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FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1995
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
Commission File No. 0-17500
VERSUS TECHNOLOGY, INC.
(Exact Name of Small Business Issuer in its charter)
Delaware 22-2283745
(State of Incorporation) (I.R.S. Employer Identification Number)
2320 W. Aero Park Ct., Traverse City, Michigan
(Address of principal executive offices)
Issuer's telephone number, including area code: (616) 946-5868
Securities registered under section 12(b) of the Act: NONE
Securities registered under section 12(g) of the Act:
Common Stock, $.01 par value
Redeemable Class A Warrants
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days. YES (X) NO ( ) .
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. ( X )
The Issuer's revenues for its most recent fiscal year: $988,616
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the average bid and asked prices of such stock was
$6,467,767 as of January 31, 1996.
State number of shares of Common Stock, par value $.01 per share,
outstanding as of January 31, 1996: 18,485,697.
DOCUMENTS INCORPORATED BY REFERENCE: NONE <PAGE>
VERSUS TECHNOLOGY, INC.
Index to Form 10-KSB
Part I Page
Item 1 Description of the Business. . . . . . . . . . . . . . . . . . .3
Item 2 Description of Properties. . . . . . . . . . . . . . . . . . . .9
Item 3 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . .9
Item 4 Submission of Matters to a Vote of Security Holders. . . . . . 10
Part II
Item 5 Market for Issuer's Common Equity and Related
Stockholder Matters. . . . . . . . . . . . . . . . . . . . . . 11
Item 6 Management's Discussion and Analysis or Plan of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 7 Financial Statements . . . . . . . . . . . . . . . . . . . . . 15
Item 8 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . . . . . 37
Part III
Item 9 Directors and Executive Officers; Promoters and
Control Persons; Compliance with Section 16(a) of
the Exchange Act . . . . . . . . . . . . . . . . . . . . . . . 38
Item 10 Executive Compensation . . . . . . . . . . . . . . . . . . . . 39
Item 11 Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . . 40
Item 12 Certain Relationships and Related Transactions . . . . . . . . 42
Item 13 Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 43
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
2<PAGE>
PART I
Item 1 - Description of the Business
(a) Business Development and Principal Products.
Versus Technology, Inc. ("Versus" or the "Company") is a Delaware
corporation incorporated in October of 1988. Versus has its principal
place of business at 2320 West Aero Park Court, Traverse City, Michigan
49686 (telephone number (616) 946-5868 and facsimile number (616)
946-6775).
In November of 1992, the Company was principally engaged in the
business of manufacturing and marketing Derived Channel Multiplex ("DCX")
alarm systems which used existing telephone lines without the necessity of
a dial tone. The Company also had under development a line of cellular
alarm transport ("CAT") systems.
On September 15, 1993, the Company completed a private placement of
one million shares of its common stock to a group of accredited investors
at $2.05 per share. Of the net proceeds of $1,774,000, approximately
$400,000 was used to purchase certain intellectual property and assets
(patents, trademarks, etc.) relating to infrared tracking ("IR Tracking")
systems and technology. The balance of the proceeds was used to provide
additional capital resources to further develop and extend the IR Tracking
technology systems, and to fund the growth of the Company's cellular alarm
technology.
Versus experienced significant losses in fiscal 1994. This led its
Board of Directors to take substantial steps to restructure the Company.
The Company implemented a plan to reduce overhead and sell the DCX
business. In November 1994, the DCX business was sold. In early January
1995, John Mischak was replaced as President and Chief Executive Officer.
The Board appointed Gary T. Gaisser as President and Chief Executive
Officer. Mr. Gaisser was then and remains President of Olmsted Engineering
Co. ("Olmsted"), the Company's principal development consultant in the area
of infrared tracking ("IR Tracking"). The Company's employment levels and
other expenses were sharply reduced, and the business headquarters moved
from Trenton, New Jersey to Traverse City, Michigan, to the principal
executive offices of Olmsted, in September, 1995.
On September 29, 1995, the Company completed a private placement of
14,674,917 shares of its common stock to accredited investors at $0.20 per
share. After payment of bridge loans the net proceeds of $2,428,050 are
being used to develop the IR Tracking business and for general operating
expenses.
The Company currently has two lines of business, the IR Tracking
System and a cellular line. The Company sees its future in the business of
IR Tracking systems. These systems permit the instantaneous identification
and tracking of the location of people and equipment, can be used to
control access, and permit instantaneous two-way communication. The
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Company believes that this technology will have a wide range of
applications. The first market being addressed by the Company is the
medical industry. Near term enhancement and expansion of this technology
that will permit the transmission of increased data is also planned. The
system is based on the Company's patented proprietary technology involving
the transmission and reception of infrared light for use in tracking
multiple subjects in several areas. The Company commenced formal marketing
of its system on August 1, 1995. Several demonstration systems, however,
were already in place and operating with high levels of customer
satisfaction. There have been only limited sales to date.
The Company also manufactures and distributes a number of cellular
products for data transmission and cellular alarm transport. The Company's
products can handle the sending of alert notices, such as alarm reporting
for fire, burglar, health, security and other alert communication
requirements. The Company's CAT products manufacturing began in late 1993.
As a result of the settlement of a patent infringement suit during the
fourth quarter of the 1995 fiscal year, the greater portion of the CAT
products sold by Versus at the beginning of the year have now been
discontinued.
(b) Business of the Issuer
(1) Principal Products and Services
Infrared Security System and Technology ("IR Tracking")
The Company's infrared security system is the chief product of the
Company. This technology was acquired in fiscal 1993. This IR tracking
system can be used to monitor and locate people and equipment and/or to
control access to secured areas. The system consists of compact badges,
sensors and receivers and a central processing computer. Badges can be
attached to people and equipment. Each badge transmits a unique
identifying code and up to sixteen status codes. Sensors and receivers,
inconspicuously located in each room or zone, receive and validate
transmitted signals and send them to the central processing computer. The
central processing computer operates on the signals from the receivers. It
locates each badge, determines its status (i.e., condition, environment,
etc.) and provides users with a graphical display locating people and
equipment. Other programmable features include directed pages, telephone
call forwarding, equipment usage logs, and door openings and closings. In
addition, two way communication is possible. The system is based on the
Company's patented proprietary technology involving the transmission and
reception of infrared light for use in tracking multiple subjects in
several areas.
Cellular Alarm Transport ("CAT")
The principal function of the Company's Cellular Alarm Transport
products is to provide a connected alarm panel with a communication pathway
through the cellular communications network. The cellular communications
network is functionally identical to the switched telephone network (land
line) service commonly employed in alarm monitoring. These alert notices
can be sent using either the Company's proprietary ProNet network, can be
4<PAGE>
carried over existing standard telephone lines without precluding voice
conversations and other uses, can utilize the patented CAT network
utilizing cellular communications to transport alarm information and
signals or when working with, or as backup to, other land line based
security systems. Additionally, the Company's cellular alarm products
provide security reporting protection in applications where land line based
security is not feasible or practical.
Generally, the CAT is used as a cellular backup alarm product (though
there are numerous stand alone applications as well). In its cellular
backup mode alarm messages are transmitted over the cellular network to a
telephone switch network used by the alarm monitoring agency to receive
such data and signals. When an event triggers the cellular alarm product
located at the protected premises, a message is transmitted to the nearest
cellular antenna site ("Cell Site"). The Cell Site passes this message to
a mobile telecommunications switching office, then on to the land line
telephone network which carries the message to the alarm monitoring center.
The Company's cellular product is comprised of a cellular radio
transceiver and an interface printed wiring assembly mounted within a steel
enclosure. The product is shipped with several ancillary items which
include: a UL approved input power transformer, a battery (optional) for
use when primary power to the unit fails, and an antenna assembly made
expressly for ease of installation. The handset which normally accompanies
the cellular transceiver is used for initial programming of the unit. This
cellular product is manufactured, assembled and tested by the Company from
components supplied by others.
Sales of cellular products began late in fiscal 1993 and were
partially discontinued this year (see "Legal Proceedings").
(2) Marketing and Distribution
Infrared Security System and Technology
Prior to its acquisition by the Company, this product had been sold
and installed in three working environments, all in the health care
industry. Additionally, two demonstration systems were sold for use in
governmental high security facilities. Planned near term enhancement and
expansion of this technology will permit the transmission of increased
data. Currently, the health care market is primarily targeted for
penetration due to the technology's initial success there, and the existing
interest that has developed. Additional applications being explored
include high security facilities (military, governmental, etc.),
correctional institutions (prisons, house arrest monitoring programs, etc.)
and commercial security (visitor tracking, institutional access control,
etc.).
On July 1, 1995, the Company entered into an exclusive distribution
agreement with Medical Enterprises International, Inc. ("MEI"), for sales
to the medical community. This agreement was modified by the Company at the
end of December to make this agreement non-exclusive. It is unclear the
extent to which MEI will continue to attempt to market the product. The
Company is now concentrating on direct marketing, as well as selling
through other non-exclusive distributors.
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In the future, the Company also intends to market its IR Tracking
products directly to office and manufacturing markets, such as professional
offices, financial institutions, governmental institutions, correctional
facilities, and manufacturing facilities, for the purpose of security,
personal equipment and document tracking, time and attendance monitoring,
and ingress/egress control.
Cellular Alarm Transport
The Company's remaining cellular products are marketed both through
direct sales and distributors.
(3) New Products or Services
During fiscal 1995 the Company formally introduced its IR Tracking
System, currently marketed primarily to the health care industry.
(4) Competitive Business Conditions
There are many products directly competitive with the Company's
infrared technology. Also, there are numerous products that perform
functions similar to this technology, including radio frequency ("RF")
paging and communication systems, ultrasound and RF badges, magnetic strip
systems and hardwired communication systems. The Company believes that its
infrared technology is competitive with RF based and other similar systems
and that in many applications it may be a superior and cost-effective
alternative.
Competition for the Company's remaining CAT products comes primarily
from only a few companies. Expected growth of the market, however, may
attract entry by additional organizations with more significant resources.
In addition, there are competing technologies which perform similar
functions.
In each of its markets, the Company seeks to compete primarily on the
basis of the technological features of its products, their cost
effectiveness, system performance, field experience and service support.
(5) Sources and Availability of Raw Materials
The Company's manufacturing operations consist primarily of the
assembly and testing of final products and subassemblies purchased from
other manufacturers. There are generally multiple suppliers available for
most components purchased by the Company. The Company estimates that no
single supplier accounts for more than 10% of total inventory requirements.
The Company performs quality tests and checks on components and
subassemblies at various stages of manufacturing. Finished products are
thoroughly tested for all functions.
6<PAGE>
(6) Material Customers
Substantially all the Company's sales for the fiscal year ended
October 31, 1995 were attributable to the Company's ten largest customers.
Sales to the Company's ten largest customers for each of the two fiscal
years ended October 31, 1994 and 1993 represented 73% and 82% of total
sales, respectively. The Company's historic operations do not include any
major customers that, if lost, would have a significantly adverse effect on
the Company. The Company does not believe its IR product line will be
dependent on any individual customer.
The Company generally does not offer extended payment terms to its
customers and generally adheres to its warranty policy of 90 days.
Consistent with industry practice, the Company maintains inventory of both
components and finished products that it believes to be sufficient to
satisfy foreseeable short-term customer requirements.
At October 31, 1995, the Company had approximately $20,000 of orders
on hand. At October 31, 1994, the Company's orders on hand were
approximately $1,022,000.
No material portion of the business of the Company is seasonal. No
material portion of the Company's business is subject to renegotiation of
profits or termination of contracts or subcontracts at the election of the
government.
The Company has announced an IR Tracking rental program. This program
provides an alternative to direct purchase.
During the last three years, inflation has not had any significant
impact on the Company's business.
(7) Patents, Trademarks, Licenses and Franchises
The Company holds several United States patents covering certain
cellular alarm and IR Tracking technologies. The Company also holds
patents in other countries for these products.
The Company also holds several United States patents in the cellular
alarm transport product area. Some of these products have also been
granted patents in other countries. Some of these patents relate to the
use of a low frequency supervisory signal to signify telephone line
continuity and status at the remote premises. The remaining patents
reinforce system design considerations. The Company also has sold and
back-licensed generally exclusive rights to use this technology throughout
the Western Hemisphere, Japan, China and certain other countries in the Far
East, Eastern Europe and the countries previously comprising the USSR. The
license agreements do not reflect any material cost to the Company or
adversely limit their use by the Company.
As a result of patent litigation described in "Litigation" below, the
Company has agreed to cease production and marketing of certain cellular
products.
7<PAGE>
There can be no assurance that the Company's patents will provide the
Company with significant competitive advantages, or that further challenges
will not be instituted against the validity or enforceability of any patent
owned by the Company or, if instituted, that any such challenge will not be
successful. Furthermore, there can be no assurance that others will not
independently develop similar technologies or duplicate the Company's
technology or design around the patented aspects of the Company's
technology. There can be no assurance that trade secrets will be
established, that secrecy obligations will be honored, or that others will
not independently develop similar or superior technology.
The Company has granted a security interest in its patents to Duane,
Morris & Heckscher, its counsel in the Telular litigation, to secure
payment of fees billed by that firm. The firm has asserted that they are
entitled to monthly payments in fiscal year 1996 and a balloon payment on
January 1, 1997. The Company disputes some of their fees and expects to
negotiate an accord at some future date.
(8) Government Approvals
The Company's Cellular Alarm Transport products are registered under
FCC regulations and comply with all relevant FCC regulations for commercial
and residential premises.
The Company's IR Technology products do not require government
approvals.
(9) Government Regulation
The Company does not believe that existing or reasonably foreseeable
governmental regulations will have a material adverse effect upon the
Company's business.
(10) Research and Development
The Company's expenditures for research and development during fiscal
1994 were $500,000. This compares with $957,000 which was expended during
fiscal 1995. To the extent it can afford to do so, the Company intends to
continue to incur significant development expenses to maintain and enhance
its technological position.
(11) Environmental Compliance
Compliance with Federal, state and local provisions which have been
enacted or adopted to regulate the protection of the environment should not
have a material effect upon the capital expenditures, earnings and
competitive position of the Company. The Company does not expect to make
any material expenditures for environmental control facilities in either
the current fiscal year (fiscal 1996) or the succeeding fiscal year (fiscal
1997).
8<PAGE>
(12) Number of Employees
At October 31, 1995, following the move of the Company to Michigan
from New Jersey and a streamlining of staff, the Company had 6 full time
employees. Of its full time employees, 2 were engaged in system design and
engineering, 1 in marketing, sales and sales administration, 1 in
manufacturing and 2 in management and administration.
None of the Company's employees is covered by a collective bargaining
agreement. The Company has never experienced any labor disruptions or work
stoppages, and considers its employee relations to be good.
Item 2 - Description of Properties
The Company currently has an informal agreement with Olmsted which
permits the company to locate in Olmsted's premises with no rent payment. A
new lease has been entered into as of January 26, 1996 for rent of $57,000
per year.
Item 3 - Legal Proceedings (Litigation)
The following is a summary of the material litigation in which the
Company is currently engaged, or which was settled, during the fourth
quarter of 1995.
1. Versus Technology, Inc. v. Satellite 2000 Corporation and
Charlie Barnum
Complaint Filed: November 1, 1993
Court: United States District Court for the Middle District of
Florida, Orlando Division
Civil Action No.: 93-970-CIV-ORL-22
Principal Parties: Plaintiff, Versus Technology, Inc.;
Defendants, Satellite 2000 corporation, Charlie Barnum
Versus has charged Satellite 2000 (a corporation) and Charlie Barnum
(an individual) with infringement of three of its patents directed to the
Versus cellular technology. Satellite 2000 Corporation has executed a
consent decree, which has been entered by the court, admitting validity and
infringement of those patents. In addition, the Company has sought to
enter a default judgment against Charlie Barnum, holding Mr. Barnum liable
for patent infringement of the three Versus patents-in-suit. Versus seeks
damages and an injunction against the defendants for infringement of the
patents-in-suit, infringement of Versus copyrights, infringement of Versus
trademarks, and for unfair competition and trade libel. A preliminary
injunction was issued against Mr. Barnum to prevent him from continuing to
engage in acts of unfair competition against Versus.
Versus cannot predict whether all or any of the sums it seeks
from the defendants are recoverable or collectable. Therefore, Versus is
seeking to restructure its expenditures on this litigation and may seek to
dismiss this litigation in the future.
9<PAGE>
2. Telular Corporation v. Versus Technology, Inc.
Complaint filed: December 16, 1993
Court: United States District Court for the Northern District
of Illinois
Civil Action No.: 93 C 7568
Principal Parties: Plaintiff, Telular Corporation;
Defendant, Versus Technology, Inc.
Telular charged Versus with infringement of two of Telular's patents
related to cellular interfaces. Versus charged Telular with infringement
of its three cellular alarm patents.
This matter was concluded during the fourth quarter of fiscal 1995
with the Company agreeing to acknowledge and respect Telular's claimed
patents and agreeing to deliver $132,000 in inventory or cash to Telular.
As a result of this settlement, the Company has discontinued production of
CAT 2000, UL and chip technology products. These discontinued products
constituted approximately 50% of the Company's 1995 cellular business. The
settlement does not affect Versus' lines of alarm systems which transmit
video signals along cellular networks, nor its mobile alarm protection
system, nor its trigger-based CAT units.
3. Special Situations Fund III, L.P. v. Versus Technology, Inc.
Complaint filed: September 27, 1994
Court: Supreme Court of the State of New York
Index No.: 127519/94
Principal Parties: Plaintiff, Special Situations Fund III, L.P.
Defendant, Versus Technology, Inc.
Special Situations Fund III, L.P. ("Special Situations") filed a
complaint alleging that Versus allowed certain warrants which the Fund held
to expire, and that the Fund was damaged by the warrants' expiration.
Special Situations also alleged that the Company breached the Warrant
Agreement pursuant to which the warrants were issued to Special Situations,
and claims that the sale by the Company of restricted stock in late 1993
required a downward adjustment of the exercise price of the warrants under
the Warrant Agreement. A judgment against the Company in the amount of
$195,000 has been entered by a trial court. The Company is appealing this
judgment and believes that it has proper cause for appeal.
Item 4 - Submission of Matters to a Vote of Security Holders
None
10<PAGE>
PART II
Item 5 - Market for Issuer's Common Equity and Related Stockholder Matters
Until recently the Company's common stock and Class A warrants were
traded over the counter on NASDAQ under the trading symbols "VSTI", and
"VSTIW", respectively. Such securities are not currently listed, as the
Company for a period of time did not meet the balance sheet requirement of
NASD. At present, the Company does not currently meet the NASD's minimum
per-share price requirements for new listings and therefore has not been
relisted. The Company intends to apply for NASDAQ relisting of its common
stock as soon as all of the NASD requirements are again met. The common
stock is traded over the counter by several market makers through the
NASDAQ Bulletin Board.
The price ranges presented below represent the high and low bid prices
during each quarter. Quotations reflect interdealer prices without retail
mark-up, mark-down or commission and may not represent actual transactions.
Common Stock Class A Warrants
Fiscal Quarter Ended High Low High Low
January 31, 1994 3 2 5/16 1/2 1/8
April 30, 1994 2 11/16 1 3/8 1/8 1/16
July 31, 1994 1 7/8 1 1/8 1/16 1/16
October 1,1994 1 3/8 3/4 1/16 1/32
January 31, 1995 7/8 3/8 -- --
April 30, 1995 3/8 1/4 -- --
July 31, 1995 9/16 1/4 -- --
October 31, 1995 17/32 3/8 -- --
As of January 31, 1996, the Company had 254 shareholders of record of
its common stock and its bid price was 3/8 and 57 holders of warrants of
record of Class A warrants.
To date, the Company has not declared or paid any dividends with
respect to its common stock, and the current policy of the Board of
Directors is to retain any earnings to provide for the growth of the
Company. Consequently, no cash dividends are expected to be paid on the
common stock in the foreseeable future.
The Class A warrants, as last extended by the Board of Directors,
expire on February 15, 1996 and are presently exercisable as follows: For
four warrants and $1.75, warrant holders may acquire one share of common
stock.
11<PAGE>
Item 6 - Management's Discussion and Analysis or Plan of Operations
The following table sets forth selected financial data for the Company
and should be read in conjunction with the financial statements and related
notes and management's discussion and analysis of financial condition and
results of operations included elsewhere in this Form 10-KSB or from prior
audited financial statements of the Company. This selected financial data
is not covered by the Independent Accountant's Report.
(in thousands except per share amounts)
Years ended October 31, 1995 1994 1993
______________________ ____ ____ ____
Statement of Operations Data:
Revenues $ 989 $3,200 $5,009
Net income (loss) (2,497) (3,176) $ 628
Net income (loss) per common
and common equivalent share (.46) (.76) $ .15
Weighted average number of
shares outstanding 5,450 4,160 5,298
Balance Sheet Data:
Working capital $1,157 $ 145 $3,036
Total assets $2,435 $3,083 $5,391
Total liabilities $1,361 $2,236 $1,376
Shareholders equity $1,074 $ 847 $4,015
Fiscal year 1995 compared with 1994:
Revenues for the fiscal year ended October 31, 1995 were $989,000 or, 69%
below the corresponding revenues for the previous fiscal year. This
decrease of $ 2,211,000 resulted primarily from the sale of the DCX product
line and the settlement with Telular involving certain cellular products.
Revenues attributable to these events included in the 1995 and 1994
revenues amounted to approximately $ 586,000, and $3,000,000,
respectively. The Company is continuing its development of infrared
products and expects this product line to be the Company's primary focus in
fiscal 1996.
Cost of sales as a percentage of revenues for fiscal 1995 decreased to 50%
from 60% in fiscal 1994. This change was primarily due to continuing
change in product mix. As the infrared product line begins to expand, the
cost of sales is targeted to be considerably less than that of the cellular
product.
Selling, general and administrative expenses for fiscal 1995 were 40% lower
than in fiscal 1994. This decrease was primarily due to the Company's
downsizing of its sales and marketing efforts in addition to cost
12<PAGE>
reductions associated with the move of its headquarters and principal
operations to Michigan. Research and development expenditures increased
$457,000 from fiscal 1994 and were attributable primarily to the
development of the Company's infrared product line and new product
development with cellular technology. Patent defense settlements and
judgment costs exceeded 1994 levels by $209,000. The legal matters
associated with these costs have been substantially completed and accrued
for in the accompanying financial statements. See "Business-Legal
Proceedings".
Other income and expense increased $824,000 from 1994 levels due primarily
to the recognition of the last installment of deferred gain associated with
the sale of the Company's subsidiary in 1992 and the gain associated with
the sale of the DCX product line in the amount of $424,000.
In connection with the move of the Company's headquarters and principal
operations, the Company has now refocused itself as a manufacturer of
infrared tracking systems and specialty cellular products. The Company's
strategy going forward will be to meaningfully expand sales of medical
tracking and monitoring systems, develop a portfolio of service contracts
with third parties and exploit the medical and health fields and to pursue
other markets. The Company intends to enter the governmental, professional
and manufacturing markets with its infrared technology products.
Fiscal Year 1994 Compared with Fiscal Year 1993
Revenues for the fiscal year ended October 31, 1994 were $1,809,000,
or 36%, below the corresponding revenues for the previous fiscal year.
However fiscal 1993 revenues included $1,189,000 for shipments to Versus
Technology, Ltd. ("VTL"), the Company's majority owned subsidiary which was
sold June 13, 1992 (Note 2 of Notes to Financial Statements). On a
comparable basis, revenues for fiscal 1994 were $620,000, or 16%, below
domestic revenues of $3,820,000 reported for fiscal 1993. The Company
anticipates no further sales to VTL. The Company's backlog of $1,022,000
at October 31, 1994 was above the comparable backlog of $337,000 at October
31, 1993. $344,000 of the backlog was included as part of the sale of the
Company's DCX product line on November 30, 1994. Of the balance,
approximately $396,000 represents a contractual commitment to purchase
products during 1995.
Cost of sales as a percentage of revenues for fiscal 1994 increased to
60% from 43% in fiscal 1993. This change was primarily due to a change in
product mix with increasing emphasis on the Company's cellular product line
with associated lower margins.
Selling, general and administrative expenses for fiscal 1994 were 25%
higher than in fiscal 1993. This increase was primarily due to the
Company's increased sales and marketing efforts pertaining to its cellular
and infrared product lines. Development expenditures increased to $500,000
for fiscal 1994 from $154,000 in fiscal 1993 and were attributable
primarily to new and improved product development. On an absolute basis,
SG&A expenses increased from fiscal 1993 compared to fiscal 1994 primarily
because of patent litigation costs associated with the cellular product
line. See "Business - Legal Proceedings"
13<PAGE>
Operating loss for fiscal 1994 was $3,165,000, compared to an
operating income of $130,000 for fiscal year ended 1993. In addition to
this operating loss, the net loss of $3,176,000 or $.76 loss per share,
included net interest and miscellaneous expenses of $11,000. Fiscal 1993
net income of $628,000, or $.15 per share, included a gain of $490,000, or
$.09 per share, on the sale of VTL.
The Company has identified two of its proprietary product lines that
present what the Company believes to be favorable opportunity markets for
the next two to five years. These product lines are the cellular alarm
products and the infrared products described above. The Company plans to
focus efforts on developing the markets, sales channels and additional
products to properly address the opportunities that these markets offer.
LIQUIDITY AND CAPITAL RESOURCES
During the twelve (12) months ended October 31, 1995, the Company
relied primarily on cash generated from operations, cash proceeds generated
from the sale of assets, and a private placementof common stock. On
September 29, 1995 the Company completed a private placement of which
generated net proceeds to the Company of approximately $2.7 million dollars.
The Company used $550,000 of the proceeds to repay certain notes payable,
and the remainder will be used for working capital. The Company believes
that the combination of the above working capital and cash generated from
operations, should be sufficient to meet projected cash needs over the next
twelve (12) months. There can, however, be no assurance that the Company
will be successful in generating sufficient operating revenue during fiscal
1996 which will be sufficient for all projected and/or unforeseen cash
needs.
Significant liquidity factors:
October 31,
_____________________________
1995 1994
____ ____
Current ratio 2.1:1 1.1:1
Quick ratio 2.0:1 0.5:1
OTHER MATTERS
The Company plans to evaluate a merger option with Olmsted. The Company
believes the basis of the merger is sound and expects to conclude
negotiations in fiscal 1996. (See "Certain Relationships and Related
Transactions")
14<PAGE>
Item 7 - Financial Statements
Index to Financial Statements
Page(s) in
Form 10-KSB
Financial Statements:
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . 16
Balance Sheets as of October 31, 1995
and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Statements of Operations for the years ended
October 31, 1995 and 1994. . . . . . . . . . . . . . . . . . . . . . . 18
Statements of Shareholders' Equity for the
years ended October 31, 1995 and 1994. . . . . . . . . . . . . . . . . 19
Statements of Cash Flows for the years ended
October 31, 1995 and 1994. . . . . . . . . . . . . . . . . . . . . .20-21
Notes to Financial Statements
October 31, 1995 and 1994. . . . . . . . . . . . . . . . . . . . . .22-37
15<PAGE>
INDEPENDENT AUDITORS' REPORT
____________________________
Board of Directors and Shareholders
Versus Technology, Inc.:
We have audited the financial statements of Versus Technology, Inc. as
listed in the accompanying index. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Versus Technology, Inc.
as of October 31, 1995 and 1994, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principals.
As discussed in note 1 to the financial statements, as of November 1, 1994,
the Company adopted the provisions of Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes".
The accompanying financial statements have been prepared assuming that
Versus Technology, Inc. will continue as a going concern. As discussed in
note 13 to the financial statements, the Company has suffered recurring
losses from operations that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters
are also described in note 13. These financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
KPMG Peat Marwick LLP
Princeton, New Jersey
February 9, 1996
16<PAGE>
VERSUS TECHNOLOGY, INC.
Balance Sheets
October 31, 1995 and 1994
Assets 1995 1994
_______ ____ ____
Current Assets:
Cash and cash equivalents $1,998,000 64,000
Trade accounts receivable (net of allowance
for doubtful accounts of $25,000 and $45,000
as of October 31, 1995 and 1994) 88,000 376,000
Notes receivable - current (note 2) - 698,000
Assets held for sale 3,000 872,000
Inventories (note 3) 11,000 295,000
Prepaid expenses and other current assets 79,000 47,000
______ _______
Total current assets 2,179,000 2,352,000
Property and equipment - net (note 4) 3,000 214,000
Deferred charges and other assets - net (note 5) 253,000 517,000
__________ _________
$2,435,000 3,083,000
__________ _________
__________ _________
Liabilities and Shareholders' Equity
____________________________________
Current liabilities:
Obligations under capital leases, current - 9,000
Accounts payable 508,000 1,197,000
Accrued expenses 395,000 375,000
Deferred revenue - customer advance payments 9,000 52,000
Deferred gain - current (note 2) - 365,000
Notes payable, current portion (note 8) 110,000 209,000
_______ _______
Total current liabilities 1,022,000 2,207,000
Notes payable, long-term (note 8) 339,000 29,000
__________ _________
Total liabilities 1,361,000 2,236,000
_________ _________
Shareholders' equity (notes 11, 12, 13, 15, and 17):
Common stock, $.01 par value 25,000,000
shares authorized 18,910,697 and 4,160,780
shares issued and outstanding in 1995
and 1994, respectively 190,000 42,000
Additional paid-in capital 23,410,000 20,834,000
Accumulated deficit (22,526,000) (20,029,000)
__________ ____________
Total shareholders' equity 1,074,000 847,000
Commitments and contingencies
(notes 13 and 15) __________ _________
$2,435,000 3,083,000
__________ _________
__________ _________
See accompanying notes to financial statements.
17<PAGE>
VERSUS TECHNOLOGY, INC.
Statements of Operations
For the years ended October 31, 1995 and 1994
1995 1994
_______ _________
Revenues:
Sales (notes 2 and 7) $ 989,000 3,200,000
_________ _________
989,000 3,200,000
_________ _________
Cost of sales 500,000 1,928,000
_________ _________
Gross margin 489,000 1,272,000
_________ _________
Cost and expenses:
Research and development (note 18) 957,000 500,000
Sales, general and administrative
(notes 16 and 18) 1,946,000 3,250,000
Patent defense costs, settlements and
judgments (note 6) 896,000 687,000
_________ _________
3,799,000 4,437,000
_________ _________
Loss from operations (3,310,000) (3,165,000)
Other income (expense):
Interest income 17,000 13,000
Interest expense (note 8) (19,000) (20,000)
Other 26,000 (4,000)
Gain on sale of subsidiary and sale of
product line(note 2) 789,000 -
_______ _______
813,000 (11,000)
_______ _______
Loss before provision for income taxes (2,497,000) (3,176,000)
Provision for income taxes (note 9) - -
Net loss $(2,497,000) (3,176,000)
___________ _________
___________ _________
Net loss per common and common
equivalent share (note 10):
Primary $ (.46) (.76)
___ ___
___ ___
Fully diluted $ (.46) (.76)
___ ___
___ ___
See accompanying notes to financial statements.
18<PAGE>
VERSUS TECHNOLOGY, INC.
Statements of Shareholders' Equity
For the years ended October 31, 1995 and 1994
Common Stock
____________
Additional
paid-in Accumulated
Shares Amount capital deficit Total
_________ ______ __________ ___________ _________
Balance,
October 31, 1993 4,155,598 $42,000 $20,826,000 $(16,853,000) $4,015,000
Issuance of
common stock:
Incentive stock
option (note 11) 3,982 - 4,000 - 4,000
Exercise of
warrants (note 11) 1,200 - 4,000 - 4,000
Net loss - - - (3,176,000) (3,176,000)
_________ ______ __________ _________ _________
Balance,
October 31, 1994 4,160,780 42,000 20,834,000 (20,029,000) 847,000
Issuance of
common stock:
Sale of common stock,
net of issuance
costs (note 11) 14,674,917 147,000 2,539,000 - 2,686,000
Directors fees 75,000 1,000 37,000 - 38,000
Net loss - - - (2,497,000) (2,497,000)
__________ _______ _________ _________ _________
Balance,
October 31, 1995 18,910,697 $190,000 $23,410,000 $(22,526,000) $1,074,000
__________ ________ ___________ _____________ __________
__________ ________ ___________ _____________ __________
See accompanying notes to financial statements.
19<PAGE>
VERSUS TECHNOLOGY, INC.
Statements of Cash Flows
For the years ended October 31, 1995 and 1994
1995 1994
_________ _________
Cash flows from operating activities:
Net income (loss) $(2,497,000) (3,176,000)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 245,000 346,000
Loss on disposal of assets (note 6) 260,000 23,000
Bad debt expense - 21,000
Gain on sale of subsidiary (365,000) -
Gain on sale of product line (424,000) -
Directors' compensation expense 38,000 -
Increase and decrease in assets
and liabilities:
(Increase) decrease in accounts receivable 308,000 465,000
(Decrease) in allowance for bad debts (20,000) -
(Increase) decrease in inventories 284,000 (162,000)
(Increase) in prepaid expenses and other
current assets (32,000) (10,000)
Increase (decrease) in accounts payable and
other liabilities (240,000) 717,000
Increase (decrease) in accrued expenses 20,000 16,000
Increase (decrease) in deferred
revenues - customer advance payments (43,000) 34,000
______ ______
Total adjustments 31,000 1,450,000
_______ _________
Net cash used in operating activities (2,466,000) (1,726,000)
__________ __________
__________ __________
Cash flows from investing activities:
Principal received on note receivable 698,000 73,000
Additions to property and equipment (19,000) (68,000)
Additions to deferred charges and other
assets (11,000) (54,000)
Proceeds on sale of assets held for sale 1,293,000 -
_________ ______
Net cash provided by (used in)
investing activities 1,961,000 (49,000)
_________ ________
_________ ________
Cash flows from financing activities:
Payments on obligation under capital
lease (9,000) (13,000)
Proceeds from issuance of note payable - 200,000
Payments on note payable (238,000) (8,000)
Sale and issuance of common stock
(note 11) 2,686,000 8,000
_________ ______
(continued)
20<PAGE>
Net cash provided by financing
activities 2,439,000 187,000
_________ _______
Net increase (decrease) in cash and cash
equivalents 1,934,000 (1,588,000)
Cash and cash equivalents, beginning of year 64,000 1,652,000
_________ _________
Cash and cash equivalents, end of year $1,998,000 64,000
__________ ______
__________ ______
Supplemental disclosures of cash flow
information:
Cash paid during the year for interest $21,000 $19,000
______ ______
Supplemental schedule of noncash investing and financing activities: During
1994, the Company had classified certain of its assets and liabilities related
to the Derived Channel Multiplex (DCX) product line as assets held for sale.
These items were sold for cash of $1,293,000 in November of 1994. The
components of those items sold are as follows, as of October 31, 1994:
Inventory $ 882,000
Property, plant and
equipment, net 47,000
Accounts payable (57,000)
_________
Assets held for sale $ 872,000
_________
_________
During 1994, the Company disposed of certain fixed assets with original costs
of $197,000 and accumulated depreciation of $174,000. A loss on disposal of
$23,000 was recognized as part of this transaction.
During 1994, the Company wrote-off $29,000 of uncollectible amounts due from
VTL.
Such amounts reduced the related deferred gain generated from the sale of VTL
in 1992 (note 2).
During 1995, approximately $449,000 of accounts payable were renegotiated to a
note payable.
See accompanying notes to financial statements.
21<PAGE>
VERSUS TECHNOLOGY, INC.
Notes to Financial Statements
October 31, 1995 and 1994
(1) Organization and Summary of Significant Accounting
Policies
Versus Technology, Inc. (Versus) develops infrared products
for the health care industry and other markets. Versus also
develops and integrates cellular products for the security
industry. Primary engineering activities include software
design, development, debugging, hardware integration,
testing, system integration, installation, maintenance,
support and training. During the year the Company
significantly downsized its manufacturing operation, moved
its headquarters and principal operating facilities, ceased
production and distribution of a significant product line
and focused development efforts on infrared product
technology.
Credit Risk:
The Company maintains its funds in national banks and does
not consider there to be a credit risk rising from cash
deposits in excess of federally insured limits. The
Company's customer base is diverse and the Company does not
believe it has a significant credit risk related to its
accounts receivable.
Inventories:
Inventories are stated at the lower of cost (first-in,
first-out method) or market.
Property and equipment:
Property and equipment are carried at cost and depreciated
over estimated useful lives, principally on the straight-
line method for financial reporting purposes and accelerated
methods for income tax purposes.
The estimated useful lives used for determination of
depreciation and amortization for financial reporting
purposes are: machinery and equipment - 3 to 10 years;
furniture and fixtures - 3 to 10 years.
Revenue recognition:
Revenue from product sales is recognized when the related
goods are shipped and all significant obligations of the
Company have been satisfied. The Company generally offers a
90 day warranty on its products. Costs incurred to service
products under warranty, which have not been significant,
are charged to operations when incurred.
22<PAGE>
Deferred revenue - customer advance payments:
Revenue from advanced payments received from customers is
deferred until all revenue recognition criteria are
satisfied.
Income taxes:
Income taxes are accounted for in accordance with Financial
Accounting Standards No. 109, "Accounting for Income
Taxes". Statement 109 requires a change from the deferred
method of accounting for income taxes under APB Opinion No.
11 to the asset and liability method of accounting for
income taxes. Under the asset and liability method of
Statement No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are
expected to be recovered or settled. Under Statement No.
109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period
that includes the enactment date.
Effective November 1, 1993, the Company adopted Statement
No. 109.
Income tax credits are accounted for as a reduction of
income tax expense in the year realized.
Intangible assets:
Patents and trademarks are recorded at cost and are
amortized using the straight-line method over seven years.
Deferred charges:
Costs incurred to ready software products for sale from the
point in time that technological feasibility has been
established, as evidenced by a detailed working program
design, to the point in time that the product is available
for general release to customers are capitalized. Such
capitalized costs are amortized using the straight-line
method over the estimated useful lives of the products,
which range from two to three years for product enhancements
and new base software products. Costs incurred prior to
establishing technological feasibility and costs incurred
subsequent to general product release to customers are
expensed as incurred.
Statements of cash flows:
For the purpose of the statements of cash flows, the Company
considers all investments with a maturity of three months or
less at date of purchase to be cash equivalents.
23 <PAGE>
Reclassifications:
Certain reclassifications have been made to the 1994
financial statements to conform to the 1995 presentation.
(2) Acquisitions and Dispositions:
Sale of Majority-Owned Subsidiary
On July 13, 1992, the Company completed the sale of all of
its capital stock of Versus Technology Ltd. (VTL), a
wholly-owned subsidiary located in the United Kingdom, and
certain other patented technology owned by the Company, to a
newly-formed organization headed by the management of VTL
and other investors. The purchase price was approximately
$1,653,000 plus repayment of indebtedness from VTL to the
Company of approximately $647,000. The Company received
$500,000 at closing with the balance deferred in periodic
payments over the next twenty-two months. Of these deferred
payments, $1,250,000 were collateralized by a subordinated
lien on the assets of VTL. In addition, as part of this
transaction, the Company was released from its guarantee
obligation under an $800,000 principal amount term loan
obtained by VTL in 1992 and the Company was obligated to pay
closing fees of approximately $260,000, of which
approximately $200,000 was to be paid over a period of
twenty-two months. Such closing fees have been accrued in
the accompanying financial statements. VTL also licensed to
the Company rights in the United States and certain other
countries to use the technology sold to VTL.
The Company realized a net gain from this transaction of
approximately $1,129,000. Due to the fact that the common
stock and certain other patented technology was sold to a
highly-leveraged group of investors, the gain was deferred
and was recognized ratably as cash was collected. The
Company recognized the balance of this deferred gain in the
amount of $365,000 in 1995 (none in 1994).
Acquisition
On August 3, 1993, the Company purchased substantially all
of the tangible and intangible assets, and none of the
liabilities, of United Identification Systems Corporation
(UIS) for approximately $400,000. UIS technology is used to
develop and manufacture security, identification and
tracking systems based on an infrared communication system.
The purchase was funded with the proceeds of a private
placement which occurred on September 2, 1993 (note 11).
The purchase price has been allocated as follows:
Patents and trademarks $365,000
Inventory 15,000
Equipment and tooling 20,000
_______
$400,000
________
________
24
(3) Inventories
Inventories as of October 31, 1995 and 1994 are as follows:
1995 1994
____ _____
Raw Materials $11,000 189,000
Work in progress - 41,000
Finished goods - 65,000
______ _______
$11,000 295,000
______ _______
______ _______
(4) Property and Equipment
Property and equipment as of October 31, 1995 and 1994 are
as follows:
1995 1994
____ ____
Machinery, equipment
and vehicles $114,000 916,000
Furniture and fixtures 25,000 124,000
_______ _________
139,000 1,040,000
Less accumulated
depreciation 136,000 826,000
_______ _______
$ 3,000 214,000
_______ ________
_______ ________
Depreciation expense was $121,000 and $221,000 in 1995 and
1994, respectively. Substantially all of the Company's
property and equipment were sold or written down to net
realizable value as a result of the Telular litigation
settlement (see note 17) and the move of the headquarters
and principal operations to Michigan (see note 16).
25<PAGE>
(5) Deferred Charges and Other Assets
Deferred charges and other assets as of October 31, 1995 and
1994 are as follows:
1995 1994
____ ____
Patents $365,000 571,000
Deferred computer
software costs - 118,000
_______ _______
365,000 689,000
Less accumulated
amortization 112,000 172,000
_______ _______
$253,000 517,000
________ ________
________ ________
(6) Patent Defense Costs
During fiscal years ended October 31, 1995 and 1994, the
Company incurred legal fees and other associated costs of
approximately $896,000 and $687,000, respectively, to defend
its proprietary patents related to certain of its cellular
products. Such costs have been charged to operations in the
accompanying financial statements. The Company was
unsuccessful in its defense of these patents (see note 17).
(7) Major Customers, Geographic Segment Information and
Export Revenues
Revenues in excess of 10% of the Company's total revenues
were attributable to sales to four and two major customers
for the years ended October 31, 1995 and 1994, respectively.
These individual major customers accounted for sales of
approximately $286,000 (29%), $144,000 (15%), $134,000 (14%)
and $103,000 (11%) in fiscal year 1995 and $1,233,000 (38%)
and $369,000 (11%) in fiscal year 1994.
All revenues, operating profit (loss), assets and
depreciation expense are generated by operations located in
the United States.
26<PAGE>
Financial information relating to export revenues for the
years ended October 31, 1995 and 1994 are as follows:
Geographic Segment Information
Export Revenues: 1995 1994
____ ____
Brazil - 78,000
Canada - 3,000
____ _______
Total - 81,000
____ _______
____ _______
(8) Notes Payable
On August 1, 1995, the Company signed a note payable to one
of its law firms for $449,000. The note bears interest at a
floating annual rate and requires 13 monthly installments of
$10,000 which commence on December 1, 1995 and a balloon
payment for the entire remaining principal balance on
January 1, 1997. The note is secured by certain patents of
the Company. The future principal amounts due under the
aforementioned loan are as follows:
1996 $110,000
1997 339,000
_______
$449,000
_______
_______
On September 29, 1994, the Company borrowed $200,000 from
five individuals (including three Directors of the Company
totaling $120,000) for operational cash flow purposes. The
notes bore interest at a rate of 8% payable semi-annually
and were due on December 31, 1995. Such amounts were paid
in full as of October 31, 1995.
(9) Income Taxes
As discussed in note 1, the Company adopted Statement No.
109 as of November 1, 1993. There was no cumulative effect
of this change in accounting for income taxes as of November
1, 1993.
There was no provision for income taxes for 1995 and 1994.
27<PAGE>
Income tax benefit for the years ended October 31, 1995 and
1994 differed from the amounts computed by applying the U.S.
Federal income tax rate of 34% to pretax loss as a result of
the following:
1995 1994
____ ____
Computed tax
benefit at 34% $(849,000) (1,080,000)
Increase in income taxes
resulting from:
Meals and entertainment
expense 4,000 4,000
Increase in
beginning of the year
balance of the valuation
allowance for deferred
tax assets 827,000 1,076,000
Other 18,000 -
________ _________
$ - -
________ _________
________ _________
28<PAGE>
The significant components of deferred income tax expense
for the year ended October 31, 1995 and 1994 are as follows:
1995 1994
____ ____
Increase in net operating
loss carryforwards $(1,181,000) (1,126,000)
(Increase) decrease
in inventory
capitalization
for tax purposes 119,000 (17,000)
(Increase) decrease in
reserve for
obsolete inventory 118,000 -
(Increase) decrease in
reserves for inventory
valuation 25,000 (9,000)
(Increase) decrease in
allowance for doubtful
accounts 8,000 (9,000)
Increase (decrease) in
various accruals and
reserves (55,000) 57,000
Increase in beginning
of the year balance
of the valuation
allowance for deferred
tax assets 972,000 1,160,000
(Increase) decrease in
difference between book vs.
tax accumulated depreciation 19,000 (32,000)
Difference in tax vs.
book treatment of
software development
costs (47,000) (12,000)
Other 22,000 (12,000)
___________ _______
$ - -
___________ _______
___________ _______
29 <PAGE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred
tax liabilities at October 31, 1995 and 1994 are presented
below:
1995 1994
____ ____
Deferred tax assets:
Net operating
loss carryforwards $6,040,000 4,860,000
Inventory capitalization
for tax purposes - 119,000
Reserves for inventory 8,000 163,000
Tax basis of software
development costs - 21,000
Allowance for doubtful
accounts 10,000 18,000
Amortization of
intangible assets 24,000 12,000
Book vs. tax basis
accumulated depreciation - 19,000
Accruals and reserves 62,000 7,000
Other - 5,000
_________ _________
Total gross deferred 6,144,000 5,224,000
tax assets
Less valuation allowance (6,144,000) (5,172,000)
_________ _________
Net deferred tax assets - 52,000
_________ _________
Deferred tax liabilities:
Tax basis of note
payable to VTL - (5,000)
Book vs. tax treatment
of software
development costs - (47,000)
_________ _________
Total gross deferred
tax liabilities - (52,000)
_________ _________
Net deferred tax liability $ - -
__________ ________
__________ ________
At October 31, 1995, net operating loss carryforwards of
approximately $15,000,000 are available for future reduction
of any Federal taxable income for income tax reporting
purposes. Such carryforwards expire in the years 2005
through 2011 and may be subject to annual limitations which
may be imposed under Section 382 of the Internal Revenue
Code of 1986.
30<PAGE>
(10) Net Loss Per Share
Net loss per common and common equivalent share for the
years ended October 31, 1995 and 1994 is based upon the
weighted average number of shares outstanding and the
equivalent shares from stock options and warrants. In 1995
and 1994, the Company has not included options and warrants
in its calculation of weighted average number of shares
outstanding due to the anti-dilutive effect of this
calculation. The determination of such shares used in
computation of per share data is as follows:
Weighted Equivalent
Twelve months average shares from
ending October no. shares dilutive Total
31, 1995 outstanding stock options shares
___________ _____________ __________
Primary 5,450,430 - 5,450,430
Fully diluted 5,450,430 - 5,450,430
Twelve months
ending October
31, 1994:
Primary 4,160,060 - 4,160,060
Fully diluted 4,160,060 - 4,160,000
(11) Stock Offerings
On September 29, 1995, the Company completed a private
placement of 14,674,917 restricted shares of unregistered
common stock. The closing price of $.20 per share
represented the fair value of the restricted common stock at
that time. The Company received $2,935,000, less placement
agent commissions of approximately $205,000 and certain
other professional fees of $19,000. In addition, the
placement agent was granted five year warrants to purchase
1,027,244 shares of the Company's common stock at a price of
$.20 per share. The proceeds were used to repay bridge loan
financing extended to the Company, fund completion of
development of a Company product, and to meet anticipated
cash flow needs. These shares also contain certain
registration rights which include, generally: (i) that the
investors, as a class, will have the right to demand
registration to be implemented by notice to the Company by a
majority interest of the investors of their desire to sell
their shares; (ii) the right will continue until public sale
under Rule 144(k) under the Securities Act of 1933, as
amended, and is available to all investors who are not
affiliates of the Company, for three years from closing; and
(iii) during this period, investors will have the right to
participate in a public offering by the Company of its
shares of common stock, subject to underwriter's cut back.
31<PAGE>
During 1995, the Company issued 75,000 shares of common
stock to its directors in lieu of cash for their annual
director fees. The shares were issued at $.50 per share,
and the related director fee expense has been recognized in
the accompanying financial statements.
On February 15, 1994, the Company adopted the first
amendment to the Class A warrant agreement. This amendment
extended the life of the Class A warrants to February 15,
1995.
During fiscal year 1993, the Company completed a private
placement of 1,000,000 restricted shares of unregistered
common stock. The closing price was $2.05 per share which
represented the estimated fair value of the restricted
common stock at that time. The Company received $2,050,000,
less placement agent's commission of approximately $137,000
and certain other professional fees of $139,000. In
addition, the placement agent was granted five year warrants
to purchase 70,000 shares of the Company's common stock at a
price of $2.05. The proceeds were used to fund the purchase
of the tangible and intangible property of United
Identification Systems Corporation (see note 2), reduce
current liabilities and increase working capital. These
shares also contain certain registration rights which
include, generally: (i) that the investors as a class will
have the right to demand registration to be implemented by
notice to the Company by a majority interest of the
investors of their desire to sell their shares; (ii) the
right will continue until unrestricted public sale is
available to all investors, three years from closing; and
(iii) during this period, investors will have the right to
participate in a public offering by the Company of its
shares of common stock, subject to underwriter's cut back.
In addition, the Company granted to the purchasers of the
aforementioned shares of unregistered stock, escrow warrants
which entitle the holders to purchase 225,000 shares of
common stock for $2.05 per share for a period of five years
if: (i) the final maturity of the redeemable Class A or
Class B warrants is extended beyond February 15, 1994; or
(ii) any of the outstanding redeemable Class A warrants are
exercised, in which case the escrow warrants will be
released, thereby becoming exercisable, in the same
proportion which the number of redeemable Class A warrants
exercised bears to the total number of redeemable Class A
warrants outstanding.
At October 31, 1995, the Company has outstanding warrants in
the following amounts exercisable through the following
dates:
1. Warrants to purchase 225,000 shares at an
exercise price of $2.05 and expiring in 1998;
32<PAGE>
2. Warrants to purchase 70,000 shares at an
exercise price of $2.05 and expiring in 1998;
3. Warrants to purchase 100,000 shares at an
exercise price of $1.00 and expiring in 1999,
issued to lenders with respect to a bridge loan
extended to the Company in September of 1994;
4. Warrants to purchase 275,000 shares at an
exercise price of $0.50 and expiring in 2000,
issued to lenders with respect to a bridge loan
extended to the Company in July of 1995;
5. Warrants to purchase 2,233,800 shares of common
stock (the "Class A warrants"). The Class A
Warrants by the terms of the original warrant
agreements and first amendment have expired.
The warrant agreement has been amended a second
time by the Company to extend, but change the
exercise terms of Class A warrants. The Class A
warrants are exercisable as follows: for four
warrants and $1.75, the holder can obtain one
share of common stock; 558,450 shares are
therefore issuable with respect to the Class A
warrants. The Class A Warrants expire in
February of 1996; and
6. Warrants to purchase 1,027,244 shares
exercisable at $0.20 have been issued to the
1995 Private Placement Agent and expire in
September of 2000.
(12) Stock Options
The Company has outstanding options pursuant to its
Incentive and Executive Stock Option Programs to purchase a
total of 462,001 shares, including options to purchase
143,333 shares at prices ranging from $0.84 to $1.44 which
expired in October 1995, options to purchase 268,668 shares
at $0.84 to $2.56 and expiring between 1996 and 1998, and
options to purchase 50,000 shares at $1.44 and expiring in
2008. There are also outstanding three options to acquire a
total of 300,000 shares held by directors at prices ranging
from $2.62 to $2.69 and expiring by 2000. In addition, the
Company has issued an option expiring in 2000 to purchase
100,000 shares at $0.50 per share to a former employee.
There are 195,000 other options presently outstanding with
exercise prices ranging between $2.00 and $2.63 and expiring
by 1999. All options outstanding at October 31, 1995 are
exercisable.
(13) Going Concern and Liquidity
Losses accumulated during the fiscal year and accumulated
losses to date have had a significant adverse impact on the
Company's financial position. The Company believes that
33<PAGE>
internally generated funds from anticipated sales,
continuing cost reductions and the capital generated from
the sale a product line in addition to funds raised in the
1995 private placement (note 11) should be sufficient to
supply the working capital needed to carry on its operations
throughout fiscal 1996. The Company is continuing to pursue
additional revenues to supplement its current working
capital, including possible joint ventures and the placement
of debt and/or equity securities. There can, however, be no
assurance that the Company will be successful in generating
sufficient capital and/or obtaining a credit facility or
obtaining additional equity funds during fiscal 1996 which
will be sufficient for all projected and/or unforeseen cash
needs.
(14) Benefit Plans
401(k) Plan:
The Company maintains a 401(k) plan for all of its
employees. Under the 401(k) plan, for each dollar
contributed by an employee to a retirement savings account
in any year (which may not be less than 2% nor more than 17%
of the employee's annual compensation), the Company
contributes $.50. Such amount is limited to a maximum of 3%
of the employee's direct compensation for that year.
Participants are fully vested in the 401(k) plan at all
times for those amounts attributable to their own
contributions and Company contributions. The Company's
contribution to the plan was $8,000 and $27,000 for the
years ended October 31, 1995 and 1994, respectively.
(15) Commitments and Contingencies
On November 1, 1993, the Company entered into employment
agreements with two officers of the Company which run
through December 31, 1995. The agreements provide for: (i)
compensation at a specified rate; (ii) incentive
compensation upon meeting specified revenues and cash flow
levels; and (iii) participation in the Company's Restated
Executive Plan.
In 1991, the Company extended employment contracts to
selected employees which run through December 31, 1995.
These contracts provide for minimum base salaries plus
additional amounts based upon attaining specific fiscal year
performance levels. In addition, each employment contract
contains "change in control" provisions (as defined) that
would entitle the employee to receive predetermined pay
benefits if there is a "change in control" in the Company
and a termination of employment. Such contracts have
expired as of October 31, 1995 or have been renegotiated in
connection with terminations.
34<PAGE>
(16) Relocation
The Company closed its New Jersey location in September
1995, and moved all operations of the Company to the
Traverse City, Michigan office location. All related costs
of this relocation, including the write down of
non-essential fixed assets to net realizable value, have
been recognized in the accompanying financial statements.
(17) Litigation
In January 1995, the Company settled litigation pending with
a former employee of the Company (See note 12). As part of
the settlement, this employee agreed to forego all his prior
options, and was issued 100,000 new options immediately
exercisable at $.50 per share, expiring five years from the
date of issuance. The additional costs of this settlement
have been recognized in the Company's financial statements.
A judgment has been entered against the Company in the
current fiscal year in connection with litigation relating
to the exercise of warrants. The judgment of approximately
$195,000 has been accrued in the Company's financial
statements. The Company is currently appealing this
decision.
The Company's defense in a patent infringement suit proved
unsuccessful. A judgment in the amount of approximately
$132,000 was entered against the Company. This judgment has
been settled by transferring $121,000 in inventory to the
Plaintiff. The remainder of the judgment was settled by a
cash payment subsequent to year end. All amounts of the
settlements have been fully accrued in the accompanying
financial statements.
In connection with the patent infringement judgment, the
Company has written down all inventory, intangible assets,
and fixed assets related to the product line named in the
lawsuit to net realizable value.
(18) Related Parties:
The President and Chief Executive Officer of the Company is
also a member of the Board of Directors and a stockholder of
Olmsted Engineering.
Olmsted Engineering provided a number of resources to Versus
Technology, Inc. for the fiscal year ended October 31, 1995,
including research and development, pass-through billings,
35<PAGE>
use of office space and development of a business plan.
The breakdown of related party billings for the year
ended October 31, 1995 is as follows:
Programming Engineering $666,000
Pass-through Billings:
Legal $14,000
Hardware 80,000
UPS 2,000
Travel 47,000
_______
Total 143,000
Business Plan & Materials 39,000
_______
Total Olmsted Billings $848,000
________
________
The Company believes services provided by Olmsted have been
negotiated at arm's length at the fair value of goods and
services received. The Company is currently maintaining its
headquarters and principal operating facilities at the
business location of Olmsted, free of rent charges.
Additionally, Olmsted has the option to merge into Versus
at $.25 a share based upon the Olmsted book value, provided
the book value of Olmsted shall be no greater than $1.5
million. The right to merge is further conditioned upon
the receipt of a fairness opinion that the fair market
value of Olmsted is greater than or equal to its book
value and the shareholders of Versus approve the merger.
(19) Subsequent Events
On November 11, 1995 a judgment relating to pending
litigation was entered against the Company in an amount of
approximately $195,000 (note 17). The Company was required
to segregate and restrict funds in an amount sufficient to
cover this judgment, and has done so subsequent to October
31, 1995. The Company has filed an appeal in this matter
(see note 17).
On January 11, 1996 the Company tendered final payment
relating to the satisfaction of a judgment for patent
infringement against the Company (see note 17).
On January 26, 1996 the Company entered into an agreement to
lease building space from an officer of the Company (see
note 18). The term of the lease commitment is five years,
at an amount of $4,750 per month. The start date of the
lease term has not been determined, as the building
construction has not been completed.
On January 26, 1996 the Chairman of the Board of Directors
and Chief Financial Officer resigned from the Company. In
36<PAGE>
connection with his resignation, the individual signed a
Stock Redemption Agreement and a Nonqualified Stock Option
Agreement with the Company. The Company repurchased 425,000
shares from the individual, which were placed into treasury
stock, and designated for issuance to employees for future
incentive plans. The options issued to the individual are
for the purchase of 100,000 shares at an exercise price of
$.50 per share, at any time for a period of five years from
the date of issuance.
Item 8 - Changes in and Disagreement with Accountants on
Accounting and Financial Disclosure
NONE
37<PAGE>
PART III
Item 9 - Directors and Executive Officers; Promoters and
Control Persons; Compliance with Section 16(a) of the
Exchange Act
Management Age Position(s) with the
Company
John G. Ross 60 Director
Gary T. Gaisser 44 Director, President
and Chief Executive
Officer
Owen O. Freeman, Jr. 61 Director
Julian C. Schroeder 48 Director
Debra A. Boyer 43 Chief Financial
Officer and
Controller
John G. Ross has served as a director of the Company
since October, 1992. Previously, Mr. Ross has served as
First Vice President of Paine Webber Specialists, a New York
Stock Exchange Specialist firm, from 1989 to 1991. Mr. Ross
is also a director of General Energy Resources and
Technology Corporation.
Gary T. Gaisser has served as President and Chief
Executive Officer of the Company since January of 1995. He
is also currently the President and Chief Executive Officer
of Olmsted. Mr. Gaisser has been with Olmsted since 1988.
Olmsted performs contract software and hardware engineering
as well as developing and selling software for precision
machining applications.
Owen O. Freeman, Jr. has served as a director of the
Company since October, 1988. He has served as Chairman of
the Board of Directors of Commonwealth State Bank, in
Newtown, Pennsylvania and its parent holding company,
Penncore Financial Services Corporation, since December,
1986. Mr. Freeman has also been Chairman of the Board of
First Capitol Bank in York, Pennsylvania since July, 1988.
In addition, Mr. Freeman serves as Chairman of the
Pennsylvania Association of Community Bankers and as a
director of H.C. Gulden Manufacturing Company.
Julian C. Schroeder has served as a director of the
Company since August, 1994. He has served with BDS
Securities Corporation (a registered broker-dealer) since
1989, most recently as President since June, 1995. Mr.
Schroeder is a director of BDS Securities Corporation and of
Optical Coating Laboratories, a manufacturer of thin-film
products.
38<PAGE>
Debra A. Boyer has served as Chief Financial Officer of
the Company since January, 1996 and controller since
November, 1995. Previously Ms. Boyer has served as an
accountant with a certified public accounting firm, from
January 1995 to September 1995. Ms. Boyer had managed her
own accounting business from 1991 to 1994.
Item 10 - Executive Compensation
EXECUTIVE COMPENSATION
The following table sets forth the annual compensation
paid to persons serving as Officers of the Corporation
during the fiscal year ended October 31, 1995. No executive
officer of the Company received cash compensation for the
fiscal year ended October 31, 1995 equaling or exceeding
$100,000:
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation(1) Compensation
______________________________ ___________
Name & Principal Fiscal Option
Position Year Salary($) Bonus($) Other($) Awards
________________ ______ _________ ________ ________ ________
Gary T. Gaisser 1995 52,000 0 0 0
President and Chief 1994 - - - -
Executive Officer 1993 - - - -
John Mischak 1995 35,000 0 25,000 100,000
Former Chief 1994 121,154 350 0 0
Executive Officer 1993 100,248 32,250 0 567,000
Options
The only options granted to named executive officers during the year were an
option to purchase 100,000 shares granted to Mr. Mischak exercisable at $.50 a
share. These were the only options outstanding at year end to named executive
officers and these options were exercisable. No options were exercised by
named executive officers during the year. No options held by named executive
officers had any value at year end.
Compensation of Directors
Each Director of the Company receives a basic fee of 15,000 shares of the
Company's Common Stock annually for service on the Board, plus a $100 per
meeting attendance fee. The Company has no other standard or other arrangement
39<PAGE>
whereby Directors are compensated for their services to the Company. The
Company's By-Laws provide that Directors may be compensated as the Board of
Directors may from time to time determine, and be reimbursed for the reasonable
expenses incurred in connection with the performance of their duties. All
Directors receive $100 for attending each committee meeting of the Board when
such meeting is held on a date other than the date of a Board meeting. In
addition, on November 11, 1993, the Company adopted the Independent Directors
Non-Qualified Stock Option Plan, whereby Directors who are not employees of the
Company can be awarded options to purchase up to 1,000,000 shares of the
Company's Common Stock.
Item 11 - Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners
The following table sets forth information as to the Common Stock
beneficially owned (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended), by any person who as of January 31, 1996 to
the knowledge of the Board of Directors of the Company, owned beneficially more
than 5% of the outstanding Common Stock of the Company, the only class
authorized:
Name & Address of Amount and Nature of Percentage of
Beneficial Owner Beneficially Owned Class Outstanding
_________________ ____________________ _______________
William Harris Investors, Inc. 2,175,000(1) 11.8
2 North LaSalle Street, Suite 400
Chicago, IL 60602
Irving B. Harris 1,050,000(2) 5.7
2 North LaSalle Street, Suite 400
Chicago, IL 60602
Jerome Kahn, Jr. 1,325,000(2) 7.2
2 North LaSalle Street, Suite 400
Chicago, IL 60602
Anthony Low-Beer 1,500,000(3) 8.1
c/o Mitchell Securities
100 Park Avenue
New York, NY 10017
Elliot Eisenberg 1,502,728(4) 8.1
101 East 52nd Street
New York, NY 10022
BDS Capital Holdings, L.L.C. 1,097,244(5) 5.6
101 East 52nd Street
New York, NY 10022
____________________________________
(1) As reported on Schedule 13G filed October 10, 1995.
40<PAGE>
(2) As reported on Schedule 13D filed October 10, 1995. The shares reported
beneficially owned by Mr. Harris and the shares reported beneficially owned by
Mr. Kahn are reported as included on the Schedule 13G filed by William Harris
Investors, Inc.
(3) As reported on Schedule 13D filed October 10, 1995.
(4) As reported on Schedule 13D filed on October 10, 1995. Of these shares,
100,000 may be acquired upon the exercise of warrants held.
(5) As reported on Schedule 13D filed October 10, 1995. All of these shares
may be acquired upon the exercise of warrants held.
Security Ownership of Management
The following table sets forth as of January 31, 1996 the beneficial
ownership of the Company's Common Stock by all Directors and by all the
Directors and Executive Officers of the Company as a group:
Approximate No.
of Shares of
Common Stock
Name & Address of Position(s) Beneficially Percent
Beneficial Owner with the Company Owned(1) of class
__________________ ________________ _______________ _________
Gary T. Gaisser President, 574,888(2) 3.1
Chief Executive
Officer & Director
Owen O. Freeman, Jr. Director 136,765(3) 0.7
John G. Ross Director 541,665(4) 2.9
Julian C. Schroeder Director 340,000(5) 1.8
All executive officers and directors as
a group (4 persons) 1,593,318(6) 8.5
_______________________________
(1) Each director has sole voting and investment power as to all shares
reflected as beneficially owned by him, except as otherwise noted. Messrs.
Gaisser, Freeman, Ross and Schroeder are all of the Company's present
directors. The mailing address of Messrs. Gaisser, Ross and Schroeder is 2320
Aero Park Court, Traverse City, Michigan 49686. The mailing address of Mr.
Freeman is c/o Commonwealth State Bank, Route 332, Newtown, Pennsylvania 18940.
(2) This amount includes 509,888 shares owned by Olmsted and 50,000 shares
currently acquirable by Olmsted upon exercise of an outstanding warrant issued
by the Company in partial consideration for moneys lent by Olmsted to the
Company during the fiscal year ended October 31, 1995. See "Certain
Relationships and Related Transactions" below.
41<PAGE>
(3) This amount includes 100,000 shares currently acquirable by Mr. Freeman
upon exercise of outstanding options granted pursuant to the Independent
Directors Plan by the Company.
(4) This amount includes 100,000 shares currently acquirable upon exercise of
outstanding options granted pursuant to the Independent Directors Plan by the
Company, 30,000 shares currently acquirable upon exercise of an outstanding
warrant issued by the Company in consideration for, in part, moneys lent by Mr.
Ross to the Company during the fiscal year ended October 31, 1994 and 25,000
shares currently acquirable upon exercise of an outstanding warrant issued by
the Company in partial consideration for monies lent by Mr. Ross to the Company
during the fiscal year ended October 31, 1995. See "Certain Relationships and
Related Transactions" below.
(5) This amount includes 25,000 shares currently acquirable under the terms of
the warrant issued by the Company in consideration for, in part, monies lent by
Mr. Schroeder to the Company during the fiscal year ended October 31, 1994 and
25,000 shares currently acquirable upon exercise of an outstanding warrant
issued by the Company in partial consideration for monies lent by Mr. Schroeder
to the Company during the fiscal year ended October 31, 1995. See "Certain
Relationships and Related Transactions" below.
(6) This amount includes 355,000 shares currently acquirable under outstanding
warrants and options.
Based solely upon a review of Forms 3 and 4 furnished to Versus pursuant
to Rule 16a-3(e) and written statements from directors and executive officers
that no report on Form 5 is due, no reporting person failed to file reports
required under Section 16(a) of the Securities and Exchange Act of 1934 with
respect to Versus securities.
Item 12 - Certain Relationships and Related Transactions
Olmsted is the principal consultant to Versus on IR-Tracking. On April
20, 1995, the Corporation entered into a Consultanting Agreement with Olmsted,
which is principally owned by the Company's President and Chief Executive
Officer, Gary T. Gaisser. The Agreement runs for a one-year period, commencing
on April 20, 1995. Under this Agreement, the Consultant receives an annual fee
of $144,000, payable monthly. They are further entitled to a fee at the rate of
$90.00 an hour for man-hours in excess of 100 hours each month.
On July 1, 1995, the Company entered into a loan transaction with Messrs.
Ross, Schroeder, Snowday, Eisenberg and two additional individuals who are
unrelated to the Company (collectively, the "1995 Lenders") whereby the 1995
Lenders lent the Company a total of $550,000 cash (the "1995 Loan"). The
Company issued promissory notes to each of the 1995 Lenders representing his or
its pro rata portion of the 1995 Loan. The 1995 Loan was secured by an
assignment of certain patents. As additional consideration for the 1995 Loan,
the Company issued five year warrants to the Lenders to purchase a total of
275,000 shares of the Company's common stock at a purchase price of $0.50 per
share (of which Olmsted and Messrs. Ross, Schroeder and Snowday are entitled
to, collectively, 125,000 shares). The warrants expire on June 30, 2000. The
42<PAGE>
Company has also granted registration rights to the holders of the warrants, at
the Company's expense, for each share of stock issued pursuant to an exercise
of any warrant, subject to certain limitations, and also in the event the
Company registers additional shares in a secondary offering. The 1995 Loan,
together with the interest thereon, was repaid in full by the Company to the
1995 Lenders as of September 29, 1995. Several of these 1995 Lenders chose to
immediately re-invest the proceeds of such repayment in the Company by
purchasing shares of Common Stock privately offered by the Company at $.20 a
share. See "Security Ownership of Certain Beneficial Owners and Management"
above.
Incident to the September 29, 1995 private placement, the Company
negotiated an incentive arrangement with Olmsted, of which Gary T. Gaisser,
President of Versus, is the principal shareholder, pursuant to which until the
Company has revenues of $1,000,000 or more and positive net income, excluding
non-recurring gains or losses, within one quarter or January 31, 1997, with an
extension to July 31, 1997 under certain conditions, Olmsted would have the
option to merge with Versus at $.25 a share based upon the Olmsted book value,
provided the book value shall be no greater than $1.5 million. The right to
merge is further conditioned upon the receipt of a fairness opinion that the
fair market value of Olmsted is greater than or equal to its book value and the
shareholders of Versus approve the merger.
Julian Schroeder is the President and a shareholder of BDS Securities
Corporation, the placement agent for the private placement. In connection with
the private placement, BDS Securities received a placement fee of $205,450
together with five-year Warrants to purchase 1,027,244 shares at $.20 a share.
In January of 1995, John Mischak ceased to be the Chief Executive Officer
and a Director of Versus Technology, Inc. In partial consideration of his
termination and waiving all claims under his Employment Agreement, Mr. Mischak
received an option for 100,000 shares of Versus Common Stock at $.50 a share
until August 7, 2000. In January of 1996, Terry Snowday ceased to be Chairman
of the Board of Directors and a Director of Versus Technology. At the time of
his departure, Mr. Snowday was also granted an option to purchase 100,000
shares of Versus Common Stock at $.50 a share until August 7, 2000.
Item 13 - Exhibits and Reports on Form 8-K
(a) The following documents are filed as part of this report:
(1) Financial statements included in Part II of this report.
(2) Exhibits included in the Exhibit Index on Page 23.
(b) Reports on Form 8-K during the fourth fiscal quarter: None
43<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the issuer has duly caused this Annual Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
VERSUS TECHNOLOGY, INC.
By: DEBRA A. BOYER By: GARY T. GAISSER
_____________________________________ _____________________________________
Debra A. Boyer Gary T. Gaisser
Controller and Chief Financial Officer President and Chief Executive Officer
(Principal Accounting Officer) (Principal Executive Officer)
Dated: February 12, 1996
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the issuer and in the capacities and on the
dates indicated:
GARY T. GAISSER February 12, 1996
__________________________
Gary T. Gaisser
Director
OWEN O. FREEMAN, JR. February 12, 1996
__________________________
Owen O. Freeman, Jr.
Director
JOHN G. ROSS February 12, 1996
__________________________
John G. Ross
Director
JULIAN C. SCHROEDER February 12, 1996
__________________________
Julian C. Schroeder
Director
44<PAGE>
Exhibit Index
Page
3(a)(i) Certificate of Incorporation dated October 11, 1988
(Filed October 14, 1988) . . . . . . . . . . . . . . . . . . . . 46
(a)(ii) Certificate of Amendment of Certificate of Incorporation
dated October 25, 1989 (Filed October 26, 1989) .. . . . . . . . 49
(a)(iii) Certificate of Amendment of Certificate of Incorporation
dated December 17, 1993 (Filed December 20, 1993) . . . . . . . 51
(b) By Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10(a) Medical Enterprises International Inc. Manufacturer's
Representative Agreement . . . . . . . . . . . . . . . . . . . . 72
(b) Excerpt from Private Placement Memorandum
regarding Merger with Olmsted . . . . . . . . . . . . . . . . . 80
(c) Olmsted Consulting Agreement . . . . . . . . . . . . . . . . . . 82
(d) Registration Rights Agreement dated September 15, 1995 . . . . . 90
(e) Registration Rights Agreement dated July 1, 1995 . . . . . . . .100
(f) Registration Rights Agreement dated September 27, 1994*
(g) Independent Directors' Plan*
27(a) Financial Data Schedule . . . . . . . . . . . . . . . . . . . .110
__________________
* Incorporated by reference from Exhibits to a Registration Statement on
Form S-3SB filed January 11, 1994.
45
<PAGE>
EXHIBIT 3(a)(i)
Certificate of Incorporation
Dated October 11, 1988
(Filed October 14, 1988)
46<PAGE>
CERTIFICATE OF INCORPORATION
OF
BT TELECOM, INC.
The undersigned incorporator, a natural person over the age of
eighteen years, in order to form a corporation under the General
Corporation Law of the State of Delaware, certifies as follows:
1. Name. The name of the corporation is BT Telecom,
Inc. (hereinafter referred to as the "Corporation").
2. Purposes. The nature of the business and purposes
to be conducted or promoted by the Corporation are to engage in,
carry on and conduct any lawful act or activity for which
corporations may be organized under the General Corporation Law of
the State of Delaware.
3. Address; Registered Agent. The address of the
Corporation's registered office is 229 South State Street, City of
Dover, County of Kent, State of Delaware; and its registered agent
at such address is The Prentice-Hall Corporation System, Inc.
4. Number of Shares. The total number of shares of
stock which the Corporation shall have authority to issue is Ten
Million (10,000,000) shares, all of which shall be shares of Common
Stock, par value of $.01 per share.
5. Name and Address of Incorporator. The name and
mailing address of the incorporator are: Nathaniel L. Corwin,
Esq., 237 Park Avenue, New York, New York 10017.
6. Indemnification and Exculpation. The Corporation
shall, to the fullest extent permitted by Section 145 of the
General Corporation Law of the State of Delaware now if effect and
as amended from time to time, indemnify all persons whom it may
indemnify pursuant thereto. A director of the Corporation shall
not be personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except
for liability (i) for any breach of the director's duty of loyalty
to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware
General Corporation law or (iv) for any transaction from which the
director derived an improper personal benefit.
7. Adoption, Amendment and/or Repeal of By-Laws. The
Board of Directors may, from time to time (after adoption by the
undersigned of the original By-Laws of the Corporation) make, alter
or repeal the By-Laws of the Corporation; provided, however, that
any By-Laws made, amended or repealed by the Board of Directors may
be amended or repealed, and any By-Laws may be made, by the
stockholders of the Corporation.
IN WITNESS WHEREOF, this Certificate has been signed on
this 11th day of October, 1988.
NATHANIEL L. CORWIN, INCORPORATOR
___________________________________
Nathaniel L. Corwin, Incorporator
47<PAGE>
EXHIBIT 3(a)(ii)
Certificate of Amendment of
Certificate of Incorporation
Dated October 25, 1989
48<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
BT TELECOM, INC.
BT TELECOM, INC. a corporation organized and existing by
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said
corporation, by the vote of a majority of the Directors present at
a meeting held on August 4, 1989, at which a quorum was present,
adopted resolutions proposing and declaring advisable the following
amendments to the Certificate of Incorporation of said corporation
and directed its consideration by the stockholders:
RESOLVED, that the Certificate of Incorporation of the
Corporation be amended by changing Article 1. thereof so that,
as amended, said Article shall be and read as follows:
1. Name. The name of the corporation is Versus
technology, Inc. (hereinafter referred to
as the "Corporation").
SECOND: That the aforesaid amendment was adopted by the
vote of a majority of the stockholders of said corporation entitled
to vote thereon at a special meeting of the stockholders of the
corporation duly called and held upon notice in accordance with the
provisions of Section 222 of the General Corporation Law of the
State of Delaware, at which a quorum was present.
THIRD: That the aforesaid amendment was duly adopted
in accordance with the applicable provisions of Sections 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the corporation has caused this
certificate to be signed by Donald M. Hooton, its President and
attested by Richard W. Haff, its Secretary this 25th day of
October, 1989.
BT TELECOM, INC.
By: DONALD M. HOOTON
__________________________
President
ATTEST:
By: RICHARD W. HAFF
___________________________
Secretary
49<PAGE>
EXHIBIT 3(a)(iii)
Certificate of Amendment of
Certificate of Incorporation
dated October 25, 1989
50<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
VERSUS TECHNOLOGY, INC., a corporation organized and
existing by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said
corporation, by the vote of a majority of the Directors present at
a meeting held on November 11, 1993, at which a quorum was present,
adopted resolutions proposing and declaring advisable the following
amendment to the Certificate of Incorporation of said corporation
and directed its consideration by the stockholders:
RESOLVED, that the Certificate of Incorporation of
the Corporation be amended by changing Article 4, thereof
so that, as amended, said Article shall be and read as
follows:
4. Number of Shares. The aggregate number of shares
which the corporation shall have the authority to issue
is 25,000,000 shares, par value $.01 per share. The
stated value applicable thereto is two hundred fifth
thousand dollars ($250,000).
SECOND: That the aforesaid amendment was adopted by the
affirmative vote of a majority of the votes cast by all
stockholders of said corporation entitled to vote thereon at a
special meeting of the stockholders of the corporation duly called
and held upon notice in accordance with the provisions of Section
222 of the General Corporation Law of the State of Delaware, at
which a quorum was present.
THIRD: That the aforesaid amendment was duly adopted in
accordance with the applicable provisions of Section 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the corporation has caused this
certificate to be signed by John Mischak, Jr., its President and
attested by Richard W. Haff, its Secretary this 17th day of
December, 1993.
VERSUS TECHNOLOGY, INC.
JOHN MISHAK, JR.
By:___________________________
John Mishak, Jr., President
ATTEST:
RICHARD W. HAFF
By:___________________________
Richard W. Haff, Secretary
51<PAGE>
EXHIBIT 3(b)
BY-LAWS
52<PAGE>
BY-LAWS
OF
Versus Technology, Inc.
(A DELAWARE CORPORATION)
ARTICLE I
DEFINITIONS
As used in these By-laws, unless the context otherwise
requires, the term:
1.1 "Assistant Secretary" means an Assistant Secretary of
the Corporation.
1.2 "Assistant Treasurer" means an Assistant Treasurer of
the Corporation.
1.3 "Board" means the Board of Directors of the
Corporation.
1.4 "By-laws" means the initial By-laws of the Corporation,
as amended from time to time.
1.5 "Certificate of Incorporation" means the initial
certificate of incorporation of the corporation, as amended,
supplemented or restated from time to time.
1.6 "Chairman of the Board" means the Chairman of the Board
of Directors of the Corporation.
1.7 "Chief Executive Officer" means the Chief Executive
Officer of the Corporation.
1.8 "Corporation" means Versus Technology, Inc.
1.9 "Directors" means directors of the Corporation.
1.10 "General Corporation Law" means the General Corporation
Law of the State of Delaware, as amended from time to time.
1.11 "Office of the Corporation" means the executive office
of the Corporation, anything in Section 131 of the General
Corporation Law to the contrary notwithstanding.
1.12 "President" means the President of the Corporation.
1.13 "Secretary means the Secretary of the Corporation.
53
1.14 "Stockholders" means stockholders of the Corporation.
1.15 "Total number of directors" means the total number of
directors determined in accordance with Section 141(b) of the
General Corporation Law and Section 3.2 of the By-laws.
1.16 "Treasurer" means the Treasurer of the Corporation.
1.17 "Vice President" means a Vice President, including an
Executive Vice President or Senior Vice President, if any, of the
Corporation.
1.18 "Whole Board" means the total number of directors of
the Corporation.
ARTICLE 2
STOCKHOLDERS
2.1 Place of Meetings. Every meeting of stockholders shall
be held at the office of the Corporation or at such other place
within or without the State of Delaware as shall be specified or
fixed in the notice of the meeting or in any waiver of notice
thereof.
2.2 Annual Meeting. A meeting of stockholders shall be
held annually for the election of directors and the transaction
of such other business as properly may come before the meeting at
a location, date and time determined by the Board.
2.3 Special Meetings. A special meeting of the
stockholders (other than a special meeting for the election of
directors), unless otherwise prescribed by statute, may be called
at any time by the Board or by the Chairman of the Board or Chief
Executive Officer or President to be held on the date and the
time and place within or without the State of Delaware as the
Board, the Chairman of the Board, the Chief Executive Officer or
the President, whichever has called the meeting, shall direct.
At any special meeting of stockholders, the only business that
may be transacted shall be business related to the purpose or
purposes of the meeting set forth in the notice thereof given
pursuant to Section 2.5 of the By-laws or in any waiver of notice
thereof given pursuant to Section 2.6 of the By-laws.
2.4 Fixing Record Date. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or for the purpose
of determining stockholders entitled to receive payment of any
dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other
lawful action, the Board may fix, in advance, a date as the
54<PAGE>
record date for any such determination of stockholders. The
record date shall not be more than sixty nor less than ten days
before the date of the meeting, nor more than sixty days prior to
any other action. If no record date is fixed:
2.4.1 The record date for the determination of
stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day
immediately preceding the day on which notice is given or,
if no notice is given or if notice is waived, at the close
of business on the day immediately preceding the day on
which the meeting is held;
2.4.2 The record date for determining stockholders
entitled to express consent to corporate action in writing
without a meeting, when no prior action by the Board is
necessary, shall be the day on which the first written
consent setting forth the action taken or proposed to be
taken is delivered to the Corporation;
2.4.3 The record date for determining stockholders for
any purpose other than those specified in Sections 2.4.1 and
2.4.2 shall be at the close of business on the day on which
the Board adopts the resolution relating thereto.
When a determination of stockholders entitled to notice of or to
vote at any meeting of stockholders has been made as provided in
this Section 2.4, the determination shall apply to any
adjournment thereof, unless the Board fixes a new record date for
the adjourned meeting.
2.5 Notice of Meetings of Stockholders. Except as
otherwise provided in Sections 2.4 and 2.6 of the By-laws,
whenever under the General Corporation Law or the Certificate of
Incorporation or the By-laws, stockholders are required or
permitted to take any action at a meeting, written notice shall
be given stating the place, date and hour of the meeting and, in
the case of a special meeting, the purpose or purposes for which
the meeting is called. Except as otherwise provided by the
General Corporation Law, a copy of the notice of any meeting
shall be given, personally or by mail, not less than ten nor more
than sixty days before the date of the meeting, to each
stockholder entitled to notice of or to vote at such meeting. If
mailed, such notice shall be deemed to be given when deposited in
the United States mail, with postage prepaid, directed to the
stockholder at his address as it appears on the records of the
Corporation. An affidavit of the Secretary or an Assistant
Secretary or of the transfer agent of the Corporation that the
notice required by this section has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated
therein. When a meeting is adjourned to another time or place,
55<PAGE>
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, and at the adjourned meeting any business
may be transacted that might have been transacted at the meeting
as originally called. If, however, the adjournment is for more
than thirty 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.
2.6 Waivers of Notice. Whenever notice is required to be
given to the stockholder under any provision of the General
Corporation Law or the Certificate of Incorporation or the
By-laws, a written waiver thereof, signed by the stockholder
entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a
stockholder at a meeting shall constitute a waiver of notice of
the meeting, except when the stockholder attends a meeting for
the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on grounds that 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 need be specified in any written
waiver of notice.
2.7 List of Stockholders. The Secretary shall prepare and
make, or cause to be prepared and made, at least ten 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. The stockholders 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 days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified,
or 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.
2.8 Quorum of Stockholders; Adjournment. The holders of
one-half of the shares of stock entitled to vote at any meeting
of stockholders, present in person or represented by proxy, shall
constitute a quorum for the transaction of any business at the
meeting. When a quorum is once present to organize a meeting of
stockholders, it is not broken by the subsequent withdrawal of
any stockholders. The holders of a majority of the shares of
stock present in person or represented by proxy at any meeting of
stockholders, including an adjournment meeting, whether or not a
quorum is present, may adjourn the meeting to another time and
place.
56<PAGE>
2.9 Voting; Proxies. Unless otherwise provided in the
Certificate of Incorporation, every stockholder of record shall
be entitled at every meeting of stockholders to one vote for each
share of capital stock standing in his name on the record of
stockholders determined in accordance with Section 2.4 of the
By-laws. The provisions of Sections 212 and 217 of the General
Corporation Law shall apply in determining whether any shares of
capital stock may be voted and the persons, if any, entitled to
vote those shares, but the Corporation shall be protected in
treating the persons in whose names shares of capital stock stand
on the record of stockholders as owners thereof for all purposes.
At any meeting of stockholders (at which a quorum was present to
organize the meeting), all matters, except as otherwise provided
by law or by the Certificate of Incorporation or by the By-laws,
shall be decided by a majority of the votes cast at that meeting
by the holders of shares present in person or represented by
proxy and entitled to vote thereon, whether or not a quorum is
present when the vote is taken. All elections of directors shall
be by written ballot unless otherwise provided in the Certificate
of Incorporation. In voting on any other question on which a
vote by ballot is required by law or is demanded by any
stockholder entitled to vote, the voting shall be by ballot.
Each ballot shall be signed by the stockholder voting or by his
proxy, and shall state the number of shares voted. On all other
questions, the voting may be viva voce. Every 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. The validity and enforceability of any proxy shall be
determined in accordance with Section 212 of the General
Corporation Law.
2.10 Selection and Duties of Inspectors at Meeting of
Stockholders. The Board, in advance of any meeting of
stockholders, may appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so
appointed, the person presiding at the meeting may, and on the
request of any stockholder entitled to vote thereat shall,
appoint one or more inspectors. In case any person appointed
fails to appear or act, the vacancy may be filled by appointment
made by the Board in advance of the meeting or at the meeting by
the person presiding thereat. Each inspector, before entering
upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at the meeting with
strict impartiality and according to the best of his ability.
The inspector or inspectors shall determine the number of shares
outstanding and the voting power of each, the shares represented
at the meeting, the existence of a quorum, the validity and
effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and shall do such acts
57<PAGE>
as are proper to conduct the election or vote with fairness to
all stockholders. On request of the person presiding at the
meeting or any stockholder entitled to vote thereat, the
inspector or inspectors shall make a report in writing of any
challenge, question or matter determined by him or them and
execute a certificate of any fact found by him or them. Any
report or certificate made by the inspector or inspectors shall
be prima facie evidence of the facts stated and of the vote as
certified by him or them.
2.11 Organization. At every meeting of stockholders, the
Chairman of the Board, or in the absence of the Chairman of the
Board, the Chief Executive Officer, shall act as chairman of the
meeting. In case none of the officers above designated to act as
chairman or secretary of the meeting, respectively, shall be
present, a chairman or a secretary of the meeting, as the case
may be, shall be chosen by a majority of the votes cast at the
meeting by the holders of shares present in person or represented
by proxy and entitled to vote at the meeting.
2.12 Order of Business. The order of business at all
meetings of stockholders shall be as determined by the chairman
of the meeting, but the order of business to be followed at any
meeting at which a quorum is present may be changed by a majority
of the votes cast at the meeting by the holders of shares of
capital stock present in person or represented by proxy and
entitled to vote at the meeting.
2.13 Written Consent of Stockholders without a Meeting.
Unless otherwise provided in the Certificate of Incorporation,
any action required by the General Corporation Law to be taken at
any annual or special meeting of stockholders of the Corporation,
or any action that 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 the action at
a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of the
corporation action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not
consented in writing.
ARTICLE 3
DIRECTORS
3.1 General Powers. Except as otherwise provided in the
Certificate of Incorporation, the business and affairs of the
Corporation shall be managed under the direction of its Board.
The Board may adopt such rules and regulations, not inconsistent
58<PAGE>
with the Certificate of Incorporation or the By-laws or
applicable laws, as it may deem proper for the conduct of its
meetings and the management of the Corporation. In addition to
the powers expressly conferred by the By-laws, the Board may
exercise all powers and perform all acts that are not required by
the By-laws or the Certificate of Incorporation or by law to be
exercised and performed by the stockholders.
3.2 Number; Qualification; Term of Office. The Board shall
consist of one or more members. The total number of directors
shall be fixed initially by the incorporator and may thereafter
be changed from time to time by action of the stockholders or by
action of the Board. Directors need not be stockholders. Each
director shall hold office until his successor is elected and
qualified or until his earlier death, resignation or removal.
3.3 Election. Directors shall, except as otherwise
required by law or by the Certificate of Incorporation, be
elected by a plurality of the votes cast at a meeting of
stockholders by the holders of shares entitled to vote in the
election.
3.4 Newly Created Directorships and Vacancies. Unless
otherwise provided in the Certificate of Incorporation, newly
created directorships resulting from an increase in the number of
directors and vacancies occurring in the Board for any other
reason, including the removal of directors with cause, may be
filled by vote of a majority of the directors then in office,
although less than a quorum, or by a sole remaining director, or
may be elected by a plurality of the votes cast by the holders of
shares of capital stock entitled to vote in the election at a
special meeting of stockholders called for that purpose. A
director elected to fill a vacancy shall be elected to hold
office until his successor is elected and qualified, or until his
earlier death, resignation or removal.
3.5 Resignations. Any director may resign at any time by
written notice to the Corporation. A director's resignation
shall take effect at the time therein specified and, unless
otherwise specified, the acceptance of any resignation shall not
be necessary to make it effective.
3.6 Removal of Directors. Subject to the provisions of
Section 141(k) of the General Corporation Law, any or all of the
directors may be removed with or without cause, by the holders of
a majority of the shares of capital stock then entitled to vote
at an election of directors.
3.7 Compensation. Each director, in consideration of his
service as such, shall be entitled to receive from the
Corporation such amount per annum or such fees for attendance at
directors' meetings, or both, as the Board may from time to time
59<PAGE>
determine, together with reimbursement for the reasonable
expenses incurred by him in connection with the performance of
his duties. Each director who shall serve as a member of any
committee of directors in consideration of his serving as such
shall be entitled to such additional amount per annum or such
fees for attendance at committee meetings, or both, as the Board
may from time to time determine, together with reimbursement for
the reasonable expenses incurred by him in the performance of his
duties. Nothing contained in this section shall preclude any
director from serving the Corporation or its subsidiaries in any
other capacity and receiving proper compensation therefore.
3.8 Place and Time of Meetings of the Board. Meetings of
the Board, regular or special, may be held at any place within or
without the State of Delaware. The times and places for holding
meetings of the Board may be fixed from time to time by
resolution of the Board or (unless contrary to resolution of the
Board) in the notice of the meeting.
3.9 Annual Meetings. On the day when and at the place
where the annual or special meeting of stockholders for the
election of directors is held, and as soon as practicable
thereafter, the Board may hold its annual meeting, without notice
of the meeting, for the purposes of organization, the election of
officers and the transaction of other business. The annual
meeting of the Board may be held at any other time and place
specified in a notice given as provided in Section 3.11 of the
By-laws for special meetings of the Board or in a waiver of
notice thereof.
3.10 Regular Meetings. Regular meetings of the Board may be
held at such times and places as may be fixed from time to time
by the Board. Unless otherwise required by the Board, regular
meetings of the Board may be held without notice. If any day
fixed for a regular meeting of the Board shall be a Saturday or
Sunday or a legal holiday at the place where the meeting is to be
held, then the meeting shall be held at the same hour at the same
place on the first business day thereafter that is not a
Saturday, Sunday or legal holiday.
3.11 Special Meetings. Special meetings of the Board shall
be held whenever called by the Chairman of the Board, the
President or the Secretary or by any two or more directors.
Notice of each special meeting of the Board shall, if mailed, be
addressed to each director at the address designated by him for
that purpose or, if none is designated, at his last known address
at least three days before the date on which the meeting is to be
held; or the notice shall be sent to each director at his address
by telegraph, cable, wireless, or be delivered to him personally,
not later than the day before the date on which the meeting is to
be held. Every notice shall state the time and place of the
meeting but need not state the purposes of the meeting, except to
60<PAGE>
the extent required by law. If mailed, each notice shall be
deemed given when deposited, with postage thereof prepaid, in a
post office or official depository under the exclusive care and
custody of the United States Postal Service. The mailing shall
be by first class mail.
3.12 Adjournment Meetings. A majority of the directors
present at any meeting of the Board, including an adjourned
meeting, whether or not a quorum is present, may adjourn the
meeting to another time and place. Notice of any adjourned
meeting of the Board need not be given to any director whether or
not present at the time of the adjournment. Any business may be
transacted at any adjourned meeting that might have been
transacted at the meeting as originally called.
3.13 Waivers of Notice. Whenever notice is required to be
given to any director or member of a committee of directors under
any provision of the General Corporation Law or of the
Certificate of Incorporation or By-laws, a written waiver
thereof, 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 the 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 on grounds that
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 directors, or of a committee of directors,
need be specified in any written waiver of notice.
3.14 Organization. At each meeting of the Board, the
Chairman of the Board, or in the absence of the Chairman of the
Board, the President of the Corporation, shall preside. The
Secretary shall act as Secretary at each meeting of the Board.
In case the Secretary shall be absent from any meeting of the
Board, an Assistant Secretary shall perform the duties of
Secretary at such meeting; and in the absence from any such
meeting of the Secretary and Assistant Secretaries, the person
presiding at the meeting may appoint any person to act as
Secretary of the meeting.
3.15 Quorum of Directors. On-half of the total number of
directors shall constitute a quorum for the transaction of
business or of any specified item of business at any meeting of
the Board.
3.16 Action by the Board. All corporate action taken by the
Board or any committee thereof shall be taken at a meeting of the
Board, or of such committee, as the case may be, except that any
action required or permitted to be taken at any meeting of the
Board, or of any committee thereof, may be taken without a
meeting if all members of the Board or committee, as the case may
61<PAGE>
be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board or committee.
Members of the Board, or any committee designated by the Board,
may participate in a meeting of the Board, or of such committee,
as the case may be, by means of which all persons participating
in the meeting can hear each other, and participation in a
meeting pursuant to this Section 3.16 shall constitute presence
in person at the meeting. Except as otherwise provided by the
Certificate of Incorporation or By-laws, the vote of a majority
of the directors present (including those who participate by
means of conference telephone or similar communications
equipment) at the time of the vote, if a quorum is present at
that time, shall be the act of the Board.
ARTICLE 4
EXECUTIVE COMMITTEE, OTHER COMMITTEES AND ADVISORY BOARD
4.1 Committees. The Board may, by resolution passed by a
majority of the Whole Board, designate one or more committees,
each to consist of two or more of the directors of the
Corporation. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the
absence of disqualification of a member of a committee, the
member of members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board to
act at the meeting in the place of any absent or disqualified
member. Any committee, to the extent provided in the resolution
of the Board, shall have and may exercise all the powers and
authority of the Board in the management of the business and
affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but
no committee shall have the power or authority in reference to
amending the Certificate of Incorporation, adopting an agreement
of merger or consolidation, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of
a dissolution, or amending the By-laws of the Corporation; and,
unless the resolution designating it expressly so provides, no
committee shall have the power or authority to declare a dividend
or to authorize the issuance of stock. The term of office of the
members of each committee shall be as fixed from time to time by
the Board, subject to the term of office of the directors and
these By-laws; provided, however, that any committee member who
ceases to be a member of the Board shall ipso facto cease to be a
committee member.
4.2 Advisory Board. The Board may designate from among its
members and/or among outside advisors or consultants an Advisory
62<PAGE>
Board, which shall advise the Board as to matters specifically
submitted thereto but shall have no authority to act in the place
of the Board or to bind the Board in any matter. Each of the
members of the Advisory Board shall serve at the pleasure of the
Board.
ARTICLE 5
OFFICERS
5.1 Officers. The Board may elect or appoint a Chairman of
the Board, a Chief Executive Officer, a President, a Secretary
and a Treasurer, may elect or appoint one or more Vice Presidents
and such other officers, including a Chief Operating Officer, as
it may determine. The Board may designate one or more Vice
Presidents as Executive Vice Presidents, and may use descriptive
words or phrases to designate the standing, seniority or area of
special competence of the Vice Presidents elected or appointed by
it. Each officer shall hold his office until his successor is
elected and qualified or until his earlier death, resignation or
removal in the manner provided in Section 5.2 of the By-laws.
Any two or more offices may be held by the same person. All
officers as between themselves and the Corporation shall have
such authority and perform such duties in the management of the
Corporation as may be provided in the By-laws or as the Board may
from time to time determine.
5.2 Removal of Officers. Any officer elected or appointed
by the Board may be removed by the Board with or without cause.
The removal of an officer without cause shall be without
prejudice to his contract rights, if any. The election or
appointment of an officer shall not of itself create contract
rights.
5.3 Resignations. Any officer may resign at any time by
notifying the Board or the President or the Secretary in writing.
A resignation shall take effect at the date of receipt of the
notice or at any later time as is therein specified and, unless
otherwise specified, the acceptance of the resignation shall not
be necessary to make it effective. The resignation of an officer
shall be without prejudice to the contract rights of the
Corporation, if any.
5.4 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall
be filled for the unexpired portion of the term in the manner
prescribed in the By-laws for the regular election or appointment
to that office.
5.5 Compensation. Salaries or other compensation of the
officers may be fixed from time to time by the Board. No officer
shall be prevented from receiving a salary or other compensation
by reason of the fact that he is also a director.
63<PAGE>
5.6 Chairman of the Board. The Chairman of the Board shall
be a member of the Board and shall preside at all meetings of the
Board. He shall have general supervision over the business of
the Corporation and such specific powers as the Board may assign
to him.
5.7 Chief Executive Officer. The Chief Executive Officer
shall be the chief executive officer of the Corporation and shall
have general and operational supervision over the business of the
Corporation, subject, however, to the control of the Board and
any duly authorized committee of directors. In the absence of
the Chairman of the Board, the Chief Executive Officer shall, if
present, preside at all meetings of the stockholders. He may,
with the President or Secretary or the Treasurer or an Assistant
Secretary or Assistant Treasurer, sign certificates for shares of
capital stock of the Corporation. He may sign and execute, in
the name of the Corporation, deeds, mortgages, bonds, contracts
and other instruments, except in cases where the signing and
execution thereof shall be expressly delegated by the Board or by
the By-laws to some other officer or agent of the Corporation, or
shall be required by law otherwise to be signed or executed; and,
in general, he shall perform all duties incident to the office of
Chief Executive Officer and such other duties as from time to
time may be assigned to him by the Board.
5.8 President. The President shall be the chief operating
officer of the Corporation and shall be responsible for the
general and day-to-day management of the business of the
Corporation. In the absence of the Chief Executive Officer or
upon his request, the President shall perform the duties of Chief
Executive Officer and when so acting shall have all the powers of
the Chief Executive Officer. The offices of Chief Executive
Officer and President may, alternatively, be held by the same
person.
5.9 Vice Presidents. At the request of the Chairman of the
Board, the Chief Executive Officer and the President, or in their
absence, at the request of the Board, the Vice Presidents shall
(in such order as may be designated by the Board or, in the
absence of any such designation, in order of seniority based on
age) perform all of the duties of the President and so acting
shall have all the powers of and be subject to all restrictions
upon the President. Any Vice President may also, with the
Secretary or the Treasurer or an Assistant Secretary or Assistant
Treasurer, sign certificates for shares of capital stock of the
Corporation; may sign and execute in the name of the Corporation,
deeds, mortgages, bonds, contracts or other instruments
authorized by the Board, except in cases where the signing and
execution thereof shall be expressly delegated by the Board or by
the By-laws to some other officer or agent of the Corporation, or
shall be required by law otherwise to be signed or executed; and
shall perform such other duties as from time to time may be
assigned to him by the Board or by the Chairman of the Board, the
Chief Executive Officer or the President.
64<PAGE>
5.10 Secretary. The Secretary, if present, shall act as
Secretary of all meetings of the stockholders and of the Board,
and shall keep the minutes thereof in the proper book or books to
be provided for that purpose; he shall see that all notices
required to be given by the Corporation are duly given and
served; he may, with the President or a Vice President, sign
certificates for shares of capital stock the Corporation; he
shall be custodian of the seal of the Corporation and may seal
with the seal of the Corporation or a facsimile thereof, all
certificates for shares of capital stock of the Corporation and
all documents the execution of which on behalf of the Corporation
under its corporate seal is authorized in accordance with the
provisions of the By-laws; he shall have charge of the stock
ledger and also of the other books, records and papers of the
Corporation relating to its organization and management as a
Corporation, and shall see that the reports, statements and other
documents required by law are properly kept and filed; and shall,
in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be
assigned to him by the Board, the Chairman of the Board, the
Chief Executive Officer or by President.
5.11 Treasurer. The Treasurer shall have charge and custody
of, and be responsible for, all funds, securities and notes of
the Corporation; receive and give receipts for moneys due and
payable to the Corporation from any sources whatsoever; deposit
all such moneys in the name of the Corporation in such banks,
trust companies or other depositaries as shall be selected in
accordance with these By-laws; against proper vouchers, cause
such funds to be disbursed by checks or drafts on the authorized
depositaries of the Corporation signed in such manner as shall be
determined in accordance with any provisions of the By-laws, and
be responsible for the accuracy of the amounts of all moneys so
disbursed; regularly enter or cause to be entered in books to be
kept by him or under his direction full and adequate account of
all moneys received or paid by him for the account of the
Corporation; have the right to require, from time to time,
reports or statements giving such information as he may desire
with respect to any and all financial transactions of the
Corporation from the officers or agents transacting the same;
render to the Chairman of the Board, the Chief Executive Officer,
the President and the Board, whenever they shall require him so
to do, an account of the financial condition of the Corporation
and of all his transactions as Treasurer; exhibit at all
reasonable times his books of account and other records to any of
the directors upon application at the office of the Corporation
where those books and records are kept; and, in general, perform
all the duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him by the Board
or by the Chairman of the Board, the Chief Executive Officer or
the President; and he may sign with such officers certificates
for shares of capital stock of the Corporation.
65<PAGE>
5.12 Assistant Secretaries and Assistant Treasurers.
Assistant Secretaries and Assistant Treasurers shall perform such
duties as shall be assigned to them by the Secretary or by the
Treasurer, respectively, or by the Board or the President.
Assistant Secretaries and Assistant Treasurers may, with the
Chairman of the Board, the Chief Executive Officer or the
President or a Vice President, sign certificates for shares of
capital stock of the Corporation.
ARTICLE 6
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
6.1 Execution of Contracts. The Board may authorize any
officer, employee or agent, in the name and on behalf of the
Corporation, to enter into any contract or execute and satisfy
any instrument, and any such authority may be general or confined
to specific instances, or otherwise limited.
6.2 Loans. The Chief Executive Officer, the President or
any other officer, employee or agent authorized by the By-laws or
by the Board may effect loans and advances at any time for the
Corporation from any bank, trust company or other institutions or
from any firm, corporation or individual and for such loans and
advances may make, execute and deliver promissory notes, bonds or
other certificates or evidences of indebtedness of the
Corporation and, when authorized by the Board so to do, may
pledge and hypothecate or transfer any securities or other
property of the Corporation as security for any such loans or
advances. The aforementioned authority conferred by the Board
may be general or confined to specific instances or otherwise
limited.
6.3 Checks, Drafts, Etc. All checks, drafts and other
orders for the payment of money out of the funds of the
Corporation and all notes or other evidences of indebtedness of
the Corporation shall be signed on behalf of the Corporation in
the manner determined from time to time by resolution of the
Board.
6.4 Deposits. The funds of the Corporation not otherwise
employed shall be deposited from time to time to the order of the
Corporation in such banks, trust companies or other depositaries
as the Board may select or as may be selected by an officer,
employee or agent of the Corporation to whom such power may from
time to time be delegated by the Board.
66<PAGE>
ARTICLE 7
STOCK AND DIVIDENDS
7.1 Certificates Representing Shares. The shares of
capital stock of the Corporation and any warrants or other
securities and the Corporation shall be represented by
certificates in such form (consistent with the provisions of
Section 158 of the General Corporation Law) as shall be approved
by the Board. Certificates shall be signed by the Chief
Executive Officer, the President or a Vice President and by the
Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer, and may be sealed with the seal of the
Corporation or a facsimile thereof. The signatures of the
officers upon a certificate may be facsimiles, if the certificate
is countersigned by a transfer agent or registered by a registrar
other than the Corporation itself or its employee. In case any
officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon any certificate shall
have ceased to be an officer, transfer agent or registrar of the
Corporation before the certificate is issued, the certificate
may, unless otherwise ordered by the Board, be issued by the
Corporation with the same effect as if that signatory continued
to be an officer, transfer agent or registrar at the date of
issue.
7.2 Transfer of Shares. Transfers of shares of capital
stock of the Corporation or other securities of the Corporation
shall be made only on the books of the Corporation by the holder
thereof or by his duly authorized attorney appointed by a power
of attorney duly executed and filed with the Secretary or a
transfer agent of the Corporation, and on surrender of the
certificate or certificates representing such shares of capital
stock or other securities of the Corporation properly endorsed
for transfer and upon payment of all necessary transfer taxes.
Every certificate exchanged, returned or surrendered to the
Corporation shall be marked "cancelled," with the date of
cancellation, by the Secretary or an Assistant Secretary or the
transfer agent of the Corporation. A person in whose name shares
of capital stock or other securities of the Corporation shall
stand on the books of the Corporation shall be deemed the owner
thereof and, in the case of shares of capital stock of the
Corporation, to receive dividends, to vote as such owner and for
all other purposes as respects the Corporation. No transfer of
shares of capital stock of the Corporation shall be valid as
against the Corporation, its stockholders and creditors for any
purpose, except to render the transferee liable for the debts of
the Corporation to the extent provided by law, until the transfer
shall have been entered on the books of the Corporation by an
entry showing from and to whom transferred.
7.3 Transfer and Registry Agents. The Corporation may from
time to time maintain one or more transfer offices or agents and
67<PAGE>
registry offices or agents at such place or places as may be
determined from time to time by the Board.
7.4 Lost, Destroyed, Stolen and Mutilated Certificates.
The holder of any shares or other securities of the Corporation
shall immediately notify the Corporation of any loss,
destruction, theft or mutilation of the certificate representing
those securities, and the Corporation may issue a new certificate
to replace the certificate alleged to have been lost, destroyed,
stolen or mutilated. The Board may, in its discretion, as a
condition to the issue of any new certificate, require the owner
of the lost, destroyed, stolen or mutilated certificate, or his
legal representatives, to make proof satisfactory to the Board of
the loss, destruction, theft or mutilation and to advertise that
fact in such manner as the Board may require, and to give the
Corporation or its transfer agents and registrars a bond in such
form, in such sums and with such surety or sureties as the Board
may direct, to indemnify the Corporation and its transfer agents
and registrars against any claim that may be made against any of
them on account of the continued existence of any certificate so
alleged to have been lost, destroyed, stolen or mutilated and
against any expense in connection with that claim.
7.5 Regulations. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with the
By-laws or with the Certificate of Incorporation, concerning the
issue, transfer and registration of certificates representing
shares of its capital stock and other securities of the
Corporation.
7.6 Restriction on Transfer of Stock. A written
restriction on the transfer or registration of transfer of
capital stock of the Corporation, if permitted by Section 202 of
the General Corporation Law and noted conspicuously on the
certificate representing the capital stock, may be enforced
against the holder of the restricted capital stock or any
successor or transferee of the holder including an executor,
administrator, trustee, guardian or other fiduciary entrusted
with like responsibility for the person or estate of the holder.
Unless noted conspicuously on the certificate representing the
capital stock, a restriction even though permitted by Section 202
of the General Corporation Law shall be ineffective except
against a person with actual knowledge of the restriction. A
restriction on the transfer or registration of transfer of
capital stock of the Corporation may be imposed either by the
Certificate of Incorporation or by an agreement among any number
of stockholders or among stockholders and the Corporation. No
restriction so imposed shall be binding with respect to capital
stock issued prior to the adoption of the restriction unless the
holders of the capital stock are parties to an agreement or voted
in favor of the restriction.
7.7 Dividends, Surplus, Etc. Subject to the provisions of
the Certificate of Incorporation and of applicable law, the Board
68<PAGE>
7.7.1 May declare and pay dividends or make other
distributions on the outstanding shares of capital stock of
the Corporation in such amounts and at such time or times
as, in its discretion, the condition of the affairs of the
Corporation shall render advisable;
7.7.2 May use and apply, in its discretion, any of the
surplus of the Corporation in purchasing or acquiring any
shares of capital stock of the Corporation, or purchase
warrants therefor, in accordance with law, or any of its
bonds, debentures, notes, script or other securities or
evidences of indebtedness;
7.7.3 May set aside from time to time out of such
surplus or net profits such sum or sums as, in its
discretion, it may think proper, as a reserve fund to meet
contingencies, or for equalizing dividends or for the
purpose of maintaining or increasing the property or
business of the Corporation, or for any other purpose it may
deem conducive to the best interests of the Corporation.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she or his or her
testator or intestate is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of
the Corporation (or any constituent or predecessor corporation)
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, to the
fullest extent permitted under the General Corporation Law. The
foregoing provisions of this Section 8.1 shall be deemed to be a
contract between the Corporation and each director and officer
who serves in such capacity at any time while this Article 8 and
the relevant provisions of the General Corporation Law and other
applicable law, if any, are in effect, and any repeal or
modification thereof shall not affect any rights or obligations
then existing with respect to any state of facts then or
theretofore existing or any action, suit or proceeding
theretofore or thereafter brought or threatened based in whole or
in part upon any such state of facts. Such right of
indemnification shall not be deemed exclusive of any other rights
to which any such person may be entitled apart from the foregoing
provisions.
8.2 Insurance. The Corporation shall have power to
purchase and maintain insurance on behalf of any person who is or
69<PAGE>
was a director, officer, employee or agent of the Corporation
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 the provisions of the Certificate of
Incorporation, Section 8.1 of the By-laws or under the General
Corporation Law or any other provision of law.
ARTICLE 9
BOOKS AND RECORDS
9.1 Books and Records. The Corporation shall keep correct
and complete books and records of account and minutes of the
proceedings of the stockholders, the Board and any committee of
the Board at such places, within or without the State of
Delaware, as the Board may from time to time determine. The
Corporation shall keep at the office designated in the
Certificate of Incorporation, or at the office of the Corporation
or of the transfer agent or registrar of the Corporation, a
record containing the names and addresses of all stockholders,
the number and class of shares of capital stock and/or other
securities of the Corporation held by each and the dates when
they respectively become the owners of record thereof.
9.2 Form of Records. Any records maintained by the
Corporation in the regular course of its business, including its
stock ledger, books of account and minute books, may be kept on,
or be in the form of, punch cards, magnetic tape, photographs,
microphotographs or any other information storage device,
provided that the records so kept can be converted into clearly
legible written form within a reasonable time. The Corporation
shall so convert any records so kept upon the request of any
person entitled to inspect the same.
9.3 Inspection of Books and Records. Except as otherwise
provided by law, the Board shall determine from time to time
whether and, if allowed, when and under what conditions and
regulations, the accounts, books, minutes and other records of
the Corporation, or any of them, shall be open to the inspection
of the stockholders.
ARTICLE 10
SEAL
The Board may adopt a corporate seal which shall be in the
form of a circle and shall bear the full name of the Corporation,
the year of its incorporation and the word "Delaware."
70<PAGE>
ARTICLE 12
VOTING OF SHARES HELD
Unless otherwise provided by resolution of the Board, the
President may, from time to time, appoint one or more attorneys
or agents of the Corporation, in the name and on behalf of the
Corporation, to cast the votes which the Corporation may be
entitled to cast as a stockholder or otherwise in any other
corporation, any of whose shares or securities may be held by the
Corporation, at meetings of the holders of stock or other
securities of such other corporation, or to consent in writing to
any action by any such corporation, and may instruct the person
or persons so appointed as to the manner of casting votes or
giving consent, and may execute or cause to be executed on behalf
of the Corporation and under its corporate seal, or otherwise,
written proxies, consents, waivers or other instruments as he may
deem necessary or proper in the premises; or the President may
himself attend any meeting of the holders of the stock or other
securities of any such other corporation and thereat vote or
exercise any or all other powers of the Corporation as the holder
of such stock or other securities of such other corporation.
ARTICLE 13
AMENDMENTS
The By-laws may be altered, amended, supplemented or
repealed, or new By-laws may be adopted, by vote of the holders
of the shares of capital stock of the Corporation entitled to
vote in the election of directors. the By-laws may be altered,
amended, supplemented or repealed, or new By-laws may be adopted,
by the Board. Any By-laws adopted, altered, amended or
supplemented by the Board may be altered, amended, supplemented
or repealed by the stockholders entitled to vote thereon.
71<PAGE>
EXHIBIT 10(a)
Medical Enterprises International
Manufacturer's Representative Agreement
72<PAGE>
MANUFACTURER'S REPRESENTATIVE AGREEMENT
Agreement made effective as of July 1, 1995 between Medical
Enterprises International (MEI) and Versus Technology, Inc. (VTI).
RECITALS
VTI designs and manufactures infra red tracking systems for use by
hospitals and other medical organizations (the "VTI products").
MEI has established a qualified technical medical sales
organization made up of independent manufacturers representatives
throughout the USA.
VTI wishes to appoint MEI as its sales and marketing representative
for the VTI products upon the terms and conditions hereinafter set
forth.
AGREEMENT
Now, therefore, in consideration of the mutual covenants, premises
and understandings contained in this agreement, VTI and MEI agree
as follows:
1. Exclusive Sales Representative. VTI grants to MEI the
exclusive right to solicit orders for the VTI products, as
defined above, through its network of independent
representatives in all parts of the medical community in the
USA. VTI further grants MEI the non exclusive right to
solicit orders from industrial customers outside the medical
field, for any other products currently for sale by VTI as of
the date of this Agreement so long as such activity does not
conflict with any agreements now or later put in place by VTI
and as described to MEI by VTI; the intention being hereby
stated that if VTI shall grant to another an exclusive right
to solicit orders for any of such other products, then MEI's
non-exclusive rights as stated in this sentence shall
terminate. VTI retains the right to itself directly solicit
and accept orders for the VTI products from time to time, if
MEI was not the procuring cause of the order and MEI is not
called upon to service the account. Notwithstanding any of
the foregoing, MEI acknowledges that VTI already has an
existing agreement with Windemuller Electric, Inc.; MEI
agrees that VTI and Windemuller Electric's performance of such
agreement is permitted, and is not in conflict with MEI's
rights under or in connection with this Manufacturer's
Representative Agreement.
2. Acceptance of Orders. All orders are subject to acceptance or
rejection by an authorized officer of VTI and to the approval
of VTI's credit department, and VTI may accept or reject any
such order at its sole discretion, with or without cause. VTI
shall be responsible for all credit risks and collections,
except as herein otherwise set forth.
73<PAGE>
3. Terms of sale. All sales shall be at prices and upon terms
established by VTI and it shall have the right, in its sole
discretion, from time to time to establish, change, alter or
amend prices and other terms and conditions of sale. MEI
shall not accept orders in VTI's name or make price quotations
or delivery promises without VTI's prior approval, which shall
be confirmed in writing.
4. Compensation.
(a) On system sales, the order for which MEI was the
procuring cause, VTI shall pay to MEI, as the entire
compensation for MEI's services rendered under this
agreement, a commission of 35% of the invoiced price of
the VTI products sold pursuant to such order. Shipping
and mailing costs, taxes, insurance, and allowances or
discounts granted to the customer by VTI, shall be
excluded from amounts against which commissions are
based. It is understood that approximately 57% of such
commission will be paid by MEI to the independent
representative organization responsible for procuring the
order and that approximately 43% of such commission will
remain with MEI. Payment to be made to MEI from VTI
within 15 days following receipt of final payment from
the customer.
(b) On rental plans:
The commission on rentals will be structured as
illustrated in Appendix A.
(c) Returns
If commission has been paid and a return takes place
requiring repayment to a customer, a covenants to MEI for
the commission amount paid will be made.
5. Responsibility of MEI and Associated Agents. The following
shall be among the responsibilities of MEI, provided, however,
VTI's sole remedy for non performance shall be termination of
this agreement pursuant to paragraph 11, and in no event shall
MEI be liable for incidental or consequential damages to VTI:
(a) Establish professional independent representative network
throughout the U.S. medical market within 4 months from
the date of this agreement.
(b) Employ their best efforts to promote the sale of the VTI
products within the assigned markets.
(c) Represent VTI, through MEI's affiliates, in all aspects
of the sale of VTI products, from taking the order to
74<PAGE>
assisting in installation, handling in service education
(after suitable training) and helping to make collections
when necessary.
(d) Develop and implement rental plans for and with the
approval of VTI.
(e) Develop and implement leasing programs for and with the
approval of VTI.
(f) Provide sales forecasts by territory within the market,
and deliver bona fide orders for VTI products aggregating
not less than 80% of said forecasts.
(g) Recommend trade shows to attend and provide the manpower
to cover those selected.
(h) Function as an extension of the VTI marketing department
to assist with marketing plans and materials as
requested.
(i) Provide information concerning performance of the systems
including customer comments and complaints.
(j) Provide information concerning competitive products.
(k) Recommend new application ideas.
(l) Maintain communications with the independent
representatives through a combination of sales bulletins
and a periodic newsletter (CAVU).
6. Responsibility of VTI. The following shall be among the
responsibilities of VTI, provided, however, MEI's sole remedy
for non performance shall be termination of this agreement
pursuant to paragraph 11, and in no event shall VTI be liable
for incidental or consequential damages to MEI:
(a) Provide the end customer with VTI products of high
quality and design following current GMP standards.
(b) Provide support materials in the form of literature,
brochures, video tapes, articles by professionals as
proof statements, and any other material that would
assist in the sale of the VTI products.
(c) Attend selected trade shows to promote the VTI products.
(d) Support the VTI products with advertising and press
releases.
(e) Provide suitable demonstration aides to assist the field
sales representatives.
75<PAGE>
(f) Provide modem support to customers.
(g) Provide installation assistance where and when required
at then prevailing prices.
(h) Provide and communicate to customers the current warranty
on VTI products.
7. Invoices. A copy of all invoices for VTI products sold by VTI
with respect to which a commission will be due will be
forwarded by VTI to MEI concurrently with delivery of the
invoice to the customer. MEI will forward a copy to its
responsible affiliated representative.
8. Proprietary Rights and Information. MEI and affiliates shall
be entitled to use VTI trademarks and commercial symbols
applicable to the products for the purpose of indicating that
MEI and affiliates are authorized to represent VTI. This
authorization shall not be interpreted as a license for use of
such trademarks or symbols, and MEI shall not use VTI's
trademarks or symbols in any manner not approved by VTI. MEI
agrees that all of VTI's intellectual or proprietary
properties which MEI learns or comes into possession of in
connection with and during MEI's association with VTI shall
remain the sole property of VTI, and MEI will maintain for
VTI's sole benefit the confidentiality of any information of
VTI which VTI has informed MEI shall be kept as confidential.
9. Relationship Created. MEI and its affiliates are not
employees, agents or partners of VTI for any purpose, and are
independent contractors responsible for their own operating
expenses including, without implied limitation, travel,
entertainment, clerical staff and general selling expenses
incurred in the sales effort. VTI shall have no
responsibility for any such expenses unless VTI has
specifically agreed in writing.
10. Representation of Other Firms. During the term of this
agreement, MEI and affiliates will devote such time as is
necessary to the sale of VTI products. VTI recognizes that
MEI and its affiliates may represent other firms and companies
but it is specifically understood that MEI and all affiliates
associated with VTI shall in no event represent companies that
are in direct competition with VTI.
11. Termination. This agreement shall commence effective as of
the date first above stated and shall continue for a term of
2 years. Thereafter, the agreement will automatically be
renewed for 12 month terms unless notice of non renewal is
given as follows: Either VTI or MEI may give written notice to
the other of its intent not to renew this agreement, without
cause, at the expiration of the then effective term, which
notice shall be given not later than sixty (60) days before
76<PAGE>
such expiration date. In addition, either party may terminate
this agreement at any time by written notice to the other,
effective as specified in the notice, in the event the other
party violates or fails to perform any obligation or condition
contained in this agreement or any other contract between the
parties, becomes insolvent, makes an assignment for the
benefit of creditors, or proceedings are brought by or against
such person under any bankruptcy or other insolvency laws,
including any reorganization, arrangement or receivership.
Any notice given pursuant to this paragraph shall be in
writing and shall be sufficient if delivered personally or
mailed by regular mail, and shall be deemed to have been given
on the date of posting or personal delivery as the case may
be.
In the event of termination, MEI and affected affiliates will
return to VTI all samples, equipment, promotional materials,
documents containing confidential information, and supplies as
requested, and shall discontinue use of VTI trademarks or
symbols.
In the event of termination of this agreement, MEI and its
affiliates will be eligible to receive commissions on sales
from any orders received by VTI within 6 months following the
effective date of the termination provided a VTI quotation has
been given to the customer on or before the date of
termination. The commission on those sales, if any, will be
at the following rates:
Sales orders received by VTI within 2 months
following effective date of termination...will
receive full commission (35%).
Sales orders received by VTI 2-4 months after
effective date of termination will receive 25%
commission.
Sales from orders received by VTI 4-6 months after
effective date of termination will receive 20%
commission.
12. Indemnification. VTI indemnifies and holds harmless MEI and
its affiliates from any and all liability arising out of use
of the VTI products, provided that such liability does not
arise from the negligence or misconduct of MEI or its
affiliates, unauthorized changes made by MEI or its affiliates
in either the products or descriptive literature, or failure
to conform with VTI's approved promotional materials or other
policies. MEI shall indemnify and hold harmless VTI from any
and all liability arising from the negligence or misconduct
77<PAGE>
MEI or its affiliates, or unauthorized changes made by MEI or
its affiliates in VTI products or VTI's descriptive
literature, or failure to conform with VTI's approved
promotional materials or other policies.
13. Assignment. VTI has entered into this agreement with MEI
based upon its evaluation of MEI's form and method of
conducting business, current ownership, business acumen,
capacity to sell and service the products and business
reputation. VTI understands, and MEI covenants to VTI, that
the conditions of this agreement will be conveyed to all MEI
affiliates and that they will be bound by the same provisions
as are contained herein.
14. Notices and Requests. Unless otherwise specifically provided
in this agreement, any notice, demand or request required or
permitted to be given hereunder shall be in writing and shall
be deemed effective twenty-four (24) hours after having been
deposited in the United States mail, postage prepaid,
registered or certified, and addressed to the addressee at the
principal office set forth above. Any party may change its
address for purposes of this agreement by written notice given
in accordance herewith.
15. Adjustment and Adjudication of Disputes. The parties shall be
free to bring all differences of interpretation and disputes
arising in connection with this agreement to the attention of
the other at any time without prejudicing their harmonious
relationship and operations hereunder, and the offices and
facilities of either party shall be available at all times for
the prompt and effective adjustment of any and all such
differences, either by mail, telephone, or personal meeting.
This agreement shall be governed and construed pursuant to,
and in accordance with, the laws of the State of Michigan,
excluding any conflicts of laws provisions. Any litigation
involving any claim arising out of or relating to this
agreement shall be brought in the circuit court for the County
of Grand Traverse, Michigan, or in the federal district court
for the Western District of Michigan. In the event of
litigation, the prevailing party may recover court costs and
reasonable attorneys' fees.
If any provision or term of this agreement is held to be
invalid, void or unenforceable, the remainder of the
provisions shall remain in full force and effect and shall in
no way be affected, impaired, or invalidated.
16. Entire Agreement; Binding Effect. This agreement constitutes
the entire agreement between VTI and MEI concerning the
subject matter of this agreement and supersedes all prior and
contemporaneous agreements between the parties. This
agreement may be amended only by an instrument in writing
78<PAGE>
expressly referring to this agreement and specifically stating
that it is intended to amend it. No party is relying upon any
warranties, representations or inducements not set forth in
this agreement. This agreement shall bind and benefit VTI and
MEI as well as their respective or permitted successors or
assigns, as the case may be.
IN WITNESS WHEREOF, each of the parties has caused this agreement
to be signed on its behalf by a duly authorized individual, or
officer, as of the date set forth above.
VERSUS TECHNOLOGY, INC.
By: GARY T. GAISSER
Gary T. Gaisser
Its: President and Chief Executive Officer
and By: H. TERRY SNOWDAY
H. Terry Snowday
Its: Chairman of the Board
MEDICAL ENTERPRISES INTERNATIONAL
By: FRANK W. BROWER, JR.
Frank W. Brower, Jr.
Its: Chairman of the Board
and By: R. WES SOUTHERN
R. Wes Southern
Its: President
79<PAGE>
EXHIBIT 10(b)
Excerpt from Private Placement Memorandum
Regarding Merger with Olmsted
80<PAGE>
VERSUS TECHNOLOGY, INC.
SUPPLEMENT TO
PRIVATE PLACEMENT MEMORANDUM
DATED AUGUST 28, 1995
Recent Developments
The Board of Directors of Versus Technology, Inc. ("Versus"
or the "Company") and Olmsted Engineering co. ("Olmsted"), the
Company's consultant in the infra-red tracking business, have
agreed that Olmsted shall have the right to have Olmsted merge
into Versus. This right expires sixty days after the filing by
Versus of the Form 10-K or Form 10-Q wherein Versus achieves one
quarter of both: (i) revenues of $1,000,000 or more, and (ii)
positive net income (excluding non-recurring gains or losses).
In the event the previous two conditions are not achieved by the
quarter ended January 31, 1997, the right expires unless the
shares offered hereby have been registered for resale by such
date. In that case, in the event the conditions are not met by
the quarter ended July 31, 1997, the right expires.
The merger itself (which Versus has undertaken to use its
best efforts to consummate) would be upon the following terms:
1. Olmsted would be valued at book value (currently $1.4
million) up to a maximum of $1.5 million.
2. The shareholders of Olmsted (including Gary T. Gaisser,
the President and CEO of Versus, who owns approximately
78% of Olmsted, and the son of H. Terry Snowday, Jr.,
the Chairman and CFO of Versus; Mr. Snowday's son owns
approximately 4% of Olmsted) would receive shares of
Versus valued at $0.25 per share.
3. The merger would be conditioned on the receipt by
Versus of an independent evaluation that the fair
market value of Olmsted is then greater than or equal
to its book value.
4. Versus would be responsible for all fees and expenses
of the merger.
Any such merger would be subject to the approval of the
holders of a majority of the shares of common stock of Versus
outstanding at the time such vote was taken.
81<PAGE>
EXHIBIT 10(c)
Olmsted Consulting Agreement
82<PAGE>
CONSULTING AGREEMENT
This Agreement is made effective as of April 20, 1995 between
Versus Technology, Inc., a Delaware corporation, having a principal
place of business at One Electronics Drive, Trenton, New Jersey
08619, its subsidiaries and divisions (hereafter "Versus"), and
Olmsted Engineering Co., a Michigan corporation, having a principal
place of business at 2320 Aero Park Court, Traverse City, Michigan
49686 (hereafter "Consultant").
Recitals:
A. Versus desires to receive the services of Consultant with
respect to products being developed and sold by Versus
involving the Lynx IR systems. Consultant is skilled in
technical sales, technical marketing, computer programming and
engineering services, and desires to provide its services for
hire to Versus on a non-exclusive basis. Consultant has
internally developed, and will probably continue to develop in
the future while working on its own projects, as well as on
other projects for other clients, certain proprietary and/or
Confidential Information (hereafter defined in paragraph 1)
which Consultant desires to maintain, either for its own
benefit or that of its other clients.
B. Consultant is being engaged by Versus pursuant to this
Agreement in a position of trust and confidence under which
Consultant may use, observe, or obtain Confidential
Information of Versus. Conversely, in the course of its
relationship with Consultant, Versus may observe or obtain
Confidential Information of Consultant or Consultant's other
clients. Versus agrees that it, too, will be acting in a
position of trust and confidence towards Consultant with
respect to any Confidential Information of Consultant or its
other clients.
C. It is to the mutual benefit of the parties that they both
protect their respective rights in Confidential Information,
while at the same time ensuring that Versus obtains the
benefit of discoveries, inventions, improvements, and
innovations developed by Consultant, to the extent Versus is
entitled to the same pursuant to the terms of this Agreement.
Now, therefore, it is agreed as follows:
1. "Confidential Information" shall mean apparatus, articles of
manufacture, methods, processes, products, technology,
techniques, operational methods, hardware, software, programs,
shop practices, formulae, compounds, compositions, equipment,
inventions, improvements, research data, marketing and sales
information and plans, personnel data, customer lists,
distributor data and lists, broker data and lists, broker and
83<PAGE>
distributor leads, financial data, plans for new product
acquisitions and all other know-how and trade secrets which
are in the possession of a party, or any of its subsidiaries
or affiliated companies, and which are not generally known and
which have not been published or disclosed to the general
public. Documented Confidential Information must be so
indicated when delivered to the other party. Confidential
Information shall not be deemed to mean or include any
information which is or was known to a party prior to
disclosure to it by the other, or was independently developed
by a party without use of any know-how or trade secret of the
disclosing party. Information which is specifically produced
or created by Consultant for Versus during the time Consultant
is directly working on the projects which are the subject
matter of this Agreement, and for which Versus has paid in
accordance with this Agreement, are agreed to be within the
ambit of Confidential Information which is proprietary solely
to Versus.
2. All correspondence, memoranda, notes, figures, records,
instruments, reports, specifications, photographs, drawings,
designs, plans, papers, computer data, software, blueprints,
manuals, or other documents made or compiled by or made
available by one party to the other during the term hereof,
and any copies or abstracts thereof, which contains
Confidential Information belonging to a party shall be
returned to such party immediately upon demand therefor. For
the term of this Agreement, and for five years after
termination of this Agreement, neither party shall, without
the written consent of the other, use or disclose to others,
any Confidential Information obtained during the term of this
Agreement.
3. Versus hereby hires Consultant for a period of one year,
commencing on April 20, 1995 and ending on April 20, 1996, to
assist Versus to market, engineer, design, code, test document
(in code and users), revise, create individual customer
interfaces, and support the Lynx IR systems, thus helping
Versus achieve access to complete data transferabilities,
proper personnel back-ups and management sign off on all
procedures.
4. Consultant will promptly advise Versus of each invention,
discovery, idea, or improvement, whether or not patentable,
that is made or conceived by Consultant, either alone or with
others, during the term of this Agreement which is solely and
directly related to Consultant's work and investigations and
resulting from or suggested by work done specifically for
Versus at its request pursuant to the above undertaking
(collectively hereafter referred to as "Invention").
Consultant will promptly submit to Versus a written disclosure
of each Invention describing its nature, use, and operation.
84<PAGE>
To this end, Consultant will maintain a record from day to day
of all work of an important character, including each
Invention in the form prescribed by Versus. Consultant will
deliver the relevant records to Versus immediately upon the
termination of this Agreement. Consultant will, without
further consideration, assign to Versus all right, title and
interest in each Invention which Consultant may possess,
whether or not patentable, and will at all times during this
Agreement and after its termination for any reason not
attributable to the fault or neglect of Versus, assist Versus
in every proper way. Versus may obtain, for its own benefit,
patents or other forms of protection for each Invention in any
and all countries. From time to time on request, Consultant
will execute all papers and do all proper things that may
reasonably be required to protect and maintain the rights of
Versus in an Invention, whether or not patented; provided,
that any costs of doing so will be paid by Versus.
5. Consultant will promptly advise Versus of each copyrighted
work that is made or created by Consultant, either alone or
with others, during the term of this Agreement, which is
solely and directly related to Consultant's work and
investigations for Versus pursuant to this Agreement. All
such works shall be deemed to have arisen out of Consultant's
agreement and shall be deemed to be works for hire.
Consultant will, without further consideration, assign to
Versus all right, title and interest in each such work which
Consultant may possess, and will, at all times during
employment and after its termination for any reason assist
Versus in every proper way; provided, that any costs of doing
so will be paid by Versus.
6. East party expressly acknowledges that any breach by it of any
of the covenants herein contained relating to use or
disclosure of Confidential Information will result in
irreparable injury to the other party for which money damages
could not adequately compensate. In the event of any such
breach or threatened breach, the non-breaching party shall be
entitled, in addition to any other rights and remedies which
it may have at law or in equity, to have an injunction issued
by any competent court of equity enjoining and restraining the
offending party and/or any other person involved therein from
continuing such breach. The existence of any claim or cause
or action which a party may have against the other or any
other person shall not constitute a defense or bar to the
enforcement of such covenants.
7. Consultant agrees that during the term of this Agreement
Consultant shall not directly or indirectly compete with
Versus in the development, production, marketing or servicing
of any product or service that relates to the work Consultant
has undertaken to perform pursuant to this Agreement; nor will
Consultant aid or become associated with others involved in
any such acts.
85<PAGE>
8. Consultant and Versus recognize that Versus's and Consultant's
business interests are worldwide in scope. Accordingly,
Consultant shall not at any time during the period of this
Agreement and one year following termination of this Agreement
engage in or contribute its knowledge to any work which is
competitive with or similar to a product, process, apparatus,
service or development of Versus on which Consultant worked or
with respect to which Consultant had access to Confidential
Information of Versus while under contract with Versus;
however, Consultant shall be permitted to engage in such
proposed work or activity, and Versus shall furnish Consultant
with a written consent to that effect, if Consultant furnishes
to Versus clear and convincing written evidence, including
assurances from Consultant that the fulfillment of
Consultant's duties in such proposed work or activity would
not cause Consultant to disclose, base judgments upon, or use
any such Confidential Information. Following the expiration
of the one year period, each party shall continue to be
obligated under the nondisclosure of Confidential Information
clauses of this Agreement so long as it shall remain
proprietary and protectable as Confidential Information. It
is understood that the geographical area set forth in this
clause is divisible so that if this clause is invalid or
unenforceable in an included geographic area, that area is
severable and this clause remains in effect for the remaining
included geographic areas in which the clause is valid.
9. If any portion of the covenant, or the application thereof, is
invalid or unenforceable, the other portions of the covenant,
or the application thereof, shall not be affected, and shall
be given full force and effect without regard to the invalid
or unenforceable portion. If any covenant is unenforceable,
the court making such determination shall have the power to
reduce the scope of such covenant to the extent required to
make such covenant enforceable as so reduced.
10. (a) As compensation to Consultant for the services to be
rendered pursuant to this Agreement, Versus agrees to pay
Consultant a fixed annual fee in the amount of $144,000,
payable in monthly installments of $12,000, with the
first such installment to be paid concurrently with the
mutual execution and delivery of this Agreement (to cover
the month of April), and subsequent installments to be
received by Consultant on the first of each month after
May 1, 1995; provided, that the entire amount shall be
due and payable upon termination of this Agreement if
terminated for any reason not attributable to a
substantial breach of a material obligation of this
Agreement by Consultant.
(b) The first 100 man hours of Consultant's time devoted to
its work for Versus during a calendar month shall be
deemed to be fully paid by that month's $12,000
86<PAGE>
installment. If Consultant spends more than 100 man
hours during a calendar month at the request of Versus,
Versus will pay Consultant an additional fee at the rate
of $90 per hour for all such excess hours during such
month. Any portion of the 100 hours not used in a
particular calendar month will lapse at the end of the
month.
(c) Versus also agrees to pay for any reasonable and
authorized travel or other out of pocket expenses paid or
incurred by Consultant which are directly related to the
rendering of services requested by Versus. Consultant
will periodically invoice Versus for all such additional
fees and expenses, if any, and Versus shall pay the same
on a net 15 basis. If any sums owed to Consultant by
Versus are not paid when due, or within a 15 day grace
period following the due date, Versus agrees to pay
interest on the unpaid principal at the rate of 15% per
annum, or the highest lawful rate, whichever is lower.
11. All services and products supplied to Versus will be performed
on a "best efforts" basis to meet Versus's written
specifications, without express or implied warranty by
Consultant of any kind, including specifically, but without
implied limitation, no warranty of FITNESS for a particular
purpose and no warranty of MERCHANTABILITY. Versus will
promptly inspect any deliveries to it from Consultant, and
will accept or reject the same promptly, in writing, and in
any event before commercial use or installation into any
Versus product. Upon acceptance or installation into a Versus
product, Consultant's liability shall cease, and Versus shall
be solely responsible for any products it may deliver to third
parties. In no event shall Consultant have any liability for
incidental or consequential damages.
12. This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of the respective parties
hereto. This Agreement constitutes and fully integrates the
entire understanding between the parties hereto, and is
intended to supersede and cancel all prior written or oral
understandings between them dealing with the subject matter
hereof. This Agreement may not be changed orally, but only in
writing, signed by the party against whom enforcement of any
waiver, change, amendment, modification, extension or
discharge is sought. No other warranties, representations or
covenants exist that are not herein contained. All notices
required or authorized under this Agreement shall be in
writing and shall be deemed to have been duly given on the
date of service if served personally on the party to whom
notice is to be given, or the second day after mailing, if
mailed to the party to whom notice is to be given by first
class mail, registered or certified, postage prepaid and
addressed to the respective parties at the addresses set forth
87<PAGE>
above, unless and until a different address shall be furnished
by any party desiring to change such address to the other
party. For each term and pronoun used in this Agreement, the
singular number includes the plural number, and vice versa,
and any gender, whether masculine, feminine, or neuter,
includes the other genders, as appropriate and as the context
may reasonably require. The invalidity of any paragraph,
provision or part hereof shall not affect the validity of any
other paragraph, provision or part hereof. This Agreement
shall be construed as a whole and in accordance with its fair
meaning. Captions, if any, and organization are for
convenience and shall not be used in construing its meaning.
This Agreement may be executed in one or more counterparts,
all of which shall constitute one and the same instrument and
each one of which shall be deemed an original. Each party
shall, upon reasonable request, execute and deliver such other
and further documents as may be necessary and proper to
effectuate this Agreement. This Agreement shall be
interpreted and enforced in accordance with the laws of the
State of Michigan, excluding any conflicts-of-law rule or law
which refers to the laws of another jurisdiction. In the
event of litigation arising under or in connection herewith,
each party consents to the exclusive in personam jurisdiction
of the state courts of the State of Michigan, with venue in
Traverse City, Michigan, and the nonprevailing party agrees to
pay the prevailing party's actual attorney's fees and expenses
in connection with any such litigation, in addition to any
costs, remedies or damages the court may award. This
Agreement constitutes the jointly bargained agreement of the
parties, and the construction of this Agreement shall not be
altered or influenced by the fact or presumption that one
party had a greater or lessor hand in drafting this Agreement.
Any Recitals are hereby made a part of this Agreement and all
exhibits, attachments, and schedules, if any, attached to this
Agreement are hereby incorporated herein by reference for all
applicable purposes. If the date for performance of any act
hereinafter falls on a Saturday, Sunday, or legal holiday,
then the time for performance thereof shall be deemed extended
to the next successive business day. Whenever it is provided
in this Agreement that days be counted, the first day to be
counted shall be the day following the date on which the event
causing the period to commence occurs. This Agreement is
intended solely for the benefit of the parties hereto and
88<PAGE>
their successors and assigns, and may not be relied upon or
enforced by any third party beneficiary.
Effective as of the day and year written above.
Olmsted Engineering Co. Versus Technology, Inc.
By: HENRY TERNARVITZ By:________________________
__________________________
Henry Ternarvitz
Its: Vice President Its:_______________________
Sales and Marketing
OWEN FREEDMAN
______________________________
Owen Freedman
GARY GAISSER
______________________________
Gary Gaisser
JOHN ROSS
______________________________
John Ross
JULIAN SCHROEDER
______________________________
Julian Schroeder
TERRY SNOWDAY
______________________________
Terry Snowday
89<PAGE>
EXHIBIT 10(d)
Registration Rights Agreement
dated September 15, 1995
90<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of this 15th day of
September, 1995, between VERSUS TECHNOLOGY, INC., a Delaware
corporation (the "Corporation"), and the persons set forth on
Schedule A hereto (the "Investors").
W I T N E S S E T H
WHEREAS, the Corporation agreed to provide the Investors with
registration rights as set forth herein as further consideration
for the purchase by the Investors of 11,250,000 shares of Common
Stock of the Corporation closing as of the date of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
terms and conditions hereof, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
Affiliate and Associate: Such terms shall have the respective
meanings assigned to them pursuant to Rule 12b-2 under the Exchange
Act.
Commission: The United States Securities and Exchange
Commission and any successor federal agency having similar powers.
Exchange Act: The Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and
regulations thereunder, all as at the time in effect.
Person: An individual, partnership, joint venture, corpora-
tion, trust, unincorporated organization or the government or any
department or agency thereof.
Registrable Securities: All of the Corporation's restricted
Common Stock, $.01 par value ("Common Stock") purchased by the
Investors as of the date of this Agreement.
Registration Expenses: Except as otherwise specifically
provided herein, all of the Corporation's out-of-pocket expenses,
without limitation as to amount, incident to the Corporation's
performance of or compliance with Section 2 herein, including,
without limitation, all fees and expenses, outside messenger and
delivery expenses, the fees and disbursements of counsel for the
Corporation and of its independent public accountant, and any fees
and disbursements of underwriters customarily paid by issuers or
sellers of securities and the expenses of one firm of attorneys who
shall represent the Investors. Registration Expenses shall not
include any underwriter's discounts, commissions or transfer taxes
paid by the Investors.
91<PAGE>
Securities Act: The Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations
thereunder, all as at the time in effect.
2. Registration
2.1 Registration on Request (Demand Registration). (a)
Request. At any one time more than six (6) months after the date
hereof, upon the written request of a majority in interest of
Investors that the Corporation effect the registration under the
Securities Act of all or part of each Investor's Registrable
Securities specifying the intended method or methods of disposition
thereof, the Corporation will use its best efforts to effect the
registration under the Securities Act of such securities to permit
their disposition (in accordance with the intended methods thereof
as aforesaid) and keep such registration open for a period of not
less than nine (9) months, provided that if such registration may
then be effected by the Corporation on Form S-3 or Form S-3B or any
successor Form of registration, then the Corporation shall keep
such registration effective until the Registerable Securities may
be sold publicly pursuant to Rule 144 by persons who are not
affiliates of the Company.
(b) Registration Statement Form. Registrations under this
Section 2.1 shall be on an appropriate registration form of the
Commission as determined by the Corporation and shall permit the
disposition of the Registrable Securities in accordance with the
intended method or methods of disposition specified in the
Investors' request for such registration.
(c) Expenses. The Corporation will pay all Registration
Expenses in connection with any registration of the Registrable
Securities.
2.2 Incidental Registration (Piggyback Registration). (a)
Notice and Request. If the Corporation at any time proposes to
register any of its securities under the Securities Act (except
registrations solely for registration of shares in connection with
an employee benefit plan or a merger or consolidation), whether or
not for sale for its own account, it will each such time give
prompt written notice to the Investors of its intention to do so.
Upon the written request of any Investor within 30 days after the
receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by the Investor,
the Corporation will use its best efforts to effect the registra-
tion under the Securities Act of all Registrable Securities which
the Corporation has been so requested to register by the Investor
as part of the incidental registration, provided that if the
Corporation shall determine for any reason not to register or to
delay registration of such securities the Corporation may, at its
election, give written notice of such determination to the
Investors, and, thereupon, (i) in the case of a determination not
to register, shall be relieved of its obligation to register any
92<PAGE>
Registrable Securities in connection with such registration,
without prejudice, however, to the rights of the Investors to
request that such registration be effected as a registration under
Section 2.1, and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any
Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under
this Section 2.2 shall relieve the Company of its obligation to
effect any registration upon request under Section 2.1. The
Registration Expenses of the Investors shall be paid by the
Corporation.
(b) Underwriters Cutback. If, in any incidental registration
referred to in Section 2.2(a) above, the managing underwriter or
underwriters thereof shall advise the Corporation in writing that
in its or their reasonable opinion the number of securities
proposed to be sold in such registration exceeds the number that
can be sold in such offering without having a material effect on
the success of the offering (including, without limitation, an
impact on the selling price or the number of shares that any
participant may sell), the Corporation will include in such
registration only the number of securities that, in the reasonable
opinion of such underwriter or underwriters can be sold without
having a material adverse effect on the success of the offering as
follows: (i) first, all of the shares to be issued and sold by the
Corporation and (ii) second, the Registrable Securities requested
to be included in such registration by the Investors and any other
Person pro rata on the basis of the aggregate number of shares
requested to be included.
(c) Sales during Registration. The Investors participating
in the incidental registration agree, if requested by the managing
underwriter in an underwritten public offering, not to effect any
public sale or distribution of securities of the Corporation of the
same class as the Registrable Securities so registered, including
a sale pursuant to Rule 144 under the Securities Act (except as
part of such underwritten offering), during the ten-day period
prior to, and during the 90-day period beginning on, the closing
date of the underwritten offering. Each Investor agrees that it
shall undertake, in its request to participate in any such
underwritten offering, not to effect any public sale or
distribution of any applicable class of Registrable Securities
during the 90-day period commencing on the date of sale of such
applicable class of Registrable Securities unless it has provided
90 days prior written notice of such sale or distribution to the
underwriter(s).
2.3 Registration Procedures. Whenever the Corporation is
required to effect the registration of any Registrable Securities
under the Securities Act as provided in Sections 2.1 and 2.2, it
shall, as expeditiously as possible:
93<PAGE>
(i) prepare and (within 120 days after a request for
registration is given to the Corporation or as soon thereafter as
possible) file with the Commission a registration statement with
respect to such Registrable Securities and use its best efforts to
cause such registration statement to become effective;
(ii) prepare and file with the Commission such amendments and
supplements to the registration statement and prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the
Securities Act for nine (9) months if under 2.1 and 90 days if
under 2.2;
(iii) furnish to each Investor participating such number of
conformed copies of such registration statement and of each
amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus contained in
such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under
Rule 424 under the Securities Act, in conformity with the require-
ments of the Securities Act, and such other documents, as such
Investor may reasonably request;
(iv) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statements under such other securities or blue sky
laws of such jurisdictions where an exemption is not available and
as the Investors participating shall reasonably request, to keep
such registration or qualification in effect for so long as such
registration statement remains in effect, and take any other action
which may be reasonably necessary or advisable to enable the
Investors participating to consummate the disposition in such
jurisdictions of the securities owned by them, except that the
Corporation shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdic-
tion wherein it would not but for the requirements of this
subdivision (iv) be obligated to be so qualified or to consent to
general service of process in any such jurisdiction; and
(v) notify each Investor participating, at any time when a
prospectus forming a part of such registration statement is
required to be delivered under the Securities Act, upon discovery
that, or upon the happening of any event as a result of which, the
prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the
circumstances under which they were made, and at the request of the
participating Investors promptly prepare and furnish to the
participating Investors a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of
such securities, such prospectus shall not include an untrue
94<PAGE>
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under
which they are made.
2.4 Limitations, Conditions and Qualifications to Obligations
under Registration Covenants. The obligations of the Corporation
to use its reasonable efforts to cause the Registrable Securities
to be registered under the Securities Act are subject to each of
the following limitations, conditions and qualifications.
(a) The Corporation shall not be obligated to file any
registration statement pursuant to Section 2.1 hereof at any time
if the Corporation would be required to include financial state-
ments audited as of any date other than the end of its fiscal year.
(b) The Corporation shall be entitled to postpone for a
period of time (which in the judgment of the Corporation is
reasonable under the circumstances) the filing of any registration
statement otherwise required to be prepared and filed by it
pursuant to Section 2.1 if the Corporation determines, in its
reasonable judgment, that such registration and offering would
interfere with any financing, acquisition, corporate reorganization
or other proposed material transaction involving the Corporation or
any of its Affiliates or that it would require the Corporation to
disclose material non-public information that it deems advisable
not to disclose and promptly gives the Investor written notice of
such determination. Further, the Corporation shall have the right
to require each Investor participating not to sell securities in a
public offering for a period of up to 90 days during the effective-
ness of any registration statement if the Corporation shall
determine that such sale would interfere with any transaction
involving the Corporation as described above or that such registra-
tion would require disclosure of such material non-public informa-
tion. If pursuant to the preceding sentence the Corporation has
required the Investor to discontinue the sale of securities during
the effectiveness of a registration statement, then the period of
time any such registration statement must be kept effective
pursuant to Section 2.3(ii) hereof shall be extended for a period
equal to the length of such discontinuance.
(c) If the Investor proposes that the sale of
Registrable Securities pursuant to Section 2.1 hereof be an
underwritten offering, the Corporation shall have the right to
approve the choice of underwriters who undertake such offering.
2.5 Indemnification. (a) Indemnification by the Corpora-
tion. In the event of any registration of any Registrable
Securities of the Corporation under the Securities Act pursuant to
Section 2.1 or 2.2, the Corporation will, and hereby does,
indemnify and hold harmless, each Investor, its directors and
officers, any underwriter and each other Person, if any, who
controls any Investor or any such underwriter, against any losses,
95<PAGE>
claims, damages or liabilities, to which any Investor or any such
director or officer or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities arise out of or are based
upon any untrue statement of any material fact contained in any
registration statement under which such securities were registered
under the Securities Act or any prospectus contained therein, or
any omission or alleged omissions to state therein a material fact
required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not
misleading, and the Corporation will reimburse each Investor, and
each such director, officer, underwriter and controlling person for
any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim or
liability or action or proceeding in respect thereof; provided that
the Corporation shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or expense arises out
of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement
or any such prospectus, in reliance upon and in conformity with
written information furnished to the Corporation by or on behalf of
any Investor or underwriter, as the case may be, specifically
stating that it is for use in the preparation thereof; and
provided, further, that the Corporation shall not be liable in any
case to the extent that such loss, claim, damage, liability or
expense arises out of an untrue or alleged untrue statement or
omission or alleged omission in a prospectus, if such statement or
omission is corrected in an amendment or supplement to the
prospectus and the Investor thereafter fails to deliver such
prospectus as amended or supplemented prior to or concurrently with
the sale of the Registrable Securities. Such indemnity shall
remain in full force and effect regardless of any investigation
made by or on behalf of any Investor, or any such director, officer
or controlling person and shall survive the transfer of such
securities by the Investor.
(b) Indemnification by the Investors. The Corporation
may require, as a condition to including any Registrable Securities
in any registration statement filed pursuant to Section 2.1 or 2.2,
that the Corporation shall have received an undertaking satisfacto-
ry in all respects to it from each Investor participating, to
indemnify and hold harmless (in the same manner and to the same
extent as set forth in subdivision (a) of this Section 2.5) the
Corporation, each director of the Corporation, each officer of the
Corporation and each other person, if any, who control the
Corporation within the meaning of the Securities Act, with respect
to any statement or alleged statement in or omission or alleged
omission from such registration statement or any prospectus
contained therein, if such statement or alleged statement or
omission or alleged omission was made in reliance upon or in
conformity with written information furnished to the Corporation by
the Investor for use in the preparation of such registration
96<PAGE>
statement or prospectus. Such indemnity shall remain in full force
and effect, regardless of any investigation made by or on behalf of
the Corporation or any such director, officer or controlling person
and shall survive the transfer of such securities by the Investor.
(c) Notices of Claims, etc. Promptly after receipt by
an indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in the preceding subdivi-
sions of this Section 2.5, such indemnified party will, if a claim
in respect thereof is to be made against an indemnifying party,
give written notice to the latter of the commencement of such
action, provided that the failure of any indemnified party to give
notice as provided herein shall not relieve the indemnifying party
of its obligations under the preceding subdivisions of this Section
3.6, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action
is brought against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party shall be entitled to participate in
and to assume the defense thereof, jointly with any other indemni-
fying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection
with the defense thereof other than reasonable costs of investiga-
tion. No indemnifying party shall be liable for any settlement of
any action or proceeding effected without its written consent. No
indemnifying party shall, without the consent of the indemnified
party, consent to entry of any judgment or enter into any settle-
ment which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to
that specified in the preceding subdivisions of this Section 2.5
(with appropriate modifications) shall be given by the Corporation
and each Investor participating with respect to any required
registration or other qualification of securities under any Federal
or state law or regulation of any governmental authority other than
the Securities Act.
3. Notices. All communication provided for hereunder shall
be sent by first-class mail and, if to a Investor, addressed to it
at the address set forth on Exhibit A, or to such other address as
the Investor may have designated to the Corporation in writing,
and, if to the Corporation, addressed to it at c/o Olmsted
Engineering, 2320 Aero Park Court, Traverse City, MI 49686,
Attention: President, or to such other address as the Corporation
may have designated to the Investor in writing.
97<PAGE>
4. Assignment. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto
and their respective successors and assigns.
5. Descriptive Headings. The descriptive headings of the
several sections and paragraphs of this Agreement are inserted for
reference only and shall not limit or otherwise affect the meaning
hereof.
6. Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be
governed by, the laws of the State of Michigan.
7. Counterparts. This Agreement may be executed simulta-
neously in any number of counterparts, each of which shall be
deemed an original, but all such counterparts shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their respective officers thereunto
duly authorized as of the date first above written.
VERSUS TECHNOLOGY, INC.
By: GARY T. GAISSER
_______________________
Name: Gary T. Gaisser
Title: President
The Investors by their Agent-in-Fact
pursuant to Subscription Agreements
signed by them
BDS SECURITIES CORPORATION
By: JULIAN SCHROEDER
____________________
Name: Julian Schroeder, President
98<PAGE>
Schedule A
Versus Technology, Inc.
Investors
Name & Address Amount Telephone Fax
99<PAGE>
EXHIBIT 10(e)
Registration Rights Agreement
dated July 1, 1994
100<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of this 1st day of
July 1995, between VERSUS TECHNOLOGY, INC., a Delaware
corporation (the "Corporation"), and the persons set forth on
Schedule A hereto (the "Lenders").
W I T N E S S E T H
WHEREAS, the Corporation agreed to provide the Lenders with
registration rights as set forth herein as further consideration
for the purchase by the Lenders of 11,250,000 shares of Common
Stock of the Corporation closing as of the date of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
terms and conditions hereof, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
Affiliate and Associate: Such terms shall have the respective
meanings assigned to them pursuant to Rule 12b-2 under the Exchange
Act.
Commission: The United States Securities and Exchange
Commission and any successor federal agency having similar powers.
Exchange Act: The Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and
regulations thereunder, all as at the time in effect.
Person: An individual, partnership, joint venture, corpora-
tion, trust, unincorporated organization or the government or any
department or agency thereof.
Registrable Securities: All of the Corporation's restricted
Common Stock, $.01 par value ("Common Stock") purchased by the
Lenders as of the date of this Agreement.
Registration Expenses: Except as otherwise specifically
provided herein, all of the Corporation's out-of-pocket expenses,
without limitation as to amount, incident to the Corporation's
performance of or compliance with Section 2 herein, including,
without limitation, all fees and expenses, outside messenger and
delivery expenses, the fees and disbursements of counsel for the
Corporation and of its independent public accountant, and any fees
and disbursements of underwriters customarily paid by issuers or
sellers of securities and the expenses of one firm of attorneys who
shall represent the Lenders. Registration Expenses shall not
include any underwriter's discounts, commissions or transfer taxes
paid by the Lenders.
101<PAGE>
Securities Act: The Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations
thereunder, all as at the time in effect.
2. Registration
2.1 Registration on Request (Demand Registration). (a)
Request. At any one time more than six (6) months after the date
hereof, upon the written request of a majority in interest of
Lenders that the Corporation effect the registration under the
Securities Act of all or part of each Lender's Registrable
Securities specifying the intended method or methods of disposition
thereof, the Corporation will use its best efforts to effect the
registration under the Securities Act of such securities to permit
their disposition (in accordance with the intended methods thereof
as aforesaid) and keep such registration open for a period of not
less than nine (9) months, provided that if such registration may
then be effected by the Corporation on Form S-3 or Form S-3B or any
successor Form of registration, then the Corporation shall keep
such registration effective until the Registerable Securities may
be sold publicly pursuant to Rule 144 by persons who are not
affiliates of the Company.
(b) Registration Statement Form. Registrations under this
Section 2.1 shall be on an appropriate registration form of the
Commission as determined by the Corporation and shall permit the
disposition of the Registrable Securities in accordance with the
intended method or methods of disposition specified in the
Lenders' request for such registration.
(c) Expenses. The Corporation will pay all Registration
Expenses in connection with any registration of the Registrable
Securities.
2.2 Incidental Registration (Piggyback Registration). (a)
Notice and Request. If the Corporation at any time proposes to
register any of its securities under the Securities Act (except
registrations solely for registration of shares in connection with
an employee benefit plan or a merger or consolidation), whether or
not for sale for its own account, it will each such time give
prompt written notice to the Lenders of its intention to do so.
Upon the written request of any Lender within 30 days after the
receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by the Lender,
the Corporation will use its best efforts to effect the registra-
tion under the Securities Act of all Registrable Securities which
the Corporation has been so requested to register by the Lender
as part of the incidental registration, provided that if the
Corporation shall determine for any reason not to register or to
delay registration of such securities the Corporation may, at its
election, give written notice of such determination to the
Lenders, and, thereupon, (i) in the case of a determination not
to register, shall be relieved of its obligation to register any
102<PAGE>
Registrable Securities in connection with such registration,
without prejudice, however, to the rights of the Lenders to
request that such registration be effected as a registration under
Section 2.1, and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any
Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under
this Section 2.2 shall relieve the Company of its obligation to
effect any registration upon request under Section 2.1. The
Registration Expenses of the Lenders shall be paid by the
Corporation.
(b) Underwriters Cutback. If, in any incidental registration
referred to in Section 2.2(a) above, the managing underwriter or
underwriters thereof shall advise the Corporation in writing that
in its or their reasonable opinion the number of securities
proposed to be sold in such registration exceeds the number that
can be sold in such offering without having a material effect on
the success of the offering (including, without limitation, an
impact on the selling price or the number of shares that any
participant may sell), the Corporation will include in such
registration only the number of securities that, in the reasonable
opinion of such underwriter or underwriters can be sold without
having a material adverse effect on the success of the offering as
follows: (i) first, all of the shares to be issued and sold by the
Corporation and (ii) second, the Registrable Securities requested
to be included in such registration by the Lenders and any other
Person pro rata on the basis of the aggregate number of shares
requested to be included.
(c) Sales during Registration. The Lenders participating
in the incidental registration agree, if requested by the managing
underwriter in an underwritten public offering, not to effect any
public sale or distribution of securities of the Corporation of the
same class as the Registrable Securities so registered, including
a sale pursuant to Rule 144 under the Securities Act (except as
part of such underwritten offering), during the ten-day period
prior to, and during the 90-day period beginning on, the closing
date of the underwritten offering. The Lender agrees that it
shall undertake, in its request to participate in any such
underwritten offering, not to effect any public sale or
distribution of any applicable class of Registrable Securities
during the 90-day period commencing on the date of sale of such
applicable class of Registrable Securities unless it has provided
90 days prior written notice of such sale or distribution to the
underwriter(s).
2.3 Registration Procedures. Whenever the Corporation is
required to effect the registration of any Registrable Securities
under the Securities Act as provided in Sections 2.1 and 2.2, it
shall, as expeditiously as possible:
103<PAGE>
(i) prepare and (within 120 days after a request
for registration is given to the Corporation or as soon thereafter
as possible) file with the Commission a registration statement with
respect to such Registrable Securities and use its best efforts to
cause such registration statement to become effective;
(ii) prepare and file with the Commission such
amendments and supplements to the registration statement and
prospectus used in connection therewith as may be necessary to keep
such registration statement effective and to comply with the
provisions of the Securities Act for nine (9) months if under 2.1
and 90 days if under 2.2;
(iii) furnish to each Lender participating such
number of conformed copies of such registration statement and of
each amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus contained in
such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under
Rule 424 under the Securities Act, in conformity with the require-
ments of the Securities Act, and such other documents, as such
Lender may reasonably request;
(iv) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statements under such other securities or blue sky
laws of such jurisdictions where an exemption is not available and
as the Lenders participating shall reasonably request, to keep
such registration or qualification in effect for so long as such
registration statement remains in effect, and take any other action
which may be reasonably necessary or advisable to enable the
Lenders participating to consummate the disposition in such
jurisdictions of the securities owned by them, except that the
Corporation shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdic-
tion wherein it would not but for the requirements of this
subdivision (iv) be obligated to be so qualified or to consent to
general service of process in any such jurisdiction; and
(v) notify each Lender participating, at any time
when a prospectus forming a part of such registration statement is
required to be delivered under the Securities Act, upon discovery
that, or upon the happening of any event as a result of which, the
prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the
circumstances under which they were made, and at the request of the
participating Lenders promptly prepare and furnish to the
participating Lenders a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of
such securities, such prospectus shall not include an untrue
104<PAGE>
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under
which they are made.
2.4 Limitations, Conditions and Qualifications to Obligations
under Registration Covenants. The obligations of the Corporation
to use its reasonable efforts to cause the Registrable Securities
to be registered under the Securities Act are subject to each of
the following limitations, conditions and qualifications.
(a) The Corporation shall not be obligated to file any
registration statement pursuant to Section 2.1 hereof at any time
if the Corporation would be required to include financial state-
ments audited as of any date other than the end of its fiscal year.
(b) The Corporation shall be entitled to postpone for a
period of time (which in the judgment of the Corporation is
reasonable under the circumstances) the filing of any registration
statement otherwise required to be prepared and filed by it
pursuant to Section 2.1 if the Corporation determines, in its
reasonable judgment, that such registration and offering would
interfere with any financing, acquisition, corporate reorganization
or other proposed material transaction involving the Corporation or
any of its Affiliates or that it would require the Corporation to
disclose material non-public information that it deems advisable
not to disclose and promptly gives the Lender written notice of
such determination. Further, the Corporation shall have the right
to require each Lender participating not to sell securities in a
public offering for a period of up to 90 days during the effective-
ness of any registration statement if the Corporation shall
determine that such sale would interfere with any transaction
involving the Corporation as described above or that such registra-
tion would require disclosure of such material non-public informa-
tion. If pursuant to the preceding sentence the Corporation has
required the Lender to discontinue the sale of securities during
the effectiveness of a registration statement, then the period of
time any such registration statement must be kept effective
pursuant to Section 2.3(ii) hereof shall be extended for a period
equal to the length of such discontinuance.
(c) If the Lender proposes that the sale of
Registrable Securities pursuant to Section 2.1 hereof be an
underwritten offering, the Corporation shall have the right to
approve the choice of underwriters who undertake such offering.
2.5 Indemnification. (a) Indemnification by the Corpora-
tion. In the event of any registration of any Registrable
Securities of the Corporation under the Securities Act pursuant to
Section 2.1 or 2.2, the Corporation will, and hereby does,
indemnify and hold harmless, each Lender, its directors and
officers, any underwriter and each other Person, if any, who
controls any Lender or any such underwriter, against any losses,
105<PAGE>
claims, damages or liabilities, to which any Lender or any such
director or officer or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities arise out of or are based
upon any untrue statement of any material fact contained in any
registration statement under which such securities were registered
under the Securities Act or any prospectus contained therein, or
any omission or alleged omissions to state therein a material fact
required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not
misleading, and the Corporation will reimburse each Lender, and
each such director, officer, underwriter and controlling person for
any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim or
liability or action or proceeding in respect thereof; provided that
the Corporation shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or expense arises out
of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement
or any such prospectus, in reliance upon and in conformity with
written information furnished to the Corporation by or on behalf of
any Lender or underwriter, as the case may be, specifically
stating that it is for use in the preparation thereof; and
provided, further, that the Corporation shall not be liable in any
case to the extent that such loss, claim, damage, liability or
expense arises out of an untrue or alleged untrue statement or
omission or alleged omission in a prospectus, if such statement or
omission is corrected in an amendment or supplement to the
prospectus and the Lender thereafter fails to deliver such
prospectus as amended or supplemented prior to or concurrently with
the sale of the Registrable Securities. Such indemnity shall
remain in full force and effect regardless of any investigation
made by or on behalf of any Lender, or any such director, officer
or controlling person and shall survive the transfer of such
securities by the Lender.
(b) Indemnification by the Lenders. The Corporation
may require, as a condition to including any Registrable Securities
in any registration statement filed pursuant to Section 2.1 or 2.2,
that the Corporation shall have received an undertaking satisfacto-
ry in all respects to it from each Lender participating, to
indemnify and hold harmless (in the same manner and to the same
extent as set forth in subdivision (a) of this Section 2.5) the
Corporation, each director of the Corporation, each officer of the
Corporation and each other person, if any, who control the
Corporation within the meaning of the Securities Act, with respect
to any statement or alleged statement in or omission or alleged
omission from such registration statement or any prospectus
contained therein, if such statement or alleged statement or
omission or alleged omission was made in reliance upon or in
conformity with written information furnished to the Corporation by
the Lender for use in the preparation of such registration
statement or prospectus. Such indemnity shall remain in full force
106<PAGE>
and effect, regardless of any investigation made by or on behalf of
the Corporation or any such director, officer or controlling person
and shall survive the transfer of such securities by the Lender.
(c) Notices of Claims, etc. Promptly after receipt by
an indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in the preceding subdivi-
sions of this Section 2.5, such indemnified party will, if a claim
in respect thereof is to be made against an indemnifying party,
give written notice to the latter of the commencement of such
action, provided that the failure of any indemnified party to give
notice as provided herein shall not relieve the indemnifying party
of its obligations under the preceding subdivisions of this Section
3.6, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action
is brought against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party shall be entitled to participate in
and to assume the defense thereof, jointly with any other indemni-
fying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection
with the defense thereof other than reasonable costs of investiga-
tion. No indemnifying party shall be liable for any settlement of
any action or proceeding effected without its written consent. No
indemnifying party shall, without the consent of the indemnified
party, consent to entry of any judgment or enter into any settle-
ment which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to
that specified in the preceding subdivisions of this Section 2.5
(with appropriate modifications) shall be given by the Corporation
and each Lender participating with respect to any required
registration or other qualification of securities under any Federal
or state law or regulation of any governmental authority other than
the Securities Act.
3. Notices. All communication provided for hereunder shall
be sent by first-class mail and, if to a Lender, addressed to it
at the address set forth on Exhibit A, or to such other address as
the Lender may have designated to the Corporation in writing,
and, if to the Corporation, addressed to it at c/o Olmsted
Engineering, 2320 Aero Park Court, Traverse City, MI 49686,
Attention: President, or to such other address as the Corporation
may have designated to the Lender in writing.
107<PAGE>
4. Assignment. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto
and their respective successors and assigns.
5. Descriptive Headings. The descriptive headings of the
several sections and paragraphs of this Agreement are inserted for
reference only and shall not limit or otherwise affect the meaning
hereof.
6. Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be
governed by, the laws of the State of Michigan.
7. Counterparts. This Agreement may be executed simulta-
neously in any number of counterparts, each of which shall be
deemed an original, but all such counterparts shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their respective officers thereunto
duly authorized as of the date first above written.
VERSUS TECHNOLOGY, INC.
By: GARY T. GAISSER
_______________________
Name: Gary T. Gaisser
Title: President
The Lenders by their Agent-in-Fact
pursuant to Subscription Agreements
signed by them
BDS SECURITIES CORPORATION
By: JULIAN SCHRODER
____________________
Name: Julian Schroeder, President
108<PAGE>
Schedule A
Versus Technology, Inc.
Investors
Name & Address Amount Warrants Telephone Fax
John G. Ross $50,000 25,000
66 Childsworth Avenue
Bernardsville, NJ 07924
Julian Schroeder 50,000 25,000
c/o BDS Securities Corporation
101 East 52nd Street
New York, NY 10022
Edgar R. Puthuff 50,000 25,000
819 Lochmoore Blvd.
Grosse Point, MI 48236
Richard Calvert 50,000 25,000
115 Allor Street
Perrinton, MI 48871-0368
Terry Snowday 50,000 25,000
856 East Eight Street
Travese City, MI 49686
Olmsted Engineering 100,000 50,000
2320 Aero Park Court
Travers City, MI 49686
Chase Manhattan Bank, 200,000 100,000
Custodian for Elliot Eisenberg
IRA Rollover, CUST #5000-4957
ATTN: Tom Hutchens, Tenth Floor
1211 Sixth Avenue
New York, NY 10036-8701 ______ ______
$550,000 275,000
109<PAGE>
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<CASH> 1,998,000
<SECURITIES> 0
<RECEIVABLES> 88,000
<ALLOWANCES> 25,000
<INVENTORY> 11,000
<CURRENT-ASSETS> 2,179,000
<PP&E> 139,000
<DEPRECIATION> 136,000
<TOTAL-ASSETS> 2,435,000
<CURRENT-LIABILITIES> 1,022,000
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0
0
<COMMON> 190,000
<OTHER-SE> 884,000
<TOTAL-LIABILITY-AND-EQUITY> 2,435,000
<SALES> 989,000
<TOTAL-REVENUES> 989,000
<CGS> 500,000
<TOTAL-COSTS> 3,799,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,000
<INCOME-PRETAX> (2,497,000)
<INCOME-TAX> 0
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