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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Three Months Ended June 30, 2000
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CAPITAL DEVELOPMENT GROUP, INC.
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(Exact name of registrant as specified in its charter)
OREGON 93-1113777
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(State or other jurisdiction (IRS Employer
of incorporation or Identification No.)
organization)
4333 Orange Street, Suite 3600 Riverside, CA 92501-3839
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(Address of principal administrative (City, State, Zip Code)
offices)
(909) 276-0873
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(Registrants telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No____
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Class Shares Outstanding, June 30, 2000
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Common Stock, $.0001 par value 8,409,335
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Capital Development Group, Inc.
Consolidated Balance Sheet
June 30, 2000 June 30, 1999
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ASSETS
Current Assets
Checking/Savings
Total Checking/Savings 131,750 0
Total Current Assets 131,750 0
Accounts Receivable 29,190 0
Prepaid Expenses 6,000 0
Fixed Assets 39,807 0
Other Assets 304,523 0
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TOTAL ASSETS 511,270 0
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LIABILITIES & EQUITY
Liabilities
Current Liabilities
Accounts Payable
Accounts Payable 49,141 89,359
Total Accounts Payable 49,141 89,359
Other Current Liabilities
Due to Porter & Co. 0 1,638
Accrued Expenses 14,156 0
Loan from Gordon Root 0 20,000
Due to DWT 0 3,907
Due to Mike Vahl 27,115 50,249
Total Other Current Liabilities 41,271 75,794
Total Current Liabilities 90,412 75,794
Convertible Notes Payable 210,000 0
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Total Liabilities 300,412 165,153
Equity
Paid in Capital 2,493,301 2,040,942
Offering Expenses (9,150) (9,150)
Common Stock 1,213 699
Treasury Stock - common for resale (0) (0)
Retained Earnings (2,149,261) (2,162,468)
Net Income (125,245) (35,177)
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Total Equity 210,858 (165,153)
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TOTAL LIABILITIES & EQUITY 511,270 0
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<PAGE>
Capital Development Group, Inc.
Income Statement
January thru June 2000
Jan - Jun 2000 Jan - Jun 1999
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Revenues 38,349 0
Ordinary Income/Expense
Expense
General and administrative 69,904 20,878
Product Support 79,391 0
Professional Fees 14,299 14,299
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Total Expense 163,594 35,177
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Net Ordinary Income (125,245) (35,177)
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Net Income (125,245) (35,177)
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Earnings per share on Income(Loss) from Operations (0.0144) (0.0049)
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Average number of shares outstanding 8,726,909 7,158,535
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<PAGE>
Capital Development Group, Inc.
Statement of Cash Flows
January thru June 2000
June 30, 2000 June 30, 1999
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Increase (decrease) in Cash
Cash Flows from operating activities
Net loss (125,245) (35,177)
Depreciation and amortization 10,230
Change in current assets
(Increase) decrease in:
Accounts Receivable (29,190) 0
Prepaid Expenses (6,000) 0
Change in current liabilities
(Decrease) increase in:
Accounts Payable (51,329) (10,217)
Due to Porter & Co. (1,638) 1,638
Accrued Expenses 27,639 0
Due to DWT (3,907) 1,870
Due to Mike Vahl (7,353) 21,886
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Net cash used for operating activities (186,793) (20,000)
Cash Flows from investing activities
Purchase of Fixed Assets (39,807) 0
Investment in Other Assets (2,023) 0
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Net cash used for investing activities (41,830) 0
Cash Flows from financing activities
Issuance of notes 210,000 0
Issuance of stock 150,373 0
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Net cash provided by financing activities 360,373 0
Net increase in cash 131,750 (20,000)
Cash, beginning of period 0 20,000
Net cash, end of period 131,750 0
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
Organizational Data:
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Capital Development Group, Inc. was incorporated on May 19, 1993 as an Oregon
corporation. The company was organized to engage in the business of purchasing
healthcare receivable from hospitals and other healthcare institutions at a
discount and administering the collection process of such receivables. The
source of funding for such purchases will be its wholly owned subsidiary, CDG
Credit Corporation which has not yet commenced operations. The company has
developed its own "Administrator One" software to monitor purchase and
collections of accounts receivable.
Effective April 1, 2000, the Capital Development Group, Inc. acquired IntraMed
Corporation, a developer of unique claims processing software. IntraMed was
purchased for CDVG stock and the assumption of ongoing expenses including the
funding of the customization and research into developing enhancements to the
software. IntraMed will operate as a subsidiary of the company.
Effective April 1, 2000, the company acquired HealthSource Financial Advisors,
LLC, a provider of medical consulting and financing programs. HealthSource
Financial Advisors was purchased for stock and the assumption of ongoing
expenses including funding for additional refinement of the entities existing
and active programs. HealthSource Financial Advisors will operate as a
subsidiary of the company.
All three entities will hereinafter collectively be referred to as "The
Company."
Accounting Method
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The Company maintains its books of account on the accrual basis of accounting.
Under this method of accounting, revenue is recognized when they are earned, or
billed, and expenses are recognized when goods or services are received, whether
paid or not.
Basis of Presentation
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Compilations are limited to presenting in the form of financial statements
information that is the representation of management. The financial statements
have not been audited or reviewed.
Cash and Cash Equivalents
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For purposes of the statement of cash flows, cash and cash equivalents include
cash on hand, funds on deposit with financial institutions, and investments with
original maturities of three months or less. The Company maintains both regular
checking accounts and a brokerage investment account.
Property & Equipment:
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Property and equipment owned by the Company are being depreciated over a period
of 5 to 7 years.
Capitalized Software Costs are amortized over a period of 15 years.
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<PAGE>
Income Taxes:
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Income tax expense is based on pre-tax financial accounting income and includes
deferred taxes for the effects of timing differences between financial
accounting and taxable earnings. Tax credits are accounted for as a reduction of
tax expense in the years in which the credits reduce taxes payable.
The Company currently has net operating loss carry-forwards to future periods
for book and tax purposes of approximately $2,274,506 in the second quarter of
2000. A deferred tax asset for the NOL carry forwards has not been recorded as
its realization in future periods is questionable at this time. Net operating
losses may be carried forward for 15 years for loss years prior to August 6,
1997 and twenty years for loss years after August 6, 1997.
Estimates
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The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
NOTE 2 - RELATED PARTY TRANSACTIONS:
The Company President who is also a 61% shareholder, provides management
services for a fee, and is also reimbursed for expenses incurred for Company
related activities. The company has been unable to compensate and reimburse the
President completely, and has therefore recorded accrued liabilities of
$81,663.51 in 2000. Total charges to the Company for management and expenses are
$45,283.20 in the second quarter of 2000.
The aforementioned management fees of $117,250 together with the note payable of
$20,000 to shareholder including accrued interest thereon of $2,550 were
converted to common shares of stock as of June 30, 2000.
The long-term accounts payable in 1997 and the note payable in 1998 are also
payable to various shareholders and an investment consultant of the company.
$44,300 of the long-term accounts payable in 1997 were converted to 103,600
shares of common stock at the end of 1998. The remaining $12,000 was paid in
cash in 1998.
The Company has received a licensing commitment from The Vahl Software Group, an
assumed business name of the Company President, for Administrator 2, which is a
new software package that is functionally similar to Administrator I. The
license agreement for Administrator II will require the Company to pay The Vahl
Software Group a royalty of $0.25 for each medical account receivable processed
through Administrator II.
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NOTE 3 - PREFERRED STOCK AND COMMON STOCK ISSUANCES:
The Company has authorized third series preferred stock, none of which is issued
and outstanding at March 31, 2000.
The third series preferred stock has no voting rights, is entitled to a
preference to common shares of stock in liquidation and is convertible to one
share of common stock under certain conditions. The stated conversion price at
which the preferred stock could be converted to common stock is $2.40 per share,
or fraction thereof. The third series preferred stock had accumulated dividends
at the rate of 8.5% of the purchase price of the stock.
In 1998, common stock was issued in three separate occasions; All 256,865 shares
of third series preferred stock outstanding were completely converted to common
stock at a rate of 1.75 shares of common stock for each share of preferred stock
held.
In addition, all accrued dividends payable on the preferred stock were converted
into common stock at the rate if $1.00 per share, resulting in the issuance of
264,259 shares of stock issued in exchange for $264,259 dollars of preferred
dividends accrued, but never declared and paid.
The company also converted $44,300 in accounts payable to 103,600 shares of
common stock as part of its settlements with creditors.
Had these conversions occurred at the beginning ot the year, the per share
earnings would have been decreased by $.0006 on income before extraordinary
items, and $.0039 on net income.
NOTE 4 - LONG-TERM NOTES PAYABLE
The Company has issued $210,000 in subordinated convertible promissory notes due
November 30, 20001. The notes bear interest from the date transacted of $10% per
annum until paid or until maturity. The Holder may convert all of the
outstanding principal of the note into the Company's Common Stock (a) at the
election of each Holder (i) within 120 days prior to the reasonably anticipated
effective date of any registered, underwritten public offering of the Company's
equity securities with proceeds to the Company in excess of $7,000,000 at a
valuation in excess of $15,000,000 (a "Qualifying Public Offering"); (ii) upon
the occurrence of an Event of Default; (iii) contemporaneously with a private
placement of the Company's equity securities resulting in an investment by one
or a group of five or fewer investors of not less than $2,000,000 (a "Qualifying
Private Placement"); (iv) immediately prior to the closing of any merger,
reorganization or sale of all or substantially all of the Company's assets; (v)
on or before the tenth (10th) day prior to a prepayment date specified in a
notice of prepayment given pursuant to Section 3, above; or (vi) at the Maturity
Date; or (b) at the election of the Company within 120 days prior to the
reasonably anticipated effective date of any Qualifying Public Offering. The
number of shares issuable upon conversion (the "Conversion Shares") shall be
equal to the total amount of principal and unpaid interest on this Note as of
the date of conversion, divided by the Conversion Price. The Conversion Price
per share shall be equal to the lesser of (I) the lowest per-share price at
which Common Stock has been sold to any person (other than pursuant to exercise
of stock options or warrants) at any time after the issuance of this Note and
before the date of conversion; or (II) $0.50.
<PAGE>
NOTE 5 - EXTRAORDINARY ITEMS AND COMMITMENTS AND CONTINGENCIES:
At December 31, 1998, the Company sought to settle debts incurred in prior
years. Creditors representing the majority of the outstanding debt accepted the
settlement, but several creditors did not respond. In 1998, those liabilities to
vendors that did not respond were written off and recorded as an extraordinary
gain on restructuring of debt. These vendors may seek payment from the Company
in the future. The Company plans to defend any subsequent claims for past
obligations by raising defenses of estoppel and time limitation, among others.
Item 2. Management Discussion and Analysis or Plan of Operation
(a) Plan of Operation
In May and June of 2000, the company raised $210,000 in the form of
Convertible Notes (see Part II, Item 2). The company expects to raise
additional funds in the same manner in the third quarter of 2000. The
company anticipates it will begin to generate revenue starting late in the
third quarter of 2000. The company moved to its new office facility in May
2000.
During the third quarter of 2000, the company plans to finalize its license
agreement with The Vahl Software Group (VSG) for its Administrator 2
tracking software. Due to the affiliated relationship between VSG and CDG,
Mr. Gordon Root and CDG counsel will negotiate and approve the license on
behalf of CDG. Although various terms of the license agreement are yet to
be negotiated, CDG has received a verbal commitment from VSG for a
non-exclusive, royalty based license that will require CDG to pay VSG a
royalty of $0.25 (twenty-five cents) for each Medical Accounts Receivable
(MAR) processed through Administrator 2.
In connection with the documentation of the license for Administrator II,
the purchase of hardware components and the engagement of full time
employees, CDG will be seeking approximately $2 million to $5 million in
additional equity investment in order to finance our initial purchase of
MAR. CDG has had preliminary discussions with counsel and with prospective
investment bankers regarding the appropriate method and process for raising
equity capital. In connection with the purchase of the MAR (and by using
the MAR as collateral), CDG also plans to seek an operating line of credit
to allow the company to expand its MAR acquisitions. The investment bankers
with whom CDG has spoken have suggested that CDG may obtain a secured
operating line of credit in an amount equal to six to ten times the amount
of the proposed equity financing. The funds from the operating line,
together with the equity funding and operating revenues, should be
sufficient to satisfy its capital requirements for the foreseeable future.
<PAGE>
(b) Management's Discussion and Analysis of Financial Condition and Results of
Operations
During the past five years, our director and officer has been working to
correct problems arising from a major fraud committed against CDG. The
fraud involved $3,500,000 in counterfeit certificates of deposit that were
issued to CDG in exchange for significant equity and $500,000 in cash. The
fraud left CDG in a tenuous financial position that CDG has sought
diligently to correct. The only revenue CDG has generated during the past
four years was a software license fee from Aries Financial Group in the
amount of $100,000.CDG used these funds, in large part, to reach accords
with most of its creditors, all of whom were due monies for products or
services provided prior to March, 1995. As a result of these compromises
reached with creditors, CDG's payables with respect to those prior
obligations have been eliminated for accounting purposes. While we now have
an accumulated deficit of $2,149,261, the company believes it has
substantially reduced the likelihood of material claims by its creditors
and that its financial condition, due to the significant debt reduction, is
more stable than in the months immediately following the fraud.
CDG used approximately $10,000 of the funds from the license to Aries
Financial Group to fund litigation against the perpetrators of the fraud,
none of whom are currently affiliated with CDG. CDG was successful in
obtaining a judgment in the litigation that resulted in a judicial
declaration that the 3,875,000 shares issued to the perpetrators of the
fraud are void for lack of consideration. As a result, the number of shares
of outstanding CDG common stock was reduced by more than 38%, effective
retroactively to May 1995. CDG also was awarded monetary damages against
the perpetrators equal to the cash consideration paid to the perpetrators,
but the prospect of recovery is remote. Significantly, all of the
individuals who approved the fraudulent transaction, including our former
president, are no longer affiliated with CDG.
In light of the significant delays in the payment of healthcare
receivables, we believe that healthcare providers remain anxious to
liquidate their claims in exchange for immediate payment. The state of the
healthcare industry is such that medical insurers are delaying payments to
the healthcare providers by 60 to 90 days or more, which often creates
significant cash flow difficulties for the providers.
However, a number of uncertainties may have an effect on CDG's business,
financial conditions and operations, and those effects may be material and
adverse. These uncertainties include the following.
CDG may be subject to claims by creditors for claims arising before 1995.
CDG has searched for and reached accord with what we believe to be most of
its creditors. However, CDG believes other creditors exist and that some of
them may have claims that have not lapsed or been extinguished by statutes
of limitation or similar legal principles. Some of these creditors may
later bring claims against CDG for amounts owed or claimed to be owed from
prior obligations. If one or more of these claims is significant in
comparison to CDG's operations, CDG may be forced into a bankruptcy or
similar proceeding. Such an event would affect CDG's operations, business
and financial condition materially and adversely.
<PAGE>
CDG is entering into a market that currently is experiencing significant
competition.
The market for medical billing services and related entities currently is
served by a substantial number of businesses, including both medical
practice management companies and billing and collection services. Many
entities with which CDG will compete are substantially better funded and
have gathered significant market share. Moreover, some of these enterprises
have significant cash reserves and can better fund shortfalls in
collections that might have a more pronounced impact on companies such as
CDG. Some of these companies also have greater experience and/or more
efficient collection methods than CDG might develop. If CDG fails to
compete effectively with businesses that provide similar services, our
business operations and financial condition will be affected materially and
adversely.
Technology Risks
CDG and its subsidiary IntraMed are developing new technology. We may not
be able to complete the project in a timely fashion. We also may not be
able to complete it without cost overruns. If developed, the product might
not meet our needs. Any one or more of these factors may have a material
adverse effect on our revenues and/or expenses.
New Additions to Capital Development Group, Inc.:
IntraMed Corporation (IntraMed)
On April 29, 2000 CDG purchased IntraMed Corporation for stock (see Part
II, Item 5). IntraMed was established to develop a scheduling program for
doctors. Since that time IntraMed has developed a program that can provide
scheduling and billing and also serves as a fax system for healthcare
related entities. The entire program can be run locally or remotely over
the Internet. It monitors the administrative status of a patient, including
initial scheduling, appointment day, doctor's reports, paying vendors,
billing the payers, and billing the patient. The Patient Tracking Wizard
(PTW) handles assigning incoming faxes to the various cases and
automatically notifies insurance companies, providers, and referring
physicians when cases are scheduled and when reports come in. Management
reports are easily generated and are available to payers and A/R finance
companies through an Electronic Digital Interface. Key components in the
system include:
<PAGE>
Scheduling
Tracking patient progress through the system
Maintaining comments about a patient's progress
Maintaining documents relevant to a case
Billing (printing and EDI)
Administrative Reporting/Summaries Financial
Reporting/Summaries
The software that was developed by IntraMed Corporation is the common
thread that holds all of the current and future subsidiaries of CDG
together. All of the companies and their clients will use the software. The
fact that it is Internet based makes it attractive to clients. Instead of
purchasing a software license and hardware to run it and pay for
installation, the client needs a $19.95 connection to the Internet (higher
speeds are recommended). They are then charged on a `per claim' basis. This
is a dramatic cost savings for healthcare providers.
IntraMed was acquired using the `Purchase Method' of accounting. The
majority of the price was allocated to the value of the software, which
will be amortized over 15 years. IntraMed hired 2 employees in the second
quarter. IntraMed will also hire 2 more employees in the third quarter.
Healthsource Financial Advisors (HFA)
On May 31, 2000 CDG purchased Healthsource Financial Advisors for stock
(see Part II, Item 2). HFA is a consulting company providing information
tools for healthcare providers, financing institutions, factors, and
medical receivable funds. Its main focus is to provide information tools
that increase revenue and profitability among its clients. HFA also
provides consulting services relating to due diligence, financial analysis
and overall performance of healthcare providers, factors and financial
institutions. HFA uses a network of healthcare consultants to add value to
each client. Management believes HFA will benefit CDG by managing the data
produced by the system and seeing that meaningful reports are generated and
delivered to the various clients. HFA can also interpret reports generated
by the IntraMed System and provide written analysis to the clients based
upon client specific parameters. This is integral to attracting lending
institutions to the program.
HFA was acquired using the `Purchase Method' of accounting. The majority of
the price was allocated to goodwill, which will be amortized over 15 years.
HFA hired 2 employees in the second quarter. HFA does not anticipate hiring
more employees in the third quarter.
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No legal proceedings have occurred or are occurring in this quarter.
ITEM 2. CHANGES OF SECURITIES
In May and June 2000, the company sold $210,000 in Convertible Notes. The
conversion features are as follows:
Holder may convert all, but not less than all, of the then outstanding principal
amount of this Note into the Company's Common Stock (a) at the election of each
Holder (i) within 120 days prior to the reasonably anticipated effective date of
any registered, underwritten public offering of the Company's equity securities
with proceeds to the Company in excess of $7,000,000 at a valuation in excess of
$15,000,000 (a "Qualifying Public Offering"); (ii) upon the occurrence of an
Event of Default; (iii) contemporaneously with a private placement of the
Company's equity securities resulting in an investment by one or a group of five
or fewer investors of not less than $2,000,000 (a "Qualifying Private
Placement"); (iv) immediately prior to the closing of any merger, reorganization
or sale of all or substantially all of the Company's assets; (v) on or before
the tenth (10th) day prior to a prepayment date specified in a notice of
prepayment given pursuant to Part 3, above; or (vi) at the Maturity Date; or (b)
at the election of the Company within 120 days prior to the reasonably
anticipated effective date of any Qualifying Public Offering. The number of
shares issuable upon conversion (the "Conversion Shares") shall be equal to the
total amount of principal and unpaid interest on this Note as of the date of
conversion, divided by the Conversion Price. The Conversion Price per share
shall be equal to the lesser of (I) the lowest per-share price at which Common
Stock has been sold to any person (other than pursuant to exercise of stock
options or warrants) at any time after the issuance of this Note and before the
date of conversion; or (II) $0.50.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No defaults have occurred this quarter.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during this quarter.
<PAGE>
ITEM 5. OTHER INFORMATION
On April 29, 2000, CDG purchased IntraMed Corporation for 1,400,000 shares of
common stock. See Part I, Item 2 for more information about IntraMed
Corporation.
On May 31, 2000, CDG purchased Healthsource Financial Advisors for 350,800
shares of common stock and 157,867 shares of Series A preferred stock. See Part
I, Item 2 for more information about Healthsource Financial Advisors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
2.1 IntraMed Stock Purchase Agreement - 04/29/2000
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of April 29,
2000 between Max Stanford Tomlinson, Jr. ("Tomlinson") and Lionel Simons
("Simons") (Tomlinson and Simons collectively, the "Sellers"), and Capital
Development Group, Inc., an Oregon corporation, a ("Purchaser").
BACKGROUND
A. Sellers are the owners of 47,143 issued and outstanding shares (the
"Shares") of the common stock of IntraMed Corporation, a California corporation
(the "Company"), which constitutes all of the issued and outstanding capital
stock of the Company.
B. Purchaser desires to purchase all of the Shares from Seller, on the
terms and subject to the conditions set forth in this Agreement. Seller desires
to sell the Shares to Purchaser, on such terms and conditions.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the adequacy of
which is hereby acknowledged, the parties agree as follows:
Definitions and Other Matters.
Definitions. In addition to the terms defined elsewhere in this
Agreement, including the recitals, the following terms, when used herein, shall
have the following meanings:
"Actual Revenues" means the total of any fees payable to the
Company resulting from licenses, enhancements or any beneficial use of the
Patient Tracking Wizard (as defined below) plus five percent (5%) of all
procedures and other inventory scheduled in the ordinary course of business,
billed or otherwise entered in the Patient Tracking Wizard.
"Governmental Authority" means any nation or government,
foreign or domestic, any state or other political subdivision thereof, and any
agency or other entity exercising executive, legislative, judicial, regulatory
or administrative functions of government, including, without limitation, all
taxing authorities.
<PAGE>
"Law" or "Laws" means any statute, rule, common law,
ordinance, regulation, order, writ, judgment, injunction, decree, determination,
or award enacted or promulgated by a Governmental Authority.
"Lien" means any interest, consensual or otherwise, in
property securing a monetary obligation owed to, or a claim by, a Person other
than the owner of the property, whether such interest is based on the common
law, statute or contract, and including, but not limited to, any security
interest, lien or other beneficial interest arising from a mortgage, recordation
of abstract of judgment, deed of trust, deed to secure debt, encumbrance,
pledge, conditional sale, option, trust (constructive or otherwise) or trust
receipt or a lease, consignment or bailment for security purposes.
"Loss" means any demand, obligation, liability, claim, loss,
cost, expense, tax, lawsuit, arbitration or other legal action, judgment or
damage, liquidated or unliquidated, accrued or contingent, incurred or suffered,
including, without limitation, any interest, penalties, and reasonable legal
fees and expenses in connection with the incurrence of any Loss or in defending
against any Loss.
"Material Contract" means any written or oral commitment,
contract, note, loan, evidence of indebtedness, purchase order or letter of
credit involving any obligation or liability on the part of the Company and not
cancelable (without liability) within thirty (30) days.
"Module Completion" means the occurrence of continuous
implementation of the Patient Tracking Wizard in any licensed physician's office
for forty-five (45) days after the Closing Date, provided that such physician is
actively using the Patient Tracking Wizard to perform billing, collection and
inventory management functions.
"Patient Tracking Wizard" means the software and systems
described in the attached Exhibit A.
"Person" means an individual, corporation, partnership,
unincorporated association, trust, joint venture or other organization or
entity, including a Governmental Authority.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
Meaning of "Knowledge."
Seller Knowledge. For all purposes of this Agreement, any
reference to the existence or absence of facts which is indicated to be based on
Seller's knowledge, is intended to signify that no information has come to the
attention of Max Stanford Tomlinson, Jr. or Lionel Simons that would give any
such Person actual knowledge of the existence or absence of such facts.
<PAGE>
Purchaser Knowledge. For all purposes of this Agreement, any
reference to the existence or absence of facts which is indicated to be based on
Purchaser's knowledge, is intended to signify that no information has come to
the attention of Michael P. Vahl that would give any such Person actual
knowledge of the existence or absence of such facts.
Persons Identified. Each of Seller and Purchaser represents
to the other that the Persons identified in Sections 0 and 0, respectively, are
those persons Seller and Purchaser believe, respectively, are most likely to
have knowledge of the matters referred to in the representations and warranties
made by such party in this Agreement.
Terms of Purchase.
Purchase and Sale of Shares. On the terms and subject to the
conditions set forth in this Agreement, Seller hereby agrees to sell, assign,
transfer, convey and deliver to Purchaser, and Purchaser hereby agrees to
purchase and take delivery of the Shares.
Purchase Price. In consideration for the sale to Purchaser by
Seller of all of the Shares, Purchaser will issue to Seller up to One Million
Four Hundred Twenty-Eight Thousand Five Hundred Seventy-Two (1,428,572) shares
of the common stock of Purchaser (the "CDG Shares") (the "Purchase Price").
Payment of Purchase Price. The Purchase Price shall be paid to
Seller as follows:
CDG Shares at Closing. Purchaser shall issue Nine Hundred
Thousand (900,000) CDG Shares to Seller on the Closing Date (as defined below).
CDG Shares upon Completion of the Physician Module. Purchaser
shall issue Five Hundred Thousand (500,000) CDG Shares to Seller within a
reasonable time after Module Completion, provided that Module Completion must
occur within three (3) years immediately following the Closing Date.
Bonus Shares. Within ninety (90) days immediately following
the first anniversary of the Closing Date, up to Twenty-Eight Thousand Five
Hundred Seventy-Two (28,572) additional CDG Shares (the "Bonus Shares") shall be
paid to Seller according to the formula contained in this Section 2.3.3,
provided that for the Bonus Shares to be issued, Module Completion must have
occurred within the time period contained in this Section 2.3.3.
Calculation of the Bonus Shares Issuance. The number of Bonus
Shares to be paid to Seller shall be determined by comparing the Actual Revenues
for the Company for the first year immediately following the Closing Date (the
"First Year") against the projected Company revenues for the first year
immediately following the Closing Date of Two Hundred Fifty Thousand United
States Dollars ($250,000) (the "Projected Revenues"). Purchaser agrees to issue
to Seller the number of CDG Shares corresponding to the Actual Revenues achieved
in the First Year by the Company as follows:
If the Company's Actual Revenues for the First Year
exceed the Projected Revenues by greater than ten percent (10%), but
twenty percent (20%) or less, then Purchaser shall issue to Seller
Fourteen Thousand One Hundred Forty-One (14,141) CDG Shares.
<PAGE>
If the Company's Actual Revenues for the First Year
exceed the Projected Revenues by greater than twenty percent (20%),
then Purchaser shall issue to Seller Twenty-Eight Thousand Five Hundred
Seventy-Two (28,572) CDG Shares.
Penalty Shares. If after ninety (90) days following the
Closing Date, the Company has not raised two hundred and fifty thousand dollars
($250,000), the company will issue one hundred forty thousand (140,000)
additional shares to Seller. The shares will be issued within 10 business days.
Further Assurances. From time to time on or after the Closing
Date, Seller and Purchaser will (and after the Closing Purchaser will cause the
Company to) execute and deliver to each other all such further assignments,
endorsements and other documents as are reasonably requested in order to
complete the sale of the Shares to Purchaser, to enable Purchaser to exercise
full rights as the sole owner of the Shares and to otherwise carry out the
transactions contemplated by this Agreement.
Ability to Unwind Transaction. For the three (3) months
immediately following the Closing Date, Seller may unwind this transaction upon
thirty (30) days' written notice if (i) Purchaser becomes unable to pay its
debts as they become due, files an application for bankruptcy, makes an
assignment for the benefit of creditors, becomes subject to any proceeding under
bankruptcy or insolvency laws, or winding up or liquidation, voluntarily or
otherwise, provided that involuntary actions results in an entry of an order for
relief against it which is not fully stayed within seven (7) business days after
the entry thereof or shall remain undismissed for a period of thirty (30) days.
If Seller elects to enforce their rights under this Section 2.5, then Seller
shall immediately pay all outstanding interest and principal on any promissory
note existing at the time of exercise between Purchaser and Seller, or (ii)
purchaser has been unable to secure sufficient funds to meet its working capital
requirements during this period.
Representations and Warranties of Seller. Seller hereby represents and
warrants to Purchaser that the following statements are true and correct as of
the date of this Agreement (unless some other date is specified as of which the
statement is made, in which case the statement is true and correct as of such
date) and will be true and correct on the Closing Date as though made on such
date:
Authorization by Seller; Enforceability. On the Closing Date,
Seller will have taken or caused to be taken all action necessary for the
authorization, execution, delivery and performance of this Agreement by Seller
and the consummation of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Seller. Assuming the due authorization,
execution and delivery by Purchaser, this Agreement constitutes a valid and
binding obligation of Seller enforceable against Seller in accordance with its
terms, except to the extent that enforceability may be limited by bankruptcy,
reorganization, insolvency or other laws affecting the enforcement of creditors'
rights generally or the availability of equitable remedies subject to the
discretion of the court.
<PAGE>
Capitalization of the Company. The authorized capital stock of the
Company consists of two hundred thousand (200,000) shares of common stock, of
which forty seven thousand one hundred forty three (47,143) shares are issued
and outstanding. The Company has not authorized any other class or designation
of securities than the Shares. The Shares have been duly authorized, offered,
issued and sold in compliance with applicable law, and are fully paid and
nonassessable.
Title to Shares. Seller has good and marketable title to and owns
the Shares, beneficially and of record. The Shares are free and clear of all
Liens, charges, demands or adverse claims or other restrictions on the exercise
of any of the attributes of ownership. Seller has full voting power over the
Shares, subject to no proxy, shareholders' agreement, voting trust or other
agreement relating to the voting of any of the Shares, other than Tomlinson who
has a tax lien. Tomlinson agrees to hold the Company harmless from this lien. As
of the Closing Date, (i) no Person will have any preemptive right to purchase
any Shares or any other securities of the Company, and (ii) there will be no
outstanding securities or other instruments of the Company which are convertible
into or exchangeable for any shares of its capital stock. Other than this
Agreement, there are no contracts, arrangements, commitments or restrictions
relating to the issuance, sale, transfer or purchase or obtaining of capital
stock or other securities or instruments of the Company. Seller owns one hundred
percent (100%) of the outstanding capital stock of the Company.
Absence of Certain Conflicts. Except as disclosed on Schedule 3.4,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby and thereby will do any of the following:
conflict with or result in a breach of any provision of the
Articles of Incorporation or Bylaws of the Company;
require the payment or the incurring of any obligation on the
part of the Company, or result in a loss of rights or default (or give rise to
any right of termination, cancellation or acceleration), with or without notice
or lapse of time, under any of the provisions of any Material Contract, except
for such defaults (or rights of termination, cancellation or acceleration) as to
which requisite waivers or consents have been obtained, which necessary waivers
or consents are listed on Schedule 3.4;
require Seller or the Company to obtain any consent,
approval, authorization or permit of, or make any filing with or provide any
notification to, any Governmental Authority, except as listed on Schedule 3.4;
or
violate any judgment, decree, order, injunction, or any
statute, law, regulation or rule of any Governmental Authority applicable to the
Seller or the Company or their respective operations or property.
Litigation. There is no action or suit pending or, to Seller's
knowledge, threatened which alone or in the aggregate with other actions and
suits could reasonably be expected to restrict Seller's ability to carry out the
transactions contemplated by this Agreement. There is no action, claim,
investigation, arbitration, grievance, litigation, suit or proceeding of any
kind, to Seller's knowledge, threatened or pending against the Company or
arising out of or relating to its business, except those described on Schedule
3.5 hereto.
<PAGE>
Financial Statements. Seller has furnished to Purchaser copies of
(i) unaudited balance sheets of the Company and unaudited statements of income,
changes in shareholders' equity and statements of cash flow for each of the two
fiscal years ending December 31, 1999, (the "Financial Statements"); and (ii) an
unaudited balance sheet of the Company as of March 31, 2000, and unaudited
statements of income, changes in shareholders' equity and statements of cash
flow ending March 31, 2000 (the "Interim Financial Statements") (the financial
statements in clauses (i) and (ii) being collectively referred to herein as the
"Financial Statements").
The Financial Statements (i) have been prepared in conformity
with GAAP applied on a consistent basis from year to year (except as noted
otherwise therein); and (ii) assuming the Company will continue as a going
concern, are true and correct and present fairly in all material respects the
financial condition of the Company and the results of operations and changes in
cash flow of the Company for the periods to which each relates.
To the knowledge of Seller, the Interim Financial Statements
(i) have been prepared in conformity with GAAP applied on a consistent basis
from year to year (except as noted otherwise therein), subject to normal
recurring year-end adjustments (the effect of which will not, individually or in
the aggregate, be material) and the absence of notes (which, if presented, would
not differ materially from those included in the Financial Statements); and (ii)
assuming the Company will continue as a going concern, are true and correct and
present fairly in all material respects the financial condition of the Company
and the results of operations and changes in cash flow of the Company for the
periods to which each relates.
Corporate Organization and Standing. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California.
Corporate Title to Assets. The Company holds good and marketable
title to and owns its assets (the "Assets"). The Assets are free and clear of
all Liens, charges, demands or adverse claims or other restrictions on the
exercise of any of the attributes of ownership.
Broker's Fees. Seller represents and warrants that no agent,
broker, investment banker, person or firm acting on behalf of or under the
authority of it is or will be entitled to any broker's or finder's fee or any
other commission directly or indirectly in connection with the transactions
contemplated herein.
Accuracy and Completeness of Representations and Warranties. No
representation or warranty made by Seller in this Agreement and no statement
contained in any document or instrument delivered or to be delivered to
Purchaser pursuant hereto 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 contained herein or therein not misleading.
<PAGE>
Representations and Warranties of Purchaser. Purchaser represents and
warrants to Seller that the following statements are true and correct as of the
date hereof and will be true and correct on the Closing Date as though made on
such date:
Corporate Organization and Standing. Purchaser is a corporation
duly organized and validly existing under the laws of the State of Oregon.
Corporate Power and Authority. Purchaser has all requisite
corporate power and authority to enter into, execute, deliver and perform this
Agreement and to carry out the transactions contemplated hereby.
Authorization; Enforceability. On the Closing Date, Purchaser will
have taken or caused to be taken all corporate action necessary for the
authorization, execution, delivery and performance of this Agreement by
Purchaser and the consummation of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Purchaser. Assuming the due
authorization, execution and delivery by Seller, this Agreement constitutes a
valid and binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms, except to the extent that enforceability may be
limited by bankruptcy, reorganization, insolvency or other laws affecting the
enforcement of creditors' rights generally or the availability of equitable
remedies subject to the discretion of the court.
Absence of Certain Conflicts. Neither the execution and delivery
by Purchaser of this Agreement nor the consummation of the transactions
contemplated hereby will (i) conflict with or result in a breach of any
provision of the Articles of Incorporation or Bylaws of Purchaser, (ii) require
Purchaser to obtain any consent, approval, authorization or permit of, or make
any filing with or provide any notification to, any Governmental Authority,
(iii) conflict with or result in a breach of any material contract, agreement,
indenture or instrument to which Purchaser is a party or by which its property
is bound, or (iv) to the knowledge of Purchaser, violate any judgment, decree,
order, injunction, or, any statute, law, regulation or rule of any Governmental
Authority applicable to Purchaser or its operations or property.
Litigation. There is no action or suit pending or, to Purchaser's
knowledge, threatened which alone or in the aggregate with other actions and
suits could reasonably be expected to restrict Purchaser's ability to carry out
the transactions contemplated by this Agreement.
Broker's Fees. Purchaser represents and warrants that no agent,
broker, investment banker, person or firm acting on behalf of or under the
authority of it is or will be entitled to any broker's or finder's fee or any
other commission directly or indirectly in connection with the transactions
contemplated herein.
<PAGE>
Closing.
Closing. The closing of the transactions contemplated by this Agreement
(the "Closing") will take place on the date dated above (the "Closing Date"),
contemporaneously with the execution of this Agreement.
Closing Deliveries by Seller. At the Closing, Seller shall deliver or
cause to be delivered to
Purchaser:
Certificates. Certificates representing the Shares, properly
endorsed for transfer;
Documents of Transfer. Such other instruments and documents as
Purchaser may reasonably require to vest in Purchaser all right, title and
interest of Seller in and to the Shares; and
Other Closing Documents. All other documents required by the
provisions of this Agreement to be delivered at Closing by Seller.
Closing Deliveries by Purchaser. At the Closing, Purchaser shall
deliver or cause to be delivered to Seller:
CDG Shares. The initial payment of the Purchase Price equaling
Nine Hundred Thousand (900,000) CDG Shares, certificated and properly issued;
and
Other Closing Documents. All other documents required by the
provisions of this
Agreement to be delivered at Closing by Seller.
Survival Of Representations And Warranties; Indemnification.
Survival of Representations and Warranties. All representations
and warranties contained in this Agreement or made pursuant hereto, whether
express or implied, shall survive the Closing and shall terminate three (3)
years from the Closing Date and thereafter shall be of no force or effect,
except for any claim with respect to which notice has been given to the party to
be charged prior to such expiration date.
Indemnification by Seller. Subject to the Closing having
occurred and the provisions of Section 6.1 , Seller shall protect, defend,
indemnify, and hold Purchaser, and its successors and assigns, officers,
directors, agents, shareholders and employees (each, a "Purchaser Indemnitee")
harmless from and against any Loss suffered by a Purchaser Indemnitee that
results from or, to the extent that the Loss relates to, any breach of any of
the representations or warranties of, or of any covenants or agreements made by,
Seller contained in this Agreement, or any activities of the Company prior to
the Closing Date.
Indemnification by Purchaser. Subject to the Closing having
occurred and the provisions of Section 6.1 , Purchaser shall protect, defend,
indemnify, and hold Seller, and its Affiliates, successors and assigns,
officers, directors, agents, shareholders and employees (each, a "Seller
Indemnitee") harmless from and against any Loss suffered by a Seller Indemnitee
that results from any breach of any of the representations or warranties of, or
of any covenants or agreements made by, Purchaser contained in this Agreement.
In addition, Purchaser agrees to specifically indemnify Seller indemnity against
any claims that may be filed alleging failure of Purchaser or Seller to perform
under contracts with Sellers clients in existence at time of purchase.
<PAGE>
Miscellaneous.
Amendments and Waivers. The provisions of this Agreement may be
amended only by the written agreement of all of the parties hereto. Any waiver,
permit, consent or approval of any kind or character on the part of any party of
any provisions or conditions of this Agreement must be made in writing and shall
be effective only to the extent specifically set forth in such writing.
Successors and Assigns. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties hereto and
any purported assignment or delegation of this Agreement without such consent
shall be null and void. This Agreement is binding upon and inures to the benefit
of the parties hereto and their respective successors, heirs, executors and
permitted assigns.
Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law. If any provision of this Agreement is held to be prohibited by
or invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience of reference only and do not constitute a part of
this Agreement.
Notices. Any notices, requests, demands or other communications
required or permitted to be sent hereunder or under any Related Document shall
be delivered personally, sent by overnight or international courier or mailed by
registered or certified mail, return receipt requested, to the following
addresses, and shall be deemed to have been received on the day of personal
delivery, one (1) Business Day after deposit with an overnight domestic courier
or three (3) Business Days after deposit in the mail:
If to Purchaser, to:
Capital Development Group, Inc.
--------------------------------
--------------------------------
Attn: Michael P. Vahl, President
Telephone:
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Facsimile:
----------------------
<PAGE>
with a copy to:
Davis Wright Tremaine LLP
1300 SW Fifth Avenue, Suite 2300
Portland, Oregon 97201
Attn: Timothy Dozois, Esq.
Telephone: 503.241.2300
Facsimile: 503.778.5299
If to Seller, to:
-------------------------------- --------------------------------
-------------------------------- --------------------------------
-------------------------------- --------------------------------
Telephone: Telephone:
---------------------- ----------------------
Facsimile: Facsimile:
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with a copy to:
--------------------------------
--------------------------------
--------------------------------
Attn:
---------------------------
Telephone:
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Facsimile:
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Governing Law. The validity, meaning and effect of this Agreement
shall be determined in accordance with the laws of the State of Oregon
applicable to contracts made and to be performed in that state. Any legal action
or other legal proceeding commenced among the parties hereto with respect to
this Agreement shall be commenced and maintained exclusively in a state or
federal court located in the County of Multnomah, State of Oregon. Each party
hereto expressly and irrevocably consents and submits to the exclusive
jurisdiction of the applicable state and federal courts located in the County of
Multnomah, State of Oregon and each appellate court located in the State of
Oregon, in connection with any such proceeding. Each party agrees that such
courts shall be deemed to be a convenient forum in any such legal proceeding,
and agrees not to assert (by way of motion, as a defense or otherwise) any claim
that such party is not subject personally to the jurisdiction of any such
courts, that such legal proceeding has been brought in an inconvenient forum,
that the venue of such legal proceeding is improper or that this Agreement or
the subject matter hereof may not be enforced in or by any such courts. Personal
service may be effected by written notice served upon either party as provided
by this Agreement, or as otherwise permitted or provided by law in the State of
Oregon.
Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed an original, and such counterparts together shall constitute one
instrument.
Parties in Interest. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by any reason of
this Agreement on any Persons other than the parties to it and their respective
permitted successors and assigns. Nothing in this Agreement is intended to
relieve or discharge the obligation or liability of any third Persons to any
party to this Agreement, nor shall any provision give any third Persons any
right of subrogation or action over against any party to this Agreement.
<PAGE>
Expenses; Attorneys' Fees. Whether or not the transactions
contemplated by this Agreement are consummated, and except as otherwise
expressly provided in this Agreement, each of the parties hereto will pay its
own expenses incurred by it or on its behalf in connection with this Agreement
or any transactions contemplated by this Agreement. Notwithstanding the
foregoing, in any legal action or other proceeding (including any arbitration
proceeding) brought to enforce or interpret the terms of this Agreement or any
Related Document, the prevailing party or parties shall be entitled to
reasonable attorney's fees and other costs and expenses incurred in that
proceeding and in any subsequent appeals, in addition to any other relief to
which it is entitled.
Entire Agreement. This Agreement, including the Disclosure
Schedules, the Related Documents, and the other exhibits, certificates and
documents expressly referred to herein or therein which form a part hereof or
thereof, including without limitation the Confidentiality Agreement, constitute
the entire agreement of the parties concerning the matters referred to herein
and therein and supersede all prior agreements and understandings, oral or
written.
The parties hereto have executed this Agreement as of the date first set forth
above.
SELLER:
------------------------------------ ------------------------------------
Max Stanford Tomlinson, Jr., Individually Lionel Simons, Individually
PURCHASER:
CAPITAL DEVELOPMENT GROUP, INC.
an Oregon corporation
------------------------------------
Michael P. Vahl, President
2.2 Healthsource Financial Advisor Membership Interest Purchase Agreement -
05/31/2000
<PAGE>
PLAN OF REORGANIZATION AND
MEMBERSHIP INTEREST PURCHASE AGREEMENT
THIS PLAN OF REORGANIZATION AND MEMBERSHIP INTEREST PURCHASE AGREEMENT (the
"Agreement") is made as of May ___, 2000 between Bruce F. Gulledge, Peter D.
Smith and Rick O. Rentschler (collectively, "Sellers"), and Capital Development
Group, Inc., an Oregon corporation ("Purchaser").
BACKGROUND
A. Sellers are the owners of one hundred percent (100%), allocated 71.37%
to Bruce F. Gulledge, 17.90% to Peter D. Smith and 10.73% to Rick O. Rentschler,
of the outstanding membership interests (the "Interests") of HealthSource
Financial Advisors, LLC, an Arizona limited liability company (the "Company"),
which constitutes all of the outstanding ownership interests in the Company.
B. Purchaser desires to purchase all of the Interests from Sellers, on the
terms and subject to the conditions set forth in this Agreement. Sellers desire
to sell the Interests to Purchaser, on such terms and conditions.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the adequacy of which
is hereby acknowledged, the parties agree as follows:
Definitions and Other Matters.
Definitions. In addition to the terms defined elsewhere in this
Agreement, including the recitals, the following terms, when used herein, shall
have the following meanings:
"Actual Revenues" means the gross income of the Company for
federal income tax purposes resulting from the conduct of the business in the
ordinary course, as conducted by the Company immediately preceding the Closing
Date (as defined below), including but not limited to revenues generated from
the purchase of medical receivables from healthcare providers and administrative
and collection services provided to healthcare providers where the medical
receivables are not purchased.
"Business" means the monitoring of medical patient billing
records, compiling reports without confidential patient information and in
compliance with federal privacy laws and submission of such reports to third
parties (including financial institutions) interested in the current status of
medical payables and all business activities conducted by Purchaser immediately
following the acquisition of the Company, IntraMed, Inc. and Seton Financial
Corporation.
"CDG Common Shares" means the authorized voting common stock of
Purchaser. The CDG Common Shares are "restricted" securities, as that term is
defined in Securities and Exchange Commission Rule 144.
"CDG Preferred Shares" means the authorized Series A preferred
stock of Purchaser, with the rights and preferences described in greater detail
on the attached Exhibit A. The CDG Preferred Shares are "restricted" securities
as that term is defined in Securities and Exchange Commission Rule 144. (The
"CDG Common Shares" and the "CDG Preferred Shares" are referred to collectively
as the "Shares").
<PAGE>
"Governmental Authority" means any nation or government, foreign
or domestic, any state or other political subdivision thereof, and any agency or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of government, including, without limitation, all
taxing authorities.
"Law" or "Laws" means any statute, rule, common law, ordinance,
regulation, order, writ, judgment, injunction, decree, determination, or award
enacted or promulgated by a Governmental Authority.
"Lien" means any interest, consensual or otherwise, in property
securing a monetary obligation owed to, or a claim by, a Person other than the
owner of the property, whether such interest is based on the common law, statute
or contract, and including, but not limited to, any security interest, lien or
other beneficial interest arising from a mortgage, recordation of abstract of
judgment, deed of trust, deed to secure debt, encumbrance, pledge, conditional
sale, option, trust (constructive or otherwise) or trust receipt or a lease,
consignment or bailment for security purposes.
"Loss" means any demand, obligation, liability, claim, loss, cost,
expense, tax, lawsuit, arbitration or other legal action, judgment or damage,
liquidated or unliquidated, accrued or contingent, incurred or suffered,
including, without limitation, any interest, penalties, and reasonable legal
fees and expenses in connection with the incurrence of any Loss or in defending
against any Loss.
"Material Contract" means any written or oral commitment,
contract, note, loan, evidence of indebtedness, purchase order or letter of
credit involving any obligation or liability on the part of the Company and not
cancelable (without liability) within thirty (30) days.
"Person" means an individual, corporation, partnership,
unincorporated association, trust, joint venture or other organization or
entity, including a Governmental Authority.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
Meaning of "Knowledge."
Seller Knowledge. For all purposes of this Agreement, any
reference to the existence or absence of facts which is indicated to be based on
Sellers' knowledge, is intended to signify that no information has come to the
attention of either any Seller that would give any such Person actual knowledge
of the existence or absence of such facts.
Purchaser Knowledge. For all purposes of this Agreement, any
reference to the existence or absence of facts which is indicated to be based on
Purchaser's knowledge, is intended to signify that no information has come to
the attention of Michael P. Vahl that would give any such Person actual
knowledge of the existence or absence of such facts.
<PAGE>
Persons Identified. Each of Sellers and Purchaser represents
to the other that the Persons identified in Sections 0 and 0, respectively, are
those persons Sellers and Purchaser believe, respectively, are most likely to
have knowledge of the matters referred to in the representations and warranties
made by such party in this Agreement.
Terms of Purchase.
Purchase and Sale of Interests. Pursuant to the Plan of
Reorganization embodied by this Agreement and on the terms and subject to the
conditions set forth in this Agreement, Sellers hereby agree to sell, assign,
transfer, convey and deliver to Purchaser, and Purchaser hereby agrees to
purchase and take delivery of the Interests.
Purchase Price. In consideration for the sale to Purchaser by
Sellers of all of the Interests, Purchaser will issue to Sellers up to Three
Hundred Fifty-Seven Thousand Nine Hundred Fifty-Nine (357,959) shares of the CDG
Common Shares and up to One Hundred Sixty-One Thousand Eighty-Nine (161,089)
shares of the CDG Preferred Shares (the "Purchase Price").
Payment of Purchase Price. The Purchase Price shall be paid to
Sellers as follows:
CDG Common Shares and CDG Preferred Shares at Closing.
Purchaser shall issue to Sellers Three Hundred Fifty Thousand Eight Hundred
(350,800) CDG Common Shares on the Closing Date (defined below) and One Hundred
Fifty-Seven Thousand Eight Hundred Sixty-Seven (157,867) CDG Preferred Shares
within sixty (60) days after the Closing Date, in proportion to each Seller's
ownership of the Interests.
Bonus Shares. Within ninety (90) days immediately following
the end of the First Year (as defined in Section 2.3.3 below), up to Seven
Thousand One Hundred Fifty-Nine (7,159) additional CDG Common Shares and Three
Thousand Two Hundred Twenty-Two (3,222) additional CDG Preferred Shares (the
"Bonus Shares") shall be issued to Sellers, in proportion to each Seller's
ownership of the Interests, according to the formula contained in Section 2.3.3.
Calculation of the Bonus Shares Issuance. The number of Bonus
Shares to be paid to Sellers shall be determined by comparing the Actual
Revenues for the Company for the period from January 1, 2001 through December
31, 2001 (the "First Year") against the projected Company revenues of
$___________ for the First Year (the "Projected Revenues"). Purchaser agrees to
issue to Sellers the number of CDG Common Shares and CDG Preferred Shares
corresponding to the Actual Revenues achieved in the First Year by the Company
as follows:
If the Company's Actual Revenues for the First Year exceed by
ten percent (10%) or more the Projected Revenues, but do not exceed the
Projected Revenues by more than twenty percent (20%), then Purchaser
shall issue to Sellers Three Thousand Five Hundred Forty-Three (3,543)
CDG Common Shares and One Thousand Five Hundred Ninety-Five (1,595) CDG
Preferred Shares.
<PAGE>
If the Company's Actual Revenues for the First Year exceed by
more than twenty percent (20%) the Projected Revenues, then Purchaser
shall issue to Sellers Seven Thousand One Hundred Fifty-Nine (7,159)
CDG Common Shares and Three Thousand Two Hundred Twenty-Two (3,222) CDG
Preferred Shares.
Noncompetition Agreement. Sellers covenant not to compete with the
Business in the States of Oregon, California and Arizona for a period of three
(3) years from the Closing Date, provided that this Section 2.4 shall cease to
be applicable if either: (i) CDG Common Shares are not traded actively on any
national securities market for a period of six (6) consecutive months unless
such trading is suspended due to a going-private transaction; or (ii) CDG ceases
to be actively engaged in the business in which the Company was engaged when as
of the Closing Date (as defined below). As used in this Section, the term
"compete" means engaging in the Business in any capacity, including without
limitation, as a consultant, employee or independent contractor, owner or
shareholder (other than the ownership of less than five percent (5%) of the
equity securities of a publicly traded company), to interfere with, solicit,
disrupt or attempt to disrupt any past, present or prospective relationships,
contractual or otherwise, of Seller of Purchaser or to solicit any employee of
Seller or Purchaser, or their subsidiaries or affiliates, to leave their
employment or hire any such employee. The parties acknowledge that the time,
scope and geographic areas and other provisions of this Section have been
specifically negotiated and geographic area and other provisions are reasonable
under the circumstances. The parties further agree that if, despite the express
agreement of the parties, a court should hold any portion of this Section 2.4
unenforceable for any reason, the maximum restrictions of time, scope and
geographic areas reasonable under the circumstances as determined by the court,
will be substituted for the restrictions held unenforceable. In the event of
breach of this covenant, Purchaser shall have all remedies at law to enforce
this Section, including specific performance, or an injunction, temporary
restraining order or other injunctive relief issued by a court of competent
jurisdiction enjoining such breach, without the posting of a bond, security or
undertaking. In the event of an action for breach of the covenants stated under
this Section, the prevailing party shall be entitled to recover all costs,
including reasonable attorneys' fees.
Shareholders' Agreement. As additional consideration for their receipt
of the Purchase Price, Sellers agree to enter into a Shareholders' Agreement in
a form substantially similar to the attached Exhibit B at Closing.
Further Assurances. From time to time on or after the Closing Date,
Sellers and Purchaser will (and after the Closing Purchaser will cause the
Company to) execute and deliver to each other all such further assignments,
endorsements and other documents as are reasonably requested in order to
complete the sale of the Interests to Purchaser, to enable Purchaser to exercise
full rights as the sole owner of the Interests and to otherwise carry out the
transactions contemplated by this Agreement.
Representations and Warranties of Sellers. Each Seller hereby
represents and warrants to Purchaser that the following statements are true and
correct as of the date of this Agreement (unless some other date is specified as
of which the statement is made, in which case the statement is true and correct
as of such date) and will be true and correct on the Closing Date as though made
on such date:
<PAGE>
Corporate Organization and Standing. The Company is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Arizona.
Authorization by Sellers; Enforceability. On the Closing Date, Sellers
will have taken or caused to be taken all action necessary for the
authorization, execution, delivery and performance of this Agreement by Sellers
and the consummation of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Sellers. Assuming the due authorization,
execution and delivery by Purchaser, this Agreement constitutes a valid and
binding obligation of Sellers enforceable against Sellers in accordance with its
terms, except to the extent that enforceability may be limited by bankruptcy,
reorganization, insolvency or other laws affecting the enforcement of creditors'
rights generally or the availability of equitable remedies subject to the
discretion of the court.
Capitalization of the Company. Sellers collectively own one hundred
percent (100%) of the authorized and outstanding ownership interests of the
Company. The Interests are validly issued, fully paid and nonassessable.
Conduct in the Ordinary Course; Absence of Changes. Since March 31,
2000, the Company has conducted the Business in the ordinary course and
consistent with past practice. Since the date stated above, the Company has had
no material adverse change in its condition (financial or otherwise) assets,
properties, or liabilities.
Title to Interests. Sellers have good and marketable title to and own
the Interests, beneficially and of record. The Interests are free and clear of
all Liens, charges, demands or adverse claims or other restrictions on the
exercise of any of the attributes of ownership. Sellers have full voting power
over the Interests, subject to no proxy, members' agreement, voting trust or
other agreement relating to the voting of any of the Interests. As of the
Closing Date, (i) no Person other than Sellers will have any preemptive right to
purchase any Interests, any other securities of the Company, or securities
convertible or exchangeable for any ownership interests of the Company; and (ii)
there will be no outstanding securities or other instruments of the Company
which are convertible into or exchangeable for any equity interests and the
Company is not subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any part of the Interests. Other than this
Agreement, there are no contracts, arrangements, commitments or restrictions
relating to the issuance, sale, transfer or purchase or obtaining of the
Interests or other securities or instruments of the Company. Sellers
collectively own one hundred percent (100%) of the Interests of the Company.
Absence of Certain Conflicts. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby and
thereby will do any of the following:
conflict with or result in a breach of any provision of the
Articles of Organization or the Operating Agreement of the Company;
<PAGE>
require the payment or the incurring of any obligation on the part
of the Company, or result in a loss of rights or default (or give rise to any
right of termination, cancellation or acceleration), with or without notice or
lapse of time, under any of the provisions of any Material Contract, except for
such defaults (or rights of termination, cancellation or acceleration) as to
which requisite waivers or consents have been obtained;
require Sellers or the Company to obtain any consent, approval,
authorization or permit of, or make any filing with or provide any notification
to, any Governmental Authority; or
violate any judgment, decree, order, injunction, or any statute,
law, regulation or rule of any Governmental Authority applicable to Sellers or
the Company or their respective operations or property.
Litigation. There is no action or suit pending or, to Sellers'
knowledge, threatened which alone or in the aggregate with other actions and
suits could reasonably be expected to restrict Sellers' ability to carry out the
transactions contemplated by this Agreement. There is no action, claim,
investigation, arbitration, grievance, litigation, suit or proceeding of any
kind, to Sellers' knowledge, threatened or pending against the Company or
arising out of or relating to its business.
Financial Statements. Sellers have furnished to Purchaser copies of (i)
unaudited balance sheets of the Company and unaudited statements of income,
changes in members' equity and statements of cash flow for January 14, 2000,
through March 31, 2000 (the "Financial Statements").
The Financial Statements, assuming the Company will continue as a
going concern, are true and correct and present fairly in all material respects
the financial condition of the Company and the results of operations and changes
in cash flow of the Company for the periods to which each relates.
Organization and Standing. The Company is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Arizona.
Title to Assets. The Company holds good and marketable title to and
owns its assets (the "Assets"). The Assets are free and clear of all Liens,
charges, demands or adverse claims or other restrictions on the exercise of any
of the attributes of ownership.
Broker's Fees. Sellers represent and warrant that no agent, broker,
investment banker, person or firm acting on behalf of or under the authority of
Sellers is or will be entitled to any broker's or finder's fee or any other
commission directly or indirectly in connection with the transactions
contemplated herein.
Subsidiaries. The Company has no subsidiaries. The Company
does not directly or indirectly own or control, either by power to control the
investment or power to vote, any shares of capital stock of, or other equity
interests in, any other corporation or entity. The Company is not a party to any
joint venture, a partner of a general or limited partnership, or a member of a
limited liability company or a member of any unincorporated association.
<PAGE>
Tax Matters. The Company has duly made all deposits required by law to
be made with respect to employees' withholding taxes. The Company has duly filed
all income, foreign, franchise, excise, employment and payroll related, real and
personal property, sales and gross receipts tax returns and all other tax
returns which were required to be filed by it. No agreement for the extension of
time for the assessment of any deficiencies or adjustment with respect to any
tax return filed by the Company has been assessed, and the Members have no
knowledge of any unassessed tax deficiency proposed or threatened against the
Company. All such tax returns were correct and complete in all material
respects. All taxes owed by the Company (whether or not shown on said returns)
have been paid.
Investment Representation. Sellers are knowledgeable and experienced in
financial and business matters, are experienced in evaluating businesses such as
Purchaser, and have retained and consulted legal and financial advisors who are
capable of evaluating the merits and risks of the transaction contemplated by
this Agreement. Sellers are acquiring the Shares for their own account, for
purposes of obtaining interest in the Business, and not with a view to, or for
resale in connection with any distribution or public offering thereof in
violation of the Federal Securities Act of 1933, as amended (the "Securities
Act"). Sellers understand and acknowledge that the Shares have not been
registered under the Securities Act and that Purchaser does not presently intend
to register the Shares. Sellers must therefore hold the Shares and bear the
economic risk of their investment in the Shares indefinitely, unless the Shares
are registered under the Securities Act or exempt from registration. Sellers
understand and acknowledge that no public market now exists for the Shares and
that it is unlikely that a public market will ever exist for the Shares. Sellers
understand and acknowledge that the certificates issued to Sellers representing
the Shares may be endorsed by the following legend:
"This certificate and the shares evidenced hereby have been acquired
for investment and not with a view to, or for resale in connection
with, any distribution within the meaning of the Securities Act of
1933, as amended, and may not be transferred until the Company has been
furnished with an opinion of counsel, satisfactory to it, to the effect
that such transfer will not involve any violation of the Securities Act
of 1933, as amended, or other applicable federal or state securities
laws. No transfer without such prior opinion of counsel will be
registered on the books of the Company, or if registered, it and any
successive transfers arising from it may be cancelled on the books of
the Company as originally and continuously void. Acceptance of this
certificate constitutes acceptance of the foregoing restrictions.
The shares represented by this certificate are subject to the
provisions of a Shareholders' Agreement dated as of May ___, 2000 (a
copy of which is on file with the Secretary of the Company). This
certificate and the shares represented hereby may not be sold,
assigned, transferred, encumbered, or in any manner disposed of except
in conformity with the terms of a written stockholders agreement among
Capital Development Group, Inc. and the registered holder of the shares
(or the predecessor in interest to the shares). Such agreement contains
certain rights and obligations regarding corporate governance and
regarding the voting, sale, assignment, transfer, encumbrance or other
disposition of such corporations' shares. The Corporation will upon
written request furnish a copy of such agreement to the holder hereof
without charge.
<PAGE>
Sellers understand and acknowledge that they are acquiring a minority interest
in a closely-held corporation and will therefore not be in a position to
exercise voting control over the business and affairs of Purchaser. Sellers
further understand and acknowledge that other shareholders of Purchaser may, by
majority vote, control Purchaser's Board of Directors, may adopt provisions
restricting corporate operation, and may issue additional capital stock which
may dilute Seller's ownership interest in Purchaser.
Compliance with Laws; Licenses and Permits. To Sellers' knowledge, the
Company is not in violation of any law, rule, regulation, order, judgment or
decree applicable to it or by which any of its assets or properties is bound or
affected, except for violations the existence of which would not have an adverse
effect upon the Business of the Company. The Company has all governmental
licenses, franchises, permits, approvals, authorizations, exemptions,
certificates, registrations and similar documents or instruments necessary to
carry on its Business as it is now being conducted. Exhibit E contains a list of
Licenses and Permits necessary to carry on the Business, all of which are being
assigned to Purchaser by Sellers in accordance with the terms of this Agreement.
Accuracy and Completeness of Representations and Warranties. No
representation or warranty made by Sellers in this Agreement and no statement
contained in any document or instrument delivered or to be delivered to
Purchaser pursuant hereto 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 contained herein or therein not misleading.
Representations and Warranties of Purchaser. Purchaser represents and
warrants to Sellers that the following statements are true and correct as of the
date hereof and will be true and correct on the Closing Date as though made on
such date:
Corporate Organization and Standing. Purchaser is a corporation duly
organized and validly existing under the laws of the State of Oregon.
Corporate Power and Authority. Except for the authority to issue the
CDG Preferred Shares, which Purchaser will obtain from its shareholders within
sixty (60) days after the Closing Date, Purchaser has all requisite corporate
power and authority to enter into, execute, deliver and perform this Agreement
and to carry out the transactions contemplated hereby.
Authorization; Enforceability. On the Closing Date, and except for the
authorization of the CDG Preferred Shares, Purchaser will have taken or caused
to be taken all corporate action necessary for the authorization, execution,
delivery and performance of this Agreement by Purchaser and the consummation of
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by Purchaser. Assuming the due authorization, execution and delivery
by Sellers, and assuming the authorization of the CDG Preferred Shares, this
Agreement constitutes a valid and binding obligation of Purchaser, enforceable
against Purchaser in accordance with its terms, except to the extent that
enforceability may be limited by bankruptcy, reorganization, insolvency or other
laws affecting the enforcement of creditors' rights generally or the
availability of equitable remedies subject to the discretion of the court.
<PAGE>
Absence of Certain Conflicts. Neither the execution and delivery by
Purchaser of this Agreement nor the consummation of the transactions
contemplated hereby will (i) conflict with or result in a breach of any
provision of the Articles of Incorporation or Bylaws of Purchaser, (ii) require
Purchaser to obtain any consent, approval, authorization or permit of, or make
any filing with or provide any notification to, any Governmental Authority,
except for the authorization of the CDG Preferred Shares by the CDG shareholders
(iii) conflict with or result in a breach of any material contract, agreement,
indenture or instrument to which Purchaser is a party or by which its property
is bound, or (iv) to the knowledge of Purchaser, violate any judgment, decree,
order, injunction, or, any statute, law, regulation or rule of any Governmental
Authority applicable to Purchaser or its operations or property.
Litigation. There is no action or suit pending or, to Purchaser's
knowledge, threatened which alone or in the aggregate with other actions and
suits could reasonably be expected to restrict Purchaser's ability to carry out
the transactions contemplated by this Agreement.
Broker's Fees. Purchaser represents and warrants that no agent, broker,
investment banker, person or firm acting on behalf of or under the authority of
it is or will be entitled to any broker's or finder's fee or any other
commission directly or indirectly in connection with the transactions
contemplated herein.
Conduct of the Business. Purchaser represents and warrants that it will
continue to operate the Business and the Company as a separate business entity
conducting the Business after the Closing Date and that Purchaser will not
liquidate the assets of the Company prior to the date the Bonus Shares may be
issued according to the provisions contained in Section 2.3.2 of this Agreement.
Closing.
Closing. The closing of the transactions contemplated by this Agreement
(the "Closing") will take place on May 31, 2000 (the "Closing Date"),
immediately after execution of this Agreement.
Closing Deliveries by Sellers. At the Closing, Sellers shall deliver or
cause to be delivered to Purchaser:
Certificates. Certificates or other documentation, if available,
representing the Interests, properly endorsed for transfer;
Shareholders' Agreement. An executed counterpart of the
Shareholders' Agreement in a form substantially similar to the attached Exhibit
B to this Agreement;
Documents of Transfer. Such other instruments and documents as
Purchaser may reasonably require to vest in Purchaser all right, title and
interest of Sellers in and to the Interests; and
Other Closing Documents. All other documents required by the
provisions of this Agreement to be delivered at Closing by Sellers.
Closing Deliveries by Purchaser. At the Closing, Purchaser shall
deliver or cause to be delivered to Sellers:
<PAGE>
CDG Common Shares. The initial payment of the Purchase Price
equaling Three Hundred Fifty Thousand Eight Hundred (350,800) CDG Common Shares,
certificated and properly issued;
CDG Preferred Shares. A resolution of the CDG board of directors,
recommending that the CDG shareholders approve the authorization of the CDG
Preferred Shares, together with a letter from CDG shareholders Michael P. Vahl
and Mr. Gordon Root, certifying to Sellers that such shareholders will, in their
capacity as shareholders, vote to authorize the CDG Preferred Shares;
Shareholders' Agreement. The Shareholders' Agreement in a form
substantially similar to the attached Exhibit B to this Agreement; and
Other Closing Documents. All other documents required by the
provisions of this Agreement to be delivered at Closing by Purchaser.
Survival of Representations And Warranties; Indemnification.
Survival of Representations and Warranties. All representations and
warranties contained in this Agreement or made pursuant hereto, whether express
or implied, shall survive the Closing and shall terminate three (3) years from
the Closing Date and thereafter shall be of no force or effect, except for any
claim with respect to which notice has been given to the party to be charged
prior to such expiration date.
Indemnification by Sellers. Subject to the Closing having occurred and
the provisions of Section 6.1 , each Seller shall protect, defend, indemnify,
and hold Purchaser, and its successors and assigns, officers, directors, agents,
shareholders and employees (each, a "Purchaser Indemnitee") harmless from and
against any Loss suffered by a Purchaser Indemnitee that results from or, to the
extent that the Loss relates to, any breach of any of the representations or
warranties of, or of any covenants or agreements made by, Sellers contained in
this Agreement, or any activities of the Company prior to the Closing Date.
Indemnification by Purchaser. Subject to the Closing having occurred
and the provisions of Section 6.1 , Purchaser shall protect, defend, indemnify,
and hold Sellers (each, a "Seller Indemnitee") harmless from and against any
Loss suffered by a Seller Indemnitee that results from or, to the extent that
the Loss relates to, any breach of any of the representations or warranties of,
or of any covenants or agreements made by, Purchaser contained in this
Agreement, or any activities of CDG prior to the Closing Date.
<PAGE>
Miscellaneous.
Amendments and Waivers. The provisions of this Agreement may
be amended only by the written agreement of all of the parties hereto. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any provisions or conditions of this Agreement must be made in writing
and shall be effective only to the extent specifically set forth in such
writing.
Successors and Assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties hereto and any
purported assignment or delegation of this Agreement without such consent shall
be null and void. This Agreement is binding upon and inures to the benefit of
the parties hereto and their respective successors, heirs, executors and
permitted assigns.
Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law.
If any provision of this Agreement is held to be prohibited by or invalid under
applicable law, such provision will be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of this Agreement.
Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience of reference only and do not constitute a part of this
Agreement.
Notices. Any notices, requests, demands or other communications
required or permitted to be sent hereunder or under any Related Document shall
be delivered personally, sent by overnight or international courier or mailed by
registered or certified mail, return receipt requested, to the following
addresses, and shall be deemed to have been received on the day of personal
delivery, one (1) Business Day after deposit with an overnight domestic courier
or three (3) Business Days after deposit in the mail:
If to Purchaser, to:
Capital Development Group, Inc.
7126 Stanhope Lane
Riverside, CA 92506
Attn: Michael P. Vahl, President
Telephone: (909) 789-6272
Facsimile: (909) 789-6270
with a copy to:
Davis Wright Tremaine LLP
1300 SW Fifth Avenue, Suite 2300
Portland, Oregon 97201
Attn: Timothy M. Dozois, Esq.
Telephone: (503) 241-2300
Facsimile: (503) 778-5299
<PAGE>
If to Sellers, to:
Bruce F. Gulledge Peter D. Smith
5607 East Horseshoe Road 1537 East South Fork Drive
Paradise Valley, Arizona 85253 Phoenix, Arizona 85048
Telephone: (480) 483-6492 Telephone: (480) 283-0085
Facsimile: (480) 483-1168
Rick O. Rentschler
---------------------------------
---------------------------------
Telephone:
Facsimile:
with a copy to:
Arthur P. Allsworth, Esq.
1649 East Bethany Home Road
Phoenix, Arizona 85016-2530
Telephone: (602) 277-6627
Facsimile: (602) 277-6427
Governing Law. The validity, meaning and effect of this Agreement shall
be determined in accordance with the laws of the State of Oregon applicable to
contracts made and to be performed in that state.
Execution in Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute one instrument.
Parties in Interest. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by any reason of
this Agreement on any Persons other than the parties to it and their respective
permitted successors and assigns. Nothing in this Agreement is intended to
relieve or discharge the obligation or liability of any third Persons to any
party to this Agreement, nor shall any provision give any third Persons any
right of subrogation or action over against any party to this Agreement.
Expenses; Attorneys' Fees. Whether or not the transactions contemplated
by this Agreement are consummated, and except as otherwise expressly provided in
this Agreement, each of the parties hereto will pay its own expenses incurred by
it or on its behalf in connection with this Agreement or any transactions
contemplated by this Agreement. Notwithstanding the foregoing, in any legal
action or other proceeding (including any arbitration proceeding) brought to
enforce or interpret the terms of this Agreement or any Related Document, the
prevailing party or parties shall be entitled to reasonable attorney's fees and
other costs and expenses incurred in that proceeding and in any subsequent
appeals, in addition to any other relief to which it is entitled.
Entire Agreement. This Agreement, including the Shareholder Agreement,
and the other exhibits, certificates and documents expressly referred to herein
or therein which form a part hereof or thereof, including without limitation the
Confidentiality Agreement, constitute the entire agreement of the parties
concerning the matters referred to herein and therein and supersede all prior
agreements and understandings, oral or written.
<PAGE>
The parties hereto have executed this Agreement as of the date first set forth
above.
SELLERS:
----------------------------------- -----------------------------------
Bruce F. Gulledge, Individually Peter D. Smith, Individually
-----------------------------------
Rick O. Rentschler, Individually
PURCHASER:
CAPITAL DEVELOPMENT GROUP, INC.
an Oregon corporation
-----------------------------------
Michael P. Vahl, President
4.1 IntraMed Shareholder Agreement - 04/29/2000
CAPITAL DEVELOPMENT GROUP, INC. SHAREHOLDER AGREEMENT
This Shareholder Agreement (this "Agreement") is made as of the 1st day of May,
2000, by and among Capital Development Group, Inc., an Oregon corporation (the
"Company"), and the shareholders of the Company listed on Schedule A hereto
executing this Agreement (each, a "Shareholder"). The parties acknowledge that
Schedule A may be amended from time to time in accordance with the terms of this
Agreement.
BACKGROUND
The Company has, in connection with the execution of this Agreement, issued to
some or all of the Shareholders shares of common stock of the Company (the
"Shares") in a stock for stock exchange pursuant to a Stock Purchase Agreement
(the "Purchase Agreement"). As a condition to the closing of the Purchase
Agreement and the Shareholders' receipt of Shares, the Shareholders have agreed
to impose certain restrictions on the Shares and to provide for certain rights
and obligations with respect to the Stock. The Company also desires to provide
certain information rights to the Shareholders in connection with their equity
interests. Therefore, the parties agree as follows:
AGREEMENT
Voting Agreements
Irrevocable Proxy
The Shareholders hereby provide a proxy to and irrevocably appoint Michael P.
Vahl to vote their Shares for all purposes. This proxy and appointment is
coupled with an interest and shall survive until the earlier of (a) the third
anniversary of this Agreement, (b) the closing of a transaction in which all of
the Shares are exchanged for unrestricted securities, or (c) the date on which
Shares are sold in accordance with this Agreement. If Shareholders sell less
than all of their Shares, the proxy and appointment shall continue with respect
to any Shares remaining unsold, as well as any other shares of common stock
acquired or obtained by the Shareholders.
Board of Directors
Until and unless the Company receives one or more equity investments totaling
$2,000,000 or more, the Company and the Shareholders agree to limit the size of
the Company's board of directors to six members, three of whom shall be elected
by the holders of the Company's common stock, one of whom shall be elected by
the holders of the Company's Series A Preferred Stock, and the remaining two of
whom shall be appointed by the other four directors.
Market Stand-Off Agreement
Stand-Off Obligation
All Shareholders hereby agree that, in connection with each of the first two
underwritten public offerings by the Company of its equity securities pursuant
to an effective registration statement filed under the Act or under similar laws
of any other nation or commonwealth (as the case may be) subsequent to the date
hereof, and upon the request of the Company, each such Shareholder shall enter
into a customary agreement to not directly or indirectly transfer, offer to
transfer, contract to transfer (including, without limitation, any short sale)
or grant any option to transfer any Shares (except any Shares that may be
included in such registration), as may be required by the underwriters of such
public offering, provided that such restriction shall not extend for a period
beyond 180 days following the commencement of such offering.
Enforcement of Stand-Off Obligation
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Shares of each Shareholder until
the end of the market stand-off period.
Inapplicable Registrations
The obligations described in this Section 2 shall not apply to (a) a
registration relating solely to employee benefit plans (including any
registration pursuant to any Form S-1, Form S-8 or similar forms that may be
promulgated under the Act in the future or as may be applicable under similar
laws of any other nation or commonwealth), or (b) a registration relating solely
to a Securities and Exchange Commission Rule 145 transaction on Form S-4 or
similar forms that may be promulgated under the Act in the future or as may be
applicable under similar laws of any other nation or commonwealth.
Information Rights
The Company will notify the Shareholders promptly following the filing of
quarterly, annual and other periodic reports as required by the reporting
requirements of the 1934 Act, so that the Shareholders can promptly obtain
access to such reports.
Legended Certificates
Each certificate representing Shares shall be endorsed with substantially the
following legend:
This certificate and the shares represented hereby may not be sold,
assigned, transferred, encumbered, or in any manner disposed of except
in conformity with the terms of a written stockholders agreement among
Capital Development Group, Inc. and the registered holder of the shares
(or the predecessor in interest to the shares). Such agreement contains
certain rights and obligations regarding corporate governance and
regarding the voting, sale, assignment, transfer, encumbrance or other
disposition of such corporations' shares. The Corporation will upon
written request furnish a copy of such agreement to the holder hereof
without charge.
<PAGE>
The legend provided by this Section 4 may be removed upon termination of this
Agreement in accordance with the provisions of Section 5. Notwithstanding any
termination of this Agreement, each Shareholder acknowledges that shares of
Stock may not be transferred absent compliance with applicable federal, state
and foreign securities laws.
Termination
This Agreement shall terminate upon the third anniversary of this Agreement.
This Agreement may alsobe terminated in its entirety prior to such time upon
agreement of Company shareholders who possess not less than seventy-five percent
(75%) of the voting stock of the Company.
Miscellaneous
Governing Law
This Agreement shall in all respects, including all matters of
construction, validity and performance, be governed by, and construed and
enforced in accordance with, the laws of the state of Oregon.
Counterparts and Effectiveness
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument. This Agreement shall become effective as to all parties
executing and delivering this Agreement when it has been executed and delivered
by all Shareholders.
Notices
All notices, demands, requests or other communications that may be or are
required to be given, served, transmitted or delivered by any party to any other
party pursuant to this Agreement shall be in writing and shall be hand
delivered, or transmitted by verified facsimile or internationally recognized
air courier, addressed to the party to be notified at the address indicated for
such party on the signature page hereof, or at such other address as such party
may designate by 10 days' advance written notice to the other party given in the
foregoing manner. Each notice, demand, request or other communication that shall
be hand delivered, telecopied or delivered in the manner described above shall
be deemed sufficiently given, served, transmitted or delivered for all purposes
at such time as it is delivered to the addressee (with the delivery receipt or,
with respect to a telecopy, the answer back being deemed conclusive, but not
exclusive, evidence of such delivery) or at such time as delivery is refused by
the addressee upon presentation.
Expenses
If any action at law or in equity is necessary to enforce or interpret the terms
of this Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
Amendments and Waivers
Any term of this Agreement may be amended and the observance of any
term may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of Shareholders
who possess not less than seventy-five percent (75%) of the voting stock of the
Company. Notwithstanding the foregoing, Schedule A to this Agreement may be
amended from time to time by (a) the Company to reflect the actual holdings of
the Shareholders of shares of Stock without formally amending this Agreement or
(b) a supplement adding a new party to this Agreement as a Shareholder. Any
amendment or waiver effected in accordance with this Section shall be binding on
each Shareholder then a party to this Agreement, each future Shareholder and the
Company.
Severability
If one or more provisions of this Agreement are held to be unenforceable under
applicable law, such provision shall be excluded from this Agreement and the
balance of the Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
<PAGE>
Further Assurances
Each party agrees from time to time to do and perform such other and future acts
(including the taking of board and stockholder action) and execute and deliver
any and all such other instruments as may be required by law or reasonably
requested by the other parties to establish, maintain or protect the rights and
remedies of the requesting party or to carry out and effect the intent and
purpose of this Agreement.
Damages and Injunctive Relief
No party shall be liable for any unforeseeable, special, consequential or
indirect damages arising from any breach or nonobservance of any term or
condition of this Agreement. It is acknowledged that it will be impossible to
measure in money the damages that would be suffered if the parties fail to
comply with any of the obligations herein imposed on them and that in the event
of any such failure, an aggrieved person will be irreparably damaged and will
not have an adequate remedy at law. Any such person shall, therefore, be
entitled to injunctive relief, including specific performance, to enforce such
obligations, and if any action shall be brought in equity to enforce any of the
provisions of this Agreement, none of the parties hereto shall raise the defense
that there is an adequate remedy at law.
Entire Agreement
This Agreement supersedes in its entirety all prior or contemporaneous
agreements and all related understandings, written or oral, among the parties
with regard to the subject matter of this Agreement (but not other contracts to
which the Company may be subject) and constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Shareholders Agreement as of
the date first above written.
CAPITAL DEVELOPMENT GROUP, INC.
By:
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Name: Michael P. Vahl
Title: President
<PAGE>
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<PAGE>
4.2 Healthsource Financial Advisors Shareholders Agreement - 05/31/2000
CAPITAL DEVELOPMENT GROUP, INC. SHAREHOLDER AGREEMENT
This Shareholder Agreement (this "Agreement") is made as of the ______ day of
May, 2000, by and among Capital Development Group, Inc., an Oregon corporation
(the "Company"), and the shareholders of the Company listed on Schedule A hereto
executing this Agreement (each, a "Shareholder"). The parties acknowledge that
Schedule A may be amended from time to time in accordance with the terms of this
Agreement.
BACKGROUND
The Company has, in connection with the execution of this Agreement, issued to
some or all of the Shareholders shares of common stock of the Company (the
"Common Shares") in a plan of reorganization (the "Plan of Reorganization") and
issued to some or all of the Shareholders shares of preferred stock of the
Company (the "Preferred Shares," the Common Shares and the Preferred Shares are
referred to collectively as the "Shares"). As a condition to the closing of the
Plan of Reorganization and the Shareholders' receipt of Shares, the Shareholders
have agreed to impose certain restrictions on the Shares and to provide for
certain rights and obligations with respect to the Stock. The Company also
desires to provide certain information rights to the Shareholders in connection
with their equity interests. Therefore, the parties agree as follows:
<PAGE>
AGREEMENT
Voting Agreements
Board of Directors
Until and unless the Company receives one or more equity investments totaling
$2,000,000 or more, the Company and the Shareholders agree to limit the size of
the Company's board of directors to six members, three of whom shall be elected
by the holders of the Company's common stock, one of whom shall be elected by
the holders of the Company's Series A Preferred Stock, and the remaining two of
whom shall be appointed by the other four directors. Upon receipt by the Company
of one or more equity investments totaling $2,000,000 or more, the Company and
the Shareholders agree to increase the size of the Company's board of directors
to seven members.
Market Stand-Off Agreement
Stand-Off Obligation
All Shareholders hereby agree that, in connection with each of the first two
underwritten public offerings by the Company of its equity securities pursuant
to an effective registration statement filed under the Act or under similar laws
of any other nation or commonwealth (as the case may be) subsequent to the date
hereof, and upon the request of the Company, each such Shareholder shall enter
into a customary agreement to not directly or indirectly transfer, offer to
transfer, contract to transfer (including, without limitation, any short sale)
or grant any option to transfer any Shares (except any Shares that may be
included in such registration), as may be required by the underwriters of such
public offering, provided that such restriction shall not extend for a period
beyond 180 days following the commencement of such offering.
Enforcement of Stand-Off Obligation
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Shares of each Shareholder until
the end of the market stand-off period.
Inapplicable Registrations
The obligations described in this Section 2 shall not apply to (a) a
registration relating solely to employee benefit plans (including any
registration pursuant to any Form S-1, Form S-8 or similar forms that may be
promulgated under the Act in the future or as may be applicable under similar
laws of any other nation or commonwealth), or (b) a registration relating solely
to a Securities and Exchange Commission Rule 145 transaction on Form S-4 or
similar forms that may be promulgated under the Act in the future or as may be
applicable under similar laws of any other nation or commonwealth.
Information Rights
The Company will notify the Shareholders promptly following the filing of
quarterly, annual and other periodic reports as required by the reporting
requirements of the 1934 Act, so that the Shareholders can promptly obtain
access to such reports. The Company will also provide the Shareholders with
adequate financial statements (income statement, balance sheet, and cash flow)
together with management discussion analysis within forty-five (45) days of the
end of each fiscal quarter.
Piggyback Registration.
If at any time prior to October 31, 2003, the Company shall determine
to register any of its securities under the Act or the Company is required to
register its securities pursuant to the demand registration rights of any other
person (other than a registration statement on Form S-8, Form S-4 or other
limited purpose form) and in connection therewith the Company may lawfully
register any of the Registrable Securities (defined below), the Company will
promptly give written notice thereof to the holders of Preferred Shares and
Common Shares (collectively, the "Holders"). Upon the written request of
Holder(s) received by the Company within thirty (30) days after receipt of any
such notice from the Company, the Company will, except as herein provided and
subject to the provisions of Section 6, cause all Registrable Securities which
the Holders have requested to be registered to be included in such Registration
Statement, all to the extent requisite to permit the sale or other disposition
of the Registrable Securities. However,
<PAGE>
nothing herein shall prevent the Company from at any time abandoning or delaying
any registration initiated under this Section 4. "Registrable Securities" means
(i) the Common Shares issued pursuant to the Plan of Reorganization; (ii) the
Common Stock issuable or issued upon conversion of the Preferred Shares, and
(iii) any Common Stock of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of the shares referenced in (i) or (ii) above, excluding in all
cases, however, any Registrable Securities (a) sold by a person in a transaction
in which the rights under this Agreement are not assigned or (b) which are
eligible to be distributed pursuant to Rule 144 promulgated under the Securities
Act in a single three-month period by the holder thereof.
Priority in Underwritten Registrations.
If a registration is an underwritten registration and the managing
underwriters shall give written advice to the Company and the persons requesting
such registration that, in their opinion, market conditions dictate that no more
than a specified maximum number of securities could successfully be included in
such registration, then the maximum number of securities included in such
registration statement shall be limited to such specified number, and the rights
of the Holders to participate in such registration shall be subject to the
following cutback provisions. In all such registrations (a) the securities
sought to be included by the Company for its own account shall have priority for
inclusion over any securities held by the Holders, (b) the securities sought to
be included in such offering by any entity exercising demand registration rights
shall have priority for inclusion over any securities sought to be registered
pursuant to piggyback registration rights, and (c) subject to the foregoing,
securities will be excluded on a pro rata basis with all other securities being
registered based upon the relative number of securities sought to be so
included.
Registration Procedures.
If and whenever the Company is required by the provisions of this
Agreement to effect the registration of Registrable Securities under the Act,
the Company shall:
prepare and file with the Commission a Registration Statement
with respect to such securities, and use its best efforts to cause such
Registration Statement to become and remain effective for such period as may be
reasonably necessary to effect the sale of such securities;
as expeditiously as possible, prepare and file with the Commission
such amendments to such Registration Statement and supplements to the prospectus
contained therein as may be necessary to keep such Registration Statement
effective for such period as may be reasonably necessary to effect the sale of
such Registrable Securities;
as expeditiously as possible, furnish to each of the Holders
participating in such registration and to the underwriters of the securities
being registered such reasonable number of copies of the Registration Statement,
preliminary prospectus, final prospectus and such other documents as such
underwriters may reasonably request in order to facilitate the public offering
of such securities;
<PAGE>
as expeditiously as possible, use its best efforts to register or
qualify the securities covered by such Registration Statement under the state
securities or blue sky laws of such jurisdictions as such participating Holder
may reasonably request following the original filing of such Registration
Statement and do any and all other acts and things that may be reasonably
necessary to enable the Holders to consummate the public sale or other
disposition in such states; provided, that the Company shall not for any purpose
be required to execute a general consent to service of process or to qualify to
do business as a foreign Company in any jurisdiction wherein it is not so
qualified;
as expeditiously as possible, notify each Holder participating in
such registration, promptly after it shall receive notice thereof, of the time
when such Registration Statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
as expeditiously as possible, notify each Holder of any request by
the Commission for the amending or supplementing of such Registration Statement
or prospectus or for additional information;
as expeditiously as possible, prepare and file with the
Commission, upon the request of any such Holders, any amendments or supplements
to such Registration Statement or prospectus which, in the opinion of counsel
for such Holders (and concurred in by counsel for the Company), is required
under the Act or the rules and regulations thereunder in connection with the
distribution of the Registrable Securities by such Holders;
as expeditiously as possible, prepare and file with the Commission
and notify each such Holder of the filing of such amendment or supplement to
such Registration Statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Act, any event shall have
occurred as the result of which any such prospectus or any other prospectus as
then in effect would include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances in which they were made, not misleading;
as expeditiously as possible, advise each such Holder, after it
shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of such Registration
Statement or the initiation or threatening of any proceeding for that purpose
and promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued.
not file any amendment or supplement to such Registration
Statement or prospectus to which a majority in interest of such participating
Holders shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the requirements of the
Act or the rules and regulations thereunder, after having been furnished with a
copy thereof at least five business days prior to the filing thereof, unless in
the opinion of counsel for the Company the filing of such amendment or
supplement is reasonably necessary to protect the Company from any liabilities
under any applicable federal or state law and such filing will not violate
applicable law; and
<PAGE>
at the request of any such participating Holder and if and to the
extent any of the following are obtained by or furnished to the Company or the
underwriter, furnish on the effective date of the Registration Statement and, if
such registration includes an underwritten public offering, at the closing
provided for in the underwriting agreement: (i) an opinion, dated each such
date, of the counsel representing the Company for the purposes of such
registration, addressed to the underwriters, if any, and to the Holders making
such request, covering such matters as such underwriters may reasonably request;
and (ii) a "cold comfort" letter dated each such date, from the independent
certified public accountants of the Company, addressed to the underwriters, if
any, and to the Holders making such request, covering such matters as such
underwriters may reasonably request. "Registration Statement" means a
registration statement filed with the Commission under the Act pursuant to this
Agreement.
Expenses of Registration.
With respect to each inclusion of Registrable Securities in a
Registration Statement pursuant to Section 5 hereof, all fees, costs and
expenses of and incidental to such registration, inclusion and public offering
(as specified in Paragraph (b) below) shall be borne by the Company; provided,
however, that any Holders participating in such registration shall bear the fees
and expense of their special counsel and their pro rata share of the
underwriting discount and commissions, transfer taxes and any expenses which the
selling Holders are required by state law to pay. Holders shall not contribute
to underwriting discounts and commissions if such Holders' Preferred Shares are
not converted and sold in the offering.
The fees, costs and expenses of registration to be borne by the
Company as provided in Paragraph (a) above shall mean all expenses incurred by
the Company in complying with this Agreement, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel and accountants for the Company, fees and disbursements of counsel for
the underwriter or underwriters of such securities (if the Company and/or
selling Holders are required to bear such fees and disbursements), all legal
fees and disbursements and other expenses of complying with state securities or
blue sky laws of any jurisdictions in which the securities to be offered are to
be registered or qualified, and the premiums and other costs of policies of
insurance against liability arising out of such public offering, fees and
disbursements of one counsel and one firm of accountants for the selling
Holders. Any other expenses incurred by the selling Holders not expressly
included above shall be borne by the selling Holders.
The Company shall not be required to pay any expenses of a
registration begun pursuant to Section 5 if the request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities covered thereby, unless the Holders agree to forfeit one registration
pursuant to such Section. The Company shall not be required to pay any expenses
of a registration completed pursuant to Section 5 beyond the amount indicated
therein.
Right of Company to Defer or Suspend Registration.
If the Company shall furnish to the Holders for whose benefit a
Registration Statement is in effect as provided in Section 5 hereof) a
certificate (the "CEO Certificate") signed by the Chief Executive Officer of the
Company stating that in the good faith judgment of the Board of Directors of the
Company, it would be detrimental to the Company and its stockholders for a
Registration Statement to be filed or remain in effect and it is therefore
essential to defer filing or suspend the effectiveness of such Registration
Statement, the Company shall have the right to defer taking action with respect
to such filing or suspend the effectiveness of such Registration Statement for a
period of not more than one hundred twenty (120) days after receipt of the
request of the Holders in the case of such deferral, or for a period of not more
than ninety (90) days after the delivery of the CEO Certificate in the case of
such suspension; provided, however, that the Company may not realize this right
more than once in any twelve-month period.
<PAGE>
Co-Sale Rights.
If any Shareholder of the Company who holds 200,000 or more Common
Shares or 10,000 or more Preferred Shares of the Company (the "Selling
Shareholder") proposes in a single transaction to transfer a number of shares
representing five percent (5%) or more of the Common Share Equivalents held by
such Selling Shareholder (a "Transaction"), then the Selling Shareholder shall
refrain from effecting a Transaction unless, prior to the consummation thereof,
each Holder of Common Share Equivalents shall have been afforded the opportunity
to join in such transfer on a pro rata basis, as hereinafter provided. Any
purported transfer subject to this Section 9 not made in compliance with this
Section 9 shall be void and shall not be consummated upon the books and records
of the Company. "Common Share Equivalents" means Common Shares at the time
outstanding or issuable upon exercise of warrants at the time outstanding plus
the number of Common Shares into which the outstanding Preferred Shares would be
convertible if converted at the time.
Prior to the consummation of any Transaction, the Selling
Shareholder shall cause each person or persons that propose to acquire Shares in
the Transaction (the "Proposed Purchasers") to offer (the "Purchase Offer") in
writing to each Holder to purchase that number of Shares from each such Holder
that, on a convertible basis, constitutes the same percentage of the aggregate
Common Share Equivalents held by such Holder as the percentage determined by
dividing the number of Common Shares to be purchased from the Selling
Shareholder by the aggregate number of Common Shares held by the Selling
Shareholder, at the same price per share (the "Joining Price"), and on such
other terms and conditions (the "Joining Terms"), as the Proposed Purchaser has
offered to purchase Shares to be sold by the Selling Shareholder.
The provisions of this Section 9 shall not apply to: (i) Rule 144
Sales or (ii) a sale of Registrable Securities pursuant to exercise of the
registration rights granted under this Agreement. In the event that a
Transaction subject to this Section 9 is proposed to be undertaken with a person
other than a Shareholder or the Company, the Selling Shareholder shall notify
such person that the Transaction is subject to this Agreement and shall ensure
that no Transaction is consummated without compliance with this Section 9.
Legended Certificates
Each certificate representing Shares shall be endorsed with substantially the
following legend:
This certificate and the shares represented hereby may not be sold,
assigned, transferred, encumbered, or in any manner disposed of except
in conformity with the terms of this Shareholders' Agreement and the
registered holder of the shares (or the predecessor in interest to the
shares). The Shareholders' Agreement contains certain rights and
obligations regarding corporate governance and regarding the voting,
sale, assignment, transfer, encumbrance or other disposition of the
Company's shares. The Company will upon written request furnish a copy
of the Shareholders' Agreement to the holder hereof without charge.
<PAGE>
The legend provided by this Section 10 may be removed upon termination of this
Agreement in accordance with the provisions of Section 11. Notwithstanding any
termination of this Agreement, each Shareholder acknowledges that shares of
Stock may not be transferred absent compliance with applicable federal, state
and foreign securities laws.
Termination
This Agreement shall terminate upon the third anniversary of this Agreement.
This Agreement may also be terminated in its entirety prior to such time upon
agreement of Company shareholders who possess not less than seventy-five percent
(75%) of the voting stock of the Company.
Miscellaneous
Governing Law
This Agreement shall in all respects, including all matters of
construction, validity and performance, be governed by, and construed and
enforced in accordance with, the laws of the State of Oregon.
Counterparts and Effectiveness
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument. This Agreement shall become effective as to all parties
executing and delivering this Agreement when it has been executed and delivered
by all Shareholders.
Notices
All notices, demands, requests or other communications that may be or are
required to be given, served, transmitted or delivered by any party to any other
party pursuant to this Agreement shall be in writing and shall be sent certified
or registered mail, hand delivered, or transmitted by verified facsimile (with
return acknowledgement of receipt) or internationally recognized air courier,
addressed to the party to be notified at the registered address of the party on
the books of the Corporation. Each notice, demand, request or other
communication that is mailed shall be deemed received five (5) business days
after deposit with the United States mail service. Each notice, demand, request
or other communication that is hand delivered, telecopied or delivered in any
other manner described above shall be deemed sufficiently given, served,
transmitted or delivered for all purposes at such time as it is delivered to the
addressee (with the delivery receipt or, with respect to a telecopy, the answer
back being deemed conclusive, but not exclusive, evidence of such delivery) or
at such time as delivery is refused by the addressee upon presentation.
Expenses
If any action at law or in equity is necessary to enforce or interpret the terms
of this Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
Amendments and Waivers
Any term of this Agreement may be amended and the observance of any
term may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of Shareholders
who possess not less than seventy-five percent (75%) of the voting stock of the
Company. Notwithstanding the foregoing, Schedule A to this Agreement may be
amended from time to time by (a) the Company to reflect the actual holdings of
the Shareholders of shares of Stock without formally amending this Agreement or
(b) a supplement adding a new party to this Agreement as a Shareholder. Any
amendment or waiver effected in accordance with this Section shall be binding on
each Shareholder then a party to this Agreement, each future Shareholder and the
Company.
<PAGE>
Severability
If one or more provisions of this Agreement are held to be unenforceable under
applicable law, such provision shall be excluded from this Agreement and the
balance of the Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
Further Assurances
Each party agrees from time to time to do and perform such other and future acts
(including the taking of board and stockholder action) and execute and deliver
any and all such other instruments as may be required by law or reasonably
requested by the other parties to establish, maintain or protect the rights and
remedies of the requesting party or to carry out and effect the intent and
purpose of this Agreement.
Damages and Injunctive Relief
No party shall be liable for any unforeseeable, special, consequential or
indirect damages arising from any breach or nonobservance of any term or
condition of this Agreement. It is acknowledged that it will be impossible to
measure in money the damages that would be suffered if the parties fail to
comply with any of the obligations herein imposed on them and that in the event
of any such failure, an aggrieved person will be irreparably damaged and will
not have an adequate remedy at law. Any such person shall, therefore, be
entitled to injunctive relief, including specific performance, to enforce such
obligations, and if any action shall be brought in equity to enforce any of the
provisions of this Agreement, none of the parties hereto shall raise the defense
that there is an adequate remedy at law.
Entire Agreement
This Agreement supersedes in its entirety all prior or contemporaneous
agreements and all related understandings, written or oral, among the parties
with regard to the subject matter of this Agreement (but not other contracts to
which the Company may be subject) and constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Shareholders Agreement as of
the date first above written.
CAPITAL DEVELOPMENT GROUP, INC.
By:
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Name: Michael P. Vahl
Title: President
<PAGE>
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4.3 Capital Development Group Convertible Note Agreement - 05/01/2000
THIS NOTE IS NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE,
AND NO INTEREST HEREIN MAY BE OFFERED, SOLD, DISTRIBUTED, ASSIGNED,
PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) THERE IS THEN EFFECTIVE A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS COVERING ANY SUCH TRANSACTION INVOLVING THIS NOTE; OR
(B) THE COMPANY RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF
THIS NOTE ACCEPTABLE TO THE COMPANY STATING THAT SUCH TRANSACTION IS
EXEMPT FROM REGISTRATION. THE COMPANY HAS ISSUED THIS NOTE IN RELIANCE
UPON THE HOLDER'S REPRESENTATION THAT THE HOLDER IS AN "ACCREDITED
INVESTOR" WITHIN THE MEANING OF THE SECURITIES ACT AND THE RULES
PROMULGATED THEREUNDER.
SUBORDINATED CONVERTIBLE PROMISSORY NOTE DUE NOVEMBER 30, 2001
$5,000 May 31, 2000
Portland, Oregon
FOR VALUE RECEIVED, the undersigned Capital Development Group, Inc., an
Oregon corporation (the "Company") promises to pay to the order of
______________________ (the "Holder," and together with the holders of all of
the Notes (as defined below), the "Holders"), at_______________________________,
or at such other place as the Holder may designate, the principal sum of five
thousand dollars ($5,000), together with interest thereon, payable in the manner
and on the terms set forth in this note (the "Note," and together with all of
the Company's Convertible Promissory Notes due November 30, 2001, the "Notes"):
1. Interest Rate; Interest Payments. This Note shall bear
interest, from the date hereof until paid, at a fixed rate equal to 10% per
annum. Interest is payable to the Holder on the Maturity Date (defined below),
and is payable, at the option of the Company, in the Company's Common Stock. If
paid in Common Stock, interest payments shall be calculated by dividing the
amount of interest due by the then current fair market value of the Common Stock
as determined (i) according to the average of the bid and ask prices of the
Company's Common Stock for the five trading days immediately preceding the date
of determination; or (ii) if the determination is made in connection with, or
within 60 days before or after, a merger, reorganization or sale of all or
substantially all of the Company's assets, or a registered public offering of
the Company's Common Stock, then at the valuation placed upon the Company's
Common Stock in connection therewith. Whether determined according to clause (i)
or (ii) of the previous sentence, the value so determined will be the "Fair
Market Value" for purposes of this Note.
2. Payments. This Note shall be due and payable in a single
installment of principal and interest on November 30, 2001 (the "Maturity Date")
unless sooner paid or converted in accordance with the terms of this Note.
3. Prepayments. The Company shall have the right to prepay this
Note, in whole or in part, at any time with no prepayment penalties; provided
that (i) any such payments, if not payment in full of all principal and
interest, shall be applied first against interest and then against principal;
and (ii) the Company shall give the Holder notice pursuant to Section 10 of its
intent to prepay all or any part of this Note, such notice to be transmitted not
less than thirty (30) days prior to the intended prepayment date. Thereafter,
the Company shall afford the Holder an opportunity to convert this Note until
the tenth (10th) day prior to the payment date specified in such notice.
<PAGE>
4. Subordination. This Note is hereby subordinated to all current
and future secured obligations of the Company, and subject to the applicability
of federal and state insolvency laws, shall rank on parity with or in preference
to all other of the Company's unsecured obligations.
5. Conversion. The Holder may convert all, but not less than all,
of the then outstanding principal amount of this Note into the Company's Common
Stock (a) at the election of each Holder (i) within 120 days prior to the
reasonably anticipated effective date of any registered, underwritten public
offering of the Company's equity securities with proceeds to the Company in
excess of $7,000,000 at a valuation in excess of $15,000,000 (a "Qualifying
Public Offering"); (ii) upon the occurrence of an Event of Default; (iii)
contemporaneously with a private placement of the Company's equity securities
resulting in an investment by one or a group of five or fewer investors of not
less than $2,000,000 (a "Qualifying Private Placement"); (iv) immediately prior
to the closing of any merger, reorganization or sale of all or substantially all
of the Company's assets; (v) on or before the tenth (10th) day prior to a
prepayment date specified in a notice of prepayment given pursuant to Section 3,
above; or (vi) at the Maturity Date; or (b) at the election of the Company
within 120 days prior to the reasonably anticipated effective date of any
Qualifying Public Offering. The number of shares issuable upon conversion (the
"Conversion Shares") shall be equal to the total amount of principal and unpaid
interest on this Note as of the date of conversion, divided by the Conversion
Price. The Conversion Price per share shall be equal to the lesser of (I) the
lowest per-share price at which Common Stock has been sold to any person (other
than pursuant to exercise of stock options or warrants) at any time after the
issuance of this Note and before the date of conversion; or (II) $0.50.
6. Default; Remedies. In the event the Company (i) fails to
perform or comply with any of the terms and provisions of this Note, if such
failure or non-compliance remains uncured after not less than ten (10) days'
written notice to the Company specifying the defect with reasonable detail; (ii)
experiences any event of the bankruptcy or any assignment for the benefit of
creditors or the commencement of an action for the appointment of a receiver for
the properties of the Company or other action or proceedings under federal or
state bankruptcy or insolvency laws that is not dismissed within ninety (90)
days after the date of filing (each of (i) and (ii) above being an "Event of
Default"), then in any such case the Holders of all Notes, voting as a group in
proportion to the relative face amounts of the Notes, may elect, as their sole
individual and collective remedy for such default, either (a) to convert the
Notes (as provided in Section 5 above) or (b) to elect two directors to the
Company's Board of Directors, and upon such election the Board of Directors
shall be increased by two seats to accommodate such election. Upon any Event of
Default in which the Holders determine to elect directors pursuant to option
(b), above, the Notes shall remain payable in accordance with their terms and
shall continue to accrue interest as provided in this Note. Any forbearance or
failure to exercise this right shall not constitute a waiver of the Holder's
right to exercise the right with respect to such default and any subsequent
default.
7. Registration Rights. For purposes of this Section 7, the term
"Registrable Securities" shall mean all of the Conversion Shares previously
issued or then issuable upon conversion of all the Notes, together with all
shares issued as payments of interest pursuant to Section 1 of the Notes.
Company Registration. The obligations of the Company arising under
this Section 7.1 shall be contingent upon the truth and accuracy of all
representations of the Holder contained in this Note, and satisfaction by the
Holder of the obligations arising under this Note.
Notice of Intent to Register. If at any time the Company elects to
to register shares of its Common Stock, either for its own account or the
account of a security holder, other than a registration relating solely to
employee benefit plans or a registration relating solely to a merger,
acquisition or reorganization, the Company shall:
<PAGE>
promptly give to each Holder written notice of the
registration pursuant to Section 10, below; and
include in such registration (and any elated qualification
under blue sky laws), and in any related underwriting, all
the Registrable Securities specified in a written request
made by any Holder within twenty (20) days after receipt
of such written notice from the Company.
Underwriting. If the notice required under Section 7.1(a)(i)
pertains to a public offering involving an underwriting, the Company shall so
advise the Holders as a part of the required notice. In an underwritten offering
the registration rights arising under this Section 7.1 shall be contingent on
the Holder's participation in the underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided in
the underwriting agreement, to which the Holder shall become a party upon
request by the Company. The underwriting agreement shall be in a form acceptable
to the managing underwriter who shall be selected by the Company in its sole and
absolute discretion.
Limitation on Registrable Securities in Registered Offering.
Notwithstanding any other provision of this Section 7.1, if the managing
underwriter of such registered offering, in its sole discretion, determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the Registrable Securities to
be included in such registration by reducing the shares to be issued and sold by
the Holder or Holders. The number of shares of Registrable Securities that may
be included in the registration and underwriting shall be allocated among all
Holders in proportion, as nearly as practicable, to the relative amounts of
Registrable Securities held by such Holders at the time the registration
statement is filed. To facilitate the allocation of shares in accordance with
the above provisions, in addition to the reduction permitted by the first two
sentences of this Section 7.1(c), the Company may, in its discretion, round the
number of shares allocated to any Holder down to the nearest one hundred (100)
shares. If any Holder or other shareholder disapproves of the terms of any
underwritten offering, that Holder may elect to withdraw from the offering by
written notice to the Company and the managing underwriter, and such withdrawal
shall not be counted against the limit imposed by Section 7.1(e); provided that
in the event such withdrawal is on or after the fifteenth (15th) day prior to
the effective date of the registration statement, the foregoing exception shall
not apply. Notwithstanding any contrary provision in this Note, any securities
excluded or withdrawn from the underwriting shall also be withdrawn from such
registration, and shall not be transferred prior to one hundred eighty (180)
days after the effective date of the registration statement. The Company may, in
its reasonable discretion, include other securities (including shares of stock
held by persons other than Holders) in a registration statement pursuant to this
Section 7.1.
Right to Terminate Registration. The Company shall have the right,
in its sole and absolute discretion, to terminate or withdraw any registration
initiated under this Section 7.1 prior to the effectiveness of such
registration, regardless of whether any Holder has elected to include securities
in such registration.
<PAGE>
Limitation on Number of Registrations. No registration shall be
effected by the Company pursuant to this Section 7.1 if the Holders collectively
have caused the Company to register Registrable Securities on three or more
occasions.
efforts to file a registration statement within one year from the
receipt of the Holders' initial request to file such registration.
Expenses of Registration. Registration expenses incurred in connection
with registrations pursuant to this Agreement, including listing and
qualification fees, registration fees, accounting and underwriting fees and
discounts of the Company, shall be borne by the Company. Unless otherwise agreed
by the Company in writing, all other expenses, including without limitation
taxes, excise fees and other governmental fees and surcharges, relating to
securities registered on behalf of the Holders shall be borne by the Holders of
such securities pro rata on the basis of the number of shares so registered.
Registration Procedures. In the case of each registration effected by
the Company pursuant to this Section 7, the Company shall keep each Holder
advised as to the initiation and status of registration. At its expense the
Company shall:
Prepare and file with the Commission a registration statement with
respect to such securities and use reasonable efforts to cause such registration
statement to become and remain effective for at least one hundred twenty (120)
days, including to prepare and file with the Commission such amendments to the
registration statement and supplements to the prospectus contained therein as
may be necessary;
Enter into a written underwriting agreement with an underwriter or
group of underwriters selected by the Company in its absolute discretion, such
agreement being in form and substance satisfactory to the Company and the
managing underwriter or underwriters in their collective and unfettered
discretion, if the offering is to be underwritten in whole or in part (which
determination shall be made by the Company on reasonable notice to the electing
Holders);
Furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
Use its reasonable efforts to register or qualify the securities
covered by such registration statement under the blue sky laws of such
jurisdictions as such participating Holders may reasonably request, except that
the Company shall not for any purpose be required to execute a general consent
to service of process or to qualify to do business as a foreign corporation in
any jurisdiction where it is not so qualified;
Notify each Holder (or if the Holder has appointed an
attorney-in-fact, the Holder's attorney-in-fact) participating in such
registration, promptly after it shall receive notice thereof, of the time when
such registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
<PAGE>
Notify such Holders or their attorney-in-fact promptly of any
request by the Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
Prepare and file with the Commission promptly upon the request of
any such Holders, any amendments or supplements to such registration statement
or prospectus which, in the reasonable opinion of counsel for the Company, is
required under the Securities Act in connection with the distribution of the
registrable securities by such Holders;
Prepare and promptly file with the Commission, and promptly notify
such Holders or their attorney-in-fact of the filing of, such amendment or
supplement to such registration statement or prospectus as may be necessary to
correct any statements or omissions if, at the time when a prospectus relating
to such securities is required to be delivered under the Securities Act, any
event has occurred as the result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein
not misleading in light of the circumstances in which they were made; and
Advise such Holders or their attorney-in-fact, promptly after it
shall receive notice thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose and promptly use
its reasonable efforts to prevent the issuance of any stop order or to obtain
its withdrawal if such stop order should be issued.
Information by Holder. The Holder of Registrable Securities
included in any registration shall timely furnish the Company such information
regarding such Holder or Holders, the Registrable Securities held by them and
the distribution proposed by such Holder or Holders as the Company may request
pertaining to any registration, qualification or compliance referred to in this
Section 7.
Transfer of Registration Rights. The rights to cause the Company to
register securities granted the Holder under this Section 7 may be assigned to a
transferee or assignee reasonably acceptable to the Company in connection with
any transfer or assignment of this Note by the Holder provided that: (i) such
transfer may otherwise be effected in accordance with Section 8, below, and in
compliance with all applicable securities laws; (ii) such assignee or transferee
acquires at least twenty percent (20%) of the Shares or Conversion Shares
(appropriately adjusted for stock split, stock dividend, reverse stock split,
recombination, reorganization or other recapitalization); (iii) the Holder shall
pay or cause to be paid all expenses incurred by the Company in connection with
such transfer; and (iv) such assignee or transferee agrees to be bound by this
Section 7 and by Section 8. This Section 7.7 shall not be construed to permit a
transfer of registration rights by any person other than the Holder.
Market Standoff. Each Holder agrees that, upon request of the Company
or the underwriters managing an underwritten offering of the Company's
securities, the Holder shall not sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Registrable Securities
(other than those included in the registration) without the prior written
consent of the Company or such underwriters, as the case may be, for a period of
time (not to exceed one hundred eighty (180) days) from the effective date of a
registration statement.
<PAGE>
Termination of Registration Rights. The rights granted in this Section
7 shall terminate on the earlier of (i) the second anniversary of the Company's
initial public offering; (ii) the date on which all Registrable Securities held
by any Holder may be sold within a three month period pursuant to Rule 144
promulgated under the Securities Act; or (iii) the date on which the Holders of
more than fifty percent (50%) of all the Notes have entered into a Registration
Rights Agreement or similar agreement with the Company covering the Registrable
Securities held by them.
8. Transfer. By accepting this Note and transferring to the Company the
consideration for the Note, the Holder represents and warrants to the Company
that the Holder is purchasing this Note for investment purposes only, for its
own account, and without the present intention of effecting a transfer or
distribution of this Note or the Conversion Shares. No Holder may pledge,
assign, sell, transfer or otherwise convey any right, title or interest in or to
this Note or the Conversion Shares without delivery to the Company of (i) an
opinion of counsel satisfactory to the Company as to form, content and maker,
that such transfer is exempt from registration under federal and applicable
state securities laws, and (ii) an undertaking by the transferee to become bound
by the provisions of this Agreement.
9. Representation of Holder. The Holder identified above hereby
represents and warrants that he or she is an "accredited investor" as defined in
Rule 501(a) under the Securities Act, and that either individually or in
connection with the Holder's purchaser representative, the Holder has sufficient
sophistication in business and financial matters as to enable the Holder to
evaluate adequately the merits and risks of an investment in the Company. In
determining to invest in this Note the Holder has exercised due diligence in
investigating the Company's properties, assets, and business and financial
condition. Such Holder has had an opportunity to ask questions of, and receive
answers from, the Company's officers, directors and employees and has reviewed
such documents as he or she deemed necessary or appropriate in determining to
invest in the Company.
10. Notice. Any notices required or permitted to be given in connection
with this Note shall be given in writing and may be transmitted (a) by certified
or registered mail, postage prepaid and return receipt requested, in which case
such notice shall be effective on the fifth day after deposit in the United
States Mail; (b) by an overnight courier service of national standing, in which
case notice shall be effective on the date the courier warrants delivery will
occur; (c) by electronic facsimile transmission with confirmation of answerback,
in which case notice shall be effective on the day after receipt of
confirmation; or (d) by electronic mail with electronic confirmation of receipt,
in which case notice shall be effective on the day after receipt of
confirmation. In the event of electronic delivery pursuant to (c) or (d) above,
the party transmitting notice shall, on or before the next business day,
transmit a copy of such written notice in compliance with (a) above. Notices to
the Company shall be addressed to the Company at its principal executive
offices. Notices to the Holder shall be addressed to the Holder at the Holder's
address set forth on the signature page of this Note, or as subsequently noticed
to the Company in compliance with the foregoing provisions of this Section 10.
Any notice required to be given to the Holder shall be transmitted on or before
the date required under this Note, or otherwise on the earliest practicable date
on which notice can be given (in the Company's good faith discretion), subject
to applicable law and to the terms of confidentiality and non-disclosure
agreements binding upon the Company. If, after complying with the foregoing
sentence, the Company cannot comply with the minimum timing requirements for
such notice, lack of notice shall not be deemed to have prejudiced the rights of
the Holder so long as the Company has transmitted notice to the Holder not less
than twenty (20) days prior to the date on which a right must be exercised under
this Note.
11. Governing Law. This Note shall be governed and construed in
accordance with the laws of the State of Oregon.
[Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, the undersigned caused this Note to be
duly executed on the day and year first written above.
CAPITAL DEVELOPMENT GROUP, INC.
By
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Michael P. Vahl, President
AGREED AND ACCEPTED:
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4.4 Capital Development Group Stock Warrant Agreement
CAPITAL DEVELOPMENT GROUP, INC.
-------------------------------
STOCK WARRANT
-------------
EFFECTIVE DATE: May 31, 2000
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF ARE NOT
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, THE
SECURITIES ADMINISTRATOR OF THE STATE OF OREGON OR THE SECURITIES AUTHORITIES OF
ANY OTHER JURISDICTION, AND NO INTEREST HEREIN MAY BE OFFERED, SOLD,
DISTRIBUTED, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND UNDER ALL APPLICABLE STATE SECURITIES LAWS COVERING ANY TRANSACTION
INVOLVING THIS WARRANT OR THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF; OR
(B) THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER ACCEPTABLE TO THE
COMPANY IN FORM, CONTENT AND MAKER TO THE EFFECT THAT SUCH TRANSACTION IS EXEMPT
FROM REGISTRATION.
Warrant
To Purchase Shares of Common Stock of
Capital Development Group, Inc.
For value received, Capital Development Group, Inc., an Oregon
corporation (the "Company"), grants to ____________________________, with its
principal address at _______________________________________ ("Holder"), the
right, subject to the terms of this Warrant, to purchase at any time during the
Exercise Period, the Underlying Shares at the price set forth in Section 1.6
below, subject to the price adjustment terms contained in Section 7.1 below.
<PAGE>
Definitions.
As used in this Warrant, unless the context otherwise requires:
"Capital Stock" means all classes of equity securities of the
Company, including without limitation all of the Common Stock, and all classes
and series of preferred stock.
"Common Stock" means the common voting stock of the Company as
constituted on the date of this Warrant.
"Exercise Period" has the meaning set forth in Section 2.1.
"Expiration Date" means the earlier of (a) July 30, 2000; (b) the
announcement of a public offering by the Company of any class of Capital Stock
or any security convertible into Capital Stock pursuant to a registration
statement on Form S-1, S-2, SB-1 or SB-2 (or any superseding forms of
registration statement); or (c) consummation of a merger, reorganization, or
sale of substantially all of the assets of the Company.
"Holder" means Holder and any permitted transferees of all or a
portion of this Warrant or of Underlying Shares, as the context may require.
"Price" means $0.50 per share, as adjusted pursuant Section 7.1
hereof.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and all rules and regulations promulgated thereunder, or any act,
rules or regulations which replace the Securities Act or any such rules and
regulations.
"Underlying Shares" means ten thousand (10,000) shares of Common
Stock (as adjusted pursuant to the terms of this Warrant) issued or subject to
issuance upon exercise of this Warrant.
"Warrant" means (i) this Warrant; and (ii) any warrants issued
upon transfer, division or combination hereof, or in substitution herefor.
Duration and Exercise of Warrant.
Exercise Period. This Warrant may be exercised at any time during
the period commencing on the effective date of this Warrant and ending on the
Expiration Date (the "Exercise Period").
<PAGE>
Method of Exercise. Subject to the provisions of Sections 2.4, 2.5
and 8 below, this Warrant may be exercised by the Holder, in whole or in part,
by (i) tendering to the Company a written notice of the Holder's election to
exercise this Warrant, which notice shall specify the number of Underlying
Shares to be purchased, (ii) surrendering this Warrant to the Secretary of the
Company at its address as identified in Section 9.2 below, and (iii) executing
and delivering to the Secretary of the Company a Notice of Exercise in the form
attached as Exhibit A. Upon receipt by the Company of the foregoing documents
and instruments, and subject to satisfaction of the conditions set forth herein,
this Warrant shall be deemed to have been exercised and certificates respecting
the Underlying Shares shall be deemed to have been issued, even though the stock
transfer books of the Company may then be closed, and regardless of whether
certificates representing the Underlying Shares have been issued or delivered to
the Holder.
Certificates. Within a reasonable time, but no more than thirty
(30) days after any exercise of this Warrant, certificates or letters of stock
ownership representing the Underlying Shares obtained by such exercise shall be
delivered to the Holder.
Securities Act Compliance. Unless the transfer of this Warrant or
the Underlying Shares has been registered under the Securities Act, as a
condition of its delivery for transfer of a Warrant or certificates for the
Underlying Shares, the Company may require the Holder (including the transferee
of this Warrant or Underlying Shares in whose name the Warrant or the Underlying
Shares are to be registered) to deliver to the Company an opinion of counsel
satisfactory to the Company in form, content and maker, to the effect that the
proposed transaction is exempt from registration. The Company may place
conspicuously upon each certificate or other instrument representing the
Underlying Shares a legend substantially in the form of the legend contained on
the first page of this Warrant, and may issue stop transfer instructions to the
Company's transfer agent or agents in respect of the Underlying Shares.
Payment of Taxes. The Company shall pay all expenses in connection
with, and all taxes and other governmental charges that may be imposed in
respect of, the issue or delivery of Underlying Shares (other than taxes
attributable to the net income of Holder). The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
of this Warrant or in connection with the issue of any certificate for
Underlying Shares in any name other than that of Holder, and in such case the
Company shall not be required to issue or deliver any stock certificate until
such tax or other charge has been paid or it has been established to the
Company's satisfaction that no such tax or other charge is due.
Validity and Reservation of Underlying Shares.
The Company represents that this Warrant is, and covenants that all
Underlying Shares issued upon exercise hereof will be, validly issued, fully
paid and nonassessable. The Company agrees that, during the Exercise Period, the
Company will have authorized and reserved for issuance upon exercise of Warrants
a sufficient number of Underlying Shares to provide for exercise in full of the
Warrants.
<PAGE>
Fractional Shares.
No fractional shares shall be issued upon the exercise of the Warrant.
As to any final fraction of a share which the Holder of the Warrant would
otherwise be entitled to purchase upon such exercise, the Company shall pay to
such Holder in cash the fair market value of such fractional share.
Limited Rights of Warrant Holder.
Until exercise of this Warrant the Holder shall not, solely by virtue
of being the Holder of the Warrant, have any of the rights of a holder of Common
Stock, either at law or equity. Following exercise of the Warrant in whole or in
part, the Holder or the Holder's permitted assigns shall for all purposes be
deemed the holder or holders of record of the shares issued upon such exercise
or partial exercise.
Exchange, Transfer or Loss of Warrant.
Transfer, Division and Combination. Subject to Section 2.4,
2.5 and 8, this Warrant may be transferred, and the transfer will be registered
on the books of the Company upon surrender hereof, together with a copy of the
instrument of transfer. Upon such surrender the Company shall, subject to
Sections 2.4, 2.5 and 8, execute and deliver new Warrants in the name of the
assignee or assignees and in the denominations specified in the instrument of
transfer, and this Warrant shall promptly be canceled.
Loss, Theft, Destruction or Mutilation. Upon receipt by the
Company of satisfactory evidence of the loss, theft, destruction or mutilation
of this Warrant and either (in the case of loss, theft or destruction) a
reasonable covenant of indemnification or (in the case of mutilation) the
surrender of this Warrant for cancellation, the Company will execute and deliver
to the Holder, without charge, a new Warrant of like denomination.
Ownership of Warrants. The Company may deem and treat the person
in whose name the Warrants are registered as the Holder and owner thereof for
all purposes, notwithstanding any notations of ownership or writing on any
Warrant or on any other instrument made by any person or entity other than the
Company, and shall not be affected by any notice to the contrary.
Antidilution Protection.
Price Adjustments.
The Price and the number of Underlying Shares shall be subject to
adjustment from time to time as set forth in this Section 7.
If the Company at any time or from time to time issues for a
consideration per share less than the Price (as adjusted for stock splits and
stock dividends and as adjusted from time to time under this Section), (i) any
shares of Common Stock (other than shares issued as a stock dividend as provided
in paragraph (b) of this Section or in connection with employee compensation as
provided in this Section), or (ii) any right or option (whether or not vested)
to obtain Converted Securities (as defined below), then the Price shall be
reduced to a price per share (calculated to the nearest cent) equal to the
per-share consideration received by the Company in such issue. For the purpose
of this paragraph (a), the following provisions also shall be applicable:
<PAGE>
"Converted Securities" means the shares of the Company's
Common Stock issued upon any conversion of Series A Common
Stock or upon exercise of any options, rights or warrants
to subscribe for shares of the Company's Common Stock, or
any other securities convertible into or exchangeable for
shares of the Company's Common Stock.
The consideration received by the Company for an issue of
additional Common Stock or Converted Securities shall (i)
to the extent it consists of cash, be computed at the net
amount of cash received by the Company after deduction of
any reasonable underwriting or similar commissions,
compensation or concessions paid or allowed by the Company
in connection with such issue or sale but without
deduction of any expenses payable by the Company; (ii) to
the extent it consists of property other than cash, be
computed at the fair value of that property as determined
in good faith by the Board of Directors; and (iii) if
Common Stock or the right or option to Converted
Securities are issued or sold together with other stock or
securities or other assets of the Company for a
consideration which covers both, be computed as the
portion of the consideration so received that may
reasonably be determined in good faith by the Board of
Directors to be allocable to such Common Stock or
Converted Securities.
No adjustment of the Price shall be made as a result of or in
connection with the conversion of the Company's Series A
Preferred Stock, or pursuant to the issuance or exercise
of Common Stock or Converted Securities pursuant to any
option, warrant or agreement outstanding or in effect on
the date of this Warrant (including but not limited to any
stock compensation agreements with the Company's key
personnel), nor shall any adjustment of the Price be made
for any issuance of Common Stock under the Company's
existing or future incentive stock option plan or any
similar employee benefit plan.
If the Company at any time or from time to time effects a split,
recombination or subdivision of its Common Stock or declares a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into Common Stock without payment of any consideration for
the additional shares of Common Stock, then (i) the number of Underlying Shares
which immediately prior to such change the Holder would have been entitled to
purchase pursuant to this Warrant shall be increased or decreased in direct
proportion to the increase or decrease, respectively, in the number of shares
outstanding immediately prior to such change, and (ii) the Price in effect
immediately prior to such change shall be increased or decreased in inverse
proportion to such increase or decrease in the number of such shares outstanding
immediately prior to such change.
In case of (i) any capital reorganization or any reclassification
of the Common Stock of the Company, (ii) the consolidation or merger of the
Company with another corporation, or (iii) any sale, transfer or other
disposition to another corporation of all or substantially all the property,
assets, business and good will of the Company, the Holder of this Warrant shall
thereafter be entitled to convert (and it shall be a condition to the
consummation of any such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition that appropriate provision shall be
made so that such Holder shall thereafter be entitled to convert) this Warrant
into the kind and amount of shares of stock and other securities and property
that would have been received by the Holder if the Holder had exercised this
Warrant in full immediately prior to such transaction.
If the Company declares a dividend upon the Common Stock payable
in securities of another entity, evidences of indebtedness issued by the Company
or other person or entity, or assets (excluding cash dividends) or other options
or rights not referred to in paragraphs (a) through (c) of this Section 7.1,
then the Holder of this Warrant, shall, upon exercise hereof, be entitled to
receive, in addition to the Underlying Shares, against payment of the Price
therefor but without further consideration, the securities or property which the
Holder of this Warrant would have received as dividends if such Holder had
continuously been the holder of record of the Underlying Shares.
<PAGE>
Notice of Certain Events.
Whenever the Price is adjusted as provided in Section 7.1 above,
the Company shall promptly deliver to each Holder a notice signed by the
Company's principal executive officer and by its principal financial officer or
secretary stating the Price as adjusted. Such statement shall describe the facts
requiring such adjustment, including where applicable a statement of the
consideration received by the Company for any additional stock issued.
If at any time:
1.1.1.1 the Company pays any dividend payable in stock upon
its Common Stock or makes any distribution (other than
cash dividends) to the holders of its Common Stock;
1.1.1.2 the Company offers for subscription pro rata to the
holders of its Common Stock any additional shares of
stock of any class or any other rights;
1.1.1.3 there occurs any capital reorganization or any
reclassification of or change in the outstanding
capital stock of the Company (other than a change in
par value, or a change from no par value to par value,
or a change resulting solely from a subdivision or
combination of outstanding shares), or any
consolidation or merger, or any sale, transfer or
other disposition of all or substantially all its
property, assets, business and good will as an
entirety, or the liquidation, dissolution or winding
up of the Company;
1.1.1.4 the Company declares a dividend upon its Common Stock
payable otherwise than out of earnings or earned
surplus or otherwise than in shares or any stock or
obligations directly or indirectly convertible into or
exchangeable for shares; or
1.1.1.5 there shall be an initial public offering of the
Company's Common Stock.
then, in each such case, the Company shall at least fifteen (15) days prior to
such event deliver notice to the registered Holder of this Warrant at the
address of such Holder as shown on the books of the Company describing the
event. The notice also shall specify the date on which the books of the Company
shall close, or a record be taken, for such stock dividend, distribution or
subscription rights, or the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, disposition, liquidation, dissolution,
winding up, or dividend shall take place, and shall further set forth such facts
as may be reasonably necessary to indicate the effect of such action on the
rights of the Holder of this Warrant.
Effect of Merger or Consolidation. In the event of any merger,
consolidation or reorganization of the Company with or into one or more other
corporations which results in the holders of the Company's voting securities
immediately prior to such event owning less than a majority interest of the
voting securities of the surviving corporation immediately following such event,
or in the event of any sale, lease, transfer or conveyance to another
corporation of all or substantially all of the assets of the Company or proposed
liquidation of the Company, then in any such event the Holder shall be given
notice of such proposed action at approximately the same time and in
substantially the same manner as to the holders of the Common Stock. If the
proposed action is approved according to applicable law, the Holder shall be so
notified in writing by the Company by registered or certified mail, and the
Holder shall be entitled to exercise the Warrant pursuant to Section 2.2 above
immediately prior to the consummation of such proposed action.
<PAGE>
Transfer Restriction.
General. The Warrant may be assigned, transferred, hypothecated or
sold only in accordance with Section 8.2 below, and only upon the assignee
entering into a written agreement with the Company agreeing to become bound by
the terms of this Warrant as a Holder. Any such assignment or transfer shall be
made by surrender of this Warrant to the Company or its transfer agent, if any,
together with delivery of (i) the form of assignment attached hereto as Exhibit
B, and (ii) funds sufficient to pay any transfer tax, whereupon the Company
shall, without charge, execute and deliver a new Warrant in the name of the
permitted assignee and this Warrant shall promptly be canceled.
Securities Law Compliance. This Warrant and the Underlying Shares
may not be sold or otherwise transferred except as follows:
in a transaction that, in the written opinion of counsel
satisfactory to the Company as to form, content and maker, is exempt from
registration under the Securities Act and the securities laws of any state and,
in which, in the opinion of such counsel, the delivery of a current prospectus
or offering circular with respect thereto is not required; or
to any person upon delivery of a prospectus or offering
circular then meeting the requirements of the Securities Act and applicable
securities laws of other jurisdictions relating to such securities (as to which
a Registration Statement or notification under the Securities Act and applicable
securities laws of other jurisdictions shall then be in effect) and the offer
and sale thereof.
Miscellaneous.
Successors and Assigns. All the covenants and provisions of this
Warrant which are by or for the benefit of the Holder shall bind and inure to
the benefit of its successors and permitted assigns hereunder. Holder shall have
the right to retain or transfer this Warrant or the Underlying Shares as
provided herein.
Notice. Any notices required or permitted to be given in
connection with this Warrant shall be given in writing and may be transmitted
(a) by certified or registered mail, postage prepaid and return receipt
requested, in which case such notice shall be effective on the fifth day after
deposit in the United States Mail; (b) by an overnight courier service of
national standing, in which case notice shall be effective on the date the
courier warrants delivery will occur; (c) by electronic facsimile transmission
with confirmation of answerback, in which case notice shall be effective on the
day after receipt of confirmation; or (d) by electronic mail with electronic
confirmation of receipt, in which case notice shall be effective on the day
after receipt of confirmation. In the event of electronic delivery pursuant to
(c) or (d) above, the party transmitting notice shall, on or before the next
business day, transmit a copy of such written notice in compliance with (a)
above. Notices to the Company shall be addressed to the Company at its principal
executive offices. Notices to the Holder shall be addressed to the Holder at the
Holder's address set forth on the signature page of this Warrant, or as
subsequently noticed to the Company in compliance with the foregoing provisions
of this Section 9.2. If notified by the Holder at any time or from time to time,
<PAGE>
the Company shall, contemporaneously with the transmittal of the notice to the
Holder, transmit a copy of such notice to the Holder's attorney-in-fact. Any
notice required to be given to the Holder shall be transmitted on or before the
date required under this Warrant, or otherwise on the earliest practicable date
on which notice can be given (in the Company's good faith discretion), subject
to applicable law and to the terms of confidentiality and non-disclosure
agreements binding upon the Company. If, after complying with the foregoing
sentence, the Company cannot comply with the minimum timing requirements for
such notice, lack of notice shall not be deemed to have prejudiced the rights of
the Holder so long as the Company has transmitted notice to the Holder not less
than twenty (20) days prior to the date on which a right must be exercised under
this Warrant.
Applicable Law. The validity, interpretation and performance of
this Warrant shall be governed by the laws of the State of Oregon applicable to
contracts wholly negotiated and performed in that State and without reference to
the choice of law principles thereof.
Headings. The Section headings herein are for convenience only and
are not part of this Warrant and shall not affect the interpretation thereof.
Severability. If any provision of this Warrant is contrary to
applicable law, such provision shall be deemed ineffective without invalidating
the remaining provisions. If and to the extent that applicable law confers any
rights or imposes any duties inconsistent with or in addition to any of the
provisions of this Warrant, the affected provision shall be considered amended
to conform to such law.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
DATED: May 31, 2000
CAPITAL DEVELOPMENT GROUP, INC.
By:
---------------------------------
Michael P. Vahl, President
HOLDER
By:
---------------------------------
Print Name:
-------------------------
Title:
------------------------------
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
(To Be Executed by the Holder to
Exercise Warrant in Whole or in Part)
TO: CAPITAL DEVELOPMENT GROUP, INC.
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the attached Warrant for, and to purchase ______________ shares
of the Common Stock and tenders payment with this Exercise Form to the order of
Capital Development Group, Inc. in the amount of $_____________.
The undersigned requests that certificates for such shares of Common Stock be
issued and delivered as follows:
Name:
------------------------------------------------------------------
Address:
------------------------------------------------------------------
Deliver to:
------------------------------------------------------------------
Address:
------------------------------------------------------------------
and, if the purchased shares of Common Stock are not all of the shares of Common
Stock purchasable under the Warrant, that a new Warrant for the purchase of the
remaining Underlying Shares evidenced by such Warrant be registered in the name
of, and delivered to, the undersigned at the address stated below.
Address:
------------------------------------------------------------------
Dated: ,
--------------------------------- -------------
Signature:
------------------------------------------------------------------
Note: Signature must correspond with the name as written upon the
face of the attached Warrant in every particular, without
alteration.
<PAGE>
EXHIBIT B
FORM OF ASSIGNMENT
(To Be Signed Only Upon Assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto______________________________________________________ the right to purchase
_________________________ shares of Common Stock evidenced by the attached
Warrant, and appoints ________________________________ to transfer the same on
the books of Capital Development Group, Inc. with the full power of substitution
in the premises.
Dated: ,
--------------------------------- -------------
By:
-----------------------------------------------
Title:
-----------------------------------------------
Note: The signature must conform in all respects to the name of Holder
as specified on the face of the attached Warrant without
alteration, and the signature must be guaranteed in the usual
manner.
Signature Guaranteed:
-----------------------------------------------
99.1 News Article re: Capital Developmnet Group Acquires IntraMed Corporation
RIVERSIDE, Calif.--(BUSINESS WIRE)--May 12, 2000--Capital Development Group
(OTCBB:CDVG), a internet based provider of billing, collection and consulting
services to middle market health care providers, has completed the first phase
of an aggressive acquisition program by purchasing IntraMed, developers of
unique claims processing software.
According to Mike Vahl, President/CEO of CDVG, IntraMed was purchased for CDVG
stock and assumption of ongoing expenses of the company including on-going
funding of the customization and research into developing enhancements to the
software. IntraMed will operate as a subsidiary of CDVG.
IntraMed was originally established to develop a scheduling program for doctors
and has grown to become a totally integrated program capable of scheduling,
billing and on line information faxing that can be operated by authorized health
care professionals locally or remotely over the internet.
The Patient Tracking Wizard (PTW) software, written by IntraMed President, Max
Stanford Tomlinson, Jr., who will remain with the company as a consultant and
developer, automatically assigns incoming faxes to the appropriate cases while
notifying insurance companies, providers and referring physicians when cases are
scheduled and when reports come in.
A variety of management reports are easily generated and available to payers and
accounts receivable finance companies through an Electronic Digital Interface.
Capital Development Group was originally founded in 1993. In 1999 the company
was reengineered to provide a service for factoring, billing and collecting
accounts receivables for financial institutions that either factor or finance
Medical Healthcare Providers or directly for the providers themselves. The
company also factors directly managed care claims for hospitals.
Stock in Capital Development Group is traded under the CDVG stock symbol.
<PAGE>
99.2 New Article re: Capital Development Group Acquires Healthsource
Financial Advisors
RIVERSIDE, Calif.--(BUSINESS WIRE)--June 2, 2000--Capital Development Group,
Inc. (OTCBB:CDVG), an internet based provider of billing, collection and
consulting services to middle market health care providers, has completed the
second phase of an aggressive acquisition program by purchasing HealthSource
Financial Advisors (HFA), providers of medical consulting and financing
programs. Mike Vahl, President/CEO of CDVG, stated that HFA was purchased for
CDVG stock and the assumption of ongoing expenses of the company including
funding for additional refinement of HFA's existing and active programs. Vahl
said, "HFA's main focus has been and will continue to be providing information
tools that increase revenue and profitability for its clients."
HFA was established to provide consulting services to financial institutions
dealing with the factoring of medical accounts receivable. In addition to this
consulting role, HFA has been working on an innovative method of financing
hospital receivables and is actively pursuing strategic alliances to begin this
portion of their operation.
HFA's consulting services include analysis of accounts receivable, due diligence
reports on potential financing clients, and recommendations of funding levels.
According to Peter Smith, president of HFA, the acquisition of HFA by CDG will
allow HFA to aggressively market its services as well as provide a marketing arm
for the IntraMed software recently purchased by CDVG. In its dealings with
various medical providers and financing institutions HFA has developed a
significant network of contacts that can rapidly expand the client base of HFA
and CDVG.
Capital Development Group was originally founded in 1993. In 1999, the company
was reengineered to provide a service for factoring, billing and collecting
accounts receivables for financial institutions that either factor or finance
Medical Healthcare Providers or directly for the providers themselves. The
company also factors directly managed care claims for hospitals.
