth above.
B. As a condition to the employment of the Employee, Employee further
agrees to execute the Company's standard Confidentiality and EDAC Agreements and
such other Confidentiality Agreements as may, during the term of Employee's
employment, be required by the Company of all employees in the Company's employ.
It is specifically understood that the consideration supportive of such latter
execution by Employee will be the continued employment of Employee, it being
specifically understood that the failure or refusal of Employee to execute such
latter documents (provided same is required of all employees of the Company)
would constitute cause for termination by the Company of Employee's employment
hereunder.
C. The provisions of this Section 8 shall survive the termination or
expiration of this Agreement.
5
<PAGE>
9. Injunctive Relief.
A. Employee acknowledges that his services to the Company are unique
and that the confidential information which will be divulged to the Employee
will be of such nature that the divulging of same by Employee to any other
person, firm or corporation or the utilization thereof by Employee, in breach of
his undertakings thereunder, could cause the Company irreparable harm or damage
for which the Company cannot be entirely compensated by an award of money
damages. It is therefore agreed that in addition to any other relief or remedy
which may be available to the Company in the event of the breach by Employee of
his confidential undertaking, the Company may seek as against the Employee
injunctive relief, and the Employee agrees that in the event such an action is
commenced by the Company against Employee which alleges, in whole or in part, a
breach or threatened breach by Employee of his confidential undertaking, to
consent, and he does hereby consent, to the issuance by the Court to a
preliminary injunction in favor of the Company restraining the Employee from
breaching his confidential undertaking as set fourth herein pending a final
determination of such judicial proceeding. The provisions hereof shall survive
the termination or expiration of this Agreement.
10. Return of Confidential Information. Upon the termination or expiration
of this Agreement, Employee shall return to the Company all material in
Employee's possession or control which is of a confidential matter relating to
the Company's business. The provisions of this Section 10 shall survive the
termination or expiration of this Agreement. 11. Employee shall be indemnified
by the Company against any liability incurred in connection with any proceeding
in which Employee may be involved by reason of his service as an officer,
director or employee of the Company except where such liability results from
willful misconduct or recklessness or where such indemnification is prohibited
by applicable law.
12. Severability. The invalidity or unenforceability of any term of this
Agreement shall not affect the validity or enforceability of this Agreement or
any of its other terms; and this Agreement and such other terms shall be
construed as though the invalid or unenforceable term(s) were not included
herein, unless the effect would be to vitiate the parties' fundamental purpose
in entering into the Agreement.
6
<PAGE>
13. Remedies Cumulative. Except as otherwise expressly provided herein,
each of the rights and remedies of the parties set forth in this Agreement shall
be cumulative with all other such rights and remedies, as well as with all
rights and remedies of the parties otherwise available at law or in equity.
14. Waiver. The failure of either party at any time or times to require
performance of any provisions hereof shall in no manner effect the right at a
later time to enforce the same. To be effective, any waiver must be contained in
a written instrument signed by the party waiving compliance by the other party
of the term or covenant as specified. The waiver by either party of the breach
of any term or covenant contained herein, whether by conduct or otherwise in any
one or more instances, shall not be deemed to be, or construed as, a further or
continuing waiver of any such breach, or a waiver of the breach of any other
term or covenant contained in this Agreement.
15. Governing Law. Employee agrees that this Agreement shall be governed by
the laws of the State of Arizona as applied by the courts of Arizona.
16. Captions. Captions of articles and paragraphs of this Agreement are
included for convenient reference only, shall not be construed as part of this
Agreement and shall not be used to define, limit, extend or interpret the terms
hereof.
17. Warranties. Employee represents, warrants, covenants and agrees that he
has a right to enter into this Agreement, that he is not a party to any
agreement or understanding whether or not written which would prohibit or
restrict his performance of his obligations under this Agreement and that he
will not use in the performance of his obligations hereunder any proprietary
information of any other party which he is legally prohibited from using.
18. Notice. Any notice required to be given pursuant to the provisions of
this Agreement shall be in writing and sent by registered mail, to the parties
at the following addresses:
To the Employer: Dimensional Visions Group, Ltd.
Attn: Board of Directors
2301 W. Dunlap, Suite 201
Phoenix, AZ 85021
To the Employee: Mr. John D. McPhilimy
1340 W. Elgin Street
Chandler, AZ 85224
7
<PAGE>
19. Assignment. This Agreement shall inure to the benefit of and be binding
upon the Company, its successors and assigns, it being specifically agreed and
understood that in the event that the Company engages in a so-called "bulk sale"
of its assets, this Agreement may, at the Company's option, for all purposes be
deemed an asset of the Company.
20. Definition. For purposes of this Agreement, the term "Company" shall
mean the Company, its subsidiaries, its successors or assignees.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
DIMENSIONAL VISIONS, INC.
By /s/ George S. Smith
-------------------------------------
George S. Smith
Member, Board of Directors
Attest:
- -----------------------------------
WITNESS:
/s/ John D. McPhilimy
- ----------------------------------- ----------------------------------------
John D. McPhilimy
8
EMPLOYMENT CONTRACT
This employment agreement is made effective for all purposes and in all
respects as of the 1st day of November, 1997, by and between Dimensional Visions
Group, Ltd.., an Delaware corporation (hereinafter referred to as the
"Employer") and Bruce D. Sandig, (hereinafter referred to as the "Employee").
WHEREAS, Employer desires to employ Employee in the capacity of SeniorVice
President, Engineering or in any other position consistent with Employee's
status;
WHEREAS, Employee desires to be employed by Employer in the aforesaid
capacity; and
WHEREAS, Employer and Employee desire to set forth in writing the terms and
conditions of their agreements and understandings;
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises
herein contained, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending legally to
be bound, agree as follows:
1. TERM OF EMPLOYMENT. Employer shall employ Employee in the capacity set
forth above. The employment shall commence on November 1, 1997 and terminate on
November 1, 2000 unless sooner terminated in accordance with the provisions of
paragraph 9. After November 1, 2000, this Agreement and all its terms and
provisions shall be automatically extended from month-to-month, unless sooner
terminated in accordance with the provisions of this contract.
1
<PAGE>
2. DUTIES OF EMPLOYEE.
(a) In accepting employment from Employer, Employee shall undertake
the responsibility of performing for and on behalf of Employer whatever duties
shall be assigned to Employee by Employer at any time and from time to time. It
is further understood and agreed that any modification in, or expression of,
Employee's duties shall not result in any modification in, or increase or
decrease of, Employee's compensation as stated in paragraph 3, unless Employer
specifically shall agree otherwise in a duly executed amendment of this
Agreement.
(b) Employee covenants and agrees that at all times during the term of
this Agreement, Employee shall devote his/her full-time efforts to his/her
duties as an employee of the Employer. Employee further covenants and agrees
that he/she will not, directly or indirectly, engage or participate in any
activities at any time during the term of this Agreement which are directly
related the Company's products and are therefore in conflict with the best
interests of Employer.
3. COMPENSATION. As compensation for the services to be rendered by
Employee for Employer under this Agreement, Employee shall be paid the following
annual salary, on a twice a month basis, during the term hereof: $68,000.00.
4. ADDITIONAL BENEFITS. In addition to, and not in limitation of, the
compensation referred to in paragraph 3, Employee shall receive the following
additional benefits: such group health insurance as may be provided by Employer
from time to time; bonus payment as may be determined by Employer from time to
time. Employee shall have the right to vacation, holidays and other paid leave
as permitted by the employee policy manual in effect upon the signing of this
Agreement.
5. DISCLOSURE OF INFORMATION. Employee acknowledges that in and as a result
of his/her employment hereunder, he/she will be making use of, acquiring and/or
adding to confidential
2
<PAGE>
information of a special and unique nature and value relating to such matters as
Employer's trade secrets, systems, procedures, manuals, confidential reports,
and lists of clients, and the fees paid by them. As a material inducement to
Employer to enter into this Agreement and to pay to Employee the compensation
stated in paragraph 3, as well as any additional benefits stated in paragraph 4,
Employee covenants and agrees that he/she shall not, at any time during or
following the term of his/her employment, directly or indirectly divulge or
disclose for any purpose whatsoever any confidential information labeled
confidntial that has been obtained by, and disclosed to, him/her as a result of
his/her employment by Employer. In the event of a breach or threatened breach by
Employee of any of the provisions of this paragraph 5, Employer, in addition to
and not in limitation of, any other rights, remedies, or damages available to
Employer at law or in equity, shall be entitled to a permanent injunction in
order to prevent or restrain any such breach by Employee or by Employee's
partners, agents, representatives, servants, employers, employees and/or any and
all persons directly or indirectly acting for or with him/her.
6. COVENANTS AGAINST COMPETITION. Employee acknowledges that the services
he/she is to render are of a special and unusual character with a unique value
to Employer, the loss of which cannot adequately be compensated by damages in an
action at law. In view of the unique value to Employer of the services of
Employee for which Employer has contracted hereunder, because of the
confidential information to be obtained by or disclosed to Employee, as
hereinabove set forth, and as a material inducement to Employer to enter into
this Agreement and to pay to Employee the compensation stated in paragraph 3, as
well as any additional benefits stated in paragraph 4, Employee covenants and
agrees as follows:
3
<PAGE>
(a) During Employee's employment and for a period of two (2) years
after he ceases to be employed by Employer, Employee shall not, directly or
indirectly, solicit or divert business from, or attempt to convert to other
methods of using the same or similar products or services provided by Employer,
any client, account, or location of Employer with which Employee has had any
contact as a result of his/her employment with Employer.
(b) Except for the Company ceasing to do business or is in the
danger of ceasing to do be a going concern (in the sole opinion of the
employee), during Employee's employment and for a period of two (2) years after
he/she ceases to be employed by Employer, Employee shall not, directly or
indirectly, engage in the business of Employer or similar or related business in
competition with Employer, in any and all geographic areas where Employer is
actually engaged or intends to be engaged in business, or where the Employer
maintains sales or service representatives or employees.
(c) During Employee's employment and for a period of two (2)
years after he ceases to be employed by Employer, Employee shall not, directly
or indirectly, solicit for employment or employ any employee of Employer.
7. ACCOUNTING FOR PROFITS. Employee covenants and agrees that if he shall
violate any of his covenants or agreements under paragraph 6, Employer shall be
entitled to an accounting and repayment of all profits, compensation,
commissions, remuneration, or other benefits that Employee directly or
indirectly has realized and/or may realize as a result of, growing out of, or in
4
<PAGE>
connection with, any such violation. These remedies shall be in addition to, and
not in limitation of, any injunctive relief or other rights or remedies to which
Employer is or may be entitled at law, in equity, or under this Agreement.
8. REASONABLENESS OF RESTRICTIONS.
(a) Employee has carefully read and considered the provisions of
paragraphs 5, 6 and 7, and, having done so, agrees that the restrictions set
forth in these paragraphs, including, but not limited to, the time period of
restriction and the geographical areas of restriction set forth in paragraph 6,
are fair and reasonable and are reasonably required for the protection of the
interests of Employer and its officers, directors, and other employees.
(b) In the event that, notwithstanding the foregoing, any of the
provisions of paragraphs 5, 6 and 7 shall be held to be invalid or
unenforceable, the remaining provisions thereof shall nevertheless continue to
be valid and enforceable as though the invalid or unenforceable parts had not
been included therein. In the event that any provision of paragraph 5 or 6
relating to the time period and/or the areas of restriction shall be declared by
arbitration to exceed the maximum time period or areas such court deems
reasonable and enforceable, the time period and/or areas of restriction deemed
reasonable and enforceable by the court shall become and thereafter be the
maximum time period and/or areas.
9. TERMINATION
A. Notwithstanding any other provision hereof, Employer may terminate
Employee's employment under this Agreement at any time for cause. The
5
<PAGE>
termination shall be evidenced by written notice thereof to the Employee, which
shall specify the cause for termination. For purposes hereof, the term "cause"
shall include, without limitation, the inability of Employee, through sickness
or other incapacity, to perform his duties under this Agreement for a period in
excess of ninety (90) substantially consecutive days; dishonesty; theft;
conviction of a felony; intoxication; unethical business conduct including
disruption of Employer's management of its business; and a material breach of
this Agreement. The term "cause" shall also include the failure of Employee for
any reason, within ten (10) days after receipt by Employee of written notice
thereof from Employer, to correct, cease, or otherwise alter any
insubordination, failure to comply with instructions, or other action or
omission to act that in the opinion of the Employer does or may materially or
adversely affect its business or operations. This contract will terminate on the
death of Employee.
B. Notice of Termination. Any purported termination by the Company
shall be communicated by written Notice of Termination to the other party hereto
in accordance with Section 17 hereof (except if the event given rise to
termination is Employee's death). For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of
Employee's employment under the provision so indicated.
C. Compensation Upon Termination
1. If the Employee's employment by the Company shall be
terminated without cause during the three year term of this Agreement, Employee
6
<PAGE>
shall be entitled to the payment of one -half her compensation at the then
current level for the remainder of the term. In the event of the sale, transfer
or reorganization of the Company, any agreement for such shall include a
commitment by the surviving entity to continue payment of such compensation for
the remainder of the said three year term. If Employee's employment shall be
terminated without cause following the expiration of his initial three year term
of employment:
(I) The Company shall continue to pay the Employee an amount
equal one half of the Employee's base salary at the rate in effect at the time
Notice of Termination is given for a period of six months, said payments to be
made at the same time and in the same manner, as if Employee had remained in the
employ of the Company; plus
(ii) Any bonus to which the Employee would otherwise be
entitled, pro rated to the effective date of termination; plus
(iii) All other amounts payable to the Employee and all
benefits payable to him under any other plan or agreement relating to retirement
benefits or to compensation previously earned and deferred, in accordance with
the respective terms of such plans or agreements, pro rated to a date six (6)
months following the date of termination.
10. BURDEN AND BENEFIT. This Agreement shall be binding upon, and shall
inure to the benefit of, Employer and Employee, and their respective heirs,
personal and legal representatives, successors, and assigns.
11. GOVERNING LAW. In view of the fact that the principal office of
Employer is located in Arizona, it is understood and agreed that the
construction and interpretation of this Agreement shall at all times and in all
respects be governed by the laws of the State of Arizona.
12. ARBITRATION. Employer and Employee agree that all disputes under this
contract will be subject to arbitration under the rules of the American
7
<PAGE>
Arbitration Association. Any such arbitration will be conducted by three
arbitrators sitting in Phoenix, Arizona, with all costs, expenses and attorney's
fees to be paid by the losing party. Any decision of the arbitrators shall be
final and may be entered as judgement in a Court of competent jurisdiction.
13. SEVERABILITY. The provisions of this Agreement, including particularly
but not solely, the provisions of paragraphs 5, 6 and 7, shall be deemed
severable, and the invalidity or unenforceability of any one or more of the
provisions of this Agreement shall not affect the validity and enforceability of
the other provisions.
14. EMPLOYER. As used herein, the term "Employer" shall include any
corporation that is at any time the parent or a subsidiary of Dimensional
Visions Group, Ltd.. for which Employee is providing services in any form during
the term of his/her employment under this Agreement.
15. NOTICE. Any notice required to be given shall be sufficient if it is in
writing and sent by certified or registered mail, return receipt requested,
first-class postage prepaid, to his/her residence in the case of Employee, and
to its principal office in Arizona in the case of the Employer.
16. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding by and between Employer and Employee with respect to the
employment of Employee, and no representations, promises, agreements, or
understandings, written or oral, not contained herein shall be of any force or
effect. No change or modification of this Agreement shall be valid or binding
unless it is in writing and signed by the intended to be bound. No waiver of any
provision of this Agreement shall be valid unless it is in writing and signed by
the party against whom the waiver is sought to be enforced. No valid waiver of
any provision of this Agreement at any time shall be deemed a waiver of any
other provision of this Agreement at such time or at any other time.
8
<PAGE>
IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement
as of the day and year first above written.
DIMENSIONAL VISIONS GROUP, LTD.
SIGNATURE:______________________________
TITLE: President and C.E.O.
----------------------------------
----------------------------------------
EMPLOYEE SIGNATURE
9
EMPLOYMENT CONTRACT
This employment agreement is made effective for all purposes and in all
respects as of the 1st day of November, 1997, by and between Dimensional Visions
Group, Ltd.., an Delaware corporation (hereinafter referred to as the
"Employer") and Roy D. Pringle, (hereinafter referred to as the "Employee").
WHEREAS, Employer desires to employ Employee in the capacity of Chief
Financial Officer & Senior Vice President, or in any other position consistent
with Employee's status;
WHEREAS, Employee desires to be employed by Employer in the aforesaid
capacity; and
WHEREAS, Employer and Employee desire to set forth in writing the terms and
conditions of their agreements and understandings;
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises
herein contained, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending legally to
be bound, agree as follows:
1. TERM OF EMPLOYMENT. Employer shall employ Employee in the capacity set
forth above. The employment shall commence on November 1, 1997 and terminate on
November 1, 2000 unless sooner terminated in accordance with the provisions of
paragraph 9. After November 1, 2000, this Agreement and all its terms and
provisions shall be automatically extended from month-to-month, unless sooner
terminated in accordance with the provisions of this contract.
1
<PAGE>
2. DUTIES OF EMPLOYEE.
(a) In accepting employment from Employer, Employee shall undertake
the responsibility of performing for and on behalf of Employer whatever duties
shall be assigned to Employee by Employer at any time and from time to time. It
is further understood and agreed that any modification in, or expression of,
Employee's duties shall not result in any modification in, or increase or
decrease of, Employee's compensation as stated in paragraph 3, unless Employer
specifically shall agree otherwise in a duly executed amendment of this
Agreement.
(b) Employee covenants and agrees that at all times during the term of
this Agreement, Employee shall devote his/her full-time efforts to his/her
duties as an employee of the Employer. Employee further covenants and agrees
that he/she will not, directly or indirectly, engage or participate in any
activities at any time during the term of this Agreement in conflict with the
best interests of Employer.
3. COMPENSATION. As compensation for the services to be rendered by
Employee for Employer under this Agreement, Employee shall be paid the following
annual salary, on a twice a month basis, during the term hereof: $60,000.00.
4. ADDITIONAL BENEFITS. In addition to, and not in limitation of, the
compensation referred to in paragraph 3, Employee shall receive the following
additional benefits: such group health insurance as may be provided by Employer
from time to time; bonus payment as may be determined by Employer from time to
time. Employee shall have the right to vacation, holidays and other paid leave
as permitted by the employee policy manual in effect upon the signing of this
Agreement.
5. DISCLOSURE OF INFORMATION. Employee acknowledges that in and as a result
of his/her employment hereunder, he/she will be making use of, acquiring and/or
adding to confidential information of a special and unique nature and value
relating to such matters as Employer's trade secrets, systems, procedures,
manuals, confidential reports, and lists of clients, and the fees paid by them.
As a material inducement to Employer to enter into this Agreement and to pay to
Employee the compensation stated in paragraph 3, as well as any additional
benefits stated in paragraph 4, Employee covenants and agrees that he/she shall
not, at any time during or following the term of his/her employment, directly or
indirectly divulge or disclose for any purpose whatsoever any confidential
information that has been obtained by, or disclosed to, him/her as a result of
his/her employment by Employer. In the event of a breach or threatened breach by
Employee of any of the provisions of this paragraph 5, Employer, in addition to
and not in limitation of, any other rights, remedies, or damages available to
Employer at law or in equity, shall be entitled to a permanent injunction in
order to prevent or restrain any such breach by Employee or by Employee's
partners, agents, representatives, servants, employers, employees and/or any and
all persons directly or indirectly acting for or with him/her.
6. COVENANTS AGAINST COMPETITION. Employee acknowledges that the services
he/she is to render are of a special and unusual character with a unique value
to Employer, the loss of which cannot adequately be compensated by damages in an
action at law. In view of the unique value to Employer of the services of
Employee for which Employer has contracted hereunder, because of the
confidential information to be obtained by or disclosed to Employee, as
hereinabove set forth, and as a material inducement to Employer to enter into
this Agreement and to pay to Employee the compensation stated in paragraph 3, as
well as any additional benefits stated in paragraph 4, Employee covenants and
agrees as follows:
3
<PAGE>
(a) During Employee's employment and for a period of two (2) years
after he ceases to be employed by Employer, Employee shall not, directly or
indirectly, solicit or divert business from, or attempt to convert to other
methods of using the same or similar products or services provided by Employer,
any client, account, or location of Employer with which Employee has had any
contact as a result of his/her employment with Employer.
(b) During Employee's employment and for a period of two (2) years
after he/she ceases to be employed by Employer, Employee shall not, directly or
indirectly, engage in the business of Employer or similar or related business in
competition with Employer, in any and all geographic areas where Employer is
actually engaged or intends to be engaged in business, or where the Employer
maintains sales or service representatives or employees.
(c) During Employee's employment and for a period of two (2) years
after he ceases to be employed by Employer, Employee shall not, directly or
indirectly, solicit for employment or employ any employee of Employer.
7. ACCOUNTING FOR PROFITS. Employee covenants and agrees that if he shall
violate any of his covenants or agreements under paragraph 6, Employer shall be
entitled to an accounting and repayment of all profits, compensation,
commissions, remuneration, or other benefits that Employee directly or
indirectly has realized and/or may realize as a result of, growing out of, or in
connection with, any such violation. These remedies shall be in addition to, and
not in limitation of, any injunctive relief or other rights or remedies to which
Employer is or may be entitled at law, in equity, or under this Agreement.
4
<PAGE>
8. REASONABLENESS OF RESTRICTIONS.
(a) Employee has carefully read and considered the provisions of
paragraphs 5, 6 and 7, and, having done so, agrees that the restrictions set
forth in these paragraphs, including, but not limited to, the time period of
restriction and the geographical areas of restriction set forth in paragraph 6,
are fair and reasonable and are reasonably required for the protection of the
interests of Employer and its officers, directors, and other employees.
(b) In the event that, notwithstanding the foregoing, any of the
provisions of paragraphs 5, 6 and 7 shall be held to be invalid or
unenforceable, the remaining provisions thereof shall nevertheless continue to
be valid and enforceable as though the invalid or unenforceable parts had not
been included therein. In the event that any provision of paragraph 5 or 6
relating to the time period and/or the areas of restriction shall be declared by
arbitration to exceed the maximum time period or areas such court deems
reasonable and enforceable, the time period and/or areas of restriction deemed
reasonable and enforceable by the court shall become and thereafter be the
maximum time period and/or areas.
9. TERMINATION
A. Notwithstanding any other provision hereof, Employer may terminate
Employee's employment under this Agreement at any time for cause. The
termination shall be evidenced by written notice thereof to the Employee, which
shall specify the cause for termination. For purposes hereof, the term "cause"
5
<PAGE>
shall include, without limitation, the inability of Employee, through sickness
or other incapacity, to perform his duties under this Agreement for a period in
excess of ninety (90) substantially consecutive days; dishonesty; theft;
conviction of a felony; intoxication; unethical business conduct including
disruption of Employer's management of its business; and a material breach of
this Agreement. The term "cause" shall also include the failure of Employee for
any reason, within ten (10) days after receipt by Employee of written notice
thereof from Employer, to correct, cease, or otherwise alter any
insubordination, failure to comply with instructions, or other action or
omission to act that in the opinion of the Employer does or may materially or
adversely affect its business or operations. This contract will terminate on the
death of Employee.
B. Notice of Termination. Any purported termination by the Company shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 17 hereof (except if the event given rise to termination
is Employee's death). For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of Employee's
employment under the provision so indicated.
C. Compensation Upon Termination
1. If the Employee's employment by the Company shall be terminated
without cause during the three year term of this Agreement, Employee shall be
entitled to the payment of one -half her compensation at the then current level
for the remainder of the term. In the event of the sale, transfer or
reorganization of the Company, any agreement for such shall include a commitment
6
<PAGE>
by the surviving entity to continue payment of such compensation for the
remainder of the said three year term. If Employee's employment shall be
terminated without cause following the expiration of his initial three year term
of employment:
(I) The Company shall continue to pay the Employee an amount
equal one half of the Employee's base salary at the rate in effect at the time
Notice of Termination is given for a period of six months, said payments to be
made at the same time and in the same manner, as if Employee had remained in the
employ of the Company; plus
(ii) Any bonus to which the Employee would otherwise be entitled,
pro rated to the effective date of termination; plus
(iii) All other amounts payable to the Employee and all benefits
payable to him under any other plan or agreement relating to retirement benefits
or to compensation previously earned and deferred, in accordance with the
respective terms of such plans or agreements, pro rated to a date six (6) months
following the date of termination.
10. BURDEN AND BENEFIT. This Agreement shall be binding upon, and shall
inure to the benefit of, Employer and Employee, and their respective heirs,
personal and legal representatives, successors, and assigns.
11. GOVERNING LAW. In view of the fact that the principal office of
Employer is located in Arizona, it is understood and agreed that the
construction and interpretation of this Agreement shall at all times and in all
respects be governed by the laws of the State of Arizona.
12. ARBITRATION. Employer and Employee agree that all disputes under this
contract will be subject to arbitration under the rules of the American
Arbitration Association. Any such arbitration will be conducted by three
arbitrators sitting in Phoenix, Arizona, with all costs, expenses and attorney's
fees to be paid by the losing party. Any decision of the arbitrators shall be
final and may be entered as judgement in a Court of competent jurisdiction.
7
<PAGE>
13. SEVERABILITY. The provisions of this Agreement, including particularly
but not solely, the provisions of paragraphs 5, 6 and 7, shall be deemed
severable, and the invalidity or unenforceability of any one or more of the
provisions of this Agreement shall not affect the validity and enforceability of
the other provisions.
14. EMPLOYER. As used herein, the term "Employer" shall include any
corporation that is at any time the parent or a subsidiary of Dimensional
Visions Group, Ltd.. for which Employee is providing services in any form during
the term of his/her employment under this Agreement.
15. NOTICE. Any notice required to be given shall be sufficient if it is in
writing and sent by certified or registered mail, return receipt requested,
first-class postage prepaid, to his/her residence in the case of Employee, and
to its principal office in Arizona in the case of the Employer.
16. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding by and between Employer and Employee with respect to the
employment of Employee, and no representations, promises, agreements, or
understandings, written or oral, not contained herein shall be of any force or
effect. No change or modification of this Agreement shall be valid or binding
unless it is in writing and signed by the intended to be bound. No waiver of any
provision of this Agreement shall be valid unless it is in writing and signed by
the party against whom the waiver is sought to be enforced. No valid waiver of
any provision of this Agreement at any time shall be deemed a waiver of any
other provision of this Agreement at such time or at any other time.
8
<PAGE>
IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement
as of the day and year first above written.
DIMENSIONAL VISIONS GROUP, LTD.
SIGNATURE:______________________________
TITLE: President and C.E.O.
----------------------------------
----------------------------------------
EMPLOYEE SIGNATURE
9
EXHIBIT 21.0 SUBSIDIARIES OF THE REGISTRANT
Name State of Incorporation
- ---- ----------------------
InfoPak, Inc. Delaware
INDEPENDENT AUDITORS' CONSENT
We consent to the use of our report dated October 7, 1999, in the
Registration Statement on Form SB-2 of Dimensional Visions Incorporated
appearing in the prospectus which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected
Financial Data" and "Experts" in such prospectus.
/s/ Gitomer & Berenholz, P.C.
- --------------------------------
GITOMER & BERENHOLZ, P.C.
Huntingdon Valley, Pennsylvania
Dated: February 10, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 573,802
<SECURITIES> 0
<RECEIVABLES> 281,975
<ALLOWANCES> 53,333
<INVENTORY> 2,128
<CURRENT-ASSETS> 814,275
<PP&E> 451,840
<DEPRECIATION> 297,500
<TOTAL-ASSETS> 1,249,067
<CURRENT-LIABILITIES> 637,797
<BONDS> 0
0
1,571,521
<COMMON> 6,026
<OTHER-SE> (1,356,468)
<TOTAL-LIABILITY-AND-EQUITY> 1,249,067
<SALES> 300,418
<TOTAL-REVENUES> 300,418
<CGS> 193,261
<TOTAL-COSTS> 193,261
<OTHER-EXPENSES> 451,096
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 120,196
<INCOME-PRETAX> (459,051)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (459,051)
<EPS-BASIC> (.08)
<EPS-DILUTED> 0
</TABLE>
