As filed with the Securities and Exchange Commission on November __, 1999.
Registration No. 333-71179
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
Amendment No. 2
Registration Statement
Under
THE SECURITIES ACT OF 1933
Medcom USA, Incorporated
(Exact name of registrant as specified in charter)
Delaware
(State or other jurisdiction of incorporation)
18001 Cowan, Suite C & D
Irvine, CA 92614
65-0287558 (949) 261-6665
(IRS Employer I.D. (Address, including zip code, and telephone number
Number) of principal executive offices)
Mark Bennett
18001 Cowan, Suite C & D
Irvine, CA 92614
(949) 261-6665
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
Copies of all communications, including all communications sent
to the agent for service, should be sent to:
William T. Hart, Esq.
Hart & Trinen
1624 Washington Street
Denver, Colorado 80203
(303) 839-0061
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date
of this Registration Statement
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
<PAGE>
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of each Proposed Proposed
Class of Maximum Maximum Amount
Securities Securities Offering Aggregate of
to be to be Price Per Offering Registration
to be Price Per
Registered Registered Unit (1) Price Fee (5)
------------------------------------------------------------------------------
Common Stock (2) 5,000,000 $0.62 $3,100,000 $ 862
Common Stock (3) 5,000,000 $0.62 $3,100,000 $ 862
Common Stock (4) 7,998,340 $0.62 $4,958,971 $1,379
----------- ------
Total 17,998,340 $3,103
========== ======
(1) Offering price computed in accordance with Rule 457(c).
(2) Shares of Common Stock issuable upon conversion of Company's Series C
Preferred Stock. Includes additional shares which may be issued due to
potential adjustments to conversion rate.
(3) Shares of Common Stock issuable upon the exercise of warrants. Includes
additional shares which may be issued due to adjustments to warrants.
(4) Shares of common stock owned by existing shareholders.
(5) A fee of $1,626 was paid when this Registration Statement was initially
filed.
Pursuant to Rule 416, this Registration Statement includes such
indeterminate number of additional securities as may be required for issuance
upon the conversion of the Preferred Stock or upon the exercise of the warrants
as a result of any adjustment in the number of securities issuable by reason of
the anti-dilution provisions of the Preferred Stock or the warrants.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of l933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
SELLING SHAREHOLDER OFFERING PROSPECTUS
MEDCOM USA, INCORPORATED.
Common Stock
This prospectus relates to the sale of common stock by certain persons who
either own or have the right to acquire shares of Medcom's common stock. These
persons are sometimes referred to in this prospectus as the selling
shareholders. See the section of this prospectus entitled "Selling Shareholders"
for more information concerning the selling shareholders. Medcom will not
receive any proceeds from the sale of the shares by the selling shareholders.
Medcom is an electronic transactions processing company with a primary
focus on the healthcare industry. Medcom's products include the MedCard System,
the only completely paperless insurance billing system designed for use by
hospitals, doctors and other healthcare providers, and a website through which a
consumer can order up to 5,000 home medical products on the Internet and obtain
healthcare information.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities offered by this
prospectus or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
The securities offered by this prospectus are speculative and involve a
high degree of risk. For a description of certain important factors that should
be considered by prospective investors, see "Risk Factors" beginning on page
____ of this prospectus.
The former name of Medcom was Sims Communications, Inc. In October 1999
the shareholders of Sims approved the change in the corporate name to Medcom
USA, Incorporated.
On November __, 1999 the closing price of Medcom's common stock on the
NASDAQ SmallCap Market was $0.62 per share. Medcom's NASDAQ symbol is EMED.
The date of this prospectus is November ___, 1999
<PAGE>
PROSPECTUS SUMMARY
Medcom USA, Incorporated (the "Company") was incorporated in August 1991
under the name Sims Communications, Inc. The corporate name was changed to
Medcom USA, Incorporated in October 1999.
Medcom's executive offices are located at 18001 Cowan, Suite C & D, Irvine
California 92614. Medcom's telephone number is (949) 261-6665.
Medcom's initial business was the rental of cellular telephones through a
stand-alone dispensing station known as an Automated Communications Distribution
Center ("ACDC"). Prior to 1996 Medcom operated ACDC units for its own account
and also sold franchises which provided third parties the right to operate ACDC
units at various franchised locations. At October 31, 1999, Medcom was not
operating any ACDC units and Medcom's only remaining franchisee had four ACDC
units in operation.
In December 1996 Medcom acquired all the issued and outstanding shares of
Link International, Inc., a corporation which manufactures and distributes
machines which dispense prepaid calling cards and terminals which are used by
merchants to perform a variety of transactions, including accepting credit cards
and bank debit cards in payment for sales of merchandise and services. In June
1999 Medcom sold substantially all of the assets associated with Link.
In May 1998 Medcom acquired One Medical Services, Inc., a corporation
which provides a financial processing and communications network for the home
medical equipment industry. In July 1999 Medcom licensed its rights to the One
Medical Service Network to an unrelated third party for $1,377,000, of which
$300,000 was paid by September 30, 1999, $267,000 of which is to be paid by
January 5, 2000 and the remainder of which ($810,000) will be paid in accordance
with the terms of an unsecured promissory note which is payable prior to July
2006.
As of the date of this prospectus substantially all of Medcom's revenues
were generated by its Justmed.com and Movie Vision divisions.
JustMed.com
The JustMed.com division involves three components:
o The Medcard health insurance verification and billing system
o The JustMed.com website
o The Med Store
MedCard System
In November 1998 Medcom acquired an exclusive world wide license to
software programs and related technology known as the MedCard system. The
MedCard system is an electronic processing system which consolidates insurance
eligibility verification and processes medical claims and approvals of credit
card and debit card payments in under 30 seconds through a single, small
terminal. Using the MedCard system, patients are relieved from the problems
<PAGE>
associated with eligibility confirmation and billings, healthcare providers'
reimbursements are accelerated and account receivables are reduced. The time it
takes to collect payments from insurance providers decreases from months to
days. Medcom obtains revenues from the sale or lease of its processing terminals
and from fees received from every transaction processed by the terminals.
As of October 31, 1999 the MedCard system was able to retrieve on-line
eligibility and authorization information from 77 medical insurance companies
and electronically process and submit billings for its healthcare providers to
over 1650 companies. These insurance providers include CIGNA, Prudential, Oxford
Health Plan, United Health Plans, Blue Cross, Medicaid, Aetna, Blue Cross/Blue
Sheild and Metrahealth.
Website
The JustMed.com website is an internet website which began functioning on
July 1, 1999. The website advertises healthcare products and services which are
available to the general public and provides medical information to the general
public. Persons in need of healthcare products and services can access the
website and order products or transfer to the more detailed websites maintained
by the companies which provide the products and services. Medcom expects to
generate revenues from this website by charging providers of healthcare products
and services fees for advertising on the website. Medcom will also receive fees
when a person transfers from Medcom's website to the websites maintained by a
provider of healthcare products or services. Medcom expects that advertisers on
its website will include distributors of healthcare equipment and products,
hospitals, physician practice groups, and clinics.
Med Store
The Med Store is a feature of Medcom's website which allows consumers to
use their computers to purchase a variety of healthcare products and services.
Items available for purchase include canes, crutches, walkers, bath chairs,
blood pressure units, cold therapies, exercise equipment and hot and cold packs.
Movie Vision
In January 1999 Medcom acquired a business known as Movie Vision. Movie
Vision rents video cassettes, primarily containing motion pictures, through
automated dispensing units in hotels. Movie Vision currently has video cassette
dispensing machines in approximately 140 hotels in the United States.
The Offering
This prospectus relates to the sale of shares of Medcom's common stock:
o issuable upon the conversion of Medcom's Series C preferred stock,
o issuable upon the exercise of warrants held by the Series C preferred
shareholders
o issuable upon the exercise of warrants and options which were previously
issued by Medcom, and
<PAGE>
o held by certain persons who either purchased the shares from Medcom in
private offerings, received the shares for services provided to Medcom,
or received the shares in settlement of amounts owed to these persons
by Medcom.
Since the number of shares to be issued upon the conversion of the
Series C Preferred Shares will depend upon the price of Medcom's common stock at
the conversion the actual number of shares which will be issued upon conversion
cannot be determined at this time. See "Comparative Share Data".
The holders of the preferred shares, warrants and options, to the
extent they convert their preferred shares into shares of common stock or
exercise the warrants or options, and the owners of the shares of common stock
described above are referred to in this prospectus as the selling shareholders.
Medcom will not receive any funds upon the conversion of the preferred shares
since Medcom received $1,700,000 when the preferred shares were sold. If all
warrants and options held by the selling shareholders are exercised, Medcom will
receive approximately $1,586,000, which will be used to fund Medcom's
operations. Medcom will not receive any proceeds from the sale of the shares by
the selling shareholders.
As of October 31, 1999, Medcom had 20,082,907 shares of common stock
issued and outstanding. Assuming all preferred shares are converted into
3,400,000 shares of common stock (assuming a conversion price of $0.50 per
share), and all warrants and options held by the selling shareholders are
exercised, there will be 27,798,888 shares of common stock issued and
outstanding. The number of outstanding shares before and after this offering
does not give effect to shares which may be issued upon the exercise and/or
conversion of other options, warrants or convertible securities previously
issued by Medcom. See "Comparative Share Data".
Statement of Operations Data:
Years Ended June 30,
1999 1998
---- ----
Revenues $2,240,876 $980,951
Cost of Services (697,481) (523,479)
Operating and other
Expenses (8,690,380) (7,503,483)
Loss from Discontinued Operations -- (63,737)
------------ ---------------
Net Loss $(7,146,985) $(7,109,748)
============ ============
Balance Sheet Data:
June 30,
1999 1998
Current Assets $1,405,096 $1,088,022
Total Assets 6,374,862 5,602,751
Current Liabilities 2,142,550 2,785,015
Total Liabilities 2,268,256 3,372,542
Working Capital (Deficit) (737,454) (1,697,013)
Shareholders' Equity 4,106,606 2,230,209
No common stock dividends have been declared by Medcom since its inception.
<PAGE>
RISK FACTORS
Prospective investors should be aware that ownership of Medcom's common
stock involves risks which could adversely affect the value of their holdings of
common stock. Medcom does not make, nor has it authorized any other person to
make, any representations about the future market value of Medcom's common
stock.
The securities offered should be purchased only by persons who can afford
to lose their entire investment. Prospective investors should read this entire
prospectus and carefully consider, among others, the following risk factors in
addition to the other information in this prospectus prior to making an
investment.
History of losses.
Medcom has incurred losses since it was formed in 1991. From the date of
its formation through June 30, 1999, Medcom incurred net losses of approximately
$(27,560,000). During the year ended June 30, 1999 Medcom had a loss of
$(7,109,748). Medcom expects to continue to incur losses until such time, if
ever, as it earns net income. There can be no assurance that Medcom will be able
to generate sufficient revenues and become profitable. Due to Medcom's recurring
losses, Medcom's auditors have qualified their opinion on Medcom's June 30, 1999
financial statements.
Medcom Needs Additional Capital to Continue in Business.
This offering is being made on behalf of certain selling shareholders.
Medcom will not receive any proceeds from the sale of the shares offered by the
selling shareholders. Medcom's continued operations will depend upon the
availability of additional funding. There can be no assurance that Medcom will
be able to obtain additional funding, if needed, or if available on terms
satisfactory to Medcom.
There is a significant potential of dilution created by the Series C Preferred
Stock and warrants.
As of October 31, 1999 Medcom would be required to issue 3,490,000 shares
of common stock if all outstanding Series C Preferred shares were converted and
all warrants held by the series C preferred shareholders were exercised. These
3,490,000 shares, if issued, would represent approximately 15% of Medcom's
issued and outstanding shares of common stock, assuming all outstanding warrants
or options are not exercised . The issuance of these shares would result in
substantial dilution to the interests of other holders of common stock.
<PAGE>
The series C preferred shares are convertible at a floating ratio based on
a discount from the price of Medcom's common stock price. The lower price of
Medcom's common stock at the time the holder converts, the more common shares
the holder will receive. As a result, Medcom does not know the exact number of
shares that it will be required to issue upon conversion.
To the extent the series C preferred shareholders convert and then sell
their shares of common stock, the price of Medcom's common stock may decrease
due to the additional shares in the market. This could allow the series C
preferred shareholders to convert the preferred shares into even greater amounts
of common stock, the sales of which would further depress Medcom's stock price.
The significant downward pressure on the price of Medcom's common stock as
the selling shareholders convert and sell material amounts of common stock could
encourage short sales by the selling shareholders or others, which would place
further downward pressure on the price of Medcom's common stock.
Dividends payable on the series C preferred stock may be paid in cash or
in shares of common stock at the option of Medcom. As a result, the lower the
common stock price, the more shares of common stock the holders of series C
preferred stock will receive in payment of dividends.
Options, Warrants and Convertible Securities issued by Medcom may result in
substantial dilution to Medcom's Shareholders.
Medcom has issued options warrants and other convertible securities
("derivative securities") which allow the holders to acquire additional shares
of Medcom's common stock. Medcom has agreed, at its expense, to register for
public sale the shares of common stock underlying these derivative securities.
The sale of these shares over a short period of time may cause the price of
Medcom's common stock to decline. See "Comparative Share Data" for more
information concerning the derivative securities issued by Medcom.
Medcom's need for capital may result in the issuance of additional shares of
common stock.
This offering is being made on behalf of certain selling shareholders.
Medcom will not receive any proceeds from the sale of the shares offered by the
selling shareholders. Due to Medcom's history of losses, it is likely that
Medcom's continued operations will depend upon funds received from the sale of
Medcom's common or preferred stock The issuance of these shares and their sale,
or potential for resale, in the public market may cause the price of Medcom's
common stock to decline. There can be no assurance that Medcom will be able to
obtain additional funding, if needed, or if available on terms satisfactory to
Medcom.
Prices for Medcom's Common Stock have been highly volatile and will be
influenced by a number of factors, including the depth and liquidity of the
market for Medcom's Common Stock, Medcom's financial results, investor
perceptions of Medcom, and general economic and other conditions.
There is No Assurance that Medcom's Common Stock Will Continue to be Listed on
NASDAQ.
Although Medcom's Common Stock is currently listed on the NASDAQ Small-Cap
Market, the National Association of Securities Dealers, Inc. ("NASD") requires,
for continued inclusion on the NASDAQ Small-Cap Market, that Medcom must
maintain $2,000,000 in tangible net worth and that the bid price of Medcom's
Common Stock must be at least $1.00. Prior to October 31, 1999 Medcom's common
<PAGE>
stock was trading below $1.00 per share. The NASD has notified Medcom that prior
to January 17, 2000 the bid price of Medcom's common stock must be at $1.00 for
a minimum of ten consecutive trading days. If Medcom fails to meet this
requirement Medcom's common stock may be delisted from the NASDAQ SmallCap
market.
If Medcom's securities were delisted from the NASDAQ Small-Cap Market,
Medcom's securities would trade in the unorganized interdealer over-the-counter
market through the OTC Bulletin Board which provides significantly less
liquidity than the NASDAQ Small-Cap Market. Securities which are not traded on
the NASDAQ Small-Cap Market may be more difficult to sell and may be subject to
more price volatility than NASDAQ listed securities. There can be no assurance
that Medcom's securities will remain listed on the NASDAQ Small-Cap Market.
If Medcom's Common Stock was delisted from NASDAQ, trades in such
securities may then be subject to Rule 15g-9 under the Securities Exchange Act
of 1934, which rule imposes certain requirements on broker/dealers who sell
securities subject to the rule to persons other than established customers and
accredited investors. For transactions covered by the rule, brokers/dealers must
make a special suitability determination for purchasers of the securities and
receive the purchaser's written agreement to the transaction prior to sale. Rule
15g-9, if applicable to sales of Medcom's securities, may affect the ability of
broker/dealers to sell Medcom's securities and may also affect the ability of
investors in this offering to sell such securities in the secondary market and
otherwise affect the trading market in Medcom's securities.
The Securities and Exchange Commission has rules that regulate
broker/dealer practices in connection with transactions in "penny stocks". Penny
stocks generally are equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the NASDAQ system, provided that current price and volume information with
respect to transactions in that security is provided by the exchange or system).
The penny stock rules require a broker/dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document prepared by the Commission that provides information about
penny stocks and the nature and level of risks in the penny stock market. The
broker/dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker/dealer and its
salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. The bid and
offer quotations, and the broker/dealer and salesperson compensation
information, must be given to the customer orally or in writing prior to
effecting the transaction and must be given to the customer in writing before or
with the customer's confirmation. These disclosure requirements may have the
effect of reducing the level of trading activity in the secondary market for a
stock that becomes subject to the penny stock rules.
Medcom's agreements with the Series C preferred shareholders may restrict
Medcom's operations.
Medcom's agreement with the Series C preferred shareholders restricts Medcom
from selling shares of its common stock at prices below then prevailing market
prices, from selling additional shares of preferred stock, or from disposing of
<PAGE>
its proprietary technology other than in the ordinary course of business. These
restrictions, unless waived by the series C preferred shareholders, may prevent
Medcom from obtaining additional capital or modifying its business in a manner
deemed advantageous by Medcom.
Medcom's recent changes in its business may not result in profits.
During the summer of 1999 Medcom began directing its efforts towards its
JustMed.com division. The JustMed.com division is in the early stage of
development and has a limited operating history. The success of the JustMed.com
division will be dependent on:
o convincing healthcare providers to use the Medcard system for insurance
verification and billing,
o the continued growth and the use of the internet by the general public.
o obtaining new advertisers and new content for its website, and
o the general public's acceptance of the internet as a source of healthcare
information and services.
There is no assurance that the JustMed.com division will gain acceptance
from healthcare providers or the general public or that the JustMed.com division
will generate any profits.
Competition.
There are many companies that will compete with Medcom at some level.
Competing health insurance processing systems include Envoy, Medical Manager,
Medic, Spot Check and Mediphis. Leading consumer healthcare websites include AOL
Health Channel, Thrive Online, drkoop.com, Mayo Clinic Health Oasis,
InteliHealth, Mediconsult.com, and OnHealth. Many of these competitors are far
better capitalized than Medcom and control significant market share in their
respective industry segments. There can be no assurance that Medcom will be able
to compete with the numerous other companies which are engaged in Medcom's lines
of business.
Medcom is Dependent on the Internet and Telecommunications Carriers for its
Operations.
Medcom's website is dependent upon the ability of the general public to
use the internet. Medcom's Medcard system relies on telecommunications carriers
to transmit data. A major equipment failure affecting the systems of internet
service providers or providers of telecommunications services, or the inability
of telecommunications carriers to provide or expand their current levels of
service to Medcom, could have a material adverse effect on Medcom's operations.
Year 2000 Issue.
The "Year 2000" issue affects computer systems, network elements and
software applications that have time-sensitive programs that may not properly
reflect or recognize the year 2000. Because many computers and computer
applications define dates by the last two digits of the year, "00" may not be
properly identified as the year 2000. This error could result in miscalculations
or system failures. Medcom does not except to incur any material cost relating
<PAGE>
to the Year 2000 issue because it is of the opinion that its computer systems
have been developed so as to avoid this problem. Medcom is currently determining
the extent to which it may be impacted by third parties' failure to remedy their
own Year 2000 issues. Medcom is having, and will continue to have,
communications with all of its suppliers, and other third parties to determine
the extent, if any, to which Medcom systems could by impacted by any third party
Year 2000 issues and related remedies. Medcom believes that the Year 2000 issues
could adversely impact Medcom if systems operated by third parties providing
services are not Year 2000 compliant.
Government Regulation.
Medcom is dependent upon the Internet for its business. Presently, the
Federal Communications Commission in the United States does not regulate
companies that provide internet services as common carriers or
telecommunications service providers. Notwithstanding the current state of the
rules, the FCC's potential jurisdiction over the Internet is broad because the
Internet relies on wire and radio communications facilities and services over
which the FCC has long-standing authority.
Medcom may face potential liability for information carried on its website.
The legal obligations and potential liability of companies which provide
information by means of the internet are not well defined and are evolving. Any
liability of Medcom resulting from information carried on or disseminated
through its website could have a material adverse effect on its business,
operating results and financial condition.
Medcom may be unable to protect its technology.
Certain technology used by Medcom is covered by U.S. patents. There is no
assurance that any patents issued or licensed to Medcom will protect Medcom's
technology as disputes may arise between Medcom and others as to the scope and
validity of these or other patents. Any defense of the patents could prove
costly and time consuming and there can be no assurance that Medcom will be in a
position, or will deem it advisable, to carry on such a defense. With respect to
Medcom's unpatented proprietary technology, there is no assurance that others
may not acquire or independently develop the same or similar technology.
Agreements with Credit Card Companies.
Medcom's terminals and video dispensing machines are capable of operating
on an automatic basis as the result of a nationwide credit card system. By means
of telephone lines and computers, this system links credit card companies,
issuing banks and credit card processing firms throughout the United States and
allows products and services to be purchased through credit cards. Medcom
presently has agreements with credit card processors which authorize the use of
various major credit cards in Medcom's machines. In order for Medcom to continue
to have the services of these credit card processors available, Medcom is
required to meet certain conditions as provided in the agreements between the
credit card processors and Medcom. In the event Medcom fails to meet these
conditions, the credit card processors may automatically refuse to accept credit
cards, in which case Medcom's machines would be unable to process transactions.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Medcom will provide, without charge, to each person to whom a copy of this
prospectus is delivered, including any beneficial owner, upon the written or
oral request of such person, a copy of any or all of the documents incorporated
by reference herein (other than exhibits to such documents, unless such exhibits
are specifically incorporated by reference into this prospectus). Requests
should be directed to:
Medcom USA, Incorporated
18001 Cowan, Suite C & D
Irvine, CA 92614
(949) 261-6665
(949) 261-0323 (fax)
The following documents filed with the Securities and Exchange Commission
by Medcom (Commission File No. 0-25474) are hereby incorporated by reference
into this Prospectus:
(1) Annual Report on Form 10-KSB for the fiscal year ended June 30, 1999.
(2) Quarterly report on Form 10-QSB for the quarter ending September 30, 1999.
All documents filed with the Securities and Exchange Commission by Medcom
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 subsequent to the date of this prospectus and prior to the termination of
this offering shall be deemed to be incorporated by reference into this
prospectus and to be a part of this prospectus from the date of the filing of
such documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference shall be deemed to be modified or superseded for
the purposes of this prospectus to the extent that a statement contained in this
prospectus or in any subsequently filed document which also is or is deemed to
be incorporated by reference modifies or supersedes such statement. Such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this prospectus.
ADDITIONAL INFORMATION
Medcom has filed with the Securities and Exchange Commission, 450 5th
Street, N.W., Washington, D.C. 20001, a Registration Statement under the
Securities Act of l933, as amended, with respect to the securities offered by
this prospectus. This Prospectus does not contain all of the information set
forth in the Registration Statement. For further information with respect to
Medcom and such securities, reference is made to the Registration Statement and
to the exhibits filed with the registration statement. Statements contained in
this Prospectus as to the contents of any contract or other documents are
summaries, and in each instance reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by the actual terms of the document.
Medcom is subject to the requirements of the Securities Exchange Act of l934 and
is required to file reports, proxy statements and other information with the
Securities and Exchange Commission. Copies of the exhibits to the registration
<PAGE>
statement, as well as copies of any reports, proxy statements and other
information filed by Medcom, can be inspected and copied at the public reference
facility maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. and at the Commission's Regional offices in New York (7 World
Trade Center, Suite 1300, New York, New York 10048) and Chicago (Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511). Copies of such material can be obtained from the Public Reference
Section of the Commission at its office in Washington, D.C. 20549 at prescribed
rates. Certain information concerning Medcom is also available at the Internet
Web Site maintained by the Securities and Exchange Commission at www.sec.gov.
COMPARATIVE SHARE DATA
As of October 31, 1999, Medcom had 20,082,907 shares of common stock
issued and outstanding. Assuming all preferred shares are converted into
3,400,000 shares of common stock (assuming a conversion price of $0.50 per
share), and all warrants and options held by the selling shareholders are
exercised, there will be 27,798,888 shares of common stock issued and
outstanding. The following table describes the origin of the shares offered by
this prospectus.
Number of Shares Note Reference
Shares outstanding as of October 31, 1999 (1) 20,082,907
Shares offered by existing shareholders 7,998,340
Shares issuable upon conversion of Series C 3,490,000 A
Preferred Stock.
Shares issuable in payment of dividends to 200,000 B
holders of Series C Preferred shares.
Shares issuable upon exercise of warrants 113,333 B
held by Series C Preferred shareholders.
Shares which may be acquired by sales agent. 40,500 B
Shares issuable upon exercise of warrants sold to 3,912,648
private investors and upon exercise of warrants
issued to sales agents and financial consultants
Shares which will be outstanding, assuming 27,798,888
conversion of all preferred shares and the
exercise of all options and warrants listed above
Percentage of Medcom's common stock represented 56%
by shares offered by this prospectus, assuming
conversion of all preferred shares and the exercise
of all options and warrants listed above
<PAGE>
Other Shares Which May Be Issued:
The following table lists additional shares of Medcom's common stock which
are not offered by this prospectus but may be issued as the result of the
exercise of outstanding options, warrants or the conversion of other securities
issued by Medcom:
Number Note
of Shares Reference
Shares issuable upon the exercise of 2,370,409
warrants sold to private investors
and upon exercise of warrants issued
to sales agents and financial consultants
Shares issuable upon conversion of notes 90,690 D
and exercise of warrants sold in
private offering
Shares issuable upon exercise of options 5,342,500
previously granted by Company
Additional shares issuable in connection
with the acquisition of One Medical
Services, Inc.: F
Warrant Shares 187,500
Incentive Shares 1,485,000
A. Between November 1998 and January 1999, Medcom sold 1,700 shares of its
series C preferred stock to a group of institutional investors for $1,700,000.
In connection with this offering, Medcom issued to Settondown Capital
International, Ltd., the sales agent for the offering, 45 shares of series C
preferred stock. Each preferred share is convertible into shares of Medcom's
common stock equal in number to the amount determined by dividing $1,000 by the
lower of (i) $1.50 (or $1.28 in the case of 750 shares sold in December 1998),
or (ii) 80% of the average price of Medcom's common stock for any two trading
days during the ten trading days preceding the conversion date. The lower of (i)
or (ii) is the "conversion price" for the series C preferred stock. The shares
in the table assume a conversion price of $0.50 per share. The series C
preferred shares will automatically convert to shares of Medcom's common stock,
at the then prevailing conversion price, two years after the date of their
issuance. Since the number of shares to be issued upon the conversion of the
series C preferred shares will depend upon the price of Medcom's common stock at
the time of conversion, the actual number of shares which will be issued may be
more or less than the amount in the table.
B. In connection with the issuance of the Series C Preferred Stock Medcom also:
(i) Agreed to pay annual dividends to the Series C Preferred shareholders at
the rate of $60 per share. At Medcom's option these dividends may be paid
in cash or in shares of Medcom's common stock. For dividends paid in shares
of stock, the number of shares to be issued is determined by dividing the
dollar amount of the dividends by 80% of the average price of Medcom's
common stock for any two trading days during the ten trading days preceding
<PAGE>
the date the dividends are payable. As of October 31, 1999 Medcom owed
approximately $100,000 in dividends to the Series C Preferred shareholders.
Medcom has elected to pay these dividends with shares of common stock. The
number of shares in the table was determined by dividing $100,000 by $0.50.
(ii) Issued to the holders of the Series C Preferred Stock, on a pro rata basis,
warrants which collectively allow for the purchase of up to 113,333 shares
of Medcom's common stock. The warrants are exercisable at a price of $1.00
per share at any time prior to July 31, 2004.
(iii)Issued to Settondown Capital International, Ltd., the sales agent for the
offering, 45 shares of Series C Preferred Stock, warrants for the purchase
of 37,500 shares of Medcom's common stock and 14,769 shares of common
stock. The Series C Preferred Shares issued to the sales agent are
convertible on the same basis as the Series C Preferred Shares sold to the
institutional investors (with a maximum conversion price of $1.50 per
share). The warrants for the purchase of the 37,500 shares of common stock
are exercisable at a price ranging between $1.27 and $1.50 per share at any
time prior to December 31, 2003. Settondown, as the holder of 45 shares of
the Series C preferred stock, also received 3,000 warrants which have the
same terms as the warrants referred to in (ii) above.
C. In connection with certain private offerings, Medcom sold shares of common
stock and warrants. The warrants sold in these private offerings are exercisable
at prices ranging between $0.44 and $1.54 per share and expire between March
2000 and April 2004. Medcom has also entered into a number of agreements with
various financial consultants. Pursuant to the terms of these agreements, Medcom
has issued to the financial consultants shares of common stock, plus warrants to
purchase additional shares of common stock. The warrants referred to above are
exercisable at prices ranging between $0.59 and $5.00 per share and expire
between November 2001 and April 2004. Up to 3,912,648 shares of common stock
issuable upon the exercise of warrants held by certain private investors, and
financial consultants are being offered to the public by means of this
prospectus. See "Selling Shareholders".
D. Between February and December l997 Medcom sold $1,017,500 of convertible
notes, together with warrants for the purchase of 75,065 shares of Medcom's
common stock. The notes bear interest at 8% per annum and are presently due and
payable. As of October 31, 1999 notes in the principal amount of $992,500 (plus
accrued interest) have been converted into shares of Medcom's common stock. The
remaining notes are convertible into 15,625 shares of Medcom's common stock at a
fixed conversion price of $1.60 per share. The warrants are exercisable at any
time prior to May 31, 2002 at prices ranging between $4.00 and $10.00 per share.
E. Options are held by present and former officers, directors and employees of
Medcom. The options may be exercised at prices ranging between $0.81 and $8.00
per share. All options are currently exercisable.
F. Effective May 30, 1998 Medcom acquired One Medical Services, Inc. in
consideration for 142,349 shares of common stock and 187,500 warrants
exercisable at $2.00 per share at any time prior to May 30, 2003. Medcom has
also agreed to issue to the former owners of One Medical up to 1,485,000
additional shares of common stock depending on the future operating of One
<PAGE>
Medical. The number of shares to be issued each quarter will be determined by
dividing the quarterly net income of One Medical (for each fiscal quarterly
beginning June 30, 1998 and ending June 30, 2001), by the average closing price
of Medcom's common stock for the five day trading period prior to the end of
each quarter. As of November 15, 1999 Medcom had not issued any additional
shares to the former owners of One Medical.
The shares which are referred to in Notes A, B and C (limited to 3,912,648
shares in the case of Note C), as well as 7,998,340 shares owned by existing
shareholders, are being registered for public sale by means of this prospectus.
A total of 1,298,000 shares issuable upon the exercise of options, and
which are referred to in Note E, have been registered for public sale by means
of a registration statement on Form S-8 filed with the Securities and Exchange
Commission
SELLING SHAREHOLDERS
The Offering
This prospectus relates to the sale of shares of Medcom's common stock:
o issuable upon the conversion of Medcom's Series C preferred stock
o issuable upon the exercise of warrants held by the Series C preferred
shareholders
o issuable upon the exercise of warrants and options which were previously
issued by Medcom, and
o held by certain persons who either purchased the shares from Medcom in
private offerings, received the shares for services provided to Medcom,
or received the shares in settlement of amounts owed to these persons
by Medcom.
The holders of the preferred shares, warrants and options, to the
extent they convert their preferred shares into shares of common stock or
exercise the warrants or options, and the owners of the common stock described
above are referred to in this prospectus as the selling shareholders. To the
knowledge of Medcom, none of the selling shareholders are affiliated with a
broker-dealer. Medcom has agreed to pay the expenses associated with registering
the shares to be sold by the selling shareholders which, as of October 31, 1999,
were approximately $35,000.
Since the number of shares to be issued upon the conversion of the Series
C Preferred Shares will depend upon the price of Medcom's common stock at the
conversion the actual number of shares which will be issued upon conversion
cannot be determined at this time.
See "Comparative Share Data".
<PAGE>
The names of the Selling Shareholders are:
Shares
Which
May Be Shares
Acquired Which
Upon Con- May be Share
version of Acquired Shares to Owner-
Series C Upon Ex- be Sold ship
Shares Preferred ercise of in this After
Name Owned Shares (1) Warrants Offering (2) Offering
- ---------------- -------- ---------- -------- ------------ --------
Tonga Partners, LP -- 1,150,000 38,333 1,188,333 --
Manchester Asset
Management Ltd. -- 650,000 21,666 671,666 --
Augustine Fund, LP -- 600,000 20,000 620,000 --
Gilston Corporation
Ltd. -- 500,000 16,667 516,667 --
Garros, Ltd. -- 500,000 16,667 516,667 --
Settondown Capital
International, Ltd. 14,769 90,000 40,500 145,269 --
Great Neck Partners 333,333 133,333 466,666 --
Jack Levit 183,334 45,000 228,334 --
Lynne Kaplin 100,000 20,000 120,000
Leon Ladd 33,350 6,670 40,020 --
Asian Restaurants 338,983 67,800 406,783 --
Jack Levit 84,745 25,000 109,745 --
James Wagner 571,429 571,429 --
Chelverton Fund Limited130,000 130,000 --
Richmark Capital 30,000 250,000 280,000 --
James Morse 250,000 250,000 --
<PAGE>
Shares
Which
May Be Shares
Acquired Which
Upon Con- May be Share
version of Acquired Shares to Owner-
Series C Upon Ex- be Sold ship
Shares Preferred ercise of in this After
Name Owned Shares (1) Warrants Offering (2) Offering
- ---------------- -------- ---------- -------- ------------ --------
Todd Brouse Grantor
Trust 40,000 40,000 --
Robert Brouse Grantor
Trust 40,000 40,000 --
Vincent Pipia 80,000 80,000 --
Continental Capital 200,000 200,000 --
Morse Financial 400,000 400,000 --
SMP Financial
Consultants 190,000 190,000 --
OAC Joint Venture, 22,857 22,857 45,714 --
Inc.
John Jones 45,714 45,714 91,428 --
Nancy Jones 22,857 22,857 45,714 --
Jeffrey Nunez 22,857 22,857 45,714 --
Dieterich & Associates 4,571 4,571 9,142 --
Gregg Berger 3,429 3,429 6,858 --
Toni Gales 3,716 3,716 7,432 --
Richard Gales 1,050 1,050 2,100 --
Ammar Kubba 33,142 33,142 66,284 --
Sam Meltzer 11,428 11,428 22,856 --
Aron D. Scharf 18,286 18,286 36,572 --
David Stone 4,571 4,571 9,142 --
<PAGE>
Shares
Which
May Be Shares
Acquired Which
Upon Con- May be Share
version of Acquired Shares to Owner-
Series C Upon Ex- be Sold ship
Shares Preferred ercise of in this After
Name Owned Shares (1) Warrants Offering (2) Offering
- ---------------- -------- ---------- -------- ------------ --------
United Recyclers, Inc. 22,857 22,857 45,714 --
Ruben Kitay 11,428 11,428 22,856 --
Zapara Inc. 22,857 22,857 45,714 --
Susan McCabe 4,571 4,571 9,142 --
Thomas McCausland 4,571 4,571 9,142 --
Chris Dieterich 11,428 11,428 22,856 --
Jessica Santuro 4,571 4,571 9,142 --
Errol Kaplan 68,571 13,714 82,285 --
Philip Brook 33,333 6,667 40,000 --
Scott Elliot 40,000 40,000 --
John Travis Rhodes 10,000 10,000 --
Andrew Collins 40,000 40,000 --
Donald Baker 10,000 10,000 --
Charles Wheet 20,000 20,000
Market Search
International Inc. 13,333 13,333
Brian Johns 10,000 10,000
Brett Carlson 20,000 20,000
Kevin Sorg 10,000 10,000
Vito Palermo 10,000 10,000
<PAGE>
Shares
Which
May Be Shares
Acquired Which
Upon Con- May be Share
version of Acquired Shares to Owner-
Series C Upon Ex- be Sold ship
Shares Preferred ercise of in this After
Name Owned Shares (1) Warrants Offering (2) Offering
- ---------------- ------- ---------- -------- ------------ --------
Fayette Severance 16,667 16,667
Craig Kinley 10,000 10,000
Larry Hansen 10,000 10,000
Knight Press 30,000 30,000
David E.Cowan 20,000 20,000
Christopher Ross 10,000 10,000
C. Larry Roark 100,000 100,000
Jeb L. Milam 10,000 10,000
John P. Weldon III 10,000 10,000
Debra Morse 10,000 30,000 40,000
First Choice Money
Resources, Inc. 10,000 30,000 40,000
Gifts of Joy
Incorporated 108,571 268,571 377,142
U.S. Automotive,
Inc. 108,571 268,571 377,142
Zora Dietrich 28,950 68,950 97,900
Michael Associates 300,000 60,000 360,000
Lynn Simay 24,000 4,800 28,800
Hal Turkiewicz 7,318 1,464 8,782
Joseph Sciacca 12,000 2,400 14,400
Lynne Levy 7,927 1,585 9,512
<PAGE>
Shares
Which
May Be Shares
Acquired Which
Upon Con- May be Share
version of Acquired Shares to Owner-
Series C Upon Ex- be Sold ship
Shares Preferred ercise of in this After
Name Owned Shares (1) Warrants Offering (2) Offering
- ---------------- -------- ---------- -------- ------------ --------
Robert Suppan 12,500 2,500 15,000
Michael Spielman 6,097 1,219 7,316
William Piazza 20,000 4,000 24,000
Edward Seganti 25,800 5,160 30,960
Kenneth Zubay 30,488 6,098 36,586
Robert Corchia 60,975 12,195 73,170
William Piazza 50,000 10,000 60,000
Patrick Alston 1,000 1,000
Wendy Bennett 7,500 7,500
Marvin Berger 7,000 7,000
George Borst 8,000 8,000
Debi Cobb 4,500 4,500
Dennis Corn 3,500 3,500
David Dyke 4,000 4,000
William Eickenberg 21,000 21,000
Jeffrey Faelnar 4,500 4,500
Ian Hart 35,000 35,000
Maria Hernandez 2,000 2,000
Michael Hughes 5,000 5,000
<PAGE>
Shares
Which
May Be Shares
Acquired Which
Upon Con- May be Share
version of Acquired Shares to Owner-
Series C Upon Ex- be Sold ship
Shares Preferred ercise of in this After
Name Owned Shares (1) Warrants Offering (2) Offering
- ---------------- -------- ---------- -------- ------------ --------
Celia Niemerow 4,000 4,000
Richard Niemerow 5,000 5,000
Tracey Olszewski 13,000 13,000
Claudia O'Neill 5,000 5,000
Debbie Peterkin 2,000 2,000
Marsh Phelps 6,500 6,500
Robert Stevens 7,000 7,000
Tho Trieu 3,500 3,500
Matthew Worthington 4,000 4,000
Ronald Pizzolo 40,000 40,000
Anthony Pizzolo 40,000 40,000
Bruce Weitzberg 7,500 7,500
Diane Kurfis 4,000 4,000
Linda Piazza 6,500 6,500
Luis Marenco 6,500 6,500
Lalit Bhatia 4,500 4,500
Maria Sabb 3,500 3,500
Lou Novembre 3,000 3,000
Ann Powell 2,500 2,500
<PAGE>
Shares
Which
May Be Shares
Acquired Which
Upon Con- May be Share
version of Acquired Shares to Owner-
Series C Upon Ex- be Sold ship
Shares Preferred ercise of in this After
Name Owned Shares (1) Warrants Offering (2) Offering
- ---------------- -------- ---------- -------- ------------ --------
Marlo Sabb 2,500 2,500
Bruno Bieler 1,500 1,500
Bettyann Falleo 1,500 1,500
Nicole Cugliandro 600 600
Jim Gallear 600 600
Margret Healy 400 400
George Baron 350 350
Jeff McKay 25,000 25,000
Jessee Massingill 9,600 9,600
Robert Crowder 19,200 19,200
Jack Sandler 15,000 3,000 18,000
Brenda Gonzalez 15,000 3,000 18,000
Nabeel Hasan 20,000 4,000 24,000
Lori Doctor 24,000 4,800 28,800
Jerry Messer 30,000 6,000 36,000
Rebecca Raff 50,000 50,000
William Crowder 19,200 19,200
Robert Herbol-
Instacall 270,755 270,755
LHL Holdings, Ltd. 172,268 172,268
<PAGE>
Shares
Which
May Be Shares
Acquired Which
Upon Con- May be Share
version of Acquired Shares to Owner-
Series C Upon Ex- be Sold ship
Shares Preferred ercise of in this After
Name Owned Shares (1) Warrants Offering (2) Offering
- ---------------- -------- ---------- -------- ------------ --------
Interactive Business
Channel 150,000 150,000
John Yazzo 80,000 80,000
Sam Meltzer 100,000 100,000
Burlington Securities 250,000 250,000
Corporation
Baritex, Inc. 20,000 20,000
Ronald Pizzolo 150,000 150,000
Anthony Pizzolo 150,000 150,000
S.R.G. & Associate
Ltd. 37,500 37,500
E.B. Lyon, III 12,500 12,500
Jack Levit 300,000 60,000 360,000
John Mahin 15,000 3,000 18,000
Bruce Yasmeh 121,951 24,390 146,341
Robert Suppan 10,000 2,000 12,000
Jack Sandler 100,000 20,000 120,000
Mark Bennett 300,000 300,000
Michael Malet 300,000 300,000
Nicholas Fegan 180,000 1,000,000 1,180,000
American Nortel
Communications,
Inc. 1,111,111 -- 200,000 1,311,111
--------- -------- --------- ---------
7,998,340 3,490,000 4,066,481 15,554,821
========= ========= ========= ==========
<PAGE>
(1) Represents shares issuable upon the conversion of the Series C Preferred
Stock assuming conversion price of $0.50 per share. The actual number of
shares to be issued upon the conversion of the series C preferred shares
will depend upon the price of Medcom's common stock at the time of
conversion. See "Comparative Share Data". The following shows the number of
series C preferred shares held by each preferred shareholder.
Name of Series C Number of
Preferred Shareholder Shares Owned
Tonga Partners, LP 575
Manchester Asset Management Ltd. 325
Augustine Fund, LP 300
Gilston Corporation, Ltd. 250
HSBC James Capel Canada, Inc. 250
Settondown Capital International, Ltd. 45
-------
1,745
(2) Assumes all shares owned, or which may be acquired, by the selling
shareholders, are sold to the public by means of this prospectus.
None of the selling shareholders will own more than 1% of Medcom's common
stock after this offering. With the exception of Continental Capital and
Burlington Securities Corporation, both of which are registered broker-dealers,
none of the selling shareholders, to the knowledge of Medcom, are
broker-dealers or are affiliated with broker-dealers.
The names of the natural persons who exercise control over those selling
shareholders which are corporations, partnerships, or similar entities are:
Tonga Partners, LP Carlo Cannell
Manchester Asset Management Ltd. Dierdie M. McCoy
Augustine Fund, LP Thomas Duszynski
Gilston Corporation Ltd. Dawn Davies
Garros Ltd. Giora Lavie
Settondown Capital International, Ltd. Anthony L.J. Inder Rieden
Great Neck Partners Marv Lyons
Asian Restaurants Morris Salem
<PAGE>
Chelverton Fund Limited James P. Morton
Richmark Capital Richard Monello
United Recyclers, Inc. Barry Huntsman
Market Search International, Inc. Russ Militello
First Choice Money Resources, Inc. Craig Morse
Gifts of Joy Incorporated Warin Nakashima
U.S. Automotive, Inc. Zora Speert
Michael Associates Albert Riccardi
Continental Capital John Manion
Morse Financial James Morse
SMP Financial Consultants James Caprio
OAC Joint Venture, Inc. Aron Scharf
Dieterich & Associates Christopher Dieterich
LHL Holdings, Ltd. Jack Levit
Interactive Business Channel Matthew Marcus
Burlington Securities Corporation Vincent Molinari
Baritex, Inc. Joseph Riccio
S.R.G. & Associates, Ltd. Scott Griffith
American Nortel Communications, Inc. Bill Williams
Manner of Sale. The shares of common stock owned, or which may be
acquired, by the selling shareholders may be offered and sold by means of this
prospectus from time to time as market conditions permit in the over-the-counter
market, or otherwise, at prices and terms then prevailing or at prices related
to the then-current market price, or in negotiated transactions. These shares
may be sold by one or more of the following methods, without limitation: (a) a
block trade in which a broker or dealer so engaged will attempt to sell the
shares as agent; (b) purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this prospectus; (c) ordinary
<PAGE>
brokerage transactions and transactions in which the broker solicits purchasers;
and (d) face-to-face transactions between sellers and purchasers without a
broker/dealer. In effecting sales, brokers or dealers engaged by the selling
shareholders may arrange for other brokers or dealers to participate. Such
brokers or dealers may receive commissions or discounts from selling
shareholders in amounts to be negotiated.
From time to time one or more of the Selling Shareholders may transfer,
pledge, donate or assign the shares received upon the conversion of the Series C
Preferred Stock (the "Conversion Shares") to lenders or others and each of such
persons will be deemed to be a Selling Shareholder for purposes of this
Prospectus. The number of Conversion Shares beneficially owned by those Selling
Shareholders will decrease as and when they transfer, pledge, donate or assign
the Conversion Shares. The plan of distribution for the Conversion Shares sold
by means of this Prospectus will otherwise remain unchanged, except that the
transferees, pledgees, donees or other successors will be Selling Shareholders
for purposes of this Prospectus. Medcom will supplement this prospectus to
disclose the names of any new selling shareholder.
A Selling Shareholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of Medcom's
common stock in the course of hedging the positions they assume with such
Selling Shareholder, including, without limitation, in connection with the
distribution of Medcom's common stock by such broker-dealers. A Selling
Shareholder may also enter into option or other transactions with broker-dealers
that involve the delivery of the common stock to the broker-dealers, who may
then resell or otherwise transfer such common stock. A Selling Shareholder may
also loan or pledge the common stock to a broker-dealer and the broker-dealer
may sell the common stock so loaned or upon default may sell or otherwise
transfer the pledged common stock.
Broker-dealers, underwriters or agents participating in the distribution
of Medcom's common stock as agents may receive compensation in the form of
commissions, discounts or concessions from the Selling Shareholders and/or
purchasers of the common stock for whom such broker-dealers may act as agent, or
to whom they may sell as principal, or both (which compensation as to a
particular broker-dealer may be less than or in excess of customary
commissions). Selling Shareholders and any broker-dealers who act in connection
with the sale of common stock hereunder may be deemed to be "Underwriters"
within the meaning of the Securities Act, and any commissions they receive may
be deemed to be underwriting discounts and commissions under the Securities Act.
Neither Medcom nor any Selling Shareholder can presently estimate the amount of
such compensation. Medcom knows of no existing arrangements between any selling
shareholder, any other stockholder, broker, dealer, underwriter or agent
relating to the sale or distribution of Medcom's common stock.
Medcom has agreed to indemnify those selling shareholders who are the
owners of Medcom's series C preferred stock from certain liabilities, including
liabilities under the Securities Act of 1933.
Medcom has advised the selling shareholders that they and any securities
broker/dealers or others who may be deemed to be statutory underwriters will be
subject to the Prospectus delivery requirements under the Securities Act of
1933. Medcom has also advised the Selling Shareholders that in the event of a
"distribution" of the shares owned by the Selling Shareholder, such Selling
<PAGE>
Shareholders, any "affiliated purchasers", and any broker/dealer or other person
who participates in such distribution may be subject to Rule 102 under the
Securities Exchange Act of 1934 ("1934 Act") until their participation in that
distribution is completed. A "distribution" is defined in Rule 102 as an
offering of securities "that is distinguished from ordinary trading transactions
by the magnitude of the offering and the presence of special selling efforts and
selling methods". Medcom has also advised the Selling Shareholders that Rule 102
under the 1934 Act prohibits any "stabilizing bid" or "stabilizing purchase" for
the purpose of pegging, fixing or stabilizing the price of the Common Stock in
connection with this offering. Rule 101 makes it unlawful for any person who is
participating in a distribution to bid for or purchase stock of the same class
as is the subject of the distribution.
DESCRIPTION OF SECURITIES
Common Stock
Medcom is authorized to issue 40,000,000 shares of common stock.
Holders of common Stock are each entitled to cast one vote for each share held
of record on all matters presented to shareholders. Cumulative voting is not
allowed; hence, the holders of a majority of the outstanding common stock can
elect all directors.
Holders of common stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor and,
in the event of liquidation, to share pro rata in any distribution of Medcom's
assets after payment of liabilities. The board is not obligated to declare a
dividend. It is not anticipated that dividends will be paid in the foreseeable
future.
Holders of common stock do not have preemptive rights to subscribe to
additional shares if issued by Medcom. There are no conversion, redemption,
sinking fund or similar provisions regarding the common stock.
Preferred Stock
Medcom is authorized to issue up to 1,000,000 shares of preferred stock.
Medcom's Articles of Incorporation provide that the Board of Directors has the
authority to divide the preferred stock into series and, within the limitations
provided by Delaware statute, to fix by resolution the voting power,
designations, preferences, and relative participation, special rights, and the
qualifications, limitations or restrictions of the shares of any series so
established. As the Board of Directors has authority to establish the terms of,
and to issue, the preferred stock without shareholder approval, the preferred
stock could be issued to defend against any attempted takeover of Medcom.
In April 1995, Medcom issued 25,250 shares of Series A preferred stock.
Each Series A preferred share is convertible into 0.2 of a share of Medcom's
common stock. As of October 31 1999, 19,000 shares of the Series A preferred
stock had been converted into shares of Medcom's common stock.
In March 1996, Medcom issued 100,000 shares of its Series B preferred
stock. Each Series B preferred share is convertible into 0.25 of a share of
Medcom's common stock. As of July 31, 1999 all shares of the Series B preferred
stock had been converted into 25,000 shares of Medcom's common stock.
<PAGE>
See "Comparative Share Data" for information concerning Medcom's series C
preferred stock.Transfer Agent
Corporate Stock Transfer, Inc., of Denver, Colorado, is the transfer agent
for Medcom's common stock.
EXPERTS
The financial statements as of June 30, 1999 incorporated by reference in
this prospectus from Medcom's annual report on Form 10-SB have been audited by
Ehrhardt Keefe Steiner & Hottman PC independent auditors, as stated in their
report which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
INDEMNIFICATION
Medcom's Bylaws authorize indemnification of a director, officer, employee
or agent of Medcom against expenses incurred by him in connection with any
action, suit, or proceeding to which he is named a party by reason of his having
acted or served in such capacity, except for liabilities arising from his own
misconduct or negligence in performance of his duty. In addition, even a
director, officer, employee, or agent of Medcom who was found liable for
misconduct or negligence in the performance of his duty may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably entitled
to indemnification. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, or persons
controlling Medcom pursuant to the foregoing provisions, Medcom has been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations, other than those contained in this
prospectus. Any information or representation not contained in this prospectus
must not be relied upon as having been authorized by Medcom. This prospectus
does not constitute an offer to sell, or a solicitation of an offer to buy, the
securities offered hereby in any state or other jurisdiction to any person to
whom it is unlawful to make such offer or solicitation.
TABLE OF CONTENTS
Page
Prospectus Summary ....................................................
Risk Factors ...........................................................
Documents Incorporated by Reference ....................................
Additional Information .................................................
Comparative Share Data .................................................
Selling Shareholders ...................................................
Description of Securities ..............................................
Experts ................................................................
Indemnification ........................................................
Common Stock
MEDCOM USA, INCORPORATED
PROSPECTUS
<PAGE>
PART II
Information Not Required in Prospectus
Item 14. Other Expenses of Issuance and Distribution
SEC Filing Fee $ 3,103
Blue Sky Fees and Expenses 2,000
Printing and Engraving Expenses 2,000
Legal Fees and Expenses 20,000
Accounting Fees and Expenses 3,000
Miscellaneous Expenses 4,897
----------
TOTAL $ 35,000
========
All expenses other than the S.E.C. filing fees are estimated.
Item 15. Indemnification of Officers and Directors.
The Delaware General Corporation Law and Medcom's Bylaws that Medcom
may indemnify any and all of its officers, directors, employees or agents or
former officers, directors, employees or agents, against expenses actually and
necessarily incurred by them, in connection with the defense of any legal
proceeding or threatened legal proceeding, except as to matters in which such
persons shall be determined to not have acted in good faith and in the best
interest of Medcom.
Item 16. Exhibits
Exhibits Page Number
1 Underwriting Agreement N/A
3.1 Certificate of Incorporation, (1)
------------------------
as amended
3.1.1 Amendment to Articles of Incorporation (1)
3.2 Bylaws (l)
4.1 Form of 1993 Incentive Stock Option Plan
and 1993 Non-Statutory Stock Option Plan (2)
------------------------
4.2 Form of Stock Bonus Plan (3)
------------------------
4.3 Designation of Series C Preferred Stock
(as amended) (4)
-----------------------
5 Opinion of Counsel -----------------------
<PAGE>
10 Series C Preferred Stock Purchase Agreement,
Escrow Agreement, Registration Rights Agreement (4)
and Form of Warrant
10.1 Agreement relating to acquisition of Medcard System _______________
10.2 Agreement relating to sale of assets of Link
International _______________
10.3 Employment Agreement with Mark Bennett _______________
10.4 Employment Agreement with Michael Malet _______________
23.1 Consent of Hart and Trinen _______________
23.2 Consent of Ehrhardt Keefe Steiner & Hottman, PC _______________
24. Power of Attorney Included as part of the
Signature Page
(1) Incorporated by reference to the same exhibit filed as part of Medcom's
Registration Statement on Form SB-2 (Commission File No. 33-70546-A).
(2) Incorporated by reference, and as same exhibit number, from Registration
Statement on Form SB-2 (Commission File Number 33-70546-A).
(3) Incorporated by reference, and as same exhibit number, from Amendment No. 1
to Registration Statement on Form SB-2 (Commission File Number 33-70546-A).
(4) Incorporated by reference, and as same exhibit number, from report on 8-K
dated December 14, 1998.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement.
(i) To include any Prospectus required by Section l0(a)(3) of the
Securities Act of l933;
(ii) To reflect in the Prospectus any facts or events
arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement;
<PAGE>
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement, including
(but not limited to) any addition or deletion of a managing underwriter.
(2) That, for the purpose of determining any liability under the
Securities Act of l933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of l933 may be permitted to directors, officers and controlling persons of
the Registrant, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE>
POWER OF ATTORNEY
The registrant and each person whose signature appears below hereby
authorizes the agent for service named in this Registration Statement, with full
power to act alone, to file one or more amendments (including post-effective
amendments) to this Registration Statement, which amendments may make such
changes in this Registration Statement as such agent for service deems
appropriate, and the Registrant and each such person hereby appoints such agent
for service as attorney-in-fact, with full power to act alone, to execute in the
name and in behalf of the Registrant and any such person, individually and in
each capacity stated below, any such amendments to this Registration Statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of l933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Irvine, State of California, on the 12th day of
November, 1999.
MEDCOM COMMUNICATIONS INC.
By: /s/ Mark Bennett
MARK BENNETT, President
By: /s/ Alan Ruben
ALAN RUBEN, Principal Financial Officer
And Chief Accounting Officer
Pursuant to the requirements of the Securities Act of l933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Mark Bennett
Mark Bennett Director November 12, 1999
/s/ Michael Malet
Michael Malet Director November 12, 1999
/s/ David Breslow
David Breslow Director November 12, 1999
Julio Curra Director November 12, 1999
<PAGE>
MEDCOM USA INCORPORATED
EXHIBITS
to
FORM S-3
Amendment No. 2
November 12, 1999
Medcom USA, Incorporated
18001 Cowan
Suite C & D
Irvine, CA 92614
Gentlemen:
This letter will constitute an opinion upon the legality of the
sale by certain Selling Shareholders of Medcom USA, Incorporated, a Delaware
corporation ("Medcom"), of up to 17,998,340 shares of Common Stock, all as
referred to in the Registration Statement on Form S-3 filed by Medcom with the
Securities and Exchange Commission.
We have examined the Articles of Incorporation, the Bylaws and the minutes of
the Board of Directors of Medcom and the applicable laws of the State of
Colorado, and a copy of the Registration Statement. In our opinion, Medcom was
authorized to issue the shares of stock mentioned above and such shares
represent fully paid and non-assessable shares of Medcom's Common Stock.
Very truly yours,
HART & TRINEN
William T. Hart
EXCLUSIVE LICENSE AGREEMENT
THIS EXCLUSIVE LICENSE AGREEMENT ("Agreement") is made as of the _____ day
of November, 1998, among Dream Technologies, LLC ("Dream"), a Delaware limited
liability company; Medcard Management Systems, Inc. ("Medcard"), a New York
corporation (Dream and Medcard are sometimes collectively referred to hereon as
"Licensors"), with its principle place of business located at 1767-8 Veterans
Memorial Highway, Islandia, New York 11722; and Sims Communications, Inc., a
Delaware corporation (hereinafter "Licensee"), with its principle place of
business located at 18001 Cowan Road, Suite C and D, Irvine, California 92614.
W I T N E S S E T H:
WHEREAS, Dream, whose sole officers, directors and security holders
consist of RP and AP, owns all right, title, and interest in and to that certain
computer program identified as "Win Medsys", "Pos Host" and "Sendclaims" and
associated documentation, a copy of which is attached as Exhibit "A" hereto
(collectively, the "Program"); and
WHEREAS, the Program contains certain software components, including, but
not limited to, lockout protection software and Zip software, that are duly
licensed to Licensor for inclusion in the Program pursuant to the remarketing
agreements identified in Exhibit B attached hereto (the "Remarketing
Agreements"), which are also being licensed to the Licensee pursuant to this
Agreement, and the Program contains no other software components in which any
third party may claim superior or joint ownership, nor is the Program a
derivative work of any other software programs not owned in their entirety by
Licensor; and
WHEREAS, Licensor has granted rights in copies of the Program to third
parties solely pursuant to the End-User License Agreements identified in Exhibit
C attached hereto (the "End-User Agreements") which are to be assigned to, and
assumed by Licensee pursuant to this Agreement; and
WHEREAS, Licensor desires to grant exclusive licensing rights in and to
the Program and certain trademarks associated therewith, and sell certain
hardware associated therewith, to Licensee, and Licensor desires to acquire such
exclusive licensing rights in and to the Program and certain trademarks
associated therewith, and purchase certain hardware associated therewith, from
the Licensor, in accordance with the terms and conditions of this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Licensor and Licensee, intending
to be legally bound, hereby agree as follows:
<PAGE>
Section 1
GRANT AND CONVEYANCE OF RIGHTS; SALE OF HARDWARE
Effective as of the date hereof, Licensor hereby:
A. grants to Licensee an exclusive license in and to the Program, including both
the tangible and the intangible property constituting the Program, for a term of
fifteen (15) years commencing upon the execution and delivery hereof by all
parties hereto, subject to Licensee's right to renew for successive ten (10)
year[s] periods commencing upon the conclusion of the initial fifteen (15) year
term provided there is a continued compliance by the Licensee with the material
terms and conditions hereof, including the following corporeal and incorporeal
incidents to the Program:
1. An exclusive license to and possession of the media, devices, and
documentation that constitute copies of the Program, its component
parts, and all documentation relating thereto, possessed or
controlled by Licensor, which are to be delivered to Licensee
pursuant to Section 2 of this Agreement;
2. An exclusive worldwide license to all copyright interests owned or claimed
by Licensor pertaining to the Program, including, but not limited to, the
U.S. Copyrights associated therewith (Numbers to be provided by Licensor to
Licensee as soon as obtained by Licensor), together with all other
copyright interests accruing by reason of international copyright
conventions and further including, but not limited to Licensor's rights as
licensee and remarketer of certain software components contained in the
Program pursuant to the Remarketing Agreements identified in Exhibit B;
3. An exclusive worldwide license to all right and benefit of Licensor
in and to all trade names, inventions, discoveries, improvements,
ideas, trade secrets, know-how, confidential information, and all
other intellectual property owned or claimed by Licensor pertaining
to the Program; and
4. All of the right, interest, and benefit of Licensor in, to, and
under all agreements, contracts, licenses, and leases entered into
by Licensor, or having Licensor as a beneficiary, pertaining to the
Program, including, but not limited to [Licensor's rights as
licensor under the End-User License Agreements identified in Exhibit
C.], except for Hypercom, and ______________ where Licensor is
required to and will promptly obtain and deliver to licensee written
consents from such entities relating thereto.
B. grants to Licensee an exclusive license to utilize the following advertising
slogans and trademarks, and the goodwill associated therewith (the "Trademarks")
owned and/or utilized by Licensor in connection with the sale and marketing of
the Program and the Licensor's business and operations: any and all references
to Medcard, Medcard Management Systems and "MMS".
C. sells, assigns and transfers to Licensee all of its right, title, and
interest in and to certain hardware identified on Schedule ___ and made a part
hereof (the "Hardware") free and clear of all liens, claims and encumbrances.
<PAGE>
Section 2
EFFECTUATION OF AGREEMENT
Within thirty (30) calendar days after the execution and delivery of this
Agreement by all parties hereto, and provided that Sims has made the payments
and performed the obligations set forth in Sections 10.1, 10.4, 10.5 and 10.8
herewith and further provided that the contents referred to in Section 1(a)(2)
have been obtained by Licensor (or waived by Licensee as the case may be),
Licensor shall deliver to Licensee (1) its entire inventory of copies of the
Program in source code and object code form; (2) a master copy of the Program,
in both source and object code form, which shall be in a form suitable for
copying; (3) all system and user documentation pertaining to the design,
development, use and maintenance of the Program, including design or development
specifications, error reports, and related correspondence and memoranda; [and]
(4) all records pertaining to all licensees, purchasers and users of the
Program; and (5) all licenses for the lockout protection software and the Zip
software used in conjunction with the Program.
Section 3
REPRESENTATIONS AND WARRANTIES
(a) Licensor represents and warrants to the Licensee as of the date hereof
and as otherwise set forth herein as follows:
3.1 Recitals. The recitals set forth in the beginning of this Agreement
pertaining to the Licensor are true and correct.
3.2 Organization and Standing.
(a) Dream is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware, has full
power and authority to own, lease and operate its properties and assets and to
conduct its business as now being conducted, and is duly qualified or licensed
to do business as a foreign limited liability company in each jurisdiction in
which the nature of its business or its ownership or leasing of property
requires such qualification, except where the failure to be so qualified as a
foreign limited liability company would not materially adversely affect the
business of Dream.
(b) Medcard is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York, has full power and
authority to own, lease and operate its properties and assets and to conduct its
business as now being conducted, and is duly qualified or licensed to do
business as a foreign corporation in each jurisdiction in which the nature of
its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified as a foreign
corporation would not materially adversely affect the business of Medcard.
<PAGE>
3.3 Authorization.
(a) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all members of Dream and by all of the and by all of the stockholders of
Dream and all other action of Dream necessary to authorize the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been taken. This Agreement constitutes the valid and binding
obligation of Dream enforceable against it in accordance with the terms hereof.
No consent of any lender, trustee, or other person or entity is required for
Dream to enter into and deliver this Agreement or to consummate the transactions
contemplated hereby, nor do the Certificate of Formation or Operating Agreement
of Dream or any contract, mortgage or other instrument to which Dream is a party
or by which Dream is bound or affecting any of its properties conflict with or
restrict the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby. The execution of this Agreement and the
performance by Dream, of its obligations hereunder will not with or without the
giving of notice, lapse of time or both or otherwise materially violate or
breach any law, rule, regulation, order or decree of any court, governmental,
regulatory or self-regulatory authority to which it is bound, or otherwise
violate, result in a breach of or constitute a default under any agreement,
contract, or commitment to which it is a party or otherwise bound or subject.
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors and all of the stockholders of Medcard and all other
corporate action of Medcard necessary to authorize the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been taken. This Agreement constitutes the valid and binding obligation of
Medcard enforceable against it in accordance with the terms hereof. No consent
of any lender, trustee, or other person or entity is required for Medcard to
enter into and deliver this Agreement or to consummate the transactions
contemplated hereby, nor do the Articles of Incorporation of Bylaws of Medcard
or any contract, mortgage or other instrument to which Medcard is a party or by
which Medcard is bound or affecting any of its properties conflict with or
restrict the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby. The execution of this Agreement and the
performance by Medcard, of its obligations hereunder will not with or without
the giving of notice, lapse of time or both or otherwise materially violate or
breach any law, rule, regulation, order or decree of any court, governmental,
regulatory or self-regulatory authority to which it is bound, or otherwise
violate, result in a breach of or constitute a default under any agreement,
contract, or commitment to which it is a party or otherwise bound or subject.
3.4 Knowledge of Certain Facts and Circumstances Concerning Program.
Licensor does not know of any facts or circumstances not disclosed to Licensee
which indicate that the Program and/or Hardware may be adversely affected or
which otherwise should be disclosed to Licensee in order to make any of the
representations or warranties made herein on the part of the Licensor not
misleading.
<PAGE>
3.5 Certain Representations Concerning Shares. Dream is acquiring the
Shares (as defined in Section 10.5 hereof) for its own account and not with a
present view to, or for sale in connection with, any distribution thereof in
violation of the Securities Act of 1933, as amended (the "Securities Act").
Dream consents to the placement of the following legend, or one similar thereto
on each certificate representing the Shares:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND MAY NOT BE
TRANSFERRED OR SOLD UNLESS SUCH REGISTRATION IS REQUIRED WITH
RESPECT TO SUCH TRANSFER OR SALE."
Dream understands that the Shares will not be registered when issued
and delivered to Dream under the Securities Act for the reason that the sale
provided for in this Agreement is exempt pursuant to Section 4 of the Securities
Act and that the reliance of Licensee on such exemption is predicated in part on
Dream's representations set forth herein. Licensor represents that it is
experienced in evaluating companies such as Licensee, is able to fend for
itself, has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of its investment in the
Shares, and has the ability to suffer the total loss of its investment. Dream
further represents that it has received all of Licensee's reports filed by the
Licensee with the U.S. Securities and Exchange Commission since June 30, 1997
through the date hereof, including but not limited to the Licensee's annual
report on Form 10-KSB for the fiscal year ended June 30, 1998 and that Dream has
read and reviewed the same and has been afforded the opportunity to obtain such
other information as it has deemed necessary to evaluate its investment in the
Shares, ask questions of and receive answers from the Licensee and to obtain
additional information (to the extent the Licensee possessed such information or
could acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to it or to which it had access. Dream
understands that the Shares may not be sold, transferred or otherwise disposed
of without registration under the Securities Act or an exemption therefrom and
that in the absence of an effective registration statement covering the Shares
or an available exemption from registration under the Securities Act, the Shares
must be held indefinitely. Dream acknowledges that the Licensee is under no
obligation to register the Shares for public resale, however, Licensee (I)
represents and warrants that it and its securities currently meet the
requirements for adequate public information under Rule 144(c), and that the
Licensee has been subject to the relevant reporting requirements thereunder and
has filed all reports required to have been filed thereunder and (ii) covenants
to file all such reports in the future in order to enable the Dream (or its
assigns) to sell the Shares, pursuant to, and in accordance with the applicable
limitations set forth in, Rule 144, including without limitation, the holding
period specified in Rule 144(d).
3.6 Best Efforts to Continue Employment of Software Programmers. Licensor
will use its reasonable best efforts to cause the continued employment of its
software programmers during the term of this Agreement and any extensions
thereof.
3.7 Exclusive License; Exceptions; No Liens, Claims or Encumbrances.
Licensee shall receive, pursuant to this Agreement as of the date of execution
hereof, during the term of the Agreement and any extensions, an exclusive
license in and to the Program, except for those matters addressed in Section 4
and Section 5 of this Agreement and the Remarketing Agreements identified in
Exhibit B hereto. Subject to the foregoing exceptions, Licensor represents and
warrants that it has developed the Program entirely through its own efforts for
its own account, that the Program is free and clear of all liens, claims,
encumbrances, rights, or equities whatsoever of any third party, and that the
Licensor, during the term of this Agreement and any renewals thereof, shall
maintain the Program free and clear of all liens, claims, encumbrances, rights
or equities whatsoever of any third party.
<PAGE>
3.8 Intellectual Property Matters. The Program does not infringe any
patent, copyright, trade secret, trademark or any other intellectual property
right of any third party; that the Program is fully eligible for protection
under applicable copyright law and has not been forfeited to the public domain;
and that the source code and system specifications for the Program have been
maintained in confidence.
3.9 Authorship of Program and Related Matters. Ronald Pizzolo, Anthony
Pizzolo and Medcard are the sole authors of the Program and the redesign or
development of new source code pursuant to those certain menu items. All
personnel who have contributed to or participated in the conception and
development of the Program either (1) have been an employee or party to a
for-hire relationship with Licensor that has accorded Licensor full, effective,
and exclusive original ownership of all tangible and intangible property thereby
arising with respect to the Program or (2) have executed appropriate instruments
of assignment in favor of Licensor as assignee that have conveyed to Licensor
full, effective, and exclusive ownership of all tangible and intangible property
thereby arising with respect to the Program.
3.10 Marketing and Distribution Agreements. There are no agreements,
arrangements or understandings in effect with respect to the marketing,
distribution, licensing, maintaining or promotion of the Program by any
independent salesperson, distributor, sublicensor, or other remarketer or sales
organization except as set forth in Exhibit C hereof, and the Licensor agrees
not to enter into any other agreements and/or understandings and/or any renewals
with any other third parties with respect thereto during the term hereof without
the prior written consent of Licensee.
3.11 Trademarks. The trademarks rights are owned by the Licensor free and
clear of any liens, claims and/or other encumbrances.
3.12 Hardware. The Hardware is fully paid for and owned by Medcard free
and/or clear of any and all liens, claims and/or other encumbrances. Upon the
sale to the Licensee of the Hardware by Medcard for the consideration set forth
in Section 10.1 hereof, the Licensee will have good title in and to the Hardware
free and clear of any liens, claims and/or other encumbrances other than as may
be created by the actions or inactions of the Licensee.
<PAGE>
3.13 Year 2000 Matters. Medcard represents that to the best of its
knowledge, the Program is Year 2000 compliant. Licensor and Licensee further
agree to cooperate to request, from those of its suppliers whose performance may
materially affect its performance hereunder, that each supplier undertake to
ensure Year 2000 compliance with respect to such material performance. The
parties hereto will use reasonable commercial efforts to cooperate and share
information to further comply with this provision, and to minimize the impact of
any Year 2000 problem on performance of this Agreement. Each of the parties will
inform the other parties of any circumstance indicating a possible obstacle to
such compliance, and the steps being taken to avoid or overcome the obstacle.
3.14 Financial Disclosure. Medcard has furnished the Licensee with its
1996 and 1997 Tax Returns, as filed with the Internal Revenue Service and New
York State Department of Taxation. Dream has only recently been formed as a
Delaware limited liability company and has therefore not been required to file
any tax returns.
3.15 No Material Changes Since Date of Tax Returns. Since the date of its
most recent Tax Returns, there has not been any event or condition of any type
that has materially and adversely affected the Medcard's business, prospects,
condition, affairs, operations, properties or assets.
3.16 Title to Property and Assets; Liabilities; Material Agreements and
Current Compliance Therewith. Except (a) as reflected in Medcard's most recent
Tax Returns (b) for liens for current taxes not yet delinquent; (c) for liens
imposed by law and incurred in the ordinary course of business for obligations
not yet due to carriers, warehousemen, laborers, materialmen, and the like; (d)
for liens in respect of pledges or deposits under workers' compensation laws or
similar legislation; or (e) for minor defects in title, none of which,
individually or in the aggregate, materially interfere(s) with the use of such
property, Medcard owns, and has good and marketable title, free and clear of all
mortgages, liens, loans, claims and encumbrances of any nature whatsoever to all
of its assets, properties and rights of every type and description, including,
without limitation, all cash on hand and in banks, good will, its corporate name
and all variants thereof, trademarks and trade names, copyrights and interests
thereunder, licenses and registrations and permits and applications therefor,
all rights and claims under contracts of whatever nature, rights and funds of
whatever nature, books and records and all other property and rights of every
kind and nature owned or held by Medcard as of the date of this Agreement, as of
the date of execution hereof by all parties hereto, except for such assets
disposed of in the ordinary course of business since the date of the Tax
Returns. With respect to the real and personal property it leases and the
material agreements to which it is a party, true and correct copies of all such
leases and material agreements have previously been provided by Medcard to the
Licensee, Medcard holds a valid leasehold interest in all such leases free of
any liens, claims and encumbrances, subject to clauses (b)-(e) above and is in
compliance in all material respects with such leases and material agreements.
<PAGE>
3.17 Continued Compliance with Material Agreements and Other Instruments,
Laws, Rules and Regulations. The Licensor is not in violation of any provisions
of its Articles of Incorporation or Bylaws, Operating Agreement and/or Articles
of Organization as same may be amended, as the case may be, and in effect on and
as of the date of execution by all parties hereto, or, in any material respect,
of any provision of any material mortgage, indenture, agreement, instrument,
contract or commitment to which it is a party, or to which it is otherwise bound
or subject or, of any provision of any federal or state judgment, writ, decree,
order, statute, rule or governmental regulation applicable to the Licensor and
its business and operations. The execution, delivery and performance of this
Agreement will not with or without the giving of notice, lapse of time or both,
or otherwise result in any such violation or be in conflict with or constitute a
default under any such provision, law, rule or regulation.
3.18 Governmental Consents. All consents, approvals, orders or
authorizations of, or registrations, qualifications, designations, declarations,
or filings with any federal or state governmental or self-regulatory authority
on the part of the Licensor required in connection with the consummation of the
transactions contemplated by this Agreement shall have been obtained prior to
the execution hereof by all parties hereto.
3.19 Litigation. There is no action, proceeding or investigation pending
or, to the Licensor's respective knowledge, threatened against the Licensor or
any of its employees before any court or administrative agency, that might
result, either individually or in the aggregate, in any material adverse change
in the business, prospects, condition, affairs, operations, properties or assets
of the Licensor, including but not limited to the Program, or in any material
liability on the part of the Licensor. The foregoing includes, without
limitation, actions pending or threatened or any basis therefore involving the
prior employment of any of the Licensor's employees or their use in connection
with the Licensor's business of any information or techniques allegedly
proprietary to any of their former employers.
3.20 Taxes. Medcard has since inception accurately prepared and timely
filed all United States income tax returns and all state and municipal tax
returns that are required to be filed by it, and has paid or made provisions for
the payment of all taxes that have become due pursuant to such returns,
including but not limited to payroll, sales taxes and property taxes. All of
such returns are true and correct in all material respects. The United States
income tax returns of Medcard have not been audited by the Internal Revenue
Service (the "IRS") nor has the IRS made inquiry of, reviewed or otherwise
investigated same. No deficiency, assessment or proposed adjustment of Medcard's
United States income tax or state or municipal taxes is pending and Medcard has
no knowledge of any proposed liability for any tax to be imposed upon its
properties or assets for which there is not an adequate reserve reflected in the
tax returns. Medcard and Dream will during the term of this Agreement and any
renewals thereof each timely file all such tax returns and timely pay in full
all taxes due and owing.
3.21 Employees. The Licensor has no employment contracts with any person,
there are no disputes or threatened disputes with any prior or current employees
of the Licensor nor, to the knowledge of each of the Licensor, is there any
basis for any of the foregoing. There are no employee stock option and/or
employee benefit plans, except for the employee medical plans in effect.
<PAGE>
3.22 Insurance. The Licensor has fire and casualty insurance policies,
with extended coverage, sufficient in amount (subject to reasonable deductibles)
to allow it to replace any of its properties that might be damaged or destroyed
and currently complies in all material respects with any and all insurance
coverage provisions set forth in its real property lease.
3.23 Conduct of the Licensor's Business. On the date of execution of this
Agreement by all parties hereto and through the term hereof and any renewal
periods, the Licensor and Licensee agree that Licensor will carry on its
business in, and only in, the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, subject to the terms and
conditions of this Agreement, and, to the extent consistent with such business,
use all reasonable efforts to preserve intact its present business organization,
keep available the services of its present officer(s) and employee(s) (and use
its best efforts to preserve its relationships with clients and others having
business dealings with it to the end that its goodwill and ongoing business
shall not be materially impaired during such time period.
3.24 No Material Misrepresentations or Omissions. No representation,
warranty or covenant made by the Licensor in this Agreement or in any written
statement, Schedule, Exhibit or certificate furnished or to be furnished to the
Licensee pursuant to this Agreement or in connection with the transactions
contemplated in this Agreement contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary to make
the statements made not misleading.
(b) Licensee represents and warrants to the Licensor as follows:
3.1 Organization and Standing. Licensee is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
has full power and authority to own, lease and operate its properties and assets
and to conduct business as now being conducted, and is duly qualified or
licensed to do business as a foreign corporation in each jurisdiction in which
the nature of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified as a foreign
corporation would not materially adversely affect the business of the Licensee.
3.2 Authorization. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of Licensee and all other corporate action of Licensee
necessary to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been taken. This
Agreement constitutes the valid and binding obligation of Licensee enforceable
against it in accordance with the terms hereof. No consent of any lender,
trustee, security holder of Licensee, or other person or entity is required for
Licensor to enter into and deliver this Agreement or to consummate the
transactions contemplated hereby, nor does the Certificate of Incorporation, as
amended or By-Laws of Licensee or any contract, mortgage or other instrument to
which Licensee is a party or by which Licensee is bound or affecting any of its
properties conflict with or restrict the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
3.3 No Material Misrepresentations or Omissions. No representation,
warranty or covenant made by the Licensee in this Agreement or in any written
statement, Schedule, Exhibit or certificate furnished or to be furnished to the
Licensor pursuant to this Agreement or in connection with the transactions
contemplated in this Agreement contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary to make
the statements made not misleading.
<PAGE>
Section 4
THIRD-PARTY SOFTWARE COMPONENTS
4.1 Licensor has duly obtained or will obtain in accordance with Section
1(a)(2), the right and license to use, copy, modify, and distribute the software
components contained in the Program pursuant to the Remarketing Agreements
identified in Exhibit B; that the Program contains no other software components
in which any third party may claim superior or joint ownership; and that the
Program is not a derivative work of any other software programs not owned in
their entirety by Licensor.
4.2 Licensor represents and warrants that each Remarketing Agreement is in
full force and effective in accordance with its terms without modification or
amendment and without default by either party thereto; that each Remarketing
Agreement grants Licensor the full and effective right and license to use, copy,
modify as necessary, and distribute the pertinent software components as part of
the Program; that each Remarketing Agreement provides only for the payment of
fees and royalties that, to the extent accrued as of the effective date of this
Agreement, have been paid in full; and that each Remarketing Agreement can be
sublicensed to Licensee pursuant to this Agreement, without the requirement of
obtaining any consent or approval, except as set forth in Section 1(a)(2),
giving any prior or subsequent notice, paying further royalty or fee to any
party thereto or to any other third party, or performing any duty that has not
already been fully performed by Licensor or Licensee and shall be sublicensed
upon execution herewith by the parties hereto, subject to the exception
contained in Section 1(a)(2). Licensor and Licensee shall jointly notify all
licensors under the Remarketing Agreements of this Agreement promptly upon
execution hereof by all parties hereto.
Section 5
END-USER AGREEMENTS
5.1 Licensor represents and warrants that it has granted rights in the
Program to third parties solely pursuant to the nonexclusive End-User Agreements
identified in Exhibit C.
5.2 Licensor represents and warrants that each End-User Agreement is in
full force and effect in accordance with its terms without modification or
amendment and without default by either party thereto; that each End-User
Agreement grants the licensee thereunder solely the nonexclusive right and
license to use the Program, for internal purposes only and not for resale or
redistribution; that each End-User Agreement provides only for rendering of
services (including warranty coverage, maintenance, and support) that, to the
extent required to have been performed as of the effective date of this
Agreement, have been performed in full; and that nothing contained in End-User
Agreement prohibits the assignment of said agreement to Licensee pursuant to
this Agreement, requires obtaining any consent or approval, giving any prior or
subsequent notice, paying any further royalty or fee to any party thereto or to
any other third party, or performing any duty that has not already been fully
performed by Licensor. Licensor and Licensee shall jointly notify all end-users
under the End-User Agreements of the foregoing assignment and assumption
promptly upon execution hereof by all parties hereto.
<PAGE>
5.3 It is mutually agreed that Licensor shall retain all amounts
previously paid to Licensor under the End-User Agreements and that, to the
extent further payments may be made thereunder following the date of execution
hereof (but excluding accounts receivable of $________ as of the date hereof),
Licensee shall be entitled to receive them directly from such end-users, and, if
such payments nonetheless are made to Licensor, Licensor shall remit such
payments to Licensee. Licensor agrees to allow authorized representatives of the
Licensee to inspect the books and records of the Licensor from time to time upon
reasonable prior notice to insure the Licensor's compliance with this provision.
Section 6
FURTHER ASSURANCES
Licensor shall execute and deliver such further conveyance instruments and
take such reasonable further actions as may be deemed necessary or desirable by
Licensee to evidence more fully the grant of an exclusive license in and to the
Program to Licensee. Licensee shall promptly reimburse Licensor for all
reasonable costs and expenses incurred in connection with such "further
assurances." Licensor therefore agrees:
1. To execute, acknowledge, and deliver any affidavits, documents or
assignments or transfer papers in furtherance of the foregoing;
2. To provide testimony in connection with any proceeding affecting the
interest of Licensee in the Program; and
3. To perform any other acts deemed necessary or desirable by Licensee to
carry out the intent of this Agreement.
Section 7
PROTECTION OF TRADE SECRETS
For purposes of this Agreement, "Program Trade Secret" means the whole or
any portion or phase of any scientific or technical information, design,
process, procedure, formula, or improvement included in the Program that is
valuable and not generally known to the business concerns engaged in the
development or marketing of products competitive with the Program. From and
after the date of execution hereof, and for so long thereafter as the data or
information remains Program Trade Secrets, the parties (including their agents,
affiliates, successors and assigns) shall not use, disclose, or permit any
person to obtain any Program Trade Secrets (whether or not the Program Trade
Secrets are in written or tangible form), except as may be specifically
authorized by the Licensor and Licensee.
Section 8
NON-COMPETITION
For the initial term of this Agreement and any renewals thereof, the
parties (including their agents, affiliates, successors and assigns) agree that
they shall not directly or indirectly develop, market or participate in the
marketing of, nor consult (except as expressly provided for herein) or provide
any services or products to any person or organization in connection with (1)
any programs or products that are similar to the Program, (excluding
modifications thereto); except for the Licensee's 1 One Medical Service Program
<PAGE>
and any modifications thereto; (2) any program hereinafter developed by Licensor
or Licensee to serve a similar purpose as that of the Program, (excluding
modifications thereto); or (3) any product or service incorporating Program
Trade Secrets, anywhere in the United States. Licensor and Licensee acknowledge
and agree that the current market for the Program extends throughout the United
States and it is therefore reasonable to prohibit Licensor and Licensee from
competing with each other anywhere in such territory. Following the termination
of this Agreement for any reason (other than by breach by the Licensor) the
Licensee agrees that it shall not directly or indirectly engage in any of the
foregoing relating to the program for a period of three (3) years therefrom
within the United States.
Section 9
ACKNOWLEDGMENT OF RIGHTS
In furtherance of this Agreement, Licensor hereby acknowledges that, for
so long as this Agreement remains in effect, Licensee has acceded to all of
Licensor's right and standing to:
1. Receive all rights and benefits pertaining to the Program, the
Remarketing Agreements (subject to the consent requirements
contained in Section 1(a)(2), and the End-User Agreements;
2. Institute and prosecute all suits and proceedings and take all
actions that Licensor, in its sole discretion, may deem necessary or
proper to collect, assert, or enforce any claim, right, interest and
benefits in the Program, the Remarketing Agreements and the End-User
Agreements; and
3. Defend and compromise any and all such action, suits, or proceedings
relating to such transferred and assigned rights, title, interest
and benefits, and perform all other such acts in relation thereto as
Licensee, in its sole discretion, deems advisable.
Section 10
PAYMENTS BY LICENSEE TO LICENSOR AND RELATED MATTERS
10.1 In consideration of the grant of an exclusive license in and to the
Program, Medcard agrees to transfer all of its right, title and interest in and
to the Hardware associated with the Program, identified by Medcard on Schedule
___ hereto and made a part hereof. In consideration thereof, Licensee will,
following execution hereof by all parties hereto, pay Medcard an initial one
time fee of $450,000.00 payable on or before the close of business on November
16, 1998.
10.2 From and after the effective date of this Agreement, Licensee will
pay a royalty fee to Dream, not to exceed $250,000.00 per month, on a monthly
basis of twenty five percent (25%) of the monthly revenue which may be received
from the use of the Program by Licensee per "Unit", as such term is defined
below, after first deducting "Direct Costs", as such phrase is defined below,
thirty (30) days after payment has been received by Licensee. Notwithstanding
the foregoing, additional royalty fees, if any, in excess of $250,000.00 per
month, will be paid to Dream on a monthly basis of ten percent (10%) of the
monthly revenue which may be received from the use of the Program, after first
<PAGE>
deducting Direct Costs, thirty (30) days after payment has been received by
Licensee. For purposes of this Agreement, a "Unit" is defined as a POS terminal
having the capability and equipment to verify medical benefits and process
medical claims, and "Direct Costs" are defined as including (a) Unit lease costs
of up to $50 per month; (b) commission charges not to exceed one third of the
gross monthly billing for each Unit per month (commissions in excess of one
third of the gross monthly billing per month require the approval of Licensor)
payable to agents which place Units with end users; and (c) network costs which
include (i) claim fees payable to Envoy/NEIC, (ii) verification charges for each
verification of insurance, payable to NDC, and (iii) other similar
telecommunications charges related to obtaining claims processing and/or
benefits verification information. Notwithstanding the foregoing, it is agreed
and understood that if Licensee desires to use (i) any program or programs that
are similar to the Program, except for the Licensee's 1 One Medical Service
Program (and any modifications thereto), excepting modifications to the Program;
(ii) any program hereinafter developed by Licensor that is similar to or serves
a similar purpose as that of the Program; or (iii) the Program in any
application other than a POS terminal, an additional license fee, in an amount
to be negotiated, shall be payable by Licensee to Dream.
10.3 Licensee agrees to allow authorized representatives of the Licensor
to inspect the relevant books and records of the Licensee from time to time upon
reasonable notice to insure the Licensee's compliance with paragraph 10.2 above.
10.4 Licensee will pay Dream a non-refundable "advance" of the royalty
fees payable pursuant to paragraph 10.2 above, of $550,000.00 of which
$100,000.00 is payable on or before the close of business on November 16, 1998,
with the balance of $450,000.00 to be paid from time to time from any excess
cash flow from the Licensee's Program operations. It is agreed and understood
that, following the payment of the $450,000.00 balance in full, Licensee shall
be entitled to retain forty percent (40%) of the then monthly royalty fee
otherwise payable to Dream and apply said sum, on a monthly basis, as a credit
until the amount of the "advance" set forth in this paragraph has been offset.
10.5 Concurrent with the execution of this Agreement by all parties
hereto, Licensee will issue to Dream 100,000 shares of the common stock of
Licensee and options to purchase 350,000 shares of the common stock of Licensee
(collectively, the "Shares") exercisable for a period of three (3) years from
the date of issuance of the options at an exercise price equal to an average of
the last sale price for the five (5) trading days prior to execution of this
Agreement. Any exercise of said options may, if so arranged by Licensee with a
third-party, be a "cashless exercise" to Licensee.
10.6 Licensee has advanced to Licensor for the purpose of covering
Licensor's payroll an aggregate of $_______________ to date, which amount shall
be deducted by the Licensee after the $555,000.00 advance described in paragraph
10.4 hereof has been paid in full; such deduction on a monthly basis, not to
exceed forty percent (40%) of any monthly royalty fee otherwise payable to
Dream.
10.7 Licensee agrees to use its reasonable best efforts to achieve
placement (i.e. sale or lease) of a minimum level of fifteen (15,000) Units
within thirty (30) months after the execution of this Agreement. The exclusive
license granted to the Licensee hereunder shall become non-exclusive but this
Agreement shall not be deemed breached or terminated if the minimum level of
fifteen thousand (15,000) Units is not; (i) obtained within thirty (30) months
after the execution of this Agreement, and (ii) maintained throughout the
balance of the term of the Agreement, including any renewed term.
<PAGE>
10.8 Licensee agrees upon execution hereof by all parties hereto to retain
each of Ronald and Anthony Pizzolo as consultants to the Licensee on a full time
basis and to pay each of such persons a consultant fee of $2,000.00 per week
together with the incentive based compensation as will be agreed to in writing
by the Licensee and such persons. Each of Ronald and Anthony Pizzolo shall be
responsible for the timely payment of all applicable taxes due and owing on such
monies paid. It is agreed that the consulting arrangement with each of Ronald
and Anthony Pizzolo shall continue for a period of thirty (30) months from the
date hereof, or for the same thirty (30) month period, if the parties otherwise
negotiate and enter into employment agreements.
Section 11
TERMINATION OF AGREEMENT
This Agreement may be terminated by either party upon thirty (30) days
prior written notice to the other, in the event of any material breach by any of
such parties of their respective representations and warranties set forth
herein, not otherwise cured to the reasonable satisfaction of the other party,
provided that at least ten (10) days prior written notice or such thirty (30)
day period has been received by said party or their counsel as provided in
paragraph 14.8.
Material obligations include, but are not limited to, a default by
Licensee in payment of royalties; cessation of business or filing of a petition
in bankruptcy under U.S. Bankruptcy Law not otherwise withdrawn within sixty
(60) days.
In the event of the termination of this Agreement by Licensor in
accordance with the termination provisions set forth above, Licensee shall
immediately cease and desist from any further use of the Program and shall
surrender any and all copies of said Program to Licensor. Notwithstanding the
foregoing, the parties hereto shall be entitled to seek all remedies available
at law or in equity as may be available to such party/parties.
Section 12
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representation and warranties of each of the parties hereto shall
survive the closing of the transactions contemplated hereby and remain in full
force and effect during the term of this Agreement and any renewals thereof.
Except as specifically provided elsewhere in this Agreement, there are no
warranties, whether expressed or implied, including but not limited to,
warranties of merchantability or fitness for a particular use.
Section 13
INDEMNIFICATION
Each of the parties hereto agrees to indemnify and hold harmless each of
the other parties hereto against and in respect of any liability, damage or
deficiency, actions, suits, proceedings, demands, assessments, judgements, costs
and expenses, including reasonable attorney's fees and costs incident to any of
the foregoing resulting from any material misrepresentation or omission made in
this Agreement, material breach of covenant, representation or warranty or
nonfulfillment of any agreement on the part of any of the parties hereto under
this Agreement or from any material misrepresentation in or omission from any
certificate or other document furnished or to be furnished hereunder. This
indemnification shall survive the termination of this Agreement for any reason.
<PAGE>
Section 14
MISCELLANEOUS
14.1 Subject to Licensor's written approval, which approval shall not be
unreasonably withheld, Licensee may assign any or all its rights and obligations
hereunder except those rights and obligations contained in Section 10.5 hereof,
to any of its now or hereafter formed direct or indirect subsidiaries.
14.2 This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, notwithstanding conflict of law
principles. Any action or proceeding relating to or arising out of this
Agreement shall be brought exclusively in the federal and/or state courts
located in New York, New York. The prevailing party in any such action or
proceeding shall be entitled to recover from the other party its reasonable
attorneys' fees and costs. Further, the parties agree that due to the complex
nature of this Agreement, each of the Licensor and Licensee waives its
respective right to a trial by jury.
14.3 This Agreement constitutes the entire agreement between the parties
hereto with respect to the specific subject matter hereof and merges and
supersedes all prior agreements, understandings, negotiations and arrangements,
both oral and written, between the parties hereto with respect to the subject
matter hereof.
14.4 This Agreement may not be amended or modified in any manner, except
by a written instrument executed by each of the parties hereto.
14.5 The invalidity of any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall not affect the
enforceability of the remaining portions of this Agreement or any part hereof,
all of which are inserted conditionally on their being valid in law. If any one
or more of the words, phrases, sentences, clauses or sections contained in this
Agreement shall be declared invalid by any court of competent jurisdiction,
then, in any such event, this Agreement shall be construed as if such invalid
word or words, phrase or phrases, sentence or sentences, clause or clauses, or
section or sections had not been inserted.
14.6 The waiver by any party of a breach or violation of any provision of
this Agreement by any other party shall not operate nor be construed as a waiver
of any subsequent breach or violation. The waiver by any party to exercise any
right or remedy it or he may possess shall not operate nor be construed as a bar
to the exercise of such right or remedy by such party upon the occurrence of any
subsequent breach or violation.
14.7 This Agreement may be executed via telecopier in any number of
counterparts and by the separate parties in separate counterparts, each of which
shall be deemed to constitute an original and all of which shall be deemed to
constitute the one and the same instrument.
<PAGE>
14.8 All notices and other communications hereunder shall be in writing
and shall be deemed to have been given if delivered in person or sent by prepaid
first class registered or certified mail , return receipt requested, via
telecopier, or via overnight delivery service by a nationally recognized
carrier, if to:
Licensor: at the address first set forth above
Telecopier No. (516) 582-4738
With a copy to: Lazare Potter & Giacovas LLP
950 Third Avenue
New York, NY 10022
Telecopier No. (212) 888-0919
Attn: Robert A. Giacovas, Esq.
<PAGE>
Licensee: at the address first set forth above
Telecopier No. ( )
With a copy to: Kipnis Tescher Lippman & Valinsky
One Financial Plaza, Suite 2308
Fort Lauderdale, Florida 33394
Attention: Jay Valinsky, Esq.
Telecopier No.(954) 467-2264
14.9 Each of the parties to this Agreement acknowledge that they each have
carefully read and reviewed this Agreement with their respective counsel, and
therefore, agree that the rule of construction that ambiguities shall be
construed against the drafter of the document shall not be applicable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal effective as of the date shown above.
DREAM TECHNOLOGIES, LLC
By:________________________________
Ronald Pizzolo, Managing Partner
STATE OF NEW YORK )
)SS
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me on this _____ day of
November, 1998 by Ronald Pizzolo, as Managing Partner of Dream Technologies,
LLC, a Delaware limited liability company, on behalf of such corporation who is
personally known to me or has produced ___________________ as identification and
did/did not take an oath.
Notary Public:
sign____________________________________
print___________________________________
State of New York at Large (Seal)
My Commission Expires: ______________
<PAGE>
MEDCARD MANAGEMENT SYSTEMS, INC.
By:________________________________________
Ronald Pizzolo, Chief Executive Officer
STATE OF NEW YORK )
)SS:
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me on this _____ day of
November, 1998 by Ronald Pizzolo, as Chief Executive Officer of Medcard
Management Systems, Inc., a New York corporation, on behalf of such corporation
who is personally known to me or has produced ___________________ as
identification and did/did not take an oath.
Notary Public:
sign____________________________________
print___________________________________
State of New York at Large (Seal)
My Commission Expires: ________________
SIMS COMMUNICATIONS, INC.
By:___________________________
Mark Bennett, President
STATE OF CALIFORNIA )
)SS:
COUNTY OF ORANGE )
The foregoing instrument was acknowledged before me this ____ day of
Delaware, 1998 by Mark Bennett, as President of Sims Communications, Inc., a
Delaware corporation, on behalf of such corporation who is personally known to
me of has produced _______________________ as identification and did/did not
take an oath.
Notary Public:
sign______________________________
print______________________________
State of California at Large (Seal)
My Commission Expires: _______________
AGREEMENT
THIS AGREEMENT is entered this 10th day of June 1999, by and between NEW
VIEW TECHNOLOGIES, INC., a California Corporation ("Seller"), and U.S. CASH
EXCHANGE, INC., a California corporation ("Buyer").
Recitals:
WHEREAS, Seller has entered thirty-nine (39) equipment lease agreements
(the "Equipment Leases") with Ladco Leasing Company ("Ladco") covering five
hundred and twenty(520) merchant locations which include pieces of debit
equipment as described in the inventory attached hereto as Exhibit "A" (the
"Equipment") of which four hundred and twenty (420) pieces of the Equipment have
been installed at retail locations in several states under the terms and
provisions of individual agreements (the "Merchant Agreements") with the owners
of the businesses in which the Equipment has been installed; and
WHEREAS, Seller has entered written agreements (the "Agent Agreements")
with those individuals identified in Exhibit "B" attached hereto for the purpose
of establishing an agent network to market placement of the Equipment; and
WHEREAS, the applicable lease numbers and numbers of equipment associated
with each Equipment Lease are shown in the list attached hereto as Exhibit "C";
and
WHEREAS, the names and addresses of the merchants that are parties to the
Merchant Agreements with Seller are shown on the list attached hereto as Exhibit
"D"; and
WHEREAS, Seller owns the items of office furniture and equipment (the
"Office FF&E") shown on the list attached hereto as Exhibit "E"; and
WHEREAS, Seller has incurred certain debts and obligations (the "Accounts
Payable") in connection with the operation of its offices located in Modesto,
California, as shown in the list attached hereto as Exhibit "F" in the combined
sum of SEVENTY TWO THOUSAND FIVE HUNDRED THIRTY-THREE AND 23/100 DOLLARS
($72,533.23).
WHEREAS, Seller desires to assign to Buyer its entire right, title and
interest in, and delegate to Buyer its obligations of performance under, the
Equipment Leases, the Agent Agreements, and the Merchant Agreements under all of
the terms and provisions set forth in this Agreement; and
WHEREAS, Seller desires to convey to Buyer, and Buyer desires to acquire
from Seller, the Office FF&E under all of the terms and provisions set forth in
this Agreement;
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration exchanged between the parties, receipt
of which is hereby acknowledged, the parties hereto agree as follows:
<PAGE>
Terms:
1. Effective Date of Assignment. The date upon which this Agreement shall
take full force and effect shall be April 23, 1999 (the "Effective Date").
2. Reimbursement Credit for Ladco Payment. Buyer shall reimburse Seller
for the lease payments made by Seller for the month of May, 1999, under the
Equipment Leases in the amount of TWENTY THOUSAND ONE HUNDRED SEVENTY SIX AND
70/100 ($20,176.70) less that portion of residual check for period April
23-April 30, 1999 (which amount will be earned by the Buyer). Amount due to
Buyer for the aforementioned seven-day period is equal to $4,719; thus Buyer
acknowledges that it owes to seller the difference or $15,457.63 for lease
payments advanced by the Seller on behalf of Buyer for May, 1999. This amount
($15,457.63) will be deducted from May's residual check to be received by Seller
week of June 14, 1999. The balance, after deduction of $15,457.63 due Seller
will be remitted immediately to Buyer. Note: as this agreement will not be
consummated and "signed off" by LADCO Leasing prior to June 11th, Buyer hereby
agrees to additionally reimburse Seller in cash an additional $17,892
immediately upon closing of this agreement (THIS AMOUNT REPRESENTS LADCO
AUTOMATIC LEASE DEBIT PAYMENTS THAT HAVE ALREADY BEEN CHARGED AGAINST SELLER'S
BANK ACCOUNT FOR JUNE 5TH AND JUNE 10TH PAYMENT DATES.) SELLER WILL NOT OFFSET
JUNE LEASE PAYMENTS MADE ON BEHALF OF BUYER AGAINST JUNE RESIDUALS. THIS AMOUNT
MUST BE RECEIVED BY SELLER UPON CLOSE-no exceptions.
3. Collection and Distribution of Merchant Agreement Payments. Buyer shall
collect all sums which hereafter comes due under the terms of the Merchant
Agreements, only after the transaction has been finalized. Until such time as
the merchants are notified of this assignment of Seller's interest, the parties
expect the payments are likely to name Seller as payee. All payments under the
Merchant Agreements naming Seller as payee shall as before continue to be
remitted to the Seller's address. Seller shall retain all such payments
attributable to amounts coming due prior to April 23, 1999 and through the date
of the close of the agreement. So long as Buyer has made provisions with LADCO
Leasing to have his bank account charged for the monthly lease/interest
debits/payments, and Seller has received proper reimbursement in full for all
lease payments advanced on behalf of Buyer, then and only then will BUYER be
entitled to direct receipt of the monthly residual check at his business
address.
4. Collection and Distribution of the Final Payment under the Equipment
Lease. Seller will be entitled to receive $15,000 of any final account
receivable amount outstanding from Ladco. It is estimated that approximately
TWENTY THOUSAND AND NO/100 DOLLARS ($20,000) is owed to Seller at the time of
this agreement.. Seller shall collect the final payment due from Ladco under the
Equipment Lease and shall remit the remaining balance (after deduction of
$15,000) to Buyer immediately upon receipt of such funds.
<PAGE>
5. Assignment of Rights and Delegation of Duties under the Equipment
Leases, the Merchant Agreements and the Agent Agreements. Seller hereby assigns
to Buyer its entire right, title and interest in the Equipment Leases, the Agent
Agreements and the Merchant Agreements. By this assignment, Seller delegates to
Buyer all of Seller's duties and obligations and obligations of performance
under the Equipment Leases, the Agent Agreements and the Merchant Agreements.
6. Acceptance of Assignment and Delegation. Buyer hereby accepts the
assignment described in paragraph 5, above, and agrees to assume and perform all
duties and obligations that Seller has under the Equipment Leases, the Agent
Agreements and the Merchant Agreements as if Buyer had been an original party to
each of those contracts. Buyer further agrees to defend, indemnify and hold
Seller harmless from any liability for performance or non-performance of the
Equipment Leases, the Agent Agreements and the Merchant Agreements.
7. Conveyance of Office FF&E. Seller hereby conveys to Buyer its entire
right, title and interest in the Office FF&E. Seller makes no representation or
warranty respecting the physical condition of the Office FF&E.
8. Seller Retains Right to Patent and/or Copyright. Seller developed
certain software needed to integrate the intelligent technology of some of the
Equipment with the intelligent technologies of the transaction hardware used by
certain merchants. This software is being applied in the Equipment located at
approximately one-half (1/2) of the locations currently operating under Merchant
Agreements. Seller contends this software may be patentable and/or copyrightable
and further contends Seller's development of this software gives Seller certain
patent and/or copyright rights. Nothing in this Agreement is intended to assign
Seller's right to patent and/or copyright this certain software application it
has developed. However, whether or not Seller, or its successors in interest,
patent and/or copyright the software application it developed for the Equipment,
this assignment is intended to, and shall have the effect of, granting to Buyer,
and its successor's in interest, an conditional and permanent right to use that
software. The right to use, granted herein by Seller to Buyer is fully paid up.
9. Assumption of Accounts Payable. Buyer agrees to pay the Accounts
Payable, and further agrees to defend, indemnify and hold Seller harmless from
any liability in connection with non-payment of the Accounts Payable.
Notwithstanding the foregoing, Buyer shall not be obligated to pay or indemnify
Seller against any portion of the obligation to the company known as TASQ
located in Sacramento, California, which obligation is approximately TWENTY-TWO
THOUSAND AND NO/100 DOLLARS ($22,000.00) (the "TASQ Debt").
10. Seller's Representations and Warranties. Seller hereby represents and
warrants to Buyer as follows:
(a) Seller is a corporation duly organized and validly existing
under the laws of the state of California , is qualified to do business in the
state of California, and has the authority to own and convey the property
interests conveyed under the terms and provisions of this Agreement. This
Agreement has been duly authorized by Seller and is not, and at the time of the
Effective Date will not, violate any provisions of any agreement or judicial
order to which Seller is a party or to which Seller or the property interests
conveyed in this Agreement are subject.
<PAGE>
(b) The Equipment Leases the Merchant Agreements and the Agent
Agreements are in full force and effect, and there are no other agreements,
written or oral, between Seller and the other parties to the Equipment Leases
the Merchant Agreements and/or the Agent Agreements respecting the subject of
those contracts. True and correct copies (and originals if available) of the
Equipment Leases the Merchant Agreements and the Agent Agreements will be
delivered to Buyer at execution of this Agreement.
(c) There are no commissions, finder's fees or other compensation
owing or which may become due to any broker or to any other person or entity
with respect to this Agreement or the transaction memorialized by this
Agreement.
(d) There is no litigation pending, or to Seller's knowledge,
threatened, against Seller or any basis therefore which arises out of the
Equipment Leases, the Merchant Agreements, the Agent Agreements, the Office
Equipment Leases or the ownership of the Office FF&E. Seller discloses, and
Buyer acknowledges that Ad Club is expecting payments (the "Ad Club Debt") by
the fifteenth of May in the amount of $1,737.30 to be delivered to AdClub
attorneys DAVIS, ECHOLS & BOYD and it is hereby acknowledged the Ad Club payment
shall be the Buyer's responsibility. Seller also discloses and Buyer
acknowledges the TASQ Debt as to which Seller and TASQ have reached an agreement
for payment on terms following demand and threat of litigation by TASQ. Buyer
shall not be obligated to pay any portion of the TASQ Debt.
(e) Seller has good and marketable title to the Office FF&E free of
security interests and encumbrances.
(f) There are no debts or obligations related to the operation of
Seller's offices located in Modesto, California, other than the Accounts
Payable, the obligations contained in the Equipment Leases, the Agent
Agreements, the Merchant Agreements, the Ad Club Debt and the TASQ Debt. Seller
agrees to defend, indemnify and hold Buyer, Buyer's property, the Merchant
Agreements, the Equipment Leases and the Office FF&E harmless from any and all
liability relating in any way to the debts and obligations of Seller, including
but not limited to the TASQ Debt, other than the debts and obligations arising
under the Accounts Payable, the Equipment Leases, the Agent Agreements, the
Merchant Agreements, and the Ad Club Debt
11. Buyer's Representations and Warranties. Buyer hereby represents and
warrants to Seller as follows:
(a) Buyer is a corporation duly organized and existing under the
laws of the state of California and is in good standing under the laws of the
state of California; this Agreement will be duly authorized, executed and
delivered by Buyer, and does not, and at the time of the Effective Date will
not, violate any provisions of any agreement or judicial order to which Buyer is
a party or to which it is subject.
<PAGE>
(b) There is no litigation pending or, to Buyer's knowledge,
threatened, against Buyer or any basis therefore before any court or
administrative agency, which might result in any material adverse change in the
business or financial condition of the Buyer.
(c) There are no commissions, finder's fees or other compensation
owing or which may become due to any broker or to any other person or entity
with respect to this Agreement or the transaction memorialized by this
Agreement.
(d) To Buyer's knowledge, there are no additional outstanding debts
of Seller, other than the Accounts Payable, which were established or incurred
by Buyer, or its authorized agents.
(e) Although the Seller's former employees have already acknowledged
in writing to the Seller they are now Buyer's employees; Buyer agrees to
indemnify and hold Seller and Seller's property harmless from any claim that may
arise in connection with activities, conduct or other circumstances occurring in
said employees employment at the Modesto, California offices prior to the date
of this agreement and after the Effective Date of the agreement
(f) The Buyer agrees to open all of its own accounts with all
vendors and, furthermore, agrees not to use any vendor accounts in the name of
Seller or any affiliated company of Seller or its parent corporation, Sims
Communications, Inc.
(g) The Buyer agrees that the leased premises located at 3001 Coffee
Road, Modesto, California, will remain the entire responsibility of the Buyer
including the April and May rent plus all utility costs in arrears at present
and, furthermore, Buyer agrees to indemnify and hold Seller's property harmless
from any and all liability relating in any way to the obligations arising under
the lease of said premises, whether past or future obligations of performance.
12. Confidentiality. Each of the parties shall hold as confidential all
information concerning this Agreement; and neither party shall release any such
information to third parties (other than to that party's lawyer, accountant,
auditor, or law enforcement representatives) without the other party's prior
written consent, except pursuant to a court order requiring such release or as
otherwise may be required by law. The Buyer understands that the Seller is
obligated to disclose material information concerning its core business and if
Seller deems it necessary will issue a press release. However, the release will
be limited to only general information concerning this transaction and the
Seller will obtain prior written approval from the Buyer before releasing any
such information, which approval by the Buyer shall not be unreasonably
withheld.
13. Miscellaneous Provisions.
(a) This Agreement contains the entire Agreement and understanding
between the parties hereto, and supersedes all prior agreements and
understandings.
<PAGE>
(b) The section headings throughout this Agreement are for
convenience and reference only, and shall in no way be deemed to define, limit,
or add to the meaning of any provision of this Agreement.
(c) This Agreement and any provision hereof, may not be waived,
changed, modified, or discharged orally, but only by an agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification, or discharge is sought.
(d) The failure of any party to insist in any one or more cases upon
the performance of any of the provisions, covenants, or conditions of this
Agreement or to exercise any option herein contained shall not be construed as a
waiver or relinquishment for the future of any such provisions, covenants, or
conditions the acceptance of performance of anything required by this Agreement
to be performed with knowledge of the breach or failure of a covenant,
condition, or provision hereof shall not be deemed a waiver of such breach or
failure, and no waiver by any party of one breach by another party shall be
construed as a waiver with respect to any other or subsequent breach.
(e) This Agreement and its application shall be governed by the laws
of the State of California. The parties hereto agree to venue and jurisdiction
in the federal and state courts located in Orange County, California. The
prevailing party in any action or proceeding shall be entitled to recover its
reasonable attorneys' fees and costs from the other party. If either party deems
that the other party has defaulted in any obligation(s) as stated and agreed
upon in this Agreement, then that party shall give the other party written
notice of the alleged default. Thereafter the party allegedly in default shall
have ten (10) business days to cure said default before the other party deems
that party in default and takes legal action to enforce this Agreement.
(f) This Agreement shall inure to and be binding upon the heirs,
executors, personal representatives, successors and assigns of each of the
parties to this Agreement.
(g) If any of the provisions of this Agreement shall be held
invalid, the remainder of this Agreement shall not be affected thereby.
IN WITNESS WHEREOF, this Agreement was entered on the first date above
written in Orange County, California.
SELLER:
NEW VIEW TECHNOLOGIES, INC.
a California corporation
By: __________________________
Mark Bennett, President
<PAGE>
BUYER:
U.S. CASH EXCHANGE, INC.,
a California corporation
By: __________________________
Jeffrey D. McKay, President
<PAGE>
EXHIBITS
EXHIBIT "A" THE EQUIPMENT LIST
EXHIBIT "B" AGENT LIST
EXHIBIT "C" LEASE NUMBERS
EXHIBIT "D" MERCHANT LIST
EXHIBIT "E" OFFICE FF&E LIST
EXHIBIT "F" ACCOUNTS PAYABLE LIST
EXHIBIT "G" ACCOUNTS RECEIVABLE LIST
EXHIBIT "H" AGREEMENT DATED JUNE 10, 1999 BETWEEN SIMS COMMUNICATIONS, INC.
(ITS SUBSIDIARIES, DIVISIONS AND AFFILIATES) AND JEFF MCKAY
<PAGE>
EXHIBIT "A"
UNITS DESCRIPTION
100 NURIT TERMINALS
381 PROTEGE TERMINALS
381 P-250 PRINTERS
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of March 2, 1999 by and
between SIMS COMMUNICATIONS, INC., a Delaware corporation (the "Company"), and
MARK EDWARD BENNETT (the "Executive").
WITNESSETH:
WHEREAS, the Company desires to continue to employ the Executive, and the
Executive desires to continue to be employed by the Company, pursuant to the
provisions contained in this Employment Agreement (the "Agreement");
NOW, THEREFORE, in consideration of the premise, and the respective
covenants and agreements of each of the Company and the Executive contained in
this Agreement, each of the Company and the Executive agrees as follows:
ARTICLE I
Employment
1.1 The Company. The Company employs the Executive and the Executive
accepts such employment. Subject to the direction of the Board of Directors of
the Company, the Executive shall serve as the Chairman of the Board, President
and Chief Executive Officer of the Company. The Executive shall have such
responsibilities, perform such duties and exercise such power and authority as
are inherent in, or incident to, the offices of Chairman of the Board, President
and Chief Executive Officer. The Executive shall devote his full business time
and attention, and his best efforts, to the diligent performance of such duties.
1.2 Subsidiary Corporations. The Executive shall serve as the Chairman of
the Board, and a principal officer of each of the Company's current and any
future wholly owned or majority owned subsidiaries.
ARTICLE II
Term
Subject to the provisions of Article VI below, the term of this Agreement
shall be for a period of three years, commencing as of March 2nd 1999 and
expiring on March 2nd 2002. Unless either party shall give to the other written
notice of termination on or before September 1st, 2001, the term of this
Agreement shall, on September 1st, 2001, be extended for a period of three
years, commencing as of March 2nd, 2002 and expiring on March 2nd, 2005.
ARTICLE III
Salary
3.1 Initial Salary. In full payment for the obligations to be performed by
the Executive during the term of this Agreement, the Company shall pay to the
Executive a salary at an annual rate equal to the sum of One Hundred and Thirty
Seven Thousand Dollars ($137,000-00).
<PAGE>
3.2 Payment of Salary. Payments of salary shall be made to the Executive
in installments from time to time on the same dates payments of salary are
generally made to all senior management employees of the Company.
ARTICLE IV
Bonus
The Executive may receive an annual bonus in an amount determined by
the Board of Directors of the Company, in its discretion, if and when so
determined by the Board of Directors.
ARTICLE V
Certain Fringe Benefits
5.1 Generally. The Executive shall be entitled to receive such benefits
and to participate in such benefit plans as are generally provided from time to
time by the Company to its sr. management employees; provided, however, that
nothing contained in this Section shall be construed to obligate the Company to
provide any specific benefits to its employees generally.
5.2 Vacations. The Executive shall be entitled to four weeks vacation time
on an annual basis in accordance with such policies as are from time to time
adopted by the Company's Board of Directors with respect to its senior
management employees.
5.3 Automobile. The Company shall provide the Executive an automobile
allowance of $700.00 per month which is to cover costs and expenses related to
Executive use of personal automobile in connection with the performance of his
duties under this Agreement.
5.4 Stock Options. The Executive shall be entitled to participate in the
Company's stock option plans as may from time to time be in effect and to
receive such incentive or other stock options as may from time to time be
granted to him thereunder; provided, however, that nothing contained in this
Section 5.4 shall be construed to obligate the Company, its Board of Directors
or any committee of its Board of Directors to grant any incentive or other stock
option whatsoever to the Executive.
5.5 Life Insurance. The Company shall purchase and maintain in effect one
or more term insurance policies on the life of the Executive in an aggregate
amount of not less than One Million Dollars ($1,000,000). The beneficiary of
each such policy shall be the person or persons who shall from time to time be
designated in writing by the Executive to the Company. In the absence of any
written designation to the contrary, the beneficiary of all such insurance
policies shall be the Executive's spouse. The Company shall purchase and
maintain in effect one insurance policy that covers loss of salary for any
disability that renders the executive unable to perform his duties.
<PAGE>
5.6 Reimbursement of Medical Expenses. The Company shall reimburse the
Executive for the full amount of any medical, dental and optical expenses not
covered under any group medical plan from time to time in effect for the benefit
of Company employees generally. Such coverage shall include without limitation
mental health care and treatment and other medical, dental and optical expenses
not covered under the Company's health care plan now or hereafter in effect. The
Company may satisfy its obligation to the Executive under this Section 5.7 by
providing excess medical, dental, optical and other health care insurance
coverage for the Executive's benefit.
5.7 Business and Entertainment Expenses. The Company shall reimburse the
Executive for all reasonable business and entertainment expenses related to the
Executive's position with the Company.
ARTICLE VI
Termination of Employment
6.1 Certain Definitions. The following terms shall have the
following respective meanings when utilized in this Agreement:
(a) "Bonus" shall mean, as of a given date, the most
recent annual bonus awarded by the Company to the Executive.
(b) "Cause" shall mean any action by the Executive or
any inaction by the Executive which constitutes:
(i) fraud, embezzlement, misappropriation, dishonesty or breach of
trust;
(ii) a material breach or violation of any or all of the
covenants, agreements and obligations of the Executive set
forth in this Agreement, other than as the result of the
Executive's death or Disability (as hereinafter defined);
(iii) a willful or knowing failure or refusal by the Executive to
perform any or all of his material duties and responsibilities
as an officer of the Company, other than as the result of the
Executive's death or Disability; or
(iv) gross negligence by the Executive in the performance of
any or all of his material duties and responsibilities
as an officer of the Company, other than as a result of
the Executive's death or Disability;
provided, however, that if the basis for any termination of the Executive's
employment by the Company as set forth in the Termination Notice (as hereinafter
defined) delivered by the Company to the Executive is any or all of the
definitions of Cause set forth in Sections 6.1(b)(ii), 6.1(b)(iii) or 6.1(b)(iv)
of this Agreement, then, in such event, the Executive shall have fifteen (15)
days from and after the date of his receipt of such Termination Notice to
present a reasonable plan to cure such action or inaction specified in the
Termination Notice, which plan may require more than twenty (20) days to cure
the specified action or inaction, but such plan must be reasonably satisfactory
to the Company and the Executive must proceed diligently to effectuate such
plan.
<PAGE>
(c) "Compensation" shall mean the sum of the Executive's
Salary (as hereinafter defined) and Bonus.
(d) "Disability" shall mean any mental or physical
illness, condition, disability or incapacity which prevents
the Executive from reasonably discharging his duties and
responsibilities as an officer of the Company. If any
disagreement or dispute shall arise between the Company and
the Executive as to whether the Executive suffers from a
Disability, then, in such event, the Executive shall submit to
the physical or mental examination of a physician licensed
under the laws of the State of California, who is mutually
agreeable to the Company and the Executive, and such physician
shall determine whether the Executive suffers from a
Disability. In the absence of fraud or bad faith, the
determination of such physician shall be final and binding
upon the Company and the Executive. The entire cost of such
examination shall be paid for solely by the Company.
(e) "Good Reason" shall mean:
(i) the assignment by the Board of Directors (or the executive
committee of the Board of Directors, if any) to the Executive,
without his express written consent, of duties and
responsibilities which results in the Executive having less
significant duties and responsibilities or exercising less
significant power and authority than he had, or duties and
responsibilities or power and authority not comparable to that
of the level and nature which he had, immediately prior to
such assignment;
(ii) the removal of the Executive from, or a failure to
reappoint the Executive to, his then current position or
positions with the Company or its subsidiaries or affiliates,
except (A) with the Executive's express written consent or (B)
in connection with any termination of the Executive's
employment by the Company as the result of the Executive's
Protracted Disability (as hereinafter defined) or for Cause;
(iii) the reduction of the Executive's Salary or the reduction
of any or all of the Executive's benefits set forth in Article
V above;
(iv) the Company's failure to perform on a timely basis its
obligations under this Agreement;
(v) the Company's requiring the Executive, without his express
written consent, to travel on Company business to an extent
substantially greater than the Executive's business travel
obligations immediately prior to such time;
<PAGE>
(vi) the Company's requiring the Executive, without his
express written consent, to change his place of permanent
residency to place outside of Orange County, California;
(vii) the Company's moving its executive offices to a place
outside of Orange County, California, without the Executive's
express written consent; or
(viii) the failure of the Company to obtain the express
written assumption of, and agreement to perform on a timely
basis, the Company's obligations under this Agreement by any
successor to the Company as required by Article IX of this
Agreement.
(f) "Protracted Disability" shall mean any Disability
which prevents the Executive from reasonably discharging his
duties and responsibilities as an officer of the Company for a
period of twelve (12) consecutive months.
(g) "Salary" shall mean, as of a given date, the
Executive's then current annual salary.
(h) "Termination Date" shall mean a specific date not
less than forty-five (45) nor more than ninety (90) days from
and after the date of any Termination Notice upon which the
Executive's employment by the Company shall be terminated in
accordance with the provisions of this Agreement.
(i) "Termination Notice" shall mean a written notice
which sets forth (i) the specific provision of this Agreement
relied upon to terminate the Executive's employment, (ii) in
reasonable detail the facts and circumstances claimed to
provide the basis for the termination of the Executive's
employment, and (iii) a Termination Date.
6.2 Termination of Employment.
(a) Notwithstanding the provisions of Article II hereof, this
Agreement (i) shall automatically terminate upon the death of the Executive
pursuant to the provisions of Section 6.3 hereof, (ii) may be terminated at any
time by the Company pursuant to the provisions of Sections 6.4 or 6.5 hereof,
and (iii) may be terminated at any time by the Executive pursuant to the
provisions of Section 6.6 hereof.
(b) If either the Company or the Executive shall desire to terminate
the Executive's employment by the Company pursuant to any of the provisions of
Sections 6.4, 6.5 or 6.6 of this Agreement, then, in such event, the party
causing such termination shall provide a Termination Notice to the other party.
<PAGE>
(c) If this Agreement shall be terminated pursuant to any of the
provisions of this Article VI, the Company shall be discharged from all of its
obligations to the Executive under this Agreement upon the payment to the
Executive of the amount set forth in the Section of this Article VI pursuant to
which such termination shall occur. The Executive's sole and exclusive remedy
for the termination of this Agreement, regardless of whether such termination
shall be initiated by the Company or the Executive, and regardless of whether
such termination shall be with or without Cause, shall be the payment by the
Company to the Executive of the amount set forth in the Section of this Article
VI pursuant to which such termination shall occur.
6.3 Termination Upon Death of Executive. If during the term of this
Agreement the Executive shall die, then the employment of the Executive by the
Company shall automatically terminate on the date of the Executive's death. In
such event, not more than thirty (30) days after the date of the Executive's
death, the Company shall pay to the Executive's estate or as otherwise directed
by the Executive's personal representative, an amount in cash equal to the
Executive's Compensation (subject to applicable payroll and/or other taxes
required by law to be withheld) determined as of the date of the Executive's
death.
6.4 Disability of Executive.
(a) In the event that at any time during the term of this Agreement
the Executive shall suffer any Disability, then the Company shall be obligated
to continue to pay in the ordinary and normal course of its business to the
Executive or his legal representative, as the case may be, the Executive's
Compensation (subject to applicable payroll and/or other taxes required by law
to be withheld) from the date that the Executive shall first suffer any such
Disability to the date that the Executive's employment by the Company shall be
terminated pursuant to any of the provisions of this Agreement.
(b) In the event that the Executive shall suffer any Protracted
Disability during the term of this Agreement, then the Company may terminate the
Executive's employment under this Agreement. In such event, in addition to any
other benefits which may have been provided by the Company to the Executive or
his legal representative, as the case may be, pursuant to the provisions of
Section 6.4(a) above, not later than the Termination Date specified in the
Termination Notice delivered by the Company to the Executive or his legal
representative, as the case may be, the Company shall pay to the Executive or as
otherwise directed by the Executive's legal representative an amount in cash
equal to the Executive's Compensation (subject to applicable payroll and/or
taxes required by law to be withheld) determined as of the date of such
Termination Notice. Subsequent to such Termination Date, the Executive or his
legal representative, as the case may be, shall also be entitled to receive any
benefits which may be payable under any disability insurance policy or
disability plan provided to the Executive by the Company.
<PAGE>
6.5 Termination of Employment by Company.
(a) The Company may terminate this Agreement at any time with Cause.
In such event, the Company shall be obligated to continue to pay in the ordinary
and normal course of its business to the Executive only his Salary (subject to
applicable payroll and/or other taxes required by law to be withheld) through
the Termination Date set forth in the Termination Notice.
(b) The Company may terminate this Agreement at any time without
Cause. If any such termination shall occur on or before March 2nd, 2002, then,
in such event, not later than the Termination Date specified in the Termination
Notice, the Company shall pay to the Executive, in cash, an amount equal to (i)
the Executive's Compensation, determined as of the date of the Termination
Notice, multiplied by (ii) the greater of (A) the number of years and any
portion of a year remaining in the term of this Agreement or (B) 2.99 (subject
to applicable payroll and/or other taxes required by law to be withheld). If any
such termination shall occur after September 2nd, 2002, then, in such event, not
later than the Termination Date specified in the Termination Notice, the Company
shall pay to the Executive, in cash, an amount equal to the Executive's
Compensation, determined as of the date of the Termination Notice, multiplied by
2.99 (subject to applicable payroll and/or other taxes required by law to be
withheld).
6.6 Termination of Employment by Executive.
(a) The Executive may terminate this Agreement at any time with Good
Reason. If any such termination shall occur on or before March 2nd, 2002, then,
in such event, not later than the Termination Date specified in the Termination
Notice, the Company shall pay to the Executive, in cash, an amount equal to (i)
the Executive's Compensation, determined as of the date of the Termination
Notice, multiplied by (ii) the greater of (A) the number of years and any
portion of a year remaining in the term of this Agreement or (B) 2.99 (subject
to applicable payroll and/or other taxes required by law to be withheld). If any
such termination shall occur after March 2nd, 2002, then, in such event, not
later than the Termination Date specified in the Termination Notice, the Company
shall pay to the Executive, in cash, an amount equal to (i) the Executive's
Compensation, determined as of the date of the Termination Notice, multiplied by
(ii) 2.99 (subject to applicable payroll and/or other taxes required by law to
be withheld).
(b) The Executive may terminate this Agreement at any time without
Good Reason. In such event, the Company shall be obligated to continue to pay in
the ordinary and normal course of its business to the Executive only his Salary
(subject to applicable payroll and/or other taxes required by law to be
withheld) through the Termination Date set forth in the Termination Notice.
<PAGE>
ARTICLE VII
Termination of Employment
Subsequent to a Change in Control of the Company
7.1 Change in Control of the Company Defined. For purposes of this Article
VII, the term "Change in Control of the Company" shall mean any change in
control of the Company of a nature which would be required to be reported (a) in
response to Item 6(e) of Schedule 14A of Regulation 14A, as in effect on the
date of this Agreement, promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), (b) in response to Item 1 of the Current Report
on Form 8-K, as in effect on the date of this Agreement, promulgated under the
Exchange Act, or (c) in any filing by the Company with the Securities and
Exchange Commission; provided, however, that, without limitation, a Change in
Control of the Company shall be deemed to have occurred if:
(i) any "person" (as such term is defined in Sections 13(d)(3)
and 14(d)(2) of the Exchange Act), other than the Company, any
majority-owned subsidiary of the Company or any compensation
plan of the Company or any majority-owned subsidiary of the
Company, becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the Company (whether by merger,
consolidation, reorganization or otherwise) representing
fifteen percent (15%) or more of the combined voting power of
the Company's then outstanding securities;
(ii) during any period of two consecutive years during the
term of this Agreement, the individuals who at the beginning
of such period constitute the Board of Directors of the
Company cease for any reason to constitute at least a majority
of such Board of Directors, unless the election of each
director who was not a director at the beginning of such
period has been approved in advance by directors representing
at least two-thirds of the directors then in office who were
directors at the beginning of such period;
(iii) any "person" (as such term is defined in Sections
13(d)(3) and 14(d)(2) of the Exchange Act), other than the
Company, any subsidiary of the Company or any compensation,
retirement, pension or other employee benefit plan or trust of
the Company or any subsidiary of the Company, becomes the
"beneficial owner" (as such term is defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly,
of securities of any wholly-owned or majority -owned
subsidiary/subsidiaries of the Company or any successor to any
wholly-owned or majority-owned subsidiary/subsidiaries of the
Company, (whether by merger, consolidation, reorganization or
otherwise) representing a majority of the combined voting
power of the then outstanding securities of any wholly owned
majority owned subsidiary/subsidiaries of the Company, as the
case may be;
<PAGE>
(iv) the Company shall merge or consolidate with or into
another corporation or other entity, or enter into a binding
agreement to merge or consolidate with or into another
corporation or other entity, other than a merger or
consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being
converted into voting securities of the surviving corporation
or entity) not less than eighty-five percent (85%) of the
combined voting power of the voting securities of the Company
or such surviving corporation or entity outstanding
immediately after such merger or consolidation;
(v) the Company shall sell, lease, exchange,
transfer, convey or otherwise dispose of all or substantially
all of its assets, or enter into a binding agreement for the
sale, lease, exchange, transfer, conveyance or other
disposition of all or substantially all of its assets, in one
transaction or in a series of related transactions;
(vi) the Company shall liquidate or
dissolve, or any plan or proposal shall be adopted for the
liquidation or dissolution of the Company; or
7.2 Termination of Employment After Change in Control of Company.
(a) Notwithstanding the provisions of Articles II and VI of this
Agreement, in the event that there shall occur any Change in Control of the
Company and at any time subsequent to the date of any such Change in Control of
the Company, either the Company shall terminate the employment of the Executive
without Cause or the Executive shall terminate his employment for Good Reason,
then, in any such event, the following shall occur:
(i) Not later than the Termination Date specified in the
Termination Notice delivered by the Company to the Executive,
or by the Executive to the Company, as the case may be, the
Company shall pay to the Executive an amount, in cash, equal
to his "base amount," as such term is defined in Section 280G
of the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder, determined as of
the date of the Termination Notice, multiplied by Two and
Ninety-Nine One Hundredths (2.99) (the "Change in Control
Termination Amount") (subject to applicable payroll and/or
other taxes required by law to be withheld); and any and all
options that may previously have been granted to the executive
shall become immediately fully vested.
(ii) Any and all stock options granted to the Executive under
any stock option plan of the Company as may from time to time
be in effect, which shall not by their terms have vested on or
before such Termination Date, shall vest on such Termination
Date.
<PAGE>
(b) The Change in Control Termination Amount shall be determined by
the Company's regularly retained certified public accountants in consultation
with the Company's regularly retained attorneys. In making such determination,
the Company's regularly retained certified public accountants and attorneys
shall liberally construe the provisions of the Internal Revenue Code of 1986, as
amended, and the applicable rules and regulations thereunder. In the absence of
fraud or manifest error, any determination made pursuant to this Section 7.2(b)
shall be conclusive and binding upon the Company and the Executive.
(c) Notwithstanding anything to the contrary set forth in Sections
7.2(a) and 7.2(b) above, the amount paid by the Company to the Executive shall
be limited to the maximum amount which will not constitute a "parachute
payment," as such term is defined in Section 280G(b)(2) of the Internal Revenue
Code of 1986, as amended. This limitation shall first be applied to amounts
provided pursuant to clause (ii) of Section 7.2(a) hereof (otherwise included in
the calculation of a parachute payment) to the extent thereof and then to
amounts provided pursuant to clause (i) of Section 7.2(a) hereof.
ARTICLE VIII
Certain Restrictions on the Executive
8.1 Certain Restrictions. The Executive covenants and agrees with the
Company as follows:
(a) He shall not, during the term of this Agreement and for a period
of two years from and after the date of termination of this Agreement, directly
or indirectly, (i) acquire or own in any manner any interest in, or loan any
amount to, any Person which competes in any manner with the Company or any of
its subsidiaries or affiliates in the Territory, (ii) be employed by or serve as
an employee, agent, officer, or director of, or as a consultant to, any Person,
other than the Company and its subsidiaries and affiliates, which competes in
any manner with the Company or its subsidiaries or affiliates in the Territory,
or (iii) compete in any manner with the Company or its subsidiaries or
affiliates in the Territory. The foregoing provisions of this Section 8.1(b)
shall not prevent the Executive from acquiring and owning not more than three
percent (3%) of the equity securities of any Person whose securities are listed
for trading on a national securities exchange or are regularly traded in the
over-the-counter securities market.
(b) In the course of the Executive's employment by the Company, the
Executive will have access to confidential or proprietary information of the
Company and its subsidiaries and affiliates. The Executive shall not at any time
divulge or communicate to any Person, or use to the detriment of the Company or
its subsidiaries or affiliates, any such confidential or proprietary
information. The term "confidential or proprietary information" shall mean
information not generally available to the public, including without limitation
personnel information, financial information, customer lists, supplier lists,
ownership information, marketing plans and analyses, trade secrets, know-how,
computer software, management agreements and procedures and techniques of
<PAGE>
operating and managing the business of the Company and its subsidiaries and
affiliates. The Executive acknowledges and agrees that all confidential or
proprietary information is and shall remain the property of the Company and its
subsidiaries and affiliates, and agrees to maintain all such confidential or
proprietary information in strictest confidence.
8.2 Remedies. It is recognized and acknowledged by each of the Company and
the Executive that a breach or violation by the Executive of any or all of his
covenants and agreements contained in Section 8.1 of this Agreement will cause
irreparable harm and damage to the Company and its subsidiaries and affiliates
in a monetary amount which would be virtually impossible to ascertain and,
therefore, will deprive the Company of an adequate remedy at law. Accordingly,
if the Executive shall breach or violate any or all of his covenants and
agreements set forth in Section 8.1 hereof, then the Company and its
subsidiaries and affiliates shall have resort to all equitable remedies,
including without limitation the remedies of specific performance and
injunction, both permanent and temporary, as well as all other remedies which
may be available at law.
8.3 Intent. It is the intent of the parties that the restrictions set forth
in Section 8.1 hereof shall be enforced to the fullest extent permissible under
the laws and public policies of each jurisdiction in which enforcement of such
restrictions may be sought. If any provision contained in Section 8.1 hereof
shall be adjudicated by a court of competent jurisdiction to be invalid or
unenforceable because of its duration or geographic scope, then such provision
shall be reduced by such court in duration or geographic scope or both to such
extent as to make it valid and enforceable in the jurisdiction where such court
is located, and in all other respects shall remain in full force and effect.
ARTICLE IX
Successor to the Company
The Company shall require any successor, whether direct or indirect,
and whether by purchase, merger, consolidation or otherwise, to all or
substantially all of the business or properties and assets of the Company, to
execute and deliver to the Executive, not later than the date of the
consummation of any such purchase, merger, consolidation or other transaction, a
written instrument in form and in substance reasonably satisfactory to the
Executive and his legal counsel pursuant to which any such successor shall agree
to assume and to perform on a timely basis or to cause to be performed on a
timely basis all of the Company's covenants, agreements and obligations set
forth in this Agreement (a "Successor Agreement"). The failure of the Company to
cause any such successor to execute and deliver a Successor Agreement to the
Executive shall (a) constitute a breach of the provisions of this Agreement by
the Company and (b) be deemed to constitute a termination by the Executive of
his employment hereunder (as of the date upon which any such successor shall
succeed to all or substantially all of the business or properties and assets of
the Company) for Good Reason.
<PAGE>
ARTICLE X
Attorneys' Fees
In the event that any litigation shall arise between the Company and
the Executive based, in whole or in part, upon this Agreement or any or all of
the provisions contained herein, then, in any such event, the prevailing party
in any such litigation shall be entitled to recover from the non-prevailing
party, and shall be awarded by a court of competent jurisdiction, any and all
reasonable fees and disbursements of trial and appellate counsel paid, incurred
or suffered by such prevailing party as the result of, arising from, or in
connection with, any such litigation.
ARTICLE XI
Miscellaneous Provisions
11.1 Governing Law. This Agreement shall be governed by, and shall be
construed and interpreted in accordance, with the laws of the State of
California, without giving effect to the principles of conflicts of law thereof.
11.2 Notices. Any and all notices and other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed to have been duly given when delivered by hand, or when delivered by
United States mail, by registered or by a nationally recognized overnight
delivery service ,or via telecopier or certified mail, postage prepaid, return
receipt requested, to the respective parties at the following respective
addresses:
If to the Company: Sims Communications, Inc.
18001 Cowan Road, Suite C & D
Irvine, California 92614
Attention: Chief Financial Officer
Telecopier No. (949)261-0323
If to the Executive: Mark Bennett
1967 Vista Caudal, Newport Beach,
California 92660
Phone No. (949) 760-8052
or to such other address as either party may from time to time give written
notice of to the other in accordance with the provisions of this Section 11.2.
11.3 Entire Agreement. This Agreement constitutes the entire agreement
between the Company and the Executive with respect to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
arrangements, both oral and written, between the Company and the Executive with
respect to such subject matter.
11.4 Amendments. This Agreement may not be amended or modified in any
manner, except by a written instrument executed by each of the Company and the
Executive.
11.5 Benefits; Binding Effect. This Agreement shall be for the benefit of,
and shall be binding upon, each of the Company and the Executive and their
respective heirs, personal representatives, executors, legal representatives,
successors and assigns.
<PAGE>
11.6 Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part hereof, all of which are inserted conditionally on their being valid in
law. Except as otherwise provided in Section 8.3 above, if any one or more of
the words, phrases, sentences, clauses or sections contained in this Agreement
shall be declared invalid by any court of competent jurisdiction, then, in any
such event, this Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, or section or
sections had not been inserted.
11.7 No Waivers. The waiver by either party of a breach or violation of
any provision of this Agreement by the other party shall not operate nor be
construed as a waiver of any subsequent breach or violation. The waiver by
either party to exercise any right or remedy it or he may possess shall not
operate nor be construed as a bar to the exercise of such right or remedy by
such party upon the occurrence of any subsequent breach or violation.
11.8 Jurisdiction and Venue; Service of Process; Waiver of Trial by Jury
Attorneys Fees.
(a) Any claim or dispute arising out of, connected with, or in any
way related to this Agreement which results in litigation shall be instituted by
the complaining party and adjudicated either in the federal or state courts for
Orange County, California, and each of the parties to this Agreement consent to
the personal jurisdiction of and venue in such courts. In no event shall either
party to this Agreement contest the jurisdiction or venue of such courts with
respect to any such litigation.
(b) Each of the Company and the Executive agrees that service of any
process, summons, notice or document, by United States registered or certified
mail, to its or his address set forth in or as provided in Section 11.2 above
shall be effective service of such process, summons, notice or document for any
action, suit or proceeding brought against it or him by the other party in the
federal or state courts for Orange County, California.
(c) In recognition of the fact that the issues which would arise
under this Agreement are of such a complex nature that they could not be
properly tried before a jury, each of the Company and the Executive waives trial
by jury.
(d) The prevailing party in any such action or proceeding shall be
entitled to recover its reasonable attorneys' fees and related costs from the
other party.
11.9 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
any or all of the provisions hereof.
<PAGE>
11.10 Counterparts. This Agreement may be executed in any number of
counterparts and by the separate parties in separate counterparts, each of which
shall be deemed to constitute an original and all of which shall be deemed to
constitute the one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has executed and delivered
this Agreement on the date first written above.
SIMS COMMUNICATIONS, INC.
By
Mark E. Bennett - (Executive)
Duly Notarized By
Michael N. Malet, Senior Executive
Vice President
Board resolution to accompany By ______________________
Mark E. Bennett, President
By______________________
Michael N. Malet, Senior Executive Vice
President
By______________________
David Breslow, Board of Director
By_______________________
Julio Curra, Board of Director
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of March 2, 1999 by and
between SIMS COMMUNICATIONS, INC., a Delaware corporation (the "Company"), and
MICHAEL NOEL MALET (the "Executive").
WITNESSETH:
WHEREAS, the Company desires to continue to employ the Executive, and the
Executive desires to continue to be employed by the Company, pursuant to the
provisions contained in this Employment Agreement (the "Agreement");
NOW, THEREFORE, in consideration of the premise, and the respective
covenants and agreements of each of the Company and the Executive contained in
this Agreement, each of the Company and the Executive agrees as follows:
ARTICLE I
Employment
1.1 The Company. The Company employs the Executive and the Executive
accepts such employment. Subject to the direction of the Board of Directors of
the Company, the Executive shall serve as a Board of Director and Senior
Executive Vice President of the Company. The Executive shall have such
responsibilities, perform such duties and exercise such power and authority as
are inherent in, or incident to, the offices of Board of Director and Senior
Executive Vice President. The Executive shall devote his full business time and
attention, and his best efforts, to the diligent performance of such duties.
1.2 Subsidiary Corporations. The Executive shall serve as a Board Member
and a principal officer of each of the Company's current and any future wholly
owned or majority owned subsidiaries.
ARTICLE II
Term
Subject to the provisions of Article VI below, the term of this Agreement
shall be for a period of three years, commencing as of March 2nd 1999 and
expiring on March 2nd 2002. Unless either party shall give to the other written
notice of termination on or before September 1st, 2001, the term of this
Agreement shall, on September 1st, 2001, be extended for a period of three
years, commencing as of March 2nd, 2002 and expiring on March 2nd, 2005.
<PAGE>
ARTICLE III
Salary
3.1 Initial Salary. In full payment for the obligations to be performed by
the Executive during the term of this Agreement, the Company shall pay to the
Executive a salary at an annual rate equal to the sum of One Hundred Twenty
Thousand Dollars ($120,000).
3.2 Payment of Salary. Payments of salary shall be made to the Executive
in installments from time to time on the same dates payments of salary are
generally made to all senior management employees of the Company.
ARTICLE IV
Bonus
The Executive may receive an annual bonus in an amount determined by
the Board of Directors of the Company, in its discretion, if and when so
determined by the Board of Directors.
ARTICLE V
Certain Fringe Benefits
5.1 Generally. The Executive shall be entitled to receive such benefits
and to participate in such benefit plans as are generally provided from time to
time by the Company to its senior management employees; provided, however, that
nothing contained in this Section 5.1 shall be construed to obligate the Company
to provide any specific benefits to its employees generally.
5.2 Vacations. The Executive shall be entitled to four weeks vacation time
on an annual basis in accordance with such policies as are from time to time
adopted by the Company's Board of Directors with respect to its senior
management employees.
5.3 Automobile. The Company shall provide the Executive an automobile
allowance of $700.00 per month which is to cover costs and expenses related to
Executive use of personal automobile in connection with the performance of his
duties under this Agreement.
5.4 Stock Options. The Executive shall be entitled to participate in the
Company's stock option plans as may from time to time be in effect and to
receive such incentive or other stock options as may from time to time be
granted to him thereunder; provided, however, that nothing contained in this
Section 5.4 shall be construed to obligate the Company, its Board of Directors
or any committee of its Board of Directors to grant any incentive or other stock
option whatsoever to the Executive.
<PAGE>
5.5 Life Insurance. The Company shall purchase and maintain in effect one or
more term insurance policies on the life of the Executive in an aggregate amount
of not less than One Million Dollars ($1,000,000). The beneficiary of each such
policy shall be the person or persons who shall from time to time be designated
in writing by the Executive to the Company. In the absence of any written
designation to the contrary, the beneficiary of all such insurance policies
shall be the Executive's spouse. The Company shall purchase and maintain in
effect one insurance policy that covers loss of salary for any disability that
renders the executive unable to perform his duties.
5.6 Reimbursement of Medical Expenses. The Company shall reimburse the
Executive for the full amount of any medical, dental and optical expenses not
covered under any group medical plan from time to time in effect for the benefit
of Company employees generally. Such coverage shall include without limitation
mental health care and treatment and other medical, dental and optical expenses
not covered under the Company's health care plan now or hereafter in effect. The
Company may satisfy its obligation to the Executive under this Section 5.7 by
providing excess medical, dental, optical and other health care insurance
coverage for the Executive's benefit.
5.7 Business and Entertainment Expenses. The Company shall reimburse the
Executive for all reasonable business and entertainment expenses related to the
Executive's position with the Company.
ARTICLE VI
Termination of Employment
6.1 Certain Definitions. The following terms shall have the
following respective meanings when utilized in this Agreement:
(a) "Bonus" shall mean, as of a given date, the most
recent annual bonus awarded by the Company to the Executive.
(b) "Cause" shall mean any action by the Executive or
any inaction by the Executive which constitutes:
(i) fraud, embezzlement, misappropriation, dishonesty or
breach of trust;
(ii) a material breach or violation of any or all of the
covenants, agreements and obligations of the Executive set
forth in this Agreement, other than as the result of the
Executive's death or Disability (as hereinafter defined);
(iii) a willful or knowing failure or refusal by the
Executive to perform any or all of his material duties and
responsibilities as an officer of the Company, other than as the
result of the Executive's death or Disability; or
(iv) gross negligence by the Executive in the performance of
any or all of his material duties and responsibilities
as an officer of the Company, other than as a result of
the Executive's death or Disability;
<PAGE>
provided, however, that if the basis for any termination of the Executive's
employment by the Company as set forth in the Termination Notice (as hereinafter
defined) delivered by the Company to the Executive is any or all of the
definitions of Cause set forth in Sections 6.1(b)(ii), 6.1(b)(iii) or 6.1(b)(iv)
of this Agreement, then, in such event, the Executive shall have fifteen (15)
days from and after the date of his receipt of such Termination Notice to
present a reasonable plan to cure such action or inaction specified in the
Termination Notice, which plan may require more than twenty (20) days to cure
the specified action or inaction, but such plan must be reasonably satisfactory
to the Company and the Executive must proceed diligently to effectuate such
plan.
(c) "Compensation" shall mean the sum of the Executive's Salary (as hereinafter
defined) and Bonus.
(d) "Disability" shall mean any mental or physical illness, condition,
disability or incapacity which prevents the Executive from reasonably
discharging his duties and responsibilities as an officer of the Company.
If any disagreement or dispute shall arise between the Company and the
Executive as to whether the Executive suffers from a Disability, then, in
such event, the Executive shall submit to the physical or mental
examination of a physician licensed under the laws of the State of
California, who is mutually agreeable to the Company and the Executive, and
such physician shall determine whether the Executive suffers from a
Disability. In the absence of fraud or bad faith, the determination of such
physician shall be final and binding upon the Company and the Executive.
The entire cost of such examination shall be paid for solely by the
Company.
(e) "Good Reason" shall mean:
(i) the assignment by the Board of Directors (or the executive committee of the
Board of Directors, if any) to the Executive, without his express written
consent, of duties and responsibilities which results in the Executive
having less significant duties and responsibilities or exercising less
significant power and authority than he had, or duties and responsibilities
or power and authority not comparable to that of the level and nature which
he had, immediately prior to such assignment;
(ii) the removal of the Executive from, or a failure to reappoint the Executive
to, his then current position or positions with the Company or its
subsidiaries or affiliates, except (A) with the Executive's express written
consent or (B) in connection with any termination of the Executive's
employment by the Company as the result of the Executive's Protracted
Disability (as hereinafter defined) or for Cause;
(iii)the reduction of the Executive's Salary or the reduction of any or all of
the Executive's benefits set forth in Article V above;
(iv) the Company's failure to perform on a timely basis its obligations under
this Agreement;
(v) the Company's requiring the Executive, without his express written consent,
to travel on Company business to an extent substantially greater than the
Executive's business travel obligations immediately prior to such time;
<PAGE>
(vi) the Company's requiring the Executive, without his express written consent,
to change his place of permanent residency to place outside of Orange
County, California;
(vii)the Company's moving its executive offices to a place outside of Orange
County, California, without the Executive's express written consent; or
(viii) the failure of the Company to obtain the express written assumption of,
and agreement to perform on a timely basis, the Company's obligations under
this Agreement by any successor to the Company as required by Article IX of
this Agreement.
(f) "Protracted Disability" shall mean any Disability which prevents the
Executive from reasonably discharging his duties and responsibilities as an
officer of the Company for a period of twelve (12) consecutive months.
(g) "Salary" shall mean, as of a given date, the Executive's then current
annual salary.
(h) "Termination Date" shall mean a specific date not less than forty-five (45)
nor more than ninety (90) days from and after the date of any Termination
Notice upon which the Executive's employment by the Company shall be
terminated in accordance with the provisions of this Agreement.
(i) "Termination Notice" shall mean a written notice which sets forth (i) the
specific provision of this Agreement relied upon to terminate the
Executive's employment, (ii) in reasonable detail the facts and
circumstances claimed to provide the basis for the termination of the
Executive's employment, and (iii) a Termination Date.
6.2 Termination of Employment.
(a) Notwithstanding the provisions of Article II hereof, this
Agreement (i) shall automatically terminate upon the death of the Executive
pursuant to the provisions of Section 6.3 hereof, (ii) may be terminated at any
time by the Company pursuant to the provisions of Sections 6.4 or 6.5 hereof,
and (iii) may be terminated at any time by the Executive pursuant to the
provisions of Section 6.6 hereof.
<PAGE>
(b) If either the Company or the Executive shall desire to terminate
the Executive's employment by the Company pursuant to any of the provisions of
Sections 6.4, 6.5 or 6.6 of this Agreement, then, in such event, the party
causing such termination shall provide a Termination Notice to the other party.
(c) If this Agreement shall be terminated pursuant to any of the
provisions of this Article VI, the Company shall be discharged from all of its
obligations to the Executive under this Agreement upon the payment to the
Executive of the amount set forth in the Section of this Article VI pursuant to
which such termination shall occur. The Executive's sole and exclusive remedy
for the termination of this Agreement, regardless of whether such termination
shall be initiated by the Company or the Executive, and regardless of whether
such termination shall be with or without Cause, shall be the payment by the
Company to the Executive of the amount set forth in the Section of this Article
VI pursuant to which such termination shall occur.
6.3 Termination Upon Death of Executive. If during the term of this
Agreement the Executive shall die, then the employment of the Executive by the
Company shall automatically terminate on the date of the Executive's death. In
such event, not more than thirty (30) days after the date of the Executive's
death, the Company shall pay to the Executive's estate or as otherwise directed
by the Executive's personal representative, an amount in cash equal to the
Executive's Compensation (subject to applicable payroll and/or other taxes
required by law to be withheld) determined as of the date of the Executive's
death.
6.4 Disability of Executive.
(a) In the event that at any time during the term of this Agreement
the Executive shall suffer any Disability, then the Company shall be obligated
to continue to pay in the ordinary and normal course of its business to the
Executive or his legal representative, as the case may be, the Executive's
Compensation (subject to applicable payroll and/or other taxes required by law
to be withheld) from the date that the Executive shall first suffer any such
Disability to the date that the Executive's employment by the Company shall be
terminated pursuant to any of the provisions of this Agreement.
(b) In the event that the Executive shall suffer any Protracted
Disability during the term of this Agreement, then the Company may terminate the
Executive's employment under this Agreement. In such event, in addition to any
other benefits which may have been provided by the Company to the Executive or
his legal representative, as the case may be, pursuant to the provisions of
Section 6.4(a) above, not later than the Termination Date specified in the
Termination Notice delivered by the Company to the Executive or his legal
representative, as the case may be, the Company shall pay to the Executive or as
otherwise directed by the Executive's legal representative an amount in cash
equal to the Executive's Compensation (subject to applicable payroll and/or
taxes required by law to be withheld) determined as of the date of such
Termination Notice. Subsequent to such Termination Date, the Executive or his
legal representative, as the case may be, shall also be entitled to receive any
benefits which may be payable under any disability insurance policy or
disability plan provided to the Executive by the Company.
<PAGE>
6.5 Termination of Employment by Company.
(a) The Company may terminate this Agreement at any time with Cause.
In such event, the Company shall be obligated to continue to pay in the ordinary
and normal course of its business to the Executive only his Salary (subject to
applicable payroll and/or other taxes required by law to be withheld) through
the Termination Date set forth in the Termination Notice.
(b) The Company may terminate this Agreement at any time without
Cause. If any such termination shall occur on or before March 2nd, 2002, then,
in such event, not later than the Termination Date specified in the Termination
Notice, the Company shall pay to the Executive, in cash, an amount equal to (i)
the Executive's Compensation, determined as of the date of the Termination
Notice, multiplied by (ii) the greater of (A) the number of years and any
portion of a year remaining in the term of this Agreement or (B) 2.99 (subject
to applicable payroll and/or other taxes required by law to be withheld). If any
such termination shall occur after September 2nd, 2002, then, in such event, not
later than the Termination Date specified in the Termination Notice, the Company
shall pay to the Executive, in cash, an amount equal to the Executive's
Compensation, determined as of the date of the Termination Notice, multiplied by
2.99 (subject to applicable payroll and/or other taxes required by law to be
withheld).
6.6 Termination of Employment by Executive.
(a) The Executive may terminate this Agreement at any time with Good
Reason. If any such termination shall occur on or before March 2nd, 2002, then,
in such event, not later than the Termination Date specified in the Termination
Notice, the Company shall pay to the Executive, in cash, an amount equal to (i)
the Executive's Compensation, determined as of the date of the Termination
Notice, multiplied by (ii) the greater of (A) the number of years and any
portion of a year remaining in the term of this Agreement or (B) 2.99 (subject
to applicable payroll and/or other taxes required by law to be withheld). If any
such termination shall occur after March 2nd, 2002, then, in such event, not
later than the Termination Date specified in the Termination Notice, the Company
shall pay to the Executive, in cash, an amount equal to (i) the Executive's
Compensation, determined as of the date of the Termination Notice, multiplied by
(ii) 2.99 (subject to applicable payroll and/or other taxes required by law to
be withheld).
(b) The Executive may terminate this Agreement at any time without
Good Reason. In such event, the Company shall be obligated to continue to pay in
the ordinary and normal course of its business to the Executive only his Salary
(subject to applicable payroll and/or other taxes required by law to be
withheld) through the Termination Date set forth in the Termination Notice.
<PAGE>
ARTICLE VII
Termination of Employment
Subsequent to a Change in Control of the Company
7.1 Change in Control of the Company Defined. For purposes of this Article
VII, the term "Change in Control of the Company" shall mean any change in
control of the Company of a nature which would be required to be reported (a) in
response to Item 6(e) of Schedule 14A of Regulation 14A, as in effect on the
date of this Agreement, promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), (b) in response to Item 1 of the Current Report
on Form 8-K, as in effect on the date of this Agreement, promulgated under the
Exchange Act, or (c) in any filing by the Company with the Securities and
Exchange Commission; provided, however, that, without limitation, a Change in
Control of the Company shall be deemed to have occurred if:
(i) any "person" (as such term is defined in Sections 13(d)(3)
and 14(d)(2) of the Exchange Act), other than the Company, any
majority-owned subsidiary of the Company or any compensation
plan of the Company or any majority-owned subsidiary of the
Company, becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the Company (whether by merger,
consolidation, reorganization or otherwise) representing
fifteen percent (15%) or more of the combined voting power of
the Company's then outstanding securities;
(ii) during any period of two consecutive years during the
term of this Agreement, the individuals who at the beginning
of such period constitute the Board of Directors of the
Company cease for any reason to constitute at least a majority
of such Board of Directors, unless the election of each
director who was not a director at the beginning of such
period has been approved in advance by directors representing
at least two-thirds of the directors then in office who were
directors at the beginning of such period;
(iii) any "person" (as such term is defined in Sections
13(d)(3) and 14(d)(2) of the Exchange Act), other than the
Company, any subsidiary of the Company or any compensation,
retirement, pension or other employee benefit plan or trust of
the Company or any subsidiary of the Company, becomes the
"beneficial owner" (as such term is defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly,
of securities of any wholly-owned or majority -owned
subsidiary/subsidiaries of the Company or any successor to any
<PAGE>
wholly-owned or majority-owned subsidiary/subsidiaries of the
Company, (whether by merger, consolidation, reorganization or
otherwise) representing a majority of the combined voting
power of the then outstanding securities of any wholly owned
majority owned subsidiary/subsidiaries of the Company, as the
case may be;
(iv) the Company shall merge or consolidate with or into
another corporation or other entity, or enter into a binding
agreement to merge or consolidate with or into another
corporation or other entity, other than a merger or
consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being
converted into voting securities of the surviving corporation
or entity) not less than eighty-five percent (85%) of the
combined voting power of the voting securities of the Company
or such surviving corporation or entity outstanding
immediately after such merger or consolidation;
(v) the Company shall sell, lease, exchange, transfer, convey
or otherwise dispose of all or substantially all of its
assets, or enter into a binding agreement for the sale, lease,
exchange, transfer, conveyance or other disposition of all or
substantially all of its assets, in one transaction or in a
series of related transactions;
(vi) the Company shall liquidate or dissolve, or any plan or
proposal shall be adopted for the liquidation or dissolution
of the Company; or
7.2 Termination of Employment After Change in Control of Company.
(a) Notwithstanding the provisions of Articles II and VI of this
Agreement, in the event that there shall occur any Change in Control of the
Company and at any time subsequent to the date of any such Change in Control of
the Company, either the Company shall terminate the employment of the Executive
without Cause or the Executive shall terminate his employment for Good Reason,
then, in any such event, the following shall occur:
(i) Not later than the Termination Date specified in the
Termination Notice delivered by the Company to the Executive,
or by the Executive to the Company, as the case may be, the
Company shall pay to the Executive an amount, in cash, equal
to his "base amount," as such term is defined in Section 280G
of the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder, determined as of
the date of the Termination Notice, multiplied by Two and
Ninety-Nine One Hundredths (2.99) (the "Change in Control
Termination Amount") (subject to applicable payroll and/or
other taxes required by law to be withheld); and any and all
options that may previously have been granted to the executive
shall become immediately fully vested.
<PAGE>
(ii) Any and all stock options granted to the Executive under
any stock option plan of the Company as may from time to time
be in effect, which shall not by their terms have vested on or
before such Termination Date, shall vest on such Termination
Date.
(b) The Change in Control Termination Amount shall be determined by
the Company's regularly retained certified public accountants in consultation
with the Company's regularly retained attorneys. In making such determination,
the Company's regularly retained certified public accountants and attorneys
shall liberally construe the provisions of the Internal Revenue Code of 1986, as
amended, and the applicable rules and regulations thereunder. In the absence of
fraud or manifest error, any determination made pursuant to this Section 7.2(b)
shall be conclusive and binding upon the Company and the Executive.
(c) Notwithstanding anything to the contrary set forth in Sections
7.2(a) and 7.2(b) above, the amount paid by the Company to the Executive shall
be limited to the maximum amount which will not constitute a "parachute
payment," as such term is defined in Section 280G(b)(2) of the Internal Revenue
Code of 1986, as amended. This limitation shall first be applied to amounts
provided pursuant to clause (ii) of Section 7.2(a) hereof (otherwise included in
the calculation of a parachute payment) to the extent thereof and then to
amounts provided pursuant to clause (i) of Section 7.2(a) hereof.
ARTICLE VIII
Certain Restrictions on the Executive
8.1 Certain Restrictions. The Executive covenants and agrees with the Company as
follows: 8.2
(a) He shall not, during the term of this Agreement and for a period
of two years from and after the date of termination of this Agreement, directly
or indirectly, (i) acquire or own in any manner any interest in, or loan any
amount to, any Person which competes in any manner with the Company or any of
its subsidiaries or affiliates in the Territory, (ii) be employed by or serve as
an employee, agent, officer, or director of, or as a consultant to, any Person,
other than the Company and its subsidiaries and affiliates, which competes in
any manner with the Company or its subsidiaries or affiliates in the Territory,
or (iii) compete in any manner with the Company or its subsidiaries or
affiliates in the Territory. The foregoing provisions of this Section 8.1(b)
shall not prevent the Executive from acquiring and owning not more than three
percent (3%) of the equity securities of any Person whose securities are listed
for trading on a national securities exchange or are regularly traded in the
over-the-counter securities market.
<PAGE>
(b) In the course of the Executive's employment by the Company, the
Executive will have access to confidential or proprietary information of the
Company and its subsidiaries and affiliates. The Executive shall not at any time
divulge or communicate to any Person, or use to the detriment of the Company or
its subsidiaries or affiliates, any such confidential or proprietary
information. The term "confidential or proprietary information" shall mean
information not generally available to the public, including without limitation
personnel information, financial information, customer lists, supplier lists,
ownership information, marketing plans and analyses, trade secrets, know-how,
computer software, management agreements and procedures and techniques of
operating and managing the business of the Company and its subsidiaries and
affiliates. The Executive acknowledges and agrees that all confidential or
proprietary information is and shall remain the property of the Company and its
subsidiaries and affiliates, and agrees to maintain all such confidential or
proprietary information in strictest confidence.
8.2 Remedies. It is recognized and acknowledged by each of the Company and
the Executive that a breach or violation by the Executive of any or all of his
covenants and agreements contained in Section 8.1 of this Agreement will cause
irreparable harm and damage to the Company and its subsidiaries and affiliates
in a monetary amount which would be virtually impossible to ascertain and,
therefore, will deprive the Company of an adequate remedy at law. Accordingly,
if the Executive shall breach or violate any or all of his covenants and
agreements set forth in Section 8.1 hereof, then the Company and its
subsidiaries and affiliates shall have resort to all equitable remedies,
including without limitation the remedies of specific performance and
injunction, both permanent and temporary, as well as all other remedies which
may be available at law.
8.3 Intent. It is the intent of the parties that the restrictions set
forth in Section 8.1 hereof shall be enforced to the fullest extent permissible
under the laws and public policies of each jurisdiction in which enforcement of
such restrictions may be sought. If any provision contained in Section 8.1
hereof shall be adjudicated by a court of competent jurisdiction to be invalid
or unenforceable because of its duration or geographic scope, then such
provision shall be reduced by such court in duration or geographic scope or both
to such extent as to make it valid and enforceable in the jurisdiction where
such court is located, and in all other respects shall remain in full force and
effect.
ARTICLE IX
Successor to the Company
The Company shall require any successor, whether direct or indirect,
and whether by purchase, merger, consolidation or otherwise, to all or
substantially all of the business or properties and assets of the Company, to
execute and deliver to the Executive, not later than the date of the
consummation of any such purchase, merger, consolidation or other transaction, a
written instrument in form and in substance reasonably satisfactory to the
Executive and his legal counsel pursuant to which any such successor shall agree
to assume and to perform on a timely basis or to cause to be performed on a
timely basis all of the Company's covenants, agreements and obligations set
forth in this Agreement (a "Successor Agreement"). The failure of the Company to
cause any such successor to execute and deliver a Successor Agreement to the
Executive shall (a) constitute a breach of the provisions of this Agreement by
the Company and (b) be deemed to constitute a termination by the Executive of
his employment hereunder (as of the date upon which any such successor shall
succeed to all or substantially all of the business or properties and assets of
the Company) for Good Reason.
<PAGE>
ARTICLE X
Attorneys' Fees
In the event that any litigation shall arise between the Company and
the Executive based, in whole or in part, upon this Agreement or any or all of
the provisions contained herein, then, in any such event, the prevailing party
in any such litigation shall be entitled to recover from the non-prevailing
party, and shall be awarded by a court of competent jurisdiction, any and all
reasonable fees and disbursements of trial and appellate counsel paid, incurred
or suffered by such prevailing party as the result of, arising from, or in
connection with, any such litigation.
ARTICLE XI
Miscellaneous Provisions
11.1 Governing Law. This Agreement shall be governed by, and shall be
construed and interpreted in accordance, with the laws of the State of
California, without giving effect to the principles of conflicts of law thereof.
11.2 Notices. Any and all notices and other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed to have been duly given when delivered by hand, or when delivered by
United States mail, by registered or by a nationally recognized overnight
delivery service ,or via telecopier or certified mail, postage prepaid, return
receipt requested, to the respective parties at the following respective
addresses:
If to the Company: Sims Communications, Inc.
18001 Cowan Road, Suite C & D
Irvine, California 92614
Attention: Chief Financial Officer
Telecopier No. (949)261-0323
If to the Executive: Michael N. Malet
28 Oakdale, Irvine,
California 92604
Phone No. (949)-551-3289
or to such other address as either party may from time to time give written
notice of to the other in accordance with the provisions of this Section 11.2.
11.3 Entire Agreement. This Agreement constitutes the entire agreement
between the Company and the Executive with respect to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
arrangements, both oral and written, between the Company and the Executive with
respect to such subject matter.
11.4 Amendments. This Agreement may not be amended or modified in any
manner, except by a written instrument executed by each of the Company and the
Executive.
<PAGE>
11.5 Benefits; Binding Effect. This Agreement shall be for the benefit of,
and shall be binding upon, each of the Company and the Executive and their
respective heirs, personal representatives, executors, legal representatives,
successors and assigns.
11.6 Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part hereof, all of which are inserted conditionally on their being valid in
law. Except as otherwise provided in Section 8.3 above, if any one or more of
the words, phrases, sentences, clauses or sections contained in this Agreement
shall be declared invalid by any court of competent jurisdiction, then, in any
such event, this Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, or section or
sections had not been inserted.
11.7 No Waivers. The waiver by either party of a breach or violation of
any provision of this Agreement by the other party shall not operate nor be
construed as a waiver of any subsequent breach or violation. The waiver by
either party to exercise any right or remedy it or he may possess shall not
operate nor be construed as a bar to the exercise of such right or remedy by
such party upon the occurrence of any subsequent breach or violation.
11.8 Jurisdiction and Venue; Service of Process; Waiver of Trial by Jury;
Attorneys Fees.
(a) Any claim or dispute arising out of, connected with, or in any
way related to this Agreement which results in litigation shall be instituted by
the complaining party and adjudicated either in the federal or state courts for
Orange County, California, and each of the parties to this Agreement consent to
the personal jurisdiction of and venue in such courts. In no event shall either
party to this Agreement contest the jurisdiction or venue of such courts with
respect to any such litigation.
(b) Each of the Company and the Executive agrees that service of any
process, summons, notice or document, by United States registered or certified
mail, to its or his address set forth in or as provided in Section 11.2 above
shall be effective service of such process, summons, notice or document for any
action, suit or proceeding brought against it or him by the other party in the
federal or state courts for Orange County, California.
(c) In recognition of the fact that the issues which would arise
under this Agreement are of such a complex nature that they could not be
properly tried before a jury, each of the Company and the Executive waives trial
by jury.
(d) The prevailing party in any such action or proceeding shall be
entitled to recover its reasonable attorneys' fees and related costs from the
other party.
11.9 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
any or all of the provisions hereof.
<PAGE>
11.10 Counterparts. This Agreement may be executed in any number of
counterparts and by the separate parties in separate counterparts, each of which
shall be deemed to constitute an original and all of which shall be deemed to
constitute the one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has executed and delivered
this Agreement on the date first written above.
SIMS COMMUNICATIONS, INC.
By _________________________
Michael N. Malet - (Executive)
Duly Notarized By _________________________
Mark E. Bennett, President
Board resolution to accompany By______________________
Mark E. Bennett, President
By______________________
Michael N. Malet, Senior Executive
Vice President
By______________________
David Breslow, Board of Director
By_______________________
Julio Curra, Board of Director
CONSENT OF ATTORNEYS
Reference is made to the Registration Statement of Medcom USA, Incorporated,
whereby certain Selling Shareholders propose to sell up to 17,998,340 shares of
Medcom's Common Stock. Reference is also made to Exhibit 5 included in the
Registration Statement relating to the validity of the securities proposed to be
sold.
We hereby consent to the use of our opinion concerning the validity of the
securities proposed to be issued and sold.
Very truly yours,
HART & TRINEN
William T. Hart
Denver, Colorado
November 12, 1999
<PAGE>
CONSENT OF INDEPENDENT AUDITORS' REPORT
We consent to the incorporation by reference in this Amendment No. 2 to the
Registration Statement on Form S-3 (No. 333-71179) of our report dated August
19, 1999 for the year ended June 30, 1999, included in the Form 10-KSB of MedCom
USA, Inc. (f/k/a Sims Communications, Inc.) for the year ended June 30, 1999.
Ehrhardt Keefe Steiner & Hottman PC
November 9, 1999
Denver, Colorado
