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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(X) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1996
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
Commission File No. 0-17500
VERSUS TECHNOLOGY, INC.
(Name of Small Business Issuer in its charter)
Delaware 22-2283745
(State of Incorporation) (I.R.S. Employer Identification Number)
2600 Miller Creek Road, Traverse City, Michigan 49684
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (616) 946-5868
Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the 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 registrant's knowledge, in definitive proxy or information
statements included in Part III of this Form 10-KSB or any amendment to this
Form 10-KSB. ( )
The issuer's revenues for its most recent fiscal year were $348,000.
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 $23,669,118
as of December 16, 1996.
As of December 16, 1996, the issuer had outstanding 36,529,073 shares of common
stock.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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VERSUS TECHNOLOGY, INC.
Index to Form 10-KSB
<TABLE>
PART I PAGE
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Item 1 Description of the Business....................................................................................... 3
Item 2 Description of Property........................................................................................... 9
Item 3 Legal Proceedings................................................................................................. 9
Item 4 Submission of Matters to a Vote of Security Holders............................................................... 11
PART II
Item 5 Market for Common Equity and Related Stockholder Matters.......................................................... 11
Item 6 Management's Discussion and Analysis or Plan of Operation......................................................... 11
Item 7 Financial Statements.............................................................................................. 16
Item 8 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure........................................................................................................ 37
PART III
Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange
Item 9 Act............................................................................................................... 38
Item 10 Executive Compensation............................................................................................ 38
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.................................................................................. 42
Signatures 44
Exhibit Index 45
</TABLE>
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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 1988 and was originally formed to be
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 had also developed 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.
In 1994, Versus experienced significant losses which 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 and 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, who was then the President of
Olmsted Engineering Co. ("Olmsted"), the Company's principal development
consultant in the area of IR Tracking. In September 1995, the Company's
employment levels and other expenses were sharply reduced, and the business
headquarters were relocated from Trenton, New Jersey to Traverse City,
Michigan, the principal executive offices of Olmsted.
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 $2,428,000 were used
to develop the IR Tracking business and for general operating expenses.
On August 26, 1996, the Company completed a private placement of
11,335,000 shares of its common stock at $.50 per share, with net proceeds
totaling approximately $5,201,000. The proceeds will be used for working
capital and further development of the IR Tracking technology. Concurrent with
this private placement, the Company acquired Olmsted in exchange for 6,379,889
shares of Versus common stock, plus cash of $65,000, amounting to a purchase
price of $3,255,000, net of related costs.
Olmsted, a wholly-owned subsidiary of Versus, will continue to do business
under the Olmsted Engineering Co. name. The Company and its Board of Directors
believe this acquisition was critical to the continued development and success
of the IR Tracking system due to the long-term business relationships that had
been developed over the years, the solid name recognition of Olmsted in the
industry and the knowledge Olmsted gained as a consultant to the Company when
developing the IR Tracking system.
The Company currently operates in two business segments: security; and
systems design and engineering. The Company's IR Tracking system and cellular
line products constitute its security business and the systems design and
engineering business incorporates Olmsted's line of business. Olmsted has been
in business for nearly 20 years and is a recognized name in a narrow segment of
the complex machining market. Its trademark product, ACU.CARV, a family of
Computer Aided Manufacturing software programs, has enjoyed considerable
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success in the precision machining industry. ACU.CARV, along with other
similar products, will continue to be sold and maintained under the Olmsted
name.
In addition to the continuing Olmsted business, the Company's primary
focus will be directed to the development and expansion 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 Company believes that this technology
will have a wide range of applications. The first market being addressed by
the Company is the health care industry. Near term enhancement and expansion
of this technology that will permit the transmission of increased data is also
underway. 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. Several demonstration systems were put
into place over the past year and have been operating with high levels of
customer satisfaction. In fiscal year 1996, the Company's sales of IR Tracking
systems totaled $89,000. See Section 6 of Item 1, and Item 6, for a discussion
of an exclusive marketing agreement with a large medical equipment supplier
that should significantly increase sales in the coming fiscal year.
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. However, a large
portion of the CAT products have since been discontinued due to the settlement
of a patent infringement suit in the fourth quarter of the 1995 fiscal year.
(b) Business of the Issuer
(1) Principal Products and Services
Security Segment
Infrared Security System and Technology ("IR Tracking")
The Company's infrared security system is the primary product of the
Company. This technology was acquired in fiscal 1993. With the assistance of
Olmsted, functioning in a consulting capacity, this technology was further
developed and enhanced. 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 CAT 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
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monitoring. 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, in which 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. The Company's cellular product is comprised of a
cellular radio transceiver and an interface printed wiring assembly mounted
within a steel enclosure.
Systems Design and Engineering Segment
As discussed earlier, the Company's acquisition of Olmsted added this line
of business. Under the Olmsted name, the Company sells and maintains the
ACU.CARV product line which consists of a wide range of manufacturing solutions
including software, hardware, support and shop floor communications networks.
ACU.CARV is an integrated family of Computer Aided Manufacturing (CAM) software
programs used to operate computer numerically controlled machines, mainly in
the mold, die and pattern making industries. ACU.CARV's focus is to allow the
end user to machine efficiently and economically. The ACU.CARV family of
products provides instructions to control the movement of a stationary robot.
This is a mature product line with a wide range of existing applications and
provides the basis for future product development. Application areas include:
- Milling
- Wire EDM (Electronic Discharge Machining)
- Turning
- CAD/CAM (Computer Aided Design/Computer Aided Manufacturing)
- Programming services
- DNC (Direct Numerical Control)
- Design
Olmsted is an Autodesk registered developer which gives it access to the
AutoCad (the largest CAD system in the world) dealer network. This network
allows access to over 600,000 architects and contractors worldwide with a
product that will help create a floor plan layout for the sensory net, which,
as discussed below, is the backbone of the Versus IR Tracking system.
In addition to revenues from the sale of ACU.CARV products, the Company
also receives monthly maintenance and enhancement fees from the customer who,
in turn, receives technical support and semi-annual update releases.
Olmsted also provides a programming service, hardware and software
integration, complete turn-key systems and contract software consulting and
development.
Underlying Olmsted's ACU.CARV software programs and other programming
capabilities is a "source code" library which consists of approximately five
million lines of code containing the underlying algorithms from which software
products are generated. The Company's IR Tracking system was based on
developments taken from this source code library during the time in which
Olmsted was performing consulting services for the Company. The Company
believed that it was critical to the future of its IR Tracking system product
line that it have continued access to this source code library along with
Olmsted's developed engineering staff. The acquisition of Olmsted ensures this
continuity and provides the Company with a competitive advantage equivalent to
much larger corporations.
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(2) Marketing and Distribution
Infrared Security System and Technology
Prior to its acquisition by the Company in 1993, this infrared security
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. Enhancements made to this
technology over the past year 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. At present, the Company has entered into an exclusive marketing
agreement with Marquette Electronics, Inc., a major medical equipment supplier
relating to the tracking of heart monitor equipment, as further discussed in
Section 6 of Item 1. In addition to the health care market, 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.).
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.
Systems Design and Engineering Segment
The ACU.CARV product line is marketed to both existing users of the
products and potential new customers through direct sales efforts. Most of the
revenues from these products consist of recurring maintenance and enhancement
fees.
(3) New Products or Services
During fiscal 1995 the Company formally introduced its IR Tracking system,
currently marketed primarily to the health care industry. Additional
enhancements have been made to the IR Tracking system during the past year to
permit the transmission of increased data and thereby accommodate a larger
number of customers.
(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.
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While competition is extensive in the overall CAD/CAM market, competition
within Olmsted's relatively narrow market is more limited due to serving a
specialized and highly technical niche group. As discussed earlier, Olmsted is
considered a very well-respected name in this market. Management believes this
market is mature and no significant changes are expected to occur over the next
10-15 years.
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 for the IR Tracking systems and
remaining cellular products consist primarily of the assembly and testing of
final products and subassemblies purchased from other manufacturers. The
Company performs quality tests and checks on components and subassemblies at
various stages of manufacturing. Finished products are thoroughly tested for
all functions.
Olmsted's business in not dependent upon the availability of raw
materials.
In fiscal year 1996, the Company purchased over 40% of its inventory
requirements from one supplier. This percentage is expected to decrease in the
future based on the anticipated sales product mix and the integration of
Olmsted for an entire year. Generally, there are multiple suppliers available
for most components purchased by the Company.
(6) Material Customers
Approximately 30% of the Company's revenues for the fiscal year ended
October 31, 1996 were attributable to software sales and maintenance and
enhancement fees from Olmsted's business since the August 1996 acquisition.
These revenues resulted from a large number of customers, none of which are
considered to be a material customer. The remaining revenues were derived from
the security business segment, and although none of the sales by individual
customer were material, there were sales to a customer that has recently signed
an exclusive marketing contract with the Company, as described in the following
paragraph. Revenues in the 1995 fiscal year were substantially all from the
Company's ten largest customers.
In July 1996, the Company entered into an Exclusive Marketing Agreement
(the "Agreement") with Marquette Electronics, Inc. ("Marquette"), which gives
Marquette exclusive marketing rights to sell the IR Tracking system to any
acute-care hospital in the United States. This agreement obligates Marquette
to purchase over a three-year period a certain number of systems primarily to
track the location of heart monitor equipment, and can be modified or
terminated by either party prior to the beginning of the second and third
contract years. This agreement is expected to result in significantly more
sales in the coming fiscal year and will be a key determining factor in the
initial success of the IR Tracking system. There can be no assurance the
agreement will not be terminated by Marquette, however, management currently
has no reason to believe that the agreement will be modified or terminated to
the detriment of the Company.
The Company generally does not offer extended payment terms to its
customers and normally adheres to its warranty policy of 90 days, except for
the Marquette agreement mentioned above in which the Company has a limited
liability warranty on its product for one year from the date of acceptance or
installation, whichever comes first. 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, 1996, the Company had approximately $98,000 of IR Tracking
system orders on hand.
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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.
During the last two 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 and/or trademarks covering
IR Tracking technologies, ACU.CARV software products and certain cellular
technologies. The Company also holds patents in other countries for these
products.
As a result of patent infringement litigation settled in fiscal 1995, the
Company has agreed to cease production and marketing of certain cellular
products, and accordingly, wrote off the remaining unamortized cost of these
patents during the year ended October 31, 1995.
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.
In August 1995, the Company granted a security interest in essentially all
its patents and intellectual properties to a law firm, which was at that time
the Company's legal counsel, 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 has disputed these
fees, as well as the validity of the note and grant of the security interest.
The Company has attempted to negotiate an accord, but presently expects it will
need to engage in litigation with its former law firm to resolve the dispute.
(8) Government Approvals
The Company's IR Tracking systems technology and its Olmsted product lines
do not require government approvals. The Company's CAT products are registered
under FCC regulations and comply with all relevant FCC regulations for
commercial and residential premises.
(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 1996
were $432,000. This compares with $957,000 which was expended during fiscal
1995. In both years, the expenditures were primarily in connection with
Olmsted's previous consulting contract to complete development of the IR
Tracking systems
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with Versus prior to the August 1996 acquisition. To the extent it can afford
to do so, the Company intends to continue to fund research and development
expenditures 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 1997) or the succeeding fiscal year (fiscal 1998).
(12) Number of Employees
At October 31, 1996, after the acquisition of Olmsted and expansion of the
business, the Company had 31 full-time employees. Of its full-time employees,
13 were engaged in systems design and engineering relating to both business
segments, 13 in marketing, sales and sales administration, and 5 in management
and administration.
None of the Company's employees are 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 PROPERTY
In December 1996, the Company moved its principal operating facilities to
a building that is owned by Traverse Software Investment, LLC ("TSI"), a
limited liability company controlled by Gary T. Gaisser, the President and
Chief Executive Officer of the Company. Versus and Olmsted are obligated under
two separate five-year lease agreements, which require aggregate total annual
rents of $111,000, increasing 4% annually after the first year.
ITEM 3 - LEGAL PROCEEDINGS
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 1996:
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, infringement of Versus copyrights,
infringement of Versus trademarks, and for unfair
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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.
2. 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.;
Defendants, Versus Technology, Inc.
Special Situations Fund III, L.P. ("Special Situations") filed a complaint
alleging that Versus allowed 300,000 warrants to expire which the Fund held,
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 for $195,000, which has now been satisfied, was entered by the
trial court and upheld on appeal.
3. Calvert et al v. Olmsted Engineering Co. et al
Complaint filed: May, 1996
Court: Grand Traverse County, Michigan Circuit Court
Civil Action No.: 96-14861-CZ
Principal Parties: Plaintiffs, Richard E. Calvert, H. Terry Snowday,
Jr., Michael and Stephanie Calvert, Thomas and Ida Calvert, and
Bank of Alma, as Trustee for Richard E. Calvert; Defendants,
Olmsted Engineering Co. and Gary T. Gaisser.
A suit was filed against Olmsted and its Chairman alleging that in
connection with a private offering of Olmsted common stock in 1994 Olmsted and
its Chairman breached an oral promise that the holders of Olmsted preferred
stock would cancel their preferred stock in consideration of the Plaintiffs'
investment in Olmsted. Subsequent to year-end, a settlement agreement was
reached, and the suit currently awaits dismissal by the Court.
4. Theodore London et al v. Versus Technology, Inc.
Complaint filed: November, 1996
Court: Supreme Court of the State of New York
Index No.: 96-120758
Principal Parties: Plaintiff, Theodore London, purportedly on behalf
of himself and others similarly situated; Defendant, Versus
Technology, Inc.
Plaintiff alleges that Versus allowed certain warrants to expire which the
Plaintiff held and that the Plaintiff was damaged by the warrants' expiration.
Plaintiff also alleges that the Company breached the Warrant Agreement pursuant
to which the warrants were issued to Plaintiff 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. The sole named
Plaintiff alleges this action should be tried as a class action, and alleges he
is an appropriate representative of the class. Plaintiff further alleges his
claims are substantially identical to the claims made by the plaintiff in the
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Special Situations Fund III litigation discussed above, which involved only
300,000 of the 2,233,800 Class A warrants at issue. Apparently, the plaintiff
believes the Company has a liability for each of the remaining warrants
identical to the per warrant liability the Company had for the 300,000 warrants
relating to the Special Situations Fund III litigation. The Company disputes
the material allegations of the Complaint and intends to vigorously defend
itself against this matter.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to the vote of security holders during the fourth
quarter of the fiscal year 1996.
PART II
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Previously the Company's common stock was traded over the counter on
NASDAQ under the trading symbol "VSTI." 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 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 of
the Company's Common Stock during each quarter. Quotations reflect interdealer
prices without retail mark-up, mark-down or commission and may not represent
actual transactions.
<TABLE>
<CAPTION>
1996 1995
Fiscal Quarter Ended: High Low High Low
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<S> <C> <C> <C> <C>
January 31 17/32 3/8 7/8 3/8
April 30 7/8 3/8 3/8 1/4
July 31 29/32 21/32 9/16 1/4
October 31 1-1/16 21/32 17/32 3/8
</TABLE>
As of December 16, 1996, the Company had 1,835 shareholders of record of
its common stock and the average of the bid and asked prices was 13/16.
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 Company's Class A warrants, as last extended by the Board of
Directors, expired on February 15, 1996.
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis focuses on the significant factors
which affected the Company's consolidated financial statements during fiscal
year 1996, with comparisons to fiscal 1995 where appropriate. It
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also discusses the Company's liquidity and capital resources. The discussion
should be read in conjunction with the consolidated financial statements and
related notes thereto included elsewhere in this Form 10-KSB.
The following table sets forth selected financial data for the Company for
the past two fiscal years:
<TABLE>
(in thousands except per share amounts)
Year Ended October 31, 1996 1995
- ---------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA:
<S> <C> <C>
Net sales $ 348 $ 989
Net loss (2,006) (2,497)
Net loss per common share (.09) (.46)
Weighted average number of common
shares outstanding 21,860 5,450
BALANCE SHEET DATA:
Working capital $ 4,076 $ 1,157
Total assets 8,787 2,435
Total liabilities 1,266 1,361
Shareholders' equity 7,521 1,074
</TABLE>
OPERATING RESULTS
During fiscal 1996, the Company experienced a net loss of $2,006,000
compared to a net loss of $2,497,000 for 1995. As discussed in more detail
below, the 1996 loss is primarily attributable to low sales levels, combined
with relatively high operating expenses, experienced as the Company
transitioned to its new product line, IR Tracking systems. Net loss per share
decreased from $.46 in 1995 to $.09 in 1996. As indicated by the increased
weighted average number of shares disclosed above, these per share numbers were
significantly impacted by the significant number of additional shares issued
during 1996 and 1995. Outstanding shares at October 31, 1996 totaled
36,543,573. This higher level of outstanding shares will affect future per
share calculations.
On August 26, 1996, the Company acquired Olmsted Engineering Co. (Olmsted)
in exchange for 6,379,889 shares of the Company's common stock, valued for
accounting purposes at $.50 per share, and cash of $65,000, resulting in a
total purchase price of $3,255,000. For accounting purposes, the price of the
acquisition was determined based upon a contemporaneous sale of restricted
common stock at $.50 per share. Olmsted's operating results have been included
in the consolidated results of operations since the date of acquisition and, as
such, did not have a significant impact on results for the year. Olmsted has
served as the Company's research and development consultant since 1994. The
Company and its Board of Directors believe the acquisition was critical to the
continued development and success of the IR Tracking system due to the
long-term business relationships that have been developed by Olmsted over the
years, the solid name recognition of Olmsted in the industry and the knowledge
Olmsted gained as a consultant to the Company when developing the IR Tracking
system.
12
<PAGE> 13
Net sales for fiscal 1996 were $348,000 or 65% below net sales of $989,000
reported for fiscal 1995. This decrease of $641,000 resulted primarily from
the sale of the DCX product line in fiscal 1995 and to the discontinuance of
sales of certain cellular products during fiscal 1996. Net sales related to
cellular products and services were approximately $157,000 in fiscal 1996, down
approximately $598,000 or 79% from $755,000 reported in fiscal 1995. Net sales
attributable to the DCX product line in 1995, prior to its sale, amounted to
approximately $586,000. The remaining 1996 security segment sales, amounting
to $89,000, were IR Tracking system sales. Fiscal year 1996 net sales also
include approximately $102,000 from sales of software and related services by
the Company's subsidiary, Olmsted Engineering Co. ("Olmsted"), which was
acquired by the Company in August 1996. This net sales amount represented
Olmsted's net sales from the acquisition date through year end. Had all
Olmsted net sales for the twelve months ended October 31, 1996, except
intercompany sales to Versus, been included in 1996 net sales, total Olmsted
net sales would have been approximately $522,000.
The Company has continued development of its infrared products during
fiscal 1996, focusing primarily upon infrared tracking systems which the
Company intends initially to market to the health care markets. The Company
began marketing infrared personnel/equipment tracking systems to health care
providers nationally in November 1996 under its marketing arrangement with
Marquette Electronics, Inc., as discussed below.
Cost of sales as a percentage of net sales for fiscal 1996 increased to
65% from 51% in fiscal 1995. This increase is primarily due to temporary
changes in product mix concentrations in fiscal 1996. Cost of sales of
infrared product lines, as a percentage of net sales, are expected to be
significantly lower than total cost of sales as a percentage of net sales as
reported for fiscal 1996. Similarly, cost of sales of software and related
services of Olmsted are expected to be significantly less as a percentage of
sales.
Selling, general and administrative expenses were reduced in fiscal 1996
by approximately $420,000 or 22% from fiscal 1995. The decrease was primarily
due to the Company's continued downsizing of its sales, marketing and other
administrative functions during 1996 while it was preparing for market
introduction of its infrared tracking systems in November of 1996. Research
and development expenditures similarly were reduced by approximately $525,000
or 55% from fiscal 1995. That reduction was primarily the result of the
Company's completion of research and development associated with its existing
infrared tracking system product lines. Litigation defense costs, settlements
and judgments were reduced in fiscal 1996 by approximately $701,000 from fiscal
1995, largely as a result of the settlement of pending litigation in August
1995. Substantially all costs associated with that pending litigation were
expensed by the Company in fiscal 1995.
Interest income increased to $73,000 in fiscal 1996 from $17,000 in
fiscal 1995, primarily due to the deposit of proceeds from the Company's private
placement of its common stock into interest bearing accounts in late fiscal
1996. Interest expense increased to $49,000 in fiscal 1996 from $19,000 in
fiscal 1995. This increase is primarily attributable to notes payable executed
by the Company in August 1995, which mature in January 1997. The reduction of
$815,000 of other income in fiscal 1996 from fiscal 1995 is due primarily to the
recognition in fiscal 1995 of the last installment of deferred gain associated
with the sale of a Company subsidiary in 1992, amounting to $365,000, and the
gain associated with the sale of the DCX product line in the amount of $424,000.
For federal income tax purposes, the Company is in a net operating loss
carryforward position. As disclosed in more detail in Note 6 to the
consolidated financial statements, realization of gross deferred income tax
assets at October 31, 1996 is dependent upon generating sufficient taxable
income prior to expiration of the loss carryforwards and such loss carryforwards
are subject to certain tax law limitations. By recording a 100% valuation
allowance against its gross deferred income tax assets, the Company has not
reflected the net operating
13
<PAGE> 14
loss carryforward amounts or other deferred income tax assets in its
consolidated financial statements at October 31, 1996. In addition, no income
tax benefit was recorded relating to the 1996 operating loss.
The Company is now positioned to begin aggressively marketing infrared
tracking systems to health care providers, beginning in early fiscal 1997, both
through its direct marketing efforts and its Exclusive Marketing Agreement with
Marquette Electronics, Inc. This Agreement gives Marquette exclusive marketing
rights to sell the IR Tracking system to any acute-care hospital in the United
States. It also obligates Marquette to purchase a certain number of systems
over a three-year period (10 systems through June 29, 1997, 100 systems from
June 30, 1997 through June 29, 1998 and 200 systems from June 30, 1998 through
June 29, 1999) to primarily track the location of heart monitor equipment, and
can be modified or terminated by either party prior to the beginning of the
second and third contract years. This Agreement is expected to result in
significantly more sales during fiscal 1997 and will be a key determining
factor for the initial success of the IR Tracking system. There can be no
assurance the agreement will not be terminated by Marquette, however,
management currently has no reason to believe that the agreement will be
modified or terminated to the detriment of the Company.
Longer term, the Company also intends to market its infrared tracking
products directly to financial institutions, governmental entities,
professional services providers, correctional facilities and manufacturing
markets. Additionally, the Company intends to continue marketing software and
related services through Olmsted. Lastly, the Company has retained two
relatively small product groups from the cellular era in the area of backup and
mobile security. However, these cellular products are not expected to
constitute a significant part of the Company's revenues in the future relative
to infrared sales.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1996, the Company relied primarily on cash proceeds
generated from private placements of its common stock in September 1995 and
again in August 1996. Those two private placement offerings generated net
proceeds to the Company of approximately $2.7 million and $5.2 million,
respectively. The cash balances at October 31, 1996 resulted from the proceeds
of the most recent private placement offering. The Company believes the
combination of these cash balances, the cash expected to be generated during
fiscal 1997 from the market introduction of its infrared tracking systems, and
continued sales of software and related services, should be sufficient to meet
projected cash needs over the next twelve months.
SIGNIFICANT LIQUIDITY FACTORS:
<TABLE>
<CAPTION>
October 31,
-----------
1996 1995
---- ----
<S> <C> <C>
Current ratio 4.2:1 2.1:1
Quick ratio 4.0:1 2.0:1
</TABLE>
NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of. The new
statement requires the Company to review long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. If it is determined that an impairment
loss has occurred based on expected future cash flows, the loss should be
recognized in the statement of operations and certain disclosures regarding the
impairment should be made in the financial statements. SFAS No. 121 is
required to be adopted by the Company beginning November 1, 1996. The Company
does not expect the adoption of SFAS No. 121 to have a material impact on the
Company's financial position or results of operations.
14
<PAGE> 15
In October 1995, SFAS No. 123, Accounting for Stock-Based Compensation, was
issued. SFAS No. 123 allows companies to continue to account for their stock
option plans in accordance with APB Opinion 25 but encourages the adoption of a
new accounting method to record compensation expense based on the estimated
fair value of employee stock options. Companies electing not to follow the new
fair value based method are required to provide expanded footnote disclosures,
including pro forma net income and earnings per share, determined as if the
company had applied the new method. The Company is required to adopt SFAS No.
123 prospectively beginning November 1, 1996. Management intends to continue to
account for its stock option plans in accordance with APB Opinion No. 25 and
provide supplemental disclosures as required by SFAS No. 123, beginning in
1997.
15
<PAGE> 16
ITEM 7 - FINANCIAL STATEMENTS
Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
Consolidated Financial Statements: Page
- ---------------------------------- ----
<S> <C>
Successor Independent Auditors' Report 17
Predecessor Independent Auditors' Report 18
Consolidated Balance Sheets as of October 31, 1996 and 1995 19
Consolidated Statements of Operations for the years ended October 31, 1996
and 1995 21
Consolidated Statements of Shareholders' Equity for the years ended October 31,
1996 and 1995 22
Consolidated Statements of Cash Flows for the years ended October 31, 1996
and 1995 23
Notes to Consolidated Financial Statements 24
</TABLE>
16
<PAGE> 17
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Versus Technology, Inc. and Subsidiary
We have audited the consolidated balance sheet of Versus Technology, Inc. and
subsidiary as of October 31, 1996, and the related consolidated statements of
operations, shareholders' equity and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Versus Technology,
Inc. and subsidiary at October 31, 1996, and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
/s/ BDO Seidman, LLP
- --------------------
BDO Seidman, LLP
Grand Rapids, Michigan
December 9, 1996
17
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Versus Technology, Inc.
We have audited the balance sheet of Versus Technology, Inc. as of October 31,
1995, and the related statements of operations, shareholders' equity and cash
flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the 1995 financial statements referred to above present fairly,
in all material respects, the financial position of Versus Technology, Inc. as
of October 31, 1995, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
- -------------------------
KPMG Peat Marwick LLP
Princeton, New Jersey
February 9, 1996, except as to Note 2
which is as of December 9, 1996
18
<PAGE> 19
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
October 31, 1996 and 1995
- --------------------------------------------------------------------------------
<TABLE>
October 31,
1996 1995
--------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $4,931,000 $1,998,000
Accounts receivable (net of allowance for doubtful
accounts of $53,000 and $25,000) 154,000 88,000
Notes receivable, net (Note 4) 32,000 -
Inventories - purchased parts and assemblies 145,000 11,000
Prepaid expenses and other assets 80,000 82,000
--------------------------
TOTAL CURRENT ASSETS 5,342,000 2,179,000
--------------------------
NOTES RECEIVABLE, net (Note 4) 19,000 -
--------------------------
PROPERTY AND EQUIPMENT
Machinery, equipment and vehicles 293,000 114,000
Furniture and fixtures 47,000 25,000
Leasehold improvements 85,000 -
--------------------------
425,000 139,000
Less accumulated depreciation 155,000 136,000
--------------------------
NET PROPERTY AND EQUIPMENT 270,000 3,000
--------------------------
SOFTWARE DEVELOPMENT COSTS, net of accumulated
amortization of $12,000 588,000 -
GOODWILL, net of accumulated amortization of $26,000 2,313,000 -
PATENTS AND OTHER INTANGIBLE ASSETS, net of
accumulated amortization of $170,000 and $112,000
(Note 5) 255,000 253,000
--------------------------
$8,787,000 $2,435,000
==========================
</TABLE>
19
<PAGE> 20
- --------------------------------------------------------------------------------
<TABLE>
October 31,
1996 1995
-----------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable (Note 5) $ 748,000 $ 508,000
Accrued expenses 135,000 395,000
Deferred revenue - customer advance payments 16,000 9,000
Note payable, current portion (Note 5) 367,000 110,000
-----------------------------
TOTAL CURRENT LIABILITIES 1,266,000 1,022,000
NOTE PAYABLE, less current portion (Note 5) - 339,000
-----------------------------
TOTAL LIABILITIES 1,266,000 1,361,000
-----------------------------
COMMITMENTS AND CONTINGENCIES (Notes 7, 9 and 10)
SHAREHOLDERS' EQUITY (Notes 2, 3, 5 and 8)
Common stock, $.01 par value; 50,000,000 and
25,000,000 shares authorized; 36,543,573 and
18,910,697 shares issued and outstanding 366,000 190,000
Additional paid-in capital 31,910,000 23,410,000
Accumulated deficit (24,532,000) (22,526,000)
Unearned compensation (Note 8) (223,000) -
-----------------------------
TOTAL SHAREHOLDERS' EQUITY 7,521,000 1,074,000
-----------------------------
$ 8,787,000 $ 2,435,000
=============================
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE> 21
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended October 31, 1996 and 1995
================================================================================
<TABLE>
<CAPTION>
Year ended October 31,
1996 1995
--------------------------------------
<S> <C> <C>
NET SALES (Note 12) $ 348,000 $ 989,000
COST OF SALES 225,000 500,000
-------------------------------------
GROSS PROFIT 123,000 489,000
-------------------------------------
OPERATING EXPENSES
Research and development (Note 9) 432,000 957,000
Selling, general and administrative (Note 9) 1,526,000 1,946,000
Litigation defense costs, settlements and
judgments (Note 7) 195,000 896,000
------------------------------------
2,153,000 3,799,000
------------------------------------
LOSS FROM OPERATIONS (2,030,000) (3,310,000)
------------------------------------
OTHER INCOME (EXPENSE)
Interest income 73,000 17,000
Interest expense (Note 5) (49,000) (19,000)
Gain on sale of subsidiary and sale of
product line (Note 3) - 789,000
Other, net - 26,000
-----------------------------------
24,000 813,000
-----------------------------------
NET LOSS $ (2,006,000) $ (2,497,000)
===================================
NET LOSS PER SHARE $ (.09) $ (.46)
===================================
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE> 22
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended October 31, 1996 and 1995
================================================================================
<TABLE>
<CAPTION>
Additional Unearned
Paid-in Accumulated Compensation
Shares Amount Capital Deficit (Note 8) Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, November 1, 1994 4,160,780 $ 42,000 $ 20,834,000 $ (20,029,000) $ - $ 847,000
Sale of common stock, net
of issuance costs (Note 8) 14,674,917 147,000 2,539,000 - - 2,686,000
Directors fees (Note 8) 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
Sale of common stock, net
of issuance costs (Note 8) 11,335,000 113,000 5,088,000 - - 5,201,000
Sale of common stock to
shareholder (Note 8) 425,000 4,000 155,000 - - 159,000
Shares issued in
acquisition of Olmsted
Engineering Co., net of
dissenting shares (Note 3) 6,379,889 64,000 3,126,000 - - 3,190,000
Shares issued for restricted
stock bonus plan (Note 8) 253,467 3,000 223,000 - (223,000) 3,000
Extinguishment of demand
note payable through issuance
of common stock (Note 5) 174,408 1,000 86,000 - - 87,000
Repurchase and retirement of
shares (934,888) (9,000) (178,000) - - (187,000)
Net loss - - - (2,006,000) - (2,006,000)
----------------------------------------------------------------------------------------------
BALANCE, October 31, 1996 36,543,573 $ 366,000 $ 31,910,000 $ (24,532,000) $ (223,000) $ 7,521,000
==============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE> 23
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended October 31, 1996 and 1995
================================================================================
<TABLE>
<CAPTION>
October 31,
1996 1995
-------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (2,006,000) $ (2,497,000)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 32,000 121,000
Amortization of intangibles 96,000 124,000
Loss on disposal of assets - 260,000
Gain on sale of subsidiary - (365,000)
Gain on sale of product line - (424,000)
Directors' compensation expense - 38,000
Changes in operating assets and liabilities, net of
effects of 1996 purchase of Olmsted Engineering Co.:
Accounts receivable, net 45,000 288,000
Inventories (132,000) 284,000
Prepaid expenses and other current assets 7,000 (32,000)
Accounts payable 194,000 (240,000)
Accrued expenses (293,000) 20,000
Deferred revenues - customer advance payments 7,000 (43,000)
--------------------------------------
Net cash used in operating activities (2,050,000) (2,466,000)
--------------------------------------
INVESTING ACTIVITIES
Principal received on note receivable 2,000 698,000
Additions to property and equipment (114,000) (19,000)
Additions to patents and other intangible assets (60,000) (11,000)
Proceeds on sale of assets held for sale - 1,293,000
Cash paid to dissenting shareholders in acquisition of
Olmsted Engineering Co., net of cash acquired (38,000) -
--------------------------------------
Net cash provided by (used in) investing activities (210,000) 1,961,000
--------------------------------------
FINANCING ACTIVITIES
Payments on obligation under capital lease - (9,000)
Payments on note payable (82,000) (238,000)
Repurchase of common stock (85,000) -
Sale of common stock 5,360,000 2,686,000
--------------------------------------
Net cash provided by financing activities 5,193,000 2,439,000
--------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,933,000 1,934,000
CASH AND CASH EQUIVALENTS, at the beginning of the year 1,998,000 64,000
--------------------------------------
CASH AND CASH EQUIVALENTS, at the end of the year $ 4,931,000 $ 1,998,000
======================================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for interest $ 46,000 $ 21,000
======================================
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE> 24
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended October 31, 1996 and 1995
===============================================================================
1. SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS
Versus Technology, Inc. (Versus) and its wholly-owned subsidiary,
Olmsted Engineering Co. (Olmsted), collectively referred to as "the
Company," operate in two business segments: security; and systems design and
engineering. All Company operations are located in one facility in Traverse
City, Michigan.
Versus develops and markets products using infrared technology for the
health care industry and other markets located throughout North America.
These products 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. Versus also develops, markets and
integrates cellular products for the security industry.
As discussed more fully in Note 3, Versus acquired Olmsted in August
1996. Olmsted writes and maintains complex software programs for the
computer-aided design and computer-aided manufacturing (CAD/CAM) industry.
It sells its own software under the ACU.CARV name, resells third party
software, and provides systems support services throughout North America.
It receives monthly maintenance and enhancement fees from customers in order
to receive technical support and semi-annual releases. Olmsted also
provides software programming services to Versus.
During 1995, Versus significantly downsized its manufacturing
operations, moved its headquarters and principal operating facilities,
ceased production and distribution of a significant product line and focused
development efforts on infrared product technology. All related costs of
this relocation, including the write-down of nonessential property and
equipment to net realizable value, were recognized in fiscal year 1995.
The Company maintains its cash accounts in national banks and does not
consider there to be a credit risk arising 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.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Versus
and the accounts of Olmsted since the date of acquisition. Upon
consolidation, all significant intercompany accounts and transactions are
eliminated.
24
<PAGE> 25
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
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.
Revenue from software product sales is recognized when the related
goods are shipped and the obligations of the Company have been satisfied.
Revenue from software maintenance and service contracts is recognized pro
rata over the life of the individual contracts. Revenue from programming
services is recognized as services are provided.
Revenue from advance payments received from customers is deferred until
all revenue recognition criteria are satisfied.
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, less accumulated
depreciation. Depreciation is computed principally on the straight-line
method for financial reporting purposes and accelerated methods for income
tax purposes over the following estimated useful lives:
<TABLE>
<S> <C>
Machinery, equipment and vehicles 3 to 10 years
Furniture and fixtures 3 to 10 years
Leasehold improvements 5 years
</TABLE>
SOFTWARE DEVELOPMENT COSTS
Software development costs recorded at October 31, 1996, represent the
estimated fair value of Olmsted's ACU.CARV and related software as of the
August 1996 acquisition date, less amortization through the fiscal year-end.
Amortization is computed on a straight-line base over eight years. With
respect to future software development, costs incurred to ready software
products for sale from the time that technological feasibility has been
established, as evidenced by a detailed working program design, to the time
that the product is available for general release to customers will be
capitalized. Such capitalized costs will be amortized based on current and
future revenue for each product with an annual minimum equal to the
straight-line amortization over the remaining estimated economic lives of
the products. Costs incurred prior to establishing technological
feasibility and costs incurred subsequent to general product release to
customers will be expensed as incurred.
25
<PAGE> 26
PATENTS AND OTHER INTANGIBLE ASSETS
Patents and trademarks are recorded at cost, less amortization computed on a
straight line basis over seven years. Other intangible assets, comprised
primarily of supplier royalty agreements, are recorded at cost, less
amortization computed on a straight line basis over ten years.
GOODWILL AND AMORTIZATION
Goodwill, representing the cost in excess of net assets acquired in the
August 1996 acquisition of Olmsted, which was accounted for using the
purchase method of accounting, is being amortized on a straight line basis
over 15 years. Management periodically reviews goodwill for impairment based
upon the projected undiscounted cash flows from operations to which the
goodwill relates. Identified impairments will be measured based on the
projected discounted cash flows related to those operations. Amortization of
$26,000 has been recorded for the year ended October 31, 1996.
ADVERTISING COSTS
All advertising costs, amounting to $33,000 and $26,000 for the years ended
October 31, 1996 and 1995, respectively, are expensed in the period in which
they are incurred.
INCOME TAXES
Deferred income taxes are recognized for the future tax consequences
attributable to "temporary" differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred income 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. The effect on
deferred income tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. To the
extent that available evidence about the future raises doubt about the
realization of a deferred income tax asset, a valuation allowance is
established.
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is based on the weighted average number of shares
of common stock outstanding. The Company has not included the effects of
options and warrants in its calculation of weighted average shares
outstanding due to their anti-dilutive effect. The resulting weighted
average shares outstanding were 21,860,076 and 5,450,430 for 1996 and 1995,
respectively.
CASH AND CASH EQUIVALENTS
The Company considers all investments with original maturities of three
months or less to be cash equivalents.
NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. This new
statement requires the Company to review long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. If it is determined that an impairment
loss has occurred based on expected
26
<PAGE> 27
future cash flows, the loss should be recognized in the statement of
operations and certain disclosures regarding the impairment should be made
in the financial statements. SFAS No. 121 is required to be adopted by the
Company beginning November 1, 1996. The Company does not expect the
adoption of SFAS No. 121 to have a material impact on the Company's
financial position or results of operations.
In October 1995, SFAS No. 123, Accounting for Stock-Based Compensation,
was issued. SFAS No. 123 allows companies to continue to account for their
stock option plans in accordance with APB Opinion 25 but encourages the
adoption of a new accounting method to record compensation expense based on
the estimated fair value of employee stock options. Companies electing not
to follow the new fair value based method are required to provide expanded
footnote disclosures, including pro forma net income and earnings per share,
determined as if the company had applied the new method. The Company is
required to adopt SFAS No. 123 prospectively beginning November 1, 1996.
Management intends to continue to account for its stock option plans in
accordance with APB Opinion No. 25 and provide supplemental disclosures as
required by SFAS No. 123, beginning in 1997.
2. OPERATIONS AND LIQUIDITY
Losses incurred during 1996 and accumulated losses to date have had a
significant adverse impact on the Company's financial position. During
fiscal 1996, the Company relied primarily on cash proceeds generated from
private placements of its common stock in September 1995 and again in August
1996. Those two private placement offerings generated net proceeds to the
Company of approximately $2.7 million and $5.4 million, respectively. The
cash balances at October 31, 1996 resulted from the proceeds of the most
recent private placement offering. The Company believes the combination of
these cash balances, the cash expected to be generated during fiscal 1997
from the market introduction of its infrared tracking systems, and continued
sales of software and related services related to its recent acquisition of
Olmsted, should be sufficient to meet projected cash needs over the next
twelve months.
3. ACQUISITION AND DISPOSITION
ACQUISITION
On August 26, 1996, Versus issued 6,379,889 shares of its common stock,
valued for accounting purposes at $.50 per share, and paid $65,000 in cash,
in exchange for all of the outstanding common stock and preferred stock of
Olmsted Engineering Co. The purchase price amounted to $3,255,000. For
accounting purposes, the price of the acquisition was determined based upon
a contemporaneous sale of restricted common stock at $.50 per share.
Olmsted, which will continue to do business as a wholly-owned subsidiary
under the name "Olmsted Engineering Co.," is in the business of developing,
marketing and maintaining various software products used primarily in the
mold, die and pattern making industries. Prior to the acquisition, the
President of Versus owned a majority of all classes of stock of Olmsted.
Olmsted has served as a research and development consultant to Versus since
1994 and has leased office space to Versus on a temporary basis since 1995.
The occurrence of the acquisition was conditioned upon Versus raising
at least $4.5 million, net of commissions, through a private placement of
its common stock, as discussed in Note 8. On August 26, 1996, the date of
the acquisition, Versus sold 11,335,000 shares of its common stock in a
private offering to accredited investors at a price of $.50 per share, with
proceeds totaling $5,201,000, net of issuance costs.
27
<PAGE> 28
The acquisition has been accounted for using the purchase method of
accounting, and accordingly, the purchase price has been allocated to the
assets purchased and the liabilities assumed based upon the estimated fair
values at the acquisition date. The excess of the purchase price over the
fair values of the net assets acquired was $2,339,000 and has been recorded
as goodwill, which is being amortized on a straight-line basis over 15 years.
The purchase price was allocated as follows:
<TABLE>
<S> <C>
Working capital $ 145,000
Property and equipment 171,000
Software development costs 600,000
Goodwill 2,339,000
------------
Total purchase price $ 3,255,000
</TABLE> ============
As of the acquisition date, Olmsted had net operating loss carryforwards for
federal income tax purposes amounting to approximately $1,800,000, subject to
certain tax law limitations, which expire through 2011, if not previously
utilized. As discussed in Note 6, the Company has recorded a 100% valuation
allowance relating to the tax effects of these net operating loss
carryforwards. The following unaudited pro forma information has been
prepared assuming the acquisition had taken place at the beginning of the
respective periods. The pro forma information includes adjustments for
depreciation based on the fair value of the property and equipment acquired,
intercompany transactions, the amortization of intangibles arising from the
transaction and the shares issued in the acquisition. The pro forma
financial information is not necessarily indicative of what the actual
consolidated results of operations might have been if the acquisition had
been effected on the assumed dates.
<TABLE>
<CAPTION>
Pro forma results for
Year ended October 31,
1996 1995
---------------------------------
<S> <C> <C>
Net sales $ 768,000 $ 1,756,000
Net loss (2,168,000) (2,489,000)
Net loss per common share (.08) (.22)
</TABLE>
Olmsted's operating results have been included in the consolidated statement
of operations since the date of acquisition.
SALE OF MAJORITY-OWNED SUBSIDIARY
During 1992, the Company completed the sale of all of its capital stock in a
wholly-owned subsidiary to a newly-formed organization headed by the
management of the former subsidiary. The purchase price was approximately
$1,653,000 plus repayment of certain indebtedness from the former subsidiary
to the Company.
The Company realized a net gain from this transaction of approximately
$1,129,000. Due to the fact that the purchaser was 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 during the year ended October 31, 1995.
28
<PAGE> 29
4. NOTES RECEIVABLE
The Company has notes receivable of $60,000 in connection with certain sales
of software which have been reduced by an allowance for doubtful accounts of
$9,000. The notes are due in various payment terms, carry interest at rates
ranging from 7.5% to 8.5% and mature at various dates through March 2000.
5. NOTES PAYABLE
DEMAND NOTE
As part of the Olmsted acquisition, the Company assumed a liability for a 6%
demand note payable to a former Olmsted shareholder. Effective October 30,
1996, the note ($74,745) and accrued interest ($12,459) were settled, at no
gain or loss, by the issuance of 174,408 shares of the Company's common
stock.
TERM NOTE
On August 1, 1995, the Company signed a note payable to one of its law
firms for $449,000 as partial payment of fees billed. The note bears
interest at a specified bank's prime rate, 8.25% at October 31, 1996, and
requires monthly installments of $10,000 each, including interest,
commencing on December 1, 1995, with a balloon payment for the remaining
balance due on January 1, 1997. The note, amounting to $367,000 at October
31, 1996, is secured by the Company's patents and intellectual property.
Approximately $150,000 of additional fees to the same law firm are included
in accounts payable at October 31, 1996 and 1995. Management intends to
dispute the amount and terms of payment of the remaining unpaid balances.
Any adjustment of the unpaid balance will be recognized in the period in
which it is made.
6. INCOME TAXES
Deferred income taxes result from temporary differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. The tax effects of temporary differences that
give rise to deferred tax assets at October 31, 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
------------------------------
Net operating loss carryforwards $ 6,052,000 $ 6,040,000
Inventory reserves - 8,000
Receivables - allowance for
doubtful accounts 21,000 10,000
Accumulated depreciation 3,000 -
Intangible asset amortization 2,000 24,000
Accruals and reserves 25,000 62,000
------------------------------
Gross deferred income tax assets 6,103,000 6,144,000
Less valuation allowance (6,103,000) (6,144,000)
------------------------------
Net deferred income tax assets
recorded in the consolidated
financial statements $ - $ -
==============================
</TABLE>
29
<PAGE> 30
At October 31, 1996, the Company had available net operating loss
carryforwards for federal income tax reporting purposes of approximately
$17,800,000 which expire through 2011, if not previously utilized.
The above net operating loss carryfoward amounts include amounts attributable
to Olmsted which were carried over to the consolidated group as part of the
August 1996 acquisition. State net operating loss carryforwards of Versus
attributable to a state in which the Company no longer operates are not
included in the October 31, 1996, net operating loss carryforward amounts.
The utilization of the total operating loss carryforwards of Versus and
Olmsted are subject to limitations under the Internal Revenue Code rules
relating to change of ownership.
Due to the recording of the valuation allowance for deferred income tax
assets at October 31, 1996, actual related tax benefits recognized in the
future will be reflected as either a reduction of future income tax expense
or goodwill related to the acquisition of Olmsted. Those tax benefits will
be allocated as follows:
<TABLE>
<S> <C>
Income tax benefit that would be reported in the
consolidated statement of operations as a
reduction of income tax expense $ 5,491,000
Recognized as a reduction of goodwill 612,000
------------
$ 6,103,000
============
</TABLE>
Realization of the gross deferred income tax assets is dependent upon
generating sufficient taxable income prior to expiration of the loss
carryforwards and, as discussed above, the loss carryforwards are subject to
tax law limitations. In assessing the realizability of deferred income tax
assets, management follows the guidance contained within SFAS No. 109,
Accounting for Income Taxes, which requires that deferred income tax assets
be reduced by a valuation allowance if, based on the weight of available
evidence, it is "more likely than not" that some portion or all of the
deferred income tax assets will not be realized. Under the provisions of
SFAS No. 109, forming a conclusion that a valuation allowance is not needed
is difficult when there is negative evidence such as cumulative losses in
recent years and tax law limitations, as discussed above. While it believes
the Company will be profitable in the future, management has concluded that,
following the guidance of SFAS No. 109, it is "more likely than not" that
these deferred income tax assets will not be realized. The net reduction in
the valuation allowance during the year ended October 31, 1996, amounting to
$41,000, is attributable to additional losses incurred during the year and
the carry over losses of Olmsted relating to the August 1996 acquisition,
reduced by the state net operating carryforwards, as discussed above, and an
adjustment for the difference between the prior year estimated and actual net
operating loss carryforward amount.
For the years ended October 31, 1996 and 1995, income taxes differed from the
amounts computed by applying the federal statutory rate of 34% to losses
before income taxes as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------------
<S> <C> <C>
Computed "expected" tax benefit $ (682,000) $ (849,000)
Increase (decrease) in tax
resulting from:
Adjustment to valuation
allowance for deferred income
tax assets relating to current
year losses 677,000 827,000
Nondeductible expenses 5,000 22,000
----------------------------
$ - $ -
============================
</TABLE>
30
<PAGE> 31
7. COMMITMENTS AND CONTINGENCIES
EMPLOYMENT CONTRACT
On July 1, 1996, the Company entered into an employment agreement with
its President, which expires on June 30, 2002. The agreement provides for
payment of specified compensation amounts and specified fringe benefits
during the term of the agreement.
LITIGATION
In January 1995, the Company settled litigation pending with a former
employee of the Company. As part of the settlement, the employee agreed to
forego all his prior stock options, and was issued 100,000 new stock
options immediately exercisable at $.50 per share, expiring five years from
the date of issuance. The additional costs of the settlement were
recognized in the Company's 1995 financial statements.
A judgment in the amount of approximately $132,000 was entered against
the Company in 1995 in connection with a patent infringement suit. This
judgment was settled by transferring $121,000 in inventory to the
Plaintiff. The remainder of the judgment was settled by an approximate
$11,000 payment in 1996. All amounts of the settlements were accrued in
the 1995 financial statements. During 1995, in connection with the patent
infringement judgment, the Company wrote down all inventory, intangible
assets, and fixed assets related to the product line named in the lawsuit
to net realizable value.
A judgment was entered against the Company during 1995 in connection
with litigation relating to the exercise of certain warrants. The judgment
of approximately $195,000 was accrued in the Company's 1995 financial
statements. The judgment was upheld on appeal during 1996 and was paid by
the Company plus interest and costs which were not material.
A suit was filed in November 1996 against the Company alleging that the
Company allowed certain warrants to expire which the plaintiff held and
that the plaintiff was damaged by the warrants' expiration. The plaintiff
also alleges that the Company breached the warrant agreement pursuant to
which the warrants were issued to the plaintiff 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. The sole
named plaintiff alleges this action should be tried as a class action, and
alleges he is an appropriate representative of the class. The plaintiff
further alleges his claims are substantially identical to the claims made
by the plaintiff in the litigation discussed in the preceding paragraph,
which involved only 300,000 of the 2,233,800 Class A warrants at issue.
Apparently, the plaintiff believes the Company has a liability for each of
the remaining warrants identical to the per warrant liability the Company
had for the 300,000 warrants discussed in the preceding paragraph. Due to
the recent filing of this suit, any loss potential is not determinable at
this time. However, the Company disputes the material allegations of the
complaint and intends to vigorously defend itself against this matter.
A suit was filed in May 1996 against Olmsted and its Chairman (the
current President of the Company) alleging that in connection with a
private offering in 1994, Olmsted and its Chairman breached an oral promise
allegedly made in connection with the plaintiffs' purchase of common stock.
The plaintiffs alleged that Olmsted's Chairman promised that the holders of
Olmsted preferred stock would cancel all of their preferred stock in
consideration of the plaintiffs' contemplated investment in Olmsted, so
that the plaintiffs would own approximately 19% of Olmsted after their
investment (and have options to purchase an equal amount of shares).
Olmsted and its Chairman denied that any such representation was ever made.
Subsequent to year end, a settlement agreement was entered into and the
suit was dismissed. The settlement amount, which was not material, was
accrued in the 1996 consolidated financial statements.
31
<PAGE> 32
Total legal fees and other associated costs incurred in connection with the
above settlements amounted to $195,000 and $896,000 during 1996 and 1995,
respectively.
8. SHAREHOLDERS' EQUITY
STOCK OFFERINGS
On August 26, 1996, the Company completed a private placement of
11,335,000 restricted shares of common stock concurrently with the Olmsted
acquisition discussed in Note 3. The purchase price was $.50 per share.
The Company received $5,667,500, less placement agent commissions of
approximately $397,000 and other professional fees of approximately
$70,000. In addition, the placement agent was granted five-year warrants
to purchase 396,725 shares of the Company's common stock at a price of $.50
per share. The proceeds will be used to fund the development and marketing
of infrared tracking products and to meet anticipated cash flow needs.
These shares also contain certain registration rights which generally
include (1) that the investors, as a class, will have the right to demand
registration to be implemented by notice to the Company by a 25% interest
of the investors of their desire to sell their shares; (2) 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 (under current rules three years from closing); and (3)
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.
During 1996, the Company sold 425,000 shares of common stock to a
present shareholder for $.375 per share, which represented the fair value
of the common stock at that time.
On September 29, 1995, the Company completed a private placement of
14,674,917 restricted shares of common stock. The purchase price was $.20
per share. The Company received $2,935,000, less placement agent
commissions of approximately $205,000 and 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 infrared
tracking products, and to meet anticipated cash flow needs. These shares
also are subject to certain registration rights which generally are
identical to those set forth in the August 26, 1996 registration rights
agreement discussed above, except that a majority in interests of shares is
required to demand registration under this agreement.
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 was
recognized in the accompanying 1995 financial statements.
STOCK WARRANTS
At October 31, 1996, 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,
expiring in September 1998, issued relative to a 1993 private placement;
32
<PAGE> 33
2. Warrants to purchase 70,000 shares at an exercise price of $2.05,
expiring in September 1998, issued relative to a 1993 private placement;
3. Warrants to purchase 95,000 shares at an exercise price of $1.00,
expiring in September 1999, issued to lenders with respect to a bridge
loan extended to the Company in September of 1994;
4. Warrants to purchase 200,000 shares at an exercise price of $0.50,
expiring in June 2000, issued to lenders with respect to a bridge loan
extended to the Company in July of 1995;
5. Warrants to purchase 1,027,244 shares at an exercise price of $0.20,
expiring in September 2000, issued to the private placement agent in
September 1995; and
6. Warrants to purchase 396,725 shares at an exercise price of $.50,
expiring in August 2001, issued to the private placement agent in August
1996.
STOCK OPTIONS
The Company's 1996 Employee Incentive Stock Option Plan grants key management
employees options to purchase shares of common stock. A total of 2,000,000
shares are available for grant under the plan. During 1996, 1,000,000
options were granted to the Company's President at $.375 per share, which
represented the fair value of the common stock at the grant date. The
options may be exercised from six months to ten years after the date of the
grant, based on a vesting schedule. Under the vesting schedule, 250,000
options became exercisable in December 1996 and an additional 250,000 are
exercisable each December for the next three years. No options were
exercisable under the plan at October 31, 1996.
The Company has issued additional stock options under a variety of agreements
over the past few years. Under two agreements, the Company has issued
options expiring in 2000 and 2001, respectively, to purchase a total of
200,000 shares at $.50 per share to former employees. As part of the Olmsted
acquisition, options held by Olmsted shareholders to acquire additional
Olmsted common shares were converted to options to acquire 266,870 of the
Company's shares at an exercise price of $.637 per share. These options
expired unexercised on December 1, 1996. The Company also had options
outstanding to a former employee to purchase 3,334 shares at $.84 per share,
and 1,000 shares at $1.56 per share, which options expired unexercised.
All of the outstanding options under these agreements are exercisable at
October 31, 1996.
RESTRICTED STOCK BONUS PLAN
During 1996, the Company established the 1996 Incentive Restricted Stock
Bonus Plan and reserved 500,000 common shares for issuance under the plan.
Under the terms of the plan, any salaried employee of the Company or any
subsidiary, except the President and directors, are eligible to receive an
allocation of bonus shares. Allocations of bonus shares are recommended by
the President and approved and adjusted, if necessary, by the Board of
Directors. Within fifteen days of the allocation, the employee shall, if he
desires to accept the allocation, pay to the Company an amount equal to the
par value of the allocated bonus shares.
33
<PAGE> 34
Upon issuance of bonus shares to the employee, he or she will have all
the rights of a shareholder with respect to such shares, including the right
to vote them and to receive all dividends and other related distributions.
Bonus shares may not, however, be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of within three years after the date of
issuance unless they are first offered by written notice back to the
Company. If a recipient's employment is terminated for any reason during
the three-year period, the termination will be deemed as an offer to the
Company to repurchase the shares at par value as follows: 100% if
termination occurs within one year from date of issuance; 75% if termination
occurs within two years, and 50% if the termination occurs within three
years.
Effective October 30, 1996, 253,467 shares were granted and issued in
conjunction with the bonus plan. The market value of the shares awarded was
$226,000. The difference between the market value and the sales price ($.01
per share) of the shares, amounting to $223,000, was recorded as unearned
compensation and is presented as a separate component of shareholders'
equity. Beginning November 1, 1996, unearned compensation will be amortized
to expense over the three-year vesting period.
9. RELATED PARTY TRANSACTIONS
The President and Chief Executive Officer of the Company was also the
Chief Executive Officer, a member of the Board of Directors and a
stockholder of Olmsted which was acquired by the Company effective August
26, 1996, as discussed in Note 3.
Olmsted provided a number of resources to the Company for the period
ended August 26, 1996 and for the year ended October 31, 1995, including
research and development, pass-through billings, use of office space and
development of a business plan. Related party billings for the period ended
August 26, 1996 and the year ended October 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------
<S> <C> <C>
Programming $ 548,000 $ 666,000
Engineering pass-through billings 167,000 143,000
Business plan and materials 21,000 39,000
Rent 19,000 -
------------------------
Total Olmsted billings $ 755,000 $ 848,000
========================
</TABLE>
The Company believes that services provided by Olmsted were 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 former business location of Olmsted.
The Company and Olmsted intend to move their principal operating
facilities in December 1996 to a building which is beneficially owned by the
Company's President. The Company and Olmsted have entered into separate
five-year lease agreements calling for aggregate annual rents of $111,000,
increasing 4% annually after the first year. The Company and Olmsted have
made combined non refundable contributions to leasehold improvements
amounting to $85,000, in accordance with terms of the lease agreements.
34
<PAGE> 35
10. EMPLOYEE BENEFIT PLAN
The Company maintains a 401(k) plan for all of its employees. Under
the plan, the Company contributes $.50 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). Company
contributions are 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 vest over a six-year period for Company contributions. The Company's
contributions to the plan were $1,460 and $8,000 for the years ended
October 31, 1996 and 1995, respectively.
11. NONCASH INVESTING AND FINANCING ACTIVITIES
As discussed in Note 3, on August 26, 1996, Versus issued 6,379,889
shares of its common stock, valued for accounting purposes at $.50 per
share, and paid $65,000 in cash in exchange for all of the outstanding
common stock and preferred stock of Olmsted. The purchase price amounted
to $3,255,000.
As discussed in Note 5, effective October 30, 1996, the Company settled
a note payable of $74,745 and accrued interest of $12,459 by issuance of
174,408 shares of the Company's common stock.
During 1994, the Company classified certain of its assets and
liabilities related to a particular product line as assets held for sale.
Those items were sold for cash of $1,293,000 in November 1994. The
components of those items sold were as follows, as of November 1, 1994:
<TABLE>
<S> <C>
Inventory, property,
plant and equipment,
net $929,000
Accounts payable (57,000)
--------
Net assets held for sale $872,000
========
</TABLE>
During 1995, approximately $449,000 of accounts payable were renegotiated to
a note payable as discussed in Note 5.
12. BUSINESS SEGMENT INFORMATION AND MAJOR CUSTOMERS
The Company operates in two business segments: security; and systems design
and engineering. During fiscal 1995 and through August 1996, when Olmsted
was acquired, the Company operated only in the security segment. The
security segment includes the Company's infrared products marketed to the
health care industry and other markets and its cellular products for the
security industry. The systems design and engineering segment, operated
under the Olmsted name, develops, sells and maintains programs for use in
operating complex machinery.
35
<PAGE> 36
Net sales, operating income (loss), identifiable assets, capital
expenditures and depreciation and amortization pertaining to the business
segments are presented below.
<TABLE>
<S> <C>
NET SALES
Security $ 246,000
Systems design and engineering 102,000
-----------
$ 348,000
===========
OPERATING LOSS
Security $(1,927,000)
Systems design and engineering (53,000)
-----------
Total operating loss (1,980,000)
General corporate expenses (50,000)
Interest income, net 24,000
-----------
Net loss $(2,006,000)
===========
IDENTIFIABLE ASSETS
Security $ 542,000
Systems design and engineering 3,234,000
Corporate 5,011,000
-----------
$ 8,787,000
===========
CAPITAL EXPENDITURES
Security $ 111,000
Systems design and engineering 3,000
-----------
$ 114,000
===========
DEPRECIATION AND AMORTIZATION
Security $ 75,000
Systems design and engineering 53,000
-----------
$ 128,000
===========
</TABLE>
Net sales in excess of 10% of the Company's total net sales were
attributable to sales to three and four major customers for the years ended
October 31, 1996 and 1995, respectively. These individual customers
accounted for net sales of approximately $56,000 (16%), $37,000 (11%) and
$34,000 (10%) in fiscal year 1996 and $286,000 (29%), $144,000 (15%),
$134,000 (14%) and $103,000 (11%) in fiscal year 1995.
36
<PAGE> 37
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective October 24, 1996, the Audit Committee of the Board of Directors
of the Company approved the dismissal of its certifying accountants, KPMG Peat
Marwick LLP. On that date, it engaged BDO Seidman, LLP to act as the Company's
certifying accountants.
KPMG Peat Marwick LLP's reports on the Company's financial statements for
the years ended October 31, 1995 and 1994 included explanatory paragraphs with
respect to the Company's recurring losses from operations that raised doubt
about its ability to continue as a going concern.
During the Company's two most recent fiscal years and the subsequent
interim period to October 24, 1996, there were no disagreements between the
Company and KPMG Peat Marwick LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of KPMG Peat Marwick
LLP would have caused it to make reference to the subject matter of the
disagreements in connection with its reports.
During the Company's two most recent fiscal years and the subsequent
interim period prior to October 24, 1996, the Company did not consult with BDO
Seidman, LLP regarding any of the matters or events set forth in Item 304 (a)
(2) (i) and (ii) of Regulation S-B.
KPMG Peat Marwick LLP's letter addressed to the SEC relating to the above
is incorporated by reference into Exhibit 16 of this Form 10-KSB. In that
letter, KPMG Peat Marwick LLP stated that it agreed with the above statements,
except that they were not in a position to agree or disagree with the Company's
statement that the change was approved by the Audit Committee of the Board of
Directors or to agree or disagree with the Company's statement that BDO
Seidman, LLP was not engaged regarding any of the matters or events set forth
in Item 304 (a) (2) (i) and (ii) of Regulation S-B.
37
<PAGE> 38
PART III
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
<TABLE>
<CAPTION>
Management Age Position(s) with the Company
- ---------- --- ----------------------------
<S> <C> <C>
Gary T. Gaisser 45 Director, President and Chief Executive Officer
Julian C. Schroeder 49 Director
Elliot G. Eisenberg 48 Director
Henry J. Tenarvitz 44 Executive Vice President of Operations
Debra A. Boyer 44 Chief Financial Officer and Secretary
</TABLE>
Gary T. Gaisser has served as President and Chief Executive Officer of the
Company since January 1995. Prior to that, he was President of Olmsted
Engineering Co. ("Olmsted"), now a wholly-owned subsidiary of the Company. Mr.
Gaisser had been with Olmsted since 1988.
Julian C. Schroeder has served as a director of the Company since August 1994.
He has served with BDS Securities, L.L.C. (a registered broker-dealer) since
1989 and its predecessor, BDS Securities Corporation, and since 1995 has served
as its President. Mr. Schroeder is also a director of Optical Coating
Laboratories, a manufacturer of thin-film products.
Elliot G. Eisenberg has served as a director of the Company since May 1996. He
is currently Managing Director of Dabney/Resnick/Imperial, L.L.C. (a registered
broker-dealer). From 1989 to November 1996 he served as Vice President of BDS
Securities, L.L.C. (a registered broker-dealer) and its predecessor, BDS
Securities Corporation.
Henry J. Tenarvitz has served as Executive Vice President of Operations since
September 1996. Prior to that, and for more than five years, he has served in
a series of positions of increasing responsibility with Olmsted.
Debra A. Boyer has served as Chief Financial Officer and Secretary of the
Company since January 1996 and as Controller since November 1995. Previously,
Ms. Boyer served as an accountant with a certified public accounting firm from
January 1995 to September 1995. Ms. Boyer managed her own accounting business
from 1991 to 1994.
Each director serves an annual term of office until the next annual meeting of
shareholders.
Based solely upon a review of Forms 3 and 4 furnished to the Company 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 the Company's securities, except that Mr. Tenarvitz was late in
filing his initial report on Form 3, Mr. Schroeder was late in filing Form 4 to
report a private sale of common stock and Ms. Boyer was late in filing Form 5
to report the grant of incentive shares.
ITEM 10 - EXECUTIVE COMPENSATION
The following table sets forth the annual compensation paid to the Chief
Executive Officer of the Corporation during the fiscal years ended October 31,
1996 and 1995. There were no other executive officers of the
38
<PAGE> 39
Company who received combined salary and bonuses for the fiscal year ended
October 31, 1996 equaling or exceeding $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------- ------------
Name & Principal Position Fiscal Year Salary Bonus Other Option Awards
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gary T. Gaisser 1996 $ 78,000 $ - $ 400 (1) 1,000,000
President, Chief Executive Officer 1995 52,000 - - -
and Director 1994 - - - -
</TABLE>
- -------------------------
(1) Represents $100 per meeting of directors held during fiscal 1996.
OPTION AWARDS
The only options granted during the year were options to purchase 1,000,000
shares, granted to Mr. Gaisser, exercisable at $.375 a share, the fair value of
the stock at grant date. These were the only options outstanding at October
31, 1996. Twenty-five percent of these options became exercisable on December
4, 1996, and an additional twenty-five percent become exercisable on each
subsequent anniversary thereof. The options expire on June 4, 2001. No
options have been exercised by Mr. Gaisser. These options had an estimated
value of $468,750 at October 31, 1996.
EMPLOYMENT AGREEMENT
As of July 1, 1996, the Company and Mr. Gaisser entered into an Employment
Agreement for a term of six years. Mr. Gaisser is employed at a base salary of
$130,000 per year and will receive a 10% annual increase during the term of the
Employment Agreement. Mr. Gaisser is entitled to such further increases as
shall be determined by the Board of Directors, and is entitled to participate
in other compensation and benefit plans of the Company.
This Employment Agreement may be terminated by the Company for "just cause,"
which is defined as "willful misconduct, embezzlement, conviction of a felony,
habitual drunkenness or excessive absenteeism not related to illness." The
Employment Agreement provides that if Mr. Gaisser is not elected or appointed
as President and Chief Executive Officer or as a member of the Board of
Directors, is removed from any such office, the ownership and control of the
Company changes, or if the principal place of the business is changed to a
location not more than 20 miles from Traverse City, Michigan without Mr.
Gaisser's consent, then Mr. Gaisser may give notice of termination, effective
at the end of the month in which notice is given. In addition, if Mr. Gaisser
concludes that because of changes in the composition in the Board of Directors
or material changes in its policies because of other events or occurrences of
material fact, he feels he can no longer properly and effectively discharge his
responsibilities, then Mr. Gaisser may resign from his position upon the giving
of sixty (60) days prior written notice. In each case, such resignation shall
be deemed constructive termination of Mr. Gaisser's employment by the Company,
and Mr. Gaisser shall be entitled to payment of the remaining amounts payable
to him under the Employment Agreement without any requirement of mitigation of
damages.
39
<PAGE> 40
Except in the event of constructive termination, Mr. Gaisser has agreed that
during the term of the Employment Agreement and for two years thereafter, he is
not to compete with the Company. Upon any termination, Mr. Gaisser has agreed
not to disclose the Company's confidential information or to solicit any
employee of the Company for a two-year period.
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
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.
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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 December 16, 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:
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Percentage of Class
Name & Address of Beneficial Owner Ownership Outstanding
- ---------------------------------- -------------------- --------------------
<S> <C> <C>
Gary T. Gaisser 5,970,123 (1) 16.2%
c/o Versus Technology, Inc.
2320 W. Aero Park Court
Traverse City, MI 49686
Anthony Low-Beer 4,959,000 (2) 13.6%
c/o Mitchell Securities
100 Park Avenue
New York, NY 10017
Merrill Lynch & Co. Inc. and 4,500,000 (3) 12.3%
Merrill Lynch Group, Inc.
250 Vesey Street
World Financial Center North Tower
New York, NY 10281-1334
Princeton Services, Inc.,
Fund Asset Management, L.P. and
Merrill Lynch Special Value Fund, Inc.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
</TABLE>
40
<PAGE> 41
- --------------------------
(1) This total includes 250,000 shares that become acquirable by Mr. Gaisser
on December 4, 1996 upon exercise of an outstanding option issued by the
Company. See "Executive Compensation" above and "Certain Relationships
and Related Transactions" below.
(2) As reported on Schedule 13D amendment filed September 9, 1996. Of these
shares, 2,559,000 are reported as being held in managed accounts over
which Mr. Low Beer shares dispositive power.
(3) As reported on Schedule 13G filed September 4, 1996. Merrill Lynch &
Co., Inc., Merrill Lynch Group, Inc., Princeton Services, Inc., Fund Asset
Management, L.P. and Merrill Lynch Special Value Fund, Inc., each claimed
shared voting power and shared dispositive on power with respect to
4,500,000 shares. Each of such entities declaimed beneficial ownership of
such shares. Merrill Lynch Special Value Fund, Inc. is the record owner
of these same shares.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of December 16, 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:
<TABLE>
<CAPTION>
Approximate Number
Position(s) with the of Common Shares
Name of Beneficial Owner Company (1) Beneficially Owned (1) Percent of Class
- ------------------------ ---------------------------- ----------------------- --------------------------
<S> <C> <C> <C>
Gary T. Gaisser President, Chief Executive 5,970,123 (2) 16.2%
Officer & Director
Julian C. Schroeder Director 1,818,969 (3) 4.8%
Elliot G. Eisenberg Director 1,502,728 (4) 4.1%
All executive officers
and directors as a
group (5 persons) 9,394,470 (5) 24.4%
</TABLE>
- --------------------------
(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, Eisenberg and Schroeder are all of the Company's present
directors.
(2) This total includes 250,000 shares that become acquirable by Mr. Gaisser
on December 4, 1996 upon exercise of an outstanding option issued by the
Company. See "Executive Compensation" above and "Certain Relationships
and Related Transactions" below.
(3) This total includes 50,000 shares currently acquirable under the terms of
the warrants issued by the Company to Mr. Schroeder and warrants to
purchase an aggregate of 1,493,969 shares issued to an affiliate of BDS
Securities, L.L.C., of which Mr. Schroeder is the President.
(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) This total includes 1,893,969 shares acquirable under outstanding
warrants and options.
41
<PAGE> 42
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 26, 1996, Olmsted was acquired by the Company in exchange for
6,379,889 shares of the Company's Common Stock and cash of $65,000. Pursuant
to the acquisition, Gary T. Gaisser, the President, Chief Executive Officer and
a Director of the Company, and the controlling shareholder of Olmsted, received
5,705,123 shares of the Company's Common Stock in exchange for his ownership
interest in Olmsted.
Olmsted had been the principal consultant to the Company in relation to the IR
Tracking System. On April 20, 1995, the Company entered into a Consulting
Agreement with Olmsted. The Agreement was for a one-year period from April 20,
1995 to April 20, 1996. Effective November 1, 1995, the Agreement was amended.
Under the Agreement and until the consummation of the acquisition, Olmsted
received an annual fee of $144,000 payable monthly as well as a fee at an
hourly rate for man-hours in excess of a fixed number of hours each month.
As of August 26, 1996, the Company completed a private placement of 11,335,000
shares of its Common Stock at $.50 per share. Julian C. Schroeder is the
President of BDS Securities, L.L.C., the placement agent for this private
placement. At that time, Elliot Eisenberg was Vice President of BDS
Securities, L.L.C. In connection with this private placement, BDS Securities,
L.L.C. received a placement fee of $396,725 together with five-year warrants to
purchase 396,725 shares of the Company's Common Stock at $.50 per share.
As of September 29, 1995, the Company completed a private placement for
14,674,917 shares of its Common Stock at $.20 per share. Julian C. Schroeder
is the President of BDS Securities, L.L.C., the placement agent for this
private placement. At that time, Elliot Eisenberg was Vice President of BDS
Securities, L.L.C. In connection with this private placement, BDS Securities,
L.L.C. received a placement fee of $205,449 together with five-year warrants to
purchase 1,027,244 shares of the Company's Common Stock at $.20 per share.
In December 1996, the Company moved its principal operating facilities to
a building that is owned by Traverse Software Investment, LLC ("TSI"), a
limited liability company controlled by Gary T. Gaisser, the President and
Chief Executive Officer of the Company. Versus and Olmsted are obligated under
two separate five-year lease agreements, which require aggregate total annual
rents of $111,000, increasing 4% annually after the first year.
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 45.
(b) Reports on Form 8-K during the fourth fiscal quarter:
(1) Form 8-K, Item 2 - August 26, 1996
The Company announced the acquisition of Olmsted Engineering, Co.
and filed as exhibits the Agreement and Plan of Merger and the
Press Release.
(2) Form 8-K(A), Item 2 - August 26, 1996
The Company filed the historical and pro forma financial
statements in connection with the acquisition of Olmsted
Engineering Co.
42
<PAGE> 43
(3) Form 8-K, Item 4 - October 24, 1996
The Audit Committee of the Board of Directors of the Company
announced the dismissal of its certifying accountants, KPMG Peat
Marwick LLP and engagement of BDO Seidman, LLP as its new
certifying accountants.
43
<PAGE> 44
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.
<TABLE>
<S> <C> <C> <C>
By: /s/ Debra A. Boyer By: /s/ 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)
</TABLE>
Dated: January 8, 1997
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:
<TABLE>
<S> <C>
/s/ Gary T. Gaisser January 8, 1997
-----------------------
Gary T. Gaisser
Director
/s/ Elliot G. Eisenberg January 8, 1997
-----------------------
Elliot G. Eisenberg
Director
/s/ Julian C. Schroeder January 8, 1997
-----------------------
Julian C. Schroeder
Director
</TABLE>
44
<PAGE> 45
EXHIBIT INDEX
<TABLE>
<S> <C>
2 Agreement and Plan of Merger between Versus Technology, Inc. and Olmsted Engineering, Inc.
(Incorporated by reference to Exhibit 2 of the Company's Form 8-K dated August 26, 1996)
3 (a) (i) Certificate of Incorporation dated October 11, 1988 (Incorporated by reference to Exhibit 3 (a) (i) of
the Company's Form 10-KSB for the year ended October 31, 1995)
3 (a) (ii) Certificate of Amendment of Certificate of Incorporation dated October 25, 1989 (Incorporated by
reference to Exhibit 3 (a) (ii) of the Company's Form 10-KSB for the year ended October 31, 1995)
3 (a) (iii) Certificate of Amendment of Certificate of Incorporation dated December 17, 1993 (Incorporated by
reference to Exhibit 3 (a) (iii) of the Company's Form 10-KSB for the year ended October 31, 1995)
3 (a) (iv) Certificate of Amendment of Certificatate of Incorporation (Incorporated by reference to Exhibit 3 of
the Company's Form 10-QSB for the quarter ended July 31, 1996)
3 (b) By-laws (Incorporated by reference to Exhibit 3 (b) of the Company's Form 10-KSB for the year ended
October 31, 1995)
4 (a) 1996 Incentive Restricted Stock Bonus Plan
4 (b) Stock Option Agreement with Gary T. Gaisser
4 (c) Incentive Stock Option Plan (Incorporated by reference to the Company's 1996 Proxy Statement)
10 (a) Lease Agreement between Versus Technology, Inc. and Traverse Software Investment, LLC
10 (b) Lease Agreement between Olmsted Engineering, Co. and Traverse Software Investment, LLC
10 (c) Exclusive Marketing Agreement between Versus Technology, Inc. and Marquette Electronics, Inc. (redacted)
10 (d) Employment Agreement with Gary T. Gaisser
10 (e) Registration Rights Agreement dated August 26, 1996
10 (f) Registration Rights Agreement dated September 15, 1995 (Incorporated by reference to Exhibit 10 (d) of
the Company's Form 10-KSB for the year ended October 31, 1995)
10 (g) Registration Rights Agreement dated July 1, 1995 (Incorporated by reference to Exhibit 10 (e) of the
Company's Form 10-KSB for the year ended October 31, 1995)
11 Statement Re: Computation of Per Share Earnings
</TABLE>
45
<PAGE> 46
<TABLE>
<S> <C>
16 Letter on Change in Certifying Accountant (Incorporated by reference to Exhibit 16 of the Company's
Form 8-K dated October 24, 1996).
21 Subsidiary of the Registrant
23 Independent Auditors' Consent
27 Financial Data Schedule
99 Financial News Releases
</TABLE>
46
<PAGE> 1
EXHIBIT 4(A)
VERSUS TECHNOLOGY, INC.
1996 INCENTIVE RESTRICTED STOCK BONUS PLAN
1. PURPOSE. This Plan's purpose is to keep personnel of experience and
ability in the employ of Versus Technology, Inc. and its Subsidiaries and to
compensate them for their contributions to the growth and profits of the
Company and its Subsidiaries and thereby induce them to continue to make such
contributions in the future.
2. DEFINITIONS. For the purposes of this Plan, the following terms will
have the definitions set forth below:
(a) "Company." Versus Technology, Inc.
(b) "Subsidiary" or "Subsidiaries." A corporation or
corporations of which the Company owns, directly or
indirectly, shares having a majority of the ordinary voting
power for the election of directors.
(c) "Board." The Company's Board of Directors.
(d) "Date of Issuance." This term shall have the
meaning supplied by Section 6(c), below.
(e) "Plan." Versus Technology, Inc. 1996 Incentive
Restricted Stock Bonus Plan.
(f) "Bonus Share(s)." The shares of common stock of
the Company reserved pursuant to Section 3 hereof and any such
shares issued to a Recipient pursuant to this Plan.
(g) "Recipient." An employee of the Company or a
Subsidiary to whom shares are allocated under this Plan, or
such individual's designated
47
<PAGE> 2
beneficiary, surviving spouse, estate, or legal
representative. For this purpose, however, any such
beneficiary, spouse, estate, or legal representative shall
be considered as one person with the employee.
(h) "Restricted Period." This phrase shall have the
meaning supplied by Section 7(c), below.
3. BONUS SHARE RESERVE.
(a) Bonus Share Reserve. The Company will establish
a Bonus Share reserve to which will be credited 500,000 shares
of the common stock of the Company, par value $0.01 per share.
Should the shares of the Company's common stock, due to a
stock split or stock dividend or combination of shares or any
other change, or exchange for other securities, by
reclassification, reorganization, merger, consolidation,
recapitalization or otherwise, be increased or decreased or
changed into or exchanged for, a different number or kind of
shares of stock or other securities of the Company or of
another corporation, the number of shares then remaining in
the Bonus Share reserve shall be appropriately adjusted to
reflect such action. If any such adjustment results in a
fractional share, the fraction shall be disregarded.
(b) Adjustments to Reserve. Upon the allocation of
shares hereunder, the reserve will be reduced by the number of
shares so allocated and, upon the failure to make the required
payment on the issuance of any Bonus Shares pursuant to
Section 6(a) or upon the repurchase
48
<PAGE> 3
thereof pursuant to Section 7(d)(i) or (ii) or Section 9
hereof, the reserve shall be increased by such number of
shares, and such Bonus Shares may again be the subject of
allocations hereunder.
(c) Distributions of Bonus Shares. Distributions of
Bonus Shares, as the Board shall in its sole discretion
determine, may be made from authorized but unissued shares or
from treasury shares. All authorized and unissued shares
issued as Bonus Shares in accordance with the Plan shall be
fully paid and non-assessable shares and free from preemptive
rights.
4. ELIGIBILITY AND MAKING OF ALLOCATIONS.
(a) Eligible Employees. Any salaried employee of the
Company or any Subsidiary (including officers, other than the
President, and, excluding directors) shall be eligible to
receive an allocation of Bonus Shares pursuant to the Plan.
(b) Selection by the President. From the employees
eligible to receive allocations pursuant to the Plan, the
President may from time to time select those employees to whom
he recommends that the Board make allocations. Such
recommendations shall include a recommendation as to the
number of Bonus Shares that should be allocated to each such
individual. In selecting those employees whom he wishes to
recommend for allocations and in determining the number of
Bonus
49
<PAGE> 4
Shares he wishes to recommend, the President shall
consider the position and responsibilities of the eligible
employees, the value of their services to the
Company and its Subsidiaries and such other factors as the
President deems pertinent.
(c) Review by Board of President's Recommendations.
As promptly as practicable after the President recommends
making allocations pursuant to (b), above, the Board will
review the President's recommendations and, in the Board's
discretion, allocate to the employees the Board selects from
those employees recommended by the President a number of Bonus
Shares not in excess of the number recommended for each
employee by the President. The date of such action by the
Board shall be the "date of allocation," as that term is used
in this Plan.
(d) Participation in Other Stock Option Plans. A
person who has received options to purchase stock under any
stock option plan of the Company or a Subsidiary may exercise
the same in accordance with their terms, and will not by
reason thereof be ineligible to receive Bonus Shares under
this Plan.
(e) Limit on Number of Allocable Shares. The total
number of Bonus shares which may be allocated pursuant to this
Plan will not exceed the amount available therefor in the
Bonus Share reserve.
50
<PAGE> 5
(f) Non-exclusivity of Plan. Nothing contained
herein is intended to amend, modify or rescind any previously
approved compensation plans or programs entered into by the
Company or any of its Subsidiaries. This Plan shall be in
addition to any and all such plans or programs.
5. FORM OF ALLOCATIONS.
(a) Number Specified. Each allocation shall specify
the number of Bonus Shares subject thereto, subject to the
provisions of Section 4.
(b) Notice. When an allocation is made, the Board
shall advise the Recipient and the Company thereof by delivery
of written notice in the form of Exhibit A hereto annexed.
6. PAYMENT REQUIRED OF RECIPIENTS.
(a) Acceptance of Allocation. Within 15 days from
the date of allocation, the Recipient shall, if he desires to
accept the allocation, pay to the Company an amount equal to
the par value of the Bonus Shares so allocated, in cash or by
check or money order at the office of its Treasurer.
(b) Investment Purpose. The Company will require
that, in acquiring any Bonus Shares, the Recipient agree with,
and represent to, the Company that the Recipient is acquiring
such Bonus Shares for the purpose of investment and with no
present intent to transfer, sell, or otherwise dispose of such
shares except for such distribution by a
51
<PAGE> 6
legal representative as shall be required by will or the laws
of any jurisdiction in winding up the estate of any Recipient.
Such shares shall be transferable thereafter only if the
proposed transfer is permitted under the Plan and if, in the
opinion of counsel (who shall be satisfactory to the Company),
such transfer at such time complies with applicable securities
laws.
(c) Written Agreement/Date of Issuance. Concurrently
with making payment of the par value of Bonus Shares pursuant
to Section 6(a) the Recipient shall deliver to the Company, in
duplicate, an Acceptance of Bonus Share Allocation, signed by
the Recipient, in form and substance as set forth in Exhibit
B, below, and the Company will promptly acknowledge its
receipt thereof. The date of such delivery and receipt shall
be deemed the "Date of Issuance," as that phrase is used in
this Plan, of the Bonus Shares to which the shares relate.
The failure to make such payment and delivery within 15 days
from the date of allocation shall terminate the allocation of
such shares to the Recipient.
7. RESTRICTIONS.
(a) Transfer/Issuance. Bonus Shares after the making
of the payment and representations, etc., required by Section
6, will be promptly issued or transferred and a certificate or
certificates for such shares
52
<PAGE> 7
shall be issued in the Recipient's name, but such certificate
or certificates shall be held by the Company until the
restrictions shall have lapsed in accordance herewith. The
Recipient shall thereupon be a shareholder of all the shares
represented by the certificate or certificates. As such, the
Recipient will have all the rights of a shareholder with
respect to such shares, including the right to vote them and
to receive all dividends and other distributions subject to
Section 7(b) paid with respect to them, provided, however,
that the shares shall be subject to the restrictions in
Section 7(d). Stock certificates representing Bonus Shares
will be imprinted with a legend stating that
"The shares of Versus Technology, Inc. Common Stock
evidenced by this certificate are subject to the terms
and restrictions of the Versus Technology, Inc. 1996
Incentive Restricted Stock Bonus Plan; such shares are
subject to repurchase under the terms of this Plan; and
such shares shall not be sold, transferred, assigned,
pledged, encumbered or otherwise alienated or
hypothecated except pursuant to the provisions of said
Plan, a copy of which is available from Versus
Technology, Inc. upon request."
Each transfer agent for the Common Stock shall be instructed
to like effect in respect of such shares. Upon lapse or
other termination of
53
<PAGE> 8
such restrictions, the Company will deliver such certificate or
certificates to the person entitled.
(b) Stock Splits, Dividends, etc. If, due to a stock
split, stock dividend, combination of shares, or any other
changes or exchange for other securities by reclassification,
reorganization, merger, consolidation, recapitalization or
otherwise, the Recipient, as the owner of Bonus Shares subject
to restrictions hereunder, shall be entitled to new,
additional, or different shares of stock or securities, the
certificate or certificates for, or other evidences of, such
new, additional, or different shares or securities, together
with a stock power or other instrument of transfer
appropriately endorsed, also shall be imprinted with a legend
as provided in Section 7(a) and deposited by the Recipient
with the Company. When the event(s) described in the preceding
sentence occur, all Plan provisions relating to restrictions
and lapse of restrictions will apply to such new, additional,
or different shares or securities to the extent applicable to
the shares with respect to which they were distributed,
provided, however, that if the Recipient shall receive rights,
warrants or fractional interests in respect of any of such
Bonus Shares, such rights or warrants may be held, exercised,
sold or otherwise disposed of, and such fractional interests
may be settled, by the Recipient free and clear of the
restrictions hereafter set forth.
(c) Restricted Period. The term "Restricted Period"
with respect to restricted Bonus Shares (after which
restrictions shall lapse) means a
54
<PAGE> 9
period starting on the Date of Issuance of such shares
to the Recipient and ending on such date not less than three
(3) years after the Date of Issuance, as the President may
establish at the time of allocations of shares hereunder.
(d) Restrictions on Bonus Shares. The restrictions
to which restricted Bonus Shares shall be subject are:
(i) During the Restricted Period applicable to such
shares and except as otherwise specifically provided in
the Plan, none of such shares shall be sold, exchanged,
transferred, pledged, hypothecated, or otherwise
disposed of unless they first, by written notice, have
been offered to the Company for repurchase for the same
amount as was paid therefor under Section 6, with
appropriate adjustment for any change in the Bonus
Shares of the nature described in Section 7(b) and the
Company shall not within 30 days following such offer
have so repurchased the shares and made payment in full
therefor. Unless such repurchase is otherwise
prohibited by the laws of the State of Delaware
currently in effect at the time of an offer of Bonus
Shares to the Company for repurchase pursuant to the
terms of this Plan, the Company shall repurchase said
shares and make payment in full therefor within thirty
(30) days following such offer.
55
<PAGE> 10
(ii) If a Recipient's employment is terminated for any
reason, including such Recipient's death or disability,
at any time before the Restricted Period ends, such
termination shall be deemed an offer to the Company as
described in Section 7(d)(i) as to:
(A) All such shares issued to such Recipient, if
such termination occurs within one year from the
Date of Issuance;
(B) 75% of the total number of such shares
originally issued including any other or
additional securities issued in respect thereof,
as contemplated by Section 7(b) to such
Recipient, if such termination occurs more than
one year after the Date of Issuance but prior to
two years after that date;
(C) 50% of the total number of such shares
originally issued (including any other or
additional securities issued in respect thereof,
as contemplated by Section 7(b) to such
Recipient, if the termination occurs on or after
two years after the Date of Issuance but prior to
the end of the Restricted Period.
(e) Lapse of Restricted Period. The restriction set
forth in Section 7(d) hereof, with respect to the Bonus Shares
to which such Restricted
56
<PAGE> 11
Period was applicable, will lapse upon expiration of
the Restricted Period or the earlier of (i) as to such shares
in accordance with the times(s) and number(s) of shares as to
which the Restricted Period expires, as described in Section
7(d)(ii), or (ii) as to any shares which the Company will
fail to purchase when they are offered to the Company, as
described in Section 7(d)(i), upon the Company's failure to so
repurchase. The President may at any time in his sole
discretion accelerate or waive all or any portion of
restrictions remaining in respect of the Bonus Share
allocation. This right may be exercised for any or all
Recipients.
(f) Transfers Upon Death of Recipient. Nothing in
this Plan will preclude the transfer of restricted Bonus
Shares, on the Recipient's death, to the Recipient's legal
representatives or estate, nor preclude such representatives
from transferring any of such shares to the person(s) entitled
thereto by will or the laws of descent and distribution,
provided, however, that any shares so transferred as to which
such restrictions have not lapsed will remain subject to all
restrictions and obligations imposed on them by this Plan.
(g) Delivery of Written Notice. All notices in
writing required pursuant to this Section 7 will be sufficient
only if actually delivered, either by
57
<PAGE> 12
personal hand delivery or delivery via registered or
certified mail, postage prepaid, to the Company, attention
Chief Financial Officer.
8. FINALITY OF DETERMINATION. The President will administer this Plan and
construe its provisions. Any determination by the President (except insofar as
he will make recommendations only) in carrying out, administering, or
construing this Plan will be final and binding for all purposes and upon all
interested persons and their heirs, successors and personal representatives.
9. LIMITATIONS.
(a) No right to Allocation. No person will at any
time have any right to receive an allocation of Bonus Shares
hereunder and no person will have authority to enter into an
agreement for the making of an allocation or to make any
representation or warranty with respect thereto.
(b) Rights of Recipients. Recipients of allocations
will have no rights in respect thereof other than those set
forth in the Plan. Except as provided in Sections 6(b) or
7(f), such rights may not be assigned or transferred except by
will or by the laws of descent and distribution. If any
attempt is made to sell, exchange, transfer, pledge,
hypothecate, or otherwise dispose of any Bonus Shares held by
the Recipient under restrictions which have not yet lapsed,
the shares that are the subject of such attempted disposition
will be deemed offered to the Company for repurchase, and the
Company will repurchase them, as described in Section 7(d)(i).
Before issuance of Bonus Shares, no
58
<PAGE> 13
such shares will be earmarked for the Recipients'
accounts nor will such Recipients have any rights as
stockholders with respect to such shares.
(c) No Right to Continued Employment. Neither the
Company's action in establishing the Plan, nor any action
taken by it or by the Board or the President under the Plan,
nor any provision of the Plan, will be construed as giving to
any person the right to be retained in the employ of the
Company or any Subsidiary.
(d) Limitation on Actions. Every right of action by
or on behalf of the Company or by any shareholder against any
past, present, or future member of the Board, the President,
or any officer or employee of the Company arising out of or in
connection with this Plan shall, regardless of the place where
the action may be brought and regardless of the place of
residence of any such director, committee member, officer or
employee, cease and be barred by the expiration of one year
from the later of:
(i) the date of the act or omission in respect of which such
right of action arises or
(ii) the first date upon which there has been made generally
available to shareholders an annual report of the Company and
a proxy statement for the annual meeting of shareholders
following the issuance of such annual report, which annual
report and proxy
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statement alone or together set forth, for
the related period, the amount of allocations.
In addition, any and all right of action by any employee (past,
present or future) against the Company, the Board or the President
arising out of or in connection with this Plan will, regardless of
the place where action may be brought and regardless of the place
of residence of the President, cease and be barred by the
expiration of one year from the date of the act or omission in
respect of which such right of action arises.
10. AMENDMENT, SUSPENSION OR TERMINATION OF PLAN. The Board may amend,
suspend or terminate the Plan in whole or in part at any time; provided that
such amendment will not affect adversely rights or obligations with respect to
allocations previously made; and provided further, that no modification of the
Plan by the Board without approval of the shareholders will (i) increase the
maximum number of Bonus Shares reserved pursuant to Section 3; (ii) change the
provisions of Section 4 with respect to the total number of Bonus shares that
may be allocated under the Plan; or (iii) render the President eligible to
receive an allocation.
11. GOVERNING LAW. The plan will be governed by the laws of the State of
Delaware.
12. EXPENSES OF ADMINISTRATION. All costs and expenses incurred in the
operation and administration of this Plan will be borne by the Company.
13. REGISTRATION OF BONUS SHARES.
(a) Registration Requirement. If the Company
determines at any time to register any of its securities under
the Securities Act of 1933 (or
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<PAGE> 15
similar statute then in effect) the Company, at its
expense, will include among the securities which it then
registers all Bonus Shares or other stock or securities issued
in respect thereof, in exchange therefor, or in replacement
thereof as to which the Restricted Period has expired. The
requirement of the preceding sentence, however, will not apply
to the extent that any Recipient at that time has no present
intent to sell or distribute the relevant shares. Also, in
the case of stock or securities not of the Company, the
Company's obligation under this Section 13 will be limited to
using its best efforts to effect such registration.
(b) Written Notification. As to each registration
pursuant to this Section 13, the Company will keep the
Recipients advised in writing as to the initiation of
proceedings for such registration and as to the completion
thereof, and at its expense will keep such registration
effective for a period of nine months, or until all sales and
distributions contemplated in connection therewith are
completed, whichever period is shorter. Each Recipient will
at his own expense furnish to the Company such information
regarding the Recipient and the Recipient's ownership of Bonus
Shares (or other stock securities) as the Company may
reasonably request in writing in connection with any such
registration.
(c) Prospectus; Indemnification. The Company, at its
expense, will furnish to each Recipient such number of
prospectuses incident to any such registration as such
Recipient from time to time reasonably may request.
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In addition, the Company will indemnify each such Recipient
against all claims, losses, damages, and liabilities caused by
any untrue statement of a material fact contained in such
prospectus (or in any related registration statement) or by
any omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, except insofar as the same may have been caused by
an untrue statement or omission based upon information
furnished in writing to the Company by such Recipient
expressly for use therein. Further, as a condition precedent
to the obligations of the Company pursuant to this Section 13,
each Recipient will agree in writing to indemnify the Company
against all claims, losses, damages and liabilities caused by an
untrue statement or omission based upon information furnished to
the Company by such Recipient expressly for use therein.
VERSUS TECHNOLOGY, INC.
BY:
---------------------------
GARY T. GAISSER, PRESIDENT
DATED AS OF:___________________
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EXHIBIT A
VERSUS TECHNOLOGY, INC. 1996 INCENTIVE RESTRICTED STOCK BONUS PLAN
NOTICE TO EMPLOYEE
To: 1._______________ , Recipient, and
2. Chief Financial Officer, Versus Technology, Inc.
This is to advise you that Versus Technology, Inc.'s Board of Directors
has on the date of this notice allocated to the Recipient above named a total
of ______ bonus Shares under and pursuant to the Versus Technology, Inc.
1996 Incentive Restricted Stock Bonus Plan.
For these shares to be issued, the Recipient must make payment of $_____
and deliver to the Treasurer of the Company an agreement in the form of
Exhibit B attached hereto, within 15 days from the date of this notice.
The Restricted Period for the above Bonus Shares shall be three years from
the Date of Issuance as set forth in the Acceptance of Bonus Share Allocation.
Versus Technology, Inc.
By:
Gary T. Gaisser, President
Effective Date: October 30,1996
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<PAGE> 18
EXHIBIT B
VERSUS TECHNOLOGY, INC. 1996 INCENTIVE RESTRICTED STOCK BONUS PLAN
ACCEPTANCE OF BONUS SHARE ALLOCATION
To: Chief Financial Officer, Versus Technology, Inc.
Enclosed is the sum of $________________, being equal to the par value of
_______ Bonus Shares allocated to and purchased by me pursuant to the Versus
Technology, Inc. 1996 Incentive Restricted Stock Bonus Plan.
I represent and agree that I am acquiring these Bonus Shares for
investment and that I have no present intention to transfer, sell or otherwise
dispose of such shares, except as permitted pursuant to the Plan and in
compliance with applicable securities laws. I agree further that I am
acquiring these shares in accordance with, and subject to, the terms,
provisions and conditions of said Plan, to all of which I hereby expressly
assent. These agreements will bind and inure to the benefit of my heirs, legal
representatives, successors and assigns.
My address of record is: ________________________(Recipient)
My Social Security Number is:
Receipt of the above together with the payment referred to, is hereby
acknowledged.
VERSUS TECHNOLOGY, INC.
By:
Date:________________ (Date of Issuance)
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<PAGE> 19
ELECTION TO INCLUDE VALUE OF RESTRICTED PROPERTY
IN GROSS INCOME IN YEAR OF TRANSFER UNDER CODE SECTION 83(b)
The undersigned hereby elects pursuant to Section 83(b) of the Internal
Revenue Code with respect to the property described below and supplies the
following information in accordance with the regulations promulgated
thereunder:
1. The name, address and taxpayer identification number of the undersigned
is:
Taxpayer I.D. No.
2. Description of property with respect to which the election is being
made:
_______ shares of Common Stock, par value $0.01 per share of Versus
Technology, Inc.
3. The date on which property was transferred is_____________________:
The taxable year to which this election relates is calendar year ____.
4. The nature of the restriction(s) to which the property is subject is:
If, on or before_______________, the employment of the
taxpayer by Versus Technology, Inc. terminates, other than by
reason of taxpayer's death or disability, the taxpayer must resell
the property transferred to Versus Technology, Inc. for $0.01 per
share.
The property is non-transferable in the taxpayer's hands, by virtue
of language to that effect stamped on the stock certificate.
5. Fair market value:
The fair market value at time of transfer (determined without
regard to any restrictions other than restrictions which by their
terms will never lapse) of the
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<PAGE> 20
property with respect to which this election is being made is ________
per share.
6. Amount paid for property:
The amount paid by taxpayer for said property is_____________
per share.
7. Furnishing statement to employer:
A copy of this statement has been furnished to Versus Technology,
Inc.
Dated:
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<PAGE> 1
EXHIBIT 4(B)
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, dated as of ____________________, between
VERSUS TECHNOLOGY, INC., a Delaware Corporation (the "Corporation"), and GARY
T. GAISSER, an employee of the Corporation or its subsidiary (herein
"Employee").
W I T N E S S E T H:
The Corporation desires, by affording the Employee an opportunity to purchase
shares of its Common Stock, $.01 par value, to provide the Employee with an
added incentive to join or to continue in the employment of the Corporation and
to continue and increase his or her efforts in that connection. This Stock
Option Agreement (this "Agreement") is being entered into pursuant to the
Versus Technology, Inc. 1996 Incentive Stock Option Plan and is subject to the
provisions thereof, including the determinations to be made by the Compensation
Committee (the "Committee") of the Board of Directors of the Corporation (the
"Board").
In consideration of the mutual covenants hereinafter set forth and for
other good and valuable consideration, the parties hereto hereby agree as
follows:
1. Grant. The Corporation with the approval and direction of the
Committee irrevocably grants the employee the right and option (the "Option")
to purchase all or any part of an aggregate of 1,000,000 shares of Common Stock
on the terms and conditions herein set forth. This Option shall be an
Incentive Stock Option.
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<PAGE> 2
2. Price. The purchase price of the shares of Common Stock covered by
the Option shall be $0.375 per share, being in excess of the fair market value
of the Common Stock on the date hereof.
3. Time of Exercise. The term of the Option shall be for a period of ten
(10) years from the date hereof, subject to earlier termination as provided in
this Agreement. Except as provided in Paragraphs 5 and 6 hereof, the Option
may not be exercised unless the Employee shall at the time of exercise be an
employee of the Corporation. Neither the Option nor any rights related to the
Option shall be exercisable for a period of six months from the date hereof
when twenty-five percent (25%) of the Option shall become first exercisable,
and an additional twenty-five percent (25%) of the Option shall become
exercisable each of the three successive anniversaries of that date until the
Option shall become fully exercisable.
4. No Transfer. The Option shall not be transferable by the Employee
otherwise than by Will or the laws of descent and distribution, and the Option
may be exercised during his lifetime only by the Employee. The Option may not
be assigned, transferred (except as aforesaid), pledged or hypothecated in any
way (whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of the Option contrary to the
provisions hereof and the levy of any attachment or similar process upon the
Option shall be null and void and without effect.
5. Termination. In the event the employment of the Employee shall be
terminated for any reason, (i) the Option may be exercised by the Employee at
any time
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<PAGE> 3
within thirty (30) days after such date (or one year after such date if the
Employee is disabled within the meaning of Internal Revenue Code Section
22(e)(3), but in no event after the expiration of ten years from the date
hereof, and only if and to the extent that he was entitled to exercise the
Option at the date of termination, and (ii) so long as the stock of the
Corporation is not listed on a national securities exchange or traded on the
over-the-counter market, the Corporation may elect in its sole discretion to
repurchase the stock at a price equal to the fair market value of the stock at
the date of termination. The Option shall not be affected (i) by any change of
duties or position so long as the Employee continues to be an employee of the
Corporation or a Subsidiary or (ii) by any temporary leave of absence that does
not sever the employment relationship, which leave of absence is approved, if
for a period of not more than three months, by an officer of the Corporation,
or if for a period of more than three months, by the Board.
6. Death of Employee. If the Employee shall die while entitled to
exercise the Option, the Option may be exercised by the legatee or legatees of
the Option under the Employee's Will, the personal representative or
distributees of the Employee to the extent that the Option would otherwise have
been exercisable by the Employee at any time within a period of one year after
the date of the Employee's death, but this provision shall not otherwise extend
the ten (10) year duration of the Option.
7. Anti-Dilution Adjustments. In the event of any change in the
outstanding Common Stock of the Corporation by reason of stock dividends, stock
splits, recapitalizations, mergers, consolidations, combinations or exchanges
of shares, split-ups, split-offs, liquidations or other similar changes in
capitalization, or any distributions
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<PAGE> 4
to common stockholders other than cash dividends, the numbers, class and prices
of shares covered by this Option shall be appropriately adjusted by the
Committee, whose determination shall be conclusive; provided, however, that no
such adjustment shall give the Employee any additional benefits under the
Option.
8. Corporate Transactions. Notwithstanding the provisions of Paragraph
7, if any "corporate transaction" as defined in Section 1.425-1 of the Treasury
Regulations promulgated under the Internal Revenue Code of 1986 occurs after
the date of this Agreement, and in connection with such corporate transaction,
the Corporation and another corporation enter into an agreement providing for
the issuance of substitute stock options in exchange for the Option or the
assumption of the Option, in either case giving the Employee the right to
purchase the largest whole number of shares of Common Stock of the Corporation
or of any other corporation at the lowest option price permitted by said
Section 1.425-1, the Option shall be deemed to provide for the purchase of such
number of shares of Common Stock at such option price as shall be agreed upon
by the Corporation and such other corporation, and the term "Corporation"
herein shall mean the issuer of the stock then covered by the Option and the
term "Common Stock" shall mean such stock.
9. No Employment Agreement. This Agreement does not confer upon the
Employee any right to continue in the employ of the Corporation nor does it
interfere in any way with the right of the Corporation or the right of the
Employee to terminate the employment of the Employee at any time.
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<PAGE> 5
10. Restrictions. The obligation of the Corporation to sell and deliver
shares of Common Stock with respect to the Option shall be subject to (i) all
applicable laws, rules, regulations and such approvals by any governmental
agencies as may be required, including the effectiveness of a registration
statement under the Securities Act of 1933, as amended and (ii) the condition
that the shares of Common Stock to be received upon exercise of the Option
shall have been duly listed, upon official notice of issuance, on a stock
exchange (to the extent that the Common Stock of the Corporation is then listed
on any such stock exchange). In the event that the shares shall be delivered
otherwise than in accordance with an applicable registration statement, the
Corporation's obligation to deliver the shares is subject to the further
condition that the Employee will execute and deliver to the Corporation an
undertaking in form and substance satisfactory to the Corporation that (i) it
is the Employee's intention to acquire and hold such shares for investment and
not for resale or distribution, (ii) the shares will not be sold without
registration or exemption from the requirement of registration under the
Securities Act and (iii) the Employee will indemnify the Corporation for any
costs, liabilities and expenses which it may sustain by reason of any violation
of the Securities Act or any other law regulating the sale or purchase of
securities occasioned by any act on his part with respect to such shares.
The Corporation may require that any certificate or certificates evidencing
shares issued pursuant to the Plan bear a restrictive legend intended to effect
compliance with the Securities Act or any other applicable regulatory measures,
and stop transfer
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<PAGE> 6
instructions with respect to the certificates representing the shares may be
given to the transfer agent.
11. Exercise. Subject to the terms and conditions of this Agreement, the
Option may be exercised only by written notice delivered to the Corporation at
its principal executive offices, attention of the Chief Financial Officer, of
intention to exercise such Option and by making payment of the purchase price
of such shares against delivery of a certificate or certificates therefor as
hereinafter provided. Such written notice shall:
(a) state the election to exercise the Option and the number of shares
in respect of which it is being exercised;
(b) fix a date not less than seven (7) business days from the date such
notice is received by the Corporation for delivery of the certificate or
certificates for said shares and the payment of the purchase price
therefor, and (c) be signed by the person or persons so exercising the
Option and in the event the Option is being exercised by any person or
persons other than the Employee, be accompanied by appropriate proof of
the right of such person or persons to exercise the Option.
On the date fixed in said written notice, a certificate or certificates
for the shares as to which the Option shall have been so exercised, registered
in the name of the person or persons so exercising the Option shall be issued
by the Corporation and delivered to or upon the order of such person or persons
against payment in full at the above-mentioned address of the purchase price of
said shares in cash, by check or by
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<PAGE> 7
surrender or delivery to the Corporation of shares of the Corporation's Common
Stock with a fair market value equal to or less than the Option price, plus
cash equal to any difference. All shares issued as provided herein will be
fully paid and nonassessable. The Employee shall not have any of the rights of
the stockholder with respect to the shares of Common Stock subject to the
Option until the certificate evidencing such shares shall be issued to him upon
the due exercise of the Option.
12. Availability of Shares. The Corporation shall at all times during
the term of the Option reserve and keep available such number of shares of
Common Stock as will be sufficient to satisfy the requirements of this
Agreement, shall pay all original issue taxes with respect to the issue of
shares pursuant hereto and all other fees and expenses necessarily incurred by
the Corporation in connection therewith and will from time to time use its best
efforts to comply with all laws and regulations which in the opinion of counsel
for the Corporation shall be applicable thereto.
13. Fair Market Value. As used herein, the "fair market value" of a
share of Common Stock shall be:
(a) if the Common Stock is listed on a national securities exchange, the
closing price of the Common Stock on the Composite Tape on the trading day
immediately preceding such given date;
(b) if the Common Stock is traded on the over-the-counter market, the
average of the bid and the asked price for the Common Stock as reported by the
Wall Street Journal at the close of trading on the trading day immediately
preceding such given date, and
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<PAGE> 8
(c) if the Common Stock is neither listed on a national securities
exchange or traded on the over-the-counter market, such value as the Board in
good faith shall determine.
14. The Plan. The Option is granted pursuant to the terms of the Plan,
which terms are incorporated herein by reference, and the Option shall in all
respects be interpreted in accordance with the Plan. The Committee shall
interpret and construe the Plan and this Agreement, and the Committee's
interpretations and determinations shall be conclusive and binding on the
parties hereto and any other person claiming an interest hereunder with respect
to any issue arising hereunder or thereunder.
15. Governing Law. This Agreement has been entered into and shall be
construed in accordance with the laws of the State of New Jersey.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be duly
executed and sealed by its duly authorized officers and the Employee has
hereunder set his hand, all as of the day and year first above written.
ATTEST: VERSUS TECHNOLOGY, INC.
By:
-----------------------------
- -------------------------
Name:
Title:
WITNESS:
By:
- ------------------------- -----------------------------
Name:
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<PAGE> 1
EXHIBIT 10(A)
LEASE
THIS LEASE entered into as of the 1st day of April, 1996, between Traverse
Software Investment L.L.C., a Michigan limited liability company, of 3676
Jackson Road, Kingsley, Michigan, 49649 (hereinafter referred to as "Landlord")
and Versus Technology, Inc., a Delaware corporation, of 2320 Aero Park Court,
Traverse City, Michigan, 49686 (hereinafter referred to as "Tenant").
W I T N E S S E T H :
1. Leased Premises. Landlord leases to Tenant and Tenant hires from
Landlord that portion of the building to be constructed by Landlord, located at
Cass Road, Traverse City, Michigan (2600 Miller Creek Dr.) consisting of
approximately 9,000 to 10,000 square feet, as shown outlined in red on the
attached drawing and consisting of approximately 5,000 sq. feet, including a
specialized area for electronic manufacturing/assembly with installed
antistatic tile, an area suitable for use by Tenant to meet its currently
estimated shipping and receiving needs, and additional space within the
building to be shared and used in common with other tenants in the building
(hereinafter the "Premises"); subject, however, to easements, liens and
restrictions of record, if any, and present and future zoning or other laws and
regulations relating to the Premises.
2. Term. The original term of this Lease shall be for a period of 60
months commencing on the 1st day of July, 1996, and ending on the 30th day of
June, 2001, regardless of actual entry, subject to the provisions of this
Lease. If Landlord is unable to give possession of the Premises on the date of
commencement of the term of this Lease because construction repairs or
improvements are not completed, rent shall abate for the period that possession
by Tenant is delayed. If such delay shall continue for more than 180 days,
Tenant may, within ten (10) days after the expiration of the said 180 day
period, give the Landlord a notice of election to terminate this Lease. Unless
possession of the Premises is sooner made available, this Lease shall terminate
on the tenth day after the giving of the said notice and Landlord shall return
to Tenant all sums previously paid. Landlord shall have no obligation to
Tenant for failure to give possession except as provided in this paragraph, nor
shall the failure to give such possession extend the term of this Lease beyond
the stated ending date.
3. Rent.
(a) Minimum Rent. The fixed minimum rent for the
Premises shall be $57,000.00 Dollars per year payable by
Tenant to Landlord in equal monthly installments of $4,750.00
Dollars each, on or before the first day of each month in
advance during the term hereof without any prior demand
therefor and without deduction or set off whatsoever, the
first monthly rental payment to be paid upon the date Tenant
is notified that the Premises are ready for occupancy.
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<PAGE> 2
(b) Additional Rent. Minimum rent as provided in
Paragraph 3(a) hereof shall be increased from time to time as
follows:
(1) The minimum monthly rent provided for in Paragraph 3(a)
shall be increased on July 1, 1997, and on July 1 of each
year thereafter, so that the minimum rent for that
ensuing 12 month period shall be equal to 1.04 times the
minimum rent applicable to the preceding 12 month period.
(2) The Tenant shall pay as additional rent any money and
charges required to be paid pursuant to the terms of this
Lease whether or not the same may be designated
"additional rent." If such amounts or charges are not
paid at the time provided in this Lease, they shall
nevertheless, if not paid when due, be collectible as
additional rent with the next installment of rent
thereafter falling due hereunder, but nothing herein
contained shall be deemed to suspend or delay the payment
of any amount of money or charge at the time the same
becomes due and payable hereunder, or limit any other
remedy of the Landlord.
(3) The Tenant shall pay to the Landlord's building
contractor, Eastwood Custom Homes, Inc., the sum of
$35,000.00 as and when the building contractor submits an
invoice therefor after the tenant improvements applicable
to Tenant have been installed. Subject to Paragraph 2,
said $35,000.00 shall be non- refundable, shall be for
the Landlord's benefit, and all tenant improvements
applicable to Tenant shall belong to the Landlord upon
termination of the Lease.
5. Security Deposit. A security deposit of one month's rent, in addition
to the first monthly rental payment, shall be paid to Landlord upon execution
of this Lease. Upon expiration or termination of the term of this Lease, the
Landlord shall return such security deposit to the Tenant less (1) any amounts
expended to repair or clean the Premises; (2) any unpaid rentals then due; and
(3) the cost of performing any obligations imposed upon Tenant by this Lease.
6. Place for Payment of Rent. All payments of rent shall be made at
Landlord's address set forth above or at such other place as Landlord shall
designate from time to time in writing.
7. Utilities and Other Services . Tenant shall pay one half of all
charges for electricity, telephone, snow plowing, janitorial services, trash
pickup, and all other utilities and services used on or at the Premises during
the term of this Lease.
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<PAGE> 3
Landlord shall bill Tenant periodically, and Tenant shall pay the same in
accordance with paragraph 3(b)(2) of this Lease.
8. Net Lease. It is the intention of the Landlord and Tenant that the
rent herein provided shall be net to the Landlord in each year during the term
of this Lease, that all costs, expenses and obligations of any kind relating to
the Premises (except as otherwise specifically provided in the Lease) which may
arise or become due during the term of this Lease shall be paid by Tenant, and
that the Landlord shall be indemnified by the Tenant against all such costs,
expenses and obligations.
9. Use of Premises. Tenant shall use and occupy the Premises only for
office administrative and computer software support and educational purposes,
as approved from time to time by the Landlord, and for no other purpose without
the prior written consent of Landlord.
10. Preparation of Premises. Tenant shall pay all expenses of preparing
the Premises for Tenant's occupancy, except as may be otherwise agreed in
writing.
11. Acceptance of Premises. Except as Landlord and Tenant may otherwise
agree in writing at such time, the taking of possession by Tenant shall be
conclusive evidence that, at such time, the Premises were in satisfactory or
acceptable condition. Landlord has made no representations as to the condition
of the Premises except as herein provided and Landlord shall not be liable for
any latent or patent defects therein.
12. Improvements and Alterations. Tenant may make alterations to the
interior of the Premises, at its own expense, provided that no structural
damage results; and further provided that any such alterations or improvements
shall first be approved by Landlord in writing.
13. Maintenance and Repair. The Landlord, after receiving written
notice from the Tenant and having reasonable opportunity thereafter to obtain
the necessary workmen therefor, agrees to keep in good order and repair the
roof and the four outer walls of the Premises but not the doors, door frames,
the window glass, window casing, window boxes, windows or any of the appliances
or appurtenances of the doors or window casings, window frames and windows, or
any attachment thereto or attachments to the building or Premises used in
connection therewith. Landlord shall not be responsible for any repairs,
structural or otherwise, which are a result of the negligence or willful
conduct of Tenant. Tenant shall maintain the interior of the Premises,
including the plate glass windows and plumbing and heating systems, in good
order and repair. Any repairs made by Tenant shall be done by a contractor
approved in writing by the Landlord before such work is commenced. If Tenant
shall fail to properly maintain and repair the Premises, Landlord may elect not
to treat such failure as a breach of this Lease, in which case Landlord may
cause the repairs to be done and shall charge the expense thereof against
Tenant, to be paid immediately upon presentation of a statement therefor.
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<PAGE> 4
14. Insurance. Landlord shall carry fire and extended coverage insurance
on the building in which the Premises are located; provided, however, Tenant
shall reimburse Landlord for 50% of such expense upon billing in accordance
with paragraph 3(b)2) of this Lease. Tenant shall reimburse Landlord for 100%
of that portion of the expense, if any, attributable to any improvements made
by Tenant or resulting from ratings or penalties imposed by reason of Tenant's
business. Tenant shall maintain insurance on Tenant's leasehold improvements,
and on the contents on property in or about the Premises. Tenant shall, at its
own cost and expense, obtain and keep in force, for its own benefit and the
benefit of the Landlord, public liability insurance with coverage in such
amounts as Landlord may reasonably request from time to time, but not less than
Three Million ($3,000,000.00) Dollars to any individual and Five Million
($5,000,000.00) Dollars for each accident, together with property damage
insurance with coverage of at least Two Million ($2,000,000.00) Dollars for
each accident; a duplicate certificate of issuance of such insurance shall be
furnished to Landlord. Such insurance shall be non-cancelable without ten (10)
days written notice to Landlord. Except for the public liability coverage
required of Tenant hereunder, Tenant shall not obtain any separate insurance
concurrent in form or contributing in the event of loss with that required of
Landlord hereunder, unless Landlord is included therein as the insured, with
the loss payable in accordance with this Lease.
15. Waiver of Subrogation. The parties hereto agree to use good faith
efforts to have at no additional cost any and all fire, extended coverage or
any and all material damage insurance which may be carried endorsed with the
following subrogation clause: "This insurance shall not be invalidated should
the insured waive in writing prior to a loss any or all right of recovery
against any party for loss occurring to the property described herein"; and
each party hereto hereby waives all claims for recovery from the other party or
Landlord for any loss or damage to any of its property insured under valid and
collectible insurance policies to the extent of any recovery collectible under
such insurance subject to the limitation that this waiver shall apply only when
it is either permitted or by the use of such good faith efforts could have been
so permitted by the applicable policy of insurance.
16. Indemnity. Tenant agrees to indemnify and hold harmless Landlord
from any and all claims, demands or liabilities of whatsoever kind or nature
which in any way arise out of Tenant's use and occupancy of the Premises,
whether or not such claims, demands or liabilities arose in part from the
negligence of Landlord, but not where any such claim, demand or liability
arises from the sole negligence of Landlord. The liability of Tenant to
indemnify Landlord as herein set forth shall not extend to any matter against
which Landlord shall be effectively protected by insurance; provided, however,
that if such liability shall exceed the amount of the effective and collectible
insurance in question, the said liability of Tenant shall apply to such excess.
17. Signs. All signs and advertising displayed in and about the Premises
shall be such only as advertise the business carried on upon said Premises, and
no sign shall be displayed excepting such as shall be approved by the Landlord
prior to the installation thereof.
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18. Tenant's Personal Property and Taxes. All personal property of
Tenant kept on the Premises shall be at Tenant's sole risk, and Tenant hereby
waives all right of recovery which it might otherwise have against Landlord for
any loss, theft or damage to Tenant's personal property, excepting such loss,
theft or damage as may result from Landlord's sole negligence. Tenant shall
pay promptly when due all personal property taxes levied on, or with respect
to, personal property owned by Tenant. Landlord shall pay all real property
taxes and assessments levied on the Premises; provided, however, Tenant shall
reimburse Landlord for 50% of such expense upon billing in accordance with
paragraph 3(b) of this Lease. In the event Landlord and/or Tenant hereafter
adds onto the existing building, the foregoing percentage will be adjusted to
reflect the relative assessed value of the portions of the building occupied by
Tenant.
19. Destruction - Fire or Other Cause. If the Premises shall be
rendered untenantable by fire or other casualty, then Landlord shall make the
Premises tenantable as speedily as possible, and the rent shall be abated in
whole or in part, according to the portion of the Premises which is rendered
untenantable, during the period of untenantability, except that there shall be
no such abatement if such fire or other casualty shall be caused by the
negligence of Tenant or its agents, employees, invitee or licensees, and
further, there shall be no abatement for the time required for the replacement
or repair of any property of Tenant, in excess of the time required to make the
Premises tenantable.
In the event that the Premises cannot be made tenantable within ninety
(90) days, then either Landlord or Tenant may terminate this Lease, effective
as of the date of casualty, by notification to the other of such termination
within ten (10) days after Landlord shall have notified Tenant of the time
required to make them tenantable. Landlord shall, in its sole judgment,
reasonably exercised, determine the length of time required to make the
Premises tenantable, and shall notify Tenant of such determination within
twenty (20) days after the occurrence of the fire or other casualty.
20. Laws and Regulations. Tenant shall, at its own cost and expense,
comply with all of the requirements of all laws and regulations, municipal,
state and federal, now in force, or which may hereafter be in force, pertaining
to the Premises, and the use and occupancy thereof. To the extent that any
renovation of all or a part of the building in which the Premises are located
requires any part of the Premises to be upgraded to meet code requirements,
Tenant shall bear the cost and expense of upgrading.
21. Eminent Domain. In the event that the Premises be lawfully condemned
or taken in any manner for any public or quasi-public use, this Lease shall
terminate as of the date of actual taking. In the event that any part of the
Premises be so condemned or taken, Landlord shall have the right to terminate
this Lease as of the date of actual taking by giving Tenant written notice of
such termination; but should Landlord not so terminate this Lease, this Lease
shall cease as to the part taken and the rent adjusted so that Tenant shall pay
a pro-rata portion of the rent determined by
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the amount of space (and rate therefor) remaining after the taking. Landlord
shall be entitled to receive the entire award from any such condemnation or
taking of the Premises or any part thereof, without deduction therefrom for any
estate or interest granted to Tenant by this Lease, provided, that nothing
herein contained shall be deemed to prevent Tenant from claiming compensation
for relocation costs or loss for interruption of business in the event an award
with respect thereto is provided for by law or is fixed in the proceeding in
which such taking shall occur; provided, further, that Tenant shall be entitled
to such amount, if any, awarded for condemnation, or taking of personal
property owned by Tenant, which personal property is not attached to the real
estate as an appurtenance thereto.
22. Assignment and Subletting. Tenant shall not assign, mortgage or in
any way encumber this Lease, nor any part, right or interest thereof, nor shall
Tenant let or sublet or permit any part of the Premises to be used or occupied
by others for any reason whatsoever, unless Landlord shall consent thereto in
writing in each and every case and instance. Landlord shall have the absolute
right to withhold consent for any reason or no reason.
An assignment within the meaning of this paragraph shall be deemed to
include one (1) or more sales or transfers by operation of law or otherwise, or
issuance of new stock, by which an aggregate of more than 50% of Tenant's
voting stock shall be vested in a party or parties who are non-stockholders on
the date hereof. For the purpose of this paragraph, stock ownership shall be
determined in accordance with the provisions set forth in section 544 of the
Internal Revenue Code as the same existed on January 1, 1996.
Any consent by Landlord to an act of assignment or subletting shall be
held to apply only to the specific transaction hereby authorized. Such consent
shall not be construed as a waiver of the duty of Tenant, or Tenant's legal
representatives or assigns, to obtain Landlord's consent to any other or
subsequent assignment or subletting or as modifying or limiting the rights of
Landlord under the foregoing covenant by Tenant not to assign or sublet without
such consent. Nor shall receipt of rent by Landlord, with knowledge of any
breach of this Lease by Tenant, or of any default by Tenant in the observation
or performance of any case and instance. Landlord shall have the absolute
right to withhold consent for any reason or no reason.
23. Default and Termination. If any one or more of the following events
(hereinafter referred to as "Events of Default") shall occur:
(a) If Tenant shall fail to make payment of any rent
or additional rent or percentage rent when due and such
default shall continue for a period of ten (10) days after
notice from Landlord to Tenant specifying the items in
default; or
(b) If default shall be made by Tenant in the
performance or compliance with any of the agreements, terms,
covenants or conditions in this Lease other than those
referred to in
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subparagraph (a) hereof for a period of twenty (20) days after
notice from Landlord to Tenant specifying the items in
default, or in the case of a default on a contingency which
cannot with due diligence be cured within the said twenty (20)
day period, Tenant fails to proceed with the said twenty (20)
day period to cure the same and thereafter to proceed with the
curing of such default with due diligence (it being the
intention hereby in connection with a default not susceptible
of being cured with due diligence within the said twenty (20)
day period that the time within which to cure the same be
extended for such period of time as may be necessary,
exercising all due diligence, to complete the same);
then and in any such event Landlord at any time thereafter may give written
notice to Tenant specifying such Event or Events of Default and stating that
this Lease and the term hereof shall expire and terminate on the date specified
in such notice, which shall be at least ten (10) days after the giving of such
notice, and upon the date specified in such notice this Lease and the term
hereof and all rights of Tenant under this Lease including any renewal
privileges, whether or not exercised, shall expire and terminate, and Tenant
shall remain liable as hereinafter provided.
24. Damages. If this Lease shall be terminated under the provisions of
the preceding paragraph or by summary proceedings or otherwise, or if the
Premises or any part thereof shall be abandoned by Tenant or shall become
vacant during the term hereof, Landlord may in Landlord's own name, but as
agent for Tenant if this Lease not be terminated, or if this Lease be
terminated, in Landlord's own behalf, relet Premises or any part thereof, or
said Premises, with additional premises, for such term or terms (which may be
greater or less than the period which would otherwise have constituted the
balance of the term of this Lease) and on such conditions (which may include
concessions or free rent and alterations of the demised Premises) as Landlord
may determine in Landlord's sole and uncontrolled discretion and may collect
and receive rents therefor. Landlord shall in no way be responsible or liable
for any failure to relet the Premises or any part thereof, or for any failure
to collect any rent due upon such reletting.
No such expiration or termination of this Lease, or summary proceedings,
abandonment or vacancy, shall relieve Tenant of its liability and obligation
under this Lease, whether or not the demised Premises shall be relet. In any
such event, Tenant shall pay Landlord the rent and all other charges required
to be paid by Tenant up to the time of such event. Thereafter:
(a) (i) Tenant, until the end of the term of this Lease, or what would
have been such term in the absence of any such event, shall be
liable to Landlord as damages for Tenant's default for the
equivalent of the amount of the rent and charges which would be
payable under this Lease by Tenant if this Lease were still in
effect, less the net proceeds of any reletting effected pursuant
to the provisions of this
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paragraph, after deducting all Landlord's expenses in
connection with such reletting, including, without limitation,
all repossession costs, brokerage and management commissions,
operating expenses, legal expenses, reasonable attorneys'
fees, alterations costs, and expenses of preparation of such
reletting.
(ii) Tenant shall pay such current damages (herein called
"deficiency") to Landlord monthly on the days on which
the rent would have been payable under this Lease if
this Lease were still in effect, and Landlord shall be
entitled to recover from Tenant each monthly deficiency
as the same shall arise.
(b) If the demised Premises or any part thereof be
relet by Landlord for the unexpired term of this Lease, or any
part thereof, before presentation of proof of such liquidated
damages to any court, commission or tribunal, the amount of
rent reserved upon such reletting shall prima facie be the
fair and reasonable rental value for the part or the whole of
the Premises so relet during the term of the reletting.
(c) If this Lease be terminated by summary proceedings or
otherwise, or if the Premises are abandoned or become vacant,
and whether or not the Premises be relet, Landlord shall be
entitled to recover from Tenant, and Tenant shall pay to
Landlord, in addition to any damages becoming due under this
paragraph 24, the following: an amount equal to all expenses,
if any, including reasonable counsel fees, incurred by
Landlord in recovering possession of the demised Premises, and
all reasonable costs and charges for the care of said Premises
while vacant, which damages shall be due and payable by Tenant
to Landlord at such time or times as such expenses are
incurred by Landlord.
25. Surrender of Premises. Upon the expiration or the termination of the
term of this Lease, or any extension of the term in accordance herewith, Tenant
shall quit and surrender the Premises to Landlord in good order and broom clean
condition, ordinary wear and damage by the elements excepted; and Landlord upon
or at any such expiration or termination may without further notice enter upon
and re-enter the Premises and possess and repossess Landlord thereof, by force,
summary proceedings, ejectment or otherwise, and may dispossess and remove
Tenant and all other persons and property from the Premises. Tenant shall
remove all of its property, including but not limited to trade fixtures,
provided such removal can be accomplished without damage to the Premises. In
the event any such removal would result in damage to the Premises, Tenant may
remove such property only with the written consent of Landlord. Landlord may
condition such consent on Tenant's placing in escrow an amount of money which
Landlord in Landlord's sole discretion determines is
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sufficient to make any repairs necessitated by any such removal. Any property
of Tenant or of anyone claiming under Tenant which shall remain on the Premises
after the expiration or termination of the Lease term, shall be deemed to have
been abandoned by Tenant, and either may be removed by Landlord as its property
or may be disposed of in such manner as Landlord may see fit, and Landlord
shall not be responsible for the same. Except as otherwise herein provided,
any improvements to or installations on the Premises made by Tenant shall
become the property of the Landlord and shall remain on the Premises at the
termination of the Lease.
26. Access to Premises. Landlord shall have the right to enter upon the
Premises at all reasonable hours for the purpose of inspecting same, preventing
waste, loss or destruction, removing obstructions, making such repairs or
alterations as it is obligated to make under the terms of this Lease, or to
enforce any of Landlord's rights or powers under this instrument, and Landlord
shall not be liable nor responsible for any loss that may accrue to Tenant's
business by reason thereof. The Landlord may show the Premises to prospective
tenants at any time during the last six (6) months of the term hereof or any
renewal term of this Lease, subject to the consent of Tenant which shall not be
unreasonably withheld.
27. Subordination. This Lease is subject and subordinate to all
underlying leases, and mortgages which nor or hereafter affect the Premises and
to all renewals, modifications, consolidations, replacements and extensions
thereof. Tenant shall execute promptly from time to time any certificate or
other instrument that Landlord may request to confirm this subordination.
28. No Waiver. The failure of either party to enforce any covenant or
condition of this Lease shall not be deemed a waiver thereof or of the right of
either party to enforce each and every covenant and condition of this Lease.
No provision of this Lease shall be deemed to have been waived unless such
waiver be in writing.
29. Notices. All notices, bills or statements required hereunder shall
be in writing, and shall be deemed to have been given if either delivered
personally or mailed by certified or registered mail to Landlord at Landlord's
address and to Tenant at the Premises. Either party may change the address for
notice, bills or statements by giving notice of such changes as hereinabove set
out.
30. Successors and Assigns. The covenants, conditions and agreements
contained in this Lease shall bind and inure to the benefit of Landlord and
Tenant and their respective successors, and except as otherwise provided in
this Lease, their assigns.
31. Quiet Enjoyment. Landlord covenants and agrees with Tenant that upon
Tenant's paying the rent and observing and performing all the terms, covenants
and conditions on Tenant's part to be performed and observed, Tenant may
peaceably and quietly enjoy the Premises leased hereby.
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32. Lien. In case Tenant shall default in the payment of rent,
additional rent and expenses, as the same become due and payable, Tenant for
the purpose of securing the payment of such rent and the performance of
Tenant's covenants herein contained, does hereby mortgage and grant a security
interest in all the fixtures, equipment and supplies now owned by Tenant or
hereafter owned by Tenant and located on the Premises during the term, or any
additional term, and does hereby authorize and empower Landlord to foreclose
the same, take possession of all of the property and sell the same at public
auction and account for the proceeds thereof according to the laws of the State
of Michigan, first giving Tenant at least thirty (30) days notice of the time
and place of such auction. Tenant hereby agrees to execute and deliver to
Landlord a financing statement for filing in the appropriate public office to
give public notice of Landlord's security interest hereby granted.
33. Holding Over. Notwithstanding any provision of law or any judicial
decisions to the contrary, no notice shall be required from either party to
terminate this Lease on the expiration date herein specified, and anything
herein contained and implied to the contrary notwithstanding, a holding over by
the Tenant, its successors or assigns, beyond the expiration of such term,
shall give rise to a tenancy from month to month only at a monthly rental rate
equal to three times the monthly rental rate in effect on the expiration date.
Tenant will not enter into any sublease for a period beyond the expiration of
this Lease or, if this Lease be renewed, beyond any renewal period. If,
nevertheless, any subtenant of Tenant or anyone holding by, through, or under
Tenant should fail to surrender possession of the Premises, or any part
thereof, by the expiration date of this Lease (or any renewal date, if this
Lease should be renewed), Tenant shall take appropriate action or proceedings
to remove any such subtenant or person from said Premises and shall conduct
such action or proceedings with reasonable diligence and continuity until the
completion thereof. While such action or proceedings are pending Tenant shall
not be deemed a holdover tenant but shall be deemed a month-to-month tenant at
a monthly rent in the same amount as that provided for during the last month of
the preceding term. If, within a reasonable time after expiration of the term
or renewal term, as the case may be, Tenant shall have failed to remove any
such subtenant or person, who shall be holding by, through or under Tenant,
Tenant shall reimburse Landlord for the reasonable cost and expense, including
attorneys' fees, which Landlord may incur if Landlord shall seek to remove any
such subtenant or person.
34. Entire Agreement. This Lease contains and fully integrates the
entire agreement between the parties and shall not be modified in any manner
except by an instrument in writing executed by the parties. If any term or
provision of this Lease or the application thereof to any person or
circumstances shall, to any extent, be invalid or unenforceable, the remainder
of this Lease, or the application of such term or provision to persons or
circumstances other than those as to which is held invalid or unenforceable,
shall not be affected thereby and each term and provision of this Lease shall
be valid and be enforced to the fullest extent permitted by law.
35. Partial Payment of Rent. No payment by Tenant or receipt by Landlord
of a lesser amount than the monthly rent herein stipulated shall be deemed to
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be other than on account of the earliest stipulated rent, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment as rent be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such rent or pursue any other remedy provided in this Lease.
36. Title to Property to be Preserved. Tenant agrees, and notice is
hereby given, that no mechanic's or other liens shall in any manner or degree
affect the title of the Landlord to land hereby leased, nor shall anything in
this Lease contained authorize the Tenant to encumber or impair in any manner
the title of the Landlord in the Premises, lands, buildings or personal
property.
37. Gender. Words of any gender in this Lease shall be held to include
any other gender in this Lease and words in the singular shall be held to
include the plural when the sense requires.
38. Tenant's Estoppel Certificates. Tenant shall, without charge, at any
time and from time to time, within ten (10) days after request by Landlord,
certify by written instrument, duly executed, acknowledged and delivered, to
Landlord or any other person, firm or corporation specified by Landlord:
(a) That this Lease is unmodified and in full force
and effect, or, if there have been any modifications, that the
same is in full force and effect as modified and stating the
modifications;
(b) whether or not there are then existing any
set-offs or defenses against the enforcement of any of the
agreements, terms, covenants or conditions hereof and any
modifications hereof upon the part of Tenant to be performed
or complied with, and, if so, specifying the same;
(c) the dates, if any, to which the minimum rent,
additional rent and other charges hereunder have been paid in
advance;
(d) the date of expiration of the current term; and
(e) the net rent then payable under this Lease.
39. Landlord's Estoppel Certificate. Landlord shall, without charge, at
any time and from time to time, within ten (10) days after request by Tenant or
leasehold mortgagee certify by written instrument, duly executed, acknowledged
and delivered, to the effect that this Lease is unmodified and in full force
and effect (or if there shall have been modifications that the same is in full
force and effect as modified and stating the modifications) and the dates to
which the net rent and other charges have been paid, the date of expiration of
the current term, the net rent then payable under this Lease, and stating
whether or not, to the best knowledge of the person executing such certificate
on behalf of Landlord, Tenant is in default in performance of
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any covenant, agreement or condition contained in this Lease and, if so,
specifying each such default of which the person executing such certificate
may have knowledge.
IN WITNESS WHEREOF, the parties hereto have executed this Lease and
affixed their seals as of the date first above written.
Witnesses: LANDLORD:
TRAVERSE SOFTWARE INVESTMENT L.L.C
By:
-------------------------------
Gary T. Gaisser
Its: Authorized Agent
TENANT: Versus Technology, Inc.
By:
-------------------------------
Debra Boyer, Chief Financial
Officer
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EXHIBIT 10(B)
LEASE
THIS LEASE entered into as of the 1st day of April, 1996, between Traverse
Software Investment L.L.C., a Michigan limited liability company, of 3676
Jackson Road, Kingsley, Michigan, 49649 (hereinafter referred to as "Landlord")
and Olmsted Engineering Co., a Michigan corporation, of 2320 Aero Park Court,
Traverse City, Michigan, 49686 (hereinafter referred to as "Tenant").
W I T N E S S E T H :
1. Leased Premises. Landlord leases to Tenant and Tenant hires from
Landlord that portion of the building to be constructed by Landlord, located at
Cass Road, Traverse City, Michigan (2600 Miller Creek Dr.) consisting of
approximately 9,000 to 10,000 square feet, as shown outlined in red on the
attached drawing and consisting of approximately 4,000 sq. feet, including a
specialized area for electronic manufacturing/assembly with installed
antistatic tile, an area suitable for use by Teneant to meet its currently
estimated shipping and receiving needs, and additional space within the
building to be shared and used in common with other tenants in the building
(hereinafter the "Premises"); subject, however, to easements, liens and
restrictions of record, if any, and present and future zoning or other laws and
regulations relating to the Premises.
2. Term. The original term of this Lease shall be for a period of 60
months commencing on the 1st day of July, 1996, and ending on the 30th day of
June, 2001, regardless of actual entry, subject to the provisions of this
Lease. If Landlord is unable to give possession of the Premises on the date of
commencement of the term of this Lease because construction repairs or
improvements are not completed, rent shall abate for the period that possession
by Tenant is delayed. If such delay shall continue for more than 180 days,
Tenant may, within ten (10) days after the expiration of the said 180 day
period, give the Landlord a notice of election to terminate this Lease. Unless
possession of the Premises is sooner made available, this Lease shall terminate
on the tenth day after the giving of the said notice and Landlord shall return
to Tenant all sums previously paid. Landlord shall have no obligation to
Tenant for failure to give possession except as provided in this paragraph, nor
shall the failure to give such possession extend the term of this Lease beyond
the stated ending date.
3. Rent.
(a) Minimum Rent. The fixed minimum rent for the
Premises shall be $54,000.00 Dollars per year payable by
Tenant to Landlord in equal monthly installments of $4,500.00
Dollars each, on or before the first day of each month in
advance during the term hereof without any prior demand
therefor and without deduction or set off
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whatsoever, the first monthly rental payment to be paid upon
the date Tenant is notified that the Premises are ready for
occupancy.
(b) Additional Rent. Minimum rent as provided in
Paragraph 3(a) hereof shall be increased from time to time as
follows:
(1)
The minimum monthly rent provided for in Paragraph 3(a)
shall be increased on July 1, 1997, and on July 1 of each
year thereafter, so that the minimum rent for that
ensuing 12 month period shall be equal to 1.04 times the
minimum rent applicable to the preceding 12 month period.
(2) The Tenant shall pay as additional rent any money and
charges required to be paid pursuant to the terms of this
Lease whether or not the same may be designated
"additional rent." If such amounts or charges are not
paid at the time provided in this Lease, they shall
nevertheless, if not paid when due, be collectible as
additional rent with the next installment of rent
thereafter falling due hereunder, but nothing herein
contained shall be deemed to suspend or delay the payment
of any amount of money or charge at the time the same
becomes due and payable hereunder, or limit any other
remedy of the Landlord.
(3) To induce the Landlord to promptly proceed with the
construction of the building, and to include therein
various features and improvements which are specifically
desired by the Tenant, the Tenant shall pay to Landlord
the sum of $50,000.00 upon the execution and delivery of
this Lease. Subject to Paragraph 2, said $50,000.00
shall be non-refundable, shall be for the Landlord's
benefit, and all tenant improvements applicable to Tenant
shall belong to the Landlord upon termination of the
Lease.
5. Security Deposit. A security deposit of one month's rent, in addition
to the first monthly rental payment, shall be paid to Landlord upon execution
of this Lease. Upon expiration or termination of the term of this Lease, the
Landlord shall return such security deposit to the Tenant less (1) any amounts
expended to repair or clean the Premises; (2) any unpaid rentals then due; and
(3) the cost of performing any obligations imposed upon Tenant by this Lease.
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6. Place for Payment of Rent. All payments of rent shall be made at
Landlord's address set forth above or at such other place as Landlord shall
designate from time to time in writing.
7. Utilities and Other Services . Tenant shall pay one half of all
charges for electricity, telephone, snow plowing, janitorial services, trash
pickup, and all other utilities and services used on or at the Premises during
the term of this Lease. Landlord shall bill Tenant periodically, and Tenant
shall pay the same in accordance with paragraph 3(b)(2) of this Lease.
8. Net Lease. It is the intention of the Landlord and Tenant that the
rent herein provided shall be net to the Landlord in each year during the term
of this Lease, that all costs, expenses and obligations of any kind relating to
the Premises (except as otherwise specifically provided in the Lease) which may
arise or become due during the term of this Lease shall be paid by Tenant, and
that the Landlord shall be indemnified by the Tenant against all such costs,
expenses and obligations.
9. Use of Premises. Tenant shall use and occupy the Premises only for
office administrative and computer software support and educational purposes,
as approved from time to time by the Landlord, and for no other purpose without
the prior written consent of Landlord.
10. Preparation of Premises. Tenant shall pay all expenses of preparing
the Premises for Tenant's occupancy, except as may be otherwise agreed in
writing.
11. Acceptance of Premises. Except as Landlord and Tenant may otherwise
agree in writing at such time, the taking of possession by Tenant shall be
conclusive evidence that, at such time, the Premises were in satisfactory or
acceptable condition. Landlord has made no representations as to the condition
of the Premises except as herein provided and Landlord shall not be liable for
any latent or patent defects therein.
12. Improvements and Alterations. Tenant may make alterations to the
interior of the Premises, at its own expense, provided that no structural
damage results; and further provided that any such alterations or improvements
shall first be approved by Landlord in writing.
13. Maintenance and Repair. The Landlord, after receiving written notice
from the Tenant and having reasonable opportunity thereafter to obtain the
necessary workmen therefor, agrees to keep in good order and repair the roof
and the four outer walls of the Premises but not the doors, door frames, the
window glass, window casing, window boxes, windows or any of the appliances or
appurtenances of the doors or window casings, window frames and windows, or any
attachment thereto or attachments to the building or Premises used in
connection therewith. Landlord shall not be responsible for any repairs,
structural or otherwise, which are a result of the
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negligence or willful conduct of Tenant. Tenant shall maintain the interior of
the Premises, including the plate glass windows and plumbing and heating
systems, in good order and repair. Any repairs made by Tenant shall be done by
a contractor approved in writing by the Landlord before such work is commenced.
If Tenant shall fail to properly maintain and repair the Premises, Landlord may
elect not to treat such failure as a breach of this Lease, in which case
Landlord may cause the repairs to be done and shall charge the expense thereof
against Tenant, to be paid immediately upon presentation of a statement
therefor.
14. Insurance. Landlord shall carry fire and extended coverage insurance
on the building in which the Premises are located; provided, however, Tenant
shall reimburse Landlord for 50% of such expense upon billing in accordance
with paragraph 3(b)2) of this Lease. Tenant shall reimburse Landlord for 100%
of that portion of the expense, if any, attributable to any improvements made
by Tenant or resulting from ratings or penalties imposed by reason of Tenant's
business. Tenant shall maintain insurance on Tenant's leasehold improvements,
and on the contents on property in or about the Premises. Tenant shall, at its
own cost and expense, obtain and keep in force, for its own benefit and the
benefit of the Landlord, public liability insurance with coverage in such
amounts as Landlord may reasonably request from time to time, but not less than
Three Million ($3,000,000.00) Dollars to any individual and Five Million
($5,000,000.00) Dollars for each accident, together with property damage
insurance with coverage of at least Two Million ($2,000,000.00) Dollars for
each accident; a duplicate certificate of issuance of such insurance shall be
furnished to Landlord. Such insurance shall be non-cancelable without ten (10)
days written notice to Landlord. Except for the public liability coverage
required of Tenant hereunder, Tenant shall not obtain any separate insurance
concurrent in form or contributing in the event of loss with that required of
Landlord hereunder, unless Landlord is included therein as the insured, with
the loss payable in accordance with this Lease.
15. Waiver of Subrogation. The parties hereto agree to use good faith
efforts to have at no additional cost any and all fire, extended coverage or
any and all material damage insurance which may be carried endorsed with the
following subrogation clause: "This insurance shall not be invalidated should
the insured waive in writing prior to a loss any or all right of recovery
against any party for loss occurring to the property described herein"; and
each party hereto hereby waives all claims for recovery from the other party or
Landlord for any loss or damage to any of its property insured under valid and
collectible insurance policies to the extent of any recovery collectible under
such insurance subject to the limitation that this waiver shall apply only when
it is either permitted or by the use of such good faith efforts could have been
so permitted by the applicable policy of insurance.
16. Indemnity. Tenant agrees to indemnify and hold harmless Landlord
from any and all claims, demands or liabilities of whatsoever kind or nature
which in any way arise out of Tenant's use and occupancy of the Premises,
whether or not such
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claims, demands or liabilities arose in part from the negligence of Landlord,
but not where any such claim, demand or liability arises from the sole
negligence of Landlord. The liability of Tenant to indemnify Landlord as
herein set forth shall not extend to any matter against which Landlord shall be
effectively protected by insurance; provided, however, that if such liability
shall exceed the amount of the effective and collectible insurance in question,
the said liability of Tenant shall apply to such excess.
17. Signs. All signs and advertising displayed in and about the Premises
shall be such only as advertise the business carried on upon said Premises, and
no sign shall be displayed excepting such as shall be approved by the Landlord
prior to the installation thereof.
18. Tenant's Personal Property and Taxes. All personal property of
Tenant kept on the Premises shall be at Tenant's sole risk, and Tenant hereby
waives all right of recovery which it might otherwise have against Landlord for
any loss, theft or damage to Tenant's personal property, excepting such loss,
theft or damage as may result from Landlord's sole negligence. Tenant shall
pay promptly when due all personal property taxes levied on, or with respect
to, personal property owned by Tenant. Landlord shall pay all real property
taxes and assessments levied on the Premises; provided, however, Tenant shall
reimburse Landlord for 50% of such expense upon billing in accordance with
paragraph 3(b) of this Lease. In the event Landlord and/or Tenant hereafter
adds onto the existing building, the foregoing percentage will be adjusted to
reflect the relative assessed value of the portions of the building occupied by
Tenant.
19. Destruction - Fire or Other Cause. If the Premises shall be rendered
untenantable by fire or other casualty, then Landlord shall make the Premises
tenantable as speedily as possible, and the rent shall be abated in whole or in
part, according to the portion of the Premises which is rendered untenantable,
during the period of untenantability, except that there shall be no such
abatement if such fire or other casualty shall be caused by the negligence of
Tenant or its agents, employees, invitee or licensees, and further, there shall
be no abatement for the time required for the replacement or repair of any
property of Tenant, in excess of the time required to make the Premises
tenantable.
In the event that the Premises cannot be made tenantable within ninety
(90) days, then either Landlord or Tenant may terminate this Lease, effective
as of the date of casualty, by notification to the other of such termination
within ten (10) days after Landlord shall have notified Tenant of the time
required to make them tenantable. Landlord shall, in its sole judgment,
reasonably exercised, determine the length of time required to make the
Premises tenantable, and shall notify Tenant of such determination within
twenty (20) days after the occurrence of the fire or other casualty.
20. Laws and Regulations. Tenant shall, at its own cost and expense,
comply with all of the requirements of all laws and regulations, municipal,
state and
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federal, now in force, or which may hereafter be in force, pertaining to the
Premises, and the use and occupancy thereof. To the extent that any renovation
of all or a part of the building in which the Premises are located requires any
part of the Premises to be upgraded to meet code requirements, Tenant shall
bear the cost and expense of upgrading.
21. Eminent Domain. In the event that the Premises be lawfully condemned
or taken in any manner for any public or quasi-public use, this Lease shall
terminate as of the date of actual taking. In the event that any part of the
Premises be so condemned or taken, Landlord shall have the right to terminate
this Lease as of the date of actual taking by giving Tenant written notice of
such termination; but should Landlord not so terminate this Lease, this Lease
shall cease as to the part taken and the rent adjusted so that Tenant shall pay
a pro-rata portion of the rent determined by the amount of space (and rate
therefor) remaining after the taking. Landlord shall be entitled to receive
the entire award from any such condemnation or taking of the Premises or any
part thereof, without deduction therefrom for any estate or interest granted to
Tenant by this Lease, provided, that nothing herein contained shall be deemed
to prevent Tenant from claiming compensation for relocation costs or loss for
interruption of business in the event an award with respect thereto is provided
for by law or is fixed in the proceeding in which such taking shall occur;
provided, further, that Tenant shall be entitled to such amount, if any,
awarded for condemnation, or taking of personal property owned by Tenant, which
personal property is not attached to the real estate as an appurtenance
thereto.
22. Assignment and Subletting. Tenant shall not assign, mortgage or in
any way encumber this Lease, nor any part, right or interest thereof, nor shall
Tenant let or sublet or permit any part of the Premises to be used or occupied
by others for any reason whatsoever, unless Landlord shall consent thereto in
writing in each and every case and instance. Landlord shall have the absolute
right to withhold consent for any reason or no reason.
An assignment within the meaning of this paragraph shall be deemed to
include one (1) or more sales or transfers by operation of law or otherwise, or
issuance of new stock, by which an aggregate of more than 50% of Tenant's
voting stock shall be vested in a party or parties who are non-stockholders on
the date hereof. For the purpose of this paragraph, stock ownership shall be
determined in accordance with the provisions set forth in section 544 of the
Internal Revenue Code as the same existed on January 1, 1996.
Any consent by Landlord to an act of assignment or subletting shall be
held to apply only to the specific transaction hereby authorized. Such consent
shall not be construed as a waiver of the duty of Tenant, or Tenant's legal
representatives or assigns, to obtain Landlord's consent to any other or
subsequent assignment or subletting or as modifying or limiting the rights of
Landlord under the foregoing covenant by Tenant not to assign or sublet without
such consent. Nor shall receipt of
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rent by Landlord, with knowledge of any breach of this Lease by Tenant, or of
any default by Tenant in the observation or performance of any case and
instance. Landlord shall have the absolute right to withhold consent for any
reason or no reason.
23. Default and Termination. If any one or more of the following
events (hereinafter referred to as "Events of Default") shall occur:
(a) If Tenant shall fail to make payment of any rent or additional
rent or percentage rent when due and such default shall continue
for a period of ten (10) days after notice from Landlord to Tenant
specifying the items in default; or
(b) If default shall be made by Tenant in the performance or
compliance with any of the agreements, terms, covenants or
conditions in this Lease other than those referred to in
subparagraph (a) hereof for a period of twenty (20) days after
notice from Landlord to Tenant specifying the items in default, or
in the case of a default on a contingency which cannot with due
diligence be cured within the said twenty (20) day period, Tenant
fails to proceed with the said twenty (20) day period to cure the
same and thereafter to proceed with the curing of such default
with due diligence (it being the intention hereby in connection
with a default not susceptible of being cured with due diligence
within the said twenty (20) day period that the time within which
to cure the same be extended for such period of time as may be
necessary, exercising all due diligence, to complete the same);
then and in any such event Landlord at any time thereafter may give written
notice to Tenant specifying such Event or Events of Default and stating that
this Lease and the term hereof shall expire and terminate on the date specified
in such notice, which shall be at least ten (10) days after the giving of such
notice, and upon the date specified in such notice this Lease and the term
hereof and all rights of Tenant under this Lease including any renewal
privileges, whether or not exercised, shall expire and terminate, and Tenant
shall remain liable as hereinafter provided.
24. Damages. If this Lease shall be terminated under the provisions of
the preceding paragraph or by summary proceedings or otherwise, or if the
Premises or any part thereof shall be abandoned by Tenant or shall become
vacant during the term hereof, Landlord may in Landlord's own name, but as
agent for Tenant if this Lease not be terminated, or if this Lease be
terminated, in Landlord's own behalf, relet Premises or any part thereof, or
said Premises, with additional premises, for such term or terms (which may be
greater or less than the period which would otherwise have constituted the
balance of the term of this Lease) and on such conditions (which may include
concessions or free rent and alterations of the demised Premises) as Landlord
may determine in Landlord's sole and uncontrolled discretion and may collect
and receive
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rents therefor. Landlord shall in no way be responsible or liable for any
failure to relet the Premises or any part thereof, or for any failure to
collect any rent due upon such reletting.
No such expiration or termination of this Lease, or summary proceedings,
abandonment or vacancy, shall relieve Tenant of its liability and obligation
under this Lease, whether or not the demised Premises shall be relet. In any
such event, Tenant shall pay Landlord the rent and all other charges required
to be paid by Tenant up to the time of such event. Thereafter:
(a) (i) Tenant, until the end of the term of this
Lease, or what would have been such term in the absence of any
such event, shall be liable to Landlord as damages for
Tenant's default for the equivalent of the amount of the rent
and charges which would be payable under this Lease by Tenant
if this Lease were still in effect, less the net proceeds of
any reletting effected pursuant to the provisions of this
paragraph, after deducting all Landlord's expenses in
connection with such reletting, including, without limitation,
all repossession costs, brokerage and management commissions,
operating expenses, legal expenses, reasonable attorneys'
fees, alterations costs, and expenses of preparation of such
reletting.
(ii) Tenant shall pay such current damages (herein called
"deficiency") to Landlord monthly on the days on which the
rent would have been payable under this Lease if this Lease
were still in effect, and Landlord shall be entitled to
recover from Tenant each monthly deficiency as the same shall
arise.
(b) If the demised Premises or any part thereof be relet by
Landlord for the unexpired term of this Lease, or any part
thereof, before presentation of proof of such liquidated
damages to any court, commission or tribunal, the amount of
rent reserved upon such reletting shall prima facie be the
fair and reasonable rental value for the part or the whole of
the Premises so relet during the term of the reletting.
(c) If this Lease be terminated by summary proceedings or
otherwise, or if the Premises are abandoned or become vacant,
and whether or not the Premises be relet, Landlord shall be
entitled to recover from Tenant, and Tenant shall pay to
Landlord, in addition to any damages becoming due under this
paragraph 24, the following: an amount equal to all expenses,
if any, including reasonable counsel
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fees, incurred by Landlord in recovering possession of
the demised Premises, and all reasonable costs and charges for
the care of said Premises while vacant, which damages shall be
due and payable by Tenant to Landlord at such time or times as
such expenses are incurred by Landlord.
25. Surrender of Premises. Upon the expiration or the termination of the
term of this Lease, or any extension of the term in accordance herewith, Tenant
shall quit and surrender the Premises to Landlord in good order and broom clean
condition, ordinary wear and damage by the elements excepted; and Landlord upon
or at any such expiration or termination may without further notice enter upon
and re-enter the Premises and possess and repossess Landlord thereof, by force,
summary proceedings, ejectment or otherwise, and may dispossess and remove
Tenant and all other persons and property from the Premises. Tenant shall
remove all of its property, including but not limited to trade fixtures,
provided such removal can be accomplished without damage to the Premises. In
the event any such removal would result in damage to the Premises, Tenant may
remove such property only with the written consent of Landlord. Landlord may
condition such consent on Tenant's placing in escrow an amount of money which
Landlord in Landlord's sole discretion determines is sufficient to make any
repairs necessitated by any such removal. Any property of Tenant or of anyone
claiming under Tenant which shall remain on the Premises after the expiration
or termination of the Lease term, shall be deemed to have been abandoned by
Tenant, and either may be removed by Landlord as its property or may be
disposed of in such manner as Landlord may see fit, and Landlord shall not be
responsible for the same. Except as otherwise herein provided, any
improvements to or installations on the Premises made by Tenant shall become
the property of the Landlord and shall remain on the Premises at the
termination of the Lease.
26. Access to Premises. Landlord shall have the right to enter upon the
Premises at all reasonable hours for the purpose of inspecting same, preventing
waste, loss or destruction, removing obstructions, making such repairs or
alterations as it is obligated to make under the terms of this Lease, or to
enforce any of Landlord's rights or powers under this instrument, and Landlord
shall not be liable nor responsible for any loss that may accrue to Tenant's
business by reason thereof. The Landlord may show the Premises to prospective
tenants at any time during the last six (6) months of the term hereof or any
renewal term of this Lease, subject to the consent of Tenant which shall not be
unreasonably withheld.
27. Subordination. This Lease is subject and subordinate to all
underlying leases, and mortgages which nor or hereafter affect the Premises and
to all renewals, modifications, consolidations, replacements and extensions
thereof. Tenant shall execute promptly from time to time any certificate or
other instrument that Landlord may request to confirm this subordination.
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28. No Waiver. The failure of either party to enforce any covenant or
condition of this Lease shall not be deemed a waiver thereof or of the right of
either party to enforce each and every covenant and condition of this Lease.
No provision of this Lease shall be deemed to have been waived unless such
waiver be in writing.
29. Notices. All notices, bills or statements required hereunder shall
be in writing, and shall be deemed to have been given if either delivered
personally or mailed by certified or registered mail to Landlord at Landlord's
address and to Tenant at the Premises. Either party may change the address for
notice, bills or statements by giving notice of such changes as hereinabove set
out.
30. Successors and Assigns. The covenants, conditions and agreements
contained in this Lease shall bind and inure to the benefit of Landlord and
Tenant and their respective successors, and except as otherwise provided in
this Lease, their assigns.
31. Quiet Enjoyment. Landlord covenants and agrees with Tenant that upon
Tenant's paying the rent and observing and performing all the terms, covenants
and conditions on Tenant's part to be performed and observed, Tenant may
peaceably and quietly enjoy the Premises leased hereby.
32. Lien. In case Tenant shall default in the payment of rent,
additional rent and expenses, as the same become due and payable, Tenant for
the purpose of securing the payment of such rent and the performance of
Tenant's covenants herein contained, does hereby mortgage and grant a security
interest in all the fixtures, equipment and supplies now owned by Tenant or
hereafter owned by Tenant and located on the Premises during the term, or any
additional term, and does hereby authorize and empower Landlord to foreclose
the same, take possession of all of the property and sell the same at public
auction and account for the proceeds thereof according to the laws of the State
of Michigan, first giving Tenant at least thirty (30) days notice of the time
and place of such auction. Tenant hereby agrees to execute and deliver to
Landlord a financing statement for filing in the appropriate public office to
give public notice of Landlord's security interest hereby granted.
33. Holding Over. Notwithstanding any provision of law or any judicial
decisions to the contrary, no notice shall be required from either party to
terminate this Lease on the expiration date herein specified, and anything
herein contained and implied to the contrary notwithstanding, a holding over by
the Tenant, its successors or assigns, beyond the expiration of such term,
shall give rise to a tenancy from month to month only at a monthly rental rate
equal to three times the monthly rental rate in effect on the expiration date.
Tenant will not enter into any sublease for a period beyond the expiration of
this Lease or, if this Lease be renewed, beyond any renewal period. If,
nevertheless, any subtenant of Tenant or anyone holding by, through, or under
Tenant should fail to surrender possession of the Premises, or any part
thereof, by the expiration date of this Lease (or any renewal date, if this
Lease should be renewed),
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Tenant shall take appropriate action or proceedings to remove any such
subtenant or person from said Premises and shall conduct such action or
proceedings with reasonable diligence and continuity until the completion
thereof. While such action or proceedings are pending Tenant shall not be
deemed a holdover tenant but shall be deemed a month-to-month tenant at a
monthly rent in the same amount as that provided for during the last month of
the preceding term. If, within a reasonable time after expiration of the term
or renewal term, as the case may be, Tenant shall have failed to remove any
such subtenant or person, who shall be holding by, through or under Tenant,
Tenant shall reimburse Landlord for the reasonable cost and expense, including
attorneys' fees, which Landlord may incur if Landlord shall seek to remove any
such subtenant or person.
34. Entire Agreement. This Lease contains and fully integrates the
entire agreement between the parties and shall not be modified in any manner
except by an instrument in writing executed by the parties. If any term or
provision of this Lease or the application thereof to any person or
circumstances shall, to any extent, be invalid or unenforceable, the remainder
of this Lease, or the application of such term or provision to persons or
circumstances other than those as to which is held invalid or unenforceable,
shall not be affected thereby and each term and provision of this Lease shall
be valid and be enforced to the fullest extent permitted by law.
35. Partial Payment of Rent. No payment by Tenant or receipt by Landlord
of a lesser amount than the monthly rent herein stipulated shall be deemed to
be other than on account of the earliest stipulated rent, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment as rent be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such rent or pursue any other remedy provided in this Lease.
36. Title to Property to be Preserved. Tenant agrees, and notice is
hereby given, that no mechanic's or other liens shall in any manner or degree
affect the title of the Landlord to land hereby leased, nor shall anything in
this Lease contained authorize the Tenant to encumber or impair in any manner
the title of the Landlord in the Premises, lands, buildings or personal
property.
37. Gender. Words of any gender in this Lease shall be held to include
any other gender in this Lease and words in the singular shall be held to
include the plural when the sense requires.
38. Tenant's Estoppel Certificates. Tenant shall, without charge, at any
time and from time to time, within ten (10) days after request by Landlord,
certify by written instrument, duly executed, acknowledged and delivered, to
Landlord or any other person, firm or corporation specified by Landlord:
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(a) That this Lease is unmodified and in full force
and effect, or, if there have been any modifications, that the
same is in full force and effect as modified and stating the
modifications;
(b) whether or not there are then existing any
set-offs or defenses against the enforcement of any of the
agreements, terms, covenants or conditions hereof and any
modifications hereof upon the part of Tenant to be performed
or complied with, and, if so, specifying the same;
(c) the dates, if any, to which the minimum rent,
additional rent and other charges hereunder have been paid in
advance;
(d) the date of expiration of the current term; and
(e) the net rent then payable under this Lease.
39. Landlord's Estoppel Certificate. Landlord shall, without charge, at
any time and from time to time, within ten (10) days after request by Tenant or
leasehold mortgagee certify by written instrument, duly executed, acknowledged
and delivered, to the effect that this Lease is unmodified and in full force
and effect (or if there shall have been modifications that the same is in full
force and effect as modified and stating the modifications) and the dates to
which the net rent and other charges have been paid, the date of expiration of
the current term, the net rent then payable under this Lease, and stating
whether or not, to the best knowledge of the person executing such certificate
on behalf of Landlord, Tenant is in default in performance of any covenant,
agreement or condition contained in this Lease and, if so, specifying each such
default of which the person executing such certificate may have knowledge.
IN WITNESS WHEREOF, the parties hereto have executed this Lease and
affixed their seals as of the date first above written.
Witnesses: LANDLORD:
TRAVERSE SOFTWARE INVESTMENT L.L.C
By:
----------------------
Gary T. Gaisser
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Its: Authorized Agent
TENANT: Olmsted Engineering Co.
________________ By:
Henry Tenarvitz, President
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EXHIBIT 10(c)
EXCLUSIVE MARKETING AGREEMENT
This Exclusive Marketing Agreement (hereinafter the "Agreement") is
entered into effective as of June 30, 1996 between Versus Technology, Inc.,
with principal offices at 2320 W. Aero Park Court, Traverse City, MI 49686
(hereinafter "Versus") and Marquette Electronics., Inc., with principal offices
at 8200 West Tower Avenue, Milwaukee, WI 53223 (hereinafter "Marquette").
RECITALS
A. Versus is engaged in the business of manufacturing, selling, licensing
and supporting an integrated hardware and software product, commonly known as
an infrared tracking system, which is used for various applications in various
markets.
B. Marquette is engaged in the sale and service of various electronics
products used by acute care hospitals and other customers.
C. The parties desire that Marquette shall become Versus's sole outside
source of distribution and supply of Versus Products (as defined herein) to
hospitals in the Market (as defined herein), and that Marquette will also be
granted non-exclusive rights to distribute Products to certain other markets,
all upon the terms and conditions set forth in this Exclusive Marketing
Agreement.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES CONTAINED HEREIN,
THE PARTIES AGREE AS FOLLOWS:
1. Definitions.
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a. The term "Product" or "Products" shall mean the hardware and related
software produced by or for Versus and supplied by Versus to its customers as a
complete infrared tracking system, as described on Versus's System Quote Sheet,
to be used for personnel and equipment tracking.
b. The term "Market" shall mean the main headquarters building of any
acute care hospital located in the 50 states of the United States of America.
Specifically excluded from the Market shall be acute care or subacute care
building facilities which are not physically annexed by "brick and mortar" (or
other permanent construction) to the main headquarters building of an acute
care hospital.
c. The term "Marquette Minimum Annual Commitment" shall mean, unless
otherwise agreed in writing by both Versus and Marquette pursuant to paragraph
12 hereof: for Contract Year 1, the purchase by Marquette from Versus of not
less than 10 Systems; for Contract Year 2, the purchase by Marquette from
Versus of not less than 100 Systems; and for Contract Year 3, the purchase by
Marquette from Versus of not less than 200 Systems.
d. The term "Contract Year 1" shall mean the period beginning on June 30,
1996 and ending June 29, 1997. "Contract Year 2" shall mean the period
beginning June 30, 1997 and ending June 29, 1998. "Contract Year 3" shall mean
the period beginning June 30, 1998 and ending June 29, 1999.
e. The term "System," as used within the definition of Marquette Minimum
Annual Commitment, shall mean the purchase by Marquette from Versus of a
Product intended for end use by a customer in the Market which has a System
Quote Sheet
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price of $50,000.00 or more, with the total number of Systems per
single Product transaction being the quotient, rounded down to the lowest whole
number, resulting from the division of the total System Quote Sheet price for
the Product, by $50,000. Example: the delivery of a Product to a customer
which has an aggregate System Quote Sheet price of $160,000 for that customer
transaction would constitute three Systems; the same would be true for a
transaction with a System Quote Sheet price of $195,000; a transaction with a
System Quote Sheet price of $200,000 would constitute four Systems.
f. The term "System Quote Sheet" shall mean the then current document
prepared and published by Versus which is designated thereon as being the
System Quote Sheet. A copy of the System Quote Sheet applicable for Contract
Year 1 is attached to this Agreement as Exhibit 1. The System Quote Sheet will
be reviewed from time to time jointly by Versus and Marquette throughout the
term of this Agreement. The System Quote Sheet applicable to Contract Year 2
will be established by Versus and delivered to Marquette not later than March
1, 1997. The System Quote Sheet applicable to Contract Year 3 will be
established by Versus and delivered to Marquette not later than March 1, 1998.
In no event will the prices stated in a System Quote Sheet be [ confidential
pricing terms deleted]. In the event Versus fails to deliver a new System
Quote Sheet to Marquette for the new Contract Year prior to March 1 of the then
current Contract Year, the System Quote Sheet for the new Contract Year shall
remain the same as the System Quote Sheet in effect on such March 1. Versus
may from time to time add or withdraw items to the list of components or
services shown on the System Quote Sheet in response to changes
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in technology and/or changes to the Product itself, as Versus may reasonably
deem necessary or advisable.
g. The "term of this Agreement" shall mean 3 years, commencing June 30,
1996. The term of this Agreement may be shorter than 3 years, pursuant the
provisions of paragraph 12 of this Agreement.
2. Appointment of Marquette
Subject to the terms and conditions set forth herein, Versus hereby
appoints Marquette as Versus's exclusive distributor of Products in the Market,
except that Versus retains the right to itself directly supply Products to
customers in the Market from time to time through use of Versus's own sales
staff, but only under circumstances where Marquette or its agents or
representatives have not been, and will not have to be, involved in any phase
of the customer specific marketing, installation, warranty or support of the
Product with the customer, and where Marquette was not the procuring cause of
the transaction with the customer. Sales made by Versus through its existing
agreement with Windemuller Electric, Inc. are permitted by this Agreement;
provided, however, Versus will terminate the Windemuller Electric, Inc.
agreement, with respect to acute care hospitals, within 240 days following the
mutual execution and delivery of this Exclusive Marketing Agreement, and will
send Marquette a copy of such notice of termination. Versus will endeavor to
give Marquette reasonable notice of and communication with respect to direct
customer transactions which Versus believes to be covered by this exception to
Marquette's exclusivity in the Market, in order to help foster coordination of
total marketing effort, and to help avoid potential confusion with the customer
or between Versus and
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Marquette. Versus hereby also appoints Marquette as a non-exclusive
distributor of Versus infrared tracking systems to customers in markets other
than the Market; provided, however, such non-exclusive rights may be terminated
at the will of Versus at any time, for any reason or no reason at all, after 30
days advance notice of termination of non-exclusive rights has been given to
Marquette by Versus. Marquette hereby accepts such appointment with respect to
the Market and other the other markets, and agrees to use its best efforts to
promote the sale of Products in the Market.
3. Independent Contractors. The relationship of Versus and Marquette
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement shall be construed to give either party the power
to direct or control the day-to-day activities of the other, nor shall it
constitute the parties as partners, joint venturers, co-owners or otherwise as
participants in a joint or common undertaking, nor shall it allow Marquette or
Versus to create or assume any obligation on behalf of the other for any other
purpose whatsoever. Marquette acknowledges that it has not and will not pay any
fee to Versus in connection with this Agreement or any prior agreement,
understanding or arrangement between them. In furtherance of the parties'
performance pursuant to this Agreement, tangible goods will be deemed to be
sold to, and the pertinent software and applicable patented or copyrightable or
other intellectual property shall be deemed licensed to, Marquette, it being
understood that Marquette may and will resell the goods to the end user
customer, and upon such sale Versus will be deemed to have granted to such end
user a license in perpetuity to use the software in the manner and for the
purposes for which it is designed. After Marquette has purchased the Product
from Versus in accordance
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with this Agreement, Marquette shall be free to set its own selling
price to the customer in the Market.
4. Terms of Purchase from Versus.
a. Use of Standard Forms. All orders from Marquette to Versus for
Products shall be in writing, requesting a delivery date during the term of
this Agreement. All orders shall be subject to the terms and conditions of
this Agreement. The parties may use their own standardized or preprinted forms
of purchase order, acknowledgment, invoices, shipping documents or the like;
provided, however, in the event any terms or conditions which may be stated in
any such forms are inconsistent with this Agreement, such inconsistent terms or
conditions shall be of no force or effect between the parties hereto, and in
the event there shall be an inconsistency between the terms or provisions of a
form used by Marquette and the terms or provisions of a form customarily used
by Versus, the terms and provisions of the Versus form shall be controlling, so
long as such Versus form is not inconsistent with this Agreement.
b. Price. All prices are F.O.B. Traverse City, Michigan. The quoted
price does not include any federal, state or local taxes that may be applicable
to the Product. When Versus has the legal obligation to collect such taxes,
the appropriate amount of tax shall be added to the invoice directed to
Marquette unless Marquette provides Versus with a valid tax exemption
certificate authorized by the appropriate taxing authority. Except for
infrared tracking systems intended for regional demonstration purposes, as
provided in paragraph 8, below, the price to be paid by Marquette for Products
will be [confidential pricing terms omitted].
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c. Terms of Payment to Versus. Versus will submit an invoice to
Marquette [confidential price and payment terms omitted] each Product ordered.
The invoice will have added to the price any freight, taxes or other applicable
costs which will initially be paid by [a party] but which are ultimately to be
borne by [the other party]. Marquette will pay to Versus [confidential terms
omitted] The remaining [ ] will be paid upon acceptance of the goods by
Marquette. Acceptance or rejection is to occur within [ ] days after delivery
by Versus [ ].
d. Shipping. All Products delivered by Versus pursuant to this Agreement
shall be reasonably packed for shipment in Versus's standard shipping cartons,
marked for shipment to the address designated by Marquette, and delivered to
Marquette F.O.B. Traverse City, Michigan. Unless otherwise instructed in
writing by Marquette, Versus will select the carrier. All freight, insurance,
and other shipping expenses, as well as any special packing expenses if any,
shall be borne by [a party]. [A party] shall also bear all applicable taxes,
duties and similar charges that may be assessed against the Products after
delivery to the carrier.
5. [confidential and competitively sensitive allocation of
service tasks omitted].
6. Warranty and Limitation of Liability. Versus makes to
Marquette the Versus standard limited warranty applicable to Versus
Products, the provisions of which are shown on Exhibit 2 attached to
this Agreement, except that the warranty period shall be, instead of
90 days, one year from the date of Marquette's acceptance or
installation, whichever comes first. Marquette shall not make or
pass on to any end user customer or other person any warranty or
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representations on behalf of Versus other than, or inconsistent
with, the standard Versus limited warranty as shown on Exhibit 2.
Except for the express limited warranty above stated, Versus makes
no other warranties, express or implied, by statute or otherwise,
regarding the Products, regarding FITNESS FOR ANY PARTICULAR
PURPOSE, quality, MERCHANTABILITY, or otherwise. In no event shall
Versus be liable for the cost of procurement of substitute goods or
systems or for any special, consequential or incidental damages for
breach of warranty. This limitation shall apply notwithstanding any
failure of essential purpose of any limited warranty or remedy.
[confidential warranty cost terms omitted]
7. Versus Software Telephone Support, Maintenance and Enhancement.
Marquette will utilize its best efforts to sell the Versus Support, Maintenance
and Enhancement package. [confidential pricing terms omitted]. Versus will be
responsible for supplying to the customer all the services and support set
forth in such package.
8. Regional Demonstrations. Marquette will be able to purchase from
Versus up to 5 infrared tracking systems, for purposes of installing 5 separate
regional demonstration locations, at a special price. [pricing terms omitted]
Regional demonstration systems will not be counted towards the Marquette
Minimum Annual Commitment.
9. Training. Versus will supply technical sales and marketing training,
two to three days per year, at regional locations selected by Marquette.
10. Special Situations. In special situations where Marquette needs
on-site technical support from Versus, Versus will supply personnel at no
charge, except that
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Marquette will pay all travel expenses for those personnel. Versus will
not, however, be obligated to spend more than [ ] per Contract Year.
11. Private Label. If desired by Marquette, the Versus products will be
sold to Marquette under a private label agreement acceptable to both parties.
12. Minimum Purchase Commitment of Marquette; Termination of Agreement.
Marquette hereby agrees to purchase from Versus the Marquette Minimum Annual
Commitment applicable to Contract Year 1. Unless Marquette has notified Versus
on or before March 10, 1997, or on or before March 10 of any succeeding
Contract Year, that Marquette does not desire to continue this Agreement for
the upcoming new Contract Year, then: (a) provided that Versus and Marquette
shall agree in writing to a different Marquette minimum purchase commitment for
the next Contract Year, Marquette will automatically be deemed, as of March 10,
to have made a binding obligation to the Marquette Minimum Annual Commitment
for the upcoming Contract Year; and (b) absent such agreement, or if Marquette
does so notify Versus on or before March 10 of a then current Contract Year
that Marquette does not desire to continue the term of this Agreement for a new
Contract Year, then the term of this Agreement shall end on June 29 of such
current Contract Year, and each party will be free to enter such other sales
arrangements as it may desire thereafter.
13. Property Rights and Confidentiality. Marquette agrees that Versus
owns all right, title and interest in all of Versus's patents, trademarks,
trade names, inventions, copyrights, know-how, documentation, software
(including diagnostic software and source code) and trade secrets relating to
the design, manufacture, operation or service of the Products. The use by
Marquette of any of these property rights is authorized only for the
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purposes herein set forth, and upon termination of this Agreement for any
reason such authorization shall cease. Marquette acknowledges that by reason
of its relationship to Versus hereunder it will have access to certain
information and materials concerning Versus's business, plans, customers,
technology, and products that are confidential and of substantial value to
Versus, which value would be impaired if such information were disclosed to
third parties. Marquette agrees that it will not use in any way for its own
account or the account of any third party, nor disclose to any third party, any
such confidential information revealed to it by Versus. Marquette shall take
every reasonable precaution to protect the confidentiality of such information.
Marquette shall not publish any technical description of the Products beyond
the description published by Versus. In the event of termination of this
Agreement there shall be no use or disclosure by Marquette of any confidential
information of Versus, and Marquette shall not manufacture or have manufactured
any products utilizing any of Versus's confidential information.
14. Trademarks and Trade Names. During the term of this Agreement
Marquette shall have the right to indicate to the public that it is an
authorized distributor of Versus and to advertise such Products under the
trademarks, marks, and trade names that Versus may adopt from time to time.
Except as provided by paragraph 11 of this Agreement, Marquette shall not alter
or remove Versus's trademarks applied at the factory to the Products, packages,
or other materials contained therein. Nothing herein shall grant to Marquette
any right, title or interest in Versus trademarks. At no time during or after
the term of this Agreement shall Marquette challenge or assist others to
challenge Versus trademarks or the registration thereof or attempt to register
any trademarks, marks or trade names
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confusingly similar to those of Versus. All representations of Versus
trademarks that Marquette intends to use shall first be submitted to the
appropriate Versus personnel for approval of design, color, and other details
or shall be exact copies of those used by Versus. If any of Versus trademarks
are to be used in conjunction with another trademark on or in relation to the
Products, then Versus's mark shall be presented equally legibly and equally
prominently, but nevertheless separated from the other so that each appears to
be a mark in its own right, distinct from the other mark.
15. Force Majeure. Nonperformance of either party, except for the making
of payments, shall be excused to the extent, and for the period of time, that
performance is rendered impracticable by strike or other labor difficulties,
fire, flood, or other casualty or occurrence which is beyond the reasonable
control of the party whose performance is required.
16. Miscellaneous. This Agreement shall inure to the benefit of and be
binding upon the heirs, personal representatives, 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
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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 above, unless and until a different address shall be
furnished by any party desiring to change such address to the other party, or
if no such address is set forth with respect to any such party, then by
personal delivery or registered or certified mail, postage prepaid, to the
principal office of such party, or alternatively, the personal residence of
such party, all as last known to the party giving such notice. 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
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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 lesser 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 hereunder 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 their successors,
heirs and assigns, and may not be relied upon or enforced by any third party
beneficiary.
IN WITNESS WHEREOF, the parties have mutually executed and delivered this
Agreement, effective as of the date first above written.
Versus Technology, Inc. Marquette Electronics, Inc.
By: /s/ By: /s/
-------------------- --------------------------------------
Gary T. Gaisser Frederick A. Robertson, M.D.
Its: President Its: Division President - Patient Monitoring
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EXHIBIT 10(D)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (hereinafter referred to as the "Agreement") is
made effective as of this 1st day of July, 1996, by and between VERSUS
TECHNOLOGY, INC., 2320 West Aero Park Court, Traverse City, MI 49686
(hereinafter referred to as the "Corporation"), a Delaware corporation
qualified to do business in Michigan, and Gary T. Gaisser of 3676 Jackson Road,
Kingsley, MI 49649 (hereinafter referred to as the "Employee").
IN WITNESS WHEREOF, the parties hereto for good and valuable consideration
the receipt and sufficiency of which is hereby acknowledged and intending to be
legally bound agree as follows:
SECTION 1. Employment. The Corporation hereby employs the Employee and
the Employee hereby accepts employment with the Corporation upon the terms and
conditions hereinafter set forth.
SECTION 2. Term. The term of this Agreement shall be for a period of six
(6) years, commencing as of the effective date hereof.
SECTION 3. Duties. The Employee is engaged as President and Chief
Executive Officer of the Corporation, and the Employee agrees to perform such
other executive services as shall from time to time be reasonably assigned to
him by the Board of Directors of the Corporation. During the period of
Employee's employment hereunder, if he is a management nominee for membership
on the Board of Directors of the Corporation, he will agree to so serve.
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SECTION 4. Compensation. During the first twelve (12) months of the term
of this Agreement, the Corporation shall pay to the Employee a base salary at a
rate of not less than One Hundred Thirty Thousand Dollars ($130,000) per annum,
payable in equal installments as nearly as practicable on the fifteenth and
last days of each month, in arrears. The base salary for the second twelve
(12) months, and for each succeeding twelve (12) month period during the term
of this Agreement, shall be 1.10% of the base salary in effect for the
preceding twelve month period. In addition, the base salary may be increased
from time to time, over and above the foregoing rate of increase, in accordance
with normal business practices of the Corporation, at the discretion of the
Corporation's Board of Directors, and if so increased, shall not thereafter
during the term of this Agreement be decreased. Compensation of the Employee
by salary payments shall not be deemed exclusive and shall not prevent the
Employee from participating in any other compensation or benefit plan(s) of the
Corporation. The salary payments (including any increased salary payments)
herein shall not in any way limit or reduce any other obligation of the
Corporation hereunder, and no other compensation, benefit or payment hereunder
shall in any way limit or reduce the obligation of the Corporation to pay
the Employee's salary hereunder.
SECTION 5. Fringe Benefits. For the term of this Agreement the
Corporation shall maintain in full force and effect, and the Employee shall be
entitled to continue to participate in, all of the Corporation's employee
benefit plans and arrangements in which the Employee is a participant or may
become a participant, or alternatively, the Corporation shall maintain for the
Employee's benefit, plans or arrangements providing the Employee
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with at least equivalent benefits thereunder (including without limitation, if
the Corporation has adopted any such plan, a pension and retirement plan and
arrangement, a supplemental pension and retirement plan and arrangement, stock
option plan, life insurance and health-and-accident plan and arrangement,
medical insurance plan, disability plan, survivor income plan, relocation plan
and vacation plan). The Corporation shall not make any changes in such plans
or arrangements which would adversely affect the Employee's rights or benefits
thereunder, unless such change occurs pursuant to a program applicable to all
executives of the Corporation and does not result in a proportionately greater
reduction in the rights of or benefits to the Employee as compared with any
other executive of the Corporation. The Employee shall be entitled to
participate in or receive benefits under any employee pension benefit or
employee welfare plan or arrangement made available by the Corporation in the
future to its executives and key management employees, subject to and on a
basis consistent with the terms, conditions and overall administration of such
plans and arrangements. Nothing paid to the Employee under any plan or
arrangement presently in effect or made available in the future shall be deemed
to be in lieu of the salary payable to the Employee pursuant to Section 4.
SECTION 6. Extent of Service. The Employee shall diligently and
competently devote his full business time (with allowances for vacations and
sick leave), attention, and energies to the performance of his duties under
this Agreement and shall exert his best efforts in furtherance of the business
of the Corporation; provided, however, that Employee may serve as a director
of other corporations or entities and may engage in other activities to the
extent that they do not
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inhibit the performance of Employee's duties hereunder, or conflict with the
business of the Corporation or affiliates.
SECTION 7. Expenses. The Employee is authorized to incur reasonable
expenses for promoting the business of the Corporation, including expenses for
meals, travel, and other similar items. The Corporation shall promptly
reimburse the Employee for all such expenses from time to time, provided that
such expenses are incurred and accounted for in accordance with the policies
and procedures established by the Corporation from time to time.
SECTION 8. Counsel Fees and Indemnification.
(a) The Corporation shall pay, or reimburse Employee, the reasonable fees
and expenses of Employee's personal counsel for professional services rendered
to Employee in connection with this Employment Agreement and matters related
thereto.
(b) In the event that (i) the Corporation terminates, or seeks to
terminate this Agreement, alleging as justification for such termination a
material breach by Employee or a cause, or causes, set out in paragraph 9(b)
hereof; Employee disputes such termination or attempted termination; and
Employee prevails in whole or in part, or (ii) Employee elects to terminate his
service hereunder pursuant to paragraph 9(a) of this Agreement; the Corporation
disputes its obligations to pay the Employee's base salary and benefits as
provided in paragraph 9(a); and Employee prevails in whole or in part; the
Corporation shall pay, or reimburse to Employee all reasonable costs incurred
by Employee in such dispute, including attorneys' fees and costs.
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(c) The Corporation shall indemnify and hold harmless the Employee, to the
maximum extent permitted by law, against judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys' fees incurred by
Employee, in connection with the defense of, or as a result of any action or
proceeding (or any appeal from any action or proceeding in which Employee is
made or is threatened to be made a party by reason of the fact that Employee is
or was an officer or director of the Corporation, or is or was an officer or
director or majority shareholder of Olmsted Engineering Co., regardless of
whether such action or proceeding is one brought by or in the right of the
Corporation or Olmsted Engineering Co., to procure a judgment in its favor (or
other than by or in the right of the Corporation or Olmsted Engineering Co.).
Included specifically in the foregoing, but not by way of limitation, is any
expense or liability of Employee, of any conceivable nature, which may arise
under or in connection with the litigation pending in the Grand Traverse
County, Michigan 13th Judicial Circuit Court, Civil Action No. 96-14,861-CZ.
The undertakings of subparagraphs (a) and (b) above, are independent of, and
shall not be limited or prejudiced by the undertakings of this subparagraph
(c).
(d) The Corporation further represents and warrants; (i) that Employee is
and shall continue to be covered and insured up to the maximum limits provided
by all insurances which the Corporation maintains to indemnify its directors
and officers (and to indemnify the Corporation for any obligations which it
incurs as a result ofits undertaking to indemnify its officers and directors;
and (ii) that the Corporation will exert its best efforts to maintain such
insurance, in not less than its present limits, in effect throughout the term
of Employee's employment.
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(e) The Corporation hereby warrants and represents that the
undertakings of payment, indemnification and maintenance of insurance covering
the Employee set out in (a), (b), (c) and (d) above are not in conflict with
the articles of incorporation or by-laws of the Corporation or with any validly
existing agreement or other proper corporate action of the Corporation.
SECTION 9. Termination.
(a) Termination by the Corporation Other Than For Material Breach or
Other Just Cause: If the Corporation should terminate Employee's employment
during the term of employment for other than material breach of this Employment
Agreement or "just cause," as herein defined, Employee shall have no obligation
to seek other employment in mitigation of damages in respect of any period
following the date of such termination and Employee shall be entitled to
receive from the Corporation 100% of the full base salary, and all fringe
benefits, to which Employee would otherwise have been entitled through the end
of the six (6) year term of employment, which shall be payable to Employee, in
monthly installments, without regard to, or reduction because of, any other
compensation or income which Employee receives or is entitled to receive,
whether from the Corporation or otherwise. It is stipulated that any payments
made in accordance with the foregoing shall be paid to and received by Employee
as liquidated damages for the unwarranted termination of his employment and not
as penalties and he shall be entitled to receive no further sums under this
Agreement except such as have accrued as of the date of such termination or as
otherwise specifically provided in this Agreement. In addition, if any time
during the term of employment, Employee is not elected
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or appointed as the President and Chief Executive Officer and as a
member of the Board of Directors of the Corporation, or if Employee is removed
from such office or from such directorship, or if at any time during the term
of employment, Employee shall fail to be vested by the Corporation with the
powers and authority of the President and Chief Executive Officer of the
Corporation, as described above (except in connection with a termination for
material breach or just cause as contemplated by paragraph 9(b) of this
Agreement) or if the ownership or control of the Corporation, including,
illustratively, the power and right to elect a majority of the Board of
Directors of the Company becomes vested, directly or indirectly, in another
corporation, or the corporate headquarters and principal place of business of
the Corporation is changed to a location more than twenty (20) miles from
Traverse City, Michigan, without Gary T. Gaisser's consent, then Employee shall
have the right, by written notice to the Corporation to terminate Employee's
service hereunder, effective as of the last day of the month of receipt by the
Corporation of any such written notice, and thereafter Employee shall have no
other obligation under this Agreement. Employee's termination of services as
provided in this paragraph shall be treated as a termination of employment by
the Corporation other than for material breach or other just cause and
Employee's rights to ongoing compensation shall be governed by the provisions
of this paragraph.
(b) Termination by the Company for Material Breach or for Just Cause:
"Just cause" shall mean willful misconduct, embezzlement, conviction of a
felony, habitual drunkenness or excessive absenteeism not related to illness.
Should Employee's employment be terminated for a material breach of this
Agreement or for "just cause," the
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Corporation shall be obligated to pay Employee's then base salary only
through the end of the month during which such termination occurs, plus such
other sums and/or benefits as have accrued to Employee as of the end of such
month.
(c) Termination by Employee. It is agreed that if during the term of
employment Employee concludes, because of changes in the composition of the
Board of Directors of the Corporation or material changes in its policies, or
because of other events or occurrences of material effect, that Employee can no
longer properly and effectively discharge Employee's responsibilities as
President and Chief Executive Officer of the Corporation, Employee may at any
time resign as Director of the Corporation and from his position as President
and Chief Executive Officer of the Corporation after giving the Corporation not
less than sixty (60) days prior written notice of the effective date of
Employee's resignation. Any such resignation shall not be deemed to be a
material breach by Employee of this Agreement, and shall instead be deemed to
be a constructive termination of Employee's employment by the Corporation other
than for material breach or other just cause, pursuant to paragraph 9(a) of
this Agreement, and Employee shall continue to receive his salary and benefits
as therein provided.
(d) Termination by Death. In the event of death of the Employee
during the term hereof, the legal representative of Employee shall be entitled
to the compensation provided for in Section 4 hereof for the month in which
the death shall have taken place, at the rate being paid at the time of death,
and the term of employment shall be deemed to have ended as of the close of
business on the last day of the month in which
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death shall have occurred but without prejudice to any other payments due in
respect of Employee's death or otherwise due the Employee.
(e) Termination by Disability. The term "Disability," as used in this
Agreement, shall mean an illness or accident which prevents Employee from
performing his duties under this Agreement for a period of six (6) consecutive
months. In the event of Disability, and without prejudice to any payments due
to the Employee in respect of Disability or otherwise due the Employee under
any employee welfare plan of the Corporation or any other rights Employee may
have under this Agreement, the Employee shall be entitled, for the period
beginning on the date of Disability (i.e. the date 6 months after the
commencement of the illness or accident) through the end of the 6 year term of
this Agreement, to a salary equal to one half of that which was in effect at
the commencement of the illness or accident which resulted in the Disability.
The Employee's right to receive fringe benefits and other rights under this
Agreement shall continue for the 6-year term of this Agreement regardless of
the existence of a Disability.
SECTION 10. Non-Competition.
(a) During the term of employment and for one year thereafter, or, in
the event of termination of Employee's employment by the Corporation for
material breach or just cause (as defined in paragraph 9(b) above), for two (2)
years after such termination, Employee will not, without prior written approval
of the Board of Directors of the Corporation, become an officer, employee,
agent, partner, or director of any business
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enterprise in substantial direct competition (as defined below) with
the Corporation or any subsidiary of the Corporation, as the business of the
Corporation or any said subsidiary may be constituted during the term of
employment or at the termination thereof.
(b) If Employee's employment by the Corporation is terminated by
Employee (other than under the circumstances set forth in paragraph 9(a) or
9(c) above), in breach of this Agreement during the term of employment,
Employee shall not, for a two (2) year period following such termination,
become an officer, employee, agent, partner, or director of any business
enterprise in substantial direct competition (as defined below) with the
Corporation or any subsidiary of the Corporation, as the business of the
Corporation or any said subsidiary may be constituted at the time of such
termination.
(c) For the purposes of this Section 10, a business enterprise with
which Employee may become associated as an officer, employee, agent, partner,
or director shall be considered in "substantial direct competition" if, during
a year (adjusted for fractions of a year in respect of a new enterprise) when
such competition is prohibited, its sales of any product or service which is
competitive with a product or service sold by the Corporation or any subsidiary
of the Corporation amount to more than either ten percent (10%) of its total
sales or more than One Hundred Thousand Dollars ($100,000). This Section 10
shall not prohibit Employee's participation, in the manner set out above, in
any enterprise during the above-mentioned time periods following the
termination of Employee's employment with the Corporation if prior to such
participation by Employee the Corporation and all of its subsidiaries shall
have ceased engaging in and carrying on all businesses of such enterprise which
would otherwise be subject to this paragraph.
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SECTION 11. Non-Disclosure and Non-Solicitation. Without limiting
Employee's obligations under any other written agreement he may have given the
Corporation, Employee shall not, at any time during, and for two (2) years
following, Employee's employment with the Corporation, disclose or use, except
in the course of Employee's employment with the Corporation in the pursuit of
the business of the Corporation or any of its subsidiaries or affiliates, any
confidential information or proprietary data of the Company or any of its
subsidiaries or affiliates, whether such information or proprietary data is in
his memory or embodied in writing or other physical form. Employee shall not
solicit any employees of the Corporation to change their employment during this
2 year period.
SECTION 12. Vacation. The Employee shall be entitled annually to six
(6) weeks of paid vacation. In addition, the Employee shall also be entitled
to all paid holidays given by the Corporation to its executives generally.
SECTION 13. Release. For and in consideration of Employee's future
services under this Agreement, and as a material inducement to cause Employee
to enter into this Agreement, the Corporation hereby releases Employee from any
and all claims or choses in action, of any and all conceivable nature or
natures, which the Corporation, or Olmsted Engineering Co., now has, or may
hereafter acquire, against Gary T. Gaisser, where such claim or chose in action
is based, in whole or in part, on any action or inaction of Gary T. Gaisser,
whether known or unknown, which may have occurred, or be alleged to have
occurred, at any time prior to the effective date of this Agreement, save only
those claims or choses in action which are based upon facts, the alleged
existence of which are: (i) unknown and unheard of by and to any of the
Corporation's Board of Directors (other than
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Gary T. Gaisser) as of the time this Agreement is signed, and (ii) have
been actively concealed by Gary T. Gaisser; and (iii) relate to egregious bad
faith, active fraud, embezzlement, or substantial and material dishonesty by
Gary T. Gaisser. Conversely, Employee hereby releases the Corporation from any
and all claims or choses in action, of any and all conceivable nature or
natures, which he now has, or may hereafter acquire, against the Corporation or
Olmsted Engineering Co., where such claim or chose in action is based, in whole
or in part, on any action or inaction of the Corporation or Olmsted Engineering
Co. which may have occurred, or be alleged to have occurred, at any time prior
to the effective date of this Agreement, save only those claims or choses in
action which are based upon facts, the alleged existence of which are unknown
and unheard of by and to Gary T. Gaisser as of the time this Agreement is
signed; provided, however, nothing contained in this paragraph shall serve to
release the Corporation or Olmsted Engineering Co. from any written contractual
or bylaws commitment made to Gary T. Gaisser, including any commitments made in
this Agreement.
SECTION 14. Miscellaneous. This Agreement shall inure to the benefit
of and be binding upon the heirs, personal representatives, 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
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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 above, unless and until a different address shall be
furnished by any party desiring to change such address to the other party, or
if no such address is set forth with respect to any such party, then by
personal delivery or registered or certified mail, postage prepaid, to the
principal office of such party, or alternatively, the personal residence of
such party, all as last known to the party giving such notice. 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
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<PAGE> 14
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 lesser 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 hereunder 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 their successors,
heirs and assigns, and may not be relied upon or enforced by any third party
beneficiary.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
APPROVED: VERSUS TECHNOLOGY, INC.
/s/ By: /s/ (SEAL)
- -------------------- -----------------------------------
Julian C. Schroeder Debra A. Boyer
ATTEST
/s/ By: /s/
- ------------------- -----------------------------------
Elliot Eisenberg Andrea Moody
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<PAGE> 15
/s/ Gary T. Gaisser
- -------------------------
Gary T. Gaisser
127
<PAGE> 1
EXHIBIT 10(E)
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of this 26 day of August, 1996,
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 10,000,000 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, corporation, 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 in the aggregate
share amount set forth on Exhibit A.
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.
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<PAGE> 2
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
two times more than six (6) months after the date hereof, upon the
written request of Investors owning at least 25% of the Registrable Securities
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(k)
promulgated under the Securities Act 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 registration 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 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
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<PAGE> 3
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:
(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 or
until such time as Rule 144(K) is available, as the case may be, 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
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<PAGE> 4
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 requirements 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 jurisdiction
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 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 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; provided, however,
that such restriction shall be effective for a period of 30 days and the
Company may only institute such restriction
131
<PAGE> 5
twice during any twelve month period. 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 effectiveness 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 registration would require disclosure of such material non-public
information. 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.
(b) 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 with such approval not to be unreasonably withheld by the Corporation.
2.5 Indemnification. (a) Indemnification by the Corporation. 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, (each, an "Indemnified Party") against any
losses, claims, damages or liabilities, to which any Indemnified Party 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 Indemnified Party 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 an Indemnified Party 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 such Indemnified Party, 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 Indemnified Party and shall survive the transfer of such securities by the
Investor.
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<PAGE> 6
(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 satisfactory 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 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 subdivisions 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 indemnifying 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 investigation. 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 settlement 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.
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 Versus Technology, Inc., 2320 W. 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.
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<PAGE> 7
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 New Jersey.
7. Counterparts. This Agreement may be executed simultaneously 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:_____________________________
Name: Gary T. Gaisser
Title: President
The Investors by their Agent-in-Fact
pursuant to Subscription Agreements
signed by them
BDS SECURITIES CORPORATION
By:_____________________________
Name:
Title:
MERRILL LYNCH SPECIAL VALUE FUND, INC.
By:____________________________________
Name:
Title:
134
<PAGE> 8
Schedule A
[omitted; copies shall be made available to the Securities Exchange Commission
upon request.]
135
<PAGE> 1
EXHIBIT 11
VERSUS TECHNOLOGY, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
1996 1995
--------------------- ---------------------
<S> <C> <C>
PRIMARY AND FULLY DILUTED EARNINGS (LOSS) PER SHARE:
- ----------------------------------------------------
Net loss $ (2,006,000) $ (2,497,000)
============== ==============
Calculation of weighted average common shares outstanding:
Outstanding common shares at beginning of year 18,910,697 4,160,780
Impact of private placement offerings:
August 26, 1996 - 11,335,000 shares 2,044,016 -
September 29, 1995 - 14,674,917 shares - 1,286,568
Impact of August 26, 1996 Olmsted Engineering Co. acquisition
and issuance of 6,379,889 shares, less 510,000 subsequently
retired shares 1,058,525 -
Other (153,162) 3,082
--------------------------------------
Total weighted average common shares (A) $ 21,860,076 $ 5,450,430
======================================
Primary and Fully Diluted Loss Per Share $ (.09) $ (.46)
=======================================
NOTE:
- -----
(A) The weighted average effect of common stock equivalents was anti-dilutive for both 1996 and 1995 and, therefore, was
not considered in the above calculation.
</TABLE>
136
<PAGE> 1
EXHIBIT 21
VERSUS TECHNOLOGY, INC.
SUBSIDIARY OF THE REGISTRANT
<TABLE>
<CAPTION>
JURISDICTION OF
NAME OF SUBSIDIARY INCORPORATION PERCENTAGE OF OWNERSHIP
- ------------------ -------------------- -----------------------
<S> <C> <C>
Olmsted Engineering Co. Michigan 100%
</TABLE>
137
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the use of our report dated February 9, 1996, except as
to Note 2 which is as of December 9, 1996, appearing in this Form 10-KSB of
Versus Technology, Inc., related to the financial statements as of and for the
year ended October 31, 1995.
/s/ KPMG Peat Marwick LLP
- --------------------------
KPMG Peat Marwick LLP
Princeton, New Jersey
January 8, 1997
138
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Versus
Technology, Inc. and subsidiary Form 10-KSB and is qualified in its entirety by
reference to such consolidated financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 4,931,000
<SECURITIES> 0
<RECEIVABLES> 205,000
<ALLOWANCES> 62,000
<INVENTORY> 145,000
<CURRENT-ASSETS> 5,342,000
<PP&E> 425,000
<DEPRECIATION> 155,000
<TOTAL-ASSETS> 8,787,000
<CURRENT-LIABILITIES> 1,266,000
<BONDS> 0
0
0
<COMMON> 366,000
<OTHER-SE> 7,155,000
<TOTAL-LIABILITY-AND-EQUITY> 8,787,000
<SALES> 348,000
<TOTAL-REVENUES> 348,000
<CGS> 225,000
<TOTAL-COSTS> 225,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 45,000
<INTEREST-EXPENSE> 49,000
<INCOME-PRETAX> (2,006,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,006,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,006,000)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
<PAGE> 1
EXHIBIT 99
================================================================================
N E W S R E L E A S E
================================================================================
VERSUS TECHNOLOGY, INC. ENTERS INTO EXCLUSIVE MARKETING AGREEMENT WITH
MARQUETTE MEDICAL SYSTEMS
TRAVERSE CITY, Mich., August 16/PRNewswire/--Versus Technology, Inc. (Nasdaq
Bulletin Board: VSTI) announced:
Two Midwest companies have combined forces to market infrared tracking systems
to acute care hospitals. Versus Technology, Inc. announced today that it has
entered into an Exclusive Marketing Agreement with Marquette Medical Systems,
of Milwaukee, Wisconsin.
Under the terms of the agreement, Marquette receives the exclusive rights to
distribute and supply Versus's infrared tracking system for personnel and
equipment tracking to acute care hospitals located in the United States. In
return, Versus receives a minimum annual commitment to purchase per contract
year.
"This agreement gives us a solid relationship with a market leader in the
health care field," remarked Versus's President, Gary Gaisser. "We are working
together on a broad range of product developments."
Versus is a producer of infrared tracking systems and related wireless
products. Its Personnel and Equipment Tracking (PET) System (now referred to
as the Traverse Tracking System) is used in hospitals to locate physicians,
caregivers, patients, and equipment on computer floor plans.
Marquette Medical Systems is a leading designer and manufacturer of medical
electronic equipment and clinical information systems for the diagnosis and
monitoring of patients requiring critical care. The company is a world market
leader in computerized electrocardiographic equipment and related supplies and
is also one of the market leaders in sales of systems used for monitoring of
vital patient physiological parameters.
Versus Technology, Inc. of Traverse City, MI is an acknowledged leader in
infrared tracking systems and portable security products. Call (616) 946-5868
or FAX (616) 946-6775.
- -0- 8/16/96
/CONTACT: Gary T. Gaisser, 616-946-5868, of Versus Technology, Inc./(VSTI)
140
<PAGE> 2
================================================================================
N E W S R E L E A S E
================================================================================
VERSUS TECHNOLOGY, INC. COMPLETES OLMSTED ENGINEERING CO. MERGER
TRAVERSE CITY, Mich., August 27/PRNewswire/--Versus Technology, Inc. (Nasdaq
Bulletin Board: VSTI) announced:
Versus Technology, Inc. announced today that it has acquired Olmsted
Engineering Co. through an exchange of 6 million shares of its common stock.
Both companies are based in Traverse City, Michigan.
The acquisition followed a private offering, placed by BDS Securities LLC, of
New York, which successfully raised approximately $5.5 million for Versus (at
50 cents per share).
Versus is a producer of patented infrared communication systems. Its Traverse
Tracking System (TTS) is used in hospitals to locate physicians, caregivers,
patients, and important equipment.
Olmsted Engineering Co. is a private company which has designed and sold
manufacturing software solutions in the Midwest for over 20 years and has acted
as a consultant to Versus in connection with Versus's Traverse Tracking System.
Versus has recently entered into an exclusive marketing agreement with
Marquette Medical Systems, of Milwaukee, Wisconsin, for the distribution of the
Traverse Tracking System in acute care hospitals. Marquette Medical Systems
had more than $500 million in world-wide sales of medical monitoring equipment
last year.
- -0- 8/27/96
/CONTACT: Gary T. Gaisser, phone 616-946-5868, or fax 616-946-6775, of Versus
Technology, Inc., Traverse City, Michigan/(VSTI)
141
