SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
|x| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1996
or
|_|Transition Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number 1-10768
MEDIWARE INFORMATION SYSTEMS, INC.
(Exact name of small business issuer in its charter)
New York 11-2209324
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1121 Old Walt Whitman Road
Melville, New York 11747-3005
(Address of Principal Executive Offices) (Zip Code)
(516) 423-7800
(Issuer's telephone number, including area code)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, par value $.10 per share Nasdaq SmallCap Market
The Pacific Stock Exchange,Inc.
Securities to be registered pursuant to Section 12(g) of the Act: None
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities 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 part 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 incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $10,432,000.
The aggregate market value of the voting stock held by non-affiliates on October
25, 1996 was approximately $12,270,864.
Number of shares of Common Stock outstanding at October 25, 1996: 4,939,344
shares.
Documents Incorporated by Reference:
The Proxy Statement for the Registrant's 1996 Annual Meeting of Shareholders is
incorporated by reference in Part III of this Report.
<PAGE>
PART I
ITEM 1. BUSINESS
The Company develops, sells and supports computer-based
management information systems for use in various clinical departments of
hospitals. The systems are designed to automate the data these departments
provide hospital management and therefore increase productivity, reduce
operating costs, enhance revenues and improve quality assurance and patient
care. These benefits are of critical importance to hospital administrators who
face increasing financial and regulatory pressures. At present, the Company
offers systems for three different departments: the blood bank, the pharmacy and
the surgical suite. With the completion of the Acquisition referred to below the
installed base of clinical information systems has increased to approximately
825 clients.
See "Financial Statements" herein for information about the
Company's revenues, operating profit and loss and assets. The Company's
operations are within one industry segment.
Products
HEMOCARE - The Company's cornerstone product is one of North
America's leading "best of breed" blood bank information systems, and is sold
either "stand-alone" or as part of an integrated "LAB/Blood Bank" system. The
system was designed in collaboration with Memorial Sloan-Kettering Cancer Center
in New York City. Hemocare's software programs are organized into subsystems
performing over 200 functions of which the major ones (a) manage and control
blood inventory; (b) perform long-term donor and transfusion record keeping; (c)
store and manage characteristics of blood products to be transfused; (d)
maintain patient and transfusion records; (e) maintain the records of patient
test results; and (f) automate billing and workload recording.
Hemocare's core technology is the UNIX operating system and
the "C" programming language, allowing it to run on multiple hardware platforms.
Current versions of the system are ported to the IBM RS/6000, as well as Intel
PC technologies. The scalability of these platforms allows Hemocare to address
the needs of virtually any size hospital. Hemocare has been the first to attempt
to market innovative product enhancements such as Validation Templates, Video
Validation, Standard Integration Module and Mock Regulatory Inspection. At this
time Hemocare is the only blood banker to offer these products, which assist
customers in their efforts to remain compliant with regulatory agency
guidelines. The Standard Integration Module was instrumental in the growth of
laboratory vendors, who have integrated and remarketed this product. The Company
currently has remarketing agreements with HBO and Company, Citation Computer
Systems, Inc., Dynacor, Inc., Keane, Inc., NLFC, Inc. and Shared Medical
Systems, Inc.
The Hemocare system is installed in approximately 250
hospitals which range in size from 100 beds to over 1,600 beds.
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DIGMEDICS - In May of 1990, the Company acquired Digimedics
Corporation, one of the country's leading vendors in information management
systems for hospital pharmacies. Digimedics had been developing and selling
products and services to hospital pharmacies since 1976. In the mid-1980's,
Digimedics introduced the first open systems version of a comprehensive pharmacy
information management system. Digimedics Corporation is a wholly owned
subsidiary of the Company.
The benefits of Digimedics include (a) potential customer
savings through the automation of drug formulary and perpetual inventory; (b)
potential enhanced revenues through more accurate and complete patient billing;
(c) improved patient care by more accurate drug dispensing, automatic checking
of adverse drug-drug interactions and automatic checking of previously recorded
drug allergies; and (d) interfacing with other hospital information systems,
drug wholesalers, and various dispensing machines, such as PYXIS and the
automated Pharmacy System robotics devices.
The current version of Digimedics, called "Digimedics XA for
Windows," is based on the UNIX operating system, the "C" programming language,
and the UNIFY relational database management system. Although largely a
"character based" application, certain Microsoft Windows features have been
included, offering the Company certain sales advantages by providing customers
and prospective customers with the type of graphical user interface they prefer.
By the end of 1996, Digimedics will introduce a new client
server pharmacy system called "Digimedics/WORx". WORx (Windows, Open, Rx) will
have a complete Microsoft Windows based graphical user interface, which the
Company feels will increase the attractiveness of the system. Also, new
technologies include integration features such as the Informix relational
database management system, point and click Windows based ad-hoc report writing,
and an integrated inpatient/outpatient database.
Other WORx features will include:
o Support of clinical pathways.
o A clinical database and drug monographs.
o Incorporation of an extensive array of clinical drug alerts concerning
allergy, diagnosis, dose, food, IV incompatibility, interaction and
therapeutic duplication.
o Foreign-language patient education monographs.
o Customization to meet community standards.
By taking advantage of its open architecture, WORx is capable
of linking with expert systems, decision-support software and clinical
databases. WORx will act as the central hub of information in the pharmacy and
will provide specialized tools for all aspects of pharmaceutical care including
order entry, distribution, outcomes, billing, utilization evaluation, education,
critical pathways, purchasing and research.
WORx can adapt into a diversity of hardware and networking
environments. Utilizing technologies such as the UNIX operation system, C++
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programming language, Informix, and Microsoft Windows 95, WORx is positioned as
a state of the art client/server solution.
Over 130 Digimedics systems have been installed at 121
hospitals (some hospitals have separate systems for inpatient and outpatient
pharmacies), including the University of California Medical Center, San
Francisco; University Medical Center, Las Vegas; Columbia-Presbyterian Medical
Center, New York City; Shands Hospital at the University of Florida,
Gainesville; University of Kansas Medical Center, Kansas City; and the
University of Michigan Hospitals and Clinics, Ann Arbor.
On June 17, 1996, the Company acquired certain assets of the
U.S. based Pharmakon division ("Pharmakon") and a pharmacy management system
operating in the United Kingdom, JAC Computer Service, LTD. ("JAC"), of
Continental Healthcare Systems, Inc. (the "Acquisition"), which will be
incorporated into the Company's Digimedics operation. The addition of Pharmakon
and its client base has increased the Company's installed base of clinical
information systems to approximately 825 (over 500 of which are pharmacy system
installations). This places the Company in the position of providing the largest
number of stand-alone pharmacy information systems in the country. The
Acquisition also provides the Company with a significant international presence;
JAC has approximately 180 pharmacy information systems installed in the United
Kingdom.
Pharmakon and JAC, which generated sales and service of
approximately $8.4 million in the fiscal year ended November 30, 1995, markets a
management information system for hospital pharmacies. The Acquisition is
expected to add approximately 415 hospital systems and 235 hospitals to the
Company's customer base in the United States and an additional 180 customers in
the United Kingdom.
Pharmakon had been providing pharmacy systems for almost
twenty years. Management's goal is to begin converting Pharmakon's U.S.
customers to the Digimedics WORx system in the fourth calendar quarter of 1996.
Pending this conversion, the Company expects to assume the existing support and
maintenance contracts and to generate approximately $3.4 million per year in
service revenues by continuing to service the newly acquired customers. Through
the Acquisition, the Company will also acquire certain technologies which are
currently under development and are expected to be integrated into future
systems offerings of Digimedics.
The Company's management team believes there exists strong
parallels between its current Digimedics customer base and that of Pharmakon,
both of which include not only large university hospitals and multi-site acute
care facilities, but also progressive community, municipal, and long-term care
facilities. Management has retained approximately 43 of Pharmakon's 75 total
employees in the U.S.
SURGIWARE - In September of 1990, the Company licensed the
right to market and relicense the Surgiware system for use in surgical suites.
Surgiware is a comprehensive information system for managing the human
resources, facilities, equipment and supplies required for surgery. The
Surgiware system integrates clinical data capture, inventory and equipment
control scheduling, quality assurance and report writing. For example, the
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system contains a program that presents a proprietary, real time moving schedule
on a color graphics display allowing the user to visually identify potential
scheduling conflicts based upon what is happening in the surgical suite at the
moment, and to test alternative solutions on the system. The core of the system
is in its unique ability to gather and disseminate data at the point of care,
providing unique advantages to hospitals in need of timely, accurate data on
their surgical activities. Additional modules and functions can be added, such
as a clinical data module that keeps track of all aspects of a patient's
treatment, including pre-operative and post-operative control.
The benefits of a fully-implemented system include (a)
improvement in the efficiency and output of operating rooms; (b) improvement in
the management of staffing, equipment and supplies; (c) improvement in inventory
controls; and (d) incremental billings resulting from procedures that, without
Surgiware, might be overlooked for billing purposes because they either were
unplanned or fall outside the billing category for the planned procedure.
Surgiware also integrates clinical data capture, and equipment control,
scheduling, quality assurance and report writing. These benefits can translate
into significant revenues and savings since the surgical suite usually produces
more revenue than any other department and is the greatest cost center in the
hospital. The record keeping functions of Surgiware can also be of significant
benefit in the areas of quality assurance, risk management, and the
accreditation of physicians.
Surgiware uses the UNIX operating system, the "C" programming
language, the INFORMIX SQL 4th generation relational database manager, and a
fault-tolerant architecture that allows the personal computer that is placed in
each operating room to operate independently in the event of a failure of the
central Surgiware computer. The system has been ported to the IBM RS-6000 and
the Data General AViiON series, and to 386, 486 and Pentium IBM compatible
personal computers.
The Company's marketing is concentrated on the approximately
1,000 hospitals that have more than 300 beds and 10 operating rooms, where
studies indicate that approximately 80% of all surgical services in this country
are performed. The Company has installed 25 Surgiware sites.
In 1992, the licensor of Surgiware commenced an arbitration
against the Company which, in late 1994, led to an award in favor of the Company
which confirmed the Company's license for the Surgiware product, including
improvements developed by the licensor. The arbitral panel confirmed the
Company's right to retain exclusivity for the Surgiware product and to license
another generic hospital scheduling software product developed by the licensor
upon the payment of additional royalties. The Company determined in early 1995
that the benefits of exclusivity and the generic hospital product did not
justify the required additional royalty payments. The Company has initiated
negotiations with the licensor of the Surgiware system to replace the existing
royalty arrangement with a fully paid-up license, requiring additional royalty
payments only in the case of a simultaneous sale by the Company of multiple
sublicenses. In the course of these negotiations the licensor has asserted that
the Company has breached the existing license agreement. The Company believes
that this assertion is meritless and is being made for negotiating purposes
only.
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Sales and Marketing
The Company's three products are sold directly by ten
full-time sales people, as well as four Company officers, with the assistance of
seven clinical specialists who demonstrate the systems and address technical
questions. The Company continues an on-going, in-house lead generation program
that generates numerous sales leads. Sales leads and support are received from
certain hardware manufacturers, especially IBM Corporation and Data General
Corporation, whose products the Company sells as a Value Added Reseller ("VAR").
The Company's products are also sold increasingly through remarketers who are
vendors of laboratory and other information systems that offer Company systems
as subsystems of their product. The Company has entered into agreements with
vendors such as HBO and Company (for both STAR and ALS product lines), Citation
Computer Systems, Inc., Dynacor, Inc., Keane, Inc., NLFC, Inc. and Shared
Medical Systems, Inc.
Software Support and Hardware Maintenance Services
The Company provides comprehensive service to its installed
base of customers through its own service organization. Virtually all of the
Company's customers enter into software support agreements with either the
Company or its resellers which are renewed either annually or at longer
intervals but, in the case of former Pharmakon customers, may be cancelled by
either party on 60 days notice. These agreements generally provide for 24-hour
access to customer support staff, as well as periodic product enhancements and a
limited product warranty, for which the customer pays a monthly fee subject to
cancellation after a specified notice period. Some of the Company's customers
have also entered into agreements for hardware maintenance, which the Company
generally subcontracts to hardware manufacturers. As of June 30, 1996, the
Company had software support and hardware maintenance agreements providing for
periodic payments totaling approximately $7.94 million on an annualized basis,
including the revenues of Pharmakon.
HEMOCARE and DIGIMEDICS are trademarks of the Company and its
subsidiary, Digimedics Corporation, respectively.
Competition
The competition in the market for clinical information systems
is intense. The principal competitive factors are the functionality of the
system, its design and capabilities, site references, reputation for ongoing
support, the potential for enhancements, price and salesmanship. Different
dynamics and competitors, however, affect each of the Company's products.
HEMOCARE -- The Company currently competes principally with
one other specialty vendor of stand-alone blood bank systems (Western Star,
Inc.), which is a company of comparable size, and with two vendors (Cerner
Corporation and Sunquest Information Systems, Inc.) of laboratory information
systems ("LIS") that contain a blood bank subsystem. The LIS vendors are much
larger companies with greater technical, marketing, financial and other
resources than the Company, and have established reputations for success in
developing and selling hospital information systems.
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DIGIMEDICS -- The Company currently competes with numerous
companies, including some of the leading vendors of healthcare information
systems. As a result of the Acquisition of Pharmakon, the Company believes that
it has the largest number of stand-alone hospital pharmacy systems in its
market. Many competitors have established reputations for success in developing
and selling medical information systems and have far greater resources than the
Company. The principal competitors of the Digimedics system are believed to be
Cerner Corporation, BDM Corp., HCS Corp. and Pharmacy Computer Systems, Inc., as
well as numerous providers of complete healthcare information systems.
SURGIWARE -- The competitors of Surgiware have significantly
larger installed bases and have substantially greater technical, marketing,
financial and other resources than the Company and have established reputations
for success in developing and selling hospital information systems. The
principal vendors competing with the Surgiware system are believed to be Serving
Software Incorporated, a wholly owned subsidiary of HBO and Company, Enterprise
Systems Incorporated, and Atwork Corporation, a wholly owned subsidiary of
Medaphis Corporation.
Copyright, Patents and Trade Secrets
The Company has relied primarily on copyright, trade secret
protection and confidentiality agreements for protection of its software
systems. Certain features of the Surgiware system are covered by a patent held
by the licensor.
Government Regulation
The hospitals that comprise the primary market for the
Company's products must comply with various federal, state and local statutes
and regulations. The adequacy of blood bank information management and record
keeping is subject to inspection and review by the Food and Drug Administration
("FDA"). Hemocare and other blood bank systems are also subject to regulation by
the FDA as medical devices. Consequently, the Company and its competitors who
provide blood bank information management systems are also subject to the
jurisdiction of the FDA as suppliers of medical devices. The Company has
dedicated substantial time and resources in its attempts to comply with
applicable guidelines and regulations and believes that it is in substantial
compliance therewith. Legislation has been introduced in Congress seeking to
expand the jurisdiction of the FDA, and the FDA is in the process of developing
new guidelines which it intends to apply to blood bank information systems and
to the inspection of vendors of such systems. The Company cannot predict whether
it will be in compliance with these new guidelines or any future guidelines,
regulations or inspection procedures. Non-compliance with any such guidelines,
regulations or procedures could have a material adverse effect on the operations
of vendors of blood bank information systems, including the Company. Any of the
Company's other activities could also become subject to Congressional or
governmental agency efforts to establish or expand governmental agency
jurisdiction.
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Miscellaneous
The Company's software development expenditures were as
follows: during fiscal 1996 -- $1,438,000; during fiscal 1995 -- $1,387,000; and
during fiscal 1994 -- $1,791,000. These expenditures included write-downs and
amortization of software development costs. In addition, software costs of
$496,000, $356,000 and $367,000, respectively, were capitalized in each year. In
addition, the Company purchased $3,891,000 of research and development in the
Acquisition of Pharmakon and JAC, which were charged to operations upon
acquisition.
The Company's business is not dependent on a single customer
or a few customers. The Company considers that its market area and customer base
is the United States and Canada. However, the Company intends to market its
products in the United Kingdom in fiscal 1997 through JAC.
Employees
As of June 30, 1996, the Company had 138 full-time employees
and 12 part-time employees, including 27 in sales and marketing, 92 in customer
support and product development, and 19 in administration. No employees are
represented by a labor union and the Company considers its employee relations to
be good.
ITEM 2. PROPERTIES
The Company's corporate headquarters are in Melville, New
York, where the Company occupies approximately 5,738 square feet under a lease
that expires on July 31, 1998. The Digimedics division is headquartered in
Scotts Valley, California, where the Company occupies approximately 11,646
square feet under a lease expiring on May 1, 2001. The Pharmakon Division is
headquartered in Overland Park, Kansas, where the company occupies approximately
13,683 square feet under a lease expiring on September 30, 1998. The United
Kingdom group is headquartered in Basildon, Essex, where the Company occupies
approximately 2,567 square feet under a lease expiring on September 26, 2004.
The Company believes that its facilities are adequate for its current needs and
that, if necessary, it will have no difficulty in securing alternate facilities
at the expiration of its current leases.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matter to a vote of its
security holders during the fourth quarter of its fiscal year ended June 30,
1996.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock is traded and quoted on the Nasdaq
SmallCap Market under the symbol MEDW. It is also traded on the Pacific Stock
Exchange under the symbol MIS. Prior to August 1991, there was no established
trading market for the Company's Common Stock.
The table below indicates the high and low of quoted bid
market prices as reported by Nasdaq for the Company's Common Stock for each
quarter during the fiscal years ended June 30, 1995 and 1996, and the first
quarter of fiscal 1997.
<TABLE>
<CAPTION>
1st quarter 2nd quarter 3rd quarter 4th quarter
ended 9/30 ended 12/31 ended 3/31 ended 6/30
-------------------- -------------------- -------------------- --------------------
High Low High Low High Low High Low
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fiscal 1997 4 1/8 3 3/4
Fiscal 1996 1/18 5/8 1 1/2 7/8 3 5/8 7/8 4 1/4 3
Fiscal 1995 1 3/8 11/16 1 3/8 11/16 1 9/16 13/16 1 1/4 13/16
</TABLE>
Such over-the-counter quotations reflect inter-dealers prices,
without retail mark-ups, mark downs or commissions, and may not represent actual
transactions.
The reported trading volume is low. As of June 30, 1996, the
approximate number of shareholders of record of the Company's Common Stock was
1,121.
Dividend Policy
The Company has never paid dividends on its Common Stock and
has no present intention to pay cash dividends on its Common Stock. Earnings, if
any, will be used to finance the development and continued expansion of the
Company's business.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Internal and External Sources of Liquidity and Capital Resources
In June of 1996, Digimedics Corporation, a wholly owned
subsidiary of the Company, purchased the Pharmakon division and JAC, a U.K.
affiliate, from Continental Healthcare Systems, Inc. ("Continental"). The total
purchase price, net of acquisition costs, was approximately $9.7 million, $3.7
million of which was paid in cash and the remaining $6.0 million of which was
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paid pursuant to a promissory note issued to Continental, due November 30, 1996.
On October 28, 1996 the promissory note was amended to provide for an extension
of the due date to August 1, 1997. The amendment provides for an immediate
payment of $1.0 million and monthly payments of $100,000 for principal and
interest and an increase in the interest rate to 15% on approximately $3,763,000
of the note (with the original rate remaining on $1,237,000). As a result of
this amendment, $4,549,000 of this liability is classified as long-term debt.
The Company will require additional sources of liquidity to fund the $4,549,000
debt payment due August 1, 1997. Management believes that they will be able to
reduce this liability by approximately $1,237,000 by providing services under an
agreement entered into in connection with the Acquisition.
To finance the cash portion of the acquisition, the Company
made a private placement of 1,692,308 shares of its Common Stock in June of
1996, at a price of $3.25 per share, for total proceeds before expenses of
$5,500,002.
The Company's cash and cash equivalent position at June 30,
1996 was $2,504,000, an increase of $1,995,000 from fiscal year end 1995. At
June 30, 1996 the net working capital was $1,536,000 and the current ratio was
1.3 - 1.
In order to cover its cash needs during fiscal years 1994 and
1995, the Company carried out financing programs under which it borrowed an
aggregate of$1,299,000 from investors, including directors. As part of the
financing package such investors received 1,040,025 warrants at $0.50 per share
and 129,695 warrants at $1.25 per share. During fiscal year 1996 the Company
repaid $120,000, leaving a balance of $1,179,000 due August 1, 1997. The Company
will require additional sources of liquidity to fund this balance due. In May of
1996 some of the investors exercised 495,025 of the $0.50 warrants for a total
of $247,512.50. A portion of these funds was used by the Company for acquisition
expenses.
The Company has procured a line of credit from its bank in New
York City in the total sum of $75,000. As of June 30, 1996, there were no
balances outstanding under this facility.
Material Changes in Results of Operations: Fiscal 1996 vs. Fiscal 1995:
Total revenues increased by $2,353,000, or 29%, to $10,432,000
in fiscal 1996 from $8,079,000 in fiscal 1995. This increase was due primarily
to the improved performance of the Hemocare product center.
System sales increased by $1,957,000, or 51%, to $5,781,000 in
fiscal 1996 from $3,824,000 in fiscal 1995. This was attributable to increased
sales of new systems by the Hemocare product center in conjunction with its
remarketers and an aggressive upgrade program which took advantage of the
pressure on hospitals to consolidate onto current product revisions.
Service revenues increased by $396,000, or 9%, to $4,651,000
in fiscal 1996 from $4,255,000 in fiscal 1995. This was due primarily to an
increase in service contracts from newly installed systems and modules.
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Cost of systems increased by $787,000, or 64%, to $2,023,000
in fiscal 1996 from $1,236,000 in fiscal 1995. This was due primarily to the
large numbers of upgrades by the Hemocare product center that included sales of
hardware purchased from third parties, as opposed to sales of software.
Cost of services increased by $163,000, or 13%, to $1,403,000
in fiscal 1996 from $1,240,000 in fiscal 1995. This increase is due to the
Company's increase of the number of personnel and other related costs of the
customer support organization in the three product centers.
Software development costs increased by $51,000, or 4%, to
$1,438,000 in fiscal 1996 from $1,387,000 in fiscal 1995, due to an increase in
software engineering personnel.
Selling, general and administrative increased by $830,000, or
20%, to $4,966,000 in fiscal 1996 from $4,136,000 in fiscal 1995. This was due
primarily to increased cost of product marketing, product consulting and
incentive commission payouts.
Interest expense of $216,000 for fiscal 1996, decreased by
$33,000, or 13%, as compared to interest expense of $249,000 in fiscal 1995. The
decrease is primarily due to the fact that fiscal 1996 did not include a debt
discount as did fiscal 1995, coupled with interest incurred in fiscal 1996 on
outstanding loans.
The Company had a net loss of $3,491,000 in fiscal 1996, or
$1.24 per share, as compared to net earnings of $90,000 in fiscal 1995, or $.04
per share, which reflects the charge to operations of acquired research and
development of $3,891,000 from the Pharmakon Acquisition. If this charge were
excluded, however, net income would result in $400,000, or $.12 and $.11 per
share on a primary and fully diluted basis, respectively, in fiscal 1996.
Material Changes in Results of Operations: Fiscal 1995 vs. Fiscal 1994:
Total revenues decreased by $198,000, or 2%, to $8,079,000 in
fiscal 1995 from $8,277,000 in fiscal 1994. This decrease was due to the sales
of more software-only systems and to slower sales of the Surgiware Product,
reflecting uncertainties resulting from an arbitration that concluded in fiscal
1995 (as described in "Business", above).
System sales decreased by $906,000, or 19%, to $3,824,000 in
fiscal 1995 from $4,730,000 in fiscal 1994. This was due to a decrease of sales
of hardware as a system component and a larger number of software only systems
sold, and decreases in Surgiware's sales due to the arbitration, which caused
uncertainties in the marketplace in fiscal 1995.
Service revenues increased by $708,000, or 20%, to $4,255,000
in fiscal 1995 from $3,547,000 in fiscal 1994. This was due primarily to product
maintenance increases relating to an increased installed base.
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Cost of systems decreased by $858,000, or 41%, to $1,236,000
in fiscal 1995 from $2,094,000 in fiscal 1994. This decrease was due primarily
to a larger number of software-only systems in fiscal 1995 as compared to sales
software and hardware in fiscal 1994.
Cost of services increased by $151,000, or 14%, to $1,240,000
in fiscal 1995 from $1,089,000 in fiscal 1994, as the Company had increased the
number of personnel and other related costs of the customer support
organization.
Software development costs decreased by $404,000, or 23%, to
$1,387,000 in fiscal 1995 from $1,791,000 in fiscal 1994. The decrease is
primarily due to a decrease in Surgiware development and the result of the
write-off of $242,000 of capitalized software in fiscal 1994.
Selling, general and administrative increased by $277,000, or
7%, to $4,136,000 in 1995 from $3,859,000 in 1994. The increase is due primarily
to increased payroll and travel expenses, commissions, professional fees and
employee health insurance claims.
The Company expensed costs of $1,222,000 in connection with
the arbitration in fiscal 1994. Such costs included $208,000, which the Company
intended to pay the licensor to retain exclusivity; the balance was principally
legal fees and expenses in connection with the arbitration. During fiscal 1995
the Company, after review of the then current circumstances, decided not to
elect to make the payments required to maintain exclusivity. Accordingly, the
$208,000 accrued expense recorded in the prior year was eliminated, resulting in
increased income.
Interest expense of $249,000, including approximately $100,000
in debt discount, for fiscal 1995 was incurred on the interim financing from
investors referred to above and the loans to the Company from the chairman of
the board.
The Company had a net profit of $90,000 for fiscal 1995, or
$.04 per share, compared to a net loss of $1,902,000, or $.75 per share, in
fiscal 1994. The net profit is due to the elimination of arbitration costs in
fiscal 1995 and the improvement in gross profits.
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ITEM 7. FINANCIAL STATEMENTS
MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PAGE
NUMBER
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REPORT OF INDEPENDENT AUDITORS F-1
CONSOLIDATED BALANCE SHEET AS AT
JUNE 30, 1996 F-2
CONSOLIDATED STATEMENTS OF
OPERATIONS FOR THE YEARS ENDED
JUNE 30, 1996 AND JUNE 30, 1995 F-3
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY FOR THE YEARS
ENDED JUNE 30, 1996 AND JUNE 30,
1995 F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1996 AND
JUNE 30, 1995 F-5
NOTES TO FINANCIAL STATEMENTS F-6
-12-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Mediware Information Systems, Inc.
Melville, New York
We have audited the accompanying consolidated balance sheet of Mediware
Information Systems, Inc. and subsidiaries as at June 30, 1996 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the two-year period ended June 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present
fairly, in all material respects, the consolidated financial position of
Mediware Information Systems, Inc. and subsidiaries at June 30, 1996 and the
results of their operations and their cash flows for each of the years in the
two-year period ended June 30, 1996 in conformity with generally accepted
accounting principles.
/s/ Richard A. Eisner & Company, LLP
New York, New York
August 23, 1996
With respect to Note E(1)
October 28, 1996
F-1
<PAGE>
MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS AT JUNE 30, 1996
================================================================================
A S S E T S
(Notes)
Current assets:
Cash and cash equivalents (Note G) ......................... $ 2,504,000
Accounts receivable, less estimated doubtful accounts
of $188,000 (Note A)...................................... 3,509,000
Current portion of contract installment receivable
(Note A).................................................. 252,000
Inventories (Note A)........................................ 208,000
Prepaid expenses and other current assets .................. 166,000
-------------
Total current assets ................................ 6,639,000
Long-term contract installments receivable, less current
portion (Note A)............................................ 155,000
Fixed assets, at cost, less accumulated depreciation of
$1,364,000 (Notes A and C).................................. 576,000
Capitalized software costs (Notes A and D)..................... 1,012,000
Excess of cost over fair value of net assets acquired,
net of accumulated amortization of $372,000
(Notes A and B) ............................................ 6,737,000
Other assets .................................................. 38,000
--------------
T O T A L............................................ $ 15,157,000
==============
L I A B I L I T I E S
Current liabilities:
Accounts payable............................................ $ 483,000
Accrued expenses and other current liabilities (Note F)..... 1,775,000
Advances from customers (Note A)............................ 1,379,000
Current portion of capital leases payable .................. 15,000
Notes payable (Note E)...................................... 1,451,000
--------------
Total current liabilities............................ 5,103,000
Notes payable, less current portion (Note E)................... 5,728,000
Capital leases payable, less current portion .................. 43,000
--------------
Total liabilities.................................... 10,874,000
--------------
Commitments and contingencies (Note H)
STOCKHOLDERS' EQUITY
(Note G)
Common stock - $.10 par value; authorized 12,000,000
shares; 4,931,320 shares issued and outstanding ............ 493,000
Additional paid-in capital .................................... 13,419,000
(Deficit)...................................................... (9,629,000)
--------------
Total stockholders' equity .......................... 4,283,000
--------------
T O T A L............................................ $ 15,157,000
==============
The accompanying notes to financial
statements are an integral part
hereof.
F-2
<PAGE>
MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended June 30,
-------------------
1996 1995
------ -----
Revenues:
System sales............................. $ 5,781,000 $ 3,824,000
Services................................. 4,651,000 4,255,000
---------------- -------------
Total revenues.................... 10,432,000 8,079,000
---------------- -------------
Costs and expenses:
Cost of systems........................... 2,023,000 1,236,000
Cost of services......................... 1,403,000 1,240,000
Purchased research and development
(Note B)................................ 3,891,000
Software development costs................ 1,438,000 1,387,000
Selling, general and administrative....... 4,966,000 4,136,000
Arbitration (income) (Note H)............. (208,000)
--------------- -------------
13,721,000 7,791,000
--------------- -------------
Earnings (loss) before interest income
and expense............................... (3,289,000) 288,000
Interest income.............................. 14,000 51,000
Interest (expense)........................... (216,000) (249,000)
--------------- -------------
NET EARNINGS (LOSS).......................... $ (3,491,000) $ 90,000
=============== =============
Earnings (loss) per share (Note A)........... $ (1.24) $ .04
=============== =============
Weighted average number of common and common
equivalent shares......................... 2,817,405 2,569,447
=============== =============
The accompanying notes to financial
statements are an integral part
hereof.
F-3
<PAGE>
<TABLE>
<CAPTION>
MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Additional
Paid-in
Capital
Common Stock
Shares Amount (Deficit) Total
<S> <C> <C> <C> <C> <C>
Balance - July 1,
1994........................ 2,521,743 $ 252,000 $ 8,083,000 $ (6,228,000) $ 2,107,000
Release of escrow
shares...................... 74,667 8,000 43,000 51,000
Issuance of
warrants.................... 21,000 21,000
Net earnings................... 90,000 90,000
------------- ------------ -------------- -------------- --------------
Balance - June 30,
1995........................ 2,596,410 260,000 8,147,000 (6,138,000) 2,269,000
Shares issued to
nonemployee
directors................... 86,040 9,000 86,000 95,000
Exercise of
warrants.................... 495,025 49,000 198,000 247,000
Shares issued in
connection with
private
placement
(Note G).................... 1,723,076 172,000 4,891,000 5,063,000
Shares issued as
fees for
acquisitions
(Note B).................... 30,769 3,000 97,000 100,000
Net (loss)..................... (3,491,000) (3,491,000)
------------- ------------ -------------- -------------- --------------
BALANCE - JUNE 30,
1996........................ 4,931,320 $ 493,000 $ 13,419,000 $ (9,629,000) $ 4,283,000
============== ============= ============== ============== ==============
The accompanying notes to financial
statements are an integral part
hereof.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended June 30,
1996 1995
------ -----
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss)............................................................ $ (3,491,000) $ 90,000
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Shares issued to nonemployee directors..................................... 95,000
Provision for doubtful accounts............................................ 162,000 128,000
Depreciation and amortization.............................................. 709,000 735,000
Purchased research and development......................................... 3,891,000
Proceeds from contract installments receivable............................. 20,000 7,000
Changes in operating assets and liabilities, net
of effects from purchase of Pharmakon & JAC:
(Increase) in accounts receivable...................................... (640,000) (314,000)
(Increase) in inventories.............................................. (53,000) (13,000)
(Increase) decrease in prepaid and other assets (28,000) 14,000
Increase (decrease) in accounts payable,
accrued expenses and customer advances............................... 665,000 (406,000)
--------------- ----------------
Net cash provided by operating activities............................ 1,330,000 241,000
--------------- ----------------
Cash flows from investing activities:
Acquisitions of fixed assets................................................... (127,000) (101,000)
Capitalized software costs..................................................... (496,000) (356,000)
Purchase of Pharmakon and JAC, net of cash acquired. (3,893,000)
---------------- ----------------
Net cash (used in) investing activities.............................. (4,516,000) (457,000)
--------------- ----------------
Cash flows from financing activities:
Proceeds from note payable and warrants........................................ 334,000
Repayment of debt.............................................................. (129,000) (23,000)
Proceeds from exercise of warrants............................................. 247,000
Proceeds from private placement................................................ 5,063,000
--------------- ---------------
Net cash provided by financing activities............................ 5,181,000 311,000
--------------- ----------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,995,000 95,000
Cash and cash equivalents - beginning of period................................... 509,000 414,000
--------------- ----------------
CASH AND CASH EQUIVALENTS - END OF PERIOD......................................... $ 2,504,000 $ 509,000
=============== ================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest................................................................... $ 64,000 $ 47,000
Income taxes............................................................... 6,000 3,000
Noncash transactions:
Shares released from escrow, recorded as additional
purchase price........................................................... 51,000
Equipment acquired with capital leases..................................... 41,000
The Company made acquisitions for $3,893,000 of cash
in the year ended June 30, 1996. The purchase
price was allocated to the assets acquired and
liabilities assumed based on their fair value as
indicated in Note B........................................................ 10,004,000
Less cash acquired........................................................... (11,000)
Promissory note issued....................................................... (6,000,000)
Common stock issued.......................................................... (100,000)
-----------------
$ 3,893,000
====================
The accompanying notes to financial
statements are an integral part
hereof.
</TABLE>
F-5
<PAGE>
(NOTE A) - The Company and its Significant Accounting Policies:
The consolidated financial statements include the accounts of Mediware
Information Systems, Inc. and its wholly owned subsidiary, Digimedics
Corporation ("Digimedics") and its subsidiary J.A.C. Computer Services Limited
("JAC"). All significant intercompany transactions have been eliminated in
consolidation.
Mediware Information Systems, Inc. and subsidiaries (the "Company")
develops, installs and maintains computerized information systems for
hospital blood banks, pharmacies and surgical suites.
As discussed in Note E, the Company has $5,728,000 of long-term debt which is
due on August 1, 1997. The Company will have to refinance this indebtedness.
There is no assurance that it will be able to do so on acceptable terms.
[1] Cash equivalents:
The Company considers all highly liquid short-term investments
with a maturity of three months or less to be cash equivalents.
[2] Revenue recognition:
Revenue from the sale of systems is recognized upon delivery,
although payment may be due upon completion of other contractual obligations.
Service revenue is recognized on a straight-line basis over the life of the
service agreements.
[3] Long-term contract installments receivable:
Contract installments receivable arising from sales of systems
with extended payment terms bear interest at rates from 7% to 16% and are due in
monthly installments through 1999.
[4] Inventories:
Inventories, which consist of equipment purchased for resale,
are valued at the lower of cost or market. Cost is determined by the specific
identification method.
[5] Fixed assets:
Furniture and equipment are depreciated by the straight-line
method over their estimated useful lives of five years. Leasehold improvements
are amortized by the straight-line method over the remaining terms of the
respective leases.
F-6
<PAGE>
(NOTE A) - The Company and its Significant Accounting Policies:
(continued)
[6] Software development costs:
In accordance with Statement of Financial Accounting Standards
No. 86, the Company capitalizes certain costs associated with the development of
computer software. Such costs, in addition to costs of purchased software, are
amortized over the software's estimated useful life of five years. Management
periodically evaluates the recoverability of capitalized software development
costs and write-downs are taken if required.
Costs to maintain developed programs and other development
costs incurred prior to achievement of technical feasibility are expensed as
incurred. Such costs were $956,000 and $951,000 for the years ended June 30,
1996 and June 30, 1995, respectively. Software development costs reported on the
consolidated statements of operations include amortization (Note D).
[7] Excess of cost over the fair value of net assets acquired:
The excess of cost over the fair value of net assets acquired,
which arose from the acquisition of Digimedics, Pharmakon and JAC, is being
amortized on a straight-line basis over twenty years.
[8] Advances from customers:
Advances from customers represent contractual payments
received by the Company. Such amounts are recorded as income upon delivery of
the system with respect to system revenues or over the life of the service
agreement with respect to service revenue.
[9] Earnings (loss) per share:
Earnings (loss) per share are based on the weighted average
number of shares outstanding during each year.
Earnings per share are computed on a primary basis since the
fully diluted basis does not result in further dilution.
[10] 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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-7
<PAGE>
(NOTE A) - The Company and its Significant Accounting Policies:
(continued)
[11] Change in accounting principle and recently issued accounting
pronouncements:
In 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS 121"), and Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS 121 requires, among
other things, that entities identify events or changes in circumstances which
indicate that the carrying amount of an asset may not be recoverable. SFAS 123
requires, among other things, that companies establish a fair value based method
of accounting or disclosure for stock-based compensation plans. These statements
are effective for the Company's fiscal year commencing July 1, 1996. The Company
believes that adoption of SFAS 121 and SFAS 123 will not have a material impact
on its financial statements. The Company expects to continue to account for
employee stock-based compensation in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," using intrinsic
values with appropriate disclosures using the fair value based method. The
Company has not elected to adopt SFAS 123 early.
(NOTE B) - Acquisitions:
On June 17, 1996, Digimedics and Information Handling Services Group, Inc.
("IHS") and its wholly owned subsidiary, Continental Healthcare Systems, Inc.
("Continental"), entered into an Asset Purchase Agreement whereby Digimedics
purchased from Continental its Pharmakon division ("Pharmakon"). Also on June
17, 1996, Digimedics purchased from Holland America Investment Corporation, a
wholly owned subsidiary of IHS, all of the issued and outstanding capital stock
of JAC, a United Kingdom corporation. Pharmakon and JAC develop, install and
maintain computerized information systems for hospital pharmacies. Digimedics
paid an aggregate of $3,666,000 in cash and issued a $6,000,000 secured
promissory note (Note E) for both acquisitions. Digimedics also incurred
acquisition costs of $238,000 in cash (of which approximately $26,000 was to a
related party) and issued 30,769 shares of common stock as a fee valued at
$100,000 to related parties.
F-8
<PAGE>
(NOTE B) - Acquisitions: (continued)
The purchase price has been allocated to the assets acquired, including cash of
$11,000, and liabilities assumed based on their fair values as follows:
Purchase price:
Cash......................................$ 3,666,000
Note payable.............................. 6,000,000
Costs of acquisition...................... 338,000
------------------
T o t a l..........................$ 10,004,000
==================
Assets acquired and liabilities
assumed:
Current assets..........................$ 638,000
Fixed assets............................ 248,000
Other assets............................ 151,000
Purchased research and development...... 3,891,000
Excess of cost over fair value
of net assets acquired................ 5,873,000
Current liabilities..................... (797,000)
------------------
$ 10,004,000
===================
The purchased research and development was charged to operations upon
acquisition. The acquisitions have been accounted for as a purchase and,
accordingly, the accompanying financial statements include the accounts of
Pharmakon and JAC from date of acquisition.
Pro forma summary of consolidated operations, based on the original agreement,
assuming the acquisition of Pharmakon and JAC has taken place on July 1, 1994:
Year Ended June 30,
1996 1995
------ -----
(Unaudited)
Revenue..................................$ 18,965,000 $ 17,526,000
================= ==================
Net income...............................$ 26,000 $ 37,000
================= ==================
Earnings per share.......................$ .01 $ .01
================= ==================
F-9
<PAGE>
(NOTE B) - Acquisitions: (continued)
Digimedics entered into an agreement with Continental to perform Continental's
obligation to provide certain services for customers of Continental, such
services to include installation of systems, customizing systems, and providing
hardware. The agreement also provides for Digimedics to assist Continental in
the collection of certain billed and unbilled accounts receivable, principally
due from the customers who will receive the above mentioned services. Digimedics
is to be paid approximately $1,237,000 plus 30% of amounts collected for
performing the foregoing services.
(NOTE C) - Fixed Assets:
Fixed assets consist of the following as at June 30, 1996:
Computer, machinery, and office
equipment........................... $ 1,614,000
Furniture.................................... 310,000
Leasehold improvements....................... 16,000
-----------
T o t a l.......................... 1,940,000
Less accumulated depreciation................ 1,364,000
-----------
B a l a n c e...................... $ 576,000
===========
(NOTE D) - Capitalized Software Costs:
June 30,
1996 1995
Balance, beginning of year
(net of accumulated amortization)..........$ 998,000 $1,079,000
Additions..................................... 496,000 356,000
Amortization................................... (482,000) (437,000)
----------- ----------
Balance, end of year (net of
accumulated amortization)...................$1,012,000 $ 998,000
========== ==========
F-10
<PAGE>
(NOTE E) - Notes Payable:
At June 30, 1996 the Company has outstanding notes payable as follows:
Promissory note issued in connection with the acquisition of
Pharmakon and JAC (the "Acquisition Note") (Note B) bearing
interest at Citibank N.A.'s base rate 8.25% at June 30, 1996
payable monthly commencing July 31, 1996, due on or before
November 30, 1996, collateralized by substantially all of
the assets of Digimedics and all of the issued and
outstanding stock of Digimedics and JAC. The loan agreement,
among other matters, restricts the Company with respect to
incurring any lien or encumbrance on its property or assets,
entering into new indebtedness and paying any
dividents (1).................................$ 6,000,000
Notes issued during the years ended June 30, 1995 and June
30, 1994, bearing interest at 12% per annum, due on or
before August 1, 1997, collateralized by the trade accounts
receivable of Digimedics which has a balance at June 30,
1996 of $1,069,000, net of estimated doubtful accounts of
$66,000, (including $804,000 issued to directors) (2)......1,179,000
7,179,000
Less current maturities.. ........................... 1,451,000
---------
$5,728,000
===========
(1) On October 28, 1996 the promissory note was amended to provide for an
extension of the due date to August 1, 1997. The extension agreement
provides for an immediate payment of $1 million and monthly payments of
$100,000 for principal and interest. In addition, the interest rate was
increased to 15% on approximately $3,763,000 with the original rate
remaining for $1,237,000. The agreement provides for the monthly
payments to be first applied to the interest on the portion of the loan
subject to the original rate. The remainder is to be applied to the
interest, then principal, of the loan subject to 15%. As a result of
this amendment, $4,549,000 of this liability is classified as long-term
debt.
F-11
<PAGE>
(NOTE E) - Notes Payable: (continued)
(2) These notes are subordinated to the acquisition note. In conjunction
with the issuance of these notes the Company issued warrants to
purchase 1,040,025 shares of common stock for $0.50 per share and
129,695 shares for $1.25 per share, exercisable through September 30,
2004. The Company recorded debt discount and additional paid-in
capital. The debt discount was expensed in prior years since the notes
were initially due prior to the current fiscal year. During May 1996,
495,025 of the $0.50 warrants were exercised.
(NOTE F) - Accrued Expenses and Other Current Liabilities:
Accrued expenses and other current liabilities consist of the following at June
30, 1996:
Wages and related benefits................... $ 562,000
Private placement costs...................... 282,000
Interest..................................... 312,000
Acquisition costs............................ 133,000
Other........................................ 486,000
-----------
T o t a l............................ $ 1,775,000
===========
(NOTE G) - Stockholders' Equity:
[1] Stock options and warrants:
Pursuant to the Company's Stock Option Plan (the "Plan") the
number of shares reserved for issuance is equal to the lower of twenty percent
of the outstanding shares of common stock or 500,000 shares. The options entitle
holders to purchase shares of common stock at an exercise price not less than
the fair value of the common stock at the date of grant. Up to 107,772
additional options may be issued under this plan.
The Company also has options outstanding pursuant to a 1982
Stock Option Plan (the "1982 Plan") and a Non-Employee Directors Stock Option
Plan (the "Non-Employee Directors Plan"). No additional options may be granted
under the 1982 Plan and 60,685 additional options may be granted under the
Non-Employee Directors Plan. The options under the Non-Employee Directors Plan
entitle the holders to purchase shares of common stock at a price equal to the
fair value on the date of grant.
F-12
<PAGE>
(NOTE G) - Stockholders' Equity: (continued)
[1] Stock options and warrants: (continued)
The following table sets forth summarized information
concerning the Company's stock options:
Number of
Shares Exercise Price
Outstanding - July 1, 1994.................... 622,266 $1.00 - $5.25
Options granted............................... 35,004 $1.00 - $1.19
Options cancelled ........................... (78,705) $1.00 - $1.76
--------
Outstanding - June 30, 1995................... 578,565 $1.00 - $5.25
Options granted............................... 80,002 $1.00 - $1.76
Options cancelled............................. (56,893) $1.00 - $1.76
--------
Outstanding - June 30, 1996................... 601,674 $1.00 - $5.25
========
Exercisable................................... 438,060 $1.00 - $5.25
========
The Company had outstanding warrants for the purchase of
87,000 shares of its common stock at $5.775 per share which expired on August 5,
1996. The Company also has outstanding warrants for the purchase of 545,000
shares of its common stock at $.50 per share and for the purchase of 129,695
shares at $1.25 per share exercisable through September 30, 2004 (Note E).
[2] Private Placement:
During June 1996, the Company completed a private placement of
its securities. The Company issued 1,692,308 shares of its common stock for
$3.25 a share, yielding net proceeds of approximately $5,063,000 after expenses
totaling approximately $437,000 (of which approximately $65,000 was to a related
party). The Company also issued 30,768 shares to related parties as a placement
fee valued at $100,000.
F-13
<PAGE>
(NOTE H) - Commitments and Contingencies:
[1] Operating leases:
Rental commitments for the remaining term of the Company's
noncancellable leases relating to office space expiring at various dates through
2004 are as follows:
Year Ending
June 30,
1997 . . . . . . . . . . . . . . . . $ 477,000
1998 . . . . . . . . . . . . . . . . 487,000
1999 . . . . . . . . . . . . . . . . 228,000
2000 . . . . . . . . . . . . . . . . 174,000
2001 . . . . . . . . . . . . . . . . 153,000
Thereafter . . . . . . . . . . . . . 101,000
----------
T o t a l. . . . . . . . . $1,620,000
==========
Certain leases provide for additional payments for real estate
taxes and insurance and contain an escalation clause for increases in utilities
and services. Rental expense for the years ended June 30, 1996 and June 30, 1995
aggregated $213,000 and $212,000, respectively.
[2] Software license agreement:
In September 1990, the Company entered into an agreement to
acquire a perpetual exclusive license for a computerized information system for
hospital operating rooms for $750,000. In addition to the purchase price, the
Company was required to pay royalties of 5% to 15% of sales of the product. To
maintain exclusivity, the Company was required to pay cumulative royalty
payments of $675,000, by September 1995 ($375,000 by September 1994 and an
additional $300,000 by September 1995).
Subsequently, the licensor asserted a variety of breach of
contract and other violations of the agreement and commenced an arbitration
proceeding in June 1992. On November 7, 1994 the arbitral panel rendered an
award confirming the Company's exclusivity for its Surgiware product, and its
license for another hospital scheduling software product developed by the
licensor. The award also established December 31, 1994 as the due date for the
Company to make the payment of $375,000 due September 1994 to retain its
exclusivity.
F-14
<PAGE>
(NOTE H) - Commitments and Contingencies: (continued)
[2] Software license agreement: (continued)
During the fourth quarter of the year ended June 30, 1994 the
Company expensed costs of $1,222,000 in connection with the arbitration. Such
costs included $208,000 which the Company intended to pay to the licensor to
retain exclusivity; the balance is principally legal fees and expenses in
connection with the arbitration. During the year ended June 30, 1995 the Company
elected not to make the payments required to maintain exclusivity. Accordingly,
the liability recorded in the prior year was reversed.
[3] Release of common shares held in escrow:
On November 10, 1994 the Company was informed by the Superior
Court of California that it would be required to release 74,667 shares of its
common stock, which were being held in escrow, to former stockholders of
Digimedics Corporation, a wholly owned subsidiary. Upon releasing the shares the
Company increased its number of common shares outstanding and, accordingly,
recorded additional capital and increased the excess of cost over fair value of
net assets acquired, by approximately $51,000 which is being amortized over the
remaining life of such asset.
[4] Other matters:
Substantially all of the Company's cash is on deposit at a
major metropolitan bank.
(NOTE I) - Income Taxes:
At June 30, 1996 the Company has available net operating loss
carryforwards to reduce future federal taxable income of approximately
$7,500,000 which is limited as to the amount which may be used in any one year.
At June 30, 1996 the Company also has available general business tax credit
carryforwards to reduce future current federal income tax expense of
approximately $321,000. The net operating loss carryforwards and business tax
credit carryforwards expire in various amounts through 2009 and 2011,
respectively.
SFAS 109 requires the recognition of deferred tax assets and
liabilities for both the expected future tax impact of differences between the
financial statements and tax basis of assets and liabilities, and for the
expected future tax benefit to be derived from tax loss and tax credit
carryforwards. SFAS 109 additionally requires the establishment of a valuation
allowance to reflect the likelihood of realization of deferred tax assets. At
June 30, 1996 the Company has total deferred tax liabilities of approximately
$396,000 and total deferred tax assets of approximately $5,034,000. The Company
has recorded a valuation allowance for the amount by which deferred tax assets
exceed deferred tax liabilities and, as a result, the Company has not reported
any liability or asset for deferred taxes at June 30, 1996.
F-15
<PAGE>
(NOTE I) - Income Taxes: (continued)
The major deferred tax asset (liability) items at June 30,
1996 are as follows:
Net operating loss carryforwards................ $ 3,019,000
Business tax credit carryforwards............... 321,000
Software cost capitalization.................... (396,000)
Purchased research and development ............. 1,551,000
Other........................................... 143,000
-----------
4,638,000
Valuation allowance........................................ (4,638,000)
-----------
$ - 0 -
========
The difference between the tax provision and the amount that
would be computed by applying the statutory federal income tax rate to income
before taxes is attributable to the following:
Year Ended June 30,
1996 1995
Income tax provision (benefit) -
statutory rate.....................................$ (1,187,000) $ 30,000
Provision for state income taxes
(benefit) - net of federal
benefit (expense).................................. (187,000) 7,000
(Reduction) increase in valuation
allowance on deferred tax assets................... 1,374,000 (37,000)
----------- ---------
$ - 0 - $ - 0 -
============= ===========
F-16
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
Information required by Part III will be
supplied by a supplemental filing of Part III
or by the incorporation by reference of a
Proxy Statement
meeting the requirements of Section 14(a).
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
A list of the Exhibits is set forth in the Exhibit Index,
which index precedes such Exhibits, and which is incorporated herein by this
reference thereto.
Reports on Form 8-K
A report on Form 8-K was filed July 1, 1996 reporting as Item
2 the acquisition of the Pharmakon Division ("Division") of Continental
Healthcare Systems, Inc. and JAC Computer Services Ltd. ("JAC"). An amendment to
the report on Form 8-KA was filed on September 13, 1996, which included, as Item
7, audited financial statements of the Division and JAC for the fiscal years
ended November 30, 1994 and November 30, 1995, for the five months ended April
30, 1996 for the Division and JAC, and consolidated proforma financial
information (i) combining the statement of operations for the Company for the
nine months ended March 31, 1996 with the statement of operations for the
Division and JAC for the nine months ending April 30, 1996 and (ii) combining
the statement of operations for the Company, the Division and JAC for the twelve
months ended June 30, 1996.
-13-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Mediware Information Systems, Inc.
----------------------------------
(Registrant)
By: /s/ Les N. Dace
--------------------------------
Les N. Dace, President
Dated: October 29, 1996
In accordance with the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Les N. Dace President, CFO & CEO October 29, 1996
- ------------------------
(Les N. Dace) Director (Principal Executive
Officer, Principal Financial
Officer and Principal
Accounting Officer)
/s/ Lawrence Auriana Chairman of the Board; October 29, 1996
- ------------------------
(Lawrence Auriana) Director
* Jonathan Churchill Director October 29, 1996
- ------------------------
(Jonathan Churchill)
* Roger Clark Director October 29, 1996
- ------------------------
(Roger Clark)
Director
- ------------------------
(Joseph Delario)
* John Frieberg Director October 29, 1996
- ------------------------
(John Frieberg)
Director
- ------------------------
(Walter Kowsh, Jr.)
* Hans Utsch Director October 29, 1996
- ------------------------
(Hans Utsch)
* Clinton G. Weiman Director October 29, 1996
- ------------------------
(Clinton G. Weiman)
* By Les N. Dace
Attorney-in-fact
-14-
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
3.1 Restated Certificate of Incorporation Incorporated by Reference to
Exhibit No. 4 to the
Registration Statement
(the "!996 Registration
Statement") on Form S-8
(File No. 333-7591)
3.2 By-laws
10.1 Agreement between the Company and **
Intellimed Corporation dated September 25,
1990
10.3.1 Asset Purchase Agreement dated June 17, *
1996 among Digimedics Corporation and
Continental Healthcare Systems, Inc. and
Information Handling Services Group, Inc.
10.3.2 Stock Purchase Agreement dated June 17, *
1996 among Digimedics Corporation and
Holland America Investment Corporation and
Information Handling Services Group, Inc.
10.3.3 Amended and Restated Secured Promissory Note
of Digimedics Corporation dated October 28, 1996
in the principal amount of $5,000,000
to Continental Healthcare Systems, Inc.
10.3.4 Pledge Agreement dated June 17, 1996 *
between Mediware and Continental Healthcare
Systems, Inc.
10.3.5 Charge dated June 17, 1996 between *
Digimedics Corporation and Continental
Healthcare Systems, Inc.
10.3.6 General Security Agreement dated June 17, *
1996 between Digimedics Corporation and
Continental Healthcare Systems, Inc.
10.3.7 Guaranty dated June 17, 1996 by Mediware in *
favor of Continental Healthcare Systems, Inc.
10.7 Letters outlining terms of engagement for Les
Dace, Thomas Mulstay, and John Esposito
-15-
<PAGE>
10.8 Employee Stock Option Plan, 1982, as **
amended
10.9 Form of Stock Option Agreement under 1982 **
Plan
10.10 Form of Stock Option Agreement with **
Quadrocom, Inc.
10.13 1992 Employee Stock Option Plan Incorporated by reference
to Exhibit C to Company's
Proxy Statement dated
December 17, 1991
10.14 Stock Option Plan for Non-Employee Incorporated by reference
Directors to Exhibit B to Company's
Proxy Statement dated
December 17, 1991
10.15 Form of Stock Option Agreement under 1992
Employee Stock Option Plan
10.16.1 Form of Note for Interim Financing
10.16.2 Form of Warrant for Interim Financing
21 Subsidiaries of the registrant
23 Consent of Richard A. Eisner & Company,
LLP
24 Powers of Attorney
27 Financial Data Schedule
- ------------------------
* Incorporated by reference to Exhibits 2(a), 2(b), 2(c), 2(d), 2(e),
2(f) and 2(g), respectively, in the Company's Current Report on Form
8-K, filed on July 1, 1996.
** Incorporated by reference to the Exhibit bearing the same designation
in the 1991 Registration Statement.
<PAGE>
Exhibit 3.2
BY-LAWS
OF
MEDIWARE INFORMATION SYSTEMS, INC.
(Restated as of October 15, 1996)
ARTICLE I
OFFICES
The offices of the Corporation shall be located in the town of
Melville, Suffolk County, and the State of New York. The Corporation may also
maintain offices at such other places within or without the United States as the
Board of Directors may, from time to time, determine.
ARTICLE II
MEETING OF SHAREHOLDERS
Section 1. Annual Meetings. The annual meeting of the
shareholders of the Corporation shall be held on the fourth Wednesday of April
or, if it be a legal holiday, then on the next succeeding day not a legal
holiday, for the purpose of electing directors and transacting such other
business as may properly come before the meeting.
Section 2. Special Meetings. Special meetings of the
shareholders may be called at any time by the Board of Directors or by the
President, and shall be called by the President or the Secretary at the written
request of the holders of ten percent (10%) of the shares then outstanding and
entitled to vote thereat, or as otherwise required under the provisions of the
Business Corporation Law.
Section 3. Place of Meetings. All meetings of shareholders
shall be held at the principal office of the Corporation, or at such other
places within or without the State of New York as shall be designated in the
notices or waivers of notice of such meetings.
Section 4. Notice of Meetings. (a) Written notice of each
meeting of shareholders, whether annual or special, stating the time when and
place where it is to be held, shall be served either personally or by mail, not
less than ten nor more than fifty days before the meeting, upon each shareholder
of record entitled to vote at such meeting, and to any other shareholder to whom
the giving of notice may be required by law. Notice of a special meeting shall
also state the purpose or purposes for which the meeting is called, and shall
indicate that it is being issued by, or at the direction of, the person or
persons calling the meeting. If, at any meeting, action is proposed to be taken
that would, if taken, entitle shareholders to receive payment for
By-Laws-1
<PAGE>
their shares pursuant to the Business Corporation Law, the notice of such
meeting shall include a statement of that purpose and to that effect. If mailed,
such notice shall be directed to each such shareholder at his address, as it
appears on the records of the shareholders of the Corporation, unless he shall
have previously filed with the Secretary of the Corporation a written request
that notices intended for him be mailed to some other address, in which case, it
shall be mailed to the address designated in such request.
(b) Notice of any meeting need not be given to any shareholder
who attends such meeting, in person or by proxy, or to any shareholder who, in
person or by proxy, submits a signed waiver of notice either before or after
such meeting. Notice of any adjourned meeting of shareholders need not be given,
unless otherwise required by statute.
Section 5. Quorum. (a) Except as otherwise provided herein,
or by statute, or in the Certificate of Incorporation (such Certificate and any
amendments thereof being hereinafter collectively referred to as the
"Certificate of Incorporation"), at all meetings of shareholders of the
Corporation, the presence at the commencement of such meetings in person or by
proxy of shareholders holding of record a majority of the total number of shares
of the Corporation then issued and outstanding and entitled to vote, shall be
necessary and sufficient to constitute a quorum for the transaction of any
business. The withdrawal of any shareholder after the commencement of a meeting
shall have no effect on the existence of a quorum after a quorum has been
established at such meeting.
(b) Despite the absence of a quorum at any annual or special
meeting of shareholders, the shareholders, by a majority of the votes cast by
the holders of shares entitled to vote thereon, may adjourn the meeting. At any
such adjourned meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as originally called
if a quorum had been present.
Section 6. Voting. (a) Except as otherwise provided by
statute or by the Certificate of Incorporation, any corporate action, other than
the election of directors, to be taken by vote of the shareholders, shall be
authorized by a majority of votes cast at a meeting of shareholders by the
holders of shares entitled to vote thereon.
(b) Except as otherwise provided by statute or by the
Certificate of Incorporation, at each meeting of shareholders, each holder of
record of stock of the Corporation entitled to vote thereat shall be entitled to
one vote for each share of stock registered in his name on the books of the
Corporation.
(c) Each shareholder entitled to vote or to express consent
or dissent without a meeting, may do so by proxy; provided, however, that the
By-Laws-2
<PAGE>
instrument authorizing such proxy to act shall have been executed in writing by
the shareholder himself, or by his attorney-in-fact thereunto duly authorized in
writing. No proxy shall be valid after the expiration of eleven months from the
date of its execution, unless the person executing it shall have specified
therein the length of time it is to continue in force. Such instrument shall be
exhibited to the Secretary at the meeting.
(d) Any resolution in writing, signed by all of the
shareholders entitled to vote thereon, shall be and constitute action by such
shareholders to the effect therein expressed, with the same force and effect as
if the same had been duly passed by unanimous vote at a duly called meeting of
shareholders.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Number, Election and Term of Office. (a) The
business of the Corporation shall be managed under the direction of its Board of
Directors, which shall consist of not less than nine Directors. The Directors of
the Corporation shall be divided into three classes, designated Class I, Class
II and Class III. All classes shall be as nearly equal in number as possible,
but each class shall consist of at least three Direc- tors.
(b) The terms of office of the Directors initially classified
shall be as follows: at the annual meeting of shareholders on January 17, 1992,
Class I Directors shall be elected for a one-year term expiring at the next
succeeding annual meeting of shareholders, Class II Directors for a two-year
term expiring at the second succeeding annual meeting of shareholders and Class
III Directors for a three-year term expiring at the third succeeding annual
meeting of shareholders. At each annual meeting of shareholders after the
January 17, 1992 annual meeting, Directors so classified who are elected to
replace those whose terms expire at each such annual meeting shall be elected to
hold office for a three-year term until the third succeeding annual meeting
following such Director's election. Each Director so classified shall hold
office until the annual meeting at which his term expires and until his
successor has been elected and qualified.
Section 2. Duties and Powers. The Board of Directors shall be
responsible for the control and management of the affairs, property and
interests of the Corporation, and may exercise all powers of the Corporation,
except as are in the Certificate of Incorporation or by statute expressly
conferred upon or reserved to the shareholders.
By-Laws-3
<PAGE>
Section 3. Annual and Regular Meetings; Notice. (a) A regular
annual meeting of the Board of Directors shall be held immediately following the
annual meeting of the shareholders, at the place of such annual meeting of
shareholders.
(b) The Board of Directors, from time to time, may provide by
resolution for the holding of other regular meetings of the Board of Directors,
and may fix the time and place thereof.
(c) Notice of any regular meeting of the Board of Directors
shall not be required to be given and, if given, need not specify the purpose of
the meeting; provided, however, that in case the Board of Directors shall fix or
change the time or place of any regular meeting, notice of such action shall be
given to each director who shall not have been present at the meeting at which
such action was taken within the time limited, and in the manner set forth in
paragraph (b) of Section 4 of this Article III, with respect to special
meetings, unless such notice shall be waived in the manner set forth in
paragraph (c) of such Section 4.
Section 4. Special Meetings; Notice. (a) Special meetings of
the Board of Directors shall be held whenever called by the President or by one
of the directors, at such time and place as may be specified in the respective
notices or waivers of notice thereof.
(b) Notice of special meetings shall be mailed directly to
each director, addressed to him at his residence or usual place of business, at
least two (2) days before the day on which the meeting is to be held, or shall
be sent to him at such place by telegram, radio or cable, or shall be delivered
to him personally or given to him orally, not later than the day before the day
on which the meeting is to be held. A notice, or waiver of notice, except as
required by Section 8 of this Article III, need not specify the purpose of the
meeting.
(c) Notice of any special meeting shall not be required to be
given to any director who shall attend such meeting without protesting prior
thereto or at its commencement, the lack of notice to him, or who submits a
signed waiver of notice, whether before or after the meeting.
Section 5. Chairman. At all meetings of the Board of
Directors, the Chairman of the Board, if any and if present, shall preside. If
there shall be no Chairman, or he shall be absent, then the President shall
preside, and in his absence, a Chairman chosen by the directors shall preside.
Section 6. Quorum and Adjournments. (a) At all meetings of
the Board of Directors, the presence of a majority of the entire Board shall be
necessary and sufficient to constitute a quorum for the transaction of business,
except as otherwise provided by law, by the Certificate of Incorporation, or by
these By-Laws.
By-Laws-4
<PAGE>
(b) A majority of the directors present at the time and place
of any regular or special meeting, although less than a quorum, may adjourn the
same from time to time without notice.
Section 7. Manner of Acting. (a) At all meetings of the Board
of Directors, each director present shall have one vote, irrespective of the
number of shares of stock, if any, which he may hold.
(b) Except as otherwise provided by statute, by the
Certificate of Incorporation, or by these By-Laws, the action of a majority of
the directors present at any meeting at which a quorum is present shall be the
act of the Board of Directors.
Section 8. Vacancies. Newly created directorships resulting
from an increase in the number of Directors and vacancies occurring on the Board
of Directors for any reason may be filled by vote of the Directors (including a
majority of Directors then in office if less than a quorum exists), provided,
however, that if the number of Directors is changed, (i) any newly created
directorships or any decrease in directorships shall be apportioned by the Board
among the classes so as to make all classes as nearly equal as possible, and
(ii) when the number of Directors is increased by the Board and any newly
created directorships are filled by the Board, there shall be no classification
of the additional Directors until the next annual meeting of shareholders. Any
Director elected by the Board to fill a newly created directorship shall hold
office until the next annual meeting of shareholders and until his successor,
classified in accordance with Section 1 of this Article III, has been elected
and qualified. Any Director elected to fill a vacancy of an existing
directorship shall hold office for the remainder of the term of that
directorship. No decrease in the number of Directors constituting the Board
shall shorten the term of any incumbent Director.
Section 9. Resignation. Any director may resign at any time by
giving written notice to the Board of Directors, the President or the Secretary
of the Corporation. Unless otherwise specified in such written notice, such
resignation shall take effect upon receipt thereof by the Board of Directors or
such officer, and the acceptance of such resignation shall not be necessary to
make it effective.
Section 10. Removal of Directors. Except as otherwise provided
in the Certificate of Incorporation or in these By-Laws, any director may be
removed, but only for cause, at any time, by the affirmative vote of the holders
of a majority of the outstanding shares of stock entitled to vote for the
election of directors of the Corporation at a meeting of the shareholders called
and held for that purpose. Directors may also be removed,
By-Laws-5
<PAGE>
but only for cause, by a majority vote of the entire Board of Directors.
Section 11. Salary. No stated salary shall be paid to
directors, as such, for their services, but by resolution of the Board of
Directors a fixed sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board; provided, however,
that nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
Section 12. Committees. The Board of Directors, by resolution
adopted by a majority of the entire Board, may from time to time designate from
among its members an executive committee and such other committees, and
alternate members thereof, as they may deem desirable, each consisting of three
or more members, with such powers and authority (to the extent permitted by law)
as may be provided in such resolution. Each such committee shall serve at the
pleasure of the Board.
Section 13. Meetings by Conference Telephone. Members of the
Board of Directors may participate in a meeting of the Board by means of
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
ARTICLE IV
OFFICERS
Section 1. Number, Qualifications, Election and Term of
Office. (a) The officers of the Corporation shall consist of a President, a
Secretary, a Treasurer, and such other officers, including a Chairman of the
Board of Directors, and one or more Vice Presidents, as the Board of Directors
may from time to time deem advisable. Any officer other than the Chairman of the
Board of Directors may be, but is not required to be, a director of the
Corporation. Any two or more offices, except the offices of the President and
Secretary, may be held by the same person.
(b) The officers of the Corporation shall be elected by the
Board of Directors at the regular annual meeting of the Board following the
annual meeting of shareholders.
(c) Each officer shall hold office until the annual meeting of
the Board of Directors next succeeding his election, and until his successor
shall have been elected and qualified, or until his death, resignation or
removal.
Section 2. Resignation. Any officer may resign at any
time by giving written notice of such resignation to the Board of
By-Laws-6
<PAGE>
Directors, or to the President or the Secretary of the Corporation. Unless
otherwise specified in such written notice, such resignation shall take effect
upon receipt thereof by the Board of Directors or by such officer, and the
acceptance of such resignation shall not be necessary to make it effective.
Section 3. Removal. Any officer may be removed, either with
or without cause, and a successor elected by the Board at any time.
Section 4. Vacancies. A vacancy in any office by reason of
death, resignation, inability to act, disqualification, or any other cause, may
at any time be filled for the unexpired portion of the term by the Board of
Directors.
Section 5. Duties of Officers. Officers of the Corporation
shall, unless otherwise provided by the Board of Directors, each have such
powers and duties as generally pertain to their respective offices as well as
such powers and duties as may be set forth in these By-Laws, or may from time to
time be specifically conferred or imposed by the Board of Directors. The
President shall be the chief executive officer of the Corporation.
Section 6. Sureties and Bonds. In case the Board of Directors
shall so require, any officer, employee or agent of the Corporation shall
execute to the Corporation a bond in such sum, and with such surety or sureties
as the Board of Directors may direct, conditioned upon the faithful performance
of his duties to the Corporation, including responsibility for negligence and
for the accounting for all property, funds or securities of the Corporation
which may come into his hands.
Section 7. Shares of Other Corporations. Whenever the
Corporation is the holder of shares of any other corporation, any right or power
of the Corporation as such shareholder (including the attendance, acting and
voting at shareholders' meetings and execution of waivers, consents, proxies or
other instruments) may be exercised on behalf of the Corporation by the
President, any Vice President, or such other person as the Board of Directors
may authorize.
ARTICLE V
SHARES OF STOCK
Section 1. Certificate of Stock. (a) The certificates
representing shares of the Corporation shall be in such form as shall be adopted
by the Board of Directors, and shall be numbered and registered in the order
issued. They shall bear the holder's name and the number of shares, and shall be
signed by (i) the Chairman of the Board or the President or a Vice President,
and (ii) the Secretary or Treasurer, or any Assistant Secretary or Assistant
Treasurer, and may bear the corporate seal.
By-Laws-7
<PAGE>
(b) No certificate representing shares shall be issued until
the full amount of consideration therefor has been paid, except as otherwise
permitted by law.
(c) The Board of Directors may authorize the issuance of
certificates for fractions of a share which shall entitle the holder to exercise
voting rights, receive dividends and participate in liquidating distributions,
in proportion to the fractional holdings; or it may authorize the payment in
cash of the fair value of fractions of a share as of the time when those
entitled to receive such fractions are determined; or it may authorize the
issuance, subject to such conditions as may be permitted by law, of scrip in
registered or bearer form over the signature of an officer or agent of the
Corporation, exchangeable as therein provided for full shares, but such scrip
shall not entitle the holder to any rights of a shareholder, except as therein
provided.
Section 2. Lost or Destroyed Certificates. The holder of any
certificate representing shares of the Corporation shall immediately notify the
Corporation of any loss or destruction of the certificate representing the same.
The Corporation may issue a new certificate in the place of any certificate
theretofore issued by it, alleged to have been lost or destroyed. On production
of such evidence of loss or destruction as the Board of Directors in its
discretion may require, the Board of Directors may, in its discretion, require
the owner of the lost or destroyed certificate, or his legal representatives, to
give the Corporation a bond in such sum as the Board may direct, and with such
surety or sureties as may be satisfactory to the Board, to indemnify the
Corporation against any claim, loss, liability or damage it may suffer on
account of the issuance of the new certificate. A new certificate may be issued
without requiring any such evidence or bond when, in the judgment of the Board
of Directors, it is proper so to do.
Section 3. Transfers of Shares. (a) Transfers of shares of the
Corporation shall be made on the share records of the Corporation only by the
holder of record thereof, in person or by his duly authorized attorney, upon
surrender for cancellation of the certificate or certificates representing such
shares, with an assignment or power of transfer endorsed thereon or delivered
therewith, duly executed, with such proof of the authenticity of the signature
and of authority to transfer and of payment of transfer taxes as the Corporation
or its agents may require.
(b) The Corporation shall be entitled to treat the holder of
record of any share or shares as the absolute owner thereof for all purposes
and, accordingly, shall not be bound to recognize any legal, equitable or other
By-Laws-8
<PAGE>
claim to, or interest in, such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by law.
Section 4. Record Date. In lieu of closing the share records
of the Corporation, the Board of Directors may fix, in advance, a date not
exceeding fifty days, nor less than ten days, as the record date for the
determination of shareholders entitled to receive notice of, or to vote at, any
meeting of shareholders, or to consent to any proposal without a meeting, or for
the purpose of determining shareholders entitled to receive payment of any
dividends, or allotment of any rights, or for the purpose of any other action.
If no record date is fixed, the record date for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if no notice is given, the day on which the meeting is held; the
record date for determining shareholders for any other purpose shall be at the
close of business on the day on which the resolution of the directors relating
thereto is adopted. When a determination of shareholders of record entitled to
notice of or to vote at any meeting of shareholders has been made as provided
for herein, such determination shall apply to any adjournment thereof, unless
the directors fix a new record date for the adjourned meeting.
ARTICLE VI
DIVIDENDS
Subject to applicable law, dividends may be declared and paid
out of any funds available therefor, as often, in such amounts, and at such time
or times as the Board of Directors may determine.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the Board
of Directors from time to time, subject to applicable law.
ARTICLE VIII
CORPORATE SEAL
The corporate seal, if any, shall be in such form as shall be
approved from time to time by the Board of Directors.
By-Laws-9
<PAGE>
ARTICLE IX
AMENDMENTS
Section 1. By Shareholders. All by-laws of the Corporation
shall be subject to alteration or repeal, and new ByLaws may be made, by a
majority vote of the shareholders at the time entitled to vote in the election
of directors.
Section 2. By Directors. The Board of Directors shall have
power to make, adopt, alter, amend and repeal, from time to time, By-Laws of the
Corporation; provided, however, that the shareholders entitled to vote with
respect thereto as in this Article IX above-provided may alter, amend or repeal
By-Laws made by the Board of Directors, except that the Board of Directors shall
have no power to change the quorum for meetings of shareholders. If any By-Law
regulating an impending election of directors is adopted, amended or repealed by
the Board of Directors, there shall be set forth in the notice of the next
meeting of shareholders for the election of directors, the By-Law so adopted,
amended or repealed, together with a concise statement of the changes made.
Section 3. Certain Amendments. Notwithstanding anything in
this Article IX to the contrary, the provisions of these By-Laws with respect to
the number, classification, term of office, quorum for meetings, qualifications,
election and removal of directors and the filling of vacancies and newly created
directorships, and the amendment thereof, that is, Sections 1, 6, 8 and 10 of
Article III and this Article IX, may be amended or repealed or new By-Laws
affecting such provisions may be adopted only by the unanimous resolution of the
entire Board of Directors or by the affirmative vote of the holders of at least
80% of the outstanding shares of stock of the Corporation entitled to vote for
the election of directors (except that if such proposed amendment or repeal or
adoption of new By-Laws shall be submitted to the shareholders with the
unanimous recommendation of the entire Board of Directors, such provisions may
be amended or repealed or such new By-Laws may be adopted by the affirmative
vote of the holders of a majority of the outstanding shares, and except that if
such proposed amendment or repeal or adoption shall not take effect for a period
of three years from the date of such action, such provisions may be amended or
repealed or such new By-Laws may be adopted by the affirmative vote of the
holders of a majority of such stock or by the majority vote of the entire Board
of Directors).
ARTICLE X
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Right of Indemnification. The Corporation shall
indemnify to the fullest extent permitted by the Business Corporation Law any
By-Laws-10
<PAGE>
person (an "indemnitee") made, or threatened to be made, a party to an action or
proceeding, whether civil or criminal, including an action by or in the right of
the Corporation or any other corporation of any type or kind, domestic or
foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise (a "Proceeding"), which any director or officer of the
Corporation served in any capacity at the request of the Corporation, by reason
of the fact that he, his testator or intestate, was a director or officer of the
Corporation, or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees actually and necessarily incurred as a result of such action or
proceeding, or any appeal therein.
The right of indemnification conferred by this By-law shall
not be deemed exclusive of any other rights to which an indemnitee may be
entitled, whether provided by law or contained in the Certificate of
Incorporation or By-laws, or a resolution of shareholders, a resolution of
directors, or an agreement providing for such indemnification or otherwise.
Section 2. Deleted as of April 16, 1990.
Section 3. Advancement of Expenses. All reasonable expenses
incurred by or on behalf of the indemnitee in connection with any Proceeding
shall be advanced from time to time to the indemnitee by the Corporation
promptly after the receipt by the Corporation of a statement from the indemnitee
requesting such advance, whether prior to or after final disposition of such
Proceeding. The advancement or reimbursement of expenses to an indemnitee shall
be made within 20 days after the receipt by the Corporation of a request
therefor from the indemnitee. Such request shall reasonably evidence the
expenses incurred or about to be incurred by the indemnitee and, if required by
law at the time of such advance, shall include or be accompanied by an
undertaking by or on behalf of the indemnitee to repay the amounts advanced if
it should ultimately be determined that the indemnitee is not entitled to be
indemnified against such expenses or to retain the sums so advanced.
Section 4. Insurance Contracts and Funding. The Corporation
may purchase and maintain insurance to protect itself and any person who is, or
may become, an officer, director, employee, agent, attorney, trustee or
representative (any of the foregoing being herein referred to as a
"Representative") of the Corporation or, at the request of the Corporation, a
Representative of another corporation or entity, against any expenses, liability
or loss asserted against him or incurred by him in connection with any
Proceeding in any such capacity or arising out of his status as such, whether or
not the Corporation would have the power to indemnify him against such expenses,
liability or loss under the provisions of this By-law or otherwise. The
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Corporation may enter into contracts with any Representatives of the
Corporation, or any person serving as such at the request of the Corporation for
an other corporation or entity, in furtherance of the provisions of this By-law.
Such contracts shall be deemed specifically approved and authorized by the
shareholders of the Corporation and not subject to invalidity by reason of any
interested directors. The Corporation may create a trust fund, grant a security
interest or use other means (including, without limitation, a letter of credit)
to ensure the payment of such amounts as may be necessary to effect
indemnification of any person entitled thereto.
Section 5. Severability; Statutory Alternative. If any
provisions or provisions of this By-law shall be held to be invalid, illegal or
unenforceable for any reason whatsoever (a) the validity, legality and
enforceability of all of the remaining provisions of this By-law shall not in
any way be affected or impaired thereby; and (b), to the fullest extent
possible, the remaining provisions of this By-law shall be construed so as to
give effect to the intent manifested by the provision held invalid, illegal or
unenforceable. In the event that the indemnitee elects, as an alternative to the
procedures specified in this By-law, to follow one of the procedures authorized
by applicable corporate law or statute to enforce his right to indemnification
and notifies the Corporation of his election, the Corporation agrees to follow
the procedure so elected by the indemnitee. If in accordance with the preceding
sentence, the procedure therefor contemplated herein or the procedure elected by
the indemnitee in any specific circumstances (or such election by the
indemnitee) shall be invalid or ineffective in bringing about a valid and
binding determination of the entitlement of the indemnitee to indemnification,
the most nearly comparable procedure authorized by applicable corporate law or
statute shall be followed by the Corporation and the indemnitee.
Section 6. Procedure for Determination of Entitlement to
Indemnification. (a) To obtain indemnification (except with respect to the
advancement of expenses), an indemnitee shall submit to the President or
Secretary of the Corporation a written request, including such documentation and
information as is reasonably available to the indemnitee and reasonably
necessary to determine whether and to what extend the indemnitee is entitled to
indemnification (the "Supporting Documentation"). The Secretary of the
Corporation shall promptly advise the Board of Directors in writing that the
indemnitee has requested indemnification. The determination of the indemnitee's
entitlement to indemnification shall be made not later than 60 days after
receipt by the Corporation of the written request and Supporting Documentation.
(b) The indemnitee's entitlement to indemnification shall be
determined in one of the following ways: (i) by a majority vote of the
Disinterested Directors (as hereinafter defined) (which term shall mean the
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Disinterested Director, if there is only one); (ii) by a written opinion of the
Independent Counsel (as hereinafter defined) if (x) a majority of the
Disinterested Directors so directs; (y) there is no Disinterested Director; or
(z) a Change of Control (as hereinafter defined) shall have occurred and the
indemnitee so requests, in which case the Disinterested Directors shall be
deemed to have so directed; (iii) by the shareholders of the Corporation (but
only if a majority of the Disinterested Directors determines that the issue of
entitlement of indemnification should be submitted to the shareholders for their
determination); or (iv) as provided in Section 7 of this By-law.
(c) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section 6(b) of
this By-law, a majority of the Disinterested Directors shall select the
Independent Counsel, but only an Independent Counsel to which the indemnitee
does not reasonably object; provided, however, that if a Change of Control shall
have occurred, the indemnitee shall select such Independent Counsel, but only an
Independent Counsel to which the Board of Directors does not reasonably object.
(d) To the extent required by law or statute, the Corporation
shall notify shareholders or any other persons of expenses or other amounts paid
by way of indemnification in a timely manner.
Section 7. Presumptions and Effect of Certain Proceedings.
Except as otherwise expressly provided in this Bylaw, the indemnitee shall be
presumed to be entitled to indemnification upon submission of a request for
indemnification together with the Supporting Documentation, and thereafter in
any determination or review of any determination, and in any arbitration,
proceeding or adjudication, the Corporation shall have the burden of proof to
overcome that presumption in reaching a contrary determination. In any event, if
the person or persons empowered under Section 6(b) of this By-law to determine
entitlement to indemnification shall not have been appointed or shall not have
made a determination within 60 days after receipt by the Corporation of the
request therefor together with the Supporting Documentation, the indemnitee
shall be deemed to be entitled to indemnification. In either case, the
indemnitee shall be entitled to such indemnification, unless (a) the indemnitee
misrepresented or failed to disclose a material fact in making the request for
indemnification or in the Supporting Documentation or (b) such indemnification
is prohibited by law, in either case as finally determined by adjudication or,
at the indemnitee's sole option, arbitration (as provided in Section 8 of this
By-law). The termination of any Proceeding, or of any claim, issue or matter
therein, by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, adversely affect the right
of the indemnitee to indemnification or create any presumption with respect to
any standard of conduct or belief or any other matter which might form a basis
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for a determination that the indemnitee is not entitled to indemnification. With
regard to the right to indemnification for expenses, (a) if and to the extent
that the indemnitee has been successful on the merits or otherwise in any
Proceeding, or (b) if a Proceeding was terminated without a determination of
liability on the part of the indemnitee with respect to any claim, issue or
matter therein or without any payments in settlement or compromise being made by
the indemnitee with respect to a claim, issue or matter therein, or (c) if and
to the extent that the indemnitee was not a party to the Proceeding, the
indemnitee shall be deemed to be entitled to indemnification, which entitlement
shall not be defeated or diminished by any determination which may be made
pursuant to clauses (i), (ii) or (iii) of Section 6(b). The indemnitee shall be
presumptively entitled to indemnification in all respects for any act, omission
or conduct taken or occurring which (whether by condition or otherwise) is
required, authorized or approved by any order issued or other action by any
commission or governmental body pursuant to any federal statute or state statute
regulating the Corporation.
Section 8. Remedies of Indemnitee. (a) In the event that a
determination is made pursuant to Section 6 of this By-law that the indemnitee
is not entitled to indemnification under this By-law, (i) the indemnitee shall
be entitled to seek an adjudication of his entitlement to such indemnification
either, at the indemnitee's sole option, in an appropriate court of the State of
New York or any other court of competent jurisdiction or, to the extent
consistent with law, arbitration to be conducted by three arbitrators (or, if
the dispute involves less than $100,000, by a single arbitrator) pursuant to the
rules of the American Arbitration Association; (ii) any such judicial Proceeding
or arbitration shall be de novo and the indemnitee shall not be prejudiced by
reason of such adverse determination; and (iii) in any such judicial Proceeding
or arbitration the Corporation shall have the burden of proof that the
indemnitee is not entitled to indemnification under this By-law.
(b) If a determination shall have been made or deemed to have
been made, pursuant to Sections 6 or 7 of this Bylaw, that the indemnitee is
entitled to indemnification, the Corporation shall be obligated to pay the
amounts constituting such indemnification within five days after such
determination has been made or deemed to have been made and shall be
conclusively bound by such determination, unless (i) the indemnitee
misrepresented or failed to disclose a material fact in making the request for
indemnification or in the Supporting Documentation or (ii) such indemnification
is prohibited by law, in either case as finally determined by adjudication or,
at the indemnitee's sole option, arbitration (as provided in Section 8 (a) of
this By-law). In the event that advancement of expenses is not timely made by
the Corporation pursuant to this By-law or payment of indemnification has been
made or deemed to have been made pursuant to Section 6 or 7 of this By-law, the
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indemnitee shall be entitled to seek judicial enforcement of the Corporation's
obligations to pay to the indemnitee such advancement of expense of
indemnification. Notwithstanding the foregoing, the Corporation may bring an
action, in an appropriate court in the State of New York or any other court of
competent jurisdiction, contesting the right of the indemnitee to receive
indemnification hereunder due to an occurrence or circumstance described in
subclause (i) of this Section or a prohibition of law (both of which are herein
referred to as a "Disqualifying Circumstance"). In either instance, if the
indemnitee shall elect, at his sole option, that such dispute shall be
determined by arbitration (as provided in Section 8(a) of this By-law), the
indemnitee and the Corporation shall submit the controversy to arbitration. In
any such enforcement action or other proceeding, whether brought by the
indemnitee or the Corporation, the indemnitee shall be entitled to
indemnification unless the Corporation can satisfy the burden or proof that
indemnification is prohibited by reason of a Disqualifying Circumstance.
(c) The Corporation shall be precluded from asserting in any
judicial Proceeding or arbitration commenced pursuant to this Section 8 that the
procedures and presumptions of this By-law are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
or arbitrators that the Corporation is bound by all the provisions of this
By-law.
(d) In the event that the indemnitee, pursuant to this
By-law, seeks a judicial adjudication of or an award in arbitration to enforce
his rights under, or to recover damages for breach of, this By-law, or is
otherwise involved in any adjudication or arbitration with respect to his right
to indemnification, the indemnitee shall be entitled to recover from the
Corporation, and shall be indemnified by the Corporation against, any expenses
actually and reasonably incurred by him if the indemnitee prevails in such
judicial adjudication or arbitration and such expenses as are allowed by a court
or arbitration or otherwise on an interim basis. If it shall be determined in
such judicial adjudication or arbitration that the indemnitee is entitled to
receive part but not all of the indemnification or advancement of expenses
sought, the expenses incurred by the indemnitee in connection with such judicial
adjudication or arbitration shall be prorated accordingly.
Section 9. Definitions. For purposes of indemnification
under this By-law or otherwise:
(a) A "Change in Control" shall be deemed to have
occurred if (i) any "person", as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934 (the "Act") is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Act), directly or indirectly, of
securities of the Corporation representing 20% or more of the combined voting
power of the Corporation's then outstanding securities without the prior
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approval of at least two-thirds of the members of the Board of Directors in
office immediately prior to such acquisition; (ii) the Corporation is a party to
a merger, consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which, members of the Board of Directors in office
immediately prior to such transaction or event constitute less than a majority
of the Board of Directors thereafter; or (iii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors (including for this purpose any new Director whose
election or nomination for election by the Corporation's shareholders was
approved by a vote of at least two-thirds of the Directors then still in office
who were Directors at the beginning of such period) cease for any reason to
constitute at least a majority of the Board of Directors.
(b) Disinterested Director" means a Director of the
Corporation who is not or was not a material party to the Proceeding in respect
of which indemnification is sought by the indemnitee.
(c) "Independent Counsel" means a law firm or a
member of a law firm that neither presently is, nor in the past five years has
been, retained to represent (i) the Corporation or the indemnitee in any matter
or (ii) any other party to the Proceeding giving rise to a claim for
indemnification under this By-law. Notwithstanding the foregoing, the term
"Independent Counsel" shall not include any person who, under the applicable
standards of professional conduct then prevailing under the law of the State of
New York, would have a conflict of interest in representing either the
Corporation or the indemnitee in an action to determine the indemnitee's rights
under this By-law.
Section 10. Amendments. Article X of the By-Laws may be
amended by action of the Board of Directors, without action of the shareholders,
but only in a manner consistent with the policy of the Company set forth in the
Certificate of Incorporation to indemnify its directors and officers to the
fullest extent permitted by law and in order to further implement such policy.
By-Laws-16
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Exhibit 10.3.3
AMENDED AND RESTATED SECURED PROMISSORY NOTE
$5,000,000 New York, New York
Issued June 17, 1996
Amended and Restated October 28, 1996
FOR VALUE RECEIVED, DIGIMEDICS CORPORATION , a California corporation
(the "Debtor"), promises to pay to the order of CONTINENTAL HEALTHCARE SYSTEMS,
INC. (the "Payee"), c/o Information Handling Services Group, Inc., 15 Inverness
Way East, Englewood, Colorado, or at such other place as the Payee or any holder
hereof may from time to time designate in writing, the principal sum of Five
Million Dollars and 00/100 cents ($5,000,000) in lawful money of the United
States, on the earlier to occur of (i) August 1, 1997 and (ii) the date of the
Refinancing (as hereinafter defined). The Debtor promises also to pay interest
on the unpaid principal amount hereof in like money at said office or place from
the date hereof until maturity (whether by passage of time, acceleration or
otherwise) (i) as to $1,236,987 of the principal amount owing hereunder (the
"Base Rate Amount"), at a rate equal to the rate of interest publicly announced
from time to time by Citibank, N.A. at its principal office in New York City as
its base rate and (ii) as to all principal amounts owing hereunder in excess of
the Base Rate Amount (such amounts, the "Fixed Rate Amount"), at a rate equal to
fifteen percent (15%) per annum. Any change in the rate of interest on the Base
Rate Amount due to a change in the aforementioned base rate shall become
effective as of the opening of business on the day on which such change in the
base rate shall be announced. Any interest hereunder shall be payable in arrears
on the last day of each month, commencing July 31, 1996, and at maturity. After
maturity (whether by declaration, acceleration or otherwise), interest on
overdue principal and accrued interest shall be payable on demand at a rate
("Default Rate") equal to four percent (4%) in excess of the rates set forth
above. Interest shall be calculated on the basis of a 360-day year and actual
days elapsed. In no event shall the interest payable hereunder exceed the
maximum amount permitted under applicable law.
This Note is an amendment and restatement of, and is being issued in
replacement and substitution for, the Secured Promissory Note dated June 17,
1996 (the "Original Note") by the Debtor to the Payee in the original principal
amount of $6,000,000. In addition to the indebtedness evidenced by this Note,
this Note shall also evidence any accrued and unpaid interest on the Original
Note.
SECTION 1. TERMS OF PAYMENT; PURPOSE OF LOAN
ss.1.1 Mandatory Payments. On the last day of each month, commencing
November 30, 1996, the Debtor shall pay $100,000 to the Payee to be applied by
the Payee in the following order: FIRST, to interest owing on the Base Rate
Amount, SECOND, to interest owing on the Fixed Rate Amount and THIRD, any
remaining amounts, to the reduction of the outstanding Fixed Rate Amount.
ss.1.2. Optional Prepayments. The Debtor may, at its option, at any
time and from time to time, prepay all or any part of the principal balance of
this Note, without penalty or premium, in multiples of $100,000, provided that
concurrently with each such prepayment the Debtor shall pay accrued interest on
the principal so prepaid to the date of such prepayment.
ss.1.3. Day of Payment. Whenever any payment to be made hereunder shall
become due and payable on a day which is not a Business Day (as defined below),
such payment may be made on the next succeeding Business Day and, in the case of
any payment of principal, such extension of time shall in such case be included
in computing interest on such payment. As used herein, "Business Day" shall mean
<PAGE>
any day which is not a Saturday or Sunday and on which banks in the State of New
York are not authorized or required to close. Interest on past due principal and
accrued interest thereon shall be calculated as follows: The amount of principal
and interest past due multiplied by the Default Rate and multiplied by a
fraction, the numerator of which is the number of days such principal and
interest is past due and the denominator of which is 360.
ss.1.4. Use of Proceeds. This Note is the "Note" referred to in Section
2.04 of the Asset Purchase Agreement dated the date hereof (as amended, modified
or supplemented in accordance with its terms, the "Purchase Agreement") among
the Debtor, the Payee and Information Handling Services Group, Inc. and
evidences part of the "Purchase Price" as therein defined.
ss.1.5. Obligation to Pay. The Debtor shall make all payments hereunder
in full without offset, reduction or deduction of any kind or amount or for any
reason, including, without limitation, setoff by any amounts which Debtor may
claim or be entitled to claim under Section 6.02 of the Purchase Agreement.
SECTION 2. COLLATERAL
ss.2.1. Security Documents. This Note is secured by the following
(collectively, the "Security Documents") and is entitled to the benefits
thereof: (i) General Security Agreement dated today's date by Debtor in favor of
the Payee (as amended, modified or supplemented from time to time, the "Security
Agreement") covering all of the asset of Debtor therein described and (ii)
Charge dated today's date by Debtor in favor of the Payee (as amended, modified
or supplemented from time to time, the "Charge") with respect to certain shares
of JAC. The Debtor shall duly execute and deliver the Security Documents, all
consents of third parties necessary to permit the effective granting of the
Liens created in such agreements, financing statements pursuant to the Uniform
Commercial Code and other documents, all in form and substance satisfactory to
the Payee, as may be reasonably required by the Payee to grant to the Payee a
valid, perfected and enforceable first priority Lien on and security interest in
the Collateral.
SECTION 3. REPRESENTATIONS AND WARRANTIES
The Debtor represents and warrants (which representations and
warranties shall survive the execution and delivery of this Note) to the Payee
that:
ss.3.1. Organization; Corporate Power. The Debtor is a corporation duly
organized and validly existing under the laws of the jurisdiction of its
organization,
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has the requisite power and authority to own its property and assets and to
carry on its business as now conducted and is qualified to do business in every
jurisdiction where such qualification is required except where the failure to
obtain such qualification would not have a Material Adverse Effect. The Debtor
has the power to execute, deliver and perform its obligations under this Note
and the other Loan Documents to which it is party.
ss.3.2. Authorization. The execution, delivery and performance by the
Debtor of this Note and the other Loan Documents to which it is party and the
grant of security interests in the Collateral created by the Security Documents
(a) have been duly authorized by all requisite action and (b) will not (i)
violate (A) any provision of law, statute, rule or regulation in any material
respect or the articles or certificate of incorporation of the Debtor, (B) any
order or decree of any court, or any rule, regulation or order of any other
agency of government, binding upon the Debtor, (C) any material provisions of
any indenture, agreement or other instrument to which the Debtor or any of its
properties or assets is or may be bound, (ii) be in material conflict with,
result in a breach of or constitute a default under any indenture, agreement or
other instrument referred to in (b)(i)(C) above or (iii) result in the creation
or imposition of any Lien (other than in favor of the Payee) upon any property
or assets of the Debtor.
ss.3.3. Governmental Approvals. No registration or filing with, or
consent or approval of, or other action by, any Federal, state or other
governmental agency, authority or regulatory body is or will be required on the
part of the Debtor in connection with the transactions contemplated hereby,
other than any which have been made or obtained.
ss.3.4. Binding Effect. This Note and the other Loan Documents when
duly executed and delivered will constitute legal, valid and binding obligations
of the Debtor enforceable in accordance with their respective terms except (i)
that enforceability may be subject to bankruptcy, insolvency, moratorium,
reorganization and other similar laws affecting the rights of creditors
generally and (ii) the remedy of specific performance and other forms of
equitable relief may be subject to equitable defenses and the discretion of any
court before which any proceeding therefor may be brought.
ss.3.5. Litigation; Compliance with Laws; etc. (a) There are not any
actions, suits or proceedings at law or in equity or by or before any
governmental instrumentality or other agency or regulatory authority now pending
or, to the knowledge of the Debtor, threatened against or affecting the Debtor
and which, if adversely determined, would have a Material Adverse Effect.
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(b) The Debtor is not in violation of any law, or in default with
respect to any judgment, writ, injunction, decree, rule or regulation of any
court or governmental agency or instrumentality, which violation or default
would have a Material Adverse Effect.
ss.3.6. Federal Reserve Regulations. The Debtor is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying Margin Stock (as such term is
defined in Regulation U of the Board of Governors of the Federal Reserve System
of the United States).
ss.3.7. Taxes. The Debtor has filed or caused to be filed (or filed or
caused to be filed extensions therefor) all Federal, state, local and foreign
tax returns which are required to be filed by it on or prior to the date hereof,
except tax returns in jurisdictions where the failure to file such returns would
not have a Material Adverse Effect. The Debtor has paid or caused to be paid all
taxes shown to be due and payable on such filed returns or on any assessments
received by it other than taxes that in the aggregate are not material and which
would not, if unpaid, result in the imposition of any Lien on any property or
assets of the Debtor.
ss.3.8. No Material Misstatements. Neither the most recent 10-K or 10-Q
reports of the Guarantor furnished by the Debtor to the Payee contains any
material misstatement of fact or omitted or omits to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
ss.3.9. Investment Company Act; Public Utility Holding Company Act. The
Debtor is not an "investment company" as defined in, or is otherwise subject to
regulation under, the Investment Company Act of 1940. The Debtor is not a
"holding company" as that term is defined in or is otherwise subject to
regulation under, the Public Utility Holding Company Act of 1935.
ss.3.10. Security Interest. The Security Documents create and grant to
the Payee a legal, valid and, upon filing of UCC financing statements in the
appropriate jurisdictions and the taking of the other actions contemplated by
the Security Documents and taking all other actions, if any, required by
applicable law, perfected first priority security interest in the Collateral,
subject only to Permitted Liens.
ss.3.11. Subsidiaries. The Debtor has no Subsidiaries other than JAC.
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ss.3.12. Title to Properties. The Debtor has good and valid title to
all of its properties and assets, free and clear of any pledge, security
interest, Lien or other encumbrance or claim of any kind, except in favor of the
Payee and except Permitted Liens.
SECTION 4. CONDITIONS OF LENDING
ss.4.1. Conditions Precedent. The obligation of the Payee to make the
loan evidenced by this Note shall be subject to the following conditions
precedent: The Payee shall have received
(a) the written opinion of Winthrop, Stimpson, Putnam & Roberts,
counsel to the Debtor and the Guarantor, in form and substance satisfactory to
Payee;
(b) (i) copies of the certificate of incorporation and by-laws of the
Loan Parties, certified as to such certificate as of a recent date by the
Secretary of State or other appropriate official of the state of its
organization, and (ii) such other charter documents and certificates as the
Payee may reasonably request;
(c) the Security Documents and such instruments and other documents as
shall be required thereunder (including, without limitation, Uniform Commercial
Code financing statements), and Uniform Commercial Code searches of each of the
Loan Parties;
(d) the Guaranty, in form and substance satisfactory to it, from the
Guarantor;
(e) copies of the Director Notes and the Subordination Agreement;
(f) evidence of compliance with the insurance provisions of the
Security Documents;
(g) executed original of the Purchase Agreement and of the Stock
Purchase Agreement dated the date hereof among the parties to the Purchase
Agreement, and each of the documents and instruments executed and delivered in
connection therewith; and
(h) evidence that all required third party consents, if any, to this
Note and the other Loan Documents have been obtained.
SECTION 5. AFFIRMATIVE COVENANTS
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The Debtor covenants and agrees with the Payee that, so long as this
Note shall remain in effect, or the principal of or interest of this Note or any
fee, expense or amount payable hereunder or with respect to this Note shall be
unpaid, it will:
ss.5.1. Existence. Do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence.
ss.5.2. Taxes. Pay and discharge promptly when due all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its property before the same shall become
delinquent or in default unless the validity or amount thereof is being
contested in good faith by appropriate proceedings and the Debtor has maintained
adequate reserves with respect thereto in accordance with generally accepted
accounting principals.
ss.5.3. Litigation and Other Notices. Upon knowledge by the Debtor,
give the Payee prompt written notice of the following:
(a) the issuance by any court or governmental agency or authority of
any injunction, order, decision or other restraint prohibiting, or having the
effect of prohibiting, the making of the loan hereunder, or invalidating, or
having the effect of invalidating, any provision of this Note or any of other
Loan Documents, or the initiation of any litigation or similar proceeding
seeking any such injunction, order, decision or other restraint;
(b) the filing or commencement of any action, suit or proceeding
against the Debtor or any other Loan Party, whether at law or in equity or by or
before any court or any Federal, state, municipal or other governmental agency
or authority, which is brought by or on behalf of any governmental agency or
authority, or in which injunctive or other equitable relief is sought and such
relief, if obtained, would materially impair the right or ability of any Loan
Party to perform its obligations under this Note or the other Loan Documents;
and
(c) any Event of Default (as hereinafter defined) or event or condition
which, with the giving of notice or lapse of time or both, would constitute an
Event of Default, specifying the nature and extent thereof and the action (if
any) which is proposed to be taken with respect thereto.
ss.5.4. Other Information. Deliver to the Payee (a) promptly upon (i)
the filing thereof with the Securities and Exchange Commission, a copy of each
report, notice or other filing (including, without limitation 10Q and 10K
filings), with respect to the
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Debtor and the Guarantor and (ii) receipt thereof, all written communications
received by Debtor or Guarantor from the Securities and Exchange Commission; and
(b) such other information as the Payee shall reasonably request.
SECTION 6. NEGATIVE COVENANTS
The Debtor covenants and agrees with the Payee that, so long as this
Note shall remain in effect or the principal of or interest on this Note, any
fee, expense or amount payable hereunder or with respect to this Note shall be
unpaid, it will not:
ss.6.1. Liens. Incur, create, assume or permit to exist any Lien or
other encumbrance of any kind or nature on any of its property or assets
including, without limitation, the Collateral, whether owned at the date hereof
or hereafter acquired, except Liens created in favor of the Payee as
contemplated by this Note and the Security Documents and Permitted Liens.
ss.6.2. Indebtedness. Incur, create, assume or permit to exist any
indebtedness for borrowed money other than (i) indebtedness incurred hereunder,
(ii) indebtedness to trade creditors incurred in the ordinary course of
business, (iii) Indebtedness pursuant to a Refinancing, (iv) unsecured
indebtedness subordinated on terms reasonably acceptable to Payee the proceeds
of which are used to repay the obligations under this Note, (v) purchase money
indebtedness secured by Liens permitted under clause (e) of the definition
Permitted Liens and (vi) indebtedness in existence of the date hereof and listed
on Schedule II hereto.
ss.6.3. Dividends and Distributions. Declare or pay, directly and
indirectly, any cash dividends or make any other distribution, whether in cash,
property, securities or a combination thereof, with respect to (whether by
reduction of capital or otherwise) any shares of its capital stock or directly
or indirectly redeem, purchase, retire or otherwise acquire for value (or permit
any Subsidiary to purchase or acquire) any shares of any class of its capital
stock or set aside any amount for any such purpose or make any principal payment
or prepayment on account of, or purchase, redeem or defease any indebtedness for
borrowed money or make any payment of interest thereon (other than prepayments
and payments permitted or required hereunder), or agree to do any of the
foregoing, or permit any Subsidiary to do any of the foregoing or agree to do
any of the foregoing.
ss.6.4. Consolidations, Mergers and Sales of Assets. Consolidate with
or merge into any other person, or sell, lease, transfer or assign to any
persons or otherwise dispose of (whether in one transaction or a series of
transactions) all or any part of its properties or assets (whether now owned or
hereafter acquired) other
7
<PAGE>
than inventory sold in the ordinary course of business, or permit another person
to merge into it, or acquire any stock or assets of any other person (except
pursuant to the Purchase Agreement and Stock Purchase Agreement), except that
any Subsidiary of the Debtor may merge with and into Debtor with Debtor as the
surviving corporation.
ss.6.5. Investments. Own, purchase or acquire any stock, obligations,
assets or securities of, or any interest in, or make any capital contribution or
loan or advance of money, credit or property to, any other person, or make any
other investments whatsoever, in excess of $100,000 in the aggregate for all of
the foregoing during the term of this Note, except that Debtor may purchase (a)
certificates of deposit in dollars of any commercial banks registered to do
business in any state of the United States (i) having capital and surplus in
excess of $1,000,000,000 and (ii) whose long-term debt rating is at least
investment grade as determined by either Standard & Poor's Corporation or
Moody's Investor Service, Inc., (b) readily marketable direct obligations of the
United States government or any agency thereof which are backed by the full
faith and credit of the United States, (c) investments in money market mutual
funds having assets in excess of $2,500,000,000, (d) commercial paper at the
time of acquisition having the highest rating obtainable from either Standard &
Poor's Corporation or Moody's Investor Service, Inc. and (e) federally tax
exempt securities rated A or better by either Standard & Poor's Corporation or
Moody's Investor Service, Inc.
ss.6.6. Guarantees. Guarantee, endorse, become surety for, or otherwise
in any way become or be responsible for the obligations of any other person,
except the indorsement for collection or collections for deposit and other
guarantees issued in the ordinary course of business.
ss.6.7. Subsidiaries. Create any Subsidiaries which have a net worth at
any time in excess of $5,000.
SECTION 7. EVENTS OF DEFAULT; REMEDIES
ss.7.1. Defaults. If any one or more of the following events ("Events
of Default") shall occur:
(a) If the Debtor shall default in the payment of any of the principal
of or interest on this Note when due and, in the case of interest, such default
shall continue for two (2) or more Business Days; or
8
<PAGE>
(b) If any Loan Party shall default in the observance or performance of
any covenants or agreements contained in this Note or the other Loan Documents
other than those specified in clause (a) above, and such default shall continue
for 15 or more days; or
(c) If any representation or warranty made by or on behalf of any Loan
Party in this Note or any other Loan Document or in connection with any of the
transactions contemplated herein shall prove to have been false or incorrect in
any material respect when made; or
(d) If any Loan Party shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts as they
become due, or shall file a voluntary petition in bankruptcy or shall be
adjudicated a bankrupt or insolvent, or shall file any petition or answer
seeking for itself any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, or shall file any answer admitting or not contesting the
material allegations of a petition filed against it in any such proceeding, or
shall seek or consent to or acquiesce in the appointment of any trustee,
receiver or liquidator of any Loan Party of all or any substantial part of the
properties of any Loan Party; or
(e) If, within sixty (60) days after the commencement of an action
against any Loan Party seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such action shall not have been dismissed or
stayed or if, within sixty (60) days after the appointment, without the consent
or acquiescence of any Loan Party, of any trustee, receiver, or liquidator of
any Loan Party or any substantial part of any Loan Parties' properties, such
appointment shall not have been vacated; or
(f) If any order, judgment, or decree shall be entered in any
proceeding against any Loan Party requiring such Loan Party to divest itself of
a substantial part of its assets, or awarding a money judgment or judgments
against any Loan Party aggregating more than $100,000, and if, within thirty
(30) days after entry thereof, such order, judgment or decree shall not have
been discharged or execution thereof stayed pending appeal; or if, within thirty
(30) days after the expiration of any such stay, such judgment, order or decree
shall not have been discharged; or
(g) Default shall be made with respect to any indebtedness for borrowed
money of any Loan Party in excess of $100,000 if the effect of any such default
shall be to accelerate or permit the acceleration of the maturity of such
9
<PAGE>
indebtedness; or any amount of principal or interest in respect of such
indebtedness shall not be paid when and as due (after giving effect to any
period of grace specified for such payment in the instrument evidencing or
governing the same); provided, however that with respect to capitalized leases,
default of amounts of more than $100,000 but less than $250,000 shall not
constitute a default hereunder so long as the Debtor is contesting the default
under the capitalized lease in good faith and has set aside reserves therefore
in accordance with generally accepted accounting principles;
(h) This Note or any other Loan Document shall for any reason cease to
be, or shall be asserted by any Loan Party not to be, a legal, valid and binding
obligation of any Loan Party, enforceable in accordance with its terms, or the
security interest or Lien purported to be created by any of the Security
Documents shall for any reason cease to be, or be asserted by any Loan Party not
to be, a valid, first priority perfected security interest in any Collateral
(except to the extent otherwise permitted under this Agreement or any of the
Security Documents);
then in the case of an Event of Default described in Section 3.1(d) or 3.1(e)
above, the unpaid balance of this Note and all interest accrued hereon shall
automatically (without any action on the part of the Payee and without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived) forthwith become due and payable, and in the case of any other
Event of Default, then and in any such event, and at any time thereafter, if
such or any other Event of Default shall then be continuing, the Payee may, at
its option, declare this Note to be due and payable without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived,
anything contained herein to the contrary notwithstanding. The Payee shall have
all of the rights and remedies of a secured party under the Uniform Commercial
Code of the State of New York, under the Uniform Commercial Code of any other
state in which any Collateral may be situated and, additionally, all of the
rights and remedies set forth in this Note and the other Loan Documents and in
any instrument or document referred to herein or therein, and under any other
applicable law relating to this Note or the Collateral.
ss.7.2. Rights and Remedies Cumulative. No right or remedy herein
conferred upon the Payee is intended to be exclusive of any other right or
remedy contained herein or in any instrument or document delivered in connection
with or pursuant to this Note or the other Loan Documents, and every such right
or remedy shall be cumulative and shall be in addition to every other such right
or remedy contained herein and therein or now or hereafter existing at law or in
equity or by statute, or otherwise.
10
<PAGE>
ss.7.3. Rights and Remedies Not Waived. No course of dealing between
the Debtor and the Payee or any failure or delay on the part of the Payee in
exercising any rights or remedies of the Payee and no single or partial exercise
of any rights or remedies hereunder or under the other Loan Documents shall
operate as a waiver or preclude the exercise of any other rights or remedies
hereunder.
SECTION 8. CERTAIN DEFINITIONS
"Collateral" shall mean the collateral described in the
Security Documents.
"Director Notes" shall mean the 12% Secured Notes of Mediware
Information Systems, Inc. made to the order of each of Lawrence Auriana, Joseph
Delario and Peter Lerner, respectively, in each case as in effect on the date
hereof, as more specifically described on Schedule I to the Guaranty.
"Guarantor" shall mean Mediware Information Systems, Inc., a
New York corporation.
"Guaranty" shall mean the Guaranty dated the date hereof by
Guarantor in favor of Payee.
"JAC" shall mean JAC Computer Services Ltd., a corporation
organized in the United Kingdom.
"Lien" shall mean, with respect to any asset, (i) any
mortgage, lien, pledge, encumbrance, charge or security interest in or on such
asset, (ii) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset, (iii) in the case of securities, any purchase option, call or similar
right of a third party with respect to such securities or (iv) any other right
of or arrangement with any creditor to have such creditor's claim satisfied out
of such assets, or the proceeds therefrom, prior to the general creditors of the
owner thereof.
Loan Documents" shall mean this Note and any other instrument,
document or agreement executed and delivered at any time and from time to time
in connection herewith.
"Loan Party" shall mean the Debtor and its Subsidiaries and
the Guarantor and its Subsidiaries.
11
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"Material Adverse Effect" shall mean a material adverse effect
on (i) the businesses, assets, operations or financial or other condition of any
Loan Party, (ii) the ability of any Loan Party to perform or pay its respective
obligations under this Note or under the other Loan Documents, (iii) the rights
of, or benefits available to, the Payee under this Note or any of the other Loan
Documents or (iv) the Payee's Lien on any portion of the Collateral.
"Permitted Liens" shall mean such of the following as to which
no enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) Liens for taxes, assessments, governmental charges and
levies not yet due and payable; (b) Liens imposed by any Federal, state, local
or foreign statute, law, ordinance, regulation, rule, code, order or
requirement, such a materialmen's, mechanics', carriers', workmen's and
repairmen's Liens and other similar Liens arising in the ordinary course of
business that (i) are not overdue for a period of 30 or more days and (ii) are
not in excess of the cost of the assets to which such Lien relates; (c) pledges
or deposits to secure obligations under workers' compensation laws or similar
legislation to secure public or statutory obligations, (d) Liens in existence on
the date hereof and listed on Schedule I hereto and (e) Liens upon any equipment
acquired through the purchase or lease by Debtor which are created directly in
connection with such acquisition to secure or provide for the payment of any
part of the purchase price of, or lease payments on, such equipment (but no
other amounts and not in excess of the purchase price or lease payments),
providing, that such Lien shall not apply to any other property of the Debtor.
"Refinancing" shall mean the closing of a financing by
Guarantor and/or Debtor which yields not less than $5,000,000 in proceeds net of
fees and expenses.
"Subordination Agreement" shall mean the Subordination
Agreement dated the date hereof among the Payee and Lawrence Auriana, Peter
Lerner and Joseph Delario, each a holder of a Director Note.
"Subsidiary" shall mean with respect to any person, the parent
of such person, any corporation, association or other business entity of which
securities or other ownership interests representing more than 50% of the
ordinary voting power are, at the time as of which any determination is being
made, owned or controlled, directly or indirectly, by the parent or one or more
subsidiaries of the parent.
SECTION 9. MISCELLANEOUS
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<PAGE>
ss.9.1. Collection Costs. In the event the Payee or any holder of this
Note shall refer this Note to an attorney for collection, the Debtor agrees to
pay, in addition to unpaid principal and interest, all the costs and expenses
incurred in attempting or effecting collection hereunder, including reasonable
attorneys' fees, whether or not suit is instituted.
ss.9.2. Waivers. Presentment, demand, protest or other notice of any
kind, except as may be otherwise specifically provided herein, are all hereby
waived with respect to this Note.
ss.9.3. Modification. No modification or waiver of any provision of
this Note and no consent by the Payee to any departure therefrom by the Debtor
shall be effective unless such modification or waiver shall be in writing and
signed by the Payee, and the same shall then be effective only for the period
and on the conditions and for the specific instances and purposes specified in
such writing. No notice to or demand on the Debtor in any case shall entitle the
Debtor to any other or further notice or demand in similar or other
circumstances.
ss.9.4. Expenses; Indemnity. (a) The Debtor agrees to pay all
reasonable out-of-pocket expenses incurred by the Payee in connection with any
amendments, modifications or waivers of the provisions hereof or of the other
Loan Documents or incurred by the Payee in connection with the enforcement or
protection of its rights in connection with this Note or the other Loan
Documents or in connection with any pending or threatening action, proceeding,
or investigation relating to the foregoing, in each case including but not
limited to the reasonable fees and disbursements of counsel for the Payee. The
Debtor further agrees that it shall indemnify the Payee from and hold it
harmless against any documentary taxes, assessments or charges made by any
governmental authority by reason of the execution and delivery of this Note, but
not against any income or other tax attributable to the interest payable to the
Payee hereunder.
(b) The Debtor agrees to indemnify the Payee and its
respective directors, officers, employees and agents against, and to hold the
Payee and each such person harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable counsel fees and
expenses, incurred by or asserted against the Payee or any such person arising
out of, in any way connected with, or as a result of (i) this Note or the other
Loan Documents, the performance by the parties hereto and thereto of their
respective obligations hereunder and thereunder (including but not limited to
the making of the loan hereunder) and consummation of the transactions
contemplated hereby and thereby, or (ii) any claim, litigation, investigation or
proceedings relating to any of the foregoing,
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<PAGE>
whether or not the Payee or any such person is a party thereto; provided that
such indemnity shall not, as to the Payee and its respective directors,
officers, employees and agents, apply to any such losses, claims, damages,
liabilities or related expenses to the extent that they result from the gross
negligence or willful misconduct of the Payee; and, provided further, that in no
event shall the Debtor be liable for any special, exemplary, punitive or
consequential damages or any damages other than or in addition to actual
damages.
(c) The provisions of this Section 9.4 shall remain operative
and in full force and effect regardless of the expiration of the term of this
Note, the consummation of the transactions contemplated hereby, the repayment of
the loan evidenced by this Note, the invalidity or unenforceability of any term
or provision of this Note, or any investigation made by or on behalf of the
Payee. All amounts due under this Section 9.4 shall be payable on written demand
therefor.
ss.9.5. Entire Agreement; Waiver of Jury Trial, etc. (a) This Note, the
Security Documents and the Guaranty constitute the entire contract between the
parties relative to the subject matter hereof. Any previous agreement among the
parties with respect to the transactions contemplated herein is superseded by
this Note and the other Loan Documents. Except as expressly provided herein or
in the other Loan Documents, nothing in this Note or the other Loan Documents,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, any rights, remedies, obligations or liabilities under or by
reason of this Note or the other Loan Documents.
(b) Except as prohibited by law, each party hereto hereby
waives any right it may have to a trial by jury in respect of any litigation
directly or indirectly arising out of, under or in connection with this Note or
the other Loan Documents.
(c) Except as prohibited by law, each party hereto hereby
waives any right it may have to claim or recover in any litigation referred to
in paragraph (b) of this Section 9.5 any special, exemplary, punitive or
consequential damages or any damages other than, or in addition to, actual
damages.
(d) Each party hereto (i) certifies that neither any
representative, agent or attorney of the Payee has represented, expressly or
otherwise, that the Payee would not, in the event of litigation, seek to enforce
the foregoing waivers and (ii) acknowledges that it has been induced to enter
into this Note or the other Loan Documents, as applicable, by, among other
things, the mutual waivers and certifications herein.
14
<PAGE>
ss.9.6. Consent of Jurisdiction. The Debtor hereby irrevocably consents
to the jurisdiction of the Courts of the State of New York and of any Federal
Court located in such State in connection with any action or proceeding arising
out of or relating to this Note.
ss.9.7. Benefit of Agreement. This Note shall be binding upon the
successors and assigns of the Debtor and inure to the benefit of the Payee and
its successors, endorsees and assigns.
15
<PAGE>
ss.9.8. Notices. Notices, consents and other communications provided
for herein shall be in writing and shall be delivered or mailed (or in the case
of telegraphic communication, delivered by telex, graphic scanning or other
telegraphic communications equipment, with receipt confirmed) addressed,
(a) if to the Debtor, to Digimedics Corp., 1600 Green Hills
Road, Scotts Valley, California 95066, Telecopy No. 408-438-8422, Attention: Mr.
Les Dace, with a copy to (i) Mediware Information Systems, Inc., 1121 Old Walt
Whitman Road, Melville, New York 11747-3005, Telecopy No. 516-423-0161,
Attention: President, (ii) Hackmyer & Nordlicht, Olympic Tower, 645 Fifth
Avenue, New York, NY 10022, Telecopy No. 212-42100499, Attention: Ira Nordlicht,
Esq. and (iii) Winthrop, Stimpson, Putnam & Roberts, One Battery Park Plaza, New
York, NY 10004-1490, Telecopy No. 212-858-1500, Jonathan M. Churchill, Esq.; and
(b) if to Payee, c/o TBG Services, Inc., at 565 Fifth Avenue,
New York, New York 10117, Attention: Stephen Green, Esq.
All notices and other communications given to any party hereto
in accordance with the provisions of this Note shall be deemed to have been
given on the date of receipt if hand delivered or three days after being sent by
registered or certified mail, postage prepaid, return receipt requested, if by
mail, or upon receipt if by any telegraphic or telex communications equipment,
in each case addressed to such party as provided in this Section 9.8 or in
accordance with the latest unrevoked direction from such party.
16
<PAGE>
ss.9.9. New York Law. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LOCAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
EXECUTED AND TO BE PERFORMED IN SUCH STATE.
DIGIMEDICS CORPORATION.
By: /s/ Lawrence Auriana
_______________________
Name: Lawrence Auriana
Title: Secretary
17
<PAGE>
EXHIBIT 10.7
Mediware Information Systems, Inc.
1121 Old Walt Whitman Road
Melville, NY 11747
July 20, 1995
Mr. Les N. Dace
11211 Quivas Loop
Westminster, Colorado 80234
Dear Les:
Pursuant to your appointment as President and Chief Executive Officer of
MEDIWARE Information Systems, Inc., this letter describes the details of your
employment, as discussed in my office on July 14, 1995.
1. You will be employed as President and CEO of MEDIWARE Information
Systems effective July 1, 1995.
2. You will continue to act as General Manager for both the Digimedics and
Surgiware product centers.
3. You will report directly to the Chairman of the Board of MEDIWARE
INFORMATION SYSTEMS, Inc.
4. Your remuneration will be:
o A gross salary of $110,000 per year, less applicable taxes,
paid bi-weekly
o A bonus based on the gross profits of MEDIWARE, including the
Hemocare, Digimedics, and Surgiware Product Centers, less all
extra ordinary corporate overhead expenses, paid at a rate
equal to 5% of the gross profit, before interest and tax
allocations. Your bonus will be calculated in the same manner
as the previous President of Mediware, John Frieberg
o 50,000 MIS options, vesting over three years beginning July 1,
1995 @ $1.00 per share
o Previously granted options will continue to be in effect
o Four weeks vacation per year
o All employee benefits offered by MIS
o A $500 per month auto allowance
5. Other elements of your employment are:
o Three months severance will be paid to you if you are
involuntarily terminated
o You will devote substantially all your efforts to this
position
o You will be based in Scotts Valley, California
o Bonuses will be paid every six months as an advance against
audited year end results
MEDIWARE Information Systems, Inc.
Lawrence Auriana I Agree to the Terms Offered Above:
Chairman of the Board Date: 7-20-95
Name: /s/ Les N. Dace
---------------------
Les N. Dace
<PAGE>
April 10, 1990
Mr. John Esposito
6A Coptor Court
Huntington, NY 11743
Dear John:
Pursuant to our conversations, this letter describes your employment with
Hemocare, Inc.
I am very happy to offer this position and look forward to continuing a working
and personal relationship that I have already found most productive and
pleasant.
The items we have discussed are:
A. You will be employed as a Vice President of Sales of
Hemocare, Inc. (HI).
B. In this position you will report to me, the C.E.O. of HI.
C. Your responsibilities will be:
1. To profitably manage the sales activities of HI,
including the supervision of the Hemocare sales staff.
2. To participate in the overall management of HI with
particular emphasis on sales and marketing topics.
D. Your remuneration will be:
1. A gross salary of $5,417 per month, less applicable
taxes.
2. A non-recoverable draw of $5,000 per year, against
bonuses, payable bi-weekly.
3. A bonus based on the gross profits of HI, (defined
herein, and subsequently, as gross receipts, less:
hardware costs, discounts, returns, customizations,
interfaces, shipping and delivery costs; and less
direct non-salary, consultant fees, (synonymous with
installation fees), training and installation costs not
covered by HI's charges of these services to customers,
and excluding all monthly support revenues from
existing and future customers) equal to 2% of gross
profit.
4. 150,000 HI options, priced at $.176 per share, or their
equivalent if splits or reverse splits occur. These
<PAGE>
options will vest over a three year period at a rate of 50,000
per year.
5. An additional 150,000 HI options, priced at $.176 per share,
or their equivalent if splits or reverse splits occur, to be
awarded at a rate of 50,000 per year, vesting immediately
after award, and awarded, pro-rata that year, based on the
total revenue of HI, achieving 25% growth.
6. A car allowance of $500 per month will be paid to you each
month to defray the cost of car payments, gas and repairs,
maintenance and all other costs associated with the operation
of said vehicle. This car allowance will be paid to you once
per month, less applicable taxes.
7. For purposes of 3 and 5, above, increases in gross profits and
sales of HI which result from new acquisitions or mergers
shall be based on the previous twelve months before the
acquisition and, solely, but reasonably, determined by HI.
E. Other elements of your employment are:
1. You will be eligible for all employee benefit programs in
place for HI employees, such as health insurance, life
insurance, dental insurance, and long term disability.
2. You will earn three weeks paid vacation per year.
3. You will devote substantially all of your efforts to
the responsibilities of this position.
4. You will honor the non-compete and confidential covenants that
are applicable at HI, as defined in the attached document
entitled "Employee Agreement", with the following exceptions:
Section 6, entitled "Damage" is removed from the document.
Section 7, sentence 4 is amended to reflect "State of New
York" versus "State of California" jurisdiction.
5. All bonuses are paid in six month intervals, with the mid-year
bonus payment treated as a draw against the final year-end
bonus, which is based on audited results, and payable when
these are available.
6. In the event of termination of your employment by HI, a
minimum of two months severance pay will be issued to you
based on the salary figures and intervals described in Section
D.(1) above.
-2-
<PAGE>
7. A salary review will be undertaken 12 months after you begin
your employment with HI, with any increase based on your
mutual agreement between HI and yourself, primarily determined
by the revenue goals described in Section D.(5) above.
8. You will be reimbursed by HI for all business related
expenses you incur.
If you find these items consistent with our understandings, and suitable to your
acceptance of the position offered, please sign and date the acceptance section
below.
Sincerely yours,
HEMOCARE, INC.
/s/ Colin Shanks
- ---------------------
Colin Shanks,
President and C.E.O.
I agree to accept the employment position offered, herein.
Date: 5/16/90
Name: /s/ John Esposito
---------------------
John Esposito
-3-
<PAGE>
Mediware Information Systems, Inc.
1121 Old Walt Whitman Road
Melville, NY 11747
March 23, 1994
Mr. Thomas Mulstay
14 Berkley Street
Nashua, New Hampshire 03060
Dear Tom:
Pursuant to our conversation, this letter describes your modified employment
with Mediware Information Systems (MIS), for the period July 1, 1993 - June 30,
1994, and will be automatically renewed annually thereafter.
TITLE - VICE PRESIDENT/GENERAL MANAGER HEMOCARE, INC. (HI)
Part Time/Vice President Marketing
Salary - Gross Salary $6,250 Per Mo/$75,000 Yr, with Auto Allowance $500
Per Mo.
Bonus:
(1) A bonus based on the profit of HI, without corporate overheads
of MIS or corporate income taxes, equal to 1.5%, if it is less
than $200,000 and 2.5% for amounts of HI profits greater than
$200,000. Bonus due no later than 30 days from fiscal period
end.
(2) A bonus based on the gross profits of HI (defined here, and
subsequently, as gross receipts, less: hardware costs,
discounts, returns, shipping delivery costs; and less special
work, shipping delivery costs; and less direct non-salary,
consultant fees, training, and installation costs and
excluding all revenues from existing customers) equal to 1% of
this gross profits.
(3) A bonus based on the gross profit of all new MIS sales,
excluding all revenues from existing customers, of 0.5% of
this gross profit.
(4) A bonus of all reseller sales for all products of 3% of
software revenues, interface fees, first year software
maintenance revenue and hardware profit margin.
(5) All bonuses, except for the bonus for reseller sales which
shall be paid on 85% on receipt of customers po or reseller
signed acceptable contract, and down payment, and 15% on
receipt of final customer acceptance or reseller payment,
<PAGE>
shall be paid no later than January 30, based on mid-financial
year results as an advance against audited year end results.
Year end bonus to be paid no later than 30 days from audited
statements.
Options - As committed in the original agreement dated May 17, 1990.
Options will be executed and documented in sixty days from
March 16, 1992, and additional options to be issued at the
discretion of the Board.
Travel Expenses - A base amount of $2,000 monthly to defray hotel/lodging,
meals, laundry and tolls and parking. Air fare will be
booked directly through corporate travel agency. Base amount
payable no later than the tenth of the applicable month.
Car Phone - This will be paid for by the company.
Other elements of Employment - You will be eligible for all employee
benefit programs in place for MIS employees.
You will earn three weeks vacation per year.
You will devote substantially all your efforts to this
position.
You will honor the non-compete and confidential covenants that
are applicable to MIS employees.
Three months severance will be paid to you if you are
involuntarily terminated as well as all bonuses and
commissions due at time of termination will be prorated and
paid at the time of termination.
If you find these terms acceptable and suitable to your acceptance of this
position offered, please sign and date the acceptance section below.
Regards,
John C. Frieberg
President
I agree to accept the position offered.
/s/ Thomas Mulstay/3/25/94
--------------------------
Thomas Mulstay/Date
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<PAGE>
EXHIBIT 10.15
1992 EQUITY INCENTIVE PLAN
MEDIWARE INFORMATION SYSTEMS, INC.
STOCK OPTION AGREEMENT
THIS AGREEMENT, made as of the _____________________, by and
between Mediware Information Systems, Inc., a New York corporation having its
principal place of business at 1121 Old Walt Whitman Road, Melville, New York
11747 (hereinafter called the "Corporation"), and the individual whose name and
residence appear on the last page of this Agreement (hereinafter called
"Optionee").
W I T N E S S E T H:
WHEREAS, the Optionee is a key employee of the Corporation;
and
WHEREAS, as an incentive for the employee and as compensation
and a benefit for serving as an employee, the Corporation has offered to issue,
and the Optionee has agreed to accept, an option to purchase shares of common
stock of the Corporation pursuant to the Equity Incentive Plan of the Company
(the "Plan").
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration, the parties
hereto hereby agree as follows:
<PAGE>
1. Grant of Option: Pursuant to and subject in all respects to
the provisions of the Plan, the Corporation hereby grants to the Optionee, under
the terms and conditions set forth in this Agreement and the Plan, as of the
date hereof (the "Grant Date"), an Option to purchase the aggregate number of
shares of common stock, par value $.10 per share, of the Corporation set forth
below on the last page of this Agreement subject to adjustment in accordance
herewith (which shares are hereinafter called "Option Shares"). The Option
Shares may be purchased by exercising this Option in accordance with the terms
of this Agreement, at the price of one dollar ($1.00) per share, which price is
not less than the fair market value of a share of such common stock on the date
of grant. Terms defined in the Plan shall have the same meaning in this
Agreement unless the context requires otherwise.
2. Number of Shares and Other Terms of Option. The Option and
exercisability of the Option shall be subject to the following terms and
conditions, and all other terms and con- ditions set forth in the Plan or
elsewhere in this Agreement:
The Option shall become exercisable to the extent of 25%, 50%,
75% and 100% of the Option Shares on the first, second, third and fourth
anniversaries, respectively, of the first day of the month in which the Grant
Date falls. The Option shall remain exercisable until May 31, 2004 unless
earlier terminated as provided herein.
-2-
<PAGE>
This Agreement shall be subject in all respects to the
provisions of the Plan and any rules or regulations or other determination of
the Committee.
It is not intended that this Option shall be an incentive
stock option for purposes of the Internal Revenue Code of 1986.
3. Transferability. This Option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or the laws of descent and distribution or as specified in Section 5(g) of
the Plan, and the Option may be exercised during the lifetime of the Optionee on
by the Optionee or by his or her guardian or legal representative. The Optionee
may designate a Beneficiary as provided in the Plan.
4. Exercisable only during Employment; Death. An Option may be
exercised only during the continuance of the Optionee's employment, except as
provided in clauses (a), (b) and (c) below and paragraph 5.
(a) Termination. If an Optionee's employment ter-
minates for any reason other than death, all exercisable portions or
installments of the Option which are exercisable on the date of termination of
employment shall be exercisable by the Optionee for a period of three (3) months
following such termination; and
(b) Death. If an Optionee dies or becomes Totally
Disabled, the Option shall be exercisable to the extent provided in Section 5(f)
of the Plan.
-3-
<PAGE>
(c) Any such exercise shall be subject to the
satisfaction of all other conditions to exercise contained in this Option and
the Plan.
5. Early Termination; Confidential Information;
Forfeiture; Blue Pencil.
(a) To the extent enforceable under applicable law, the
Optionee hereby agrees that he or she (i) will not, without the Company's prior
written consent, for a period of nine (9) months within the United States and
Canada directly or indirectly, alone or as a partner, joint venturer, officer,
director, employee, consultant, agent, independent contractor or significant
shareholder of any company or business, engage in any business activity which is
directly or indirectly in competition with the Company with respect to any of
the products or services being considered, developed, sold or otherwise provided
by the Company at such time; and (ii) will not, for a period of (12) twelve
months within the United States and Canada directly or indirectly, employ, or
knowingly permit any company or business organization directly or indirectly
controlled by him or her to employ, any person who is employed by the Company or
in any manner seek to induce any such person to leave his or her employment by
the Company or in any manner seek to induce any such person to leave his or her
employment with the Company.
Any unexercised Options shall be forfeited immediately upon
a breach of such undertaking as determined by the Committee, any such
determination to be final and binding on all parties.
-4-
<PAGE>
(b) The Optionee hereby agrees that he or she will not
at any time, whether during or after the termination of the Optionee's
employment, reveal to any person or entity any of the trade secrets or
confidential information concerning the products, services, organization,
business or finances of the Company or of any third party which the Company is
under an obligation to keep confidential (including but not limited to trade
secrets or confidential information respecting inventions, designs, methods,
know-how, techniques, systems, processes, software programs, works of
authorship, customer lists, projects, plans and proposals), except as may be
required in the ordinary course of performing the duties as an Optionee of the
Company, and the Optionee shall keep secret all matters entrusted to him or her
and shall not use or attempt to use any such information in any manner which may
injure or cause loss or may be calculated to injure or cause loss, whether
directly or indirectly, to the Company. Any unexercised Options shall be
forfeited immediately upon a breach of such undertaking as determined by the
Committee, any such determination to be final and binding on all parties.
(c) Any unexercised Options that have been awarded to
the Optionee shall be forfeited if the Committee determines that the Optionee's
employment has been terminated because of willful misconduct or gross
negligence, or if at any time after the termination of an employment, the
Committee determined that the Optionee has failed satisfactorily to carry out
any of her or his remaining obligations to the Company; or has engaged in any
activity which is hostile, detrimental or antagonistic to the best interests of
-5-
<PAGE>
the Company; or the Optionee has been convicted of a crime or offense involving
the misappropriation of money or of a felony. The Committee's determination with
respect to a forfeiture shall be set forth in a notice given to the Optionee and
to the Company and shall be final and binding on both; any forfeiture shall take
place immediately upon receipt of the notice by the Company.
(d) If any court of competent jurisdiction shall at any
time deem any term of this Agreement or any provision or provisions of any
covenant, undertaking or agreement on the part of the Optionee contained in this
Section 5 ("Restrictive Covenants") too lengthy or too restrictive or the
territory too extensive, the other terms and provisions of Section 5 shall
nevertheless stand, the restrictive periods shall be deemed to be the longest
periods permissible by law under the circumstances, the other restrictive
provisions and conditions shall be the most protective to the Company as may be
permissible under law in the circumstances, and the territory in which
activities are restricted shall be deemed to comprise the largest territory
permissible by law under the circumstances. The court in each case shall reduce
the Restrictive Covenants, time period, territory and/or other restrictions or
provisions to the maximum permissible duration or size or reasonable
restriction.
(e) Reasonableness. Optionee acknowledges and agrees
that the Restrictive Covenants are reasonable and necessary for the protection
of the Company's business interests. Nothing contained herein shall be construed
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<PAGE>
as prohibiting the Company from pursuing any other remedies available to it
including equitable relief and the recovery of any damages.
6. No Right to Dividends, Distributions or Voting. The
Optionee shall not have any rights as a shareholder with respect to any Option
Shares until the date of issuance of stock certificate for such Option Shares
upon due exercise of this Option. Until the issuance of stock certificates, no
right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to Option Shares notwithstanding the exercise of the Option.
No adjustment will be made for a dividend or other rights for which the record
date is prior to the date the stock certificate is issued except as provided in
Section 7 hereof.
7. Adjustment in Option Shares. If all or any portion of this
Option is exercised subsequent to any stock dividend, split-up,
recapitalization, combination or exchange of shares, merger, consolidation,
acquisition of property or stock, spin-off, reorganization or liquidation, as a
result of which shares of any class shall be issued in respect of outstanding
shares of common stock or shares of common stock shall be changed into the same
or a different number of shares of the same or another class or classes, the
person or persons so exercising this Option shall receive, for the aggregate
price payable upon such exercise of this Option, the aggregate number and class
of shares which, if shares of common stock (as authorized at the
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<PAGE>
Grant Date) had been purchased at the Grant Date of this Option for the same
aggregate price (on the basis of the option price per share provided in this
Option) and had not been disposed of, such persons or persons would be holding
at the time of such exercise, sa a result of such purchase and any such stock
dividend, split-up, recapitalization, combination or exchange of shares, merger,
consolidation, acquisition of property or stock, spin-off, reorganization or
liquidation; provided, however, that no fractional share shall be issued upon
any such exercise. If any such adjustment shall result in the Optionee being
entitled to exercise this Option with respect to a fractional share, the number
of shares subject to this Option shall be reduced to the next lower number of
full shares.
In the event of any such change in the outstanding common
stock of the Corporation, the aggregate number and class of shares reserved by
the Corporation for exercise of options to purchase common stock shall be that
number and class which a person, to whom an Option had been granted for all of
such reserved shares of common stock on the date preceding such change, would be
entitled to receive as provided in the first sentence of this Section 7.
If, in connection with any Change of Control, any Option is
not proposed to be assumed by the surviving corporation or the purchaser in a
manner which will carry out the intention of this Agreement in view of the
Committee or others appointed to administer stock options, which may be but need
not be the Committee appointed to administer other options (the "Committee"),
-8-
<PAGE>
then, (i) the terms of any outstanding Option may be amended by the Committee to
provide that the date of termination of such Option may be extended, (ii) the
date on which such Option, or any part thereof not then exercisable may be
exercised may be advanced to a date to be fixed by the Committee, or a limited
period of exercisability may be so established, (iii) the terms of such Option
may be modified so as to permit the acquisition by the Optionee (during the same
period of exer-cisability as provided under this Agreement) of any cash,
property or securities which would be receivable by him or her if he or she
owned the total number of Option Shares immediately prior to such event, (iv)
such other action, if any, may be taken by the Committee through amendment of
this Agreement or otherwise, including surrender for value and/or the grant of
rights to acquire cash, property or securities, as may be necessary or
appropriate to carry out the intent of this Agreement; and/or (v), in the event
of a hostile Change of Control, if none of the foregoing action is taken, the
Option shall become exercisable as to all Option Shares upon the completion of
the Change of Control. The provisions of Section 4(f) of the Plan shall not
apply to this Option Agreement.
8. Exercise. This Option shall be exercised by written notice
to the Corporation at its principal place of business, accompanied by full
payment of the purchase price, which notice shall:
-9-
<PAGE>
(a) state the election to exercise the Option, the
number of shares in respect of which it is being
exercised, the person in whose name the stock
certificate or certificates for such shares of
common stock is to be regis- tered, his address
and social security number (or if more than one,
the names, addresses and social security numbers
of such persons);
(b) contain such representations and agreements as
to the holder's investment intent with respect
to such shares of common stock as may be
satisfactory to the Corporation's counsel;
(c) be signed by the person or persons entitled to
exercise the Option and, if the Option is being
exercised by any person or persons other than
the Optionee, be accompanied by proof,
satisfactory to counsel for the Corporation, of
the right of such person or persons to exercise
the Option.
Payment of the purchase price of any Option Shares shall be
(i) by certified or bank cashier's or teller's check or (ii) by shares of common
stock of the Company duly endorsed for transfer valued at fair market value at
the date of tender as determined in accordance with the Plan. The certificate or
certificates for shares of common stock as to which the Option shall be
exercised shall be registered in the name of the person or persons properly
exercising the Option.
-10-
<PAGE>
9. Compliance with Laws and Regulations. The grant and
exercise of this Option, and the Corporation's obligation to sell and deliver
stock hereunder, are subject to such approvals by any regulatory or governmental
agency as may be required and shall comply with all relevant provisions of
applicable Federal and state laws, rules and regulations, including, without
limitation, the Securities Act of 1933, the Securities Exchange Act of 1934,
state securities laws, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange or of any quotation association or
organization upon which the Option Shares may then be listed or quoted, and
shall be further subject to the approval of counsel for the Corporation with
respect to such compliance. The Corporation may imprint any legends on the
Options Shares restricting their subsequent sale or transfer which may be
required by state or Federal law.
By accepting this Option, the Optionee represents and warrants
for himself and any other person or persons properly exercising this Option that
any and all shares purchased hereunder shall be acquired for investment and not
with the intention to sell or distribute such shares. As a condition to the
exercise of this Option in whole or in part at any time, the Optionee or other
person or persons properly exercising the Option shall deliver to the
Corporation a written representation that the shares being purchased are being
acquired for investment and not with a present intention of sale or with a view
to distribution, and a consent that the certificate representing such shares be
endorsed to indicate such representation.
-11-
<PAGE>
The Corporation shall not be liable in the event it is unable
to issue or sell shares of common stock or other securities to the Optionee if
such issuance or sale would be unlawful, nor shall the Corporation be liable if
the issuance or sale of shares of common stock or other securities to an
Optionee is subsequently invalidated.
10. Withholding. The Corporation shall withhold all income or
other taxes required to be withheld by applicable law and shall remit them to
the appropriate taxing authority.
11. Employment Rights. Nothing contained in the Plan or in
this Option shall confer upon the Optionee any right to be employed by, or to be
continued in the employ of, the Corporation or of any of its subsidiaries or
interfere in any way with the right of the Corporation or any subsidiary by whom
such person may be employed to terminate his employment at any time.
12. Notice of Disposition. Optionee or his estate or legal
representative shall immediately notify the Corporation in the event of any
disposition of any kind by him of Option Shares acquired pursuant to this
Option.
13. Notices. Any notice to be given under the terms of this
Option shall be addressed to the Corporation or to the Optionee at the addresses
appearing on the first and last pages of this Agreement, or at such other
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<PAGE>
address as either party may hereafter designate in writing to the other.
14. Interpretation of this Agreement. Any dispute regarding
the interpretation of this Agreement shall be resolved in accordance with the
Plan and may be submitted by the Optionee or by the Corporation forthwith to the
Committee for resolution, which shall review such dispute at the time of the
next regular meeting of the Board or such Committee. The decision of the
Committee, as the case may be, with regard to such dispute shall be final and
binding upon the Corporation and upon the Optionee.
15. Successors and Assigns. Except as otherwise provided
herein, the provisions of this Agreement shall inure to the benefit of, and be
binding upon, the successors and assigns of the Corporation and the
administrators, heirs and legal representatives of the Optionee.
16. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
17. Amendments. No provision of this Agreement shall be
modified, amended, extended or waived except in writing signed by the parties
hereto or as otherwise be permitted or con- templated by the Plan.
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<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Agreement
to be duly executed in duplicate by its duly authorized officer, and Optionee
has executed this Agreement in duplicate, all as of the date and year first
above written.
MEDIWARE INFORMATION SYSTEMS, INC.
By___________________________
Chairman of the Board
Number of Option Shares Optionee
_____________________________ _______________________________
________________________________
Name and Address
<PAGE>
EXHIBIT 10.16.1
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THIS NOTE
MAY NOT BE SOLD OR OFFERED FOR SALE, TRANSFERRED, HYPOTHECATED OR OTHERWISE
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT
THERETO UNDER SUCH ACT OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY THAT AN EXEMPTION FROM REGISTRATION FOR SUCH SALE, OFFER, TRANSFER,
HYPOTHECATION OR OTHER ASSIGNMENT IS AVAILABLE UNDER SUCH ACT.
MEDIWARE INFORMATION SYSTEMS, INC.
(FORMERLY HEMOCARE, INC.)
12% Secured Note Due _________________
No. R New York, New York
$ -------------------
MEDIWARE INFORMATION SYSTEMS, INC., a New York corporation
(the "Company"), for value received, hereby promises to pay to
___________________, or registered assigns, the principal amount of $__________
on _________________, with interest (computed on the basis of a 360-day year of
twelve 30-day months) on the unpaid balance of such principal amount at the rate
of 12.00% per annum from the date hereof, payable upon maturity or earlier
prepayment of principal. Payments of principal and interest on this Note shall
be made in lawful money of the United States of America at the principal office
of the Company located at 1121 Old Walt Whitman Road, Melville, New York
11747-3005,New York, New York 10006, or at such other office or agency in the
State of New York as the Company shall have designated by written notice to the
holder of this Note as provided in the Subscription Agreement referred to below.
<PAGE>
This Note is being issued pursuant to a Subscription Agreement
(the "Subscription Agreement"), dated as of _________ _______, between the
Company and the holder and is one of a group of identical notes issued in an
offering to sell notes having an aggregate principal amount of up to $750,000
made pursuant to identical Subscription Agreements (the "Offering"). The holder
of this Note is entitled to the benefits of the Subscription Agreement and may
enforce the agreements of the Company contained therein and exercise the
remedies provided for thereby or otherwise available in respect thereof.
This Note is a registered Note and is transferable only upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the holder
hereof or his attorney duly authorized in writing. References in this Note to a
"holder" shall mean the person in whose name this Note is at the time registered
on the register kept by the Company and the Company may treat such person as the
owner of this Note for the purpose of receiving payment and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
This Note is subject to optional prepayment by the Company at
any time, without a premium, in whole or in part in denominations of $10,000.
Any prepayment shall be applied first to interest and then to principal.
This Note must be prepaid in full within thirty-one days after
the closing of the earlier to occur of (a) a prospective offering of rights to
purchase common stock of the Company, par value $.10 a share, for $.50 a share
resulting in at least $1,000,000 proceeds to the Company or (b) a sale of all or
substantially all of the assets of the Company or a merger of consolidation of
the Company in which the Company is not the surviving corporation.
This Note is one of the Notes secured by a security interest
in the present and future accounts of the Company, whether now owned or
hereafter acquired. The Company undertakes to file appropriate financing
statements in order to perfect such security interests.
At no time shall the interest rate payable on this Note,
together with all other amounts payable hereunder or in connection herewith, to
the extent same are construed to constitute interest, exceed the maximum rate of
interest permitted by law. If at any time the applicable rate of interest
computed in the manner provided in this Note, together with all fees and charges
as provided for herein, contracted for, charged, received, taken or reserved by
the holder in connection with the loan evidenced by this Note which are treated
as interest under applicable law exceeds the maximum lawful rate (the "Maximum
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<PAGE>
Rate") which may be contracted for, charged, taken, received or reserved by said
holder in accordance with applicable law, taking into account all charges made
in connection with the loan evidenced by this Note which are treated as interest
under applicable law, the rate of interest payable hereunder, together with all
such charges, shall be limited to the Maximum Rate; provided, however, that any
subsequent reduction in all such charges shall not reduce the rate of interest
earned hereunder, together with all charges, and shall equal the total amount of
interest which would have accrued if there had been no Maximum Rate. It is
expressly stipulated and agreed to be the intent of the Company and holder at
all times to comply with the applicable state or other law governing the Maximum
Rate or amount of interest payable on the loan evidenced by this Note (or
applicable United States federal law to the extent that it permits any lender to
contract for, charge, take, reserve or receive a greater amount of interest than
under applicable state law). If and for so long as any applicable law is ever
judicially interpreted so as to render usurious any amount called for under this
Note, or contracted for, charged, taken, reserved or received with respect to
the loan evidenced by this Note or if any prepayment by the Company results in
the Company having paid any interest in excess of that permitted by applicable
law, then it is the Company's and the holder's express intent that all excess
amounts theretofore collected by the holder be credited to the principal balance
of the loan evidenced by this Note (or, if all sums owing hereunder have been or
would thereby be paid in full, refunded to the Company) and the provisions of
this Note immediately be deemed reformed and the amounts thereafter collectible
hereunder reduced, without the necessity of the execution of any new document,
so as to comply with such applicable law and also to permit the recovery of the
fullest amount otherwise called for hereunder.
1. Holder's Acknowledgments and Agreements. By acceptance of
this Note, the holder of this Note acknowledges and agrees (in addition to and
not in limitation of any agreements and acknowledgments set forth in the
Subscription Agreement relating to this Note) as follows:
(a) No Assurances of Repayment. The holder
acknowledges that he has been advised by the Company that (i) the Company
anticipates the need for capital additional to the proceeds of the Notes in
order to fund its operations and to repay the sums to become due under this Note
and (ii) that there can be no assurance that the Company will be able to obtain
the additional capital required to fund its operations and to repay this Note,
whether by completion of a public offering, through any other offering of its
securities or otherwise. The holder acknowledges, represents and warrants that
he has purchased this Note other than in reliance on any assurance that the
Company will be able to obtain such additional capital.
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<PAGE>
(b) Restrictions on Transfer. The holder acknowl-
edges that he has been advised by the Company that this Note has not been
registered under the Securities Act of 1933 (the "Securities Act"), that the
Note is being issued on the basis of the statutory exemption provided by section
4(2) of the Securities Act and/or Regulation D promulgated thereunder relating
to transactions by an issuer not involving any public offering, and that the
Company's reliance thereon is based in part upon the representations made by the
holder in the Subscription Agreement. The holder acknowledges that he has been
informed by the Company of, or is otherwise familiar with, the nature of the
limitations imposed by the Securities Act and the rules and regulations
thereunder on the transfer of securities. In particular, the holder agrees that
no sale, assignment or transfer of the Note shall be valid or effective, and the
Company shall not be required to give any effect to any such sale, assignment or
transfer, unless (i) the sale, assignment or transfer of the Note is registered
under the Securities Act, it being understood that the Note is not currently
registered for sale and that the Company has no obligation or intention to so
register the Note, or (ii) the Note is sold, assigned or transferred in
accordance with all the requirements and limitations of Rule 144 under the
Securities Act, it being understood that Rule 144 is not available at the
present time for the sale of the Note and that there can be no assurance that
Rule 144 sales will be available at any time in the future, or (iii) such sale,
assignment, or transfer is otherwise exempt from registration under the
Securities Act. The holder represents and warrants that this Note has been
acquired for his own account for investment and not with a view to the sale or
distribution thereof or the granting of any participation therein, and that he
has no present intention of distributing or selling to others any of such
interest or granting any participation therein.
2. Miscellaneous.
2.1. All the covenants and agreements made by the
Company in this Note shall bind its successors and assigns.
2.2. No recourse shall be had for the payment of
the principal, interest or premium, if any, on this Note or for any claim based
hereon or otherwise in any manner in respect hereof, against any incorporator,
stockholder, officer or director, past, present or future, of the Company or of
any predecessor or successor corporation, whether by virtue of any
constitutional provision or statute or rule of law, or by the enforcement of any
assessment or penalty or in any other manner, all such liability being expressly
waived and released by the acceptance hereof and as part of the consideration
for the issue hereof.
2.3. No course of dealing between the Company and
the holder hereof shall operate as a waiver of any right of any
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<PAGE>
holder hereof, and no delay on the part of the holder in exercising any right
hereunder shall so operate.
2.4. This Note may be amended only by a written
instrument executed by the Company and the holder hereof. Any amendment shall be
endorsed upon this Note, and all future holders shall be bound thereby.
2.5. All communications provided for herein shall
be sent, except as may be otherwise specifically provided, by registered or
certified mail: if to the holder of this Note, to the address shown on the books
of the Company; and if to the Company, to Mediware Information Systems, Inc.,
1121 Old Walt Whitman Road, Melville, New York 11747-3005, attention of the
President, or to such other address as the Company may advise the holder of this
Note in writing. Notice shall be deemed given three (3) business days after so
mailed.
2.6. In the event that this Note is placed in the
hands of an attorney for collection, or in the event that any action be
instituted on this Note, or any action is taken with respect to a default
hereunder, the holder hereof shall be entitled to the payment by the maker and
any other party liable for the obligations of the maker hereunder of all
expenses in connection therewith, including without limitation, reasonable
attorneys' fees.
2.7. The headings of the Sections of this Note are
inserted for convenience only and shall not be deemed to constitute a part of
this Note.
2.8. This Note is made and delivered in New York, New
York, and shall be governed by the laws of the State of New York.
IN WITNESS WHEREOF, Mediware Information Systems, Inc. has
caused this Note to be executed in its corporate name by its President.
MEDIWARE INFORMATION SYSTEMS, INC.
By--------------------------------
John C. Frieberg, President
ATTEST:
- --------------------------------
, Secretary
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<PAGE>
GUARANTY
--------
FOR VALUE RECEIVED, Digimedics Corporation, a California
corporation ("Digimedics") which is a wholly-owned subsidiary of the Company,
hereby guarantees the due and punctual payment of all sums which are or may
become due and owing by the Company to the Holder under the foregoing Note, and
hereby grants the Holder a security interest in the present and future accounts
of Digimedics, whether now existing or hereafter acquired, to secure its
obligations to Holder under this Guaranty. Digimedics undertakes to file
appropriate financing statements in order to perfect such security interests.
IN WITNESS WHEREOF, Digimedics Corporation has caused this
Guaranty to be executed with its corporate name by its President and attested to
by its Secretary, and its seal to be affixed hereto.
Digimedics Corporation
By:---------------------------
Title: President
ATTEST:
- ----------------------------
, Secretary
[SEAL]
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<PAGE>
EXHIBIT 10.16.2
NEITHER WARRANTS REPRESENTED BY THIS
CERTIFICATE NOR THE SHARES ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933.
NEITHER SUCH WARRANTS NOR SUCH SHARES
MAY BE SOLD OR OFFERED FOR SALE,
TRANSFERRED, HYPOTHECATED OR OTHERWISE
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT
THERETO UNDER SUCH ACT OR AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY THAT AN EXEMPTION FROM
REGISTRATION FOR SUCH SALE, OFFER,
TRANSFER, HYPOTHECATION OR OTHER
ASSIGNMENT IS AVAILABLE UNDER SUCH ACT.
THE TRANSFER OF THIS CERTIFICATE IS
RESTRICTED AS DESCRIBED HEREIN.
MEDIWARE INFORMATION SYSTEMS, INC.
Warrant for the Purchase of Shares of Common Stock
par value $.10 per share
No. Shares
THIS CERTIFIES that, for receipt in hand of $__ and other
value received ________________________________, (the "Holder"), is entitled to
subscribe for and purchase from MEDIWARE INFORMATION SYSTEMS, INC., a New York
corporation (the "Company"), upon the terms and conditions set forth herein, at
any time or from time to time after _________________, and before 5:00 P.M. on
_____________ __________________, New York time (the "Exercise Period"),
________ shares of the Company's Common Stock, par value $.10 per share ("Common
Stock"), at a price of .50 per share (the "Exercise Price"). This Warrant may
not be sold, transferred, assigned or hypothecated except that it may be
transferred, in whole or in part, (i) by will or by intestate succession, or
(ii) by operation of law; and the term the "Holder" as used herein shall include
any transferee to whom this Warrant has been transferred in accordance with the
above. As used herein the term "this Warrant" shall mean and include this
Warrant and any Warrants hereafter issued as a consequence of the exercise or
transfer of this Warrant in whole or in part.
The number of shares of Common Stock issuable upon exercise of
this Warrant (the "Warrant Shares") and the Exercise Price may be adjusted from
time to time as hereinafter set forth.
<PAGE>
1. This Warrant may be exercised during the Exercise Period as
to the whole or any lesser number of whole shares, by the surrender of this
Warrant (with the election at the end hereof duly executed to the Company at its
office at 1121 Old Walt Whitman Road, Melville, New York 11747, or such other
place as is designated in writing by the Company, together with a certified or
bank cashier's check payable to the order of the Company in an amount equal to
the Exercise Price multiplied by the number of Warrant Shares for which this
Warrant is being exercised.
2. Upon each exercise of the Holder's rights to purchase the
Warrant Shares granted pursuant to this Warrant, as reissued from time to time,
the Holder shall be deemed to be the holder of record of the Warrant Shares
issuable upon such exercise, notwithstanding that the transfer books of the
Company shall then be closed or certificates representing such Warrant Shares
shall not then have been actually delivered to the Holder. As soon as
practicable after each such exercise of this Warrant, the Company shall issue
and deliver to the Holder a certificate or certificates for the Warrant Shares,
registered in the name of the Holder or its designee. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the right of the
Holder to purchase the balance of the Warrant Shares (or portions thereof)
subject to purchase hereunder.
3. Any Warrants issued upon the transfer or exercise in part
of this Warrant (together with this Warrant, the "Warrants") shall be numbered
and shall be registered in a Warrant Register as they are issued. The Company
shall be entitled to treat the registered holder of any Warrant on the Warrant
Register as the owner in fact thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrant on the
part of any other person, and shall not be liable for any registration or
transfer of Warrants which are registered or to be registered in the name of a
fiduciary or the nominee of a fiduciary unless made with the actual knowledge
that a fiduciary or nominee is committing a breach of trust in requesting such
registration or transfer, or with the knowledge of such facts that its
participation therein amounts to bad faith. The Warrants shall be transferable
only on the books of the Company upon delivery thereof duly endorsed by the
Holder or by his duly authorized attorney or representative, or accompanied by
proper evidence of succession, assignment or authority to transfer. In all cases
of transfer by an attorney, executor, administrator, guardian or other legal
representative, duly authenticated evidence of his or its authority shall be
produced. Upon any registration of transfer, the Company shall deliver a new
Warrant or Warrants to the person entitled thereto. The Warrants may be
exchanged, at the option of the Holder thereof, for another Warrant, or other
-2-
<PAGE>
Warrants of different denominations, of like tenor and representing in the
aggregate the right to purchase a like number of Warrant Shares (or portions
thereof) upon surrender to the Company or its duly authorized agent.
Notwithstanding the foregoing, the Company shall have no obligation to cause
Warrants to be transferred on its books to any person if, in the opinion of
counsel to the Company, such transfer does not comply with the provisions of the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations thereunder.
4. The Company shall at all times reserve and keep available
out of its authorized and unissued Common Stock, solely for the purpose of
providing for the exercise of the rights to purchase all Warrant Shares granted
pursuant to this Warrant, such number of shares of Common Stock as shall, from
time to time, be sufficient therefor. The Company covenants that all shares of
Common Stock issuable upon exercise of this Warrant, upon receipt by the Company
of the purchase price therefor, shall be validly issued, fully paid
nonassessable, and free of preemptive rights.
5. (a) In case the Company shall at any time after the date of
this Warrant (i) declare a dividend on the outstanding Common Stock in shares of
its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine
the outstanding Common Stock into a smaller number of shares, or (iv) issue any
shares of its capital stock by reclassification of the Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), then, in each case, the Exercise
Price, and the number and kind of shares of Common Stock receivable upon
exercise of this Warrant, in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination, or
reclassification, shall be proportionately adjusted so that the Holder after
such time shall be entitled to receive the aggregate number and kind of shares
which, if such Warrant had been exercised immediately prior to such time, he
would have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination, or reclassification. Such adjustment
shall be made successively whenever any event listed above shall occur.
(b) Whenever there shall be an adjustment as
provided in this section 5, the Company shall promptly cause written notice
thereof to be sent by registered mail, postage prepaid, to the Holder, at its
principal office, which notice shall be accompanied by an officer's certificate
setting forth the number of Warrant Shares purchasable upon the exercise of this
Warrant and the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment and the computation thereof,
which officer's certificate shall be conclusive evidence of the correctness of
any such adjustment absent manifest error.
-3-
<PAGE>
(c) The Company shall not be required to issue
fractions of shares of Common Stock or other capital stock of the Company upon
the exercise of the Warrants. If any fraction of a share would be issuable on
the exercise of any Warrant (or specified portions thereof), the Company shall
purchase such fraction for an amount in cash equal to the same fraction of the
Current Market Price of such share of Common Stock on the date of exercise of
the Warrant.
6. In case of any consolidation with or merger of the Company
with or into another Corporation (other than a merger or consolidation in which
the Company is the surviving or continuing corporation), or in case of any sale,
lease or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, such successor, leasing or purchasing
corporation, as the case may be, shall (i) execute with the Holder an agreement
providing that the Holder shall have the right thereafter to receive upon
exercise of this Warrant solely the kind and amount of shares of stock and other
securities, property, cash or any combination there of receivable upon such
consolidation, merger, sale, lease or conveyance by a holder of the number of
shares of Common Stock for which this Warrant might have been exercised
immediately prior to such consolidation, merger, sale, lease or conveyance, and
(ii) make effective provision in its certificate of incorporation or otherwise,
if necessary, in order to effect such agreement. Such agreement shall provide
for adjustments which shall be as nearly equivalent as practicable to the
adjustment in section 5.
7. The Warrant Shares issued upon exercise of the Warrants
shall be subject to a stop transfer order and certificate or certificates
evidencing such warrant Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. SUCH
SHARES MAY NOT BE SOLD, OFFERED OR
TRANSFERRED, HYPOTHECATED OR OTHERWISE
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT
THERETO UNDER SUCH ACT OR AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY THAT AN EXEMPTION FROM
REGISTRATION FOR SUCH SALE, TRANSFER,
HYPOTHECATION OR OTHER ASSIGNMENT IS
AVAILABLE UNDER SUCH ACT."
-4-
<PAGE>
8. Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), and upon reimbursement of the Company's reasonable
incidental expenses, the Company shall execute and deliver to the Holder thereof
a new Warrant of like date, tenor and denomination.
9. The Holder of any Warrant shall not have, solely on account
of such status, any rights of a stockholder of the Company, either at law or in
equity, or to any notice of meetings of stockholders or of any other proceedings
of the Company, except as provided in this Warrant.
10. This Warrant shall be construed in accordance with the laws
of the State of New York applicable to contracts made and performed within such
State, without regard to principles of conflicts of law.
Dated:
MEDIWARE INFORMATION SYSTEMS, INC.
By:_______________________________
President
[SEAL]
___________________________
Secretary
-5-
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, ______________________________________
hereby sells, assigns and transfers unto __________________________ a Warrant to
purchase ________ Shares of Mediware Information Systems, Inc. (the "Company"),
together with all right, title and interest therein, and does hereby irrevocably
constitute and appoint ______________________________attorney to transfer such
Warrant on the books of the Company, with full power of substitution.
Dated: _____________________
Signature____________________________
Signature Guaranteed:
NOTICE
The signature on the foregoing Assignment must correspond to the
name as written upon the face of this warrant in every particular, without
alteration or enlargement or any change whatsoever.
-6-
<PAGE>
To: MEDIWARE INFORMATION SYSTEMS, INC.
1121 Old Walt Whitman Road
Melville, New York 11747
ELECTION TO EXERCISE
The undersigned hereby exercises his or its rights to purchase
_____ Warrant Shares covered by the within Warrant and tenders payment herewith
in the amount of $________ in accordance with the terms thereof, and requests
that certificates for such securities be issued in the name of, and delivered
to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print Name, Address and Social Security
of Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a New Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated: ____________________ Name______________________________
(Print)
Address:________________________________________________________________________
______________________________
(Signature)
-7-
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
Digimedics Corporation
JAC Computer Service, LTD.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the
Registration Statement on Form S-8 of Mediware Information Systems, Inc. and
subsidiaries of our report dated August 23, 1996 (October 28, 1996 with respect
to Note E(1)) which is included in the annual report on Form 10-KSB for the year
ended June 30, 1996.
/s/ Richard A. Eisner & Company, LLP
- ------------------------------------
New York, New York
October 28, 1996
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
of Mediware Information Systems, Inc. (the "Company") constitutes and appoints
Lawrence Auriana and Les Dace, and each of them, singly or jointly, with full
power of substitution, to act for him in any and all capacities, including
director, principal executive officer, as principal financial officer and/or
controller or principal accounting officer of the Company to sign on his behalf
any and all Reports on Form 10-K, including Form 10-KSB, and any amendments or
supplements thereto of the Company, and to file the same with all exhibits
thereto with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or their substitute
or substitutes may do or cause to be done by virtue hereof.
Dated October 29, 1996
/s/ Les N. Dace
-----------------------------
Les N. Dace
/s/ Lawrence Auriana
-----------------------------
Lawrence Auriana
/s/ Jonathan Churchill
-----------------------------
Jonathan Churchill
/s/ Roger Clark
-----------------------------
Roger Clark
------------------------------
Joseph Delario
/s/ John C. Frieberg
-----------------------------
John C. Frieberg
------------------------------
Walter Kowsh, Jr.
/s/ Hans Utsch
------------------------------
Hans Utsch
/s/ Clinton G. Weiman
-----------------------------
Clinton G. Weiman
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,504
<SECURITIES> 0
<RECEIVABLES> 3,509
<ALLOWANCES> 188
<INVENTORY> 208
<CURRENT-ASSETS> 6,639
<PP&E> 576
<DEPRECIATION> 159
<TOTAL-ASSETS> 15,157
<CURRENT-LIABILITIES> 5,103
<BONDS> 0
0
0
<COMMON> 493
<OTHER-SE> 3,790
<TOTAL-LIABILITY-AND-EQUITY> 15,157
<SALES> 10,432
<TOTAL-REVENUES> 10,432
<CGS> 3,426
<TOTAL-COSTS> 13,721
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 216
<INCOME-PRETAX> (3,491)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,289)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,491)
<EPS-PRIMARY> (1.24)
<EPS-DILUTED> 0
<PAGE>
</TABLE>
